ESCROW HOLDINGS FORTY-ONE LTD v HEARTLAND BANK LTD [2021] NZHC 3227

ESCROW HOLDINGS FORTY-ONE LTD v HEARTLAND BANK LTD [2021] NZHC 3227 [29 November2021]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2017-004-000241[2021] NZHC 3227BETWEEN ESCROW HOLDINGS FORTY-ONELIMITEDPlaintiffAND HEARTLAND BANK LIMITEDDefendantHearing: 31 May, 1, 2, 3, 4 June, 30 September, 1 October 2021Appearances: T J Herbert for PlaintiffT J G Allan & T P Kelly for DefendantJudgment: 29 November 2021JUDGMENT OF PAUL DAVISON JThis judgment was delivered by me on 29 November 2021 at 4:00 pmpursuant to r 11.5 of the High Court Rules.Registrar/Deputy RegistrarSolicitors:Goodwin Legal, AucklandGrove Darlow, AucklandIntroduction[1] This proceeding arises from a dispute between a property owner and a bankregarding two neighbouring properties in Hargreaves Street, Auckland. The plaintiff,Escrow Holdings Forty-One Limited (Escrow) is the owner of the property located at19 Hargreaves Street on which there is a multi-level building currently used forcommercial office premises.1[2] Escrow sues Heartland Bank Limited (Heartland) for damages, alleging breachof the terms of a deed entered into on or about 10 October 2008 (the Deed). The Deedrequired Heartland's predecessor, Marac Finance Limited (Marac), to install screenson decks and windows on the top floor units of the neighbouring property at 21Hargreaves Street (21 Hargreaves) when it was being converted from commercialoffices into unit title residential units by Central Stata Management Ltd (CSM), whichowned the property and had borrowed development finance from Marac which held aregistered first mortgage over the title of the property.[3] Escrow says that Marac failed to install the screens as required by the deedbefore 21 Hargreaves was sold to a new owner, resulting in the present and any futureowners and occupants of the top floor residential units of 21 Hargreaves being able tolook across into the upper levels of 19 Hargreaves Street (19 Hargreaves). Escrowclaims that this ability for the owners and occupants of 21 Hargreaves to look into theupper levels of 19 Hargreaves has reduced the value of its property, for which it claimsdamages of $506,685.[4] Heartland was incorporated on 30 September 2010. On 1 December 2013,Marac Finance Limited, PGG Wrightson Finance Limited and Heartland BankLimited amalgamated to become Heartland Bank Limited and from that dateHeartland assumed any obligations of Marac.21 Being Lot 3 of Deposited Plan 121257 in the Land District of North Auckland ("Lot 3").2 On 31 December 2015 six companies including Heartland Bank Limited amalgamated to becomeHeartland New Zealand Ltd, which then changed its name to Heartland Bank Limited.Background[5] In the course of the first stage of converting 21 Hargreaves from commercialoffices into residential units, CSM constructed balconies on the building whichencroached into and above a registered right of way easement (Easement L) which asowner of 19 Hargreaves, Escrow was entitled to the benefit of.[6] When Escrow complained about the encroachment, CSM commencedproceedings in the Auckland District Court applying for orders modifying EasementL so as to retrospectively permit the encroachments by the balconies. Escrow opposedCSM's application. The dispute was resolved on terms of an agreement reachedbetween Escrow, Marac as mortgagee and provider of project finance to CSM, CSMitself, and the body corporate3 representing the unit owners (the Body Corporate), andset out in a Deed of Settlement dated 10 October 2008.[7] The terms of the Deed would enable CSM and the Body Corporate to make anew application to the Auckland Council with Escrow's consent to proceed with thedevelopment of the conversion to residential units, extinguish Easement L, createreplacement right of way easements, include the balconies within the legal boundariesof the relevant unit titles, and obtain certificates of title for the residential units. Theterms of the Deed also provided that Escrow would consent to an application by CSMand Marac to undertake development of the top floor units at level four of the building(the Top Floor Development) as shown on a plan attached to the Deed ("sheet 6").The Deed[8] There are four parties to the Deed: CSM; Body Corporate 341188; Marac; andEscrow.[9] At the time when the terms of settlement of the dispute and the Deed werebeing negotiated, CSM was effectively insolvent. Its sole director was Mr StephenKelly. The unauthorised encroachment of the balconies built by Mr Kelly's companyon 21 Hargreaves had caused Escrow's sole director Mr Humphrey O'Leary, to hold3 Body Corporate 341188.significant concerns regarding Mr Kelly's ability to undertake complex constructionwork. Mr O'Leary conducted the negotiations on Escrow's behalf, and Mr ChrisWilkinson and Mr Grant Anderson conducted the negotiations on behalf of both Maracand CSM. Mr Kelly was not directly involved in any of the settlement negotiationswith Mr O'Leary.[10] Recital J to the Deed recorded that CSM and/or Marac intended to carry outfurther development of the Top Floor Units as marked on "sheet 6 of the plan attachedas Schedule 2 ('the Top Floor Development')."[11] A further term of the Deed provided that when Marac undertook the buildingwork for the Top Floor Development, the building contractors it engaged would notbe CSM, Mr Kelly, or any entity associated with them.[12] The Deed also provided:Following the Top Floor Development, CSM/Marac has indicated that it mayconsider developing the roof level of the building on DP341188 as shown onsheet 7 of the plan attached as Schedule 2 ("Roof Development"). For theavoidance of doubt, Escrow Holdings does not currently consent to the RoofDevelopment. The parties have agreed, as part of this settlement, that for aslong as Marac continues to hold Marac's Interest, or any other direct orindirect interest over any property in the development, Marac will makeEscrow aware, 14 days in advance of the lodging of any Resource Consentapplication to carry out the Roof Development, of the intended content andlodging of that application. The purpose of the foregoing is to notify EscrowHoldings prior to any such application being made.[13] Mr O'Leary says that in the course of negotiating the settlement, Mr Wilkinsontold him that Marac which had full control of property, intended to undertake theproposed Top Floor Development itself, as by doing so it could recoup its position asthe provider of finance for the project. Mr O'Leary became concerned that the TopFloor Development residential units would look directly across into and down onto 19Hargreaves and adversely affect the privacy of residents in the event that Escrowconverted its building to residential apartments. He considered that while this wouldnot be of significance while 19 Hargreaves continued to be used for commercial officepremises, if Escrow should decide in the future to convert the existing commercialoffices to residential apartments, then being overlooked by the occupants of 21Hargreaves' level four would adversely affect the privacy of residents of 19Hargreaves, and also the value of the property. Mr O'Leary accordingly proposed thatin order to protect the privacy of any future residential occupants of 19 Hargreaves,CSM, Marac and their assignees and successors, be required to erect screens on thedecks and windows of the residential units proposed to be built on level four (the TopFloor ) of 21 Hargreaves. As a result of negotiations between the parties directed atthis issue, the Deed further provided that:Terms of Settlement1 The parties agree the following terms:(f) If the Council grants the New Application:(iv) Marac and/or CSM will install screens on decks andwindows on the Top Floor Units as marked on sheet6 in the plan attached as schedule 2; and(v) Marac and CSM will be jointly and severally liablefor all reasonable costs that have or will be incurredby Escrow Holdings arising from the changes referredto in paragraph 1(f)(i) and (iv) above (for theavoidance of doubt, to include Escrow Holdings'legal costs from 8 October 2007 onwards).[14] The Deed also provided for Marac to pay Escrow financial compensation forthe loss of value caused to 19 Hargreaves by the encroaching balconies as follows:(h) Marac will pay to Escrow Holdings:(i) contemporaneous upon the execution by Escrow Holdings and Maracof this deed, the amount of $100,000 (plus GST, if any); and(ii) within 5 working days of and conditional on the issue of Certificatesof Title for the New Units, the sum of $350,000 (plus GST, if any),the total of $450,000 (plus GST, if any) representing compensation for loss ofvalue to Lot 3 caused by the continuing existence of the Balconies; and[15] The Deed further provided it contained all of the terms, representations andwarranties made between the parties and that it superseded all prior discussions andagreements regarding the matter. It also provided that the payments to be made andthe undertakings to be given to Escrow, would be consideration for full and finalsettlement of all disputes, claims and causes of action between the parties relating tothe encroachment of the balconies into Easement L, the proceedings in the AucklandDistrict Court and all other matters which were the subject of the Deed. It alsostipulated that references to CSM, Marac, the Body Corporate, and Escrow are deemedto include their respective successors and assignees.Completion of Schedule 2[16] The Deed, as I have noted, is dated 10 October 2008. It was executed by allfour parties on or about that date, and the signatories also initialled each of the pagesof Schedules 1, 2, 3 and 4, with the Body Corporate affixing its common seal on eachpage. Schedule 2 comprises seven pages of plans prepared by Kea Consultants Ltdshowing the residential unit development of 21 Hargreaves. They include a scheduleof the easements to be extinguished, and floor plans showing the basement level,ground floor level, and first to fourth floor levels. The plan of the fourth floor is"Sheet 6 of 9" and is entitled "Plan at Fourth Floor Level" (sheet 6).[17] Although the Deed provided that Marac and/or CSM would install screens ondecks and windows "on the Top Floor Units as marked on sheet 6 in the plan attachedas schedule 2", when the Deed was executed on 10 October 2008, sheet 6 in Schedule2 of the Deed had not been marked to show the location of the screens.[18] On 15 October 2008 Marac's solicitor, Ms Liza Irvine of Glaister Ennor, wroteto Escrow's solicitor, Mr Herbert of Lee Salmon Long, enclosing the originalsettlement Deed signed by all parties, and requesting that the easement documents beexecuted by Escrow and sent back to her.[19] Then on 6 November 2008 Ms Irvine wrote again to Mr Herbert proposing anamendment to a clause in the easement. Ms Irvine attached two plans to her email andreferring to them said:We have also noticed that the original Deed you have does not have thelocation of the screens and windows marked on page 6 of the Schedule 2 planand it should. These markings are referred to in cl 1(f)(iv) in the Deed. Yourclient supplied our client with a plan showing where your client wanted thescreens and windows to go (see copy attached) and these were marked on anearlier copy of the Deed sent to you by letter on 5 September for signing. Yourclient then wanted the 4th floor plan changed (which it was). The new 4th floorplan was attached to the Deed for signing, but unfortunately page 6 of theSchedule 2 plan attached to the Deed you have does not have the screen andwindow markings on it. Can you please mark your original copy in the samemanner as the plan attached to this email and titled "Signed Deed".The "Plan supplied by Mr O'Leary"[20] In her email of 6 November 2008 Ms Irvine said that prior to execution of theDeed by the parties, Mr O'Leary had provided Marac with a copy of a floor plan toshow where Escrow wanted screens and louvre windows to be placed on level four.The "copy attached", Ms Irvine refers to in her email has the handwritten notation,"Plan supplied by Mr O'Leary" and "(fourth floor)" written on it. It also hashandwritten notations "Louvre Screen" and "Louvre Windows" with arrows pointingto sections of the exterior walls along the north side of the building. HoweverMr O'Leary said in evidence that none of the handwriting on this floor plan is his, andthat he does not know whose handwriting it is. As Mr Wilkinson was dealing with thematter for Marac these handwritten notations and arrows are likely to have been madeby him following his discussions with Mr O'Leary.[21] However, the "Plan supplied by Mr O'Leary" differs from the one attached assheet 6 to Schedule 2 of the Deed, as although it is described in the handwrittennotation as being a plan of the "fourth floor" it is identified as being the "Level 6Floor Plan" in the printed title given to it by the architect who prepared it. Theresidential unit shown on this plan has an exterior deck located on the north wall andanother exterior deck on the north-east wall. Both are labelled on the plan as, "Deck8m2". One of the "Louvre Screen" notations written on this plan is locatedimmediately adjacent to the deck on the north wall, and the second "Louvre Screen"notation has an arrow from it to the deck on the north-east side of the unit. The "LouvreWindows" notation has an arrow to a section of the exterior wall on the north-east sideof the unit. The effect of these several notations is that both of the decks have louvrescreens, while the windows are shown as having louvre windows. Moreover, whilethe deck on the north wall is shown as requiring a louvre screen, there is no deckshown on the north wall of the "Signed Deed" plan.[22] On 7 November 2008 Mr Herbert replied to Ms Irvine's email of 6 November2008 advising that Escrow accepted the proposed amendments to the easement, andhe requested that a new document be sent for execution by his client. He added:We will also arrange for the change as to the Deed re screens and windows.The "Signed Deed" version of the Plan at Fourth Floor Level[23] The "Signed Deed" version of the fourth floor plan attached to the Deed as aresult of these arrangements is produced as Exhibit CB2 292. It is a further copy ofthe plan entitled "Plan at Fourth Floor Level" showing level 4 of 21 Hargreaves andidentified as being "Sheet 6 of 9" which had been attached to the Deed. It is initialledby the four parties to the Deed, has the Body Corporate's seal affixed and is also signedby Mr O'Leary.[24] On this "Signed Deed" version of the level four plan, are the handwrittennotations, "Louvre Windows" and "Louvre Screen". Beside the words LouvreWindows is a hand-drawn arrow pointing to a section of the exterior of the north sideof Unit 41 (which is the side of 21 Hargreaves nearest to and directly opposite 19Hargreaves), and a second arrow pointing to the section of the exterior wall located onthe north-eastern side of Unit 41. Small marks or lines placed on either side of wherethese arrows point, appear to define the sections of the exterior wall referred to by thenotation. Another hand-drawn arrow from the Louvre Screen notation points to thenorth-eastern side of the deck of Unit 41. Therefore on the basis of the "Signed Deed"version of the plan, the only area to have a louvre screen installed was the exteriordeck, and the windows were to have louvre windows installed.[25] On 11 November 2008 Mr O'Leary and Mr Wilkinson had a telephoneconversation regarding the terms, Louvre Windows and Louvre Screen, as used on the"Signed Deed" copy of the floor plan which was to be attached to the Deed.Mr O'Leary was concerned that those terms were not sufficiently specific and thatthey would enable Marac or CSM to install louvres or screens that could be adjustedor folded back, thereby defeating Escrow's objective of preventing people in theresidential units on the top floor from looking across and down into 19 Hargreaves. Inthe course of their telephone conversation Mr O'Leary and Mr Wilkinson agreed thatMarac and CSM would be required to install fixed louvre screens in all locations.[26] On 13 November 2008 Mr Herbert wrote to Ms Irvine. He said:The plan attached to the Settlement Deed, showing the location of thesescreens, refers to "louvre windows" and "louvre screens".On the basis that this might cause confusion, we understand that the partieshave discussed the nature of the screens and agreed that should all (whethermarked "windows" or "screens") be fixed louvred screens for the purpose ofprivacy.We would, however, appreciate your written confirmation of that agreement.Please would you provide this as soon as practicable.[27] Glaister Ennor referencing their client CSM, responded to Mr Herbert by letterdated 14 November 2008, advising:We have taken instructions from our client and they agree that all referencesto "louvre windows" and "louvre screens" on the plan attached to theSettlement Deed should all be "fixed louvred screens."Resource consent granted by Auckland Council (2013)[28] At the time that Marac entered into the Deed in October 2008 it was a whollyowned subsidiary of Pyne Gould Corporation Limited (PGC). On 30 October 2009Marac transferred its registered mortgage over 21 Hargreaves to Real Estate CreditLimited (RECL). RECL was wholly owned by Marac Financial Services Limitedwhich was wholly owned by PGC. On 23 December 2010 RECL assigned andtransferred the mortgage to Property Assets Limited (PAL) which was also whollyowned by PGC. On 8 July 2011 pursuant to its mortgagee's power of sale, PALtransferred title to the property to Land House Limited (LHL) which was whollyowned by PAL which was also within the PGC corporate structure. On 15 July 2011by order of this Court CSM was put into liquidation. A year later on 9 July 2012, LHLtransferred title to the property to Stephen Kelly and Final Hargreaves Trust CompanyLimited (FHTC Ltd), subject to a registered first mortgage to FM Custodians Limitedwith a registered second mortgage to Allenby Group New Zealand Limited.[29] It is therefore apparent that although Marac had transferred its security interestto another company within the PGC corporate structure on 30 October 2009, theinterest it held as mortgagee in possession of the property continued to be held byvarious other PGC companies through until 12 July 2012, and accordingly Marac orits successors had effective control of the building throughout that period.[30] On 31 January 2013 the Auckland Council granted resource consent to FHTCLtd to construct eight residential units at 21 Hargreaves in accordance with plansprepared by architects Milic Auckland Limited and entitled "5th Floor Office –Apartments Conversion. Stage 2". On 2 September 2013 Auckland Council grantedMr Kelly and FHTC Ltd building consent to undertake the work of converting theexisting commercial offices to five residential units. However, as the work had notcommenced within 12 months of the building consent being granted, Mr Kelly appliedfor and was granted extensions of time in 2014 and 2015. The architects' plans forwhich building consent was granted by Auckland Council did not show any louvrescreens on the north and east sides of the top floor units of 21 Hargreaves adjacent to19 Hargreaves.[31] Pursuant to the resource and building consents, construction of the residentialTop Floor units was undertaken during 2015 – 2016 by a new owner of the propertyProject Solutions Limited (Project Solutions).Escrow sends letter before action[32] On 23 July 2015, approximately 18 months before this proceeding wascommenced, Mr Herbert wrote on behalf of Escrow to Heartland's solicitors, GroveDarlow & Partners. He noted that CSM had been put into liquidation and said the onlyparty to the Deed capable of compliance with it was Heartland. He said:The various easement modifications were granted in November 2008, on thebasis that the Auckland Council had granted the resource consent application.However, no screens have been installed on the decks and windows in the TopFloor Units ( as defined in the Deed).Obviously, events have moved forward with the Top Floor Units. My clienthas been patient during these events, but that patience has now expired..In the absence of a sensible proposal as to compliance, I anticipate that myclient will now seek to enforce the Deed against [Heartland Bank] or claimdamages in substitution. It will also seek any legal costs that it incurs in sodoing on an indemnity basis, as per clause 1(f) (v) of the Deed.[33] During the course of construction of the top floor residential units on 21Hargreaves, negotiations took place between Escrow, Heartland and the buildingowner Project Solutions regarding the terms on which the screens provided for in theDeed could be erected on the building. On 2 November 2015, Mr David Morrison ofGrove Darlow wrote to Mr Herbert saying:3. As you are aware, the top floor development is not at a stage wherethe external walls have been constructed and consequently, not a stagewhere louvres could be installed so we are wondering if Heartlanddoes have an obligation, how could it in the circumstances, undertakeand complete that obligation? The answer to that is that Heartlandcannot (if it is obliged to do so) do anything until the external wallsare completed and it is safe to install the louvres.6. In the event Heartland has an obligation and Heartland is frustratedfrom performing that obligation, then the issue will boil down to whatdamages Mr O'Leary will be entitled to (if any). To date Mr O'Learyhas provided only the following " In Mr Deane's [sic] opinion, on aconservative basis, the loss will be $116,250.00 inclusive of GST".The top floor development looks down on Mr O'Leary's building, sothe issue will be is Mr Deane's [sic] opinion sustainable or is it somelesser sum?[34] In December 2015 Heartland sought permission from Project Solutions to enterits premises to install fixed louvred screens on the north and north-east sides of thebuilding where the screens were shown on the Deed. Project Solutions respondedadvising that it was willing to permit Heartland access to its premises to install fixedlouvred screens subject to Heartland providing it with the specifications of the screensand payment of a sum to represent the reduction in value of the relevant unit causedby the installation of the screens. Because of what was described by Project Solutions'solicitor as the "materially detrimental impact on the views" that the proposed fixedscreens would have on the views enjoyed from the unit and which were said to be oneof its main attributes, it sought compensation of 50 per cent of its value, being a sumof $675,000.[35] In January 2016 Mr Peter Dyke of Heartland requested and obtained a quotefrom a joinery manufacturer to supply fixed louvre screens for installation on the fifthfloor apartments at 21 Hargreaves. With his written request to Bradnam's Windowsand Doors NZ, Mr Dyke enclosed a copy of the Milic architects' plan of the fifth floorof 21 Hargreaves on which lines had been drawn along the north and north-east wallsof Unit 41 and along the north-east side of the exterior deck. Associated with each ofthese lines were two handwritten notations reading: fixed louvre screen and fixedlouvre screens with a line drawn from the notations to indicate the position of thescreens along the exterior of the walls. Mr Dyke advised Bradnam's in an email afterconferring with Mr Paul Lamb of Project Solutions that:Mr Lamb has advised that:"Windows are located on the northern boundary of FDU #3, if they view pageDWG-A20 this highlights the particular unit and also the decks that are an(sic) issue. Measurements are as per scale on the drawings."Please also refer to page DWG 60 and for this exercise use the Sliderdimensions for the Fixed Louvers (sic) plus the other windows for unit41(FDU 3 – refer DWG 20)[36] Bradnam's provided an estimated cost to supply and install fixed louvres of$16,091.00 plus GST.[37] Subsequent negotiations between the parties, including an approach made tothe Body Corporate, failed to resolve the matter. In a letter from Grove Darlow toMr Herbert on 3 March 2016, Heartland denied that it had any liability for the damagesclaimed by Escrow and advised that it considered that Escrow had not suffered anyloss as a result of fixed screens not being installed for several reasons including thatowners of commercial property do not have rights to privacy in respect of adjacentresidential units, and because the Auckland Council when granting resource consenthad already determined that Escrow was not adversely affected by the residential unitsestablished at 21 Hargreaves. For its part the Body Corporate advised Heartland'ssolicitors in a letter dated 27 October 2016 that it did not have any obligation to permitHeartland to undertake installation of the screens.[38] Escrow then commenced proceedings in the Auckland District Court on 22December 2016 in which it claimed damages of $146,000 for the reduction in valueof 19 Hargreaves resulting from Heartland's failure to install the louvre screens on 21Hargreaves in breach of the provisions of the Deed.4 Following the promulgation ofthe Auckland Unitary Plan, Escrow decided to increase the amount of its claim and byconsent the proceeding was transferred to the High Court on 7 February 2019. In anamended statement of claim dated 7 March 2019 Escrow claims that Heartland'sfailure to install the screens has adversely affected any future residential developmentof its property, which has reduced its value prior to development, by $517,650.[39] In its statement of defence Heartland admits that Marac did not install thelouvre windows and screens on the top floor unit of 21 Hargreaves as marked on sheet6 of the plans attached to the Deed. However it denies that Escrow has suffered anyloss as a result of the louvre screens not being installed, and says that any loss ofamenity of privacy is minimal.[40] The defendant also pleads four affirmative defences:.(a) that the relevant term of the Deed is vague and unenforceable;(b) that there was an implied term of the Deed requiring Escrow to notifyHeartland of the requirement that it install the screens within areasonable period, which it failed to do;(c) that by reason of Marac/Heartland ceasing to hold an interest in theproperty at 21 Hargreaves the terms of the Deed are frustrated andHeartland is thereby discharged from further performance of theobligation to install the screens;(d) and contributory negligence on the part of Escrow which caused orcontributed to its own loss by failing to notify Marac/Heartland that thetop floor development of 21 Hargreaves was to be carried out andthereby denying it the opportunity of either compelling or negotiatingthe installation of the louvre screens with the new owner of the4 CIV 2017-004-241.building. The defendant also pleaded but at trial abandoned anaffirmative defence of laches.Submissions as to liability under the DeedThe relevant floor plan and variation to refer to fixed louvres[41] Escrow notes that although prior to trial, the defendant had disputed whether itwas bound by the original obligation contained in the Deed, it notes that in closing itscase the defendant acknowledges that by being a party to the Deed Marac bound itselfto comply with paragraph 1(f)(iv) and to install screens on decks and windows on thetop floor units of 21 Hargreaves as marked on the signed schedule that was substitutedinto the Deed following its execution. The plaintiff accordingly notes that there is nodispute as to whether the defendant is bound by the terms of paragraph 1(f)(iv) of theDeed and that the relevant plan showing the position of the louvre screens is the signedplan of level four of 21 Hargreaves with the handwritten notation, "Signed Deed"written on it.[42] The plaintiff says that the original terms of the Deed as set out in paragraph1(f)(iv) and the "Signed Deed" floor plan, were orally varied by Marac and itselffollowing a telephone conversation between Mr O'Leary and Mr Wilkinson in whichit was agreed that the louvres would be "fixed". The plaintiff notes that thisamendment was confirmed in correspondence between the parties' solicitors and thestatement by Glaister Ennor in their letter of 14 November 2008 that:We have taken instructions from our client and they agree that all referencesto "louvre windows" and "louvre screens" on the plan attached to theSettlement Deed should all be "fixed louvre screens."[43] Although Glaister Ennor's letter of 14 November 2008 is referenced "EscrowHoldings Forty-One Ltd – Central Strata – Louvre Screens" and does not expresslyrefer to Marac, that subject reference repeats the reference used in the letter fromEscrow's solicitor Mr Herbert, dated 13 November 2008. It is clear from Mr Herbert'sletter that Escrow was proceeding on the basis that Glaister Ennor were acting for bothMarac and CSM as he referred in his letter to "your clients" as having an obligation toinstall screens on decks and windows on the top floor units at 21 Hargreaves. It is alsoimplicit from the wording of Glaister Ennor's letter that they were acting for both CSMand Marac. Unfortunately, the issue of who Glaister Ennor were acting for in relationto the fixed louvre correspondence cannot be determined by reference to theirsolicitors' file as it appears that the relevant files were destroyed as part of the firm'sroutine process in 2017, and Heartland was unable to locate any internal Maraccorrespondence relevant to the matter.[44] However I am satisfied that Glaister Ennor was acting for both CSM and Maracin relation to the fixed louvre correspondence, as it was Mr Wilkinson of Marac whohad reached the agreement with Mr O'Leary, and it was Marac which had an obligationunder the deed to install the screens. In correspondence at the time the Deed wasentered into and its provisions were being implemented, Glaister Ennor referencedemails they sent as: "Re: Escrow Holdings/CSM/Marac", and were clearly acting forMarac in relation to its payment of Escrow's legal costs as required by the terms of theDeed. Moreover, Marac as mortgagee in possession of the property had effectivecontrol of it and there was no other firm of solicitors acting for it in relation to theissues and dispute settled by the Deed. Furthermore, in response to a query fromMr Herbert in 2009 as to whether Glaister Ennor were only instructed by Marac andCSM and not the Body Corporate, Ms Irvine replied: "[n]o we are not the office ofservice for the Body Corporate," thereby confirming that Glaister Ennor wasinstructed by both Marac and CSM.[45] The plaintiff notes that Mr O'Leary's evidence regarding the agreement hemade with Mr Wilkinson was not challenged in cross-examination, and that at leastfrom 14 November 2008 Marac had an obligation to install fixed louvre screens wheremarked on the "Signed Deed" floor plan for the purpose of affording privacy to futureresidential occupants of 19 Hargreaves.[46] The defendant does not dispute that Mr Wilkinson and Marac agreed to avariation of the terms of the deed to include the "fixed louvre clause". However thedefendant notes that the other two parties to the Deed, namely the Body Corporate andCSM as the owner of the property, did not agree to the variation and consequently thelouvre screens could never have been required to be installed and thereafter remainfixed.[47] Although I have found that Glaister Ennor were acting on behalf of both Maracand CSM in connection with: the dispute that had been settled by the Deed; thearrangements made following execution of the Deed to substitute the "Signed Deed"version of the level four plan; and also as regards the agreement to include a referenceto fixed louvre screens, there is no evidence of the Body Corporate having beeninvolved in any of the discussions or arrangements, notwithstanding that it was a partyto the Deed and would be directly affected by the installation of the fixed screens.[48] The Deed contained provisions stipulating that it expressed the whole of theagreement between the parties and that the payments and undertakings provided for inthe Deed were in full and final settlement of all disputes, claims, and causes of actionbetween the four parties to the Deed. Having regard to those provisions of the Deed,the arrangements made between the plaintiff, Marac and CSM regarding the screensbeing fixed and which are recorded in correspondence between their respectivesolicitors do not constitute a valid and binding variation of the Deed.[49] I note that the substituted level four plan is signed by Mr O'Leary, and has thecommon seal of the Body Corporate affixed, and is initialled by the other parties inthe same manner as the original version of the plan at sheet 6 of Schedule 2 of theDeed. As such the "Signed Deed" version of the level four plan was confirmed by allfour parties as being intended to form part of the Deed.[50] I accordingly find that the agreement made between Escrow, Marac, and CSMstipulating that the references to screens or louvre screens in the Deed are to be treatedas referring to fixed louvre screens is not a term of the Deed, and consequently thefixed louvre clause is not enforceable under the Deed. That finding means that thescreens referred to in the Deed are those described on the Signed Deed version of theplan of level four as "Louvre Windows" and "Louvre Screen", and consequently thatthe fixed louvre arrangement entered into by Marac and Escrow does not form part ofthe terms of the Deed. In order for the varied deed to be valid, the proposed variationrequired the agreement of all parties to the deed.55 McCombie v Waihi Extended Gold-Mining Co Ltd [1920] NZLR 333 (SC) at 335, MacDonald vC1 Gloucester Street Ltd [2012] NZHC 2842 at [26].[51] Nevertheless, I find that as Marac's successor, Heartland is required to complywith the terms of the Deed which required it to install the louvre screens on thewindows and deck of level 4 at 21 Hargreaves in the places depicted by the notations,arrows and markings placed on the level four plan. In my view the adjective "fixed"is of no significance in relation to the interpretation of what is meant by the termsLouvre Windows and Louvre Screen insofar as being fixed to the exterior of thebuilding. In my view it is implicit in the use of those terms that the screens would befixed to the exterior of the building or along the side of the deck in a manner that wasintended to be permanent and form part of the building.[52] This interpretation also gains support from Marac's Mr Dyke obtaining aquotation from Bradnam's Windows for the supply and installations of screens alongthe windows on the north and north-east sides of Unit 41. Bradnam's quote was basedon supplying louvres from its " Highbrook range in any standard Bradnam's powdercoat colour" at a cost of $16,091 plus GST.Interpretation of the louvre screen obligation in the Deed[53] The plaintiff says that the context and background of the Deed as referred to inthe section headed "Background" informs its proper interpretation. The plaintiff saysthat the clear purpose of the screens provisions contained in the Deed was to preventEscrow suffering a loss of market value of its property as a result of the loss of privacyto residential occupants of 19 Hargreaves due to the proximity and views into itsbuilding by people on level four of 21 Hargreaves and specifically those viewing fromUnit 41 on the north and north-east corner of 21 Hargreaves.[54] The plaintiff notes that the terms of settlement contained in the Deed includedMarac and CSM paying Escrow $450,000 plus GST (if any) "representingcompensation for loss of value to [19 Hargreaves] caused by the continuing existenceof the Balconies " The plaintiff also notes that Mr O'Leary explained in evidencethat the money was paid as compensation for the loss of privacy as:and that was the best that could be done, given the fact that the balconieswere there and they already [had] the sale and purchase agreements as Iunderstood it on them, so they were hand[s] tied.[55] The plaintiff says that rather than seeking monetary compensation in relationto the effects of the further development of the top floor units which was yet to becompleted, it decided that it could effectively prevent the detrimental effect that thetop floor units at 21 Hargreaves would have on the privacy amenities of a futureresidential development of 19 Hargreaves by the installation of permanent screens.The plaintiff says that if the privacy purpose of the screens is not clear enough fromthe Deed itself, it also relies on the correspondence sent by Escrow's solicitors toMarac's solicitors on 12 November 2008 advising that the parties had discussed thescreens and had agreed that they should "all be fixed louvred screens for the purposeof privacy".[56] However, in my view the statement in the plaintiff's solicitor's letter regardingthe parties' agreement does not inform an interpretation of the Deed as providing forscreens to achieve privacy for people occupying a future residential development of19 Hargreaves. Rather, it shows that the suggestion that the louvre screens be fixed inorder to achieve the objective of privacy was a subject first discussed well after thesettlement and execution of the Deed, and was considered necessary because Escrowwas concerned that the terms louvre windows and louvre screen were themselvesunclear and as the plaintiff's solicitor put it: "might cause confusion".[57] The plaintiff further says that on a proper interpretation of the louvre screenobligation in the Deed, Marac and CSM were bound to install the screens and to do soin a manner and on a basis that would ensure that they remained permanently installed.The plaintiff says that when the Deed was entered into, neither Marac nor CSM haddecided on the details of the top floor development as appears from the outline planfor level four used in the Deed. The plaintiff says that therefore the terms of the deedproviding for the screens left Marac and CSM considerable latitude as to when andhow they undertook and arranged the installation of the screens. The plaintiff furthersays that the only restriction on them, was that whatever they did should ensure theprivacy of 19 Hargreaves from Unit 41 on level four. Mr Herbert says that so far asthe plaintiff is concerned it would not matter whether the screens were placed on theexterior or the interior of Unit 41. The plaintiff submits that as CSM was at that timethe owner of the building, and Marac had effective control of it pursuant to is mortgagesecurity, it could have agreed to a registerable covenant with Escrow to maintain thescreens which would bind its successors in title. The plaintiff says that had a restrictivecovenant been created, pursuant to s7 of the Unit Titles Act 1972, the subsequentdeposit of a unit plan for the premises would have not have any effect on the covenant.Escrow nevertheless accepts that the Body Corporate was not bound by the louvrescreens obligation in the Deed, and as I have already noted it had no involvement inthe discussions between Mr O'Leary and Mr Wilkinson or the correspondencebetween the solicitors recording their agreement regarding the screens being fixed.[58] In considering the context and background of the Deed as informing aninterpretation of provisions which refer to the installation of screens it is significant inmy view that the term privacy is not used anywhere in the Deed. The Deed recordsthat the terms of settlement set out are in full and final settlement "relating to theencroachment of the balconies on Easement L," It is also clear that the principalmatter which was being addressed and compensated for is the encroachment of thebalconies constructed on 21 Hargreaves over the right of way easement L which runsalong the eastern side of the building and which provides access from HargreavesStreet to 21 and 19 Hargreaves. The balconies encroach into the easement space tothe extent of approximately three metres at various heights the lowest of which isapproximately 2.44 metres above ground level.[59] However I note that Escrow's architect, Mr Allan Taylor, prepared a set ofdiagrams in July/August 2007 entitled "Visual Privacy-Planning Contravention" onwhich he showed the bulk and location of both 19 and 21 Hargraves with an outlinediagram of the exterior walls of 19 Hargraves as would be the case if it were to bedeveloped as residential apartments in the future. Mr Taylor included on his diagramsthe then applicable provision of the Auckland District Plan dealing with "VisualPrivacy [Rules]" for a Mixed Use Zone which provided:Protection of neighbours private open spaceDirect views from habitable rooms of buildings in the Mixed Use zone intothe principal areas of adjoining private open space of residential units shouldbe screened or obscured within a 9m radius and 45 degrees of the wallcontaining the window by either:a solid wall or screen not less than 1.8 m in height constructed ofconcrete, timber, stone;or plantingAny such screening shall be established in a workmanlike manner[60] As the heading of the rules clearly indicates the rules were intended to protectthe privacy of neighbours' open space and required the installation of a screen onbuildings in the Mixed Use Zone where there are direct views from habitable roomsinto principal areas of adjoining private open space. Mr Taylor prepared separatediagrams showing the extent of the area affected by the Visual Privacy Rules as theywould apply to each level of a notional redevelopment at 19 Hargreaves intoresidential apartments which would have a view from habitable rooms across and intothe private open spaces on the various level of 21 Hargreaves. In the case of the topfloor of 21 Hargreaves the area encompassed within the visual privacy rules is shownon the diagram as extending to and including the windows on the north and north-eastwalls and the north-eastern side of the deck. The diagram therefore illustrates thatapplication of the rules would require the installation of a screen on 19 Hargreaves inorder to protect the privacy of the occupants of the top floor of 21 Hargreaves.Significantly there is no assessment or diagram showing the effect of the rule as itapplies to the habitable rooms of 21 Hargreaves in relation to a future residentialdevelopment of 19 Hargreaves.[61] Mr Taylor also prepared computer generated three dimensional perspectives toshow the views from locations from the top floor (level 5) within proposed residentialapartments 1 and 2 of 19 Hargreaves looking across towards 21 Hargreaves, andspecifically to show how far the eastern side of the building projected into the commonright of way area of Easement L. These visual privacy plans prepared by Mr Taylorin 2007 show the effect of the rule on all five levels of 21 Hargreaves, and specificallyon the residential units on the north side of the building. The diagrams show that onlypart of the exterior deck or balcony on each level would fall within the nine metreradius area covered by the rule when measured from what Mr Taylor termed"imaginary windows", located on the south wall of a future residential developmentof 19 Hargreaves.[62] It therefore appears that, although privacy was one of the issues that wasconsidered and discussed by the parties prior to the Deed being finalised, asMr Taylor's diagrams show, the issue that he was addressing was the effect of thevisual privacy rules on a future development of 19 Hargreaves where the rules wouldrequire the installation of screens on that building, and not on 21 Hargreaves. It isalso clear from the terms of the Deed that the compensation was paid to Escrow forthe effects of the encroachment of the balconies into the right-of-way easement towhich Escrow, as the registered owner of 19 Hargreaves, was entitled. Had the issueof privacy been the principal reason for the payment of that compensation that issuewould have been referred to in the detailed provisions of the Deed setting out thebackground to the terms of settlement. Therefore, although I accept that the issue ofprivacy as it applied to residents of a future development of 19 Hargreaves was one ofthe aspects of the development at 21 Hargreaves relied on by Escrow as justifying isclaim for compensation in respect of the levels below the top floor level, I do notaccept Mr O'Leary's evidence that the compensation sum of $450,000 payablepursuant to the terms of settlement related only to the loss of value caused to 19Hargreaves by a loss of privacy in respect of views towards 19 Hargreaves availablefrom the 21 Hargreaves levels other than from the top floor.Escrow's notional design for future residential apartments[63] Escrow's case is founded on the plans prepared by Mr Allan Taylor of AllanTaylor Architects Limited showing a possible redevelopment of 19 Hargreaves intoresidential apartments. Escrow says that as a direct consequence of Marac and itssuccessor Heartland failing to install screens on the decks and windows on the TopFloor Units in accordance with the marked copy of the plan (sheet 6) annexed to theDeed, it has suffered a loss of value of its property, notwithstanding that it has not yettaken any steps to convert the use of 19 Hargreaves from commercial offices toresidential apartments, and that it has no immediate plans to do so. Escrow says thathad the screens been installed as required in accordance with the terms of the Deed,they would have enhanced and protected the privacy of the residents of 19 Hargreavesif at some future date it is converted from commercial offices to residential apartments.The plaintiff says that although its building is presently used for commercial officepremises and the absence of screens on 21 does not presently affect any residentialtenants occupying its building, the fact that the screens were not installed adverselyaffects the current value of the property because any future residential apartments itestablishes will have a reduced value because of their compromised privacy as a resultof being in the view of the occupants of the unscreened top floor apartment of 21Hargreaves.[64] Although Escrow has no present intention to construct the residentialapartments, in order to illustrate and quantify the loss it claims to have suffered, itengaged Mr Taylor to prepare a set of plans for residential apartments at 19Hargreaves. The plans Mr Taylor was engaged to prepare are intended to show whatcould be constructed in the future at 19 Hargreaves and if so, how the privacyamenities of those future residential apartments would be adversely affected by theabsence of screens on the top floor of 21 Hargreaves. On the basis of Mr Taylor'splans, Escrow relies on evidence from a registered valuer, Mr Stephen Dean, toquantify the amount of the reduction in value of the residential apartments due to theircompromised privacy and to express his opinion as to the effect that has on the presentvalue of the property.Mr Taylor's plans[65] In his evidence Mr Taylor said that in early 2018 he was engaged by Escrowto prepare concept plans for a "notional" development at 19 Hargreaves. He wasbriefed on Marac's failure to install louvred screens on the top floor level ofneighbouring 21 Hargreaves, and was instructed to design a residential developmentas if the failure to install the screens had not occurred. Mr Taylor explained that hewas instructed to assume that 19 Hargreaves would have the benefits afforded by theinstallation of the louvred screens – mainly that of privacy. Mr Taylor explained thatthe plans he initially prepared were for a "notional development" and were an outlineconcept representing the first stage in the development process in order to show bulkand location of the building and to explore the potential of the site. He says that thefirst set of plans he prepared were never intended for anything beyond that preliminaryconcept stage because there was little purpose in designing a block of apartments thatwere hypothetical and not intended to be built. Mr Taylor says that he wassubsequently instructed by the plaintiff to confer with a planning consultant, Mr PaulArnesen, and prepare a second set of plans that would be capable of obtaining resourceand building consent. Following consultation with Mr Arnesen, Mr Taylor prepared afurther set of plans which he considers to be capable of obtaining resource consentfrom Auckland Council (the consent plans).[66] Mr Taylor's consent plans comprise five sheets on which are shown: GroundFloor Entrance & Carpark level; Apartment Plan Levels 1-4; Apartment Plan Level5; the East and North Elevations; and the West and South Elevations.[67] The consent plans provide for "Privacy Louvres" to be placed on the windowsof the bedroom located on the south side of apartment number 5 on levels 1 - 4 so thatthose bedrooms would be afforded privacy from viewing by people using the deck ofits neighbouring apartment in the same building which is described on the consentplans as "Proposed Studio Apartment 6". Mr Taylor says that although he has placedwindows on the south and south-east sides of the apartments in positions where theywould be directly adjacent to the north side of 21 Hargreaves, he considers thatnevertheless desirable views are afforded from these windows, which he has illustratedwith a series of photographs he took from approximately the same elevation of thewindows at level 5.[68] Mr Taylor said that the design brief he was given by Mr O'Leary was fairlysimple as he was basically to look at how many apartments could be fitted in, whiledealing with the existing shape and condition of the 19 Hargreaves building as muchas possible. He said that Mr O'Leary had asked him to provide him with plans thatwould show the effect that the building at 21 Hargreaves would have on his buildingat 19 Hargreaves, if 19 was developed and converted to residential use. He said thatwhen he prepared the plans he had been told by Mr O'Leary that the required screeningof the windows on the top floor apartments of 21 Hargreaves had not been done, andthat he had marked a copy of his plan for level 5 of 19 Hargreaves to show the locationof the "Not installed Privacy Screens" on 21 Hargreaves. He said that althoughMr O'Leary told him that he would like the plans to provide for as many apartmentsas he could fit into the site, as the architect it had been his decision to design thebuilding with its south wall hard up against the boundary line, and to include windowsin the wall along the boundary line. He said that his placement of windows right onthe boundary was a "design solution" that he had proposed, although it was not thefinal design solution as it still needed to be audited by fire and structural engineers andwould also have to be approved by a planning assessment.[69] To show the bulk and location of the notional residential apartmentdevelopment built in accordance with his consent plans relative to 21 Hargreaves,Mr Taylor prepared a series of plans and computer generated images. These show thelocation of the notional residential apartments on 19 Hargreaves with its south wallbuilt right up to and along the boundary with 21 Hargreaves, and includes a computergenerated image of the view from the top floor of 19 Hargreaves looking back towards21, and show the location of the windows and decks on 21 in relation to the apartmentson 19 Hargreaves.[70] The plaintiff also called evidence from Mr Arnesen who had been asked toundertake an assessment of Mr Taylor's consent plans and provide his opinion as towhether they would be likely to support a successful application to the AucklandCouncil for resource consent. In his evidence Mr Arnesen explained his examinationof the plans and the site. He assessed the proposal against the requirements of theAuckland Unitary Plan Operative in Part (AUPOP). He found that the proposeddevelopment complies with the 16 metre occupiable height control of the AUPOPusing the average ground level methodology. He noted that the development doesinfringe the Mixed Use zone outlook space requirements as a result of a slightoverlapping of the outlook space of the bedroom in Apartment 5 and the living area ofApartment 6 on levels 1 - 4 of the building. Mr Arnesen concluded that thedevelopment would require resource consent under the AUPOP for three reasons:(a) For the conversion of a building to dwellings as a restricteddiscretionary activity.(b) For additions and alterations to a building within the Business MixedUse zone, as a restricted discretionary activity.(c) For providing Outlook Space from separate units that overlap, as arestricted discretionary activity.[71] Mr Arnesen said that in his opinion the proposed development would begranted resource consent. He noted that the reasons that resource consent was requiredwere relatively few, and the scope of the assessment required relatively confined.[72] Mr Herbert submits that the plaintiff's damages claim is not for a loss it willsuffer in the future only if and when it converts its building to residential apartments.He says that its claim is based on the loss of value resulting from it being unable touse the property in the way it would have been able to, had the screens on Unit 41been installed as required by the Deed. Mr Herbert says that based on Mr Arnesen'sevidence and opinion that the consent plans prepared by Mr Taylor would obtainresource consent, it has proved that its plans for developing the site as residentialapartments are feasible and possible, and that the consent plans demonstrate theadverse effects of the loss of privacy caused by the absence of screens on Unit 41.Escrow's assessment of loss of value - Mr Stephen Dean – Registered valuer[73] The plaintiff engaged Mr Nigel Dean who is a registered valuer, to make anassessment of the impact of Marac's failure to install window and deck louvre screenson the top floor of 21 Hargreaves, on the value of residential apartments at 19Hargreaves were they to be built in accordance with the consent plans. He said that inhis experience apartments which can be seen into by other apartments because of theloss of privacy will be of less value than those which are not, particularly where it isthe living areas that are impacted. Mr Dean examined Mr Taylor's plans andelevations for the proposed residential apartments and concluded that the lack ofscreening on level 5 (the top floor) of 21 Hargreaves will have "a deleterious impacton the value of 19 Hargreaves".[74] In his evidence Mr Dean explained that more highly valued apartments arelikely to suffer a greater reduction in value as buyers at the upper end of the marketare likely to be more discerning and likely to choose another apartment that cannot beoverlooked or viewed from another. He said by comparison smaller apartments havea wider appeal and their market is more competitive. Mr Dean said that although theprice of a smaller apartment that can be seen into will be detrimentally affected, theloss of value on that account is likely to be less significant than for high valueapartments.[75] Mr Dean said that based on his examination of Mr Taylor's first set of plansand his site visit and inspection of level 5 of 21 Hargreaves (the top floor), level 4 of19 Hargreaves (the top floor), and the rooftop of 19 Hargreaves, he concluded that thenon-installation of screening on the top floor of 21 Hargreaves would result in theapartments on the northern side of the building and specifically from their north andnorth-east facing windows, to look directly into the southern windows of the proposedpenthouse apartment and down into the southern windows of the "front" and "rear"apartments of 19 Hargreaves. Conversely, the penthouse apartment on 19 Hargreaveswould have a view through its southern windows into the north and north-easternwindows of the apartments on the northern side of 21 Hargreaves. And the front andrear apartments of 19 Hargreaves would look up into the north and north-easternwindows of the apartments on the north side of level 5 (the top floor) of 21Hargreaves. Mr Dean said that if the level 5 screening on 21 Hargreaves had been putin place these views would not be possible, and he concluded that the failure to installthe screening on the top floor of 21 has caused a reduction in the value of the penthouseapartment and the front and rear apartments located on the south side of 19 Hargreaves.[76] In order to quantify the loss of value due to the lack of privacy, Mr Deanundertook a valuation of the proposed penthouse and the front and rear apartments at19 Hargreaves. He identified a number of comparable apartment sales which heconsidered informed an assessment of the value of the proposed apartments at 19Hargreaves, and he expressed their values in terms of square metres. He concludedthat the value of the penthouse on 19 Hargreaves should be determined based on$13,500 per square metre; the front apartment on $12,000 per square metre, and therear apartment on $11,000 per square metre. Applying those rates to the relevant areasof those apartments he concludes that the market value of the apartments that wouldapply had the screens been installed and their privacy been protected, would be:(a) The penthouse: 174.8 m2 x $13,500 = $2,360,000.00.(b) The front apartment: 106.8 m2 x $12,000 = $1,282,600.00.(c) The rear apartment: 64.8 m2 x $11,000 = $713,000.00.[77] Mr Dean then assessed the impact of the detrimental effect of the loss ofprivacy to each of the three apartments by applying a percentage reduction of theirvalue. Because the rear apartment was the least affected as it occupies a recessed rearposition in the development, Mr Dean considers a five per cent reduction in its valueis appropriate to recognise the loss of privacy. As the front apartment will be more"heavily" overlooked, particularly by views into its living area, Mr Dean considersthat a more substantial reduction of 10 per cent of its value is appropriate. In relationto the penthouse, Mr Dean considers that although some of the intrusion is into two ofthe bedrooms, given the amount of the living areas affected its value will becompromised and he says that a reduction of 15 per cent is appropriate.[78] Based on these assessments made with reference to Mr Taylor's first set ofplans for 19 Hargreaves he calculates the appropriate deductions to recognise the lossof privacy resulting from the non-installation of screens on level 5 of 21 Hargreavesas totalling $517,650 comprised as follows:(a) The penthouse, $2,360,000 x 15 % = $354,000.(b) The front apartment: $1,282,600 x 10% = $128,000.(c) The rear apartment: $713,000 x 5% = $35,650.[79] However after reviewing some further relevant market sales data andMr Taylor's consent plans in which the floor area of the penthouse is reduced from174m2 to 169 m2, Mr Dean said he considered it necessary to reduce his valuation ofthe penthouse from $2,360,000 to $2,286,900 and consequently the total loss of valueto $505,685.Heartland's case[80] As I have already noted, Heartland acknowledges that Marac did not installany screens on 21 Hargreaves. It says however that the louvre screens and louvrewindow terms of the Deed are vague and uncertain and that consequently the terms ofthe Deed which purport to impose an obligation on Marac and it successors to installscreens on the top floor of 21 Hargreaves are unenforceable. However, as analternative defence Heartland says that in any event Marac's failure to install thescreens on the top floor of 21 has not caused and will not cause Escrow any loss.The failure to install screens has not caused any loss[81] In order to show that Marac's failure to install louvred screens on the top floorof 21 Hargreaves did not cause the plaintiff any loss, the defendant engaged and calledevidence from Mr Paul Leuschke who is a Registered Architect and Director ofLeuschke Kahn Architects. Mr Leuschke has practiced in Auckland as an architect for36 years. He has extensive experience in designing commercial and residentialbuildings including the development project at Princes Wharf which incorporatedapartments, penthouse apartments, a parking building, commercial offices, hospitalityvenues, and a hotel.[82] Mr Leuschke was asked to assess Mr Taylor's plans and provide anindependent expert opinion regarding the design and its implications. He examinedMr Taylor's plans for the development and conversion of 19 Hargreaves intoresidential apartments and considered the contents of the Deed, the briefs of evidenceof the plaintiff's witnesses, the pleadings, and undertook a site visit which included aviewing of Unit 41.Would Mr Taylor's plans obtain resource consent?[83] Mr Leuschke said that when considering an application for a resource consentfor 19 Hargreaves the Council would be concerned regarding the effect that a proposedconversion of commercial to residential use will have on existing residentialneighbours, and since 21 Hargreaves is already established as a residentialdevelopment the Auckland Council could be expected to be more concerned by theeffects of the proposed development on the existing residential occupants of 21Hargreaves.[84] He said that pursuant to the Auckland Unitary Plan (AUP) a height restrictionof 16 metres for an occupiable building applies, with a further two metres for "roofform" which can include mechanical services which protrude above the roof level. Hesays that the plaintiff's proposed building with its additional level above the existingbuilding takes it substantially above the height restriction permitted under theprovisions of the AUP. He said that although he had doubts that the height of the liftshaft would comply with the applicable height restriction, he neverthelessacknowledged that the other aspects of the development which would make it arestricted discretionary activity are minor, and he accepts that Mr Taylor's revisedplans may get resource consent.[85] However, Mr Leuschke described the consent plans as "a very preliminarydesign," and said that in his experience the placement of "huge" windows right on theboundary as shown on the plans would never be accepted by the Council. He said:. the first thing I looked at was the fact that all these windows on theboundary, you can't actually do. You cannot build windows on the boundary.. when I looked at the plans, the plans show the layout that couldn't be built.[86] Referring to Mr Arnesen's opinion that Mr Taylor's consent plans would getresource consent, Mr Leuschke said:I agree with him that the plans will get resource consent but it won'tnecessarily get building consent, and since this man is not a fire engineer hehas no ability to tell you whether those windows will be able to be put thereor not.Counsel: Are you a fire engineer?My experience and expertise says that they do not like and do not encourageand vigorously fight not to have windows on boundaries. The principle is easy.If you put a window on a boundary and the guy next door builds up against itthat room has no windows. In residential architecture, which is not the same,you can't put windows on boundaries. You have to fire rate any wall that youput on a boundary. So you're protecting your neighbour from you if there is afire.Taking advantage of the site and mitigating undesirable aspects[87] Mr Leuschke said that while architects generally design buildings, particularlyresidential buildings, away from negative aspects, both Mr Taylor's initial plans andhis revised "consent" plans had not configured the apartments to mitigate the negativeaspect of the proximity of 21 Hargreaves. He said that even if there were louvrescreens on Unit 41, that would not change the way in which a prudent architect wouldand should design the units located on the southern boundary of 19 Hargreaves. Hesaid:A prudent architect would still be taking advantage of the view and designingout the negative aspect, namely the presence of 21 Hargreaves whether unit41 had louvres (inside or out) or not. No one wants to look at a building,whether it has louvres or not.[88] He explained that when designing any project, an architect's intention is tomaximise the advantages and minimise the disadvantages of the site. He said that inhis opinion it would make logical sense for any architect designing a residentialdevelopment at 19 Hargreaves to take advantage of the views available in the 180degree arc passing from west, through north, to east. He said that water views willgenerally carry the most value and as developers seek to maximise profit, where anapartment can be given a water view, its value will consequently increase.[89] Mr Leuschke said that in the case of 19 Hargreaves, the available harbour andcity views add great value to the property. Conversely, the south facing views towardsneighbouring 21 Hargreaves would add no value to the property as there are nodesirable views in that direction, and views of neighbouring residential buildings, donot add value. He notes that the plans prepared by Mr Taylor would give theapartments on the southern boundary views into either a blank wall, or into aresidential unit at 21 Hargreaves. He says that where there are negative aspects to asite, such as another building in close proximity, then an architect would try to removeor lessen the impact of that negative aspect in the design that they produce for the site,and in this case by deleting the windows facing those negative views, so that thenegative aspects are no longer relevant.[90] Mr Leuschke described a number of amendments to the proposed design thatcould be made in order to take advantage of the views available rather than thenegative aspects of the site. He said that in his opinion the plans prepared for theplaintiff make no effort to take advantage of the desirable view, but rather crudelymake use of the undesirable views. In his opinion no reasonable or prudent architectwould design a conversion from commercial offices to residential apartments in themanner that has been done in the plaintiff's consent plans.[91] Mr Leuschke said he would redesign the units on the south side of the buildingso that they were configured to come within the requirements of the AUP, and wouldnot place any windows in the wall on the south side of the building, not only becauseof the negative view they would have, but also because windows in that location wouldneed to meet the requirements of specific fire rating regulations and compliance withthose regulations is expensive. He said that reorienting the windows to the moredesirable views would make the apartments more desirable and therefore of increasedvalue. Conversely, by using the design set out in the plaintiff's plans the value of theapartments would be reduced.[92] Mr Leuschke also said that there are a number of further design measures thatif employed would mitigate any impact caused by the absence of louvre screens onUnit 41 given its proximity to the apartments on the southern side of 19 Hargreaves.He notes that the plaintiff's plans show four windows on the southern boundary of 19Hargreaves: two in the penthouse and two in the rear apartment. There are alsowindows on both the penthouse and the front apartment that look across the southernboundary from a distance of 4.8 metres. Mr Leuschke says that design measures hewould employ would remove or reduce any impact of Unit 41 not having louvres, andcould be achieved without incurring significant cost, and well below the costimplications of including fire rated windows on the southern boundary wall. Theavailable design measures could include changing the orientation of the windows onthe south side from the horizontal plane presently adopted in the plans (whichMr Leuschke says in his view appear designed for the worst possible outcome andwithout mitigating the proximity of 19 to 21 Hargreaves), to the vertical plane andmoving the window to the eastern end of the south wall and into the corner of theroom. With that orientation the window could be made narrow and extend from floorto ceiling thereby allowing the same amount of light into the room while minimisingany view from 21 Hargreaves and affording privacy. The use of frosted glass or afrosted pattern on glass would ensure privacy without reducing the light, or theinstallation of a perforated roller blind which would enable the occupant of the roomthe ability to look out while maintaining their privacy. Other design measuresdescribed by Mr Leuschke are the use of tinted film on the windows, the installationof internal wooden louvres, the installation of external horizontal or vertical louvres,or a decorative screen installed on the exterior of the building which can provide anaesthetic privacy solution.[93] Mr Leuschke costed the various design solutions he proposed on the basis oftheir installation on the windows located on the southern boundary and those whichare southern facing but not on the boundary. The most expensive solution being thedecorative screens at a cost of $23,100. The cheapest being the use of frosted glass,blinds and tinted film which he costed at approximately $1,300 to $1,400, and theinternal and external louvres at approximately $10,000 to $13,000.[94] He said:I maintain the opinion that the plans exhibit signs of hasty consideration. Aprudent architect would have ensured the plans went through several moreiterations before they are finalised for consent. The Original Plans look as ifthey tried to maximise views to the south. The Revised plans look to do thesame while also maintaining compliance with the AUPOP.In my opinion, the Revised plans do not design away from the southerlyaspect but simply attempt to make the plans conform to what Mr Taylorbelieves will obtain consent.As I said in my earlier brief, the plans are not configured in a way to makebest use of the space and do not show a sense of reality. I would expect suchconcept plans to be worked on for several months to create the optimal layout.Louvre screens[95] Mr Leuschke also commented on the terms louvre screen and louvre windows.In his experience as an architect the words have very different meanings. He says thatin his opinion a louvre window, means a window with a bank of operable glass, wood,or metal blades. If the blades were made of clear glass they would certainly notprovide any visual privacy, and if the blades were made of wood or metal and couldbe rotated then again the louvred window would not offer visual privacy.[96] As regards the term louvre screen, Mr Leuschke says that it could be a wallcomprising either fixed or operable louvre blades, with the blades spaced and angledin such a way as to allow air to flow through it. Depending on whether they wereplaced vertically or horizontally, the angle of the blades would allow either adownward view through the gaps of horizontal blades or to the left or right throughthe gaps between vertical blades.[97] Mr Leuschke says that within the plans and Deed he has not seen any sizerequirements for the louvred screen or any details showing how the screen is designedto provide privacy, thus leaving open the possibility that the louvres could behorizontal, vertical, adjustable, or positioned at varying degrees or angles. He saysthat there are several orientations that would fit within the definition of louvre screenor louvre window, and if there is no significant impact on the views and the louvresare designed in a way to only partially limit views between 19 and 21 Hargreaves, inhis opinion there would be no diminution in the value of 19 Hargreaves.Mr Guilford's evidence[98] The defendant also called evidence from Mr Ian Guilford who is a propertydeveloper with over 25 years' experience in high rise development for residentialapartments, apartment hotels, student accommodation, terrace houses and landsubdivision.[99] Mr Guilford described the factors a developer will take into account whenconsidering the redevelopment of an existing building such as 19 Hargreaves fromcommercial to residential apartments. He said that it was of particular importance toweigh up the value that can be attributed to each apartment that would be establishedand what it could be expected to sell for, against the cost of the property and convertingit to apartments. Mr Guilford said that in his opinion there are a number of "red flags"associated with 19 Hargreaves that could prevent him from undertaking aredevelopment of the property. These included: the age of the building and theuncertainty as to its condition; the potential for it to lose the currently valuable viewsto the north; the lack of available space for car parking within the building; proximityto 21 Hargreaves; views from the lower levels into a retaining wall and 17 HargreavesStreet; and car traffic around the building.[100] Mr Guilford said that in his opinion no competent developer or architect wouldlook to take advantage of the southern aspect of 19 Hargreaves as it receives no lightand is up against an adjacent building. He said there is a reason why the lifts andstairways on 19 Hargreaves are located on the southern boundary, and in his opinionany architect a developer engaged on the project, would look to orientate the apartmentviews to the east.[101] Mr Guilford said that he considered the absence of louvre screens on 21Hargreaves to be relatively insignificant to an assessment of the value of the buildingat 19 Hargreaves. He said that as it was unlikely that the proposed plans would getresource consent, and the plans would need to be modified anyway. He said that theproposed changes to the plans suggested by Mr Leuschke were just one solution, andhe was sure there are others.Mr Churton's assessment of the plaintiff's loss[102] The defendant also called evidence from a registered valuer, Mr John Churton,of Churton Valuation Services Limited. Mr Churton has considerable experience as avaluer having been involved in valuation work for 38 years and in private practice asa registered valuer for 33 years. His valuation experience covers a wide range ofresidential, commercial and industrial properties and he has given expert evidencepreviously at arbitration and court proceedings.[103] Mr Churton was engaged by the defendant to provide his expert opinion on:(a) How an estimate of the diminution of value of a property is calculated.(b) Whether 19 Hargreaves has suffered a diminution of value as a resultof fixed louvre screens not being present on three windows in Unit 41of 21 Hargreaves.(c) What, if any, is the estimated quantum of diminution of value due tofixed louvre screens not being installed on Unit 41.(d) Whether the loss of privacy claimed to have been caused by the absenceof three fixed louvre screens on Unit 41 could be ameliorated ormitigated altogether by design measures or features which mitigate orcompletely extinguish any adverse effect.[104] Mr Churton reviewed the briefs of evidence of Mr Dean and Mr O'Leary,Mr Taylor's plans and undertook a site visit to both 19 and 21 Hargreaves. He wasalso provided with copies of the pleadings and relevant documents including copiesof the Deed, an Auckland Council Report dated 10 March 1998 relating to anapplication for resource consent for the construction of an additional floor at 19Hargreaves, and copies of signed lease agreements relating to the current tenants of 19Hargreaves.[105] In his evidence Mr Churton noted that the principal view from the top floorsof 19 Hargreaves are to the east of the building over Victoria Park and toward theAuckland Central Business District. He said that this view carries significant valuefor a residential apartment. There are also views to the north from the top floors.[106] Mr Churton notes that the AUP height restriction in the Business - Mixed Usezones in which 19 Hargreaves is located is 16 metres with an allowance of two metresfor roof form. He says on the basis of the information contained in the 1998 AucklandCouncil Resource Consent report, it appears that 19 Hargreaves is currently near themaximum height of 16 metres, and from the proposed plans for redevelopmentincluding the addition of another floor the maximum permitted height would beexceeded. Mr Churton concluded that the proposed residential conversion of 19Hargreaves is a significant departure from the 1998 application which sought to addanother floor level to extend the commercial office space as 21 Hargreaves was acommercial office block in 1998 and is now residential apartments. He says thatbecause of its significant impact on adjoining properties a proposed residentialdevelopment of 19 Hargreaves would undoubtedly require resource consent by reasonof the excess height above the allowed 16 metres and because the building is locatedright on the southern boundary.[107] Mr Churton says that the issue of whether the proposed development of 19Hargreaves could obtain resource consent is fundamental to an assessment ofdiminution of value, as without the ability to obtain resource consent to convert thebuilding to residential apartments there would be no diminution of value as a result ofthe absence of screens on Unit 41. He says that while he is unable to comment withcertainty on the issue of whether the proposed plan would obtain resource consent,given the significant differences in the proposal to the 1998 resource consentapplication, he says that in his opinion it is clear that a resource consent would not begranted as of right.[108] Mr Churton says that someone considering a conversion of 19 Hargreaveswould undoubtedly seek to make use of the available outlook, which does not includea view to the south. He says that the orientation of any living or bedroom area wouldbe towards the principal outlook to the east and not towards an adjoining building. Hesays there would be little added value in developing a southerly outlook or placing awindow on the south side, and fire rated windows are expensive. He says that ifwindows were to be placed on the southern wall then the best option for privacy wouldbe to place fixed louvres, blinds, or one way glazing on 19 Hargreaves and not 21Hargreaves, and any development looking to maximise the principal outlook woulduse orientation, design features and appropriate angles to overcome any issues relationto privacy. He said:building right up to the boundary brings with it issues as to feasibility.Without intruding on the adjoining property, it raises issues relating toconstruction where there may be issues in terms of fire rating of joinery on theboundary, and matters relating to building maintenance. I understand thatneighbour's consent or a court order would need to be sought to maintain anywindows from the adjoining property if the building was built right up to theboundary. It is unlikely the ability to access the neighbouring property formaintenance would be as of right. Consent from the neighbouring bodycorporate cannot be assumed given the impact on 21 Hargreaves.My conclusion is that on assessment of the property, I do not believe thedevelopment would be feasible as of right. If it is unable to go ahead thenthere is no diminution of value to 19 Hargreaves Street resulting from thefailure to install fixed louvre screens on Unit 41.[109] Mr Churton nevertheless went on to consider the value of the penthouse andtop floor apartments were they to be established at 19 Hargreaves in accordance withthe plans and to assess the diminution of value caused by the absence of screens onUnit 41. He considered that the most directly comparable residential apartments andsales to inform his valuation assessment were those at 21 Hargreaves. He identified anumber of sales of apartments in 21 Hargreaves from December 2017, and analysedseven apartment sales and calculated a value expressed per square metre. He alsonoted that two apartments were listed for sale, including the penthouse apartment.However as the asking prices would not necessarily provide a reliable indication ofvalue he disregarded those apartments for his valuation purposes.[110] From his analysis Mr Churton comments that the value of each proposedresidential unit in 19 Hargreaves would be highly dependent on the size, layout, andquality of the amenities and features provided. He says that if all the units arecompleted to a high standard the distinguishing feature effecting value, would be theviews from each unit. He notes that the outlook from the apartments to all points otherthan directly to the south is unaffected by the presence or otherwise of fixed louvrescreens on Unit 41. Mr Churton identifies three apartments as being potentiallyaffected by privacy issues on the south side. They are: proposed apartment 5 on level6 (the Penthouse); and the two apartments on the level below the Penthouse labelledas Proposed Apartment 5 (the Front apartment) and Proposed Apartment 6 (the Rearapartment).[111] Mr Churton notes that the Penthouse apartment would be at a higher elevationto the floor of Unit 41. Its views towards the Auckland CBD from the south-eastthrough to the north-east would not be affected by Unit 41 directly to the south. The"Master" bedroom, bedroom 2, and the living and sitting room are shown on theproposed plan as all having windows with views to the south. There is also a terraceoff the "Master" bedroom and living room which would overlook 21 Hargreaves. InMr Churton's opinion, the perception that there will be a loss of privacy would not beremedied by fixed louvre screens installed on Unit 41, although screens on Unit 41would be likely to enhance the privacy of that unit rather than the Penthouse on 19Hargreaves. However, in his view privacy for the Penthouse apartment could beachieved by the provision of blinds or one-way glazing or a window coating. If thatwere done, overall the diminution of value on account of privacy issues would beminor.[112] On the basis of confirmed sales of similar apartments in the area, Mr Churtonassesses the value of the Penthouse apartment as in the range of $1,750,000 to$1,850,000. Allowing for two secure car parks at $50,000 would yield a rate ofbetween $9,439 m2 to $10,011 m2.[113] Assuming that they had a high standard of finish and included car parking,Mr Churton assesses the value of the Front apartment between $900,000 and$950,000, and the Rear apartment between $650,000 and $700,000.[114] Mr Churton says that where there is a perception of a minor change in valueby reason of a reduced amenity such as privacy, while it is difficult to measure, in hisopinion the negative impact would be plus or minus 2.5 per cent. This would increaseif the impact is measurable but not decisive to plus or minus five per cent. Where theperception or change is easily observable the impact could be 10 per cent or more.[115] In his opinion the diminution to the value of the Penthouse and to the Frontapartment due to the absence of screens on Unit 41 would equate to 2.5 per cent oftheir value. He assesses the Rear apartment to be impacted to a lesser degree and thediminution to be 1.25 per cent.[116] On the basis of those valuations and diminutions he concludes that the amountof diminution would be: the Penthouse, $43,000; the Front apartment, $21,000; andthe Rear apartment, $8,000. A total of $72,000 (inclusive of GST, if any).Discussion and AnalysisThe Deed - Meaning of the terms louvred windows and louvred screen[117] Apart from the description of the screens in the Deed as expressed by thenotations louvre windows and louvre screens and the arrows associated with thosenotations and the hand drawn marks which appear to indicate the extent of the area tobe covered, the Deed contains no other detail of what is required to satisfy theobligation for their placement on Unit 41.[118] The word "windows" in the phrase louvre windows, implicitly refers to a see-through installation rather than one which obstructs a view through it. Unless somespecific type of louvred window is specified, such as having opaque glass which wouldoperate as a screen, the meaning of the phrase louvred windows as used in the Deed isinherently uncertain and open to several interpretations. Moreover, when the term"louvred windows" is used together with the term "louvred screen" it clearly impliesthat they are different things – one a window, the other a screen. If it was intendedthat that the installations in both locations were to operate as a visual screen to preventany viewing through both of them in both locations on the north and north-east sidesof Unit 41, it would be inconsistent with that intention to use two apparentlyinconsistent terms to describe what was to be installed.[119] There are no measurements to define the length and height of the screens, andthe hand drawn marks on the exterior wall do no more than provide a generalindication of the dimensions. Although Mr Herbert submitted that it was possibleusing the adjacent deck area of 8m2 to calculate the length of the screen along the northwall as being at least six metres long, the deck that calculation is based on appearsonly on the "Plan supplied by Mr O'Leary" floor plan and not on the "Signed Deed"version of the floor plan.[120] There are also no specifications as to materials, or how the louvres are to bepositioned or as to whether they are to be positioned horizontally or vertically, andnothing requiring the louvre screens to be positioned or fixed so as to protect theprivacy of future residential occupants of 19 Hargreaves.[121] The terms louvre windows and louvre screen do not provide any detail as towhether they would be vertical or horizontal louvres, or whether the louvre elementswould themselves be adjustable to change their angle and orientation. There iscertainly nothing in the Deed to indicate or convey a requirement that the louvres ofthe louvre screens be set in a fixed position to prevent someone in Unit 41 from beingable to view the southern side of 21 Hargreaves and be able to look into the windowsor onto the decks along that side of the yet to be constructed residential apartmentbuilding.[122] Mr Herbert submitted that the words of clause 1(f)(iv) of the Deed "Maracand/or CSM will install screens on decks and windows on the Top Floor Units "should be interpreted as imposing an obligation on Marac to install a screen on allwindows and decks on the Top Floor units. However Mr Hebert's submissionoverlooks the qualifying phrase that follows, namely: " as marked on sheet 6 in theplan attached as Schedule 2; and". It is clear from the wording that the only placeswhere screens are to be attached pursuant to the provision are those marked on theattached plan.[123] The lack of any specific provisions in the Deed and the lack of certainty ofwhat was required by the Deed, is further evident and illustrated by the steps taken byEscrow a month after execution of the Deed by seeking to add the adjective fixed tothe terms louvre windows and louvre screens in an attempt to add some specificity asto what those terms meant and required. The lack of clarity and certainty surroundingthe terms louvre windows and louvre screens is also reflected in the various attemptsmade by the parties to themselves describe what was intended by the Deed. In theversion of the top floor plan endorsed with the description "Plan supplied byMr O'Leary", which I have found was likely prepared by Mr Wilkinson, he has useda different plan and has added three notations. Because the plan he has used is not thesame as the level four plan used in the Deed version, his notations and arrows refer tolouvre screen in the location of the two exterior decks shown on the plan he used, anda single notation of louvre windows.[124] Yet another description of what the terms of the Deed required is contained inMr Dyke's instructions to Bradnam's and the plan he provided to them to indicate thelocation and dimensions of the screens required. On his plan of the top floor of 21Hargreaves, Mr Dyke drew a line to indicate the position of a fixed louvred screenalong the entire length of the wall and windows on the north side of Unit 41, as wellas the windows on the north-east wall and deck. He instructed Bradnam's to take thedimensions for fixed louvred screens from the architect's plans and specificallydrawing 60 on which the aluminium window joinery for Unit 41 is detailed.Mr Dyke's instructions to Bradnam's made no reference to louvred windows.[125] Mr Herbert submitted that the plaintiff's strongest point as to certainty wasillustrated by Marac's Mr Dyke requesting a quotation for the supply and installationof screens and thereby showing that Marac was itself able to interpret the requirementsof the Deed. However Mr Dyke used a different plan from the "Signed Deed" sheet6, and drew a much longer line along the north exterior wall of Unit 41 to indicatewhere the screen would go. He also used different terminology – "Fixed louvredscreens" as applicable to that area, rather than the term "Louvre Windows" as providedfor on the Signed Deed version of the plan. But contrary to Mr Herbert's contentionand rather than showing that the terms of the Deed were expressed with certainty,Mr Dyke's interpretation of what was required was yet another permutation of theDeed's requirements, and one using different terminology and different dimensionsfrom those appearing on the Signed Deed version of the floor plan for the Top Floorand Unit 41.[126] I therefore find that there is significant uncertainty as to what would berequired by Marac or its successor in order to discharge the obligation upon it in theDeed to install the screens referred to in clause 1(f) (iv) and the level four plan bearingthe louvre windows and louvre screens notations, arrows, and markings.[127] If the provisions of the Deed do not enable the parties to be certain as to whatis required to comply with the obligation to install the louvred screens and there is nomechanism provided for within the Deed to determine that issue, and the provision ofthe Deed is vague and uncertain, then the Court cannot fill the gaps by means of animplied term or terms then the contract will be is unenforceable.[128] In Fletcher Challenge Energy Ltd v ECNZ Ltd the majority of the Court ofAppeal said:6[67] Lack of clarity or ambiguity in express terms can also be resolved so asto "save" the contract. It is only if there is such uncertainty in an essential termthat the Court cannot determine what the parties meant that the agreement willbe held to be meaningless or void – where "the language used was so obscureand so incapable of any definite or precise meaning that the court is unable toattribute to the parties any particular contractual intention" (G Scammell andNephew Ltd v Ouston [1941] AC 251 per Lord Wright at 267). Where the termin question is meaningless but inessential (both in law and to the parties) itwill simply be disregarded in determining the rights of the parties under thecontract.[129] Here the express terms and circumstances do not enable the Court to interpretthe terms of the Deed by filling the gaps or implying a contractual term in order togive effect to an intention of the parties where their intention is not clear or apparent.It is not open to the Court to construct an enforceable contract by implying terms which6 Fletcher Challenge Energy Ltd v Electricity Corporation of New Zealand Ltd [2002] 2 NZLR 433(CA) at [67].prescribe what the terms louvre windows and louvre screen mean in this context whenthere are so many possibilities and where the claimed contractual objective ofproviding privacy to future residential occupants of 19 Hargreaves is not referred toor described in the express terms of the Deed.[130] In my view the background and context of the Deed and its settlementprovisions do not support the plaintiff's submission that the terms "Screens"; "LouvreWindows" and "Louvre Screen" together with the arrows and marks on the level fourplan should be interpreted as requiring the placement of louvred screens in such amanner as would prevent a person inside Unit 41 or on the exterior deck of that unitfrom being able to see across to any part of the south wall of 19 Hargreaves whichmay be built as part of a future residential development on that site.[131] I accordingly find that the terms of the Deed requiring Marac and/or CSM to"install screens on decks and windows on the Top Floor Units as marked on sheet 6 inthe plan attached as Schedule 2" is unenforceable. Having found the relevantprovision of the Deed to be unenforceable, the plaintiff's claim against Heartland fails,however I shall nevertheless also address the effect of Marac's failure to install louvrewindows and a louvre screen on Unit 41.The effect of the failure to install louvre windows and screens[132] The plaintiff claims that Marac's failure to install the louvre windows andlouvre screen, has enabled people in Unit 41 to have an unobstructed view acrosstowards 19 Hargreaves, which has had the effect of reducing the current value of itsproperty, because of the adverse effect such an unobstructed view will have on thevalue of any future residential apartments that may be built.[133] Mr Herbert submits that the provisions of the Deed which required theinstallation of louvre windows and a louvre screen meant that the plaintiff or itssuccessors, could build residential units in the "box of air" located within its boundarywhich would not be adversely affected by privacy issues. Mr Herbert says that becauseof Marac's breach and failure to install the louvre screen, Escrow can no longer dowith its asset what it would otherwise be able to do, with the result that the presentvalue of its property has been reduced and resulting in it suffering loss.[134] Consideration of the effect of the absence of louvre screens on Unit 41 on thevalue of 19 Hargreaves must start with the question of whether the plaintiff would beable to redevelop its building and convert it to residential apartments, and whether itcan show that it could obtain the required consents to establish residential apartmentson its property which would be adversely affected by a lack of privacy from theoccupants of Unit 41. The consent plans prepared by Mr Taylor have not been grantedresource consent by the Auckland Council, and notwithstanding Mr Arnesen's opinionand evidence, in my view the plaintiff has failed to show that there is a realisticprospect of the plans obtaining resource consent and building consent in their currentform with windows located right on the southern boundary.[135] Given the location of several wide windows on the southern boundary wall andthe likelihood that the height of the proposed development would exceed themaximum height permitted by the AUP, the issue of whether the plaintiff's plans intheir current form are capable of satisfying the Council's requirements andassessments is at best problematic and uncertain. The placement of wide windows onthe southern boundary is inevitably going to attract careful scrutiny by the Council,and the issue of whether the plans with those windows are approved by the Council,and if so, whether the construction of the windows remains financially viable havingregard to the high cost of satisfying the fire-rating requirements cannot be predictedwith any confidence. Furthermore, the plaintiff has no intention of lodging the plansfor consideration by the Auckland Council and no current intention of proceeding witha development to convert its present commercial office premises into residentialapartments. Such a development project may never happen. In these circumstances Iconsider Mr Leuschke's description of the plaintiff's proposed building as "fictional"is appropriate and entirely justified.[136] However the issue as to whether or not the plaintiff's consent plans would orcould be granted a resource consent does not determine the issue of whether or notMarac's failure to install screens has caused the plaintiff loss by adversely affectingits ability to develop its property in the future. I agree with Mr Leuschke that itappears that the plaintiff's plans have been developed to maximise the intrusion ofprivacy caused by the absence of louvre screens on Unit 41. By not adopting theapproach of designing to take maximum advantage of the available views, and by notemploying design solutions to enhance and achieve privacy while also minimising theability of any occupants of 21 Hargreaves and specifically Unit 41 to haveunobstructed views into the apartments, the plaintiff's plans represent an unrealisticbasis on which to make an assessment of the impact and effect of Marac's failure toinstall louvre screens on Unit 41. In my view it is significant that Mr Taylor wasinstructed by Mr O'Leary to endeavour to fit as many residential apartments aspossible into his plans for the future development of 19 Hargreaves. Furthermore,although Mr Taylor said that it was his decision as the architect to design a buildingthat extended right up to and along the southern boundary, it also appears that therewas little or no consideration given by either him or Mr O'Leary to develop a designthat took advantage of the views available to the north and north-east and mitigatedthe effect of viewing by occupants of Unit 41 by designing away from the negativeand undesirable views to the south.[137] In preparing his design Mr Taylor placed large windows for the masterbedrooms of the two top floors, and a second bedroom and living room right on theboundary in a position where windows are required to be fire rated. As I have noted,in his evidence Mr Taylor explained that his placement of windows on the boundarywas not his final design solution. Nevertheless, his placement of wide windows righton the boundary when other options such as those explained by Mr Leuschke wereavailable, is an illustration of how his plans appear to have been intended to emphasisethe impact of the absence of any screens on Unit 41, rather than seeking to develop adesign that mitigated the adverse privacy effects on those apartments due to availableviewing from Unit 41.[138] It is also clear from Mr Guilford's and Mr Leuschke's evidence that anyarchitect given a brief to maximise the potential of a proposed property developmentin terms of the value, would take full advantage of the most desirable views, whileminimising the effects of negative or less desirable or undesirable views. Here, asMr Leuschke and Mr Churton have explained, there are desirable views from 19Hargreaves in the arc passing from the north-west, through to the north and to thenorth-east, and with the least desirable view towards the south. To the north-east is aview over the city towards Rangitoto Island, and to the east is a view over VictoriaPark towards the central city and Sky Tower.[139] The plaintiff or any subsequent owner of 19 Hargreaves can be expected toseek to maximise the value of any redevelopment and do so by exploiting and takingadvantage of the most desirable views. The absence of louvre windows and a louvrescreen on the north and north-east sides of Unit 41 would not have any significantimpact on the value of residential apartments designed to take advantage of the mostdesirable views, and designed to minimise views towards the south. By doing so thedeveloper would increase the value of the apartments and there would be no reductionor loss of value caused by occupants of Unit 41 being able to have an unobstructedview towards 19 Hargreaves.[140] There are also a number of possible design solutions that could be employedat a relatively low cost in the context of a development project such as would berequired to covert 19 Hargreaves to residential apartments, that would be effective tosubstantially mitigate if not practically eliminate any adverse effects in terms ofprivacy due to the ability of people in Unit 41 to look across towards 19 Hargreaves.[141] My finding that the absence of louvre windows and a louvre screen on Unit 41would not be detrimental to the value of any future residential apartments designedand developed by a properly briefed and competent architect and built by a developermotivated to maximise the value of the project by taking advantage of the desirableview amenities, means that the absence of any louvre screen and windows on Unit 41cannot have had any adverse effect on the present value of 19 Hargreaves.[142] I accordingly find that the plaintiff has failed to prove on the balance ofprobabilities that Marac's failure to install the louvre windows and louvre screenreferred to in the Deed has caused it any loss of value of its property at 19 Hargreaves.Not only has the plaintiff failed to show that the plans upon which its claim is basedrepresent a viable building plan capable of obtaining resource consent, but it has alsofailed to show that the plans represent what would be a realistic basis for futuredevelopment, as the plans its claim is based on were prepared in order to support theplaintiff's case rather than being for an actual proposed development intended tomaximise the amenities of the site and the value of the apartments and consequentlythe profit to be gained from the development.[143] The implausibility of the plaintiff's claim to having suffered loss by reason ofthe unobstructed views from Unit 41 is also illustrated by the fact that people locatedin and on the exterior deck of the unit immediately below Unit 41 in 21 Hargreaveswould also have an unobstructed view across towards 19 Hargreaves. Although theywould be looking up towards the upper levels of 19 Hargreaves, their proximity andability to do so would not be significantly less intrusive upon the privacy of theoccupants of 19 Hargreaves, than would be the case as a result of unobstructed viewingfrom Unit 41. As Mr Churton explained: To me the privacy [of 19 Hargreaves] has already been compromised beforethe extra floor goes on. The floor below [Unit 41] can look into the proposedtop floor of the 19 building, adding it an extra degree of loss of privacy is onlyadding an extra degree of loss of privacy. It's not adding a whole new spectrumof loss. So I – it's not going to make much of a difference at all.[144] Significantly in my view, when the terms of settlement recorded in the Deedwere negotiated Escrow did not seek the installation of louvre screens on the levelbelow Unit 41 or on any of the other apartments located on the north side of 21Hargreaves. Mr Herbert argues that the privacy of the top floor apartments (level 5)on the proposed development at 19 Hargreaves could not be affected by peopleviewing from the floor below Unit 41 in 21 Hargreaves because their sight angle fromthat level would be too acute, and that would appear to be the case. However theviewing angle from the level below Unit 41 across towards level four of the proposedapartments on 19 Hargreaves would not be at such an acute angle and people using theexterior deck of level 4 would be fairly close to and within the direct view of peoplein and on the deck of the apartment below Unit 41. Thus, the privacy of the occupantsof levels four and five of the proposed residential apartments on 19 Hargreaves wouldbe affected by viewing from 21 Hargreaves in any event irrespective of the presenceor absence of screens on Unit 41.[145] Accordingly, and in addition to my finding that the terms of the deed areunenforceable by reason of their uncertainty, I also find that the plaintiff has failed toprove on the balance of probabilities that it has suffered any loss as a result of Marac'sfailure to install louvre screens on Unit 41. The plans on which it bases its case provideno more than a vague and uncertain foundation for its claim to have suffered loss ofvalue of its property by being unable to develop residential apartments at some futuredate. Furthermore the plaintiff's failure to employ any design solutions to reduce oreliminate any privacy intrusion due to the availability of unobstructed views from Unit41, is another illustration of the essentially tenuous nature of its claim.[146] Although these findings make it unnecessary to determine the amount ofdiminution of value that would result from Marac's failure to install louvre screenshad it been required to do so, I also find that Mr Churton's valuation analysis andopinion and his assessment of the degree of diminution of value due to the absence ofany screens on Unit 41 is to be preferred over the assessments and opinion of Mr Dean.In my view the sales data relied on by Mr Churton being based on actual concludedsales was more directly comparable and probative than the market data and salesinformation relied on by Mr Dean for his valuation opinion.[147] I also prefer and accept Mr Churton's evidence as to the percentage valuediminution caused by the adverse effect on the privacy of the occupants of 19Hargreaves due to the absence of screens on Unit 41. In this regard I noteMr Churton's reference to the five per cent value diminution awarded by the LandValuation Tribunal in Samson Corporation Limited v Auckland Council (CRLAcquisition)7 as compensation for the diminution of value due to the Auckland CityRail Link tunnel passing beneath the properties of the claimants.8 The Tribunalconsidered that the overall compensation should reflect the view of potential buyersof the property as to constraints and the reasons for them, imposed by both theacquisition of the right to a portion of the land under Samson's property along the railline to enable the tunnel to be constructed, and more particularly the restrictivecovenant imposed from the top of the acquisition level to a distance five metres belowground level. The Tribunal found that the existence of the restrictive covenant wouldadd an additional layer of complexity to ownership of the site, and in particularcomplexities relating to obtaining consents for future redevelopment of the site and7 Samson Corporation Limited v Auckland Council (CRL Acquisition) [2021] NZLVT 5.8 At [17] and [18]. The Tribunal found that the impacts on the area above and adjacent to the tunnelfrom noise or vibration of the train tunnel would be minimal and could be disregarded, and theissue was the extent of the impact on the subject property of the acquisition of the tunnel area itselfand the imposition of a restrictive covenant that would extend from the tunnel to five metres belowSamson's property.the potential costs associated with applying for consents. The Tribunal concluded thatthe site was affected by around five per cent of its capital value.9[148] That level of diminution in value also informs my view that any diminution ofvalue caused by the absence of screens on Unit 41 would be minimal. In contrast tothe owner (or future owners) of the property in Samson who cannot avoid theconsequences of the acquisition and restrictive covenant, the owners and architectsengaged to design a future residential development at 19 Hargreaves will be able todesign away from any intrusion of privacy from 21 Hargreaves and Unit 41, andemploy design solutions and privacy mechanisms such as screens, blinds, and one-way glass to significantly mitigate, if not entirely eliminate, any visual intrusion ofprivacy from people in Unit 41 in such a manner as would not only avoid a loss ofvalue of the apartments, but which would enhance their value.Result[149] The plaintiff's claim against the defendant fails and is dismissed.[150] The defendant is entitled to costs on a Scale 2B basis together with reasonabledisbursements. In the event that the parties are unable to agree on the plaintiff's costs,they are directed to file costs memoranda.[151] The plaintiff is to file and serve its costs memorandum within 10 working daysfollowing delivery of this judgment. The defendant is to file and serve its costsmemorandum in reply within five working days following its receipt of service of theplaintiff's costs memorandum. The memoranda are not to exceed three pages inlength apart from the title page and any annexures or schedules.[152] Upon the filing of the memoranda by both parties, I shall determine costs onthe papers._____________Paul Davison J9 At [117]–[119].