McDonalds demands high standards from its suppliers, not reciprocated when it left a Tauranga trucking company high and dry without formalising a contract for regular stock delivery runs across Bay of Plenty. The Court of Appeal ruled Kingsbeer Transport is entitled to compensation for loss of profits on an abandoned contract. Damages are yet to determined; Kingsbeer claims some $678,000.
Kingsbeer Transport Ltd, operated out of Te Puke by Tony and Nicky Kingsbeer, was contracted for supply runs from Auckland to McDonalds outlets in both Gisborne and Whakatane when offered the opportunity in early 2018 to take up the Rotorua run as well.
It thought a deal had been agreed with McDonald’s then distribution manager Andy Millin promising a long-term five year contract and an agreement to meet short term truck-leasing costs while Kingsbeer had a further refrigerated truck and trailer constructed. Mr Millin was McDonalds most senior manager in New Zealand.
McDonalds New Zealand, controlled out of Australia and under the watchful eye of head office in Chicago, was in the middle of a staff reorganisation. Mr Millin was made redundant. The court was told Kingsbeer was left hanging; picking up the Rotorua contract, incurring substantial short-term leasing costs and making no headway in email conversations with McDonalds about progress on a formal contract. Kingsbeer needed surety of a long-term contract in order to get some $500,000 finance for an extra truck and trailer. In addition, there was haggling over the per kilometre rate to be paid for the job.
Frustrated and running into cashflow problems, Kingsbeer bailed out several months later, abandoning the Rotorua contract and suing for breach of contract.
After a High Court hearing, the trial judge ruled Mr Millin had no authority to conclude any contract with Kingsbeer; approval was required from Australia. Kingsbeer’s claim was dismissed.
The Court of Appeal ruled that while Mr Millin had no actual authority to make the contract, he had ostensible authority: McDonald’s had previously accepted actions taken by Mr Millin outside his actual authority and consequently had to accept the Rotorua Kingsbeer contract as being similar to past practice by McDonalds for the selection and management of contractors.
The Court of Appeal ruled Kingsbeer did have a five year contract for the Rotorua run which it was justified in abandoning when McDonalds did not follow up with a formal contract needed to get funding for an extra vehicle. The court also ruled Kingsbeer was promised up to $50,000 to cover short-term leasing costs. Kingsbeer says it spent $91,200 on short-term costs.
The case was sent back to the High Court to assess damages.
Kingsbeer has wound up its business and sold its trucks after giving notice that it was also quitting its Whakatane and Gisborne runs.
Kingsbeer Transport Ltd v. Martin-Brower New Zealand – Court of Appeal (23.08.23)
23.143