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McGruddy v Spotless Facility Services (NZ) Ltd [2020] NZHC 2471 (25 September 2020)

Last Updated: 2 October 2020

JUDGMENT OF THOMAS J

This judgment was delivered by me

on 25 September 2020 at 4.30 pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

Solicitors:

Gawith Burridge, Masterton for Appellant

Couch Harlowe Kovacevich, Auckland for Respondent

MCGRUDDY v SPOTLESS FACILITY SERVICES (NZ) LTD [2020] NZHC 2471 [25 September 2020]

Table of contents

Appeal [2]

The approach on appeal [4]

Background [5]

Did the Judge err in his finding of waiver by estoppel? [20]

The pleadings [22]
The District Court decision [27]
Submissions on appeal [32]
The law [38]
Assessment [45]
The away allowance [65]
Termination [68]
District Court [70]
Assessment [71]
Damages [75]

Promissory estoppel [89]

General damages [95]
Result [101]
Costs [102]

• [1] Paul McGruddy carried out painting work for Spotless Facility Services (NZ) Ltd (Spotless) between October 2010 and October 2015. There was first an oral contract and then a written contract. Both contracts allowed Mr McGruddy to charge for mileage costs. Mr McGruddy carried out 248 jobs for Spotless but charged for mileage 15 times only, in respect of work carried out by his brother. After Spotless terminated his contract, Mr McGruddy issued retrospective mileage claims dating back to 2010. In the District Court, Mr McGruddy failed in his action to enforce payment of his claim, the Judge finding that there was a waiver by estoppel.¹ Mr McGruddy appeals against this and other findings.

Appeal

• [2] Mr McGruddy contends that the District Court was wrong in fact and law, and in particular:

(a) finding there was a “waiver by estoppel” preventing Mr McGruddy from claiming mileage expenses because:

¹ McGruddy v Spotless Facility Services (NZ) Ltd [2020] NZDC 2800 [District Court Judgment].

(i) the argument of waiver by estoppel was not pleaded; and

(ii) the written contract between the parties which commenced on 16 October 2013 (the Contract) precluded any modification other than in writing;

(b) finding the Contract came to an end because there was no further work available for Mr McGruddy;

(c) holding that Mr McGruddy was not entitled to written notice 30 days prior to termination or compensation for failure to give such notice;

(d) holding that Mr McGruddy was not entitled to loss of earnings as a result of waiting for jobs that had been promised to him (promissory estoppel); and

(e) holding that general damages are not recoverable for a breach of a commercial contract.

• [3] Mr McGruddy seeks orders quashing the whole of the District Court judgment and instead granting judgment in his favour.

The approach on appeal

• [4] In considering the appeal, I apply the principles articulated by the Supreme Court in Austin, Nichols & Co Inc v Stichting Lodestar.² Those principles are:

(a) I must make my own assessment of the merits of the parties’ cases.

(b) The District Court may have had a particular advantage, such as the opportunity to assess the credibility of witnesses. Where such an assessment is important, the High Court may rightly hesitate to conclude that the findings of fact, or fact and degree, are wrong and it

² Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141.

may take the view that it has no basis to reject the reasoning of the District Court and the decision should stand.

(c) Mr McGruddy bears the onus of satisfying me I should differ from the District Court’s conclusions.

(d) It is only if I consider the District Court was wrong that I am justified in interfering with its judgment.

(e) If my view is different from the conclusions of the District Court, then the decision is wrong, even if it is a conclusion upon which minds might reasonably differ.

(f) In such circumstances I should not defer to the District Court’s assessment of the acceptability and weight to be accorded to the evidence rather than my own judgement.

Background

• [5] Spotless was contracted by New Zealand Steel to undertake painting work covered by warranty claims in respect of defective Colorsteel coating on rooves. Spotless subcontracted painting contractors throughout the country to carry out this work, which began in 2010 with 642 painting jobs. The work declined over the next four years and came to an end in 2017. As the work declined, so did the number of painting contractors, there being 13 at the start, only five by 2015 and one in the final year.

• [6] Mr McGruddy was one of those painting contractors. He started work for Spotless in October 2010 when his manager was a Spotless employee, Martin Bright. Spotless and Mr McGruddy entered into an oral contract (the Oral Contract) whereby he could claim mileage at a specified rate beyond the first 100 kilometres travelled, accommodation costs and an overnight allowance. It seems there was no specified time within which any claims were to be submitted to Spotless for payment.
• [7] In October 2013, Frank Fox commenced employment with Spotless and assumed management of the painting contracts. The Contract commenced on 16 October 2013. The background section of the Contract provided as follows:

Background: Spotless has agreed to provide the Services to various Principals under the Head Contracts. Spotless may from time to time, by issuing a Purchase Order or by other direction engage Contractor to provide the Services, and Contractor makes a standing offer to Spotless to provide the Services, in accordance with the terms and conditions contained in this Agreement.

• [8] There was no guarantee of any work:

Contractor acknowledges and agrees that:

(a) This Agreement does not confer any right on contractor to provide any, or any particular level of, services under the Agreement;

(b) Spotless may elect to perform any or all work in respect of the services or which might otherwise have been part of the services, itself, or to have that work carried out by another party.

• [9] In respect of payment, the Contract provided:

On or after the first day of each month, contractor must make a claim for payment for each docket or work order completed in the previous month by issuing to Spotless nominated representative written claims for each completed docket or work order (including details of any deductions Spotless is entitled to make to such claim). ...

• [10] Spotless would approve an amount for payment after assessing Mr McGruddy’s claim and it would in turn charge New Zealand Steel for the repair costs of each job.

• [11] The Contract included a specific provision for termination by 30 days’ written notice. Clause 8.2 provided:

Spotless may terminate this Agreement (in whole or in part) with immediate effect if any Principal requests Spotless to remove Contractor from the performance of the Services. In addition, Spotless may terminate this Agreement (in whole or in part) for convenience at any time and for any reason by giving 30 days’ notice in writing to the Contractor.

• [12] Clause 15 of the Contract provided:

The provisions of this Agreement may only be varied by further written agreement of the parties.

• [13] The Contract was headed: “Subcontractor agreement” and appears to be the standard form used by all subcontractors. Spotless and Mr McGruddy agreed to delete a provision of the standard form whereby Mr McGruddy’s fee would have been discounted as his income increased. There were no other amendments to the standard form.

• [14] Spotless engaged several painters in different areas, assigning work to the subcontractors in their local area in order to avoid paying the mileage fee, accommodation and overnight allowance. At times, painters were allocated work outside their contracted areas. Mr McGruddy’s area was Masterton and the lower North Island.

• [15] In February 2015, Mr McGruddy informed Frank Fox that he was going to Ruawai, a small town south of Dargaville, to complete a job and stay with his daughter. Frank Fox warned him there was no guarantee of further work in the area and that a local contractor could do what work there was. Mr McGruddy went to Ruawai, then stayed in Russell. He telephoned Mr Fox requesting work but was informed there was none. Nevertheless, Spotless tried to find some work for Mr McGruddy and he was advised of this in April 2015.

• [16] On 27 May 2015, Mr McGruddy invoiced Spotless for mileage for the period 1 January to 26 May 2015 and for the costs of accommodation in Russell during the period March and April 2015. In June 2015, Spotless paid the mileage claim and one of the two accommodation claims. Although Mr McGruddy had never claimed for travel costs previously, Spotless decided to pay the invoice in the interests of the relationship.

• [17] There was an issue regarding a job Mr McGruddy had carried out in Masterton in the 2014/2015 season. The time taken on the job meant scaffolding was erected for a relatively lengthy period and Spotless was charged for scaffolding costs of around

$16,000. There was clearly some tension between Spotless and Mr McGruddy over this issue.

• [18] Around the second week of October 2015, Daniel Fox, who had by then taken over from his father as painting manager for Spotless, advised Mr McGruddy that there would be no further work for him that season.

• [19] On 15 October 2015, Mr McGruddy issued a retrospective mileage claim for

$42,296.56 ($48,641.04 including GST) covering the period 2010 to 2015 (the Invoice). The Invoice included $3,200 in respect of an away allowance claim.

Did the Judge err in his finding of waiver by estoppel?

• [20] This issue relates to the first cause of action alleging breach of contract in respect of the unpaid Invoice.

• [21] The appeal is on the basis that the defence of waiver was not pleaded or raised in argument. Mr Beck characterised this as a case “where the Court has gone off on its own inquiry without any proper basis”.

The pleadings

• [22] In its amended statement of defence dated 8 November 2018, Spotless admitted it received the Invoice but denied any liability to pay it because Mr McGruddy failed to comply with the Contract’s payment procedure; he had represented on a number of occasions that he would not charge mileage or accommodation, or the away allowance; in respect of a portion of the claim, Spotless had not on-charged the costs; many of the claims occurred over six years prior to the proceedings and were statute barred;³ and, in any event, the amount claimed was incorrect.

• [23] Spotless pleaded three affirmative defences: estoppel, limitation and a contractual exclusion of liability.

• [24] The defence of estoppel relied on the pleading that, while the Contract provided for Mr McGruddy to be paid allowances:

(a) During 2013 Mr McGruddy approached Spotless’ Painting Manager, Mr Frank Fox, seeking work outside of the Masterton area.

³ Limitation Act 1950 and/or 2010.

(b) Mr Fox explained that such work is assigned to subcontractors in the relevant area(s), as they are not required to travel over 100 kilometres for such work.

(c) Mr McGruddy represented to Mr Fox that he would not charge Spotless for any mileage expenses or for accommodation and away allowance when working in certain areas in which he had family and/or friends.

(d) Prior to October 2015, Spotless did not charge for mileage expenses when issuing invoices for work that he completed.

• [25] Spotless pleaded that Mr McGruddy had represented to it on a number of occasions that he would not charge for mileage and Spotless relied upon that representation to its detriment in that:

(a) In reliance on the representation, Spotless engaged Mr McGruddy to undertake work the subject of Mr McGruddy’s mileage claim rather than engaging subcontractors based in the area(s) in which the jobs were located.

(b) In reliance on the representation, and the fact that Mr McGruddy did not invoice for his mileage at the same time as he invoiced for the related services, Spotless did not recover any mileage expenses from its customers and will not be able to recover such expenses given the time that has passed.

• [26] Spotless claimed it was reasonable to rely upon the representation and it would be unconscionable for Mr McGruddy to resile from it because that would cause detriment to Spotless.

The District Court decision

• [27] Judge Harrison addressed Mr McGruddy’s claim by noting that Spotless denied any liability, essentially on the basis that Mr McGruddy had waived any right to claim travel expenses in return for which he was given work he would otherwise not have received.

• [28] The Judge referred to the affidavit evidence of Frank Fox and cited the following passage:⁴

14. I distinctly recall on my first day at Spotless, Mr McGruddy called me to introduce himself. He was eager to let me know right away that he

⁴ District Court Judgment, above n 1, at [28].

had an agreement with Spotless that he would not charge for mileage so that he could get more jobs out of town. He appeared to be very anxious about securing out of town work. I was happy to continue issuing Mr McGruddy jobs out of his area of Masterton on this basis, although I would also defer to the local contractor first.

15. It was important to me that Mr McGruddy did not charge Spotless for mileage because I wanted to keep Spotless costs down as much as possible, while also helping Mr McGruddy to take on additional work as he had requested. If Mr McGruddy was going to charge for mileage, Spotless would not have provided him with work outside of the Masterton area where there was someone else available in the area.

• [29] The Judge noted that Mr McGruddy made no claim for travel costs in respect of work carried out for Spotless up to 1 January 2015, although he would have been entitled to, given the terms of the Contract. He observed that Mr McGruddy did not reply to the affidavit of Frank Fox although he did file an affidavit in reply in respect of affidavits of Michael Smith, another painting contractor for Spotless at the relevant time, and Daniel Fox. In cross-examination, Mr McGruddy denied telling anyone at Spotless he would not charge for mileage, although acknowledged he had not done so.

• [30] The Judge did not accept Mr McGruddy’s evidence and preferred the evidence of Frank Fox, accepting that the telephone conversation he described (the Conversation) took place. The Judge gave his reasons for that preference, saying:

[32] I do not accept the evidence of Mr McGruddy. I prefer the evidence of Mr Frank Fox and accept that the conversation he described took place. At that time Mr McGruddy knew how the system worked. He was confronted with a new Manager. He wanted to ensure the continuation of work outside the Masterton area which would only be given to him if he did not charge mileage. As a consequence he continued to receive work outside that area and did not charge for mileage. Indeed, at one stage Mr McGruddy’s brother was undertaking work in the Wellington area and a special arrangement was entered into whereby he was paid mileage because he preferred to return to his home in the evening, and so Spotless did not have to pay accommodation and agreed to pay the travel costs instead.

• [31] The Judge concluded that there was a waiver by estoppel in Mr McGruddy’s agreement not to charge travel costs, which resulted in him receiving additional work from Spotless which he would not otherwise have received. He relied on the following passage from Chitty on Contracts:⁵

⁵ Hugh Beale (ed) Chitty on Contracts (33rd ed, Sweet & Maxwell, London, 2019) at [22-040].

Where one party voluntarily accedes to a request by the other that he should forbear to insist on the mode of performance fixed by the Contract, the Court may hold that he has waived his right to require the Contract to be performed in this respect according to its original tenor. Waiver (in the sense of “waiver by estoppel” rather than “waiver by election”) may also be held to have occurred if, without any request, one party represents to the other that he will forbear to enforce or rely on a term of the Contract to be performed or observed by the other party, and the other party acts in reliance on that representation.

Submissions on appeal

• [32] Mr Beck contends that, as waiver was not in issue on the pleadings, there was no jurisdiction for the Court to make findings on this matter, citing Manukau Golf Club Inc v Shoye Venture Ltd (Manukau Golf Club).⁶ Furthermore, in his submission, findings should not be made against a party without that party having notice of the allegation and an opportunity to respond to it.⁷

• [33] In any event, in his submission, the evidence cannot properly be interpreted as supporting a finding of waiver. Mr Beck says this because, in his submission, there was no evidence of waiver in relation to the Oral Contract; the obligation to pay travel expenses was a “fundamental and express” term of the Contract which contains an entire agreement provision; and the Contract was signed on 16 October 2013, meaning any waiver must have occurred before then because the Conversation pre-dated the Contract. In Mr Beck’s submission, the suggestion that Mr McGruddy waived his rights prior to signing the Contract makes no sense and, had there been the intention to depart from the terms of the Contract, then it would have been amended.

• [34] Mr Beck then submits that the alleged waiver concerned “a substantial aspect” of the Contract. He cited Watson v Healy Lands Ltd in support of the proposition that a significant modification which affects the structure of a contract should be regarded as a variation rather than a waiver.⁸ The process for a variation had not, however, been followed (as it was not recorded in writing) and therefore there was no basis for concluding a variation had been agreed.

6. Manukau Golf Club Inc v Shoye Venture Ltd [2012] NZCA 154, (2012) 21 PRNZ 235 [Manukau Golf Club] at [26]; only the issue of costs was reversed by the Supreme Court in Manukau Gold Club Inc v Shoye Venture Ltd [2012] NZSC 109, [2013] 1 NZLR 305.

⁷ Manukau Golf Club, above n 6, at [27].

⁸ Watson v Healy Lands Ltd [1965] NZLR 511 at 513.

• [35] Referring to the need for the party claiming waiver to prove a clear statement made by the other party to depart from contractual rights,⁹ and the intention to do so,¹⁰ Mr Beck submits that Spotless had neither pleaded an intention to waive nor addressed it in evidence. Therefore, he contends, the elements of waiver were not established.

• [36] Added to that, in Mr Beck’s submission, the District Court’s finding that it would be unconscionable for Mr McGruddy to seek payment of travel costs when Spotless could not recover them from New Zealand Steel was in conflict with the evidence of Frank Fox that Spotless did not ever recover travel expenses from New Zealand Steel. Therefore, in Mr Beck’s submission, the conclusion on unconscionability cannot stand.

• [37] Finally, he said that the question of overnight allowances was not addressed by the Court. There was no suggestion the right to claim this had been waived – this amounted to $3,200.

The law

• [38] Before deciding whether the District Court was in error, it is necessary to address the law.

• [39] Historically, there have been many different doctrines of estoppel, the three strands recognised in equity being estoppel by representation, promissory estoppel, and proprietary estoppel.¹¹ The New Zealand courts now recognise a unified doctrine of equitable estoppel with its overall requirement of unconscionability.¹² As the learned authors of Equity and Trusts in New Zealand say:¹³

The basic principle behind the modern doctrine of equitable estoppel can be simply stated: a party will not be permitted to deny an assumption, belief or expectation that it has allowed another to rely on where such a denial would be unconscionable.

⁹ Watson v Healy Lands Ltd, above n 8, at 513.

¹⁰ Bell v BDO Spicers Manawatū Ltd [2012] NZHC 1598.

11. Sutherland v Lane [2020] NZHC 721 at [129] citing Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed, Brookers NZ, Wellington, 2009) at 605.

¹² Gold Star Insurance Co Ltd v Gaunt [1998] 3 NZLR 80 (CA) at 86.

¹³ Equity and Trusts in New Zealand, above n 11, at 602.

• [40] To establish equitable estoppel, a claimant must show:¹⁴

(a) a belief or expectation on the part of the claimant that was created or encouraged by the words or conduct of the defendant;

(b) the belief or expectation has been reasonably relied on by the claimant;

(c) detriment will be suffered if the belief or expectation is departed from;¹⁵ and

(d) it would be unconscionable for the defendant to depart from the belief or expectation.

• [41] A waiver requires:

(a) a clear, unequivocal representation by the waiving party, which can be made orally or by conduct;

(b) the intention to waive must be made known to the other party expressly or by conduct;¹⁶ and

(c) the person relying on the waiver must demonstrate that they have relied on the representation made.

• [42] Waivers are distinct from variations of a contract in that variations tend to require consideration and tend to be in writing while a waiver does not require those things.¹⁷ However distinguishing between a waiver from a variation, in practice, is

¹⁴ Equity and Trusts in New Zealand, above n 11, at 613; Gold Star Insurance, above n 12, at 86 per Holland J; and Gillies v Keogh [1989] NZCA 168; [1989] 2 NZLR 327, (1989) 5 FRNZ 490 (CA) at 346 per Richardson J.

¹⁵ While recent Court of Appeal cases describe this requirement as a claimant’s reasonable reliance to its detriment, this conflates requirements (b) and (c), perhaps reflecting the facts of the cases. See Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd [2014] NZCA 407, [2014] 3 NZLR 567 at [44]; and Vervoort v Forrest [2016] NZCA 375, [2016] 3 NZLR 807 at [80].

¹⁶ At 776; and Eagle Flight Training Ltd v Aerospace Invest Pte Ltd [2018] NZHC 966.

¹⁷ Jeremy Finn, Stephen Todd and Matthew Barber Burrows, Finn and Todd on the Law of Contract in New Zealand (6th ed, LexisNexis, Wellington, 2018) [Burrows, Finn and Todd] at 774.

difficult. Woodhouse J attempted to distinguish the two concepts in Watson v Healy Lands Ltd:¹⁸

[A]t least I think it can be said that where the modified version of the original contract involves such changes in the contractual obligations of the parties that its structure is clearly affected, then the change goes beyond any question of waiver and must be regarded as a variation.

• [43] The authors of Burrows, Finn and Todd suggest that, in recent times, the relevance of the doctrine of waiver (and therefore estoppel by waiver) is in decline. First, the authors observe that variation is overshadowing the doctrine of waiver in light of the new era where consideration might no longer be necessary for a variation of contract. However, a waiver may still be relevant in that writing is still not required and can be retracted with proper notice whereas a variation changes the substance of the contract itself.¹⁹ Secondly, “the doctrine of promissory estoppel has, to a large extent, overtaken the doctrine of waiver”, to the extent that “it is not easy to think of a case of waiver which could not equally well be dealt with as one of promissory estoppel. However, the position is not cut and dried”.²⁰

• [44] The distinction between equitable estoppel and waiver is a very fine one. The elements are almost identical. The main difference is the need in the case of waiver to prove intention on the part of the party who is claimed to have granted the indulgence. As Williams J observed in Bell v BDO Spicers Manawatū Ltd (Bell):²¹

Waiver is also distinct from the equitable doctrine of promissory estoppel, although the two doctrines share many of the same features. As the learned authors of Law of Contract in New Zealand observe, both doctrines require a clear representation by words or conduct, proof the plaintiff has relied on the representation and the absence of any retraction before reliance.²² The difference is that waiver focuses on the scope of the intention of the party (or parties) granting the forbearance, whereas estoppel focuses on the conduct of that party and its effect on the other party.²³ Still, in some recent cases, the doctrines have been argued as alternatives.²⁴

¹⁸ Watson v Healy Lands Ltd, above n 8, at 513.

¹⁹ Burrows, Finn and Todd, above n 17, at 775.

²⁰ At 775 and 777.

²¹ Bell v BDO Spicers Manawatū Ltd, above n 10.

²² Burrows, Finn and Todd, above n 17, at 773-777.

²³ Edwin Peel (ed) Treitel on The Law of Contract (13th ed, Sweet & Maxwell, London, 2011) at [3-077].

²⁴ See, for example, Hudson Bay Holdings Ltd v Waitākere Properties Ltd HC Auckland CIV-2009-404-1134, 28 March 2011; and Minaret Resources Ltd v McLellan (2003) 5 NZCPR 161 (HC).

Assessment

• [45] The District Court said:²⁵

I do not think that the agreement with Mr Frank Fox not to charge mileage amounts to an estoppel as such. In my view the answer lies in whether or not the failure to charge mileage amounts to a waiver or forbearance.

• [46] It is unfortunate that the Judge did not elaborate on his reasons for rejecting the pleaded defence, particularly given his finding of waiver and the fine distinction between equitable estoppel and waiver as discussed above.

• [47] The Bell case involved an appeal from the District Court which had decided a contract had been varied orally. Williams J, in the High Court, decided, despite there being no pleading to this effect, that it was really a case of mutual waiver. This approach underscores the need to look at cases of this nature on the basis of the factual position and the correct legal remedy. A claim of merit should not be dismissed because the pleadings have been framed on a certain interpretation of the law where there is room for different approaches, subject to there being no prejudice to the defendant.

• [48] That is clearly the position in this case. There is no dispute that, except for his brother’s mileage costs, Mr McGruddy made no claim for mileage, despite being entitled to do so under both the Oral Contract and the Contract. When there was a change of management in 2013, Mr McGruddy told the new management of his previous approach under the Oral Contract, with the clear inference that that was his intention and indeed expectation going forward. That applied notwithstanding the fact he (might have) entered into the Contract shortly thereafter. When testifying, Frank Fox explained the position as follows:²⁶

I had started with Spotless – I could have only been there a couple of weeks, maybe a month, I’m not quite sure because I started in the off-season no one was at work yet so the contractors weren’t actually working and Mr McGruddy phoned me the very first time and introduced himself to me and he said to me – and he was quite keen to get it out, it was a bit of a strange phone call because normally you’d have a chat and get to know each other

²⁵ District Court Judgment, above n 1, at [38].

26. It is therefore not necessarily correct to say that the conversation took place before the Contract was signed.

maybe a little bit, you know, but it was straight into it, “Listen I had an agreement with your predecessor Martin Bright that I would not charge mileage if you gave me away work,” and I said to him, “Well if that’s the agreement you had, you know, I’ll honour that agreement and we can carry on and build a relationship from here.”

• [49] Frank Fox was not cross-examined about the Conversation.

• [50] The evidence as to what Mr McGruddy said in the Conversation was confirmed by his actions, that is, he did not charge for mileage either before the Contract or after it. Furthermore, Mr McGruddy did not dispute Spotless’ evidence that, had he charged for mileage, he would not have been used for out of town work. Notably, Frank Fox said the reason for that was that Mr McGruddy’s jobs had a higher than average cost.

• [51] In his affidavit, Michael Smith said that he and others knew Mr McGruddy did not charge for mileage for out of town work and that Mr McGruddy received work outside Masterton because he did not charge for mileage. Mr Smith was cross-examined on this evidence.

• [52] When giving evidence, Mr McGruddy was pressed on the issue of intention. It was put to him that, each time he issued an invoice, there was never any intention to charge for mileage. Mr McGruddy continually obfuscated in his responses, saying that he did not include mileage.

• [53] Any claims for payment were due “on or after the first day of each month”. Spotless did not insist on strict compliance with that requirement and Mr McGruddy billed Spotless at the end of each job rather than monthly. Spotless did not have any concerns with his invoices. That he billed at the end of each job provides further evidence of Mr McGruddy’s intention to waive his entitlement to claim mileage.

• [54] Mr McGruddy was also asked whether he ever told Spotless that at some stage he would charge for mileage. Again, he had to be pressed on the point and eventually replied:

No, I didn’t. I would have no reason to.

• [55] Notably, Mr McGruddy did discuss mileage with Frank Fox in respect of the Wellington jobs undertaken by Mr McGruddy’s brother. Those invoices included mileage and were paid by Spotless.

• [56] The Judge found, for the reasons he gave, that the Conversation took place and that Mr McGruddy represented to Frank Fox that he did not charge for mileage, in return for which he would be allocated jobs outside Masterton. It was open to the District Court to find on the evidence that, from the time of the Conversation, Mr McGruddy would not charge for out of town mileage and that, given he had not done so prior, he had overall intentionally waived any such right.

• [57] A finding that the elements of equitable estoppel were established was equally available to the Judge on the evidence.

• [58] I reject the contention that Mr McGruddy was prejudiced because the case was not pleaded on the basis of waiver by estoppel. It is difficult to see how the claim would have proceeded differently had that been the affirmative defence. Mr Beck suggested Mr McGruddy would have called evidence from Mr Bright, the Spotless manager under the Oral Contract, and that waiver could not be established without that evidence. I do not accept that. The intention to be proved was that of Mr McGruddy, whose evidence is discussed above.

• [59] Manukau Golf Club is not apposite because there was a lack of any pleaded affirmative defence in that case whereas the affirmative defence of estoppel was pleaded by Spotless.²⁷ Mr McGruddy was on notice that at issue was the alleged representation by words and action that he would not claim his contractual entitlement. He therefore had the opportunity to respond to that contention.

• [60] I also reject the argument that the Judge was precluded from finding as he did because the evidence of waiver was by conduct, as opposed to words, as pleaded. A waiver may be oral or written or inferred from conduct.²⁸ Mr McGruddy knew before the hearing that the evidence on behalf of Spotless covered both what Mr McGruddy

27. Manukau Golf Club, above n 6, at [27] citing Proprietors of Māwhera v Māori Land Court [1994] NZHC 787; [1995] 2 NZLR 620 (HC) at 631 and Ali v Deportation Review Tribunal [1997] NZAR 208 (HC) at 220.

²⁸ Burrows, Finn and Todd, above n 17, at 292 and Chitty, above n 5, at [22-041].

said and what he did. Spotless’ amended statement of defence specifically said that Mr McGruddy’s failure to invoice Spotless for any mileage expenses until May 2015 induced in Spotless the belief that Mr McGruddy would not claim for mileage expenses. The amended statement of defence therefore gave the necessary particulars that informed the Court and Mr McGruddy of the defence, as required under r 5.50(5) of the District Court Rules 2014.

• [61] I have already observed that the case could just as easily have been determined on the basis of estoppel by representation as was pleaded. As discussed, the law has moved on from the different categories of estoppel to a unified doctrine of equitable estoppel with the requirement that the plaintiff show a belief or expectation encouraged by the words or conduct of another. On the evidence, this was clearly proved.

• [62] The evidence revealed that Spotless relied on Mr McGruddy’s representations that he would not charge mileage when it offered him work in areas outside his main contracted area. The Judge found on the evidence that Mr McGruddy’s position not to charge travel costs resulted in him receiving additional work which he would not otherwise have received. Reliance was proved.

• [63] The final element of unconscionability was clearly met in the circumstances where Mr McGruddy issued the Invoice on a date after he had billed for completed jobs (in most cases, years after). Whether or not Spotless always recovered those costs from New Zealand Steel is not the point. The unconscionability comes from the fact that, in reliance on the representations, Spotless had made a business decision to give work to Mr McGruddy which he would not otherwise have received. That decision was clearly made on the basis of what Mr McGruddy would charge. He is now trying to charge something different. It would be unconscionable to allow him to do so.

• [64] Given this analysis, there is no need to address the argument on variation.

The away allowance

• [65] Although the Judge did not in terms address the claim for the away allowance which was included in the Invoice, it can be taken that exactly the same reasoning

applied. I accept that the Conversation might not have referred to the away allowance. Relevantly, however, the away allowance claim dated back to 2011. It would have been governed by the Oral Contract. Again, Mr McGruddy can be taken to have waived any entitlement to be paid that amount.

• [66] Estoppel by representation would also apply. By not invoicing for the away allowance since 2011, Mr McGruddy represented that he would not claim the allowance. Spotless relied on this representation, as it did with Mr McGruddy’s representation that he would not claim for mileage for work outside his main contracted area. Similarly, Spotless would suffer detriment if it now had to pay the away allowance. In these circumstances, it would be unconscionable for Mr McGruddy to depart from this representation.

• [67] For these reasons, the first ground of appeal fails.

Termination

• [68] In Mr Beck’s submission, the District Court failed to engage with the legal issues that formed the basis of Mr McGruddy’s claim that Spotless was in breach of the Contract by failing to give Mr McGruddy 30 days’ written notice of termination as required by cl 8.2. The claim was that, as a result of having no such notice, Mr McGruddy was unable to make other arrangements for work prior to receiving no more work from Spotless. He claimed $12,596.29, calculated on the basis of his average monthly income from Spotless between 1 April 2011 and 31 March 2015.

• [69] Spotless, by its statement of defence, relied on the terms of the Contract and its nature as a standing offer, together with cl 8.5 which provides:

With the exception of payment for Services performed in accordance this Agreement before the effective date of termination or expiration, Contractor will not be entitled to any compensation or to make any claim against Spotless following termination for any reason or following the expiry of this Agreement.

District Court

• [70] The Judge referred to the evidence that Daniel Fox called Mr McGruddy in October 2015 and said there would be no further jobs for the next season. That formed a basis of the claim the Contract was terminated. The Judge found that, pursuant to the Contract, Spotless was not obliged to give work to Mr McGruddy, even if work were available. The Contract would therefore come to an end when no further work was offered to Mr McGruddy, whether or not a notice of termination was given. That led the District Court to reject the claim for 30 days’ income. In any event, the District Court relied on the terms of the Contract, which precluded any claim.

Assessment

• [71] Mr Beck says the evidence disclosed that Spotless continued to allocate work to various contractors until 2018 and that, in evidence, Daniel Fox accepted work was given to other contractors after he decided not to use Mr McGruddy.

• [72] Daniel Fox had emailed another person on 25 June 2015 saying that he was not going to use Mr McGruddy in the next season. In the email, Daniel Fox noted that Mr McGruddy took too long with his work and that he, Daniel Fox, could not trust Mr McGruddy. Under cross-examination, Daniel Fox reiterated this concern about trust. In his affidavit, Daniel Fox said that termination was due to the remaining number of paint jobs as well as the fact that Mr McGruddy’s charges were higher than the average.

• [73] On 15 October 2015, Daniel Fox telephoned Mr McGruddy and told him that there would be no more jobs for him. In evidence, Daniel Fox accepted he made a commercial decision in October 2015 not to allocate any work to Mr McGruddy and he told Mr McGruddy that. He said Mr McGruddy already had a contract in Masterton and all the other jobs had been allocated so there were no jobs left to do. He denied Mr McGruddy was dismissed as such. He said:

So it wasn’t like a whole lot of jobs I could allocate him, I would have to start taking jobs off other contractors and then they wouldn’t have had enough to fill their season.

• [74] I accept that the evidence was that Spotless made a conscious decision not to give Mr McGruddy any further work and it communicated that decision to him. It is, in my view, too simplistic to say the Contract came to an end simply because the work had run out. The limited amount of work remaining was one of several reasons behind Spotless’ decision to terminate the Contract.

Damages

• [75] Mr Beck contends that the approach taken by the District Court meant that cl 8.2 of the Contract was meaningless. The fact no jobs were guaranteed under the Contract was not the issue. Mr Beck submits it is not a question of what work could have been available to Mr McGruddy but “a question of putting some value on the right to notice at the time it should have been given”. Mr Beck says, had notice been given in accordance with the Contract, Mr McGruddy would have been able to take action a month earlier and would have had the opportunity to arrange to take on other work. On that basis, average monthly earnings were a reasonable way to calculate the loss. Mr Beck clarifies that this was not a claim for loss of profits or indirect or consequential loss (which is precluded by cl 8.5 of the Contract) but a claim for damages for breach of contract.

• [76] Mr McGruddy was aware that there was a limited amount of work to be done and that the work was going to run out at some point. It was for that reason that he made inquiries of Frank Fox in January 2015 about the workload for the next season. Frank Fox’s evidence was that Spotless had little idea how much forward work there would be at any one time because it was dependent upon receiving jobs from New Zealand Steel. He said there was no way to guarantee work from one week to the next.

• [77] The Contract constituted a standing offer from Mr McGruddy to Spotless. The Contract also specifically provided that it did not confer any right on him to provide any, or any particular, level of service under it. This form of contract has been described as follows:²⁹

²⁹ Laws of New Zealand Offer and Invitation to Treat (online ed) at [20].

An exceptional form of contractual relationship which may arise out of a tender amount to a “standing offer”: that is, a tender which indicates a continuing willingness to supply such goods or to perform such services, without stipulation as to the particular quantum of goods or the extent of services, as may be requested by the offeree from time to time. In such a case the acceptance of the tender on any one occasion leaves the offer in existence for the future and there may be repeated acceptances, each giving rise to a separate contract.

• [78] The offeror cannot sue the offeree for not ordering any goods or requiring any services but if the offeree does order or require any, the condition of the offer is fulfilled and there is a complete contract which the offeror is bound to perform.³⁰

• [79] In Mr Harlowe’s submission, Mr McGruddy could not therefore prove any loss flowing from the breach of contract. He accepts that might make the notice provision a meaningless one in the particular circumstances but, when it came to assessing any damages for breach, that was the position.

• [80] The learned authors in Burrows, Finn and Todd on the Law of Contract in New Zealand note that a claim for damages raises two questions.³¹ The first is the measure of damages, which concerns the principles upon which damage must be evaluated or quantified in terms of money. The second is the kind of damage for which the plaintiff is entitled to recover compensation: for instance, a plaintiff has no claim when losses are too remote.³²

• [81] Turning to the first question, the underlying principle is that a plaintiff who sustains loss from a breach of contract that is not too remote must, so far as money can do it, be restored to the position they would have been in had the breach of contract not occurred.³³ Loss can be characterised into three interests which a plaintiff might have following a breach of contract: a restitution interest, a reliance interest or an expectation interest. Mr McGruddy’s claim does not fall within any of these categories.

³⁰ Tairua Golden Hills Ltd v McKane [1911] NZGazLawRp 278; (1911) 31 NZLR 108 at 116.

³¹ Burrows, Finn and Todd, above n 17, at 815–816.

³² At 816; citing Hadley v Baxendale [1854] EngR 296; (1854) 9 Exch 341.

³³ At 816 citing Robinson v Harman [1848] EngR 135; (1848) 1 Exch 850 at 855.

• [82] A restitution interest is a right to have a valuable benefit restored.³⁴ Such an interest arises when the plaintiff, in relying on the promise of the defendant, has conferred some value to the defendant and the defendant then fails to perform the promise. The purpose is to prevent unjust enrichment.

• [83] A reliance interest is the right to compensation for loss for steps taken by a plaintiff in reliance upon a contract to put a plaintiff in the position they would have been in had the contract not been entered into.³⁵ A reliance interest arises when the plaintiff, in relying on the promise, incurs costs (or “wasted expenditure”)³⁶ for the purposes of performing the contract or incurs costs in the ultimately vain expectation that the defaulting party would perform his or her side of the bargain.³⁷

• [84] Both restitution and reliance interests involve actual loss to the plaintiff. Mr McGruddy cannot demonstrate any such loss.

• [85] Mr McGruddy’s claim can best be considered as falling into the category of an “expectation interest”, that is, the right to compensation for loss of the bargain, in order to financially restore the plaintiff to the position they would have occupied had the contract been performed.³⁸ Mr McGruddy provided a standing offer to Spotless but there was no guarantee of work, something the Contract made clear. He was told, although not in writing, he would not get more work. Had the breach not occurred and Spotless provided written notice to Mr McGruddy terminating the Contract, which it was entitled to do, Mr McGruddy would be in the same position. As Mr Harlowe submitted, Spotless could simply have failed to give Mr McGruddy any more work and there was nothing he could have done about it. There was therefore no expectation interest.

• [86] While there is no need to take this issue any further, I would also observe that Mr McGruddy has failed to prove any damages. Mr Beck suggests using “average

34. Newmans Tours Ltd v Rainier Investments Ltd [1992] 2 NZLR 68 (HC) [Newmans Tours Ltd] at 86.

³⁵ Dunes Café and Bar Ltd v 623 Rocks Road Ltd (in liq) [2010] BCL 341 (HC) at [39]; citing

Newmans Tours Ltd, above n 34, at 86.

³⁶ Peter Blanchard Civil Remedies in New Zealand (2nd ed, Thomson Reuters, Wellington) at 34.

³⁷ Newmans Tours Ltd, above n 34, at 86.

³⁸ At 86.

monthly earnings”, as Mr McGruddy “would have been able to take that action a month earlier had timely notice been given, and he would have had the opportunity to arrange to take on other work”.

• [87] Such a claim would fail for two reasons. First, there was no evidence to support the claim. Secondly, Mr McGruddy was obliged to take reasonable steps to mitigate the loss.³⁹ Mr McGruddy had received verbal notice there would be no more work in October 2015. Even though this was not in the prescribed written form, this did not preclude him from seeking alternative work and undertaking the forward planning Mr Beck contends would have been the benefit of written notice.

• [88] Therefore, while Spotless breached the Contract by not providing notice of termination in writing, there is no entitlement to damages in the circumstances.

Promissory estoppel

• [89] Somewhat ironically, given the defence to the first cause of action, Mr McGruddy then relied on promissory estoppel in his claim for loss of earnings. He pleaded that, in February 2015, Spotless told him it had work for him in Auckland and, in reliance on that, he remained in Auckland to be available for work. Mr McGruddy claimed that Spotless delayed sending him the job as a result of which he had no work for 17 days. He lost income of $6,907.64 plus GST because he relied on Spotless’ promise.

• [90] Spotless denied the claim and, in any event, relied on cl 6.2 of the Contract to preclude any claim for loss of profits:

Notwithstanding any other provision of this Agreement, to the maximum extent permitted by law, Spotless will not be liable to Contractor for any claim in the nature of loss of profits or revenue or for any indirect or consequential loss whatsoever related to or in any way in connection with the subject matter of this Agreement or the Services.

• [91] The District Court dealt with this issue as follows:

³⁹ Burrows, Finn and Todd, above n 17, at 870; citing British Westinghouse Electric and Manufacturing Co v Underground Electric Rly Co of London [1912] UKLawRpAC 43; [1912] AC 673 (HL) at 689 per Lord Haldane.

• [53] In his affidavit Mr Fox said:

21. In around February 2015 I received a phone call from Mr McGruddy. He told me that he was going to the Coromandel to visit his daughter and to do some work and after that he was going to complete a job in Ruawai remaining from the 2013/2014 season. I advised Mr McGruddy against going to Ruawai as there were no other jobs up there for him and as such I would not be able to allocate him any work in the area. I would have got the local contractor up North to take care of that job. Mr McGruddy said that he had to go up North any way to do some work for a friend. Since Mr McGruddy insisted on going to Ruawai, I agreed to the Ruawai job but told him not to expect any other work.

• [54] Mr McGruddy also claimed that there was a job in Ruakaka. Mr Fox said that in February 2015 that job did not exist. It was issued on 23 March 2015 and assigned to Mr McGruddy by Daniel Fox on 13 April 2015.

• [55] There were inconsistencies in Mr McGruddy’s evidence. He was unsure of the dates when he alleged that he was promised the job in Ruakaka. While allegedly waiting for these jobs to be referred to him Mr McGruddy stayed in Russell which is a substantial distance from both job locations. Mr McGruddy admitted that he had a friend in Russell although denied doing any work for him. Furthermore, while staying in Russell he had an unfinished job back in Masterton where Spotless had been incurring costs for scaffolding. New Zealand Steel refused to pay those costs.

• [56] In April 2015 Mr Daniel Fox offered Mr McGruddy four jobs in Pokeno, Hibiscus Coast, Western Springs and the Ruakaka job. Mr McGruddy accepted the jobs at Pokeno and Ruakaka but declined the others as being too difficult for him to undertake.

• [57] I accordingly reject the claim for loss of earnings on the basis that that claim has not been proved, and that when jobs became available they were offered to Mr McGruddy, he accepting two of the four that were available. Furthermore, in the event that this amounted to a valid claim it was again precluded by clause 6.2 of the Contract.

• [92] The appeal is essentially a challenge to the District Court’s factual findings, it being contended that Mr McGruddy consistently maintained his position and “there is no reason for him to have made this up”.

• [93] The evidence was that the conversation at issue did not occur until Mr McGruddy was already in the north of the country in any event. Mr McGruddy was in Ruawai in March and he accepted that the telephone conversation with Frank Fox took place in March.
• [94] The District Court therefore had good reason for discounting Mr McGruddy’s version of events. The Judge found he had failed to prove the claim and he was entitled on the basis of the evidence to do so. There was no error and this ground of appeal is dismissed.

General damages

• [95] Mr McGruddy claimed, as a result of Spotless’ breaches of contract and promises, he suffered substantial inconvenience and disruption to his business. He therefore claimed general damages of $20,000.

• [96] The District Court described this as a claim for distress damages and said:

[59] ... that would require findings in favour of Mr McGruddy which has not been the case. In any event, such damages are not [recoverable] for breach of an ordinary commercial contract – Mouat v Clark Boyce.⁴⁰

• [97] In Mr Beck’s submission, the Judge had failed to grapple with the context that Mr McGruddy had been effectively working full-time for Spotless for about five years and the relationship was “summarily terminated”. In Mr Beck’s submission, general damages are now available for inconvenience and disruption.

• [98] The Courts have generally not awarded damages for emotional and mental distress for a breach of contract unless an object of the contract is to avoid such distress,⁴¹ although the authors of Burrows, Finn and Todd have noted that awarding damages for a breach of contract causing distress has been a matter of controversy.⁴²

• [99] I note the analysis undertaken by Mallon J in Bruce v IAG NZ Ltd:

[166] As also discussed in McGregor on Damages, it was once the law that no damages could be recovered in contract for injury to the feelings. The law has developed since then, going through a period of expansion when such awards were made, then a downturn, followed be a re-emergence of such

⁴⁰ Mouat v Clark Boyce (No 2) [1992] 2 NZLR 559 (CA) at 569.

41. Bloxham v Robinson (1996) 7 TCLR 122 (CA) cited in Huljich v Huljich [2018] NZHC 3429 at [141].

⁴² Burrows, Finn and Todd, above n 17, at 859.

awards led by the important and influential decision of Ruxley Electronics v Forsyth.⁴³ The learned authors conclude:⁴⁴

The above views appearing in cases at the highest level, admittedly of an obiter nature, suggest that the general rule in [Addis v Gramophone Co Ltd]⁴⁵ may soon be abandoned and that, in addition, one should not adhere too closely to the somewhat limiting test, for recovery of damages for mental distress, of whether a principal object of the contract is to promote enjoyment or avoid distress but simply to apply the wider, more principled test of whether recovery for the particular loss is within the contemplation of the contracting parties. This is how it was put by Lord Millett: “In such cases [namely, cases of ordinary commercial contracts]”, he said in Unisys, “non-pecuniary loss such as mental suffering consequent on breach is not within the contemplation of the parties and is accordingly too remote.”

• [100] While I have concluded that Spotless was technically in breach of the Contract by failing to provide written notice of termination, the whole tenor of the Contract and its nature of a standing offer would not support a finding that recovery for mental distress was within the contemplation of the parties.

Result

• [101] With the exception of the finding of breach of contract by failing to give written notice of termination, in respect of which there is no award of damages in the circumstances, the appeal is dismissed.

Costs

• [102] Costs are awarded to Spotless. If the parties cannot agree, brief memoranda are to be filed within 28 days of the date of this judgment.

Thomas J

⁴³ Ruxley Electronics v Forsyth [1995] UKHL 8, [1996] AC 344.

⁴⁴ Chitty, above n 5, at [5-034]. See, also, Burrows, Finn and Todd, above n 17, at 865-867 and the decision of the Supreme Court of Canada in Fidler v Sun Assurance Co of Canada [2006] 2 SCR 3.

⁴⁵ Addis v Gramophone Co Ltd [1909] UKHL 1, [1909], [1909] AC 488. In that case, a wrongfully dismissed employee could recover damages for the loss of salary and commission but not for injured feelings. See also Burrows, Finn and Todd, above n 17, at 859.