Meister v Carey
IN THE HIGH COURT OF NEW ZEALAND
BLENHEIM REGISTRY
CIV 2005 406 008
BETWEEN CHRISTIAN FRED MEISTER
Plaintiff
AND JAMES NIVEN MILLER CAREY
First Defendant
AND CAREY'S BOATYARD (1992) LIMITED
Second Defendant
Hearing: 22, 23, 24 May 2006
Counsel: N D Smith for the Plaintiff
D J Clark for the Defendants
Judgment: 3 July 2006
JUDGMENT OF WILD J
Introduction
[1] The plaintiff claims special, general, and exemplary damages for what he alleges was a careless pre-purchase survey of a yacht called the Enterprise III ('the Enterprise'). The survey was completed by the first defendant (Mr Carey) at Greymouth on 19 May 2003. Mr Carey is the proprietor of the second defendant, Carey's Boatyard (1992) Limited (Carey's Boatyard). The plaintiff subsequently purchased the Enterprise.
[2] The special damages claimed are for:
a) The difference between Mr Carey's estimate to the plaintiff of the cost of repairing defects he found upon survey, and the actual costs of repairing those defects subsequently incurred by the plaintiff, and
b) The costs incurred by the plaintiff of repairing defects not found by Mr Carey upon survey, but which the plaintiff alleges he ought to have found.
[3] The general damages are for resulting inconvenience and stress through a lengthy repair process during which the plaintiff and his family were living aboard the Enterprise. The exemplary damages are to punish the defendants for endangering the plaintiff and his crew on a voyage they made after the plaintiff had purchased the ketch, post survey.
[4] Seven causes of action are pleaded. Against Mr Carey personally, the plaintiff alleges:
a) Breach of contract, in failing to exercise reasonable care and skill in surveying the Enterprise at Greymouth on 19 May 2003.
b) Negligence, on the same basis as for a).
c) Negligent misstatement, in failing to exercise reasonable care and skill in reporting to the plaintiff on the condition of the Enterprise, during and after survey of it at Greymouth.
d) Breach of s9 of the Fair Trading Act 1986 in surveying the Enterprise and reporting to the plaintiff on that survey.
[5] Against Carey's Boatyard the plaintiff alleges:
a) Breach of contract - as per [4]a) above.
b) Negligence - vicarious liability for Mr Carey's negligence as per [4]b) and c) above.
c) Breach of an oral contract between the plaintiff and Carey's Boatyard to exercise reasonable care and skill in estimating the cost of repairs to the portside hull of the Enterprise at Tauranga on 30 July 2003.
[6] The particulars of carelessness alleged by the plaintiff in relation to both his contractual and tortious causes of action are that Mr Carey:
a) Wrongly advised that the Enterprise was in general in good shape.
b) Wrongly advised that the Enterprise was suitable for purchase as a charter vessel to operate in the 2003/04 season.
c) Wrongly advised that the Enterprise was seaworthy and safe to sail from Greymouth to Tauranga.
d) Wrongly advised that the rot in the portside hull of the Enterprise would cost $7-12,000 to fix.
e) Incorrectly and inadequately investigated and reported rot in the:
• Anchor locker/stowage area;
• Down forward bunk room;
• Engine room;
• Main wheel house;
• Water closet to starboard;
• Hull;
• Deck and deck fittings;
• Port holes;
• Stem planking and associated timbers;
• Transom;
• Trail boards;
• Beam port cabin.f) Failed to locate and accurately identify the existence of defects, in particular rot.
[7] I amended the plaintiff's amended statement of claim to include that last particular of carelessness, in the course of the plaintiff's opening on 22 May 2006. The third cause of action against Carey's Boatyard, alleging breach of an oral contract on 30 July 2003, was added by leave early on the third day of the hearing, 24 May 2006. The defendants opposed the latter amendment.
[8] The plaintiff's claim for special damages, as ultimately formulated at trial, was for $49,358.11, made up as follows:
Area of defect |
Cost of repair |
Rot in portside hull |
$11,243.65 1 |
Rot in starboard side hull |
$12,112.75 |
Rot in bow/stem |
$8,683.00 |
Rot in transom |
$16,069.64 |
Rot in trail boards (nameplates) |
$4,503.21 |
Rot in portside cabin (down forward bunk room) |
$1,203.75 |
Total |
$49,358.11 |
1 Being $55,664.18 cost of repair less $14,420.53 materials incorrectly included by repairer, less $30,000 met by the owners of the Enterprise (the $45,000 contract retention sum for repairs less $15,000 paid to the owners by the plaintiff on 4 August 2003).
[9] The defendants admit that Carey's Boatyard contracted with the plaintiff to survey the Enterprise, and that the exercise of reasonable care and skill was a term of that contract. They deny that Mr Carey personally had a contract with the plaintiff.
Factual background
[11] After spotting an advertisement for sale on the Internet in about mid-2002, the plaintiff became interested in the Enterprise. He had never before owned a yacht, although he had considerable sailing experience. There was a suggestion in evidence that the advertisement seen by the plaintiff was by a ships' broker and that, in dealing directly with the owners of the Enterprise, the plaintiff circumvented the broker. I need not make any finding about that, since it has no relevance to this dispute.
[12] The Enterprise is a two masted ketch, built by the Kato Boatyard in Japan in 1975. Her overall length (LOA) is 65 ft with a beam of 16.8 ft and a 6 ft draft. She was designed by Brewer Wallstron & Associates of the United States of America. She is a wooden vessel: her hull is triple skin mahogany planking with teak frames; her deck teak over plywood.
[13] When the plaintiff became interested, the Enterprise was moored in the town basin at Greymouth. Mr Carey gave evidence that the Enterprise had been "down in Greymouth ... for some years". Her owners were Mr and Mrs J C Acker, a couple living at Kumara on the West Coast. I understand Mr Acker was or is a goldminer. Mr Carey's evidence was that the Enterprise had been used for charter work out of Picton for some years, but since being based in Greymouth had not been chartered owing to Mr Acker's poor health, was not in current survey, and had probably not been sailed much at all. All the evidence indicates that it was being neglected by its owners, who wished to sell it.
[14] Having seen the Internet advertisement offering the Enterprise for sale, the plaintiff made further inquiries. Through a friend, he ascertained that it was owned by the Ackers, and arranged to meet Mr Acker at Greymouth in early April 2003 to inspect the Enterprise. He flew down to Greymouth from his home in Tauranga. He inspected the Enterprise from a dinghy, rowing slowly around the Enterprise as she lay at her mooring in the boat harbour. The plaintiff liked what he saw, in fact in evidence he said he "really fell in love with (the Enterprise)". He spent the rest of the day on board, and also slept on board overnight.
[15] As the plaintiff intended to live on board with his family, he also arranged for his wife to fly down from Tauranga to look at the Enterprise, and he deposed "she also really fell in love with it".
[16] Nevertheless, the plaintiff was understandably concerned that the Enterprise was a 28 year old wooden vessel, and decided to have her surveyed. The advice he received from various quarters, including from Mr Acker, was that Mr Carey was the man for the job. On 8 May 2003 he telephoned Mr Carey who agreed to survey the Enterprise, but asked for written confirmation from the plaintiff of his instructions. There is some dispute as to what the plaintiff, in this 8 May telephone call, asked Mr Carey to do. On 9 May the plaintiff faxed the following instructions to Mr Carey:
Attn: Mr J Carey
Referring to our conversation by phone yesterday regarding inspection of ENTERPRISE III.
Time for pre purchase survey: Monday 19/5 - Tuesday 20/5/03.
Place: Greymouth slippway where the boat will be out of the water from 16/5/03 and water blasted but not painted.
I would like the inspection of the hull, framework and deck to be the priority. The boat got a stainless steel centerboard and box; I only expect a limited inspection of the centerboard, as the boat is sitting on the slippway.
A visual inspection of: Rigging, engine room and electrical system.
If time allows a check on sails. If you find it necessary to spend a 2nd day to finish the survey I be happy to pay any extra costs for food and accommodation. Can you give me an estimated cost and also let me know if the dates are suitable for you. If it is OK with you, I would like to spend the time on board when you are surveying, and get your expert advise if there is any major issues. Looking forward to hear from you soon.
Best regards: CHRIS MEISTER
[17] Mr Carey faxed the plaintiff back later on 9 May advising that his survey fee would be $450, his travel and other expenses $600, a total of $1,222.25 including GST.
[18] The plaintiff said he telephoned Mr Carey that afternoon, confirmed that the fee was acceptable, and arranged to meet Mr Carey at Greymouth on 19 May. The plaintiff says that, in response to a question from Mr Carey, he explained on the telephone to Mr Carey that he planned to use the Enterprise as a charter vessel and would need to bring it up to MSA standards. The plaintiff says he also told Mr Carey that he intended eventually to sail the Enterprise around the world.
[19] On Sunday 18 May, the plaintiff travelled down to Greymouth with two crew members, and all three were "on board" when Mr Carey surveyed the Enterprise on 19 May 2003. For this survey the Enterprise had been taken out of the water and was standing on the hard, in a cradle, keel retracted. The hull below the waterline had been water blasted, to clean off marine growth. Mr Carey gave evidence that this pressure blasting can expose problem areas in timber boats: the pressure jet is powerful enough to dislodge deteriorated parts of the hull.
[20] 19 May 2003 was a wet, windy and generally miserable day in Greymouth.
[21] Mr Carey arrived at Greymouth about 11.30 a.m., having driven from Picton. He met Mr Meister at the Port Company's slipway, and was introduced to Messrs Torr and Cook. Mr Carey said that, despite the bad weather, the plaintiff wished him to proceed with the survey. Mr Carey said he gained the clear impression that the plaintiff was very keen to complete purchase of the Enterprise and sail it away, and did not want any delay.
[22] In his evidence, Mr Carey made quite a point about the weather. He said that, despite the size and weight of the Enterprise (I do not think a displacement was given in evidence), the wind was rocking it in its cradle. He said that the weather was so bad he began the survey below decks on the Enterprise, hoping the weather would improve. He said that the rain had wet everything, making it difficult to distinguish between dampness from the rain and problem dampness. It is the latter which causes rot and deterioration in a wooden vessel.
[23] A 'tapping' hammer and a 'prodder' were the tools Mr Carey used to survey the Enterprise. It is agreed that the plaintiff accompanied Mr Carey during most, but not all, the survey, moving around the vessel with him, both below decks and then outside. It is also agreed that, as the two men went over the vessel together, Mr Carey gave the plaintiff oral advice about the condition of the Enterprise and the defects he found.
[24] In evidence Mr Carey said that it was unusual for him to be accompanied during a survey in this way by a prospective purchaser. The norm was for him to complete the survey on his own and then submit a written survey report to the prospective purchaser. Mr Carey commented that having someone constantly talking to you and asking questions "makes it quite difficult" to concentrate on the task at hand.
[25] Having completed his internal survey, Mr Carey moved outside. Although the rain had stopped, the wind had not. He used a trestle and ladder for the external survey. Having completed an area of the hull, he needed to climb down the ladder, move the trestle to the next area, climb back on to the trestle and repeat that process as he moved around the hull.
[26] Mr and Mrs Acker arrived while Mr Carey was surveying the exterior of the Enterprise. Mr Acker accompanied Mr Carey during part of his external survey. Mr Carey's evidence was that Mrs Acker stayed in the Acker's car, but later in the day the plaintiff and Mr Acker were having discussions over at the car. Mr Carey was not party to those discussions. He was not asked by the plaintiff and Mr Acker to comment on the asking price for, or the value of, the Enterprise, or on the cost of repairs.
[27] Mr Carey said he got the impression that the defects in the vessel he identified were being used by the plaintiff to drive down the purchase price, but that there appeared to be no doubt the plaintiff was going to buy the Enterprise. He said that it did not seem to him that the defects he pointed out to the plaintiff concerned him, despite the fact that repairing them all was going to cost him money.
[28] Following the internal and external surveys of the Enterprise, the plaintiff and his two crew gave evidence that there were further discussions with Mr Carey on board the Enterprise in the saloon. They said that these discussions continued over dinner in an hotel that evening. However, there is a dispute as to what that advice Mr Carey gave the plaintiff, in particular as to whether he gave any estimate(s) of repair costs, and if so what that estimate(s) was. I will revert to that when making findings of fact.
[29] Mr Carey stayed overnight in the Union Hotel in Greymouth which the plaintiff had booked for him. The plaintiff and his crew slept on board the Enterprise. The plaintiff's written instructions to Mr Carey (set out in [16] above), indicated that Mr Carey was to take two days to complete the survey if necessary. Mr Carey's evidence was that he returned to the Enterprise at 9 a.m. the following morning, 20 May. The hatches were closed and he could not raise anybody by calling out. He said "in the end I figured that (the plaintiff) didn't want me for anything more". He therefore returned by car to Blenheim.
[30] On 21 May 2003 the plaintiff purchased the Enterprise from Mr and Mrs Acker, signing the following contract with them:
SALE AGREEMENT
ENTERPRISE III
65' KETCH
Receive from Mr Chris Meiser the sum of three hundred thousand dollars ($300,000-00) being part payment for the vessel as inspected.
Also received as part payment:
One Mannlicher carbine rifle No. 1956 Cal 30-06 and scope.
Balance of ($45,000-00) fourty five thousand dollars, less cost of repairs to hull planking top, middle portside, to be payable on or before 31-7-03.
Yet to be received.
One Husquvarna rifle Cal .270 and scope, also as part payment to be forwarded as soon as possible.
Account for diesel fuel $384-24.
Signed Seller (J Acker)
Buyer (C Meister)21-5-03
[31] The plaintiff and his two crew, then readied the Enterprise for sea. After waiting out some stormy weather, on the Harbour Master's advice, they then set sail from Greymouth bound for Tauranga. Shortly after clearing the Greymouth bar, they had engine problems which persisted for some time until the plaintiff was able to effect a temporary repair. Over the first three to four days they encountered two frontal systems and resulting stormy seas off the northern west coast of the South Island, and in the northern reaches of Cook Strait.
[32] Knowing now - but not at the time of that voyage - of the true state of disrepair of the Enterprise, the plaintiff says that he and his crew were lucky the Enterprise did not break apart in the stormy conditions they encountered and sink. He attributes their safe passage to the skill of his crew, both experienced blue water sailors.
[33] After five-six days at sea, the Enterprise put in at New Plymouth, from where one crew member returned home. The plaintiff and remaining crew member then completed their voyage up the west coast of the North Island, around North Cape, and down the east coast to Tauranga. This part of the voyage was uneventful, the Enterprise sailing well in good conditions.
[34] On 26 May, I think while the Enterprise was voyaging back to Tauranga, Mr Carey completed and sent to the plaintiff a written survey report on the Enterprise. This report is on Carey's Boatyard letterhead, on which is printed "Proprietors: Jim Carey". Mr Carey began his report by setting out the vessel's measurements, builder and designer. He then reported on the Enterprise, area by area (19 in total), commenting upon the conditions of the vessel and any defects he had found. His report concluded:
In general the vessel is in good shape with only three areas of rot that need attention. The main area is top of hull portside, cabin top roof, wheel house coamings and partition ply inside cupboard.
When these areas have been attended to, I would have no hesitation in recommending the vessel for insurance purposes.
[35] With this report Mr Carey enclosed Carey's Boatyard's GST invoice to the plaintiff for the survey fee of $450 and travelling and accommodation expenses of $600, a total of $1,181.25 GST inclusive. This was exactly the total fee and expenses he had earlier indicated. Stapled to that account was a receipt made out to the plaintiff and dated 22 May. Mr Carey's evidence was that the plaintiff had paid him, he thinks at the hotel, on the evening of 19 May.
[36] Once back at Tauranga, the plaintiff engaged Mr Donald Mattson of Hutcheson Boat Builders (1993) Ltd to repair the defects in the Enterprise found by Mr Carey upon survey. The most significant of these defects was rot in the portside planking of the hull. Once Mr Mattson began removing the rotten timbers, he found the rot was far more extensive than the plaintiff says Mr Carey had advised, and it was going to cost far more to repair than the $7-12,000 which the plaintiff and both his crew say was the estimate Mr Carey had given the plaintiff on 19 May.
[37] Additional defects were also discovered, namely in the bow/stem area portside, in the transom (or stern) of the vessel and under the nameplates (trail boards) near the bow. In addition, removal of the cupboard in the starboard water closet (toilet) revealed rot, not only in the plywood on the aft side of the bulkhead against which the cupboard was fitted, but in the structural timbers, including the gunwale, in the side of the vessel against which the cupboard was also fitted.
[38] The cost of repairing these defects became a matter of disagreement between the plaintiff and Mr and Mrs Acker, in relation to payment of the $45,000 balance of the purchase price, which had been retained partly against the cost of repairs "to the hull planking top, middle portside, to be payable on or before 31.7.03".
[39] On 30 July 2003 Mr Carey travelled to Tauranga to inspect the repair work and meet with the plaintiff and Mr Mattson. According to the plaintiff, the purpose of this visit was to give the plaintiff and Mr and Mrs Acker an estimate of the cost of the repairs required to the portside hull of the Enterprise, so that payment under the purchase agreement could be finalised. In a letter Mr Acker sent the plaintiff's solicitors on 18 November 2004 he stated:
...
There was a verbal agreement (witnessed) Mr Meister knows exactly what that was. The reason for Mr Meister retaining the $45,000.00 was that he did not have the funds as he was waiting for his house sale to be completed. He was short of funds to the extent that I had to pay for and fill the boat with fuel so that he could leave port.
...
Never at any stage did I agree to or sanction Mr Carey's visit to review the repairs to the vessel. His visit was of no interest or concern to me.
[40] Although I am not concerned with any dispute between the plaintiff and the Ackers, what Mr Acker stated in that letter is relevant to the disputed issue of what, if any, estimate of the cost of repairs Mr Carey gave on 19 May (see [**] below).
[41] I will need to resolve a disagreement as to the estimate given that day of the cost of completing repairs to the portside hull. The plaintiff's evidence is that Mr Mattson gave an estimate of $30,000 with which Mr Carey concurred. In his evidence Mr Mattson agreed that, by the time of that meeting, his estimate had gone up to $30,000. Mr Carey's evidence was that Mr Mattson gave an estimate of $15- 18,000 to complete the portside hull repairs.
[42] Relying, he says, on the agreed $30,000 estimate, the plaintiff on 4 August 2003 paid the Ackers a further $15,000 of the purchase price i.e. the $45,000 retention less the $30,000 estimated cost of repairs to the portside hull.
[43] Mr Carey made a second visit to Hutchesons Boatyard in Tauranga on 7 February 2004 to check on progress in repairing the Enterprise. It is not entirely clear to me why he went, although he explained in evidence that the repairs seemed to be taking a very long time. Mr Carey said that he did not see the plaintiff on that second visit to Tauranga, but did speak to Mr Mattson, who told Mr Carey that the plaintiff was intending to sue Mr Carey. The plaintiff's evidence was that he, Mr Carey and Mr Mattson again met on this second visit. The plaintiff says that Mr Carey commented that he would get in touch with his insurance company, but he did not again contact the plaintiff. The plaintiff said that when he rang Mr Carey again, Mr Carey said that he did not think he was at fault or liable.
[44] At trial the plaintiff said that about a week's work is all that is required before the Enterprise is ready to be put to work. His evidence was that he intends using the Enterprise for single day or overnight charters, using his skills as a trained chef to offer his guests fine food as well as enjoyable sailing.
[45] The plaintiff concedes that he has undertaken a complete refurbishment and refit of the Enterprise. In addition to repairing completely all the defects in the hull and repainting it entirely, the wheel house has been rebuilt to incorporate a hatchway which enables removal of the Enterprise's Perkins marine diesel engine. During the refurbishment, that engine was removed and completely overhauled. Extensive repairs and improvements below deck have also been carried out, including installation of a new toilet system and new tanks. The plaintiff accepted that he has spent approximately $199,000 on repairing and refurbishing the Enterprise, which is now insured for $650,000 on an indemnity rather than replacement basis.
Which is the correct defendant?
[46] Establishing this is a necessary prerequisite to consideration of the plaintiff's various claims. The plaintiff submitted that his contract was with Mr Carey personally, and thus it was Mr Carey who owed him a tortious duty of care. The basis for this submission was that the plaintiff approached Mr Carey personally, sent his written instruction (set out in [16] above) to Mr Carey personally, that Mr Carey completed the survey personally, and that the plaintiff paid Mr Carey, all before he became aware of the existence of the second defendant. Obviously, the plaintiff would have become aware of the second defendant, at the latest, upon receipt of the written survey report dated 26 May ([34] above).
[47] In my view, the plaintiff's contract was with the second defendant, and his legal remedy(ies), if any, is only against the second defendant. My reasons for so holding are:
a) I do not consider the circumstances relied upon by the plaintiff to impose personal liability on Mr Carey, are sufficient to achieve that, as a matter of law. The leading authority in this area is, of course, the Court of Appeal's decision in Trevor Ivory Ltd v Anderson [1992] 2 NZLR 517. Applying what the Court of Appeal said to this case, Mr Carey had, upon incorporating the second defendant in 1992, made it clear to all the world that limited liability was intended. That aim would be undermined by imposing personal liability on him. I do not consider that any of the circumstances relied upon by the plaintiff make it just and reasonable to impose personal liability on him. They are all consistent with the operation of a small family company.
b) Mr Carey's evidence was that he answered the phone "Carey's Boatyard". The plaintiff accepted that, although it was Mr Carey who was recommended to him, he knew that Carey's Boatyard "was pretty much a family business". As Mr Clark submitted, simply dealing with the principal of a company is not on its own sufficient to render the principal personally liable. Something more, "something special", is required to have that result. Were it otherwise, personal liability would arise from countless dealings in New Zealand between one or two man companies and their customers/clients.
c) As I have said, upon receipt by the plaintiff of the survey report dated 26 May 2003, at latest, the plaintiff became aware that Mr Carey was acting as proprietor of Carey's Boatyard. Printed at the bottom of each sheet of the Carey's Boatyard letterhead on which the survey report was printed was "Proprietors: Jim Carey". Further, it was Carey's Boatyard that issued to the plaintiff the receipted account dated 22 May enclosed with that survey report. Yet the plaintiff did not object, upon or following receipt of those documents, that he was dealing with Mr Carey personally.
d) Nor did the plaintiff take that objection, or make that point, at the time of the 30 July 2003 meeting in Tauranga. The plaintiff met half the fee (his share was $550 GST inclusive) for Mr Carey to travel to Tauranga for that meeting and to assess the repairs to the Enterprise which were in progress. The account was rendered by the second defendant.
[48] I hold that the plaintiff's legal recourse, whether in contract, tort or under the Fair Trading Act, lies only against the second defendant. Accordingly, I dismiss all four causes of action against the first defendant and, in that respect, give judgment for the first defendant against the plaintiff.
Contract or tort
[49] The plaintiff sues Carey's Boatyard alternatively in contract or tort. The plaintiff claims exemplary damages which are generally not recoverable for breach of contract: Paper Reclaim Ltd v Aotearoa International Ltd CA7O/04 14 March 2006. He also claims general damages for anxiety and inconvenience. The limitation on the award of such damages in the commercial sphere was, perhaps, originally restricted to breach of a "commercial" contract. See, for example, Innes v Ewing [1989] 1 NZLR 598 at 630 per Eichelbaum CJ. It is now recognised that a concurrent and co-extensive tortious duty of care will generally be imposed if there is a contract between the parties: Frost & Sutcliffe v Tuiara [2004] 1 NZLR 782 (CA) at [17] that limitation applies also in negligence. Given that recognition, the general damages limitation applies also in negligence. That is a point made by Mr Clark, citing Todd The Law of Torts in New Zealand (3ed 2001) at 1184, para 25.3.
[50] Arguably, the requirements of causation can be different in contract and tort, although I cannot see that that would be the case here. Nor do I think the tortious requirement that the damages claimed be reasonably foreseeable at the time of the carelessness causes any difficulties here.
[51] For the defendants, Mr Clark conceded that the second defendant owed the plaintiff a duty to observe the standards of a prudent surveyor in the circumstances. I take that to be a concession of the concurrent and co-extensive duty in contract and tort referred to in 0 {49?} above.
[52] As it potentially serves the plaintiff better to sue in tort, I focus this judgment on his cause of action in negligence. I proceed on the basis that, in completing its contract to survey the Enterprise, Carey's Boatyard owed the plaintiff a duty to exercise reasonable care and skill in the circumstances.
The survey generally
[53] Before dealing with the plaintiff's heads of claim, I make some observations and findings about the survey generally.
[54] First, the plaintiff's instructions. In his evidence, the plaintiff sought to suggest that his instructions to Mr Carey on the telephone on 8 May were more extensive than his written instruction of 9 May. I hold firmly against the plaintiff on that score. Mr Carey asked the plaintiff to put his instructions in writing and the plaintiff did that. It is the plaintiff's written instructions of 9 May to Mr Carey which must be regarded as definitive.
[55] Several points about those written instructions are noteworthy. First, Mr Carey was clearly instructed that this was a pre-purchase survey. Giving evidence for the plaintiff, Mr Parkinson stressed the "big difference" between a pre-purchase survey and a routine survey for a commercial vessel. Ascertaining the extent of any rot or other deterioration, or damage, is very important in the former because it is the only way of estimating repair costs, and avoiding a prospective purchaser paying too much for a vessel. Mr Parkinson said it was less important in the case of a routine survey, because rot or damage has to be repaired before the vessel can obtain a survey certificate to operate commercially. Although that latter comment appears somewhat to beg the question (i.e. no discovery, no repair), I need not comment further, because this was a pre-purchase survey.
[56] Second, the written instruction asked for:
a) Inspection of the hull, framework and deck as "the priority".
b) A "visual inspection" of rigging, engineering and electrical system.
c) "A check" on sails.
All the items in issue here are in the "priority" category. I do not except from that the ceiling beam in the down forward bunkroom, as it was structural. Nor do I except the rot in the trail board, because it potentially affected the hull.
[57] Third, the instruction indicated that Mr Carey could, if necessary, spend a second day to finish the survey. While the instruction indicated a willingness to pay "any extra costs for food and accommodation" if a second day was necessary, it left unclear whether the "estimated cost" requested was to include or exclude a second day. As this did not feature in argument, I simply note the point.
[58] Fourth, the instruction indicated that, if it was "OK" with Mr Carey, the plaintiff wanted "to spend the time on board when you are surveying and get your expert advice if there is any major issues". I revert in [58] below to "any major issues". In [24] above I have referred to Mr Carey's evidence that it was both unusual and distracting that the plaintiff accompanied him while he was surveying the Enterprise. But Mr Carey clearly accepted that course, and so his complaints on that score, if that is what they are, come to nothing.
[59] Fifth, the instruction indicated that the plaintiff wanted to get Mr Carey's expert advice if there are "any major issues". Mr Clark is surely correct in submitting that this was a recognition that the Enterprise was a 28 year old wooden vessel which was in a somewhat neglected condition. The plaintiff was aware of its condition, because he had already inspected the Enterprise closely himself and his wife had looked over it as well. In short, I find that the plaintiff was looking to Mr Carey to advise him about any major defects or problems with the Enterprise, but not to point up every minor problem. The judgment which follows reflects that.
[60] I held that the plaintiff's instructions to Mr Carey required him to complete a thorough practical examination of the areas of the Enterprise identified as priorities. By "practical", I adopt Mr Parkinson's evidence that the examination, as well as being visual, was to include tapping the hull planking and framework in order to detect, and try to determine the extent of, any rot or other deterioration. Use of a knife or screwdriver or similar instrument to confirm the "tapping" findings was also, I find, standard survey practice. Mr Carey said he did this, using a tapping hammer and what he described as a "prodder".
[61] Mr Parkinson gave evidence that Mr Carey ought to have taken core samples with a drill in a further effort to determine the extent of the rot he found, particularly in the portside of the hull. He said that this was common and accepted practice in New Zealand and overseas, stressing that such core samples are only taken from areas that are going to have to be repaired anyway. Although T found Mr Parkinson to be a careful witness who had prepared an impressively detailed and well illustrated report, Mr Parkinson accepted that he was not an approved MSA (Maritime Safety Authority) surveyor. His evidence was that he had carried out "a couple of dozen" pre-purchase surveys himself. He accepted that his real expertise was as a boat builder, not a surveyor. However, Captain Roberts agreed with Mr Parkinson that drilling to take core samples would have been appropriate, particularly as Mr Carey must have suspected rot in the middle skin of the triple skin mahogany hull planking of the Enterprise. I was impressed with Captain Roberts as an expert witness, and with her direct but balanced evidence. She is a qualified Marine Surveyor, in addition to holding a New Zealand Masters Certificate, Foreign Going. In terms of sailing vessels, Captain Roberts also holds a Square Rig Certificate from the Nautical Institute of London, and has years of experience at sea, including on sailing ships.
[62] In evidence, Mr Carey said that when a pre-purchase survey shows problems the extent of which cannot be determined by visual/practical examination - as this one did - the prospective purchaser normally either:
a) Obtains the owner's permission to carry out further investigation. Here, that would have included removal of the outer planking on the portside, which would have required the Enterprise to be taken to a boat builder's yard; or
b) Requires the vendor to make the necessary repairs before the sale is completed.
Mr Carey said that sometimes there is a little of both. He deposed that, in his 40 years experience, it is rare for a boat of this size to be sold without the purchaser knowing the full extent of the repairs required and putting aside the money necessary to complete them. Mr Carey said that he gained the impression from the plaintiff that the fact that the Enterprise needed work was a real plus. It meant the plaintiff had the opportunity to purchase the Enterprise at a cheaper price, and then use his own labour to bring it up to scratch. Mr Carey pointed out that the vessel was listed with marine brokers at Picton with an asking price of $435,000, as against the $350,000 the plaintiff agreed to pay the Ackers for it.
[63] Mr Carey's evidence was that he and the plaintiff agreed that Mr Carey would complete a written report for the plaintiff, in particular because the plaintiff needed it for insurance purposes. He pointed out that this report recommended the Enterprise "for insurance purposes" when rot in the top of hull portside (identified as "the main area"), cabin top roof, wheel house coamings and partition ply inside cupboard had been attended to. Mr Carey agreed that his written report confirmed the areas he had discussed verbally with the plaintiff, except the transom. He claimed that he had not mentioned that in his report because it was so obvious and because the plaintiff was well aware of it. I revert to the transom in [109] and following below.
[64] Mr Carey's written report does not give estimates of the cost of repairing the defects it identifies. The plaintiff in evidence explained that he did not ask Mr Carey to include those in his report because he did not think the cost of repairs would be anything like the ultimate costs, and because he still had full trust in Mr Carey at the time.
[65] Mr Carey said that his $450 survey fee allowed 4-8 hours of his time. Travel and accommodation totalling $600 was an additional charge. He indicated that his charge for a full or comprehensive survey of the Enterprise would have been in the $2,000-$3,000 range plus GST and travel.
[66] Captain Roberts said that a pre-purchase survey of the Enterprise would require "considerably more time than $450 could cover". She said that her fee for an unrestricted pre-purchase survey would have been $2,000 plus travel and expenses.
[67] There was a good deal of evidence about the second day of survey referred to by the plaintiff in his written instruction. The plaintiff's evidence was that Mr Carey had told him he would return the following day, although he had completed the main part of his survey and was quite happy with what he had seen. There was nothing major he wanted to investigate further. The plaintiff said that he did not ask Mr Carey to look any further at the Enterprise: he had basically got the all clear/all OK from Mr Carey on the evening of 19 May over dinner at the hotel.
[68] I accept Mr Carey's evidence that he went back to the Enterprise at about 9 a.m. on Tuesday 20 May, found the hatches closed and was unable to raise anybody by shouting from the ground. In evidence Mr Carey said that he had returned to the vessel to continue his work, "I did not believe that I had finished. (The plaintiff) had previously asked for me to spend a second day of inspection". When he could not raise anyone, he left. He said "I wasn't going to get wet a second time, I got drowned the first day, I carried on home".
[69] I accept the plaintiff's evidence on this aspect. I find that Mr Carey told the plaintiff at the hotel over dinner on the evening of 19 May that he had completed his survey and would confirm his findings in a written report to the plaintiffs. Although I accept that Mr Carey went back to the Enterprise the following morning, his action in leaving to drive home when he could not raise anyone is consistent with his having finished the job. If he had not, I am sure Mr Carey would have waited, or climbed on board and raised the plaintiff and his crew, in order to complete his survey. As Mr Smith submitted, this "second day of inspection" issue is essentially a red herring.
[70] Commenting generally on Mr Carey's report, Mr Parkinson disagreed with Mr Carey's conclusion that the Enterprise "is in good shape with only three areas of rot that need attention ... (Mr Carey then specifying four areas)". Mr Parkinson deposed:
In my opinion the vessel was not in 'good shape' because it had several large areas of rot in structurally significant areas and also the full extent of the rot had not been discovered.
[71] Mr Parkinson also considered that Mr Carey's conclusion that the Enterprise was in seaworthy condition contradicted his opinion that it needed work on the three (in fact four) areas he identified before he could recommend it for insurance purposes.
[72] Captain Roberts generally agreed with Mr Parkinson that Mr Carey's survey and report "appear to be inadequate". I have already referred to Captain Roberts' evidence that her $2,000 fee for an unrestricted pre-purchase survey represented the amount of inspection time that was properly required, as opposed to the $450 Mr Carey charged.
[73] I can deal quite shortly with the final, general point about Mr Carey's survey. This is Mr Carey's claim that he enclosed a written disclaimer of all liability for latent defects with his written report. I accept the plaintiff's evidence that he did not. That conclusion is supported by the fact that the copy of the disclaimer discovered by Mr Carey is signed by him. I think he meant to send that signed copy, but by mistake retained it. Quite apart from that, Mr Smith's submission that that disclaimer would have come too late is a sound one. No doubt recognising the force of those points, Mr Clark did not submit that there was an effective disclaimer. I find there was not.
The plaintiff's heads of claim
[74] It is convenient to take each of the plaintiff's claims in turn, summarising the evidence relating to it, making necessary findings of fact, deciding whether a lack of reasonable skill and care on Mr Carey's part caused the relevant losses, and assessing what those losses are. In short, I will deal with liability; causation and quantum, and in that order. I will deal first with the various heads of special damage.
Rot in portside of hull
[75] Mr Carey's written report about the hull of the Enterprise was:
Hull Under Water: Some wear in stern gland, not enough to warrant replacing yet. Bottom Pintal bearing - quite a bit of movement here would sugest when next rudder is removed that the bottom pintal bearing is replaced. No movement found in lead to hull joint. Generally all underwater areas in good condition.
Hull Above Water Line: Generally in good condition. One area of deteriation of hull planking found in port side in dark blue section - starting just aft of last fwd port hole, and approx 1.5 metre line. Went inside and found inner skin was also affected but not quite to the same extent. Carefull examination and removal of planking is required here because of the triple skin construction. The frames did not appear to be affected.
[76] Mr Carey found an area of deterioration on the portside of the hull starting just behind the mast of the forward portholes at approximately the 1.5m line. I am in no doubt that, having found this, Mr Carey failed to exercise reasonable care and skill in determining its extent.
[77] First, he did not take core samples. Both Mr Parkinson and Captain Roberts said he ought to have done that. That is primarily because this was a 28 year old triple skin mahogany vessel. It is well known that some mahoganies are susceptible to rot. The triple skin construction meant that any rot was possibly more extensive on the inaccessible middle planking. I reject Mr Carey's response that he did not have permission to take core samples from the hull planking. In the circumstances, he needed to ask for that permission. He did not do so. If he had sought permission, I have little doubt that it would have been granted. As Mr Parkinson pointed out, the sampling would move out from the rotten area, and thus most of the sample planking would need to be repaired anyway. And the owners, Mr and Mrs Acker, were on hand during the latter part of the afternoon, to give permission.
[78] Mr Carey said that, having found the deterioration on the portside of the hull, he went inside the Enterprise and found the deterioration also evident on the inside, but to a lesser extent. He said that he could not poke a hole through the hull planking, so its integrity was not compromised. I find that, in making that internal inspection and already alerted to the presence of rot in the hull planking, Mr Carey missed obvious rot in the lower face of the gunwale. That rot is clearly evident in the photographs in evidence (the lower photograph on p82 of the common bundle of documents). It shows the rot is clearly evident at the left hand end of the photograph, above the white painted plywood blocking bolted onto the bulkhead.
[79] When it was put to Mr Carey in cross-examination that prodding in the lower face of the gunwale in that area would have confirmed the rot visible he answered:
I can't say if I would have prodded in that particular area or not and if my prodder would have gone into that timber or not.
(Notes of evidence 68/6-8)
[80] I also find that Mr Carey did, during the survey, give the plaintiff a $7-12,000 estimate as the cost of repairing this rot in the portside hull. I accept the plaintiff's evidence on that point. It is confirmed by both crew members who say they were present when Mr Carey gave that estimate. I found both the crew members, Messrs Torr and Cook, to be straightforward and credible witnesses who had no axe to grind in this matter.
[81] It is a matter of fact that the plaintiff effectively withheld $45,000 of the agreed $345,000 purchase price for the Enterprise. I find that he did not do that as an estimate of the likely cost of repairs. Rather, he did it because he only had $300,000 in cash available. He had just sold his house and was waiting for the final payment to come through from that sale. The Ackers were happy to leave $45,000 unpaid, subject to finalisation of the cost of repairing the portside hull. That was the plaintiff's evidence and it is supported by Mr Acker's account given in the documentary evidence.
[82] I find that at the meeting in Tauranga on 30 July Mr Carey agreed that $30,000 was an accurate estimate of the likely cost of completing repairs to the portside of the hull. The most reliable evidence on that is the payment the plaintiff subsequently made to which I have referred in [42] above. On 4 August he paid the Ackers a further $15,000, leaving $30,000 still retained against the cost of repairing the portside hull.
[83] Whether the $30,000 estimate was that of Mr Mattson, concurred in by Mr Carey, or vice versa, matters not. I find that Mr Carey agreed with it. And I also find that the plaintiff and the Ackers relied on it.
[84] I hold that that estimate was not a negligent one. It was concurred in by Messrs Mattson and Carey with the benefit of inspecting the Enterprise with most of the portside of the hull opened up. The extent to which the rotting hull planking had been removed is clearly recorded in photographs taken at the time.
[85] The position is that subsequently, as Hutcheson Boat Builders were preparing the hull for repainting, they discovered further rot. My understanding is that this discovery was made while stripping the old paint off the hull planking, preparatory to repainting the entire hull, which the extent of hull repairs ultimately necessitated. If this further rot was not evident to Hutcheson Boat Builders until they started stripping off the paint, then I am not prepared to hold that Mr Carey was careless not to detect it on 30 July 2003. And if proper care would not have led to its detection on 30 July 2003, then it certainly would not have led to its detection during the survey at Greymouth on 19 May 2003. This head of claim accordingly fails.
[86] For the defendants, Mr Clark had a further point that the plaintiff, in February 2006, released the Ackers from further liability in relation to the portside hull. Mr Clark submitted that that release must prevent the plaintiff recovering any sum from the second defendant. I do not quite follow that submission. If the Ackers and the defendants were joint tortfeasors, it would have a foundation. But they are not. In any event, I do not need to rule on that submission, because the plaintiff's claim under this head fails anyway.
Rot in starboard side of hull (starboard water closet)
[87] Mr Carey's written report about this area was:
W/C To Starboard: The main bulkhead fwd wall is double lined. There is a leak inside cupboard which has caused the plywood lining on the aft side of the bulkhead to delaminate. The cupboard would have to be removed for effective repairs to be carried out.
[88] The plaintiff's evidence was that this accurately records what Mr Carey reported to him orally: the cupboard would have to be removed to repair the delaminated lining. The plaintiff said that that is why he did not ask Mr Carey to remove the cupboard.
[89] Mr Carey's evidence was that a leak was evident inside the cupboard which had caused the lining to delaminate. He said he pointed this out to the plaintiff, telling him that the extent of the problem could only be determined if the cupboard was removed. The plaintiff did not ask him to remove the cupboard.
[90] The photographs on p74 of the common bundle were put to Mr Carey in cross-examination. He accepted that staining running down the rib on the inside of the starboard hull is evident in these photographs. Mr Carey said that this did not necessarily indicate rot. Even if it did, he said that this staining was hidden by plywood lining on the hull side of the cupboard. He agreed that if he had been able to see that staining he would - or should - have been alerted to a potential rot problem. His point was that there was lining on the inside of the cupboard both on the hull side and at the back of the cupboard against the bulkhead, and that this lining was screening the telltale signs of rot.
[91] I find that Mr Carey is not correct in that assertion. As Mr Smith convincingly points out in his submissions (paragraph 73), the left hand or top photograph on p74 of the common bundle shows that the shelving in the cupboard was harder against the stained rib. Further, Mr Parkinson confirmed that there was no lining on the starboard side of the cupboard when he inspected it, and Mr Mattson's evidence was that the gunwale beam shown in photograph 74 was exposed and could have been tapped by someone surveying the vessel.
[92] Although he was not required to determine the source of the leaking into the cupboard (a point on which Captain Roberts disagreed with Mr Parkinson), the state of the deck outside this cupboard ought further to have alerted Mr Carey. For example, Mr Torr said that the deck at this point had a step in it, allowing water to pond there. He remembers it as being green and slimy at the time of the survey.
[93] Mr Parkinson drew attention to further evidence of a major and longstanding problem in this area. He said that closer examination of the engine room (on the other side of the bulkhead against which the cupboard was fitted) would have shown that rot had travelled through from the starboard water closet bulkhead into the engine room. Photographs of this area in the engine room show repairs to the underside of rotted decks and gunwales.
[94] Upon all this evidence, I find that proper examination inside the cupboard, including prodding of the exposed gunwale beam, would have revealed that there was extensive rot in the structural timbers in this area. That was Mr Parkinson's view, generally agreed with by Captain Roberts, although she pointed out that Mr Carey was only asked to carry out a visual inspection of the engine room.
[95] Under cross-examination the plaintiff said that Mr Carey had given him an oral estimate of $2,000 to repair the bulkhead, telling him that the rot had not gone into the gunwale or painted timbers. Based on Mr Carey's written report, Mr Mattson said he would have estimated the cost of repairs at $1,300-$1,600 plus GST, that estimate including the cost of repainting.
[96] The actual cost of repairs to this area was $12,112.75. Deducting from this the $2,000 estimate the plaintiff accepts Mr Carey gave him, this head of claim succeeds in the sum of $10,100 (I round off that figure).
Rot in bow/stem
[97] Mr Carey's written report states:
Anchor Locker/Stowage Area: Other than being very damp, the only defect found here was in the hatch lid itself - ply rotting from inside. No other defects were found in this area.
[98] Consistent with this, the plaintiff's evidence was that Mr Carey commented to him that the anchor locker was damp, but that it was nothing to worry about. The plaintiff said he asked Mr Carey if he wanted the anchor chain run out, and Mr Carey told him that was not necessary. The plaintiff said he also offered to take up the floor boards in the little workshop area next to the chain locker, but Mr Carey said he did not need that done.
[99] Mr Carey's evidence was the antithesis of this. Consistent with his report, he said he pointed out to the plaintiff the rot in the hatch lid. He then suggested to the plaintiff that the anchor chain be taken out so that he could inspect inside the locker. Mr Carey says the plaintiff did not want the anchor chain taken out. He says he did not push that with the plaintiff. He commented that the Enterprise would have had about 100m of anchor chain, and that it would not have been "a two minute job" to take the anchor chain out.
[100] For two reasons I prefer the plaintiff's evidence. First, I think it inherently unlikely that the plaintiff would have countermanded a suggestion by Mr Carey that the anchor chain be run out. Second, and supporting my finding that the plaintiff did not do this, is the evidence of Mr Carey himself. In his evidence in chief, in attempting to justify not finding the rot in the stem of the Enterprise, Mr Carey suggested that it was not reasonably possible to find it given the restraints of:
a) Not removing the anchor chain;
b) The rot being covered up by paint; and
c) The weather.
[101] Cross-examined about the first of these justifications, Mr Carey said:
The ship was moving on (the) cradle, probably estimate lOOm of half inch chain (weighing) in excess of half a ton, not very acceptable thing to do in those conditions.
(69/15-17)
When it was put to Mr Carey that he had said he wanted the chain run out he answered:
I wanted the chain to come out, believe you me, but it wasn't a wise thing to do because it was a very rough day.
(69/18-19)
Mr Carey then confirmed that the plaintiff had refused his suggestion to take the chain out. He said that the plaintiff "couldn't see the point of taking it out" (69/21).
[102] I have already commented that Mr Carey made quite a point about the weather in Greymouth that day. I regret to say that my conclusion is that Mr Carey simply did not want to go to the additional time and trouble of running the anchor chain out in the inclement weather prevailing.
[103] Captain Roberts, Mr Parkinson and Mr Mattson were unanimous in expressing the view that running the anchor chain out, enabling inspection of the chain locker, was good surveying practice. In attempting to justify his not doing that, Mr Carey is essentially agreeing with that evidence. I am in no doubt that sound surveying practice required Mr Carey to have the plaintiff and his crew run the anchor chain out, so that he could carry out a thorough examination of the chain locker.
[104] The next question is whether such examination would have revealed the rot which was in the hull planking at the bow or stem of the Enterprise. My finding is that it probably would. First, this rot had developed from the inside out. As it was revealed after the plaintiff had ground off the paint at the bow of the Enterprise, below the waterline, preparatory to repainting, the rot is shown in the two photographs at p79 of the common bundle. Captain Roberts expressed the opinion that this rot should have been picked up by a surveyor tapping the hull planking in this area. In fact, she even went as far as saying that this rot may have been discernible before the paint was ground off, due to a breakdown of the paint coating. The very evident dark area of rot in the top photograph on p69 of the common bundle indeed suggests that the rot was developed enough to have caused a breakdown in the paint.
[105] If the rot should have been picked up by external tapping of the hull planking and may even have been evident upon careful external examination, then it must surely have been very visible upon a careful examination of the chain locker area.
[106] Mr Parkinson expressed the view that this rot would have been visible upon internal examination if the chain had been removed. Mr Mattson said it "very possibly may have been picked up" by inspection of the anchor locker, the anchor chain having been run out. Captain Roberts did not actually express a view about that. However, her views as to the likelihood of detection by proper external examination strongly suggest that she was not in much doubt that internal examination would have detected this rot. That must be the case, because the rot had developed from the inside out.
[107] To summarise my findings under this head:
a) The plaintiff asked Mr Carey whether he would like the anchor chain run out. Mr Carey said that was not necessary.
b) Good surveying practice required Mr Carey to run the anchor chain out, and make a careful examination of the locker chain. That was particularly the case, given that Mr Carey had found rot in the hatch lid of the anchor chain locker.
c) Careful internal examination of the chain locker would probably, indeed almost certainly, have detected the rot which had developed from the inside out in the hull planking in the area of the bow/stem.
d) Careful visual examination and tapping of the hull from the outside may also have detected rot in the bow/stem area.
[108] It follows from these findings that Mr Carey was negligent in his survey of the bow/stem area.
[109] The cost of repairs to the bow/stem area cost $8,683. The plaintiff succeeds with his claim under this head to that amount.
Transom
[110] There is no mention in Mr Carey's written report of any rot in the transom (or stern) of the Enterprise.
[111] Mr Carey's evidence was that he pointed out to the plaintiff during the survey the area of rot in the transom above the porthole. This is the area shown in the two photographs on p63 of the common bundle, the top photograph being a 'close up' shot of the area shown in the lower photograph.
[112] Mr Carey accepted that he had not detected the area of rot subsequently picked up by Mr Mattson, when looking over the Enterprise while inspecting the Enterprise with the plaintiff while it was moored in the Sulphur Point Marina at Tauranga. Mr Mattson said he noticed a small discoloured area about the size of a 50 cent piece on the starboard side of the transom just in front of the stainless steel trim around the transom. Mr Mattson said this area of discoloration was visible from a distance of about 2-2'/2m. The plaintiff confirmed this evidence, recounting that Mr Mattson had said to him "You've got a problem there". The plaintiff said they could not tell by looking how far the rot had gone. This is the area of rot shown in the lower photograph on p69 of the common bundle. Mr Carey accepted that he had not detected that area of rot, and thus obviously had not pointed it out to the plaintiff.
[113] The plaintiff denied that Mr Carey had drawn to his attention during the survey any area of rot in the transom: "that is completely wrong". The plaintiff was supported in that by his crew, Messrs Torr and Cook, who both said that rot in the transom was not referred to by Mr Carey during the 'oral report' in the wheelhouse on board the Enterprise on the day of the survey. It is worth setting out the cross- examination of Mr Carey on these points:
Q. You didn't advise Mr Meister of the rotten transom area?
A. There were areas of transom that were seen from the ground and I tapped it out, I didn't, there was an area above the window I pointed out to Mr Meister on the transom, there were areas he said he knew he would have to investigate and I agreed, that was, I tapped the transom, and I pointed out areas I thought needed investigation and passed it on to him. Mr Meister and Mr Acker were on the ground sheltering from the wet under the boat, I was up in the wet on the trestle.
Q. The window you refer to can be seen in photograph 63, bottom, the transom there?
A. That's the area yes.
Q. Closeup of it above?
A. Correct.
Q. You say that you found this area and advised Mr Meister orally, its not in the report?
A. No.
Q. I put it to you your memory is incorrect?
A. (Witness shrugs.)
Q. The area further down on the starboard side, photograph 79, bottom, you didn't identify that area did you?
A. No.
Q. That's the area that Don Mattson says was visible from 2m?
A. That's the area he said was the size of a 50 cent piece.
(69/37-70/13)
[114] I find that Mr Carey did not detect and point out to the plaintiff any area of rot in the transom. I prefer the plaintiff's evidence about this, as it is confirmed by that of Messrs Torr and Cook. I have already recorded that I found both those two witnesses to be straightforward and reliable. But, placing this matter beyond any doubt, is the fact that Mr Carey did not in his written report refer to any area of rot in the transom. I reject his suggestion that this was because the plaintiff was well aware of it, and he therefore did not see a need to include it in his written report. That explanation makes no sense, in particular because the report was primarily for insurance purposes.
[115] If Mr Mattson could see the 50 cent piece sized area of rot on the starboard side of the transom from a distance of about 2m while the Enterprise was afloat in a marina, then Mr Carey certainly ought to have seen it upon survey. His evidence (which I have rejected) that he pointed out the area of rot above the window in the transom is effectively acceptance that he ought to have detected that area of rot. Captain Roberts' evidence that that area of rot would have been visible before any trim was removed puts that beyond doubt.
[116] There was also rot in the portside of the transom. Mr Mattson, who found this further rot after removing the stainless steel trim, said he did not think a surveyor would have picked up rot on the portside of the transom, because it was concealed behind the teak and stainless steel trims. This was a smaller area of rot, but in approximately the same position, though portside.
[117] I find that Mr Carey was careless in not detecting and pointing out the areas of rot above the window in the transom and on the starboard side.
[118] The cost of repairs to the transom was $16,069.64. I do not have a breakdown of the cost of these repairs, which excludes the cost of the repairs portside. I therefore have to make the best estimate I can. Given that the area of rot portside on the transom was smaller, I fix the cost of repairing the two areas of rot Mr Carey ought to have found at $10,000.
[119] Mr Clark made the point that the plaintiff did not, at the 30 July meeting, take issue with Mr Carey about these transom repairs. His point was that that was consistent with the plaintiff having prior knowledge of rot in the transom, having been advised by Mr Carey verbally during the survey. I have found that there was not such advice. Mr Clark's point therefore comes to nothing.
[120] Under this head I allow the plaintiff $10,000.
Rot in trail boards/nameplates
Rot in portside cabin (down forward bunkroom)
[121] Mr Clark submitted that these were both "modest" areas of rot, and that their detection by Mr Carey would not have made any difference to the plaintiff's acquisition of the Enterprise. In making this submission, I understood Mr Clark to be drawing a distinction between these "modest" areas of rot, and the request by the plaintiff in his written instruction to Mr Carey for expert advice "if there is any major issues".
Rot in portside cabin (down forward bunkroom)
[122] In respect of the beam in the forward cabin portside, I agree with Mr Clark's submission. The cost of repairing this beam was $1,203.75. It was not a major issue and, had it been pointed out to the plaintiff, I hold that it would not have altered either his decision to buy the Enterprise, or the terms on which he did so.
[123] Strictly, I need not therefore go into the detail of this item. I do so, albeit briefly, against the unlikely event that this matter goes further. I find that the plaintiff did draw to Mr Carey's attention a 'rusty' stain on the ceiling beam. I find that Mr Carey inspected and stated that there were no problems with the beam. I accept the evidence of Mr Parkinson, confirmed by that of Captain Roberts, that proper inspection would probably have detected the rot which was in this beam. The extent of that rot is shown in the photographs on pp 60-61 of the common bundle. I am alive to the fact that those photographs were taken after the head lining was removed, and that Mr Carey said that the head lining was concealing the rot. I do not accept that. Although I accept that prodding the lower surface of the beam would not have detected the rot in it (because two fresh laminations had been added to the beam), I find that prodding the side faces of the beam would have detected softness, and therefore the rot in the beam.
Rot in trail boards/nameplates
[124] Under the heading 'mast/rigging' Mr Carey's report stated:
A small area of rot found on top of nameplate portside at top of stem.
[125] Based on that report, Mr Mattson said he would have estimated the cost of repairs at $350-450 plus GST. He made the point that there was also rot beneath the starboard nameplate and in the planking beneath it, although not as extensive as on the portside.
[126] The plaintiff gave evidence that Mr Carey, consistent with his written report, had verbally reported that there was an indication of rot in the portside trail board. He said that Mr Carey indicated it was only a little bit of surface rot in the trail board, and did not tell him that the rot may have spread into the hull planking beneath, but that the extent of that rot could not be determined without removing the trail board.
[127] Mr Mattson said that he would have expected Mr Carey to suspect something more than he reported to the plaintiff, both verbally and in writing.
[128] Mr Parkinson expressed the view that Mr Carey's report "vastly understated" the problem: the trail board was about 50% rotten and the rot had spread into the planking beneath. There was a similar, though smaller, problem to starboard. Captain Roberts shared Mr Parkinson's opinion.
[129] Mr Carey said that he told the plaintiff that, without removing the portside trail board, he could not determine the full extent of the rot. He claimed that he had told the plaintiff that further investigation of the portside nameplate was required. He said "its in my verbal report" (69/24).
[130] I prefer the plaintiff's evidence as to what Mr Carey reported to him. The plaintiff's evidence is consistent with what is in Mr Carey's written report.
[131] I accept the evidence of Messrs Mattson and Parkinson, supported by Captain Roberts, that Mr Carey's report considerably understated the problem. I find that this was inadequate and careless surveying.
[132] The repairs to the trail boards were not a minor item. They cost $4,503.21.
[133] The evidence did not support a finding that Mr Carey was careless in not detecting the smaller rot problem beneath the nameplate to starboard. The evidence does not break down the cost of repairs, as between the nameplates portside and starboard. Again, I need to do the best I can to limit damages to repair of the problem portside. As that was the larger area of rot, I allow the plaintiff two-thirds of his claim, or $3,000.
Hard stand fees
[134] As formulated by Mr Smith, this claim was for the hard stand fees the plaintiff paid Bridge Marina Travel Lift Ltd at $619.73 per month GST inclusive, for "the 8 ¼ months additional time the repairs took".
[135] This item, along with the claims for loss of profits and general damages, yet to be dealt with, runs into a general difficulty for the plaintiff. That is, that he accepted in evidence that he had ultimately spent $199,000 on repairing and refurbishing the Enterprise. Not only are many of those repairs not in issue in this proceeding (for example, a complete rebuilding of the wheelhouse), but the refurbishing included the installation of entirely new equipment and the overhaul of the engine, which have nothing to do with the dispute between the parties. As I mentioned at [44] above, the plaintiff's evidence at trial was that the Enterprise was, finally, almost ready to be put to charter work. That situation renders this head of claim untenable. That is because the plaintiff cannot establish that it was the time taken to complete the repairs for which I have held the second defendant liable that caused the hard stand fees claimed to be incurred, as opposed to other repair and refurbishment work.
[136] This head of claim fails.
Plaintiff's own labour
[137] This claim, optimistic at best, runs into the difficulties I have just referred to in relation to hard stand fees. The evidentiary basis for the claim comprised:
a) Reliance on references in the report of Hutcheson Boat Builders, prepared by Mr Mattson and dated 14 October 2004 (common bundle pp 44-46) to the plaintiff working on the Enterprise.
b) The evidence the plaintiff gave, in particular in paragraphs 72-74 of his written statement.
[138] I have read, or in the case of the plaintiff's statement, reread that evidence. As Mr Clark submits, Mr Mattson's report records the plaintiff doing work which could only be described as refurbishment. For example, sanding and scraping off the anti-fouling and paint on the hull ready for epoxy coatings (p45).
[139] The plaintiff's evidence refers to his spending "all my spare time working on the Enterprise to save costs". The emphasis is mine, because it is incompatible with a claim founded on earnings lost by the plaintiff in his employment with the Port of Tauranga, as this head of claim appears to be.
[140] This head of claim falls far short of a proper standard of proof, and I dismiss it.
Loss of profits
[141] This claim also fails, and for much the same reasons as has the plaintiff's claim for hard stand fees and for his own labour. It, like those claims, is based on a period of 8 ¼ months "additional time the repairs took". Effectively, the plaintiff claimed the loss of chartering income for season, approximately November to March.
[142] As Mr Clark pointed out in his submission, the Enterprise is still not in survey for commercial use, which will be a prerequisite for charter. And the plaintiff in evidence indicated that his intention was to have the Enterprise surveyed and ready for charter work from October this year.
[143] I have already found that the additional time taken for the repairs in issue has not, to my satisfaction, been separated from the time taken to make other repairs and completely to refurbish the Enterprise. So, as a matter of causation, this head of claim fails. Even if causation was established, there is no proper proof of this claim. The plaintiff has never been in the charter business. The estimates he gave of what he hopes to earn are just that. The plaintiff accepted under cross-examination that his estimates of charter income had come from others. He said that he believed he would be able to occupy a niche in the market, particularly because of his catering skills (he is a qualified chef). Under cross-examination the plaintiff accepted that he had not done any chartering before, and that he would need 2000 hours to acquire his Coastal Skipper's Certificate (some 500 hours of coastal sailing he had done had lapsed as to its currency, because it was now outside the certificate time frame).
[144] This is not a claim for the loss of profits which can be proved to have been earned in the past, but which have been lost through something for which the second defendant is responsible. Finally, I ruled against a belated attempt by the plaintiff to call accounting evidence. The attempt by the plaintiff, who has no accountancy qualifications, to fill that gap with evidence of his own, drawn together as best he could by Mr Smith in an attachment to his submissions, falls short of proper proof.
[145] It is for those reasons that this head of claim fails.
General damages for stress and inconvenience
[146] As I understand it, the plaintiff and his wife, Rosemarie, had sold their house with the intention of living on board the Enterprise. The sale of the house, and the fact that the sale proceeds were the source of the remainder of the purchase price, is referred to in [79] above.
[147] Immediately, the difficulties I have referred to in dealing with the previous three heads of claim arise. Repairs not in issue were to be undertaken. Refurbishment was undertaken, eventually a total refurbishment of the Enterprise. I do not question that living on board the Enterprise while all this was going on caused stress, discomfort and inconvenience to the plaintiff, his wife and their two children. But the plaintiff has altogether failed to establish that fault on the second defendant's part caused this, as opposed to repairs and refurbishment which have nothing to do with the second defendant. This claim fails at the causation stage.
[148] Accordingly, I need not consider quantum. I merely comment that I have already pointed out that general damages for breach of a commercial contract such as this was are generally awarded in only modest sums. In his submissions, Mr Smith provided me with a $15,000-$20,000 range of awards in roughly comparable cases. The $25,000 claimed by the plaintiff is beyond that range. Even had I got to quantum, I would not have put the plaintiff's circumstances in the same category as those of the plaintiffs in Rowlands v Collow [1992] 1 NZLR 178 or Stevenson Precast Systems Ltd v Kelland HC AK CP303-SD01 9 August 2001.
[149] I decline to award the plaintiff any general damages.
Exemplary damages
[150] The plaintiff seeks $20,000 exemplary damages. This claim aims to punish Mr Carey for reporting to the plaintiff that the Enterprise was basically seaworthy, knowing that the plaintiff and his crew intended to sail the Enterprise from Greymouth to Tauranga.
[151] Mr Smith referred to the Court of Appeal's decision in Bottrill v A [2001] 3 NZLR 622, as the leading decision on exemplary damages. He drew from the headnote which states:
Exemplary damages could only be awarded for negligence if the defendant was subjectively aware of the risk of conduct and acted deliberately in reckless disregard of the result. Gross negligence was not sufficient. ...
[152] As I understand this claim, it is effectively that Mr Carey allowed the plaintiff and his crew to put to sea in a vessel which he knew was unseaworthy. Reliance is particularly placed on the evidence of Mr Parkinson that the rot in the portside of the hull extended to the planking to which the chain plates were secured. Those chain plates anchor the rigging of the vessel. Had the chain plates ripped out, the Enterprise would have been demasted. Worse, it could have taken on sufficient water through the hole left in the decking to sink, risking the lives of the plaintiff and his crew. I should mention that, although ultimately she agreed the rot was so extensive that the chain plates could have pulled out, Captain Roberts regarded the scenario of the Enterprise sinking with loss of life as an extreme one.
[153] I am unable to reconcile this claim with the plaintiff's claim, which has succeeded, that Mr Carey negligently failed to determine the extent of the rot in the hull portside, and in particular that it had spread into the gunwale. Although I have found Mr Carey to have been negligent in aspects of his survey, I do not think he was subjectively aware of the risk of the Enterprise demasting as a result of the portside chain plates pulling out. Whatever else might be said about Mr Carey, I do not think he was or is the sort of person who would act deliberately in reckless disregard of a consequence like that. Boats, boat building, and the sea are his livelihood. If anything, his own interests were the antithesis of recklessly allowing the plaintiff and his crew to sail away to Tauranga. If he had suggested that hull repairs were appropriate before the Enterprise made the voyage back to Tauranga, it may well have been that Carey's Boatyard was selected to undertake those repairs. There was no evidence as to the availability of boat building services in Greymouth, but my understanding is that the nearest ports providing them were Nelson and Picton.
[154] Exemplary damages are awarded to punish a defendant, not to compensate a plaintiff. Although, in law, it is strictly an irrelevant comment, I feel constrained to observe that the plaintiff and his crew were oblivious to the risk of the chain plates pulling out. It is not as if the risks of which the plaintiff claims Mr Carey was aware came to pass, with dreadful consequences for the plaintiff and his crew. The chain plates did not pull out. The Enterprise was not dismasted. It did not sink. It made the voyage to Tauranga safely, albeit for the first five days through stormy seas.
[155] Further, and again as Mr Clark submitted, the primary problem that the plaintiff and his crew encountered on the voyage was nothing to do with the state of the portside hull. The problem was with the Enterprise's Perkins diesel engine. Not long after the Enterprise had cleared the Greymouth bar and headed out to sea, the engine failed. It continued to give problems, overheating, because a belt was slipping. Presumably, this belt was driving the pump which circulated the water cooling the engine.
[156] I think Mr Clark was entitled to submit that it is somewhat extraordinary that the plaintiff put to sea without having the engine checked over.
[157] The evidence also indicated that the plaintiff and his crew were using, for navigation, a GPS device unchecked as to its accuracy. Fortunately, this GPS was reading accurately. But the point is that the plaintiff, who was skipper and therefore responsible for the safety of the Enterprise and its crew, put to sea with an engine which had not been checked over after a long period of disuse, and an untested navigational device.
[158] The plaintiff's claim for exemplary damages fails.
Result
[159] The plaintiff's claim for special damages succeeds in the sum of $31,783 made up as follows:
Head of damage |
Amount |
Rot in starboard hull (water closet to starboard) |
$10,100 |
Repairs to rot in bow/stem |
$8,683.00 |
Repairs to rot in transom |
$10,000 |
Repairs to rot in portside trail board/nameplate |
$3,000 |
Total |
$31,783 |
[160] The plaintiff's claims for hard stand fees, for his own labour, for loss of profits, for general damages for stress and inconvenience and for exemplary damages all fail.
[161] There will be judgment for the plaintiff against the second defendant in the sum of $31,783.
[162] Although not the subject of submissions, in his statement of claim the plaintiff also claimed interest. I award him interest on the judgment of $31,783 from 17 January 2005 (the date on which he commenced this proceeding) to the date of judgment. Interest is to be at 7.5%, as prescribed in s87 Judicature Act 1908.
Costs
[164] I gather there may also have been some negotiations between the parties, and possibly some pre-trial offer by the second defendant.
[165] For all these reasons costs are reserved. Failing agreement I will fix them upon receiving memoranda.
Further submissions
[166] As arranged, I received closing submissions for the defendants on 30 May, and for the plaintiff on 7 June. Subsequently, the Registrar forwarded to me further submissions for the defendants filed on 9 June, and then a reply submission by the plaintiff filed on 20 June. I have not read those two further sets of submissions. Counsel are out of order in filing them. In the High Court, in a civil case where both parties adduce evidence, as here, the rule as to closing submissions is essentially "first in last out". It is contained in r487(3) of the High Court Rules, albeit in somewhat outmoded language.
Solicitors:
Sharp Tudhope, Tauranga for the Plaintiff
Wisheart Macnab & Partners, Blenheim for the Defendants