Little v Warwick
[2019] NZHC 822
•15 April 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2017-404-2748
[2019] NZHC 822
BETWEEN ANDREA LOUISE LITTLE and SDM TRUSTEE COMPANY LIMITED
PlaintiffsAND
RODNEY STEPHEN WARWICK and SALLY JOAN MACFARLANE WARWICK
Defendants
Hearing: 19 October 2018 Appearances:
G R Grant and M C Frogley for the Plaintiffs W McCartney for the Defendants
Judgment:
15 April 2019
JUDGMENT OF ASSOCIATE JUDGE SMITH
This judgment was delivered by me on 15 April 2019 at 11.00am, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors / Counsel:
Rainey Law, Auckland
T S Carnachan, Auckland W McCartney, Auckland
LITTLE v WARWICK [2019] NZHC 822 [15 April 2019]
[1] The defendants apply for summary judgment on the plaintiffs' claims against them.
Background
[2] The case arises out of an agreement for sale and purchase dated 27 November 2011 (the Agreement), under which the plaintiff Andrea Little (or nominee) agreed to purchase a residential property in Brookfield Street, St Heliers (the property) owned by a trust associated with the defendants (Mr and Mrs Warwick). The trust was the Rod and Sally Warwick Family Trust (the Trust), and its sole trustee, R & S Warwick Trustee Company Limited, was the registered proprietor of the property
[3] The Agreement provided for the purchaser to obtain a building report and a LIM report, although the real estate agent acting for the vendor had already provided a LIM report to the solicitors acting for Ms Little. Ms Little obtained a building survey report from a company called Dwell Healthy Homes Limited (the Dwell report) on 29 November 2011, and on 1 December 2011 she instructed her solicitor to declare the agreement unconditional. Settlement was completed on 13 January 2012.
[4] Ms Little says that, in August 2017, she learned that the house on the property (the dwelling) is leaking. She obtained expert advice, and was told that extensive repairs would be necessary, including a full re-clad.
[5] Ms Little and her nominated co-purchaser, SDM Trustee Company (2007) Limited (SDM), commenced the present proceeding in November 2017. They contend that certain misrepresentations were made by or on behalf of Mr and Mrs Warwick, and that Ms Little was induced by those misrepresentations to enter into the Agreement.
[6] The plaintiffs say that the misrepresentations were made either deceitfully by Mr and Mrs Warwick, or that they constituted negligent misrepresentations. In either event, they say that Mr and Mrs Warwick are liable to them for damages currently estimated at $500,759, plus consequential losses to be particularised before trial. They also seek an award of general damages in the sum of $25,000 or such other sum as the Court might deem just.
[7] The vendor under the Agreement, R & S Warwick Trustee Company Ltd, has not been joined as a defendant. The Trust was wound up after the sale to the plaintiffs, and R & S Warwick Trustee Company Limited was removed from the Register of Companies on 15 June 2015.
[8] Mr and Mrs Warwick contend that the plaintiffs' claims against them are not reasonably arguable, and they ask the Court to enter judgment on the basis of the affidavits filed, without the need for a trial.1
The evidence of fact
The Warwicks
[9] Mr and Mrs Warwick bought the property in 2007. It was intended to provide a home for them for the rest of their lives, although the property was put into the Trust on the advice of their lawyer.
[10] Before they bought the property, they say that they asked the real estate agent selling it whether it was a leaky home. They say they were assured it was not: they were told that it was made of treated timber and had been built before the years in which leaky houses were being built.
[11] Mr Warwick and Mrs Warwick say they had no reason to doubt that advice. However, they were clearly alert to at least some of the issues involved with leaky houses, and they understood that houses with plaster construction such as the dwelling required vigilance as to maintenance.
[12] Mrs Warwick said in her evidence that she saw an advertisement in 2009 offering moisture tests for owners of plaster homes, and thought it would be a good idea to have the dwelling checked out. She and her husband were not aware of any leaks or problems of any sort at the time, and they were shocked when the company
1 Under r 12.2(2) of the High Court Rules 2016, the Court may give judgment against a plaintiff if the defendant satisfies the Court that none of the causes of action in the plaintiff's statement of claim can succeed.
that did the moisture testing reported that they had found some high moisture readings, and that the Warwicks should have some repair work done.
[13] At the time of her first affidavit Mrs Warwick could not remember the name of the company that did the moisture testing work in 2009, and that company's report was only located subsequently by solicitors acting for the plaintiffs. The report in question was provided by a company called The Imaging Specialists Limited, trading as "Drybuild Infrared Solutions" on 4 November 2009. Details of this report, which I will call "the Drybuild report", are set out at paragraphs [49] to [59] below.
[14] Mrs Warwick said that the testing company recommended a company called ECOS Homes (NZ) Limited (trading as ROK Build) to do the necessary work. Mr and Mrs Warwick contacted Mr Nigel Armstrong of ROK Build, and he came to the property and looked at the moisture report. He then told them what work needed to be done. They instructed him to proceed with the work.
[15] In her first affidavit, Mrs Warwick said that Mr Armstrong assured the Warwicks that the work would involve targeted repairs and maintenance only, for which no building consent would be required. As he was a professional builder and had been recommended to them, Mr and Mrs Warwick accepted that advice.
[16] The Warwicks proceeded with the work recommended by ROK Build. As Mrs Warwick put it in her evidence, they did not skimp on anything — they had ROK Build do everything that Mr Armstrong thought needed to be done.
[17] Mrs Warwick said that she never saw any exposed timber framing, and she had no reason to think that any framing timber was replaced in the course of the work.
[18] After the plaster work was done, Mr Armstrong recommended that the dwelling should be repainted with elastomeric paint, to give the plaster the best possible protection. That was done. Mr Armstrong also recommended replacement of the whole roof, and that was also done.
[19] The targeted repair and maintenance work was carried out between December 2009 and January 2010. When it was finished, ROK Build provided a letter dated 1 February 2010 (the ROK Build report) confirming that the works referred to had been carried out to the standards required by the New Zealand Building Code. A copy of the ROK Build report was later made available to the plaintiffs when they were considering purchasing the property, and the plaintiffs say that they relied on it in making their decision to buy the property.
[20] The Warwicks had intended to remain living in the dwelling as their permanent home, but Mr Warwick ran into health issues which resulted in his early retirement. Mr and Mrs Warwick decided to downsize, and they put the property on the market.
[21] Mrs Warwick's evidence was that, although the house was in good condition, she and her husband wanted some peace of mind on that issue, so they telephoned Mr Armstrong at ROK Build. Mr Armstrong suggested that they have an inspection done by a company called Leakscan.
[22] Mr Lineham of Leakscan came and did an inspection, probably in September 2011. The Leakscan inspection used infrared thermal imaging, which detects any higher moisture levels.
[23] Mrs Warwick's recollection was that Mr Lineham noticed a small crack in the plaster, which the Warwicks had not noticed. He said they should get it fixed. He also recommended some work to two window junctions.
[24] Mr and Mrs Warwick asked ROK Build to come back in to carry out those repairs, and Mr Armstrong arranged for his subcontractor to attend to the work. The Warwicks then got Mr Lineham back in to inspect the work, and he inspected the whole house. He provided a report dated 5 October 2011 (the Leakscan report), in which he summarised the condition of the dwelling as being "very good … with only a minor area of concern which is currently being repaired".
[25] In her evidence, Mrs Warwick said she did not understand why Mr Lineham had said that the minor area of concern was "currently being repaired". She said
Mr Lineham did two inspections, but only one report, and the report was prepared after ROK Build's subcontractor had been back to fix the issues identified by Mr Lineham.
[26] Mrs Warwick said that when open homes were conducted by the Barfoot & Thompson agent who acted in the sale, Caroline Holden, the ROK Build report and the Leakscan report were both left out for prospective purchasers to look at. So was a warranty document which had been issued for the new roof.
[27] The Warwicks never met Ms Little — all the negotiating was done by Ms Holden.
[28] The Warwicks say they had no idea about any problems experienced by Ms Little with the dwelling until they were contacted by her solicitors in October 2017.
Mr Armstrong
[29] Mr Armstrong said that he was a director of ROK Build (a division of ECOS NZ Homes Limited), which specialised in targeted preventive repairs on plaster houses.
[30] Initially Mr Armstrong could not recall having seen the Drybuild report. However, when the Warwicks' lawyer showed him a copy of the Drybuild report, he noted that it was dated very close to the date his own work was commenced. He concluded that the Drybuild report probably was the report that he was shown at the time the ROK Build work was done.
[31] Mr Armstrong arranged for a subcontractor, Mr Ian Chisholm, to do the remedial work. Mr Armstrong said he occasionally called in to check on progress and the quality of the work.
[32] Mr Armstrong said that one of his visits to the property in the course of the repair work resulted from a call from one of the builders about a stringer under the main deck. He said that these days stringers are fixed to walls by bolts (and spaced off the wall), but his recollection in this case was that the stringer was fixed to the wall only by nails driven through the plaster into the framing timber. Mr Armstrong
described that as bad practice, because water gets trapped between the stringer and the plaster and then seeps through nail holes in the plaster into the wall.
[33] Mr Armstrong concluded that the stringer had to be removed and replaced with a new stringer spaced off the wall to prevent water trapping. The old stringer was taken out, and a new stringer inserted between the joists and the wall, spaced out 12 millimetres from the wall and fixed with bolts to the framing timber.
[34] Mr Armstrong also described an investigation of two beams attached to the wall, which appeared to serve no structural purpose. The beams were cut off about 200 to 300 millimetres from the wall, leaving two holes in the plaster where the beams had been. The holes were replastered. Mr Armstrong said there was no rotten framing timber visible in the wall. If there had been, he said he would have informed Mr and Mrs Warwick that they needed to replace the affected framing timber.
[35] The ROK Build report was issued on 1 February 2010, on completion of the ROK Build work. It provided:
1st February 2010
[Mr and Mrs Warwick]
Warranties for work at [the property]
The following works were carried out from 3rd December 2009 to 26th January 2010, to the standards required by the NZ Building Code./
Scope of Works:
1) Install 6mtr slot drain outside back door area down side of house
2) Install gravel drain 13mtrs on west & east end by vege garden
3) Install concrete drain at the end of slot drain approx. 5mtrs
4) Windows – re-seal plaster to aluminium junctions x 12no.
5) Cut back plaster cladding to roof and install bottom plaster stainless steel flashing
6) Deck – Remove stringer against wall and install new stringer spaced off wall by 12mm
7) Supply and install dog ear flashing to gable ends x 2no.
8) Paint exterior of house with two coats of suitable exterior paint
9) Re-roof house and garage with Pabco Asphalt Shingles
10) Supply and install new fascia to top floor study & kitchen area. Remove spouting and replace.
11) Renovate curved window roof on East side over stairwell
These works carry a ROK Build workmanship warranty for 24 months, this is inclusive of our Statutory Liabilities which are set out in the Building Act 2004 sections 396-399.
To ensure the longevity of your building please find attached a copy of our recommended Maintenance Schedule.
Yours Sincerely Nigel Armstrong Director
[36] Mr Armstrong said that items 1, 2 and 3 in the ROK Build report all related to providing proper clearances between the cladding and the ground. Item 4 was concerned with cleaning out an area between the plaster and the aluminium windows and putting in polyurethane to replace the old silicone.
[37] Item 5 involved cutting the plaster where it was in indirect contact with a roof below. No framing timber would have been exposed in the process. Mr Armstrong commented that if there had been a serious leak where any of this work was done, the building paper would have been wet or rotted away. He said that he would have notified the council and would have obtained a building consent to do any necessary repair work in the area.
[38] Mr Armstrong confirmed that the whole roof was replaced, a new spouting was installed, and the whole house was repainted with Elastomeric paint. New PVC dog ear flashings were installed, as per item 7 in the ROK Build report.
[39] Mr Armstrong said that it was his firm belief at the time that the work involved preventative maintenance only. He said that he advised Mr and Mrs Warwick of that at the time, and that he would not have signed the ROK Build report if he thought the work required a building consent. He said that no framing timber was exposed in any part of the job, except where strange non-structural beams were cut back from the wall. There was no rotten timber visible where that was done. No framing timber was replaced, and no structural work was done.
[40] Mr Armstrong expressed concern at allegations that, in carrying out the remedial work on the old stringer, he covered up rotting timbers. He said that the old
stringer was not rotten at all, and if the framing timber had been rotten it would have been obvious because the bolts would not have gripped as they were screwed in.
[41] Mr Armstrong denied that any of his firm's work would have resulted in leaks or damage. He expressed the opinion that if the dwelling has water damage, it would be as a result of the way it was originally built.
[42] Mr Armstrong also provided an affidavit in reply, responding to two expert affidavits filed for the plaintiffs. However, I do not need to refer to this evidence, as it was substantially directed to the issue of whether the ROK Build repairs required a building consent and/or were carried out properly. Mr McCartney acknowledged at the hearing that, for the purposes of the summary judgment application only, the Court may proceed on the basis that (i) a building consent arguably was required for the ROK Build work, and (ii) the work carried out by ROK Build was arguably defective. For convenience I will refer to this acknowledgment as "the ROK Build work acknowledgment".
Ms Little
[43] Ms Little's account of the events leading up to the purchase of the property was not materially different from that of the Warwicks. She confirmed that she first saw the dwelling at an open home conducted by Ms Holden, which she attended with her mother, Mrs Angela Little. Ms Little deposed that Ms Holden assured her and her mother that the house was not a leaky home, and that the dwelling had been built before "all those leaky houses". Ms Holden gave her a copy of the Leakscan report. Ms Holden then said, "Of course, you should get your own report done".
[44] Ms Little asked for the name of a building inspection company and Ms Holden gave her a printed list with the names of a number of such companies.
[45] Ms Little said in her first affidavit that she relied on the following documents when she purchased the property:
(a)The certificate of title;
(b)The LIM report;
(c)The Leakscan report;
(d)The list of building inspection companies given to her by Ms Holden;
(e)A real estate flyer;
(f)The ROK Build report;
(g)The roof warranty.
[46] She said that she read those documents at the time, and they gave her comfort that the house was sound and compliant in all respects. She referred specifically to the ROK Build report, noting that the work ROK Build carried out between December 2009 and January 2010 was said to have been carried out to the standards required by the Building Code.
[47] Ms Little referred to the Dwell report, which she obtained after she entered into the Agreement. She said that she read the Dwell report and was satisfied the house was sound.
[48] Mrs Warwick provided a second affidavit sworn on 25 July 2018. She attached a copy of the Drybuild report to this affidavit.
The Drybuild report and the Leakscan report
The Drybuild report
[49] The Drybuild report was based on an inspection of the property carried out on 13 October 2009. It described the dwelling as a three-storey detached dwelling, with solid plaster / rigid backing exterior cladding. A summary at the beginning of the Drybuild report described the problems with the dwelling as follows:
Summary
This dwelling … appears to be average constructed and in poor condition with major signs of abnormal or high moisture content levels. The main contributing factors to the increased moisture levels are:
Failures from –
·Cracking to the cladding
·Cracking between joinery and cladding
·Mitres, mullions and junctions
·Gutter to wall junctions
·Lack of spreaders on the downpipes
·Penetrations through the cladding
·Deck to wall junctions
·Insufficient ground clearance
·Roof (with further investigation)
[50] Drybuild provided a table setting out location, moisture reading percentage, and "thermal anomaly" for different parts of the dwelling.
[51] It is not necessary to set out the detail of the Drybuild report, but some examples of the reports' findings indicate the extent of the moisture problems.
[52] In the "entrance – ground level" section, Drybuild recorded a moisture percentage reading of 12 – 30%, and allocated the priority "Soon as possible" to the repair rating. They commented that highly elevated moisture readings of 30% were obtained from the bottom plate of the south internal wall, and that moisture had tracked internally from the ceiling in bedroom 1 due to the deck to wall junction tracking moisture internally. They then said "Invasive investigation to the south internal walls is required at the bottom plate level".
[53] In their report on "bedroom 1 – ground level", Drybuild recorded a moisture reading of 12 – 96%, and noted that there was a "thermal anomaly". They described highly elevated moisture readings from the south-facing wall with 96% moisture tracking down to the bottom plate with 80% moisture. They again recommended
"invasive investigation" of the south wall of the bedroom to ascertain the extent of structural damage (if any).
[54] Drybuild addressed the external west and internal north-facing walls in bedroom 1 on the ground level separately. In this area, they recorded highly elevated moisture readings from the external west wall, and they said that the west wall "requires invasive investigation to ascertain the extent of structural damage (if any)."
[55] In the master bedroom – ground level, Drybuild recorded high moisture readings obtained towards the bottom plate, with 22% moisture tracking along the south internal wall, to 19% moisture. They noted a number of moisture issues, including "the deck to wall junction tracking moisture to this area … and the screw penetrations through the Perspex and cladding … tracking moisture internally to the west and north walls". They said that the west wall at the bottom plate required "invasive investigation to determine the extent of structural damage (if any)".
[56] In the dining room – first level, Drybuild noted that "highly elevated moisture readings were obtained from the bottom plate of the south internal wall, with 29.6% and 36% moisture. They considered that invasive investigation was required to the bottom plate of the south-facing wall. They also said that highly elevated moisture readings were also obtained from the ceiling near the north wall top plate. The gutter stop end was too close to the cladding, and the roof–to–wall junction was possibly tracking moisture internally. Drybuild then said that the ceiling towards the north wall top plate would require invasive investigation to ascertain the extent of structural damage (if any).
[57] Drybuild's report on the study (second level) again recorded highly elevated moisture readings at the north-facing window jamb. They noted that silicone had been used to stop a previous leak, which had possibly failed. They recommended checking the mitres and junctions of the joinery, and said that invasive investigation was required to ascertain the extent of structural damage (if any).
[58] In the decks and balustrades area, Drybuild commented that there was no saddle flashing or cap flashing to the deck balustrade. Moisture could track through
the top of the balustrade along with the junction of the balustrade and the house cladding. Due to past moisture ingress through the deck, it appeared that the deck framing had had considerable amounts of moisture exposure. Drybuild said that the structural integrity of this timber may be compromised, and that the deck off the level 2 study needed further investigation due to the amount of butynol covering the deck, as moisture could track through in seams or holes in the waterproofing.
[59]Drybuild concluded:
… our report showed that this dwelling had major issues with regards to moisture ingress at the time of our investigation. Invasive investigation is required to ascertain the extent of structural damage. Any damaged timbers would need to be treated or replaced prior to painting and re-plastering …
The Leakscan report
[60] The Leakscan report was dated 5 October 2011, approximately one and a half months before the Agreement was signed.
[61] The Leakscan report stated that Leakscan technicians had inspected all accessible interior and exterior areas of the dwelling, using a state–of–the–art thermal imaging camera that was able to detect moisture (but not damage done as a result of moisture exposure).
[62] The report recorded moisture readings at various locations throughout the dwelling, with averages generally in the range between 10 per cent and 20 per cent ("high" levels of 19.8% were recorded in the master bedroom and in bedroom 2).
[63] The Leakscan report noted, in a section headed "Window Junctions", "Remedial work is currently underway on 2 window junctions. All other junctions were in good condition on the day of our inspection". Under a heading "Paint and Plaster", the author noted that, although the dwelling was painted around 18 months ago, there was one minor crack in the plaster "for which repair is currently underway". On the day of the inspection, the condition of all other areas was noted as "Good".
[64] Leakscan summarised its findings by saying that the dwelling was "in very good condition with only a minor area of concern which is currently being repaired".
The summary referred to a final inspection being pending, "to provide an all clear on this property once these very minor issues have been rectified".
The expert evidence
Mr Maiden
[65] Mr Richard Maiden, an experienced building consultant, quantity surveyor and building surveyor, provided two affidavits for Mr and Mrs Warwick.
[66] In his first affidavit, Mr Maiden expressed his view on whether the repair work done at the property, as described by the Warwicks and Mr Armstrong, required a building consent. In the event, the ROK Build work acknowledgment makes it unnecessary for me to describe the evidence given by Mr Maiden in this affidavit.
Mr Dagger
[67] Mr Quentin Dagger, an Auckland building surveyor, provided two affidavits for the plaintiffs. Mr Dagger is a qualified carpenter with over 40 years' experience in the construction industry. He has previously been employed by Auckland Council and the former Waitakere City Council, managing several specialist units (including the Weathertightness Unit and the Building Consent unit at Waitakere City Council). Mr Dagger inspected the dwelling on 2 July 2018.
[68] Mr McCartney objected to Mr Dagger's evidence on two grounds. First, Mr Dagger's affidavit did not contain a statement (required by r 9.43(2)) that he had read the code of conduct for expert witnesses set out in Schedule 4 to the High Court Rules 2016, and that he agreed to comply with that code. The effect of that omission is that Mr Dagger's affidavit can only be read with the leave of the Court.2
[69] Secondly, Mr McCartney submitted that Mr Dagger had not in any event complied with the code of conduct for expert witnesses — his evidence did not comply
2 High Court Rules 2016, r 9.43(3).
with the overriding duty of an expert witness to assist the Court impartially on relevant matters within the expert's area of expertise.3
[70] Parts of Mr Dagger's evidence were clearly inadmissible, including speculation that the Warwicks knew that the invasive investigations recommended by Drybuild would result in significant repair costs, and so chose to do only "cosmetic repairs". I put that evidence on one side.
[71] Mr Dagger commented on the evidence of Mr Armstrong, but in view of the ROK Build work acknowledgment this evidence is perhaps of lesser importance. However, I accept that Mr Dagger's evidence to the effect that by 2009 any builder experienced in repair work of the kind carried out in this case would have known that direct-fixed solid plaster cladding systems had generally failed to prevent water penetrating to the timber framing, is relevant and potentially significant. I give leave to the plaintiffs to adduce this evidence, and Mr Dagger's evidence that Mr Armstrong, having seen the Drybuild report, must have known that there was a high risk of timber decay and consequent loss of structural integrity, under r 9.43(3). I take into account in granting that leave Mr Dagger's long experience in work of this sort, and the fact that I am here dealing with an interlocutory hearing only.
Mr Graham Durkin
[72] Mr Durkin, a building surveyor employed by AS Jacobs Property Consultancy Limited, gave evidence for the plaintiffs. He was engaged by Ms Little to investigate the causes of moisture ingress and the extent of damage to the dwelling.
[73] Mr Durkin said that he carried out invasive investigations at the property in January and July of 2018. His investigations showed that the dwelling suffers from major water ingress issues, which have resulted in significant damage to the timber framing and other building elements.
3 Code of Conduct for Expert Witnesses, High Court Rules 2016, Schedule 4.
[74] Mr Durkin expressed the view that the building repair work performed by ROK Build in the first floor deck area had not worked, and has allowed water to continue to enter the building envelope.
[75] Mr Durkin noted that the top floor deck had been completely rebuilt and extended to form a larger deck with clear glass balustrades. In his opinion this was "new" structural work, and required a building consent. The new roof deck was constructed after November 2009, however, and it was not referred to in the Drybuild report. Nor was there mention of this "new" building work in the ROK Build report. Mr Durkin concluded that the new roof deck must have been built between November 2009 and November 2011 when the property was sold to the plaintiffs.
[76] Mr Durkin expressed the view that the "visually degraded condition of the timber" in the dwelling would have been "obvious to an untrained individual".
Mr Maiden in reply
[77] Mr Maiden responded to certain evidence given by Mr Dagger relating to the third level deck (off the study). He noted that the only reference to the study deck in the Drybuild report was a comment that the deck off the study needed further investigation due to the amount of butynol covering the deck, as moisture could track through in seams or holes in the waterproofing. Mr Maiden noted that that comment did not amount to a statement that the deck, at the time of the Drybuild report, was either damaged or leaking. No moisture readings were given for the area.
[78] Mr Maiden also noted that Mr and Mrs Warwick did not treat the third level deck as something requiring repair. Mr Maiden agreed with that view, noting that the plaintiffs do not appear to allege that any defects in the study deck have caused damage to the dwelling.
[79] Mr Maiden referred to Mr Durkin's comment that the "visually degraded condition of the timber would have been obvious to an untrained individual". In Mr Maiden's opinion, that conclusion could not be reliably drawn after nearly 9 years of decay.
[80] In response to Mr Durkin's opinion that if Mr and Mrs Warwick were present during the repair works it is likely they would have been aware of the moisture ingress issues, Mr Maiden acknowledged that there are "moisture ingress issues", but expressed the opinion that repeated assertions that there was visible damage to the framing timber are not supported by any evidence.
Defendants' applications for summary judgment – legal principles
[81]Rule 12.2(2) of the High Court Rules provides:
…
(2) The court may give judgment against a plaintiff if the defendant satisfies the court that none of the causes of action in the plaintiff's statement of claim can succeed.
[82] The principles applicable to an application for summary judgment by a defendant were discussed by Elias CJ in Westpac Banking Corp v MM Kembla NZ Limited:4
[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.
...
[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
4 Westpac Banking Corp v M M Kembla NZ Limited [2001] 2 NZLR 298, (2000) 14 PRNZ 631 (CA) at [61]-[63].
completion of discovery or other interlocutory steps and before the plaintiff's evidence can reasonably be assembled.
The issues to be decided
[83]The following issues fall to be decided:
(1)Is it clear on the evidence that Mr and Mrs Warwick did not make any relevant representation of fact?
(2)Were the Warwicks clearly mere conduits of opinions expressed by others, for which they cannot be liable?
(3)Is it clear on the evidence that Mr and Mrs Warwick had no reason to believe, and did not believe, that the statements in the ROK Build report were incorrect?
(4)To the extent that they may be held to have made a relevant representation or representations, is it clear on the evidence that Mr and Mrs Warwick did not intend the plaintiffs to rely on the representation(s)?
(5)Is it clear on the evidence that the plaintiffs did not rely on the ROK Build report in deciding to enter into the Agreement?
(6)If the plaintiffs did rely on the ROK Build report, is it clear on the evidence that it was not reasonable for them to have so relied?
(7)Is it clear on the evidence that the plaintiffs have no reasonable argument that Mr and Mrs Warwick owed them a duty of care in tort?
(8)If the answer to issue (7) is no, is it clear on the evidence that the plaintiffs have no reasonably arguable case that Mr and Mrs Warwick breached any duty of care they may have owed?
[84] I will address each of those issues in turn, on the basis that the onus of proof is on Mr and Mrs Warwick to show that the plaintiffs have no reasonably arguable case on either of their two causes of action.
Issue (1) — Is it clear on the evidence that Mr and Mrs Warwick did not make any relevant representation of fact?
[85] The representations relied upon by the plaintiffs are the provision of the ROK Build report, and a counter-offer signed by the Warwicks and delivered to the plaintiffs on or about 27 November 2011. The counter-offer contained the following vendor's warranty:
Where the vendor has done or caused or permitted to be done on the property any works:
(a)Any permit, resource consent or building consent required by law was obtained; and
(b)The works were completed in compliance with those permits or consents; and
(c)Where appropriate, a code compliance certificate was issued for those works.
[86] The supply of those documents by the defendants is said to have constituted a representation that the plaintiffs or the vendor had done or caused or permitted to be done on the property building works that had been completed to the standards required by the New Zealand Building Code, that a building consent had been obtained for the work, that the work had been completed in compliance with the Building Consent, and that a Code Compliance Certificate had subsequently been issued.
[87] Mr McCartney submitted that the Warwicks made no representation to Ms Little, whether true or false. They merely gave copies of the ROK Build letter and the Leakscan report to the vendor's agent.
[88] Ms Little and her mother both say that they were physically given the Leakscan letter by the agent; when, where, and how they received the ROK Build report is unclear. They were also told by the agent that the dwelling did not leak, but that they should obtain their own building report. Mr McCartney submitted that those events
cannot constitute a representation made by the Warwicks to Ms Little, who they never met. There was no connection between the parties, and the connection is too remote.
[89] The precise circumstances in which the ROK Build report and the Leakscan report came from the Warwicks, who commissioned both reports, to Ms Little, is a matter for evidence and submissions at trial. However, it does seem clear at this stage that the Warwicks must have participated in the delivery of these two reports to prospective purchasers of the property, and intended and expected that the two reports would be read by prospective purchasers. The fact that they may never have met Ms Little does not affect that view. If someone gives a document to an agent with the instruction or expectation that the agent will pass the document on to a particular identified group, I do not think it can be said with sufficient confidence to justify the entry of summary judgment that the person giving the document to the agent has not represented anything (which in an appropriate case may include the contents of the document) to the third party group.
[90] Mr McCartney submitted that the plaintiffs have not expressly pleaded representation by silence, but he acknowledged that the following particulars of breach appear in both the deceit and negligence causes of action:
(k) By providing the ROK Build letter and the LeakScan report to the first-named plaintiff, and by not providing a copy of the Drybuild report obtained by them in November 2009, and by their silence in not disclosing at the time of sale of the property the extent of leaking problems with the house as known to them, the defendants misrepresented the true condition of the house, the extent of the targeted repairs done on the house and the real reason why the repair work had been done by and for them in their personal capacity prior to the sale of the property.
[91] Some further amendments to the statement of claim might be necessary but I think it is clear enough from their pleadings that the plaintiffs do wish to rely on misrepresentation by silence (including by failure to disclose the Drybuild report). I do not consider that it would be appropriate to enter summary judgment on the basis of an arguably incomplete pleading, where the nature of the plaintiffs' case on this issue is sufficiently clear and any pleading deficiency can be cured by amendment.
[92] On the issue of misrepresentation by silence, Mr McCartney referred to the judgment of Potter J in Ladstone Holdings Ltd v Leonora Holdings Ltd, a case where an allegation of misrepresentation by silence failed because the facts that supposedly rendered the defendant vendor's representation false were not in fact known to the vendor at the relevant time. Her Honour noted that most cases of misrepresentation by half-truth involve the representor knowing of the fact which invalidates the positive statement and which the representor deliberately conceals.5 Her Honour referred to the judgment of Hardie Boys J in Savill v NZI Finance,6 before concluding that it would not serve either the policy of the Contractual Remedies Act 1979 or the objective approach adopted by Hardie Boys J in Savill if the non-disclosure of facts unknown to the representor could constitute a misrepresentation, whether innocent or fraudulent.7
[93] Counsel also referred to the Court of Appeal decision of Magee v Mason, where Mrs Magee, one of the vendors of a house, had stated (in response to a question asked before the relevant sale contract) that the house was not a leaky building.8 The Magees had owned the house for two years, and Mrs Magee said that in that period they had never had any weathertightness issues. In fact the house had a number of original design and construction defects, and it subsequently did leak.
[94] The principal question on appeal was whether Mrs Magee's statements conveyed a false representation about the building's design or construction. The majority of the Court (Miller and Gendall JJ) considered that the effect of Mrs Magee's statement that she and her husband had never had any weathertightness issues within the time they lived in the house was to qualify her (immediately preceding) response that the house was not a leaky building. Mrs Mason had inferred from Mrs Magee's statements that the house did not and would not leak, assuming that as Mrs Magee had lived in the house for two years she would know whether it was a leaky building. But Mrs Magee had done nothing to engender that assumption, and in particular had made no representations about her knowledge or expertise. The Magees were not responsible for the assumption made by Mrs Mason.
5 Ladstone Holdings Ltd v Leonora Holdings Ltd [2006] 1 NZLR 211 at [52].
6 Savill v NZI Finance [1990] 3 NZLR 135 (CA).
7 Ladstone Holdings Ltd v Leonora Holdings Ltd, above n 5, at [55].
8 Magee v Mason [2017] NZCA 502; (2017) 18 NZCPR 902.
[95] It is not necessary to refer to the dissenting judgment of Courtney J, or to the reasoning of the majority. The case is quite different from the present, where the argument is that the Warwicks did have relevant knowledge or expertise (in the form of the Drybuild report) which they are said to have deceitfully or negligently withheld.
[96] Nor does Ladstone Holdings Ltd assist the defendants on the question of whether the Warwicks arguably misrepresented the position by their silence in not disclosing the Drybuild report. Ladstone Holdings Ltd is clearly distinguishable, as in that case the vendor did not know the undisclosed facts which were said to have rendered its pre-contract statement misleading. Here, the Warwicks must be taken to have known and understood the contents of the Drybuild report (at least for the purposes of the summary judgment application).
[97] For the foregoing reasons I do not consider that this issue is so clearly in favour of the Warwicks as to justify a defendant's summary judgment. I find for the plaintiffs on Issue (1).
Issue (2) — Were the Warwicks clearly mere conduits of opinions expressed by others, for which they cannot be liable?
[98] In their second amended statement of claim, the plaintiffs plead that, by providing the ROK Build letter and the Leakscan report to Ms Little, and by not providing a copy of the Drybuild report, and by their silence in not disclosing at the time of the sale of the property the extent of leaking problems with the dwelling as known to them, the defendants misrepresented the true condition of the dwelling, the extent of the targeted repairs done on the dwelling and the real reason why the repair work had been done by and for them in their personal capacity prior to the sale of the property.9
[99] Mr McCartney submitted that the Warwicks neither adopted the statements in the ROK Build report, nor added to them, and simply acted as a conduit in passing it (via the agent) to Ms Little and other prospective purchasers. He relied on the Court of Appeal decision of Goldsbro v Walker for the proposition that an innocent agent
9 Plaintiffs' second amended statement of claim dated 26 July 2018, at 20(n) and 27(k).
who acts merely as a conduit and purports to do no more than pass on instructions from his principal does not thereby become responsible for anything misleading in the information so passed on.10 On the other hand an agent who does not merely purport to pass on what he or she has been told, or who passes it on inaccurately or in some way adopts it or adds to it, may thereby engage in misleading conduct.11
[100] Mr McCartney also relied on Mainland Products Ltd v BIL (NZ) Holdings Ltd, a case where a vendor supplied a valuation to a purchaser.12 Cooper J referred with apparent approval to the decision of the Supreme Court of Queensland in Lake Koala Pty Ltd v Walker, a case in which the vendor of motel premises commissioned a firm of accountants to prepare trading projections for the business, and furnished the accountants' report to prospective purchasers. Connolly J said:13
… The representation which is made in the case of the mere furnishing of a report, such as that prepared by Peat Marwick in this case, is that the document is what it purports to be, namely the opinion of the expert, and that the vendor believes it to be honestly made and made in the exercise of professional competence or, which amounts to much the same thing, that he has no reason to believe to the contrary.
[101] In the Mainland Products Ltd case, Cooper J found that there was nothing in the evidence to suggest that the defendants or their officers had or claimed to have special knowledge or expertise on the basis of which they could independently verify or approve the conclusion of the valuation. Even if the valuation had been negligently performed, His Honour considered that it could not be attributed to the defendants in a way which would make them liable to the plaintiffs. The defendants were not aware of the basis upon which the valuation was now said to have been deficient, and there was no room for any finding that the defendants did not have reasonable grounds to rely on the valuation.14
[102] I do not consider that the "mere conduit" defence is suitable for summary determination in this case. The issue is whether Mr and Mrs Warwick arguably did not have reasonable grounds to rely on the ROK Build report and the Leakscan report
10 Goldsbro v Walker [1993] 1 NZLR 394 at 398.
11 At 398.
12 Mainland Products Ltd v BIL (NZ) Holdings Ltd HC Auckland CIV-2002-404-1889, 8 June 2004.
13 Lake Koala Pty Ltd v Walker [1991] 2 Qd.R 49, at 58.
14 Mainland Products Ltd v BIL (NZ) Holdings Ltd, above n 7, at [146]-[147].
as together providing an accurate picture of the need for the repair work that had been carried out, and its likely effectiveness. That issue is not one for determination on a summary judgment application. On the limited evidence available at this stage I consider it at least arguable for the plaintiffs that the Drybuild report should have put Mr and Mrs Warwick on notice that invasive investigation might be required in a number of areas of the dwelling, to ascertain the full extent of the moisture ingress and any structural damage it may have caused. It should arguably have been apparent to them that the subsequent ROK Build report did not refer to the conduct of any invasive investigations of the kind referred to by Drybuild, and that none may have been carried out. Also, there may be a question as to why Mr and Mrs Warwick considered it necessary to obtain a further moisture report before the sale (the Leakscan report) if they were confident that the work carried out by ROK Build sufficiently addressed the moisture ingress issues discussed in the Drybuild report.
[103] Mrs Warwick said in her reply affidavit that (having received the Drybuild report): "We hired a professional builder who told us what needed to be done, and we paid to have that done. … We actually went to talk to Drybuild after we got their report, and it was Drybuild who recommended that we engage ROK Build to do the work". But neither she nor Mr Armstrong said why the invasive investigations recommended by Drybuild were apparently not carried out, or even if they discussed the need for invasive investigations.
[104] The reasons Mr and Mrs Warwick elected to not make the Drybuild report available to prospective purchasers in the foregoing circumstances will be a matter for cross-examination at trial, and it is at very least arguable for the plaintiffs that if they had seen the Drybuild report as well as the ROK Build report and the Leakscan report, that would have impacted their decision to enter into the Agreement.
[105] In short summary, the problem for the Warwicks on this issue is the "no reason to believe to the contrary" part of the passage from the judgment of Connolly J in the Lake Koala case which is quoted at paragraph [100] above. The question is whether the Drybuild report may indeed have given the Warwicks "reason to believe to the contrary" when they considered the competence and likely effectiveness of the ROK
Build recommendations and work, and put them in a position where it was not
reasonable for them to have relied on the ROK Build report.
[106] In his oral submissions Mr McCartney submitted that a half-truth by silence cannot qualify as deceit. But I am not sure what authority there might be for that proposition, which seems on its face to be improbable (if a representor were to deliberately tell only half the story, withholding information that would have told a quite different story, I cannot see why such dishonesty should not equally qualify as deceit).15
[107] For completeness, I add that the Leakscan report stated that the thermal imaging camera would not have detected damage done as a result of moisture exposure, and for that reason it is of lesser importance than the ROK Build report.
[108] I conclude that Mr and Mrs Warwick have not made out a sufficient case for summary judgment on the basis that they were mere conduits, who did not adopt or endorse ROK Build report.
Issue (3) — Is it clear on the evidence that Mr and Mrs Warwick had no reason to believe, and did not believe, that the statements in the ROK Build report were incorrect?
[109] For the reasons already discussed, this is again not an issue suitable for determination on a summary judgment application. The critical issues, which can only properly be resolved at trial, are whether the Warwicks appreciated the seriousness of the matters raised in the Drybuild report (including the recommendation for invasive investigations), and if they did, whether they believed that the repair work recommended and carried out by ROK Build sufficiently addressed the Drybuild concerns. Those issues are not suitable for determination on the basis of affidavit evidence alone.
15 For the avoidance of any doubt, I add that I am not finding in this judgment that Mr and Mrs Warwick acted dishonestly. The only finding I make is that the contention that they acted dishonestly cannot be ruled out on a summary hearing such as this. It will be a matter for trial, where the Court will have the benefit of seeing the witnesses under cross-examination, whether the plaintiffs can prove that the Warwicks acted dishonestly in withholding information about the leaking issues (including the Drybuild report).
Issue (4) — To the extent that they may be held to have made a relevant representation or representations, is it clear on the evidence that Mr and Mrs Warwick did not intend the plaintiffs to rely on the representation(s)?
[110] Mr McCartney submitted that, in order for the Warwicks to have intended anyone to rely on a false representation, they must first have knowingly made a false representation. If there was no knowingly false statement, there could have been no intended reliance on such a statement.
[111] For the reasons discussed above under Issues (1) to (3), this too is an issue which can only properly be resolved at trial. I find for the plaintiffs on Issue (4).
Issue (5) — Is it clear on the evidence that the plaintiffs did not rely on the ROK Build report in deciding to enter into the Agreement?
[112] Mr McCartney submitted that Ms Little did not in fact rely on the ROK Build report before committing herself to the Agreement. She made the Agreement conditional on being satisfied with a building report to be obtained from a builder of her choice, and she subsequently obtained the Dwell report.
[113] The Dwell report contained an expression of the author's view that the cladding (stucco plaster usually 20mm thick laid over a softboard lining) is a good absorber of moisture, and stated that there were no moisture readings throughout the dwelling other than at some window and door sills (in stated locations within the dwelling). The author expressed the view that those issues were due to condensation and some moisture ingress before all the window and door frames were raked out and sealed. The author said that the moisture ingress was also obvious from the slightly bowed sills and sunken nails in the door sills, which was from moisture soaked into these particle board sills. The author said that they would be "fine now that the frames have all been sealed and will dry out over time, or lift them out and replace with solid timber sills fitted over DPC …".
[114] Mr McCartney summarised these passages from the Dwell report as a statement that the dwelling had been leaking and still had high moisture readings, 21 months after completion of the ROK Build work. Nevertheless, Ms Little said in her evidence that, having read the Dwell report, she was satisfied that the dwelling
was sound. He submitted that, on her own evidence, Ms Little relied on the Dwell report to satisfy herself that the dwelling was in good condition.
[115] In my view, these submissions do not sufficiently make a case for defendant's summary judgment on the basis of Issue (5). In her evidence, Ms Little said that she relied on a number of documents when she entered into the Agreement to purchase the property, and those documents included the ROK Build report and the Leakscan report.16 Of course at that stage the plaintiffs did not have the Dwell report, which was obtained pursuant to a condition contained in the Agreement. But quite apart from that, I do not think it is possible to say with the level of certainty required for the entry of summary judgment (i) that the plaintiffs did not also place some reliance on the ROK Build report, or (ii) that such reliance was not a material factor in their decisions to enter into the Agreement and later declare the Agreement unconditional (following receipt of the Dwell report).
[116]I find for the plaintiffs on Issue (5).
Issue (6) — If the plaintiffs did rely on the ROK Build report, is it clear on the evidence that it was not reasonable for them to have so relied?
[117] Mr McCartney submitted that, even if Ms Little did rely on the ROK Build report as to the quality of the work done, it was unreasonable for her to do so. He referred to the Court of Appeal decision in Savill v NZI Finance Ltd, a case concerned with the application of the Contractual Remedies Act 1979,17 but containing useful discussion on the general law of representation.18 The Court of Appeal noted that the term "misrepresentation" was not defined in the Contractual Remedies Act, and should therefore be understood in its established sense of a false or erroneous statement of fact. Nor did the Contractual Remedies Act say anything as to the materiality of the representation, or as to the intention of the representor in making it. However, both of those are requirements at general law — a material representation is one which would
16 In Magee v Mason, above n 8 at [48], the Court of Appeal confirmed that there may be more than one factor inducing entry into a contract. The test for any single inducement is whether it had any material effect on the decision.
17 Relevant provisions of the Contractual Remedies Act 1979 are now contained in the Contract and Commercial Law Act 2017.
18 Savill v NZI Finance Ltd , above n 6, at 145.
have induced a reasonable person to enter into the contract. If no reasonable person in the position of the purchaser would have relied on a statement of the type given, it would be a rare case in which the misrepresentation could be said to have "induced" the purchaser to buy the property.
[118] Mr McCartney also referred to the Leakscan report on moisture ingress at the dwelling. He noted that the Leakscan report said that remedial work was then underway on two window junctions, and that there was one minor crack in the plaster for which repair was then underway. Mr McCartney submitted that the Leakscan report therefore showed that, despite the repair work completed by ROK Build 20 months earlier, the dwelling was still suffering weathertightness issues. Given that, it was impossible to conclude (other than unreasonably) that the ROK Build work had been successful.
[119] Ms Grant submitted that where a clear and unequivocal representation is made, the representee should normally be able to take it at face value. It does not normally sit well in the mouth of someone who has been guilty of misrepresentation to blame the other person for believing the misrepresentation.19 She submitted that the representations in this case would have induced a reasonable person to enter into the Agreement, and they did not need to be the only inducing factor.
[120] Again, I am unable to accept Mr McCartney's submission. On its face, the Leakscan report identified only apparently minor issues, and it was limited in that the equipment used, although able to detect moisture, was unable to detect any underlying structural damage. For summary judgment purposes at least, I think it goes too far to say that the Leakscan report clearly showed the existence of continuing weathertightness issues, notwithstanding the ROK Build repair work. One minor crack in the plaster would not necessarily have alerted a purchaser to the possibility that the works described in the ROK Build report had not been completed competently and effectively, and nor would the reference to remedial work underway on two window junctions. The ROK Build report had described the re-sealing of the plaster to aluminium window junctions, referring to 12 such junctions, and it is not clear
19 Referring to Vining Realty Group Ltd v Moorhouse & Altimarloch Joint Venture Ltd [2010] NZCA 104, at [53].
whether the two window junctions referred to by Leakscan may have been other window junctions, not covered by the ROK Build repair work.
[121] More generally, I think it may reasonably be assumed that the ROK Build report was made available to prospective purchasers, with the Leakscan report, to reassure them that the dwelling was not a "leaky house". If that is right, the starting point is that whoever directed that those reports should be made available to prospective purchasers probably intended them to rely on the reports in deciding whether to purchase the property.
[122] In my view the evidence is not sufficiently clear that the plaintiffs did not rely (at least in part) on the ROK Build report, or if they did, that it was unreasonable for them to have done so, to justify the entry of summary judgment for the defendants.
[123]I find for the plaintiffs on Issue (6).
Issue (7) — Is it clear on the evidence that the plaintiffs have no reasonable argument that Mr and Mrs Warwick owed them a duty of care in tort?
[124] Mr McCartney took the following description of the test for a duty of care in tort from the Court of Appeal decision in Invercargill City Council v Southland Indoor Leisure Centre:20
[85] The elements of the cause of action in negligent misstatement may be framed in this way:
(a)Proximity: the parties must be in a relationship of proximity, or a "special relationship". This requires that the adviser knew for what purpose the advice was wanted, knew the advice would go to the plaintiff or an ascertainable class that included the plaintiff, and knew the advice would likely be acted on without independent inquiry. Knowledge may be imputed, the court having found that the adviser ought in the circumstances to have known or foreseen what would likely happen.
(b)Policy: wider policy reasons must not exclude a duty of care in the circumstances. For example, a court may exclude a duty for risk of indeterminacy, or for conflict with some other duty or the public interest.
20 Invercargill City Council v Southland Indoor Leisure Centre [2017] 2 NZLR 650 (CA).
(c)The ultimate question: whether, having regard to (a) and (b), a duty is fair, just and reasonable.
(d)Specific reliance and loss: the plaintiff actually relied on the advice and suffered loss in consequence.
[125] First, it is far from clear that the requirement of proximity is not met in this case. Although they never met her, the Warwicks appear to have been in a relatively close relationship of proximity with Ms Little as a prospective purchaser, and they would have been the prime movers in making the ROK Build report and the Leakscan report available to prospective purchasers (via the agent). Indeed, the plaintiffs allege in their second amended statement of claim that the Warwicks, as directors of the vendor, acted as its agents for the purposes of marketing and negotiating the sale of the property.
[126] Mr McCartney accepted in his submissions that a person other than the vendor may be liable for negligent misrepresentation in certain circumstances; his position was simply that this is not such a case. Whether or not that is so seems to me to be a matter best determined in the light of all the evidence that will be available at trial. Particular consideration will have to be given to the plaintiffs' allegations that the Warwicks had special knowledge relating to the matters in issue, arising from their having lived in the house and their knowledge of the Drybuild report, and that they assumed responsibility for the representations contained in the ROK Build report and the counter-offer. At this stage I do not consider that it is sufficiently clear that no special relationship existed between the Warwicks on the one hand, and the class of prospective purchasers of the property on the other, that a finding of no duty of care would be justified on that account.
[127] It is a more difficult question whether the Warwicks can be said to have known that the advice contained in the ROK Build report would likely be acted upon without independent enquiry — when the Agreement was completed, they knew that the plaintiffs would be obtaining a building report before they declared the Agreement unconditional. However, it is not clear that the Warwicks believed, at the earlier time or times they provided the advice contained in the ROK Build report and the Leakscan report (to their agent, for delivery to prospective purchasers), that the advice would not be likely to be acted upon by prospective purchasers without independent enquiry.
(Indeed, in signing the Agreement Ms Little arguably did act on the representations without further enquiry, at least at that point.) I think there is also an issue as to how the expectation of independent enquiry point is to be dealt with where the principal misrepresentation relied upon, as in this case, is in the nature of an alleged withholding of relevant information (specifically, that the Warwicks had obtained expert advice that invasive investigations were required and that none had been undertaken). At this stage I do not consider there is a sufficient evidential foundation for a finding that the Warwicks clearly knew that Ms Little would likely make independent enquiries of the kind that would have been required to pick up the serious problems that existed with the dwelling.
[128] I have already addressed the issues of specific reliance, and there is sufficient evidence (in the form of the evidence of Mr Durkin) that loss has been suffered. Policy considerations are better addressed in the context of all of the evidence that will be available at trial.
[129] For the foregoing reasons I do not consider that the Issue (7) matters are suitable for determination at summary judgment level. The critical factual enquiries for trial seem likely to be whether the Warwicks appreciated the full seriousness of the problems identified in the Drybuild report, whether they really believed that the ROK Build repairs were sufficient to remedy the problems identified by Drybuild, and why the Drybuild report was not disclosed with the other two reports. Without factual determinations on those matters I consider it would be premature and unsafe to make any determination on the duty of care issue. On the limited evidence presently available, I am not satisfied that the defendants have sufficiently shown that there is no reasonable prospect of the plaintiffs establishing at trial that it would be fair just and reasonable to impose the duty of care for which they contend.
Issue (8) — If the answer to issue (7) is no, is it clear on the evidence that the plaintiffs have no reasonably arguable case that Mr and Mrs Warwick breached any duty of care they may have owed?
[130] Again, this is not a matter that can be properly resolved on a summary judgment application. By way of example only, I do not think the defendants have produced sufficient evidence to show, to the standard required for the entry of
summary judgment in their favour, that they have not breached a duty of care to the plaintiffs by failing to take reasonable care to ensure that the representations were true and correct in all respects, and in particular in the respect pleaded in the passage from the plaintiff's second amended statement of claim which is reproduced at paragraph [90] of this judgment.
[131]I find for the plaintiffs on Issue (8).
Result
[132] For the foregoing reasons, the defendants have failed to satisfy the Court that none of the causes of action in the plaintiffs' second amended statement of claim can succeed. The application for summary judgment is dismissed accordingly.
[133] The usual practice is that costs on a plaintiff's unsuccessful application for summary judgment are reserved.21 However, the authorities appear to take a different approach where the unsuccessful application is a defendant's application. In Nand v Tower Insurance the Court noted that a defendant is better able to assess the strength of the case before making a summary judgment application, and in such cases costs should normally be awarded against the unsuccessful defendant.22 It may be that similar considerations will apply here, although Mr McCartney submitted that the plaintiffs effectively ran a different argument (deceit or negligence by wrongfully withholding information) than what had been pleaded. He referred to the Court of Appeal decision in Thompson v Turner Hopkins23 in support of the proposition that costs should not be awarded in such circumstances. For her part, Ms Grant expressly requested an opportunity to be heard on the issue of costs after delivery of my judgment.
[134] If counsel cannot agree on costs, the plaintiffs may file and serve a memorandum within 15 working days, setting out their costs claim. The defendants
21 NZI Bank Ltd v Philpott [1990] 2 NZLR 403, (1990) 3 PRNZ 695 (CA).
22 Nand v Tower Insurance [2016] NZHC 1455, at [49]. See also Commercial Factors Ltd v Meltzer
[2017] NZHC 30, at [33].
23 Thompson v Turner Hopkins [2018] NZCA 197.
may file a reply memorandum within 10 working days of their receipt of the plaintiffs' memorandum. I will then deal with any costs issues on the papers.
[135] The Registrar is directed to schedule a telephone conference for the purpose of giving directions for the future conduct of the proceeding, on the first practicable date after 17 May 2019.
Associate Judge Smith
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