Thrown together with an overwhelming workload following the Christchurch earthquake sequence, loss adjusters Thomas Pasley and Godfreys were then over $2.7 million dollars apart in a dispute over allocation of costs when their shotgun joint venture came to an end. After seven expensive days argument in the High Court, Godfreys was ordered to pay $589,000 to balance costs.
The two businesses had informally discussed merger possibilities before the Christchurch earthquakes forced co-operation to deal with a massive workload assessing damaged properties. The initial September 2010 quake led to some informal co-operation; the catastrophic February 2011 quake led to overnight negotiations agreeing an operational merger.
There was no formal written agreement. The High Court was told their working relationship developed ad hoc in the face of practical realties on the ground. It was not until three months after merger that it was agreed all invoicing would be made through Godfreys’ accounting system with net proceeds divided 62.5 per cent to Godfreys and 37.5 per cent to Thomas Pasley & Associates. In determining ‘net proceeds’ each business was to carry its own costs, with each reimbursing the other for increased costs arising from their combined operations. Labour costs were a big component. Arguments later arose as to which staff were permanent employees (a cost to the employing business) and which were new staff or contractors (potentially assessed as increased costs of combined operations). Demand for experienced loss adjusters had seen staff leaving to work on their own account. Much of the High Court time was spent analysing the employment status of individual loss adjusters. Godfreys claimed a $111,200 adjustment for managing director Mark Godfrey’s management time; it was agreed he would have overall management responsibility for joint operations and this cut into hours available for billable work, Godfreys said. This claim was disallowed. There was never any agreement for this adjustment.
TPD 2018 Ltd v. Godfrey and Company Ltd – High Court (9.03.21)
21.046