NEWFOUNDWORLD SITE 2 (HOTEL) LIMITED v AIR NEW ZEALAND LIMITED [2018] NZCA 261

NEWFOUNDWORLD SITE 2 (HOTEL) LIMITED v AIR NEW ZEALAND LIMITED [2018] NZCA 261 [20July 2018]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA341/2017[2018] NZCA 261BETWEEN NEWFOUNDWORLD SITE 2 (HOTEL)LIMITEDAppellantAND AIR NEW ZEALAND LIMITEDRespondentCA515/2017BETWEEN AIR NEW ZEALAND LIMITEDAppellantAND NEWFOUNDWORLD SITE 2 (HOTEL)LIMITEDRespondentHearing: 14 March 2018Court: Winkelmann, Asher and Gilbert JJCounsel: N R Campbell QC and J S Learner for Newfoundworld Site 2(Hotel) LimitedN S Gedye QC and J A MacGillivray for Air New ZealandLimitedJudgment: 20 July 2018 at 10.30 amJUDGMENT OF THE COURTA The appeal is dismissed.B The cross-appeal is dismissed.C Newfoundworld Site 2 (Hotel) Ltd must pay Air New Zealand Ltd costsfor a standard appeal on a band A basis (reduced by 20 per cent to takeinto account the cross-appeal) and usual disbursements.____________________________________________________________________REASONS OF THE COURT(Given by Winkelmann J)Table of ContentsPara No.Introduction [1]The High Court decision [8]Appeal [13]First issue: was agreement reached in July 2012 that Novotelcould charge for early check ins?[14]Background facts [15]High Court judgment [28]Argument on appeal [29]Analysis [31]Second issue: did the July agreement form part of the 2013Agreement?[37]Background facts [38]High Court judgment [48]Argument on appeal [50]Analysis [51]Third issue: is Air New Zealand estopped by reason of itsconduct from recovering the payments for early check ins?[63]High Court judgment [67]Analysis [69]Fourth issue: is Air New Zealand entitled to recover reasonableindemnity costs from Novotel under clause 11.2 of the 2013agreement?[73]Analysis [82]Result [89]Introduction[1] Newfoundworld Site 2 (Hotel) Limited owns the Novotel Citygate Hotel inHong Kong, located close to the Hong Kong International Airport. Like most hotels,Novotel Citygate has standard check in and check out times to enable the cleaning andturnover of rooms. While the hotel does allow early check ins, it usually charges anadditional fee for it, which can be as much as the room's daily rate.[2] Air New Zealand Ltd is New Zealand's national airline. In 2011, it enteredinto a formal agreement (the 2011 Agreement) with Newfoundworld (which we referto as Novotel in this judgment) for the provision of hotel accommodation for itscabin crew in Hong Kong for the next 24 months. The terms of the 2011 Agreementincluded that Novotel would not charge for early check ins unless mutually agreed.[3] At the time, Air New Zealand's flight schedules allowed for the possibility of"back to backing" — an arrangement whereby one crew member checks out of thehotel very early in the morning, allowing time, with careful management by Novotel,for the room to be made up and available for the next (early) crew. The ability toback-to-back made the inability to charge for early check ins more commerciallypalatable because Novotel was still able to charge for the room on each day.[4] In March 2012, Air New Zealand's flight schedule changed so thatback-to-backing was no longer possible. Following this change, a practice developedwhereby Novotel would charge Air New Zealand, and Air New Zealand would pay,for early check ins. Novotel claimed an agreement was reached in July 2012 that itcould charge for early check ins because of the change to the Air New Zealandschedule.[5] In June 2013, following negotiations, a further contract was entered intobetween the parties for accommodation for a further period of two years(the 2013 Agreement). The written agreement executed by the parties stipulated thatNovotel would not charge Air New Zealand for early check ins. Nevertheless from16 June 2013, the start of the new contractual period, Novotel continued to invoiceAir New Zealand for early check ins and Air New Zealand continued to pay on thoseinvoices.[6] Following termination of the 2013 Agreement, Air New Zealand soughtrecovery of the early check in charges it had paid after the 2013 Agreement came intoforce. It claimed it had been invoiced for these amounts in breach of contract and thatit paid the invoices under the mistaken belief that the charges for early check ins werecorrectly invoiced. It sought recovery of the overpayments under four heads of claim:breach of contract; indemnity under the 2013 contract; breach of theFair Trading Act 1986; and unjust enrichment (action for money had and received).11 Air New Zealand Ltd v Newfoundworld Site 2 (Hotel) Ltd [2017] NZHC 1131 [High Courtjudgment] at [9].[7] Novotel argued in response that it was either contractually entitled to chargethose additional fees for early check ins, or that Air New Zealand was estopped fromrelying on the strict terms of the 2013 Agreement.2The High Court decision[8] In the High Court, Wylie J was satisfied that there was an agreement reachedin July 2012 that allowed Novotel to charge for early check ins.3 On appealAir New Zealand challenges that factual finding.[9] The Judge nevertheless rejected Novotel's defence that the July 2012agreement continued in force after the formal documentation of the 2013 Agreement.4It followed that Novotel had no contractual right to charge for early check ins andAir New Zealand had no contractual obligation to pay for those charges if invoiced.[10] It also followed, the Judge found, that Air New Zealand paid the invoices undera mistake — the payment clerk mistakenly believed that Novotel was entitled toinclude charges for early check ins under the 2013 Agreement.5 WhileAir New Zealand might have been careless in paying the invoices, carelessness on itspart did not deprive it of its right to repayment of the amount paid — an amount bywhich Novotel had been enriched.6[11] Wylie J was also satisfied that Novotel had breached its contract withAir New Zealand by levying the additional charges, and so it was contractuallyobliged to indemnify Air New Zealand for the breach. He entered judgment in favourof Air New Zealand for the sum of HKD 7,603,110 plus interest, calculated from thedate the dispute was first raised by Air New Zealand — a date selected to avoidAir New Zealand receiving any interest benefit from its own carelessness. 72 At [10]–[12].3 At [34].4 At [51].5 At [80].6 At [81], citing Dextra Bank & Trust Co Ltd v Bank of Jamaica [2001] UKPC 50, [2002] 1 All ER(Comm) 193 at [45]; and Saunders & Co (a firm) v Hague [2004] 2 NZLR 475 (HC) at [121].7 High Court judgment, above n 1, at [87].[12] The Judge rejected Air New Zealand's contract-based claim for an award ofindemnity costs.8 Air New Zealand cross-appeals against this latter finding.Appeal[13] The issues arising in this appeal are therefore as follows:(a) Was Wylie J correct to find that in July 2012 Air New Zealand agreedwith Novotel that, notwithstanding the terms of the 2011 Agreement,Novotel could charge Air New Zealand for early check ins where"back to backing" was not possible?(b) If so, did that agreement form part of the 2013 Agreement?(c) If not, is Air New Zealand estopped, by reason of its conduct in payingthe charges under the 2013 Agreement, from denying that Novotel wasentitled under that Agreement to charge Air New Zealand forearly check ins where no back-to-back room booking was possible?(d) Under cl 11.2 of the 2013 Agreement, is Air New Zealand entitled torecover reasonable indemnity costs from Novotel?First Issue: Was agreement reached in July 2012 that Novotel could charge forearly check ins?[14] Although successful in resisting Novotel's claims in the High Court,Air New Zealand nevertheless challenges the factual finding that in July 2012 itagreed Novotel could charge for early check ins. This factual finding has significancefor Novotel's appeal, because if there was no agreement in July 2012, it is much lesslikely such an agreement formed part of the 2013 Agreement.8 Air New Zealand Ltd v Newfoundworld Site 2 (Hotel) Ltd [2017] NZHC 2016 at [20][Costs judgment].Background facts[15] In March 2011 Air New Zealand initiated a request for a proposal (RFP) inconnection with cabin crew accommodation in Hong Kong. Novotel responded to theRFP with its proposed rates. In relation to early check ins, it stated that a check inbefore 10 am would result in one full overnight rate. As for late check outs, check outany time between 2 pm and 10 pm would incur a cost of 60 per cent of the agreedroom rate. After 10 pm, it was one full overnight rate.[16] Following negotiation, Novotel agreed to lower room rates and to abandon theproposed charges for early check ins and late check outs. Critical to Novotel'sagreement to forego these charges was that Air New Zealand's flight schedulesbetween Auckland, Hong Kong and London permitted outgoing and incoming crewsto occupy rooms on a back-to-back basis. On 19 April 2011, Novotel's thenGeneral Manager Mr Munro sent an email to the Supplier Relationship Manager,Ms Radovanovich, and another Air New Zealand representative, Mr Whaley, whichreads as follows: Novotel Citygate remains very keen to secure the Air NZ crew, and so,we're happy to remove the early check-in (and checkout) charges based on usbeing able to back-to-back crew, even with crew arriving at the hotel25-30 mins (we believe) early than estimate/scheduled (to HK Island andKowloon) whilst keeping the crew hotel departing-times the same.Should these arrival and departure timings change, and we can't physicallyback-to-back crew rooms, we would need to re-consider thisearly check-in/checkout charge. This would be the case only for 2 weeks inJune 2011 should we be successful in winning this contract, and we would behappy to waive this charge for 2011[17] By email dated 20 April 2011 Mr Munro confirmed Novotel's revised offer,reiterating Novotel's position as follows:Early Check in and Late Check out Charge: no charge based on current arrivaland departure pattern.[18] A formal contract was then executed (the 2011 Agreement). It was to be foran initial term of 24 months but with rights of renewal for further terms of 12 months.Novotel undertook to provide Air New Zealand with hotel accommodation inaccordance with the layover schedule provided to Novotel by Air New Zealand or itsagent. Both parties acknowledged that Air New Zealand schedules might changeduring the term of the contract. Clause 3.3 provided that where Air New Zealandnotified Novotel of a change to the layover schedule which represented a 30 per centor more increase to either the weekly hotel accommodation, early check ins or latecheck outs required by Air New Zealand, then the parties may renegotiate the hotelaccommodation rates and/or charges for early check ins and late check outs.[19] Clause 5.4 of the 2011 Agreement stipulated "[t]he supplier will not charge theAirline for Late Check-outs or early Check-ins except where this has been mutuallyagreed and detailed in Item 8 of Schedule 1." Item 8 in Sch 1 provided thatearly check in and late check out charges were not applicable.[20] Finally, both parties agreed that any amendment to or variation of the contractwas to be in writing, and executed by all the parties (cl 18.1).[21] In June 2011, the Agreement came into operation. Novotel did not initiallycharge for early check ins or late check outs. The arrival and departure of cabin crewsto and from the hotel allowed Novotel to utilise back-to-back arrangements, and so itdid not need to pre-hold rooms. Air New Zealand's ground handling agent —Jardine Airport Services Ltd (Jardines) — provided Novotel with theAir New Zealand flight schedules in advance. Room bookings were usually requestedin four weekly blocks. Upon receipt, Novotel reservation staff would review theschedule, make the bookings and confirm room availability to Jardines.[22] Sometimes things did not go in accordance with the usual pattern andearly check in charges were levied. Wylie J put the matter thus:9Occasionally there were additional bookings, for example, where additionalcrew required accommodation, or there was an unscheduled flight. In thesesituations, where back-to-back arrangements were not possible, Novotelwould make and confirm the room bookings to Jardines and Air NZ by email.The emails had attached Excel spreadsheets, which showed the bookings thathad been made. Where it was necessary to pre-hold rooms for additionalbookings or unscheduled flights, there was a "pop up" message notation. Thepop up message showed Novotel's intention to pre-hold the room. It was, orshould have been, obvious to a viewer that Novotel was intending to levyearly check-in charges in these situations.9 High Court judgment, above n 1, at [23].[23] Ms Lee, Air New Zealand's Manager for Asia Airports, gave evidence at theHigh Court hearing. Ms Lee said she did not open the Excel spreadsheets but alsoagreed she did not advise Novotel that she was not looking at them.[24] From March 2012, the ability to charge for early check ins became more of anissue after a change to the Hong Kong/London flight-departure time meant thatback-to-back arrangements could no longer occur. Outbound crews needed theirrooms longer, and inbound crews were arriving earlier. We adopt Wylie J's summaryof the evidence as to what happened at that point:[26] On 2 March 2012, when Novotel became aware through Jardines ofthe change in Air NZ's schedule, its Airline Accounts Manager, Mr Lung, sentan email to Ms Lee. The email advised that Novotel would need to pre-holdcrew rooms in order to provide for early check ins, and that the contract ratewould apply. The email requested confirmation from Ms Lee that this wasacceptable. Ms Lee responded on 2 March 2012, accepting Novotel'sposition. Much the same process was followed again later in March, whenNovotel again advised Ms Lee that it would need to pre-hold rooms, and thatit intended to charge for the same. Again, Ms Lee accepted this.[27] Novotel did not expressly request Air NZ's approval for pre-holdingrooms in accordance with flight schedules sent between early May 2012 andearly July 2012. Rather it confirmed the bookings, and sent through itsspreadsheet in the usual format [25] The critical exchange of emails began on 16 July 2012. Mr Lung sent an emailto Ms Lee in response to receipt of the August and September accommodation reportsfor Air New Zealand cabin crews. The Novotel email noted two things. First, that theback-to-back arrangements could not be applied for the August crew accommodationplan so rooms would need to be pre-reserved, and secondly, that due to high demandon Fridays and Saturdays in August any additional crew rooms would be charged outat the superior room rate rather than the contracted room rate.[26] Ms Lee forwarded that to Ms Radovanovich, who responded by email dated24 July 2012:I would accept that where we cannot "hot bed" the crews then we would haveto pay extra to block out the rooms from the night before.However our contracted rate is HKD$810 and I don't think we should bepaying extra if they have no standard rooms left. The contract recognises thatour layover schedule changes from time to time and the parties can onlyrenegotiate the rate if it is a change of more than 30% to the weeklyaccommodation requirements.[27] Ms Lee then forwarded that email to Novotel along with a note:Karyn share same view as mine and the extra one night charge due to not ableto meet back to back is fine. The only disagree of the superior room chargeand this pattern advise with sufficient notice as in the contract.High Court judgment[28] Throughout these proceedings Air New Zealand has contended that inthe email of 24 July 2012, Ms Radovanovich only agreed to a charge forearly check ins in a specific situation on a specific occasion. Wylie J rejected thatargument.10 He was satisfied that the parties had agreed they would not require strictadherence to the contractual provisions, and that from July 2012 onwards, Novotelwas entitled to make an extra charge for rooms pre-held where back-to-backarrangements were not possible because of Air New Zealand's altered schedule. Hesaid the contract proceeded on that basis and "it is noteworthy that Air NZ does notseek to recover any of the early check in charges it paid pursuant to the2011 contract".11Argument on appeal[29] Air New Zealand rehearses the same argument on appeal. It says the July 2012email was just another in a series of emails making ad hoc arrangements to rendercharges outside the 2011 Agreement and did not amount to a variation of the terms ofthe contract. Air New Zealand points to cl 18.1 of the 2013 Agreement which,as noted, provided that a variation was not valid and binding unless made in writingand executed by all parties. While Air New Zealand accepts the clause does notpreclude the possibility of informal variation, it argues the formalities contemplatedby the clause make it more likely the email was an arrangement to pay the charges on10 At [34].11 At [34].one occasion and not an agreement to vary the basis on which the parties dealt witheach other on an on-going basis.[30] Air New Zealand also relies upon the fact that following this allegedagreement, Novotel continued to ask for approval to charge early check ins in responseto receipt of cabin crew accommodation reports from Air New Zealand. It points tothe evidence of Mr Kam, Director of Sales and Marketing at Novotel, that Novotel didthis to "play safe". It follows, Air New Zealand argues, Novotel did not have anythingclear enough from Air New Zealand to cause them to stop asking after July 2012.Analysis[31] We find the Judge's reasoning persuasive. As the Judge observed, whileMr Lung's email of 16 July 2012 was notifying an intention to charge forearly check ins for a particular period only, Ms Radovanovich's and Ms Lee's emailsin reply were not so limited.12[32] Air New Zealand relies upon Mr Kam's concession that Novotel continued toask for permission to charge for early check ins after the July email exchange. We donot see this as significant. Mr Kam's explanation that it was good business practice toplay it safe is plausible. Mr Kam was tested about his understanding of the emailexchange in cross-examination:Q. can you see any words in Ms Lee's email which indicatethat she intended to reach a permanent agreement with you?A. Well I think the most important message is from[Ms Radovanovich], I think also the period from thebeginning of 2012 to approximately in July, there's been quitea number of extra flights that we have sought through theassistance from [Ms Lee] from Hong Kong office then wecould see slowly the flight change and getting some flights arenot able to be back to back, so that's obviously forclarification and eventually we get a confirmation from[Ms Radovanovich] as well as [Ms Lee] as well, basicallythey were agreed to the concept that if back to back is notpossible they wouldn't pay for the pre-hold, so that's the keymessage.12 At [34].Q. And is that the key message you took from this email fromMs Lee?A. Yes.Q. Would you not accept that you made a request for specificdates and you got a response in respect to those specific dates?A. From this onward?Q. No, on this occasion [Ms Lee] was responding to a specificrequest wasn't she?A. Um, she did not specific to answer that message —Q. Mmm.A. — but she and [Ms Radovanovich] basically giving us all fullpicture of what the concept's going to be and it matches ourrequirement instead of every time we seek for their approvaland it takes a few days now I assume it's a clear picture thatif whatever reason that it cannot be back to back they'rewilling to pay.[33] In cross-examination, Ms Lee also confirmed her understanding of theposition, an understanding which mirrored that of Mr Kam's:Q. And so what you wanted to convey to the hotel [by sendingthe email] was that in general terms if back to backing wasnot available to the hotel it could pre-hold rooms, well if ithad to pre-hold a room it should charge an extra night –A. That's correct.Q. So at this time in July [2012] would you accept thatyourself and [Ms Radovanovich] had accepted that if the hotelcould not back to back rooms on scheduled flights that thehotel was entitled to charge an extra night if it had to pre-holda room?A. That is correct.[34] Air New Zealand contends the cl 18.1 formalities were not complied with, andthis shows an intention not to be bound by the variation. On its own terms this is nota very persuasive argument. Air New Zealand accepts it agreed to vary the terms ofpayment — the only issue is for how long.[35] It seems to us, there may also be an issue as to whether the cl 18.1 formalitieswere in fact complied with — whether the exchange of emails could constitute awritten agreement executed by the parties. But no argument was addressed to thisissue and we therefore do not further address it.[36] To conclude on this point, we are satisfied that Wylie J was right to find thatagreement was reached in July 2012 that Novotel could charge for early check ins.Second issue: did the July agreement form part of the 2013 Agreement?[37] Novotel argues that the 2013 Agreement, objectively assessed, was intended tobe a renewal of the 2011 contract, so that the informal July agreement reached underthe 2011 contract continued to apply to the 2013 Agreement. Alternatively, Novotelargues that the July agreement continued to operate under an express term ofthe 2013 Agreement. Accordingly, Novotel says, the trial Judge should have rejectedAir New Zealand's claim.Background facts[38] Clause 2 of the 2011 Agreement dealt with the agreement's term. It provided:2 TERM2.1 This Agreement commences on the Effective date and will continuefor the Initial Term, subject to earlier termination as provided underClause 10 or at law.2.2 This Agreement may be renewed for further terms of twelve (12)months each (Renewal Term(s)) following expiry of the Initial Termsubject to both parties agreeing each Renewal Term in writing.2.3 If this Agreement is not renewed in accordance with Clause 2.2 it shallremain in full force and effect until terminated by either party not lessthan 30 days prior written notice of termination.[39] Negotiations towards a new agreement began in early 2013. By this point intime, the new flight schedule, under which back to backing was not possible, had beenin operation for some time. Negotiations began with an email from Ms Radovanovichto Mr Kam on 11 January 2013 which read as follows: I have noted that our crew contract ends on 15 June 2013.Would you be interested in extending the contract for another term? If so,could you please give me an indication of rates?[40] Mr Kam replied that Novotel wished to keep Air New Zealand's crew at thehotel. He asked for timeframes to submit Novotel's new proposal. Ms Radovanovichsuggested a timetable but said that once she had the new rates she would probablyhave to initiate a "market review".[41] On 26 February 2016, Mr Kam responded proposing a room rate of HKD 950for the next 12 months. Ms Radovanovich replied that was a huge increase, she would"have to go to RFP and carry out a full review of the market". She asked Mr Kamwhether he would consider a two-year term, which of course, was a year longer thanthe renewal term allowed for in cl 2 the 2011 Agreement. Mr Kam responded that therate he had proposed was very competitive and for any second year, Air New Zealandshould "make a provision of 10% increases".[42] Air New Zealand undertook the market review, but not the full RFP. It soughtindications from a range of Hong Kong hotels, and contacted Accor Hotel Group toassist it with this process. Amongst other tasks performed for Air New Zealand, Accorled discussions with Novotel which eventually led to Novotel reducing the rates it wasoffering Air New Zealand. On 6 March 2013, Mr Berglind, Director of Sales andDistribution for Accor Australia, emailed Ms Radovanovich to advise of the ratesoffered by Novotel for both the first and second year of any new contract. His emailrecorded that "other terms remain unchanged". Air New Zealand provided a draftcontract to Novotel. Mr Kam sent that draft to Head Office. As a result of HeadOffice's review, Novotel suggested a number of amendments to the draft contract.13Mr Kam's evidence was that he checked through the document to make sure it wasidentical to the 2011 Agreement and requested changes to ensure that.13 Email 8 May 2013 from Henry Kam to Karyn Radovanovich.[43] The new agreement was executed for Novotel in May 2013 and took effectfrom 16 June 2013. It was largely, but not completely, identical to the2011 Agreement: the same term, the same required services, the same limitation upona right to vary the contract and the same stipulation that early check ins andlate check outs were not to be charged to the airline other than as mutually agreed anddetailed in the schedule. The schedule expressly provided that they were not to becharged.[44] As with the 2011 Agreement, the 2013 Agreement contained cl 7 whichprovides:7 EXISTING SUPPLY ARRANGEMENTS7.1 This Agreement and any Crew Accommodation Specification enteredinto between the Parties contains the entire agreement between theParties with respect to the supply of Hotel Accommodation andsupersedes all prior agreements and understandings between theparties in connection with it.[45] The parties continued to operate under the 2013 Agreement in the same way asthe 2011 Agreement. Air New Zealand sent layover schedules to Novotel.Novotel prepared booking spreadsheets. For any early check-ins whereback-to-backing was not possible, Novotel pre-held rooms, showing these on thespreadsheet. Until October 2014, Novotel emailed the spreadsheets to Jardines and/orAir New Zealand. Thereafter Novotel did not email the spreadsheets but its emailsstated that the rooms were being pre-held, sometimes saying that the pre-holding was"as per the previous arrangement".[46] The invoices included additional charges for early check ins from the outset,and were paid without objection. Air New Zealand says that these two methods ofmarking the charges for early check ins did not sufficiently draw it to their attention.An Air New Zealand witness, Ms Drew, explained that prior to the 2013 Agreementshe had manually doubled the number of nights in theBednight Accommodation Report for the Auckland-based crew to produce a matchwith the invoice information provided by the hotel. She was not advised by anyonethat different terms had been put in place from June 2013 and continued with thispractice. Wylie J accepted the evidence of Ms Drew that she had made a mistake.14That finding is not challenged on appeal.[47] The initial term of the 2013 Agreement was due to expire on 16 June 2015.In advance of that, Air New Zealand conducted another market review. It decided notto renew the contract with Novotel and gave notice of termination on 18 June 2015.On that same day, and for the first time, it raised with Novotel its concern that Novotelhad been charging for pre-holding rooms in breach of the terms of the contract.High Court judgment[48] Wylie J considered that the steps both parties took in early 2013 stronglysuggested that a new contract, rather than a renewal, was contemplated.Air New Zealand undertook a market review indicating the possibility that it wouldtake its business elsewhere, the parties entered into unfettered negotiations, and thecontract ultimately concluded was based upon fresh documentation which wasreviewed and altered by Novotel. The Judge attached particular weight to the lastpoint. He said:15In my judgment, the fact that Air NZ sent Novotel a new contract documentwith a new term and a new schedule, and containing an entire agreementclause excluding all prior agreements, is very strong evidence that a freshcontract was intended and was made.[49] He also noted that there were different clauses in the contract suggesting it wasa new contract not a renewal.16 He was satisfied that the July 2012 agreement was notpart of the 2013 Agreement and Novotel was not entitled to charge for early check insor late check outs.Argument on appeal[50] Novotel argues that, objectively assessed, the parties intended when enteringinto the 2013 Agreement, that the terms that applied under the 2011 Agreement would14 High Court judgment, above n 1, at [80].15 At [51].16 At [52].continue to apply under the 2013 Agreement other than where expressly agreedotherwise. This intention is evident from the following:(a) Under cl 2 of the 2011 Agreement the parties could agree to renew thecontract for a further term of 12 months. If not renewed the contractwould remain in force and effect until terminated by other party givingnotice. On this occasion neither party gave notice. Mr Campbell QCfor Novotel argues that a bystander would conclude that this wasbecause the parties intended that the 2013 Agreement would be arenewal of the 2011 Agreement.(b) The terms of the 2011 and 2013 Agreements were, in substance,identical.(c) The parties' communications with each other were consistent withrenewal. Ms Radovanovich started the negotiations by asking Mr Kamwhether Novotel was interested in extending the contract for anotherterm, merely asking for an indication of rates. Novotel's final offeraccepted by Air New Zealand was for a reduced room rate while "otherterms remain unchanged". Novotel argues that the context for thiscommunication is important. Ms Radovanovich had agreed, just a fewmonths earlier, that Novotel was entitled to charge for early check inswhen back-to-backing was not possible. Against this background,Novotel says, Ms Radovanovich was clearly accepting a continuationof that arrangement. If she had intended otherwise she could have beenexpected to say so. She never did.(d) The fact the parties intended that the 2011 terms remain unchanged isreinforced by the omission from the 2013 Agreement ofthe Crew Accommodation Specifications. The definition ofCrew Accommodation Specification in the 2013 Agreement is theannexure to the RFP or if there was no RFP, the relevant annexure tothat agreement. In this case, there was no RFP but nor was there anannexure to the 2013 Agreement. To work out the requiredCrew Accommodation Specifications therefore required reference backto the 2011 Agreement.(e) Finally, Ms Radovanovich's response to Mr Kam's initial proposedroom rate of HKD 950 shows that she anticipated early check-incharges on top of that. Since over the past year Novotel had beencharging early check ins, thus charging HKD 1620 for each actual nightstayed, a room rate of HKD 950 was a reduction in room rate. Why,asks Novotel, would Ms Radovanovich respond that the proposal wasa "huge increase" if she was not assuming that early check in rateswould apply?Analysis[51] Novotel's argument entails us accepting the proposition that, notwithstandingthe effort taken by the parties in 2013 to formally document contractual terms toregulate their business dealings over the next 24 months, their intention was simply torenew the pre-existing 2011 Agreement as amended by the 24 July 2012 email.We find that proposition implausible.[52] We see nothing in Novotel's reliance upon cl 2 of the 2011 Agreement.As Wylie J held, there was no contractual right of renewal of the 2011 Agreement onits existing terms and conditions, and so no right of renewal was exercised. There isno doubt that the 2011 Agreement came to an end — while there was no notice oftermination, the parties clearly agreed it was at an end when the 2013 Agreement cameinto effect. We also note that while the 2011 Agreement provided the parties couldagree a further one-year term, the new written agreement was for two years, not one.[53] While largely identical, the new contract did contain different terms, such asthe addition of clauses relating to construction works, reporting of inappropriatebehaviour and further terms of confidentiality. The parties then signed the agreed formof written contract as a record of the terms to which they committed. Having takencare to document their agreement in this fashion, there is a powerful inference to bedrawn that it recorded the terms on which the parties had agreed to do business.17It does not matter how close to the terms of the 2011 Agreement the new documentwas, it is by the new written agreement they have agreed to be bound.[54] We also do not consider that the negotiations are admissible to assist Novotelwith this argument of the contract. Evidence of contractual negotiations is notgenerally admissible to assist with the construction of the contract ultimately formed.While there are exceptions to this rule, they do not apply. Novotel has not sought toargue for a rectification of the written agreement, the usual grounds for the admissionof evidence of negotiation.[55] We also do not consider that the arguments based on those negotiations (evenif properly admissible) or the other matters raised by Mr Campbell, can stand in theface of these express terms. Mr Campbell points to the absence of detailed conditionsof service in the new agreement. While we accept that the parties seem to haveproceeded on the basis that the existing terms of service from the 2011 Agreementwould continue to apply, we see no logical connection between that aspect of the2011 Agreement being carried forward and Novotel's argument that the right to chargefor early check-ins should also be carried forward. The conditions of service areconsistent with the terms of the new written contract. However, the right to charge forearly check ins is in direct conflict with those terms.[56] As to the notion that Ms Radovanovich would not have expressed surprise atthe increased cost, when the cost was a reduction from the per-night charge includingearly check ins, again this argument has its difficulties. A room rate of HKD 950 is asignificant increase over the standard room rate being charged under the2011 Agreement of HKD 780.[57] Clause 7.1 is a further obstacle to Novotel's argument. It provides:7 EXISTING SUPPLY ARRANGEMENTS7.1 This Agreement and any Crew Accommodation Specification enteredinto between the Parties contains the entire agreement between the17 Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [35].Parties with respect to the supply of Hotel Accommodation andsupersedes all prior agreements and understandings between the Partiesin connection with it.[58] As Wylie J observed, entire agreement clauses generally take effect accordingto their terms, particularly where clear and ambiguous as the clause is here and wherethe contract has been negotiated between parties of equal negotiating strength.18[59] We therefore address Novotel's alternative argument. If the Court finds thatthe 2013 Agreement stands alone, Novotel argues that cl 5.4 gives operative effect tothe July 2012 mutual agreement. Novotel relies upon the use of past tense in cl 5.4.It will be remembered that cl 5.4 provides "[t]he Supplier will not charge the Airlinefor Late Check-outs or Early Check-ins except where this has been mutually agreedand detailed in Item 7 of Schedule 1." Novotel argues cl 5.4 is to be read as anagreement that Novotel would not charge, except where it had already been mutuallyagreed that they would charge. Because there was an agreement in place whichcontinued on from the earlier period, being the agreement of 24 July 2012, past tenseis used in the clause to incorporate that earlier agreement into the contract.[60] That argument cannot succeed in light of the plain wording of cl 5.4. It is tobe remembered that the 2013 Agreement was negotiated after Air New Zealand hadchanged its flight schedules with the effect that back to backing was not possible.It was in that context that the parties agreed there were to be no charges for earlycheck ins. It is inherently improbable that the parties would commit to a writtenagreement recording that that there would be no charge, if they had in fact agreed thatthere would be a charge which, because of the schedule, would frequently, if not,invariably apply.[61] While the clause may contemplate the existence of agreement to allowcharging in certain circumstances outside the formal contract, it also provides that ifthere is such agreement, it will be detailed in Item 7 of Sch 1. Item 7 of Sch 1 simplystates that charges for early check in and late check out are not applicable.18 See Brownlie v Shotover Mining Ltd CA181/87, 21 February 1992 at 31–33.[62] For these reasons, we find that the informal agreement reached in July 2012did not form part of the 2013 Agreement. Accordingly, this ground of appeal mustfail.Third issue: is Air New Zealand estopped by reason of its conduct fromrecovering the payments for early check ins?[63] Novotel advances a further alternative argument — that Air New Zealand wasestopped from denying that Novotel was entitled to charge for early check ins whereback to backing was not possible.19 The estoppel arose because:(a) Novotel believed that if it pre-held rooms to allow early check inswhere back to backing was not possible, it was entitled to charge forthat. Novotel's belief was created by Air New Zealand's conduct;(b) Novotel reasonably relied on Air New Zealand's conduct bypre-holding rooms where back-to-backing was not possible; and(c) Novotel did so to its detriment.[64] Novotel argues that it reasonably believed that if it pre-held rooms to allowearly check ins where back to backing was not possible, it was entitled to charge forthose early check ins. It also argues that belief was created by Air New Zealand'sconduct. Novotel emailed booking spreadsheets to Jardines which were often copiedto Air New Zealand. Those spreadsheets showed that rooms were being booked forthe night prior to early check in. Each such booking had a pop up: "Rooms pre-holdfor early arrival due to cannot back to back." The spreadsheets emailed on 22 Augustand 30 September 2014 did not have the pop ups, but did show that the rooms werebooked for the night prior to early check in. From 10 October 2014, Novotel no longerattached the spreadsheets to their emails to Jardines and Air New Zealand. But the19 In the High Court Novotel also argued estoppel by convention based upon conduct prior to the2013 Agreement, including the circumstances preceding entry into the 2011 Agreement, andconduct during the 2011 contract period, including the 24 July email. Wylie J rejected thatargument finding that the parties did not enter into the 2013 Agreement on the basis of any sharedassumption either of law or fact. He said that Air New Zealand put forward the draft contractconveying its assumption to Novotel. The draft contract was a clear statement by Air New Zealandof its position and that position was inconsistent with any assumption that Novotel may have madethat early check in charges could be charged. That finding was not challenged on appeal.email that day said, "I would like to RE-CONFIRM that since hotel normal check-intime is from 2:00pm, each set of crew accommodation will be pre-hold 1 day prior totheir actual arrival, ie 2 nights rental will be levied". All subsequent emails said, "[a]sper the previous arrangement, each set of crew accommodation will be pre-holding1 day prior to their actual arrival for an early check-in, therefore, 2 nights rental willbe applied".[65] Novotel argues from this it would have been obvious to Air New Zealand thatNovotel believed it could charge the pre-held room as an early check in. At no pointdid Air New Zealand object to that or query that assumption. Moreover, Novotelinvoiced Air New Zealand on the basis that it was entitled to charge for early check inswith the invoices itemising a second night's accommodation. Against this conduct,which continued over years, Novotel argues it was reasonable for it to rely on therepresentation that it was entitled to charge for early check ins.[66] As to detrimental reliance, Novotel says that it was not contractually obligedto provide early check ins without charge because, while it was obliged to provide theaccommodation, there was no contractual stipulation that it was obliged to provide theaccommodation immediately upon the crew's scheduled arrival at the hotel.As already noted, the 2013 Agreement did not include a Crew AccommodationSpecification.High Court judgment[67] Wylie J rejected the notion that Air New Zealand's payment of the invoiceswithout demure could amount to representation. He said:20[69] Similarly, I do not consider that the fact that Air NZ paid Novotel'sinvoices under the 2013 contract creates an estoppel preventing Air NZ fromrecovering charges levied in breach of the contract. At no point during theterm of the 2013 contract was Air NZ's agreement sought or obtained forpayment of the extra charges levied, and payment of the invoices renderedunder the 2013 contract was not clear and unequivocal conduct that Novotelcould reasonably rely on as indicating an acceptance by Air NZ of legalliability for the additional charges for early check ins. Payment by Air NZwas in direct conflict with the contract.20 High Court judgment, above n 1.[68] The Judge found that Novotel could not point to any detrimental reliance basedupon those payments of invoices.21 That was because once the parties entered into the2013 Agreement, Novotel had no option but to provide accommodation at the contractrate.Analysis[69] We see no error in Wylie J's reasoning. The payment by Air New Zealand ofamounts in response to invoices for charges which were not payable in terms of thewritten contract cannot amount to an unambiguous representation by conduct thatAir New Zealand agreed to pay those amounts.[70] Novotel emphasises the information it provided to Air New Zealand in emailsand pop up notifications in spreadsheets which it says showed that early check inswere being charged. Novotel puts the case that Air New Zealand should have knownNovotel was charging these amounts when it paid the invoice. It puts these factstogether and says payment by Air New Zealand in those circumstances was arepresentation by Air New Zealand that it accepted a contractual obligation to pay forearly check ins.[71] We, however, agree with Air New Zealand that the fact of payment in suchcircumstances was intrinsically ambiguous. Air New Zealand stipulated as a term ofits contract that early check in charges were not to be made in circumstances wherethere was no possibility of back to backing. Air New Zealand staff simply paid inresponse to invoices which on occasions were accompanied by material which could,if considered carefully, have alerted Air New Zealand to the fact that it was frequentlybeing charged for early check ins. This conduct seems to us to be more consistentwith a mistaken payment, rather than a representation that the contract was now variedto allow the charging of early check ins.[72] It follows that Novotel cannot make out the first and critical element of anestoppel; that there must be a belief or expectation which has been created or21 At [70].encouraged.22 This ground of appeal must therefore fail. We do not therefore proceedto consider the other elements Novotel would need to prove to succeed in its claim toan estoppel.Fourth issue: is Air New Zealand entitled to recover reasonable indemnity costsfrom Novotel under clause 11.2 of the 2013 agreement?[73] Clause 11.2 of the 2013 Agreement reads as follows:[Novotel] shall indemnify [Air New Zealand] from and against all losses,damage and costs incurred by [Air New Zealand] (excluding anyconsequential or indirect losses, damages or costs) arising out of or related toa breach by [Novotel] of any of the warranties or any undertaking given by[Novotel] or breach by [Novotel] of any term or condition of this Agreement.[74] Air New Zealand seeks recovery of indemnity costs pursuant to that clause.At issue in the High Court was whether the cost to Air New Zealand of the legalproceedings was a loss, damage or costs arising out of Novotel's breach, and if it was,whether it was consequential or indirect.[75] Wylie J began his analysis, citing the case of Boswell v Millar in support of thefollowing principle:23Costs are not damages, and they do not arise out of the breach of a contract.Rather, costs "are losses flowing from steps taken by [persons] to enforce[their] contractual rights, rather than flowing from the breach itself".[76] While the costs claimed by Air New Zealand did not arise or flow out of thebreach, Wylie J was satisfied there was a clear connection between the cost of the legalproceedings and the breach.24 Wylie J noted that the indemnity provided under cl 11.2extends to costs that are related to the breach, not just those arising out of the breach.Accordingly, but for the proviso, he would have considered Novotel obliged toindemnify Air New Zealand for the costs.22 Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd [2014] NZCA 407, [2014] 3 NZLR 567 at[44]. See also John Burrows, Jeremy Finn and Stephen Todd Law of Contract in New Zealand(6th ed, LexisNexis, Wellington, 2018) at [4.6.2].23 Costs judgment, above n 8, at [12] (footnotes omitted), citing Boswell v Millar [2014] NZCA 314,[2014] 3 NZLR 332 at [50].24 At [14].[77] As to the application of the proviso, the Judge noted an ambiguity in cl 11.2.25While it extended the indemnity to costs that do not arise from the breach but whichare related to it, the proviso excludes consequential or indirect costs. These, the Judgeobserved, are by definition costs that do not arise from the breach, but are related toit.26 He said, "[e]ffectively the indemnity gives with the one hand but takes away withthe other."27[78] The Judge regarded the contra proferentum rule as the tie-breaker ofthe ambiguity, construing the clause against Air New Zealand as the party who draftedit. He concluded that the solicitor/client costs which Air New Zealand was seeking torecover are consequential or indirect costs, excluded from the indemnity put in placeby cl 11.2.28[79] Air New Zealand argues the Judge erred in holding that cl 11.2 was ambiguous.It is not genuinely ambiguous, it says, because the parties agreed that Air New Zealandis to be indemnified against legal costs that arise out of, or are related to, a breach ofthe contract by Novotel. Legal costs incurred in taking action against the other partyto the contract to enforce legal rights under the contract are the most direct type ofcosts that can be envisaged in this context; they are directly related to the breach.If those costs are excluded, then no legal costs could be recoverable under cl 11.2which would rob the clause, as it relates to costs, of any meaning and effect. It wouldbe inconsistent with the overall purpose of the clause, which is that, subject to somelimits, Air New Zealand is to be indemnified following a breach of contract in respectof all damages, losses and costs.[80] Air New Zealand says therefore that there was no ambiguity and no need tohave regard to the contra proferentem rule. But in any event, cl 1.2(h) of the contractprovides that nothing in the agreement "is to be interpreted against a Party solely onthe ground that the Party put forward this Agreement or any part of it".25 At [15].26 At [16], citing Bryan Garner (ed) Black's Law Dictionary (10th ed, Thomson Reuters, Minnesota,2014) at 472 and 1087–1088.27 At [18].28 At [20].[81] Air New Zealand also argues that the Judge was wrong to base his decisionthat legal costs were consequential or indirect on the case of Boswell v Millar becausethat was a case dealing with a claim for costs as damages flowing from a breach incontract.29 It has, on Air New Zealand's argument, no application to a claim for costsunder an indemnity clause.Analysis[82] We see several difficulties with Air New Zealand's argument. First, asthe Judge held, the costs of legal proceedings to enforce a breach of contract areproperly understood as indirect or consequential. They do not flow directly out of thebreach, but are the result of the actions of a party taken to seek redress for that breach.Boswell may have been a case about the recovery of costs as damages rather than costsunder an indemnity clause, but the observations in that case as to causative distanceare useful. We are satisfied that the costs in question are consequential or indirect, andtherefore fall within the proviso.[83] We accept Novotel's submission that there is no ambiguity in the clause in needof resolution and therefore no need to have resort to the contra proferentem principle.Even if the general indemnity was broad enough to extend to legal costs, the fact theproviso takes that entitlement away does not create an ambiguity. It is in the generalnature of a proviso that it takes away or qualifies in some way a rule which wouldotherwise apply.[84] In any case, we are not persuaded that a general right to be indemnified for"costs" associated with a breach of contract extends to solicitor/client costs even ifsuch costs could be categorised as "related". The clause refers to costs, not legal costs.And it does not extend the indemnity to solicitor/client costs. The latter point isrelevant because in New Zealand, legal costs are as a rule recoverable on a party/partybasis, calculated by reference to the High Court Rules 2016. Rule 14.6(4)(e) providesthat the court may order a party to pay indemnity costs if "the party claiming costs is29 Boswell v Millar, above n 23.entitled to indemnity costs under a contract or deed". However, such an entitlementmust be "plainly and unambiguously expressed".30[85] There are cases in which an indemnity has been held to extend tosolicitor/client costs, but they are on rather different facts to the present.In Suttie v Bridgecorp Ltd, the indemnity was for "all costs and expenses (includingbut not limited to legal fees) incurred by the Lender".31 Significance was attached tothe language of "legal fees", not costs. In ANZ Banking Group (NZ) Ltd v Gibson, theindemnity included costs and expenses "computed as between solicitor and ownclient".32[86] Likewise, in Watson & Sons Ltd v Active Manuka Honey Assoc, the indemnitywas against all "actions and damages that may result from the licensees' operations".33This Court said that the use of the term "actions or damages" plainly contemplated thepossibility of court proceedings which might result in the Association incurring legalcosts.34 The Court was satisfied that, as a matter of construction, the recovery ofsolicitor/client costs was necessarily implied.35 In reaching that view, the Court reliedupon the decision in Beecher v Mills which involved a claim for legal costs under anindemnity given to the vendor in an agreement for sale and purchase of shares in acompany.36 As with the clause in Watson, the clause in Beecher referred specificallyto the possibility of a claim by a named party but made no specific reference to legalcosts. The Court was satisfied in that case that it was a necessary implication of theclause that solicitor/client costs did fall within the indemnity.37[87] In the current matter, cl 11.2 makes no reference to legal costs, nor is thereanything in the words that suggest such an indemnity was contemplated.[88] We therefore see no error in Wylie J's conclusion that cl 11.2 does not entitleAir New Zealand to recover indemnity costs.30 Re Adelphi Hotel (Brighton) Ltd [1953] 1 WLR 955 at 961 (Ch).31 Suttie v Bridgecorp Ltd HC Auckland CIV-2006-404-3667, 8 December 2006 at [3].32 ANZ Banking Group (NZ) Ltd v Gibson [1986] 1 NZLR 556 (CA) at 565.33 Watson & Son Ltd v Active Manuka Honey Assoc [2009] NZCA 595 at [10].34 At [22].35 Costs judgment, above n 8, at [25].36 Beecher v Mills [1993] MCLR 19 (CA).37 At 24–25.Result[89] The appeal is dismissed.[90] The cross-appeal is also dismissed.[91] Newfoundworld Site 2 (Hotel) Ltd must pay Air New Zealand Ltd costs for astandard appeal on a band A basis (reduced by 20 per cent to take into account thecross-appeal) and usual disbursements.Solicitors:Simpson Grierson, Auckland for Newfoundworld Site 2 (Hotel) LimitedTompkins Wake, Hamilton for Air New Zealand Limited