Mcfarlane v Dickson Marine (Refits) Ltd

JurisdictionNew Zealand
CourtHigh Court
JudgeMILLER J
Judgment Date27 March 2013
Neutral Citation[2013] NZHC 647
Docket NumberCIV-2012-442-375

[2013] NZHC 647

IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY

CIV-2012-442-375

UNDER District Courts Act 1947

IN THE MATTER OF an appeal against a decision of the District Court at Nelson

Between
Andrew Angus Mcfarlane
Applicant
and
Dickson Marine (Refits) Limited
Respondent
Counsel:

P A Cowey for Appellant

J M Fitchett for Respondent

Appeal against a District Court decision awarding $24,700 to respondent in respect of a time and materials contract for repairs on the appellant's boat — respondent gave estimates and promised in correspondence to keep appellant updated about the progress of the work and the costs — initially updated appellant but thereafter did not honour the promise and ultimately invoiced appellant for almost twice the estimates — whether the estimates had been near-quotes — whether the promise to update was a term of the contract which preceded its formation — whether appellant had been obliged to file a counter-claim in order to put the accuracy of the estimates and failure to update in issue — whether appellant had suffered a loss — whether appellant had relied on estimates.

The issues were: whether the estimates were near-quotes and Dickson had been obliged to keep within 10% or one third of its estimates; whether the promise to update M was a term of the contract which preceded its formation; whether M had been obliged to file a counter-claim in order to put the accuracy of the estimates and failure to update in issue; whether Dickson's conduct resulted in losses for M and if so what were the losses; whether M could be charged more than the estimate and if so, what was the reasonable price for the work; whether any further deductions ought to be made for time that would not have been spent had Dickson honoured its promise to keep M informed.

Held: Cases suggesting that where an estimate was given the final price ought not to exceed it by more than 10 percent or perhaps one-third did not apply in this case. The estimates could not be treated as near-quotes; when the estimates were given the scope of repairs was known to be inexact, so these parties dealt with the risk that prices would exceed estimates by agreeing that Dickson would report weekly.

The promise that M would be told weekly of labour hours spent as the work progressed was a term of the contract. It preceded formation of the contract, which occurred when the estimates were accepted and the vessel was delivered to Dickson's yard. It was an express promise made as part of the negotiations over price and it induced M to enter the contract.

M had raised an affirmative defence to Dickson's claim by invoking in the information capsule and in his evidence, Dickson's promises to keep him informed and the disparity between the estimates and the bills. He clearly intended it as a defence, for he did not seek judgment for any sum by way of counterclaim. It was available as a defence, to limit the amount recoverable or to set off against it a sum calculated as damages for breach of the obligation.

Dickson's conduct of not keeping M informed of the progress of the work and the costs resulted in M losing the right to put a stop to the work. M's losses might take several forms such as the opportunity to change the methodology or the scope of work, or the ability to negotiate a fixed price for completion of any given job once its scope was established. He might also have lost the opportunity to sell the vessel without having all the repairs done at the same price that it ultimately fetched. Finally, he might have lost an opportunity to put the capital expended on repairs to a better use. These last two options could be discounted on the facts.

Although the contract was a time and materials contract, Dickson did not have the right to define the scope of work and spend as many hours as it thought appropriate to complete the work to the required “good” standard. Rather, its obligation to keep M informed would have allowed M to manage a risk assigned to the customer under a time and materials contract; that is, the risk that the final price would be higher than expected. Faced with the necessity to report weekly to its customer, Dickson conceded that its staff spent more time on some jobs than was reasonable.

The expert evidence confirmed that the wrong caused loss in the form of more and more expensive work than necessary. The loss was the difference between the value of time and materials actually expended by Dickson and the reasonable price for the work commissioned by M. When set off against the claim, it might result, subject to considerations of proof, in a reasonable price being paid for the work. It was reasonable to assume that had the obligation been met, the scope of work and methodology used would have been reasonable and Dickson would have done the work as efficiently as it was reasonably able to do.

M had relied on the estimates and promises. He insisted on estimates because he had been warned that Dickson might overcharge him, and when he questioned the estimates he was persuaded to accept them by Dickson's promise to keep him informed of progress weekly. That he did use them could not be disputed; he authorised the work in the job sheets. His willingness to pay a little more than the amended estimates was largely explicable by additional work that he approved, some of it done without an estimate.

M's case was that he had paid a reasonable price for all of the work. He relied on the expert evidence for the reasonable prices of jobs for which he was later billed. M could not invoke an implied term that the work would not exceed estimates by more than a given percentage. The parties recognised that the scope of work would evolve, which was why they agreed that M would be kept informed. He would have known that the estimates would likely be exceeded. Further, M did not deny that Dickson had spent the time and used the materials that it claimed.

After making the necessary deductions from the total amount of $54,856.12 in respect what M had paid ($28,309.67) and the amount claimed for job 701 which was not authorised by M, the amount would be reduced to $25,106.29. The question was whether any further deductions should be made for time that would not have been spent at all had Dickson honoured its promise to keep M informed. As M had advanced an affirmative defence, he had to prove how much should be deducted. The evidence showed that the judgment sum had to be reduced by $15,652.77, resulting in an award of $9,093.52.

Appeal allowed. Judgment set aside. Judgment for $9,093.52 for Dickson.

JUDGMENT OF MILLER J

MILLER J
Introduction
1

Dickson Marine repaired a large launch, the Akarua, at the request of Mr McFarlane. This appeal from the District Court concerns a sum of $24,746.29 that Dickson won from Mr McFarlane for the work. 1

2

The District Court established that this was a time and materials contract with an agreed hourly labour rate. But Dickson had given estimates, and it had promised to tell Mr McFarlane weekly what stage the work had reached and how much time had been expended. It did not honour the promise, and it ultimately invoiced

Mr McFarlane for about twice the estimates. The question on appeal is this: did the District Court err when it denied Mr McFarlane relief for Dickson's admitted breach of that promise?
3

The Dickson estimates that are in dispute - a small portion of the work is not contested - totalled $26,650.38. After work began in February 2010 Dickson initially kept Mr McFarlane informed of progress and cost, but it ceased to do so at the end of April. About mid-May it rendered invoices totalling $29,105.05 for work to 30 April. Mr McFarlane paid $28,309.67. In mid-June 2010 he went to Dickson's yard to collect the vessel, and found invoices for a further $25,751.07, which he had not anticipated and refused to pay.

4

It is common ground that the appeal must be allowed in small part, for Dickson conceded in the District Court that it had claimed too much but that concession was not reflected in the judgment. Mr McFarlane's case goes much further than that, however: he says that he has paid more than the reasonable cost of the work. To prove that, he called expert evidence, a challenge to the admissibility of which has been renewed on appeal.

The narrative
5

The Akarua is a 20m launch, built in 2002. Through one of his companies Mr McFarlane bought the vessel in 2005. Between 2006 and 2008 he had extensive repair and maintenance work done, some of it by men who gave expert evidence at the hearing. That work cost more than $400,000.

6

In 2010 Mr McFarlane decided to prepare the vessel for sale. He approached Dickson about necessary repair and maintenance work, explaining why he wanted it done.

7

Before the vessel was delivered to the yard one of Dickson's operations managers, Barry Hart, travelled to Queen Charlotte Sound to inspect it and discuss the work needed. Several days later, on 12 February, he emailed three job sheets and estimates to Mr McFarlane, who had requested them. They included GST and materials:

  • a) Job 130 involved lifting the vessel, washing its bottom, removing aerials and mast, setting down in the shed and re-launching. The estimate was $1141.88.

  • b) Job 301 involved repairs to soft caulking on part of the starboard deck, which comprised teak planks laid over fibreglass-coated plywood. The soft caulking material in the affected area was to be removed, the seams cleaned out and new caulking installed, with any loose planks being re-fastened. The estimate, which included sums of $180 and $52.50 for caulking and glue and other consumables, was $3508.50.

  • c) Job 302 involved repairs to the aft bulwark and paint repairs. It included some sanding and painting the port belting. The initial estimate was $7,886.98, again including specified sums for labour and materials.

8

The total of the three estimates was...

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