Zondag and Zondag v Zondag
[2008] NZCA 321
•27 August 2008
IN THE COURT OF APPEAL OF NEW ZEALAND
CA334/2007
CA558/2007
[2008] NZCA 321BETWEENBERRY ZONDAG AND MEI ZONDAG
Appellants
ANDHERMANUS JOHANNUS GERARDUS ZONDAG
Respondent
Hearing:23 July 2008
Court:Hammond, Chisholm and Miller JJ
Counsel:B Zondag in person for Appellants
D M O'Neill for Respondent
Judgment:27 August 2008 at 2.15 pm
JUDGMENT OF THE COURT
A. THE APPEALS ARE DISMISSED.
B.The appellants must pay the respondent costs for a standard appeal on a band A basis and usual disbursements.
____________________________________________________________________
REASONS OF THE COURT
(Given by Chisholm J)
[1] These appeals arise out of an extraordinarily bitter dispute between two brothers (and the wife of one of them) in relation to the sale of land and the erection of a house and associated infrastructure. Although these were not necessarily all full days, the dispute occupied a total of 22 hearing days in the High Court and gave rise to a substantive judgment of 144 pages, as well as a lengthy judgment on costs and interest.
[2] Numerous issues have been raised by the appellants in relation to both judgments. To a large extent they are attempting to challenge every finding that is unfavourable to them. It is significant that when making his opening statement to us Berry Zondag acknowledged with reference to the substantive judgment that “virtually the entire judgment turns on findings of credibility”. We will have more to say about that later.
[3] In this judgment we will refer to the appellant Berry Zondag as “Berry” and the respondent Hermanus Zondag as “Hans”.
Background
[4] In 1992 Berry and his wife, Mei, emigrated from the Netherlands to New Zealand. For most of his career in the Netherlands Berry had been involved with a computer company, ultimately serving as its managing director. Before that he had gained diplomas in architecture and law from universities in the Netherlands and had spent some time working in the construction industry.
[5] After emigrating to New Zealand Berry and his wife purchased a 300 acre block of land near Thames and subdivided it into ten lifestyle lots (the subdivision). They built a house on Lot 7 for themselves and began to design, build and sell houses on the remaining lots. Since arriving in New Zealand Berry has completed a law degree.
[6] Hans practised as an actuary in the Netherlands and established an actuarial consultancy firm in that country. After selling his interest in that firm, and having visited Berry and Mei in New Zealand during 1998 and again in 1999, Hans became interested in emigrating to New Zealand with his family.
[7] It was proposed that Hans would buy lot 6 in the subdivision and that Berry would build a house for him on that lot. Hans alleges that after he received approval to immigrate to New Zealand in September 2000, his brother agreed to design and build a house and associated infrastructure on the lot for a fixed price plus extras and variations. Berry, on the other hand, alleges that the arrangement was that the design and construction would be on a cost plus basis.
[8] By the time Hans and his family arrived in New Zealand during August 2001 the house had been completed. However, part of the car park had been erroneously built on lot 7 and the septic tank was also on lot 7. While Berry and his wife were prepared to overcome this problem by transferring 327m2 from lot 7 to lot 6, Hans claimed that they had agreed to transfer 1,676m2. This issue escalated and on 8 October 2002 Hans issued proceedings in the High Court seeking specific performance of the alleged agreement to transfer 1,676m2.
[9] Berry and Mei responded to the proceeding by alleging that Hans owed them a further $296,040.73 for the design and construction of the house and infrastructure. Having already paid more than $1.2 million without sighting any invoices, Hans requested a full accounting. On 20 January 2003 Berry provided a statement accompanied by around 800 invoices. After perusing those documents Hans concluded that he had been overcharged and that Berry and Mei in fact owed him $381,305. From that point there was a sharp deterioration in the relationship between the parties.
[10] After his application for summary judgment was dismissed by Associate Judge Faire in April 2003, Hans amended his pleadings by adding another six causes of action (which will be outlined shortly). He also caveated lot 7. A failed attempt at mediation was followed by numerous interlocutory hearings. The trial before Nicholson J commenced on 19 July 2005 and, as a result of disruptions and deficient time estimates, it was not completed until 25 January 2006. About 18 months later, on 19 June 2007, Nicholson J issued his substantive judgment. The judgment as to costs and interest followed on 28 September 2007.
Pleadings
[11] Both the statement of claim and counterclaim were amended on several occasions.
[12] In his second amended statement of claim the plaintiff relied on seven causes of action. Of those the following are directly relevant to this appeal:
· Second cause of action seeking specific performance of an agreement to transfer 327m2 from lot 7 to lot 6 (an alternative to the first cause of action seeking transfer of 1,676m2).
· Third cause of action seeking $2,500 for repositioning a driveway which encroached on to lot 7.
· Fourth cause of action seeking a refund of $340,926.51 which was alleged to be an over payment by the plaintiff after allowing for the fixed price of the house, agreed costs of the driveway and agreed variations and extras.
· Sixth cause of action seeking $59,842.15 for defects in the house and incomplete work.
It is unnecessary to traverse the other three causes of action except to explain that the plaintiff failed on the first and seventh causes of action and the Judge did not need to consider the fifth cause of action because it was an alternative to the fourth cause of action.
[13] In their counterclaim the defendants relied on three causes of action. The first cause of action sought $299,623.05, which the defendants maintained was the balance owing to them by the plaintiff for the design and construction of the house and infrastructure. The second cause of action sought removal of a retaining wall constructed by the plaintiff that encroached into lot 7, plus exemplary damages or alternative remedies. The third cause of action sought $522.16 for repairs to a right of way.
Outline of High Court’s substantive decision
[14] Seven witnesses, including Hans, gave evidence for the plaintiff and four, including Berry, gave evidence for the defendants. Three of these witnesses were overseas and gave evidence by video link. After the evidence had been completed the Judge made a site inspection of the property with a Court registrar.
[15] Nicholson J recorded that there was direct conflict between the evidence of Hans and Berry on many important alleged facts and that he preferred the evidence of Hans on the primary issue of whether or not there was a fixed price contract. The Judge said that he had been able to form impressions about the brothers from having seen and heard them give evidence over many days. While he formed a favourable impression of Hans as “a witness of credibility and reliability” (at [152]), he formed an unfavourable impression of Berry. When explaining those conclusions the Judge contrasted Hans’ “clear and consistent” evidence with Berry’s “implausible, convoluted, or difficult to understand” evidence (at [153]).
[16] It was the Judge’s view that Berry’s credibility was also “substantially diminished” by proved instances of dishonesty by him in attempting to deceive Hans (at [154]). These involved Berry providing a false swimming pool invoice, two floor covering invoices for floor coverings that had not been laid in the house, and the “whiting out” of information on some of the plumber’s invoices. In the case of the swimming pool invoice, evidence had been given by the person who, the Judge found, had been “pressured” by Berry into providing the false pool invoice (at [164]). In each of those instances the Judge concluded that Berry had acted “dishonestly”.
[17] Against that background we turn to the conclusions reached by Nicholson J in relation to the four causes of action that are relevant to this appeal.
[18] In the second cause of action Hans sought a boundary adjustment between lots 6 and 7 so that 327m2 was added to lot 6 for the purpose of overcoming the parking area and septic tank problems. Nicholson J concluded that an agreement for a boundary change, which the parties intended to be immediately binding, had arisen. The area to be transferred was 327m2. The Judge also accepted that it had been agreed between the parties that Hans only needed to pay the reasonable expenses incurred with third parties in implementing the boundary change. Beyond that he did not have to pay anything for the land.
[19] Nevertheless, Nicholson J accepted that the agreement was not in writing and that it could not satisfy the requirements of s 49A(1) of the Property Law Act 1952 or s 2(2) of the Contracts Enforcement Act 1956. He decided, however, that there was sufficient part performance (by virtue of Berry obtaining a survey plan of the land and sending a copy of that plan and later an account to Hans) to satisfy the doctrine of part performance and render it unconscionable for Berry and Mei to rely on the absence of a written document. Specific performance of the agreement to transfer 327m2 was ordered.
[20] The third cause of action concerned the encroachment of Hans’ driveway on to lot 7. Nicholson J accepted Berry’s suggestion that the Court should vary the easement so that the small encroachment was included in it. Berry and Mei were directed to take all necessary steps to include the area in the easement with the cost of the variation to be borne by them.
[21] The issue at the forefront of the fourth cause of action, which is unquestionably the primary cause of action, was whether there was a fixed price contract. Several factors prompted the Judge to find for the plaintiff: Berry’s email of 8 November 1999 to Hans that “you will have a house built for cost price”; Hans’ evidence in 2000 that he and Berry had agreed that Berry would design and construct a house and driveway on lot 6 for a fixed price; an intention on the part of both parties to create a contractual relationship and binding legal obligations; and a “cost plan” specifying a price of $484,316.51 for the house, which the Judge found had been prepared by Berry and sent to Hans. Underlying most of those findings was Nicholson J’s preference for Hans’ evidence.
[22] Nicholson J also concluded that it was “likely” that Hans and Berry had agreed that Hans would pay any higher actual costs of items for which provisional sums had been given and would pay the additional costs of any extras and variations. The Judge said that even if there was no agreement, he was prepared to imply those terms. We should add that Hans accepted that these additional sums were payable.
[23] Having reached that point, Nicholson J analysed the evidence as to payments that had been made by Hans to Berry and Mei. He accepted that Hans had paid $1,217,053.32 (which was $444.55 less than the amount Hans alleged that he had paid and $80,873 more than the amount acknowledged by Berry). Then the Judge conducted a detailed analysis of the statement and invoices provided by Berry in January 2003 which led him to the conclusion that Hans had overpaid Berry and Mei by $46,151.62. He accepted that this overpayment had been made in the mistaken belief that it was payable and ordered Berry and Mei to refund the overpayment.
[24] In the sixth cause of action Hans claimed $59,982.15 for rectifying defects and incomplete work. With the exception of a claim for a rusting hand rail, this component of the claim was dismissed. In the case of the hand rail, Berry and Mei were ordered to pay Hans $4,400 if settlement with the supplier was not achieved within a specified period.
[25] We now turn to the Judge’s determination of the counterclaim. Given that he had found that the contract was a fixed price contract and that the defendants had been overpaid, it was inevitable that the defendants’ first cause of action based on a cost plus agreement would fail, and it was dismissed accordingly. The Judge rejected Berry’s attempt to argue unjust enrichment or quantum meruit, primarily on the basis that they had not been pleaded.
[26] In relation to the second cause of action Nicholson J accepted that Hans had trespassed on Berry and Mei’s property when he built the retaining wall. But the Judge did not regard the trespass as contumelious or outrageous and declined to award exemplary damages or make any order for restitution. Only nominal damages of $1 were awarded.
[27] Finally, the Judge addressed the third cause of action for repairs to the right of way. Having decided, first, that the defendants had not proved an agreement with the plaintiff for payment by the plaintiff of the claimed share of repairs and, second, that the defendants had failed to serve notice on the plaintiff as required by s 126C of the Property Law Act 1952, the Judge dismissed this cause of action.
Outline of costs judgment
[28] Costs and disbursements totalling $389,519.53 were sought by the plaintiff. The defendants responded by seeking costs and disbursements of $163,540.44 against the plaintiff.
[29] Nicholson J decided that most of the pre-trial costs and all the trial costs and disbursements should be determined on a proportion of trial success basis (which we will discuss later). Except for the cost of discovery and inspection (which were on a 2C basis), he decided that costs should be awarded on a 2B basis.
[30] Numerous interlocutory matters were then addressed. In some the Judge directed the defendants to pay costs. In one instance there was an order for the plaintiff to pay the costs. And in some instances the Judge directed that costs should rest where they fell.
[31] With reference to trial costs the Judge began by traversing the history of the proceeding. He noted that the plaintiff had failed on two of the six causes of action on which judgment was given and the defendants had failed on two of the three counterclaim causes of action. After referring to the relevant High Court Rules and to relevant authority, Nicholson J confirmed that trial costs and disbursements should be determined on a proportionality of trial success basis, which he explained in detail. In the end result the defendants were ordered to pay costs totalling $162,945.54 to the plaintiff.
This appeal
[32] As mentioned earlier, Berry acknowledged at the outset that virtually the entire substantive judgment turns on findings of credibility. He contends that it was not open to the Court to make many of its findings on the basis of “oral allegations and credibility only” and without considering later amendments to the documents underpinning the finding of dishonesty. Berry also claims that issues that were pertinent to credibility findings had not been properly pleaded by the plaintiff and that the Court had failed to accurately consider issues about his brother’s credibility.
[33] Given those challenges it is appropriate to repeat the observations of Thomas J in Rae v International Insurance Brokers (Nelson Marlborough) Ltd [1998] 3 NZLR 190 at 198 and 199 (CA):
The principle that an appellate Court will only interfere with a trial Judge’s findings of fact in exceptional circumstances is so well established it does not require the citation of authority. For present purposes Viscount Haldane LC’s dictum will suffice. In Nocton v Lord Ashburton [1914] AC 932 at p 957, the learned Law Lord said:
“. . . it is only in exceptional circumstances that judges of appeal, who have not seen the witness in the box, ought to differ from the finding of fact of the judge who tried the case as to the state of mind of the witness.”
See further, and by way of example, the decision of the Privy Council in Clark Boyce v Mouat [1993] 3 NZLR 641 per Lord Jauncey at p 647, preferring the conclusions drawn from the evidence of the trial Judge rather than the conclusions drawn by the majority in this Court. More recently, the Board, in Rangatira Ltd v Commissioner of Inland Revenue [1997] 1 NZLR 129 at pp 138 – 139, reiterated that an appellate Court should not reverse the decision of a trial Judge on a question of fact unless that decision is shown to be wrong. Notwithstanding that it may have been a decision which could have gone either way at first instance, it cannot be reversed if it was one which the trial Judge was “entitled to reach”.
Yet, notwithstanding how frequently the principle is reiterated, counsel for unsuccessful parties just as often seem bent on bringing appeals to this Court challenging the findings of fact of the Judge at first instance.
… It may not be fully appreciated that the deference of an appellate Court to the findings of fact of the Court at first instance is founded on a number of pragmatic considerations which make it inappropriate for the appellate Court to intervene. The advantages possessed by the trial Judge in determining questions of fact are manifest. Of paramount importance, of course, is the fact the trial Judge hears and sees the witnesses first hand over a matter of days, or even weeks, of taking evidence. He or she can form an impression of the reliability of witnesses and, where necessary, their credibility – although in deference to the witness’s feelings the Judge may not always express an adverse conclusion in that regard. As the evidence unfolds the trial Judge gains an impression from the evidence which is not necessarily or usually apparent from the cold typeface of the transcript of that evidence on appeal. The Judge forms a perception of the facts in issue from which he or she adds or subtracts further facts as witnesses give their evidence, and so obtains as complete a picture as is possible of the events in issue. The Judge perceives first hand the probabilities inherent in the circumstances traversed in the evidence and can obtain a superior impression of those probabilities as a result.
An appellate Court has none of these advantages and must acknowledge that the Court at first instance is far better placed to determine the facts. Indeed, it would be an arrogance for an appellate Court to assert the capacity to be able to “second-guess” a trial Judge’s findings of facts when it does not share those advantages. Exceptional caution in departing from the trial Judge’s findings of fact are therefore regarded as imperative.
In Austin, Nichols & Co Inc v Stichting Lodestar [2008] 2 NZLR 141 the Supreme Court acknowledged the advantages that a trial Judge enjoys over an appellate Court when assessing the credibility and reliability of witnesses.
[34] Plainly Nicholson J had the advantage of assessing the credibility of both Hans and Berry over a very lengthy period and there is no sound basis on which we could overturn those findings. In any event the Judge’s uncomplimentary conclusions about Berry were fully justified by the documents concerning the swimming pool, floor coverings and plumbing invoices which the Judge found were used to deceive Hans. Those documents cannot be explained away on the basis that they were somehow part of a negotiating strategy.
[35] Other documentation also undermined Berry's credibility. For example, he denied that he had completed the 20 page “cost plan” and claimed that Hans himself had created the document from spreadsheet files and other information. Nicholson J’s rejection of that evidence severely damaged Berry’s credibility. It is unnecessary to mention any other examples.
[36] We conclude our consideration of credibility issues by responding to the other matters raised by Berry. First, there is no substance in Berry’s contention that the Judge failed to take into account later amendments to the documents underpinning the credibility findings. Nicholson J was perfectly entitled to consider the documents in their original form and to take into account the use that Berry had made of those documents. Second, the plaintiff was not required to plead evidential matters. Finally, we do not accept the contention that Nicholson J failed to accurately consider issues about Hans’ credibility. It is clear from the judgment that Nicholson J carefully considered the credibility of both brothers.
[37] Apart from credibility findings, Berry challenges eight specific aspects of the substantive judgment:
(i) Parking area encroachment (plaintiff’s second cause of action);
(ii) Driveway encroachment (plaintiff’s third cause of action);
(iii) House construction (plaintiff’s fourth cause of action);
(iv)Faulty workmanship (plaintiff’s sixth cause of action);
(v) House construction (defendants’ first cause of action);
(vi)Retaining wall encroachment (defendants’ second cause of action);
(vii)Contribution to easement repairs (defendants’ third cause of action);
(viii)Plaintiff’s caveat over the defendants’ title.
Of those matters the construction of the house, which straddles both (iii) and (v), is undoubtedly the primary issue and we will consider it first. After that we will consider the remaining matters and then the costs judgment. However, before doing so, two matters require comment.
[38] First, unfortunately Berry has pursued each ground of appeal in exhaustive written submissions without any real attempt to confine his submissions to matters that can be properly raised in this Court. While we have considered all the points that he has raised, for the purposes of this judgment, we will confine ourselves to those points that are arguable.
[39] Second, Berry alleges that a breach of natural justice arose because there was no transcript of evidence taken during an overseas video link. This situation arose because there was no sound recording due to a technical problem. Once Nicholson J became aware of this problem he convened a telephone conference on 10 February 2006 (after the hearing had concluded). He records in his judgment that:
[32] At this conference, I said that there seemed to be three options available in the circumstances. First, the evidence could be heard again by video/audio link with opportunity for cross-examination and re-examination again. Second, the parties file a memorandum setting out their recollection of significant points in the cross-examination and re-examination. Third, I could decide upon the basis of the written statements of each of the overseas witnesses, which they confirmed in evidence as being correct, combined with my recollection of the impression made and the content of cross-examination and re-examination. I pointed out that I had made no hand-written note of what was said in cross-examination and re-examination and the reasons for this.
Although the judgment then records that both Mr O’Neill and Berry accepted the third alternative, Berry maintains that his acceptance was only a conditional acceptance, as set out in his memorandum to the High Court.
[40] We do not accept Berry’s contention that the absence of a transcript has given rise to a breach of natural justice. Even though Berry’s acceptance was a qualified acceptance, it was ultimately for Nicholson J to determine how the problem should be overcome. As the Judge said, he had seen and heard the witnesses and had the benefit of their written statements as well as his recollection of the impression they made and the content of the cross-examination and re-examination. Apart from that the evidence was obviously not pivotal to the outcome.
Construction of house – fourth cause of action
[41] Numerous challenges were mounted by Berry to Nicholson J’s conclusions in relation to the plaintiff’s fourth cause of action (which also effectively put an end to the defendants’ first counterclaim). In short the Judge concluded that there was a fixed price contract with provision for variations and extras and that Hans was entitled to have the overpayment returned to him. Amongst other things, Berry contends that the Judge failed to consider estoppel, his findings were not open to him, there were irregularities in the Court process, and the remedy given by the Court was unavailable.
[42] The allegation that the Court failed to consider estoppel is based on the premise that it was not until two years after Hans had accepted the house and had completed making payments that he first claimed there was a fixed price contract and that there had been an overpayment. Berry maintains that up to that time the actions of both parties were consistent with a cost plus arrangement and that Hans was estopped from advancing the contrary proposition that there was a fixed price contract. He relied on National Westminster Finance NZ Ltd v National Bank of NZ Ltd [1996] 1 NZLR 548 (CA).
[43] The short answer is that estoppel was not pleaded by Berry and he is not entitled to raise it now. We also agree with Mr O’Neill that even if estoppel had been pleaded, the facts, as found by Nicholson J, would have fallen well short of supporting an estoppel. Amongst other things, there would have been nothing unconscionable in allowing Hans to contend that there was a fixed price contract. Until he obtained the detailed information in January 2003, Hans had been trusting his brother and was justified in believing that the payments he was making were for a fixed price contract subject to adjustments for variations together with agreed extras.
[44] To support his next argument that Nicholson J’s findings were not open to him, Berry relies on many more propositions including allegations that the Judge: reversed the evidential onus; failed to take an objective approach; misapplied the law in relation to dealings between relatives; failed to appreciate the connection between certainty of terms and legal intention; deviated from the contract as pleaded; and failed to consider the law that parties are normally assumed not to have contracted until a document is signed by them. For the reasons that follow, we do not find merit in any of these propositions.
[45] The suggestion that Nicholson J reversed the onus fails to construe the Judge’s comments in context. Even though the comments relied on by Berry were made in the overall context of the plaintiff’s fourth cause of action, they were directed towards the defendants’ counterclaim. The Judge was explaining that as a result of Berry’s evidence under cross-examination there was no prospect of the defendants establishing an express term that would support their counterclaim and that under those circumstances they would have to establish an implied term if their defence and counterclaim (which were inextricably linked) were to succeed. There was no erroneous reversal of onus.
[46] To the extent that the appellants’ attempt to argue that it was not open to Nicholson J to find that the parties had reached agreement, there is an obvious anomaly. The defendants themselves pleaded (in paragraph [30] of their amended statement of defence) that there was an agreement. So the issue was not whether or not there was an agreement, but rather whether the agreement was of a fixed price or cost plus nature. Nicholson J found that it was the former.
[47] We do not accept that in reaching that conclusion the Judge failed to apply an objective approach. He simply preferred Hans’ evidence. Nor did he misapply the law relating to contract formation in a familial situation. To the contrary he correctly applied the decision of this Court in Fleming v Beevers [1994] 1 NZLR 385 and reached a conclusion that was plainly open to him on the evidence. Moreover, there was no deviation from the pleadings and the Judge was entitled to reach the conclusion that he did even though the contract was not in writing. There was no requirement of law for the agreement to be in writing and the Judge was entitled to take into account all relevant evidence, whether oral or documentary, when determining the terms of the contract.
[48] Obviously the “cost plan” was pivotal to the Judge’s conclusions. That 20 page document summarised the cost of each component of the house (which totalled $484,316.51) and provided supporting particulars of the labour, material and equipment making up each component. Despite Berry’s denial, Nicholson J accepted that he had prepared the document. The Judge also accepted that after it had been received by Hans there was a telephone discussion between the brothers and that they had reached agreement about the cost of building the house.
[49] There is no merit in Berry’s contention that the “cost plan” was inadmissible or that it had no evidential value. We also reject his contention that a fixed price contract with provision for variations and extras is “utterly meaningless” when it does not include specific details of what is included in the fixed price. That submission fails to take into account the existence of the “cost plan”, drawings, and the surrounding evidence, particularly the evidence from Hans which the Judge accepted.
[50] Having decided that there was a fixed price contract subject to adjustment for variations and extras, Nicholson J then had to determine whether there had been an overpayment. His first step was to resolve the dispute about the payments that Hans had made. He found that there had been 18 payments totalling $1,217,053.32, which was close to Hans’ figure. In the context of this appeal that conclusion was open to the Judge and he has not been shown to be wrong.
[51] Then the Judge had to determine the allowance that should be made for variations and extras. On this topic the plaintiff and defendants were diametrically opposed and Nicholson J effectively rejected both approaches. Instead he used as his reference document the statement that had been forwarded by Berry to Hans’ solicitors on 20 January 2003. Berry alleges that the Judge erred by deviating from the expert witness process that had been established and that if that process had been allowed to take its course a huge amount of Court time would have been avoided. However, the reality is that despite the earlier interlocutory processes aimed at achieving a consensus between the experts, there was no consensus and Berry’s submission is fanciful. Ultimately it was for Nicholson J to give the competing expert evidence such weight as he saw fit.
[52] Using the “cost plan” of January 2003 as his reference point, Nicholson J effectively allowed the variations and extras claimed by the defendants after deducting overcharges and unauthorised remuneration, thereby arriving at an overpayment of $46,151.62. While there might have been more than one way of determining the allowance that should be made for variations and extras, it seems to us that the approach adopted by the Judge was generous to Berry. We do not accept his allegation that the Judge’s approach was wrong or that it was not based on the contractual terms the Court had implied.
[53] The final step involved an inquiry by Nicholson J as to whether Hans was entitled to a refund of the overpayment. After considering the relevant law Nicholson J concluded:
[544] … Hans paid $1,217,053.32 to Berry and Mei in the mistaken belief that all of it was payable to them for the lot 6 project. Only $1,170,901.70 was payable. This was not a mistake about the legal terms of the contract. It was a mistake about the amount payable pursuant to those terms. Berry repeatedly represented that more costs had been incurred in the course of construction. Hans paid the amounts requested by Berry on the basis of the trust he then reposed in Berry. Investigation of the January 2003 claim and this proceeding have established that there was substantial overpayment by Hans.
The Judge also noted that Berry and Mei had been enriched by the overpayment and that it would be unjust for them to retain it. He ordered them to repay Hans $46,151.62.
[54] Again Berry has mounted numerous challenges to the Judge’s conclusion. These include: the claim that it was not open to the Court to grant relief on the ground of a mistaken payment when the pleading relied on money having been received; the claim was in substance a claim for breach of contract and the proper remedy was restitution under the Contractual Remedies Act 1979; absence of an identifiable payment in reliance on a mistake of law or fact defeats the claim; the equitable remedy is only available where there is a total lack of consideration; and there were other defences to any equitable relief.
[55] No error in the approach adopted by the Judge has been exposed. There was ample justification for the Judge’s conclusion that Berry and Mei had received money to which they were not entitled and that this overpayment had been made by Hans in the mistaken belief, induced by Berry’s actions, that costs justifying the overpayment had been incurred. As Nicholson J concluded, it does not matter whether the claim is to be categorised as a payment made by mistake or a claim for money had and received: Thomas v Houston Corbett and Company [1969] NZLR 151 (CA). Either way Hans was entitled to a refund of the overpayment.
[56] For the sake of completeness we should add that Berry’s allegation that the proper remedy was restitution under the Contractual Remedies Act is misconceived. The plaintiff was not relying on breach of contract. Rather he was relying on an equitable remedy to recover his overpayment. Moreover, in all the circumstances, in particular Berry’s deception, there was no possibility of a successful defence such as estoppel being advanced by him.
[57] The appeal against the Judge’s conclusions in relation to the fourth cause of action is without merit and must fail.
Other grounds of appeal against the substantive judgment
[58] In relation to most of these grounds of appeal Berry acknowledged that the challenge was “mainly for its effect on the costs judgment”. Whatever the motivation, the remaining grounds of appeal are also without merit and our reasons for reaching that conclusion can be stated quite briefly.
Parking area encroachment – second cause of action
[59] Berry complained that the remedy (transfer of 327m2) had always been offered to the plaintiff and effectively contended that there should have been a consent order. However, he then went on to argue that the prerequisites for contract formation had not been met and that the Court was wrong in law to find that there was a contract. He also claimed that the requirements for the doctrine of part performance had not been met, that the Court should have established a reasonable price for the land to be transferred and that the judgment failed to define the costs that are payable by the plaintiff under the judgment.
[60] This was not a consent order situation. Although the defendants pleaded at paragraph [17] that they were prepared to transfer the 327m2 to the plaintiff, paragraph [8] pleaded that there was no agreement as to the price of the land to be transferred and paragraph [21] pleaded that they were willing, able and prepared to transfer the land “on such terms including price as [the High Court] may consider appropriate and just”. Plainly Nicholson J had to determine whether or not anything had to be paid for the land being transferred. In the event he decided that only expenses incurred with third parties had to be paid. The fact that the parties are still bickering about those expenses reflects that the matter was not as straightforward as Berry contends.
[61] As to the alternative argument that the Judge should not have found that a contract had come into existence or that there were was part performance, we are satisfied that those arguments are without merit. On the evidence before him, in particular the emails addressing the boundary change, Nicholson J was entitled to conclude that there was an enforceable agreement for the boundary adjustment. He was also entitled to conclude that there had been part performance. His decision is entirely compatible with Mahoe Buildings Ltd v Fair Investments Ltd [1994] 1 NZLR 281 (CA).
Driveway encroachment – third cause of action
[62] Nicholson J adopted Berry’s suggestion that this cause of action should be determined by varying the easement to include the small encroachment. Berry claims that there should have been a consent order and that it was wrong to give judgment for the plaintiffs.
[63] At paragraph [23] of their statement of defence the defendants “deny that the driveway encroached into lot 7 …”. Moreover, according to the judgment under appeal, it was not until Berry’s closing submissions that he told the Court that a variation to the easement could be made by consent. Nicholson J was entitled to approach the matter in the way he did.
Faulty workmanship – sixth cause of action
[64] Berry claims that there should have been judgment for the defendants on this cause of action.
[65] While it is true that the Judge found against the plaintiff on all but one of the allegations of faulty workmanship, he did accept that there was a problem with the rusting handrail and directed the defendants to pay the plaintiff $4,400 if the problem was not remedied to the satisfaction of Hans within a specified time. It is nonsense to suggest that there should have been judgment for the defendants.
Counterclaim
[66] Given that the High Court’s determination of the plaintiff’s fourth cause of action stands, it is unnecessary for us to consider the defendants’ first cause of action any further.
[67] As far as the second cause of action is concerned, Berry contends, first, that the High Court was wrong to find that the trespass was not in contumelious disregard of the defendants’ rights and, second, that exemplary damages should have been awarded. Given Nicholson J’s finding that Hans believed on reasonable grounds that he had a legal interest in the part of lot 7 involved and that full legal ownership of it would soon be transferred to him, there is not the slightest prospect of this ground of appeal succeeding. The Judge’s finding was open to him and there was no foundation for an award.
[68] As to the third cause of action, Berry claims that the real issue was how much should be paid and that the Court was wrong to award nothing and dismiss this cause of action. However, at paragraph [32] of his statement of defence to the counterclaim Hans denied liability to pay the sum of $522.16. Thus the question of whether there should be any payment at all was before Nicholson J and, on the evidence before him, he was entitled to reject the defendant’s claim completely.
The caveat
[69] Because there was no reference in the substantive judgment to the caveat (except to direct its withdrawal once the boundary adjustment had been completed), this ground of appeal can only be relevant to the costs judgment. See [74] to [76] below for further discussion.
Costs judgment
[70] Berry alleges that the costs judgment was a nullity because the extension of Nicholson J’s warrant expired when the substantive judgment was delivered, at which point the Judge became functus officio. Plainly that submission is without merit. At [656] of his substantive judgment, Nicholson J expressly stated that he was deferring consideration of the issue of costs and interest until further submissions were received. Thus he did not become functus officio when the substantive judgment was delivered and the extension of his warrant included the later judgment on costs and interest.
[71] The remainder of our judgment concerning Berry’s appeal against the costs decision is divided into a number of categories. However, regardless of the category, each component of Berry’s appeal constitutes an appeal against the exercise of a discretion and it is well known that an appellate Court will not overturn the exercise of a discretion unless the Court appealed from proceeded on a wrong principle, gave undue weight to some factor or insufficient weight to another factor, or is plainly wrong. This applies with particular force to costs judgments where this Court is very slow to upset costs awards in the High Court: Lewis v Cotton [2001] 2 NZLR 21 at [65] (CA).
Summary judgment
[72] Although Nicholson J awarded costs to the defendant on the summary judgment application, he confined that award to hearing costs and directed that any costs leading up to the hearing were to lie where they fell. This approach was adopted by the Judge on the footing that after he received the notice of opposition and Berry’s affidavit in support, Hans should have realised that it was extremely unlikely his application for summary judgment would succeed. This conclusion was open to the Judge and has not been shown to be wrong.
[73] Berry maintains that he should have received full costs because it was apparent from the earlier correspondence between the parties that the application for summary judgment was futile. While the correspondence relied on by Berry certainly provided early indications that there could be difficulties with the summary judgment application, it was nevertheless open to Nicholson J to take the more conservative approach based on formal Court documents. We are not prepared to interfere with the Judge’s exercise of discretion.
Caveat
[74] Berry claims that Nicholson J had no jurisdiction to award costs against him in relation to the interlocutory hearing at which Hans sought to sustain his caveat. His primary argument is that the caveat matter was a different proceeding. The same argument was advanced to Nicholson J, and rejected by him.
[75] The history of the matter was this. On 15 June 2005 Priestley J made an interim order sustaining the caveat and directed that the application was to be determined in conjunction with the pending trial before Nicholson J. The only direct reference to the caveat in the substantive judgment concerned its withdrawal once the boundary exchange had been completed. In his costs judgment Nicholson J accepted that Hans had a caveatable interest in lot 7 by virtue of the agreement relating to the 327m2 boundary adjustment and that Hans was therefore legally justified and acted reasonably in lodging and sustaining the caveat. Again, this conclusion was open to Nicholson J and it has not been shown to be wrong.
[76] Given that the matter had been referred to Nicholson J by Priestley J, there can be no argument about jurisdiction. Moreover, since Hans was successful in obtaining an interim order before Priestley J and that order was not discharged by Nicholson J, a costs order in favour of Hans was entirely appropriate.
Interlocutory costs
[77] It is alleged that Nicholson J erred when he directed that costs should lie where they fell in respect of an adjournment hearing before Gendall J on 16 June 2004. Berry’s principal allegation is that submissions referred to by the Judge were irrelevant. We disagree. The Judge’s decision was open to him.
[78] Costs awards against Berry arising from hearings before Cooper J on 1 September 2004, MacKenzie J on 7 October 2004 and a call-over before Venning J on 8 December 2004 are also challenged by Berry. In each case Nicholson J carefully considered the matter and reached a decision that was open to him.
[79] We also reject Berry’s contention that Nicholson J was not entitled to award costs for the taking of evidence before the registrar. This situation is covered by clause 11 in the Third Schedule of the High Court Rules which permits the Court to make an allowance for “other steps in the proceeding not specifically mentioned”.
[80] Finally, we do not accept Berry’s challenge to the order made by Nicholson J part way through the trial (on 23 November 2005) when he required the defendants to pay the plaintiff $5,000 to compensate the plaintiff for additional expenses arising from the late amendment to Berry’s brief. As a matter of principle the Judge was entitled to make such an award if he was satisfied that the plaintiff had been put to additional cost and the amount awarded was within the discretion available to him.
Trial costs
[81] As mentioned earlier (at [31] above), Nicholson J decided that in the particular circumstances of this case it was appropriate to award costs on a proportionality of trial success basis. He explained:
[86] In deciding trial proportionality of trial success I have assessed the portion of the trial time that each cause of action reasonably occupied. I have taken into account the relief sought and obtained for each cause of action and the complexity and relevance of its factual and legal issues. As some evidence and submissions were common to more than one cause of action and because time spent on each factual and legal issue was not specifically identified and recorded, assessment cannot be on a precise mathematical basis. In the words of Tipping J in the passage of the Chilcott judgment quoted earlier, I have endeavoured “to do justice to both sides, bearing in mind all material features of the case”.
Having carefully applied that philosophy to each phase of the trial process (and to some interlocutory steps), the Judge carried out the necessary arithmetic and arrived at a net figure for costs and disbursements of $162,945.54.
[82] Berry contends that there should have been no award of costs at all because the plaintiff was only “marginally successful in a limited number of causes of action” and that the defendants had always sought resolution. However, it is not surprising that Nicholson J took the approach that he did in the circumstances of this case. Hans was successful on the fundamental issue at trial about whether there had been an overpayment or underpayment for the house and associated infrastructure. Given that outcome, it was appropriate for Nicholson J to apply the principle in r 47(a) that the party who fails should pay costs to the party who succeeds.
[83] The methodology used by Nicholson J to arrive at his award of costs is also challenged by Berry in numerous respects. He claims that Nicholson J used incorrect principles or, alternatively, that he had applied them incorrectly. In particular Berry claims that the Judge’s approach was incompatible with the decision of this Court in Paper Reclaim Ltd v Aotearoa International Ltd (2007) 18 PRNZ 743. Supporting these allegations is an extensive critique of Nicholson J’s judgment and submissions as to the particular amounts that should have been awarded by way of costs and disbursements.
[84] Given the highly unusual circumstances of this case it was not surprising that Nicholson J found it necessary to depart from the traditional approach in an endeavour to arrive at an award that was fair and just to both parties. Although his judgment preceded this Court’s decision in Paper Reclaim Ltd v Aotearoa International Ltd, we are satisfied that it is broadly compatible with that decision. The determination of costs issues are not susceptible to mathematical precision. Nothing that Berry has brought to our attention has persuaded us that the methodology adopted by the Judge on this occasion warrants our interference. Indeed, we consider that the award was in fact generous to Berry.
Result
[85] The appeals against the substantive judgment and costs judgment are dismissed. The appellants are to pay the respondent costs for a standard appeal on a band A basis and usual disbursements.
Solicitors:
Miller Poulgrain, Thames for Respondent
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