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Morgan and Banks New Zealand v Electric Power Corporation [2019] WSSC 34 (18 July 2019)

SUPREME COURT OF SAMOA
Morgan and Banks New Zealand v Electric Power Corporation [2019] WSSC 34


Case name:
Morgan and Banks New Zealand v Electric Power Corporation


Citation:


Decision date:
18 July 2019


Parties:
MORGAN AND BANKS NEW ZEALAND LTD, a company carrying on business throughout New Zealand and elsewhere as a Human Resource Company v ELECTRIC POWER CORPORATON a body corporate established pursuant to the Electric Power Corporation Act 1980, Section 4


Hearing date(s):



File number(s):



Jurisdiction:
Civil


Place of delivery:
Supreme Court of Samoa, Mulinuu


Judge(s):
Patu F M Sapolu

Temporary Justice of the Supreme Court and
Former Chief Justice
On appeal from:


Order:
- The plaintiff’s claim should therefore be upheld.
- Judgment is given for the plaintiff in the sum of NZ$19,000 as claimed.


Representation:
R Drake for plaintiff
K Sapolu for defendant


Catchwords:
acceptance – agreement –contract – contract formation – global or objective approach – offer –


Words and phrases:
effect of silence – traditional offer and acceptance analysis


Legislation cited:


Cases cited:
Boulder Consolidated Ltd v Tangaere [1980] 1 NZLR 560
Brogden v Metropolitan Railway Co (1877) 2 App Cas 666 Corrick v Silich [2017] NZHC 1630
Felthouse v Bindley (1862) 11 CBNS 869; [1862] EWHC CP J35 142 ER 1037Savvy Vineyards 3552 Ltd v Kakara Estate Ltd [2014] NZSC 121; [2015] 1 NZLR 281
Savvy Vineyards 3784 Ltd v Arck Ltd [2015] NZCA 534


Summary of decision:

IN THE SUPREME COURT OF SAMOA
HELD AT MULINUU


BETWEEN


MORGAN AND BANKS NEW ZEALAND LTD, a company carrying on business throughout New Zealand and elsewhere as a Human Resource Company.
Plaintiff


A N D


ELECTRIC POWER CORPORATON a body corporate established pursuant to the Electric Power Corporation Act 1980, Section 4.


Defendant


Counsel:
R Drake for plaintiff
K Sapolu for defendant


Judgment 18 July 2019


JUDGMENT OF SAPOLU J
TEMPORARY JUSTICE OF THE SUPREME COURT
AND FORMER CHIEF JUSTICE

Introduction

  1. hese proceedings are concerned with an action in contract by the plaintiff against the defendant for non-payment of the sum of NZ$19,000 claimed to be owing by the defendant to the plaintiff for professional services alleged to have been provided by the plaintiff to the defendant. The plaintiff, Morgan and Banks New Zealand Ltd (Morgan and Banks), is a human resource company in New Zealand which provides specialised recruitment services for particular industry sectors and functional disciplines. The defendant, Electric Power Corporation (EPC), is a statutory body established under the provisions of the Electric Power Corporation Act 1980.

The legal issues

  1. There were two legal issues which arose from these proceedings. The first is the approach to be adopted in determining whether a contract has been formed. The second issue is the effect of silence on contract formation.

(a) The approaches to contract formation

  1. There are two approaches for determining whether a contract has come into existence. The first approach is based on the traditional offer and acceptance analysis and the second, which is sometimes referred to as the “global” or objective approach, seeks “to determine whether or not the totality of the dealings between the parties should be regarded as having resulted in a contract having come into existence”: Burrows, Finn and Todd Law of Contract in New Zealand (2002) 2nd ed at 3.2.1, p.37. In this case, the plaintiff seems to have relied on both the traditional approach and the global or objective approach in submitting that a contract came into existence between the plaintiff and the defendant whilst the defendant relied only on the traditional approach to contract formation in arguing that no contract came into existence.

The global or objective approach to contract formation

  1. The global or objective approach to contract formation, at least in the context of New Zealand law, is to be found in the following authorities. In Corrick v Silich [2017] NZHC 1630, paras [62] and [63], Wylie J stated:
  2. In Savvy Vineyards 3784 Ltd v Arck Ltd [2015] NZCA 534, paras [55]-[59], Asher J, in delivering the judgment of the New Zealand Court of Appeal, stated:
  3. In the judgment of the majority of the New Zealand Supreme Court in Savvy Vineyards 3552 Ltd v Kakara Estate Ltd [2014] NZSC 121; [2015] 1 NZLR 281 which was delivered by William Young J, His Honour, at [111], cited with approval from Brogden v Metropolitan Railway Co (1877) 2 App Cas 666 (HL) at 682 and Boulder Consolidated Ltd v Tangaere [1980] 1 NZLR 560 (CA) as follows;
  4. Finally, on the modern approach to contract formation, Miller J, in delivering the judgment of the New Zealand Court of Appeal in Coughlin v Cox [2014] NZCA 617 at [48], stated:

(a) The effect of silence on contract formation

  1. The second legal issue that arose from these proceedings is the effect of silence on contract formation. In the often-cited case of Felthouse v Bindley (1862) 11 CBNS 869; [1862] EWHC CP J35 142 ER 1037, it was held that silence on the part of the offeree cannot give rise to acceptance of an offer so as to constitute a contract. When discussing the principle in Felthouse v Bindley, the learned authors of Burrows, Finn and Todd Law of Contract in New Zealand (2002) 2nd ed at 3.4.1, stated, in so far as relevant.

The evidence

(a) Evidence for the plaintiff

  1. According to the evidence for the plaintiff Morgan and Banks, as set out in the submissions of its counsel, in 1997 Mr Doyle, the manager for the plaintiff, had met with the then general manager of the EPC and at that meeting the latter engaged Morgan and Banks to recruit a financial controller for the EPC. That was duly done and one Mr Sollitt was recruited as a result. Apparently, the EPC paid for the services of Morgan and Banks on that occasion. When Mr Sollitt left the employment of the EPC, the then general manager of the EPC again met with Mr Doyle at the offices of Morgan and Banks in Auckland, New Zealand, on 26 January 1999 and instructed Morgan and Banks to urgently find another financial controller for EPC as Mr Sollitt had left.
  2. The plaintiff claimed that at the meeting on 26 January 1999, the then EPC general manager provided to Mr Doyle and his staff member Mr Scott the job description, the details and background of where a candidate for the advertised position should come from, and a copy of the advertisement that the EPC had placed in the New Zealand Herald and the Sydney Morning Herald. The then general manager of EPC requested Mr Doyle to provide a potential advertisement as well as a proposal on how Morgan and Banks would recruit the position. At the same time the EPC general manager provided to Mr Doyle for the purpose of contact while in Auckland his hotel address, telephone and fax numbers.
  3. The meeting on 26 January 1999 was followed by a facsimile letter dated 27 January 1999 by Mr Scott of Morgan and Banks to the EPC general manager thanking the latter for their meeting and for explaining the position that the EPC general manager wanted Morgan and Banks to fill for EPC. The letter also explained that the assignment specification for the position would not be ready that day but would be sent the following day.
  4. On 28 January 1999, Mr Scott sent a further facsimile letter to the EPC general manager enclosing the assignment specification which sets out what Morgan and Banks was going to do to recruit a financial controller for EPC. It also sets out the plaintiff’s two methods of charging its fees which were on an ‘exclusive assignment basis’ or on a ‘contingency basis’. Mr Doyle said that the plaintiff subsequently proceeded on a contingency basis instead of on an exclusive assignment basis when there was no response to its letter of 28 January 1999 from the defendant. This meant that the full fee was payable according to scale upon acceptance of a candidate for the job that was advertised.
  5. By covering letter dated 10 February 1999, Mr Scott sent the plaintiff’s report or resume on Mr Rodney Brown to the then EPC general manager. At paragraph 5 of that letter, Mr Scott reminded the EPC general manager that: “In the event that this introduction leads to you employing Rodney, then our fees would be based on our Standard Terms and Conditions of Business and Fee Structure (a copy is enclosed)”.
  6. According to the submissions by counsel for the plaintiff, following receipt by the EPC of the report on Mr Brown’s details, the EPC general manager requested Morgan and Banks to arrange an interview between himself, the deputy chairman of the EPC board and Mr Brown on 12 February 1999 at the Koru Club, Auckland Airport. Morgan and Banks accordingly contacted Mr Brown who flew from Invercargill to Auckland for the interview. Mr Brown’s airfare was paid by the EPC’s agent in New Zealand. After the interview on 12 February 1999 and the return to Samoa of the EPC general manager on 13 February 1999, AusAid became involved in the recruitment process for a financial manager of EPC.
  7. Between February 1999 and June 1999, Morgan and Banks kept in contact with Mr Brown by telephone to check on the status of his potential employment with EPC. Then on 16 June 1999, EPC, by its then deputy general manager, sent a facsimile message to the plaintiff requesting Morgan and Banks to advise urgently whether Mr Brown was still interested in the post of financial controller as the EPC had to make a decision very soon. On the same day (NZ time), Mr Scott responded that Mr Brown was very interested in the post and wanted to be financial controller of EPC.

(a) Evidence for the defendant

  1. Counsel for the defendant EPC pointed out in her submissions that the key issue in these proceedings was whether a contract for service existed between the plaintiff and the defendant and that the defendant was liable to pay the fees as claimed by the plaintiff. In determining that issue, counsel for the defendant referred to the communications between the plaintiff and the defendant and the conduct of both parties.
  2. In the first place, the EPC general manager denied that he made any commitment to the plaintiff Morgan and Banks that its services would be engaged for the recruitment of a financial controller for the EPC. It was further submitted by counsel for the EPC that it can be inferred from subsequent correspondence from the plaintiff that the discussions of 26 January 1999 were subject to the assignment specification being perused and agreed to by the EPC general manager and other details required from the general manager. Reference was then made to the plaintiff’s facsimile letter dated 27 January 1999 sent to the EPC general manager. That letter stated:
  3. A second facsimile letter dated 28 January 1999 was sent by the plaintiff to the EPC general manager. That letter stated:
  4. It was submitted for the defendant that the assignment specification sent by the plaintiff to the EPC general manager under cover of the letter dated 28 January 1999 constituted an offer from the plaintiff to the general manager of the services the plaintiff was prepared to undertake with its costs, which, if accepted by the general manager would constitute a contract between the parties. The EPC general manager in his evidence said that when he looked at the document it appeared to him to be the same document as the one that he was asked to sign at the plaintiff’s offices in Auckland on 26 January 1999 but he refused to, so he did not give it much more thought.
  5. The general manager never responded to the plaintiff’s letter of 28 January 1999 so that counsel for the EPC submitted that there was no acceptance of the offer by the plaintiff and therefore no contract between the parties eventuated.
  6. According to the evidence for the defendant, the next written communication from the plaintiff to the defendant was the covering letter dated 10 February 1999 from Mr Scott accompanying the report on Mr Brown to the EPC general manager. In that letter Mr Scott stated:
  7. Even though Mr Doyle in his evidence said that the fee structure mentioned in the faxed letter of 10 February 1999 was sent together with the private and confidential report on Rodney Brown, it was contended for the defendant that that was not so or at least there was no satisfactory proof that that was in fact done.
  8. Anyhow, following receipt by the EPC of the letter of 10 February 1999, the general manager requested the plaintiff to arrange an interview between himself, the deputy chairman of the EPC board and Mr Brown on 12 February 1999 at the Koru Club, Auckland Airport. That was done by the plaintiff and the meeting was held as requested.
  9. Between February 1999 and June 1999 there was no further communication between the plaintiff and the defendant. According to the defendant, at that time the recruitment of a financial controller for the EPC was in the hands of AusAid. The then EPC deputy general manager said that in June 1999 the EPC was getting anxious because of the delay in an appointment being made by AusAid and had therefore decided that the EPC itself would fund the position. The EPC then wrote to Mr Brown and the other applicants as well if they were still interested in the job. By faxed message of 16 June 1999, the EPC general manager requested Mr Brown through the plaintiff to advise urgently if he was still interested in the position of financial controller. That message was as follows:

“General Manager”

  1. By faxed message of 17 June 1999, Mr Scott replied:
  2. In October 1999, Mr Brown was appointed as financial controller of EPC and in November 1999 he commenced duties with the EPC. The appointment of Mr Brown was made after he was brought as a potential employee by EPC to the attention of PACTAF the recruitment arm of AusAid. However, counsel for Morgan and Banks pointed out in her submissions that it was Morgan and Banks who introduced Mr Brown to the EPC after which EPC brought Mr Brown to the attention of PACTAF.
  3. On 16 February 2000, Morgan and Banks sent to the EPC an invoice for the sum of NZ$19,000 being its fee for professional services rendered in respect of the recruitment of Mr Brown. This fee was charged pursuant to the covering letter of 10 February 1999 from Mr Scott to the EPC general manager that if Mr Brown was appointed financial controller, then Morgan and Banks would charge a fee based on its enclosed fee structure.

Discussion

  1. Applying the modern global or objective approach to this case, I am of the respectful opinion that, in spite of the very able submissions by counsel for the defendant, the correspondence and the rest of the evidence when viewed as a whole and objectively show a concluded agreement. This agreement related to the use by the EPC of the services of the plaintiff Morgan and Banks to assist with the recruitment of a financial controller for the EPC. As the evidence showed, in 1997 the EPC had engaged the services of Morgan and Banks to recruit a financial controller for the EPC. One Mr Sollitt was recruited and the services of Morgan and Banks were paid for. On 26 January 1999, Mr Doyle and Mr Scott of Morgan and Banks met with the then EPC general manager at the offices of Morgan and Banks in Auckland. It appears from the evidence that that meeting was at the initiative of the EPC general manager because the financial controller Mr Sollitt had left the employment of the EPC and the EPC was looking for a replacement. Given the circumstances, I have decided to accept the evidence given by Mr Doyle for the plaintiff that at that meeting on 26 January 1999, the EPC general manager provided the job description, the details and background of where a candidate for the advertised position should come from, and a copy of the advertisement for the post of financial controller that the EPC had placed in the New Zealand Herald and the Sydney Morning Herald. The EPC general manager also requested Mr Doyle to provide a potential advertisement as well as a proposal on how Morgan and Banks would recruit the position. At the same time, the EPC general manager provided to Mr Doyle for the purpose of contact while in Auckland his hotel address, telephone and fax numbers.
  2. It does not appear from the communications that followed between Morgan and Banks and the EPC on 27 January 1999 and 28 January 1999 that the EPC did not want to engage the assistance and services of Morgan and Banks. It would be inconsistent with the EPC general manager having taken the initiative to meet with Mr Doyle on 26 January 1999 if that were so. The EPC was also at the time looking for a replacement financial controller and that issue must have been paramount in the mind of the general manager at that time.
  3. In the covering letter of 10 February 1999 from Mr Scott accompanying the plaintiff’s report on Mr Brown to the EPC general manager, it is there stated by Mr Scott as follows:

“We hope that you find this resume of interest, and would be happy to supply you with any further information that you need or to make any further arrangements that you may require”.

  1. There was then no further communication between the parties until the faxed message of 26 June 1999 from the EPC general manager to Mr Brown, through Morgan and Banks, enquiring whether Mr Brown was still interested in the position as advertised. In my opinion, that faxed message from the EPC and the reply by Morgan and Banks suggested that the EPC still had its relationship with Morgan and Banks and still needed the assistance of Morgan and Banks and was making use of that assistance in EPC’s search for a financial controller. The enquiry of 26 June 1999 from the EPC general manager to Mr Brown through Morgan and Banks was also in line and consistent with what Mr Scott had said in his covering letter of 10 February 1999 to the EPC general manager:” ...we would be happy to supply you with any further information that you need...”
  2. I have also decided to accept the evidence of Mr Doyle that the plaintiff’s fee structure was sent together with the report on Mr Brown to the EPC. That is also clear from Mr Scott’s covering letter of 10 February 1999 to the EPC general manager.
  3. Viewed as a whole and objectively, I am of the respectful opinion that the conduct of Morgan and Banks on one hand and that of the EPC on the other together with the written communications between themselves from 27 January 1999 to 16 June 1999 showed that a concluded agreement came into existence between the parties. This agreement took its shape and form starting from the meeting between the parties in Auckland on 26 January 1999 until the faxed communication of 10 February 1999 from Mr Scott to the EPC general manager and the latter’s request to Morgan and Banks to arrange a meeting with Mr Brown on 12 February 1999 at the Koru Club, Auckland Airport. The faxed communications that subsequently followed further confirmed the agreement that had already come into existence between the parties.
  4. Turning to the conventional approach to contract formation based on the traditional offer and acceptance analysis, the meeting on 26 January 1999 between the EPC general manger and Mr Doyle and Mr Scott was at the initiative of the EPC general manager as EPC was looking for a financial controller to replace Mr Sollitt who had left the employment of EPC. As already mentioned, Mr Sollitt was recruited as financial controller for the EPC in 1997 with the assistance of Morgan and Banks. At the said meeting, the EPC general manager engaged the services of Morgan and Banks to assist with the recruitment of a new financial controller for EPC. It appears that there was an exchange of offer and acceptance at that meeting between the parties and as a result a contract came into existence. This was notwithstanding that Mr Scott was only able to send the assignment specification to EPC by faxed communication of 28 January 1999 instead of 27 January 1999.
  5. There was no response from the EPC general manager to the faxed communication of 28 January 1999. Counsel for the defendant in her submissions said that the assignment specification sent under cover of the faxed communication of 28 January 1999 constituted an offer by the plaintiff to the defendant. Given that there was no response from the EPC general manager, there was therefore no acceptance of the plaintiff’s offer. In consequence, there was no concluded contract between the parties.
  6. With respect to the very able submissions by counsel for the defendant, I am of the view that the contractual process started from the meeting of 26 January 1999 when the EPC general manager engaged the services of the plaintiff for the recruitment of a financial controller. The assignment specification only sets out, inter alia, the nature of the service provided by the plaintiff and the two methods of calculating its fee. If one were to assume that the assignment specification constituted an offer, then that offer from the plaintiff was accepted by the defendant by conduct though not by word of mouth.
  7. On 10 February 1999, the EPC general manager received from Mr Scott a private and confidential report on Mr Brown. Mr Scott requested the general manager to let him know if EPC required more information. Furthermore, Mr Scott enquired that if the general manager wished to proceed after an interview with Mr Brown, then Morgan and Banks would, at that time, undertake a confidential reference checking with the nominated referees. The response by the EPC general manger was to request Mr Scott to arrange an interview between himself, the deputy chairman of EPC board and Mr Brown on 12 February 1999 at the Koru Club, Auckland Airport. Then by faxed message of 16 June 1999, the EPC general manger requested the plaintiff to advise urgently whether Mr Brown was still interested in the post of financial controller as an appointment was to be made very soon. The plaintiff responded the same day (New Zealand time) that Mr Brown was still very interested and would like to be financial controller of EPC. In October 1999 Mr Brown was appointed.
  8. Thus, the assignment specification sent by the plaintiff to the defendant must have been accepted by conduct by the defendant and a concluded agreement came into existence. But if I am mistaken in that view, then I am satisfied that viewed as a whole and objectively, the evidence showed a concluded agreement.
  9. This is not an easy or straightforward case as demonstrated by the submissions for the defendant. Thus, before leaving this case, I want to refer again to Burrows, Finn and Todd Law of Contract in New Zealand (2002) 2nd ed at 3.2.1, pp 37-38, where the learned authors stated:

Conclusion

  1. From the foregoing, I have come to the conclusion that a concluded agreement came into existence between the parties and the plaintiff’s claim should therefore be upheld.
  2. Accordingly, judgment is given for the plaintiff in the sum of NZ$19,000 as claimed.

----------------------------------------
Patu F M Sapolu
Temporary Justice of the Supreme Court and
Former Chief Justice

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