Koskela v North Shore District Council HC Auckland Cp90-Sw01

[2001] NZHC 1126

IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY CP90-SW01

IN THE MATTER of the Judicature Amendment Act 1972

BETWEEN: ROBERT NORMAN KOSKELA of Auckland, Businessman and SYLVIA MAY KOSKELA, his wife
Plaintiffs

AND: NORTH SHORE DISTRICT COUNCIL a City Council under Part III First Schedule, Local Government Act 1975, having its principal office at Takapuna
First Defendant

AND ROLAND MILTON of Auckland, Medical Practitioner and JEAN ISABELLA DUNN MILTON, his wife
Second Defendants

Hearing: 2 November 2001

Judgment: 21 November 2001

Counsel: David Schnauer for plaintiffs
Michael T Wharfe for first defendant
Stephen H Barter for second defendant

JUDGMENT OF WILLIAMS J

Solicitors:
Schnauer & Co., CX BP64014 Milford, Auckland,
Simpson Grierson, DX CX10092 Auckland
S H Barter, DX BP61507 Albany

[1] This judgment deals with a dispute between neighbours over a right-of-way. Disputes between neighbours are often unhappy and difficult to litigate. This case is a signal example.

[2] The right-of-way is known as Tree Tops Way. It is in North Shore City, the first defendant. It is Lot 11 on DP173708. A copy of a title showing the right-of-way is attached as Schedule 1. It is owned by Mr and Mrs Koskela, the plaintiffs (one-quarter), a Mr Matiatos (one quarter), a Mr and Mrs Smart (one-eighth), a Mr and Mrs McLeod (one quarter) and a Mrs Ashworth (one eighth). The second defendants, Dr and Mrs Milton own Lot 2 DP174411 on Schedule 1. They do not own any part of Tree Tops Way but their land has a right-of-way over it. Dr and Mrs Milton and Mr and Mrs Ashworth are friends.

[3] Dr and Mrs Milton wished to sub-divide their property by creating two new lots with access along Tree Tops Way. Their application to the North Shore City for consent to the sub-division was approved on 6 December 1999 without being publicly notified.

[4] Mr and Mrs Koskela took the view that Dr and Mrs Milton’s application should have been publicly notified and that, amongst other things, the conditions imposed by North Shore City in relation to Tree Tops Way were inadequate in traffic terms for reasons of gradient and, more particularly, visibility along its twisting length, particularly in the vicinity of the sharp elbow shown on Schedule 1. In addition, further sub-division over the years, including by Mr and Mrs Koskela, has increased traffic usage of Tree Tops Way, a situation which would be exacerbated by an additional house on Dr and Mrs Milton’s land. Mr and Mrs Koskela’s concerns were supported by a report they commissioned from Traffic Design Group.

[5] When Mr and Mrs Koskela were unsuccessful in trying to persuade North Shore City to rescind the sub-divisional consent or amend or add to the conditions, they commenced these proceedings seeking judicial review.

[6] The proceedings allege that the subdivisional consent was unauthorised or unlawful because of lack of service, lack of public notification and suggested breach by North Shore City of its proposed District Plan. An order was sought quashing the consent and requiring Dr and Mrs Milton’s application to be dealt with on notification.

[7] The proceedings were commenced on 15 March 2001 but the parties agreed to a Settlement Conference. This was conducted by O’Regan J on 5 April 2001. A settlement was reached but took about two months to be reduced to a deed. That deed is dated 7 June 2001. It is central to the matter presently before the Court.

[8] The principal operative provision of the deed is clause 2 which requires North Shore City to instruct a firm of engineers, McGuigan Syme & Chilcott, to prepare an engineering plan for works to upgrade Tree Tops Way generally by widening the carriageway outside Mrs Ashworth’s property by about 2m, erect a small retaining wall and adjust Mrs Ashworth’s driveway (cl 2.1). The engineers were to consult with Council officers and Mr Koskela when preparing the plan and when “supervising and arranging for the carrying out of the right-of-way works” (cl 2.2). The deed provided that it was to be suspended pending re-negotiations if the fixed price contract exceeded $12,000. In that case the parties to the litigation would need to meet part of the costs to date (cll 2.3 and 2.4). The deed then continued:

“2.5 Where the Total Cost of the Works does not exceed $12,000 the parties agree:

2.5.1 McGuigan Syme & Chilcott is to supervise and arrange for the carrying out of the Right of Way Works.

2.5.2 The survey pegs identifying the boundary of the Right of Way in the area of the Right of Way Works shall be located prior to the start of any works.

2.5.3 If the Right of Way boundary can not [sic.] be established from the survey pegs the Council shall arrange for a survey to be carried out, provided the cost of the survey does not result in the Total Cost of the Works exceeding $12,000. In the event that the total cost does exceed $12,000 clause 2.4 of this deed applies.

2.5.4 The Right of Way Works are to be carried out only within the boundaries of the Right of Way and no private property right are to be infringed.

2.5.5 The written consent of all the owners of the Right of Way is to be obtained prior to the start of any works.

2.5.6 At the completion of the works McGuigan Syme Chilcott is to certify that the Right of Way Works have been completed to usual engineering standards.

2.6 The Total Cost of the Works is limited to $12,000 (including GST).

2.7 The parties have agreed to contribute to the Total Cost of the Works in the following way:

2.7.1 The Koskelas will pay 1/6th (one-sixth) of the Total Cost of the Works.

2.7.2 The Miltons will pay 1/6th (one-sixth) of the Total Cost of the Works.

2.7.3 The Council will pay 2/3rd (two-thirds) of the Total Cost of the Works.

. . .

2.10 The Miltons agree to register a restrictive covenant (as per the attached transfer marked “T’”) prohibiting them from any further subdivision which would result in the use of the Right of Way. The Miltons further agree to sign and have registered a surrender of the Right of Way from the Miltons’ Balance Title (ie the Balance Title to issue after subdivision pursuant to the Miltons’ Subdivision Consent).

2.11 Subject to the Miltons complying with the payment obligations referred to in clause 2.4 and 2.7 herein, and to the Miltons executing and complying with the restrictive covenant referred to in clause 2.10 herein, and further to their executing the surrender of the Right of Way from the Milton Balance Title, the Koskelas agree that they will make no further challenge through the Courts or otherwise to the right of the Miltons or their successors in title, to the two residences created by the subdivision consent having access to and the right to utilise the Right of Way strictly in accordance with Transfer C.973538.5.”

[9] North Shore City received a report from McGuigan Syme Chilcott on 31 July 2001 estimating the cost of the works at $10,417.50 including GST. Mr and Mrs Koskela are critical in this proceeding of the interval between the execution of the settlement deed and the receipt of the report. The evidence shows that the matter was first discussed by Mr Benefield of North Shore City with the engineers on 10 July. The report was received three weeks later. In the Court’s view, nothing hangs on delay in that respect.

[10] All the owners of Tree Tops Way other than Mrs Ashworth consented to the works.

[11] After receiving the McGuigan Syme Chilcott report, Mr Benefield set about discussing the proposal with Mrs Ashworth, it having been agreed by the parties that the North Shore City should undertake that task.

[12] It should be noted that though Mrs Ashworth is the sole registered proprietor of the Ashworth property, her husband is a registered civil engineer. He sent a fax to North Shore City on 30 May 2001 expressing their concern about any proposed work on Tree Tops Way and Mr Ashworth telephoned Mr Benefield on a number of occasions after that date including on 2 August seeking a copy of the brief to the engineers.

[13] Mr Benefield spoke to Mr and Mrs Ashworth on a number of occasions during August. The frequently and duration of that contact is criticised by Mr and Mrs Koskela so it is pertinent to refer to it briefly The evidence shows:

[a] A chance meeting at North Shore City’s offices on 6 August between Mr Benefeld, Mr Ashworth and Mrs Milton. The proposed works were discussed in a general way.

[b] On 8 August 2001 Mr Ashworth telephoned and faxed Mr Benefield seeking a copy of the McGuigan Syme Chilcott report. Mr Benefield sent a plan.

[c] On 9 August 2001 Mr Benefield had a lengthy discussion with Mr and Mrs Ashworth at their home and gave them a full-sized copy of the plan. He did not give them a copy of the report, believing it at that stage to be confidential. It was evident from the discussion that Mr and Mrs Ashworth were concerned whether the proposed works were the most appropriate solution. They suggested modifications. They gave Mr Benefield a list of questions to be answered as part of their consideration of the proposal.

[d] Mr Benefield faxed a copy of the McGuigan Syme report to Mr and Mrs Ashworth on 10 August having established that it was not confidential.

[e] The Ashworths sent faxes to Mr Benefield on 11, 13 and 15 August dealing with details of the proposal and Mr Ashworth’s engineering response. In each they made it clear they were not consenting and would not consent to the proposed works.

[f] On 16 August North Shore City’s solicitors advised Mr and Mrs Koskela’s solicitors that cl 2.5.5 of the settlement agreement could not be satisfied and purported to terminate it.

In the Court’s view that chronology shows that North Shore City took reasonable steps to obtain Mrs Ashworth’s consent (Connor v Pukerau Store Ltd [1981] 1 NZLR 384, 388).

[14] From the several affidavits filed in this proceeding, the precise course of events over Friday 24 and Saturday 25 August is somewhat unclear. However, what is clear is that on Saturday 25 August at 1457 hours, Mr and Mrs Ashworth faxed a letter to North Shore City saying that for a number of reasons which they set out “we reconfirm our rejection to the Koskela road-widening option for Tree Tops Way”. North Shore City officers first read the fax on Monday 27 August.

[15] There was also in evidence a document bearing the date of 25 August 2001 headed “Jennifer Ashworth’s Agreement to Road Improvement Proposal” which briefly recounted the background and then said “Jennifer Ashworth Agreement to Tree Tops road-widening is dependant on” followed by a list of some nine matters concerning the widening of Tree Tops Way. Those matters largely reflected the views Mr and Mrs Ashworth had previously expressed and the detailed calculations and drawings which Mr Ashworth had prepared.

[16] What is somewhat unclear is whether that “agreement” was handed to Mr Benefield by Mr and Mrs Ashworth at a meeting on Friday 24 August or whether it was attached to the fax of 25 August (though it bears no fax transmission imprint) or precisely how it came into North Shore City’s possession.

[17] At this hearing, Mr and Mrs Koskela endeavoured to claim that the “agreement” represented Mrs Ashworth’s consent in terms of cl 2.5.5 of the settlement deed. The Court’s view is that such cannot possibly be the case. If it was a consent and if it was given to North Shore City before the City’s receipt of the 25 August fax, it was plainly conditional on a number of matters. They have not been satisfied. In any event, the suggested consent was withdrawn by the 25 August fax. And, in the light of the discussions conducted by Mr Benefield with Mr and Mrs Ashworth to which reference has been made, it is no answer to Mr Koskela to say that had North Shore City sent him a copy of the “agreement” before it was withdrawn he and Mrs Koskela would have accepted Mrs Ashworth’s terms in order to satisfy cl 2.5.5.

[18] The Court next turns to review another aspect of the discussions concerning Mrs Ashworth’s consent. Because there has been deep disagreement and disharmony between Mr and Mrs Ashworth and Mr and Mrs Koskela in the past, Mr and Mrs Koskela asked Mr Smart if he would act as informal mediator between them to try and obtain Mrs Ashworth’s consent to the proposed works. Mr Smart kept a careful diary which was put in evidence of his discussions with Mr and Mrs Ashworth over the period from 12 August-25 August 2001. It is unnecessary to recount the detail save to note that Mr Smart, as a good neighbour, plainly spent a considerable amount of time and effort endeavouring to resolve the matter. Mr and Mrs Ashworth expressed to Mr Smart the concerns they had expressed to Mr Benefield, they discussed Mr Ashworth’s plans, modifications were proposed and at one stage it seemed possible that an agreement might be reached. Mr Smart was careful to advise Mr and Mrs Koskela of the detail of each discussion with Mr and Mrs Ashworth and conveyed Mr and Mrs Koskela’s views to Mr and Mrs Ashworth. The point was reached by 23 August where agreement seemed possible by modification of the developments which both Mr and Mrs Ashworth and Mr and Mrs Koskela had undertaken on their respective sides of Tree Tops Way outside the boundaries to their properties. The proposal concerning Mr and Mrs Koskela’s land was to be marked with stakes to see if Mr and Mrs Ashworth would agree. Mrs Ashworth said that they viewed the stakes on the evening of 24 August and were “amazed at the result which to our mind represented nothing of the essence of the discussions that we had entertained through Mr Smart as a last-ditch effort to resolve the matter”. They told Mr Smart this at what would appear to have been about midday on Saturday, 25 August, and told him their final position was that they would not consent. Mr Smart’s notes show that he was disappointed at the outcome, but he advised Mr and Mrs Koskela of what had occurred. Mr and Mrs Ashworth then sent their fax to North Shore City later that afternoon. It is therefore clear that by midday on Saturday 25 August 2001 or thereabouts Mr and Mrs Koskela knew that Mrs Ashworth would not consent to the carrying out of the McGuigan Syme Chilcott proposals for work on Tree Tops Way and that the unanimous consent of all owners of the right-if-way required by cl 2.5.5 would not eventuate. They presumably advised other part-owners of the position.

[19] That notwithstanding, there were further attempts over the next few days by Mr and Mrs Koskela to endeavour to obtain Mr and Mrs Ashworth’s agreement to the proposal. They came to nothing.

[20] Despite the fact that they did not have Mrs Ashworth’s consent, and despite the fact that cl 2.5 would not be fulfilled, Mr and Mrs Koskela and the other part-owners of Tree Tops Way went ahead and carried out the works on the right-of-way. They took place apparently beginning late on Friday, 21 September, and over the following weekend. They cost $13,784.62. Mr Koskela says that the other part-owners are prepared to meet their proportionate shares of the excess over the $12,000 for which the settlement deed provides.

[21] When this matter came back before the Court, there were a number of adjournments. Without recording the detail, Mr and Mrs Koskela were seeking somewhat longer adjournments than the defendants. It is unnecessary to deal with those matters. However, on 3 October 2001 Fisher J issued a Minute, noting Mr and Mrs Koskela’s wish to sue on the settlement deed, giving a series of directions “designed to achieve for the defendants the same outcomes as if there had been a formal discontinuance” of the claim but requiring Mr and Mrs Koskela to file an amended claim substituting “an entirely fresh cause of action stemming from the settlement deed”.

[22] The amended claim filed on 16 October certainly sued the first and second defendants for the $8000 and $2000 for which they had agreed to be liable under cl 2.7 and sought an order by way of specific performance requiring Dr and Mrs Milton to sign a transfer containing the restrictive covenant for which cll 2.10 and 11 provide, but, despite Fisher J’s Minute, went on to plead alternative causes of action based on an implied term that the parties would make reasonable efforts to obtain Mrs Ashworth’s consent and the defendants were in breach, and seeking relief under the Contractual Remedies Act 1979 s 9 against the defendants’ purported cancellation of the settlement agreement prior to the carrying out of the works.

[23] Further, in their defences, both defendants pleaded that the contract was legally frustrated, that Mr and Mrs Koskela were themselves in breach and should therefore be denied an order for specific performance, that in carrying out the works they did not act pursuant to the settlement deed and that North Shore City was entitled to cancel the agreement as cl 2.5.5 was not fulfilled within a reasonable time. An additional matter raised in submissions was that the settlement deed was an illegal contract pursuant to the Illegal Contracts Act 1970.

[24] In addition, the parties filed a number of affidavits raising substantial factual disagreements which could not be resolved in a proceeding tried on affidavit evidence alone. That particularly applied to the extensive evidence concerning the works proposed, Mr and Mrs Ashworth’s suggested modifications and the works carried out.

[25] Seen from the legal viewpoint, this case is, in the Court’s view, a straightforward matter.

[26] The parties to the litigation settled their differences and entered into a settlement deed to reflect their agreement. Amongst other things, that deed required the consent of all of the part-owners of Tree Tops Way other than Mr and Mrs Koskela. That was a necessary provision to include in the deed since, obviously enough, carrying out the proposed works would interfere with the right of access enjoyed by the other part-owners whilst the works were being undertaken and it would enable Dr and Mrs Milton’s subdivision (and possibly other subdivisions) to proceed thus increasing usage and congestion on the right-of-way and possibly also interfering with the other part-owners’ rights. In addition, there was the possibility of trespass by workers or machinery onto other part-owners’ properties whilst the work was being undertaken and interference to, or destruction of, developments undertaken by part-owners outside the legal boundary to their land.

[27] However, in signing a deed which required performance of actions by persons other than the parties to the litigation, those parties must or should have contemplated the possibility that they would be unsuccessful in obtaining unanimous consent. North Shore City was certainly aware by the date of the deed that Mr and Mrs Ashworth had serious concerns about the proposal. It is reasonable to assume that they or neighbourhood gossip would have conveyed that information to Mr and Mrs Koskela as well.

[28] The narrative suggests that Mr and Mrs Ashworth gave serious consideration to the McGuigan Syme Chilcott proposals and fully participated in the negotiations and discussions as to whether they would be prepared to consent to those proposals with or without modification. Mr and Mrs Koskela were kept informed of the progress of those discussions by Mr Smart. There could therefore be no basis for suggesting that Mr and Mrs Ashworth were unreasonable or capricious in finally deciding that they would not give consent to the proposed works. Even if they were, the form of the settlement deed which the parties to the litigation signed neither provided a remedy in the event that unanimous consent was not obtained or set out the course of action for the parties to follow in that event.

[29] Mr Koskela said that when he looked at the settlement deed in hindsight, he was of the view that the form of cl 2.5.5 was a “mistake” and that consultation should have been all that was required. There was no application for rectification.

[30] It was further submitted that the settlement deed was conditional on the unanimous consent of all owners under cl 2. 5.5 and that, Mrs Ashworth having declined consent, a condition to which the contract was subject was not fulfilled and accordingly the contract did not come into force. There is nothing in that. The settlement deed provided for a number of actions to be taken by the parties including an instruction to McGuigan Syme Chilcott for preparation of plans and specifications for the works and the costing. All of that was completed. Further, the contract did not say it was conditional on unanimous consent under cl 2.5.5. Rather than being a conditional contract, the settlement deed was a contract between the parties to the litigation which required each to undertake certain works and attend to certain matters. One of those was to try and obtain the unanimous consent to the work of the part owners of Tree Tops Way. That did not occur. The parties to the settlement deed made no provision as to what was to happen in the event that unanimous consent was not secured.

[31] The position therefore, following Mr and Mrs Ashworth’s last discussion with Mr Smart and their fax of 25 August, was that the parties had agreed that unanimous consent of all the owners of Tree Tops Way was required prior to the start of any works. The discussion and the fax made it clear that unanimous consent was unobtainable. In terms of the contact, the parties had thereby agreed that the works could not start. The settlement deed was accordingly incapable of further performance by the parties. Contractually, the matter was at an end.

[32] However, Mr and Mrs Koskela then proceeded to do two things. In the first place, they and other part-owners proceeded to undertake the work. It is difficult to see how they could have justified that action. In view of the position reached on 25 August, the Court’s view is that they could not claim to have been undertaking that work pursuant to the settlement deed. As a matter of contract they were not entitled to do anything further under the deed, still less to seek to force the defendants to pay for what they did.

[33] The second matter is that Mr and Mrs Koskela pressed on with the litigation. But, instead of taking stock and deciding how best to manage the litigation to endeavour to obtain appropriate relief, they pressed on solely pursuant to the settlement deed. Although, as mentioned, they did implead other causes of action they all related to the settlement. Importantly, they did not join the Ashworths or other parties. For the reasons given, this Court is of the view that following the last discussion with Mr Smart and receipt of Mr and Mrs Ashworth’s fax of 25 August, completion by the parties of the remaining obligations under the settlement deed was impossible in terms of the deed which the parties themselves had signed. Accordingly Mr and Mrs Koskela’s claim under the settlement deed cannot succeed and must be dismissed.

[34] That may be thought to be an unfortunate result for all concerned. The amounts involved in this case are comparatively modest. Mr and Mrs Koskela and the other part-owners may be out of pocket to the contractors. Substantial work has been done on Tree Tops Way which, though not complying with Mr and Mrs Ashworth’s wishes, may assist in remedying a number of the safety, visibility and access problems which all users of the right-of-way have experienced. Dr and Mrs Milton may still be able to proceed with their subdivision. If so, while they and the buyers of their section enjoy the improvements to the right-of-way they do so without cost. However, in this Court’s view that is the clear result of the contractual provisions on which the parties agreed.

[35] In the light of that result, it is strictly unnecessary to deal with the other matters raised by the defendants but brief mention may be warranted.

[36] In this Court’s view the settlement deed was not an illegal contract under the Illegal Contracts Act 1970. Its provisions were never illegal. They were just unable to be performed by the parties in the event unanimous consent of the part-owners was not obtained.

[37] Similarly, there is no need for the implication of terms into the settlement deed such as those contemplated in Devonport Borough Council v Robbins [1979] 1 NZLR 1, 23. The suggested implied term is unnecessary to the contract’s business efficacy and effectiveness, it is not so obvious that it goes without saying and further, the implication of the suggested term would contradict cl 2.5.5.

[38] Similarly, the settlement deed was not frustrated as a matter of law. Mrs Ashworth’s refusal of consent could not be regarded as so essential to the attainment of the fundamental object of the contract that its absence should be regarded as making performance radically different from that for which the contract provides (Roberts v Independent Publishers Ltd [1974] 1 NZLR 459, 463 per McCarthy P). Its absence made further performance impossible not radically different. In addition, this was a contract in which the parties provided for the frustrating event - unanimous consent - but failed to provide adequately for what was to occur in the event unanimous consent was not available. The position would therefore appear to be as the learned authors of Burrows Finn & Todd Law of Contract in New Zealand (1997 para 19.2.1 p 680) put it:

“Yet it is submitted that the mere fact that a disastrous event was foreseen, or foreseeable, by the parties should not in every case prevent a finding of frustration. Everything must surely depend on the inference to be drawn in the particular case, from the fact that the parties entered the contract knowing of the risks but failing to provide expressly for them. The true inference may sometimes be that they hoped the event would not happen, but were prepared to let the ordinary laws of contract, including the law on frustration, govern them if it did.”

[39] This is a case where the parties failed to provide for what might happen in the event of lack of unanimous consent. It is difficult to see that the law of frustration was intended by them to apply in that event. The true position would appear to be that they simply did not fully turn their minds to what would happen if cl 2.5.5 was not or could not be complied with.

[40] Further again, in this Court’s view, the Contractual Remedies Act 1979 s 7 does not apply. Neither North Shore City nor Dr and Mrs Milton repudiated the contract. North Shore City merely advised that a provision affecting a third party could not be complied with. That could not amount to repudiation. Nor, strictly, was there any need for cancellation. The contract meant that work could not commence until unanimous consent of the part-owners had been received. North Shore City advised the parties that that unanimous consent was unobtainable. The contract was incapable of further performance thereafter. That was a statement of fact. It was not a question of repudiation or cancellation.

[41] Though not pleaded, Mr Schnauer for Mr and Mrs Koskela argued that the contract should be regarded having been substantially performed thus entitling the plaintiffs to relief. For the reasons earlier discussed, in the Court’s view the works carried out by Mr and Mrs Koskela and the other part-owners on and from 21 September were not works carried out under the settlement deed. Accordingly that point requires no further consideration.

[42] In all those circumstances, the plaintiffs’ claim is dismissed.

[43] Concerning costs, Mr Schnauer’s submission was that the plaintiffs should not be liable to the defendants for costs other than in respect of actions taken since the filing of the amended statement of claim. However, that argument overlooks that the judicial review causes of action were all to be treated as if they were discontinued. In those circumstances, R 476 applies and the defendants are entitled to their costs of the earlier part of the proceeding unless the Court orders otherwise. The Court can see no basis for ordering otherwise and accordingly the plaintiffs are directed to pay the defendants their costs on an agreed 2B basis for the whole of the proceedings since their commencement. There is no basis, in the Court’s view, for awarding solicitor-client costs as Dr and Mrs Milton sought.