KINGSBEER TRANSPORT LTD v MARTIN BROWER NEW ZEALAND [2023] NZCA 385

KINGSBEER TRANSPORT LTD v MARTIN BROWER NEW ZEALAND [2023] NZCA 385 [23 August 2023]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA52/2022[2023] NZCA 385BETWEEN KINGSBEER TRANSPORT LIMITEDAppellantAND MARTIN-BROWER NEW ZEALANDRespondentHearing: 2–3 November 2022Court: Courtney, Venning and Mander JJCounsel: D M Fraundorfer, A G Needham and S A Stretton for AppellantS S Cook, M J Cassaidy and OJD Brown for RespondentJudgment: 23 August 2023 at 3.30 pmJUDGMENT OF THE COURTA The appeal is allowed.B The case is remitted to the High Court for determination of quantum.C The respondent must pay the appellant costs for a standard appeal on aband A basis, with usual disbursements. There is certification for secondcounsel.____________________________________________________________________REASONS OF THE COURT(Given by Courtney J)TABLE OF CONTENTSIntroduction [1]Approach on appeal [12]The High Court decisionKTL's claim and MBNZ's affirmative defence [15]MBNZ's counterclaims [25]Isssue 1: Mr Millin's authority to bind MBNZThe ground of appeal [28]Did Mr Millin have authority to bind MBNZ? [30]Issue 2: was there an agreement reached between KTL andMBNZ for the Additional BOP Runs and, if so, what were theterms?The parties' positions [45]Relevant principles [47]The evidence at trialThe existing relationship between MBNZ and KTL [51]MBNZ proposes the Additional BOP Runs [53]The parties negotiate and KTL starts the Additional BOPRuns[60]Subsequent events [97]Was there a contract and, if so, what were its terms?KTL and MBNZ intended to be bound [135]Express terms [140]Implied term [144]Was there a breach of contract by MBNZ? [148]Affirmation [155]Failure to mitigate [157]Relief: quantum, failure to mitigate and the quantum meruitclaim[160]Remaining grounds of appeal: estoppel/FTA/quantum meruit [163]Result [164]Introduction[1] In 2017, Tony and Nicky Kingsbeer were operating a small truckingcompany, Kingsbeer Transport Ltd (KTL), based in Tauranga. One of its clients wasMartin-Brower New Zealand (MBNZ), which is part of a global logistics companythat serviced McDonalds restaurants in New Zealand. KTL had been responsible forthe runs from Auckland to Gisborne and Whakatāne since 2011.1 Since 2016, theseruns had been governed by an individual contractor agreement (the 2016 ICA).1 KTL was incorporated in 2014. The Kingsbeers contracted to MBNZ and KTL as a partnershipuntil 2016, when KTL took over the runs. For convenience, we refer to the relevant entity asKTL for the entire period except where it is necessary to differentiate.Another contractor, Hall's Group Ltd (Hall's), had the contract for runs to Rotoruaand the Bay of Plenty. In 2017 MBNZ decided not to renew that contract. Hall'swas to cease its Rotorua and Bay of Plenty runs on 28 January 2018. MBNZ had toensure continuity of service to McDonalds and KTL was well-regarded as a reliablecontractor. MBNZ proposed that KTL take on additional runs to Rotorua and theBay of Plenty (the Additional BOP Runs), with the first delivery on 29 January 2018.[2] KTL was keen to expand its business with MBNZ. But taking on theAdditional BOP Runs involved a significant financial commitment. KTL wouldneed to either buy or lease a truck and two trailers. Any financier or lessor wouldrequire certainty as to KTL's contract with MBNZ. Moreover, the necessarymodifications would take several weeks from the order being placed. That wouldmean renting temporary equipment, at higher rate (the short-term costs). Theviability of the proposal depended on KTL being able to secure the leased equipmentas quickly as possible, in order to minimise the short-term costs.[3] KTL was dealing with MBNZ's New Zealand Distributions Manager,Andrew Millin. It says that MBNZ, through Mr Millin, agreed to provide a five-yearcontract for the Additional BOP Runs and to provide a written contract recording theagreement within either six weeks, or a reasonable period, so that it could arrangefinance or a long-term lease for the equipment as quickly as possible. KTL also saysthat MBNZ agreed to meet the short-term costs until the leased equipment wasavailable. There is no written record of the agreement and MBNZ does not acceptthat any binding agreement was reached.[4] Mr Millin was made redundant from MBNZ on 15 January 2018. KTL beganthe Additional BOP Runs on 29 January 2018, using rental equipment. Despiterequests made to Mr Millin's successor, no written contract was forthcoming. WhenKTL raised the question of the short-term costs, MBNZ responded that, in theabsence of a written agreement, it had no obligation to meet those costs, though laterit did agree to meet some of the costs. By 22 June 2018 KTL had cash-flowproblems. MBNZ had finally provided a draft contract for a five-year term.However, the promised payment for some of the short-term costs had not been made.KTL advised MBNZ that it would cease undertaking the Additional BOP Runs on 30June 2018. It continued the Gisborne and Whakatāne runs until 3 September 2018,when it gave 12-weeks notice to terminate those as well. KTL was unable tocontinue operating. It returned the rental equipment, sold its remaining assets andceased trading.[5] KTL brought a proceeding against MBNZ asserting a partly-written,partly-oral contract for a five-year term covering the Additional BOP Runs and forpayment of the short-term costs. It alleged: (1) breach of the contract or(2) repudiation of the contract or (3) that MBNZ was estopped from denying theexistence of the contract or (4) breach of a collateral agreement to pay the short-termcosts or (5) misleading and deceptive conduct in breach of the Fair Trading Act 1986(FTA) and (6) if no agreement was found to exist, then quantum meruit.[6] MBNZ responded that, if the asserted agreement was found to exist, KTL hadaffirmed it. Further, it had failed to mitigate its loss. It counterclaimed for breach ofcontract and unjust enrichment.[7] Jagose J found that the parties had not entered into an agreement on the termsalleged.2 Rather, KTL had begun the Additional BOP Runs for MBNZ in theexpectation, based on its previous experience with MBNZ, that a new contract wouldbe forthcoming, that it would be paid at its specified rates and in the hope that theshort-term expenses would be manageable pending the implementation of thecontract.3 As a result of that finding, KTL's causes of action for breach of contractand for repudiation of the contract both failed.4[8] The Judge also held that MBNZ had not represented that it would enter into acontract for five years, with the result that there was no unconscionable conduct tosupport the estoppel cause of action, nor any misleading and deceptive conduct inbreach of the FTA.5 The Judge also rejected the assertion of a collateral contract2 Kingsbeer Transport Ltd v Martin-Brower New Zealand [2021] NZHC 3494 [decision underappeal] at [68].3 At [78].4 At [82].5 At [85]–[88].under which MBNZ would pay KTL's short-term expenses pending entry into aformal contract.6[9] Finally, the claim in quantum meruit failed save in respect of one particularinvoice.7 In a supplementary judgment the Judge found for KTL in respect of that,giving judgment against MBNZ for $7,876.8 There is no appeal against thesupplementary judgment.[10] KTL challenges all of the Judge's findings. It says that the Judge erred infinding that there was no agreement of the kind asserted by KTL and that norepresentations were made as to the five-year term or payment of the short-termcosts. The specific complaints are that the Judge:(a) erred in finding that Mr Millin lacked the authority, either to bindMBNZ in relation to the five-year term and payment of the short-termcosts, or to make representations as to either; and(b) failed to take all the evidence into account.[11] MBNZ filed a notice seeking to support the judgment on other grounds,namely that:(a) Any binding five-year contract was conditional upon the parties'agreement to the terms and conditions of a written contract for theAdditional BOP Runs.(b) Any binding five-year contract was conditional upon KTL satisfyingcertain competency requirements, which it did not do.(c) MBNZ had complied with the asserted essential terms by:(1) providing draft written contracts on 14 and 19 June 2018; and6 At [90].7 At [102].8 The Judge indicated at [99]–[102] in the decision under appeal that the parties should seek toagree in relation to the invoice and, in the absence of agreement, he would issue a supplementaryjudgment, which he subsequently did: Kingsbeer Transport Ltd v Martin-Brower New Zealand[2022] NZHC 2931.(2) paying the claimed short-term costs on invoice 131 and remainingprepared to negotiate on the remaining amounts claimed.(d) All iterations of a letter of intent (LOI) provided to KTL were silent asto any obligation for MBNZ to meet the short-term costs and therewas therefore no binding agreement to meet such costs.(e) If there was a binding five-year agreement between the parties, KTLaffirmed the agreement by performing the Additional BOP Runs forthe period up to 30 June 2018, such that it was not entitled to cancelthe agreement, in accordance with s 38 of the Contract andCommercial Law Act 2017 (CCLA).(f) If there was a binding five-year agreement between the parties, it wasterminable by either party on three months' notice.(g) Alternatively, KTL failed to take reasonable steps to mitigate itslosses upon termination of the Additional BOP Runs by notcontinuing to trade and failing to account for the value of theequipment that would have been used to carry out the Additional BOPRuns.Approach on appeal[12] In finding that the parties had not entered into an agreement for five years orfor payment of the short-terms costs, the Judge rejected evidence given bythe Kingsbeers and by Mr Millin. He held that the Kingsbeers, although notdishonest, had rationalised KTL's circumstances with the benefit of hindsight.9 Heconsidered that some of Mr Millin's evidence was inconsistent with thecontemporaneous documents.10[13] KTL challenges these findings. MBNZ urged caution. Mr Cook, for MBNZ,submitted that, in assessing whether there had been an error this Court must take into9 Decision under appeal, above n 2, at [77].10 At [73].account the inherent advantages that the trial Judge had and exercise the"'customary' caution" before overturning them.11[14] Where a Judge has made credibility findings, especially following a lengthytrial, those views ought to be taken into account. Where the findings of fact do notdirectly engage questions of credibility, however, there is no need to defer to the trialJudge's view.12 In this case, the Judge did not make adverse credibility findingsagainst either the Kingsbeers or Mr Millin. Although he regarded the Kingsbeers'account as the product of ex post facto rationalisation, he expressly found that theywere not dishonest.13 As for Mr Millin, the Judge referred to his evidence beingillogical and confused in relation to the short-term expenses,14 but gave no indicationthat he considered Mr Millin to lack credibility.The High Court decisionKTL's claim and MBNZ's affirmative defence[15] The Judge focussed on KTL's allegation that the various written and oralcommunications, between it and MBNZ, through Mr Millin, had culminated in apartly-written, partly-oral agreement containing express terms that:15(a) KTL would undertake the Additional BOP Runs;(b) the agreement would be for a term of five years;(c) MBNZ would provide a written contract suitable to enter long-termleases for the plant and/or obtain finance on;1611 Relying on Sena v New Zealand Police [2019] NZSC 55, [2019] 1 NZLR 575 at [37]–[38] citingAustin Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [13];and ANZ Bank New Zealand Ltd v Bushline Trustees Ltd [2020] NZSC 71, [2020] 1 NZLR 145at [58]–[59].12 Austin Nichols & Co Inc v Stichting Lodestar, above n 12, at [17].13 Decision under appeal, above n 2, at [77].14 At [74].15 At [52].16 "Plant" as used in KTL's pleadings refers to rental equipment, including trucks, trailers amdforklifts.(d) the written contract would be provided within six weeks of thecommencement date; and(e) MBNZ would pay the short-term costs.[16] As an alternative to (d) it was said that there was an implied term that MBNZwould provide the written contract within a reasonable time from the commencementdate of 29 January 2018.17[17] KTL asserted that Mr Millin had either implied actual authority to offer KTLa five-year contract, with reimbursement of its short-term costs or, alternatively, thathe had ostensible authority to make that offer and MBNZ was estopped fromdenying that fact. MBNZ denied that Mr Millin had either actual or ostensibleauthority, and in relation to the latter, asserted that KTL must have known thatMr Millin lacked the authority to bind it.18[18] The Judge set out the evidence in some detail at the start of his decision. Inconsidering whether a contract had been entered into, he focussed particularly on theevidence of the Kingsbeers and Mr Millin and concluded that:[68] Viewed objectively, I see nothing in the parties' conduct prior toKTL's commencement of the runs from which to infer their respectiveintentions immediately to be bound, less still to their agreement on essentialterms, as pleaded. I take that commencement as the last point to determine ifsufficient agreement had been reached, despite the Kingsbeers' insistencesuch was established earlier.[19] The Judge identified five reasons for his conclusion (which we consider later)before adding:[77] Having heard the witnesses directly over a period of days, myassessment is the Kingsbeers have sought to rationalise KTL's circumstancesin hindsight, and adopted immutable beliefs as to how they came to pass. I17 Decision under appeal, above n 2, at [52].18 The second amended statement of defence pleaded that the plaintiff knew or ought to haveknown that because the draft LOI was to be signed by Cameron Sutherland (the defendant'sOperations Director for Australia and New Zealand), rather than Mr Millin, that Mr Millin didnot have authority to agree to a multi-year contract, to the provision of a written contract withinany specific time frame or to the reimbursement of any additional costs, and/or that such matterswould need to be recorded in the final of that draft [LOI] in order to be binding, and at no stagedid this occur.do not ascribe to the Kingsbeers any dishonesty in doing so; rather, bothappear to base their comprehension of what occurred on 'mantra' — as Ihave noted, in relation to the three to six weeks for MBNZ's provision of thedraft contract, but also for a five-year term and with payment of short-termexpenses — repeated as gospel. Neither do I overlook the Kingsbeers'desire to escape the competitive stresses of their previous transport businessfor MBNZ's monopsony. But clearly the actual circumstances of theircontinuing and expanded work for MBNZ gave rise to unexpected and on-going financial and personal stresses for the Kingsbeers, which may haveexacerbated their rationalisations.[78] Ultimately, in my assessment, KTL commenced its provision of theadditional runs for MBNZ without any certainty as to the longer-termconditions for that work, in reliance on its knowledge of MBNZ's generalrequirements for the conduct of and payment for such work and its generallyconstructive experience with MBNZ since 2011 It provided thoseservices in the expectation it would be paid at its specified rates, as occurred,and in the hope its additional expenses would not — either in sum, or byreason of MBNZ's contribution to them — be beyond KTL's ability to bear,pending MBNZ's provision of a longer-term contract. In the end, that also iswhat happened, although by that time the Kingsbeers had moved from theiroriginal reliance.(Footnotes omitted.)[20] The Judge rejected the pleaded alternative implied term that MBNZ wouldprovide a written contract suitable to enter into long-term leases and/or obtainfinance on within a reasonable time on the basis that it was not capable of clearexpression.19[21] The Judge did not consider the question of Mr Millin's authority to bindMBNZ when discussing whether a contract had been formed. It was not until hecame to deal with the issues of estoppel and the FTA that he considered this question,and did so very briefly:[86] For all the reasons I have expressed in relation to KTL's first causeof action, I do not find any representation by MBNZ in those terms. I add,for Mr Millin's statements to be attributed to MBNZ, MBNZ must have heldhim out as having authority to bind it. Nothing in his role as New Zealanddistribution manager inherently carried that authority. He witnessed theKingsbeers' execution of their 2016 contract (the copy in evidence not beingexecuted by MBNZ at all), suggesting he lacked authority to execute it orsimilar for MBNZ. And the letter of intent only identified him as MBNZ's"main point of contact" for MBNZ, to clarify questions. None is sufficientto convey any sense he carried MBNZ's authority to commit MBNZ in theterms pleaded.19 Decision under appeal, above n 2, at [79].(Footnotes omitted.)[22] Given the failure of the first to fourth causes of action, the Judge addressedMBNZ's affirmative defence of failure to mitigate only briefly, saying just that, hadhe been required to consider it, he would have found that, in the circumstances,KTL's disposal of the means of conducting its business was as reasonable a step totake in mitigation as continuing to trade.20[23] The Judge then rejected the fifth cause of action — assertion of a collateralcontract for the payment of short-term costs — essentially for the same reasons as hehad found that the contract alleged in the first cause of action had not been formed.21[24] Finally, the Judge dismissed the quantum meruit cause of action, subject tothe one invoice that was the subject of the supplementary judgment.MBNZ's counterclaims[25] MBNZ had contended that KTL was obliged to give 12 weeks' notice of itstermination of the Additional BOP Runs. This was said to have been agreedexpressly in terms of the LOI's incorporation of or reference to the ICA or on thebasis of implied reasonable notice. The Judge rejected the former argument. He wasnot satisfied that there was any agreement that the ICA would be extended toencompass the Additional BOP Runs; there was nothing in the communicationsbetween the parties to show such agreement and, in any event, if the ICA was to beextended formally, its first or second schedules needed to be executed, which had nothappened.22[26] In terms of what notice was reasonable, the Judge considered that reasonablenotice would be whatever was sufficient for MBNZ to substitute KTL's serviceswithin KTL's continuing rental duration, that being a period reasonable to both20 At [89].21 At [90]–[91].22 At [105].parties.23 Given that MBNZ had substituted KTL's services within eight days ofnotice being given, he regarded the notice given by KTL as reasonable.24[27] MBNZ had also counterclaimed on the alternative basis of unjust enrichmentin the event of KTL succeeding on any of its first to fourth causes of action. Givenhis conclusion regarding those causes of action, the Judge did not regard it asnecessary to address that counterclaim.25 There is no challenge in relation to thecounterclaim.Issue 1: Mr Millin's authority to bind MBNZThe ground of appeal[28] Mr Fraundorfer, for KTL, submitted that the Judge failed to apply therelevant principles and to properly assess the evidence on this issue.[29] Judges are not required to explain their reasoning at length on every issue.However, Mr Millin's authority was clearly relevant in relation to the main issue inthe case — whether an agreement had been reached — not just to the estoppel andFTA causes of action. The lack of any discussion about this aspect in connectionwith the first cause of action leaves us concerned that the issue of authority was notfully considered at that earlier point.Did Mr Millin have authority to bind MBNZ?[30] It was common ground that Mr Millin was the most senior MBNZ managerin New Zealand from 2015 until his departure on 15 January 2018. He reported tothe Operations Director for Australia and New Zealand, Cameron Sutherland, whowas based in Australia. There was, however, limited evidence about Mr Millin'sauthority.2623 At [107].24 At [108].25 At [110].26 It appears that MBNZ first raised this issue in its second amended statement of defence andcounterclaim filed on 30 October 2021, two days before the start of the trial.[31] MBNZ did not produce Mr Millin's employment contract. It produced only ajob description for his position of "Distribution Centre Manager – New Zealand".This was framed largely in aspirational language and appears to have been preparedfor general recruitment purposes rather than for identifying Mr Millin's actualresponsibilities and authority. To the extent it is relevant, we note that it describesthe "Pipeline Level" of the position as "Department Manager/General Manager" andthe summary of the position as including being "[r]esponsible for the implementationof the operations strategy" and sitting as a "member of the Senior Leadership Team."[32] The only other documentary evidence produced about Mr Millin's authoritywas a document headed as "APPROVAL CODE MATRIX" that purported to set outthe limits of Mr Millin's (and others) authority in dollar figures. However, Mr Millinsaid he had never seen the document while he worked for MBNZ and only saw it forthe first time a few days before the hearing. The Judge properly ascribed no weightto it.[33] Mr Millin rejected the suggestion he did not have authority to agree to KTL'sshort-term costs and described his role generally as follows:I had complete management control of the New Zealand network. My rolewas to ensure that the 168 McDonald's restaurants received their deliverieson time and in a safe manner. I was responsible for finding suitablecontractors to carry out the work. I had authority to negotiate with thecontractors, including rates and routes, and sign off on renewal contracts.[Mr Sutherland], my manager in Australia, was kept abreast of all decisions.[34] Mr Millin also gave evidence that when MBNZ moved its contract for theWellington region from Hall's to KAM Transport he had "negotiated all of the ratesand routes without needing approval from anyone else." There was no challenge tothis evidence. Nor was there any evidence that MBNZ ever cautioned Mr Millinabout exceeding his authority. Nor did it take any steps to constrain Mr Millin in hisdealings with other contractors or to open a direct line of communication with itsother contractors, including KTL.[35] Nevertheless, there was unchallenged evidence that a change of contractorhad to be approved by MBNZ's Managing Director, Yves-Marie Brillant. It was alsoclear that Mr Millin could not issue a LOI without Mr Sutherland's approval. As aresult, we are satisfied that, while Mr Millin had the authority to negotiate withMBNZ, he had did not have actual authority to bind it to a new contract.[36] We turn to the question of ostensible authority. In Pascoe Properties Ltd vAttorney-General, this Court discussed ostensible authority:27[21] Ostensible authority is created, therefore, by the actions of theprincipal, who by words or conduct represents to the other party that aperson has the necessary authority to enter into the transaction on theprincipal's behalf. The authority may be express or implied, and may ariseby the principal permitting the agent to act in some way in the conduct of theprincipal's business with other persons. The representation of authority canbe effected through a course of dealing that is sufficiently frequent andunderstood. It also may arise where an agent is vested with a particularoffice and that office is of the kind that could reasonably be expected tocarry the authority. The perception of authority by the other party must bereasonable. Specific limitations on the authority of an agent may not beeffective if the actions of the principal have created the representation ofauthority.[22] No representation by the agent can create ostensible authoritywithout something more. However an agent's authority may emanate fromthe joint actions of both the principal and the agent where the principalappoints an agent to a position that enables the agent to then bolster itsauthority in dealings with a third party.(Footnotes omitted.)[37] The Judge considered that, not only did Mr Millin not have ostensibleauthority, KTL should have known that he did not. This conclusion rested on twopieces of evidence — the fact that Mr Millin had witnessed the 2016 ICA rather thansigned it on behalf of MBNZ and the fact that Mr Sutherland, rather than Mr Millin,had signed an LOI dated 29 November 2017.28 Mr Fraundorfer submitted that theevidence did not support the Judge's conclusion.[38] The unchallenged evidence was as follows. Mr Millin was the only seniorMBNZ manager KTL dealt with during the relevant period. Mrs Kingsbeer, whowas responsible for the administration of KTL and directly involved in thenegotiations with Mr Millin, said that "our instructions and negotiations were witheffectively a New Zealand manager, who was Andy Millin." Mr Kingsbeer said thathe "got [his] orders" from Mr Millin, whom he described as "my boss."27 Pascoe Properties Ltd v Attorney-General [2014] NZCA 616, [2015] NZAR 457.28 Decision under appeal, above n 2, at [86].[39] The only other MBNZ representative KTL dealt with prior to Mr Millinleaving MBNZ was Philip Gordon, the Transport Supervisor, who was responsiblefor day-to-day operational matters and reported to Mr Millin. Mr Gordon was askedin cross-examination whether he understood Mr Millin's role as being "to go sort outthe contract with [Mr Kingsbeer]", to which he answered "[m]ost definitely". Laterhe said again that he assumed Mr Millin was allowed to offer the contract to KTL.[40] MBNZ had therefore placed Mr Millin in a situation where both thecontractor (KTL) and the MBNZ representative who reported to Mr Millin (MrGordan) were under the impression that he had the authority to enter into a contractwith KTL. We turn to the Judge's reasons for concluding that he did not, and thatKTL should have known that.[41] The Judge's first reason was that Mr Millin had witnessed the 2016 ICA,rather than signed it on behalf of MBNZ.29 When this was put to Mr Kingsbeer incross-examination, he did not see any significance in the point, saying that he(Mr Kingsbeer) just "signed my name and that's all I know". This seemsunsurprising. Even assuming that Mr Kingsbeer saw Mr Millin add his signature asa witness, the difference between a manager witnessing a contractor's signature andactually signing on behalf of the company is unlikely to be recognised by a layperson as having any significance in terms of the manager's authority. Further, the2016 ICA had been signed more than 18 months beforehand and it is unlikely thatthe Kingsbeers would have recalled this detail, even assuming they noticed it at thetime.[42] Secondly, on 29 November 2017 Mr Millin sent KTL a LOI signed byMr Sutherland, which concluded by saying that:To ensure and facilitate prompt progress, Andrew Millin will continue to bethe main point of contact for [MBNZ] and can clarify any questions. Thankyou for working with [MBNZ] in this process.[43] In our view, the fact that the LOI was signed by Mr Sutherland was notsufficient to dispel the appearance conveyed to both KTL and to Mr Gordan that29 At [86].Mr Millin was authorised to deal on its behalf. To the contrary, Mr Sutherland'sadvice that Mr Millin would continue to be the main point of contact for MBNZ inNew Zealand was more likely to reinforce the fact that KTL was to continue to dealwith Mr Millin in the way it had always done.[44] Viewed in the context of KTL's overall relationship with MBNZ, we considerthat the structure MBNZ put in place for the selection and management of newcontractors meant that Mr Millin had the ostensible authority to secure a bindingagreement on behalf of MBNZ for the Additional BOP Runs. This means that theJudge's consideration of whether a contract had been reached proceeded on anincorrect basis. We therefore turn to consider the existence of the alleged agreementon the basis that Mr Millin had the authority to bind MBNZ and, as noted earlier,was not the subject of any adverse credibility finding.Issue 2: was there an agreement reached between KTL and MBNZ for theAdditional BOP Runs and, if so, what were the terms?The parties' positions[45] Mr Cook, for MBNZ, supported the Judge's conclusions. He summarisedMBNZ's view of the arrangement between it and KTL as follows:The parties shared a common plan – to enter a written five-year contract forthe Additional Runs. However, any five-year contract would be deferreduntil certain competency requirements were satisfied and a written ICA wasexecuted. In the meantime, KTL would begin the runs on 27 January 2018(and make its first delivery on 29 January 2018), in accordance with theparties' interim arrangements, which were reduced to writing in an agreedletter of intent (LOI).[46] Mr Fraundorfer, for KTL, submitted that the Judge erred in his conclusion asa result of failing to consider all of the evidence and reaching a conclusion that wasagainst the weight of the evidence. In particular, he complained that there wasinadequate attention given to the contextual evidence and error in recognising therationale for the LOI.Relevant principles[47] The approach to determining the existence of a partly written, partly oralagreement is well settled and there is no challenge to the Judge's summary of it.Whether such a contract has been entered into and, if so, on what terms, arequestions of fact.30 The usual approach to contractual interpretation applies — thefacts are to be objectively assessed to ascertain whether sufficient agreement wasreached.31 The question is whether the parties intended to be bound at the pointwhen the bargain is said to have been agreed, and whether there was express orimplied agreement on essential terms.32 Evidence of context, parties' subjectiveintentions and subsequent conduct are all admissible to assist in that inquiry.33[48] The principles which govern the implication of terms were confirmed by theSupreme Court in Bathurst Resources Ltd v L & M Coal Holdings Ltd.34 The Courtnoted that prior to the decision in Attorney-General of Belize v Belize Telecom Ltd,35the following passage from Lord Simon's judgment in BP Refinery (Westernport)Pty Ltd v President, Councillors and Ratepayers of the Shire of Hastings was themost commonly cited authority in New Zealand in relation to the implication ofterms:36 for a term to be implied, the following conditions (which may overlap)must be satisfied: (1) it must be reasonable and equitable; (2) it must benecessary to give business efficacy to the contract, so that no term will beimplied if the contract is effective without it; (3) it must be so obvious that"it goes without saying"; (4) it must be capable of clear expression; (5) itmust not contradict any express term of the contract.30 ANZ Bank New Zealand Ltd v Bushline Trustees Ltd, above n 12, at [65] citingCarmichael v National Power plc [1999] 1 WLR 2042 (HL) at 2049 per Lord Hoffmann.31 Bathurst Resources Ltd v L & M Coal Holdings Ltd [2021] NZSC 85, [2021] 1 NZLR 696 at[43]; citing Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1WLR 896 (HL); and Firm PI 1 Ltd v Zurich Australian Insurance Ltd [2014] NZSC 147, [2015]1 NZLR 432 at [60]–[61] and [63].32 Fletcher Challenge Energy Ltd v Electricity Corporation of New Zealand Ltd [2002] 2 NZLR433 (CA) at [53].33 ANZ Bank New Zealand Ltd v Bushline Trustees Ltd, above n 12, at [65].34 Bathurst, above n 34.35 Attorney General of Belize v Belize Telecom Ltd [2009] UKPC 10, [2009] 1 WLR 1988.36 Bathurst, above n 34, at [94] citing BP Refinery (Westernport) Pty Ltd v President, Councillorsand Ratepayers of the Shire of Hastings (1977) 180 CLR 266, (1977) 16 ALR 363 (PC) at 283.[49] In Belize, Lord Hoffman considered that the five conditions in BP Refineryare:37 best regarded, not as [a] series of independent tests which must each besurmounted, but rather as a collection of different ways in which judges havetried to express the central idea that the proposed implied term must spell outwhat the contract actually means[50] The Supreme Court in Bathurst concluded that:38The BP Refinery conditions are a useful tool to test whether the proposedimplied term is strictly necessary to spell out what the contract, read againstthe relevant background, must be understood to mean. Whilst conditions (4)and (5) must always be met before a term will be implied, conditions (1)–(3)can be viewed as analytical tools which overlap and are not cumulative. Thebusiness efficacy and the "so obvious that 'it goes without saying'"conditions are both ways, useful in their own right, of testing whether theimplication of a term is strictly necessary to give effect to what the contract,objectively interpreted by the court, must be understood to mean.The evidence at trialThe existing relationship between MBNZ and KTL[51] When KTL began runs from MBNZ's Auckland depot to McDonaldsrestaurants in Gisborne and Whakatāne in December 2011, it did so at short notice,following an urgent request from MBNZ. It did not have a written contract in place,but MBNZ assured it that a written contract would be provided within a few weeks,which it was.[52] The subsequent 2016 ICA covered the Gisborne and Whakatāne runs for aperiod of three years, expiring on 31 January 2019.39 It specified the services thatKTL was to perform and provided that if the parties agreed in writing KTL couldprovide "Additional Services" — being those not within the specified services — inaccordance with and subject to the terms and conditions of the ICA. However,changes to the contract beyond the Additional Services would require a fresh37 Belize, above n 38, at [27].38 At [116(f)]. Footnotes omitted.39 Although there is no dispute over the fact that MBNZ was committed to the 2016 ICA, theevidence was unclear as to whether it had ever actually signed the agreement since no signedcopy was disclosed.contract to be executed because the ICA could "only be amended or replaced byanother written agreement or deed executed by the parties".MBNZ proposes the Additional BOP Runs[53] In an email of 10 October 2017, Mr Millin invited KTL to outline a plan forhow it would manage the Additional BOP Runs, if it was interested. KTL wouldhave to commit to a start-date of 29 January 2018. Mr Millin understood that thiswould not be straight-forward, as he explained in his evidence, when it was put tohim that this was a reasonable amount of time for KTL to do the necessary planningand preparation: unless you worked in the transport industry, you cannot move multi-tonvehicles around the countryside at your free will. You have to getpermissions, you have to get grants, you have to get the right equipment, youhave to make sure they're roadworthy; you need the right equipment for theright job. It's not something you can do in a [matter] of weeks, it really isn't.So three months is a very tight time period.[54] KTL was very interested — it was keen to increase its share of MBNZ work,which it viewed as providing a solid work stream for a reputable company. It beganwork to assess the viability of taking on the new runs, which would require KTL toexpand its delivery routes from two McDonalds restaurants to 12. Mr Kingsbeerdescribed the necessary preparation:Between October 2017 and early January 2018, I liaised with tyrecompanies, fuel companies and insurance companies to put the necessarysteps in place for KTL to commence the Additional Runs in January. Wetalked to KTL's finance company, truck sales reps, forklift companies andthe TR Group regarding specs associated with this equipment We hiredextra staff, ordered specific logbooks, set up our yard, hired a forklift trailer,and arranged a site in [Taupō] to keep an extra forklift It was difficultorganising something that had to remain confidential.[55] The main consideration was that KTL would require a new truck and twonew trailers. These could either be purchased (KTL's preference) or leased. But ineither case, to be economic, KTL would need to borrow or lease for a term of fiveyears. As noted, any financier or lessor would require certainty that KTL had acontract of similar length with MBNZ, to ensure that their own position would besecure.[56] MBNZ usually required its contractors to use vehicles fitted with tail-lifts,which had to be custom-fitted. But KTL preferred to use forklifts. It owned twoforklifts and MBNZ had accepted it using them for the Gisborne and Whakatāneruns. The forklifts were left on-site at Gisborne and Whakatāne. KTL's initial planwas to use the forklifts for the Additional BOP Runs by carrying them behind thetruck, using newly built truck and trailers. However, that plan would depend onsecuring an order "slot" which it could not do without having its contract withMBNZ in place.[57] The alternative was to lease the new equipment from TR Group, which wouldrequire modifying the trailers to fit tail-lifts. TR Group was not prepared to proceedwithout KTL having a contract in place. David Carpenter, TR Group'sManaging Director, gave evidence that the expense involved in installing tail-lifts ontrailers meant that it was not economical to do so for short-term leases. TR Groupquoted on leases for both three- and five-year periods for cost comparison purposes,but intended that the lease would be for five years in order to make the arrangementeconomical for both parties, and TR Group required KTL to provide the underlyingcontract in order to proceed.40[58] KTL's accountant, James McGregor, helped to work out budgets to see howthe Additional BOP Runs could be operated cost effectively. Mr McGregor gaveevidence that:We were always operating on the basis that there would be a long-termcontract of at least five years. The equipment required and costs that KTLwould incur to set up the new delivery runs would only be profitable overthat period.[59] On 24 October 2017 KTL emailed its plan to Mr Millin. It set out a schedulefor deliveries and a proposed rate of $3.35 plus GST per kilometre. It noted that thebuild time for the new vehicles required were February and March 2018, based onorders being placed within two weeks. The plan also included a proposal foradditional Hawkes Bay/Napier runs even though they were not part of the immediatenegotiation.40 Ultimately, TR Group agreed to credit the difference between the rental rates and the long-termlease rates once the long-term lease was confirmed but this did not happen until May 2018 —well after KTL had started the Additional BOP Runs.The parties negotiate and KTL starts the Additional BOP Runs[60] There was a meeting at the Kingsbeers' home on 16 November 2017.Mrs Kingsbeer's evidence was that:At the meeting, we told MBNZ that KTL would need a written contract inplace within a reasonable time. Without a contract, KTL would not be ableto secure finance and order the necessary equipment and machinery to carryout the Additional Runs We told [Mr Millin] and [Mr Gordon] that, ifthere was no written contract in place by MBNZ's required start date, KTLwould have to incur costs of leasing equipment on a short term basis. Therewould also be costs of setting everything up at such short notice KTLcould not maintain those ongoing costs indefinitely. [Mr Millin] told us thatif KTL incurred extra costs, that MBNZ would cover those expenses.[61] Mr Millin said in evidence that:As our negotiations progressed in late-2017, KTL requested that they take onthe Hawkes Bay/Napier delivery runs MBNZ agreed , although theywould commence slightly later.The offer that MBNZ made for the Additional BOP Runs was for a five-yearterm We discussed this with KTL, as it was their preferred contract term.I recall that KTL needed a long-term contract of at least five year[s] togenerate enough income to cover the introduction of the new vehicles anddrivers required for the Additional BOP Runs.The Additional BOP Runs were outside the normal services that KTLprovided to MBNZ under its existing Contractor Agreement. A new contractwas required which would include the agreed rates and routes that KTLwould undertake.Between October 2017 and January 2018, I corresponded with Tony andNicky Kingsbeer to work out the details of the Additional BOP Runs Dueto the short time frame until MBNZ needed KTL to commence theAdditional BOP Runs, KTL advised me that they would have to hire short-term equipment. This meant hiring forklifts to help with the loading andunloading. I understand KTL needed a written contract to secure financeand to order or lease the trucks and plant they required I agreed thatMBNZ would cover KTL's reasonable costs to commence the AdditionalBOP Runs. I recall speaking to [Mr Sutherland] about KTL's start-up costs. We agreedto help KTL during this period. It was expected the costs would be paidback over time, but due to KTL's service and high standards we were willingto step outside normal practice to assist.[62] Mr and Mrs Kingsbeer and Mr Millin were strongly challenged on theirevidence in relation to whether agreement had been reached on a five-year term andon whether Mr Millin had agreed that MBNZ would meet the short-term costs. Allmaintained their positions. Mr Millin's evidence included the following exchange incross-examination in relation to the five-year term:Q. So [Mr Sutherland] did not agree to a five year contract, did he?A. He didn't disagree with it either.Q. Because in fact you never said to KTL or to Kingsbeer that [MBNZ]agrees to a five year term, did you?A. Yes, I did.Q. And Mr Sutherland's evidence that he will give, that MBNZ wasnever prepared to commit to a five year term is in fact the correctposition isn't it?A. Doesn't matter how many times you say it, I agreed to a five yearcontract with [KTL].[63] In relation to the short-term costs, Mr Kingsbeer said that he had givenMr Millin a "ballpark figure" of $20,000 to 50,000, which he was able to do from hisexperience renting similar equipment. Under cross-examination, Mr Millinestimated that he had given his agreement to meet the short-term costs at the "end ofthe year, beginning of January because we were running out of time to get thecontract in place." He said that the Kingsbeers had given him a "ballpark figure" of$50,000, which would be discussed as they arose. He was cross-examined on thefact that the costs were unknown and did not resile from his position:Q. So if the costs had come in and you thought actually they were toohigh, on your understanding you could have said: "No we're notgoing to pay them"?A. No, we would have negotiated. I would never have said no becauseI agreed to support them through the early stages.Q. you say: "We agreed to help KTL during this period". And byusing that word "help" here, were you indicating to KTL that we'dhelp you out subject to seeing what all these costs were about?A. No. What I was referring to there was I would help them throughthe start-up 'cos we basically left them short notice to, to, to get thecontract going.Q. Yet [MBNZ] was not in the business of paying for start-up orshort-term costs for its contractors, is it?A. No, but [MBNZ] are in the business of ensuring their restaurants areserviced twice a week, on time, every single day.Q. But [KTL] wasn't the only transport company that you could haveused for these runs, was it?A. I was very limited for that region, yes. The only other one was Halls. [64] On 24 November 2017 Mrs Kingsbeer asked Mr Millin if MBNZ wouldprovide an LOI from MBNZ recording the agreement and MBNZ's commitment tothe five-year contract. Mrs Kingsbeer wanted a LOI to order the new equipmentKTL would need. In a text on 28 November 2017, she followed up her request,referring to the need to "get this gear .. booked" and adding that "a very brief letterof intent is all that is needed to get balls rolling". In evidence, Mr Millin confirmedthe purpose of the LOI as being "for [KTL] to access the short term equipment sothey can do the job I've asked them to do. With the end goal being a five yearcontract."[65] Mr Millin consulted Mr Sutherland, who agreed that MBNZ would provide aLOI. On 29 November 2017 he sent a LOI addressed to Mr Kingsbeer to Mr Millinfor forwarding on to KTL. This is a convenient point to address MBNZ's argumentthat the contractual arrangement that existed between the parties was reduced towriting in the form of the LOI. The evidence is strongly against this assertion. It isclear from both the oral and contemporaneous written evidence (includingMrs Kingsbeer's text) that the LOI was to be used as a basis for arranging rentalequipment. The LOI was not intended to form the basis of a contract betweenMBNZ and KTL. Therefore, its failure to specify a five-year term or any obligationto meet short-term expenses is not significant in determining whether a contractexisted in the terms asserted by KTL.[66] The LOI provided by MBNZ stated that:[MBNZ] intends to progress in assessing the ability of [KTL] to comply withall safety and service requirements for undertaking work on behalf of[MBNZ] in the Bay of Plenty & Rotorua regions. We would like to establishthe next steps towards ensuring compliance.1) [KTL] is required to review and meet the contractor capabilityrequirements as set out within competency response document. Thisdocument is attached to this letter and will assess and confirm:a. [KTL] has, or can obtain within the required timeframecompliant assets as set out in the competency documentb. [KTL] has adequate process and controls to ensure that allemployees engaged in [MBNZ] work meet the requirementsset out in the competency document.c. [KTL] meets all other requirements set out in the competencydocument.2) Upon successful completion of the competency document to thesatisfaction of [MBNZ] the intent is to implement a contractoragreement which will establish service levels and all other terms andconditions between [MBNZ] and [KTL].To ensure and facilitate prompt progress, Andrew Millin will continue to bethe main point of contact for [MBNZ] and can clarify any questions. Thankyou for working with [MBNZ] in this process.[67] Mr Millin forwarded the LOI to KTL without comment and without thecompetency document referred to. That was provided later and comprised more than30 pages of policies and codes of conduct. We come to those later.[68] The LOI did not meet KTL's needs. Mrs Kingsbeer sought Mr McGregor'sadvice. He responded:I am aware that you will be asked to sign an agreement to lease plant on afive year basis today.You need confirmation that the Napier/Hastings run will be offered to youand that the contracts will include the following;1 Km rate of $3.352 Annual CPI adjustment.3 Maximum pallet numbers per run (must fit on your truck/trailer)[69] Later on 29 November 2017, Mrs Kingsbeer forwarded Mr McGregor'semail to Mr Millin saying:See below from my accountant . This is what needs to be in place toproceedI know you are busy with everything, but for us to start signing up gear to bebuilt to meet the timeframes of 28th January 2018 and potentially 25thFebruary 2018, this is what needs to be done.No one will sign me up unless I've got all my "T's" crossed and "I's" dotted.Also I want to order 3 trailers (Gisborne, BOP, Hawkes Bay) I need to orderthem all at the same time, as well as ordering two trucks.[70] Mr Millin responded:I can confirm the below, I just need to do some work before I change overthe Napier route to [KTL].[71] Without a suitable LOI or contract, KTL could not place the order and missedthe available December 2017 slot. As a result, by January 2018, the plan to ordernew equipment was superseded by the leasing option. However, TR Group requiredthe certainty of knowing that KTL had a secured long-term contract with MBNZ,and a start date, before it would action any order.[72] Over this period there were emails between Mr Millin and Mr Sutherlandabout finalising the arrangements with KTL. On 8 January 2018 Mr Millinrequested that Mr Sutherland provide a LOI detailing the runs to be undertaken, that"[the] contract we'll be looking at is a 5 year contract" and that MBNZ would like todiscuss the Napier/Hastings route "further down the line." Two days later Mr Millinemailed Mr Sutherland again saying "I really need this letter otherwise we can't golive in BOP on the 27th" to which Mr Sutherland responded "Agreed. Must close thistoday". However, later that day, Mr Sutherland asked about the contractor transitionplan, noting that "[to] gain approval for the [LOI] we must be able to demonstratethe plan." The latter was a reference to the internal requirement of MBNZ that itsManaging Director, Yves-Marie Brillant, approve the change in contractor.Mr Millin provided the necessary information. Mr Sutherland obtained Mr Brillant'sapproval of the change and of the terms of an updated LOI that Mr Sutherlandproposed.[73] On 10 January 2018 Mr Millin emailed the Kingsbeers asking for trip routesfor the deliveries "so I can send them to Chicago to put in the contract". It thenemerged that MBNZ was working from a rate of $3.25 plus GST per kilometre,rather than the $3.35 plus GST per kilometre that KTL had referred to in its originalplan, and to which Mr Millin had agreed in his email of 29 November 2017. Thisput the viability of KTL's plan in doubt. Mrs Kingsbeer immediately emailedMr Millin reminding him that he had agreed to the $3.35 plus GST per kilometrerate. He acknowledged that — describing it as "a miss on my part" — but said thathe would not go higher than $3.25 and "if that's not possible I'll just agree tocontinue with [Hall's] at [their] increased rate."[74] Mrs Kingsbeer consulted Mr McGregor. He advised that theAdditional BOP Runs could still be viable at the lower rate but it was essential that,among other things, KTL was offered the Hawkes Bay/Napier runs, and that it wasgiven a five-year contract with the written contract provided soon so that KTL couldlease the necessary equipment — the lower rate would only be economical if KTLleased the purpose-built trailers in the long term. Mrs Kingsbeer emailed Mr Millinwith new "trip rates" based on the $3.25 plus GST per kilometre rate. Mr Millinresponded that "I'm happy to go with the $3.25 km rate if [KTL] can't managethat rate please let me know so I can have the necessary conversation to ensurecontinuity of service to the restaurants."[75] The Judge placed significance on this last email. The first of his five reasonsfor finding that no contract had been formed was that the email showed that as lateas 11 January 2018, whether KTL was to undertake the Additional BOP Runs wasstill in issue because of Mr Millin's "unsubtle reference" to continuing to use Hall'sfor the runs.41 While we agree that the lack of agreement on the dollar per kilometrerates, which was obviously an important factor for MBNZ, indicated that no finalagreement had been reached as at that date, we do not consider it especiallysignificant. It must be viewed against Mr Millin's evidence that a seamlesstransition between one contractor and another was vital because McDonalds was"ruthless". He was asked what would have happened had the Kingsbeers said at thatpoint they could not do the runs. Mr Millin responded that it "[d]idn't even bearthinking about, to be fair. I would have had to go back to [Hall's] cap in hand andapologise. Say: "Listen guys," and I know what he would have done." Undercross-examination Mr Millin was asked:41 Decision under appeal, above n 2, at [69].Q. So if KTL hadn't agreed to the rate of $3.25, did you have anotheroption?A. The only other option I had for the Kingsbeers' area was to carry onwith Halls and pay the higher rate.[76] In our view, both KTL and MBNZ were committed to reaching an agreedposition on the dollar per kilometre rate. From MBNZ's perspective, reverting toHall's was not a realistic alternative because MBNZ had already decided not renewHall's contract and, evidently, ongoing service by Hall's would come at a cost. Inany event, this exchange occurred approximately two weeks before the scheduledstart date and it is clear from the exchanges that followed that the dollar perkilometre rate was settled satisfactorily and therefore had no ongoing significance interms of determining whether the parties had reached a firm agreement before thestart date.[77] On 12 January 2018 two things happened. First, Mr Millin emailed theupdated LOI and texted Mrs Kingsbeer to alert her. This LOI, dated 10 January2018 and received by KTL on 12 January 2018, contained the same introductoryparagraph and paragraph one. However, the latter part of the LOI now said:2) Upon successful completion of the competency document to thesatisfaction of [MBNZ] the intent is to implement a multi-yearcontractor agreement which will establish service levels and all otherterms and conditions between [MBNZ] and [KTL].Subject to the above the intended commencement date for [KTL] on theseadditional deliveries (attached) is Monday 29th January 2018. With furtherconsideration acknowledged for the Hawkes Bay region within the next6 months. Andrew Millin will continue to be the main point of contact for[MBNZ] and can clarify any questions. Thank you for engaging with[MBNZ] in this process.[78] Mrs Kingsbeer texted Mr Millin about the "competency document" referredto in paragraph two to which Mr Millin replied "Don't worry about the"Competency" document, you already provide a service for us so that's a given."We come back to the issue of the competency requirements later.[79] The second thing was a telephone call between Mr and Mrs Kingsbeer andMr Millin. It is unclear who called who. Mr Kingsbeer said that Mr Millin hadcalled him and Mrs Kingsbeer about the updated LOI:During that call, [Mr Millin] gave KTL the green light to start the[Additional BOP runs] on the new rate of $3.25/km. He assured us that theHawkes Bay deliveries would commence in a few months. We reiteratedthat, until the formal, written contract came through, KTL would incur thecosts of hiring short-term rentals. [Mr Milllin] assured us that a formal,five-year contract was three to six weeks away.Mrs Kingsbeer said that:On 12 January 2018, I called [Mr Millin] and told him the terms[Mr McGregor] had said KTL needed. [Mr Millin] verbally accepted theterms during our phone call. I reiterated to [Mr Millin] that KTL would notbe able to enter into long-term leases until it had a written five-year contractin place. I told him again that KTL would need to hire equipment on ashort-term basis in the meantime, and that this would be an extra cost forKTL. Again, [Mr Millin] confirmed that MBNZ would cover the costsincurred[80] At this point, therefore the evidence from Mr Millin and the Kingsbeers wasto the effect that: (1) Mr Millin had offered and KTL had accepted a five-yearcontract for the Additional BOP Runs, with a written agreement expected within amatter of weeks (2) once the written contract was available, KTL would be able tolease the necessary equipment (3) Mr Millin had agreed to meet the short-term costswithin a ballpark of $50,000 (4) agreement had been reached on the dollar perkilometre rate and (5) Mr Millin had given the "green light" for KTL to start.[81] However, the updated LOI still did not meet KTL's needs, as Mr McGregormade clear in his email of 15 January 2018, in which he commented that:Just a few points to get sorted in the letter of intent.The contract must be for five years as this is the commitment you aremaking with your financing.[82] But Mr and Mrs Kingsbeer could not raise this — or anything else — withMr Millin because Mr Millin was placed on leave on 12 January 2018 as a result of apending restructure of the senior management team at MBNZ. By 15 January 2018his position had been disestablished and his employment terminated. No one toldKTL this. Mr and Mrs Kingsbeer thought Mr Millin was simply on leave. Theydirected their questions about the LOI to Mr Gordon, who told them to contactMr Sutherland.[83] Mr and Mrs Kingsbeer forwarded Mr McGregor's email of 15 January 2018to Mr Gordon, who forwarded it to Mr Sutherland, who was managing the processpending Mark Bavister assuming his role. On 17 January 2018 Mr Sutherlandresponded:I have made a couple of changes to the letter of intent, clarifying that theseadditional routes are already covered under the existing ContractorAgreement until a new one is signed. It is noted 5 years is your preferredlength of the new agreement.(emphasis added)[84] Paragraph two of the updated LOI sent on 17 January 2018 now read:2) Upon successful completion of the competency document to thesatisfaction of [MBNZ] the intent is to implement a multi-year(maximum 5 years) contractor agreement which will establishservice levels and all other terms and conditions between [MBNZ]and [KTL]. Note the additional routes are to fall under the currentContractor Agreement expiring 31 January 2019 in the interim andsignificant diversions due to road closure will be compensated asrequired and agreed.(emphasis added)[85] The LOI confirmed 29 January 2018 as the start date. It also confirmed thatMr Millin would remain the main point of contact, even though Mr Millin'semployment with MBNZ was about to cease.[86] The idea that the Additional BOP Runs would be accommodated under theexisting ICA was new to the Kingsbeers. There is no evidence that Mr Millin hadconveyed it to them. To the contrary, his evidence was that the Additional BOP Runswere outside the existing ICA and a new contract would be required that included theagreed rates and routes for the new runs. We note too that, under the terms of theICA, written agreement by the parties was required for "Additional Services" to beundertaken pursuant to the existing contract. MBNZ appears not to have sought thatagreement from KTL. Nevertheless, Mr and Mrs Kingsbeer "did not think too muchabout it as [they] had been assured that a new written contract would be providedsoon". Mr Sutherland's email did not suggest otherwise.[87] However, the revised LOI still did not meet KTL's needs because it did notconfirm a five-year term. The Judge's second reason for finding that there was nocontract was that a five-year term was not consistent with either the 2016 ICA or theprogressive iterations of the LOI.42 We respectfully disagree.[88] We do not see the three-year term of the 2016 ICA as relevant, given thesignificantly different circumstances in which the agreement to undertake theAdditional BOP Runs had arisen, namely the quadrupling of the volume of workbeing undertaken by KTL, at quite short notice, which required a substantialinvestment in new equipment and the letting go of existing work.[89] Nor do we see the iterative terms of the LOI as determinative. The Judgeviewed as particularly significant the email Mrs Kingsbeer sent to Mr McGregor on15 January 2018 forwarding him the updated LOI, with a number of comments andquestions, including:In the letter of intent, it says to implement a "multi-year" contractoragreement. As we are wanting to sign up to TR Group for 5 years, shouldthe letter of intent say 5 years, I would hate to get a contract that says 2 or 3.[90] It was put to Mrs Kingsbeer in cross-examination that the email showed shewasn't sure at that point whether MBNZ was going to agree to five years. Sherejected that, explaining that: what I was saying is that the letter of intent needed to say five yearsbecause we were going to align an agreement with TR Group for five years.If we aligned in agreement with TR Group for five years and all of a suddenit turned out to be a contract for two or three years and then they cancel we would be liable to TR Group for the balance of the term of that long-termlease and we would have to pay it out. So the letter of intent and the contractand the agreement with TR Group all had to align the same.[91] This explanation does not address the obvious implication that, as at15 January, Mrs Kingsbeer harboured some concern that MBNZ might produce acontract for two or three years. However, this email is the single piece of evidenceinconsistent with an understanding that there existed a five-year contract. It needs tobe viewed against the following: for the Additional BOP Runs to be viable, KTLneeded to lease new equipment but could not do so until it could satisfy TR Group as42 Decision under appeal, above n 2, at [70].to the underlying contract with MBNZ. Mr Millin had said firmly that he hadoffered and KTL had agreed to a five-year term; after Mr Sutherland "noted that5 years is [KTL's] preferred length of the new agreement", there was no furthernegotiation, or even communication, about the term of the contract until MBNZproduced the draft contract in June 2018 for a term of five years, which suggests thatMr Sutherland's "noting" of KTL's preferred term is properly viewed as anacknowledgement that there was a contract and that it would reflect KTL's preferredterm. So, although we accept the basis for the Judge's concern aboutMrs Kingsbeer's email, the weight of the evidence is against ascribing much, if any,significance to it. In our view, the Judge did not give sufficient weight to the parties'explanation for the LOI and wrongly treated it as indicative of the agreementregarding the term of the contract, which it was not.[92] After that updated LOI there were further exchanges between Mrs Kingsbeerand Mr Sutherland regarding the Routes Schedule, which was to be attached to theLOI. There was, however, no further request for changes to the substance of theLOI. On 18 January 2018, Mrs Kingsbeer emailed Mr Sutherland, requesting a finalsign off on the attached Route Schedules and LOI, adding that:I will be forwarding your reply email directly to TR Group, as well [as] acopy of our current contract, which as you explain in [the] letter of intent hasbeen extended to include the new runs.No pressure but we require this ASAP, in order to finalise rental equipmentrequired to commence runs next week.[93] Mr Sutherland circulated the email to Mr Brillant and to Mr Millin'ssuccessor, Mr Bavister (who did not see it until he started his new role in lateJanuary 2018). The next day he sent the final version of the LOI with the agreedRoutes Schedule to KTL. The substance of the LOI was unchanged from that senton 17 January 2018.[94] At this point MBNZ began to address the issue of compliance with itscompetency requirements. MBNZ argued that if there was an agreement as to afive-year contract, it was conditional on KTL satisfying the competencyrequirements, which it had not done.43 This argument was based on the assertionthat KTL had not returned the "EOI Response Schedule" to MBNZ and, in anyevent, one of the requirements in that schedule, the "Contract Schedule 11 – DQMPElements", was not supplied to KTL until 14 June 2018 (with the draft contract) sothat it could not have been satisfied until that point.[95] On 17 January 2018 MBNZ's Compliance Officer, Shaun Galway, emailedMrs Kingsbeer documents relating to the competency requirements. The followingday MBNZ's Field Service Consultant, Emily Thomas, sent more documents. A fewdays later Ms Thomas came to the Kingsbeers' house to explain the policies and getKTL drivers' sheets, health and safety forms and policies signed. Mrs Kingsbeersaid that she gave Ms Thomas the completed "EOI Response Schedule".Ms Thomas denied receiving it. Mrs Kingsbeer said that she never heard anythingfurther from MBNZ regarding the competency requirements. There was noconclusive evidence on whether Mrs Kingsbeer had given the signed schedule toMs Thomas. Mrs Kingsbeer acknowledged that when she signed the EOI ResponseSchedule she could not have not seen the "Contract Schedule 11 – DQMP Elements"because the 2016 ICA only contained schedule 9.[96] By the start date on 29 January 2018, there was no new written contract inplace. KTL started the Additional BOP Runs using short-term rental equipment.Subsequent events[97] KTL's case was that it had a binding contract with MBNZ for theAdditional BOP Runs by 29 January 2018. However, because the parties'subsequent conduct may be taken into account in that determination, we review therelevant events that followed that date. Before doing so, we make some generalobservations about the context in which these events occurred.[98] First, Mr Sutherland and Mr Bavister, clearly, had many other calls on theirtime and attention around the start date. The circumstances in which Mr Bavister43 At trial, KTL argued that this requirement had been waived by Mr Millin's text of12 January 2018. The Judge rejected this and we respectfully agree with that conclusion.However, the argument was not advanced on appeal and we do not need to address it.assumed his new position can be gleaned from his comment in cross-examinationthat "there was a massive change at [MBNZ] at that time. There was a lot of thingsgoing on." It appears that he did not meet with Mr and Mrs Kingsbeer until sometime in mid-March 2018.[99] Secondly, Mr Bavister and Mr Sutherland could not be sure about whatMr Millin had said to the Kingsbeers. There was no personal hand-over. Mr Millindid not leave any handover notes. Mr Bavister did not have access to Mr Millin'semails. There appears not to have been any attempt made to check KTL's claimswith Mr Millin — for example, regarding the short-term costs — though this mayhave been attributable to the circumstances in which Mr Millin's employment wasterminated.[100] Thirdly, Mr Bavister appears to have received limited written information byway of introduction to the KTL situation, with an email dated 18 January 2018 fromMr Sutherland to others in the MBNZ management team summarising the transitionfrom Hall's to KTL, together with the LOI and the routes schedules. The emailreferred to KTL's history with MBNZ — that it had "provided good service andestablished strong relationships with the restaurants", and confirmed that KTL wouldbe taking over Hall's Rotorua/BOP runs. It detailed the restaurants and theschedules. It did not mention the contractual basis for the new arrangements, whichwas mentioned only in the LOI. Mr Bavister first saw these documents after heassumed his new position.[101] Mr Bavister was cross-examined about the extent to which he familiarisedhimself with the KTL's assumption of the Additional BOP Runs. He took from theLOI that the new runs were being treated as falling under KTL's existing ICA. Thissuggests a misunderstanding of the purpose of the LOI (as discussed, it was onlyrequested to provide a basis for securing the rental agreement so that KTL could startthe runs). In addition, Mr Bavister was not sure when he familiarised himself withthe 2016 ICA.[102] Nor was Mr Bavister able to say what the position was regarding thecompetency requirements. He had a meeting with Mr Galway and discussed variousthings, including KTL's completion of the competency requirements. They weresaid to be "a work in progress" but Mr Bavister did not follow this up because hewas not directly responsible for this issue and Mr Galway did not report to him. Inthese circumstances the evidence falls short of showing that, if a contract had beenformed, it was conditional on completion of the "EOI Response Schedule". KTLpoints out that the "Schedule 11 DQMP Elements" document did not requireexecution, merely that KTL had to read and understand it. We agree with KTL that ifany competency matters were outstanding, completion was a formality.[103] Mr Bavister's initial discussions with the Kingsbeers were mainly aboutoperational matters. However, by March 2018 KTL was under financial pressure asa result of the short-term costs and was concerned that there was no indication fromMBNZ as to when the contract would be provided. On 21 March 2018, Mr andMrs Kingsbeer emailed Mr Bavister raising concerns over the lack of a new contractand seeking reimbursement of the short-term costs. They explained the impact of thechange of dollar per kilometre rate on the KTL budget and the need to start the newruns with rental equipment. They went on to say:We advised [Mr Millin] at the time that although the letter of intent assistedus in being able to short term lease equipment, it wasn't a long term fix andwe would need to have a contract [i]n place within 6 weeks ofcommencement. We advised [Mr Millin] that we needed a long termcontract in place before we could order the equipment. [Mr Millin] had indicated on his part that he acknowledged the shorttimeframe and in lieu [of] remuneration for this extra contract expensewould be reimbursed.We feel we are stuck, we can't order the right equipment, because we don'thave a long term contract, but in the meantime, we have all these extraexpenses, that weren't part of the original deal, that we do, in order to get thejob done The original plan was by now to have contracts in place,equipment on order (build times for trucks and trailer will take at least 4 to 6months). In the meantime be reimbursed, and by now the gear would havebeen arriving next month or may . But none of that has happened, and weare now at the tail end of March, without a resolution.[104] There was no reply to this email. Mr Bavister said that he did not see it until28 March 2018 when Mrs Kingsbeer followed it up with a phone call and then resentthe email. Our impression is that, whether as a result of pressure of work and/or lackof information, Mr Sutherland and Mr Bavister did not grasp why a fresh writtencontract and the short-term costs seemed so important to KTL.[105] On 31 March 2018, KTL sent two invoices for "above contract expenses" —dated 28 February and 31 March 2018 for $17,310.03 and $17,316.64 respectively.Mr Bavister described receipt of the invoices as "quite a shock", noting that Januaryand February 2018 had proceeded without any invoices rendered for these additionalcosts. His view was that without any specific written agreement regardingreimbursement for these costs, it would be difficult to get the invoices approved forpayment.[106] Mr Bavister's evidence was that he was confused by the Kingsbeers'suggestion that the short-term costs were caused by the lack of a written contract.The 2016 ICA was in place and he therefore could not understand why the lack of afresh contract should be a problem. Mrs Kingsbeer explained that the 2016 ICA didnot allow KTL to arrange its financing and leasing requirements but Mr Bavister stilldid not understand — he considered that the 2016 ICA should have been sufficient.This evidence is important. The Kingsbeers had made it clear that KTL's plan wasonly viable if it could take a long-term lease on the new equipment — the costs of ashort-term rental could not be sustained. But a long-term lease required KTL tosatisfy TR Group that it had a long-term contract. By the start date of theAdditional BOP Runs, the 2016 ICA had less than a year to run and was insufficientto secure a long-term lease. Mr Millin understood this. Mr Bavister appears not tohave understood.[107] On 6 April 2018 Mr Bavister emailed KTL to say that he was working on adraft of the written contract and expected to have something the following week. Nodraft was provided.[108] On 9 April 2018, Mrs Kingsbeer emailed Mr Bavister. She raised fourmatters. First, the short-term expenses, which would continue to accumulate untilthe right equipment was in place. Secondly, the written contract, explaining againthe need for a contract matching the term of the equipment lease. Thirdly, the factthat, despite a Consumer Price Index (CPI) clause in the 2016 ICA, no compensationfor CPI increases had been paid over the entire period of the contract. Finally, sheprovided the email exchange regarding the dollar per kilometre rate.[109] Mr Bavister's evidence about this email is telling. He reiterated the fact thatthere was no written agreement regarding the short-term costs or a written contractand, in relation to the CPI increases, commented that "[i]t seemed as though everytime we tried to get clarification from KTL about what they were claiming, and onwhat basis, KTL tried to claim for more and more costs (this is seen later in therelationship too)". In cross-examination, however, Mr Bavister accepted the KTLwas entitled to CPI adjustments. On 20 April Mr Bavister wrote formally to KTLadvising that the new runs were intended to fall under the 2016 ICA and MBNZ didnot accept any obligation to meet the short-term costs. It agreed to review the dollarper kilometre rate. In relation to the CPI adjustment, MBNZ would commit toreviewing CPI on an annual basis but would not conduct any prior year reviews.[110] At this stage, Mr Bavister's position in relation to the various issues beingraised by KTL, as it appears from his evidence, can be summarised as: (1) he did notsee why not having a fresh contract for five years was a problem because he had"been dealing with contractors for many years and they had been able to sign up withequipment et cetera without the need for a contract to be in front of them" (2) hedid not know when the contract would be available (3) without any written record ofagreement to pay the short-term costs, he saw no obligation to do so and (4) he knewnothing about KTL's financial position and was not aware that there was any stresson the business.[111] KTL's very different perspective is captured in Mrs Kingsbeer's emails toMr McGregor at the end of April 2018. Following a telephone discussion betweenMrs Kingsbeer and Mr Bavister two days prior, Mrs Kingsbeer emailedMr McGregor on 26 April 2018, saying:[I've] tried and tried to explain to them that the letter of intent was what gotthe ball rolling just so we could get equipment from TR Group, it had nosubstance or longevity to it, and we have been making that clear since theday we started. Its so short TR Group won't even put tail lifts on thetrailers!!!! I didn't discuss the TR Group deal, only to say if we had a draftcontract in place by 1st May, long term lease rates kick in.He then said, how can this all be fixed, as a new contract could take 1, 3, 4weeks, or 4 months. I said I would be continuing to email monthly invoicesfor the short fall, as the deal we are doing is not the deal we signed up forand we are not meeting the budgets that we set and [our operation is]unviable at those rates.And in another email a few minutes later:Our Cashflow has dried up.Today we have been doing the run for 13 weeks. We are in a far worse placethat what we were 13 weeks ago. We had money in the bank and our mentalhealth was ok. Both have deteriorated.[112] At this point, Mr McGregor became directly involved. He emailedMr Sutherland on 27 April 2018 to express his concern. Mr Sutherland responded byemail the same day:In terms of the contract, the incremental work was included as additionalservices under the existing contractor agreement expiring 2019 (which Iconfirmed via email). [MBNZ] are in the final stages of an updatedagreement template which when reviewed and mutually signed wouldoverride the existing one.In terms of additional costs, we are not aware of any commitment by[MBNZ] to pay additional costs nor do we understand the breakdown ofthese claims. Should you be able to clarify these points please forward toMark Bavister and myself.[113] Mrs Kingsbeer appears to have acted on that email, contacting TR Group on2 May 2018 to advise:According to [MBNZ] they are in their final stages of providing a contract tous. I'm not sure what it will look like, whether it be 5 years or 2, 3x3.We had the conversation last week regarding back dating the short termleases, into the long term 5 year plan. Can you or Andrew send me a emailconfirming this.[114] TR Group responded immediately: the group's Sales and Account Manager,Peter Sowman, emailed "sounds like progress is [being] made on the contract sothat's great as that is fundamentally key to the new leases [being] signed off." Thisis a convenient point to record the Judge's third reason for finding that no contractualagreement had been reached. The Judge considered that:44 other than that five-year term, there was no evidence at all whateverTR Group or any other financier may have required as "suitable" forlong-term leasing or other financing was communicated to MBNZ, still lessthat MBNZ accepted the contract would be provided in those terms. [115] The Judge noted that TR Group's correspondence with KTL went no furtherthan TR Group waiting on "some paper information" which it later explained asmeaning that KTL's financial information was sufficient for it to be confident tomake its $500,000 or more investment in the new equipment.45 The Judge went onto observe that whether TR Group's requirement to be satisfied either as to thefinancial strength of the client or the basis on which the vehicle would be used wouldhave been satisfied by this contract was conjecture.46 However, there was evidencethat provision of the contract from MBNZ would have been sufficient for TR Groupto have leased the new equipment. Mr Carpenter said in evidence that TR Group"required KTL to provide their underlying five year contract to proceed with thelease agreement, along with their financials to approve finance and secure theleases". He confirmed in cross-examination that if KTL provided the contractbetween it and MBNZ, TR Group would have signed up a five-year lease agreement,and that TR Group did not regard the Kingsbeers as financially strong enough toenter into a long-term lease with TR Group without evidence of the contract. Andlater said "what we were looking for was the proper contract signed for thelong-term lease we were looking for the contract, not just the [LOI]."[116] As we have already noted, Mr Millin clearly understood that KTL could notfinance or lease the necessary equipment without satisfying the financier or lessor asto the underlying contract between it and MBNZ. Given Mr Millin's position andthe fact that no adverse credibility finding was made against him, Mr Millin'sknowledge of this must be treated as imputed to MBNZ. It seems clear to us thatTR Group did require the contract between KTL and MBNZ in order to provide a44 Decision under appeal, above n 2, at [71].45 At [71].46 At [72].lease for the new equipment and that, had it received the contract, the lease wouldhave been forthcoming and that MBNZ is taken to have known that.[117] It is also convenient at this point to address the Judge's fourth reason forfinding there was no contract reached — that there was no contemporaneousevidence that MBNZ had indicated that a draft contract would be provided withinany particular time period.47 Mr Millin had agreed in cross-examination that he didnot give a binding commitment to the Kingsbeers that the contract would beprovided within a certain period because he did not know when it would beprovided. But he also said that he had expected it to be provided before the startdate:A. I was expecting the contract to be issued before [KTL] actuallystarting their work because how can you commit to doing the workwithout a contract? I mean, you can't cover cost that way, it'sridiculous so it's, yeah, that's what I would've expected. In otherroles I've been in, the contract would have been issued before thework was started so yeah, I would have expected that to be pretty,pretty fast. But it didn't.Q. And within the ongoing conversations that you were having with theKingsbeers about the contract and when it would be delivered, wasthat a topic that was coming up?A. Yeah, they were continually asking which I'd expect them to. It's ahuge commitment to agree to do the I asked them to do and toreally, but they put, they would have put a lot on a line if thatcontract hadn't come out because, and I was just as nervous becauseat the end of the day if for any reason something went wrong andthey pulled out or anything, it would have been in my lap. I wouldnever have put, I never wanted to put myself in that sort of positionbecause McDonalds are ruthless.[118] It is apparent that Mr Millin fully grasped that KTL needed to have thecontract within a time frame that would enable it to secure the new equipment asquickly as possible because renting equipment on a long-term basis was not viablefor it. Further, on the information Mr Millin had in January 2018, he could haveagreed to provide the contract within a reasonable time. He had no reason to believethat could not be done. Unbeknownst to Mr Millin, the template was being revisedand this would take much longer than anyone expected. That fact does not, however,47 At [73].mean he did not agree with KTL that the contract would be provided within areasonable time.[119] Even after Mr Millin left MBNZ, its staff continued to act consistently withthe expectation that a contract could be provided within a reasonable time.Mr Bavister acknowledged that:I probably did say that a written contract could be provided relativelyquickly, but that would be because I did not know that the contract was beingreviewed by our legal counsel in the USA. I learned that subsequently.[120] While we agree with the Judge's assessment that there is no basis on which toconclude that there was a definite commitment to provide the contract within a threeto six week period, we think the correct inference to draw from the evidence is thatthe parties agreed that a contract would be provided within a reasonable time. Wecome to the question of what a reasonable time was in this context later.[121] As Mrs Kingsbeer had repeatedly tried to explain, the provision of the writtencontract was linked to the issue of the short-term costs; putting an end to theshort-term costs depended on them being able to enter into the lease with TR Groupand that depended on provision of the contract. This brings us to the Judge's finalreason for rejecting the assertion that MBNZ had agreed to meet the short-termcosts.48 This conclusion was based on Mr Millin's evidence that, with the benefit ofthe ballpark figure provided by the Kingsbeers that the costs would be under$50,000, the Kingsbeers would "be discussing them as they come in" and that it was"expected that the costs would be paid back over time, but due to KTL's service andhigh standards we were willing to step outside normal practice to assist". Heclarified this in cross-examination, agreeing that in the long run, there would"ultimately be no cost to [MBNZ]" because the cost would be "worked out in therates" — in other words, it would all come out in the wash. The Judge said:49It is unclear if Mr Millin contemplated some form of bridging finance.The illogic of Mr Millin's indiscriminate consideration of KTL's additionalexpenses incurred by short-term rentals for payment, and inevitable start-upexpenses for recovery, indicates his further confusion. There is no evidencehe was aware of TR Group's preparedness to credit KTL, which may have48 At [74].49 At [74] (footnote omitted).made sense of MBNZ's 'recovery'; that preparedness was not in any eventindicated by TR Group until well after Mr Millin says he discussedshort-term expenses with the Kingsbeers.[122] Respectfully, we find this reasoning difficult to follow. There was never asuggestion of any formal repayment that might involve some form of bridgingfinance. Mr Millin was clearly conveying that the short-term costs could be met byMBNZ to ensure that KTL would sustain its delivery services (which was essentialto MBNZ) and that future rates could be settled in a way that allowed MBNZ toeffectively recover its up front support for KTL. When Mr Millin was negotiatingwith KTL in late 2017 and early 2018, it was not yet known that TR Group wouldultimately offer to credit the short-term rental costs against the cost of the long-termlease — that offer was not made until May 2018, after Mr Millin had left thecompany.[123] On 4 June 2018 Mr Bavister emailed KTL requesting a meeting to discuss"a couple of items, including the status of the contract." Infuriated, KTL declined tomeet until the issue of the contract and the short-term costs were resolved. The nextday, however, Mr Kingsbeer spoke to Mr Sutherland and Mr Bavister by telephone(prompted by an accident Mr Kingsbeer had during a run). On 6 June 2018Mrs Kingsbeer emailed Mr Bavister, with a copy to Mr Sutherland, as follows:[Mr Kingsbeer] has talked to [Mr Sutherland] regarding the extra expenseswe are incurring. I think its been established with all parties now that theseextra expenses incurred are solely because of the way the runs are currentlyset up, and this set up is due to the delay in receiving the contract.Once everything is in place i.e. the forklifts are mounted to the actualtrucks, these extra expenses will cease.As [Mr Sutherland] has indicated to [Mr Kingsbeer] in their conversationyesterday, he now fully understands what these expenses are for and thatthey will not be an ongoing expense once correct gear is set up with Forkliftsmounted to the trucks, he indicated that there shouldn't be any problem inyou signing off on those invoices 108 Feb, 109 Mar, 116 Apr, and paying us.I will email you May Invoices expenses later in the week.Now that everyone is on the same page, and you can clearly see from theinvoices what every expense is for, can you please confirm what date theywill be paid.Thank you and we look forward to hearing from you tomorrow (Thursday)as we should be receiving a copy of the contract.[124] Mr Sutherland took no issue with Mrs Kingsbeer's summary at the time,though at trial he said it was a "step too far" to suggest that he had agreed that therewould be no problem signing off on the invoices.[125] On 10 May Mr McGregor called Mr Bavister and was told that the contractwas with MBNZ's lawyers and that Mr Bavister would get back to him with anupdate. Mr Bavister did not recall the specifics of this call but acceptedMr McGregor's account. Mr McGregor emailed Mr Bavister on 22 May 2018enquiring about progress. He was told that the contract was still being reviewed byMBNZ's lawyers and Mr Bavister would update him on 28 May 2018, which he didnot do.[126] Mr Bavister replied that Mr Sutherland would be responding in relation to thecontract and the extra expenses. On 10 June 2018 Mr Bavister emailed theKingsbeers to say that a contract should be available on 12 June. Nothing wasreceived.[127] Finally, on 14 June 2018 MBNZ send a draft contract. It was in substantiallythe same terms to the 2016 ICA, but for a five-year term. It was, howeverincomplete in that the schedules referring to the agreed rates were missing —Mr Bavister advised that MBNZ and KTL would "still need to work together tocomplete schedule 2 and 3". In a separate email Mr Bavister set out a number ofquestions about the short-term costs.[128] KTL replied, providing the information, its exasperation evident from thecomments (presumably by Mrs Kingsbeer) that:This is disappointing and frustrating, as we have explained [in] so manyemails and conversations to both you and [Mr Sutherland], the breakdown ofthese costs. This is not something we [are] profiteering from, these areactual expenses we are incurring, that we never budgeted for.[129] Following this exchange, on 15 June 2018, Mr Bavister emailed KTL that"[MBNZ] is committed to finalising these discussions as quickly as possible" andsuggesting a face to face meeting the following week. He confirmed that MBNZ hadreviewed the information provided and "agree[d] with covering the majority [of]expenses" to the tune of approximately $34,000. MBNZ ultimately agreed to pay$39,772.62.[130] KTL responded positively on 18 June 2018 and asked if money could be paidthat day. MBNZ requested a revised invoice for the agreed amount ($39,722.62),which Mrs Kingsbeer provided in the evening of 18 June 2018, asking that it be paidas soon as possible. The following afternoon Mr Bavister asked for a change to oneof the items such that it stated the amounts as NZD and included the details of KTL'sbank account. Payment was not made. On the morning of 20 June 2018,Mrs Kingsbeer emailed Mr Bavister asking when payment would be made "as I hadto report to my bank before COB" adding that she could "not stress theimportance of this [enough]". Mr Bavister replied that he understood the importanceand would let her know. By the afternoon, nothing had been heard. Mrs Kingsbeeremailed again. Mr Bavister responded that Ian Thomas (the Finance Director) wasback in Australia the next day and a further update would be provided then.[131] On 21 June Mr Bavister confirmed that "payment [had] been completed thismorning by the Australian team." Mrs Kingsbeer was cautious. She decided that theplanned meeting ought to wait until the payment had been received. But paymentwas not received. On 22 June 2018 KTL's lawyers wrote to MBNZ requiringpayment of the short-term costs reflected in invoices 131, 134, 135 and 136 by27 June 2018 and giving notice that KTL would cease the Additional BOP Runs on30 June 2018. It confirmed that it would continue the Gisborne and Whakatāne runs.[132] The agreed payment for the short-term costs was finally made on3 July 2018. MBNZ asserts that the delay was the fault of its bank.[133] On 3 September 2018, KTL gave three months' notice, as required by the2016 ICA, of its intention to cease the existing runs. It could no longer managethese runs economically because it was using the larger trailer leased for theAdditional BOP Runs, which was too expensive to use on the Gisborne andWhakatāne runs.[134] Mr Kingsbeer gave evidence that after ending its relationship with MBNZ,KTL made efforts to find other work. It found that very difficult. It had beenoperating in a specialist area and its equipment was set up to transport refrigeratedgoods to MBNZ requirements. There was no opportunity to find other work of thattype. The other main contractor for that kind of work was Hall's, the contractor fromwhich KTL had taken over. It had surplus capacity and would have handled anyextra work itself. Mr Kingsbeer made enquiries as to other kinds of work. However,there was little work available, and moving away from refrigerated transport wouldhave meant modifying the existing equipment, which KTL could not afford to do. Itreturned the leased equipment to TR Group and sold off the equipment that it alreadyowned, using the proceeds to repay debt.Was there a contract and if so, what were its terms?KTL and MBNZ intended to be bound[135] We consider that the weight of the evidence is to the effect that when KTLand MBNZ negotiated the terms on which KTL would assume theAdditional BOP Runs, they both intended to be bound from 29 January 2018 andthey reached an agreement on that basis.[136] KTL was certainly keen for the increased business from MBNZ. But it wasalso sufficiently cautious to seek advice from Mr McGregor about the viability of thenew runs and to follow that advice. The evidence does not suggest that Mr andMrs Kingsbeer took what would be a significant financial risk (including stoppingwork for its other clients) without knowing that MBNZ was committed to a five-yearterm on terms that would ensure the contract was viable for KTL.[137] MBNZ was equally keen. On Mr Millin's evidence, KTL was really the onlyavailable contractor in the region — the only other being Hall's, which was ceasingwork on 28 January 2018. There was pressure on Mr Millin to ensure a seamlesstransfer — it was evident that McDonalds was a demanding client and lapses inservice would not be tolerated. MBNZ itself needed the certainty of having KTLcommitted to avoid risk in terms of its own contractual obligations to McDonalds.These considerations were exacerbated by the difficult time of the year for startingthe Additional BOP Runs. Both MBNZ and KTL needed the certainty of the otherbeing committed.[138] So, Mr Millin and the Kingsbeers both understood that: (1) the runs wouldonly be viable for KTL if it had a five-year lease of new equipment (2) that could nothappen until TR Group saw that KTL had a five-year contract with MBNZ(3) although it was not known exactly when a written contract would be available, itwas reasonable given the parties' history and the state of knowledge at the time, toexpect that this would only be a matter of weeks and (4) if MBNZ coveredshort-term costs arising from having to hire equipment on a short-term basis pendingthe written contract becoming available, KTL could confidently undertake the newruns.[139] The interconnectedness of the short-term costs and the provision of a writtencontract within a reasonable period, which was known to Mr Millen, was notsubsequently understood by MBNZ's Australian management and not adequatelyrecognised by the Judge.Express terms[140] Mr Millin, who had the ostensible authority to conclude an agreement withKTL, was certain he had agreed to a five-year term. For the reasons discussedabove, we do not accept MBNZ's argument that any long-term agreement wassubject to the written contract being provided or to the competency requirementsbeing completed. We find that there was an express term of the contract that KTLwould perform the Additional BOP Runs for a five-year term.[141] For completeness, we address the Judge's comment that "[the] pleadedessential terms also omit any obligation on KTL to perform work for MBNZ".50This comment was made in relation to the argument that the parties had agreed thatthe pleaded terms that MBNZ would provide a written contract within a reasonabletime and meet the short-term costs were essential to them — suggesting that the lackof any obligation on KTL to actually undertake the runs "might be thought fatal to50 At [80].the pleaded terms' contended essentiality."51 MBNZ adopted the Judge's view.Respectfully, we disagree.[142] KTL's assumption of the Additional BOP Runs was the raison d' être of thearrangement, for both KTL and MBNZ. The Amended Statement of Claim pleadedan essential term that MBNZ would provide a "Written Contract" within areasonable period. The "Written Contract" was defined as "a written contractdocumenting the BOP Additional Runs". The meaning of "BOP Additional Runs"was drawn from the pleading at paragraph nine that "[KTL] would undertakeadditional delivery runs to: Bay of Plenty and Rotorua ('the BOP AdditionalRuns')".[143] We also find that there was an express term that, pending the written contractbeing provided, MBNZ would meet KTL's short-term costs up to a maximum of$50,000. The fact that the precise short-term costs were unknown does not precludean agreement because the parties had agreed the upper limit. Nor does the fact thatthere was no express agreement regarding when the costs would be reimbursed —the parties can be taken to have agreed that the usual commercial practice ofinvoiced costs being paid the following month would apply. We note that theinvoices KTL rendered on 31 March 2018 were endorsed "Terms: 20th of followingmonth".Implied term[144] MBNZ submits that there are no grounds on which to imply a term that awritten contract would be provided within a "reasonable time". It argues that such aterm is not capable of clear expression.52 It give two broad reasons for thissubmission. First, it is unclear what form of written contract would be "suitable toenter into long-term leases and/or obtain finance on". We do not accept thissubmission because there was clear evidence from TR Group that a written contractbetween KTL and MBNZ for a five-year term would allow TR Group to provide along-term lease to KTL.51 At [80]52 Referencing Bathurst, above n 34, at [116].[145] The second reason given is that it is not obvious what would constitute areasonable timeframe. We do not accept this submission either. We emphasise againthat the viability of the Additional BOP Runs depended on KTL being able to securea long-term lease of equipment and have its short term costs met by MBNZ in themeantime. We have found that there was an express term that MBNZ would do soup to a maximum of $50,000, which was intended to assist KTL for the periodpending the written contract being provided. A reasonable time for a written contractto be provided is necessarily within the period for which KTL would have itsshort-term costs met — beyond that the Additional BOP Runs would not be viablefor it.[146] The invoices for "above-contract" expenses, and additional costs breakdownattached to them, show that $54,865.42 of short-term costs had been incurred by theend of May 2018. The costs incurred were reasonably foreseeable and consistent ona month-to-month basis — with the average monthly short-term costs being$12,837.75. KTL would therefore accrue the recoverable limit of $50,000 ofshort-term costs in just under four months. A reasonable time for MBNZ to providethe contract within would have been, at the very latest, by 29 May 2018.[147] We therefore find there was a binding contract between KTL and MBNZ, theterms of which were that:(a) KTL would undertake the Additional BOP Runs from29 January 2018 for a term of five years;(b) MBNZ would provide a written contract to that effect within areasonable time of the start date (where a reasonable term was nomore than four months from the start date); and(c) pending the written contract being provided, MBNZ would meetKTL's short-term costs up to a maximum of $50,000.Was there a breach of contract by MBNZ?[148] KTL pleaded both repudiation and breach of the contract by MBNZ, thoughits case, both in the High Court and on appeal, rested primarily on the allegation ofbreach. The alleged breaches were the failures to provide a written contract within areasonable period and to pay the short-term costs.53 It is said that these failures gaverise to a right of cancellation under s 37(2)(a) and (b) of the CCLA — beingbreaches of terms that were essential to KTL and which substantially reduced thebenefit of the contract to it.[149] The Judge, having found that no contract existed, did not make adetermination on the issue of breach:54 I need not to, and do not, contemplate if MBNZ nonetheless may be saidin breach of KTL's pleaded essential terms for contract provision andshort-term expenses' payment, or any resultant quantification of lost profits.Such is to pile conjecture on conjecture. But it should not go withoutmention MBNZ provided a draft five-year contract, and paid short-termexpenses, to KTL. Whether that was provision at a reasonable time, orpayment of all payable, is not now for determination under this first cause.(footnotes omitted)[150] MBNZ does not accept that either of the terms was essential. It says thatKTL knowingly entered into the arrangement on the basis that it would incurshort-term expenses and that a written contract would follow at some point in thefuture. There was no reason the arrangement could not have continued on that basisbut for KTL's cancellation of it.[151] We do not accept that submission, for the reasons explained earlier — bothKTL and MBNZ needed the Additional BOP Runs to be viable for KTL, and thatdepended on KTL being able to secure long-term leases of new equipment, which, inturn, required a written contract from MBNZ and support from MBNZ in relation tothe short-term costs in the meantime. For the same reason, we find that the termregarding payment of the short-term costs was agreed to have been essential. We53 We only consider the issue of breach in relation to the implied term that MBNZ would provide awritten contract within a reasonable period, which we have found. This is instead of thealternative term asserted, that a written contract be provided within three to six weeks.54 At [80].have previously commented on MBNZ's apparent failure to appreciate theinterconnectedness of these aspects of the arrangement, which Mr Millin appreciatedand which was the reason he reached the agreement he did with KTL.[152] Finally, MBNZ denies that there was any breach of the terms. In relation tothe obligation to provide a written contract within a reasonable period, it relies on thefact that the contract template was under review by MBNZ's overseas lawyers andneither Mr Sutherland, nor Mr Bavister could reasonably have been aware of howlong that would take. It asserts that if there was a breach, it was cured by MBNZ'sprovision of the draft contract on 14 June 2018 and a full copy on 19 June 2018. Wehave held that a reasonable time for providing a written contract was on or before29 May 2018 — at the outside. The contract, in its final form, was not provided untilthree weeks after that date. MBNZ was unquestionably in breach of this obligation.[153] As to the asserted breach of the obligation to pay the short-term costs, MBNZmaintains that it discharged its obligation by engaging in constructive negotiationsfor payment and that it "did pay them, subject to the bank error". KTL'scommunications in June 2018 about the pressing need for payment could not havemade it clearer that the time for payment had passed and KTL could not wait anylonger. Whatever the reason for MBNZ's failure to make the payment when it hadpromised to do so, it is an error that MBNZ must bear.[154] For the same reasons as we found that performance of these terms was agreedto be essential, we also find that the failure to provide the written contract within areasonable time and to reimburse the short-term costs substantially reduced thebenefit of the contract for KTL. By mid-June 2018, KTL could not expect anyfurther reimbursement of short-term costs beyond what had been agreed. Thesewere accruing at approximately $12,000 per month. There were serious difficultieswith cash-flow. Even with the final contract, there would be a lead time of someweeks while new leased equipment was modified. Essentially, the Additional BOPRuns were no longer viable. KTL was entitled to cancel the contract on that ground.Affirmation[155] It will be recalled that KTL's solicitors wrote to MBNZ on 22 June 2018advising that it was no longer viable for KTL to continue the Additional BOP Runsand that it would cease doing so on 30 June 2018. MBNZ pleaded that KTL's actionin continuing the runs until 30 June 2018 amounted to an affirmation of the contract,disentitling it to cancel. The Judge did not address this issue. MBNZ raised it in itsnotice supporting the judgment on other grounds.[156] A contracting party may lose their right to cancel a contract for breach bychoosing to affirm the contract. Affirmation, now provided for by s 38 of the CCLA,has its origins in equity and "rests on the underlying notion that an aggrieved personmust elect between fundamentally inconsistent rights."55 Whether a party has madethat election and affirmation the contract is very much a question of fact. Theevidence must show that the party has made a firm choice to which they areirrevocably committed.56 In this case, the evidence is perfectly clear that KTL hadelected to cancel. Its preparedness to continue servicing the Additional BOP Runsfor a further eight days — conveyed in the same paragraph as the notice to cancel —cannot be viewed as indicating any uncertainty about that election. What it did wasallow MBNZ time to make alternative arrangements, something that was very muchto MBNZ's advantage.Failure to mitigate[157] MBNZ had asserted that, if there was a binding agreement between theparties, then KTL had failed to take reasonable steps to mitigate its losses upontermination of the Additional BOP Runs by ceasing business. It contended that KTLshould have continued to trade and to find new customers. The Judge did notconsider it necessary to deal with this issue, but added that if he had done so, hewould have found that disposing of the means of conducting its business wasreasonable in the circumstances.57 MBNZ challenges that finding.55 Crump v Wala [1994] 2 NZLR 331 (HC) at 336.56 See for example Hughes v Huppert [1991] 1 NZLR 474 (HC) at 478; and Jansen v WhangamataHomes Ltd HC Hamilton CIV 2003-419-1511, 29 November 2004.57 Decision under appeal, above n 2, at [89].[158] In our view the Judge's indicative conclusion was correct. The onus ofproving that KTL failed to mitigate its loss was on MBNZ, but Mr Kingsbeer'sevidence, as recorded earlier, makes it clear that KTL took reasonable steps to tryand continue the business before ceasing to trade.[159] Also in the context of KTL's obligation to mitigate, MBNZ complained that,in calculating its claim, KTL failed to account for the value of the equipment thatwould have been used to carry out the Additional BOP Runs. Mr Cook made afurther submission that did not reflect the pleadings relating to failure to mitigate thatthe value of the business should have been deducted from any loss sustained. Thesearguments go to quantum, rather than the question of mitigation.Relief: quantum, failure to mitigate and the quantum meruit claim[160] In the event of its appeal succeeding, KTL seeks to have this Court enterjudgment for the amount sought in its Amended Statement of Claim for damages forloss of profits ($679,475) and short-term costs ($91,261.44). MBNZ, however, seeksto have the question of quantum remitted to the High Court.[161] There was extensive evidence in the High Court on the question of quantumbut the Judge did not make any findings. We consider it preferable for the questionof quantum in relation to both the loss of profits claim and the short-term costs to bedetermined by the trial Judge so that the parties have the benefit of a first instancedecision on this aspect.[162] The issue of relief is complicated slightly by the outcome on the quantummeruit cause of action. In the event of its contractual claim failing, KTL had sought$91,261.44 in respect of the short-term costs on the basis of quantum meruit.The Judge held that KTL's claim in quantum meruit failed except to the extent of to$7,876 — but that finding in relation to invoice 136 was made in his supplementaryjudgment. Given our finding that a contract did exist, quantum meruit was not theappropriate basis for determining KTL's entitlement and that aspect of the mainjudgment should be set aside. However, there is no appeal against the supplementaryjudgment and that judgment must stand. The modest amount recoverable under thatjudgment can be taken into account in assessing quantum overall.Remaining grounds of appeal: estoppel/FTA/quantum meruit[163] Given our conclusions on the issue of whether a contract existed between theparties, it is unnecessary to consider the remaining grounds of appeal.Result[164] The appeal is allowed. The judgment in the High Court is set aside.[165] The case is remitted to the High Court for determination of quantum inaccordance with the findings in this judgment.[166] MBNZ must pay KTL costs for a standard appeal on a band A basis, withusual disbursements. We certify for second counsel.SolicitorsHolland Beckett Law, Tauranga for AppellantBuddle Findlay, Auckland for Respondent