Aldridge v Boe
[2012] NZHC 277
•10 January 2012
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2010-404-7805
NZHC [2012] 277
UNDER THE WEATHERTIGHT HOMES RESOLUTION SERVICES ACT 2006
BETWEEN STEPHEN LESLIE ALDRIDGE, KATHLEEN MARGARET ALDRIDGE AND CA TRUSTEES LIMITED AS TRUSTEES OF THE SL AND KM ALDRIDGE FAMILY TRUST Appellants
ANDJOHN WILLIAM BOE, ROBYN JEAN BOE, KAY LYNETTE PEEBLES PERSONALLY AND AS TRUSTEES OF THE JOHN BOE FAMILY TRUST AND THE ROBYN BOE FAMILY TRUST
First Respondents
ANDTHE HAMILTON CITY COUNCIL Second Respondents
ANDMICHAEL SWART Third Respondent
ANDKERRY MURPHY Fourth Respondent
Hearing: 14, 15, 16 and 17 June 2011
Counsel: P J Wright for Appellants
P Grimshaw and B Easton for First Respondents D Heaney and C Goode for Second Respondents M Talbot for Third Respondent
P Napier and N Pye for Fourth Respondent
Judgment: 10 January 2012 at 3:00 PM
JUDGMENT OF POTTER J
ALDRIDGE V BOE HC AK CIV-2010-404-7805 10 January 2012
In accordance with r 11.5 High Court Rules
I direct the Registrar to endorse this judgment with a delivery time of 3 p.m. on 10 January 2012.
Solicitors: McDonald Law, Auckland – [email protected] Grimshaw &Co,Auckland – [email protected] and [email protected]
Heaney & Co, Auckland – [email protected]
Keegan Alexander, Auckland – [email protected]
Copy to: M Talbot, Auckland – [email protected]
P J Wright, Auckland – [email protected]
Table of Contents
Introduction [1] Parties [4] Factual background [10] Decision of Tribunal [55]
Responsibility of the first respondents, Mr and Mrs Boe [59]
(i) Misrepresentation [60] (ii) Vendor warranty [69] (iii) Tort [76]
Volenti non fit injuria [89]
Lack of causation defence [92]
The appeal and cross appeal [96] Approach on appeal [105] The Aldridges‘ knowledge [107] Volenti non fit injuria (Voluntary assumption of risk)
Issue [110] Submissions [111] Coughlan v Abernethy [123] Discussion [134] Conclusion [137]
Lack of causation defence
Issue [138] Appellants’ submissions [139] Respondents’ submissions [166] Discussion [169] Conclusion [182]
Mr and Mrs Boe : misrepresentation [183]
Submissions [186] Relevant law [190] (a) Meaning of “misrepresentation” [192] (b) Made “by or on behalf of” [197] (c) Made “to him” [198] (d) Inducement [199] Application of the principles – Mrs Boe’s email [202] Mr Murphy’s report [213] Clause 5.2 sale and purchase agreement [223] Conclusion [237]
Mr and Mrs Boe : vendor warranty [238]
Relevant contractual provisions [239]
Apellants’ submissions [242] The Boes’ submissions [250] Principles of contractual interpretation [255] Exclusion clauses [257] Building Act provisions [261] Analysis of a Vendor Warranty in cl 14.2 [266] The exclusion clause 5.3 [276] Conclusion [290]
Was Mrs Boe a head contractor? [292]
Submissions [294] Head contractor authorities [296] Analysis [319] Application of the principles in this case [323] Conclusion [336]
Limitation defence – third respondent [337] Summary of conclusions [351] Costs [356]
Other matters [357]
Introduction
[1] Stephen Aldridge, Kathleen Aldridge and CA Trustees Limited as trustees of the SL and KM Aldridge Family Trust (the Aldridges) appeal against a final determination of the Weathertight Homes Tribunal (the Tribunal) at Auckland, dated
28 October 2010 (the decision).1 The appellants challenge on some 25 grounds of fact and law the decision which dismissed the appellants‘ claim against all the respondents for the cost of repairs to their home, estimated in the statement of claim at $1,100,000 together with general damages of $25,000 and consequential loss of
$35,670.
[2] The first respondents Mr and Mrs Boe (the Boes) appeal against the
Tribunal‘s finding that Mrs Boe was a head contractor.
[3] At the start of the appeal hearing the appellants sought leave to adduce further evidence on the appeal. I declined the application in relation to an affidavit by Shane Douglas Albrecht as to construction costs to date and received de bene esse a further affidavit of Mr Aldridge dated 9 June 2011 relating to events at the auction leading up to execution of the agreement for sale and purchase for the property.2
Parties
Appellants
[4] The Aldridges, who were the claimants before the Tribunal, are the owners of the property at 11 Riverlinks Lane, Hamilton (the property) which was the subject of the claim in the Tribunal. They purchased the property from the Boes in November
2006.
1 Aldridge v Boe [2010] NZWHT Auckland 31.
2 Minute of Potter J dated 15 June 2011.
First Respondents
[5] The Boes are two of the three trustees of the family trusts which previously owned the property and sold it to the Aldridges.
Second Respondent
[6] The Hamilton City Council (the Council) is the relevant territorial authority.
Third Respondent
[7] Michael Swart is the labour-only builder who built the house for Mr and Mrs
Boe (he was the fourth respondent before the Tribunal).
Fourth Respondent
[8] Kerry Murphy is a building surveyor who was engaged by Mr and Mrs Boe
(he was the fifth respondent before the Tribunal).
Other respondents before the Tribunal
[9] The third respondent before the Tribunal, Mr Scott, an architect who drew up plans for the house, and two other parties were removed as respondents from the proceedings in the Tribunal. The sixth respondent, Mr Ken Martin, was declared bankrupt in 2010 and the appellants did not proceed against him before the Tribunal.
Factual background
[10] I summarise the factual background from the comprehensive overview in the decision.
[11] In 1997/1998 the Boes built a large and expensive home at 11 Riverlinks Lane, on a 5,000 square metre site on the banks of the Waikato River in North Hamilton. According to the Boes this was their dream home and they lived in it for
approximately seven years. They then had a change of plan and decided to move to Australia. They had already departed and the house was vacant when the Aldridges purchased it at auction in November 2006. Settlement followed in December 2006.
[12] The building consent for the new dwelling was obtained in two stages from the Hamilton City Council. The consent for stage two was issued in April 1997 after plans had been completed by Mr Scott to the satisfaction of Mr and Mrs Boe.
[13] After two false starts with builders who found the project beyond their expertise, the Boes engaged Mr Swart on a labour-only basis to erect the framing, install the external and internal joinery, and fix the harditex cladding and the internal gib board. There was no written contract for Mr Swart‘s employment. He commenced work in either late December 1996 or early 1997. The Tribunal states that he had some role in co-ordinating the sequential operation of the other trades, but he did not have any supervisory or management control over the other trades engaged by Mrs Boe.3
[14] Mr Swart completed his work on the main part of the dwelling between early
1998 and March 1998 but the main building envelope had been completed by the end of 1997.
[15] While Mr Swart was on site he called for building inspections during construction. The last inspection was a pre-lining inspection in September 1997.
[16] The Tribunal records that the Boes took occupation of their new home sometime between early autumn 1998 and mid-summer 1999.
[17] In early 2000 a Council officer paid a visit to the property having discovered that the final inspection had not been carried out, and to ascertain what stage had been reached with the building work. Consequent upon that visit the Council issued a letter dated 8 February 2000 listing seven items still to be completed. (These items
are not relevant to the claim). The letter concluded:
3 Decision at [12].
Upon satisfactory completion of the project, a Code Compliance Certificate will be issued which is normally a requirement should you ever wish to sell the property, which would also avoid any delays should a proposed purchaser request a land information Memorandum from Council.
We look forward to receiving your advice of completion of building work.
[18] Apparently the seven items received attention but the Boes did not arrange for a final inspection by the Council until 2005 when they decided to relocate to Australia and to sell their home.
[19] A valuation was obtained from Darragh Fergusson & Green dated 6 October
2005. They assessed the current market value of the property as at 22 September
2005 at $2,752,000 including chattels of $160,000.
[20] According to Mrs Boe an offer of $2.9m was received soon after the property was put on the market. When the potential purchaser asked for a copy of the Code Compliance Certificate (CCC) the Boes discovered they did not have one as they had never called for a final inspection by the Council. Mrs Boe therefore arranged for a final inspection in September 2005 but by then the potential purchaser had ―gone cold‖. Mrs Boe said in evidence that the real estate agent advised that the property would be much more difficult to sell and the price achieved would be significantly reduced without a CCC.
[21] When the Council inspected in September 2005 the building inspector confirmed that the seven items identified as outstanding on 8 February 2000 had been completed. However, since construction of the house had been completed several years earlier the Council was not prepared to issue a CCC until an independent report about the cracks to the exterior of the structure was received. This advice was confirmed to Mrs Boe by Mr Saunders, the Council‘s building control manager.
[22] Mrs Boe then instructed Mr Murphy, a registered building surveyor, whom the Boes had engaged on earlier occasions in relation to other property, to take a look at the house to assist her in getting a report to the Council for the issue of a CCC.
[23] Mr Murphy visited the house on 8 October 2005 and carried out an external inspection. He noted that the house consisted of a number of different cladding systems including concrete masonry, harditex and insulclad and that cracking to the exterior, although very minor, was extensive. He determined he was not in a position to reasonably provide a report to the Council for the obtaining of a CCC. Not having been involved with the building or any inspections during the building of the house, he was not prepared to assess the entire cladding system or its installation.
[24] In response to an email from Mrs Boe dated 13 October 2005 asking how the report for the ―Code of Compliance‖ (sic) was progressing, Mr Murphy sent her an email dated 14 October 2005 in which he said:
I have a real problem with the Code Compliance report at this stage … What I did find was of concern of potential moisture ingress. There is also extensive movement and cracking of the cladding that is obviously also interacting with moisture, either as cause or more probably as an aggravating factor to an original movement crack. These issues are fundamental to compliance with Building Code and compromise compliance with ss E2 and B2 particularly.
Any maintenance will need to be carried out by a company very well trained and experienced specifically in this type of work. I observe there have been earlier repairs that has seen joints ground out and sealed …
Needless to say I am very nervous about providing a statement to the weathertightness which is critical to being Code compliant …
(This email was not disclosed to the appellants until Mr Murphy filed a brief of evidence in the proceedings in the Tribunal).
[25] On 14 October 2005 Mrs Boe wrote to Mr Murphy explaining the Council‘s visits in February 2000 and September 2005 and that because of the length of time that had lapsed since the completion of the house the building inspector now required a report from an independent person in relation to the cracking observed on the exterior of the house, before a ―Code of Compliance‖ (sic) could be issued. She asked Mr Murphy to provide the ―necessary report‖.
[26] Mrs Boe‘s letter to Mr Murphy was slightly inaccurate and sanguine in that it described the inspection by the Council on 8 February 2000 as a ―Final Inspection‖, when in fact it was an inspection carried out pursuant to an audit by the Council of
properties where building consents had been issued but final inspections had not been made.
[27] Mrs Boe also indicated that the seven things detailed in the Council‘s letter of
8 February 2000 were what was required in order for a CCC to be issued when in fact the Council required the seven items to be completed prior to final inspection and had advised that ―upon satisfactory completion of the project‖ a CCC would be issued.
[28] On 5 November 2005 Mr Murphy revisited the house and provided a report to Mr and Mrs Boe headed ―Assessment of Cracks in Harditex Cladding‖. He described the scope of the inspection as being to carry out visual assessment of cracking to the harditex clad dwelling and to prepare a report specifically focusing on the cracks that had appeared and to recommend a repair protocol. He stated that the inspection was to be ―non-invasive in which visual inspection is supported by non-invasive testing for moisture at cracks‖. He stated that testing was not exhaustive and the inspection was not an audit of the building design, cladding system installation or compliance with NZ Building Code. He stated:
The moisture testing tends to suggest that moisture has begun to penetrate the cracks but at this stage is of a level indicative of being in the early stage of penetration which following a winter season suggests relatively low level risk at this stage.
[29] He recommended remedial work to both the hairline cracks and serious/larger cracks above the lounge doors and other less advanced though still significant cracks.
[30] He said that the work must not be allowed to be deferred through another winter season. He concluded:
Given effective and complete repair, carried out in a manner consistent with the manufacturer‘s recommendations, the writer believes the cracking as existing at time of inspection, will be repaired in a permanent manner.
[31] The report was provided to the Council. The report included a disclaimer that it was prepared for use of the addressees only, they being Mr and Mrs Boe. The disclaimer noted that where items were concealed or access was not available Mr
Murphy had used judgment and experience ―… but actual conditions may only be
evident upon opening up the relevant areas‖.
[32] The cracks were not repaired and the house was not repainted until the spring of 2006 by which time the Boes were residing in Australia. Apparently no reason for this delay, which was contrary to the advice of Mr Murphy, was given at the Tribunal hearing.
[33] On 17 March 2006 the Council wrote to Mrs Boe referring to ―… your recent inquiry in regard to your dwelling receiving a Code Compliance Certificate‖. The letter advised that cracks in the cladding systems were required to be repaired in accordance with the manufacturer‘s specifications. Further a Producer Statement was to be provided by the cladding repair contractor confirming repairs had been completed in accordance with the cladding manufacturer‘s recommendations. The Council also stated that due to the age of the dwelling it would require a total repaint
―… as it is believed that at about 6-8 years water is starting to penetrate the paint system‖. Further the cladding was required to meet the durability requirements of the Building Act of 15 years once a CCC is issued. The Council concluded:
Once the above work has been completed provide Council with a clean weathertightness report, and if the report is acceptable to Council, Council will consider if it will issue a Code Compliance Certificate.
[34] Approximately six months later, in September 2006, the Boes instructed Janice Fischer of Lodge Real Estate (Hamilton) Limited to sell their home. The Boes stressed the need to ensure that any potential purchaser fully understood that there was no CCC. They provided to Ms Fischer the following documents to copy to any serious potential purchaser:
(a) Valuation report from Darragh Fergusson & Green dated 6 October
2005.
(b) The Council‘s letter dated 8 February 2000.
(c) Mr Murphy‘s report about cracks in the harditex cladding following his visit on 5 November 2005.
(d) The Council‘s letter dated 17 March 2006.
[35] According to Mrs Boe, Ms Fischer‘s opinion was that $3m was a realistic price for the house if it had a CCC but without a CCC the house would be difficult to sell and the price would be substantially less. Ms Fischer advised that the property be auctioned.
[36] On 13 October 2006 Mrs Boe emailed Mr Murphy stating that an interested
buyer, Mr Aldridge, had received a copy of Mr Murphy‘s report.
[37] On 23 October 2006 Mrs Boe sent an email to Mr Murphy referring to ―buyer resistance‖ because the house did not have a CCC. She mentioned that ―one serious buyer‖ thought there was a possibility that the whole place would need to be reclad to get a CCC ―… and so the price should be reduced by an amount that would pay this i.e. $400 to $500,000!!‖ (The ―one serious buyer‖ was not identified). She told Mr Murphy that Ken Martin had repaired and repainted the house (three coats) and would provide the Producer Statement required for the Council but the Council would still require an independent building expert or certifier to provide a report. She asked Mr Murphy if there was any way he could help them get the CCC ―maybe if we indemnified you‖. Mrs Boe concluded that as the auction was on 15
November they needed to act fast.
[38] Mr Murphy did not respond to this email, apparently because he was not in a position to assist. In a conversation with Mrs Boe about another property owned by the Boes, she asked him to provide a very brief conclusion to his earlier report on cracking in the harditex, but he declined, saying that his report had to be read in its entirety or it could be misconstrued.
[39] Mr and Mrs Aldridge had decided some time previously to purchase a house on the river in Hamilton. They had already bid unsuccessfully at auction on two other riverside properties which sold for $1.8m and $2.5m respectively. Towards the end of October 2006 Mr Aldridge‘s real estate agent introduced him to Ms Fischer. Mr Aldridge mentioned it was very important to them that they make a thorough pre- purchase investigation and carry out proper due diligence on the property. They
obtained a LIM report for the property dated 10 November 2006 which had attached to it the letters from Council dated 8 February 2000 and 17 March 2006. The LIM report also disclosed that the property had no CCC. They took legal advice and were advised by their solicitor that there was no issues with the title to the property.
[40] Mr Aldridge visited the Council twice prior to the auction. He examined all the documents on the property file. It did not contain any plans or copies of any building reports. It did contain the two letters from the Council which were annexed to the LIM report.
[41] Mr Aldridge visited the property. He noted that the painting of the exterior was nearing completion and he spoke to the painter, Mr Ken Martin. He also received from his real estate agent a summary of the work prepared by the painter. Mr Aldridge said he understood this to be the Producer Statement required by the Council. Mr Aldridge gave evidence that he satisfied himself in discussions with the painter that the plastering repairs and painting work had been completed to the manufacturer‘s specifications.
[42] From his real estate agent Mr Aldridge received a copy of the valuation dated
6 October 2005. He also received a letter (undated) from Mrs Boe to Ms Fischer which was headed ―Council – Code of Compliance‖ and included the following statements:
I think the Council should give us a letter stating that all the required building Consents were obtained, the house was built as per the submitted plans, all required engineering certificates and Producer Statements were produced and provided to the Council, all required inspections were carried out by the Council. But the final paper work was never completed and so no Code of Compliance was issued. Now because of the time delay and age of the house the Council will not issue a Code of Compliance.
When the house was completed the Council did a final inspection and then sent a list of minor things that needed to be completed in order to get a Code of Code of Compliance (I think you have a copy of this letter). We did all these things – notified the Council that they had been done, and we believed we had our final sign off. We were not aware that we did not have a Code of Compliance (I did not know that there was a certificate involved until we decided to sell the house and the real estate agent asked for it). I personally came into the Council Office to get the certificate and that‘s when I learned that we did not have the final sign off. BUT then I was told that because of the time lapse the Council would not issue a Code of Compliance because it
could not be back-dated – it would have to have today‘s date on it and under the Code of Compliance law that means the Council have to guarantee the house for the next 15 years. The Council will do that for the first 15 years of a new house but as our house is already 5 years old they would not do it (effectively they would be issuing it to a 5 year old house up until it was 20 years old).
(emphasis added)
[43] Although this letter is undated it was clearly sent to Ms Fischer by Mrs Boe prior to the auction. Mr Aldridge received a copy of it. He approached an officer at the Council to discuss the letter, particularly the part which said the Council would not issue a CCC as it could not be back-dated and that Council would effectively have to guarantee the house until it was 20 years old. The officer told Mr Aldridge that any decision about the CCC would be made by Mr Saunders. Mr Aldridge said he tried to contact Mr Saunders but was not successful as he was apparently on annual leave.
[44] Mr Aldridge learned that Mr Murphy had prepared a report and eventually received a copy of Mr Murphy‘s report. On 14 November 2006 Mr Aldridge telephoned Mr Murphy about his report. Mr Murphy made a diary note of the conversation. The date and time of the conversation are recorded as 14 November
2006 at 5 p.m. Mr Murphy acknowledged that information was recorded on the note by his personal assistant the following day, but it seems to be common ground that the conversation took place on 14 November 2006, the day before the auction. Mr Murphy said to Mr Aldridge that he did not do a code compliance report for the same reason as the Council would not issue a CCC, namely that the house was nearly ten years old which would extend the period of liability. In relation to Mr Ken Martin‘s work on the property, Mr Murphy said he had no reason to believe anything other than that the repairs to the cracks would have been well done.
[45] Mr Murphy‘s diary note records that he told Mr Aldridge ―plaster systems using harditex are disproportionately highly represented in leaks‖. He said the most important thing would be to be very proactive on maintenance and that ―if you don‘t want that level of involvement with the house, then perhaps a plaster house is not for you‖.
[46] On the night prior to the auction, 14 November 2006, the Aldridges through Janice Fischer, negotiated with the Boes for certain furniture to be included in the purchase price, and for $10,000 to be retained by their solicitor until they made sure the spa and ensuite worked, if the Aldridges became the successful bidders at the auction. The Boes agreed to the spa condition and to include certain items in the purchase price, but not all those requested by the Aldridges.
[47] Mr Aldridge attended the auction. At the start of the auction the auctioneer announced that the house did not have a CCC, that the vendors would not be getting one and that the vendors made no representations about the state of the house. The Aldridges became the successful bidders at the auction at the price of $2.35m after a further negotiation which resulted in the Boes agreeing to the inclusion of all the chattels the Aldridges had asked for in the approach made the previous night. Those chattels were listed in appendix A attached to the agreement. Appendix A recorded the agreement for the withholding of $10,000 pending the spa being shown to be in working order, and that the settlement date was 15 December 2006, a month earlier than specified in the conditions of sale on which the property was offered. The change in settlement date was also recorded in clause 3 of the agreement, initialled by Mr Aldridge.
[48] The way in which the additional chattels listed in Appendix A came to be included in the purchase price is described in the further affidavit of Mr Aldridge dated 9 June 2011 which I received de bene esse on the first day of the appeal hearing. Mr Aldridge‘s evidence on this point is consistent with paragraph 78 of Mrs Boe‘s brief of evidence when she says that Mr Aldridge had insisted that all the items of furniture and the ride-on mower listed on the fax the previous night be included in the price and they agreed because they were financially stretched. I admit Mr Aldridge‘s affidavit of 9 June 2011 as further evidence on appeal. It essentially confirms evidence that was before the Tribunal.
[49] There are a number of provisions of the particulars and conditions of sale which are relevant to these proceedings and which I consider later in the judgment. At this stage it is worth noting clauses 23 and 24 which are consistent with the advice given by the auctioneer:
23.THE purchaser acknowledges that they are aware that there is no final Local Body Code of Compliance Certificate issued in respect of this property.
24.THE purchaser acknowledges that the property does not have a Hamilton City Code of Compliance and the vendor will not be obtaining one.
[50] The Aldridges took possession of the property following settlement in
December 2006.
[51] On 7 March 2007 Mr Aldridge met with Mr Saunders of the Hamilton City
Council.
[52] The Aldridges obtained a report from Joyce Group Limited in October 2007
entitled ―Building Envelope Report‖. The report described the brief as:
Re: To inspect and give a written report on the following;
*visual inspection of the site
*non-invasive testing of moisture levels
*visual inspection of the exterior cladding.
It did not satisfy the Council.
[53] The Council referred the matter to the Department of Building and Housing (DBH). The DBH appointed Alexander & Co to examine and report on the exterior cladding at the property. They completed a report as at 21 February 2008 following a visual inspection, invasive moisture testing and cutting small holes through the exterior cladding to establish construction methods at various points of the dwelling structure. They identified several areas of non-compliance with the Building Code and with the cladding manufacturers‘ requirements. A final determination from the DBH was issued on 29 May 2008 identifying that the house did not comply with the Building Code under clause B2 ―Durability‖, Clause E2 ―External moisture‖ and
―other appropriate provisions of the building code‖. Consequently the Council issued a Notice to Fix under ss 164 and 165 of the Building Act 2004, on 13 June
2008. The notice advised that a CCC could not be issued for the project until the work described in the Notice had been completed.
[54] The Aldridges subsequently lodged a claim with the Weathertight Homes Resolution Service which was accepted on 7 July 2008. The hearing before the Tribunal occupied four days between 17 and 20 August 2010 with closing submissions being presented on 10 September 2010. The decision was issued by the adjudicator, Mr KD Kilgour, on 28 October 2010.
Decision of the Tribunal
[55] After setting out the factual background essentially as summarised above, the
Tribunal identified the salient issues requiring determination as: (a) The defects occurring to the dwelling;
(b) The quantum of the claimants‘ loss;
(c) The responsibilities, if any, of the respondents in relation to that loss;
and
(d) The responsibility, if any, of the claimants for their own loss.
[56] As to defects, the Tribunal recorded the agreement of the experts that the following defects were the material causes of moisture ingress:4
a) Cladding:
Inadequate cladding to ground clearances
Bottom edge of Harditex cladding not protected as required by Harditex manufacturer. I accept the expert evidence on this defect notwithstanding the evidence that Mr Buckman, the plasterer, had pre-sealed the Harditex cladding after it was delivered to the building site and before Mr Swart installed it
Bottom edge of Harditex cladding not overlapping plaster block work.
b)Window edge: the return surfaces of reveal had no drip edge even though the building consent and the James Hardie literature required one.
4 At [42] and [46].
c) Lack of horizontal control joints: a breach of the manufacturer‘s
literature and the building consent
d) Flat tops to balcony balustrades: breach of the building consent and
the manufacturer‘s literature
e)Inadequate clearance to the deck surface: it is noted tha6t during his visit to the remedial site, Mr Hursthouse saw four of the five decks unclad and observed no damage from this defect.
[57] The Tribunal noted that there was no substantial dispute as to the key causes of the damage and that these causes had resulted in moisture ingress and timber decay. The Tribunal concluded that the repair work necessary to remediate the defects to the home was that it be fully reclad.
[58] The Tribunal dealt briefly with quantum and determined the quantum of loss in a sum approaching $800,000.5
Responsibility of the first respondents, Mr and Mrs Boe
[59] The Tribunal noted that the causes of action against the Boes were in both contract based on pre-contractual misrepresentation and breach of the agreement for sale and purchase, and in tort in terms of their duty as developers, builders and/or head contractors. The Tribunal referred to the Boes‘ pleadings that each of these causes of action failed based on the defences of volenti non fit injuria (voluntary acceptance of risk) and causation (that the respondents did not cause the claimants‘ loss).6 These defences were also relevant to the determination of the other respondents‘ responsibilities, and the Tribunal considered them after determining the specific causes of action against the Boes.
(i) Misrepresentation
[60] The Tribunal referred to the claimants‘ allegation that the misrepresentations were contained in two documents, the email from Mrs Boe to Ms Fischer in October
2006 and Mr Murphy‘s report in November 2005. The Aldridges alleged that these
5 At [48]-[53]. By agreement of counsel as recorded in my (amended) minute of 15 June 2011, issues of quantum to the extent they remain relevant, are to be sent back to the Tribunal for determination. It is therefore unnecessary to consider further matters of quantum.
6 At [97].
documents amounted to representations by the Boes that the house complied with the building consent and the Building Code and the house did not suffer from weathertight issues.
[61] The Tribunal referred to s 6 of the Contractual Remedies Act 1979 and said that in order for the claimants to prove their claim for misrepresentation they needed to establish that:
(a) There has been a false or erroneous statement of fact;
(b) The misrepresentation was made by or on behalf of the Boes;
(c) The misrepresentation induced the claimants to enter into the contract to purchase; and
(d)The claimants have suffered loss as a result of relying on that misrepresentation.
[62] It identified that the first matter to consider was whether or not the Boes had said that a problem with leaks or weathertightness did not exist and whether, if indeed said, those statements were true or untrue when they were made.
[63] It then considered the first of the two documents in question, the email from
Mrs Boe to Ms Fischer. The relevant passages are set out above.7
[64] The Tribunal said it is well established that there is prima facie no misrepresentation if one party makes it clear that he or she is merely expressing his or her opinion or belief on the matter or that he or she is passing on information received, or a statement made by a third party, and not adopting it as his own. An expression of opinion is not a representation of fact and in the absence of fraud its
falsity does not afford relief.8
7 See at [42] above.
8 Bissett v Wilkinson [1927] AC 177.
[65] It determined that the statements made in Mrs Boe‘s email to Ms Fischer could only properly be understood as Mrs Boe‘s opinion or understanding of what the Council had informed her. Accordingly the Tribunal held that the contents of Mrs Boe‘s email to Ms Fischer did not amount to a misrepresentation under s 6 of the Contractual Remedies Act.
[66] The Tribunal turned secondly to the report prepared by Mr Murphy which the claimants alleged represented that the house complied with the building consent and the Building Code and was weathertight. It held that Mr Murphy‘s report did not contain any such representations and could not be construed as representing what the claimants attributed to the report. It said that the following matters referred to in the report clearly suggested otherwise:
ASSESSMENT OF CRACKS IN HARDITEX CLADDING Report on:
Assessment of cracks in Harditex cladding …
2.0 Reason for Visit and Scope of Inspection.
2.1To carry out visual assessment of cracking to the Harditex clad dwelling.
2.2To prepare a report specifically focussing on the cracks that have appeared …
2.3 …
2.4The inspection is not an audit of the building, design, cladding system installation or compliance with the NZ Building Code.
2.5 Internal inspection or testing was not carried out.
2.6 No destructive or invasive investigation or testing was carried out.
Disclaimer
This report has been prepared for the addressee‘s use only, in terms of
instructions to us …
7.0 Conclusion
7.1 The existing cracks at time of writing are …
Limits to Accountability:
The comments are limited to that which is available to visual inspection.
Concealed items … are not confirmed by this report …
[67] The Tribunal determined that the report did not amount to a misrepresentation under s 6 of the the Contractual Remedies Act.
[68] It also concluded that there was no reliance by the claimants on the contents of Mrs Boe‘s email or Mr Murphy‘s report, essentially because of the inquiries Mr Aldridge made directly with the Council to seek verification of the information provided in Mrs Boe‘s email.
(ii) Vendor warranty
[69] The Tribunal identified that the focus of this claim was the vendor warranty contained in cl 14.2 of the agreement for sale and purchase for the property which provided:
The Vendor warrants and undertakes that:
.…
14.2Where the Vendor has done or caused or permitted to be done on the property any works for which a permit or building consent was required by law:
(a) The required permit or consent was obtained; and
(b) The works were completed in compliance with that permit or consent; and
[70] The Tribunal noted the claimants‘ contention that cl 14.2 amounted to a warranty from the Boes that the house was built in accordance with the Building Code. The Tribunal accepted that ―on a strict reading of cl 14.2 it is clear that as vendors the Boes have failed to meet their obligations contained therein given the defects in the construction‖. The Tribunal said, however, that to make a determination solely on the words of cl 14.2 would ignore the reality of the agreement‘s constitution and the intentions of the parties to the agreement.
[71] The Tribunal then referred to the fact that the claimants knew the house did not have a CCC when they entered into the agreement. Further, they knew the
Council had concerns about the cladding on the house and that it required a clean weathertightness report before considering whether a CCC could be issued.
[72] Secondly, they knew that a clean weathertightness report was not prepared
prior to the purchase; Mr Murphy‘s report could not be construed as such.
[73] Thirdly, the Boes specifically recorded in the agreement that they would not be obtaining a CCC.
[74] Finally, cl 5.3 of the agreement specifically provided an acknowledgment by the purchaser:
5.3That neither the vendor, the vendor‘s agent nor the auctioneer shall be liable in any manner whatsoever in respect of the condition of the property, and in particular but not in limitation in respect of the condition or structural soundness of the buildings …
[75] The Tribunal said that cl 5.3 ―clearly prohibits the claimants from seeking recovery for any loss or damage in respect of the condition or structural soundness of the dwelling‖. The Tribunal said that cl 5.3 was ―wholly inconsistent with the wording of cl 14.2‖ but rejected, in all the circumstances of this case, that the exclusion clause should be ignored and unqualified effect given to the other clause. The Tribunal held:9
Based on all the evidence relating to the construction of the contract, I determine that it is fair and reasonable in the specific circumstances of the present case to conclude that the claimants and the Boes intended to enter into the agreement for sale and purchase of a dwelling that had no CCC and therefore with no guarantee or warranty as to the condition of the building. As a result, the claim that the Boes breached clause 14.2 of the Agreement must fail.
(iii) Tort
[76] The Tribunal then considered the claim in tort against the Boes, that the Boes breached their duty of care as developers and/or head contractors.
9 At [76].
[77] It referred to relevant authorities in relation to the claim that Mrs Boe was a developer and identified the two essential considerations: firstly, the party must have direct involvement or control in the building process, and secondly, the party is in the business of constructing dwellings for other people for profit.
[78] It referred to the following factors derived from the evidence as relevant in
considering Mrs Boe‘s role in the construction process:
(a) Mrs Boe has experience with previous building projects for houses and motels;
(b) The Boes purchased the land at Riverlinks Lane in order to build a house on that land;
(c) Mrs Boe arranged for plans to be drawn up for the contemplated house;
(d) Mrs Boe forwarded Mr Scott extensive specifications for the home she wanted him to design;
(e) Mrs Boe was involved in obtaining the necessary building and resource consents from the Council in order to begin construction work;
(f) Mrs Boe engaged the various contractors to undertake the construction work on a labour-only basis;
(g) All invoices were provided directly to and paid by Mrs Boe;
(h) The Boes sourced and purchased the building materials themselves;
and
(i) The Boes occupied the home themselves for seven years.
[79] The Tribunal summarised the evidence on this issue as follows:10
… Mrs Boe owned the property in her capacity as a trustee and was in control of the consent, design, construction, approval and ultimately the marketing process. She was the person who decided on and engaged the tradespeople involved in the construction. She was responsible for the implementation and completion of the construction process and had the power to make all important decisions. Even though Mrs Boe was unable to recall how much it cost to purchase the land and build the home, I accept that she was conscious of the costs in having the home constructed.
[80] The Tribunal found that Mrs Boe was the party ―sitting at the centre of, and directing the project‖. The Tribunal said that ―being cost-conscious will often mean
10 At [85].
that an owner will engage trades on a labour-only basis thereby requiring the owner to undertake control of administrative matters relating to the project‖. But by doing so it does not mean that a person should automatically be categorised as a developer. This was particularly so when, as in the case of the Boes, they were not in the trade of building residential properties and the evidence established that the dwelling was intended as their dream family home.
[81] The Tribunal said:11
Mrs Boe was merely organising the building of a house in which she and her family would live.
[82] The Tribunal concluded that the evidence did not establish that Mrs Boe was a developer and accordingly she did not owe the claimants a non-delegable duty of care. (This finding is not challenged on appeal).
[83] It went on to conclude: ―… the evidence outlined above clearly indicates that Mrs Boe‘s role in the project was akin to that of a head contractor‖.12 The Tribunal referred to the judgment in Gardiner v Howley13 where former owners were held liable as head contractors. The Tribunal said in that case it was the fact that the former owners had assumed and taken control over the various tradesmen that attracted liability.
[84] It considered the evidence that Mrs Boe engaged each of the trades, paid the contractors‘ invoices, controlled the design for the dwelling and processed the resource and building consents. She had the power to make all important decisions and as there was no overall contracted site supervisor, the building project was in effect run and controlled by Mrs Boe. The Tribunal said that the evidence also suggested that it would have been Mrs Boe‘s decision not to engage a site supervisor
for the project.
11 At [86].
12 At [88].
13 Gardiner v Howley HC Auckland HC117/92, 17 May 1994; (1995) ANZ ConvR 521.
[85] On the basis of that evidence, the Tribunal found that Mrs Boe was the head contractor and owed the claimants a duty of care associated with that role. (This finding is appealed).
[86] The Tribunal then turned to whether Mrs Boe breached her duty of care as head contractor. It referred to Mrs Boe‘s evidence that she was entitled to assume that the tradespeople engaged would carry out their work competently and in accordance with the necessary building requirements. The Tribunal found:14
Moreover, there is insufficient evidence suggesting that the trades specifically relied on Mrs Boe to control, supervise or monitor the work in terms of compliance with the necessary building requirements, in any event. Nor was there any evidence that such tradesmen were expecting to rely on Mrs Boe in that capacity, and the Tribunal infers that any such expectation would be unrealistic in any event due to Mrs Boe‘s lack of relevant building expertise and the fact that she was employed full time in their motel business. There is no evidence that any decision that Mrs Boe made or any sequencing issues for which she would have some responsibility would have led to or caused any of the building defects which are set down in para [46] above.
[87] For those reasons the Tribunal found that Mrs Boe did not breach the duty of care she owed as a head contractor.
[88] The Tribunal said that because of the findings made in relation to the Boes‘ responsibility there was no need to consider the defences of volenti non fit injuria or lack of causation in relation to the claims against them. But as those defences were advanced by the other respondents as well, the Tribunal then turned to consider those defences.
Volenti non fit injuria (voluntary acceptance of risk)
[89] The Tribunal noted that all respondents contended that the claimants‘ claims failed due to the defence of volenti non fit injuria. The basis for this submission was that the claimants voluntarily assumed the full extent of the risk of buying a house
with no CCC, with known weathertight defects, and that the claimants:
14 At [95].
… entered into the purchase with their eyes wide open in knowing about the risks posed by the defects relating to the home, but yet chose to proceed with the transaction in any event.15
[90] The Tribunal referred to the two types of cases of volenti recognised in
James v Wellington City Council:16
It is well recognised that a defence of volenti may arise in one or other of two ways. In the more simple type of case the defendant relies solely on the action of the plaintiff in voluntarily encountering an existing risk of which the plaintiff is fully aware. The second type of case involves some form of transaction or dealing between the parties before the risk is actually encountered by one of them … [I]n this type of case the defence of volenti could be founded either on express agreement or on a term implied in a contract or on the somewhat wider concept of a transaction.
[91] The Tribunal continued:
[100] Based on the facts of the present claim, it is clear that the claim has the potential to fall within both types of volenti cases enunciated in James v Wellington City Council. However the real issue for the Tribunal to consider is whether the claimants voluntarily accepted the risk of the loss which they are now experiencing. It is important to note however that it is not sufficient if a respondent can prove that the claimant was aware of the risk at the time of the damage. Instead the volenti defence is primarily based on whether a respondent can establish that the claimant fully appreciated the danger. Accordingly as the test is a subjective one, the volenti defence is known to be especially hard to establish.
[101] The evidence to be considered by the Tribunal in relation to this defence includes the following:
(a) Mr Aldridge knew that the home did not have a CCC prior to purchase;
(b) Mr Aldridge had seen the Council‘s letter of 17 March 2006 stating that about six to eight years of water was starting to penetrate the paint system, that the cladding was required to meet the durability requirements of the Building Act of 15 years once a CCC is issued, and that a weathertightness report was required in order for the Council to consider whether to issue a CCC;
(c) Mr Aldridge had a copy of Mr Murphy‘s report identifying issues of extensive cracking, evidence of external water effects being found, and moisture tests suggesting that moisture had begun to penetrate the cracks;
15 At [98].
16 James v Wellington City Council [1972] NZLR 1978 at 982.
(d) Mr Aldridge knew that the repair work recommended by Mr Murphy to be done promptly was not carried out until another winter had passed;
(e) Mr Aldridge knew that Mr Saunders from the Council was the person with ultimate authority to decide on the issue of a CCC and yet Mr Aldridge went ahead with the purchase without communicating with Mr Saunders;
(f) In the absence of legal advice, Mr Aldridge negotiated a purchase agreement after the auction without any conditions for a CCC or a weathertight report;17
(g) Mr Aldridge knew that the Boes were making no warranties about the condition or structural soundness of the house;
(h) Mr Aldridge knew at the time of purchase that he was buying the home at a significant discount from the late 2005 valuation he had obtained; and
(i) Mr Aldridge admitted that he was aware of the leaky home publicity and yet purchased an expensive and monolithically-clad house in late 2006 without his own independent expert investigations/inspections.
[102] Mr Aldridge admitted under cross-examination that he was a ―fairly commercially savvy‖ businessman and therefore had considerable experience that enabled him to make judgment calls. With that considerable business experience however, Mr Aldridge himself elected to proceed with the purchase without consulting the other trustees and certainly without consultation with his conveyancing lawyer or Mr Saunders. The result was that Mr Aldridge signed the Agreement for Sale and Purchase on behalf of the Trust which included the following terms:
5. The purchaser acknowledges:
5.1 That the Purchaser has inspected the property and buys it
sol el y i n rel i ance on t he Purchaser ’s ow n j udgment ;
5.2That the Purchaser does not rely on any representation of the vendor, the vendor‘s agent or the auctioneer or the auctioneer‘s agent as to any matter whatever obtaining to the property ...;
5.3That neit her t he vendor, t he vendor ’s agent nor t he auctioneer shall be liable in any manner whatsoever in respect of the condition of the property and in particular but not in limitation in respect of condition or structural soundness of the buildings …
17 The evidence is that the sale and purchase agreement was executed at rather than after the auction, but after Mr Aldridge had further negotiations with the Boes about chattels to be included in the sale. The negotiations did not relate to compliance or weathertightness issues.
23.The Purchaser acknowledges that they are aware that there is no final Local Body Code of Compliance Certificate issued in respect of this property.
24.The Purchaser acknowledges that the property does not have a Hamilton City Code of Compliance and the vendor will not be obtaining one (Emphasis added)
[103] In evidence Mr Aldridge proffered his interpretations of the circumstances that led up to the purchase of the dwelling. Firstly, Mr Aldridge stated that the obtaining of a CCC was solely a matter of working through the Council‘s bureaucracy. However no evidence was adduced as to how he came to that conclusion other than believing that the Boes had simply become frustrated in fighting such bureaucracy and had given up. Secondly, Mr Aldridge initially stated that he thought Mr Murphy‘s report was a weathertight report. However under cross-examination, Mr Aldridge admitted that a proper reading of the report could never be construed as such. Thirdly, Mr Aldridge himself admitted that in regards to his decision to purchase the subject dwelling , ―he took a punt which didn‘t pay off‖. This indicates that Mr Aldridge not only had an awareness of the risk of purchasing the home without a CCC but also knew of the uncertainty as to whether one would be forthcoming, as indicated in the Council‘s letter dated 17 March
2006. Finally, Mr Aldridge considered he had undertaken an
adequate ―due diligence‖. But by contrast, he also admitted that he
was prepared to undertake whatever was necessary to obtain the
CCC.
[104] Based on a subjective assessment of all the evidence as a whole, the Tribunal finds that the respondents have established that Mr Aldridge had full knowledge of the nature and extent of the risk he ran in purchasing a home that had no CCC and potential weathertight defects. From his own conscious volition Mr Aldridge chose to incur, and did in fact incur, the risk of his own mischance.
[105] As a result of the volenti defence being established in this case, the Tribunal finds that the acts and/or omissions of the respondents did not cause the claimants‘ loss. Accordingly the claimants fail in their claims against all the respondents to this proceeding.
Lack of causation defence
[92] The Tribunal turned to consider the issue of causation in case the finding that the defence of volenti had been established, was wrong. The Tribunal identified that the issue for determination was whether the respondents caused the loss which the claimants had in fact suffered, or whether the loss was caused by the claimants themselves. The Tribunal summarised the submission of all respondents under this head of defence:
… the claimants‘ loss was not caused by any act or omission of the respondents, but instead by the claimants themselves due to their knowledge that the house was ―blighted‖. Therefore by taking a calculated risk that the house needed to be repaired in order to obtain a CCC, and realising that the risk has not paid off Mr Grimshaw submits that the claimants cannot now place responsibility on the respondents for their bad bargain.18
[93] The Tribunal referred to the recent decision in Scandle v Far North District
Council for the legal principles relating to causation: 19
Whether or not an action or omission has caused damage entails a two stage inquiry: see ACC v Ambros [2007] NZCA 304, [2008] 1 NZLR 340. First, there is a factual inquiry into whether the defendant‘s conduct caused the loss. This involves the application of the ―but for‖ or causa sine qua non test. The purpose of this test is to determine if the loss would have arisen even without the defendant‘s conduct. If so, the defendant‘s conduct cannot be said to have caused the loss: See Ambros at [25].
The second stage of the inquiry looks to see if there is causation in a legal sense; if there is, legal liability for the loss will follow. This involves two steps. First, the appropriate scope of liability for the conduct is assessed; and secondly, there is an investigation into the proximity between the cause and the loss.
…
The second step can be viewed as either the final stage of the causation inquiry, or as a separate inquiry into remoteness of damage. It is then that the court comes to assess the issue of proximity, by looking at whether the conduct constituting a factual cause is a substantial and material cause of the loss. It is not enough that the conduct merely creates the opportunity or occasion for the loss to occur; only if the conduct was a substantial and material cause is legal causation established.
[94] The Tribunal then said:
[108] … As these case authorities show, the courts have consistently held that builders, whether as head-contractors or labour-only contractors of domestic dwellings, owe the owners and subsequent owners of those dwellings a duty of care and are thereby held responsible for the costs for the necessary repairs as their defective work has caused the loss suffered by the claimants. The difficulty in applying that reasoning to the present case is that in such case authorities the claimants did not realise they were purchasing a non-Code compliant dwelling until after the transaction was complete, whereas in the present case the evidence establishes that this was not the case for the claimants.
18 Decision at [106].
19 Scandle v Far North District Council HC Whangarei CIV 2008-488-203, 30 July 2010 at [37].
[109] The Tribunal notes that the roles undertaken by the Council and Mr Murphy as parties to these proceedings are not related to the actual construction work. Nevertheless based on the evidence discussed earlier that the claimants knew that the Council required a report on the dwelling‘s cladding in order to consider whether the dwelling complied with the Building Code, they knew that it was never obtained, and they knew that Mr Murphy‘s report identified weathertightness issues that was occurring to the house at the time the claimants purchased it, a determination that these respondents still ought to be held responsible for the claimants‘ bad judgment would be unjust.
[110] Without a full assessment of the responsibilities of the other respondents to this proceeding, in relation to the principles set out in Scandle above, the material and substantial cause of the claimants‘ loss in this case was the claimants‘ decision to buy a dwelling with known weathertight concerns. The most that can be said of the respondents‘ alleged breaches is that, at best, they created an opportunity for the occurrence of the claimants‘ losses. … the Tribunal accepts that the claimants‘ decision to proceed with the purchase of the dwelling operated as a novus actus interveniens breaking any causal chain which the respondents may have created.
[95] The Tribunal held that the losses which the claimants claimed were not within the scope of the risk created by the respondents‘ conduct, and that the claimants voluntarily and knowingly acquired a home that had ―weathertightness defects‖, no CCC and none guaranteed to be forthcoming. The Tribunal concluded that it would be wrong in law and principle to impose liability on the respondents. It dismissed the Aldridges‘ overall claim.
The appeal and cross appeal
[96] The appellants appeal against the decision on a number of grounds. They say that various factual findings of the Tribunal and the decision as to quantum were erroneous.
[97] As to the Boes, they say the decision of the Tribunal was erroneous as follows:20
9.That the statements made by Mrs Boe in her email to Mrs Fisher21 in October 2006 as given to the appellants were an opinion and not a (mis)representation.
20 Numbering refers to paragraphs in the Notice of Appeal.
21 This is clearly intended to be a reference to Ms Janice Fischer of Lodge Real Estate.
10. That Mrs Boes‘ email of October 2006 together with Mr Murphy‘s report both as given to the appellants, were not representations that the house complied with the Building Consent and/or the Building Code and that the house did not suffer from any weathertightness issues (and therefore, by virtue of the defects, misrepresentations).
11. That the Aldridges did not rely on those misrepresentations and/or that they would need to have relied solely on the misrepresentations, and the reasons for that finding.
12. As to the vendor warranty that the Boes gave no warranty and/or would have no liability pursuant to the warranty in the Agreement for Sale and Purchase and the reasons for that including as a matter of construction of the agreement.
13.That Mrs Boe did not breach her duty of care as a head contractor and as to the reasons for that finding.
[98] As to the liability of the second, third and fourth respondents that the
Tribunal erred by failing to articulate findings as to their liability.
[99] As to the defence of voluntary acceptance of risk that the decision of the
Tribunal was erroneous in finding that:
15. The Aldridges‘ voluntarily and knowingly accepted the risk of the
defects thereby giving rise to the defences including that:
(a) they knew of the existence of the weathertightness defect;
and/or
(b) they knew of the risks posed by the weathertightness defects and/or
(c) they voluntarily accepted the risk of the loss arising from the weathertightness defects and/or
(d) they otherwise had sufficient knowledge of the weathertightness defects and/or risk of and relating to the defects so as to give rise to the defence.
Other matters
[357] In my (amended) minute of 15 June 2011 I said that after the judgment issued I would convene a conference of counsel to determine how outstanding issues should best be progressed. If counsel consider such a conference would be of assistance they should file memoranda within 21 days identifying the matters they consider such a conference should address.
6