Mitchell v Murphy

[2019] NZHC 3262

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-965

[2019] NZHC 3262

BETWEEN

HOWARD BRENT MITCHELL AND LYNNE MARY MITCHELL

Plaintiffs

AND

CLARE DIANA MURPHY as trustee of the VICTOR SYDNEY TRUST

First Defendant

IAN BRUCE KEMP
Second Defendant

BARFOOT & THOMPSON LIMITED

Third Defendant

Hearing:

14-18, 21-22, 30 October and 1 November 2019

Appearances:

S Wroe and M Ibram for the Plaintiffs D Collecutt for the First Defendant

No appearance by or on behalf of the Second and Third Defendants

Judgment:

11 December 2019

JUDGMENT OF GORDON J

This judgment was delivered by me

on 11 December 2019 at 4.00 pm, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

Solicitors:           Rainey Law, Auckland

Ganda & Associates, Auckland

Counsel:            S Wroe, Auckland

D Collecutt, Auckland

MITCHELL v MURPHY as trustee of the VICTOR SYDNEY TRUST [2019] NZHC 3262 [11 December 2019]

TABLE OF CONTENTS

Introduction  [1]

A preliminary matter  [12]

Background  [20]

Construction of the townhouses  [20]
Ownership and occupation of units 6 and 7  [23]
Leaks in units 1 to 6  [27]
Unit 7 — leaks prior to sale to the Mitchells  [66]

Work in unit 7 prior to sale  [89]
Sale to the Mitchells  [94]

First cause of action — s 35 CCLA  [117]

What representations were made to Mr Mitchell?  [124]

Were the representations actionable?  [131]

Discussion  [136]

Were the representations false  [153]

Is unit 7 a leaky home?  [153]

The alleged defects  [166]

Alleged defect 1(a) — metal pipes buried within the top plaster surface of

the balustrade  [167]
Alleged defect 1(b) — metal parapet cap buried within the top parapet

surface of the balustrade to the ensuite balcony  [174]

Alleged defect 1(c) — apron flashings inserted into the Duraplast cladding

with limited/no turnouts  [177]
Alleged defect 1(d) — failing membrane on the surfaces of the decks
combined with defective drain outlet installation  [182]
Alleged defect 1(f) — poorly conceived/detailed pipe penetration and pipe
through the balustrade of the ensuite balcony  [187]
Alleged defect 1(g) — generic failure of the flashing system on doors and

windows  [188]
Alleged defect 1(h) — defective membrane/cladding detailing at balcony

doors  [194]
Alleged defect 1(i) — inadequate and failing waterproofing in the shower in

the ensuite bathroom.  [195]

Was unit 7 built with extra care?  [201]

Inducement  [202]

Did Mrs Murphy intend that Mr Mitchell would be induced by the
misrepresentation to enter into the SPA?  [202]
Did Mrs Murphy use language that would induce a reasonable person in the
same circumstances to enter the contract?  [206]

Did the Mitchells rely on the misrepresentations?  [207] Was it reasonable for Mr Mitchell to rely on the representations?  [224] Is it fair and reasonable that cl 22 be conclusive between the parties?  [225] Section 50 of the CCLA  [239]

Discussion  [224]

Second cause of action — Fair Trading Act 1986  [257] Is Mrs Murphy guilty of misleading and deceptive conduct?  [269] Did the misleading conduct cause the Mitchells’ loss or damage?  [272] “Failure to maintain”  [276]

Accessory liability — s 43(1)  [284]

Loss  [292]

Scope of work  [295]

Items of disagreement between the quantity surveyors  [318]

Timber propping and samplings  [319]

Provision of temporary support to existing roof structure during remedia

works  [321]
Protection of adjoining property  [323]

Length of project  [326]
Mr Hanlon’s comparison and benchmark  [331]

Conclusion on loss/cost of repair  [332]

Consequential costs  [333]

General damages  [334]

Interest  [339]

Should damages be reduced on the basis of an increase in value?                  [343]

Claim against second defendant  [346]
Liability of an employee  [348]
Do the exclusion of liability clauses operate to protect Mr Kemp?                [350]
Alleged breaches by Mr Kemp  [352]
Did Mr Kemp’s report mislead the Mitchells?  [357]
Measure of loss under the FTA — Mr Kemp  [362]
Apportionment between first and second defendants  [367]

Result  [369]

Orders  [372]

Costs  [374]

Introduction

[1]    Howard Mitchell entered into an agreement (SPA) to purchase a town house at 7/103 Remuera Road (unit 7) from the first defendant, Clare Murphy, in her capacity as a trustee of the Victor Sydney Trust (the trust). On settlement, both Mr Mitchell and his wife, Lynne Mitchell, became the registered proprietors of unit 7.

[2]    The real estate agent acting for Mrs Murphy on the sale was Jocelyn (or Joss) Goodall of Barfoot & Thompson Ltd (Barfoots). Mr Mitchell says that Ms Goodall said to him and his wife that the owner says unit 7 is not a leaky home. Ms Goodall further said that the unit had been built with extra care and included some superior features as compared to the other units in the property.

[3]    Mr Mitchell also says that Ms Goodall told him and his wife that Mrs Murphy and her husband were the original developers for the block of seven townhouses and that unit 7 had been built for Mrs Murphy and her husband and they had lived in it.

[4]    The Mitchells say that the representations in [2] above were untrue; that the representations induced them to enter into the SPA; and that they have suffered loss as a consequence. The Mitchells bring a claim against Mrs Murphy under s 35 of the Contract and Commercial Law Act 2017 (CCLA).

[5]    Mrs Murphy primarily relies on the “as is, where is” clause in the SPA which she says precludes any reliance by the Mitchells on pre-contractual representations. She says that under s 50 of the CCLA it is fair and reasonable that that clause is conclusive between the parties. But in any event, Mrs Murphy denies any misrepresentation and says that whatever Ms Goodall said was only an opinion and not a representation of fact.

[6]    The Mitchells’ second cause of action against Mrs Murphy is under the Fair Trading Act 1986 (FTA) alleging misleading and deceptive conduct (s 9). They say that Mrs Murphy was in trade when she sold unit 7 to them — it had been rented out for a large part of the time that Mrs Murphy had owned it as a trustee. An alternative claim under the FTA is that Mrs Murphy is liable under s 43(1)(d) for being knowingly concerned in contravention of the FTA by Ms Goodall.

[7]    In response, Mrs Murphy pleads that she was not in trade. Mrs Murphy also says that the Mitchells cannot prove that unit 7 is as defective as they claim, and they have failed to mitigate, and instead have exacerbated, their losses.

[8]    The Mitchells also brought a claim under the FTA against Barfoots alleging misleading and deceptive conduct. They settled with Barfoots prior to the hearing.1 As a consequence, the claim against Barfoots has been discontinued, as has Barfoots’ cross-claim against Mrs Murphy.

[9]    The Mitchells also bring a claim under s 9 of the FTA against the second defendant, Ian Kemp, who inspected the property and provided a report after the SPA was signed but prior to the Mitchells declaring the purchase unconditional. Mr Kemp has taken no steps in the proceeding and the Mitchells seek judgment against him by way of formal proof.

[10]The claim, excluding interest and costs, is $552,833.00, being:

(a)       Repair costs	$449,091.00
(b)       Consequential costs	$ 68,742.00
(c)       General damages	$ 35,000.00

[11]Interest of $32,531 is also claimed, bringing the total claim to $585,364.2

A preliminary matter

[12]   Mr Collecutt, for Mrs Murphy, belatedly raised the issue of Mrs Mitchell’s standing, on the basis that it was Mr Mitchell who signed the SPA. It is therefore necessary to address this issue at the outset.

[13]The SPA records the purchaser as “Howard Brent Mitchell and/or nominee”.

1      There are confidentiality clauses in the settlement agreement between the Mitchells and Barfoots. For that reason, the settlement sum will be redacted from the published version of this judgment.

2      These amounts are rounded down by the Mitchells to the nearest dollar.

[14]   In Laidlaw v Parsonage, the appellants agreed to sell a house to a purchaser “and/or nominee”.3 The respondents, trustees of a family trust, became the nominee under the agreement and the property was transferred to them. The house leaked, and the respondents sought summary judgment for breach of warranty, in the agreement for sale, that the house had been completed in accordance with building consent and relevant obligations under the Building Act 1991. The claim was upheld: the promise relied upon by the respondents was made to the purchaser and the purchaser included the nominee.

[15]   However, in the present case, the representations were not in a deed or contract.4 Under s 35 of the CCLA, a representation inducing a contract between a representor and representee is treated as if it were a term of the contract, but it does not actually become a term. Therefore, as stated in Burrows, Finn and Todd on the Law of Contract in New Zealand, on its face, a pre-contractual representation is not a “promise contained in a deed or contract” for the purposes of s 12.5

[16]   There are conflicting authorities on the issue. On the one hand, in Pragma Holdings Ltd v Great South 507 Ltd, Associate Judge Faire (as he then was) refused to strike out a claim by a third party alleging an inducing misrepresentation by one of the contracting parties.6 However, in Closurepac NZ Ltd v WS 2014 Ltd, Thomas J held that the predecessor to s 12 did not include an inducing misrepresentation.7

[17]   The learned authors of Burrows, Finn and Todd suggest that Thomas J’s view is arguably the better one.8 I respectfully tend to that view also. However, it is not necessary, for the purposes of this judgment, to reach a concluded position as I consider the issue can be resolved on the basis of agency.

[18]   I consider it is more likely than not that Mr Mitchell was acting as the agent for himself and his wife at the time. Mr and Mrs Mitchell inspected the property

3      Laidlaw v Parsonage [2009] NZSC 98, [2010] 1 NZLR 286.

4      Contract and Commercial Law Act 2017, s 12.

5      Jeremy Finn, Stephen Todd and Matthew Barber Burrows, Finn and Todd on the Law of Contract in New Zealand (6th ed, LexisNexis, Wellington, 2018) at 566.

6      Pragma Holdings Ltd v Great South 507 Ltd HC Auckland CIV-2005-404-1931, 30 August 2006.

7      Closurepac NZ Ltd v WS 2014 Ltd [2015] NZHC 1587 at [148]–[164].

8      Finn, Todd and Barber, above n 5, at 567.

together; the representations were made by Ms Goodall to both of them; the SPA includes the words “and/or nominee”; following settlement both Mr and Mrs Mitchell became registered proprietors of unit 7; and they live together in unit 7 as their family home.

[19]   Mrs Mitchell therefore has standing to bring the claims. In the end, this issue makes little or no difference to the proceeding as it is not suggested that Mr Mitchell does not have standing.

Background

Construction of the townhouses

[20]   Unit 7 is the last in a row of seven townhouses, each with its own freehold title, constructed between 1996 and 1998. New Zealand Pinewood Ltd (NZPL) was the developer. At the time of construction and until 20 August 2007, Mrs Murphy and her late husband, Bernard Murphy, were the two directors of NZPL, which went into liquidation on 14 December 2007.

[21]   Construction of all the units generally consists of a masonry base with a further two floors above,9 constructed using a light timber frame. Roofing is a mixture of clay tiles and Butynol-covered flat roofs. Unit 7’s roof differs from the other units in order to accommodate height to boundary restrictions. The first floor is constructed as a tray deck with a concrete topping. All the units were built with the same style of windows and each has tiled balconies over a membrane, with living space underneath. Unit 7 has five balconies, with the two upper balconies (on the second floor) being timber framed and two (on the first floor) being concrete. The fifth balcony, which is on the first floor, is constructed in metal and is attached to the building and cladding.

[22]   The external cladding is a light-weight plaster system, “Duraplast”, applied to directly fixed fibre-cement sheet to timber framing. Unit 1 has since been reclad with weatherboard. The external cladding of the other units is unchanged from the original construction

9      I will refer to the floors as: ground floor, first floor and second floor.

Ownership and occupation of units 6 and 7

[23]   NZPL owned both units 6 and 7 from construction. Mr and Mrs Murphy moved into unit 7 when it was completed in or about December 1997. They continued to live there until about 2004. Mrs Murphy’s evidence was that they moved out because Geoffrey Read, who owned (and still owns) unit 4 was making a nuisance of himself. More of that later. After the Murphys moved out, NZPL rented out unit 7. Unit 6 was also rented out.

[24]   On 13 October 2006, units 6 and 7 were transferred from NZPL to Mr and Mrs Murphy as trustees of the Victor Sydney Trust. Both units 6 and 7 continued to be rented out. On 26 February 2013, Mrs Murphy became the sole owner of both units 6 and 7 as a trustee, following the death of her husband.

[25]   Mrs Murphy, as trustee of the trust, sold unit 6 to Eric Buisman and his wife who had been renting that unit, with settlement occurring on 22 April 2016. More on unit 6 shortly.

[26]   Mrs Murphy moved back into unit 7 in January 2016 and lived there until approximately one week prior to settlement of the sale to the Mitchells, which was on 30 March 2017.

Leaks in units 1 to 6

[27]   There was evidence that there were leaks in units 1 to 6 commencing from around 2002. Whether Mrs Murphy had knowledge of those leaks is relevant in this proceeding. Leaking in those other units, and more particularly any defects causing those leaks, is also potentially relevant to the allegations of defects causing leaks in unit 7.

[28]   Mr Read, who owns unit 4, was called as a witness on behalf of the Mitchells. He and his wife bought unit 4 from NZPL with settlement occurring on 22 April 2002. Prior to that date, NZPL had rented out unit 4 for about four years. Mr Read said that when he bought unit 4, he was aware that there were possible leaks. He had noticed signs of leaking around the downstairs shower and therefore ensured there was a clause

in the SPA that required NZPL to repair the leaks. He says this clause was worded widely enough to cover all leaks. He asked NZPL to fix the downstairs leak before he completed the purchase.

[29]   Mr Read said that after he and his wife moved in, it soon became clear there were problems beyond the shower. He contacted Prendos Ltd to investigate. Prendos prepared reports dated 21 June and 8 August 2002 which, Mr Read says he gave to the Murphys and asked them to fix the problems. Mrs Murphy’s position is that she never saw those reports.

[30]   I interpolate here to record that during his closing submissions, Mr Collecutt made a late objection to the admissibility of the Prendos reports and other reports in relation to unit 4 and other units in the complex. He accepted that the reports were relevant to Mrs Murphy’s knowledge and therefore admissible on that issue, but he made the submission, for the first time, that the reports were not admissible to prove the truth of their contents.

[31]   In my view, the reports all qualify as “business records”10 and the statements contained within those reports are admissible on the basis that undue delay would have been caused if those persons were required to give evidence.11 In relation to the earliest reports in 2002 and 2003, I also consider that no useful purpose would have been served by requiring the persons who supplied the information for the composition of the reports to be witnesses as those persons cannot reasonably be expected to recollect the matters dealt within the reports.12

[32]   I return to the Prendos reports. The areas identified with water ingress issues, which are common to the allegations made in relation to unit 7, are: flashings at the window junctions; pipe rail penetrations into the balcony balustrades; method of construction of balconies, including membranes; and internal showers.

[33]   There were two meetings held in September 2002 attended by the owners of the units, Mr Murphy and his builder. The minutes of 2 September 2002 record that

10     Evidence Act 2006, s 16(1).

11     Section 19(1)(c).

12     Section 19(1)(b).

there were “discussions around leaks of building, concern of leaking around windows and also through balcony”.

[34]The minutes of the 16 September 2002 meeting record:

Consensus of opinion there are four issues:

(a)Decks

(b)Cladding around windows

(c)Little isolated issues with each of the three units [3, 4 and 5]

(d)Showers within the units

[35]   Mr Read said he thought about bringing a claim against NZPL and there was correspondence between his lawyer and NZPL’s lawyer. However, having been told it would cost a lot in legal fees to pursue a claim, Mr Read decided to put the money towards repairs. He obtained a report from Pilchers Waterproofing Ltd in December 2002. Pilchers undertook the works on units 3 and 4. Mrs Murphy said she never saw the Pilchers report. She said it was never delivered to them (the Murphys) as, by then, Mr Read had banned Mr Murphy from his property.

[36]   Pilchers completed the remedial work for units 3 and 4 in late 2002 and early 2003. Mr Read’s evidence was that, in unit 4, they pulled out the windows and reinstalled them so that they were watertight. They completely redid the decks, pulling up the tiles and the membrane. The showers were also replaced. In all, Mr Read said he spent about $50,000 on remedial work.

[37]   In February 2006 and again in May 2007, unit 7 was listed for sale. Mr Read said that he passed on information about the history of the units to real estate agents and to members of the public coming to view unit 7. He says he was also approached by a professional contact of his, a financial advisor, and Mr Read gave him access to his reports and file so that any interested buyers could draw their own conclusions. Unit 7 did not sell at that time.

[38]   The owners of unit 1, Christopher Frame and his wife, had also identified problems in 2002/2003. Mr Frame, who gave evidence for the Mitchells, says that he

and his wife moved into unit 1 in 1996. They later purchased unit 2 as well. Mr Frame said that he attended the second meeting referred to in [34] above on 16 September 2002. He had been reluctant to accept that he would have problems with his unit but around December 2002 he noticed that there was bulging around the skirting boards in their lounge. He says this was just under the window near the fireplace. He put a hose against the window on the outside and he says water poured in. A few months later they carried out some further investigations themselves by removing gib boards. Mr and Mrs Frame then applied to the Weathertight Homes Resolution Service (WHRS) on 14 February 2003 but did not receive a report until May 2004. That report recommended a total reclad of unit 1.

[39]   Mr Frame said that prior to getting the report, he and his wife had already attempted to get Mr Murphy and his builder to accept responsibility for repairs that needed to be done to a lot of the units, including his. He was not satisfied with what they proposed. He said there were some attempts to mediate with NZPL and the builders in 2004 and 2005. He then put the WHRS claim on hold in January 2006 because of his wife’s health.

[40]   He returned to the issue in April 2008, when he advised WHRS that he wished to proceed with the claim and requested an addendum report. This was provided in June 2008. On 20 April 2010, Mr Frame’s representative wrote to Mr Murphy, advising that an assessor had identified significant weathertightness issues with unit 1 and that remedial work was necessary. That work was done under the management of O’Hagan Building Consultants Ltd (O’Hagans) and the recladding (in weatherboard) was completed in August 2010. Mr Frame said that when the cladding came off it was not as bad as they had feared but where it did leak “it was bad”.

[41]   The O’Hagan report of 19 May 2011 stated that below the majority of the windows there was decayed framing and mould was growing on the Hardibacker sheet. The report further stated that, because of this defect, a full reclad of unit 1 was required.

[42]   In August 2011, Mr Murphy was served with a statement of claim filed with the Weathertight Homes Tribunal13 and documents including the WHRS addendum report and the O’Hagan report referred to above. The WHRS addendum report included that “[t]he investigation confirmed the presence of timber decay and mould in the framing of this building”.

[43]   Mr Frame said that the whole process with the WHRS and negotiating with the developer had taken such a long time that he decided not to proceed with an adjudication, opting instead to take the Government’s financial assistance package.

[44]   Mrs Murphy’s position was that she had not seen the WHRS report of May 2004 nor the later supplementary report nor the O’Hagan’s report. She did, however, admit that she had been aware of potential claims in the Weathertight Homes Tribunal against NZPL in relation to both units 1 and 4, and that NZPL had received documents that related to claims against it. She also accepted that those documents included reports outlining the defects alleged in relation to those units.

[45]   In relation to unit 2, Mr Frame said they sold that in January 2004. By then the Frames knew that there were some leaks on the ground floor of unit 2. They disclosed this to the buyer and showed her through unit 1, where the gib was still off the walls. There was a reduction in the purchase price for unit 2, which Mr Frame believed was around $20,000.

[46]   Mr Buisman and his wife rented unit 6 from Mrs Murphy in 2011. They later purchased it from her under an agreement dated 18 March 2014 containing a long settlement period, with settlement occurring on 22 April 2016. They agreed to buy unit 6 for $800,000 on the condition that Mrs Murphy pay for any repairs.

[47]   During the Buismans’ tenancy there had been problems with water ingress. Mr Buisman liaised with Mrs Murphy over these issues. In summary, there was work done on the downstairs bathroom including repairs to the shower a number of times during the two years that the Buismans rented the property. The bathroom shares a party wall with unit 7 and the shower is located against that party wall. Mr Buisman

13     Mr Murphy was named as a respondent as NZPL had been liquidated by then.

said that one of the walls in the bathroom became flaky, and you could put your fingers through it. Once the plaster had been taken off there was mould apparent on the timber behind. There was a recurring issue with dampness in this wall.

[48]   Mr Buisman’s evidence was that he also had to replace ceiling panels in a downstairs bedroom as a result of water coming into the lounge on the floor above through the balcony into the bedroom below. He described this as quite a major leak which caused a lot  of  damage.  Mr  Buisman’s  evidence  was  that  he  advised  Mrs Murphy of all of these issues, including the recurring problem with dampness in the bathroom wall. Mrs Murphy organised tradesmen and paid for the work during the tenancy period.

[49]   Mr Buisman said as the settlement date was approaching, he began to think about obtaining finance for the purchase. He knew the bank would want a building report, which he commissioned in October 2015, leaving time for any problems to be repaired by Mrs Murphy before settlement. The report highlighted issues with the unit. As to the cladding, it stated that, “Cracks are sighted to many areas, past repairs are noted. Repairs and re-coating is required.” There were also high moisture content levels in some areas, which were noted to be of immediate concern.

[50]   Mr Buisman raised this with Mrs Murphy and sent her the report in October 2015. Her emailed response included:

Many of his “findings” are incorrect, it is populated with normal simple basic maintenance, facts relevant to all buildings, and others that have no relevance to your property. However there are other items we should discuss.

[51]   Mrs Murphy nonetheless maintained she had not read the report at the time. She said she simply scanned it.

[52]   Mr Buisman’s position was that he had agreed with Mrs Murphy that she would remain responsible for the issues raised in the October 2015 report. Mrs Murphy’s position was that there was no such agreement. An email from Mr Buisman’s solicitor to Mrs Murphy’s solicitor dated 22 April 2016 states:

My client has instructed me to advise that there has been agreement in correspondence between your client and our client in terms of which your

client has undertaken to remedy the moisture issues in the downstairs bathroom and downstairs adjacent rooms, and that this obligation on your client’s part remains, notwithstanding settlement taking place today.

[53]Through her lawyers, Mrs Murphy denied any responsibility.

[54]   Mrs Murphy did however arrange for some work to be done on unit 6 and also unit 7 at the same time. This was in February 2016. It included resealing cracks in the external plaster and repainting. Her position in relation to unit 6 was that she was not obliged to do so under the agreement with Mr Buisman.

[55]   It is not for this Court to determine where the obligation lay. The point is that Mr Buisman was asserting in April 2016 (around seven months before the sale of unit 7 to the Mitchells) that there were ongoing problems with leaks in unit 6. He says he ended up arranging for a tradesman to repair what he described as the “faulty/leaking roof” and the Butynol which was causing water to enter down the ceiling fan in the bathroom which had been a recurring problem.

[56]   A second report, once the external plaster work had been completed, was apparently accepted by Mr Buisman’s bank. A copy of that report was not available.

[57]   Mr Buisman said he has spent about $100,000–$120,000 on unit 6, trying to sort out the various problems which he says were caused by poor workmanship. He has not yet replaced the membrane on the balcony.

[58]   Finally, as to reports on other units, there is a report dated 14 October 2011 from Drybuild in relation to unit 5. Drybuild conducted infrared testing for moisture ingress both internally and externally. The report recorded slightly elevated moisture readings on the sides of two downstairs doors; high moisture readings in a downstairs bathroom due to a possible flat roof junction failure above; high moisture readings in a downstairs bedroom due to a possible balustrade failure on the deck above; signs of a leak from next door with water tracking down the internal wall; high moisture readings in a toilet on level one due to a joinery failure coupled with a possible flat roof failure; and slightly elevated moisture readings by windows in the lounge on level one and bathroom and bedrooms on level two.

[59]   Under cross-examination, Mrs Murphy said she had not seen the Drybuild report until discovery of documents in this proceeding. There was no other evidence which contradicted her evidence. However, the reports in relation to unit 4 also implicated unit 5.

[60]   With that summary of evidence regarding other units in the complex, I turn to my findings as to Mrs Murphy’s knowledge of the defects in those units. I first record that in some respects Mrs Murphy has given differing accounts. For example, she denied having seen or read the reports in relation to units 1 and 4. However, in her sworn list of documents, she confirmed that NZPL did have documents in relation to a potential claim against it, but that she no longer had them. Her sworn response to interrogatories confirmed that this statement related to claims for units 1 and 4.

[61]   She also acknowledged in cross-examination that she was aware (prior to the sale of unit 7) that the WHRS report for unit 1 essentially found that the building had not been constructed in a way that complied with the Building Code. Further, she said that she understood that there were allegations that external water had got into unit 1 and caused damage.

[62]   In relation to unit 4, she referred to a letter which she had typed on behalf of NZPL, dated 2 November 2004, in which it was asserted that there were no architectural or building issues with unit 4. Under cross-examination, Mrs Murphy accepted that allegations had been made, but, as to whether they had been clearly identified, she said, “if it’s a Prendos report you really need to do more investigative work”. Under further questioning, she then acknowledged that the confirmatory report from Pilchers would have been enough to confirm the problems identified by Prendos. She also acknowledged her husband’s handwriting on a letter enclosing the Pilcher’s report which addressed issues with unit 3 as well as unit 4.

[63]   Further in relation to unit 4, Mrs Murphy was aware of the steps taken  by  Mr Read to inform prospective purchasers and the real estate agents in 2006 and 2007, when unit 7 was being marketed, of the weathertightness issue he had experienced with unit 4. She was also aware that Pilchers had done work on unit 4.

[64]   In relation to unit 6 and the report obtained by Mr Buisman, she said that she did not read it, but an email at the time indicates that she did. Under cross- examination, she accepted that she scanned the report.

[65]   I therefore find that at the material time, that is before the marketing of unit 7 in 2016, Mrs Murphy was aware of allegations of watertightness issues in relation to unit 1, unit 3, unit 4, unit 5 and unit 6.

Unit 7 — leaks prior to sale to the Mitchells

[66]   Going back to 2006 or 2007, Mr Frame said he went into unit 7 when it was being marketed for sale. He said that when he walked around unit 7, he could smell a damp musty smell, particularly in the master bedroom on the second floor.

[67]   In late 2011, while unit 7 was tenanted, there was a serious leak into the ceiling of the kitchen (which is on the first floor) which caused the ceiling to sag (the ensuite bathroom on the second floor is above the kitchen). There was also a leak in the ensuite bathroom. The tenants had moved out saying they did so because of the severity of the damage to the kitchen ceiling. They had feared for their safety as they thought the ceiling would collapse.

[68]   Mrs Murphy’s evidence was that she engaged Auckland Butynol Ltd to diagnose and fix the cause of the mould on the ceiling gib of the second-floor ensuite bathroom. She believes that Auckland Butynol’s employee told her that the leak was probably due to the Sky TV satellite dish installation being a rough job and he had installed silicon to fix the problem.

[69]   Mrs Murphy says she also has a recollection that, at some stage or stages, Auckland Butynol told her they had also investigated the extractor fan above the second floor ensuite and roof area generally and they were unable to identify the source of the leak with certainty; and they had installed silicon around the aerials and any other areas that they thought might have been causing the problem. She cannot recall with certainty when that advice was given. She said her focus in 2011 and 2012 was on her husband, who was very ill.

[70]   Mrs Murphy filed a claim with her insurer, Vero Insurance, around November 2011. The loss adjuster’s report of 30 November 2011 records the cause of loss/damage as follows:

Split butinol [sic] lining on roof [above second-floor ensuite bathroom], insured advises tenants had a TV aerial installed and assumes the hole was put in the butinol [sic] at this time. This was approximately a year ago.

[71]The full description of loss/damage in the loss adjuster’s report is as follows:

All wall and ceilings throughout the level 2 [ensuite] bathroom have water damage. There is mould on the ceilings and walls are showing signs of rot. The tenants were catching leaking water with a bucket.

The ceiling in the kitchen on level 1 is also badly sagged and insured seems to think this is water leaking down through walls of and also from the butinol [sic] on the roof above on level 2. We suspect this area of damage is also contributed by the shower in level 2 bathroom which appears to be leaking at the corners of the shower unit.

[72]As to reinstatement/replacement, the report records as follows:

Gib wall and ceiling linings in level 2 bathroom to be removed and replaced and painted throughout. Kitchen ceiling on level 1 approximately 8 sqm of gib to be removed and replaced. Ceiling throughout to be painted.

[73]As to the claim status, Vero initially took the view that:

Since our visit to the property yesterday, the insured has called and advised, the damage is how it would be after a single event. We do not fully agree with this as there is mould and gib is rotten in areas throughout the level 2 bathroom. The level 1 ceiling in the kitchen has a large sagg [sic] and in our view has been an on-going problem.

[74]   Vero then commissioned a report from a building expert who confirmed that there had been damage to the Butynol ridge capping which had been repaired. That had caused the damage to the ensuite bathroom on the second floor. In relation to the kitchen ceiling, the report noted that the damage could possibly be attributed to the same cause but could also be a leak of the pipe to the shower mixer, as there was water damage to particle board in that location underneath the shower. In the end, Vero gave Mrs Murphy the benefit of the doubt in relation to the possible cause of damage to the kitchen ceiling and allowed the claim.

[75]   Mrs Murphy says she commissioned Fix It Building Services to repair the kitchen and bathroom ceilings. An invoice for this work was issued on 26 April 2012. Mrs Murphy’s son, Brendan Murphy, who is a builder, also did repair work on the kitchen ceiling between approximately late November 2011 to 3 February 2012 in response to the ceiling issue I have referred to.

[76]   Mrs Murphy’s evidence was that her belief at the time was that it was the tenants’ use of the shower for hydrotherapy that had caused the water to leak from the shower down to the kitchen ceiling. She said as part of the repairs, silicon was installed around the shower mixer plate. She said she believed the shower leak was fixed.

[77]   However, leaks occurred again  during  the  period  of  the  next  tenancy.  Mrs Murphy leased unit 7 to John O’Toole around May 2012. He was the last tenant of unit 7, remaining there until late 2015. Mrs Murphy said that, during his tenancy, Mr O’Toole advised her on at least two occasions there was an intermittent leak in the ceiling of the second-floor ensuite bathroom. This was in the same location as the area Auckland Butynol had investigated in late 2011. Mr O’Toole, who gave evidence for Mrs Murphy, confirmed there was such an intermittent leak. Mrs Murphy said she got Auckland Butynol in again. She said their employee told her he could not see anything wrong. There are invoices dated 5 August 2013 and 30 October 2014 for repairing water damage to the ensuite ceiling and repainting it. Mr O’Toole says he cannot recall the leak in the bathroom ceiling recurring in the last year of his tenancy.

[78]   The second area where leaks occurred during Mr O’Toole’s tenancy was again in the kitchen ceiling.

[79]   Mrs Murphy said she called in a plumber and her son Brendan. Brendan’s evidence was that they installed silicone around the shower mixer in the ensuite bathroom. He then replaced approximately 1 m2 or less of gib in the kitchen ceiling. He said it was only the gib that had been damaged.

[80]   Mrs Murphy says the leak in the kitchen ceiling did not recur after Brendan and the plumber fixed it.  However, this is the same area where the Mitchells had   50 litres of water come through several days after settlement.

[81]   Mrs Murphy acknowledged that there was no investigation into the drainage from the ensuite deck to the kitchen ceiling by any of the plumbers. Her position was this was not a factor as the leak in the kitchen ceiling could be attributed to leaking around the face plate of the mixer in the ensuite shower.

[82]   Mr O’Toole says that, in general (apart from the problems I have referred to), he did not notice any problem during his tenancy with leaking, mould or excess wetness in unit 7.

[83]   However, Mr Read gave evidence that in 2016, before Mrs Murphy moved back in, he walked through unit 7 with Eric Buisman and Ross Fernandez of unit 5. At that stage, unit 7 was empty. Mr Read described the condition of unit 7 in his brief of evidence as follows:

18.… The condition of the place was terrible. I could see that this was more than general wear and tear. I could see evidence of the deteriorated timber in the corner of the kitchen. There was a big crack running down the middle of the kitchen and I could see water marks around the crack. I remember thinking it would be very difficult to repair this crack as it was impossible to tell where it began and where it ended.

19.I saw that the edges of carpet were wet and had signs of mould and the beginning of rot. There was another quite bad area of water damage near the balcony door. …

[84]   In oral evidence, Mr Read said he remembered looking in the corner of the kitchen and he said, “there’s a bubble up there at one stage and I thought, ‘You know, a serious amount  of  water’s coming through  there.’”  The  corner of the kitchen  Mr Read was referring to was the corner of the kitchen/dining room area to the left- hand side of the balcony. This is the area where the painters engaged by the Mitchells identified water damage to the wall and swollen skirting boards shortly after they took possession following settlement on 30 March 2017.

[85]   Mr Read was cross-examined about his ability to make assessments about property damage and it was put to him that he was not a building expert but rather a lay person. Mr Read’s position is that he had worked for a building company, Fletchers, for a long time. He said he was Homestar-rated, so he is able to assess people’s houses and give advice on making them healthier to live in. He said he therefore did know what he was dealing with.

[86]   In terms of dampness,  there  is  some  consistency  with  the  evidence  of  Mr O’Toole, who said he recalled the downstairs bathroom and the cupboard smelt a bit damp because of the cupboard under the stairs. He said he did not know what caused the smell. He said there was no mould, wetness or leaks in the cupboard.

[87]   Mr Buisman also gave evidence of his walk through unit 7 with Mr Read while the property was empty, after Mr O’Toole moved out but before Mrs Murphy moved in. In his brief of evidence, he said:

23. … We walked around the property which was the first time I saw it without any furniture. I immediately noted a strong smell of mould and an odour of dampness in the downstairs. …

[88]   Under cross-examination, Mr Buisman accepted that the strong smell of mould and odour of dampness in the downstairs could have been associated with the downstairs cupboard.

Work in unit 7 prior to sale

[89]   Around late February 2016, after Mrs Murphy had moved back into unit 7, a Butynol contractor was doing some work on the roof of unit 6 for the Buismans.  Mrs Murphy asked the contractor to look at the Butynol on her roof above the ensuite bathroom. She said he found a pinprick hole and he applied a hot patch to repair it. Mrs Murphy says she waited for unit 7 to go through another winter and then had the ensuite ceiling repaired (including making good the gib in the ceiling, stopping and painting) in October 2016.

[90]   Mrs Murphy also had the exterior of unit 7 painted in February 2016 by    Uno Plasterers Ltd.

[91]   Mrs Murphy replaced the carpet in unit 7 in October/November 2016. She said that was because the carpet was approximately 20 years old and there had been tenants in unit 7 for around 12 years. She said that she did not see any mould on the original carpet when it was replaced and the underlay was reused.

[92]   Kevin Giles, who has owned Giles Carpets Ltd for around 38 years, measured up for replacement carpet. He said he saw nothing untoward about the carpet such as a mouldy smell or dampness on the carpet that would have precluded laying new carpet on the existing underlay. However, in oral evidence, Mr Giles said that his evidence was not based on a clear recollection of the work he undertook but instead based on his usual practice. He also accepted that, for the purposes of his inspection, he would have just pulled up one corner of the carpet. He would not have inspected the whole house. Mr Giles also acknowledged that he was not there when the carpet was removed.

[93]   The Mitchells’ position is that the work undertaken by Mrs Murphy was to disguise the effects of water ingress. Mrs Murphy disputes that. It will therefore be necessary to determine what Mrs Murphy knew, or should have known, in relation to water ingress in unit 7 and any manifestation of problems associated with water ingress. I will address that issue later in this judgment.

Sale to the Mitchells

[94]   In the spring of 2016, the Mitchells were looking to purchase a property in Remuera. They were first attracted to the townhouses at 103 Remuera Road when they saw advertising material for 2/103 Remuera Road. They went to inspect unit 2 and met Ms Goodall of Barfoots there. Ultimately, the Mitchells did not pursue their initial interest in unit 2. They had a property which they had not sold at the time of the auction for unit 2 and they also thought it would be slightly above their price range.

[95]   In November 2016, Ms Goodall telephoned Mr Mitchell and told him that the owner of unit 7 wished to sell. Mr Mitchell responded to Ms Goodall saying that they were still in the market for a property in the particular area and that they would like to view unit 7. They met Ms Goodall at unit 7.

[96]   Mr Mitchell’s evidence was that Ms Goodall made a very enthusiastic sales pitch about the property. Unprompted by either Mr or Mrs Mitchell, she said, “The owner says it is not a leaky home”. Mr Mitchell’s evidence in this regard is supported by Mrs Mitchell’s evidence. She says Ms Goodall repeated it several times at the first viewing. Mr Mitchell said that Ms Goodall seemed very impressed with unit 7, telling them that Mrs Murphy and her husband were the original developers of the block of townhouses and that unit 7 had been built for Mrs Murphy and her husband and they had lived in it. He said that Ms Goodall said, for that reason, unit 7 was built with extra care and included some superior features as compared to the other units in the complex.

[97]   Mr Mitchell said he noted some disturbance to paint around the skylight above the stairs on the first floor and in the corner of the kitchen/dining room ceiling nearest the doors opening onto the balcony. (I interpolate to add that the latter area is the area which was identified by Mr Read on his walk through in early 2016). He says he does not recall specifically anything that was said about previous leaks in these areas. But he recalls feeling reassured that there was nothing to worry about in relation to those areas or anything else to do with the property. From what Ms Goodall said to them, Mr Mitchell says they were of the understanding that anything that had been done to the property was basic maintenance and any problems had been minor and taken care of.

[98]   Mr Mitchell says that they visited unit 7 at least two or three times prior to making an offer. They decided to make an offer of $1,150,000. Mr Mitchell spoke to a solicitor at Fortune Manning. That firm had acted as their solicitors over the years.

[99]   On 22 November 2016, Mr Mitchell sent Ms Goodall a copy of three clauses drafted by the solicitor acting for them (the Mitchells). Those clauses became further terms of sale as follows:

19.0Agreement Conditional on Due Diligence

19.1This agreement is conditional on the purchaser carrying out a comprehensive due diligence investigation of the property, including without limitation the following:

(a)All legal and title issues relating to the property;

(b)Resource Management, Code of Compliance and LIM matters relating to the property;

(c)A building inspection report including engineering, structural integrity and weather tightness issues;

(d)Finance condition

19.2The date for satisfaction of the condition in clause 19.1 is the 15th working day after the date of this agreement. If the condition is not satisfied the purchaser will not be required to state any reason for the condition not being satisfied.

19.3The parties acknowledge that the condition in clause 19.1 is inserted for the sole benefit of the purchaser and may, at any time prior to the agreement being cancelled, be waived by the purchaser giving written noted to the vendor.

20.0Sale of Purchaser’s Property

20.1This agreement is conditional upon the purchaser obtaining an unconditional agreement for the sale of the purchaser’s property situated at 98 Glenmore Road, Sunny Hills at a price and on terms and conditions acceptable to the purchaser by Tuesday 28th February 2017. This condition is inserted for the sole benefit of the purchaser and may, at any time prior to the agreement being cancelled, be waived by the purchaser giving written notice to the vendor.

21.0Escape Clause

21.1If before this agreement becomes unconditional the vendor receives an acceptable offer from a third party to purchase the property, then the vendor may serve on the purchaser a notice requiring the purchaser to advise within 10 working days after service of the notice whether all conditions for the benefit of the purchaser have been satisfied or waiver, and whether the requisition procedure clause in 6.0 of the General Terms of Sale has been completed to the purchaser’s satisfaction. If the purchaser does not notify the vendor within the period set out above that the above matters have all be [sic] satisfied and that this agreement is accordingly unconditional, then this agreement will immediately terminate.

[100]   Ms Goodall responded on 22 November 2016 with a draft agreement, including the three clauses (cls 19–21) and an additional clause entitled “Purchaser acknowledgment” (cl 22). It is this latter clause that is the basis of Mrs Murphy’s primary defence. The clause reads:

22.0Purchaser acknowledgment

22.1The purchaser acknowledges that:

(a)the dwelling has been built with a plaster cladding system;

(b)prior to entering into this agreement the purchaser has been advised to and has had the opportunity to make independent enquiry in respect of the construction, the cladding and weathertightness issues.

22.2Notwithstanding anything in this agreement the vendor provides no representations or warranties in respect of the matters set out in clause 22.1(a) and (b) and the vendor shall not be liable for any claims, costs, losses, damages or liabilities whatsoever suffered or incurred by the purchaser in relation to the matters set out in clause 22.1 and relating to the construction of the property, the cladding system and the weathertightness therefore.

22.3The purchaser agrees that the purchaser is purchasing the property on an @as is where is@ basis and the vendor warranties in clause 7.1 and 7.3 of this agreement shall apply to the matters set out in clause 22.1.14

(footnotes added)

[101]   Mr Mitchell recalls that this clause had been briefly mentioned by Ms Goodall, who had suggested that it was the type of clause that was standard for a plaster clad home. He said it was presented to him as something that he should not particularly worry about.

[102]   Mr Mitchell forwarded the blank SPA to their solicitor. Mr Mitchell then signed the SPA with their proposed purchase price of $1,500,000 and a proposed settlement date of 26 May 2017. Mrs Murphy responded on 30 November 2016 with a revised purchase price of $1,200,000; a reduction in the period for due diligence from 15 working days to 10 working days; a reduction in the notice period under the escape clause from 10 working days to five working days; and with settlement to be on 5 May 2017.

14     The parties are agreed that the word “not” should be inserted after the word “shall” so as to read “shall not apply”.

[103]   Mr Mitchell then spoke by phone to a solicitor at Fortune Manning. He says they discussed the terms of the SPA. He said the SPA did not ring any serious alarm bells for them, given the highly positive view they had already had of the property. So, he signed it on 1 December 2016 and returned it to Ms Goodall.

[104]   On 2 December 2016, Mr Mitchell received a copy of the SPA by email back from Ms Goodall. In her covering email, Ms Goodall provided the names of three building inspectors who the Mitchells might use for their building inspection report. They decided to use one of those, Ian Kemp. As he had prepared the report in relation to unit 2, the Mitchells thought he would be a good choice on the basis that he already had some knowledge about the complex.

[105]   Mr Kemp provided a report entitled “General non-invasive building structure and moisture inspection”. In the report, he noted one area near the balcony door from the ensuite bathroom on the second floor which had moisture in the “minor to mid- range”. He attributed it to broken down sealant to the corner of the bottom sill of the door. He described the condition of unit 7 generally as “good”. Mr Mitchell said that neither Mr Kemp’s report nor Mr Kemp’s discussion with him raised any red flags about unit 7 or any reason to be concerned.

[106]   The Mitchells visited the property again after Mr Mitchell had signed the SPA and Mrs Murphy was present. There was evidence about a discussion on one of those occasions. The parties disagree as to what was said. I will come to that when considering the issue of inducement and reliance under s 35 of the CCLA.

[107]   Mr Mitchell says that Ms Goodall began to put some pressure on them to bring forward the unconditional date. The Mitchells knew there were other interested parties and they were keen to be able to go ahead with the purchase and did not want someone else to put in an offer which would allow Mrs Murphy to rely on the escape clause to get out of the SPA. Mrs Murphy offered to reduce the purchase price by $10,000 if the Mitchells declared the property unconditional by 23 December 2016. On that date, the Mitchells instructed their solicitor to declare the purchase unconditional. The purchase price at that stage was therefore $1,190,000.

[108]The settlement date was also brought forward to 30 March 2017.

[109]   Mrs Murphy allowed the Mitchells access to unit 7 to obtain quotations for painting and associated work prior to settlement. At a pre-settlement inspection on 27 March 2017, the Mitchells were at unit 7 with a painter who drew their attention to the ceiling in the entry area on the ground floor. When the painter put his finger on it, the material in the ceiling disintegrated and water appeared. Mr Mitchell telephoned Ms Goodall about this, and she recommended that Mr Mitchell talk to his solicitor. There then followed an exchange of correspondence between the Mitchells’ solicitor and Mrs Murphy’s solicitor.

[110]   Mr Mitchell’s evidence is that he also spoke to Mrs Murphy a couple of times. Mr Mitchell says she told him that the problem was “new”. There had been a lot of heavy rainfall that month and Mr Mitchell’s evidence was that Mrs Murphy said it was likely due to a blocked or broken drain or downpipe.

[111]   Because settlement was imminent, and they would not have time to have the matter investigated further, after some back and forth between the solicitors, the Mitchells proposed that the purchase price be reduced by $5,000. Mr Mitchell said he proceeded on this basis because they accepted this was a minor problem and believed that Mrs Murphy would have told them if there were other problems.

[112]   Mrs Murphy accepted that she had sent an email to the Mitchells on 30 March 2017 (the settlement date) saying it was “new damage”. The email also states that “it happened on my watch so I [Mrs Murphy] must bear the cost of repair and making good”. Mrs Murphy denies saying it was a minor problem and would be easy to fix, as she says she did not know what the cause of the problem was. Under cross- examination, she accepted that she might have suggested to Ms Goodall that a check be made for blocked drains and a broken downpipe. Settlement occurred on 30 March 2017. The purchase price was $1,185,000.

[113]   When the Mitchells moved in, they made arrangements to have the interior repainted. Mr Mitchell says that when the painters were looking at the wall in the kitchen/dining area near the balcony, they showed him that the wall was damaged by

water and the skirting boards were swollen. Within a few weeks of settlement, during a stormy wet period and while the painters were still working in the kitchen/dining area, they alerted Mr Mitchell to serious amounts of water coming through the ceiling into the kitchen. Mr Mitchell distributed trays and bins to collect the water, and in one 24-hour period, over 50 litres of water entered the kitchen in this way. Mr Mitchell says that, at this stage, they thought they had been unlucky due to the excessively wet weather and did not suspect bigger problems.

[114]   Mr Mitchell contacted Mr Kemp who put him in touch with a water proofer and then a builder. Mr Mitchell says that builder’s investigations established that the membrane on the balcony outside the bathroom on the second floor (and directly above the leaks into the kitchen ceiling) was not operating effectively and that was letting water into the downstairs and the kitchen. Mr Mitchell says that, as investigations were carried out over a few months, it became clear that there were serious problems with the property. In the meantime, Mr Mitchell had put tarpaulins over the ensuite balcony on the second floor and the kitchen/dining room balcony below on the first floor. Ultimately, in August 2017 the builder downed tools because of the extent of problems with the property. By that time, the Mitchells were convinced that they had bought a leaky home.

[115]   In August 2017, the Mitchells called in John-Paul Biggelaar, a building surveyor with experience in dealing with leaky homes.

[116]   As a result of Mr Biggelaar’s involvement, more permanent scaffolding and further tarpaulins were put in place. Mr Mitchell says there has been on-going maintenance to allow the property to be habitable at a basic level until permanent rebuilding work takes place.

First cause of action — s 35 CCLA

[117]   The first cause of action is brought under s 35 of the CCLA. Section 35(1)(a) provides:

35       Damages for misrepresentation

(1)If a party to a contract (A) has been induced to enter into the contract by a misrepresentation, whether innocent or fraudulent, made to A by or on behalf of another party to that contract (B),—

(a)A is entitled to damages from B in the same manner and to the same extent as if the representation were a term of the contract that has been breached; and

…

[118]   A misrepresentation is a representation of past or present fact that is false or misleading, and excludes statements of intention, opinion and law. What matters is the meaning that the words convey.15 The meaning is what it would be reasonably understood to mean in its context and circumstances.16

[119]   An opinion may be actionable if it implies past or present fact. An opinion statement may also be actionable where it is found that the opinion was not honestly held, or that a reasonable person possessing the representor’s knowledge could not reasonably have it.17

[120]   The Court of Appeal, in Magee v Mason, addressed the framework for misrepresentation in an appeal where the vendor had told the purchaser the building “isn’t a leaky house”.18 The Court stated:19

The first question in all misrepresentation cases is “What was the meaning of the misrepresentation”. In other words, was the statement made fairly capable of the meaning alleged.

[121]   The Court of Appeal addressed inducement (albeit only briefly, as the majority determined that the appeal succeeded on the ground there was no misrepresentation as the statement did not convey any meaning that was false). The majority stated that, to be actionable, the representee must show that:

15     Shen v Ossyanin [2019] NZHC 135 at [16], citing on Finn, Todd and Barber, above n 5, at 369.

16     West v Quayside Trustee Ltd (in rec and in liq) [2012] NZCA 232, [2012] NZCCLR 16 at [30].

17     Tompkins v Wensley Developments The Marina Ltd (in liq) [2012] NZHC 1863 at [15].

18     Magee v Mason [2017] NZCA 502 at [33].

19 At [26], paraphrasing D W McLauchlan “Intention to Induce: Should it be a Requirement for Actionable Misrepresentation?” (2001) 7 NZBLQ 43 at 47, citing Bisset v Wilkinson [1927] AC 177 (PC) at 183.

(a)The representor intended that he or she would be induced by the misrepresentation to enter the contract; or

(b)The representor used language that would induce a reasonable person in the same circumstances to enter the contract; 20 and

(c)The representee relied on the representation when entering the contract and that such reliance was reasonable.21

[122]I adopt the following framework for the issues to be determined under s 35:

(a)What representations were made to the Mitchells?

(b)Were they actionable representations?

(c)If they were statements of opinion:

(i)Did Mrs Murphy honestly hold that opinion; or

(ii)Would a reasonable person with Mrs Murphy’s knowledge have held that opinion?

(d)Were the representations false?

(i)Was unit 7 a leaky home?

(ii)Was unit 7 built with extra care and to a high standard?

(e)Were   the   Mitchells    induced   to   enter    into   the    SPA by the misrepresentations?

(i)Did Mrs Murphy intend the Mitchells would be induced by the representations to enter into the SPA?

20     At [42], citing Savill v NZI Finance Ltd [1990] 3 NZLR 135 (CA) at 145–146.

21 At [51].

(ii)Did Mrs Murphy (through Ms Goodall) use language that would induce a reasonable person in the same circumstances to enter into the SPA?

(f)Did the Mitchells rely on the misrepresentations?

(g)Was it reasonable for the Mitchells to rely upon the misrepresentations?

[123]   Having determined those issues, the issue then is whether cl 22 of the SPA should be conclusive between the parties. Mrs Murphy, as the party seeking the benefit of this provision, has the burden of demonstrating why it should prevail.22

What representations were made to Mr Mitchell?

[124]   The only two witnesses to what Ms Goodall  actually said  were  Mr  and  Mrs Mitchell. As set out in [96] above, Mr Mitchell’s evidence was that, unprompted by either him or his wife, Ms Goodall, said “the owner says it is not a leaky home”. Mr Mitchell’s evidence on this issue is supported by Mrs Mitchell. She said that she distinctly remembered the conversation with Ms Goodall at the first viewing of the property. Ms Goodall mentioned the fact that the owner said it was not a leaky home without any prompting from either Mr or Mrs Mitchell. Mrs Mitchell said it was part of a sales pitch that she was giving in relation to the property and that she repeated it several times at the first viewing.

[125]The cross-examination of Mr Mitchell contains the following:

A.We were told that she has said it was not a leaky home. That’s what we accepted.

Q.Isn’t it possible that what you were told was that … effectively in Mrs Murphy’s opinion it wasn’t a leaky home?

A.       No we were never told that.

[126]   As further set out in [96] above, Mr Mitchell also said that Ms Goodall seemed very impressed with unit 7 telling them that Mrs Murphy and her husband were the

22     Bushline Trustees Ltd v ANZ Bank New Zealand Ltd [2019] NZCA 245 at [245].

original developers for the block of townhouses and that unit 7 had been built for Mrs Murphy and her husband and they had lived in it. He said that Ms Goodall said, for that reason, unit 7 was built with extra care and included some superior features as compared to other units in the complex.

[127]   Mrs Murphy has not called any evidence that contradicts what the Mitchells say they were told by Ms Goodall. Mrs Murphy was asked about what she had said to Ms Goodall. She accepted that she had told Ms Goodall that unit 7 “was more highly specked inside”. Mrs Murphy was  also  asked  whether  she  passed  on  to Ms Goodall that it was built “for you and your husband, the developers to live in?” She answered, “Correct, in fact he built it for me”.

[128]   Mr Collecutt, for Mrs Murphy, acknowledged that he was in a “weak position” in terms of challenging precisely what had been said, not having called Ms Goodall.

[129]   There is no good reason for the Court not to accept the evidence of Mr and Mrs Mitchell. I accept that Ms Goodall told Mr and Mrs Murphy that “the owner says it is not a leaky home” and that it was “built with extra care and included superior features as compared to other units in the complex”. I accept that Ms Goodall also explained to Mr and Mrs Mitchell that Mrs Murphy and her husband were the original developers for the complex at 103 Remuera Road and that unit 7 had been built for the Murphys to live in.

[130]   Ms Goodall was the agent for Mrs Murphy. The statements she made were within the scope of her authority.23 It therefore follows that what she said were representations by Mrs Murphy.

Were the representations actionable?

[131]   Ms Wroe, for the Mitchells, says that the meaning of the representations relied upon by the Mitchells is that:

(a)Particular care had been taken in the construction of unit 7;

23     See Snodgrass v Hammington CA254/93, December 1995 at 15.

(b)Unit 7 was built to a higher standard;

(c)Unit 7 was not a leaky home which conveyed the following meanings (following the analysis in Magee):

(i)Mrs Murphy had no knowledge of leaks in the property (meaning one); and/or

(ii)Mrs Murphy knew of no reason why the property would be prone to leaking (meaning two); and/or

(iii)The property was not built or designed in a manner that rendered it prone to leaking (meaning three).

[132]   The Mitchells’ case is that the representations made by Ms Goodall conveyed each of the three Magee meanings and went further due to the additional comments made by Ms Goodall, namely, that the Murphys were the developers of the complex and that unit 7 was built for the Murphys to live in.

[133]   Ms Wroe submits that if the Court is of the view, in relation to meaning three, that Mrs Murphy was doing no more than conveying an opinion in relation to whether the design and construction of the house was such that it was prone to leaking, then she did not honestly hold that belief or, alternatively, that a reasonable person possessed with her knowledge of the property and the other townhouses could not reasonably have held that opinion.

[134]   Further, and/or alternatively, the Mitchells plead that Mrs Murphy misrepresented the condition of unit 7 by:

(a)causing the Mitchells to believe that she had conveyed to them all material information in relation to the issue as to whether the property was a leaky home; and

(b)failing to advise the Mitchells of the history of leaks and repairs in relation to the other townhouses and the property.

[135]   For Mrs Murphy, Mr Collecutt submits that what was said by Ms Goodall to the Mitchells did not constitute a misrepresentation of fact. It was a mere opinion. Further, the opinion that unit 7 was not a leaky home was honestly and reasonably held.

Discussion

[136]   In Magee, the Court of Appeal acknowledged that the third meaning (that a building is not, through design or construction, prone to leak) could be an opinion but that it may carry with it representations of past or present facts. I examine the surrounding evidence in order to understand the meaning of what was said.

[137]   First, I contrast the context in which the representations were made in Magee. In that case, the representations were made in a more informal setting and contained a qualification in relation to the vendor’s experience whilst they owned the property.

[138]   In this case, the statement that the owner says the property was not a leaky home needs to be seen in the context of the other statements made by Ms Goodall. They were supportive of that statement, rather than qualifying it, as was the case in Magee.24 Here, there was the added endorsement by Ms Goodall, who was representing a former direction of the developer, and therefore it carried the implication that unit 7 had been built properly, including in relation to such matters as following the architect’s plans and technical literature. By Mrs Murphy describing herself as the developer, without qualifying her expertise, she held herself as knowledgeable both about the construction of the property and its history. The situation is somewhat akin to the case of Humphries v Edinborough, where the Court of Appeal accepted that a real estate agent had held herself out as an expert in relation to an apartment building.25

[139]   The instant case also bears some similarity to the circumstances in Ridgway Empire Ltd v Grant.26 In that case, Mr Ridgway had marketed and sold the particular unit himself. His statements — “the unit does not leak” and “it is not a leaky building”

24     Magee v Mason, above n 18, at [36] and [37].

25     Humphries v Edinborough [2010] NZCA 416.

26     Ridgway Empire Ltd v Grant [2019] NZCA 134.

— were determined to be expressed as statements of present fact and were not qualified in any way or expressed as merely being his opinions. He was found to have superior knowledge of the state of the particular unit, having owned it for a period of around six years prior to sale, having carried out significant renovation and then having lived in an adjoining unit for a period.

[140]   There is also the fact that Ms Goodall had sold unit 2. This carries with it an implication of some knowledge of the complex on her part beyond the property concerned.

[141]   For the above reasons, in my view, Ms Goodall’s statement that the “owner says it is not a leaky home” was a representation of fact, not a statement of opinion.

[142]   Which of the three meanings does this statement of fact carry? For the reasons I have discussed, I consider, first, that it carries meaning three, namely that unit 7 was not built or designed in a manner that rendered it prone to leaking.

[143]   I consider that the statement that unit 7 was not a leaky home was also capable of carrying the meaning that Mrs Murphy had no knowledge of leaks in the property (meaning one). This is a statement of fact on behalf of Mrs Murphy who was the developer, had lived in unit 7, the then-landlord and who then returned to live in unit 7.

[144]   There was some further evidence given by Mr Mitchell, which I refer to in order to consider whether it acted to qualify this meaning. In his brief of evidence, Mr Mitchell, referring to the first visit when Ms Goodall made the representations, said:

9. I noticed some disturbance to paint  around the  skylight  and  in the corner of the kitchen ceiling [by the doors leading out from the kitchen/dining area onto the balcony]. I do not recall specifically anything that was said about previous leaks in these areas. I do recall feeling reassured that there was nothing to worry about in relation to those areas or anything else to do with the property. From what Joss [Goodall] said to us, we were of the understanding that anything that had been done to the Property was basic maintenance and any problems had been minor and taken care of.

[145]   Mr Mitchell was asked about this evidence in cross-examination. The exchange was as follows:

A.We’re not building inspectors.  I mean, we were babes in the wood at that time. We noticed some paint disturbance there. We had a brief discussion with Clare [Murphy] I think or may have been Joss about things in the ceiling, didn’t ring any alarm bells, we just wondered what they were. I mean things happen in houses, minor things.

Q.You go on at the end of that paragraph to say, “From what Joss said to us we were of the understanding that anything that had been done to the property was basic maintenance and any problems had been minor and taken care of.” Isn’t it the case that Joss had actually told you that there had been minor leaks and they had been fixed?

A.Yeah, and she seemed … to be very hazy herself in this in the sense   that I don’t think, I don’t know if she really knew. She’d spoken to the owner, it sounded like everything had been downplayed, it was very brief in passing, there was nothing there to alert us that there were any serious issues.

[146]   I do not consider that this evidence operates in any way to qualify meaning one. The leaks referred to in the discussion were passed off as being minor and having been remedied; something quite different from leaks as a result of a property being a leaky home.

[147]   I consider the statement “the owner says it is not a leaky home” is also capable of carrying meaning two, namely that Mrs Murphy knew of no reason why the property would be prone to leaking. It is a statement of fact, namely that Mrs Murphy knew of no reason that would put the property in the category of a leaky home.

[148]   There is then the representation that unit 7 was built with extra care and included superior features as compared to other units in the block. I will consider that statement in two parts.   First, the statement that unit 7 was built with extra care.       I consider this is a representation of fact rather than opinion, for the same reasons that I have determined that the statement that the property is not a leaky building is a statement of fact not a statement of opinion. It carries with it the meaning that this is a property which would not have construction defects or faults that would give rise to weathertightness issues.

[149]   I see the statement by Ms Goodall that unit 7 included “some superior features as compared to other units in the property” somewhat differently. Mrs Murphy’s evidence was that she had told Ms Goodall that unit 7 “was more highly specked inside”. I do not consider that the representation necessarily carries the meaning that unit 7 was built to a higher standard. It is equally capable of bearing the meaning that Mrs Murphy said she conveyed to Ms Goodall, namely that the interior fit out was of a higher standard than the other units — in cross-examination, Mrs Murphy says that she referred to “the marble benches, the parquet flooring, the quality of the carpet”. Taking that as the objective meaning, I do not consider it is an actionable representation. It goes to the quality of the interior fittings rather than to any defect in construction.

[150]   To conclude on this issue, and in summary, the statements that unit 7 was not a leaky home and that particular care had been taken in the construction of unit 7 are actionable representations.

[151]   As to Ms Wroe’s further submission set out in [134] above,  I accept that  Mrs Murphy misrepresented the position by causing the Mitchells to believe she had conveyed all material information on the issue as to whether unit 7 was a leaky home. She did not tell them that there had been a recurring leak in the bathroom ceiling that “had plagued the life out of her”. What she presented to Ms Goodall was that it was  a minor leak (a pinprick hole in the Butynol) that had been fixed. She did not tell them that an external influence had not been ruled out in relation to the kitchen ceiling leak. There was some mention of a previous leak in the kitchen ceiling but no mention of its severity and that it had recurred.

[152]   I also accept that she further misrepresented the condition of unit 7 by failing to advise the Mitchells of the allegations of leaks in and repairs to other units.

Were the representations false

Is unit 7 a leaky home?

[153]   The term “leaky home” or “leaky building” is commonly understood to mean a house or building that is prone to leak as a result of design and construction defects.27

[154]   Mr Biggelaar gave evidence on behalf of the Mitchells. Mr Biggelaar is a building surveyor based in Auckland operating his own consultancy company. Among his qualifications are that he is a registered member of the New Zealand Institute of Building Surveyors (NZIBS); a certified weathertight inspector (2005); a full member of NZIBS (February 2008); Trade Certificate in Carpentry (Advanced) and Joinery.

[155]   Mr Biggelaar served an apprenticeship in the building industry in the 1970s, which was followed by extensive experience in other facets of the timber industry. Since 2005, he has completed a large number of building assessments on behalf of the Weathertight Homes Tribunal. Since 2008, he has completed a number of full remedial projects, both by his own company and also as engineer’s representative for other building surveying companies. His work extends from remedial works on single-storey dwellings through to complex large homes, including multi-storey mixed-use apartments and commercial buildings. He has acted as an expert witness in a number of claims, both under the Weathertight Homes Tribunal banner and also in this Court. I accept that Mr Biggelaar is well qualified to give the evidence he did and that his evidence and opinions fall within his area of expertise.

[156]   He examined unit 7 in August and October 2017. His evidence, in short, was that unit 7 is a leaky home. His evidence, which was supported by his expertise and experience, was that there were active leaks, some going on for a very long time “from a very early stage in the life of the building”. For example, in relation to the kitchen ceiling leak, he referred to “stains, long-term stains, long-term moisture ingress, long- term rot and decay to … all the timbers”.

27 See Weathertight Homes Resolution Services Act 2006, s 8: “leaky building means a dwellinghouse into which water has penetrated as a result of any aspect of the design, construction, or alteration of the dwellinghouse, or materials used in its construction or alteration”.

[157]   Geoffrey Bayley gave evidence on behalf of Mrs Murphy. Mr Bayley is the director of a private dispute resolution practice which specialises in dispute resolution for construction disputes and provision of expert evidence in construction matters. He is a qualified and registered quantity surveyor and a qualified architectural draftsman. He has a New Zealand certificate in Quantity Surveying and also in Architectural Drafting. Mr Bayley has been engaged in the construction industry since 1976, initially as a qualified architectural draftsman and then as a project manager, architectural draftsman and quantity surveyor in a small to medium size construction company. Mr Bayley has acted as an expert in dispute processes and proceedings in the Weathertight Homes Tribunal, District Court, High Court and in arbitrations. Many of the disputes have been in respect of residential, multi-unit and commercial leaky buildings. I am satisfied that Mr Bayley has the necessary expertise to give evidence  and provide opinions on this issue.   Mr Bayley first  visited unit  7 on     27 August 2019, some two years after Mr Biggelaar.

[158]   His position was that unit 7 was not built or designed in a manner that rendered it prone to leaking in 1998 when the Code Compliance Certificate was issued, but, with subsequent changes to the Building Code in 2005, some of the design elements (which I will come to when addressing the alleged defects) became a recognised potential risk. With the greatest of respect to Mr Bayley, this explanation lacks credibility. A change to the Building Code is irrelevant on this issue. The functional performance requirements in the Code have not changed.

[159]Mr Bayley was asked the following in cross-examination:

Q. Just going back again to whether or not we agree that this meets the definition of a leaky building under the Act, Mr Bayley. Whether it’s a crack at the junction or not, it is, is it not, attributable to the construction detail and therefore a leaky building defect?

A.I don’t regard, “The detail”, as being a leaky building detail.   It is,    over the years, has been found to be defective when not maintained. And so, as a result of that, the design details have been changed in 2005 to make them more robust. So, I would regard this as a building with some leaks, rather than a leaky building.

[160]   Again, with respect to Mr Bayley, his accepting that there has been a failure of aspects of construction which have then led to moisture ingress means that unit 7 meets the statutory definition of a leaky building.

[161]   Additionally, Mr Bayley’s statement seems to be somewhat inconsistent with his further evidence that “the original design resulted in undiagnosed defects that manifested themselves after significant weather events without further timely maintenance” by the Mitchells. Mr Bayley did not put forward any evidence to show that the weather conditions were more adverse than any others experienced throughout Mrs Murphy’s ownership.

[162]   In respect of the second part of Mr Bayley’s opinion in the above paragraph, namely a lack of timely maintenance, in effect, his position is that this arises in the period from the Mitchells’ ownership from 30 March 2017.

[163]Mr Mitchell responded to that proposition. He said:

2.… Mr Bayley suggests that unprotected decks on my house were exposed to “significant rainfall and wind events ([four] in April, two in May and one in July 2017) before the initial tarpaulin was erected”.

3.Throughout April, May, June and July 2017 we did not do any exterior building work on the house. The roofer and plumber came to have a look but essentially the house was in the same condition outside as it was when we bought it. … The work outside did not start until we engaged Superior Waterproofing Limited in August 2017.

4.The first tarpaulins that were in place were ones that I put up myself in April. … These tarps were in place until Superior Waterproofing put theirs on, which was in August 2017.

…

6.I made the handwritten note on the quote [from Superior Waterproofing] which says they were due to start around 14 August 2017. The first thing they did was to put up bigger tarpaulins over the kitchen and ensuite decks. They did not lift any of the deck tiles or interfere with the decks in any way until their tarpaulin was up.

7.… This tarpaulin was still up when Mr Biggelaar first visited. It remained in place until it was removed and immediately replaced by the shrink wrapping and other protection arranged by Mr Biggelaar.

8.Mr Bayley’s brief of evidence suggests that the large influx of water that we saw was somehow due to a lack of maintenance, significant

weather events and possibly unprotected decks. The first major leak in the kitchen occurred when we had serious storms, so of course weather was a factor. However, the other two factors cannot have been relevant as we had not disturbed the decks (so they were not exposed and unprotected) and we had only just bought the property.

[320]   Ms Parkinson’s evidence is clear that the rate that she has included in her estimate for removal and replacement does not include either propping or sampling. The rate allows purely for the labour and materials associated with the replacement of decayed timber. Ms Parkinson’s evidence was that the rate she used was based on the library of rates which is maintained by her employer, Kwanto Ltd. It is a reputable firm with relevant experience. Ms Parkinson herself has worked as a quantity surveyor for over eight years, both in New Zealand and overseas. She explained how the rate was built up and that the rates for materials were based on the Carters’ trade rates that she has access to at Kwanto. Ms Parkinson has first-hand knowledge of the model she used. Her evidence was that she began working on the model when she first started at Kwanto in 2011 and had been managing it and updating it regularly since she returned to work there in 2017. Consequently, she says she is very familiar with the library of rates which she relied on. I accept her evidence that the rate she has used allows purely for labour and materials to remove and replace decayed timber and that propping and sampling is properly included as a separate item.

Provision of temporary support to existing roof structure during remedial works

[321]   Ms Parkinson makes an allowance of $300 for this line item. Mr Hanlon’s position is that that is already included in the rate for removing and replacing decayed timber flat roof framing, which is a separate item. Ms Parkinson says that it is not.

[322]   I have accepted Ms Parkinson’s evidence in relation to the build-up of rates for wall framing in relation to the previous item. This present item relates to timber roof framing  and  is  essentially  based   on   the   same   approach.   Having   accepted Ms Parkinson’s evidence in relation to the wall framing, I also accept her evidence in relation to the roof framing. There is no reason to differentiate between the two. Accordingly, the provision of temporary support is properly included as a separate item.

Protection of adjoining property

[323]   Ms Parkinson has made an allowance for both labour and materials to provide protection to the adjoining properties. She refers to the fact that it is a rather narrow driveway and also the fact that unit 6 is connected to unit 7, so an allowance is made for protection of that unit. As far as the labour involved, Ms Parkinson referred to erecting protection in terms of plywood to the adjoining units and/or the removal of materials along the driveway. This allowance is over and above what would typically be provided specifically because of the location of unit 7. It also takes into account work on the party wall between unit 6 and 7. I have already accepted Mr Biggelaar’s evidence on the need for that work.

[324]   Mr Hanlon considered the work unnecessary. As far as the scaffolding was concerned, he suggested all that might be required is some warning tape and orange cones and, if it is a ‘making good’ issue, then that should be covered in the allowances made for the party wall (if the party wall in fact does need to be interfered with).

[325]   Having been to the site during the hearing, I accept Ms Parkinson’s evidence that the work will provide challenges, having regard to the narrow driveway and the location of unit 7 at the back of the property. While I acknowledge Mr Hanlon’s point that the foreman will be on site anyway, given the particular challenges in relation to access and also the fact that unit 7 adjoins unit 6, even without the work on the fire wall, I consider this item is properly claimed.

Length of project

[326]   The estimated length of the project informs some of the other costs such as costs of alternative accommodation, allowance for scaffolding and the building surveyor rate. Ms Parkinson estimates 26 weeks. Mr Hanlon says 17 weeks.

[327]   Ms Parkinson based her estimate on Mr Biggelaar’s scope of work, which I have accepted. Her assessment was based on similar projects in which she was directly involved in making assessments and for other estimates that have been prepared at Kwanto. She says her evidence is that the duration is in line with those other estimates.

[328]   Mr Hanlon acknowledged that programming is a fairly involved topic and he did not pretend for one minute to be a programmer. However, having said that, he also said he is often called on to estimate the timeframe for a project. He said he typically refers to the Australian Institute of Quantity Surveyors’ Estimated Times for Construction and Cashflow, which has been in use for many years. He did acknowledge, however, that the document does not take account of New Zealand weather.

[329]   Relevant  to  this  item  is  the   likely   extent   of   timber   replacements.   Mr Biggelaar’s evidence is 50 per cent as opposed to Mr Bayley’s 25 per cent. I have accepted Mr Biggelaar’s evidence in that regard.

[330]   In the end, I take into account the consistency of this estimate with other estimates provided by Kwanto and also the 50 per cent timber replacement as providing support for Ms Parkinson’s assessment. I accept that the allowance that she makes of 26 weeks is a fair and proper estimate.

Mr Hanlon’s comparison and benchmark

[331]   Mr Hanlon says that he has had involvement in the full reclad remediation of several terrace developments. Based on that experience, he gives a reclad estimate and concludes that Ms Parkinson’s estimate is overstated. However, those projects are all repairs to multiple units and are substantially larger. There is also the fact that unit 7 is an end unit with three elevations and would result in a higher cost per square metre

rate than a middle unit due to the additional external wall area. Other relevant factors include access to the site, how the contract was procured and how long the project lasted. In other words, there is not enough information for Mr Hanlon’s figures so as to provide a useful comparison. They therefore do not undermine Ms Parkinson’s estimate.

Conclusion on loss/cost of repair

[332]The Mitchells claim is for $449,091. I deduct from that sum the amount of

$6,020.20, being the cost of the roof items referred to in [312] above which are associated with the replacement of the Butynol roofing (which itself is now not claimed). The loss/cost of repair is therefore $443,070.80.

Consequential costs

[333]   In a schedule to the amended statement of claim, the Mitchells claimed consequential damages of $72,848.44 as compensatory damages. At the beginning of the hearing, the Mitchells filed a second amended statement of claim. An amended schedule was attached. The amount now sought is $68,742. The various items are for invoices, all properly proven, in relation to investigations and work undertaken to assess the defects and provide reports; waterproofing; and assessed costs for alternative accommodation and storage during the remediation period along with moving costs. I accept the amount of $68,742 as properly claimed under this heading.

General damages

[334]   The Mitchells seek general damages of $35,000 for stress, anxiety and inconvenience. Mr Mitchell says, as well as huge uncertainties for the future, the stress of having to live in a semi-habitable dwelling through three winters has taken a great toll on his family. He says it is not a place conducive to any sort of normal lifestyle. He further noted the “all or nothing” nature of the required work; it is not a case where patching things up will make the property temporarily comfortable.

[335]   Mrs Mitchell echoes that evidence, saying, the constant uncertainty of whether they will be able to continue living in unit 7 after dealing with all the leaks, mould,

dampness, dirt and financial outgoings has been draining and has led to many sleepless nights. She says they have not yet fully unpacked well over two years after moving in. This has resulted in anxiety and stress. This has led to an increase in her blood pressure and general anxiety leading her to see her GP.

[336]   Mr and Mrs Mitchell were not cross-examined on this aspect of their evidence. I can see no reason why I should not accept it.

[337]   The purchaser(s) of defective premises can recover for distress resulting from the pressure of having to live in the premises or deal with the problem.48 In O’Hagan v Body Corporate 189855, which was an appeal concerning leaky apartments, the Court of Appeal referred to awards for general damages in previous High Court decisions as follows:49

[115]          High Court decisions include Court v Dunedin City Council ($6,000); Chase v de Groot (two years’ disturbance, $15,000); Birch v Palmerston North City Council ($10,000); Battersby v Foundation Engineering Ltd (total loss of cliff property to family with four children, $20,000 joint award to husband and wife); Dicks v Hobson Swan Construction Ltd ($22,500); Sunset Terraces ($25,000 per person); Body Corporate 185960 v North Shore City Council ($25,000); Body Corporate 183523 v Tony Tay & Associates Ltd ($25,000 per person).

[116]          The facts of these cases vary considerably but generally entailed occupancy of a leaky building for a significant period and the associated anxiety.

…

[152]    I consider that this Court has a role in giving general guidance as to appropriate levels of compensation for non-economic loss in leaky homes cases. Rules of thumb would serve to reduce the cost of resolving litigation of this sort, and, as well would facilitate consistency. On the other hand, I agree with Baragwanath J that this is not an ideal case for such general guidance to be given, primary because, as he notes, the material before us was rather too limited for us to be confident that we have a reasonably complete grasp of all the relevant issues.

[153]    For the reasons given by Baragwanath J, I support awards for non- economic loss in this case which proceed on the bases that:

48 See RA & TJ Carll Ltd v Berry [1981] 2 NZLR 76 (HC); Stieller v Porirua City Council [1986] 1 NZLR 84 (CA); Snodgrass v Hammington, above n 23; Smith v Singh HC Wellington CIV-2004- 485-1169, 27 March 2007; Watts v Morrow [1991] 1 WLR 1421 (CA); and Patel v Hooper & Jackson [1999] 1 WLR 1792 (CA).

49 O’Hagan v Body Corporate 189855 [Byron Avenue] [2010] NZCA 65, [2010] 3 NZLR 445.

(a)Such awards should not made in favour of corporate owners;

(b)$15,000 is appropriate per unit for non-occupiers; and

(c)$25,000 is appropriate per unit for occupiers.

As Baragwanath J points out, however, not all the claims can be neatly categorised in this way and some evaluative assessment may be required.

[154]    This approach involves elements of rough justice. By way of illustration of this proposition, a purchaser with a phlegmatic disposition does as well as one who is more prone to stress and allowances for the length of time the purchasers have lived with the problem are broad-brush at best. On the other hand, there is a limit to the extent to which it is practical to go into fine detail on assessments of this kind.

(footnotes omitted)

[338]   I consider that this is a case where an award of general damages to reflect stress, disruption and inconvenience to the Mitchells is appropriate. Adopting the level of compensation in O’Hagan, I award the sum of $25,000.

Interest

[339]   Mr Mitchell seeks an award of interest under s 10 of the Interest on Money Claims Act 2016 (IMCA).50 Awards of interest under the IMCA are mandatory.51

[340]   The rationale behind an award of interest under the IMCA is that a defendant has had the use of money which should have been available to a plaintiff for the relevant period. In this case, the Mitchells seek interest from 22 January 2018, being the date that Kwanto first quantified the cost of the remedial work.52

[341]   In calculating interest claimed, Ms Wroe acknowledges the payment of [readacted] by Barfoots on 19 August 2019. Interest of $32,531 is claimed.53

[calculations redacted]

50     The Interest on Money Claims Act 2016 came into effect on 1 January 2018 prior to the commencement of this proceeding.

51     Section 10.

52     Section 9(1)(a)(ii).

53     Interest under the Interest Money Claims Act is made using the Civil Debt Interest Calculator.

[342]   In making an award of interest, the amount sought needs to be adjusted, having regard to my deduction of $6,020.20 for some of the repair costs and $25,000 for general damages as opposed to $35,000 claimed. The amount is therefore $536,812.80 rather than $552,833 (the amount claimed). The amount of interest is therefore

$31,494.08.

[calculations redacted]

Should damages be reduced on the basis of an increase in value?

[343]   Mr Collecutt does not make the basis for this claim clear. If it is “betterment” this was not pleaded as an affirmative defence, nor was leave sought to amend the pleading.  Neither  did  Mrs  Murphy  advance   evidence  to  prove  betterment.54   Mr Collecutt did cross-examine Christopher Swann, the expert valuer called by the Mitchells, aiming to adduce evidence from him of the difference in value of unit 7 in a complete state and the sum that the Mitchells paid for unit 7. There was however no evidence that the difference in value is betterment and there was no evidence from Mr Swann as to the value of any such betterment.

[344]   It is also important that betterment not be conflated with an increase in capital value, which will occur in every case where a building is remediated.

[345]There is no basis to reduce damages because of an increase in value.

Claim against second defendant

[346]   Mr Mitchell brings one cause of action under s 9 of the FTA for misleading and deceptive conduct against Mr Kemp, the pre-purchase inspector who inspected unit 7 and provided the Mitchells with a report after Mr Mitchell had signed the SPA but prior to the purchase being declared unconditional.

[347]   Before considering the claim, there are two preliminary issues to be determined:

54     Grant v Ridgway Empire Ltd [2018] NZHC 2642 at [57].

(a)Can Mr Kemp be held liable for representations made in his capacity as an employee or agent of A K Property Consultants Ltd?

(b)Do the exclusion of liability clauses in A K Property Consultants’ contract protect Mr Kemp?

Liability of an employee

[348]   In Body Corporate 202254 v Taylor, the Court of Appeal considered this issue and noted that references to “professions” and “occupation” in the definition of “trade” in the FTA can include a person who is not trading on their own account.55 It was sufficient that the conduct was undertaken as an agent for some other party on whose account the business was being undertaken.

[349]   Mr Kemp therefore cannot escape liability on the basis that he was an employee or agent of A K Property Consultants.

Do the exclusion of liability clauses operate to protect Mr Kemp?

[350]Clause 15 of the standard form for A K Property Consultants reads:

15. No liability for any defect related to “leaky building” syndrome.

It is agreed that A K Property Consultants Ltd is not liable for any loss, cost, defect or damage whatsoever to any building, structure, person or animal whether identified or not identified in he [sic] building inspection, not any claim, defense [sic] cost or injury cost, which is directly or indirectly caused by or contributed to by or arises directly or indirectly out of:

…

(c) Any failure to discover or identify any defect or damage or for the exaggeration of minimisation of any defect or damage of the type referred to in (b) or (c) above [include the effects of rot, decay, gradual deterioration, failure to meet the New Zealand Building Code in relation to moisture entering the building or structure].

55     Body Corporate 202254 v Taylor [2008] NZCA 317, [2009] 2 NZLR 17 at [71].

[351]   It is immediately apparent from the above clause that the contract was with Mr Kemp’s company. He was not a party to it and therefore cannot rely on the exclusion clause. In any event, parties cannot contract out of liability under the FTA.56

Alleged breaches by Mr Kemp

[352]   The Mitchells’ case is that Mr Kemp’s report contained false statements which misled and/or deceived them. It is pleaded that, in the report, Mr Kemp falsely:

(a)attributed raised moisture levels near a door leading out to the balcony from the ensuite bathroom to sealant around the sill of the door requiring replacement;

(b)presented findings of “acceptable” moisture levels near exterior openings as confirmation of there being no water ingress issues with unit 7; and

(c)described unit 7 as being in good condition, well built with quality materials and maintained to a good standard.

[353]   Based on the evidence of Mr Biggelaar, which I have accepted, those statements were false because:

(a)The raised moisture level was due to more serious defects in the construction of the balcony and water migrating from other areas, for example, from the defective apron flashing;

(b)Replacing sealant around the sill of the balcony doors would not rectify the defects and would not repair the damage by way of decay that had already occurred;

(c)There was moisture ingress on all levels of unit 7;

56     Smythe v Bayley’s Real Estate Ltd (1993) 5 TCLR 454 at 472 (HC), approved in Body Corporate 202254 v Taylor, above n 55, at [63].

(d)The property was, and is, a leaky home;

(e)There were aspects of its construction which rendered it prone to leak; and

(f)There was evidence that leaks had already occurred, and this would have been obvious to a reasonably competent building inspector.

[354]   In relation to the last point, Mr Bayley agreed with Mr Biggelaar that Mr Kemp ought to have noticed aspects of construction which created a risk of water ingress.

[355]   This case bears some similarity to the situation in Hepburn v Cunningham, where the Court found that the pre-purchase inspector had breached s 9 of the FTA, saying:57

[160]    … The report taken as a whole, suggested the dwelling was generally in good condition with the only matters of significance being cladding cracks and retaining wall moisture levels. …

[161]    … the whole thrust of the report was that the building had some issues, but they were not “huge”. Its condition was generally good, and, apart from the rumpus room, moisture readings were normal throughout the house. …

[356]   Similarly, in this case, the condition of unit 7 was far from “good”. The Mitchells have established that Mr Kemp’s report contained false statements.

Did Mr Kemp’s report mislead the Mitchells?

[357]Mr Mitchell, in his brief of evidence, said:

25. After the inspection I was left with the impression that  there was  nothing to be concerned about in relation to the property. I understood that since it had been built in the late 1990s it would require some maintenance, such as checking the sealant in the area Mr Kemp had identified. Neither his report nor his discussion with me raised any red flags about the property or any reason to be concerned.

[358]   While Mr Mitchell’s evidence was that Mrs Murphy’s representation about the property not being a leaky home remained one of the most influential factors, he said

57     Hepburn v Cunningham [2013] NZHC 210.

they also relied on Mr Kemp’s report as confirming what Mrs Murphy had told them through the real estate agent. He said that they believed that if there were serious issues, they would certainly have been picked up in a pre-purchase report.

[359]   It is also pertinent to note that Mr Kemp was one of several building surveyors recommended by Ms Goodall, and Mr Mitchell selected him as Mr Kemp was familiar with the complex and had previously reported on unit 2.

[360]   I find therefore that the Mitchells reasonably relied on Mr Kemp’s knowledge and experience generally as a building surveyor but also as one who was familiar with the complex.

[361]The Mitchells succeed on their cause of action against Mr Kemp.

Measure of loss under the FTA — Mr Kemp

[362]   Ms Wroe submits, and I accept, that home owners are generally entitled to the full cost of repair if it is reasonable.58 An award of less than the full amount of damages should not be lightly made because the policy of the FTA relates to the standard of conduct of those in trade.59 The factors in favour of awarding remedial costs are present in this case.60 First, the property was purchased as a family home as opposed to an investment property. The Mitchells gave evidence that they wished to live in unit 7 as it is in an ideal location for them. It is close to the train station at Newmarket, Mr Mitchell’s office is nearby and it is on transport routes for their son who is at university.

[363]   Secondly, it is reasonably possible to remedy the defects. As is already apparent from this judgment, there is a scope of works prepared by Mr Biggelaar, and the quantity surveyor engaged has prepared a remedial estimate based on that scope of works. The Mitchells intend to have unit 7 repaired and it is reasonably able to be repaired.

58 At [165].

59     Goldsboro v Walker [1993] 1 NZLR 394 (CA).

60     Warren & Mahoney v Dynes CA49/88, 26 October 1988.

[364]It is therefore reasonable for Mr Mitchell to be awarded the cost of repairs.

[365]   In exercising the discretion when awarding damages under the FTA, relevant considerations in leaky building cases have included the role played by a defendant; the benefit obtained by the defendant; their relationship or proximity to the plaintiff; and the plaintiff’s contribution to the loss.61

[366]   I have already accepted that the role played by Mr Kemp was a material factor in inducing the Mitchells to purchase unit 7. Their dealings with Mr Kemp were in the context of a professional relationship. They took reasonable steps to prevent their loss by engaging Mr Kemp. Finally, they acknowledge that the benefit received by Mr Kemp was limited compared to the benefit received by Mrs Murphy. Mr Mitchell’s evidence was that Mr Kemp charged somewhere between $600–$800 for his report.

Apportionment between first and second defendants

[367]   I accept that the Mitchells are  able  to  recover  their  entire  loss  against  Mrs Murphy. It is her actions which are the primary cause of the loss. They are therefore entitled to the full amount of the claim against Mrs Murphy less the [redacted] recovered from Barfoots. In relation to Mr Kemp, having regard to the significantly lesser benefit compared to that obtained by Mrs Murphy, I consider that Mr Kemp’s liability is properly assessed at 20 per cent of the balance of the claim after the deduction of the [redacted] settlement sum. In doing so, I adopt the approach of Whata J in Mok v Bolderson, where the Judge assessed the liability of a pre-trial inspector at 25 per cent of the loss suffered under the FTA.62 Whata J said:

[185] I take some support from the approach taken by the courts to apportionment of responsibility to councils at 15 per cent and 20 per cent in the Body Corporate litigation. I add another 5 per cent to take into account the proximity between Mr Bolderson and the pre-purchasers.

(footnotes omitted)

61     Mok v Bolderson [2011] 13 TCLR 209 (HC) at [171]–[177] at [184].

62 At [184].

[368]   In this case, the factor of proximity between the inspector and the pre- purchaser does not exist. Hence, I have adopted the percentage figure of 20 per cent rather than 25 per cent as in Mok v Bolderson.

Result

[369]   The Mitchells have succeeded in their claim against Mrs Murphy on the first cause of action under s 35 of the CCLA on the balance of probabilities.

[370]   The Mitchells have succeeded in their claim against Mrs Murphy on the second cause of action under the FTA on their alternative basis under s 43(1)(d) of the FTA on the balance of probabilities.

[371]   The Mitchells have succeeded in their claim against Mr Kemp on the first cause of action against him under the FTA on the balance of probabilities.

Orders

[372]   I enter judgment in favour of the Mitchells against Mrs Murphy in the sum of [redacted] (being the total of repair costs of $443,070.80; consequential costs of

$68,742; general damages of $25,000; plus interest of $31,494.08; less [redacted] recovered from the third defendant).

[373]   I enter judgment in favour of the Mitchells against Mr Kemp in the sum of [redacted] (being 20 per cent of the judgment sum against Mrs Murphy).

Costs

[374]   Costs are reserved. If the parties are able to agree costs, a joint memorandum is to be filed within 30 working days from the date of this judgment.

[375]   If costs cannot be agreed the Mitchells are to file and serve their memorandum within 10 working days of the date for the joint memorandum and Mrs Murphy is to

file and serve her memorandum within a further 10 working days. Memoranda should not exceed five pages (excluding any attachments).

Gordon J