Trott v Barnett

[2017] NZHC 478

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2016-404-2896 [2017] NZHC 478

BETWEEN

MICHAELENA MARY TROTT

Plaintiff

AND

DEBORAH JOSEPHINE BARNETT First Defendant

ELAINE LILLIAN SMITH Second Defendant

Hearing:	22 February 2017
Counsel:	GI Seagar and JG Ussher for plaintiff SJ Tee for defendants
Judgment:	16 March 2017

JUDGMENT OF FITZGERALD J

[ON APPLICATION FOR INVASIVE TESTING]

This judgment was delivered by me on [            ] at [        am/pm], pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           Jeff Ussher, Auckland

Morton Tee, Auckland

Trott v Barnett [2017] NZHC 478 [16 March 2017]

Introduction

[1]      The plaintiff has applied pursuant to r 9.34 of the High Court Rules for invasive weathertightness testing at a property in Tairua (“Property”).  This is in the context of proceedings commenced by the plaintiff as lessee of the Property, against the current owners/lessors of the Property, being her stepdaughters (i.e. the first and second defendants).

Factual background

[2]      The Property was originally owned by the plaintiff and her husband, who has since deceased.   The first and second defendants are children from the deceased’s first marriage.

[3]      On 27 June 1997, the plaintiff and her husband, the then owners of the Property, granted themselves a lease for life in relation to the Property (“Lease”). This was presumably for estate planning purposes.  Pursuant to the Lease, the lessees were entitled to occupy the Property until death.   Clause 6 of the Lease provided that:

6.        AT  the request of the Lessees, the Owners agree that they will sell the house and apply the funds in the purchase (in the name of the Owners) of another house or unit that the Lessees consider more convenient for their requirements.  The substitute house will also be made available for lease by the Lessees during their lifetime, on the same rental terms and conditions as contained in this Lease including the terms of this clause.

[4]      Pursuant to a sale and purchase agreement dated 10 July 1997, the plaintiff and her husband transferred ownership of the Property to the defendants for the sum of $210,525.  The purchase price was documented as a loan from the plaintiff and her husband to the defendants, being payable on demand and interest free.  It was accordingly vendor finance.   Subsequently, the loan was forgiven pursuant to the provisions of the Estate and Gift Duties Act 1968.  The result was that the defendants did not provide valuable consideration for the transfer of the Property to them.

[5]      Pursuant to Special Condition 16 of the sale and purchase agreement, the Property was sold subject to the Lease.  As such, the defendants became the owners and lessors of the Property and the plaintiff (and her husband) the lessees.   The

plaintiff’s husband died in 2006 and the plaintiff accordingly became the sole lessee under the Lease.  The plaintiff has remained in occupation of the Property since that time.

[6]      It seems that, in or around April 2016, issues arose between the plaintiff and the defendants concerning the plaintiff ’s husband’s estate and its disposition.   It is alleged that in an attempt to settle disputes in this regard, the plaintiff transferred

$20,000 to each of the first and second defendant’s bank account.   It is further alleged  that  these  payments  were  invalid,  coming  about  as  a  result  of  undue influence and/or unconscionable conduct, and/or unjustly enriched the defendants. Demands were made for the moneys to be repaid.

[7]      It is alleged that following these demands, discussions ensued between the plaintiff and the defendants, including in relation to the potential sale of the Property to the plaintiff.  The defendants’ statement of defence records that on 13 July 2016, the defendants’ solicitor confirmed that the defendants were prepared to sell the Property to the plaintiff.

[8]      The plaintiff alleges that as a result of those discussions, she took steps to have the value of the Property assessed.   It is alleged that, through that process, inspections  disclosed  that  the  dwelling  was  predominantly  clad  with  the  James Hardie Pty Ltd product “HardieTex”.  It is alleged that inspections also uncovered decay  caused  by  water  ingress  around  the  windows  and  parts  of  the  subfloor structure in the house and garage.

[9]      The plaintiff advised the defendants of the water ingress issues and that she proposed to have the Property assessed.   The statement of claim alleges that the Lease imposes obligations on the defendants in relation to, inter alia, the provision of a dwelling fit for occupation and maintenance of the exterior of the Property. The plaintiff alleges that, as evidenced by the water-tightness issues at the Property, the defendants have breached these obligations.   The defendants’ position is that the Property remains in a tenantable condition and that they have no obligations under

the Lease to undertake any repairs or works in any event.1     The defendants accordingly objected to any water-tightness testing.

[10]     The plaintiff subsequently engaged Incodo Ltd (“Incodo”) to assess both the structural and water-tightness integrity of the Property by means of non-invasive testing.  Various inspections and reports were carried out and prepared by Incodo.  It is sufficient to record for current purposes that Incodo reports as follows:

(a)      There are factors that are indicators that water is entering the dwelling through the cladding.2

(b)Spore findings made as a result of non-invasive testing are evidence of toxic mould growth in the wall cavity, as a direct result of water ingress through the exterior cladding, causing rotting of the timber framing.3

(c)       In  Mr Probett’s  expert  opinion,  the  testing  carried  out  by  Incodo

provides conclusive evidence of:

(i)core decay in the central part of the bottom plate in the side wall adjacent to the driveway under the living room window;

(ii)      advanced  decay under the family room  window facing  the

Harbour;

(iii)very high moisture content and associated visible damage in the  wooden  framing  of  the  bottom  plate  of  the  master bedroom, family room, lounge and garage, indicative of substantial water ingress through the exterior cladding of the

dwelling; and

1      It is also part of the defendants’ defence that the Lease is not in fact valid and as such is not binding on them.

2      Affidavit  of  Paul  Stephen  Edwin  Probett,  affirmed  27 January  2017  (“Probett Affidavit”),

paragraph 45.

3      Probett Affidavit, paragraph 54.

(iv)generally sound timber framing in the third bedroom, however a risk that water and decay will continue to spread to this room as a consequence of the high moisture content found in other areas.4

Matters at issue on the pleadings

[11]     In addition to the claims of undue influence, unconscionable bargain and unjust enrichment, the plaintiff’s statement of claim alleges breach of the Lease, namely that the defendants have failed to provide a watertight dwelling, either as a consequence of structural deficiencies in the dwelling’s cladding or as a result of failing to carry out necessary maintenance.5

[12]     As well as denying the legal basis for this claim, the defendants deny, inter alia, any failure to provide a watertight dwelling and that there are any structural deficiencies in the dwelling’s cladding.6

Developments during course of hearing of application

[13]     The plaintiff’s application as drafted, was for orders that, inter alia, “the defendants undertake invasive weathertightness and mould testing” at three locations identified  in  the  Incodo  Report,  and  that  the  defendants  pay  the  costs  of  such testing.7

[14]     However, at the hearing, Mr Seagar for the plaintiff changed approach, and proposed that the plaintiff (via an independent expert nominated by the plaintiff) carry out the invasive testing, at the plaintiff’s cost.   As will be appreciated, this represented a significant change from the position adopted in the interlocutory application.  Mr Tee rightly, in my view, voiced his concerns in relation to this.

[15]     At the commencement of the hearing, Mr Seagar also provided the Court with an undertaking as to damages from the plaintiff, which I consider to be in an

4      Probett Affidavit, paragraph 71.

5 Statement of claim dated 8 November 2016, at [57].

6 Statement of defence dated 16 December 2016, at [47].

7      Interlocutory application for orders that defendants carry out expert inspection, at [1](a) and (c).

appropriate form.  He also provided details of two potential independent experts to carry out the testing.   The defendants have nominated their own expert.   Mr Tee responsibly acknowledged, however, that there was no distinction between the three proposed experts, in terms of their qualifications and expertise.

[16]     At the hearing, Mr Tee submitted that it would be appropriate for issues in relation to the disputed obligations under the Lease to be determined first, before invasive testing is carried out.   However, no application for determination of preliminary issues has been made.

[17]     During the course of the hearing, I expressed my provisional view that, given the issues raised on the pleadings, and given that there appears to be a sufficient factual foundation for the need for such invasive testing (based on the two Incodo inspections), I was minded to grant the application, at least on the new approach adopted by Mr Seagar at the hearing.   I indicated, however, that I was not in a position to consider the matter further, as there was not sufficient evidence before me of the precise steps proposed for any such invasive testing.  It is important that any orders for such invasive testing (or other inspections) are prescriptive in their terms,

so that there is clarity for all parties concerned as to what is permitted to occur.8

[18]     Subsequent  to  the  hearing,  the  parties  filed  memoranda  addressing  the specific work to be carried out, if I order invasive testing.  There is broad agreement on the nature of the work to be carried out, subject to two matters (see [26]-[33]] below).

Is it appropriate to order invasive testing?

[19]     Rule 9.34 of the High Court Rules 2016 gives the Court broad powers to make orders for the inspection or testing of property:

9.34     Order for inspection, etc

(1)       The court may, for the purpose of enabling the proper determination of any matter in question in a proceeding, make orders, on terms, for—

8      See, for example, the very prescriptive orders made by Venning J in SF Nominees Ltd v Ballan

[2014] NZHC 2977 at [14].

(a)      the inspection of any property:

(b)      the taking of samples of any property: (c)  the observation of any property:

(d)      the measuring, weighing, or photographing of any property: (e)     the conduct of an experiment on or with any property:

(f)       the observation of a process.

(2)      An order may authorise a person to enter any land or do anything else for the purpose of getting access to the property.

(3)      In this rule, property includes any land and any document or other chattel, whether in the control of a party or not.

[20]     Orders may only be made where necessary to enable proper determination of any question in the proceeding.  But once that jurisdictional threshold is reached, the Court’s power to make such orders is discretionary.9

[21]     In Overseas Containers Ltd v Geo H Scales Ltd, McGechan J observed that inspection orders can be as invasive as Anton Piller orders, and that the Court might accordingly require the same undertakings and precautions.10    In Barge v Freeport, Master Faire (as Faire J then was) granted an application seeking invasive testing by way of  drilling  into  concrete,  on  the  condition  that  the  damage  be  made  good following the testing.11

[22]     There is little other relevant case law on this topic.

[23]     Given the live issues on the pleadings and the evidential foundation for the need for more invasive testing, I consider that it is necessary to make the orders to enable the proper determination of a matter in question on the proceedings, namely the current water-tightness of the Property.  The defendants have not suggested any means  of  determining  that  factual  issue  other  than  via  invasive  water-tightness

testing.

9      McKay v Johnson [2016] NZHC 466.

10     Overseas Containers Ltd v Geo H Scales Ltd HC Wellington CP395/86, 22 September 1986.

11     Barge v Freeport Development Ltd HC Auckland CIV 2002-404-1771, 23 April 2004; Sim’s

Court Practice at [HCR9.34.5].

[24]     I am fortified in my conclusion by the change in stance by Mr Seagar at the hearing, namely that the testing is to be at the cost of the plaintiff (initially at least, as I also agree that it would be appropriate for the plaintiff to be able to seek to recover those costs, if she is subsequently successful at trial) and that a suitable undertaking as  to  damages  has  been  provided.    Mr Tee  confirmed  at  the  hearing  that  the defendants do not have any solvency concerns in respect of the plaintiff.

[25]     The hearing accordingly focused on who should carry out the invasive testing and to what extent.

Who should carry out the testing?

[26]     As noted earlier, three experts have been nominated to carry out the invasive testing; two by the plaintiff and one by the defendants.  As also noted, there is no dispute that all experts are appropriately and equally qualified to carry out these works.

[27]     Given  the  plaintiff  is  to  pay  for  the  costs  of  the  testing,  I  consider  it appropriate to appoint one of the experts nominated by the plaintiff.   I therefore propose to appoint Mr Chris Phayer, a chartered and registered building survey. Mr Phayer has provided a formal consent to his appointment as an expert for the purpose of the testing.

What should the scope of invasive testing be?

[28]     In the context of the plaintiff’s further memorandum referred to at [28], Mr Phayer has  provided  further  details  of the  proposed  scope of works  for the invasive testing.  This scope of works is set out in paragraphs 1–10 of an email from Mr Phayer to Mr Seagar dated 2 March 2017, annexed as attachment “B” to the memorandum for the plaintiff dated 8 March 2017 (“Phayer email”).

[29]     By  memorandum  dated  9 March  2017,  the  defendants  stated  that  their nominated expert had confirmed the scope of works proposed in paragraphs 1–2 and

4–10 of the Phayer email.  What is in dispute, however, is paragraph 3 of the Phayer email, which records as follows:

3.To supplement the panel cut-outs, wider investigation can involve initial drilling of 8 to 10mm holes through the cladding.  In addition to  recording  moisture  content  levels  in  concealed  framing,  these probe holes provide additional evidence for assessment, being the resistance of the timber under drilling and the visible condition of drill tailings.  This evidence can assist my judgement of any damage that may exist, or be extending, beyond a particular point of water ingress.  If drilling leads to additional concerns of water ingress and damage, it may be prudent to remove additional cut-out panels to establish differing causes of water ingress to different parts of the building.

[30]     The defendants object  at this time to any invasive testing wider than as originally identified in the application and the first Incodo Report.  The application and first Incodo Report were originally limited to three areas, being:

(a)       Behind the television in the lounge;

(b)      Under the north-east window in the family room; and

(c)       Under the bottom left corner of the north-west facing window in the lounge.12

[31]     However, as a result of the second Incodo inspection, as recorded in the Probett affidavit, the particular areas of concern appear to be somewhat wider. These are recorded at paragraphs 71(a)–(c) of the Probett affidavit.

[32]     In my view, it is appropriate to restrict the invasive testing at this stage to specifically identified  areas, rather than to make a more “open-ended” order as suggested for the plaintiff.  Given the content of the second Incodo Report, and those areas of concern described with some particularity at paragraphs 71(a)–(c) of the Probett affidavit, I am minded to make orders that invasive testing may be carried out at those specific locations.  However, as the areas identified at paragraphs 71(a)– (c) of the Probett affidavit are (it seems) wider than those identified in the first Incodo Report, I consider it is appropriate to allow the parties a further opportunity

to comment on the framing of such an order before it is formally made.

12     See Common bundle, page 76.

[33]     I also consider it appropriate that any party has the right to have their own

expert attend and view, but not direct or control, the inspection as it is carried out. With good cooperation and commonsense between the respective experts during the course of the testing, it may be that, if testing of the specific areas indicates that further testing is necessary, the parties may be able to agree this amongst themselves. If they are unable to do so, however, then the plaintiff will need to seek further orders expanding the scope of the invasive testing.

Result

[34]     For these reasons, I make the following orders and directions:

(a)      Mr Chris Phayer, of Solve IT Building Surveyors Ltd, is appointed as the independent expert to carry out the water-tightness testing described in these orders.

(b)The defendants, on reasonable notice (being not less than 7 days), are to permit the plaintiff and/or her representatives, and Mr Phayer (and any of his employees who are to assist him), to enter onto the land at the Property for the purpose of carrying out invasive water-tightness testing.

(c)      The testing is to be carried out in accordance with the procedures set out at paragraphs 1–2 and 4–9 of the Phayer email.

(d)The testing is to be carried out in specific locations only.  The parties are to file a joint memorandum, or if agreement is not able to be reached, their respective memoranda, within 5 working days of this judgment,  setting  out  their  formulation  of  the  specific  areas  for testing, taking into account those areas identified in the first Incodo Report  and  those  areas  identified  at  [71](a)–(c)  of  the  Probett affidavit.    Upon  receipt  of  such  memorandum/memoranda,  I  will make an order confirming the specific areas for testing.

(e)      All costs associated with the testing are to be met by the plaintiff, subject to the plaintiff being entitled to seek to recover those costs through these proceedings.

(f)      Any party may have their own expert present at the testing, solely for the purposes of observing, rather than directing or controlling, the testing.

[35]     I reserve leave for any party to seek any further orders that may be necessary to give effect to the above orders.

[36]     I direct the Registry that if further directions or orders are required by either party in relation to the implementation of the above orders, they are to be referred to me for determination.

Costs

[37]     The plaintiff has, in one sense, succeeded on her application.  However, as noted, the approach taken on behalf of the plaintiff at the hearing differed markedly from the orders sought in the application itself.  I have no doubt that better progress would have been made in determining the application by consent, or at least with a broader degree of agreement, had the application been framed from the outside in the manner proposed by Mr Seagar at the hearing.  In addition, I have not ordered the broader, open-ended invasive testing proposed in the plaintiff’s memorandum of

8 March 2017.

[38]     In those circumstances, costs on the application are to lie where they fall.  For the avoidance of doubt, this excludes the costs of Incodo and those of Mr Phayer actually carrying out the testing.   The plaintiff may seek to claim these costs as disbursements in the substantive proceeding.  Whether those costs are recoverable by the plaintiff in the substantive proceeding will obviously depend on the outcome of

the parties’ respective claims.

Fitzgerald J