McLeish v Rock Hill Ltd HC Auckland CIV 2010-409-1409
[2010] NZHC 1938
•5 November 2010
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2010-409-001409
BETWEEN ANNE KATHRYN MCLEISH AND THOMAS ARTHUR MCLEISH Appellants
ANDROCK HILL LIMITED First Respondent
ANDPETER HURLEY AND ANN HURLEY Second Respondents
ANDDAN VAN ASCH Third Respondent
Hearing: 20 September 2010
Counsel: P J Shamy and J W Wall for Appellants
H C Matthews and L B Frampton for First and Third Respondents
G M Brodie for Second Respondents
Judgment: 5 November 2010
JUDGMENT OF PANCKHURST J
Table of Contents
Para No
Introduction [1] The factual background: including the terms of the covenant [6] Was a mandatory injunction the appropriate remedy?
The Judge’s approach [17]
The argument for the appellants [24] The opposing arguments [27] Evaluation [32] Was the award of damages appropriate? [36] Should damages have been assessed on the basis of a loss of a chance? [37] The Judge’s approach to quantum [54] Assessment of the chance [59] The value of the hypothetical loss [61] Result [65]
ANNE KATHRYN MCLEISH AND THOMAS ARTHUR MCLEISH V ROCK HILL LIMITED AND ORS HC CHCH CIV-2010-409-001409 5 November 2010
Introduction
[1] This is what may be termed a “building scheme” case. The appellants, Anne and Tom McLeish, and the second respondents Peter and Ann Hurley, purchased adjacent sections in a hillside subdivision known as Quarry Hill. The first respondent, Rock Hill Limited, promoted the subdivision, under the management of the third respondent, Daniel van Asch.
[2] Purchasers of sections in the subdivision enjoyed the benefit of a restrictive covenant, by which the view from their section, amongst other things, was said to be protected. In the District Court Judge MacAskill found that Mr van Asch in approving the Hurleys’ building plans, breached the terms of the covenant in that “he failed to consider the protection and preservation of the arc of view from the [McLeishes’] property” (para [15] of the judgment). In the result the Hurleys’ house was constructed in a manner which gave rise to a breach of the covenant.
[3] However, the Judge declined to order the primary relief sought by the appellants, a mandatory injunction, and instead ordered damages in the sum of
$10,000. This appeal represents a challenge to the relief granted in the District Court. There is no cross appeal against the finding that Rock Hill, through Mr van Asch, failed in its duty to implement the covenant.
[4] The focus of the appeal is two-fold. Firstly, Mr and Mrs McLeish contend that the Judge was wrong in not granting a mandatory injunction requiring the Hurleys to reconfigure the roofline of their home so as to better preserve the arc of view available from their property. Secondly, and by way of a fallback position, the McLeishes contend that if damages were the appropriate remedy, the award of
$10,000 was simply inadequate to repair the breach.
[5] The appellants seek an extension of time to pay security on appeal. Security was paid one day late through oversight on the part of the appellants’ solicitor. There was no fault on the appellants’ part. Although s74 of the District Courts Act
1947 provides that an appeal is deemed to be abandoned if security is not paid in accordance with the High Court rules, I am satisfied that jurisdiction to extend time
pursuant to r.1.19 nonetheless exists: see Graham v Mills,[1] in particular Heath J’s reasoning at [24] – [26]. Here, affidavit evidence explains the failure. The respondents raised no issue. Accordingly, I extend the time for payment by one day.
The factual background: including the terms of the covenant
[1] Graham v Mills [2006] NZFLR 282 (HC).
[6] The Rock Hill subdivision is situated on the lower slopes of the western Port Hills adjacent to the former Halswell quarry. The land was purchased from a family farming company and was eventually rezoned in 1997 to enable a lower density housing development to proceed. Section sizes were laid out to a minimum size of
850m2, with a maximum of 3,000m2, giving rise to a average section size of
1,500m2.
[7] The subdivision proceeded in stages. In July 2004 20 sections comprising stage 3A of the development were released onto the market. Previous promotional material in relation to Quarry Hill included the following representations:
Strict covenants have been placed on The Rocks development to ensure that houses are aesthetically pleasing, complement the colours and forms of the environment, and are sited to preserve the panoramic views, says Dan van Asch.
The same covenants extend to the whole of Quarry Hill, to maintain the distinctive character of the area, and protect homeowners’ investments.
Covenants will cover:
■ Natural light, views, and privacy.
■ The siting and positioning of the building.
■ Height of the building.
■ Aesthetic considerations.
■ Exterior colours must be in keeping with the environment.
■ The preservation of views from properties.
[8] On 1 December 2004 the McLeishes entered into an agreement for sale and purchase in relation to lot 10, Quarry Hill Terrace, a stage 3A section. The section size was 964m2 and the purchase price payable to Rock Hill was $240,000.
[9] The restrictive covenant which was registered against all the titles comprising stage 3A of the subdivision relevantly provided:
1.There shall not be erected on the land any building, fence (including a live hedge) or other structure on the property unless Rock Hill Ltd or nominee has approved all plans and specifications including the siting of the building on the land, fence or other structure prior to building commencement. The design for any dwelling or accessory building shall be submitted to Rock Hill Ltd or nominee at sketch plan stage which will include indicative external colour schemes and estimated construction costs so that approval for the design can be given (or not) prior to commencement of working drawings. In exercising his unfettered in any way discretion, Rock Hill Ltd or nominee shall be entitled to disapprove (by way of example but not limited to) the following:
1.1 Any house or building on the property which is not of individual architectural design and/or not designed to an architecturally satisfactory standard.
1.2 Any building on the property other than a single new dwellinghouse capable of being used by one family unit having floor area of not less than 160m2 (including in the calculation of the area any covered verandah or balcony but excluding any garage).
1.3 Any garage which is not attached to the dwellinghouse.
1.4 Any house which is of a kitset or prefabricated nature or a relocatable dwellinghouse.
1.5 Any dwellinghouse utilising secondhand materials for roofs
(other than slate) or for outer wall facings (including bricks).
1.6 Any dwellinghouse utilising any building materials other than new bricks, stone, plaster finish, or other materials previously consented to by Rock Hill Ltd or nominee for all outer facings (with any plaster finish to only be constructed utilising first class materials). New timber or new brick are acceptable as outer facings subject to Rock Hill Ltd or nominee approval of the standard, type and quality of construction.
1.7 Any dwellinghouse constructed using poles for a foundation, unless the poles are enclosed to the satisfaction of Rock Hill Ltd or nominee so as not to be visible.
1.8 Any dwellinghouse with a flat roof unless specifically approved by Rock Hill Ltd or nominee. Partial flat roof areas may be allowed on some lots at the discretion of Rock Hill Ltd or nominee.
1.9 Any ancillary building unless constructed in acceptable materials and in keeping the environment.
1.10 Any building whose colour is not in keeping with the environment.
2.In considering and/or giving any of the above approvals, Rock Hill Ltd or nominee shall take into account the following matters relating to the structures and their position on the land:
2.1 Height.
2.2 Siting and positioning on the lot.
2.3 External design (including roofs, fences or screens).
2.4 The relevance of height, site positioning and external design to natural light, view and privacy for adjacent properties.
2.5 The view from other properties, particularly those with the same height or higher than the property to ensure a reasonable view is maintained.
2.6 The protection and preservation of the arcs of view of the other properties in the Quarry Hill development and the aesthetic considerations of the Quarry Hill development.
(emphasis added)
[10] Paragraph 3 of the covenant prescribed maximum building heights for each of the lots in stage 3A. In relation to lot 10, and for the benefit of lot 11, the maximum building height was 131.0 metres above the Christchurch City Council drainage datum. Subsequently, Mr and Mrs Hurley purchased lot 9, in relation to which the maximum building height was 127.5 metres, shown as for the benefit of lots 10 and 13.
[11] Paragraphs (4) - (12) contained further terms of the covenant which are not of direct relevance to the present dispute. Finally, the enforcement clause provided:
These restrictive covenants shall apply in perpetuity for the benefit of all the lots shown as Lots 1 to 20 on Plan No. DP339454. Any person having the benefit of these restrictive covenants shall be entitled, in the event of any default, breach or non-observance or any one or more of those restrictive covenants, without having to establish that any loss has been or will be suffered to either an immediate injunction prohibiting such use or an order that such breach be remedied forthwith, notwithstanding that such order may necessitate the demolition either in whole or in part or removal of any structure/building or the closure of any business.
[12] The McLeishes’ agreement was settled in May 2004. They engaged an architectural designer, Mr Warren Sheddan, to draft plans for the house they wished to build. In due course the house plans were submitted to Mr van Asch for his approval. This was granted, subject to some modifications to soften the appearance of a foundation wall on the north side of the house. Mr van Asch also raised with the McLeishes and Mr Sheddan whether the height of the house could be lowered by
500 millimetres in order to improve the view for the owners of lot 14, Mr and Mrs Rhodes. However, this change was not made. As it was, the maximum height of the McLeishes’ house was some 200 millimetres below the 131.0 metre height restriction. Construction of the house was completed in the second half of 2007.
[13] In October 2006 the Hurleys purchased lot 9 Quarry Hill Terrace from a private vendor who had previously purchased the lot from Rock Hill. The section size is 964m2 and the purchase price $300,000. They engaged Mr Andrew Lill, an architectural designer with a building company, to design their new house. After the Hurleys approved the proposed design, the drawings were submitted to Mr van Asch who on 3 August 2007 consented to the proposed design. Construction of the dwelling commenced a short time later and by late January 2008 roof trusses were in position.
[14] The McLeishes immediately became concerned about the likely interruption to the view from their property. They made contact with Mr van Asch, and the Hurleys as well. Despite various initiatives, and the involvement of Messrs Sheddan and Lill, no progress was made in negotiating changes to the house design which might allay the McLeishes’ concerns. On 4 February 2008 Mr Lill advised the McLeishes that proposals suggested by them in relation to changes to the Hurleys’ roofline would not be entertained. The email concluded on the note “Mr Hurley has instructed us to continue construction of the original design”.
[15] The McLeishes then took legal advice. On 18 February 2008 this proceeding was filed in the District Court.
[16] The hearing took place over three days in February 2010. By then of course construction of the Hurleys’ house had been long completed. On 1 June 2010 Judge MacAskill delivered a reserved judgment. He awarded the McLeishes damages of
$10,000 payable by Rock Hill. This sum was awarded with reference to the first cause of action for breach of covenant. Alternative causes of action for pre- contractual misrepresentation and for breach of the Fair Trading Act 1986 were dismissed. Judge MacAskill held that although various representations were made, these were superseded by the terms of the restrictive covenant itself. Put another
way, the alternative causes of action added nothing to the primary claim based upon breach of the covenant. There is no challenge to this aspect of the judgment.
Was a mandatory injunction the appropriate remedy?
The Judge’s approach
[17] The principal relief sought by the McLeishes was a mandatory injunction “to remedy the breach and/or default and/or non-observance” of the covenant. In the alternative, damages of $100,000 for diminution in the value of the McLeishes’ property were sought, together with general damages of $40,000 for distress, anxiety and loss of enjoyment of their property.
[18] The Judge found a breach of the covenant in these terms:
[15] I am satisfied that, in granting Rockhill’s consent under clause 1, Mr van Asch failed to consider the view from the plaintiffs’ property and that he failed to consider the protection and preservation of the arc of view from the plaintiffs’ property. He simply did not apply his mind, on behalf of Rock Hill, to those issues at all. As a result, he did not know that the roofline of the Hurleys’ house would have such a substantial impact on the plaintiffs’ views to the north. He did not realise that, when he requested that the Hurleys change their roofline from a “peaks and valleys” type to a “monopitch”, he was making the plaintiffs’ position worse. Indeed, if the Hurleys’ house had retained the original roofline designed by Mr Lill, the plaintiffs may have been content.
[19] At [17] he added this:
For reasons that I shall give shortly, I find that the Hurleys were not implicated in Rockhill’s breach of duty so as to attract any liability on their part. It follows that the remedy of a mandatory injunction to compel the Hurleys to modify the roofline of their house is not available and that any remedy against Rock Hill must assume that the Hurleys’ roofline will not be modified.
Hence, the finding that the Hurleys were not implicated in Rock Hill’s breach of the covenant was viewed as conclusive against injunctive relief.
[20] At [37] - [42] the Judge considered the cause of action against the Hurleys whereby it was alleged that they were parties to the restrictive covenant, were bound by its terms and that they knew, or must have known, that the consent granted by
Rock Hill was in breach of the covenant, in that mandatory considerations had not been taken into account.
[21] Judge MacAskill characterised this claim as one based upon Wrotham Park Estate Company v Parkside Homes Ltd.[2] This case concerned a restrictive covenant taken by Wrotham when a block of land was sold by it for redevelopment. The covenant required the initial purchaser, and successors in title, to obtain Wrotham’s approval to any “layout plan” in relation to the land. No such approval was obtained by Parkside. It, together with individual purchasers of lots in a subdivision, were
sued for breach of the covenant.
[2] Wrotham Park Estate Company v Parkside Homes Ltd [1974] 2 All ER 321 (CD).
[22] Brightman J found that the individual purchasers “aided and abetted the breach” (p 338), in that they entered into contracts to purchase from Parkside at the height of the relevant dispute. Wrotham had initiated its proceeding after “holding deposits” had been paid, but before contracts had been signed. Parkside arranged insurance cover to guard against the risk which the purchasers faced in entering into contracts when Parkside had not obtained approval to the layout plan. In these circumstances, Brightman J did not hesitate in finding that the purchasers were implicated in the breach. Interestingly, a mandatory injunction was refused in favour of an award of damages, payable by Parkside and the individual purchasers on a shared basis.
[23] Judge MacAskill considered that Wrotham Park was readily distinguishable. Here, there was no evidence that the Hurleys had any knowledge that Rock Hill had failed in its duty to assess their construction plans by reference to the stipulations contained in the covenant. He observed that the Hurleys “were not complicit in any way” in Mr van Asch’s omission and that they “did not embark upon the design and building of their house knowing, or even suspecting, that the consent was questionable” (at [40]).
The argument for the appellants
[24] Mr Shamy endeavoured to circumvent this analysis by arguing that “the covenant itself is silent on the issue of fault, and dictates that the fact of a breach is enough to base an entitlement to relief”. Hence, it was said, it was not encumbent upon the McLeishes to show that the Hurleys had knowledge of Mr van Asch’s failings – it was enough that they had built their house in reliance upon a consent which subsequently proved to be flawed. Counsel also relied upon the building
scheme cases, in particular the decision of Parker J in Elliston v Reacher.[3] Four
requirements were held to give rise to reciprocal equitable obligations owed by lot holders to one another. The four requirements were that the parties derived title from a common vendor, that the vendor sold the land subject to restrictions intended to affect all of the lots, such restrictions were intended to be for the benefit of all lot holders (and perhaps the vendor as well), and that the restrictions were to enure for the benefit of successors in title. It was not disputed that the four requirements were met in this instance. Hence, Mr Shamy submitted, the Quarry Hill subdivision gave rise to a building scheme, with the result that the McLeishes enjoyed a direct equitable right of action against the Hurleys with respect to a breach of covenant.
[3] Elliston v Reacher [1908] 2 Ch 374.
[25] Even assuming for present purposes that this argument is correct, at the end of the day fashioning a remedy is discretionary. While Judge MacAskill treated the finding that the Hurleys were not implicated in Rock Hill’s breach as necessarily decisive against injunctive relief, that I think may not necessarily have been so. To my mind it is necessary to evaluate the appropriateness of a mandatory injunction against the background of a rather broader canvas. I shall turn to this assessment shortly.
[26] In addition to the criticism that the Judge was wrong to treat the Hurleys’ non-implication in the breach as decisive, Mr Shamy also submitted that a mandatory injunction was the proper remedy, in principle, in this instance. He pointed out that an injunction is the primary remedy recognised in the covenant itself (see [10]). The view from their home is in the nature of a property right enjoyed by Mr and Mrs McLeish. Damages, counsel submitted, comprised a one off payment;
which was inadequate to meet the intangible loss which the McLeishes suffered through the restriction to the expansive view for the time they occupied the property. And, to restrict relief to damages was to countenance a breach of the appellants’ rights, or, put another way, to enable Rock Hill to procure a breach of the covenant for a price. Mr Shamy further submitted that a mandatory injunction was not a remedy disproportionate to the loss suffered by the McLeishes, as owners of the dominant tenement. I accept that these considerations were fundamental to the decision whether a mandatory injunction was the proper relief in this case.
The opposing arguments
[27] Mr Brodie, in supporting the conclusion reached by the Judge, drew attention to the decision of Hammond J in Butler v Countrywide Finance Limited.[4] The case concerned non-delivery of chattels, and in particular whether specific performance or an award of damages was appropriate. At pp 631-633 Hammond J discussed the approach to primary remedies (specific performance or a mandatory injunction) as opposed to an award of damages. He advocated the need for a flexible approach reflecting a specific evaluation of the remedy most appropriate in the circumstances of a given case. The starting point remains the object of civil remedies: in
negligence to put the plaintiff in the position he would have been in had the tort not been committed; and in contract to put the plaintiff in the position he would have enjoyed had the contract been performed according to its terms.
[4] Butler v Countrywide Finance Limited [1993] 3 NZLR 623 (HC).
[28] Then he listed a range of relevant factors:
(a)plaintiff autonomy: where possible the plaintiff’s choice of remedy should be viewed with respect,
(b) economic efficiency: that the relative efficiency of alternative remedies is a proper and relevant matter to be taken into account,
(c) the severity of the remedy on the parties or, put another way, whether the proposed remedy is proportionate to the breach,
(d)the nature of the right being supported by the remedy (e.g. here, an entitlement in the nature of a property right),
(e) the moral view to be attached to the interests at stake,
(f) the effect if any of a proposed remedy on a third party, or the public, (g) any difficulties of calculation in relation to damages,
(h) the practicability of enforcement, and
(i) the conduct of the parties.
With these considerations in mind Hammond J added this:
All of this leads to a conclusion that what is involved in the allocation of the “appropriate” remedy in a given case is a matter of informed choice, bearing in mind the general compensation principle and the factors I have estimated above. These considerations do not lead to a wholesale abandonment of much of the traditional learning. They simply point to a more open remedial system; and a requirement for articulation and candour as to why the relevant choices are being made, rather than the formalistic application of (in many cases) somewhat arid doctrinal rules drawn from some far distant time.
[29] I agree with and adopt this suggested approach. It emphasises the need for a wide-ranging evaluation. Although frequently one of several considerations may be most influential, it is nonetheless important that all relevant considerations are weighed in the balance.
[30] The point which weighed with Judge MacAskill, namely the effect of a mandatory injunction on a third party, the Hurleys, was I accept a highly significant factor in this instance. Even if it is assumed that the Hurleys were in breach of the covenant on account of building their home in reliance upon an invalid consent, the impact of a mandatory injunction requiring them to reconfigure their house (even at Rock Hill’s expense) required close consideration.
[31] But, another consideration, which was at the forefront of Mr Matthews’ argument, weighs to an even greater extent with me. Counsel submitted that the injunction sought by the appellants was unparticularised and vague. In Attorney- General Ex relatione North Auckland Electric-Power Board v Wilson’s (NZ) Portland Cement Limited,[5] Myers CJ stressed that if relief is to be granted by way of a mandatory injunction the first duty of the Court is to lay down a clear and definite
[5] Attorney-General Ex relatione North Auckland Electric-Power Board v Wilson’s (NZ) Portland
Cement Limited [1939] NZLR 813 (CA).
rule (at 835). The language of the order in which an injunction is contained must be unambiguous and certain, so as to provide clear guidance to a defendant. Here, said Mr Matthews, it was not possible to frame a mandatory injunction which defined remedial steps to be undertaken by the Hurleys and/or Rock Hill. Nor, he suggested, was it appropriate or sensible to remit the case back to the District Court for further inquiry into this aspect.
Evaluation
[32] I agree. The present evidence gives no or little clue as to what could be done in order to alleviate matters from the appellants’ perspective. In short, it is a vexed question whether a redesign of the Hurleys’ roof would repair the breach. Mr Sheddan advanced various proposals on behalf of the McLeishes when the issue first surfaced in January 2008. But, I doubt that this evidence could be converted into the terms of a mandatory order of the Court.
[33] In any event, I consider that there is another insurmountable hurdle in the path of making a mandatory injunction. The breach found by Judge MacAskill was based on Mr van Asch’s failure to take into account the matters listed in paragraph 2 of the covenant. These were mandatory considerations. In giving evidence Mr van Asch acknowledged that he had not when approving the design of the Hurleys’ house given consideration to the “protection and preservation of the arcs of view ...” of the McLeishes’ property. Wrongly, he had assumed that Mr Sheddan, in siting and designing the McLeishes’ home, had ensured the preservation of their view. Mr van Asch took no advice, nor any other steps, in an endeavour to evaluate the effect of the construction of the Hurleys’ home upon the McLeishes’ view.
[34] While this was surely a breach of obligation on the decision-maker’s part, whether at the end of the day it made any appreciable difference is problematic. On the one hand Mr van Asch was bound to consider the likely impact on the McLeishes’ view, but whether in the exercise of Rock Hill’s unfettered discretion he would necessarily have considered it necessary to require changes to the siting or design of the Hurley home is another matter.
[35] This factor, to my mind, emphasises the difficulty, if not inappropriateness, of ordering a mandatory injunction in this case. Although I accept there is merit in several of the arguments advanced by Mr Shamy in favour of a mandatory injunction, the aspects I have just discussed indicate to me that an award of damages was the only viable remedial choice in the particular circumstances of this case.
Was the award of damages appropriate?
[36] Broadly, there are two aspects to this argument. The first contention is that the Judge erred in assessing damages on a loss of a chance basis. The further alternative argument is that, even if the correct approach was taken, the Judge erred in relation to the quantum of damages. In particular, Mr Shamy contended that the evidence of the appellants’ valuer should have been preferred over that of Rock Hill’s valuer.
Should damages have been assessed on the basis of a loss of a chance?
[37] At [18] – [19] of his decision the Judge began by noting that the plaintiffs’ evidence posited that at best 50 per cent of the view now obstructed by the Hurleys’ roofline could have been “saved” had Rock Hill required design modifications. The analysis continued:
[19] The starting point must be for the Court to determine the value of the maximum advantage to the plaintiffs that Rock Hill could have required in exercising its discretion under clause 1. That value must then be adjusted to take into account the chances that a lesser or no benefit to the plaintiffs might have been given. In other words, the plaintiffs’ loss must be assessed as the loss of a chance to obtain a better outcome.
These observations reflected the fact that it lay with Rock Hill to determine in its unfettered discretion what modification, if any, to the Hurleys’ submitted building plans was appropriate.
[38] Mr Shamy submitted that a loss of a chance approach was “entirely inappropriate” in the circumstances of this case. He accepted that the uncertainty in this case lay in what Rock Hill would have done had Mr van Asch turned his mind to
the mandatory considerations listed in cl. 2 of the covenant. The argument continued:
This does not support a loss of chance analysis. It is enough to say that the covenant was breached, and that the appellants suffered loss as a result. That loss is a matter of historic fact. It has occurred, it was a result of the breach, and the appellants did not play a role in causing that loss.
Hence, counsel contended that the correct measure of damages was the loss of market value suffered by the McLeishes as a result of the breach. Quantum should have been assessed on the basis of the valuation evidence.
[39] I do not agree. In my view a loss of a chance analysis was necessary in this case. This conclusion is best explained by reference to the Court of Appeal decision in Benton v Miller & Poulgrain (a Firm),[6] in which the Court adopted loss of a chance principles from the English Court of Appeal case, Allied Maples Group Ltd v Simmons and Simmons (a firm).[7] Both cases concerned a failure by the defendant’s solicitors to give appropriate legal advice. However, Stuart-Smith LJ’s explanation of the relevant legal principles is of general application.
[6] Benton v Miller & Poulgrain (a Firm) [2005] 1 NZLR 66 (CA).
[7] Allied Maples Group Ltd v Simmons and Simmons (a firm) [1995] 4 All ER 907.
[40] At p 914 he said:
In these circumstances, where the plaintiffs’ loss depends upon the actions of an independent third party, it is necessary to consider as a matter of law what it is necessary to establish as a matter of causation, and where causation ends and quantification of damage begins.
(1) What has to be proved to establish a causal link between the negligence of the defendants and the loss sustained by the plaintiffs depends in the first instance on whether the negligence consists on some positive act or misfeasance, or an omission or non-feasance. In the former case, the question of causation is one of historical fact. The Court has to determine on the balance of probability whether the defendant’s act, for example the careless driving, caused the plaintiff’s loss consisting of his broken leg. Once established on the balance of probability, that fact is taken as true and the plaintiff recovers his damage in full. There is no discount because the judge considers that the balance is only just tipped in favour of the plaintiff; and the plaintiff gets nothing if he fails to establish that it is more likely than not that the accident resulted in the injury ....
(2) If the defendant’s negligence consists of an omission, for example to provide proper equipment, or to give proper instructions or advice, causation depends, not upon a question of historical fact, but on the answer to the
hypothetical question, what would the plaintiff have done if the equipment had been provided or the instruction or advice given. This can only be a matter of inference to be determined from all the circumstances ....
Although the question is a hypothetical one, it is well established that the plaintiff must prove on the balance of probability that he would have taken action to obtain the benefit or avoid the risk. But again, if he does establish that, there is no discount because the balance is only just tipped in his favour
....
(3) In many cases the plaintiff’s loss depends on the hypothetical action of a third party, either in addition to action by the plaintiff, as in this case, or independently of it. In such a case does the plaintiff have to prove on the balance of probability, as Mr Jackson submits, that the third party would have acted so as to confer the benefit or avoid the risk to the plaintiff, or can the plaintiff succeed provided he shows that he had a substantial chance rather than a speculative one, the evaluation of the substantial chance being a question of quantification of damages?
... I have no doubt that Mr Jackson’s submission is wrong and the second alternative is correct. (emphasis added)
[41] The present case falls in the third category identified by Stuart-Smith LJ. The McLeishes’ loss (if there was one) depends upon what Rock Hill, or its nominee, would have done had it considered the mandatory factors in cl. 2 of the covenant before reaching a decision to approve the Hurleys’ building plans. The breach found by Judge MacAskill was procedural in nature. That is, he correctly held that Mr van Asch was in breach of cl. 2 of the covenant because he did not assess the mandatory considerations (in particular the protection and preservation of the McLeishes’ view) when exercising the discretion to approve, or disapprove, the Hurleys’ building plans. This was not a positive act; rather an omission. Being an omission there is no historical fact upon which the breach is founded. Instead, it is necessary to hypothetically evaluate what Mr van Asch might have done, acting independently, had he approached the decision in a correct manner – that is, by having regard to the mandatory cl. 2 considerations.
[42] In the District Court the McLeishes, as plaintiffs, had to show that there was a substantial chance, rather than a speculative one, that had Mr van Asch followed a correct procedure he would have required changes to the Hurleys’ building plans in an endeavour to better protect the views from the McLeishes’ house.
[43] I note that the Judge did not refer to the relevant authorities, but rather assessed the “chance” as follows:
[28] I now turn to consider the probability that Mr van Asch, had he turned his mind to the impact of the Hurleys’ house on the McLeishes’ views from [their] property, would have required the Hurleys to modify their design ...
(emphasis added)
Strictly speaking this was an incorrect approach. The McLeishes did not have to establish the hypothesis of modification to the Hurleys’ design plans on the balance of probabilities, rather that there was a substantial chance of this. But, the mistake was favourable to the defendants (respondents) in that a higher standard than that actually required was adopted. I accept there was a substantial chance that Mr van Asch would have required remedial steps to be taken had he turned his mind to the clause 2 factors. But, my reasons for reaching this conclusion differ from those of the Judge.
[44] He, at [28] listed six factors which prompted his conclusion that Mr van Asch would probably have intervened in favour of the McLeishes. These were:
(a)that the McLeishes did not exploit the height restriction by designing their house to take full advantage of it, with the consequence they were vulnerable to a partial loss of their view;
(b)Rock Hill had an unfettered discretion as to the weight to be given to the protection and preservation of the McLeishes’ views and, having regard to the modest bulk and appropriate location of the Hurleys’ house, the McLeishes had only a “low expectation” that Rock Hill would compel the Hurleys to modify their building design;
(c)although a substantial part of the McLeishes’ original view has been lost, by far the greater part of that loss was inevitable once a house was built on lot 9;
(d)the Hurleys’ house is of modest dimensions and their roofline is at a shallow pitch, even for a monopitch roof;
(e) it was predictable that Mr van Asch required the Hurleys to adjust their roofline to a more modern design in order to achieve an architecturally satisfactory standard, and
(f)that steps to preserve and protect the McLeishes’ view by requiring a redesign of the Hurleys’ roof could well have been considered “disproportionate to the imposition”.
[45] In light of this list of factors it is not altogether clear how the Judge reached his conclusion that intervention by Mr van Asch to protect the McLeishes’ views was probable. If anything, the factors listed in [28] are negative in nature and prompt the contrary conclusion.
[46] To my mind the dominant factor indicating the existence of a substantial chance that Mr van Asch would have intervened, is the obtrusive and dominating impact of the Hurleys’ roofline when viewed from the McLeishes’ property. Some exhibits clearly demonstrate this factor. Annexed to this judgment is a site plan which shows the relative locations of the two homes (and the maximum height at various points of the respective rooflines). As can be seen, the McLeishes’ property on lot 10 is essentially north-facing, although slightly offset in a westerly direction. The northern aspect of the house includes a large deck and the living areas open off the deck and feature large north-facing glass doors and windows. Prior to the construction of the Hurleys’ house the McLeishes enjoyed a commanding view across the Canterbury Plains to the Southern Alps and foothills.
[47] Following construction of the Hurleys’ house a commanding view remains, but this is largely a sky view, with major interruption to what might be termed the lower horizon view which previously existed. This is evident from the photograph annexed to this judgment (taken from a sitting position on the McLeishes’ deck). However, the interruption is of course confined to the arc which coincides with the Hurleys’ roofline. To each side of the Hurleys’ house and roofline narrower arcs of view remain on either side.
[48] The Hurleys’ roof comprises two monopitch plains, the larger one facing the
McLeish property. Mr van Asch required that the roofline be completely redesigned
in a monopitch style, because the proposed “hip and valley” design was out of keeping with the architectural approach adopted for other houses in the subdivision. As Judge MacAskill noted, the slope of the monopitch roof was only 9°, which ensured that the maximum height restriction of 127.5 metres was not exceeded. However, insistence upon the monopitch design meant that the McLeishes were confronted with a continuous ridgeline, extending almost from one side of the Hurleys’ house to the other, at a height of 127.12 metres. Moreover, as is evident from the photograph, the McLeishes face a uniform expansive roof which extends back to a point adjacent to the boundary of the two sections.
[49] Of course, the impact of the Hurleys’ roof is one thing, but the scope to improve upon that impact is another. Put another way, given that the McLeishes purchased lot 10 in the knowledge that a house would be erected on lot 9, could they have had a reasonable expectation that the covenant would better protect and preserve their arc of view. This, of course, is the real issue. If Mr van Asch had turned his mind to the impact upon the McLeishes’ view, would he have felt a need to intervene and require changes to the Hurleys’ building plan?
[50] Interestingly, Mr Sheddan expressed the opinions that the original “hip and valley” roof design for which the Hurleys sought approval, would have been a better option from the McLeishes’ viewpoint. He also, when briefed by the McLeishes in January 2008, advocated a shortening of the dominant monopitch ridgeline running from one side of the house to the other. He saw this as the obvious way to alleviate the intrusion which the end design represented.
[51] But these were remedial solutions suggested at a time when the Hurleys’ house was significantly built. Mr van Asch approved the building plans in advance of the commencement of construction. At that point it was open to consider the siting of the Hurleys’ home as well as the roof design. Lots 10 and 9 are situated on a part of the hillside which is gently sloping. This explains why, even with a three and a half metre height differential between the two houses, there is nonetheless a difficulty in preserving the lower view previously available from the McLeishes’ property. But there was scope to reconsider the siting of the Hurleys’ house.
[52] This issue was raised in the course of the District Court hearing. It emerged that the Hurleys sited their house close to the McLeish boundary because they wished to maximise the section area forward of the house for the development of a garden. This positioning of the house also enhanced the Hurleys’ view in that the home was on the higher part of the section.
[53] This evidence indicates that Mr van Asch would have encountered opposition from the Hurleys had he required them to relocate the building platform. But to my mind there was some scope for this to be done. There is a reserve in front of the Hurleys’ property. Hence, they cannot be built out. The nearest properties downhill of them are some little distance away. All in all I am of the view that there was a substantial chance Mr van Asch would have found scope to intervene in relation to the Hurleys’ building design and siting, if he had gained a true appreciation of the impact upon the McLeishes’ view from approving the house design subject only to substitution of a monopitch roof. The potential to resite the house to some degree, and to amend the roofline would, I am satisfied, have enabled about 50 per cent of the intrusion to be avoided. This, of course, was the finding made by Judge MacAskill, albeit without reliance upon some resiting of the house.
The Judge’s approach to quantum
[54] The Judge first considered the valuation evidence of Mr Mark Dunbar and Mr Christopher Barrowclough, called by the McLeishes and Rock Hill, respectively. Mr Dunbar concluded that the diminution in the value of the McLeishes’ property due to the obstruction of view by the Hurleys’ house was $100,000, or 13 per cent of the assessed market value of the house, $750,000. Mr Barrowclough, however, considered that if there was any diminution in value, it was minor and no greater than five per cent of the property’s value, $37,500. The Judge preferred the lesser assessment.
[55] However, the figure of $37,500 was reduced to $30,000 to take account of Mr Barrowclough’s evidence that in his opinion adjustments to the Hurleys’ roofline would have had little or no “positive value impact” for the McLeishes, although a
redesign of the Hurleys’ house could have improved the view and significantly avoided a diminution in value. Hence, the value figure became $30,000.
[56] Attention was then turned to assessment of the chance. The Judge concluded that there was no more than a 40 per cent chance Mr van Asch would have required modification to the Hurleys’ building design, had he applied cl. 2 of the covenant. He then said that he discounted this chance assessment to 30 per cent “to take account of the real possibility that, if any modification had been required, it would have been less than that contemplated by a view (as earlier discussed) valued at
$30,000”. And, 30 per cent of $30,000 was calculated to be $10,000 (rather than
$9,000).
[57] The methodology was, I think, wrong in part. In broad terms, there were two aspects to the exercise. The first concerned the value of the view which could have been preserved if the covenant was correctly applied. I have already found (as did Judge MacAskill) that only about 50 per cent of the lost view could have been saved through intervention pursuant to the covenant. The second aspect concerned fixing the percentage chance, given the finding already made that there was a substantial chance Mr van Asch would have intervened had he appreciated the actual intrusion to the McLeishes’ view from construction of the Hurleys’ house.
[58] I consider that the Judge did not separate the two aspects of the evaluation. He arrived at a $30,000 value figure, and then assessed the chance at 40 per cent. However, at this point the chance assessment was reduced to 30 per cent because the assumed requirements imposed by Mr van Asch would “possibly” have improved the available view by a lesser extent than was assumed in fixing the value figure. This was to intermingle the evaluations of chance on the one hand, and value on the other – when the two required discrete consideration.
Assessment of the chance
[59] My approach to this issue is different to that of Judge MacAskill: see [38] – [42]. It is not surprising, therefore, that my assessment of the chance is different to the 40 per cent initially fixed by the Judge. I consider there was a very high chance
Mr van Asch would have intervened pursuant to the covenant had he better appreciated the actual impact of the Hurleys’ house on the McLeishes’ view. I have endeavoured to explain this impact by reference to the site plan and a photograph. In percentage terms I fix the chance at 80 per cent.
[60] But what could Mr van Asch have achieved under the covenant? I have already accepted the Judge’s finding that at best the inroad into the McLeishes’ view could have been lessened by about 50 per cent through a combination of change to the roof design and some resiting of the Hurleys’ house. But it does not necessarily follow Mr van Asch would have gone this far. He would have had to balance the interests of both property owners. No doubt the Hurleys would have contested a requirement to resite their building platform, particularly given that their design was within the height restriction. In the end result, this evaluation is necessarily a matter of impression. I find that Mr van Asch would probably in fact only have protected about half the total view which was able to be protected. That is 50 per cent of the actual loss could have been prevented, but only half (25 per cent) was likely to be protected given the competing considerations Mr van Asch had to confront.
The value of the hypothetical loss
[61] This depends upon an assessment of the valuation evidence. Mr Dunbar adopted a before, and after, approach. He considered that the before value of the McLeishes’ property was $750,000, while after construction of the Hurleys’ property he considered the market value to be only $650,000. He accepted that inevitably construction of the Hurleys’ house would impact upon the McLeishes’ view, but he characterised the impairment as “greater than should [have been] expected”. What he meant by this was challenged in cross-examination. From reading the record it seems to me that, while Mr Dunbar correctly turned his mind to the need to make allowance for inevitable intrusion upon the McLeishes’ arc of view, his before value did not make it clear that proper allowance was made for this (i.e. that which even the covenant could not guard against).
[62] On the other hand, Mr Barrowclough was of the opinion that the construction of the Hurleys’ house was “within a reasonable range of anticipated outcomes”. He
therefore thought Rock Hill was not in breach of its obligations under the covenant. However, in case he was wrong in that evaluation, Mr Barrowclough added that any breach on Rock Hill’s part resulted in a diminution in value of the McLeishes’ property “no greater than 5% of the property’s value”. He did not separately value the McLeish property, and Judge MacAskill therefore applied the five per cent against Mr Dunbar’s total valuation figure of $750,000 to arrive at a diminution value of $37,500.
[63] I do not consider that the valuation evidence directly answers the question of quantum in this case. This is not a criticism. The valuers were confronted with a significant difficulty, in that assessment of a diminution value required value judgments to be made concerning whether Mr van Asch would have intervened pursuant to the covenant and, if he had, what changes to the Hurleys’ building plans would have resulted. Only then, can the hypothetical lost opportunity (chance) for him to have better protected the McLeishes’ view be assessed. At that point a value assessment may follow.
[64] However, the valuation evidence provides a basis for the necessary judgment to be made. I am satisfied that the availability of an expansive view is an integral component of the property value of homes in this subdivision. I assess that the value of the view lost through non-application of the covenant is of the order of $65,000. This figure, however, must be halved in recognition of the finding that Mr van Asch would probably have required changes which protected the view as to only half the total protection attainable under the covenant. The resulting figure, $32,500, must be further reduced to recognise that there was only an 80 per cent chance Mr van Asch would have applied the covenant in the first place. The final figure is $26,000.
Result
[65] The appeal is allowed in part. The damages payable to the plaintiffs are increased from $10,000 to $26,000, plus interest on the same basis as was allowed in the District Court. Such damages are payable by Rock Hill.
[66] The plaintiffs are also entitled to costs in relation to the appeal. My tentative view is that 2B costs for a one day hearing are appropriate, but if this indication is
not acceptable to the parties memoranda may be filed.
Solicitors:
Raymond Donnelly & Co, Christchurch for Appellants
White Fox & Jones, Christchurch for First and Third RespondentsGeoffrey Brodie Barrister, Christchurch for Second Respondents
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