Browning v Jones
[2020] NZHC 3301
•14 December 2020
IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY
I TE KŌTI MATUA O AOTEAROA WHANGĀREI-TERENGA-PARĀOA ROHE
CIV-2020-488-000002
[2020] NZHC 3301
BETWEEN ROBERT BROWNING
Plaintiff
AND
SUSAN ANN JONES
Defendant
Hearing: 8 December 2020 Appearances:
K Wendt for the Plaintiff
No appearance by or on behalf of the Defendant
Judgment:
14 December 2020
JUDGMENT OF WOOLFORD J
This judgment was delivered by me on Monday, 14 December 2020 at 4:00 pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors: Palmer Macauley (Rick Palmer), Kerikeri, for the Plaintiff Counsel: K Wendt, Richmond Chambers, Auckland, for the Plaintiff Copy to: S Jones, Waimate North (Defendant)
BROWNING v JONES [2020] NZHC 3301 [14 December 2020]
[1] This is the formal proof of a claim by Mr Browning against Ms Jones in relation to a property they co-own at 15 Waikuku Road, North Waimate (the property). Ms Jones was initially legally represented, but, in August 2020, her lawyers were granted leave to withdraw. Since then she has taken no further steps to defend the proceeding.
[2] Some parts of Mr Browning’s claim have already been determined by Associate Judge Bell by way of summary judgment on 7 September 2020 (which was also undefended). In summary, Mr Browning successfully obtained orders for payment of a liquidated loan amount and default interest and for the sale of the property. Associate Judge Bell rejected Ms Jones’ pleaded affirmative defences, including estoppel by silence or acquiescence.
[3] On 3 November 2020, Mr Browning filed a second amended statement of claim which quantified parts of his claim and withdrew a cause of action (quantum meruit). The second amended statement of claim was served on Ms Jones that day by email as per Associate Judge Bell’s minute dated 19 October 2020.
Remaining claims to be determined
[4] The remaining claims to be determined at the formal proof hearing are as follows:
1.Mr Browning’s claim for rent, whether that is pursuant to a contractual entitlement or under s 343(f) of the Property Law Act 2007 (the PLA).
2.Mr Browning’s contractual claim for orders that Ms Jones pay her 60 per cent share of expenses that Mr Browning has incurred:
(a)Share of legal conveyancing expenses — $2,477.03 (that is, 60 per cent of total $4,128.38).
(b)Share of Council rates — $18,504.80 (that is, 60 per cent of total
$30,841.34).
(c)Share of repair and maintenance expenses — $119,360.66 (that is, 60 per cent of total $198,934.44).
3.Other orders in connection with the sale of the property and distribution of sale proceeds under the PLA; and
4.Costs, including costs on the interlocutory application, which were reserved.
Formal proof principles
[5] As the balance of Mr Browning’s claims are not liquidated amounts, r 15.9 of the High Court Rules 2016 applies. It requires that the plaintiff “file affidavit evidence establishing, to a Judge’s satisfaction, each cause of action relied on and, if damages are sought, providing sufficient information to enable the Judge to calculate and fix the damage”.
[6] In BBC Technologies Ltd v Sociedad Agricola Topagri Ltd, Brown J accepted that in respect of formal proof hearings:1
[5] … the plaintiff is only required to prove a cause of action so far as the burden of proof lies on the plaintiff. The plaintiff is not required to engage with any matters of affirmative defence, set-off or counter-claim.
Factual background
[7] In early 2007, and at Ms Jones’ request, Mr Browning agreed to assist her financially with the purchase of the property. Ms Jones required financial assistance, as she had entered into an agreement to purchase the property without funds to settle.
[8] Mr Browning and Ms Jones purchased the property together, with Mr Browning effectively fully funding the purchase. He purchased a 40 per cent share of the property, and provided a loan to Ms Jones for her 60 per cent share which was secured by a registered mortgage. Mr Browning and Ms Jones also entered into a deed dated 8 March 2007 (the deed) that recorded their property sharing rights and
1 BBC Technologies Ltd v Sociedad Agricola Topagri Ltd [2014] NZHC 2386.
obligations. This arrangement was intended to be short-term only, with either Ms Jones purchasing the property after a year or it being sold.
[9] Following the purchase, however, leaks were discovered in the house and garage. What was intended to be short-term, and a favour to Ms Jones, ended up with Mr Browning working on the property for many years. The expenses Mr Browning incurred, and of which he is claiming a contribution, were over the whole period. However, the bulk of the expenses were incurred for the financial year ending 31 March 2009 (when he was working initially to identify and repair leaks and various other work on the property) and for the financial year ending 31 March 2017 (once he had moved into a cottage on the property with a view to completing repairs and selling the property).
[10] In the meantime, Ms Jones had the benefit of living in the main house and receiving rental income from tenants without making loan repayments, interest repayments or rent payments of any substance to Mr Browning. When Mr Browning wished to sell the property, Ms Jones opposed that course of action.
Rent claim
[11] Mr Browning seeks an order that Ms Jones pay rent to him in respect of his share of the property, either under the deed or under the PLA.
[12] Since settlement on 13 March 2007, Ms Jones has occupied the double storey main house. She earned income from tenanting the cottage until 7 October 2016 (when Mr Browning moved into the cottage) and having boarders in the main house. Mr Browning has estimated that she would have been earning about $400 a week when she had both tenants and boarders. Notwithstanding this, Ms Jones has paid only the small amount of $1,590.67 to Mr Browning as rent in the financial year ending 31 March 2018. She has not paid anything further. Nor has she paid any share of the income from the cottage tenants and house boarders to Mr Browning over the entire period since the property purchase on 13 March 2007. Ms Jones has not disclosed how much income she has earned from the tenants and boarders.
[13] Mr Browning is claiming rent under the deed. It recorded in the recital that “SUE [that is, Ms Jones] intends to live at the property and rent part of the property”. A term of the deed was as follows:
4.2(i) BOB and SUE may negotiate BOB’s rental entitlement and failing agreement the parties are entitled to the net income in apportionment to their shares in the property.
[14] The amount Mr Browning is claiming totals $108,984, being 717 weeks (that is 13 March 2007 to 8 December 2020) x $152 (the agreed amount).
[15] This term of the deed is an “agreement to agree”. Courts have held that an agreement to agree may be enforceable in certain circumstances. In Fletcher Challenge Energy Ltd v Electricity Corporation of New Zealand Ltd, the Court of Appeal observed that the paramount consideration was whether there is an intention by the parties to be bound.2 If so, the Court will strive to give effect to that intention by applying any mechanism agreed by the parties. This does not mean courts will imply terms, but rather that they can fill in missing terms by applying any mechanism agreed by the parties for that purpose. The Court of Appeal also explained that the parol evidence rule does not apply to determining the parties’ intention.
[16] Mr Browning’s position is that there was a clear intention in the deed that he would be compensated financially for Ms Jones’ use of his share of the property and that, in fact, he and Ms Jones did agree a rental amount. At the time the deed was signed, Ms Jones was already in the process of obtaining valuations for the property rental, to enable them to calculate rent for Mr Browning’s 40 per cent share in the property. Although Mr Browning no longer has those valuations, his third affidavit annexes a rental appraisal invoice addressed to Ms Jones and dated 1 March 2007.
[17] Mr Browning explains that he agreed to use the lowest assessed rent ($380 per week) and calculated that 40 per cent of that was $152 per week. That low amount was premised on Mr Browning’s understanding that after a year his involvement would end, with the property being sold.
2 Fletcher Challenge Energy Ltd v Electricity Corporation of New Zealand Ltd [2002] 2 NZLR 433 (CA) at [60].
[18] On about 13 March 2007, being the date of settlement of the property purchase, Mr Browning handed to Ms Jones a handwritten note with Ms Jones’ repayment amounts, which included a calculation of the agreed weekly rental amount of $152. It read:
Rent payment
40 per cent x $380/week = $152/week = $658.67/month.
[19] I am satisfied that there is therefore sufficient evidence from which the Court can find that the parties did agree a mechanism for rent calculation under the deed and that the rent term is enforceable. The sum of $152 per week for the whole period gives Ms Jones the benefit of the low amount across the whole period and no adjustments for market rental increases during that time. Ms Jones has to pay Mr Browning the sum of $107,393.33 as rent from 13 March 2007 to 8 December 2020, being the claimed sum of $108,984 minus the sum of $1,590.67 paid by Ms Jones as rent in the financial year ending 31 March 2018.
[20] For completeness, Ms Jones has, in her statement of defence, denied any rent was agreed or payable, but her denial has no weight. She has not pleaded any alternative position, and her denial is inconsistent with the documentary evidence. The intention recorded in the deed was that Mr Browning obtain some financial benefit for his 40 per cent share of the property. Ms Jones pleaded no knowledge of any rent appraisals, even though the appraisal invoice that Mr Browning still has in his possession was addressed to Ms Jones.
[21] There is no need for the Court to consider Mr Browning’s alternative claim for fair occupation rent under s 343(f) of the PLA.
Claim for share of expenses
[22]The deed provided that:
3.Contributions
BOB and SUE must both pay an apportionment of 40/100 by BOB and 60/100 by Sue of the following payments:
(a)legal fees and disbursements and bank fees incurred when purchasing the property;
(b)rates and insurance premiums on the property;
(c)costs of maintaining the property;
(d)valuation fees for any valuations carried out under this deed.
Legal conveyancing expenses
[23] Mr Browning seeks an order that Ms Jones pay her 60 per cent share of legal expenses that he has paid for the purchase of the property and preparation of the deed. These total $4,128.38, of which Ms Jones’ 60 per cent share is $2,477.03. I am satisfied that Ms Jones has to pay Mr Browning the sum of $2,477.03, being her 60 per cent share of the legal conveyancing expenses.
Council rates
[24] Mr Browning seeks an order that Ms Jones pay her 60 per cent share of the Council rates that he has paid for the period March 2007 to 20 November 2019. These total $30,841.34, of which Ms Jones’ 60 per share is $18,504.80. Since November 2019, Ms Jones has paid her share of the Council rates. I am satisfied that Ms Jones has to pay Mr Browning the sum of $18,504.80, being her 60 per cent share of the rates.
Maintenance and repair expenses
[25] Mr Browning seeks an order that Ms Jones pay her 60 per cent share of expenses Mr Browning has incurred to maintain and repair the property. These total
$198,934.44, of which Ms Jones’ 60 per share is $119,360.66.
[26] Mr Browning has explained the work he has undertaken on the property in his first and third affidavits, the list annexed to the second amended statement of claim and in an explanatory document he prepared for verification of his expenses by BDO Northland Ltd. The majority of the work undertaken was at the request of Ms Jones.
[27] Mr Browning has maintained careful calculations for the end of each financial year of expenses he incurred on the property, which were mostly for materials and for
some contractors (for example, painters). BDO Northland Ltd was engaged by Mr Browning as independent experts to undertake a verification process by comparing Mr Browning’s expense calculations against source documents (invoices) and bank records. They have confirmed a substantial majority of Mr Browning’s expenses.
[28] BDO Northland Ltd has not been able to verify expenses for the financial year ending 31 March 2009 as Mr Browning no longer has the source documentation. Mr Browning has, however, explained his expenses for that period, confirmed that he maintained careful records of his expenses, and expressed confidence that the amounts he recorded and claimed are correct. I am satisfied that Ms Jones has to pay Mr Browning the sum of $119,360.66, being her 60 per cent share of maintenance and repair expenses.
Ms Jones’ set-off claim
[29] For completeness, Ms Jones has counter-claimed in respect of amounts totalling $168,295. The bulk of Ms Jones’ claim is $108,000 for her labour. There is no contractual basis for this however as the parties expressly agreed in the deed that “Both parties will put labour into improving the property and neither party will be able to charge for the labour”. Mr Browning is not claiming for the considerable amount of time he has spent maintaining, repairing and improving the property over the years.
[30] In respect of the balance of Ms Jones’ claim (that is, $60,295), Ms Jones has provided no invoices or other verification for the amounts claimed. Further, Mr Browning disagrees with the majority of the amounts Ms Jones is claiming. Mr Browning’s position is that Ms Jones relied on him to undertake the work and to pay the expenses. I accept his evidence in that regard.
Property sale orders
[31] Mr Browning is seeking property sale-related orders that were not made by way of summary judgment. Associate Judge Bell made an order appointing a sales agent and the parties have since agreed a sale and marketing plan. The balance of the orders sought are intended to ensure there is a process for lawyers to act on the sale and for distribution of the sale proceeds. Mr Browning also requests leave to apply
for any further orders reasonably necessary because of difficulties that may arise if Ms Jones does not cooperate in the sale process. I am satisfied that the orders sought in the Second Amended Statement of Claim at para C(i)–(iv) are necessary to facilitate the sale process and ensure the fair distribution of the sale proceeds.
Costs
[32] At the hearing on 7 September 2020, Associate Judge Bell granted Mr Browning’s summary judgment application, awarding the principal loan amount and default interest amounts, and also making property sale orders. Costs on the application were reserved.
[33]Mr Browning now seeks costs as follows:
1.Solicitor/client costs on the interlocutory application totalling
$32,098.80, including GST (that is, $27,912 plus GST) plus a filing fee disbursement of $200.
2.2B costs on the balance of his claim totalling $20,195.50 and disbursements totalling $13,450.32.
Interlocutory application costs
[34]Clause 27 of the mortgage agreement entitles Mr Browning to costs as follows:
27. COSTS
(a)Costs payable by the party giving security: the party giving this mortgage must pay to the mortgagee on demand, the mortgagee’s legal costs (as between solicitor and the client) for:
(i)Documentation: the arranging, preparation and registration of this mortgage and any variation or discharge or transfer in lieu of discharge:
(ii)Costs on default: legal services arising from or relating to any default under this mortgage or the enforcement or exercise or attempted enforcement or exercise of any of the mortgagee’s rights, remedies and powers under this mortgage (including the giving or attempted giving of any notice under the Property Law Act 1952 or any enactment in substitution for that Act, the inspection and valuation of the land and, if
the mortgagee is a solicitor’s nominee company, the cost of compliance by the relevant solicitor with the Solicitors Nominee Company Rules 1988 or any similar rules in relation to the matters mentioned in this paragraph (ii).
[35] Mr Browning’s interlocutory application claimed solicitor/client costs with reference to cl 27.
[36] Mr Browning has set out in schedule form detailed time narrations for the solicitor/client costs claim between March and September 2020, identified steps and time claimed and is cross-referenced to invoices. I am satisfied that the steps and time in connection with the interlocutory application were reasonable. This included preparing detailed application orders, and research and submissions on defences of estoppel by silence/acquiescence and under the Credit Contracts and Consumer Finance Act 2003 that Ms Jones had raised in her statement of defence. I am also satisfied that the hourly rate of $400 plus GST is reasonable.
[37] The interlocutory application included sale orders sought under the PLA. I accept that, to the extent attendances for sale-related orders were outside the scope of cl 27 solicitor/client cost recovery, the Court should nonetheless exercise its discretion and award solicitor/client costs on all interlocutory application attendances. I am of this view for the following reasons:
1.The mortgage agreement entitled Mr Browning to exercise comparable mortgagee sale powers, the costs of which would have been recoverable under cl 27 on a solicitor/client basis. For various reasons (including Mr Browning anticipating Ms Jones would oppose a sale), sale orders were instead sought in this proceeding under the PLA.
2.Any inconsistency or “gap” arising from what might otherwise be separate costs entitlements on the same application can be addressed by awarding indemnity costs under r 14.6 of the High Court Rules. Ms Jones acted improperly in defending this proceeding, putting Mr Browning to additional cost. There was no basis for Ms Jones to defend the proceeding or to refuse to agree to the sale of the property, in circumstances where she had the benefit of ownership and
occupation of the property for 13 years without making any mortgage or interest payments to Mr Browning.
3.It is not practicable or possible to separate attendances on the interlocutory application relating only to mortgage default enforcement, given the overlapping claims and defences. For example, Ms Jones’ estoppel defence applied equally to enforcement of mortgage obligations and the application for sale orders under the PLA.
4.Mr Browning has not claimed costs of pre-proceeding demands for payment of loan and interest, which he is entitled to under cl 27.
Balance of claim costs
[38] On the balance of steps in this proceeding, 2B costs are sought. Those costs and disbursements have been calculated by counsel and are set out in schedule form. I am satisfied that they are appropriately claimed. The large sum for disbursements include payments totalling $10,956 made to BDO Northland Ltd for the verification of Mr Browning’s maintenance and repair costs. The remainder are a service fee and various court fees.
Result
[39] The following orders as to payment of rent, legal expenses, rates and maintenance costs are made:
1.Ms Jones is to pay $107,393.33 to Mr Browning as rent from 13 March 2007 to 8 December 2020.
2.Ms Jones is to pay $2,477.03 to Mr Browning as her share of the legal conveyancing expenses.
3.Ms Jones is to pay $18,504.80 to Mr Browning as her share of Council rates.
4.Ms Jones is to pay $119,360.66 to Mr Browning as her share of maintenance and repair costs.
[40]The following property sale orders are made:
1.Palmer and Macauley are authorised to act for the plaintiff and the defendant on the conveyancing of the property to any purchaser of the property.
2.Following a settlement of the sale of the property, Palmer and Macauley may deduct and pay any amounts required to be paid in connection with the sale of the property (for example, Council rates) and reimburse to the plaintiff any costs reasonably incurred in connection with the marketing, auction or sale of the property (for example, agent fees and legal conveyancing fees).
3.After payment of any fees or costs as per [40](2) above, Palmer and Macauley must pay to the plaintiff the following amounts:
(a)The plaintiff’s 40 per cent share of the sale proceeds;
(b)The sum of $394,800 awarded by this Court by judgment dated 7 September 2020;
(c)The sum of $284,256 awarded by this Court by judgment dated 7 September 2020; and
(d)Any further amount ordered by the Court in this proceeding (including any costs award).
4.Following the payments as per [40](2) and (3) above, Palmer and Macauley will hold any balance of the sale proceeds in its trust account pending either agreement between the parties or further order of the Court.
5.Leave is granted to apply for such further orders as are reasonably necessary.
[41]The following costs orders are made:
1.Ms Jones is to pay solicitor/client costs on the interlocutory application of $32,098.80 including GST plus a filing fee disbursement of $200 to Mr Browning.
2.Ms Jones is to pay 2B costs on the balance of the claim of $20,195.50 plus disbursements totalling $13,450.32 to Mr Browning.
Woolford J
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