Edwards v Cull
[2017] NZHC 336
•3 March 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2014-404-547 [2017] NZHC 336
BETWEEN PATRICK ANTHONY EDWARDS AND
COLLEEN EDWARDS Plaintiffs
AND
NELSON JOHN PATRICK CULL AND ELIZABETH MEGAN CULL
First Defendants
DWELL HEALTHY HOMES LIMITED Second Defendant
ANTHONY JOHN WINTER Third Defendant
PAUL JOHN DEMPSEY Fourth Defendant
Continued over page
Hearing: 10 October 2016 Appearances:
S F Powrie for Plaintiffs
Judgment:
3 March 2017
JUDGMENT OF PETERS J
This judgment was delivered by Justice Peters on 3 March 2017 at 4.30 pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date: ...................................
Solicitors: Grove Darlow & Partners, Auckland
EDWARDS v CULL [2017] NZHC 336 [3 March 2017]
AND PAUL JOHN DEMPSEY, MICHELE
AVENELL DEMPSEY, JONATHAN PAUL STUART HESLOP and FINBAR NOMINEES LIMITED
Fifth Defendants
GS MASTERS BUILDERS LIMITED Sixth Defendant
SCOTT AARON MASTERS Seventh Defendant
GRANT ROSS MASTERS Eighth Defendant
THE DC CO LIMITED (formerly Dominion
Constructors (1973) Limited) Ninth Defendant
MSC CONSULTING GROUP LIMITED (formerly known as McGuigan Syme Chilcott Limited)
Tenth Defendant
SOLID PLASTERERS LIMITED Eleventh Defendant
STEPHEN ROY MOYLE Twelfth Defendant
AUCKLAND COUNCIL Thirteenth Defendant
AND
GREGORY CLAYTON WATERHOUSE First Third Party
AJ RUSSELL BRICKLAYERS LIMITED Second Third Party
Introduction
[1] The plaintiffs, Mr and Mrs Edwards, seek judgment against the second and third defendants, Dwell Healthy Homes Ltd (“Dwell”) and Mr Anthony Winter, a building inspector and a director of Dwell. Mr and Mrs Edwards claim against Dwell and Mr Winter is in negligent misstatement.
[2] The proceeding was for trial on the date of hearing. However, there was no appearance for Dwell or Mr Winter and for reasons set out below, I have determined this proceeding in accordance with High Court Rules, rr 10.7 and 15.9 (the differences between them for present purposes being immaterial). I have also had regard to the principles regarding formal proof referred to in: Chen v Zhong; Neumayer v Kapiti Coast District Council; Ferreira v Stockinger; Kim v Cho; and
Superior Blocklayers Ltd (in liq) v Bacon.1
[3] Mr and Mrs Edwards’ claim arises from their purchase in 2011 of what they subsequently discovered was a leaky home (“property”), and which they have repaired at a cost of more than $1 million. The home was built in 2003 and 2004. In
2014, Mr and Mrs Edwards issued proceedings against 13 defendants, comprising those associated with the construction of the home and those associated with Mr and Mrs Edwards’ purchase. Mr and Mrs Edwards have resolved and/or discontinued their proceedings as regards 11 defendants and, to date, have recovered approximately $1 million. The Edwards have applied this sum in reduction of their total loss which, in addition to the costs of repair, includes interest and legal costs. The sum claimed from Dwell and Mr Winter is approximately $360,000.
[4] For the reasons set out below, I decline to enter judgment as sought.
Background
[5] The Edwards, as prospective purchasers of the property, received what I refer to as the first Dwell report on 25 February 2011. This report was dated 12 January
1 Chen v Zhong HC Auckland CIV-2010-404-1995, 14 November 2011; Neumayer v Kapiti Coast District Council [2013] NZHC 1106; Ferreira v Stockinger [2015] NZHC 2916; Kim v Cho [2016] NZHC 1771, [2016] NZAR 1134; and Superior Blocklayers Ltd (in liq) v Bacon [2016] NZHC 2601.
2011. It was sent to the Edwards by email from Mr Richard Lyne, a real estate agent acting for the vendors, Mr and Mrs Cull. Mr Lyne forwarded the Land Information Memorandum for the property and a copy of the certificate of title at the same time.
First Dwell report
[6] The first report comprises two pages of text; a one page document on Dwell letterhead referring to “Limitations of our Moisture Check” and six pages of photographs of various parts of the property.
[7] On its face, the report is described as a “Building Survey Report” for Mr Cull and says “Our Client required a building survey of the house on the above property, and a moisture check as noted in this report”. The report said that a moisture check had been carried out and that no moisture reading in any area “throughout the house” had been registered. It also referred the reader to the Limitations of Moisture Check sheet for more detail about “the moisture detection limitations and process”.
[8] The particular statements on which the Edwards rely are:2
2a.The house is solid concrete block to both levels plastered & coated with a paint system that will need recoating every 7 plus years to maintain the weathertightness of the coating system …
2b.There are the odd minor cracks that will also appear during the life of the building & just need to be kept sealed & maintained. These cracks would generally not constitute a leak issue as the construction is concrete block which is not the usual plaster clad type home & should not [be] classified as a risk like all the other types of plaster clad homes associated with leaky homes …
Able report
[9] The Edwards’ receipt of the first Dwell report coincided with their receipt of their own building inspection report from Able Inspections Limited (“Able”).3
[10] The Able report is dated 25 February 2011. The Able report recorded the results of inspection of the exterior and interior. On the whole, the Able report was
to the effect that the house was in good condition but it recommended investigation
2 Second Amended Statement of Claim dated 13 May 2016 at [28].
3 Email from Mr Lyne to Mr Edwards dated 25 February 2011.
of any “moisture reading” greater than 17 per cent and said that moisture readings of
20 and 25 per cent had been taken in a bedroom and of 90 per cent in the garage. The report also stated that there were cracks in the exterior cladding on all bar the south elevation. Able recommended investigation of the cladding under a pergola where it joined a concrete block wall, and invasive inspections of walls where higher moisture readings were recorded to determine the source of water ingress and extent of repair required.
[11] Mr Edwards emailed the Able report to Mr Lyne on 28 February 2011 with an email saying that he himself had observed mould on the garage wall and he asked what the vendors proposed to do about it.
[12] On 2 March 2011, Mr Lyne informed Mr Edwards that Mr Winter of Dwell had re-inspected the property and that, although they had previously been willing to have the walls opened for further investigation, the vendors were now “convinced” that there were no issues.
Second Dwell report
[13] Mr Lyne emailed the second Dwell report to Mr Edwards on 2 March 2011. That report was critical of Able’s finding of moisture levels of 90 per cent in the garage and saying that such a finding was impossible. It also said that such moisture as Mr Winter had been able to detect in the bedroom was no cause for concern. It also said that Able was incompetent.
[14] Mr and Mrs Edwards purchased the property at auction on 10 March 2011 and settled in April 2011.
[15] Two years later, in April 2013, Mr and Mrs Edwards discovered a leak in their laundry. They engaged Mr Roger Crichton, a registered building surveyor, to advise them. Mr Crichton advised that the property had extensive weathertightness problems. Mr and Mrs Edwards then undertook remedial works. The works were completed in 2016.
[16] The Edwards have filed and served three statements of claim (March 2014, November 2015 and May 2016) but their claim against Dwell and Mr Winter has remained the same in all material respects.
[17] Dwell and Mr Winter filed a statement of defence to the first statement of claim. The statement of defence does not plead the affirmative defence of contributory negligence. Neither Dwell nor Mr Winter has taken a step since the statement of defence was filed.
[18] Two issues arise with the statement of defence. First, counsel for the Edwards advised me that it was not served. Secondly, although on its face the statement of defence was filed for Dwell, as a company it could only be represented through its solicitor.
[19] I do not consider that anything in particular turns on either point. Counsel for the Edwards was aware of the statement of defence and it is helpful to the Edwards as both Dwell and Mr Winter admit owing the Edwards a duty of care. I shall treat the pleading as effective for both defendants and proceed on the basis that the Edwards seek judgment under High Court Rules, r 10.7. If I am wrong in that, the Edwards’ application for judgment against Dwell proceeds pursuant to r 15.9.
Discussion
[20] To succeed in negligent misstatement against Dwell and Mr Winter, the
Edwards must prove:
(a) the making of a false or misleading statement;
(b) in circumstances where the maker owed them a duty of care; (c) that they relied on the statement, and did so reasonably; and (d) that they have suffered loss as a result.
[21] In support of their application, the Edwards rely on affidavits from Mr Edwards, Mr Robert Spence, a quantity surveyor, Mr Crichton to whom I have referred above and Mr Roger Thorburn, a civil engineer.4
[22] The material allegations in the Edwards’ second amended statement of claim are that:
(a) the Dwell reports include the statements to which I have referred in
[8] above/summarised in [13] above (“statements”);
(b) they relied on the statements in purchasing the property;
(c) the property is suffering from significant water ingress and damage;
(d)moisture ingress through the exterior cladding has caused damage and decay and has resulted in the property failing to comply with clause B1, B2 and E2 of the building code;
(e) they have been required to effect the repairs listed in the pleading because of the presence of the defects, damage and associated health and safety risks;
(f) Dwell and Mr Winter owed them a duty to exercise reasonable skill and care in making the statements because they knew and intended that the statements would be provided to and relied upon by the Edwards and it was reasonably foreseeable to Dwell and Mr Winter that the Edwards would suffer loss if they made the statements negligently;
(g)Dwell and Mr Winter failed to exercise reasonable skill and care in making the statements because there were no reasonable grounds for
Dwell and Mr Winter to be satisfied that the property was constructed
4 Affidavit of P A Edwards sworn 3 October 2016; Affidavit of R B Spence sworn 30 September
2016; Affidavit of R J Crichton sworn 30 September 2016; and Affidavit of R J Thorburn sworn
29 September 2016.
in accordance with the building code, due to the presence of the weathertightness defects and in particular high moisture levels; and
(h)the statements were therefore negligent misstatements and the breach has caused them loss.
[23] In their statement of defence Dwell and Mr Winter admit they owed the duty alleged in [22](f) but deny all other allegations.
[24] The pleading as to [22](g) above is critical which, as I say, Dwell and Mr Winter have denied. There is no statement in either Dwell report that the house was constructed in accordance with the building code as the Edwards allege. In fact the following statement in the first Dwell report is to entirely the opposite effect:
This survey has been carried out in accordance with NZS 4306:2005 and is not a statement that a property complies with the requirement of any act, regulation or bylaw, nor is the report a warranty against any possible problems not seen or noted during this survey, or developing after the date of this property report.
Refer to NZS 4306:2005 for full details.
[25] Accordingly, I do not consider that the misstatement that is alleged and relied upon is contained in either Dwell report.
[26] It is possible (and no more than that) that the position would be different if the Edwards had alleged that, read together, the two reports were to the effect that the house did not leak as at the date of the reports. Bell AJ largely took that view of the reports when he declined an application by the Culls as vendors for summary judgment on their defence against the Edwards’ claim against them for damages for misrepresentation.5
[27] However, even if that were pleaded, on an application for formal proof it would be necessary to construe the reports in their entirety. Other paragraphs of the
first Dwell report may be material such as:
5 Edwards v Cull [2014] NZHC 1556; and Contractual Remedies Act 1979, s 6.
2c.It does not however rule out the possibility of leaks from any opening such as windows & doors as well as pipes and drains etc which must be kept sealed as noted above. The most important sealing work to maintain is around the window & door frame joints which the sun causes the paint coating [sic] to peel back from the aluminium frames & can allow moisture to get inside the walls. This is especially important on the north & west sides which get the most sun & need to be checked especially before winter. Any peeling gaps need to be raked out and sealed right around the frame & also done around every window & door frame when the house is recoated as part of the recoating warrantee [sic] some of which can be up to 10-
12 years.
2d.The only cladding that is not solid concrete are the plastered pergola beams on the west side of the house which also house the motor controlled louver sun shade system. This is made with a boxed (probably ply or Hardies panels over timber framing) & solid plastered & paint coated as per the house. These beams are showing some previous cracks now sealed & some cracks at the joints with the concrete columns which need to be maintained as noted above to ensure that they stay weather tight in future.
(emphasis in original)
[28] It would also be necessary to consider the limitations that are stated in the first Dwell report as to the ability to detect moisture in the absence of invasive testing (although Able detected it in at least two areas) and the statement that I have quoted in [24] above. I mention these points because the outcome of the Edwards’ claim may have been the same even if the Edwards had alleged a different misstatement. But the important matter for present purposes, however, is that I decline to enter judgment on the claim as presently pleaded.
[29] No order for costs is required.
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Peters J
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