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Villages of New Zealand (Pakuranga) Limited v Ministry of Health HC Auckland CIV 2003-404-5143 [2005] NZHC 1664; (2006) 8 NZBLC 101,739 (6 April 2005)

Last Updated: 10 July 2020

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2003-404-5143

Hearing: 6-8 December 2004

Appearances: Mr Stuart for plaintiff
Ms Jagose & Ms Williams for defendant Judgment: 6 April 2005

This judgment was delivered by me on 6 April 2005 at 10.00 am, pursuant to Rule540(4) of the High Court Rules.

Registrar/ Deputy Registrar

Solicitors:

Webster Malcolm Kilpatrick, Warkworth, for Plaintiff Crown Law Office, Wellington, for Defendant

VONZ V MINISTRY OF HEALTH HC AK CIV 2003-404-5143 [6 April 2005]

• [1] The plaintiff, Villages of New Zealand (Pakuranga) Ltd (“VONZ”) provides retirement accommodation, residential care and rest home services. VONZ claims payment from the defendant for services provided to six residents of its Pakuranga Park Village during the period 1997 to 2004.

• [2] From 1993 to 2001 as a result of ongoing reform of the health sector, there were a number of statutory bodies charged with contracting with health providers for the provision of services including those of the type provided by VONZ. In 2001 all of the assets and obligations of those bodies were vested in the defendant, the Ministry of Health pursuant to the provisions of s 94(3) of the New Zealand Public Health & Disability Act 2000. It is by reason of this vesting that the Ministry of Health is the defendant in these proceedings.

• [3] VONZ alleges that the defendant is obliged to pay it for rest home services provided to residents of Pakuranga Rest Home who qualified for the state funded rest home subsidy during the period June 1997 through to the present. The services in question were provided when there was no current agreement between VONZ and the relevant statutory body at the time for the provision of rest home services. All such contracts had expired. During some of this time VONZ and the relevant statutory body were actively involved in negotiations for a new services agreement.

• [4] VONZ claims that the conduct of the statutory bodies was such that they held out that they would pay for the services, knowing that VONZ was providing those services and was seeking to be paid for them. It advances its claim for payment on the following alternative bases: (i) quantum meruit, (ii) unjust enrichment, and (iii) promissory estoppel. Although it maintains all of these claims, counsel for VONZ expressly placed most reliance upon the promissory estoppel cause of action.

Legislative framework

• [5] The events in this proceeding occurred against a background of ongoing reform of the health care sector. It is necessary to give brief outline of the basic

structure of the sector and the reforms to assist in understanding the chronology of events.

• [6] The Health and Disability Act 1993 (the 1993 Act) effected the first significant reform of the health sector for the purposes of this proceeding, and in particular the funding of residential health care and services for the retirement sector. The long title of the 1993 Act provided in material part:

An Act to reform the public funding and provision of health services and disability services in order to -

(a) Secure for the people of New Zealand -

(i) The best health; and

(ii) The best care or support for those in need of services; and

(iii) The greatest independence for people with disabilities -

that is reasonably achievable within the amount of funding provided; and

(aa) Improve, promote, and protect public health; and

(b) Facilitate access to personal health services and to disability services; and

(c) Achieve appropriate standards of health services and disability services.

• [7] The Act contemplated that the funding of health and disability services would be carried out separately to the provision of health services. It created four regional health funding authorities (“the Funding Authorities”). It provided that the Crown would enter into a “funding agreement” with each Funding Authority. In those agreements the Crown agreed to provide money to the Funding Authority in return for the Funding Authority funding health and disability services for people in the Funding Authority’s region.

• [8] It was the task of the Funding Authorities to contract with health providers, both in the public and private sectors, for the purchase of health services and to monitor the performance of those contracts once concluded: s 22 of the 1993 Act.
• [9] Section 51 of the 1993 Act provided an alternative means by which the Funding Authority could procure and pay for services. Section 51 provided, in material part:

51 Arrangements Relating To Payments For Health and Disability Services

[(1) Where [the Health Funding Authority] gives notice of the terms and conditions on which [the Authority] will make a payment to any person or persons, and, after notice is given, such a payment is accepted by any such person from [the Authority], then—

(a) Acceptance by the person of the payment shall constitute acceptance by the person of the terms and conditions; and

(b) Compliance by the person with the terms and conditions may be enforced by [the Authority] as if the person had signed a deed under which the person agreed to the terms and conditions.]

(2) Any terms and conditions of which notice is given under subsection

(1) of this section shall, unless they expressly provide otherwise, be deemed to include a provision to the effect that four weeks' notice must be given of any amendment or revocation of the terms and conditions.

(3) For the purposes of this section, notice may be given individually or by public notice.

• [10] Funding for elderly persons was at the relevant time, and continues to be accessed through s69F of the Social Security Act. That section provides generally that a person aged 65 years of age or more who requires residential care disability services, and is likely to require these indefinitely, may apply to the Chief Executive (at the time of Income Support Services) to have his or her financial means to pay or contribute to the cost of those services assessed. Every person to whom the section applies (‘qualifying persons’) is required to pay either the lesser of the full cost of the services provided to him or her, or the total amount of the assets and the annual income of that person and his or her spouse as assessed by the Department. A two stage assessment of potential qualifying persons is therefore contemplated. First, an assessment of the person as to whether they need rest home services and whether they are likely to require those services on an on-going basis. This is conducted by a needs assessment agency contracted by the Funding Authority. Second, an income and asset assessment conducted by the Income Support Services.
• [11] By this means, persons falling within the provisions of s69F could apply to have part of the cost of services met. However entitlement under s69F is not entitlement to payment of a pension or benefit. During the time relevant to this proceeding, if a person was eligible, they had to access publicly funded services by residing in a rest home where the service provider had a contract with the Funding Authority. Under that contract, payments were made by the Funding Authority to the provider for the difference between the qualifying person’s contributions and the cost of care.

• [12] Until June 1997 it was the Northern Regional Health Authority’s responsibility to contract with the service provider for those services in the Northern Region. VONZ was in the Northern Region. In June of 1997 all Regional Health Authorities were dissolved. A single health authority, the Transitional Health Authority, was established to replace the four Regional Health Authorities. The Regional Health Authorities assets and liabilities were transferred to the Transitional Health Authority. Then in January of 1998 the Health Funding Authority was established as the single health funding body. The Health Funding Authority was dissolved from 1 January 2001 by the New Zealand Public Health and Disability Act 2000, which also provided that the assets and liabilities of the Health Funding Authority should vest in the Crown. From 1 October 2003 aged residential care funding has been contracted to the District Health Boards under s 10 of the New Zealand Public Health and Disability Act 2000. Because of the constant changes in the identity of the funding authority consequent upon these reforms, to assist in comprehension I have referred to the various statutory bodies preceding 1 January 2001 simply as “the Funding Authority”.

Factual background

• [13] In October of 1993 VONZ contracted with the Funding Authority to provide subsidised rest home continuing care for older people. In October of 1994 that contract expired but was in effect extended as to its terms, by notice under s 51 of the 1993 Act, and was subsequently extended again by a s 51 notice on 30 March 1995. In July 1995 another contract was entered into between North Health and VONZ for

the provision of subsidised continuing rest home care for eligible older people. In May of 1996 the contract expired again but on four occasions was extended by means of s 51 notices. The final notice extended the contract to 31 May 1997. No payments for provision of subsidised rest home care had been received by VONZ for services provided after May 1997.

• [14] For approximately two years after all contracts and s 51 notices expired, the parties were in negotiation for a new services agreement. In 1996, the Funding Authority had begun processing and negotiating contracts with all rest home providers in the Northern region. In late 1996/early 1997, a group of rest homes in the Northern region calling itself Joint Action Group (JAG) was formed to act for certain rest homes in relation to the proposed new contracts. VONZ was not a part of JAG but the Funding Authority initially proceeded in its contract negotiations with VONZ on the basis that it was.

• [15] On 14 February 1997 Ms Spratt-Casas of the Funding Authority wrote to VONZ stating that agreement had been reached with JAG as to the terms and conditions on which services would be provided through to 30 June 1998. The letter recorded that although JAG had been given the authority to sign the contracts on behalf of a portion of rest homes, the Funding Authority had no record of authorisation for JAG to negotiate on behalf of VONZ. The Funding Authority requested that if it was VONZ’s intention to be part of the JAG settlement, VONZ should contact JAG to follow the agreed settlement implementation process.

• [16] Mr Murphy, a director of VONZ, gave evidence that he contacted Ms Spratt- Casas and told her that VONZ was not part of JAG and would be negotiating independently. He said that it was agreed that she would send VONZ a set of contract documents. However, if the documents were sent, it seems that they were sent to another rest home operator due to an incorrect address for VONZ being entered into the Funding Authority database. They were not received by VONZ.

• [17] Ms Spratt-Casas left the Funding Authority and was replaced by Ms Weir. Mr Murphy gave evidence that he and the Nurse Manager of the rest home, Colleen Lukins, attended at the Funding Authority’s offices in about May of 1997 to meet

with Ms Weir. He says that they were kept waiting for a long time and accordingly left without seeing Ms Weir.

• [18] In June of 1997, VONZ received a facsimile from Ms Weir attaching a Rest Home Contract Schedule 1 Response Form for VONZ to complete. The letter acknowledged that there had been confusion within the Funding Authority as to VONZ’s membership of JAG, and further that there was an incorrect address on the Funding Authority database for VONZ so that correspondence including s 51 notices had most likely been sent to Pakuranga Rest Home, a Metropolitan Life Care facility. Ms Weir undertook to sort out the database and to monitor communications in the near future to see if the problem could be overcome. The letter requested that VONZ complete and sign off the response form and return it immediately, to enable the Funding Authority to confirm the status of VONZ’s contract.

• [19] After a conversation on 10 September 1997 between Mr Murphy and Ms Weir, VONZ received a facsimile from Ms Weir of the same date. In the letter Mr Murphy confirmed:

After our phone conversation this afternoon, I immediately instigated a rest home contract s 51 notice to extend your contract for a further two months beyond 31 May 1997. I have attached a copy in draft form only, for your information. We are fasttracking the contract sign off process internally and hope to get your payments reinstated to you in this Thursday’s payment round, or by the latest next Tuesday’s payment. Your copy of the s 51 notice will be sent to you by the end of this week.

With your agreement we now need to turn to the fact that we have not managed to reach agreement since May 1996 on a new contract. It appears that since that date, we have put in place a series of s 51 notices that simply extend the terms and conditions of an existing contract. The last of these expired on 31 May 1997. We had some leeway to continue payments to you while the May/June negotiations were under way. The attached copy of my fax dated 26 June 1997 outlines my written communication to you. I subsequently followed up through phone calls but have not had a response.

• [20] The letter then went on to again traverse the confusion within the offices of the Funding Authority as to VONZ’s membership of the JAG group, and as to its address. The letter concluded:

As discussed with you, I am committed to working this matter through with you constructively and speedily so that we come to some resolution of your

contract. Unless the clients wish to do otherwise, moving clients elsewhere is an option we would be reluctant to take.

• [21] No s 51 notice was received by VONZ. No contract was concluded, as VONZ and North Health were unable to agree upon the price. It is common ground that price was, and remained throughout negotiations, the one obstacle to reaching agreement.

• [22] By March of 1998 VONZ had still received no payment from North Health for its ongoing care of qualifying persons and negotiations were at a halt. VONZ prepared and sent to North Health an invoice dated 4 March 1998 for $33,540.36. The invoice included three residents who had not been qualifying persons as at May 1997, the date of the expiry of the s 51 notice. These were Mr Trevor Gilbert, Mrs Florence Johnston and Mrs Maisie Campbell. Two of the residents who were qualifying persons at the time the s 51 notice expired were no longer listed. One had died shortly after the contract expired, and the other had moved to a public hospital.

• [23] VONZ arranged a meeting with Ms Weir on 29 April 1998. At that meeting Mr Murphy was handed a letter dated 28 April 1998 from the Funding Authority to VONZ. The letter commences:

Please find attached your contract settled on your behalf by the Joint Action Group in January 1997.

It is evident from the contents of the letter that the Funding Authority was, almost a year after expiry of the last s 51 notice, still confused as to the involvement of VONZ in the JAG group, and as a consequence the state of contractual negotiations with it.

• [24] After the meeting Ms Weir wrote to VONZ in a letter dated 6 May 1998. Again she apologised for the extent of the confusion which had been caused firstly by the error in the database and said that the database had been rechecked for accuracy. Secondly, Ms Weir confirmed that there had been confusion as to VONZ’s membership of JAG, but the Funding Authority now accepted it had never reached agreement with VONZ on terms and conditions of the contract including price.
• [25] Ms Weir made two offers to VONZ. The first offer involved the application of the JAG settlement to VONZ including backdating of prices for services to 1 June 1996 and continuation of the JAG pricing structure through to 30 June 1998. The second offer was a flat rate offer at a slightly higher level than that involved in the JAG settlement. The offer was a daily rate per qualifying person of $68.25. Ms Weir said:

I’m proposing that this begin as at 1 June 1996 firstly to reduce any unnecessary administration costs on your part, secondly as a response to you for the difficulties experienced in concluding your contract, and thirdly to give you the parity you indicated you wanted with the marketplace in terms of your performance as a provider.

• [26] The letter of 6 May 1998 confirmed that VONZ was to provide to the Funding Authority the price they had factored into the invoice presented by them in March 1998, on the basis that this was the contract price VONZ wanted.

• [27] In August 1998, Ms Weir again wrote to VONZ. Since her May letter, there had been no progress toward reaching a contractual settlement with VONZ. She recorded that the Funding Authority had followed the letter of May 1998 up on a number of occasions with VONZ but had received no response. There seems clearly to have been delay on the part of VONZ in stipulating the contract price it was seeking. Ms Weir observed that on 1 September 1998 a new restructured organisation of the Funding Authority would begin. She said:

I am keen that we resolve whatever matter appears to be restricting progressing negotiations between us so that the situation was not further protracted by any potential loss of continuity of knowledge.

• [28] In September of 1998 Mr Timaloa began working for the Funding Authority and took over from Ms Weir responsibility for negotiations with VONZ. Mr Timaloa arranged a meeting with Mr Murphy from VONZ, and Ms Colleen Lukins, the Nurse Manager. On 1 December 1998 a meeting took place at Pakuranga Park Village. Mr Timaloa’s handwritten note of the meeting recorded the following outcomes from the meeting:

HFA [Funding Authority] will pay [VONZ] for the cost of care incurred since expiry of the last contract (May of 1997).
Possibility of effecting a s 51 at the old price [until] present time until able to enter formal contract.

Need to reconcile our payment records with [VONZ’s] records.

HFA send out a letter of offer setting out the proposed offer and await for response from [VONZ].

• [29] Mr Timaloa wrote on Thursday, 15 December 1998, confirming two offers to VONZ. These were similar to those contained in Ms Weir’s letter of 6 May 1998. However the offers were updated to take the position forward to 30 June 1999, with the price offered for the period 1 July 1998 to 30 June 1999 to be at a higher daily rate of $68.76 for each qualifying person.

• [30] The letter of 15 December 1998 was followed by Mr Timaloa’s letter of 23 February 1999 enclosing another copy of 15 December 1998 letter, and seeking a response from VONZ.

• [31] On 10 March 1999 Mr Murphy contacted Mr Timaloa by telephone. They discussed the letter of 15 December 1998. Mr Murphy responded that the daily rate of $68.76 was too low. He believed his competitors were being paid a higher amount. He said that he required a price offer tantamount to his competitors at around $70 to $72.

• [32] On 16 March 1999 Mr Timaloa wrote confirming a new offer with a pricing structure up to a maximum daily rate of $69.71 for the period 1 July 1998 through to 30 September 1999 applying. He said:

We note that this is our final offer to Pakuranga Park Village. In the event that you do not agree with the final offer, then a section 51 Advice Notice will be effected from June 1996 till the present on a contract rate of $68.25 until such time as an agreement is reached between Pakuranga Park Village and the HFA on the above.

• [33] Mr Murphy responded by telephone on 29 March 1989. He rejected the offer. He said that he was personally aware of several facilities that were receiving a price of around $71 to $72. He confirmed that he wished to be paid the same price

as comparable facilities and requested a price of $71.86 excluding GST. Mr Timaloa responded that what he was asking for was unrealistic as it would “void” the factors taken into account in the equity pricing model used for settling with the industry. The ‘equity pricing model’ was apparently a model the Funding Authority had developed in order to achieve some parity and fairness in the pricing throughout the industry. Mr Murphy responded that in its letter the Funding Authority was threatening that the only option available to Pakuranga was to accept a s 51 notice. Mr Timaloa requested that Mr Murphy put his concerns in writing and that he detail his sources for pricing.

• [34] On 20 April 1999 the solicitors for VONZ wrote to the Funding Authority making a request under the Official Information Act for official information held or used by Funding Authority in connection with setting the amounts offered to Pakuranga Park Village and other retirement homes. Mr Timaloa for the Funding Authority responded by letter dated 21 April 1999 enclosing the correspondence with VONZ. He also stated:

Once the HFA is able to reconcile your client’s records of patients during the period in question, it will then be in a position to effect payment, based on our offer which remains open for acceptance.

• [35] On 21 April 1999 Mr Timaloa again wrote to VONZ. He purported to set out a detailed chronology of the various dealings between VONZ and the various statutory bodies over the period. At paragraph 7 in reference to the meeting on Tuesday, 1 December 1998, he stated that it was agreed at the conclusion of that meeting that the Funding Authority would pay for the cost of care provided to subsidised clients since the expiry of their last contract on 31 May 1997. He said, however, that:

In effecting this we need to reconcile your records of clients against our records, along with agreeing on a price offer.

And further on in the letter it is said:

We have considered issuing a Section 51 Advice Notice but are faced with the same problem in that we have not reached agreement on the clients in your care who qualify for subsidised care.

We are therefore in no position to calculate the amount owing to you under any such Notice.

Notwithstanding a lack of a new agreement, once the HFA is able to reconcile your client records to the HFA’s records, it will issue a new Section 51 Advice Notice. The payment terms recorded in the Section 51 Advice Notice will be:

(a) $68.25 for the period 1 June 1997 to 30 June 1998; and

(b) $69.71 for the period 1 July 1998 to 30 September 1999.

Immediately after the Section 51 Advice Notice has been issued, the HFA will pay for the clients, reconciled to its records, on the basis set out in that Section 51 Advice Notice.

13. Therefore we have no option but to effect a section 51 in the interim given its been 22 months since we last contracted with you and will attempt to work with you in reconciling the number of subsidised clients in your care from 1/6/97 up till the present time.

• [36] On 23 April 1999 the solicitors for VONZ wrote again seeking the information sought in their letter of 21 April 1999. The Funding Authority responded providing more information including databases in relation to facility pricing for individual providers, copy of the pricing model used, and an explanation of the offer made to VONZ.

• [37] On 18 May 1999 the solicitors for VONZ wrote threatening legal proceedings and alleging that the Funding Authority had misled VONZ in relation to the amounts being paid to other operators. The letter contained a counter-offer similar to that made on 29 March 1999 by Mr Murphy. The details of the offer were:

• - 1 June 1996 to 30 June 1998 $70.75 plus GST

• - 1 July 1998 to 30 June 1999 $71.86 plus GST, plus interest on all payments due since 31 May 1997.

• [38] By letter dated Monday, 31 May 1999, the Funding Authority rejected the counter-offer and denied having mislead VONZ. It confirmed that its final position was as per its letter of 21 April 1999.
• [39] On 6 July 1999 the Funding Authority again wrote to the solicitors for VONZ referring to the letter of 21 April 1998. The Funding Authority confirmed that it required information from VONZ in order to assist the Funding Authority in making the s 51 payment. It said that it would be an arduous task to reconcile the records given the time that had elapsed, and because the payment and processing function for all residential care for the elderly had been relocated to the Funding Authority Dunedin office as of 1 July 1999.

• [40] On 11 August 1999 the solicitors wrote complaining that the Funding Authority had not complied with its obligations under the Official Information Act and saying that until the authority:

provides this information our client is not in a position properly to present its case to the authority as to what the appropriate level should be; without the material we have sought any appearance of consultation is merely a sterile process engaged in by the authority only for the sake of appearances.

• [41] After that exchange of correspondence, the matter lay quiet until 2002 when VONZ instructed its solicitors to take up the matter of payments this time with the Funding Authority’s successor, the Ministry of Health. Mr Murphy says that the reason for the inactivity in the period 1999 to 2002 was that he had become exhausted by the process of negotiating with Funding Authority and had to get on with other things.

• [42] VONZ seeks to be recompensed for the following qualifying persons and for the following ‘eligible periods’, where eligible period means the period each person lives in the rest home after being assessed as qualifying for subsidised rest home accommodation.

Maisie Campbell, eligible period 29/07/97 to 09/06/00 1046 days Trevor Gilbert, eligible period 11/06/97 to 11/01/01 1310 days Nola Evelyn Grant, eligible period 01/06/97 to 03/09/98 460 days
Constance Rita Hughes, eligible period 03/10/98 to
31/10/04 2219 days

Florence Charlotte Johnston, eligible period 18/02/98
to 18/04/98 59 days
Gladys Mary Murdoch, eligible period 01/04/98 to
31/10/04 2405 days

• [43] In addition VONZ claims to be entitled to be recompensed for rest home and carer services provided to Constance Hughes and Gladys Murdoch from 31/8/04, down to the date of judgment “or until they sooner die or leave the rest home”. VONZ concedes however that from its claim must be deducted amounts received from or on account of each of the residents the subject of the claim.

• [44] It is not disputed that each of these persons had been assessed as to their needs and financial resources and approved for subsidised care. Nor is it disputed that VONZ was, at all material times, a licensed rest home. The detailed chronology and content of the negotiations between VONZ and the Funding Authority is also not materially in dispute. What is in dispute is the parties interpretation of and the significance to be attached to the communications between the Funding Authority and VONZ during the course of the negotiations, and also to the conduct of VONZ.

Causes of Action

Promissory Estoppel

• [45] Although counsel for the plaintiff has characterised this cause of action as promissory estoppel, the distinctions recognised in the past between the various forms of estoppel have in recent times tended to fall away, such that a general cause of action known as “equitable estoppel’ has emerged. In National Westminster Finance NZ Ltd v National Bank of New Zealand [1996] 1 NZLR 548 at 549-550, Tipping J summarised the position as follows:

The decisions of this Court in Wham-O MFG Co v Lincoln Industries [1984] 1 NZLR 641 and Gillies v Keogh [1989] NZCA 168; [1989] 2 NZLR 327 have emphasised the element of unconscionability which runs through all manifestations of estoppel. The broad rationale of estoppel, and this is not a test in itself, is to prevent a party from going back on his word (whether express or implied) when it would be unconscionable to do so.

Having considered the authorities we would venture to sum the matter up in the following way. There is a single doctrine of estoppel with a variety of manifestations. For ease of analysis it is convenient to examine the particular ingredients of different manifestations but the underlying conceptual unity of the doctrine is important and should not be overlooked.

• [46] Adopting this approach, it therefore continues to be appropriate to consider whether the elements of promissory estoppel are made out, whilst recognising that the underlying element of unconscionability must also be present. The elements of the promissory estoppel were succinctly described by Richardson J in Burbery Mortgage Finance & Savings Ltd v Hindsbank Holdings Ltd [1988] NZCA 220; [1989] 1 NZLR 356 at 361:

This then is a straight forward application of modern principles of equitable estoppel. It is well settled that where one party has by words or conduct made to the other a clear and unequivocal promise or assurance intended to affect the relations between them and to be acted on accordingly, then once the other party has taken him at his word and acted on it, the one who gave the promise or assurance is bound by that assurance unless and until he has given the promisee a reasonable opportunity of resuming his position (16 Halsbury’s Laws of England (4th ed) para 1514). Although there are indications in some of the authorities that there must be a pre-existing contractual relationship between the parties, I am of the view that the doctrine applies in appropriate cases where there is a pre-existing legal relationship ...; or where the promise affects a legal relationship which will arise in the future ...; or more broadly where, as here, the promisor and promisee have interests in the same subject-matter

• [47] VONZ relies on the following as the basis of its promissory estoppel claim:

1. That to the knowledge of the Funding Authority VONZ was providing rest home care for eligible residents in anticipation of being paid for those services.

2. That the Funding Authority conducted itself in such as way as to leave VONZ with a reasonable expectation that VONZ would be paid (either pursuant to contract or under a s51 notice) if it continued to provide those services. It says that this was made most explicit in the letters from the Funding Authority dated 16 March 1999 and 21 April 1999, but VONZ’s evidence is that this merely confirmed the attitude as expressed orally by Funding Authority throughout the negotiations from 1997 to 1999, and which was never repudiated.

100. In reliance on the assurances and in the expectation that the HFA would issue a s51 notice that was backdated to 1 June 1997 VONZ did provide those services and has suffered a detriment.

• [48] VONZ says it was implicit in the assurances given by the Funding Authority that the s51 notice would specify payment terms as follows for qualifying residents:

• - $68.25 plus GST per day per resident for the period 1 June 1997 to 30 June 1998

• - $69.71 plus GST for the period 1 July 1998 and following.

Representation

• [49] The defendant responds that there was no clear or unequivocal promise or representation that VONZ would be paid for the services. It says that the negotiations were clearly undertaken on the basis that payment would be made only when a contract had been entered into and that in turn required that there be agreement on price. Agreement on price was not reached. The defendant accepts that although it did say it would implement a s 51 notice to see VONZ paid in the absence of contractual agreement, that offer was always subject to reconciliation of VONZ’s records. VONZ did not provide those records. Further, the plaintiff made it plain that it would not accept a s 51 notice offered on the terms set out by Mr Timaloa.

Discussion

• [50] I am satisfied that there was an unequivocal representation that VONZ would be paid. The defendant made statements on a number of occasions to the effect that if no contract was reached as to price, then payment would be effected through a s 51 notice. The rates at which the notice would be issued were also clearly stated in correspondence and in particular in the letter of 21 April 1999.

• [51] In reaching this view I have relied particularly upon correspondence and discussions with Ms Weir during the period late 1997 through to September of 1998, where dealings between the parties were upon the basis that VONZ would be paid for services provided in the period since the expiry of the last s 51 notice. These discussions occurred within the context of VONZ having previously received

payment for services in the absence of contractual arrangement, by use of the s 51 mechanism. I also rely upon the following:

1. The statement in the letter of 10 September 1997 that Ms Weir had instigated the immediate issuing of a s 51 notice to achieve payment (which did not eventuate for reasons not before me).

2. The meeting between Mr Timaloa and Mr Murphy in December of 1998 in which it was agreed that the Funding Authority would pay VONZ for cost of care incurred since expiry of the last contract in May of 1997.

100. Mr Timaloa’s letter of 21 April 1999 in which he recorded the agreement of 1 December 1998 that the Funding Authority would pay for cost of care provided to subsidised clients since the expiry of their last contract on 31 May 1997, but recording that in effecting payment they would need a reconciliation of the records.

• [52] Ms Jagose for the defendant says that these representations were never unequivocal because the undertaking to pay was stated to be subject to a contract being concluded or the provision of adequate records to enable a reconciliation VONZ’s payment claims. I do not accept that payment was always stated to be conditional upon a contract being concluded. That proposition is inconsistent with the evidence in relation to the s 51 payment mechanism. That establishes that both parties did contemplate the possibility of payment being made, even if a contract was not concluded.

• [53] I also do not accept Mr Timaloa’s evidence that the reconciliation of payments was a necessarily pre-condition to the issue of the s 51 notice, or that it was always expressed as such to VONZ. In her September 1997 letter, Ms Weir was prepared to issue a s 51 notice without such reconciliation having been undertaken. Further, Ms Waddell, Operations Manager for the Ministry of Health, accepted that the detail of the payment was a separate matter to the issue of the notice itself (Transcript, page 29, lines 24 and 25). There is nothing in the s 51 notice procedure

that necessitates such a reconciliation before the notice is issued. The amount of any payment made pursuant to the notice would need to be justified, most likely by a reconciliation, but that is a different matter. In any event, even on the defendant’s own evidence, the first mention of the requirement of reconciliation is in December of 1998, some 18 months after payment for services had ceased.

• [54] As to the defendant’s submission that VONZ did not want to accept a s 51 notice payment, I am satisfied that VONZ expressed reluctance to accept payment using the s 51 methodology. However, that was while it attempted to negotiate a contractual resolution to the situation. This negotiating stance was within the context of its understanding based upon the representation of the Funding Authority, that ultimately it would be paid, one way or another.

Was VONZ’s Reliance Reasonable?

• [55] The defendant says that it is not sufficient for the plaintiff to prove that there was reliance. That reliance must be reasonable. I accept that this is a correct statement of the law (Commonwealth of Australia v Verwayen (1990) 170 CLR 394 at 445 per Deane J). The defendant says that VONZ’s reliance was not reasonable. It must have known, from experience in the health sector and from the plain and clear language of the s 51 offers, that the defendant was willing to pay only when a contract had been concluded or otherwise (in respect of the s 51 mechanism) when a reconciliation of records was completed.

• [56] It follows from the findings in relation to the nature of the representations made by the Funding Authority, that I find that reliance was reasonable. The Funding Authority intended that VONZ should continue providing the services, and clearly represented that VONZ would be paid for those services.

Period of Reliance

• [57] The defendant submits that even if an unequivocal representation is found by the Court, it was unreasonable for VONZ to continue to rely after September 1999, by which stage negotiations between the parties had broken down. I accept that

proposition. By that time, VONZ had walked away from any attempt to negotiate and resolve the issues with the defendant. I appreciate that in respect of elderly residents, the obligation to provide care and services to them was undertaken prior to this date, and the plaintiff could not lightly or quickly walk away from its obligations to those persons. However, in reality by as early as April of 1999 when VONZ’s solicitors became involved, it was plain that the negotiation process was deteriorating. If it chose not to further engage in negotiation, VONZ should by then have begun to make necessary arrangements with existing ‘qualifying person’ residents so that those residents could be informed of the loss of entitlement to ongoing subsidy if they remained at Pakuranga Park Village. It was not suggested in argument before me that VONZ could not make such arrangements.

• [58] I am therefore satisfied that after 30 September 1999, it was unreasonable for VONZ to continue to provide subsidised care to existing residents, in reliance upon an expectation of payment by the defendant.

Unconscionability

• [59] The defendant submits that it is not unconscionable to allow it to avoid paying for services provided by VONZ during the period June 1997 to 30 September 1999. It says that because VONZ was a commercial party, conducting a contractual negotiation it took upon itself the risk that a contract would not be concluded and it would go unpaid. It was VONZ’s fault that no contract was concluded. Equity should not intervene.

• [60] In relation to the argument that equity should not intervene to assist one party where commercial parties have failed to contract, the defendant relies upon the case of Marine Steel Ltd v The Ship “Steel Navigator” [1992] 1 NZLR 77.

• [61] That case clearly turned upon its own facts, and has little or any relevance to the present case. It certainly does not assist the defendant.

• [62] It is clear that Courts are traditionally reluctant to interfere and grant relief to parties to a commercial negotiation who were negotiating on an arms length basis

toward a contract, where that contract does not eventuate. In Austotel Pty Ltd v Franklin Selfserve Pty Ltd (1989) 16 NSWLR 582, Kirby P said at 585:

We are not dealing here with ordinary individuals invoking the protection of equity from the unconscionable operation of a rigid rule of the common law. Nor are we dealing with parties which were unequal in bargaining power. Nor were the parties lacking advice either of a legal character or of technical expertise. The Court has before it two groups of substantial commercial enterprises, well resourced and advised, dealing in a commercial transaction having a great value. As has been found, they did not reach the point of formulating their agreement in terms which would be enforced by the law of contract. This is not, of itself, a reason for denying them the beneficial application of the principles developed by equity. But it is a reason for scrutinising carefully the circumstances which are said to give rise to the conclusion that an insistence by the appellants on their legal rights would be so unconscionable that the Court will provide relief from it.

At least in circumstances such as the present, the Court should be careful to conserve relief so that they do not in commercial matters, substitute lawyerly conscience for the hard-headed decisions of business people.

• [63] However, VONZ and the defendant were not arms length commercial parties with freedom to move as to their negotiations. Although the model provided by the health reforms is a contracting model, the context within which these parties were operating was a longstanding relationship during which, pursuant to various contractual arrangements and s. 51 notices, the plaintiff had provided health care services to elderly persons and had been paid for them. There was a pattern established of the two parties working together to provide continuity of accommodation and care to the residents of Pakuranga Park. Neither party desired that the elderly persons be upset or disrupted by the contractual machinations between them, and the administrative difficulties that the defendant was suffering. It was known by the defendant that VONZ was continuing to provide services in expectation that it would be paid, either pursuant to a contract or by use of a s 51 notice. The defendant not only knew it would occur, it desired it. As Ms Weir said in her letter of 10 September 1997 :

Unless the clients wish to do otherwise, moving the clients elsewhere is an option we would be reluctant to take.

• [64] Turning to the issue of fault in relation to the failure to reach agreement, having reviewed the course of negotiations between the parties, it cannot be said that any one party is to blame for the final breakdown in negotiation or the failure to

reach agreement. It is clear that in the period up until late 1998, internal problems within the Funding Authority had led to substantial delays in negotiations, namely, the address error in the database and the continuing confusion as to VONZ’s membership of the JAG negotiating group. It is also apparent that there was delay on the part of VONZ in providing information requested by the defendant. However, while both parties remained actively committed to the negotiation process, and VONZ continued to reasonably rely on the defendant’s representation that it would be paid for services to date, the issue of blame for the failure to conclude a contract is irrelevant. Rather the issue is whether it would be unconscionable to allow the defendant to avoid paying the plaintiff for the services in question.

• [65] In all the circumstances, I am satisfied that when both parties were negotiating on the basis and understanding that VONZ would continue to provide services to the qualifying persons, and would be paid for those, and that this was the desired outcome from the perspective of the defendant, it would now be unconscionable for the defendant to refuse to pay for those services.

Period of recovery

• [66] In light of my finding that reliance upon the representation of the Funding Authority was only reasonable up until 30 September 1999, VONZ should receive remuneration for services provided only during the period of time 1 June 1997 to 30 September 1999.

Rate of remuneration

• [67] As to the appropriate payment rate, VONZ seeks the rates proposed by Mr Timaloa in his letter of 21 April 1999, referred to at para [35] above. VONZ however proposes that as against that, some credit be given for sums it has received from or on account of the residents in respect of services provided.

• [68] I am satisfied that in all the circumstances VONZ should not be able to recover a higher price than the representation of the defendant could reasonably have

caused it to expect to recover. That is consistent with the principle that the appropriate remedy in a case of equitable estoppel is “the minimum equity to do justice” (Crabb v Arun District Council [1976] Ch. 179). VONZ continued to provide services on the basis of a representation that it would be paid for its services under a contract, or failing that using the s 51 notice procedure if a contract was not concluded. By means of the latter procedure a price could be imposed upon VONZ, and the prices proposed were those set out in the letter of 21 April 1999. From that must be deducted the amounts VONZ has received from or on account of the residents in respect of the services provided in the period 1 June 1997 to September 1999.

• [69] I am also satisfied, on the information before me, that although not the price negotiated for by VONZ, these rates provide reasonable remuneration for the services provided. It was the evidence of Mr Timaloa that this rate of remuneration was in the top 6% of rates being paid to service providers in the Northern Region.

Quantum meruit

• [70] The plaintiff also advances a claim in quantum meruit for recovery of the reasonable costs of services provided to the six qualifying persons during the periods described at paragraph [42] of this judgment. The “reasonable cost” of service is sought which VONZ alleges to be $71.86 per day (plus GST) per qualifying person. That is the rate VONZ was negotiating for with the Funding Authority.

• [71] VONZ alleges that the Funding Authority, was aware of and/or consented to, or acquiesced in the provision of the services by VONZ, was benefited by those services and should now make payment for them. The defendant says:

(i) that there was no request by it for the provision of services;

(ii) the services were provided to third persons, (the residents) and it therefore cannot be said to have freely accepted the services;

(iii) the residents could not have freely accepted the services, when they did not know that there was any issue regarding payment for them.

(iv) the defendant has not benefited by reason of the services because they were provided to the residents, not the Funding Authority;

(v) alternatively, the Funding Authority cannot be said to have benefited unless the provision of services by VONZ discharged a contractual or statutory obligation on the defendant.

Relevant principles

• [72] The issue of the ability to recover, via a restitutionary claim, remuneration for services provided arises in two common contexts, firstly where services have been provided under a contract which is subsequently found to be void or unenforceable for some reason, and secondly, where services are provided in anticipation of a contract being concluded, which ultimately is not concluded. This case falls into the latter category.

• [73] Counsel for both the plaintiff and defendant identified the elements of the quantum meruit cause of action as follows:

1. A request by the defendant of the plaintiff to provide services, or;

2. free acceptance of the services provided by the defendant;

3. a benefit to the defendant from the provision of the services.

Request/Free acceptance

• [74] The first and second elements identified by counsel require some discussion. The quantum meruit cause of action continues to evolve. The Courts were in the past reluctant to impose upon a defendant an obligation to pay for services which he or

she had not requested. The rationale for this reluctance was that while the receipt of money clearly advantages a defendant, the receipt of services may not do so. In Taylor v Laird (1856) 25 LJ Ex 329, 332 Pollock CB famously remarked:

One cleans another’s shoes. What can the other do but put them on?

• [75] The learned authors of Goff & Jones, The Law of Restitution, (5^th ed), Sweet & Maxwell, London, 1998, however, express the view that a defendant should be regarded as liable to pay for services which he or she has freely accepted:

In our view, he can be held have benefited from the services rendered if he, as a reasonable man, should have known that the plaintiff who rendered the services expected to be paid for them, and yet he did not take a reasonable opportunity open to him to reject the proffered services. Moreover, in such a case, he cannot deny that he has been unjustly enriched. (p 20.)

• [76] This passage was cited with approval by Paterson J in Phillip GL Grey v The Charter Yacht “Manutara” (High Court, Auckland, AD811/97, 16 October 1998). I am also of the view that it is to cast the cause of action in quantum meruit too narrowly to require evidence of a clear request for services. The insistence upon evidence of a request is out of step with a recognition that the quantum meruit cause of action like other claims for restitution at common law, is solidly based upon principles of unjust enrichment, rather than upon a notion of implied contract. The implied contract theory for claims for restitution at common law has now been laid to rest. In Westdeutsche Landesbank Girozentrale v Islington Borough Council [1996] UKHL 12; [1996] AC 669, Lord Browne Wilkinson said:

Subsequent developments in the law of restitution demonstrate that this reasoning is no longer sound. The common law restitutionary claim is based not on implied contract but on unjust enrichment: in the circumstances the law imposes an obligation to repay rather than implying an entirely fictitious agreement to repay ... In my judgment, your Lordships should now unequivocally and finally reject the concept that the claim for moneys had and received is based on an implied contract. I would overrule Sinclair v Brougham on this point.

• [77] In this case, it is not pleaded there has been a request for the services. The plaintiff’s claim seems to have been formulated on the basis that the Funding Authority freely accepted the services. The relevant pleading is:

The HFA was aware of and consented to or acquiesced in the provision of services by VONZ.

• [78] Although on the face of the correspondence there would seem to be the basis for an allegation of a request, the plaintiff did not attempt to expand upon its existing pleading during the course of argument and the defendant has accordingly not addressed any argument in relation to “request”. I therefore propose to deal with the claim on the basis of an allegation of “free acceptance” only.

• [79] The defendant argues that the notion the defendant accepted the services knowing that the plaintiff would expect payment is untenable. It says the plaintiff was providing its services to the residents, and not to the defendant. Because the residents did not know that no mechanism for payment was in place, they were unable to reject the services and choose services where the mechanism for payment of public funds was in place.

• [80] I am satisfied that the provision of services to the residents was freely accepted by the Funding Authority. As I have found, the Funding Authority desired that those services be provided, knew that they were being provided by VONZ in expectation of payment by the Funding Authority, and did not protest the provision of the services.

Benefit

• [81] The next issue is the nature of the benefit that can give rise to the cause of action. Where a defendant has requested or freely accepted services in circumstances where he has gained no residual objective benefit from those services, the plaintiff may still recover the reasonable cost of those services if the services were provided and accepted in circumstances where the defendant knew that the plaintiff expected to be recompensed for the services. A case where recovery was allowed, although there was no enrichment of the defendant (if benefit is measured as the economic value of the residue of the services) was William Lacey (Hounslow) Ltd v Davis [1957] 1 WLR 932.

• [82] In William Lacey (Hounslow) Ltd v Davis, the plaintiff was led to believe that it would secure a contract for reconstruction of premises damaged in the war. At the request of the owner of the premises, the plaintiff prepared extensive additional

estimates to enable the owner to make submissions to the War Damage Commission for an increase in compensation. The additional work was carried out at the request of the owner which enabled the owner to successfully negotiate a higher award. However subsequently, the owner decided to sell the premises so that the owner, although requesting, receiving and accepting the services, was not economically advantaged by the services. It was held that the plaintiff was entitled to a quantum meruit for the additional work that had been carried out at the plaintiff’s request. The Court said, referring to the decision in Craven-Ellis v Canons Ltd [1936] 2 K.B. 403, a case concerned with an unenforceable contract:

I am unable to see any valid distinction between work done which was to be paid for under the terms of a contract erroneously believed to be in existence, and work done which was to be paid for out of the proceeds of a contract which both parties erroneously believed was about to be made. In neither case was the work to be done gratuitously, and in both cases the party from whom benefit was sought requested the work and obtained the benefit of it. In neither case did the parties actually intend to pay for the work otherwise than under the supposed contract, or as part of the total price that would become payable when the expected contract was made. In both cases, when the beliefs of the parties were falsified, the law implied an obligation – and, in this case, I think the law should imply an obligation - to pay a reasonable price for the services which had been obtained.

• [83] In this case, counsel for the defendant argues for a different approach to the issue of ‘benefit’. She argues that there has been no benefit to the defendant because the services were provided to third parties. I am however satisfied that where services were provided to third parties in circumstances where the Funding Authority knew that VONZ expected to be paid for those services by the Funding Authority, and the Funding Authority took no steps to protest the continued provision of those services (and indeed, as I have held, desired their provision) then the Funding Authority is benefited by them.

• [84] I am also prepared to accept that the services provided to the qualifying persons by VONZ did benefit the defendant in the sense of enriching the defendant if enrichment is measured objectively and in economic terms. The residents had an entitlement to receive a contribution from the defendant towards the cost of their residential care, accessed by direct payment to a contracted provider. If the residents had moved elsewhere to a provider who had a subsisting contract with the Funding

Authority, then the Funding Authority would immediately have been under a contractual obligation to pay for those services.

• [85] Ms Jagose for the defendant submits that the cases of Regional Municipality of Peel v Her Majesty the Queen in right of Canada (1992) 98 DLR (4^th) 140 (SCC), and Bettina Rest Home & Anor v The Attorney General & The Health Funding Authority (High Court, Auckland, CP118/95, 20 December 1999, Chambers J) are against VONZ on this point. She relies upon them for the proposition that unless the provision of the services by VONZ discharged a contractual or statutory liability of the defendant, VONZ should not recover for them.

• [86] In Peel McLachlin J drew a distinction between cases involving the positive conferral of a benefit upon the defendant (for example money), and those cases involving a “negative” benefit, in the sense that the benefit conferred upon the defendant is that it has been spared the expense. The provision of services would normally fall into the “negative” category. In the case of ‘negative’ benefits McLachlin J said that recovery would only be allowed where the plaintiff had provided the service under a compulsion and thus discharged a statutory or contractual obligation of the defendant. McLachlin J discussed a further category of recovery which for the purposes of argument it was prepared to accept as a possible extension of the existing recognised narrow category of cases where recovery should be allowed. She referred to the argument that where a defendant can be shown to have been incontrovertibly benefited by the provision of services recovery should be allowed. McLachlin J described:

[an] incontrovertible benefit as an unquestionable benefit, a benefit which is demonstrably apparent and not subject to debate and conjecture. ... it is limited to situations where it is clear on the facts (on the balance of probabilities) that had the plaintiff not paid, the defendant would have done so.

The Supreme Court of Canada held that in the particular facts of that case, there was no incontrovertible benefit.

• [87] I would respectfully differ from this analysis. If the plaintiff has provided a service at the request of the defendant, or the defendant has freely accepted those

services, and the defendant knew or should have known that the plaintiff expected to be paid for them by the defendant, then the cause of action is made out. In my view the “incontrovertible benefit” doctrine is better regarded as an extension to the request/free acceptance model of quantum meruit, such that where it cannot be said that the defendant requested or freely accepted the services, such as where the defendant was ignorant of the provision of the services, the plaintiff may still recover if the defendant has been incontrovertibly benefited by the services. In such cases a very careful approach to the issue of benefit is indicated, because it is admitting of an exception to the principle most succinctly expressed in Falcke v Scottish Imperial Insurance Co. (1887) LR 34 ChD 234:

Liabilities are not to be forced on people behind their backs any more than you can confer a benefit upon a man against his will.

• [88] This analysis is consistent with treatment of the case by Goff & Jones, The Law of Restitution, (5^th ed), Sweet & Maxwell, London 1998 at 24-7. The outcome of Peel is also consistent with this analysis. The case was concerned with that category of case where services are provided pursuant to legislation subsequently ruled invalid. Pursuant to s20(2) of the Juvenile Delinquents Act, RSC 1970, C.J. 3 Judges were empowered to order a municipality to which the subject child belonged to contribute to the child’s support. This section was subsequently held to be invalid by the Supreme Court of Canada as being beyond the powers of Parliament. The municipality brought an action against the Province to recover the amount of payments made by it, on the basis that the Province had been unjustly enriched by the payments. Payments had been made by the municipality pursuant to a then statutory obligation, so that there was no question of a ‘request’ or ‘free acceptance’ by the Province. As a matter of fact, the Supreme Court found that there was no constitutional, statutory or legal liability on the Province to provide for the care of the children. The Supreme Court therefore found that even were it to recognise a principle of ‘incontrovertible benefit’, there had been no incontrovertible benefit to the Province by reason of the provision of services.

• [89] In Bettina a rest home operator sought recovery from the Crown for services provided to persons suffering from an intellectual disability. Various claims were advanced including a claim in quantum meruit. It is difficult to ascertain from the

judgment the exact factual basis for the claim, and when the judgment is read as a whole it is apparent that the Judge had some difficulty in obtaining a clear articulation of the plaintiffs’ claim from either the pleadings or counsel. Chambers J dealt with the quantum meruit claim on the basis of how it had been argued by both counsel. That argument assumed, on the authority of Peel, that it was necessary for a plaintiff seeking recovery for services on the basis of a quantum meruit, to prove either a discharge of a liability on the defendant by the provision of those services, or an incontrovertible benefit. I have held that I do not accept that analysis of the cause of action. It is also clear that the Judge went on to reject the claim on additional grounds which included the failure by the plaintiff to establish that it had not received reasonable remuneration for the services, and further that there was disentitling conduct on the part of the plaintiffs because the rest home operator was not licensed to provide the services in question to the elderly or to disabled persons.

• [90] Accordingly, I do not see the analysis in either Peel or Bettina as providing an obstacle to VONZ’s claim.

Duration of recovery

• [91] The Funding Authority cannot be said to have freely accepted the services after September 1999. There is nothing before me to suggest that it knew of the continued provision of the services. Even if it had, given the absence of any contract from VONZ, I am not satisfied that applying the ‘reasonable person’ test, the Funding Authority would have known that VONZ expected to be paid for those services. Accordingly the period VONZ may recover for is again the period 1 June 1997 to 30 September 1999.

• [92] If a defendant has freely accepted services then the logical date for their valuation is the date that they are provided. I have already held that the proposed s51 rate is good evidence of the reasonable value of the services in all the circumstances. Although VONZ seeks recovery at a higher rate, there is no evidence before me that that is a reasonable rate. Accordingly the rate of recovery should be in accordance with that set out in paragraph [35] above.

Conclusion on quantum meruit

• [93] I therefore find the defendant liable to the plaintiff for the cost of services provided to the qualifying persons listed at paragraph 42 above, calculated on a daily rate as set out in paragraph 35 for the duration as mentioned above. From this sum must be deducted amounts already received by VONZ from or on account of the residents.

Unjust enrichment

• [94] VONZ also advances a claim in unjust enrichment for the cost of the services so provided, submitting that there is now broad acceptance that there is a cause of action in unjust enrichment. The defendant does not argue against the notion that there is a cause of action in unjust enrichment. Both counsel suggest that the elements of the cause of action are an enrichment of the defendant by the plaintiff by receipt of a benefit; that benefit at the expense of the plaintiff; and finally circumstances rendering it unjust that the enrichment be retained.

• [95] I was referred by counsel to ASB Bank Ltd v Davidson & Ors (2003) 7 NZBLC 103, 927 where Laurenson J was prepared to accept that there was an unjust enrichment cause of action. In that case, Laurenson J undertook a careful review of recent New Zealand authority where the recognition of such a cause of action had been at issue or referred to. In particular he referred to the dicta of Thomas & Henry JJ in National Bank of New Zealand Ltd v Waitaki International Processing (NI) Ltd [1999] 2 NZLR 211 (CA). At 215 Henry J said:

The remaining cause of action was based on an allegation of unjust enrichment. It is unnecessary to embark upon a dissertation on the concept of unjust enrichment as a ground for restitution or restoration of benefit. The present claim clearly falls within accepted and well-established principles which allow recovery, whether it is to be classed as a claim in restitution (Goss v Chilcott [1996] 3 NZLR 385 at p 390), a payment made by mistake, or a claim for money had and received does not matter. Gallen J’s analysis of the elements required to be established by the bank to entitle it to recovery were correct: enrichment of Waitaki by the receipt of a benefit, which was at the expense of the bank, and circumstances rendering it unjust that the enrichment be retained.

Thomas J agreed. He said at 226:

I agree with Henry J. that for the purposes of this appeal, it is unnecessary to embark upon a dissertation on the concept of unjust enrichment as a ground for restitution or restoration of a benefit. As my learned brother states, whether the present claim is to be classed as a claim in restitution as in Goss v Chilcott [1996] 3 NZLR 385 at p390, a payment made by mistake, or a claim for money had and received does not matter. The elements which the bank must establish to entitle it to recover the money remain essentially the same.

• [96] Having referred to this material and other academic writing, Laurenson J concluded at [56] to [57]:

Based on my understanding of the views of Henry and Thomas JJ in National Bank of New Zealand my conclusion is that the point has been reached where realistically a cause of action said to be founded on unjust enrichment should be regarded as acceptable, providing it is related to an accepted cause of action and it meets the three criteria I have referred to.

In other words a pleading based on unjust enrichment simpliciter which does not meet the conditions I have referred to, could not be regarded as an acceptable pleading on the basis of the law as it stands at present.

• [97] The three criteria identified by Laurenson J were those set out at paragraph

[94] above. The learned Judge then said:

I therefore find that this alternative cause of action, pleaded as it is on the ground of unjust enrichment, is open to consideration in this case. For a start I am satisfied that the evidence discloses both a case of monies had and received and a payment of monies paid under a mistake.

• [98] Although this was urged upon me as authority for the existence of a new ‘unjust enrichment’ cause of action, I do not read it as such. Laurenson J’s approval of a pleading of an unjust enrichment cause of action was clearly predicated to it being “related to an accepted cause of action”.

• [99] I have held that the plaintiff is entitled (on the basis of estoppel and quantum meruit) to recover reasonable remuneration for the services provided by it for a portion of the time for which it seeks recovery. As is apparent from the analysis in respect of the quantum meruit judgment, the three elements identified above do underpin that finding. Accordingly even were I to recognise a cause of action in unjust enrichment independent of existing accepted causes of action, it would likely be of academic interest only, the outcome for the plaintiff would be identical to its

quantum meruit cause of action. In any case, I do not accept that there is yet such an independent cause of action. The elements identified by Laurenson J can accurately be identified as the common threads running through the various forms of action, both at common law and equity, which give rise to a claim to restitution or compensation in respect of a benefit conferred. However, when extracted in this bare form, and taken in isolation, the principles identified are singularly unhelpful in identifying in what circumstances such relief is available. It says nothing of the type of “benefits” for which relief is available, and most importantly nothing of the circumstances in which it would be “unjust” for the benefit to be retained. To avoid such a cause of action bestowing unfettered judicial discretion, the detailed rules worked out by the Courts over the last several centuries in relation to the common law equitable restitution causes of action would continue to be resorted to for guidance. Alternatively, a whole new set of rules would be required. As is said by Dr Jeremy Finn in Burrows, Finn & Todd’s Law of Contract in New Zealand, (2^nd ed), Lexis Nexis Butterworths, Wellington 2002.

The term is frequently used in judgments, although the New Zealand courts have not yet accorded it [unjust enrichment] the status of a cause of action.

Much work remains to be done in this area of the law. It will take a long time for the judges, no doubt with appropriate prompting from the writings of academics and others, to mould the current complex mass of precedent into a new coherent whole. The challenge is to tease out of the apparently amorphous concept of “unjust enrichment” a set of consistent principles, without losing sight of the important fact that the various circumstances in which a plaintiff can recover from a defendant differ greatly. Some fear that too ready a use of unjust enrichment may cloud those very real distinctions.

• [100] Accordingly, because the present case clearly falls within the well- established principles allowing recovery, I do not propose to attempt to express an alternative formulation of an ‘unjust enrichment’ cause of action. Even were I to attempt to do so, the principles identified by the plaintiff and defendant as the supposed elements of a cause of action of unjust enrichment are in my view insufficiently detailed and would create uncertainty.

Defences

• [101] The defendant raises several defences in respect of each of the causes of action.

Causation

• [102] The defendant says that VONZ has caused its own loss by failing to advise eligible residents that there was no longer a contract in place from June 1997 and what that meant for them. Acknowledging that this defence is not one of the recognised defences to a proprietary estoppel or quantum meruit claim the defendant says, to put this submission another way, the plaintiff has voluntarily or officiously provided the services.

• [103] As I have already held I do not accept that the services were voluntarily or officiously provided. The Funding Authority was aware that the services were being provided and represented that VONZ would be paid for them, and knew that it was providing the services in expectation of being paid for them.

Policy based argument

• [104] A policy based argument was advanced in respect of all three causes of action. The defendant says that as a matter of implementing the policy evident in the Act, VONZ cannot be allowed to refuse to accept offers made in good faith and assert some years later that they are entitled to a remedy as if the contract terms had been agreed (in the absence of some disentitling conduct by the Funding Authority). Further, the services offered since 1997 have not been the subject of monitoring or assessment.

• [105] I have considered the policy arguments advanced as to why this Court should be slow to hold the defendant estopped from refusing to pay for the cost of the services. However, I do not accept that a finding in favour of VONZ, will have the effect of undermining the policy of the Act. This case turns upon its own facts, and in particular the representations made by the defendant that the plaintiff would be

paid. It was not argued by the defendant that this was one of those category of cases where an estoppel should not be held to arise because it would have the effect of sanctioning an unlawful act, or rendering valid transactions of a type declared invalid by Parliament on the grounds of public policy. (Spencer Bower, The Law Relating to Estoppel by Representation (4^th ed), Lexis Nexis, London, 2004, p161-177.

• [106] As to the concern that VONZ will be paid for services that have not been the subject of monitoring and assessment, that was not a concern of the Funding Authority during the period up until mid-1999. Up until then the Funding Authority reiterated many times that it was prepared to pay for the services.

Laches/acquiescence

• [107] The defendant submits that VONZ has delayed in asserting any rights it had to recovery. This is clearly correct. This claim was filed in September 2003, 3 years after negotiations came to an end between the parties. The defendant says that if VONZ is right that the defendant is obliged to pay it for the cost of services provided, then from August 1999 at the latest, the necessary facts were available to it to enable it to bring an action against the defendant. The defendant says that given the delay the plaintiff should not be able to recover because since the last date of communication between the parties over the contract in 1999, the health funding sector has changed again as follows:

(i) Funding Authorities were dissolved from 1 January 2001, with health sector funding being achieved by central funding by Parliament through annual appropriations to the defendant.

(ii) From October 2003, the District Health Boards have been responsible for purchasing residential care services.

Further, between August 1999 and May 2002, VONZ created the impression that any residents it had who were eligible to access the subsidised publicly funded heath services had made other arrangements, or that it had no qualifying persons in its home.

• [108] It is submitted that a defendant may resist an equitable claim where it can establish (the onus being upon the defendant) that the plaintiff has by delaying prosecution of its case, acquiesced in the defendant’s conduct, has caused the defendant to alter its position in reliance on the plaintiff’s acceptance or has otherwise permitted a situation to arise which it would be unjust to disturb.

• [109] As to the nature and application of the doctrine of laches, In Neylon v Dickens [1987] NZCA 55; [1987] 1 NZLR 402, delivering the judgment of the Court, Cooke P said at 407:

Whether hard-and-fast requirements for a successful defence of laches in any context can be identified is very doubtful. There is a useful discussion in Meagher, Gummow and Lehane, Equity: Doctrines and Remedies (2nd ed, 1984) chapter 36, where the authors say "in view of the confused state of the later authorities, certainty on the point is not possible" but give the opinion that mere delay does not constitute laches. The only opinion that we would venture is that it may be unwise to depart from the classic exposition of the doctrine by Sir Barnes Peacock, delivering the judgment of the Privy Council in Lindsay Petroleum Company v Hurd (1874 LR 5 PC 221, 239- 241, which treats the length of the delay and the nature of the acts done during the interval as always important in arriving at a balance of justice or injustice between the parties, but stops short of laying down that detriment is always essential. It is understandable that textbook writers often find the ostensible certainty of abstract propositions more attractive than do those whose task it is to decide actual cases in accordance with law.

What is undoubted, and was fully accepted by Hardie Boys J and counsel for the vendors before him and on appeal, is that the onus of showing that on balance it would be inequitable to allow the claim to proceed is on the defendant: see O’Connor v Hart [1983] NZLR 280, 292, per McMullin J delivering the judgment of this Court.

• [110] The defendant pleads both laches and acquiescence as a defence to both the common law (quantum meruit) and equitable (estoppel) claims. In closing, Ms Jagose limited her argument in relation to the availability of this defence to VONZ’s equitable claim, without expressly abandoning the more general application contended for in the pleading.

• [111] The defence of laches has not been applied in New Zealand outside of those cases where the cause of action is at equity, or where an equitable remedy is sought. The notion that laches should be available as a defence at law was rejected in Australia (Orr v Ford [1989] HCA 4; (1989) 167 CLR 316) but has found some favour in England (Habib Bank Ltd v Habib Bank, AG Zurich [1982] RPC 1). In Butler (ed) Equity

and Trusts in New Zealand, Brookers, Wellington 2003, it is said in relation to this issue: (at 972)

It is submitted that the Australian approach is to be preferred. It must be recalled that laches developed as a means of balancing the equities between plaintiff and defendant in the absence of statutory limitation periods. Where a cause of action is covered by a statutory limitation period, laches is inapplicable: as Lord Wensleydale observed in the House of Lords’ judgment in Archbold v Scully: “the fact of simply neglecting to enforce a claim for the period during which the law permits him to delay without losing his right .... cannot be any equitable bar.” To hold otherwise would be inconsistent with the policy of the statute.

• [112] It is also material to consideration of this issue that the defence of change of position is available at law as a means of achieving a balance of justice between plaintiff and defendant, and the importation of the doctrine of laches may well add unnecessary complexity. I therefore propose to limit consideration of the defence to the estoppel cause of action.

• [113] In this case the defence does meet the plaintiff’s claim in relation to the period after 30 September 1999. The conduct of VONZ thereafter was such that the Funding Authority would reasonably have believed that VONZ had no expectation of payment for services.

• [114] In balancing the equities between the parties for the period up until 30 September 1999 however, there is little if anything that weighs against the grant of relief other than the fact of delay itself. I am not satisfied that the defendant has been prejudiced by VONZ’s delay in advancing the claim. Given that I have found that the Funding Authority knew that VONZ was providing the services in expectation of payment, and that the Funding Authority was benefited by the provision of the services I am satisfied that the plaintiff should not be denied relief by reason only of its delay in pursuing its claim.

• [115] The defendants’ pleading refers also to ‘acquiescence’ but as pleaded, and as addressed in closing I understand that to be no more than an alternative expression of the defence of laches.

Result

• [116] Accordingly, VONZ is entitled to judgment on its estoppel and quantum meruit causes of action. The judgment sum is to be calculated on the basis that:

(i) VONZ is to recover for services provided to the qualifying persons during the period 1 June 1997 to 30 September 1999 as follows:

Maisie Campbell 29/07/97 to 30/09/99

Trevor Gilbert 11/06/97 to 30/09/99

Nola Evelyn Grant 01/06/97 to 03/09/98

Constance Rita Hughes 03/10/98 to 30/09/99

Florence Charlotte Johnston 18/02/98 to 18/04/98

Gladys Mary Murdoch 01/04/98 to 30/09/99

(ii) the daily rate to be applied in calculating the judgment sum is:

1. $68.25 plus Goods & Services Tax for the period 1 June 1997 to 30 June 1998.

2. $69.71 plus Goods & Services Tax for the period 1 July 1998 to 30 September 1999.

• [117] Amounts recovered by VONZ from or on account of each of the named residents for services provided during the period 1 June 1997 to 30 September 1999, are to be deducted from the amount as calculated. The judgment sum will require calculation. I anticipate that counsel will be able to agree upon the relevant calculation.
• [118] VONZ also seeks to recover interest at Judicature Act rates. Before dealing with the issue of interest I would be assisted by counsels submissions on duration and rate of interest.

Costs

• [119] The plaintiff is entitled to costs. If the parties are unable to agree costs, they may also deal with this issue in the memoranda to be filed. Accordingly, memoranda dealing with interest, the calculation of the judgment sum, and if necessary costs are to be filed as follows:

Plaintiff 29 April 2005

Defendant 6 May 2005.







H D Winkelmann J