Langton v Burgess HC Auckland CIV 2009-404-5470

[2010] NZHC 1516

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2009-404-005470

BETWEEN  JAMES KERRY LANGTON AND MURRAY BRYCE FREESTONE Plaintiffs

ANDDOUGLAS MARK ANDREW BURGESS Defendant

Appearances: J B Samuel for the Plaintiffs

N Reid for the Defendant

Judgment:      11 June 2010

JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN

This judgment was delivered by me on

11.06.10 at 3.30pm, pursuant to

Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors/Counsel:

J B Samuel, Jennifer Connell, Auckland – [email protected]

T Stewart, Kennedys, Auckland – [email protected]

JAMES KERRY LANGTON AND MURRAY BRYCE FREESTONE V DOUGLAS MARK ANDREW BURGESS HC AK CIV 2009-404-005470  11 June 2010

The claim

[1]      The plaintiffs  apply for  summary judgment  upon  their  claim  against  Mr Burgess.   He acted as their solicitor in the purchase of a residential development property.  They claim Mr Burgess failed to search relevant certificates of title which disclosed the existence of a land covenant which contained a height restriction which limited development options.   The claim is based on their contractual relationship and also asserts a breach by Mr Burgess of his duty of care in searching relevant certificates of title of the two properties concerned.  The plaintiffs claim this resulted in a foreseeable diminution of value of the land resulting from the undisclosed existence of the height restriction.

The third party application

[2]      The hearing of this summary judgment application has been delayed to hear Mr Burgess’ application to join the Registrar-General of Land as a third party.  That application was heard on 5 May 2010.  At that time I adjourned the hearing to 21

May 2010 to enable Mr Burgess’ counsel to consider submissions raised on behalf of the Registrar-General.  On 14 May 2010 Mr Burgess’ counsel filed a memorandum requesting the joinder application be withdrawn.  Counsel advised, in effect, that she was persuaded by the Registrar-General’s submissions that the joinder application could not succeed.

[3]      In my judgment awarding costs to the Registrar-General I noted that Mr Burgess acknowledged reading one of two cross lease titles only.  Mr Burgess said he assumed that the underlying fee simple of both properties would be identical.  He said there was no reference on the title he read to a height restriction.  He claimed the Registrar-General of Land committed an error when the paper title was converted to the electronic register, in that it omitted to record the land covenant, being the height restriction, over that title.  As my judgment noted, that submission from Mr Burgess could not have succeeded in the face of the decision of the Court of Appeal in

Harvey v Hurley & Ors [1].  The effect of that decision was to note that Mr Burgess as

[1] 9 NZCPR 427

a matter of law had the details of the relevant land covenant constructively placed

before his eyes and therefore was deemed to have read it or to have constructive knowledge of it.

Background to the claim

[4]      The plaintiffs were interested in being nominated to an agreement for sale and   purchase   affecting   two   cross   lease   properties   at   Rawhiritoa   Avenue, Kohimarama, as a result of the then existing purchasers’ defaulting in terms of their obligations  under  that  agreement.    It  was  made  clear  to  Mr  Burgess  that  the plaintiffs’ interest was in being able to effect a subdivision of those properties, and to obtain advantage and enjoyment of the wide harbour views which appeared possible to achieve.

[5]      The plaintiffs engaged Mr Burgess just a day or two prior to settlement being due.  They consulted him about whether they should be nominated to the agreement bearing in mind their objectives for development.  Acting upon Mr Burgess’ advice that the titles did not contain any memorials that would have been of concern to the plaintiffs and their intentions regarding the properties, they proceeded to settle the purchase of same.

[6]      Indeed  by  his  affidavit  Mr  Burgess  acknowledged  the  extent  of  his professional responsibilities in connection with the instructions he received from the plaintiffs.

[7]      Following settlement on 21 August 2007 the plaintiffs began to undertake subdivision work.   In or about March/April 2008 they became aware of a height restriction.  This they claim, and it appears undisputed, prevented development of a dwelling to the size required and to a sufficient height to enable access to Auckland Harbour views.   They then cancelled their proposed subdivision.   The existing dwelling remained in place.   The plaintiffs attempted to renegotiate the height restriction covenant, but without success.

[8]      Their claim includes a claim for diminution of land value of $588,000.  That figure is supported by a valuation by a Mr Beagley, a registered valuer, with Bayleys Valuations Limited.

[9]      Mr Beagley considered that a subdivision of the two properties into four sites which did not have views would be worth $370,000 per site or $1,480,00 in total.  A subdivision  of  the  two  properties  into  four  sites  with  views  would  be  worth

$2,460,000 at $615,000 per site.   The value difference therefore was $980,000. Because the height restriction allows for two levels of development only instead of the three that would otherwise be available he calculates a total view benefit of 60 per cent  of  the total  view  value which  computes as  a loss  of  value  overall  of

$588,000.

[10]     As well the plaintiffs claim costs including holding costs and disbursements of $102,183.53.  There is also a claim for interest to 13 June 2009, less an allowance for rental received, totalling $235,876.98.  Finally a claim for interest from 14 June

2009 plus legal costs and disbursements is sought.

The defence

[11]     As pleaded and by his evidence Mr Burgess has relied in his defence upon claims of negligence by the Registrar-General of Land.   Those claims no longer assist his defence and little more remains of it than Mr Burgess’ challenge of the plaintiffs’ calculation of its losses.  This challenge is threefold:

1.That a calculation of diminution of value based on a section having or not having a sea view is not the correct measure of loss; that the correct measure of damage was the difference between  what  the  plaintiffs  paid  for  the  property  and  the market value of the property at the time they discovered the height restriction when they could have mitigated their loss and on-sold.

2.No cause of action could accrue and therefore no loss could incur  until  the  plaintiffs  discovered  there  was  a  height restriction in April 2008.

3.Therefore, the correct  measure of damage is  the difference between the purchase price and the properties’ valuation with a height restriction in April 2008 when the plaintiffs could have mitigated their loss by selling the properties.

Recent developments

[12]     On  14  May  2010  an  affidavit  of  Mr  Perry  (on  behalf  of  Mr  Burgess) exhibited a property valuation prepared by Mr Foote, a registered valuer.  Mr Foote’s conclusion is that the properties were worth $2.2M as they were i.e. with the height restriction.   That was the price the plaintiffs paid for the properties.   In short it is argued for Mr Burgess that therefore the property is worth what they paid for it regardless of development potential; that the properties are not worth any less than what they paid for them.  It follows, Ms Reid submits, that a claim for diminution of value in the land cannot succeed.

[13]     In response to that evidence Mr Samuel filed a memorandum with the Court dated 19 May 2010.  In it he notes Mr Perry’s affidavit and acknowledges that the valuation evidence raised a conflict that the Court was likely to accept could not be dealt with on a summary judgment application.  He indicated that at today’s hearing he would only pursue the issue of liability and that a hearing as to quantum would be pursued later.

The hearing

[14]     It was acknowledged by Ms Reid for Mr Burgess that in the outcome of the third party application nothing remained of a defence of claims of breach of contract and tort except in relation to the quantum of claims.

Quantum

[15]     The plaintiffs’ claim has three parts: (a)          For diminution in value of land;

(b)     For holding costs and disbursements; (c)           For interest.

[16]     There is a considerable disparity of view between the parties concerning the parameters within which these three claim items should be confined.  The plaintiffs claim a loss of $588,000 for diminution of value.  Mr Burgess submits no such loss occurred at all.   The plaintiffs claim holding costs of $102,183.53.   Mr Burgess’ view point is that the plaintiffs are entitled to $54,036.85 in wasted development costs only.

[17]     The plaintiffs claim $235,876,098 for interest from the date of purchase to

13 June 2009 at 8.2 per cent on $2.2M, after allowing for rental received of $90,820, during that period.  As well the plaintiffs seek interest at that same rate from 13 June

2009 to date of judgment.  For Mr Burgess it is submitted that any claim for interest should be capped at the end of a period of one month following discovery of the height restriction in March/April 2008.   Also issues are raised with respect to the claim for interest on the purchase sum of $2.2M when a sum of $920,000 only was borrowed for the purpose of the purchase.

[18]     Ms Reid submits that because there is no issue about liability that therefore there is no utility in entering judgment at all until issues of quantum are resolved. Arguably the Court will have reason for significant enquiry into aspects of the plaintiffs’ claims.  But, should they be denied the liability judgment they seek?

Result

[19]     I think the plaintiffs should not be denied their liability judgment.  Rule 12.3 contemplates that course being taken when the Court is satisfied the only issue to be

tried  is  one  about  the  amount  claimed.    The  present  case  does  not  involve  a dichotomy of issues or other significant reasons why the Court should not undertake this course.   Whilst there is a disparity between them regarding assessment for damages a future hearing will only be concerned with the issue of quantum.

Orders

[20]     Judgment is entered in favour of the plaintiffs against the defendant upon the issue of liability upon its claims for breach of contract and for negligence.

[21]     Costs upon the summary judgment application are fixed on a category 2B basis together with disbursements approved by the Registrar, and are payable by the defendant.

[22]     The defendant shall also pay the plaintiffs’ costs upon the defendant’s third party application, on a 2B basis.

Further directions

[23]     I direct the Registrar to schedule a hearing of two days (or such lesser time as counsel agree) to hear the plaintiffs’ quantum claims.

[24]     I direct that the Registrar schedule a judicial settlement conference for one day to assist the parties to resolve outstanding issues.

[25]     Neither the quantum hearing nor the judicial settlement conference should be scheduled before me.

Associate Judge Christiansen