Cambridge Homes Holdings Limited v Kenna
[2019] NZHC 1922
•8 August 2019
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2018-419-154
[2019] NZHC 1922
UNDER The District Court Act 2016 IN THE MATTER OF
an appeal
BETWEEN
CAMBRIDGE HOMES HOLDINGS LIMITED
First Appellant
AND
PETER SANTNER
Second Appellant
AND
GRANT PHILLIP KENNA AND CATHERINE JANE KENNA
Respondents
Hearing: 21 March 2019 Appearances:
M Majeed & V A Whitfield for Appellants P J Wright & A J Peat for Respondents
Judgment:
8 August 2019
JUDGMENT OF PAUL DAVISON J
This judgment was delivered by me on 8 August 2019 at 9:30 am Pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
Harris Tate Lawyers, Tauranga
Sellar Bone & Partners, Newmarket, Auckland
CAMBRIDGE HOMES HOLDINGS LTD v KENNA [2019] NZHC 1922 [8 August 2019]
Introduction
[1] In December 2007 the respondents entered into a written contract with Cambridge Homes 2003 Limited (CH2003) for the construction of a house on their property at Te Kauwhata. During construction by CH2003 it was discovered that the concrete floor slab it had laid was not level, and to remedy the problem CH2003 engaged a contractor to apply a self-levelling surface pour (the self-levelling pour). In accordance with the building plans but as separate work not included in the building contract, the respondents engaged a contactor to lay a wooden floor on top of the concrete slab and surface pour. However, it soon became evident that the wooden flooring had developed a hollow sound which the respondents considered to be due to defects relating to the non-adhesion of the self-levelling pour with the concrete slab causing the timber floor to lift.
[2] In August 2017 the respondents commenced proceedings in the District Court at Hamilton seeking damages of $139,172 for the cost of remedying the defects in the concrete slab and surface pour by re-laying the self-levelling pour and replacing the timber flooring. They say that although it was CH2003 that arranged the self-levelling pour, the appellants together, or either of them, subsequently assumed responsibility for it. The respondents’ claims are founded on five causes of action being: breach of contract; estoppel; breach of s 9 of the Fair Trading Act 1986; negligence; and ss 28 and 29 of the Consumer Guarantees Act 1993.
[3] The appellants, who are the second and fourth defendants in the District Court proceeding, applied for summary judgment together with the third defendant Cambridge Homes Investment Limited (CHI). The District Court granted the application for summary judgment made by CHI but declined the summary judgment applications made by the appellants. They now appeal against that decision.
Background
[4] The first company operating under the name Cambridge Homes 2003 Limited (which is not CH2003) was incorporated in 2003 and thereafter operated as a construction company building houses in the Waikato region. The directors and principals of the company were Mr Peter Santner and Mr Webb. It appears that it was
a successful building business, and in 2006 as part of a restructuring, Cambridge Homes 2003 Ltd ceased trading as a construction company and changed its name to Cambridge Homes Holdings Limited (CHH). CHH thereafter conducted business as the franchisor of the Cambridge Homes franchise. Mr Santner and Mr Webb also incorporated S & W Homes Limited, which became the Cambridge Homes franchisee for the Waikato region. S & W Homes subsequently changed its name and became CH2003.
[5] In December 2007 the respondents entered into a written contract with CH2003 (the construction contract), pursuant to which CH2003 agreed to build a house for the respondents on their property at Te Kauwhata. The second appellant, Mr Peter Santner, was a manager and director of CH2003, and he was principally involved in the discussions and negotiations that preceded the construction contract being entered into. The terms of the construction contract provided that the house would be built in accordance with the plans and specifications annexed or intended to be annexed to the contract. The contract price for the building of the house was $747,754 inclusive of GST. Pursuant to the terms of the construction contract, CH2003 was to be responsible for the laying of the concrete slab for the house. In July 2008 the respondents and CH2003 agreed that the respondents themselves would arrange for and meet the cost of a contractor to lay a wooden floor on top of the concrete slab. The work relating to the timber floor was then excluded from the scope of work required to be provided by CH2003 under the construction contract. The respondents engaged Mr Graeme Farrell of Superior Timber Floors, to lay the timber floor.
[6] The respondents allege in their statement of claim that shortly after the concrete slab had been poured it was discovered that the surface was not level and that there was variance of the levels throughout the house. In September 2008 and without involving the respondents in the decision to do so, CH2003 engaged Mr Darren Webster (the fifth defendant named in the respondents’ claim), to apply a self-levelling pour over the surface of the concrete slab.
[7] In early October 2008 the respondents’ flooring contractor went on site to lay the timber floor and found that the self-levelling pour had been applied. The flooring contractor observed that the self-levelling pour had lifted away from the concrete slab
in several places. This meant that the timber floor could not be installed without remedial work first being done to ensure that the self-levelling pour was properly adhered to the concrete slab beneath it, and the surface of the concrete slab onto which the timber floor was to be laid was properly level.
[8] The respondents allege that a meeting on site was then arranged to discuss the situation. Mr Santner advised that grinding back and re-pouring the self-levelling pour over the surface of concrete slab where it appeared the self-levelling pour had failed to adhere to the slab would rectify the problem and produce a level surface over which the timber floor could be laid.
[9] The respondents allege that Mr Santner told them at the meeting that “Cambridge Homes” would remedy any subsequent problems with the floor.
[10] Following the meeting Mr Webster reapplied the self-levelling pour over the areas of non-adhesion and the respondents were advised that the concrete pad was ready for the timber floor to be laid. The respondents’ flooring contractor then proceeded to lay the timber floor.
[11] On 15 December 2008 CH2003 issued a certificate of completion in relation to the construction contract signed by Mr Santner, and the respondents moved into their new house.
[12] In September 2010 the respondents discovered that the floor had developed a hollow sound. They informed CH2003 but received no response. By Mid-2013 the area of the floor having a hollow sound had expanded. The respondents arranged for their flooring contractor to examine it and he concluded that it appeared the self- levelling pour had once again lifted away from the concrete slab. In November 2013 Mr Santner visited the respondents at their home to inspect the floor. The respondents allege that Mr Santner agreed at this meeting that the hollow sound of the floor appeared to be due to the self-levelling pour having lifted away from the concrete slab.
[13] The respondents say that Mr Santner did not dispute that “Cambridge Homes” (being as the respondents described it, an umbrella term capturing the three entities of
CH2003, CHI and CHH) was responsible for rectifying the problem and suggested a possible remedy could be achieved by injecting glue into the cavity beneath the floor. The respondents allege that Mr Santner reassured them that Cambridge Homes would fix the problem saying to Mrs Kenna: “Don’t worry, Cathy. We will see you right over this.”
[14] In November 2013 Mr Santner emailed the respondents’ flooring contractor to arrange the suggested injection of glue into the cavity beneath the floor. He was advised by the contractor that he doubted the process would work and, in any event, would result in a floor with multiple holes.
[15] In mid-2014 the respondents say that they were assured by a representative of CH2003, Mr Dekker, that Cambridge Homes would continue working on remedying the flooring issue.
[16] In late February or March 2015 Mr Neil, a consultant engaged by Cambridge Homes, visited the respondents at their home to discuss the floor problem. During the meeting Mr Neil expressed his opinion that the problem of the hollow sound was caused by the self-levelling pour, and said that removal of the self-levelling pour and full replacement of the floor would be required to remedy the problem. Mr Neil was to provide a report on the matter to Cambridge Homes. Mr Neil subsequently forwarded an email to the respondents’ flooring contractor suggesting that the glue injection remedy should be undertaken. The respondents say that in June 2015 they ascertained that Mr Neil was no longer engaged by Cambridge Homes and Mr Santner was unavailable as he was overseas.
[17] The respondents say that on 15 March 2016, Mrs Kenna spoke by telephone to Mr Santner. During their conversation Mr Santner blamed the flooring contractor for causing the flooring defects.
[18] By 31 March 2016 CH2003 had ceased trading. The respondents were not informed of this development and proceeded to communicate with Mr Santner in the belief that CH2003 was still viable and solvent.
[19] Thereafter, on 9 June 2016, Mr Santner sent an email to Mrs Kenna denying liability for the flooring problem and commenting that it appeared there was shrinkage in the timber floor itself. He wrote:
The contractual situation of this issue is that Cambridge Homes is not the main contractor on the supply and laying of the flooring. We have not been paid to be in control, if something goes wrong with the floor. You need to seek remedy from the contractor you appointed to this part of the contract as he is ultimately responsible to sort this problem out. There appears to be shrinkage in the flooring itself and again your contractor has to explain this event to you. Cambridge Homes obviously is happy to stand by the products they supply, but we did not supply or install this flooring.
[Emphasis added].
[20] On 12 August 2016 an expert retained by the respondents inspected the floor. He later commented in his report that the bond between the concrete pad and the self- levelling pour had failed, and that the problem was not associated with the flooring timber.
[21] In late 2016 the respondents endeavoured to have their dispute with CH2003 referred to arbitration, and applied to the New Zealand Law Society for the appointment of an arbitrator. On 21 December 2016 the New Zealand Law Society wrote to the respondents’ solicitor saying that it had been advised by CH2003’s accountants that “due to its solvency” the company had ceased trading on 31 March 2016.
[22] On 12 January 2018 Mr Santner alleged that the respondents’ flooring contractor had laid the floor negligently by using timber with moisture levels that were too high. On 20 July 2018 CH2003 was removed from the Companies Register.
The District Court Judgment
[23] In his judgment Judge Spear referred to and set out Rule 12.2 of the District Court Rules 2014, noting that pursuant to r 12.2(2) the court may give judgment against a plaintiff only if the defendant satisfies the court that none of the causes of action in the plaintiff’s statement of claim can succeed. Judge Spear also set out the
relevant legal principles as summarised by the Court of Appeal in Westpac v Kembla,
and undertook a detailed review of the factual background.1
[24] Judge Spear observed that Mr Santner was a director and controlling influence of all the relevant Cambridge Homes defendants at all material times. The Judge noted that in October 2008 Mr Santner attended a meeting at the house with the respondents at which Mr Webster, who had applied the self-levelling pour, also attended. At the meeting Mr Santner proposed a solution to the flooring problems which involved the remedial work being undertaken by or on behalf of Cambridge Homes. Once that remedial work had been undertaken, Cambridge Homes advised the respondents that the problem with the self-levelling floor had been resolved and the concrete base was ready for the laying of the timber flooring.
[25] The Judge found it to be of significance that from November 2013 Mr Santner became actively involved in the dispute that had arisen regarding rectifying the problem of the hollow sounding flooring, and that Mr Santner’s involvement was obviously an attempt to achieve some form of resolution. The Judge noted that in these conversations, Mr Santner referred to “Cambridge Homes” rather than CH2003, which was perfectly understandable in that context.
[26] The Judge then observed that by March 2016 there was a significant change in the approach adopted by Mr Santner when dealing with the respondents in relation to the flooring problem. When Mrs Kenna telephoned him on 15 March 2016, Mr Santner for the first time told her that he considered responsibility for the problem lay with the respondents’ own flooring contractor, Mr Farrell.
[27] The Judge set out Mr Santner’s email of 9 June 2016, in which he stated that “Cambridge Homes obviously is happy to stand by the products they supply…”
[28] Judge Spear then examined the issue of what entity Mr Santner meant when he wrote “Cambridge Homes”, as by then CH2003 had ceased to trade for reasons of solvency, and the Cambridge Homes Waikato franchise had been either sold or taken up by a new and entirely separate company, Cambridge Homes (Waikato) Ltd in
1 Westpac Banking Corporation v M M Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA).
respect of which Mr Santner apparently had no interest. The Judge noted that the respondents had been reassured by Mr Santner’s statement in his email of 9 June to the effect that Cambridge Homes would stand by its products, indicating to them that if the fault with the floor was laid at Cambridge Homes’ feet, Cambridge Homes would meet the cost of repair or replacement. The Judge also noted that the respondents were not aware that CH2003 had ceased trading at 31 March 2016, and that they were not aware of the corporate structure of the Cambridge Homes group of companies.
[29]Judge Spear concluded:
[37] In these circumstances, it is at least possible that a Court, with the benefit of a full hearing of the evidence and with a full disclosure, will conclude that Mr Santner was indeed representing CHH and thus the Cambridge Homes franchise when he made the representation particularly evidenced by his email of 9 June 2016. If that was not the case then one would assume that Mr Santner would have explained that CH2003 had ceased trading and would not be able to meet any damages for the cost of repairing or replacing the floor if found liable.
[38] A party seeking to rely upon a claim based on estoppel must establish four elements:
(a)The party against whom the estoppel is alleged has acted in a clear and unequivocal manner that has caused the claimant to have a certain belief or expectation;
(b)The claimant has reasonably relied upon that belief or explanation
(c)The claimant has suffered detriment by relying on the belief or expectation
(d)It would be unconscionable for the party against whom the estoppel is alleged to be permitted to depart from the belief or expectation
[39] The argument for the plaintiffs is that they understood that they were dealing with a solvent building company and that Mr Santner’s representations that Cambridge Homes would stand behind its product could be taken as a measure of comfort. I consider that it is at least arguable that this was so and that it was reasonable for the plaintiffs to have that belief. What detriment the plaintiffs may have suffered as a consequence of relying on Mr Santner’s representation may emerge during the course of discovery as they may have lost the opportunity to recover against CH2003 by their reliance on Mr Santner’s representations. That could well be unconscionable.
[footnote omitted]
[30]Judge Spear then addressed the Fair Trading Act cause of action and said:
[40] Whether or not that claim is established on the basis of an estoppel, it is certainly arguable that Mr Santner, both in his own respect and on behalf of CHH, had engaged in misleading and/or deceptive conduct in trade. It is unnecessary for the purpose of this cause of action (the third claim) for there to have been a contractual relationship between the plaintiffs and CCH or Mr Santner.
[41] Ms Whitfield argued that an unfilled statement of intention will only be considered misleading if the person expressing that intention did not genuinely have that intention or had no reasonable grounds for expecting to fulfil that intention – citing the decision of AJ Gendall (as he was) in the Kinloch Golf Resort case as authority. Accepting that to be so, however, it is certainly arguable that Mr Santner did not have that intention nor did he have such reasonable grounds given the way in which he conducted himself. Furthermore, that Mr Santner’s conduct must extend to include CHH.
[footnote omitted]
[31] Judge Spear concluded by saying that it was unnecessary for him to go on and consider the merits of the claims brought in negligence and alleging a breach of the Consumer Guarantees Act 1993 as to defeat the application brought by the defendants for summary judgment it was only necessary that the plaintiffs are able to point to a cause of action pleaded against a defendant that cannot be dismissed as being without substance. The Judge found that the CHH and Mr Santner had both failed to prove that none of the causes of action brought against them could succeed, and their applications for summary judgment were dismissed.
[32] However, the Judge went on to find that as there was no evidence to connect the third defendant Cambridge Homes Investments Limited, that company’s application for summary judgment would succeed and His Honour entered judgment for the third defendant.
Legal principles – defendant applications for summary judgment
[33] The Court of Appeal in Westpac Banking Corporation v M M Kembla New Zealand Ltd explained the onus on a defendant applying for summary judgment, and the courts’ approach to determining a defendant’s application for summary judgment as follows:2
2 Westpac Banking Corporation v M M Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA).
[61] The defendant has the onus of proving on the balance of probabilities that the plaintiff cannot succeed. Usually summary judgment for a defendant will arise where the defendant can offer evidence which is a complete defence to the plaintiff's claim. Examples, cited in McGechan on Procedure at HR 136.09A, are where the wrong party has proceeded or where the claim is clearly met by qualified privilege.
[62] Application for summary judgment will be inappropriate where there are disputed issues of material fact or where material facts need to be ascertained by the Court and cannot confidently be concluded from affidavits. It may also be inappropriate where ultimate determination turns on a judgment only able to be properly arrived at after a full hearing of the evidence. Summary judgment is suitable for cases where abbreviated procedure and affidavit evidence will sufficiently expose the facts and the legal issues. Although a legal point may be as well decided on summary judgment application as at trial if sufficiently clear ( Pemberton v Chappell[1987] 1 NZLR 1), novel or developing points of law may require the context provided by trial to provide the Court with sufficient perspective.
[63] Except in clear cases, such as a claim upon a simple debt where it is reasonable to expect proof to be immediately available, it will not be appropriate to decide by summary procedure the sufficiency of the proof of the plaintiff's claim. That would permit a defendant, perhaps more in possession of the facts than the plaintiff (as is not uncommon where a plaintiff is the victim of deceit), to force on the plaintiff's case prematurely before completion of discovery or other interlocutory steps and before the plaintiff's evidence can reasonably be assembled.
[64] The defendant bears the onus of satisfying the Court that none of the claims can succeed. It is not necessary for the plaintiff to put up evidence at all although, if the defendant supplies evidence which would satisfy the Court that the claim cannot succeed, a plaintiff will usually have to respond with credible evidence of its own. Even then it is perhaps unhelpful to describe the effect as one where an onus is transferred. At the end of the day, the Court must be satisfied that none of the claims can succeed. It is not enough that they are shown to have weaknesses. The assessment made by the Court on interlocutory application is not one to be arrived at on a fine balance of the available evidence, such as is appropriate at trial.
[34] A defendant applying for summary judgment must discharge the onus of satisfying the court that none of the claims can succeed. As explained by the Court of Appeal, it is not enough for the defendant to demonstrate that the claims made against them have weaknesses. Moreover, the assessment to be made by the court at the interlocutory stage of proceedings is not one to be determined on a fine balance of the available evidence such as may be necessary and appropriate to a determination of the merit of the claim or claims at trial.
The appellants’ submissions
The Fair Trading Act cause of action
[35] In relation to the Fair Trading Act cause of action, Ms Majeed makes two principal submissions:
(a)Firstly, that the statements referred to in the email sent by Mr Santner on 9 June 2016 are not capable of constituting misleading or deceptive conduct under s 9, because Mr Santner made it clear in his email that liability was denied in respect of the flooring; and
(b)Secondly, that the respondents have no reasonably arguable case for establishing the elements of causation or loss in respect of the statement made in the email, because the email was sent after the loss suffered by them had already been incurred.
[36] Ms Majeed refers to and relies on Red Eagle Corporation v Ellis in which the Supreme Court identified a two stage test applicable to s 9 of the FTA.3
(a)Has the plaintiff proved a breach of s 9 by the defendant?
(b)Has the plaintiff suffered loss or damage caused by the contravening conduct of the defendant? This question requires the court to consider whether the plaintiff was misled or deceived, and if so whether the defendant’s conduct was the effective cause or an effective cause of the plaintiff’s loss or damage.
[37] Ms Majeed says that while the respondents as plaintiffs have pleaded that the conduct of Cambridge Homes was misleading and deceptive because Cambridge Homes had no intention of remedying the flooring faults, there is no specific pleading as to why Mr Santner’s email of 9 June 2016 was misleading.
3 Red Eagle Corporation v Ellis [2010] NZSC 20, [2010] 2 NZLR 492.
[38] Counsel submits that the Judge’s findings that Mr Santner’s email of 9 June 2016 could be taken as a representation that the respondents were dealing with a solvent company and that Cambridge Homes would stand by the products it supplied, including the flooring, are unsustainable. Ms Majeed submits that the email makes it clear that Cambridge Homes did not consider it was responsible for the flooring defects because it was not the contractor responsible for the supply and laying of the timber flooring.
[39] Counsel furthermore submits that it is clear the respondents themselves did not read or interpret the 9 June email as conveying the meaning attributed to it by the Judge. Ms Majeed notes that in her affidavit Mrs Kenna has referred to an email she sent to Mr Santner in response to his 9 June email, in which she said she was upset that Mr Santner was deflecting responsibility for the faulty floor to the flooring contractor, Mr Farrell.
[40] Ms Majeed submits that CHH did not supply any products or services to the respondents, and their contract was with CH2003. Counsel submits that no reasonable person could have interpreted Mr Santner’s email as being an assurance by CHH that it would accept responsibility for any products or services that had been earlier supplied by CH2003. Ms Majeed further submits that there is no suggestion of solvency made in the email, and nothing is said that has any association with financial soundness. She submits that it would be an extraordinary leap to suggest that a reasonable person would interpret the contents of the email as amounting to a representation of solvency. Nevertheless, the email makes it clear that Cambridge Homes did not accept it had any responsibility for the flooring faults.
[41] In relation to the issue of whether the respondents were misled by Mr Santner’s email of 9 June, Ms Majeed submits that the evidence before the court clearly shows that they were not misled. Counsel notes that following their receipt of the email, the respondents engaged lawyers and instructed them to write a letter of demand to CH2003. The letter they sent was dated 20 September 20016. Ms Majeed says that in August 2017 the respondents initiated arbitration proceedings against CH2003, but put the proceedings on hold following their receipt of advice from CH2003 that it would not take part in any arbitration. From these actions says Ms Majeed it is inconceivable
that the respondents had been led to believe anything other than that CH2003 denied responsibility for the defects in the flooring.
[42] Ms Majeed submits that the same analysis applies to the question of whether Mr Santner’s email was the effective cause or an effective cause of the loss that the respondents claim was caused by reason of their reliance on the email.
[43] Ms Majeed therefore submits that the District Court Judge’s decision ought to be overturned on the basis that there is no seriously arguable case to establish the elements of causation and loss which are required to make out a claim under the Fair Trading Act. She says that the respondents were in no different position as a result of the email as they would have been if the email had stated that CH2003 was no longer trading and would not be able to meet any future claim made against it. Counsel says that the essential point made by the appellants on this issue is that a statement cannot give rise to liability for a loss that had already been caused before the statement was made.
The estoppel cause of action
[44] Ms Majeed submits that in order for the respondents’ estoppel cause of action to succeed on the basis of Mr Santner’s 9 June email they must show:
(a)That the email contained or amounted to an unequivocal representation on behalf of CHH.
(b)That the respondents relied on the representation in the email to their detriment.
(c)That it would be unconscionable for CHH to depart from the terms of the representations made in the email.
[45] Here the appellants rely on the same arguments as they have advanced in relation to the Fair Trading Act cause of action. Ms Majeed submits that the 9 June email cannot amount to a clear and unequivocal representation that CHH and/or Mr Santner personally, intended to remedy the flooring faults. Counsel submits that the
District Court Judge’s approach involved a strained interpretation of Mr Santner’s email, and by doing so illustrates that the respondents have failed to show that the representation made in the email was clear and unequivocal.
[46] Furthermore, says Ms Majeed, the respondents did not rely on the 9 June email as containing a representation that CHH intended to remedy the flooring fault. Counsel submits that no one could rely on the email as meaning that CHH and/or Mr Santner personally would stand behind and be responsible for ensuring that the faults in the flooring were fixed at their expense, when the email made it clear that any responsibility for the faulty flooring was denied.
[47] Ms Majeed says that the respondents could not have relied on CHH in any event as they had no knowledge of it. She notes that the email contains no mention of CHH, and the respondents had no knowledge of it until the current proceedings were contemplated.
[48] Accordingly, Ms Majeed submits that the District Court Judge’s decision that there was a reasonably arguable claim that CHH is liable in estoppel because of the email of 9 June 2016, is wrong in fact and in law.
The negligence cause of action
[49] Ms Majeed notes that the District Court Judge did not address or determine whether this cause of action against Mr Santner was reasonably arguable. Counsel says that for this Court to grant summary judgment in favour of the appellants, it ought to determine that the negligence cause of action is not reasonably arguable against CHH and Mr Santner.
[50] Ms Majeed says that in the respondents’ statement of claim they allege that each of the appellants owed them a duty of care to exercise reasonable care and skill or diligence: when building the house or any part thereof; when dealing with defects in the house including in relation to the concrete slab and/or self-levelling pour and/or the timber flooring; and when advising the respondents in relation to any matter concerning or arising out of the building of the house.
[51] However, says Ms Majeed, CHH had no relationship or involvement with the respondents, and it was not a party to the construction contract. In those circumstances it could not have owed any duty of care to the respondents.
[52] Ms Majeed says that as regards Mr Santner, there is no allegation made by the respondents that he was the project manager on site, or that he had any involvement with the physical work undertaken in the construction of the respondents’ house. Therefore, allegations relating to Mr Santner arise from his attendance at particular meetings at the house and from representations he is alleged to have made during the meetings.
[53] Ms Majeed submits that in order for Mr Santner to be found to owe the respondents a duty of care, they must establish that he assumed personal responsibility for ensuring that Cambridge Homes undertook the remedial work necessary to repair the faulty flooring, concrete slab and self-levelling pour. Counsel submits that to the contrary the evidence confirms that the respondents relied on the responsibility of CH2003 and not Mr Santner personally in relation to the repair work.
[54] Ms Majeed says that the following matters all point away from Mr Santner having assumed any personal responsibility:
(a)The allegation that Mr Santner said that Cambridge Homes would rectify any problems with the self-levelling pour;
(b)The allegation that it was another Cambridge Homes employee, and not Mr Santner, who advised Mrs Kenna that she could advise Mr Farrell, the flooring contractor, that he could proceed to lay the timber flooring.
(c)The fact that Mrs Kenna emailed another member of Cambridge Homes staff and not Mr Santner when advising that a hollow sound in the timber floor had become noticeable.
(d)Mrs Kenna’s evidence that when Mr Santner proposed the use of glue to fix the problem he had said :4
we, (that is Cambridge Homes, as they were responsible and taking responsibility) would reassess and go onto the next option. Mr Santner finished up by saying, “Don’t worry, Cathy. We will see you right over this.”
(e)Mrs Kenna’s evidence in her affidavit in which she said:
We proceeded with the following course of action because of this and because Mr Santner had reassured and promised us that Cambridge Homes would fix the flooring.
(f)During 2014 and 2015 the respondents dealt with employees of CH2003 rather than Mr Santner regarding the flooring issues.
[55] Ms Majeed submits that the respondents’ pleadings and evidence are insufficient to support an allegation that Mr Santner personally assumed any responsibility to the plaintiffs.
The Consumer Guarantees Act 1993 cause of action
[56] Ms Majeed notes that in their pleading the respondents allege that the first, second, third, and fifth defendants were suppliers pursuant to s 2 of the Consumer Guarantees Act. The term “supplier” is defined in s 2 of the Act as requiring a person in trade to supply goods or services to a consumer. Counsel submits that the construction contract is clear that the any supply of services or goods was undertaken by CH2003 and not CHH.
[57] Ms Majeed accordingly submits that this cause of action could not possibly succeed.
[58] Ms Majeed concluded by submitting that the District Court Judge’s decision was wrong in fact and in law by his finding that there were reasonably arguable causes of action against CHH and Mr Santner for misleading and/or deceptive conduct under the FTA and estoppel. Furthermore, there is no reasonably arguable cause of action
4 Affidavit of Catherine Kenna (7.12.2017) at paragraph [43].
against CHH and Mr Santner in either negligence or under the Consumer Guarantees Act.
The respondents’ submissions
[59] Mr Wright for the respondents supports Judge Spear’s judgment and submits that the Judge was correct to dismiss the first and second appellants’ applications for summary judgment. Mr Wright submits that the respondents have reasonably arguable causes of action against the appellants, and says that there are disputed factual issues which will need to be addressed at trial. In these circumstances he submits that it would be wrong for the court to dismiss the respondents’ claims.
First cause of action – breach of contract
[60] The respondents submit that although CH2003 ceased trading on 31 March 2016, and has since been removed from the Companies Register, there is evidence which supports their allegation that prior to CH2003 ceasing to trade, it had transferred or assigned its responsibilities for performance of the construction contract to CHH.
[61] The respondents say that on a date well after CH2003 had ceased trading, Mr Santner made a representation to the respondents in his 9 June 2016 email on behalf of Cambridge Homes by saying that Cambridge Homes was happy to stand by the products they supplied. The respondents say that Mr Santner’s representation was consistent with his earlier statements such as his 2008 statement that “Cambridge Homes” would remedy any subsequent problems with the floor, and his 2013 statement: “Don’t worry, Cathy. We will see you right over this.”
[62] Mr Wright notes that according to the CHH website the Cambridge Homes group of companies undertook a major restructuring in 2012. Mr Wright says that there is no clear evidence as to when CH2003 began the process of winding down the company’s business prior to it ceasing to trade on 31 March 2016. Consequently it is not clear which company or companies Mr Santner was referring to on those occasions after the 2012 restructuring when he and the other Cambridge Homes representatives made further representations and gave assurances to the respondents as follows:
(a)Mr Santner said during his 2013 visit to the respondents’ home, “Don’t worry, Cathy. We will see you right over this.”
(b)In mid-2014 Mr Dekker told Mrs Kenna that Cambridge Homes would continue working on remedying the flooring issue.
(c)Cambridge Homes’ consultant Mr Neil inspected the floor in either late February or early March 2015 and indicated that Cambridge Homes was working towards finding a solution for the flooring problem.
(d)Mr Santner in his email to the respondents of 9 June 2016 said: “Cambridge Homes obviously is happy to stand by the products they supply, but we did not supply or install this flooring.”
[63] Furthermore says Mr Wright, it is not clear who the current Cambridge Homes franchisee is for the Waikato area, with CH2003 having ceased trading on 31 March 2016. It is also not clear whether any arrangements were entered into with whichever company is the current Cambridge Homes franchisee for the Waikato area regarding taking responsibility for Cambridge Homes construction work undertaken in the Waikato in relation to Cambridge Homes buildings such as the respondents’ house. Mr Wright emphasises that when Mr Santner said in June 2016 that “Cambridge Homes obviously is happy to stand by the products they supply ...”, as CH2003 had by then ceased to trade, he must have been referring to some other trading member of the Cambridge Homes group such as CHH, which was in a financial position to make good the pledge that Cambridge Homes would stand by the products it had supplied.
[64] Mr Wright notes that Mr Santner has stated in his reply affidavit that there is some overlapping between the various Cambridge Homes entities, with work being carried out by individuals from one Cambridge Homes entity for another. Counsel submits that having regard to CH2003 having ceased trading on 31 March 2016 and the subsequent representation by Mr Santner which had to have been made on behalf of one or more of the Cambridge Homes companies, the arrangements and obligations of the Cambridge Homes companies need to be determined and explained, and this cannot be done on the limited information presently available for the purposes of the
appellants’ summary judgment application. Mr Wright says that this information at present is solely in the hands of the defendants named in the respondents’ claim.
[65] Accepting that there is more to be discovered about the Cambridge Homes group of companies and their interrelationship, Mr Wright submits that on the present information it is at least open to suggest that possibly as early as 2012 CHH had taken over responsibility for performing CH2003’s obligations under the construction contract with the respondents, as part of the restructuring of the company that took place at the time. Were that to be the case it would explain why Mr Santner was able to say in his email of 9 June 2016 that Cambridge Homes would by stand by the products they supplied, when CH2003 had by then ceased trading.
[66] Mr Wright submits that should it be established that the contractual obligations of CH2003 were assigned to CHH, then there is clear evidence that CHH breached the terms of the contract with the respondents by failing to carry out the necessary repairs to the building work that had been provided by CH2003 or Cambridge Homes under the construction contract.
Second cause of Action - Estoppel
[67] The respondents say that from the time in 2008 when the concrete slab was first discovered not to be level, through to 2016, Mr Santner and other representatives of Cambridge Homes made a series of representations to the respondents that Cambridge Homes would carry out any necessary repairs and remedial work. These representations included Mr Santner’s reassurance to Mrs Kenna during his visit to their home on 20 November 2013 in which he said, “Don’t worry Cathy. We will see you right over this”, and his email of 9 June 2016 in which he said “Cambridge Homes obviously is happy to stand by the products they supply, but we did not supply or install this flooring.”
[68] Mr Wright submits that those statements were clear and unequivocal representations made by and on behalf of Cambridge Homes that it would carry out any repairs that were necessary as a result of a failure to construct the building to the required standard. Counsel submits that the statements were made in terms that are sufficiently clear to satisfy the requirements for a claim based on estoppel. Mr Wright
also relies on the statements made by the other Cambridge Homes representatives, namely Mr Dekker and Mr Neil, in which they clearly state that Cambridge Homes would remedy the flooring problem.
[69] Mr Wright submits that in the context of the summary judgment application it is at least arguable that those representations made on behalf of Cambridge Homes were being made on behalf of CHH given the possibility that CH2003 may not itself have been in a position to carry out the necessary repairs and therefore could not have been the company that was being referred to by those making the representations.
[70] Mr Wright submits that the respondents believed and relied on the representations made to them that Cambridge Homes would carry out the necessary repairs to the floor. He submits that it was entirely reasonable for the respondents to have done so as the representations were being made by a professional construction business which had an extensive history of having carried out similar house building projects in the Waikato area.
[71] Counsel submits that the respondents can also satisfy the element of estoppel that they suffered detriment by their reliance on the representations. Mr Wright says that the respondents allowed Cambridge Homes to continue to use the self-levelling pour process to rectify the problem despite it not being successful the first time it was used. And furthermore, by accepting and relying on Mr Santner’s assurances that Cambridge Homes would carry out any necessary remediation, the respondents lost the ability to enforce their contractual rights against CH2003 due to that company being no longer financially viable by 31 March 2016, giving rise to possible limitation issues.
Third cause of action – misleading conduct – s 9 Fair Trading Act 1986
[72] In this cause of action the respondents allege that at all material times the appellants, as the first and second defendants, and Mr Santner were “in trade” as defined in the Fair Trading Act 1986 (FTA), and that Mr Santner acted as the agent of the appellants, and furthermore and alternatively acted in his personal capacity. The respondents allege that CHH and/or Mr Santner were engaged in misleading or
deceptive conduct and that they were misled and deceived to their detriment, causing loss.
[73] The respondents allege that various representations were made to them on behalf of CH2003 and CHH and by Mr Santner himself, regarding rectification of the fault in the construction of the concrete slab and the self-levelling pour that was subsequently applied to it on two occasions. The respondents allege that the representations were misleading and/or deceptive as the representations were not true and the appellants, particularly Mr Santner himself, never intended to perform the work required to rectify the faults which had been found to have occurred in the laying of the concrete slab and the application of the self-levelling pour.
[74] Mr Wright submits that as a matter of law Mr Santner as a director of the CH2003 and other Cambridge Homes companies can be held liable under s 9 of the FTA.5
[75] Mr Wright notes that after a series of reassuring representations were made to the effect that Cambridge Homes would undertake and meet the cost of any necessary remedial work to the floor, after some six years Mr Santner adopted a different approach and maintained that Cambridge Homes had no responsibility for the flooring faults. Mr Wright notes that on 15 June 2016 Mr Santner for the first time suggested that the respondents’ flooring contractor, Mr Farrell, was responsible for the flooring faults. Counsel submits that if genuine, this contention should have been advanced in 2013. Mr Wright submits that if Mr Santner was saying that Cambridge Homes would take responsibility for the remedial work required to fix the flooring, but at the same time had failed to explain that the respondents’ own flooring contractor was responsible for the flooring faults meaning that Cambridge Homes was not responsible, then it follows that neither Mr Santner nor Cambridge Homes could have had any intention of carrying out the assurance that Cambridge Homes would rectify the flooring faults.
5 Kinsman v Cornfields Ltd (2001) 10 TCLR 342 (CA), at [27]; Ferrer-Aza & Ors v NZONE Race Management Limited [2016] NZHC 855 at [56], [63]-[64].
[76] Mr Wright submits that it is significant that Mr Santner’s change of position came after he argued that the respondents’ remedy for breach of contract against CH2003 for failing to lay the concrete slab properly may have become time-barred as has been pleaded by the first to fourth defendants.
[77] Mr Wright submits that for the purpose of defeating the appellants’ summary judgment application there is a proper factual basis on which the Court could find at trial that Mr Santner’s conduct was misleading or deceptive. He submits that on the basis of the evidence before the court, the appellants are unable to show that the respondents’ claim under this cause of action could not succeed. That being the case says Mr Wright the appellants’ application for summary judgment cannot succeed.
[78] Mr Wright submits that the respondents were in fact misled by the misleading and deceptive representations made to them by Mr Santner to the effect that Cambridge Homes would remedy the problems that arose as a consequence of the concrete slab not being level and the issues that arose with the self-levelling pour. In this regard counsel also notes that in December 2008, Mr Santner signed and presented the respondents with a certificate of completion for their signatures confirming that their house had been built in accordance with the plans and specifications provided for in their construction contract with CH2003. Moreover, in 2013 Mr Santner had proposed the use of a glue injection between the concrete slab and the self-levelling pour as a remedy for the problem.
[79] Mr Wright says, however, that the respondents will present evidence at trial from the expert they retained in 2016 to look into the matter, and who will say that to rectify the fault, the timber floor will need to be lifted to enable remedial work to be undertaken on the concrete slab and self-levelling pour. The respondents’ expert building consultant will say that in 2008 the house was not built in accordance with the plans and specifications, and that the suggestion of injecting glue to rectify the problem will not work.
[80] Accordingly, Mr Wright submits that the respondents are able to prove that Mr Santner’s representations were false and misleading, and that as a result of quite reasonably relying on his representations, the respondents have suffered losses.
Fourth and fifth causes of action – negligence and Consumer Guarantees Act 1993
[81] Although Mr Wright has also made detailed submissions to support the respondents’ causes of action in negligence and under the Consumer Guarantees Act 1993, it is unnecessary for me to address them in this judgment, as in order to succeed the appellants have to demonstrate that the respondents could not possibly succeed on all or any of the causes of action brought against them.
Discussion
[82] In their statement of claim, the respondents as plaintiffs have brought claims against both CH2003 and CHH in breach of contract, estoppel, misleading and deceptive conduct under the Fair Trading Act, negligence and breach of the Consumer Guarantees Act. They have brought claims against Mr Santner personally in estoppel, breach of the Fair Trading Act and negligence. If one of the respondents’ claims is reasonably arguable the appeal must be dismissed.
[83] Judge Spear focused on the representations made by Mr Santner. The Judge found that those representations provided a reasonably arguable case for either misleading or deceptive conduct under s 9 of the Fair Trading Act, or an estoppel.
[84] The appellants say that the District Court erred in determining that the representations made by Mr Santner could give rise to those consequences. They submit:
(a)the 9 June 2016 email cannot be either misleading and deceptive conduct or an unequivocal representation because it made clear that liability was declined; and
(b)even if the email were capable of being such a representation, it would not have caused the loss because any loss relating to the flooring had crystalized by 2016.
[85] However, the respondents’ case is not based solely on the alleged representations made by Mr Santner in his 9 June 2016 email, and nor was the finding
in the District Court limited to the representations made in the email. There remains the matter of the representations made in 2008 and 2013.
[86]I consider the following constitutes a reasonably arguable case.
[87] In 2008, the respondents and Mr Santner were involved in an on-site meeting regarding the flooring. The respondents allege that at the meeting Mr Santner told them that “Cambridge Homes” would remedy any subsequent problems with the floor.
[88] While Mr Santner accepts that he may have made that representation, he denies having given any guarantee. The nature and extent of any representations made is a matter which ought to be determined at trial. Similarly, whether this constitutes misleading conduct will likely depend on Mr Santner’s knowledge at the time he made the representation, the foundation for performance of any promise made, and his means to make good that promise.6 This also is a matter which can only properly be resolved at trial.
[89] In 2013 Mr Santner came to the respondents’ home again. During that meeting he is said to have assured Mrs Kenna’s doubts over his proposed solution by telling her, “Don’t worry Cathy. We will see you right over this”. Mr Santner denies making this representation. The nature and extent of this representation is again a matter for trial.
[90] It is clear that the construction contract was entered into between the respondents and CH2003. While the respondents’ claim in contract against CH2003 is met by the fact that that company ceased trading on 31 March 2016, that event is also relevant to how the representations alleged to have been made by Mr Santner are to be interpreted. In particular, the alleged representations contained in the email sent by Mr Santner to the respondents on 9 June 2016.
6 See generally Red Eagle Corporation Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492; Muollo v Creative Engineering Design Ltd (2006) 8 NZBLC 101 (CA); Gunton v Aviation Classics Ltd [2004] 3 NZLR 836; Phillips v King Pie New Zealand Ltd HC Auckland CP165/98, 9 September 1999; McKeown Group Ltd v Russell (2010) 13 TCLR 1 (HC).
[91] At the time Mr Santner sent the email, CH2003 had ceased trading. If throughout his dealings with the respondents, Mr Santner had been representing only CH2003 he could have been expected to bring this to their attention when dealing with the respondents around that time. However, in his 9 June email, although declining liability, he made no mention of CH2003 having ceased trading which would have meant that irrespective of any merit of the respondents’ claim, CH2003 was no longer in a position to undertake any remedial work. Instead, Mr Santner said in his email that Cambridge Homes stands by the products it supplies, thereby implying that there is some ongoing and enforceable obligation between a Cambridge Homes entity represented by Mr Santner, and the respondents.
[92] This is a foundation for a reasonably arguable case that at certain points during their relationship, during which Mr Santner acted as a director of all relevant Cambridge Homes companies, Mr Santner was speaking and acting on behalf of CHH. Mr Santner accepts that there has always been intermingling between the business dealings of the Cambridge Homes entities, and even now Cambridge Homes includes on its website a testimonial given by the respondents regarding their satisfaction with their home. The nature of CHH’s business and whether Mr Santner made representations on their behalf is a matter which can only properly be determined at trial.
[93] While the appellants say that Mr Santner’s denial of liability in his email means that the respondents could not possibly have been misled to believe that any Cambridge Homes entity, and particularly CHH, would accept responsibility for undertaking any repairs to the flooring of their home, I consider that submission to miss the point made by the respondents. What the respondents say is that the statement in the email in which Mr Santner said, “Cambridge Homes obviously is happy to stand by the products they supply, but we did not supply or install this flooring”, clearly implies that a Cambridge Homes entity was financially able to make good any defects in the products it had previously supplied. In my view that statement certainly does imply that a Cambridge Homes entity existed that was financially able to make good any obligation it had to rectify a fault in the products it had supplied should such an obligation to do so exist. What the statement did not say was that CH2003 was no longer trading by reason of solvency issues, and that as a result CH2003 was not in a
financial position to stand by, or make good, any fault in the concrete slab or self- levelling pour.
[94] It is clearly arguable that that statement was misleading and deceptive, as Mr Santner obviously knew that CH2003 had ceased trading and could not meet the cost of undertaking repairs to the floor of the respondents’ house. It is also arguable that Mr Santner must have known and intended that his email was misleading.
[95] How the respondents interpreted the representations made in the email and how they were prejudiced is a matter for evidence and trial. The degree of reliance placed on these statements, and the appropriate remedy, as well as the scope of loss suffered from any misleading or deceptive conduct, is also a matter to be determined at trial. I am not persuaded by the appellants’ submission that any loss suffered by the respondents had already been suffered by them by the time the representations in the 9 June email were made. While the physical damage to the flooring apparently caused by the uneven concrete slab and the failure of the self-levelling pour to adhere effectively had clearly taken place back in 2008, it is at least arguable that the effect of the series of representations commencing in 2008 had deflected and prevented the respondents from taking legal proceedings against CH2003 prior to it ceasing to trade, and also deflected the respondents from taking legal proceedings against CHH and Mr Santner personally by being reassured that they need not do so because “Cambridge Homes” would see them right. Moreover, it was only after Mr Santner had consistently reassured the respondents over an extended period that he suddenly changed his and Cambridge Homes’ position, and in March 2016, only weeks before CH2003 ceased trading, started suggesting that Mr Farrell the flooring contractor was responsible for the flooring faults.
[96] It is certainly arguable that the timing of Mr Santner’s change of position from Cambridge Homes being willing to see the respondents “right” to that of suggesting in March 2016 that Mr Farrell was responsible for the flooring faults, was related to developments regarding CH2003’s solvency and the decision that it would cease trading. In my view it is also arguable that when making representations as to what Cambridge Homes was prepared to do regarding rectification of the flooring faults, Mr Santner was not referring exclusively to CH2003, but to the Cambridge Homes
group of companies or at least one of them that was financially able to make good the assurance given. Mr Santner’s 9 June 2016 email provides support for that proposition, as he could only have been referring to a member of the Cambridge Homes group of companies, other than CH2003.
[97] I also agree with Mr Wright, that the situation as regards the Cambridge Homes Waikato franchisee, and whether the company that took over the franchise from CH2003 has any responsibility for the contractual obligations of CH2003, is unclear and is an issue that the respondents are entitled to investigate and pursue in the context of their proceedings against the appellants and the other defendants.
[98] Ms Majeed submits that how the respondents reacted to the 9 June email clearly shows that they were not misled. Counsel refers to Mrs Kenna’s reply affidavit in which she states that she completely disagreed with what Mr Santner said, and had forwarded a reply email saying that she and her husband would be engaging legal counsel. While the respondents were clearly not misled as to whether or not Cambridge Homes denied liability for the flooring fault, that is a different issue from whether any Cambridge Homes entity still existed that would be financially able to meet the cost of any remedial work if it was found to be liable to do so.
[99] The Court of Appeal has observed that summary judgment may be unusual where breaches of the FTA are alleged. This is because such cases almost inevitably raise questions of fact that are unsuitable for determination at the summary judgment stage. The Court of Appeal has said.7
Although the threshold issue of whether the material in question is capable of breaching the Fair Trading Act is a question of law for the Judge, it will often be difficult to divorce that question from the issue of whether there has been a breach in fact in all the circumstances. It would be relatively unusual to find that a plaintiff’s claims cannot succeed where issues of judgment are involved and where the evidence is incomplete and has not been tested at trial.
[100] There are here a number of factual issues which can only be satisfactorily addressed and determined by means of a trial, prior to which full discovery will have been provided, and at which evidence will be given and witnesses, including
7 Luxottica Retail New Zealand Ltd v Specsavers New Zealand Ltd [2012] NZCA 357 at [51].
Mr Santner, can be cross-examined. As the Privy Council has remarked, a defendant’s summary judgment will “rarely if ever be appropriate where the outcome of the action may depend on disputed issues of fact”.8
[101] As regards the estoppel cause of action, again it was not just the 9 June 2016 email that is relied on as the basis for the representation, as any interpretation of the 9 June email will also involve consideration of whether earlier representations were made and the effect of any such earlier representations on the proper interpretation of the 9 June email. It is arguable for the same reasons I have set out above, that the representation made by Mr Santner must have been made on behalf of CHH as CH2003 had ceased to be in position to stand by the products it had supplied. The issue as to whether the respondents relied on the representation, and the issue as to whether it would be unconscionable for CHH and/or Mr Santner to depart from the representation, are matters for trial and not for determination in the context of an application for summary judgment.
[102] I am therefore satisfied that the respondents’ claim brought pursuant to the Fair Trading Act and their claim based on estoppel are both arguable and are matters to be properly determined at trial rather than on an application for summary judgment.
Result
[103] I find that the appellants have failed to show that the District Court Judge made any error of law or fact in reaching his decision to reject and dismiss their summary judgment application, and accordingly their appeal is dismissed.
[104] The respondents are entitled to costs, and I direct that the respondents file and serve their costs memorandum within ten working days of the date of delivery of this judgment, and that the appellants file and serve their costs memorandum within five working days following their receipt of the respondents’ costs memorandum.
Paul Davison J
8 Jones v Attorney General [2004] 1 NZLR 433 (PC) at [5].
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