Mok v Bolderson HC Auckland CIV-2010-404-007292
[2011] NZHC 397
•4 April 2011
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2010-404-007292
BETWEEN CHONG HUNG MOK AND SHUI HA HO Appellants
ANDALAN RICHARD BOLDERSON First Respondent
ANDBLAKE WILLIAM BOYD Second Respondent
Hearing: 17 March 2011
Counsel: F R McLaren for Appellants
S R J Hamilton for First Respondent
No Appearance for Second Respondent
Judgment: 4 April 2011
RESERVED JUDGMENT OF WHATA J
This judgment was delivered by me at 4.00 pm on 4 April 2011 pursuant to Rule 11.5 of the High Court Rules
Solicitors:
Hayden Tate Limited, PO Box 47-640, Ponsonby, Auckland 114 for Appellants
Kennedys, Level 6, 70 Shortland Street, Auckland for First Respondent
CHONG HUNG MOK AND SHUI HA HO V ALAN RICHARD BOLDERSON HC AK CIV-2010-404-007292
4 April 2011
Table of Contents
Para No
Introduction [1]
Background
Construction of house [2]
Compliance assessment [3] Sale and purchase agreement: condition 20 [4] Building report: scope and statements [5] Leaks [10] WHT assessment [11] Remediation [12] Claim lodged [13] Evidence: Medricky, Dibley, Duffy, Bolderson [14] Tribunal decision [21] Grounds of appeal [28] Issues [30] Jurisdiction on appeal [32]
Fair Trading Act 1986: Section 9 (Ground 1)
Issue 1: misleading and deceptive conduct – the threshold test [44]
Discussion [58] Issue 2: the proper framework: misleading? [66] Step 1: was the conduct capable of being misleading?
Preliminary Issue [68] Appellants’ core argument [73] First Respondent’s core argument [76] Discussion [81] The “Misleading” Statements [82] The causes of the damage [83] Available information? [85] Observable Defects [91] Knowledge of leaky homes [97] Summary on available information [111] Correct statements of fact, omission or simply opinion [115] Steps 2 and 3: Reliance? [125] Conclusion on s9 [128]
Negligent Misstatement
Issues 3 and 4: standard of care [129]
General damages (Issue 5) [151]
Relief
Liability under FTA [161]
Discussion [171] Benefit [178] Role [179] Nexus [181] Relationship [183] Liability for negligent misstatement [186] Directions [189] Costs [192]
Introduction
[1] The appellants, Chong Hung Mok and Shui Ha Ho, appeal the decision of the Weathertight Homes Tribunal declining to grant them any relief against the first respondent. They say the first respondent‟s report on a home they purchased in 1999 was misleading and negligent. The Tribunal said that the report complied with industry standards for the time and so was neither misleading nor negligent. The appellants contend that the Tribunal erred in applying industry standards as the benchmark for misleading conduct or negligence.
Background
Construction of house
[2] The appellants, Mr Mok and Mrs Ho, purchased the leaky home in question in this appeal from the second respondent, Blake William Boyd, and Mrs Boyd in
1999. The property is situated at 2/55 Clovelly Road, Bucklands Beach. The Boyds had purchased the section on 5 September 1996, and applied for a building consent to the Manukau City Council. The house plans attached to this application had been prepared by architects Cook, Hitchcock and Sargisson Limited and approved by Approved Building Certifiers Limited (ABC). Upon the consent being granted, construction of the house occurred between October 1997 and May 1998.
Compliance assessment
[3] ABC carried out ten building inspections during construction, all of which were approved. The Code Compliance Certificate was issued on 8 May 1998.
Sale and purchase agreement: condition 20
[4] The appellants entered an agreement for sale and purchase for the property from the Boyds on 8 July 1999. This was conditional upon their being satisfied with the contents of a LIM report and a building report, in accordance with clauses 19 and
20. The building report is central to the present appeal, so clause 20 is set out in full as follows:
20.0: Conditional on Specialist’s Report
This agreement is conditional on the Purchaser being satisfied with a report on House construction to be obtained from Builder. Should the Purchaser in good faith be dissatisfied with any matter contained in the report the Purchaser may terminate this agreement by notice in writing to the Vendor or the Vendor‟s Solicitor, such notice to be received by 4pm on 16th July 99. If notice is not received within time the Purchaser shall be deemed to have waived the Purchaser‟s rights under this condition, time being of the essence.
Building report: scope and statements
[5] Mr Bolderson on behalf of his company, House Inspections Limited, prepared the pre-purchase inspection report for the appellants. Mr Bolderson is a qualified building surveyor who, at the time, had 30 years worth of building experience, had specialised in pre-purchase inspections for around 12 years and was a member of the Master Builder‟s Association. He visited the property on 13 July
1999 and carried out a visual inspection. He prepared his handwritten report onsite at the property and gave this to Mr Mok after explaining its contents. At the hearing, Mr Bolderson stated that when performing inspections he was generally onsite for
3¼ to 3½ hours. Of this around 2 hours were spent inspecting the building, ½ to ¾ of an hour was spent writing up the report, and a further ½ to ¾ of an hour was spent with the client. For this he was paid $200 plus GST.
[6] A statement of policies adopted by House Inspections Limited is attached to the report prepared by Mr Bolderson. It records that the report follows a “visual inspection only”, it is “not a structural survey”, and it makes “no representation that the building complies” with legislation.
[7] Mr Bolderson‟s report observed that the house was generally in good condition and that defects were generally minor. The core allegedly misleading statements, as recorded in the appellants‟ submissions, are:
52.1 The cladding is identified as “good” in the checklist. The comments
section states;
“The exterior cladding appears generally sound ... There is some minor cracking that can be expected from this type of cladding”:
52.2The roof is also identified as “good” in the checklist. The comments section states:
“The roofing appears generally sound ... (Some water is ponding on this [the dining room] roof)”,
And on the last page before the printed terms:
“Some sealant would be beneficial along the top roofing edge at the
deck end (wind driven rain may enter)”;
52.3 The summary comments are:
“This house appears generally sound and well presented ... The item‟s [sic] in this report are generally minor but do require attention in parts. There is also some unfinished work.”:
[8] Specific alleged misrepresentations in the report are in turn set out by the
appellant‟s first amended statement of claim as follows:
(1) “Flashing detailing has been used around the joinery”;
(2) “Cladding moisture breaks through most of the building except for the upper decking and some of the rear base cladding”;
(3) “There is some minor cracking that can be expected from this type of cladding”;
(4) “The house appears generally sound and well presented ... The items in this report are generally minor but do require attention in part. There is some unfinished work”;
(5) “The exterior cladding, roof, spouting and down pipes in the exterior joinery were all described as being in good condition.”
[9] The appellants sent a copy of Mr Bolderson‟s report to their solicitors, who wrote to the Boyd‟s solicitors to request that certain items be repaired before possession. Agreement was reached on most of these and the agreement for sale and purchase was declared unconditional. An issue with the external stairs delayed settlement, which proceeded on 18 October 1999.
Leaks
[10] In about July 2005, the appellants noticed damp carpet in the house and a minor leak in the upstairs bathroom. Further leaks were discovered over the course of the next year, including leaks after heavy rain and a leak situated under a flat section of the roof. An insurance claim was made, and minor repairs were carried
out on the roof in March 2006. In April 2006 the appellants applied to the
Weathertight Homes Resolution Service for an assessor‟s report.
WHT assessment
[11] An assessment was carried out by David Medricky who issued his first report in September 2006. He concluded that water was entering the dwelling due to inadequately designed and installed flashing systems, cracks in the cladding, and plaster contact causing wicking of water into the walls. There was a delay in the appellants taking any action on this report due to Mr Mok‟s health problems, but a request for settlement or mediation was made to the Boyds in late 2007. Following their refusal, an addendum report was applied for to update the original report. This was issued on 7 April 2008 and recommended a complete reclad of the dwelling and repairs as necessary to the joinery and junctions.
Remediation
[12] The appellants sought their own assessment and their expert, Mr Dibley, agreed that a full reclad was necessary. Tenders were sought for the remedial work, with Dibley and Associates Limited engaged to carry out the repairs. A building consent for this work was lodged on 29 October 2008 and the appellants wrote to the Boyds to advise them that they would be held liable for the costs. The dwelling was reclad with weatherboards and XpressClad, the total remedial costs coming to
$229,611.43.
Claim lodged
[13] The appellants lodged a claim in the Weathertight Homes Tribunal on
18 December 2009. The original claims were made in tort but were amended at different stages of the proceedings to include claims in contract. Claims were made against Blake Boyd as developer or project manager, Craig Tibbets as a builder involved in the construction work, Alan Bolderson as pre-purchase inspector, and Michael May as the company director that gave quotes for the plastering work and
arranged subcontractors. The claims against Mr Tibbets and Mr May were later withdrawn.
Evidence: Medricky, Dibley, Duffy, Bolderson
[14] Expert evidence was provided at the Tribunal as to the defects that caused the leaks, the amount claimed for repairs, betterment of the property, Mr Bolderson‟s competence, and the visibility of defects at the time of Mr Bolderson‟s report.
[15] Mr Medricky, the Tribunal‟s assessor, is a registered building surveyor with experience as a building inspector for a territorial authority. Nick Dibley was the appellant‟s expert, a registered architect and registered building surveyor from 2003-
2007. Both gave evidence as to the causes of the leaks and the issue of betterment.
[16] Mr Dibley also gave evidence concerning the defects that he believed would have been visible in 1999. He provided a list of these in his brief. He described the industry context at the time and the information that would have been available to an inspector, including the Good Stucco Practice Guide 1996. He identified areas of non-compliance with that guide that he says should have been addressed in the report. Counsel for Mr Bolderson was critical of this evidence because Mr Dibley did not work in New Zealand until 2003 and had never carried out a pre-purchase inspection.
[17] Mr Bolderson gave evidence as to the purpose of his inspection, which he stated to be a condition report of the building. He also described his process in carrying out inspections and went through some of the statements made in the report.
[18] Mr Duffy was the expert called by Mr Bolderson to give evidence on the standard of care demonstrated by the report and the amounts claimed for repairs. He is a construction and building consultant who holds a Bachelor of Engineering. His evidence was that the report was thorough, generally well detailed and of a suitable standard for the time. He stated that the report addressed the main defects alleged, but that many of the others would not have been visible at the time or would have required invasive investigation. He did consider that an inspector should reasonably
have identified inadequate ground clearance on the sides of the garage door, and placed the cost of remediating this at $3,797.16. The biggest difficulty with the report that he could see was that the language may not have been fully understood by a layperson. However, Mr Bolderson had discussed its detail with the purchaser.
[19] A fourth expert, Mr Gray, was called by Mr Tibbets to provide evidence as to the building work he carried out and the value attached to this. Mr Gray is a qualified builder and a NZBIS Registered Building Surveyor and Certified Weathertightness Surveyor. He did not, however, carry out a site survey.
[20] Mr Medricky and Mr Dibley were both generally in agreement as to the defects and that a full reclad of the dwelling was required. After some discussion at the tribunal, this conclusion was also accepted by Mr Duffy. All of the experts were similarly in agreement that there was no betterment arising from the recladding.
Tribunal decision
[21] The Tribunal found that Mr Boyd was the developer of the dwelling, and thus owed a duty of care to any intended owner to supervise the construction of the dwelling. In the alternative he could also be considered the project manager and would owe a duty on this basis. The Tribunal then found that he breached these duties so was liable to the appellants for the cost of $268,994.62 for remedial repairs (less betterment for painting), consequential losses including interest and a global award of $25,000 for general damages.
[22] The main causes of the damage are described as follows:1
[23] Mr Medricky‟s evidence was that water entered the joinery due to an inadequately designed and installed flashing systems. Mr Dibley said that the defects arising from the joinery affected all elevations. Mr Medricky also noted the non-compliant minimum ground level and the cladding embedded onto the decks, cracks in the cladding and a failure to install the cladding in accordance with the standards required. At the time of his investigations Mr Medricky was not able to confirm whether or not the cladding had control joints without destructive testing. However Mr Dibley observed during the remedial work that there were none.
1 [2010] NZWHT Auckland 29.
[24] There was some discussion between Mr Medricky and Mr Dibley as to the cause of water pooling on the roof at the junction between the bay window and the main roof. In Mr Dibley‟s opinion the ponding occurred over a defect which caused more water ingress than would have been caused by water ponding alone. Mr Dibley identified the defects causing leaks in this area at paragraph 3.5.2 of his report. The primary defects were a defective membrane detail at the junction of the roofs and the construction of the roof with an inadequate slope causing ponding of the water.
[25] Mr Dibley and Mr Medricky agreed that the requirement at the time in terms of roof slope was that the roof was „to shed water‟ and that although BRANZ recommended a 1.5 degree slope there was no specific requirement in the Building Code for a particular degree of slope. Mr Medricky stated that even if sealant had been added as recommended by Mr Bolderson, it would have only limited water entry temporarily and eventually would have broken down.
[26] In summary there was no challenge to the causes of defects as identified by Mr Medricky and Mr Dibley or to Mr Dibley‟s apportionment of repair costs to defects. No alternative costings were produced by any party and there was no dispute with the costs claimed other than in relation to betterment.
(emphasis added)
[23] None of the defects were found to be attributable to the building work performed by Mr Tibbets, and he was cleared of liability.
[24] The claims against Mr Bolderson under s 9 Fair Trading Act 2006 and in tort for negligent misstatement were unsuccessful. Both of these claims were addressed together, the Tribunal finding that the report met the required standard in the industry at the time and was produced with reasonable skill and care. The adjudicator was not satisfied that any aspect of the report was misleading. The Tribunal observed:
[97] For the reasons given I attribute more weight to Mr Duffy‟s evidence on the standard of pre-purchase inspections in 1999 than to the evidence of Mr Dibley. I therefore accept the evidence of Mr Duffy that the report issued by Mr Bolderson met the required standard and was produced with reasonable skill and care. I therefore find that there was no negligent statement by Mr Bolderson nor am I satisfied that there was any aspect of his report which was misleading.
[25] The claim against Mr May was withdrawn, but the Tribunal still stated that Mr May exercised no control over the way in which the plastering was completed, nor had any supervisory role over those who carried out the work. There were therefore no grounds for holding him personally liable as a director.
[26] No contributory negligence was found on behalf of the appellants.
[27] Because all of the other claims were dismissed, no apportionment of the sum was carried out and Mr Boyd was held liable for the full amount.
Grounds of appeal
[28] The appellants usefully provided an abbreviated grounds of appeal in the written submissions of counsel, as follows:
(a) The Tribunal erroneously applied a negligence test of liability to the
Fair Trading Act 1986.
(b)The Tribunal failed to consider whether the report met an objective standard of what ought to have been expected from a reasonable and prudent purchase inspector in 1999 rather than the practice of the time.
(c) The Tribunal wrongly concluded that Mr Mok and Ms Ho‟s claim (the appellants) for general damages was confined to a global “maximum benchmark” of $25,000, so failed to consider properly Mr Mok and Ms Ho‟s particular circumstances in assessing an appropriate award of general damages.
[29] The appellants seek an increase in general damages to an award of $25,000 each and a general judgment awarding damages against the first respondent for the same amount together with the judgment sum awarded against the second respondent, totalling $293,994.62.
Issues
[30] With the benefit of full and careful argument from both counsel, the appeal raises the following main issues:
(a) whether the Tribunal erred by incorporating a negligence threshold into the test of misleading and deceptive conduct for the purposes of s 9 of the Fair Trading Act 1986;
(b) was the conduct misleading;
(c) whether the Tribunal applied the correct standard of care that ought to have been expected from a reasonably prudent pre-purchase inspector in 1999;
(d) did the first respondent meet the requisite standard of care;
(e) whether the Tribunal erred in fixing a maximum damages total award of $25,000 for joint resident owners.
[31] A number of subsidiary issues arise under each of these main issues which I
will address in turn.
Jurisdiction on Appeal
[32] The powers of this Court on appeal are also defined by s 95 of the
Weathertight Homes Resolution Services Act 2006 as follows:
95. Determination of appeal
(1) In its determination of any appeal, the court may do any 1 or more of the following things:
(a) confirm, modify, or reverse the determination or any part of it:
(b) exercise any of the powers that could have been exercised by
the tribunal in relation to the claim to which the appeal relates.
(2) A determination under subsection (1) –
(a) has effect as if it were a determination made by the tribunal for the purposes of this Act; and
(b) is a final determination of the claim.
[33] The powers of the Tribunal in an adjudication proceedings are set out in s 73 and are widely framed to include, among other things:
73. Powers of tribunal in adjudication proceedings
(1) The tribunal may do any or all of the following things in relation to adjudication proceedings or the parties to them:
(a) conduct the proceedings in any manner it thinks fit, including adopting processes that enable it to perform an investigative role:
…...
(f) appoint an expert adviser to report on specific issues, as long as the parties are notified before the appointment is made:
......
(i) request the parties to do any other thing during the course of the proceedings that it considers may reasonably be required to enable the effective and complete determination of the questions that have arisen in them:
......
(l) issue any other reasonable directions relating to the conduct of the proceedings.
[34] Section 73(2) also provides:
The parties to adjudication proceedings must comply with any request or direction of the tribunal made or given under this section.
[35] It is evident therefore that the scope of the powers of the Court to finally resolve claims is very wide, including further inquiry if necessary.
[36] The appellants further submitted that this appeal is by way of rehearing in accordance with r 20.18 and 20.19 of the High Court Rules. The respondent accepted this.
[37] The jurisdiction on a rehearing is now relatively well-settled, as/and captured by the judgment of the Supreme Court in Austin, Nichols & Co Inc v Stichting Lodestar.2
[38] A synopsis of the key principles, drawn from the Supreme Court decision is helpfully provided by Wylie J in Chee & Anor v Stareast Investment Ltd & Ors,3 emphasizing that no deference is required beyond the customary caution.
[39] The appellants therefore submitted that this Court in as good a position as the Tribunal was to determine whether or not the first respondent is liable to the appellants and whether general damages awarded against the second respondent (Mr Boyd) should be increased. In a jurisdictional sense this submission is well
founded.
2 [2007] NZSC 103, [2008] 2 NZLR 141.
3 HC Auckland, CIV-2009-404-5255, 1 April 2010 at [31].
[40] However, while I accept that my jurisdiction is wide and extends to revisiting the facts and then forming my own judgment on critical matters with finality, I consider that care must still be taken in seeking to supplant a determination of a specialist tribunal that has had the benefit of hearing both lay and expert evidence on critical matters and placing that evidence within the wider specialist experience of the Tribunal.
[41] I am also cognisant of the fact that: 4
The purpose of this Act is to provide owners of dwellinghouses that are leaky buildings with access to speedy, flexible, and cost-effective procedures for assessment and resolution of claims relating to those buildings.
[42] This becomes particularly relevant when making fine grained assessment of cause, liability and apportionment. The inquisitorial powers of the Tribunal may be particularly useful on such matters.
[43] With that limited proviso however, I proceed on the basis that I have a broad discretion to supplant the determination of the Tribunal below if I identify an error of law or fact and I consider such an error to be material.
Fair Trading Act 1986: Section 9 (Ground 1)
Issue 1: misleading and deceptive conduct – the threshold test
[44] The first ground of appeal advanced before me relates to the test of misleading conduct under the Fair Trading Act 1986, s 9.
[45] There was no dispute that the jurisdiction of the Fair Trading Act 1986
(“FTA”) may apply in this context.
[46] I was also told by counsel that in fact there was no High Court authority dealing with claims concerning pre-purchase inspection reports. The only authority cited to me in the „leaky homes‟ context concerning the FTA was essentially an
obiter observation of Gendall AJ in Young v Holden that negligence does not fall
4 Weathertight Homes Resolution Services Act 2006, s3.
within the statutory concept of misleading or deceptive conduct or conduct likely to mislead or deceive.5
[47] In any event, in the absence of any challenge to scope, I proceed on the basis that the FTA is capable of encompassing and regulating statements made in pre- purchase inspection reports.
[48] Section 9 reads:
9. Misleading and deceptive conduct generally
No person shall, in trade, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
[49] There is no dispute that the first respondent is a person “in trade”.
[50] The salient facts (which are not disputed for this part), are that the first respondent produced a pre-purchase inspection report for the appellants and that report made various statements about the condition of the home to be purchased with a general summary that it was in good condition in several respects.
[51] It is common ground that in fact the house was affected by various defects with the ultimate result that the cladding had to be almost completely replaced at a significant cost. The second respondent, Mr Boyd, was found liable by the Tribunal for the cost of the repair on the basis that he had been negligent as project manager in securing or meeting appropriate standards for construction.
[52] The appellants say, however, that the first respondent, Mr Bolderson, was equally liable in that his report either failed to identify relevant defects or if it did identify defects, it failed to identify to the appellants the potential implications of those defects.
[53] Key to the Tribunal‟s decision is the following passage:
[78] The three step test is an objective one. Therefore the test is not whether the claimants were misled but whether, if they were, it was
5 Refer Young v Holden & Ors HC Auckland CIV 2006-404-6989, 9 November 2007 at [42]; however, for a comprehensive discussion of principle, refer Body Corporate 202254 v Taylor [2008] NZCA 317, at [45]-[99].
reasonable for them to be misled by the report. In order to establish that Mr Bolderson was negligent or that his report was capable of being misleading, the claimants are required to prove that this report failed to meet the standard reasonably expected of such reports at the time.
[54] The appellants contend that the Tribunal was wrong to incorporate essentially a negligence test into the test for misleading and deceptive conduct.
[55] The appellants cited authorities and text for the proposition that negligence in relation to a breach of s9 is irrelevant.6 The appellant further submitted that s 9 imposes strict liability for misleading conduct.
[56] The first respondent‟s counsel did not actively engage on this first issue other than to confirm his instructions to argue that negligence was an appropriate threshold for misleading conduct in this context.
[57] In fairness to Counsel for the respondent, he usefully cited authorities dealing with statements of opinion to the effect that an honestly held, reasonably based opinion may not be actionable under section 9.7
Discussion
[58] This is a leaky home case. We are dealing with an expert pre-purchase inspection report on the condition of a house. It was completed over ten years ago. The report was sought for the specific purpose of assisting the purchasers in deciding whether to buy the house. But it was based on a visual inspection only. That assessment generally concluded that the house was in good condition. The purchasers relied on that assessment before purchasing the property.8 It transpires that the house was poorly designed and constructed and this ultimately resulted in
significant water damage to the house.
6 Refer Taylor Bros Ltd v Taylors Group Ltd [1988] 2 NZLR 1, at 39 (CA), Stephen Todd (ed)
The Law of Torts in New Zealand (5th ed, Brookers, Wellington, 2009) at 221 and 225.
7 Premium Real Estate Ltd v Stevens [2009] 1 NZLR 148 and
Parapine Timber Products Ltd v Redington CA266/92, 10 May 1993.
8 Counsel for respondent accepted this during the course of oral argument.
[59] Within this context, I must apply the policy of the Act, namely to insist on acceptable standards of conduct by those in trade.9 But as the Court of Appeal said in Premium Real Estate Ltd v Stevens:
[48] Mr Akel‟s formulation of the issue raises the question of the reach of s9. Section 9 is undoubtedly a broad provision, but it does have limits. Elias J made this point, albeit in a different commercial context, in Des Forges v Wright [1996] 2 NZLR 758 at 764 (HC):
Section 9 is not to be turned into a general warranty by a vendor of the expectations of the purchaser.
Similarly, s9 does not provide a mechanism to deal with every situation which parties consider that they have suffered loss as a result of accepting, or being influenced by, the (mistaken) views of those acting for them. Decisions that have proved unwise in hindsight, and against which other advisors might have counselled, may well cause regret, but they will not necessarily be capable of remedy through s9.
[60] I am not satisfied that the “negligence” test adopted by the Tribunal sets a high enough standard for the purpose of section 9. Nothing in the language of section
9 requires an industry standard of acceptability.
[61] Furthermore, the report was produced for a specific purpose and the extent to which the report is misleading is informed by that purpose. The purpose was to specifically advise the purchasers about the condition of the house so that they could rely on it. A “not negligent” standard is not necessarily commensurate with that purpose.
[62] But nor am I convinced that in this context it is enough for the claimants to simply show with the benefit of hindsight the report was wrong. The report specified limitations as to scope10 and it did not guarantee the views expressed.
[63] In my view the policy of the Act (and the balance envisaged by the Court of Appeal in Premium Real Estate Ltd) is achieved in this context by assessing whether the report was reasonably based on information available to an expert at the time of the inspection. I reject for that purpose a supposed “industry standard” of the time.
That may or may not set an acceptable benchmark. I prefer an objective assessment
9 Goldsbro v Walker [1993] 1 NZLR 394 at 399.
10 It was common ground that it was based on a visual inspection only.
of reasonableness and availability of information. This objective approach is supported by longstanding authority.11
[64] I consider that this test has equal application to both statements of fact and opinion when dealing with pre-purchase inspection reports. It will be evident that such reports often include statements of fact and statements of opinion or a mixture of both, as in “the condition of the house is good”. This is a direct representation of existing fact,12 underpinned by an expert view as to quality. From the purchasers‟ perspective the statement is simply a statement about the present condition of the house. In many instances it will be artificial, especially from the purchaser‟s perspective, to categorise the statements as statements of fact or opinion. I therefore
prefer an approach that captures the reality of the situation by objectively assessing whether the statement was reasonably based on information available to the expert at the time. Any obviously erroneous statements of fact will be caught, as will a poorly based opinion as to quality.
[65] Given this, I find that the Tribunal member was in error both in the sense of using a negligence framework for assessment and in relying on an „industry standard‟.
Issue 2: the proper framework: misleading?
[66] The appellants submit that the test for establishing liability under s 9 are well- settled and summarised in Krtolica v Westpac Banking Corporation,13 where Stevens J set out the essential elements as follows:
[158] [s 9] is an objective test of fact, having regard to the circumstances in which the conduct occurred and the person or persons likely to be affected by it. There must further be proof of a causal nexus between the misleading conduct and the loss or damage suffered: Savill v NZ Finance Ltd [1990] 3
NZLR 135 at 143 (CA). Tipping J outlined the approach to determining whether there was a breach of s 9 in AMP Finance NZ Ltd v Heaven (1997)
8 TCLR 144 at 152 (CA). In summary this involves consideration of three questions, namely, whether:
(a) The conduct was capable of being misleading;
11 Goldsbro v Walker [1993] 1 NZLR 394 at 401, per Richardson J
12 cf Body Corporate 202254 v Taylor [2008] NZCA 317, at [47]-[53], William Young J.
13 Krtolica v Westpac Banking Corporation [2008] NZCCLR 24.
(b) the plaintiff was in fact misled by that conduct; and
(c) it was reasonable for the plaintiff to have been misled by that conduct.
[67] The respondents accepted that this was the appropriate approach to take,14 and
I am content to proceed on that basis.15
Step 1: was the conduct capable of being misleading? Preliminary Issue
[68] A preliminary contention was made by the respondent that the scope of the inquiry should be limited to the individual statements pleaded, rather than a review of the report in its entirety.16 The complaint is that this was not argued in the Tribunal and not pleaded in the points of appeal.
[69] The first respondent also challenges the belated raising of an alleged failure by Mr Bolderson to recommend a destructive testing report. Not only was this a fresh allegation on appeal, it is said there is no evidence to suggest that the advice would have been taken up or even allowed.17
[70] I consider that the first respondent‟s approach on scope is unrealistic and unduly formalistic. The pith and substance of the appellant‟s case is that the report misled the appellants. They have particularised the statements of concern. But the Tribunal and this Court could ignore the effect of the report in the round only with the benefit of blinkers. Nor can I see prejudice to the first respondent. It must have appreciated that the entire report was in issue. Its case in favour of the individual statements must logically add up to a case in favour of the whole report. A holistic approach was also endorsed by the Court of Appeal in the Premium Real Estate Ltd
case.18
14 First Respondent‟s submissions at [5.2].
15 while acknowledging the guidance in Red Eagle Corporation v Richard Ellis [2010] NZSC 20; [2010] 2 NZLR 492.
16 Ibid at [5.4].
17 Ibid at [5.21]-[5.26].
18 Premium Real Estate Ltd v Stevens [2009] 1 NZLR 148 at [49].
[71] The second more specific concern has more substance. The first respondent marshalled its case at the Tribunal to address the concerns raised, namely that various statements were misleading. If the allegation that the failure to recommend further analysis was not pleaded or argued, then the respondent cannot fairly be expected to address it now without the benefit of evidence. However on my reading of the evidence, the parties were well aware that one of the fundamental issues in this case was the failure on the part of Mr Bolderson to identify the full implications of the identified defects and then to recommend further investigation. For example Appendix C to Mr Dibley‟s report states on about 10 occasions:
“Pre-purchase report did not identify defect…., or did not alert the reader as
to the need for further investigation”
[72] While appellants might now specify “invasive testing”, the core of the complaint was before the Tribunal and now this Court. Accordingly I proceed on that basis.
Appellants‟ core argument
[73] The appellants‟ case can be stated succinctly. As evidenced by the findings by the Tribunal, they say that the report as a whole was wrong and the individual statements made in the report were wrong.
[74] The appellants contended that contrary to the statements in the report:
(a) the house was not in “good condition” in key respects;
(b)the report failed to either identify material defects or where it did identify defects, failed to advise the purchasers of the implications of those defects and in particular that they might lead to significant water damage;
(c) the statements are statements of fact not opinion; and
(d)Mr Bolderson failed to recommend further more intensive testing and this was misleading by omission and not mere silence.
[75] The appellants also say that there was clear evidence before the Tribunal that the key defects were observable at the time of the report and that this evidence was improperly rejected
First Respondent‟s core argument
[76] The first respondent submitted in relation to the Fair Trading Act claim that the alleged misrepresentation were either not incorrect or were simply statements of opinion that are not actionable under s 9 FTA.
[77] Mr Hamilton also observed that alleged failures to identify implications of factually correct statements or to recommend further investigation were omissions that are not actionable under the FTA.
[78] More specifically and dealing with each alleged misrepresentation in turn:
(a) “Flashing detailing has been used around the joinery”: Mr Hamilton submitted that this statement was correct in terms of the scope of the report, namely a visual inspection. While accepting that this was not a correct statement in relation to sills at the kitchen window and of bi-fold doors, the absence of such flashing was not readily observable if at all. As this was a visual inspection only, the report was accurate.
(b)“Cladding moisture breaks to most of the building except for the upper deck and some wear base cladding”: Mr Hamilton makes the point that the report identified that there were no moisture breaks. He says further that a lack of moisture breaks is a defect requiring investigation, and does not make this representation false.
(c) “There is some minor cracking that can be expected from this type of cladding”: Mr Hamilton submitted that this statement cannot be misleading. If evidence at the hearing and accepted by the Tribunal is that cracking is to be expected from this type of cladding when the ground settles, then that cannot be misleading.
(d)In relation to general statements “that the house appears generally sound” and that “the items in this report are generally minor”, and that exterior cladding, roof spouting and down pipes and exterior joinery were in “good condition”: Mr Hamilton contends that these are clearly statements of opinion that were genuinely and reasonably
held.19
[79] Mr Hamilton also stressed in oral argument that the report and the statements must be understood in the context within which they were given. The report was given at a time when “leaky homes” issues were not prominent. The report was not an investigation of the type undertaken retrospectively by Mr Dibley. He made the point that Mr Dibley‟s report cost several thousands of dollars while Mr Bolderson‟s report cost only $200 and was based on a visual inspection only.
[80] He said this all added weight to the point that Mr Bolderson did not assume the responsibility or duty of a compliance inspector. His duty was limited by context to the role of a visual inspection on the general condition of the house. This inspection occurred shortly after the fine grained, full compliance inspection by accredited compliance inspectors that did not identify any of the shortcomings now alleged. Once viewed in that context, the statements were accurate, reflecting the condition of a recently constructed house and satisfied the purpose of the pre
purchase report. Overall, the views of the report had a proper and reasonable basis.
19 Citing Premium Real Estate Ltd v Stevens [2009] 1 NZLR 148 and
Parapine Timber Products Ltd v Redington CA266/92, 10 May 1993.
Discussion
[81] I propose to address this part of the evaluation in this way. I will assess the correctness of the statements and whether objectively they would have been misleading. I will then assess whether the defects identified by the Tribunal as causing the damage were observable at the time of the report. If they were observable, I will examine whether Mr Bolderson should have been alerted to the implications of those observable defects and reported on them. I will then assess the significance of the nature of the statements, including whether they are statements of fact or opinion, and or omissions that are actionable under the FTA.
The “Misleading” Statements
[82] The allegedly misleading statements are recorded at [7] and [8].
The causes of the damage
[83] Approaching those statements with the full benefit of hindsight, the statements were wrong as a statement of general condition or omitted to identify their full implications.
[84] This is supported by the unchallenged findings of the Tribunal as to the causes of water ingress and associated damage. In this regard the Tribunal adopted the evidence of Messrs Medricky and Dibley. As recorded at [22] of this judgment, the decision identifies the following defects as key to causing the water damage:20
(a) water entered the joinery due to an inadequately designed and installed flashings system;
(b)there was non-compliant minimum ground level and the cladding embedded onto the decks, cracks in the cladding and a failure to install the cladding in accordance with standards required;
(c) ponding occurred over a defect which caused more water ingress than would have been caused by water ponding alone;
20 Refer [23] – [26] of the Tribunal decision.
(d)the primary defects were a defective membrane detail at the junction of the roofs and the construction of the roof into an inadequate slope causing ponding of the water.
Available information?
[85] As I have set out above, it is not sufficient to assess whether the conduct was misleading simply on the basis of hindsight. Rather, I must assess whether the report and the statements within it were reasonably based on information available to an expert at the time of the inspection.
[86] The Tribunal inquired into the level of understanding of weathertightness issues at the time the report was produced. The Tribunal observed:
[94] There is no evidence before me to suggest that in 1999 pre-purchase inspectors, or the building industry generally, had the level of understanding of weathertightness issues suggested by Mr Tam.
[95] It was Mr Duffy‟s evidence that the report was of a suitable standard at the time that it was delivered. He described the claimants‟ dwelling as “an anomaly” as it had a cavity which was not common in 1997/1998. He said that it was not until November 2003 that the Auckland City Council required cavities in construction and the early cavity systems were generally wrongly installed. In Mr Duffy‟s opinion there was no reason for Mr Bolderson to believe that the building had a cavity as it was not well known at the time and not possible to detect with a visual inspection although Mr Bolderson did note the cavity by the deck area was not open draining.
[87] The Tribunal dismissed the evidence given by Mr Dibley for the claimants about what would have been available by way of information to Mr Bolderson at the time of his report. The Tribunal considered that Mr Dibley was not qualified to give expert evidence on the standard of pre-purchase inspections in 1999.21
[88] In my view, the passages cited above illustrate where, with respect, the Tribunal went wrong. Rather than inquiring whether or not the report was reasonably based on available information, the Tribunal inquired as to whether or not the report was of a commensurate standard to other reports at that time. I also consider that the Tribunal incorrectly disregarded the evidence given by Mr Dibley
as to the information that would have been available to an expert at that time. While
21 Refer [87].
Mr Dibley may not have been qualified to provide evidence on the standard of reports (and I make no finding on that), Mr Dibley was clearly qualified to identify the available information at the time upon which the pre-inspection report could have been based.
[89] In fairness to the Tribunal, the framing of the evidence and indeed the submissions for the claimants appeared to be influenced by an industry threshold for acceptability.22
[90] Be that as it may, the very detailed and careful evidence of Mr Dibley as to the type and nature of the information available to Mr Bolderson at the time he gave his report seems to have been wholly rejected by the Tribunal member.23 I note also that Mr Tam (for the claimant) was prevented from putting questions to Mr Medricky as to what would have been visible to Mr Bolderson at the time of his report.24 This had the effect of cutting off an inquiry into a crucial aspect of the claim. Given these combined errors, I must now undertake that task as far as I am able.
Observable Defects
[91] In a helpful summary table, Mr Dibley at 6.8 of his report25 sets out the defects that would and would not have been visible at the time of inspection, using the defects lists in the statement of claim. He records the following as being visible at the time of the report:
(a) The lack of a sill flashing below the timber sill was clearly visible;
(b)the head flashing of the kitchen window on the east elevation was cut down and there was no seal overlap of the sill of the main window or on the upper level;
(c) the clearance between the ground and the cladding on both sides of the garage door was inadequate;
22 Refer [82] and [83] of the decision and the record there of the evidence and the submissions of counsel.
23 Refer decision at [87]
24 Refer transcript at pp 52-53.
25 CBD, Vol 3, Part 2 tab 3 page 347.
(d)the deck tiles were laid above the base of the plaster and the plaster was applied over the door frame at the sill;
(e) the detail at the base of the plaster cavity above the garage door lacked a provision for drainage;
(f) the deck balustrade was constructed with a horizontal top without adequate slope;
(g)the membrane detail at the junction of the roofs was not adequately lapped or sealed;
(h) the roofs had not been constructed with an adequate slope;
(i)there was a lack of flashings or sealant at the junction between the barges and the plaster cladding;
(j) control joints were not installed.
[92] Mr Duffy (the expert for Mr Bolderson) similarly addressed the visibility of the relevant defects in his report.26 While Mr Duffy seeks to explain Mr Bolderson‟s actions, he largely concurs with the observations of Mr Dibley as to whether or not those defects would have been present at the time of inspection. In particular he agrees that the items above would have been present at the time of inspection and all but two would have been observable,27 and one defect was unlikely to have been observable without close investigation.28
[93] Mr Duffy also observes that the following defect was present at the time of inspection and would have been observable and in fact was observed:29
The base of the cavity, and the sill, of the bi-fold door between the living room and the deck have not been properly flashed.
[94] Mr Duffy also noted that some of the defects were also noted by the report, but the report did not specifically highlight the implications of them.30
26 Refer CBD Vol 4 Part 3 tab 4 page 452.
27 Ibid , refer comments at para 28(b), (c), (e), (g), (j), (m), (o) (though see comment below), (p), (q).
28 Ibid, refer item c page 452.
29 Refer transcript at page 71.
30 Ibid, refer page 453 Item (e), (f), (g), (j) and (p). Refer also to (o), where ponding is identified as a defect, but there is some doubt as to whether roof slope can be considered a defect.
[95] The points of difference relate to the membrane detail at the junction of the roofs and whether the control joints were installed. Mr Duffy disagrees with Mr Dibley that these defects would have been observable without closer inspection.
[96] It follows that several of the key defects identified by the Tribunal as causing the damage31 were observable at the time of Mr Bolderson‟s report, with expert disagreement on two of them.
Knowledge of leaky homes
[97] The next issue is whether Mr Bolderson should have been alerted to the implications of observable or observed defects. As noted above the Tribunal resolved this by reference to the standards of the industry at the time. I have found that to be an erroneous threshold.
[98] The evidence before the Tribunal on the likely state of knowledge of inspectors was provided by Mr Dibley for the claimants and Mr Duffy for the first respondent.
[99] Mr Dibley attached samples of press cuttings from BRANZ and the New Zealand Herald from 1991 through to 1998. One such article dated August 1991 makes the following observation:
Cracked plaster is not only unsightly but also allows water to penetrate through it, leading to the possibility of corroded reinforcing and rotten framing timbers. BRANZ has recently undertaken a number of site visits to report on cases of cracking in solid plaster. In each case a proprietary self- furring galvanised steel reinforcement had been used, and failure could in part could be attributed to the manufacturer‟s fixing instructions not being followed.32
[100] In another BRANZ publication in 1996 the following statement was made:
Stucco that goes wrong though results in ugly cracks, decomposition of the materials and moisture stains. That‟s just what you can see. The internal moisture damage is the worst problem and, in some instances, the only solution is to tear off the stucco cladding, replace some framing and start again. Very costly.
31 Refer [22]–[26] of the Tribunal decision.
32 Refer CBD Vol 3, Part 2, tab 3, page 429.
A better alternative is to forestall failure and learn how to do it properly. In
1995 BRANZ technical advisers, industry suppliers and manufacturers joined together to give a nationwide series of seminars on good stucco
practice, from Whangarei to Invercargill.
[101] Finally, there is also included an article from the New Zealand Herald dated
31 October 1994 headed “Builder Sounds Warning to Stucco Houses”. It is further
noted in the article:
High quality paint finishes helped to keep water out, but only for so long. Huge problems could show up in future with moisture fed fungal decay growing in timber frames and causing structural failures.
[102] Balanced against this is the evidence given by Mr Duffy whose experience and expertise was not challenged (from what I can see on the record). In his report he observed:33
It is claimed that this representation was false and that the house was not sound, had been constructed with major defects and would require extensive remedial work. This allegation is unreasonable in that the inspector could not ascertain many of the issues from a simple exterior inspection of the building without undertaking invasive testing and many of the significant defects were identified by the inspector but not acted upon or queried by the purchaser. It is now common knowledge that buildings with this type of cladding system do not perform as well as the more traditional cladding systems but this knowledge was not widely understood and accepted by the industry at the time of this report.
[103] I note that the observation given by the expert is that “this knowledge was not widely understood and accepted by the industry at the time of this report”. The inference is that it was at least understood by some members of the industry.
[104] I would add further that the reliability of the sources of the statements attached to Mr Dibley‟s evidence were not challenged and there was no objection to their production. Under cross examination Mr Dibley also observed:34
Mr Dunne: Yes, but I suppose what I‟m asking here is why should that be common knowledge or reasonable to assume there‟d be a serious deterioration due to lack of flashings in 1999?
33 CBD, Vol 4, Part 3 page 456.
34 Refer transcript at page 71.
Mr Dibley: Because there were a number of publications, including publications by BRANZ who are the country‟s leading publisher on building construction issues, that identified the need for flashings in plaster cladding.
[105] Furthermore, the articles were put to Mr Duffy under cross-examination and he did not challenge their veracity. Mr Duffy also accepted under cross-examination that the Good Stucco Practice Guide was published in February 1996, and that the house was constructed in 1997.35
[106] The following passage of cross-examination by Mr Tam (then counsel for the claimants) of Mr Duffy is also instructive:
Mr Tam: in terms of industry standard what I understand Mr Duffy to be saying is that industry standard at the time in 1999 didn‟t know that the cavity behind the plaster above the garage door that was not open draining was a risk. I‟m putting to Mr Duffy that it is at risk, even at the time, because it‟s contrary to BRANZ Good Stucco Practice Guide 1996. That will be the question I will put to Mr Duffy if I may.
Mr Duffy: Yes I can agree with that, that all I‟m saying is that the Good Stucco Guide wasn‟t particularly well known, it was only – what is it a couple of years since it was published and these things – it is almost in osmotic process whereby it gets into the industry and into practice so I am not at all surprised that Mr Bolderson and others were not familiar with the suggestions in the Good Stucco Guide. I can you around large parts of Auckland city and you‟ll find buildings built a number of years after this that will not comply with the Good Stucco Guide building and I‟m sure this Tribunal sees a lot of it.36
[107] I draw from this that Mr Duffy accepted that the Good Stucco Practice Guide
1996 identified risks and techniques to address the risks associated with Stucco buildings, including weather tightness risks, but that this guide was not well known to the industry at the relevant time.
[108] Mr Dibley also provided detailed evidence about the how the observable defects do not accord with the recommendations of the Good Stucco Practice Guide.37
[109] I note for completeness that Mr Bolderson‟s investigation took place
reasonably shortly after compliance certificates had been issued for the house, with
35 Refer transcript at page 217.
36 Refer transcript at page 221.
37 Refer CBD, Vol 3, Part 2 at pages 335, 338, 339 and 342, and Table at paragraph 6.8.
the implication that any non compliances leading to weathertightness issues that were not obvious to him on a visual inspection should have been dealt with prior to his inspection.
[110] There is also some suggestion in the evidence that Mr Bolderson supplemented his report with “an oral review of the report with the purchaser to ensure a full appreciation of the report issues noted”.38 Accepting this at face value does not in my view assist Mr Bolderson in terms of the weathertightness issues as the evidence from him and his expert is that the significance of the issues and the Good Stucco Guide practices were not known to him. As such any oral review must have fallen short of bringing those matters to the purchasers‟ attention.
Summary on available information
[111] Overall, I make the following findings from the evidence before the Tribunal: (1) Several of the defects causing the water damage were observable at the
time of Mr Bolderson‟s inspection;
(2)The country‟s leading publisher on building construction issues identified various concerns with stucco buildings and produced the Good Stucco Practice Guide 1996 to address them, one year before the construction and at least two years before the pre-inspection report;
(3)The Good Stucco Practice Guide 1996 addressed weather tightness risks associated with Stucco buildings;
(4) Various of the defects in construction did not comply with the the Good
Stucco Practice Guide 1996;
(5)The Good Stucco Practice Guide 1996 was not particularly well known in the building industry at the time of construction or at the time of the
pre-purchase report.
38 Refer CBD Vol 4, Part 3, page 455.
(6) A compliance certificate had been issued shortly prior to
Mr Bolderson‟s inspection.
(7)Mr Bolderson supplemented his report with a oral review, but this review did not address the potential implications of non compliance with the Good Stucco Practice Guide 1996.
[112] Based on the foregoing, I consider that Mr Bolderson had sufficient available information to make very different observations on the general condition of the house. While the Good Stucco Practice Guide 1996 may not have been generally well known in the industry, Mr Bolderson held himself out as an expert on such matters. An expert in Mr Bolderson‟s shoes should be aware of the concerns raised by “the country‟s leading publisher on building construction issues”. This is not a case where the issues are raised in an obscure international academic journal.
[113] In summary, all of the relevant and readily available information pointed to serious risks associated with the observable and the observed defects. Their full implications were not put to the purchasers. Quite the reverse, the purchasers were told that the house in key respects was in good condition.
[114] On that basis Mr Bolderson‟s report was misleading in so far as it wrongly stated and implied that the house was in good condition and that the identified defects were not material for the purposes of purchase.
Correct statements of fact, omission or simply opinion
[115] Before turning from this topic, I address the first respondent‟s twin
contentions that:
(1)Several of the specific statements were correct on their face and so not misleading; and
(2) Opinions as to condition are not subject to s9.
[116] Firstly, I do not accept that the comment about the „flashing‟ was correct. This was wrong at the time. Given the importance of flashings to protection from water ingress, Mr Bolderson should have satisfied himself that the statement was correct before stating it.
[117] I accept that two of the statements may be factually correct on their face, namely:
(1)“cladding moisture breaks to most of the building except the upper deck and some rear base cladding”;
(2) “there is some minor cracking that can be expected from this type of
cladding”.
[118] I do not accept the related submission that a “lack of moisture breaks is a
defect requiring investigation, and does not make this representation false”.39
[119] The problem for the unsuspecting purchasers is that they had no clear appreciation (on the evidence before me) what all of this meant in terms of understanding the implications of those statements, namely that those “facts” can lead to significant water damage. Mr Bolderson was specifically retained to advise them on implications of these facts. I therefore consider that the omission to state that implication in very clear language is capable of misleading for the purpose of section 9.
[120] While this seems relatively straightforward, in light of the emphasis given to the point by the first respondent, I make the following observation. Conduct is defined in the FTA s 2 to include an omission to act. Given the purpose of the report was to advise on the condition of the home in a pre-purchase context, Mr Bolderson40
was obliged to identify the implications of identifiable facts within his expertise.
39 Refer respondent‟s submissions at [5.13].
40 I note for completeness that the report was undertaken in the name of House Inspections
Limited, not Mr Bolderson. However the first respondent accepted that Mr Bolderson was
acting in trade at the time the statements were made (paragraph 5.1). By so acting, Mr Bolderson assumed the obligation to provide accurate advice on the condition of the home.
The failure to clearly specify the implications of the otherwise correct factual statements was therefore a material omission in this context.41
[121] The first respondent‟s submission on the scope of s 9 and opinions is on stronger ground. I have foreshadowed above my response on this. I accept that some of the statements are statements of fact, some are opinion and some are a mix of both. I also consider that separating them out in this context is somewhat artificial. For this reason I have erred on the side of caution and adopted an approach akin to that contemplated by the Court of Appeal in Premium Real Estate Limited.42 I have focused my inquiry on whether the statements made were reasonably held based on information available to a suitable qualified expert.
[122] I note for completeness that unlike the valuation advice under scrutiny in Premium Real Estate Limited, where the valuation was plainly at the evaluative end of the spectrum, the pre purchase inspection report in this case is at the descriptive end of the same spectrum. Accordingly the basis for the “opinion” is capable of much closer scrutiny against information available at the time.
[123] Turning then to the alleged statements of opinion, the first respondent highlighted the following:43
(1)“The house appears generally sound and well presented... the items in this report are generally minor but do require attention in part. There is some unfinished work.”
(2) The exterior cladding, roof, spouting and downpipes and exterior
joinery were all described as being in “good condition”.
[124] I consider that these are opinions but only just. They are highly descriptive and held out to be statements of fact. I consider that it is appropriate to test whether
they were reasonably based on information available at the time. As noted I consider
41 For discussion on omission, refer Heiber v Barfoot & Thompson (1996) 5 NZBLC 104,179;
cf Mills v United Building Society [1988] 2 NZLR 392 at 406.
42 Premium Real Estate Limited at [54].
43 Refer respondent‟s submissions at [5.17]-[5.20].
that they fail that test. The items in the report were not “minor” and the exterior
cladding, among other things, was not in good condition.
Steps 2 and 3: Reliance?
[125] I am satisfied that the appellants were misled and that it was reasonable for them to have been misled by the report.
[126] There is little need for me to go into the case law on this aspect as Mr Hamilton conceded in argument that the appellants did rely on Mr Bolderson‟s report for the purpose of the purchase the house. He also accepted that it was reasonable for them to expect that the report would be enough to determine whether they should purchase the property.
[127] For completeness I consider these concessions to be appropriate for the following reasons:
(1)The report was obtained by the purchasers in furtherance of a condition of the sale and purchase agreement with the effect that the purchasers could have terminated the agreement for any matter arising out of the report.44
(2)The basically unchallenged evidence of one of the purchasers, Mrs Ho, was that they made the purchase conditional on a pre purchase inspection45 and that her husband was a person of caution.46
(3)Further evidence from Ms Ho was that the issues raised by the report were “minor problems” and so they were happy to purchase the house.47
(4)The report was wrong in several key respects and I could see no evidence to suggest the significance of the errors (in light of the Good
44 CBD Vol 3, tab 1, page 318.
45 CB Vol 3, tab 1, page 318.
46 Transcript page 17, lines 8-9.
47 Transcript, page 22, lines 27-8 page 23, line 8.
Stucco Practice Guide 1996) had been brought to their attention prior to purchase. As explained I cannot see how Mr Bolderson could have brought the implications to their attention when he was not aware of them.
(5)While Mr Hamilton argued in his written submissions that the purchasers would have purchased the house in any event (but he did not press this in oral argument),48 I find it implausible that the purchasers would have carried on with the purchase if the full implications of potential water damage were brought to their attention.
Conclusion on s9
[128] Having applied the three steps set out in Krtolica v Westpac Banking Corporation,49 I find that the report breached s 9 of the FTA. I am satisfied that the report as a whole and several of the statements within it50 were misleading, leaving a false impression of the quality of the house. I am also satisfied that the appellants relied on the report for the purpose of purchasing the house, and did so reasonably.
Negligent Misstatement
Issues 3 and 4: standard of care
[129] The alleged negligent misstatements in the report are the defects outlined at paragraph [7] and [8].
[130] The appellants and first respondent have narrowed the debate to whether
Mr Bolderson‟s conduct met the standard of care expected from a competent pre- purchase inspector carrying out an inspection in 1999.51
48 Refer respondent‟s submissions pages 15-16, discussed in the context of negligence, pages 15 and 16 of submissions.
49 Krtolica v Westpac Banking Corporation [2008] NZCCLR 24.
50 Including the specific statements recorded at paragraph [8] of this judgment.
51 Refer first respondent‟s submissions at [4.16].
[131] Both accept that a “common industry practice” is not determinative.52 The effect of this is that the Tribunal fell into error when it based its assessments on industry standards.53
[132] The appellants then contend that the report was negligently prepared, with some defects not identified, and other defects missed altogether. The appellant is particularly critical of Mr Bolderson‟s “professed” ignorance of BRANZ material and the failure to have regard to basic building code requirements. They say the recommendation to use sealant to prevent water egress from a flat roof was flawed when the code requires the roof to shed water. 54
[133] Mr Hamilton contends that the standard of care must be informed by the scope of the report and the full context within which it was generated. This included the following facts:
(a) the report was based on a visual inspection only, with physical constraints in terms of access to parts of the house;
(b)the report was not a code compliance report and should not be measured against the requirements of the building code;
(c) the inspection was prefaced by a full code compliance inspection only
14 months earlier leading to a reasonable assumption by Mr Bolderson that it complied with the building code; and
(d) the investigation cost only $200.
[134] Mr Hamilton also submitted that the appellants‟ expert, Mr Dibley, was not qualified to comment on industry standards at the time of the report and therefore there was no evidence from the appellant on the appropriate standard of care. By contrast, Mr Duffy was qualified and he was clear that Mr Bolderson exceeded industry standards for a pre-purchase inspection report. This was endorsed by the
Tribunal.55
52 Ibid at [4.15], appellants‟ submissions at [75].
53 At [90].
54 See appellants‟ submissions at [18]-[20].
55 Refer [91]-[96].
[135] A detailed review is also provided by Mr Hamilton of the individual observable defects based on the evidence of Mr Duffy to explain the limited provenance of those defects.56
Discussion
[136] I agree that industry practice is not determinative.57 While that may be so, industry practice is not irrelevant. It is part of the factual matrix against which to assess, objectively, whether policy considerations negate or confirm the prima facie duty established through proximity.58 Furthermore I would be slow, in the absence of statutory direction59, to impose a standard of care without due regard for accepted
standards for professionals.60
[137] I would add that professional standards may fall below an acceptable common law standard where they fail to keep abreast with developing knowledge.61
But this will need to be evaluated on a case by case basis given the temptation to develop standards with the benefit of hindsight. There must be genuine regard for the contextual matters that inform the scope of the exercise that Mr Bolderson undertook. In saying this I am not suggesting that Mr Bolderson contracted out of his duty in tort to take reasonable care. Rather I am concerned to ensure that whatever duty is imposed on Mr Bolderson is fair, just and reasonable in the
circumstances.62
[138] I prefer nevertheless to impose a standard informed by the Good Practice
Stucco Guide 1996, as I consider that this guide was available to the profession at the time of the report and should have been used by Mr Bolderson.
56 Refer first respondent‟s submissions at [4.24]-[4.37].
57 For helpful discussion, see Stephen Todd (ed), The Law of Torts in New Zealand
(5th ed, Brookers, Wellington, 2009) at [7.4.01].
58 Attorney General v Carter [2003] 2 NZLR 160 (CA) at [27], and [31].
59 For example by s 9 of the FTA.
60 cf McLaren Maycroft & Co v Fletcher Development Co Ltd [1973] 2 NZLR
100 at 107-108 per Richmond J.
61 see Barber v Sommerset County Council [2004] UKHL 13; [2004] 2 All ER 385 at [65].
62 Attorney-General v Carter [2003] 2 NZLR 160 (CA) at [30].
[139] I note the following statement by Lord Walker in Barber v Somerset County
Council:63
… Every case will depend on its own facts and the well-known statement of
Swanwick J in Stokes v Guest, Keen & Nettlefold (Bolts & Nuts) Ltd [1968]
1 WLR 1776 at 1783 remains the best statement of general principle:
… The overall test is still the conduct of the reasonable and prudent employer, taking positive thought for the safety of his workers in light of what he knows or ought to know; where there is a recognised and general practice which has been followed for a substantial period in similar circumstances without mishap, he is entitled to follow it, unless in the light of common sense or newer knowledge it is clearly bad; but, where there is developing knowledge, he must keep reasonably abreast of it and not be too slow to apply it; and where he has in fact greater than average knowledge of the risks, he may be thereby obliged to take more than the average or standard precautions. He must weigh up the risk in terms of the likelihood of injury occurring and the potential consequences if it does; and he must balance against this the probable effectiveness of the precautions that can be taken to meet it and the expense and inconvenience they involve. If he is found to have fallen below the standard to be properly expected of a reasonable and prudent employer in these respects, he is negligent.
[140] I find that the above reasoning applies with equal force in this context.
[141] I do not consider, however, it is sufficient to show that the statements were simply wrong. Experts can disagree on the implications of the same facts. One opinion may be proven to be correct, but that does not make the other opinion negligent.
[142] I also accept that the burden sits with the appellants to show that
Mr Bolderson fell below that standard.
[143] This aspect of the case is finely balanced. Mr Bolderson should have kept abreast of the Good Stucco Practice Guide 1996. Mr Dibley‟s evidence presents a broad brush picture of non-compliance with that Guide.
[144] But there are several factors that militate against a finding that Mr Bolderson did not take reasonable care:
(1) the report was limited to a visual report, combined with a reasonable assumption that the house was compliant with the building code;
63 [2004] UKHL 13; [2004] 2 All ER 385 at [65].
(2)Mr Bolderson made a reasonable (though erroneous) assumption that the house design complied with the building code and therefore did not require further examination;
(3)several of the defects were identified and recommendations made to address them - it was “an” available view that if the recommendations were followed, this would not lead to major water damage;
(4)there is an expert dispute on the evidence as to whether two key defects (concerning the roof membrane and control joints) were observable and I am not able on the written evidence to resolve that dispute one way or other;
(5)I accept the evidence of Mr Duffy that the report was superior to comparable reports of the time - while not conclusive by itself, this lends weight to the conclusion that the report while materially wrong was not carelessly written.
[145] Overall, however, and with some reluctance, I find that Mr Bolderson did not exercise reasonable care. He failed to keep abreast of the Good Stucco Practice Guide 1996. With the benefit of that guide, the evidence as it sits is that he should have „taken more than the average or standard precautions‟. He did not, and the report left the purchasers with the erroneous inference that the house was in good condition.
[146] But this is not the end of the inquiry. I must also be satisfied that there is a clear causal nexus between the subject matter of the erroneous statements and the damage to the house, informed by the Good Stucco Practice Guide 1996. It is not sufficient given the implications of a negligence finding to simply say that the statements were misleading as with FTA liability. It must be proven that the erroneous statements related to matters that, either individually or collectively,
materially contributed to the damage.64
64 Refer Morton v Douglas Homes Limited [1984] 2 NZLR 548 at 582
[147] I am not comfortable to undertake that exercise simply “on the papers”. I accept that Mr Dibley has provided an evidential basis for a finding that a nexus exists. By contrast, as noted, Mr Duffy has provided evidence on why some of the key matters could not have been observed by Mr Bolderson, thereby disputing the Dibley evidence. Mr Hamilton has raised matters in defense of the report that are arguable. Only the Tribunal can resolve credibility and reliability issues to a standard commensurate with the interests and risks facing the parties.
[148] Nor am I prepared to find against the appellants on the basis they have not discharged the burden of proof. That inquiry was effectively cut off by the Tribunal member when the appellant was prevented from exploring that nexus fully with the expert witnesses. Accordingly that assessment must go back to the Tribunal for careful evaluation.
[149] I consider that the appellant‟s submission about the recommendation to use sealant is one example of an issue that needs to be resolved in a thorough way following a proper inquiry. I consider the appellant may be using hindsight to establish negligence. It is not clear to me that at the time of the report use of sealant was considered inappropriate to deal with weathertightness risk. While that has been proven to be so, that is different from proving that the recommendation was negligent at the time. I was not taken to any part of the Good Stucco Practice Guide
1996 that said use of sealant was not sufficient. In those circumstances, I am not prepared to find that the recommendation was negligent.65
[150] In summary, the appellants have satisfied me that Mr Bolderson did not take reasonable care in light of the Good Stucco Practice Guide 1996. But I am unable on the evidence before me to conclude with sufficient surety that there is a material nexus between the subject matter of the erroneous statements and the damage to the
house.
65 Consider also the observations of Baragwanath J in Dicks v Hobson Swan Construction Ltd
(in liq) (2006) 7 NZCPR 881).
Issue 3: General damages (Issue 5)
[151] The appellants contend that the Tribunal erred by fixing a general damages award at $25,000. The appellants say that this in effect was an award per dwelling as opposed to per appellant.
[152] The appellants cite various authorities which support the contention that an award for each individual occupant or per resident owner, rather than per dwelling, is appropriate.66
[153] The respondent contends that the appellate courts will not generally interfere with the exercise of a discretion by a first instance decision-maker, citing Baragwanath J in Byron Avenue,67 as follows:
The trial Judge must be accorded what is elsewhere termed a margin of appreciation, and one of generous proportions.
[154] But the respondent does submit that without cogent evidence linking ownership of a defective building with health problems of which they complain there is no basis for an increased general damages award.
[155] I agree with the general proposition that a specialist tribunal should be afforded some margin of appreciation when dealing with such matters as apportionment of loss and quantum of damage. The Tribunal is better placed than the High Court in assessing the credibility and reliability of claims to suffering and stress.
[156] On that issue the Tribunal member was unequivocal about the stress suffered by the claimants. It was stated:
[38] However from the time of discovery of the leaks in 2005 until this adjudication the claimants have had some five years of stress and uncertainty and have been required to move out of their home while the repairs had been carried out.
66 Referring to White v Rodney District Council HC Auckland CIV-2009-404-1880,
19 November 2009; Body Corporate 191608 v North Shore City Council
HC Auckland CIV-2008-404-2358, 19 February 2009.
67 [2010] NZLA 65; [2010] 3 NZLR 445 at [113].
[39] The decision of the High Court in Findlay Family Trust confirms that, in accordance with the decision of the Court of Appeal in Byron Avenue the usual award per unit for occupiers is $25,000. I am not satisfied that there is any justification for reducing what has been awarded by the Courts as a maximum bench mark for an award of general damages to claimants in similar situations and I therefore award these claimants the sum of $25,000.
[157] I detect no fatal error on the part of the Tribunal member in fixing a per unit for occupiers award of $25,000. Indeed that award is entirely consistent with the approach taken by the Court of Appeal in Byron Avenue.
[158] I accept the logic that the Tribunal member could have arrived at a different result based on other authorities, including an award of $25,000 per occupant. But I do not consider that to be a sufficient basis for overturning the award made by the Tribunal member. Nor do I consider that the Tribunal reached this conclusion by inadvertence. The contention that the claimants here had experienced a shorter period of stress and anxiety than other claimants who had been awarded $25,000 each is recorded at [37] of the decision. Accordingly the Tribunal had in mind whether or not it should award a joint sum.
[159] I appreciate the use of the language “maximum bench mark” may have stated the implications of the Byron decision too highly. And as William Young J stated, not all claims can be neatly categorised in this way and some evaluative assessment may be required.68 But I am satisfied that the Tribunal member specifically contemplated whether an individual award should be made and did not do so.
[160] Accordingly this point of appeal is dismissed.
Relief
Liability under FTA
[161] I have found that the Tribunal erred in applying industry standards as a threshold test for non-compliance with s 9 of the FTA and for the purposes of
negligent misstatement. I have also found that the Tribunal erred by refusing to
68 Byron Avenue at [153].
allow the appellants to put to the various witnesses evidence from Mr Dibley about observable defects and the significance of them.
[162] I have also found that the report and the statements within it, breach s 9 of the FTA as misleading. I have further found that the purchasers relied on the report and accordingly an award in favour of the appellants in accordance with s 43 of the FTA may be appropriate.
[163] Section 43 of the FTA provides:
43. Other orders
(1) Where, in any proceedings under this Part of this Act, or on the application of any person, the Court finds that a person, whether or not that person is a party to the proceedings, has suffered, or is likely to suffer, loss or damage by conduct of any other person that constitutes or would constitute –
(a) a contravention of any of the provisions of Parts 1-4 of this
Act; or
...
the Court may (whether or not it grants an injunction or makes any other order under this Part of the Act) make all or
any of the orders referred to in subsection (2) of this section. (2) For the purposes of subsection (1) of this section, the
Court may make the following orders –
...(c) an order directing the person who engaged in the conduct, referred to in subsection (1) of this section to refund money or return property to the person who suffered the loss or damage:
(d) an order directing the person who engaged in the conduct, referred to in subsection (1) of this section to
pay to the person who suffered the loss or damage the
amount of the loss or damage:
[164] There appears to be common ground between the parties that the Court (and the Tribunal) is not bound by conventional common law remedies for tort or breach of contract.69 Both parties accept that it is “a matter of doing justice to the parties in
the circumstances of the particular case and in terms of the policy of the Act”.70
69 Refer appellants‟ synopsis as to apportionment of damages at [4] and first respondent‟s
Supplementary submissions at [2.2].
70 Goldsbro v Walker [1993] 1 NZLR 394 (CA) at 404, per Richardson J.
[165] Both parties appear to accept, as the appellant put it, that the position is flexible because the Act “imposes a stricter standard of behaviour but allows the Court to soften the consequences for a wrongdoer.”71
[166] The parties also agree that the Court should not lightly award less than full damages.72
[167] I have also considered the alternative argument raised by the appellant, namely that it is relevant that the purchasers have been unable to enforce their judgment against Mr Boyd, the certifier, the builder, the architect, plasterer or roofer.
[168] There is some disagreement between the parties of the relevance or otherwise of the solvency of other potential contributors. For my part, while it is helpful to draw guidance from the various authorities, ultimately the discretion has to be exercised within the context of the particular proceedings and to give effect to the policy of the Act “without at the same time being Draconian or doing injustice”.73
[169] The appellants maintain further that they did not know and could not have the means of knowing who else might have been involved in constructing the property.
[170] In response the first respondent notes that there is no evidence that the appellants attempted to join any indemnifier of the certifier or the architect.
Discussion
[171] I am not attracted to the “last man standing” apportionment of liability approach under the FTA. Context is everything74 or, as the Supreme Court in Red Eagle Corporation Ltd v Richard Ellis stated:75
[31] The exercise of the power to make an order for payment under s 43 is, in the end, as Richardson J also said [in] Goldsboro, a matter of doing
71 Foseco NZ Ltd v Cumberworld Contracting Ltd (1997) 6 NZBLC 102,033 (CA) at 102,037;
Goldsbro v Walker (supra) at 399, per Cooke P.
72 Goldsbro (supra) at 399, per Cooke P.
73 Goldsbro at 399, per Cooke P.
74 McGuire v Hastings District Council [2002] 2 NZLR 577 (PC), at [9].
75 [2010] NZSC 20; [2010] 2 NZLR 492.
justice to the parties in the circumstances of the particular case and in terms of the policy of the Act.
[172] I am, of course, also bound by the balance of the decision of the Supreme Court in Red Eagle. I acknowledge in that case that the Supreme Court considered that “it was not unreasonable for the Judge to disregard the part played by Ms Black who became bankrupt, when apportioning the blame and to determine that each of the two men should bear 50 per cent of the loss of the capital of the loan, and to order also that the sum of $125,000 awarded to Red Eagle should bear interest at the
Judicature Act rate.”76
[173] However, I take comfort from the Court‟s direction:
[26] It is not desirable to attempt to formulate a methodology to be applied prescriptively by a court whenever the application of these provisions is in issue, for the circumstances are too variable. The approach to be taken in a particular case will depend on the type of situation under scrutiny; for example, whether there is a claimant alleging an injurious as consequence already suffered, whether the claimant instead fears future loss for itself or others, or whether the claim is brought by the Commerce Commission or another party which is acting in the interests of those who may be affected by the defendant‟s conduct.
[27] The following approach commends itself in a relatively simple case like the present when there is no doubt about what was said or about its meaning and all of the loss arose from the same event, namely the advancing of the money. The loss did not have different components.
[174] The Court also observed:77
[29] ... Put another way was the defendant‟s breach the effective cause or an effective cause? Richardson J in Goldsbro spoke of the need for, or, as he put it, the sufficiency of, a “clear nexus” between the conduct and the loss or damage. The impugned conduct, in breach of s 9, does not have to be the sole cause, but it must be an effective cause, not merely something which was, in the end, immaterial to the suffering of the loss or damage. The claimant may, for instance, have been materially influenced exclusively by some other matter, such as advice from a third party.”
[175] While that comment is not directly apposite (in the sense that it is dealing purely with the issue of causation), I consider that it illustrates that the Act is to be
76 At [39].
77 Goldsbro v Walker [1993] 1 NZLR 394 (CA) at 401.
applied in the manner which properly takes into account the full context, including the role played by various parties that may have loss suffered by the purchasers.
[176] I therefore prefer an approach, in this case, that takes into account the full context, including:
(a) the benefit obtained by Mr Bolderson from the misleading statements; (b) the role played by Mr Bolderson;
(c) the nexus between the misleading statements and the loss; and
(d) his direct relationship with the purchasers.
[177] I consider that this will best achieve justice between the parties, including the purchasers.
Benefit
[178] In my view the developer/owner/vendor of the property has plainly obtained the greatest benefit from the purchasers‟ loss and, accordingly, should be responsible for the largest portion of that loss. By contrast Mr Bolderson received just $200 for his services. It would be disproportionate to load the full liability on Mr Bolderson.
Role
[179] Secondly, in terms of Mr Bolderson‟s role, unfortunately (both for the purchasers and Mr Bolderson) but not unusually in this context, there are several different players who were at fault, including Mr Bolderson, with the ultimate consequence that the purchasers suffered a significant loss. While a more robust report from Mr Bolderson may have averted that loss, I do not consider it realistic to say that he was the primary cause of the loss. I am also conscious of the implications of loading the entire loss on pre-purchase inspectors who, in reality, are at the end of the chain of accountability. Architects, builders, council inspectors, and certifiers in addition to pre-purchase inspectors will need to be cognisant of the reach of s 9 and that responsibility for any breach will, where applicable, fall proportionately on them.
[180] In addition there are several mitigating factors in Mr Bolderson‟s favour even
if they is no defence to the breach of section 9:
(1) He was not directly at fault for poor workmanship – that sits with
Mr Boyd.
(2)At the time the compliance certificates were only recently issued with the (erroneous) implication that the house was in reasonable condition;
(3)There is no suggestion whatsoever that Mr Bolderson was mala-fides or intentionally sought to mislead;
(4)I accept the evidence that the industry as a whole at the time was not alive to the severity of the consequences of the observable defects and the evidence was that Mr Bolderson‟s report was in fact superior to the general run of reports at the time.
Nexus
[181] As to the nexus between the misleading statements and the loss, my assessment has been somewhat broad brush. I am satisfied that there is a sufficient link between the misleading contents of the report and the decision to purchase the house.
[182] I was initially minded to invite the Tribunal to assess the nexus between the subject matter of the misleading statements and the water damage to the house. But, on reflection, even if the misleading statements are not materially linked to the water damage, they are still misleading and a material reason for the acquisition. In short, an accurate report on the quality of the house may have avoided the loss. Liability under the FTA should follow.
Relationship
[183] Balanced against all of this, the purchasers in this case plainly relied upon the building inspection and were misled by it with the consequence that they purchased the home. Mr Bolderson was the closest to them in the chain of accountability. Had Mr Bolderson taken heed of the Good Stucco Practice Guide 1996, more cautious
recommendations would have been provided. This triggers the underlying policy of the Act to prohibit conduct which is misleading. Accordingly, any award I make must fully ventilate that policy as a deterrent for similarly misleading conduct.
[184] In all the circumstances, I consider that Mr Bolderson should be liable for
25% of the loss suffered under the FTA.
[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.78 I add another 5 per cent to take into account the proximity between Mr Bolderson and the pre-purchasers.
Liability for negligent misstatement
[186] I have stopped short of finding liability for negligent misstatement. I have found that Mr Bolderson was negligent in the sense he failed to keep abreast of the Good Stucco Practice Guide 1996, with the result that he produced an erroneous report. A prima facie case has been established by the appellants. But I am not in a position to resolve with surety the nexus between the subject matter of the erroneous report and the damage has been established. The Tribunal member will need to make that evaluation.
[187] The Tribunal should:
(a) inquire into whether the observable and observed defects and any associated non-compliance with the Good Stucco Practice Guide 1996, incorrectly reported or missed by Mr Bolderson, were a material cause of the damage to the appellants‟ home, and
(b) in assessing the quantum of liability, inquire into whether the
recommendations in Mr Bolderson‟s report, if implemented, would
have mitigated the loss, and to what extent (if any).
78 Referred to at 3.11 of the respondent‟s supplementary submissions, Body Corporate 189855
& Ors v North Shore City Council & Ors HC Auckland CIV-2005-404-5561, 25 July 2008
At [301] and Body Corporate 188529 v North Shore City Council [2008] 3 NZLR 479 at [586].
[188] While the appellants did not seek to address me on liability under negligent misstatement, I apprehend that they would maintain the “but for” approach they adopted for the FTA claim, that is but for the report, the purchasers would not have purchased the house. It seems to me that this can only be right, in the context of negligent misstatement, if the errors in the report relate to matters that were a
material cause of damage.79 A negligent report on matters not materially related to
the cause of damage is not a material breach of the duty to take care.
Preliminary Directions
[189] In light of my findings, I direct as follows:
(a) The first respondent is liable to the appellants for breach of s 9 of the
FTA for 25 per cent of the damages award;
(b)that this matter be referred back to the Tribunal to inquire into the matters set out at [187] (a) and (b) of this judgment.
[190] Given that there was little consideration of the damages sum before me, I invite counsel to file memoranda as to the final sum of damages under (a) plus interest within seven working days of the date of delivery of this judgment. I would further hope that counsel can arrive at an agreement on this point.
[191] For clarity, the referral back should not be used as an opportunity to revisit my findings in relation to the FTA claim. The Tribunal is specifically tasked with completing the assessment for the purposes of assessing liability for negligent misstatement. I appreciate that the distinction between loss caused by the acquisition per se and the water damage may be a fine one. But the net cast by the FTA is both a larger and finer mesh than the net cast by the common law on negligent misstatement. The FTA „simply‟ requires misleading conduct and reliance, with the loss arising on the purchase. Negligent misstatement drives from proximity and a duty to take care. As I have said, a negligent report on matters not materially related
to the cause of damage is not a material breach of the duty of care.
79 Consider Morton v Douglas Homes Ltd [1984] 2 NZLR 548, at 582.
Costs
[192] The appellants have been largely successful and should be entitled to costs on a 2B basis, together with normal disbursements. However, if counsel cannot agree,
submissions on costs may be lodged within 14 days with seven days for reply.
Whata J
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