Andrews v AHS Construction Limited
[2024] NZHC 937
•26 April 2024
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE
CIV-2022-470-000084
[2024] NZHC 937
BETWEEN DANIEL WILLIAM KELLY ANDREWS and GLENDA LORRAINE ANDREWS
Appellants
AND
AHS CONSTRUCTION LIMITED
Respondent
Hearing: 10 July 2023 Appearances:
D Fraundorfer and A Needham for the Appellants N Elsmore and C Frost for the Respondent
Judgment:
26 April 2024
JUDGMENT OF POWELL J
This judgment was delivered by me on 26 April 2024 at 4.00 pm pursuant to
r 11.5 of the High Court Rules
…………………..
Registrar/Deputy Registrar
DANIEL WILLIAM KELLY ANDREWS and GLENDA LORRAINE ANDREWS v AHS CONSTRUCTION LIMITED [2024] NZHC 937 [26 April 2024]
[1] Daniel and Glenda Andrews have appealed a decision of Judge K D Kelly. Judge Kelly found Mr and Mrs Andrews liable for unpaid invoices issued by the respondent AHS Construction Limited (“AHS”) and dismissed their counterclaim against AHS.1
Background
[2] The litigation arose as a result of work undertaken by AHS in respect of a proposed holiday home to be built for Mr and Mrs Andrews at Pahoia Road Whakamārama, near Tauranga. There is no real dispute as to the factual background and I adopt Judge Kelly’s summary:
[5] On 17 March 2018 the defendants, who are based at the Gold Coast, Australia, went into AHS’s showroom in Te Puna and inquired about building a holiday house on their property at Pahoia Road, Whakamarama, Tauranga. This was a chance ‘off the street’ meeting, the Andrews seeing the AHS showroom from a café across the street.
[6] It was proposed by the Andrews that a house designed by the Andrews’ Australian architect Hamilton Hayes Henderson (HHH) be built on a site the Andrews had already purchased. The Andrews were looking for a New Zealand builder to take the concept design plans prepared by HHH and to translate these into working drawings necessary for obtaining building consent.
[7] During this discussion Mr Paul Williams, the Director of AHS, told the Andrews that standard homes in New Zealand costs $2,500 - $3,000/m2; that the show room they were in was about $3,000 – 3,500/m2; and that a bespoke home was in the range of $3,500 - $4,000/m2.
[8] The Andrews arranged for the HHH concept plans to be sent to AHS and a further meeting was convened on 20 March 2018 with the expectation that the Andrews would engage AHS to prepare the necessary drawings, obtain consent and thereafter, build the property. The 18-page plan package provided by HHH was substantial and consisted of a dimensioned site plan, floor plans, elevations, cross sections, 3D coloured external elevations and a schedule of internal and external finishes.
[9] At this meeting, the Andrews say that based on the plans and information provided by HHH, AHS confirmed the price range of $3,000 - $4,000/m2 for building the house. The Andrews also say that AHS understood the Andrews’ budget to be $1.5 million. As the property was to be 441m2, at $3,000 -
$4,000/m2 the total build cost would have been $1.3 million - $1.5 million, i.e. within the Andrews’ budget.
[10] As a result of this meeting and, the Andrews say, in reliance on the $3,000
- $4,000/m2 estimate, the Andrews agreed to proceed with the necessary
1 AHS Construction Ltd v Andrews [2022] NZDC 13462.
design works and site works including the construction of the building pad. It was expected that the Andrews would enter into a build contract on acceptance of a quote that was being prepared at the same time by AHS.
[11] At about the same time (i.e. in late March), the Andrews directly instructed Civix Limited to apply for resource consent which was done by 1 April 2018.
[12] Following the 20 March 2018 meeting, on 5 April 2018 AHS provided the Andrews a written fixed fee proposal of $62,500 for the architectural design work which included fees for detailed design and documentation ($42,500), and for consent lodgement ($3,500). This was accompanied by a draft Target Programme that allowed eight weeks for producing the consent documentation.
[13] Given the work that had been undertaken by HHH to date, the scope of the work was reduced and it was agreed that AHS would work on a time-cost basis instead of a fixed fee basis. Accordingly, AHS presented the Andrews with a second fee proposal setting out hourly rates for a senior technician and a technician/draughtsperson for detailed design and documentation (the Fee Proposal). Separate consultant fees were broken out in the proposal for Arnold & Johnstone (Structural and Civil Engineers), and for Geoconsult (Geotech Consultants). This Fee Proposal was accepted by the Andrews and the work on the design documentation commenced.
[14] Subsequently on 23 March 2018, AHS sent to Mr Andrews a Geoconsult fee proposal for the geotechnical work required for the site, which Mr Andrews accepted the same day.
[15] On 15 June 2018 the Andrews say that AHS confirmed during a Skype meeting that the work was progressing well.
[16] At a further in-person meeting on 29 June 2018, however, the Andrews say that they were becoming unhappy with progress and wanted to confirm that all matters were on track. The Andrews say they were reassured by AHS that the project was still on budget and within the expected price range.
[17] On 6 July 2018, AHS sent their first invoice for $48,104.50 to the Andrews for the design work completed to date (which included Geoconsult fees). The Andrews paid this on 10 July 2018.
[18] On 13 July 2018, AHS then emailed Mr Andrews confirming that work on stripping the site would begin the following week and provided DMD Contracting Limited’s (DMD) rates for the necessary fill. Work on the site and building pad commenced on or around 20 July 2018.
[19] On 3 August 2018, being approximately 4.5 months after the meeting on 20 March 2018, AHS provided the Andrews with a written but incomplete estimate for the house build, being $3,401,000.13 (GST incl.). Together with the design and earthworks undertaken to date, and the as yet uncosted appliances, fittings, tiling, and plumbing, the total build cost was now estimated to exceed $8,000/m2.
[20] On 6 August 2018, on receipt of this estimate, Mr Andrews emailed AHS saying:
We have decided to put the proposed new house at 333 Pahoia Road on hold due to the cost blow out over the original budget of $3000-$4000 per m2 plus we have committed to purchasing additional development on the Gold Coast.
Please complete the building platform and get the engineer to issue a compliance certificate for the building platform & cease all other works inclusive of plan changes until further notice.
[21] Mr Andrews sent another email to AHS on 8 August 2018 expanding on his earlier email, and saying:
We made a decision to proceed with you based on the initial meetings which AHS was confident they could build the proposed house within a $3000-$4000 per m2 budget, we did not alter the design of the plans other than add an additional 60m2 to the garage.
We have sunk a large chunk of time & money into this to find out the price is double the original estimate after the event which of course is not ideal.
One of the options we are considering is selling Lot 1 with an engineer consented building platform & WBOP building consent, these items need to be delivered to optimise this as a possible outcome.
[22]Mr Williams replied the same day saying:
Yes was quite the design, have stopped all works and will get the sign off. May be a few weeks as we have had a lot of rain which has held up final compaction.
[23] Prior to this email exchange, on 31 July 2018 AHS issued the Andrews an invoice for $18,066.50 for work completed to date. A second invoice was sent to the Andrews on 7 August 2018 for $2,346.00. On 9 August 2018 a third invoice was sent to the Andrews for $78,946.562 (totalling $99,359.06).
[24] AHS did not obtain certification for the building pad and the building consent application that was lodged with the Council was the subject of requests for information (RFIs) by the Council.
[3] AHS sought payment of the unpaid invoices either on the basis of a verbal contract covering detailed design work and the construction of the building pad, or on the basis of quantum meruit. Mr and Mrs Andrews responded by arguing that there was no contract, or at least no written contract, in breach of the Building (Residential Consumer Rights and Remedies) Regulations 2014 (“Building Regulations”). In addition, they claimed a set-off or counterclaim against AHS variously for misrepresentation pursuant to s 35 of the Contract and Commercial Law Act 2017 (“CCLA”), misleading and deceptive conduct in terms of s 9 of the Fair Trading Act
2 Which included a sum for earthworks completed by DMD and subsequently paid by AHS.
1986 (“FTA”) and negligent misstatement and/or breaches of the Consumer Guarantees Act 1993 (“CGA”).
The District Court decision
Judge Kelly identified the issues to be addressed as follows:
[122] The first issue for determination is the extent of any contract under which the Andrews may be obliged to pay AHS’s outstanding invoices following cancellation by the Andrews. If there is a contract, then three secondary issues arise:
(a) were the Andrews induced to enter that contract by misrepresentations made by AHS, primarily that the cost of the new build would be $3,000 - $4,000/m2, such that the Andrews are entitled to relief;
(b) did AHS engage in misleading or deceptive conduct when it represented to the Andrews that the new build would cost $3,000
- $4,000/m2 such that the Andrews are entitled to relief; and
(c) did AHS carry out the services with reasonable skill and care, and is the price charged for those services reasonable?
[123]If there is no contract then two other secondary issues arise:
(a) is AHS entitled to compensation on a quantum meruit basis and if so, what is the reasonable fee for the services provided; and
(b) did AHS breach a duty of care owed to the Andrews by mis-stating the price of the new build at the outset?
[5] Having reviewed the evidence, Judge Kelly concluded that an exchange of correspondence in April 2018 gave rise to a contract for the architectural design work undertaken by AHS,3 and this was accepted by Mr Andrews at trial.4 His Honour did not accept Mr and Mrs Andrews’ contention that such work had been capped at around
$10,000.5 In relation to the building pad and site works, Judge Kelly noted that Mr Andrews had, in March 2018, accepted a fee estimate for the geotechnical work required for the site, while in July 2018, AHS forwarded plant and supply rates for DMD Contracting Limited (“DMD”). Following the provision of this information, AHS and Mr Andrews discussed the materials to be used for the building platform. As a result, Judge Kelly concluded:
3 At [137].
4 At [138].
5 At [140]–[144].
[149] Given this exchange, I am satisfied that following the site meeting on 29 June 2018 and certainly by 16 July 2018, the Andrews knew that DMD was engaged, or to be engaged, to prepare the building pad. While the total price of this work on the pad is not expressly stated, I am satisfied that the Andrews knew and agreed to AHS using DMD to undertake the site works using Gap 40 at $30,000 per tonne (being the rate that had been provided by AHS on 13 July 2018), to commence on or around 20 July 2018.
[6]Overall, Judge Kelly concluded:
[159] By way of summary, I am satisfied that there was a contract between AHS and the Andrews whereby the Andrews agreed:
(a) on a time-cost cost basis that AHS would:
(i) produce permit drawings specifications and H1 calculations required for building consent;
(ii) coordinate other consultants and ensure the integration of services with document package; and
(iii) prepare and lodge building consent and attend to Council questions; and
(b)that AHS would engage consultants to prepare the building pad for the house at rates AHS provided to the Andrews in advance of that work commencing, on the understanding that the Andrews would be invoiced on completion of the pad.
[7]Following on from this conclusion Judge Kelly observed:
[160] In reaching this agreement, it is apparent that AHS was expected to then go on to build the house. That was the Andrews’ sole reason for having a relationship with AHS and there is no evidence that other potential builders were being contemplated, or that they might be, following completion of the design and site works. As Mr Williams himself says in evidence, he saw the matters going between the design phase, consent phase and build phase. Mr William’s email to Mr Andrews dated 9 April 2018 about the Fee Proposal refers to the ‘actual build’ phase and that it was his understanding that the Andrews were looking for a negotiated contract with AHS. This is also consistent with AHS providing the Andrews with a Masterbuild contract although that was not signed pending the final quote.
[161] In short, the verbal agreement was made against the backdrop that AHS anticipated building the house subject to the estimate that it was preparing although that was to be the subject of a separate build contract. The point being that the design and site works was not done in a vacuum but with an eye to further engagement on the build phase. As Mr Andrews said: “if he [sic] build price is what its meant to be well happy days.”
(footnotes omitted)
[8] As a result of the conclusions reached with regard to the contract, Judge Kelly observed that any issue with regard to quantum meruit fell away.6
[9] The focus then turned to whether AHS had misrepresented that the cost of constructing the home would be between $3,000–$4,000/m2. Judge Kelly noted that it was not in dispute that AHS had provided an estimate on that basis to Mr and Mrs Andrews,7 and the figure underpinned Mr and Mrs Andrews’ budget.8 Judge Kelly accordingly concluded:
[177] I am satisfied that in the normal course of business it is reasonable to expect a price to be agreed between parties before work is commenced on building a house. Mr Williams said that this price was the fee estimate provided in August 2018 and that the Andrews, in driving the build project, effectively agreed to commence the build not knowing what this cost would be.
[178] I do not accept this. I do not find it credible that an experienced developed like Mr Andrews, who was unfamiliar with build costs in New Zealand, would proceed on the basis of an open ended build price. The more likely scenario is that the build commenced with the parties having some expectation as to the likely or estimated cost of the total build, notwithstanding that more information was required before a more refined and precise cost could be included in a written build contract.
[179] I accept that the evidence establishes that it was understood between the parties that AHS would work on the production of drawings for building consent purposes, and would commence the earthworks based on the expectation that the total build cost would be within the range of $3,000 -
$4,000/m2 or within a budget of $1.5 million. Without this I do not consider that the Andrews would have embarked on the project. Again, Mr Williams himself says that he saw matters going between the design, consent and build phases.
(footnotes omitted)
[10] Judge Kelly did not, however, accept that Mr and Mrs Andrews’ actions were actionable. This is because the estimate did not relate to an existing fact or past event. This was because:
[195] It is clear that when the design and site works were agreed to, there was no understanding by either party that the costs for all major items for the build were known.
6 At [164].
7 At [169].
8 At [175].
[196] For these reasons, I am not satisfied that AHS has made an inaccurate estimate during pre-contractual representations which exceeded an acceptable margin from the final quoted price and that the Andrews were induced to commence the detailed design and building pad works on that basis.
[11]As a result, Judge Kelly concluded:
[198]I do not accept that it was reasonable for the Andrews to rely on the
$3,000 - $4,000/ m2 price range, this being more in the nature of a puff made ‘off the cuff’ and on which a reasonable person, let alone an experienced developer like Mr Andrews, would not put much stock. This is apparent by Mr Andrew’s request of Mr Benjamin for detailed costings of all major items such as window joinery, metal cladding, the floor slab, and supply and installation of plasterboard, and from the steel fabricator.
[199] I find that the Andrews, in embarking on the design [and] site works prior to receiving the estimate dated 3 August [2018], proceeded at their own risk.
(footnotes omitted)
[12] Having concluded there was no misrepresentation, Judge Kelly likewise concluded the statements provided by AHS were not misleading and/or deceptive in terms of the FTA, as his Honour explained:
[207] On an objective analysis I do not find that the statement was misleading in the circumstances already described. The discussions about the $3,000 -
$4,000/m2 was a discussion between what Mr Williams described as ‘colleagues’; where AHS had detailed plans from HHH; and the parties engaged in detailed discussions about various factors that go to building costs such as building ratios. Mr Andrew, a professional in the industry, asked about the likely build costs on more than one occasion and knew full well the various variables that were likely to affect this. Again, when the design and site works were agreed to, there was no understanding by the Andrews the costs for all major items for the build were known as yet such as to render this statement a reliable indicator of the total build cost. As an experienced developer possessing the knowledge, actual and implied, that is associated with him working in the building profession, Mr Andrews would have understood this. I do not accept this to be any different in Australia.
[208] Given this, I am not satisfied that the conduct of AHS in the circumstances in which the statement was made, is capable of being misleading. Nor do I consider it reasonable for the Andrews to have been misled in the circumstances.
[209] The range provided by AHS was simply the expression of an opinion which proved to be incorrect.
[13]And further:
[214] I am not persuaded that the Andrews have established that AHS, at the time of making the statement about the price range for the house, had no intention to deliver on that price. Nor am I persuaded, for the purposes of the FTA, that the statement about the price range was demonstrably untrue at the time it was made.
[14] Finally, Judge Kelly rejected the alleged breaches of the CGA. Judge Kelly did not accept that AHS had breached its obligation to provide services with reasonable care and skill pursuant to s 28, nor was there any breach of any guarantee as to price in terms of s 31. In particular, Judge Kelly did not accept that the requests for information (RFIs) issued by the Council in relation to the building consent lodged by AHS showed a lack of care or skill on the part of AHS. On the contrary, his Honour accepted the evidence of the experts of both parties that RFIs were common and that “what would have been required is for more drawings and more reference information and product data to have been provided, and that if this was done consent would have been granted”.9
The case for Mr and Mrs Andrews
[15] Although Mr Fraundorfer, on behalf of Mr and Mrs Andrews, expressed the view that Judge Kelly was “95 per cent correct”, it did not stop him from making a wide-ranging attack on the judgment and the conclusions reached.
[16] Mr Fraundorfer took issue with the evidence provided on behalf of AHS and submitted that none of it should have been given any weight. Mr Fraundorfer took particular exception to Judge Kelly’s refusal to exclude as inadmissible two expert witnesses called by AHS, John Moore and Rex Moyle. Mr Fraundorfer criticised Judge Kelly’s decision to provisionally admit both witnesses and, having heard that evidence, allowing it in while placing “little to no weight on Mr Moore’s evidence”10 and likewise finding “Mr Moyle’s evidence ought to be afforded little weight.”11
[17] Mr Fraundorfer contrasted the approach taken by Judge Kelly with what he submitted was the wrongful exclusion of one of Mr and Mrs Andrews’ experts,
9 At [223].
10 At [63].
11 At [65].
Jason Hiku.12 He submitted that, overall, Judge Kelly had placed insufficient weight on any of Mr and Mrs Andrews’ witnesses including, in particular, their remaining experts Linda Lodetti, a quantity surveyor, and Paul Probett, a building “forensic specialist” or investigator.
[18] More substantively, Mr Fraundorfer submitted that while Mr and Mrs Andrews intended to be bound by the fee proposal document, AHS breached the terms of that contract by not obtaining the building consent and, in failing to do so, thereby failed to provide the services with reasonable care, skill, and competency, nor did AHS charge a reasonable price for these services. Mr Fraundorfer submitted that the correspondence between the parties showed that work should have cost less than the initial fee proposal provided on 5 April 2018. The $56,000 invoiced by AHS not only thereby breached the contract but was unreasonable because the building consent was never obtained, and indeed it was Mr Fraundorfer’s submission that AHS lacked the requisite skills to obtain that consent.
[19] Mr Fraundorfer denied that there was any contract at all for the siteworks undertaken by DMD. In his submission “[t]here was insufficient certainty to form a contractual relationship for the Site Works with no intention to be bound immediately.” In the alternative, Mr Fraundorfer submitted that Mr and Mrs Andrews were charged contrary to the rates schedule provided by DMD, the building platform was not completed and code compliance was not obtained. In Mr Fraundorfer’s submission it was AHS that instructed DMD to proceed at AHS’s own risk, on the expectation AHS would complete the build in the future.
[20] In any event, Mr Fraundorfer submitted that to the extent there were contracts for the design works and/or the sitework, such contracts were subject to the Building Regulations, which require such contracts to have been carried out in a proper and competent manner, with reasonable care and skill and that the building contract would obtain code compliance before submitting its final payment claim.
[21] From there Mr Fraundorfer took issue with Judge Kelly’s conclusions that there was no actionable misrepresentation, and no breach of the FTA and/or CGA.
12 At [51]–[54].
[22] With regard to misrepresentation, Mr Fraundorfer submitted that with the information AHS had at the outset and when the representations were made, it had “a logical basis for giving the range and that it could build the particular house within the range.” It was Mr Fraundorfer’s submission that the representation was, however, false at the time that it was made, and AHS in any event did not make any attempt to correct the representation as further information became available.13 In Mr Fraundorfer’s submission the fact that “some costs were to be determined, should not have precluded the Court from finding that [there was] a misrepresentation capable of inducing entry into a contract.” Likewise, Mr Fraundorfer submitted Mr Andrew’s expertise in the building industry in Australia did not mean he was not able to reasonably rely on the representations made.
[23] With regard to the FTA, Mr Fraundorfer accepted Judge Kelly applied the correct legal principles, but submitted that the extent of the range given by AHS and the failure to correct had the capacity to mislead a “hypothetical, reasonable person in the Andrews’ circumstances”. Mr Fraundorfer similarly repeated his submissions that AHS never had an intention on delivering on the representation and that it was instead demonstrably untrue even at the time it was made.
[24] Finally, with regard to the CGA, Mr Fraundorfer again submitted that while Judge Kelly correctly identified the legal test it was misapplied to the evidence. Mr Fraundorfer submitted that Judge Kelly should not have relied on the evidence that indicated consent would ultimately had been granted once the RFI issued by the Council had been complied with. In Mr Fraundorfer’s submission, this overstated the
13 In relation to misrepresentation under the CLA and the FTA, Mr Fraundorfer also submitted that there had been a misrepresentation by AHS that it had the necessary skills and accreditation to undertake the construction and/or to obtain building consent. This was not before Judge Kelly, nor does it properly form part of this appeal. The extension of misrepresentation to include those issues had been the subject of a late application to amend the statement of defence and counterclaim prior to trial, but Judge Blackie declined to allow the amendments sought given pleadings had closed: Advanced Housing Solutions Ltd v Andrews [2021] NZDC 14401. On appeal, Mr Fraundorfer also sought to raise further misrepresentations which were never pleaded at any point, including the time it would have taken AHS to build the house, the identity of the contracting party and the rates that were charged. Whether an appellant may raise a new point on appeal is a matter of discretion for the appellate court, which must ensure the conduct of proceedings is procedurally fair (see McCollum v Thompson [2017] NZCA 269, [2017] NZAR 1106 at [52]–[54]. Given the material prejudice to the respondent that would be caused by allowing these new issues to proceed — especially given their factual nature and the consequent need for new evidence — I find that none of these issues are permissible or relevant for the purposes of the appeal.
legal position and overlooked the extent of the defects in the building consent application filed by AHS.
[25] In Mr Fraundorfer’s submission, the building consent application was inadequate and breached AHS’s obligation of reasonable skill and care, noting a range of matters including a wide range of additional information requested by Council, “false declarations as to the likely build cost” and the fact that the design work undertaken by AHS had been undertaken by an unsuitably qualified practitioners.14
[26] Likewise, with regard to the application of s 31 of the CGA, Mr Fraundorfer submitted that Judge Kelly erred in law in concluding that s 31 did not apply because the price of the work was capable of being determined in the course of dealings between the parties, on the basis that there was the fee proposal for the design works and the rates schedule for the siteworks. Mr Fraundorfer submitted that Mr and Mrs Andrew were, in fact, “charged for services, materials, labour and plant outside the Rates Schedule and Fee Proposal.” Furthermore, in Mr Fraundorfer’s submission, Mr and Mrs Andrews have been overcharged for the design works, and should not have been charged for siteworks. Even if some amounts were owing, Mr Fraundorfer submitted that significant deductions should be applied as AHS failed to obtain compliance for the building platform and, therefore, Mr and Mrs Andrews were charged for “abortive and undetermined work.”
Discussion
[27] This appeal proceeds by way of rehearing.15 This Court must reach its own view on both the facts and law. If the opinion of the Court differs from the conclusion reached by the District Court, the appeal must be allowed.16
14 In his submissions, Mr Fraundorfer also raised the issue as to whether the siteworks undertaken by DMD were also in breach of s 28 of the CGA. As with the additional misrepresentation matters raised that were not considered by Judge Kelly as they were not pleaded by Mr and Mrs Andrews at any point, they do not stand to be considered in this appeal.
15 High Court Rules 2016, r 20.18.
16 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [16].
Evidential Issues
[28] I begin my analysis by addressing the evidential issues raised by Mr Fraundorfer. There is nothing in any of the issues identified. First, as Judge Kelly noted in his judgment, there were good reasons for not excluding either Mr Moore’s or Mr Moyle’s evidence in total, notwithstanding an array of issues that led Judge Kelly to conclude that little weight could be put on the evidence of either witness.17
[29] This was principally because, in the case of Mr Moore, his evidence underpinned the joint statement provided by him and Ms Lodetti in which, as a result of the meeting of the experts, Ms Lodetti had made various concessions.18 Similar considerations applied to the evidence of Mr Moyle, given that in his evidence for Mr and Mrs Andrews Mr Probett had replied to Mr Moyle’s evidence (with hearsay evidence and submissions of his own)19 and, the evidence having been tested, it was appropriate to deal with the issues identified on the basis of weight. It is noted that Judge Kelly dealt with the issues identified with Mr Probett’s evidence in exactly the same way as he did with Mr Moyle.20
[30] In contrast, the exclusion of Mr Hiku’s evidence was for a different reason. The trial in the District Court was what is known as a “simplified trial”, convened pursuant to pt 10 of the District Court Rules 2014 (“DCR”). As a result, pursuant to r 10.6(2) of the DCR only one specialist witness per topic was entitled to give evidence without obtaining the leave of the Court. While Mr Fraundorfer suggested that Mr Hiku had given evidence on a different basis to Ms Lodetti, that submission does not withstand scrutiny. Ms Lodetti had assessed the work performed by or under the direction of AHS and whether the invoices recorded were reasonable.21 As Judge Kelly pointed out, this was the same basis on which Mr Hiku was instructed.22 Although Mr Hiku had a different expertise, being a contractor rather than a quantity surveyor and had undertaken a site visit of the building pad, as Mr Elsmore pointed out, in the absence of detailed plans of the work undertaken or subsequent testing to
17 See [61]–[65].
18 At [64].
19 At [65]–[66].
20 At [66].
21 At [51].
22 At [52] and [54].
determine the actual depth of the work undertaken, Mr Hiku’s assessment was effectively completed on the same basis as Ms Lodetti’s desktop analysis. As a result I am satisfied that Mr Hiku’s evidence was appropriately excluded.
[31] More broadly, it is clear that none of the expert evidence was of central importance in Judge Kelly’s decision. As neither of Mr and Mrs Andrews’ experts alleged that the amounts charged by AHS and the other contractors were unreasonable, it was unnecessary for Mr Moore to comment otherwise. Ultimately, there was little difference in the amounts identified by Ms Lodetti and those invoiced, either for the design works undertaken or the siteworks. Likewise, given that Mr Probett accepted RFIs were common and that, once answered, a building consent would be granted, there was ultimately little at issue between the evidence given by him and Mr Moyle’s evidence.
[32] Instead, the key issues, as Judge Kelly clearly identified, were whether there was a contract between AHS and Mr and Mrs Andrews; if so, what were its terms; and whether any contract had been induced by misrepresentation under either the CCLA or FTA or was otherwise in breach of the CGA. On these issues none of the various experts had anything significant to contribute beyond that which I have noted above.
A contract for the design works?
[33] Addressing these issues, I turn first to the design works undertaken by AHS. Leaving aside the various set offs and counterclaims alleged by Mr and Mrs Andrews, there can be no doubt that a contract existed on the terms set out in the second fee proposal forwarded by AHS in an email dated 11 April 2018. This provided:
Fee Proposal for Proposed New Residence – 333 Pahoia Rd, Whakamarama
Further to our meeting & discussions we are pleased to submit herewith our fee proposal to provide permit drawings, specification & H1 Calculations required for building consent for the new house located 333 Pahoia Rd, Whakamarama, Tauranga, New Zealand.
We set out below the scope of services we propose to provide and the fees for that scope, based on our discussions and concept design by Hamilton Hayes Henderson Architects
Scope:
1.Consent Documentation:
a.Production of Permit Drawings, Specification & H1 Calculations required for Building consent
b.Co-ordinate other consultants and ensure integration of services with documentation package
2. Consents:
a.Lodge for building consent and attend to council questions
Building Construction Permit Design Fees:
As agreed services are to be charged on a time cost basis the following rates shall apply for the respective team members:
Separate Consultants’ Fees:
Exclusions:
The following is excluded from the fee offer:
1.GST is excluded in all prices
2.Other additional consultants’ fees
3.Any additional consulting fees etc.
4.Any consent fees or such like.
[34] The second fee proposal was clearly accepted by Mr Andrew when he responded by email the same day:
Hi Paul
Thank you for your email, yes we would like AHS to proceed forward as per your attached fee proposal letter.
I believe our combined efforts will deliver an outstanding result, we look forward to working with your team to achieve this.
[35] Although the work proposed had narrowed since the initial fee proposal, as Judge Kelly noted, the remaining work was still substantial, constituting some $45,500 out of the initial fee proposal.23 Given that, it is difficult to see, as indeed Judge Kelly observed, on what basis Mr Andrews could credibly say he expected the design works, being the architectural work carried out by AHS, would not exceed $10,000. Instead, Mr Andrews took no issue with, and paid, the first invoice covering a range of design work and attendances of meeting, which totalled $37,984.50.
[36] As noted, Mr Fraundorfer took issue with the lack of any analysis by Judge Kelly of the requirements under ss 362B and 362D of the Building Act 2004, and the terms implied pursuant to the Building Regulations. Judge Kelly had equated these to the guarantees contained in the CGA. Having considered this issue, it does not appear that they were in fact relevant given it is in fact clear that the type of residential building contract at issue in part 4A of the Building Act (including ss 362B and 362D) does not include design work.24
A contract for the siteworks?
[37] I am also satisfied that there was a contract for the siteworks, the construction of the building platform undertaken by DMD.25 As Judge Kelly noted, while the documentation is limited, it is clear that Mr Andrews gave the go ahead for the siteworks to be carried out by DMD in July 2018 on the basis of the pricing for machinery hire and product provided by AHS on 13 July 2018.26
23 At [133]–[134].
24 Building Act 2004, s 362B(1). A residential building contract “means a contract under which one person (the building contractor) agrees with another person (the client) to do building work for the client in relation to household unit…”. The definition of “building work” for the purposes of part 4A of the Building Act, however, specially excludes design work and provides that the definition of building work in s 7 of the Building Act which does include design work, does not apply to part 4A.
25 That these works were undertaken without the issue of a building consent was initially puzzling, but counsel confirmed at the hearing that the siteworks had been undertaken pursuant to a resource consent obtained by Mr Andrews directly, first to demolish the existing building on the property (an old lockwood home) and then undertaking the earthworks necessary to create the building pad.
26 At [149].
[38] Specifically, I am satisfied there was sufficient evidence for Judge Kelly to conclude Mr Andrews gave his approval for AHS to instruct DMD to excavate the building pad following the earlier clearance of vegetation off the site. This work proceeded, and it appears that DMD undertook the works under the direct supervision of Geoconsult, the geotechnical consultant instructed by Mr Andrews, who had provided a detailed geotechnical investigation report on 4 May 2018. DMD appears to have still been working on the building platform at the time Mr Andrews ordered all work halted after he received final costings for the construction of the house from AHS on 3 August 2018.
Quantum meruit and negligent misstatement?
[39] Having concluded that both the design works and siteworks were undertaken pursuant to contracts, it is not necessary to consider either quantum meruit or negligent misstatement.
Misrepresentation?
[40] As already noted, there is no dispute that AHS did on several occasions advise Mr and Mrs Andrews that the new home could be constructed for between $3,000–
$4,000/m2, which equated at different times to a total cost of between $1.3–$1.7
million.
[41] While this initial estimate was clearly what brought the parties together in the first place, I agree with Judge Kelly that the parties had some expectation as to the likely or estimated cost of the total build but that more information was required before more refined and precise costs could be included in a written build contract.27
[42] As Judge Kelly stated, the issue is whether the expectation is actionable.28 An actionable misrepresentation is a representation of past or present fact that is false or misleading.29 Statements of future fact are not actionable except to the extent that they
27 At [178].
28 At [185].
29 As “misrepresentation” is not defined in the CCLA (nor in the former Contractual Remedies Act 1979), it has been assumed to bear the meaning which it had under the old law (see Ware v Johnson [1984] 2 NZLR 518 (HC) at 537 per Prichard J; New Zealand Motor Bodies Ltd v Emslie [1985]
impliedly assert the truth of past or present fact. This may be the case where the statement of future fact is a statement of intention or opinion.30
[43] A statement of intention impliedly asserts that the intention is genuinely held at the time the statement is made. It thereby asserts a present fact. If the intention is not genuinely held when the statement is made, it is a misrepresentation. A statement of opinion also impliedly asserts that the opinion is genuinely held at the time the statement is made. In certain circumstances, a statement of opinion also impliedly asserts the existence of present facts providing the representor with a reasonable basis for their opinion. Where the facts are better known to representor, the statement is more likely to be found as an implied statement of fact rather than a mere statement of opinion.31 On the other hand, when, to the knowledge of the representee, the representor cannot be certain of the statement’s truth, it is likely to be considered as mere opinion.32
[44] Having reviewed the evidence, it is clear that the estimate had been prepared on the basis of AHS’ experience with its own “high-end” homes along with looking at the plans provided and there is no evidence to suggest that the figure was known to be incorrect at the time it was made. It was nonetheless apparent to both AHS and Mr and Mrs Andrews from the outset that there were significant aspects for the design yet to be costed. This process was ongoing and it does not appear to have been disputed that as quotes were obtained they were made available to Mr Andrews by way of an online dropbox, thereby ensuring that Mr Andrews was fully aware of the quotes as they were received. Despite this, Mr and Mrs Andrews wished to complete construction as soon as possible and therefore chose to proceed with the design work necessary to obtain the building consent and the earthworks necessary for the building platform prior to knowing whether the house could be built within their budget. As Judge Kelly observed, Mr and Mrs Andrews “in embarking on the design [and]
2 NZLR 569 (HC) at 593 per Barker J; and King v Wilkinson (1994) 2 NZ ConvC 191,828 (HC) at 191,832 per Holland J).
30 Narayan v Arranmore Developments Ltd [2011] NZCA 681, (2012) 13 NZCPR 123 at [45].
31 New Zealand Motor Bodies Ltd v Emslie [1985] 2 NZLR 569 (HC).
32 AE McDonald Ltd v Adams HC Wellington A318/82, 22 March 1985.
siteworks prior to receiving the estimate dated 3 August [2018], proceeded at their own risk.”33
[45] The fact that there was insufficient information as to know what the house at issue would cost is in fact reflected in Mr Andrews’s own actions. Mr Andrews refused to commit to a building contract with AHS until all costs were known after, in many cases, obtaining multiple quotes for all of the work specified. When those quotes became available and were consolidated into the final quote provided by AHS to Mr and Mrs Andrews, there was no suggestion that the final estimated cost of the building had been overstated nor that the house in question could be built for anywhere near the original estimated price, nor was consideration given to construction of a home of reduced specification or modified design. Instead, Mr Andrews appears to have accepted that the August estimate was a fair price for the building. Taking these matters together, it is clear Mr and Mrs Andrews’ set off/counterclaim based on misrepresentation could not succeed, and on this issue the appeal must be dismissed.
Misleading or deceptive conduct?
[46] Much of the analysis set out with regard to misrepresentation under the CCLA is equally relevant to the analysis as to whether the conduct of AHS was misleading and/or deceptive in terms of ss 9 and 43 of the FTA.
[47] The Supreme Court in Red Eagle Corporation Ltd v Ellis expressly sought to avoid prescribing a methodology for the application of ss 9 and 43 of the FTA.34 However, in simple cases where there is no doubt about what was said or its meaning and all loss arose from the same event, the Court suggested the following two-pronged approach:35
(a)First, it is necessary to decide whether the appellant has proved a breach of s 9. That section is directed to promoting fair dealing in trade by proscribing conduct which, examined objectively, is deceptive or misleading in the particular circumstances. Accordingly, it requires an
33 At [199].
34 Red Eagle Corporation Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at [26].
35 At [27].
assessment of the circumstances in which the conduct occurred and the person(s) likely to be affected by it. The question to be answered is whether a reasonable person in the appellant’s situation — that is, with the characteristics known to the respondent or which the respondent ought to have known — would likely have been misled or deceived. It is not necessary at this stage to show that the appellant was actually misled or deceived, but this may well be enough to show that the requisite capacity to mislead or deceive existed;36 and
(b)Secondly, if a breach of s 9 is proved, then the Court must determine, when applying s 43, whether the respondent’s conduct caused the appellant to suffer loss or damage. At this stage of the test, the appellant must prove they were actually misled or deceived and that the respondent’s conduct in breach of s 9 was an effective cause of their loss or damage. The Court should also determine whether the appellant’s carelessness, if there is any, should be regarded as the sole or a contributory operative cause of the loss. Although any careless contribution to the appellant’s own downfall will not disqualify their claim, the Court has a discretion to decide that only part of their loss or damage (or in cases of reckless behaviour, none at all) should be paid by the respondent to the appellant.37
[48] Overall, the Supreme Court observed that the exercise of the power to make an order for payment under s 43 is a matter of doing justice to the parties in the circumstances of the particular case and in terms of the policy of the FTA.38
[49] Whether or not the estimate would have been capable of being misleading, it is clear from that analysis that Mr Andrew was not misled, evidenced by his refusal to enter into a building contract until the project had been fully costed. Had Mr Andrews
36 At [28].
37 At [29]–[30].
38 At [31]. Also see Premium Real Estate Ltd v Stevens [2008] NZCA 82, [2009] 1 NZLR 148 at [54]: There is a distinction under s 9 of the FTA between asserting a present fact and expressing an opinion. An honestly held and reasonably based opinion is not actionable under s 9 simply because it is not borne out by subsequent events.
been misled, such an approach would not have been necessary. The uncertainty was reflected by Mr Andrews’ comment in evidence that “we’ve put so much into this thus far surely paying this bill here we get a build price and if the build price is what it’s meant to be well happy days”.39
[50] Likewise, and as noted, there is equally no evidence that the estimates given by AHS were given with no intention to deliver on that price. On the contrary, after Mr Andrews had ordered that work was to cease Mr Williams emailed Mr Andrews offering to build one of AHS’ own high-specification homes on the site for the original estimated price. This, and the lack of any challenge by Mr and Mrs Andrews to the costings for the house at issue, showed it was the particular specifications of the project rather than the estimates provided by AHS which resulted in the costs overrunning the Andrews budget. The decision to proceed with the application for building consent and ultimately the siteworks was to meet self-imposed timeframes, given there could have been and was no certainty as to price.
[51] As a result, it is clear that a set-off/counterclaim based on misleading and/or deceptive conduct under the FTA also could not succeed.
Breaches of the Consumer Guarantees Act?
[52] As noted, two sections of the CGA were identified by Mr Fraundorfer as giving rise to a set-off or counterclaim upon which Mr and Mrs Andrews can rely. I begin with s 28, which provides:
28 Guarantee as to reasonable care and skill
Subject to section 41, where services are supplied to a consumer there is a guarantee that the service will be carried out with reasonable care and skill.
[53] This section requires a supplier to exercise the ordinary skill of an ordinary competent person exercising the particular art, the standard being an objective one. However, there is no implied promise that the supplier’s efforts will succeed.40 This
39 At [141].
40 Matthew Barber (ed) Commercial Law in New Zealand (online looseleaf ed, LexisNexis) at [18.6.1].
replicates the normal standard of care in both contract and tort.41 As Judge Kelly noted, in this case it was for Mr and Mrs Andrews to satisfy the court, on the balance of probabilities, that AHS failed to carry out their supply of services with reasonable skill and care.42
[54] It is noted in the pleadings in the District Court that Mr and Mrs Andrews pleaded that the services provided by AHS were not carried out with “reasonable skill and care” because:
…
(a)The defendants provided the plaintiff with a copy of Hamilton Hayes Henderson Architects’ plans for the New Build;
(b)The Hamilton Hayes Henderson Architects’ plans were paid for by the defendants;
(c)Notwithstanding the Hamilton Hayes Henderson Architects’ plans, the plaintiff spent a total of 498 hours on detailed design/working drawings/coordination over a period of two months; and
(d)The plaintiff has invoiced the defendants a total of $41,460 for the 498 hours it spent on detailed design/working drawings/coordination over a period of two months.
[55] The problem for Mr and Mrs Andrews with regard to these issues is that at no point did their expert Ms Lodetti in her evidence ever say that the fees charged by AHS were unreasonable for the amount of work required and the amount actually involved in relation to the amount estimated by Ms Lodetti as reasonable.
[56] Ultimately, however, and as noted earlier in this judgment, the principal allegation against AHS in the District Court with regard to its alleged failure to carry out the services provided with reasonable skill and care arose because the building consent was not issued by the Western Bay of Plenty District Council, with two RFIs issued instead by the Council.
[57] As Judge Kelly noted, on the evidence before the Court this also does not show that AHS did not act with reasonable care and still. Instead, the evidence before the
41 Sleight v Beckia Holdings Ltd [2020] NZHC 2851 at [330].
42 Jetz International Ltd v Orams Marine Ltd [1999] DCR 831 (DC) at 837.
Court, from Mr Probett in particular, was that RFIs were common and that once the information requested by the Council had been provided the building consent would issue. Exactly what additional work would have been required and at what cost is unknown. Much of the information requested by the Council required input from other contractors and, in any event, because AHS had been told to cease work prior to the second and principal RFI being issued it was never given a chance to respond. Having engaged directly with the Council over the building consent, Mr Andrews then chose not to respond to the RFIs, with a result that the building consent application was eventually dismissed by the Council.
[58] I therefore conclude that Judge Kelly was correct in concluding that no breach of s 28 of the CGA had been established, and, as a result, this ground of the appeal also fails.
[59] The second limb of Mr and Mrs Andrews appeal on the CGA was with regard to the application of s 31. This section provides:
31 Guarantee as to price
(1)Subject to section 41, where services are supplied to a consumer there is a guarantee that the consumer is not liable to pay to the supplier more than a reasonable price for the service in any case where the price for the service is not—
(a)determined by the contract; nor
(b)left to be determined in a manner agreed by the contract; nor
(c)left to be determined by the course of dealing between the parties.
(2)Where there is a failure to comply with the guarantee in this section, the consumer’s right of redress is to refuse to pay more than a reasonable price.
(3)Nothing in this Part confers any other right of redress.
[60] The breach of s 31 pleaded by Mr and Mrs Andrews against AHS was as follows:
(a)In accordance with the June Invoice, between 1 June and 30 June 2018, [AHS] spends 316 hours on detailed design/working drawings/coordination and invoiced [Mr and Mrs Andrews] a total of
$26,370 for that time; and
(b)In accordance with the plaintiff’s invoice dated 31 July 2018, between 1 July and 31 July 2018, [AHS] spent a further 182 hours on detailed design/working drawings/coordination and invoiced [Mr and Mrs Andrews] a total of $15,090 for that time.
[61] It is noted that there was no pleading that in any way alleged that the amounts charged by DMD for the siteworks were in any way unreasonable and so the s 31 issue related only to the amounts charged by AHS.
[62] In his judgment, Judge Kelly noted that s 31 did not apply as, between AHS and Mr and Mrs Andrews, “there was a contract and that the price for the work was capable of being determined in the course of dealings between the parties”.43
[63] Given the clear words of s 31(1)(a) of the CGA Judge Kelly’s finding on this point is self-evidently correct. In any event as Ms Lodetti did not conclude that the amounts charged by AHS were unreasonable, a claim under s 31 could not have succeeded given the lack of evidence.
[64]The final ground of appeal therefore also fails.
Decision
[65]The appeal is dismissed.
[66] AHS is entitled to costs. If these cannot be agreed, AHS is by 10 May 2024 to file a memorandum of not more than three pages setting out the amounts claimed. Mr and Mrs Andrew will have until 24 May 2024 to respond, again by memorandum of not more than three pages. I will then determine the issue on the papers.
Powell J
43 At [228].
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