Botany Land Development Ltd v Pallister
[2016] NZHC 1371
•23 June 2016
IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
CIV-2014-404-003015
[2016] NZHC 1371
BETWEEN BOTANY LAND DEVELOPMENT LIMITED
First Plaintiff184 MARAETAI ROAD LIMITED
Second Plaintiff
AND
MARGARET ELLEN PALLISTER, WENDY JANE PALLISTER AND JULIAN MARY MENZIES
First Defendant
AUCKLAND COUNCIL
Second DefendantPAUL KENNETH FOSTER of FLEMING FOSTER PALMER
First Third PartyBAYLEYS REAL ESTATE LIMITED
Second Third Party
Hearing: 17 May 2016 Counsel:
R D Butler for the Plaintiffs
A H Waalkens QC and P Fuller for the First Defendants B J Upton and J S Learner for the Second Defendant No Appearance of, or on Behalf of the First Third Party K M Burkhart for the Second Third Party
Judgment:
23 June 2016
JUDGMENT OF EDWARDS J
This judgment was delivered by Justice Edwards on 23 June 2016 at 11.00 am, pursuant to
r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
BOTANY LAND DEVELOPMENT LTD and ANOR v PALLISTER and ORS [2016] NZHC 1371 [23 June 2016]
Introduction
[1] The plaintiffs (Botany) and the second defendant (Council) are each purchasers under two separate sale and purchase agreements for land owned by the first defendants (trustees). The land is held in two titles located at the eastern end of Umupuia beach in Auckland (land). The key issue in dispute concerns which of those two agreements takes priority.
[2] A four week trial has been set down to commence on 3 October 2016. The parties have exchanged briefs of evidence and reply briefs of evidence. Botany and the second third party (Bayleys) object to expert evidence to be called on behalf of the trustees. They seek a ruling that the evidence to which they object is inadmissible. The trustees oppose both applications.
[3] By way of separate application the trustees seek an order that the Council provide an undertaking as to damages in support of its caveat over one of the titles to the land. The trustees say that the undertaking is necessary to protect them against a claim for penalty interest should Botany succeed on its claim for specific performance of its agreement. The Council opposes such an order.
Background
[4] In 2011, Mrs Margaret Pallister on behalf of the trustees decided to sell the land and approached the Council to see whether it would be interested in buying it. It is alleged that in December 2011, the Council told Mrs Pallister that she should put the land on the market which is what she proceeded to do.
[5] The trustees then entered into a sale and purchase agreement with Botany on 5 November 2012 (Botany agreement). The price for the property was $2.35m. The agreement was conditional on Botany obtaining a subdivision consent by 10 May 2013.
[6] In March and April 2013 Botany met with the Council in relation to obtaining a subdivision consent for the property. The Council told Botany that a 2002 concept subdivision consent for the property was still active and enabled the property to be subdivided. As a result, on 9 May 2013, Botany declared the Botany agreement unconditional and paid a deposit. The second plaintiff (184 Maraetai) was nominated to take title to the property.
[7] In March 2013, the Council learned of the Botany agreement. It informed the trustees that it enjoyed a right of first refusal in respect of one of the two titles to the property. That right of first refusal was contained in an encumbrance registered against that title and under which the trustees are obliged to offer the property in that title to the Council in certain circumstances.
[8] On 7 June 2013, the Council lodged a caveat against one of the titles claiming an interest under the encumbrance. The Council’s caveat prevented settlement of the Botany agreement. Both the trustees and Botany challenged the Council’s caveat. This Court granted an order sustaining the caveat, but required the Council to bring substantive proceedings to substantiate its claim.1 That judgment was upheld on appeal.2 The Council commenced those substantive proceedings against the trustees and Botany in November 2013 (caveat proceeding).3
[9] On 19 November 2014, the Council and the trustees settled the caveat proceeding and entered into a sale and purchase agreement for one of the titles at a sale price of $2.745m (Council agreement). On 10 December 2014, the trustees purported to cancel the Botany agreement.
Pleadings
[10] Botany’s claim is set out in the second amended statement of claim dated 18 December 2015. Specific performance of the Botany agreement or damages in the alternative is sought. Botany also claims against the Council for a declaration that its interest in the land has priority over whatever interest the Council has.
1 Auckland Council v Pallister [2013] NZHC 2717, [2014] 2 NZLR 405.
2 Botany Land Developments Ltd v Auckland Council [2014] NZCA 61, [2014] 14 NZCPR 813.
3 Auckland Council v Pallister HC Auckland CIV-2013-404-4901.
[11] The trustees defend Botany’s claim on the basis that the Council’s agreement is superior to the Botany agreement, and that any equitable interest Botany may have had was extinguished by the cancellation of the Botany agreement. If it is found that Botany retains an interest in the land the trustees argue specific performance should be denied because the encumbrance runs with the land and the trustees were acting under a contractual mistake.
[12] The Council defends Botany’s claim on similar terms. It counterclaims against Botany for a declaration that its interest in the land takes priority over Botany’s interest and an injunction requiring Botany to remove its caveat over the title to the land.
[13] The trustees have a cross-claim against the Council for equitable compensation equal to any damages found to be payable by the trustees.
[14] The first third party to the claim (Foster) was the trustees’ former solicitor. The trustees have a claim in negligence against Foster for breach of the legal services agreement. Bayleys is the second third party and was engaged to market the land on the trustees’ behalf. The trustees claim that Bayleys acted in breach of the real estate agency agreement by failing to exercise due and proper care and skill.
[15] Botany identifies the following issues in the proceeding (reference to the “Pallisters” is reference to the trustees):
(a)Did the Pallisters validly cancel the Botany agreement?
(b)Which of the plaintiffs’ interest and Council’s interest (if any) has priority?
(c)If the plaintiffs’ interest has priority, are there any other grounds for refusing specific performance?
(d)If the plaintiffs’ interest has priority, should specific performance be denied on the grounds of mistake?
(e)If the plaintiffs obtain an order for specific performance, what interest for late settlement will be payable by the Pallisters on settlement?
(f)If the Botany agreement remains on foot, but specific performance is refused, what damages should be awarded to the plaintiffs in lieu of specific performance?
(g)Should any damages award be reduced on account of contributory negligence by the plaintiffs?
(footnotes omitted)
[16]The other parties to the proceeding have not objected to this list of issues.
The admissibility application
[17] Botany’s application originally extended to portions of the briefs of evidence of Mr Ian Duder and Mr Nicholas Williamson. However, during an adjournment and following the hearing, Botany and the trustees were able to reach an agreement in relation to that evidence. I record for completeness that the admissibility challenges to Mr Williamson’s evidence are stayed pending determination of issues relating to the validity of the concept development consent in the Environment Court.
[18] Botany challenges parts of Mr Peter Nolan’s reply brief of evidence and all of the evidence of Mr Adam Thompson. Both witnesses are expert witnesses called on behalf of the trustees.
[19] Bayleys also objects to parts of the evidence of Mr Nolan in which he expresses an opinion on the practise of real estate agents. In addition, Bayleys objects to parts of Mr Garry Denley’s brief of evidence, another expert called on behalf of the trustees.
[20] The trustees oppose both applications on the grounds that the evidence is relevant and admissible and questions of weight should be left to the trial judge for determination.
[21] The Council has filed submissions in relation to Botany’s challenge to Mr Nolan’s evidence only. It argues that this evidence should be admitted.
Governing principles
[22] Section 25 of the Evidence Act 2006 governs the admissibility of expert evidence. In order to comply with s 25, the opinion must be that of an “expert”, it must comprise “expert evidence” and it must offer “substantial help” to the fact finder in understanding other evidence or ascertaining any fact in the proceeding.4
[23] “Expert” is defined in s 4(1) as a “person who has specialised knowledge or skill based on training, study, or experience”.
[24] The “substantial help” criterion involves an assessment of relevance, probative value, and reliability of the evidence.5
Mr Peter Nolan
[25] Mr Peter Nolan is a solicitor practising on his own account. His brief of evidence details his extensive experience in the property law area and in conveyancing practice in particular. His evidence is mainly directed towards the trustees’ third party claim against Foster, and the alleged lack of advice concerning the encumbrance, although it does traverse other matters also.
Bayleys’ challenge
[26] Bayleys challenges paragraphs 65 to 75 of Mr Nolan’s brief of evidence, and paragraphs 18 to 31 of Mr Nolan’s reply brief of evidence. Those paragraphs refer to the obligations and duties of real estate agents under the Real Estate Agents Act 2008, the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2009, and a decision of a Real Estate Agents Disciplinary Tribunal (READT). An explanation of the findings in the latter decision takes up the greater portion of the challenged paragraphs of Mr Nolan’s first brief of evidence.
4 Elizabeth McDonald Principles of Evidence in Criminal Cases (Brookers, Wellington, 2012) at [8.4]; and Richard Mahoney and others The Evidence Act 2006: Act and Analysis (3rd ed, Brookers, Wellington, 2014) at [EV25.01].
5 Mahomed v R [2010] NZCA 419 at [35]; and Pora v R [2015] UKPC 9, [2016] 1 NZLR 277.
[27] Bayleys submits that Mr Nolan is not a real estate agent and has no expertise relating to the professional obligations or qualifications of real estate agents. Bayleys says further that much of Mr Nolan’s evidence is inadmissible because it is in the nature of legal submission about the interpretation of a decision of the READT, and is not therefore substantially helpful in understanding the evidence or determining a fact in issue.
[28] Mr Nolan does not particularise the specialised knowledge or experience in the practice of real estate agents which would qualify him as an expert in this area. Nevertheless his experience spans 30 years and touches most aspects of conveyancing practice and law. This background may well include experience or knowledge that would qualify Mr Nolan as an expert in real estate agent practice. I am not prepared to rule out his evidence on the basis that he is not an expert at this preliminary stage.
[29] However, I agree with Ms Burkhart that evidence concerning the legal effect of the READT decision is unlikely to be substantially helpful. The Court is well placed to interpret decisions of the READT, and counsel are entitled to make legal submissions on that decision and any other which bears on the duties of real estate agents. Expert evidence is not required in addition. In that context, Mr Nolan’s observations on the case in paragraphs 67 to 73 of his first brief of evidence will not be substantially helpful.
[30] Although there is reference to the case in Mr Nolan’s reply brief of evidence, that reference is by way of context to his opinion which follows. His evidence is also given in reply to the evidence of Mr John Greenwood, another lawyer called to give expert evidence on behalf of Bayleys. Read in that light, Mr Nolan’s reply evidence may be substantially helpful for the trial judge and I decline to rule it out at this stage.
[31] I rule that paragraphs 67 to 73 of Mr Nolan’s first brief of evidence are inadmissible. The remainder of Bayleys’ application in relation to Mr Nolan’s evidence is dismissed.
Botany’s challenge
[32] Botany challenges paragraphs 3 to 16 of Mr Nolan’s reply brief of evidence. That evidence is given in reply to the evidence of Mr Gregory Simon. Mr Simon is a director of Botany and was also its solicitor at the relevant times. Mr Nolan gives opinion evidence on what Mr Simon ought to have done in relation to Botany as regards the Council’s encumbrance.
[33] Mr Butler submits that these paragraphs are irrelevant. He points out that Mr Simon is not a party to the proceeding and there is no claim of negligence made against him. Mr Simon accepts that he knew of the encumbrance within 10 working days of the Botany agreement being signed. Given that admission, Mr Butler submits that expert evidence from Mr Nolan regarding the usual practice of a solicitor in relation to such an encumbrance is not substantially helpful.
[34] Although Mr Nolan’s evidence regarding Mr Simon’s conduct is not directly relevant, it may nevertheless have some bearing on the issues in the proceeding. Mr Simon’s knowledge of the encumbrance is specifically referred to in the pleadings as being relevant to the competing equities between Botany and the Council. It may also be relevant in assessing whether Botany contributed to its own loss. In that context, I accept that Mr Nolan’s evidence about steps that Mr Simon ought to have taken may well be substantially helpful in assessing these issues. Ultimately I consider this to be a matter of discretion for the trial judge and I decline to rule the evidence out as inadmissible at this stage in the proceeding.
Mr Thompson
[35] Mr Thompson is another expert witness called on behalf of the trustees. He is an urban economist and property market analyst. His evidence is primarily concerned with the quantification of damages. His brief of evidence refers to the brief of evidence of Mr Martin Reesby called on behalf of Botany.
[36] Botany seeks to have the entire brief of evidence of Mr Thompson ruled inadmissible. Botany says that Mr Thompson’s evidence is unnecessarily repetitive, and improperly expresses views on legal issues such as whether Botany has made a profit and the date for the assessment of damages. There is also non-compliance with cl 3(c) of the Code of Conduct for expert witnesses in that Mr Thompson does not specify the issues he has been asked to address in his brief of evidence. Botany submits that Mr Thompson’s evidence is not of substantial assistance to the Court because he is neither a valuer, nor a quantity surveyor.
[37] I consider a cautious approach is warranted when the entire brief of an expert for the other party is sought to be excluded. Whilst there may be some merit in Mr Butler’s submissions, I consider the grounds of Botany’s challenge concern matters of weight rather than admissibility. The trial judge will be much better placed to consider whether Mr Thompson’s evidence is substantially helpful to the Court, and if so, what weight should be accorded to it. Non-compliance with the Code of Conduct may be remedied by supplementary evidence clarifying the issues upon which he was asked to express an opinion. That is a matter which I leave to counsel to resolve directly. In the circumstances, I decline to rule Mr Thompson’s brief inadmissible at this stage in the proceeding.
Mr Denley
[38] Mr Denley is called by the trustees as an expert in the practice of real estate agents.
[39] Bayleys challenges paragraphs 25 to 28 of Mr Denley’s brief of evidence. Those paragraphs concern his interpretation of a READT decision. Bayleys says that this is neither factual evidence, nor opinion evidence, which is substantially helpful for the Court.
[40] On closer reading, it would appear that Mr Denley’s evidence is not as to the legal effect of the READT decision but as to the understanding and experiences of the profession in light of such a decision. Viewed from that perspective, the evidence is not clearly inadmissible although I accept that the trial judge may choose
to put little weight on it given its legal references. It is for the trial judge to determine whether this evidence is substantially helpful and I decline to rule this evidence inadmissible at this stage of the proceeding.
Undertaking as to caveat
[41] The trustees seek an order directing the Council to provide an undertaking as to damages in support of its caveat. Such an application was not made at the time the caveat was sustained and has only been raised for the first time in this proceeding.
[42] Mr Waalkens QC submits that there is jurisdiction to make an order of the type sought in this proceeding. He submits that the undertaking will only take effect in the event that Botany succeeds on its claim for specific performance and the trustees are ordered to pay penalty interest under the Botany agreement. In those circumstances the order to pay penalty interest will only have arisen as a result of the Council’s caveat which, implicit in any courts’ finding in favour of Botany, must have been found to be unsustainable. Mr Waalkens contends that the existing cross- claim is pleaded on narrow grounds and that if the trustees do not succeed in proving that cross-claim then it would not have recourse to recover damages from the Council for its inability to deal with the property as a result of the caveat. It is for that reason the trustees seek protection by way of an undertaking from the Council.
[43] There is no dispute between the parties that the Court has jurisdiction to require an undertaking as to damages on application under s 143 or s 145 of the Land Transfer Act 1952 to either remove or sustain a caveat. The discretion is necessary to ensure adequate protection is given to registered proprietors in a proper case which goes beyond the compensation criteria in s 146 of the Land Transfer Act.6
[44] Whilst the jurisdiction to order an undertaking existed at the time applications to sustain and remove the caveat were determined, I am doubtful that jurisdiction to do so still exists in the context of this proceeding. The application to sustain the
6 Raiser Developments Ltd v Trefoil Properties Ltd [2008] NZCA 73, (2008) 9 NZCPR 161 at [38].
caveat has been determined by Lang J, with that judgment upheld on appeal.7 The Court is no longer seized of that application and there is no fresh application before the Court under either s 143 or s 145 of the Land Transfer Act.
[45] Furthermore, the caveat proceeding appears to have been settled, although I accept that there is some doubt about the status of that proceeding, as a notice of discontinuance has not been filed. The current proceeding does not contain a cause of action which directly challenges the validity of the caveat. The Court’s discretion to order that an undertaking as to damages be provided in relation to a caveat does not exist in a vacuum, and I seriously doubt that there is a jurisdictional basis upon which such an order can be made.
[46] But even if there was jurisdiction, I would not exercise my discretion to grant the order. The parties are no longer adversaries having settled their differences in the caveat proceeding. They now stand together against Botany and advance more or less the same arguments in this proceeding. The trustees now seek to shift the risk of those arguments not succeeding at trial onto the Council using the undertaking in support of the caveat as the procedural mechanism to do so. I consider the change in circumstances since the caveat was sustained makes an order requiring an undertaking in support of that caveat to be inappropriate.
[47] This does not leave the trustees without a route by which they may seek to protect themselves from an adverse damages award. A pleaded cross-claim against the Council is another means by which to achieve the same end. I consider it to be the preferable route in all the circumstances. If, as Mr Waalkens submits, loss sustained as a result of the caveat is a separate head of loss falling outside the existing cross-claim, then a separate pleading will clearly identify the legal basis and circumstances in which it is alleged that such a loss is recoverable from the Council.
[48]
The trustees would need to seek leave to bring such a cross-claim at this stage in the proceeding. I consider a leave requirement is appropriate given the proceeding is all but ready to proceed to trial. A leave requirement would also flush out whether7 Although leave was reserved to list the proceeding for mention on 48 hours notice, that was only in the event that the Council elected not to issue proceedings. The Council did issue proceedings and so the precondition for leave is not triggered in this case.
there is in fact any prejudice to the Council in the making of such a cross-claim at this stage in the proceeding. In any respect, the trustees should not be able to circumvent the interest which leave is designed to protect by seeking to protect themselves by way of an undertaking in support of a caveat, rather than a cross- claim.
[49] I accordingly decline the trustees’ application for an undertaking as to damages to support the caveat.
Result
[50]Botany’s application as to the admissibility of evidence is dismissed.
[51] Bayleys’ application is granted in part with paragraphs 67 to 73 of Mr Nolan’s brief ruled inadmissible at trial. The remainder of Bayleys’ application is dismissed.
[52] The trustee’s application for an undertaking as to damages in support of the caveat is dismissed.
[53] I encourage counsel to agree questions of costs. If costs cannot be agreed then I invite memoranda in support of costs to be filed within 15 working days of this judgment, with memoranda in reply to be filed five working days thereafter. I will determine costs on the papers.
Edwards J
Counsel: N R Campbell QC, Auckland
A H Waalkens QC, Auckland R D Butler, Auckland
P Fuller, Auckland
Solicitors: Simpson Grierson, Auckland
Kennedy’s Auckland
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