JUDGMENT OF MACKENZIE J

Introduction

[1] This is an appeal against a judgment given in the District Court at Nelson on 4 September 2003, and a subsequent ruling on costs dated 26 October 2003. The appellant was the plaintiff in the District Court. Its claim related to a sum of money which had been paid by the appellant to the respondent by mistake.

Background

[2] There were extensive disputes on the facts. The following is a brief outline of the essential facts, largely uncontroversial.

[3] The appellant operated airline services in Europe. It is based in Sweden. The respondent is a New Zealand citizen. In January 1999 she travelled with her children to Sweden to join her husband who was flying as a pilot for the appellant. Mr Templeman, as well as flying as a contract pilot for the appellant, entered into an arrangement with a Mr Beale to carry out certain administrative functions in relation to the appellant’s operations. An agreement dated 31 October 1999 was entered into between the appellant and Beale and Templeman. The respondent had become involved in working for the appellant, initially in Sweden. She subsequently moved to Finland and was involved in the operation there. The appellant decided to close down the operation in Finland in about March 2000. Mr Templeman returned to New Zealand in January 2000. The respondent remained in Finland with her daughter, and completed administrative work relating to the closing down of the Finnish operation. She left Finland to return to New Zealand on 15 April 2000.

[4] In the course of her work, the respondent had been carrying out what had been the responsibility of Beale and Templeman relating to the payment of wages of the pilots in Finland, and other outgoings of the appellant in respect of the Finnish operations. She submitted monthly accounts to the appellant in Sweden, and the necessary funds were paid by the appellant. Upon receipt, payment was made by her to the pilots and other creditors. The proceedings related to the payment due from the appellant to the respondent in respect of outgoings for February 2000. That amount was US$36,287. The appellant paid that into Mr Templeman’s bank account. The funds should have been paid to the respondent’s bank account. Because the respondent had not received payment, she made requests for an urgent payment, and a second payment was made on 14 March 2000, to the respondent’s bank account. The funds which had been paid into Mr Templeman’s bank account were subsequently paid by him (on the instructions of the appellant) to the respondent. So, the February account of US$36,287 was paid twice. The appellant sought repayment. In November 2000, the respondent paid to the appellant US$13,724, in respect of the overpayment. The balance of US$22,563 was retained by the respondent, who claimed that she was entitled to that sum, in respect of a number of items. The appellant’s claim in the Court below was for judgment for that balance of US$22,563, plus interest and costs.

[5] The matter was heard before Judge Barber on 12 May 2003, with subsequent detailed submissions. His reserved judgment was delivered on 4 September 2003. He held that the respondent was entitled to retain all but US$2,000 of the amount that she had retained. He gave judgment for the appellant for that amount. He did not award interest, so that interest ran only from the date of judgment. In a subsequent decision dated 26 October 2003, he awarded costs of NZ$8,000 together with all costs and disbursements to be fixed by the registrar, in favour of the respondent.

The issues on this appeal

[6] The appeal is against both of those decisions. The appellant raised four points on appeal, which are that the judgment is wrong on the following points:

(a) It found the respondent was entitled to deduct amounts equal to holiday pay, wages, return airfares and the cost of returning her possessions to New Zealand from the amount she mistakenly received from the appellant. These findings are incorrect in law as the respondent was required to prove a contractual entitlement on the balance of probabilities. It is also not supported by the evidence.

(b) It held that payments allegedly made to pilots (US$7,000) were authorised by the appellant. This finding is contrary to the evidence.

(c) The respondent accepted she received an additional payment by mistake in April 2000. Yet the Court awarded interest on the amount outstanding from the date of judgment. No reasons for this finding were provided.

(d) It found in favour of the appellant yet awarded significant costs in favour of the respondent [paragraph 38 and the subsequent costs decision]. There are no factors of disentitling conduct which justify this departure from the ordinary principles applying to the award of costs.

Point 1 – funds retained by the plaintiff

[7] The bulk of the funds retained by the respondent were retained to satisfy amounts which the respondent claimed to be due to her in respect of salary, holiday pay, the cost of travel for herself and her daughter to New Zealand and the costs of returning her possessions to New Zealand. The first point on appeal relates to these amounts. The appellant submits that the Judge’s findings on these aspects are incorrect in law as the respondent was required to prove a contractual entitlement on the balance of probabilities. He also submits that it was not supported by the evidence.

[8] I must first consider the submission that the findings were incorrect in law, in that the respondent was required to prove a contractual entitlement on the balance of probabilities.

[9] In the case of mistaken payment, in situations where the Contractual Mistakes Act 1977 does not apply (which was not contended to be the case here) recovery of a mistaken payment lies in the law of unjust enrichment. I need not discuss the principles in detail. As Gallen J said in National Bank of New Zealand Ltd v. Waitaki International Processing (NI) Ltd [1997] 1 NZLR 724, at 728 (approved in the Court of Appeal: see Henry J, at [1999] 2 NZLR 211 at 215) there are three elements which a plaintiff must establish in a claim for just enrichment:

(a) Enrichment by receipt of a benefit.

(b) Enrichment at the expense of the plaintiff.

(c) The retention of the benefit is thereby unjust.

[10] All of those elements must be established by a plaintiff, in a claim for money had and received, or for unjust enrichment, or however a claim of this nature is described. There is also a potential defence, namely that the defendant has changed his or her position in such a way that it would be unjust to order repayment. That is both an equitable defence, and a statutory defence under s 94B of the Judicature Act 1908. The onus of establishing that defence is on the defendant. No reliance was placed on that defence in this case.

[11] Accordingly, to succeed in its claim, the appellant had to establish the three elements to which I have referred above. The onus of establishing those was on the appellant. Accordingly, I do not accept the submission that the respondent was required to prove a contractual entitlement on the balance of probabilities. I consider that the appellant was required, on the balance of probabilities, to prove that the respondent was not entitled to make the deductions which she had made. Proof of that on the balance of probabilities, was a necessary element of establishing its claim, and in particular establishing that the respondent had been enriched by receipt of the payment, and had not received monies which would otherwise have been owing to her by the appellant, and that the retention of the monies would be unjust.

[12] While I consider that the onus was on the appellant to establish that the amounts should not have been retained, it does not appear that the Judge proceeded on that basis. He said:

However, it seems to me that the defendant had an obligation to return the payment, which had been passed on to her by her husband, unless she was entitled to a legal set off or counter claim.

He also said:

I appreciate that both counsel have referred to a number of case authorities and made submissions in terms of the concept of restitution for moneys ‘had and received’, failure of consideration, unjust enrichment, breach of contract and the like, and that the plaintiff must come to this Court with ‘clean hands’ to obtain an equitable remedy such as restitution. However, it seems to me that the facts of this case clearly determine the outcome.

[13] Accordingly, it appears that the Judge did apply substantially the legal test for which the appellant now contends and determined, on the facts, that the appellant could not succeed. In doing so, the test which he adopted was arguably unduly favourable to the appellant. This ground of the first point on appeal is accordingly not made out.

[14] As to the contention, on this point of appeal, that the findings are not supported by the evidence, the hurdle to be overcome by an appellant challenging a decision on the facts is a high one. In Rae v. International Insurance Brokers (Nelson/Marlborough) Limited [1998] 3 NZLR 190, Thomas J had some trenchant comments to make on the point. In the course of his comments, he expressed the well established principle of the deference paid by an appellate Court to the findings of fact of a trial Judge in these terms:

An appellate Court has none of these advantages [of seeing and hearing the witnesses] and must acknowledge that the Court at first instance is far better placed to determine the facts. Indeed, it would be arrogance for an appellate Court to assert the capacity to be able to ‘second-guess’ a trial Judge’s findings of fact when it does not share those advantages. Exceptional caution in departing from the trial Judge’s findings of fact are [sic] therefore regarded as imperative.

[15] In this case, much turned on credibility. The Judge, in summing up the credibility of the two principal witnesses, Mr Jakobsen for the appellant, and the respondent, said:

[36] When Mr Jakobsen denied in cross-examination that there were verbal and rather loose business arrangements and undertakings along the lines stated by the defendant, I think he had a memory lapse. He seemed a little vague in cross-examination as to whether he had agreed to holiday pay for the defendant.

[37] The defendant was a credible and clear witness. I am satisfied that arrangements and agreements between her and Mr Jakobsen on behalf of the plaintiff were effected verbally most of the time.

[16] Mr Darroch for the appellant submits that the Judge erred in failing to give weight to the written agreement between the appellant and Beale and Templeman (which the Judge found had been novated so that the respondent stood in the place of Beale and Templeman). I am not persuaded by that submission. The Judge clearly did take the agreement into account. However, there was other evidence to consider also. In relation to the arrangements, he made the finding which I have referred above, namely that the arrangements and agreements between the respondent and Mr Jakobsen on behalf of the appellant were effected verbally most of the time. That conclusion is unsurprising. The work which the respondent was doing was described by the Judge in these terms:

When I stand back and look at the evidence overall, I find that the defendant was clearly entrusted with full responsibility for the plaintiff’s air-flights operation in Finland between April 1999 and April 2000 when, for various good reasons, the plaintiff decided to close down that operation.

In those circumstances, it is hardly surprising to find that not all of the arrangements which are relevant to the decision which the Judge had to make were contained in the written agreement. That is a brief three page document. Its terms are meagre. The Judge said of it “the agreement seems very ‘home made’ and, apparently, was drafted by Mr Jakobsen”. That agreement clearly does not contain all of the detail which would be necessary to enable the respondent to carry out the very wide ranging task which the Judge found that she had been entrusted with. I am completely unpersuaded that the Judge has placed too little reliance upon the agreement. He was entitled to view the agreement in the context of the evidence as a whole. He held that it did not cover all the matters agreed between the parties. That is a finding that he was clearly entitled to make.

[17] The appellant also challenges the findings of fact by referring to passages in the evidence which it submits do not justify the findings made. That is precisely the type of exercise which cases such as Rae have held is not appropriate. Despite that, I do now turn to consider the amounts which were retained by the plaintiff, and to discuss the Judge’s finding in respect of each.

[18] The amounts which were retained by the respondent for her own expenses were as follows:

(a) Payment for salary US$2,000. This was a claim for one half of a month’s salary at the rate of US$4,000 per month. The Judge found that this payment was correct. It appears that it relates to the period from 1 to 15 April 2000. The Judge found that the respondent had worked for that period, and there appears to be no dispute about it. I can see no basis on which it could properly be suggested that that amount was not due to the respondent.

(b) Airline tickets and relocation costs to New Zealand. A total of US$8,000 was claimed for these two items. The Judge said:

I accept the defendant’s evidence that, in appreciation of her efforts, Mr Jakobsen frequently promised the defendant that he would look after her and that he was speaking on behalf of the plaintiff. I accept her evidence that he promised to fly her and her daughter and their possessions back to New Zealand at the end of her association with the plaintiff.

He further said:

At the request of the plaintiff, the defendant agreed to remain in Finland with her daughter and their return tickets to New Zealand expired. As already indicated, I accept that Mr Jakobsen’s promised, on behalf of the plaintiff, that he would look after the defendant and her daughter financially including providing the costs of the return airfares to New Zealand, together with possessions, in due course.

He further held that while the costs may have been higher than the appellant could have acquired the tickets for, they were a fair cost to the respondent. The submission that those findings are not supportable because the payments were not provided for in the written agreement made in October 1999 is simply untenable, for the reasons I have given. The Judge has made a clear finding of fact that a separate promise was made in respect of those matters. That finding of fact cannot properly be disturbed on this appeal.

(c) Holiday pay. The respondent made a deduction of US$4,000. The Judge held that she was entitled to holiday pay, but that the amount was excessive. He said:

In all the circumstances I accept the defendant’s evidence that she was to deduct a reasonable sum for holiday pay, but I fix fair holiday pay at US$2,000 rather than the US$4,000 which she deducted.

The Judge further said:

In her evidence-in-chief the defendant says, inter alia, that because of the long hours she worked, Mr Jakobsen on behalf of the plaintiff promised her on numerous occasions in January and February 2000 that she would receive holiday pay upon termination of her employment. However, that aspect was not finalised.

As to Mr Jakobsen’s evidence on the point he said:

He seemed a little vague in cross-examination as to whether he had agreed to holiday pay for the defendant.

Again, those findings of fact and credibility are unassailable on this appeal.

(d) A sum of US$1,276 was deducted in respect of costs of renting a car. As to that, the Judge said:

Mrs and Mrs Templeman gave evidence that they had agreed with the plaintiff that they would not incur any costs in respect of a car leased by them but made available to the defendant and other pilots. Understandably then, the defendant made a deduction for that from the funds she received from the plaintiff in error. In terms of the overall evidence, the US$1,276 deduction by the plaintiff from the defendant’s March account for our hireage was inappropriate because the item to cover use of her car in the plaintiff’s business was reasonable and had been agreed upon. It is surprising that the plaintiff queries the item of repayment to the defendant of money deducted from her wages for the cost of leasing her car when it was used by the plaintiff’s business in Finland.

Those findings of fact are also unassailable on this appeal.

[19] Accordingly, I find that none of the challenges covered by the first point on appeal have been made out.

Point 2 – pilots’ salaries

[20] The remainder of the deduction made by the respondent, US$7,000, was for payments which she made to two pilots who had been employed by the appellant in the Finnish operations. The Judge held that the respondent was clearly entrusted with full responsibility for the appellant’s air flying operations in Finland between April 1999 and April 2000. It was undisputed that she had regularly received claims from the pilots for payment. The practice was for the pilots to submit their invoices to her, and for her to collate those and prepare a covering invoice, which she would send to Sweden and request payment. The amount involved in this item represents payments after the last scheduled operations had taken place, in March 2000. The Judge said:

I appreciate that the plaintiff submits that there was no specific authorisation for payment to two pilots for services in April 2000. I am satisfied from the evidence that the defendant had authority from the plaintiff to make such payments. I do not think it relevant that one of the pilots may have been ineligible, technically, to be flying in April 2000 because his licence had expired. Also, insofar as holiday pay was paid to him, I consider that the defendant had authority to do that within reason, as she did. The plaintiff now maintains that one pilot was paid more than he claimed for April 2000 i.e. US$6,000, but there is no convincing evidence to support that.

[21] The appellant submits that this finding is contrary to the evidence. He submits that the evidence was that all other payments to pilots were authorised by the appellant, and that these were the only payments not specifically authorised. Again, I am not persuaded that the evidence on that point was so clear cut that it could be said that the Judge’s conclusion was wrong. The evidence to which the appellant points was only part of the evidence. The Judge also accepted that the respondent had full authority to settle debts in respect of the closure. He also held that there were communication difficulties towards the end of the period. There is no suggestion that the respondent benefited personally from the payments which she made to the pilots. The payment would have satisfied any liability which the pilots might have had against the appellant. In those circumstances, I consider the Judge was right in holding that the appellant would have had to show that the pilots had been paid more than was due to them. It was therefore appropriate to consider whether the appellant had proved that the payments were wrong. In all the circumstances, I consider that the findings made by the Judge on this aspect also are unassailable.

Point 3 - interest

[22] The appellant challenges the decision of the Judge not to award interest for the period prior to judgment. The power to award interest for a period prior to judgment is conferred by section 87 of the Judicature Act 1908. It is a discretionary power. The appellant must demonstrate that the Court acted on a wrong principle, overlooked some relevant matter, took into account some irrelevant matter, or was plainly wrong. Counsel for the appellant submits that no reasons for the finding were provided. That is so, so far as the section of the judgment where interest is actually awarded is concerned. However, the Judge did address the question of whether there had been undue delay by the plaintiff in making the repayment. He said:

In terms of her authority as she understood it, she returned the balance as she calculated it to the plaintiff within a reasonable time bearing in mind banking and communication difficulties (of the defendant with Mr Jakobsen) in achieving that refund. This caused the refund to be delayed for about six months rather than the one or two months as should have happened.

[23] In the light of that finding, I consider that the Judge was justified in not awarding interest prior to judgment. It cannot be said that the Judge has erred in the exercise of his discretion as to interest.

Point 4 – costs

[24] The appellant submits that the Judge found in favour of the appellant yet awarded significant costs in favour of the respondent and that there were no factors of disentitling conduct which justify his departure from the ordinary principles applying to the award of costs.

[25] An award of costs is quintessentially discretionary and review and appellate Courts are reluctant to interfere: Lewis v. Cotton [2001] 2 NZLR 21 (CA). Again, the appellant must demonstrate that the Court acted on a wrong principle, overlooked some relevant matter, took into account some irrelevant matter, or was plainly wrong. The appellant has not made out any of those grounds. The appellant succeeded for only a very small part of its claim. I consider that the Judge cannot be said to have erred in the exercise of his discretion in considering that the respondent had been substantially successful in the proceedings, and that an award of costs to the respondent was appropriate. I see no basis on which I could interfere with the exercise of the discretion as to costs.

Result

[26] In the result, for the reasons I have given, the appeal is dismissed.

[27] As to costs on this appeal, Mr Sansom drew attention to the remarks by Thomas J in Rae as to the possible consequences on costs on an unsuccessful appeal which seeks to overturn findings of fact. Mr Sansom submits that an award of costs according to scale would not be adequate in this case. He advises that the respondent’s actual costs are in excess of $5,000 plus disbursements.

[28] If this appeal were treated as a category 2 proceeding, and costs calculated on the basis of a hearing time of one half day, and a preparation time of twice that time, schedule costs would be 1½ days at $1,450 per day, a total of $2,175. In the circumstances, I do not regard that as a sufficient recompense to the respondent for costs. The appeal was doomed to failure. I consider that she is entitled to an award which is closer to actual costs. I award costs of $4,000, plus disbursements to be fixed by the registrar, in favour of the respondent.

A D MacKenzie J

Signed at 11.05 a.m. this 13th day of August 2004