BFMG Ltd v Speirs
[2014] NZHC 2503
•13 October 2014
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2014-485-2370 [2014] NZHC 2503
BETWEEN BFMG LIMITED
Plaintiff
AND
DAVID JOHN CAMERON SPEIRS First Defendant
GEORGE SPEIRS Second Defendant
Hearing: 22-23 September 2014 Counsel:
A J Knowsley with N J Manuel for Plaintiff
D G Dewar with M Freeman for DefendantsJudgment:
13 October 2014
RESERVED JUDGMENT OF MACKENZIE J
I direct that the delivery time of this judgment is
3.30 pm on the 13th day of October 2014.
Solicitors: Rainey Collins, Wellington, for Plaintiff
Thomas Dewar Sziranyi Letts, Lower Hutt, for Defendants
BFMG LTD v SPEIRS [2014] NZHC 2503 [13 October 2014]
The claim
[1] This is a claim by the owner of a property for specific performance of a contract to sell the property to the defendant. The defence is that the contract was cancelled under s 7 of the Contractual Remedies Act 1979 for misrepresentation.
Background narrative
[2] The property in issue is a house situated at 6 Palliser Road, Roseneath, Wellington. It was built in about 1920/30, and has been owned by the plaintiff company for about 12 years. The house was let to a tenant. Ms Deborah Marris, the managing director of the company, lives in Sydney. In 2013, Ms Marris listed the property for sale through Harcourts. There were a number of quite severe earthquakes in Wellington in July and August 2013 and these prompted Ms Marris to ask the Earthquake Commission (EQC) to inspect the property to ensure there had been no damage. She spoke to EQC on or around 5 September 2013. On
7 October 2013 Ms Di Austin from Harcourts met with EQC representatives on site and they inspected the property. Ms Austin reported by email to Ms Marris on that visit.
[3] On 24 October 2013, Ms Miroula Fakas, a selling consultant with Harcourts, was asked by the defendant Mr David Speirs to arrange a viewing of the property. Ms Fakas arranged for that to take place the following morning, 25 October 2013. She and Ms Austin met Mr Speirs at the property so that he could view it. What was said in the course of that viewing is of critical importance. I discuss that fully later, and do not address it in this background narrative. At the end of the viewing Mr Speirs told Ms Fakas that he wanted to make an offer on the property. They went to Harcourts’ office where an offer was prepared on the REINZ/ADLSI form (ninth edition 2012). Mr Speirs made an unconditional offer of $1,100,000. The vendor counter offered at $1,375,000. Mr Speirs responded with a final offer of $1,300,000 which was accepted on the afternoon of Friday 25 October 2013.
[4] That afternoon, Ms Austin sent an email to Ms Fakas congratulating her on the sale. She attached the contract and asked Ms Fakas to forward that to the
purchaser and arrange for payment of the deposit. That email contained some further background information, including the following:
The vendor had the property inspected by the EQ Commission after the last of the two recent earthquakes, everything was found to be secure and that there was no movement of the house. No claim was made. This inspection was done to ensure that there were no problems.
[5] Ms Fakas sent an email to Mr Speirs on Saturday 26 October 2013 in which she passed on much of the information contained in Ms Austin’s email to her, including that paragraph.
[6] Sometime later, Mr Speirs made enquiries about arranging insurance over the property and the insurer asked to see the EQC report. He telephoned Ms Fakas to ask for that, and also to arrange access for a builder, to look at building a deck on the property. Ms Fakas replied by email on 27 November 2013 as follows:
The EQC people said there was nothing to report. Vendor doesn’t have a written report so cannot supply one. No movement no breakages no issues were recorded when the two EQC people came through.
[7] The next day, 28 November 2013, the lawyers then acting for Mr Speirs wrote to the plaintiff’s lawyers on that issue. In the course of the letter they said:
In the meantime, an issue of considerable concern has arisen for our client.
At the time that your agent prepared the agreement for our client, our client intended that the agreement would be subject to a building inspection report. Your agent advised our client that the property had been fully inspected by EQC engineers and that EQC was completely satisfied with the condition of the property.
Only because of the assurance from your agent that EQC had fully inspected the property was our client induced to enter into the agreement without requiring a building report condition.
The agent has now reported to our client that the vendor does not have a written report from EQC.
In response to an enquiry from our client EQC has confirmed that EQC provides a written report for every property inspected by EQC. If there was no written report from EQC then the property has not been inspect by EQC.
[8] The plaintiff ’s lawyers referred that letter to Harcourts, and Ms Fakas commented to Mr Speirs in an email dated 29 November 2013 in these terms:
We have no recollection of you requiring or requesting a builder’s report during or after negotiations. I mentioned to you the Monday after you had bought the property that EQC had inspected the property and there were some concept plans for a deck which we should be able to pass on to you – that is all. EQC did not write a report. They inspected the property on the vendors request and in the presence of the listing agent (two people came up to the property) and, finding nothing wrong, left the property (hence no report).
[9] As it happens, on 28 November 2013, EQC wrote to Ms Marris in Sydney recording that Ms Marris had on 5 September 2013 lodged a claim with EQC in respect of the property relating to an earthquake on 16 August 2013. The letter reported on the assessment made in these terms:
The Statement of Claim completed by the EQC assessor who inspected your property concludes that the damage was of a pre-existing nature and therefore was present at the time of the Earthquake. We are therefore unable to accept your claim. A copy of the statement of claim outlining the damage recorded at your property is enclosed.
[10] Attached to that letter was a one page statement of claim reporting on the property indicating, for all rooms and internal and external areas of the house, that there was no event damage. The statement noted defective items for some areas, which were recorded as being not earthquake damage.
[11] Mr Speirs replied to Ms Fakas’ email of 29 November 2013 on
18 December 2013. He said he had spoken with EQC, who confirmed there was a current claim on the property and in order to access the information he needed to be added as an interested party. EQC emailed a copy of the statement of claim and the letter of 28 November 2013 to Ms Marris on that same day, 18 December 2013. On
20 December 2013, Ms Fakas emailed that letter and the statement of claim to
Mr Speirs.
[12] There was further correspondence which it is not necessary to detail. Mr Speirs pressed for a further inspection of the property and was advised that a pre- settlement inspection in the week of settlement would be authorised, but not earlier. On 24 January 2014, the date due for settlement, Mr Speirs’ then lawyers wrote to the plaintiff’s lawyers and said:
The agreement will not settle today.
We wrote you on the 28th of November 2013 and set out in detail the misrepresentations made by your client’s agent which induced our client to enter into the contract to purchase the property from your client. Our client had wished to enter into a contract which would have been conditional upon our client’s experts investigating the state of the property and reporting to our client for his satisfaction.
Your client’s agent induced our client to enter into an unconditional contract by assuring our client that neither an expert inspection nor an expert’s report were necessary. Your client’s agent stated that expert investigation was not necessary because the EQC had inspected the property and that there was nothing to report. Your client’s agent confirmed that there had been no movement, no breakages and no issues at the property recorded when the QC [sic] inspected the property.
Solely in reliance upon the assurance of your client’s agent to our client, our client entered into the agreement.
…
Our client therefore gives notice of cancellation of the contract upon the basis that sections 7(3)(a) and sections and [sic] 7(4)(a) and (b) of the Contractual Remedies Act 1979 apply to this matter.
[13] The plaintiff’s lawyers responded disputing that cancellation. These
proceedings followed.
The alleged representation
[14] The essential issue in this case is whether a representation was made by Ms Austin or Ms Fakas at the inspection of the property on 25 October 2013. There is a conflict in the evidence, between that of Mr Speirs on the one hand and Ms Austin and Ms Fakas on the other, which I must resolve.
[15] Mr Speirs’ evidence in chief on the point was contained in his brief of
evidence in these terms:
9.We eventually gathered in the lounge and I told them I was keen, but my biggest concern was about the foundation for an older structure like this on the side of a hill and I would want to get some advice about that. I told them I wanted to have the foundations checked and inspected before I put an offer in, so that I could put in, as I put it, “A clean offer”. What I had meant by that was that I thought that if I could get an engineer to look at it straightaway and tell me whether or not there were any concerns, I would be prepared to put an unconditional offer in. Mira Di Austin and I were in the lounge when I said this.
10.Di Austin told me then that the owner, who lives in Australia, was a friend of hers, that she was very particular. She said that as soon as the earthquake had happened (in August), that she had got hold of an engineer and that a full inspection of the house had been done and they had reported that it was absolutely perfect and the foundation was 100 percent fine.
11. Towards the end of the site visit Mira asked me whether or not I wanted to see under the house and I recall distinctly telling her that there is no point if engineers had already looked at it. I said this to Mira with Di Austin present. That was the last discussion we had before we said our goodbyes and I left the property. After than Mira and I walked up the path from the house together and she asked me “do I want to put in an offer” to which I said “yes”.
[16] In cross-examination, he was asked who first mentioned the foundations. He said that it was Ms Austin and that she was the only person that spoke to him about the foundations. He said that the initial conversation that led to the foundations discussion concerned earthquakes, and he expressed his concern about the foundations. He also said that Ms Austin had told him that the vendor, who was very particular, had an inspection done straight after the earthquake and that they were
100 per cent fine.
[17] In neither his evidence in chief, nor in that cross-examination, did Mr Speirs say that Ms Austin had referred to EQC. The statement in the letter from his lawyers dated 28 November 2013, to the effect that the agent had advised him that the property had been fully inspected by EQC engineers and that EQC was completely satisfied with the condition of the property, was put to him. He was asked why in his brief of evidence he did not mention whether Ms Austin told him about EQC. He said:
I can’t answer that question. Di Austin definitely mentioned the EQC, I state
that categorically.
[18] He further said:
Di Austin definitely made representations to me that EQC had inspected the property.
[19] It was put to him that EQC was not mentioned to him at all until Ms Fakas’
email of 26 November 2013 and he responded “totally incorrect”.
[20] Mr Speirs was also cross-examined on his evidence, given at paragraph 11 of his brief, that he told Ms Fakas there was no point in looking under the house if engineers had already looked at it. He said:
A. … Di and I were talking in the lounge for some length of time, while Mira familiarised herself with the property. Later we were in the kitchen and Mira says, “Well would you like to have a look down underneath the house?” And because I’d previously had assurances from Di Austin, I said there’s no point in me having a look underneath the house, engineers had already seen it.
Q. So when did that discussion with Mira in the kitchen take place? A. This is towards the end of the visit.
Q. Well Mira has denied having that conversation with you? A. Yes I agree with that. It seems incredible.
[21] Ms Austin in her evidence said that on 7 October 2013 she met Ms Lutton from EQC and their builder Mr Bull at the property. She stayed with them and let them do a full inside inspection and waited until they came back out to the street to see if there were any problems with the property. Ms Lutton said to her there was nothing of consequence. Her evidence is supported by her diary, which records the appointment with Ms Lutton and Mr Bull, and contains the notation, made immediately after the inspection: “nothing to report due to EQ”.
[22] Of the meeting on 25 October 2013, Ms Austin’s evidence in chief in her brief is in these terms:
5. On 25 October Mira and Mr Speirs came to the house at 9:15am.
We were introduced and I remained in the house until the close of the appointment to ensure that should Mr Speirs want to ask me
questions, or Mira require assistance, I will be available to help. I
provided a Title and the Harcourt’s A4 Flyer to Mr Speirs and advised him that the property has a small encroachment (garage) and that there is an annual fee as well as a Licence paid to the Council for the use of the land. I also informed him that the house needs painting. Mr Speirs did not ask me any questions about the house, and neither did he suggest that he wanted to obtain a builder’s report. The appointment lasted about 40 minutes and I farewelled Mr Speirs from the double garage. Mira then informed me that he was interested in the property.
6.At no stage did Mr Speirs mention anything to do with the foundations of the house and there was no discussion of an EQC claim or report.
[23] In cross-examination, it was put to her that if a claim had been lodged with EQC and there was no result that would have had to be disclosed to a prospective buyer. There was then this exchange:
Q. – these are the first people you have taken through this house since
EQC looked at it? A. Yes.
Q. The good news about EQC and their inspection is something you
would likely to tell people isn’t it?
A. May I stop you just one moment. Your client came through in a great hurry, right.
Q. 40 minute hurry.
A. Yes and I left him with Mira, the agent who was actually showing him through and he didn’t at all ask me – (1) to have a builder’s inspection done on the property and (2) whether or not there is an engineer’s report on the property. He didn’t ask me about any reports at all.
Q. I put to you that it’s more likely than not that you told him about
EQC and the inspection?
A. I beg your pardon, you're quite wrong.
Q. I suggest to you that it was a promotional feature of this house now, in your mind, that you would have been likely to talk about?
A. I would have if the man had spoken to me but he didn’t speak to me.
Q. Well he must have because you told him about an encroachment
licence didn’t you?
A. He was not speaking to me, I was speaking to him.
[24] It was further put to her that there must have been a discussion as described by Mr Speirs in these terms:
Q. You must have spoken to him during that time other than to tell him that there’s an encroachment licence and a need for painting, you must have said more than that?
A. Actually it’s not usual for me to talk a lot so there is no must.
Q. You’ve given some pretty long answers to me. You must have been there as a good sales person is to promote a sale of the house mustn’t you?
A. I was there as the listing agent, not selling at that stage.
Q. You were assisting a brand new young real estate to show her the
ropes weren’t you?
A. She knew Mr Speirs, I didn’t.
Q. Okay.
A. She had a friendship for him, with him that I didn’t.
Q. You're there to promote a sale aren’t you?
A. The selling agent, Mira, knew Mr Speirs better than I did, it’s a – I
understand it’s a historical friendship.
Q. You thought and believed that the EQC result was a good feature of
this house didn’t you?
A. Um, we’ve passed that stage sir.
Q. I see. I put to you again, that you must have referred to that EQC
inspection to this buyer?
A. No that’s not correct because I didn’t have a report. I had an inspection done and 15 days later this gentleman comes into the house to have a look at it, I am talking about the current, what I had given him and I haven’t spoken to him at all about an inspection so you're wrong.
[25] Ms Fakas in her evidence in chief described the viewing on 25 October 2013 in these terms:
5.The following morning, at about 9.15am, Di Austin (Harcourts’ listing agent) and I met Mr Speirs at the property and showed him around. During this inspection, Di told Mr Speirs that there was a garage encroachment and that the house needed painting.
6.I made no statement to Mr Speirs about the state of the house’s foundations and I did not hear Di Austin make any such statements. I was present and close to Di Austin throughout the inspection and at no time did she say anything to Mr Speirs about the foundations or any claim to EQC or any inspection by them.
7.Mr Speirs did not indicate that he required a building report or inspection, or an engineer’s report or inspection. He did not mention any worries or concerns about the foundations. Neither Di nor I had any reason to believe Mr Speirs had any concerns about the property.
8.After Mr Speirs had looked around, he said he wanted to make an offer. I replied that the C.V. was $1.275 million. He then told me he would be at the Harcourts office by 10.00am to sign the contract.
[26] In cross-examination, she said that the viewing of Mr Speirs on
25 October 2013 was the first time that she had seen the property at 6 Palliser Road. She was taken in detail through the course of the viewing. Her statement that she had been close to Ms Austin the entire time was put to her and she responded, in these terms:
Q. So I am just referring to your evidence at paragraph 6, “I was present and close to Di Austin throughout the inspection and at no time did she say anything to Mr Speirs about the foundations or any claim to EQC or any inspection by them.” So is that first part, that you were present and close to Ms Austin, the entire time.
A. Yes.
Q. That’s not true is it?
A. No I was close to her. The house is just, the staircase is just a little bit down the stairs and she was present the whole time and when there was three of us, in the house, I was always around.
Q. When there was the three of you? A. Yes.
Q. But when Mr Speirs went downstairs you followed him down and
Ms Austin stayed up upstairs? A. That’s correct.
[27] She was further cross-examined in these terms:
Q. Now is it fair to say that on this particular listing Ms Austin was the, was training you? You were looking at how she did it, was that not a fair comment?
A. She was present because I was still under supervision. Q. And Ms Austin did the talking?
A. It was her listing.
Q. Yes, so she did the talking? A. That's correct.
Q. And did she have a pitch [for] Mr Speirs about the house? A. No pitch.
Q. What positive things did she say about the house to Mr Speirs?
A. All she mentioned was that it had been painted and there was an encroachment.
Q. Well she said that it needed to be painted didn’t she?
A. Yes it needed to be painted, that's correct. Q. And there was an encroachment?
A. Yes.
[28] It was then put to her that Ms Austin must have pointed out positive features of the property. She agreed that they had referred to there being stunning views, but could not recall what positive features were pointed out. Mr Speirs evidence was put to her in these terms:
Q. Now you’ve read, haven’t you, Mr Speirs’ evidence and you’ve commented on it and you know that Mr Speirs says that there was a distinct conversation with Ms Austin, with you there, where he asked, well he said, he wanted to have engineers through to look at the foundations and that’s when she raised the EQC inspection, that’s what he says, you know that isn’t it?
A. That’s not correct.
Q. You are saying he is just lying?
A. If that is what you want to say, it is not correct, he did not mention any of that.
Q. And then he also says, doesn’t he, that you asked him whether or not
he wanted to look under the house? A. Not correct.
Q. Just didn’t happen you say?
A. No.
Q. And he, his response to that was, “Well why would I if engineers have already looked at it” never happened?
A. I beg your pardon?
Q. And his response, he says, was “Well there’s no need if engineers have already looked at it.”
A. None of that was ever discussed.
Discussion
[29] I find Mr Speirs’ evidence that a representation was made at the viewing on
25 October 2013 implausible, for a number of reasons, which I now articulate.
[30] If I were to accept Mr Speirs’ evidence of what Ms Austin said to him, it necessarily follows that Ms Austin told him a deliberate falsehood. Mr Speirs’ evidence is that he was told that the vendor had had a full inspection of the house carried out by an engineer. There is a lack of precision in his evidence as to whether he was told that the engineer had been engaged by the vendor, or by EQC, in carrying out its inspection. But his evidence is clear that the inspection was by an engineer. Ms Austin knew that there had been no engineer’s inspection. The only inspection had been by Ms Lutton from EQC (whose position is unclear: perhaps an assessor, but in any event not an engineer) and a builder. If Mr Speirs’ evidence is accepted, Ms Austin must have known that a statement that the property had been inspected by an engineer was important to him. He said that Ms Austin’s statement to him followed his statement that if he could get an engineer to look at the property straight away and tell him whether there were any concerns, he would be prepared to put in an unconditional offer. So the fact that the inspection was conducted by an engineer was important to Mr Speirs, and known by Ms Austin to be important to him. If Ms Austin had told a falsehood, that the property had been inspected by an engineer, it is highly improbable that she would have couched the terms of her email to Ms Fakas, set out at [4] above, in the terms that she did. In her email to Ms Fakas, Ms Austin never mentioned an engineer. Ms Austin may not have intended that her email comment to Ms Fakas be communicated to Mr Speirs, but she must have anticipated the possibility that Mr Speirs would hear of it. She was communicating to a relatively inexperienced agent, Ms Fakas, and did not instruct her not to pass the information onto Mr Speirs. Indeed, there was little reason to pass that information to Ms Fakas unless it was intended that Mr Speirs might be told. If Ms Austin had told a deliberate falsehood that the property had been inspected by an engineer, then I find it implausible that she would have couched her email in the way she did.
[31] I also find it implausible that if Ms Austin had told Mr Speirs that the property had been inspected by an engineer, Mr Speirs did not, when he received
Ms Fakas’ email passing on Ms Austin’s email comment to her, immediately take issue with that statement. On his evidence, he had just entered into an unconditional contract to purchase the property for $1,300,000, relying upon a representation that there had been an engineer’s inspection following the recent earthquakes, on the strength of which he had decided not to get his own report on the condition of the property. If Mr Speirs’ evidence is accepted, that communication from Ms Fakas must have immediately triggered alarm bells, because it did not mention an engineer’s inspection. But the issue of an EQC report was not raised by him until almost a month later.
[32] I also find implausible Mr Speirs’ evidence as to his interpretation of the representation. He had been told, on his evidence, that the report was “absolutely perfect and the foundation was 100 per cent fine”. He had relied upon those statements, on his evidence, as indicating not merely that there had been no problems or damage arising from the recent earthquakes, but as relating to the condition of the foundations generally. He says that he understood those statements to be a representation to the effect that there were no problems at all with the foundations, whether by reason of earthquakes or otherwise. Mr Speirs’ written brief did not refer to EQC, but he said that he was told that an engineer’s inspection was commissioned after the earthquake. In the letter dated 28 November 2013 from his lawyers, quoted at [9], he is said to have relied upon an assurance that the property had been fully inspected by EQC engineers and that EQC was completely satisfied with the condition of the property. Mr Speirs did not explain to my satisfaction why he thought that an inspection by an engineer engaged by EQC would be concerned with anything other than possible earthquake damage. I do not find it credible that Mr Speirs, who is experienced in business matters, would have assumed, without further confirmation, that the inspection of which he says he was told would have extended beyond an examination of whether any earthquake damage had occurred, to a full examination of the soundness of the house from an engineering perspective in all respects.
[33] I also find unconvincing Mr Speirs’ evidence about exactly what he was told at the viewing on 25 October. There is a considerable difference between what he said in evidence, and what he relied upon when cancelling the contract. In evidence
he said that the representation was that the foundations were “100 per cent fine”. In his lawyer’s letter of 24 January 2014, cancelling the contract, the alleged representation is described in terms that are similar to Ms Fakas’ email. There is a substantial difference between what was said in the email, and the alleged representation, which was that an engineer had inspected as a result of the recent earthquakes, and that the report was “absolutely perfect and the foundation was
100 per cent”. That difference was not referred to in the letter of cancellation.
[34] For these reasons, I do not accept Mr Speirs’ evidence that the representation
he alleges was made by Ms Austin on behalf of the plaintiff.
[35] For completeness, I mentioned that the plaintiff relies upon two pieces of evidence from Ms Fakas to suggest that Mr Speirs had repented of his bargain. The first is her evidence that she and Mr Speirs were both at the house of mutual friends, Mr and Mrs Cameron, on the evening of 25 October, after the contract had been signed. She said that Mr Speirs “expressed that he had buyer’s remorse”. Mr Speirs denied that, and called Mr Cameron, who said he did not recall such a conversation. I do not rely on that alleged remark by Mr Speirs in reaching my conclusion that no representation was made. I therefore need not address the conflict of evidence on it.
[36] The second is Ms Fakas’ evidence that on 23 December 2013 she had a conversation with Mr Speirs. She described this in her evidence in these terms:
57.At 2.00 pm 23 December 2013 Mr Speirs called me and told me he had gone completely cold on the property. He told me that he spoke to his lawyer, and his lawyer advised him that he cannot get out of the contract and the only way out is to go to the Real Estate Agents Authority. He told me it was in my best interest to get him out of the contract. I found this threatening and intimidating, so I informed management.
[37] That description is consistent with a file note she made at the time. Mr Speirs accepted that he rang her and told her he had “gone cold on the property”.
[38] This evidence might suggest a concern on Mr Speirs’ part that he may be unable to reply upon the alleged representation as a ground for cancelling the contract. If so, it potentially supports the conclusion I have reached. Again, I have
reached that conclusion independently of that evidence, so I need not discuss it further.
[39] Furthermore, I find unconvincing Mr Speirs’ evidence that he was induced to enter into the contract in reliance upon that representation. His evidence is that he initially intended to have his own inspection done before committing himself unconditionally to the purchase, but was induced not to do so by the representation he says was made to him. I find it implausible that he would have been induced to dispense with his own inspection, on the basis of a verbal assurance from the agent, without seeking further confirmation of the engineer’s report. The words which he says Ms Austin used, that “it was absolutely perfect and the foundation was
100 per cent fine” were clearly and obviously not a quotation from a report. I do not accept that Mr Speirs believed that the engineer had reported in precisely those terms. If his evidence about what Ms Austin said was accepted, he must have understood that Ms Austin was paraphrasing the conclusions in the engineer’s report. I do not accept that he would have been content to rely upon that verbal description to enter into a substantial contract, without making the inquiries which he says he had otherwise intended to make. I do not accept that he would have been content to rely upon an engineer’s report he had not seen.
[40] I have rejected the contention that the representation for which Mr Speirs contends was made. In reaching that conclusion I have considered Mr Speirs’ evidence, and the contemporary documentary evidence. I have not directly addressed the conflict between his evidence and that of Ms Austin and Ms Fakas. They deny that anything at all was said about the EQC inspection. It is a necessary corollary of my rejection of Mr Speirs’ evidence that the representation was made that I accept their evidence that the representation was not made.
[41] However, for completeness, I address the possibility that the topic of the earthquake inspection may have been discussed to some extent during the inspection. While Ms Austin and Ms Fakas’ evidence is that it was not, I would have less confidence in concluding that the subject was not discussed at all at the viewing on
25 October 2013. There had been an inspection by EQC, and Ms Austin had been told that there had been no earthquake damage. Her evidence on that point is
confirmed by her contemporaneous diary note. It would not be surprising if that had been mentioned at some stage during the viewing. The possibility that it might have is strengthened by the terms of Ms Austin’s email to Ms Fakas that afternoon. I therefore consider the possibility that the information which is contained in that email, and which was conveyed to Mr Speirs in Ms Fakas’ email after he had signed the contract, was conveyed, in essentially those terms, before the offer was signed.
[42] If that information was given to Mr Speirs, in essentially the terms conveyed by Ms Austin in her email to Ms Fakas, then I find that it was not a misrepresentation. The advice in that email was substantially true. It accurately reported what I have held Ms Austin was told at the EQC inspection. It was therefore not a false representation when made. It was not later rendered inaccurate by the information in the subsequent EQC letter and statement of claim. The EQC statement of claim reported internal damage by reporting on each room in the house. For each room under the heading “Event Damage”, the answer was given as no. For four rooms, there was an additional description which described some items of damage or items in need of repair. In three of those rooms, those items were specifically noted as “not EQ damage”. In the fourth, a toilet, the damage described was not of a nature likely to have been caused by earthquake. In reporting external damage, the statement of claim list different individual components of the house. Under the heading “Event Damage” the answer given for all components was “no”. For one item, decks, there was an additional description which, as relevant, said “evident signs of long term subsidence, no EQ damage”. There were specific items for foundations and piling. Each of those had the answer no to the question “Event Damage”, and there was no further description against them.
[43] That report is substantially consistent with the statement that “everything was found to be secure and that there was no movement of the house”. Mr Speirs places strong reliance on the notation in the EQC statement of claim, relating to the decks, of “evident signs of long term subsidence” as indicating a problem with the foundations. On its face, the statement of claim does not support that proposition. The reference to evident signs of long term subsidence is a notation about the deck. In relation to foundations and piling, no subsidence is noted. That does not mean that there was in fact no subsidence, since the inspection was not carried out for that
purpose. But the statement of claim, received subsequent to Ms Fakas’ email, does not make the statement in the email inaccurate.
[44] For these reasons, I conclude that if there was a statement at the viewing, to the same effect as the post-contractual communication to Mr Speirs the following day, that statement was not a misrepresentation.
[45] The findings I have made means that it is unnecessary for me to consider other evidence adduced. Engineers were called by the respective parties, addressing the state of the foundations of the house and what work might be necessary to the foundations. I do not discuss that evidence. I observe that there would be an air of unreality in considering the extent to which the actual condition of the house differs from a representation which I have held was not made. The defendant also called a real estate agent, to give expert evidence on real estate practice and the duties of an agent. As this case turns on the factual question whether the alleged representation was made, I need not discuss that evidence.
Outcome and relief
[46] For these reasons, the defendant’s claim that he was induced to enter into the contract by misrepresentation made on behalf of the plaintiff must fail. Accordingly, no right to cancel the contract arose.
[47] The plaintiff gave a settlement notice under the contract on 27 January 2014, following the defendant’s failure to settle on 24 January 2014. Clause 10.4 of the contract provides:
10.4If the purchaser does not comply with the terms of the settlement notice served by the vendor then, subject to subclause 10.1(3):
(1) Without prejudice to any other rights or remedies available to the vendor at law or in equity the vendor may:
(a) sue the purchaser for specific performance; or
(b) cancel this agreement by notice and pursue either or both of the following remedies namely:
(i) forfeit and retain for the vendor’s own
benefit the deposit paid by the purchaser, but
not exceeding in all 10% of the purchase price; and/or
(ii) sue the purchaser for damages.
…
(3) The damages claimable by the vendor under subclause
10.4(1)(b)(ii) shall include all damages claimable at common law or in equity and shall also include (but shall
not be limited to) any loss incurred by the vendor on any bona fide resale contracted within one year from the date by
which the purchaser should have settled in compliance with the settlement notice. The amount of that loss may include:
(a) interest on the unpaid portion of the purchase price at the interest rate for late settlement from the settlement date to the settlement of such resale; and
(b) all costs and expenses reasonably incurred in any resale or attempted resale; and
(c) all outgoings (other than interest) on or maintenance expenses in respect of the property from the settlement date to the settlement of such resale.
[48] The plaintiff seeks both specific performance and damages. It is not in dispute that the appropriate remedy is specific performance. The remaining issue is the extent of the damages to which the plaintiff is also entitled.
[49] The plaintiff claims interest on the purchase price of $1,300,000 less the deposit of $65,000, that is $1,235,000, at 14 per cent per annum, amounting to
$473.38 per day. The interest rate for late settlement is prescribed in cl 3.12(1) of the contract. That provides:
3.12If any portion of the purchase price is not paid upon the due date for payment, then, provided that the vendor provides reasonable evidence of the vendor’s ability to perform any obligation the vendor is obliged to perform on that date in consideration for such payment:
(1) The purchaser shall pay to the vendor interest at the interest rate for late settlement on the portion of the purchase price so unpaid for the period from the due date for payment until payment (“the default period”); but nevertheless this stipulation is without prejudice to any of the vendor’s rights or remedies including any right to claim for additional expenses and damages. For the purposes of this subclause, a payment made on a day other than a working day or after the termination of a working day shall be deemed to be made on
the next following working day and interest shall be computed accordingly.
[50] The interest rate for late settlement is specified in this contract as 14 per cent per annum. Interest at that rate is payable for “the period from the due date for payment until payment”. Payment in this case will occur post judgment. Ordinarily, interest is awarded only until judgment, and the judgment debt carries interest at the rate prescribed under s 87(3) of the Judicature Act 1908.1 However, the Court may
award interest after judgment at the contractual rate, where the contract so provides.2
I consider that the stipulation for interest to be payable “until payment” amounts to a contractual provision for payment of interest after judgment. I award interest at the daily rate from 25 January 2014 until the date on which settlement takes place.
[51] The plaintiff also claims interest on loan repayments on its borrowings secured against the property, which amount to approximately $98.47 per day. The award of interest for late settlement will compensate the plaintiff for being out of its money, including any borrowed money, for the relevant period, so that it would be double counting to award this item to the plaintiff. I decline to award damages under this head.
[52] The other items claimed are for ongoing costs incurred in respect of the property following the defendant’s failure to settle. They include rates and encroachment licence fees paid to the Wellington City Council totalling $1,339.90, insurance costs for the property from 24 January 2014 of $3.26 per day until
17 July 2014, and thereafter at the rate of $120.60 per month, and maintenance costs for the property including gardening costs of $1,039.
[53] While the interest for late settlement will compensate the plaintiff for the use of money as consequences of the failure to settle, the plaintiff has remained responsible for the ongoing costs incurred in respect of the property which would otherwise have fallen on the purchaser of the property. Rates are a necessary payment. Continuing to keep the property insured was a prudent step. A relatively
small charge for the maintenance of the property was also a prudent step. An award
1 High Court Rules, r 11.27(2).
2 IFC Securities v Sewell [1990] 1 NZLR 177 (HC).
of these items is not double counting because they would not have been incurred if settlement had taken place on due date, and they are costs additional to the loss which is compensated for by the award of interest. I award the sums claimed.
Result
[54] There will be judgment for the plaintiff as follows:
(a) An order for specific performance of the contract for the sale of
6 Palliser Road, Roseneath between the plaintiff and the defendant dated 25 October 2013.
(b)An award of damages in favour of the plaintiff against the defendant as follows:
(i) Late interest at the rate of $473.38 per day from
25 January 2014 to the date on which settlement is effected under order (a).
(ii) The following items:
(1) Rates and encroachment licence fees of $1,339.90. (2) Gardening costs of $1,039.00.
(3) Insurance costs at the rate of $3.26 per day from
25 January 2014 to 17 July 2014, and thereafter at the rate of $120.00 per month until the date on which settlement is effected under order (a).
[55] Costs are reserved. The parties may submit memoranda if they are unable to agree.
“A D MacKenzie J”
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