Reid v Taylor

[2023] NZHC 1231

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2022-409-550

[2023] NZHC 1231

BETWEEN

TIMOTHY JAMES REID, GILLIAN RUTH REID and DAVID MILLAR LANG as

trustees of the Lentune Trust Plaintiffs

AND

INGRID ROBYN TAYLOR and ANDREW

DENIS SUNDERLAND as trustees of the Sunderland No 2 Trust

Defendants

Hearing:	20 April 2023
Appearances:	G D Jones and S J McLean for Plaintiffs N J McKessar for Defendants
Judgment:	24 May 2023

JUDGMENT OF ASSOCIATE JUDGE PAULSEN

This judgment was delivered by me on 24 May 2023 at 5.00 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

REID v TAYLOR [2023] NZHC 1231 [24 May 2023]

[1]    The plaintiffs purchased a residential property from the defendants. They consider the defendants breached a warranty in the agreement for sale and purchase because the sewer and stormwater services to the property were not in reasonable working order as at the date of settlement.1 They have completed repair work and seek to recover the costs of doing so from the defendants. They apply for summary judgment as to liability for only some of the alleged defects and costs.

[2]    The defendants oppose summary judgment and argue the vendor warranty does not apply, and that, in any event, the sewer and stormwater services were in reasonable working order on the date of settlement.

[3]The issues arising are:

(a)Does the vendor warranty apply to the sewer and stormwater services?

(b)Were the sewer and stormwater services in reasonable working order as at the date of settlement?

Factual background

[4]The plaintiffs are the trustees of the Lentune Trust.

[5]    The defendants are the trustees of the Sunderland No 2 Trust. They were the owners of the property at 34A Jacksons Road from 2014 until it was purchased by the plaintiffs in March 2022. The defendant, Andrew Sunderland, and his partner lived in the property during that period.

[6]    The property was damaged in the 2010/2011 Canterbury earthquakes and was purchased by the defendants on an “as is” basis. I understand that at least some of the defects that the plaintiffs have identified in the sewer and stormwater services are considered by them to be unrepaired earthquake damage.

1      Auckland District Law Society and Real Estate Institute of New Zealand Agreement for Sale and Purchase of Real Estate (11th ed, 2022), cl 7.3(1).

[7]    The defendants did some earthquake repairs on the property. The garage was demolished, and the garage and laundry area was rebuilt. Mr Sunderland says the work involved putting in new drainage and pipes in the rebuilt garage and laundry area which connected a sump to a soak pit underneath the garage foundation.

[8]    From late January 2022, the defendants marketed the property for sale through Harcourts Gold Real Estate. In the marketing materials, the property was described as situated “in the desirable neighbourhood of Fendalton”, as well as having mains sewerage, a “highly functional kitchen”, and “promising an effortless lifestyle”.

[9]    One of the plaintiffs, Timothy Reid, who lives overseas, viewed the marketing materials and was interested in the property. The property was put up for auction on 24 February 2022 but did not sell. Through further negotiation, the plaintiffs agreed to purchase the property.

[10]   The agreement for sale and purchase, signed on 1 March 2022, is the 11th edition of the standard form agreement produced by the Auckland District Law Society and the Real Estate Institute of New Zealand (REINZ/ADLS agreement). It contains several vendor warranties, and most relevantly cl 7.3(1), which reads as follows:

7.3   The vendor warrants and undertakes that at settlement:

(1)The chattels included in the sale listed in Schedule 2 and all plant, equipment, systems or devices which provide any services or amenities to the property, including, without limitation, security, heating, cooling, or air-conditioning, are delivered to the purchaser in reasonable working order, but in all other respects in their state of repair as at the date of this agreement (fair wear and tear excepted) but failure to do so shall only create a right of compensation.

[11]   Clause 21 of the agreement, a further term of sale, is headed “Remediated Property Clause”. It reads:

The purchaser acknowledges that they have been advised, prior to the signing this Agreement that the property is a “remediated Property” and was purchased by the vendor as an uninsured property on an “as where is” basis with no assignment of any EQC or private insurance claims and there are no claims outstanding. Therefore the purchaser agrees that there are no residual entitlements to be assigned at settlement.

[12]   The plaintiffs settled the purchase of the property on 18 March 2022 and took possession. Mr Reid’s son, Benjamin Reid, moved in as a tenant. Benjamin’s evidence is that three or four days after moving into the property there was some light rain and he was surprised at some puddling in front of the garage where a stormwater sump overflowed. In July 2022, there was heavier rain and, he says, more significant flooding around the house. He also says that after living in the house for “two weeks or so”, the toilets would not flush properly, made a strange gurgling sound, and he noticed a foul smell outside the eastern side of the house where the toilets were located. He alerted his father to these problems who arranged for them to be investigated and fixed.

[13]   Mr Reid  arranged  for  a  builder,  Mark  Hamlyn,  to  view  the  property.  Mr Hamlyn’s evidence is that he first  saw the  sewer  and stormwater systems on   22 March 2022, but that is a matter to which I will return.

[14]   On 24 May 2022, Mr Reid notified the defendants’ real estate agent, Harrison Joseph, that there were issues with the property. Specifically, he complained that an oven did not work and (more relevantly for present purposes) that:

The storm water soak pit in the lawn had collapsed and was ineffective. We have had to dig out and rebuild the soak pit. This defect, or at [least] recognition of the stormwater system shortcomings must have been known to the former owner given that the drive area flooded with the slightest rain shower. Clearly there was a problem with the storm water system that was not brought to our attention.

The sewerage system blocked. Again, I cannot believe that problems with the sewerage system were not known to the former owner as our plumbers advise that the blockage they located had been in place for some time. Further an inspection of the sewerage pipe has identified that it is broken in at least three places and we are having to dig up the drive to replace the entire sewerage pipe.

[15]   Mr Joseph responded by email on 25 May 2022 asking Mr Reid to advise “what you would like me to do and what outcome you hope for”. Mr Reid responded that day stating:

I don’t expect to receive any outcome. I just want Harcourts Gold to be aware of the condition the former owner sold the house in.

[16]   The plaintiffs’ builder, Mr Hamlyn, engaged a firm of plumbers and drainlayers, Gillon & Maher Plumbing Ltd, to use video cameras to inspect the sewer and stormwater drains. It appears this work was undertaken in June 2022. No one from that company has provided an affidavit in support of the summary judgment application. It is common ground that the video footage shows the sewer pipes were blocked in two places, and that the stormwater pipes contained a significant amount of silt and other debris. The plaintiffs consider there was considerably more damage but have not relied upon that in support of summary judgment.

[17]   On 27 June 2022, Mr Reid emailed one of the defendants, Ingrid Taylor, advising her of the issues with the property and proposing a meeting to discuss payment of compensation for work that had already been done to repair it. Ms Taylor advised that she was an independent trustee and would seek instructions and revert back to Mr Reid. The matter was referred to the defendants’ solicitors, White, Fox & Jones. On 28 June 2022, White, Fox & Jones emailed Mr Reid advising that the defendants had not experienced any problems with the property, and that as the drains were functioning as normal at the date of settlement, there had been no breach of warranty, and they were unwilling to meet to discuss the claims for compensation. White Fox & Jones said that if there was any evidence that these items were not in reasonable working order on the date of settlement they would consider it.

[18]   The plaintiffs went ahead and completed repair work. On 13 September 2022, Mr Reid wrote to Ms Taylor making demand for payment by 30 September 2022 of

$94,486.27 for the costs of the work. He received no response to that demand and this proceeding was commenced.

Preliminary issues

[19]   Both parties objected to some of the affidavit evidence and asked me to make rulings on those matters.

[20]   The plaintiffs object to Mr Sunderland’s affidavit where he states he had no intention of providing a warranty for the stormwater and sewer services for the

property. Mr Sunderland’s undisclosed intentions are irrelevant to the assessment of the meaning of cl 7.3(1) of the agreement and I do not take them into account.2

[21]   Mr Sunderland refers to and exhibits data summaries from the National Institute of Water and Atmospheric Research Ltd (NIWA) of rainfall figures for February and July 2022. The plaintiffs argue that evidence is inadmissible hearsay. The defendants argue the NIWA records should be admitted as business records under s 19 of the Evidence Act 2006 or under s 130 of the Evidence Act. In my view, the defendants have not provided a proper foundation for the admission of the NIWA records on either basis, and I have not had regard to them.

[22]   In Mr Joseph’s affidavit, he refers to a conversation with a contractor concerning whether it would have been known the sewer pipes were blocked and whether it was necessary to replace the sewer and stormwater pipes. The contractor is not identified and the grounds for admitting this evidence under s 18 of the Evidence Act as a hearsay statement are not established. The evidence has no probative value. I disregard it.

[23]   The defendants object to Mr Hamlyn’s evidence where he says the sewer and stormwater systems on the property were not in a state of reasonable working order when he first saw them on 22 March 2022. The objection is that Mr Hamlyn has not qualified himself as an expert to proffer that opinion and his evidence goes to the ultimate issue the Court must decide.

[24]   I accept Mr Jones’s submission that s 25(2)(a) of the Evidence Act deals with the objection that the evidence goes to the ultimate issue. However, I do not accept Mr Jones’s further submission that Mr Hamlyn’s opinion evidence is otherwise admissible because it was necessary for Mr Hamlyn to communicate what he saw or perceived.3   Mr Hamlyn could describe what he saw without expressing his opinion. I consider the evidence Mr Hamlyn gives could only be given by an expert.4 Section 26 of the Evidence Act requires experts giving evidence in civil proceedings to comply

2      Bathurst Resources Ltd v L&M Coal Holdings Ltd [2021] NZSC 85, [2021] 1 NZLR 696 at [77].

3      Evidence Act 2006, s 24.

4      Section 25(1).

with Court rules relating to the conduct of experts. Rule 9.43 of the High Court Rules 2016 requires experts to comply with the code of conduct for expert witnesses in sch 4, under which the expert must agree to comply with the code. Mr Hamlyn does not identify himself as an expert in plumbing or drainage matters and makes no reference to the code or his compliance with its requirements.

[25]   Even if that was not the case, I can take little from Mr Hamlyn’s evidence that he first saw the sewer and stormwater systems on 22 March 2022. The circumstances under which Mr Hamlyn came to do so just days after settlement are unexplained and there is no obvious reason he would have done so. Importantly also, he does not say what inspections he undertook on that day and provides no factual basis supporting the assertion that the sewer and stormwater systems were not in reasonable working order.

Summary judgment principles

[26]   There was no dispute between counsel as to the relevant principles and I was referred to the summary of Associate Judge Osborne in Mount Grey Downs Ltd v Pinot Properties Ltd as follows:5

(a)Commonsense, flexibility and a sense of justice are required.

(b)The onus is on the plaintiff seeking summary judgment to show that there is no arguable defence. The Court must be left without any real doubt or uncertainty on the matter.

(c)The Court will not hesitate to decide questions of law where appropriate.

(d)The Court will not attempt to resolve genuine conflicts of evidence or to assess the credibility of statements in affidavits.

(e)In determining whether there is a genuine and relevant conflict of facts, the Court is entitled to examine and reject spurious defences or plainly contrived factual conflicts. It is not required to accept uncritically every statement put before it, however equivocal, imprecise, inconsistent with undisputed contemporary documents or other statements, or inherently improbable.

(f)In assessing a defence the Court will look for appropriate particulars and a reasonable level of detailed substantiation – the defendant is

5      Mount Grey Downs Ltd v Pinot Properties Ltd [2018] NZHC 3094 at [12] (footnotes omitted).

under an obligation to lay a proper foundation for the defence in the affidavits filed in support of the Notice of Opposition.

(g)In weighing these matters, the Court will take a robust approach and enter judgment even where there may be differences on certain factual matters if the lack of a tenable defence is plain on the material before the Court.

(h)The need for judicial caution in summary judgment applications has to be balanced with the appropriateness of a robust and realistic judicial attitude when that is called for by the particular facts of the case. Where a last-minute, unsubstantiated defence is raised and an adjournment would be required, a robust approach may be required for the protection of the integrity of the summary judgment process.

(i)Once the Court is satisfied that there is no defence, the Court retains a discretion to refuse summary judgment but does so in the context of the general purpose of the High Court Rules which provide for the just, speedy and inexpensive determination of proceedings.

The statement of claim

[27]   The statement of claim pleads the stove, sewer and stormwater systems were not in reasonable working order in several respects. These are:

(a)The stove blew the switch board fuse when turned on.

(b)The earthware/clay sewer pipe at the rear of the house was cracked and broken and was leaking raw sewerage into the ground.

(c)Sewer pipes slumped and/or misaligned, holding water and with insufficient fall to avoid blockages.

(d)Sewer pipe down driveway collapsed and blocked.

(e)Stormwater soak pit was full of silt and/or liquefaction and not fit for purpose.

(f)Stormwater sump/chamber not functioning due to sump pump missing.

(g)Five stormwater pipes/risers discharging into pipework which was not connected to any stormwater system or soak pit.

[28]   However, for the purpose of the summary judgment application the matters relied upon are those in [27](d), (f) and (g).

Issue 1 Does the vendor warranty apply to the sewer and stormwater services?

[29]   This is an issue of contractual interpretation. I accept the Court can determine questions of law on a summary judgment application including issues of contractual interpretation.6 However, as explained in Zurich Australian Insurance Ltd v Cognition Education Ltd the Court must be satisfied that the facts are sufficiently ascertained, the matter is adequately argued and the Court can be confident that the point at issue turns on pure questions of law or interpretation.7 I am not satisfied that I am in a position to determine the interpretation issue on this summary judgment application. I consider the meaning of cl 7.3(1) is unclear and I do not consider the facts which have a bearing on the issue are sufficiently ascertained or that all relevant legal arguments have been put before me.

[30]   The affidavit evidence is very brief. While the claim is primarily advanced on the basis that the sewer and stormwater services are systems, there is no clear evidence as to what the systems consist of. There is no complete description of them in any of the affidavits and counsel and I struggled to make sense of plans and drawings that have been produced, the accuracy of which cannot be certain. There is also little evidence concerning the negotiations that resulted in the agreement, which may be relevant extrinsic material, particularly in relation to cl 21 and what the plaintiffs were acknowledging in relation to earthquake remediation work that had been completed.

[31]   As far as legal argument is concerned, there was little consideration of the relation of cl 7.3(1) to other clauses or to the agreement as a whole. There was also no evidence or submissions (apart from reference to dictionary definitions) of what distinguishes plant, equipment, systems  and  devices  as  those  terms  are  used  in cl 7.3(1).

[32]   Further, it is important, in my view, that this case concerns a standard form agreement that is used routinely by real estate firms throughout the country and is subject to regular revision. While the particular factual background that led to the

6      Zurich Australian Insurance Ltd v Cognition Education Ltd [2014] NZSC 188, [2015] 1 NZLR 383 at [37].

7      At [37] citing International Ore & Fertiliser Corp v East Coast Fertiliser Co Ltd [1987] 1 NZLR 9 (CA) at 16.

signing of the agreement is relevant and important, so too must be the background known to participants in the real estate industry. In circumstances where the meaning of cl 7.3(1) is, in my view, not clear, I consider the development of the corresponding clause in earlier editions of the agreement may well provide important insight into what cl 7.3(1) is to be taken to mean.8 No submissions were presented about that.

[33]   I raised with counsel the possibility of seeking further legal submissions, but I have not done so. This is because further legal submissions will not resolve deficiencies in the evidence. I am satisfied that regardless of what conclusion is reached on the interpretation issue, the plaintiffs’ summary judgment application cannot succeed because there is an arguable case the sewer and stormwater services were in reasonable working order at the date of settlement.

[34]I will now explain why I consider the meaning of cl 7.3(1) is unclear.

[35]   The proper approach to contractual interpretation is an objective one; to ascertain the meaning the document would convey to a reasonable person having all the background knowledge reasonably available to the parties at the time of the contract.9 Contractual language must be interpreted within its overall context broadly viewed. If the language used, construed in the context of the whole contract, has an ordinary and natural meaning, it will be a powerful, but not conclusive, indicator of what the parties meant.10

[36]   Extrinsic evidence is prima facie admissible if it tends to prove or disprove anything of consequence to determining the meaning the contractual document would convey to a reasonable person having all the background knowledge reasonably available to the parties in the situation they were in at the time of the contract.11

8      HG Beale (ed) Chitty on Contracts (34th ed, Sweet and Maxwell, London, 2021) vol 1 at [15- 058].

9      Firm PI 1 Ltd v Zurich Australian Insurance Ltd [2014] NZSC 147, [2015] 1 NZLR 432 at [60] citing Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 (HL) at 912 per Lord Hoffmann.

10 At [61] and [63].

11 Bathurst Resources Ltd v L&M Coal Holdings Ltd, above n 2, at [40] and [62].

[37]   Mr Jones submits the words of cl 7.3(1) plainly cover the sewer and stormwater pipes and components which, he says, are equipment, systems or devices that provide services or amenities to the property.

[38]   He also submits the parties must be taken to have intended to comply with the law and not enter into an illegal contract. He referred me to statutory and regulatory requirements relating to the sale and occupation of dwellinghouses, which he says are relevant to an interpretation of cl 7.3(1) as background knowledge available to the parties when they entered into the agreement.12

[39] The most important of these is s 39(1) of the Health Act 1956 which provides, amongst other things, that it is not lawful for any person to sell, let, sublet, or permit to be occupied as a dwellinghouse any building unless sufficient provision is made in accordance with the building code and the Building Act 2004 for suitable appliances for the disposal of refuse water in a sanitary manner and sufficient sanitary conveniences for the inmates of the dwelling. Section 39(2) makes it an offence punishable by a fine to contravene the section.

[40]   Mr Jones also submits the agreement needs to be interpreted in terms of the factual context broadly viewed which includes that the contract was for the sale of a very valuable property in a desirable neighbourhood, which was said to have mains sewerage, a highly desirable kitchen and would deliver an effortless lifestyle. He submits a property without working sewer and stormwater services would not deliver these attributes.

[41]   For the defendant, Mr McKessar notes that sewer and stormwater services are not referred to in sch 2 of the agreement. He submits they are not “plant, equipment, systems or devices” for the purposes of cl 7.3(1) and therefore not covered by the warranty.

[42]   Mr McKessar submits the Court can be assisted by the application of ejusdem generis principle. The argument is that the words “plant, equipment, systems or

12     Health Act 1956, s 39(1); Housing Improvement Regulations 1947, reg 14; and Building Regulations 1992, sch 1, cls E1.3.3, G13.2(a) and G13.3.2.

devices” in cl 7.3(1) take their meaning from the subsequent words “security, heating, cooling, or air-conditioning”. On this basis, he submits cl 7.3(1) should be taken to apply to items that have the following features:

(a)the ability to be switched on and off;

(b)require a source of power to function; and

(c)are not core features of a house, but are additional features that would not be expected in every house.

[43]   He also submits the plaintiffs’ argument that sewer and stormwater services are subject to cl 7.3(1) would unreasonably extend the scope of the warranty beyond what could have been intended. There appears to be two aspects to this argument. First, that there will be doubt as to where a “system” begins and ends. To demonstrate his point, Mr McKessar argues that a “stormwater system” could be said to start at the roof of a house so that if the roof leaked at settlement, on the plaintiffs’ interpretation, the warranty would apply to the roof. Second, the warranty would extend to any combination of building elements commonly referred to as a “system”, such as cladding systems and foundation systems.

[44]   Mr McKessar referred me to Hosking v Bell, which was an appeal from the District Court concerning a claim for breach of a vendor warranty.13 The warranty read: 14

The vendor warrants that the swimming pool filter lights and motor and the oil heating system and the ducting relating thereto and the dishwasher and wastemaster included in the sale will be in a proper and efficient working order on date of settlement.

[45]   Wylie J agreed with the District Court Judge’s view that “a swimming pool does not work, it is a passive object filled with water, whereas each of the other items [filter, lights and motor] is of a kind that do work”.15 Applied to this case,

13     Hosking v Bell HC Auckland M1757/84, 4 February 1987.

14     At 2.

15     At 8.

Mr McKessar submits sewer and stormwater facilities are passive objects that do not work and therefore not subject to cl 7.3(1).

[46]   Mr McKessar also submits the advertising material relied upon by the plaintiffs is not relevant background because it is illogical to argue that the location of the house in a desirable neighbourhood assists in the interpretation of standard warranties. He also dismisses the statutory and regulatory background relied upon by the plaintiffs as not useful in the interpretation of the warranty.

My analysis

[47]   Under the common law the onus lies on the purchaser of land to ensure the property bought meets their requirements. There is no duty upon the vendor to disclose matters of quality or use of the land. The position is described in Sale of Land as follows:16

Unless the property is being bought from the builder while the building is in the course of construction, there is no implied warranty that the property has any particular quality or fitness for any particular purpose. In the absence of any actionable misrepresentation or express or implied warranty, the vendor incurs no contractual liability for failure to disclose defects of quality, whether patent or latent, whether rendering the property dangerous or unfit for occupation, or even if the vendor has created the defect or is aware of its existence, though the vendor may not deliberately conceal a defect.

(footnotes omitted)

[48]   However, the position at common law is subject to express warranties such as cl 7.3(1). Comparable warranties in prior editions of the REINZ/ADLS agreement have been in materially different terms.17 Some of these changes are traced through successive editions of the Sale of Land text.

[49]   Turning to cl 7.3(1), it applies to both chattels listed in sch 2 to the agreement, and other items, some of which would be regarded as fixtures. I say this as items providing security, heating, cooling and air conditioning (which are referred to in the

16 DW McMorland Sale of Land (4th ed, Cathcart Trust, 2022, Auckland) at 299.

17 I note that some prior editions of the standard form agreement were issued by the Real Estate Institute of New Zealand and the New Zealand Law Society but to avoid confusion I will continue to refer to the REINZ/ADLS form of agreements.

clause) are often so permanently attached to the land or buildings as to be considered fixtures. However, the clause is plainly not intended to apply to all fixtures and the word “fixtures” does not appear in it.

[50]   The items to which the clause applies, other than those listed in sch 2, must be either plant, equipment, systems or devices and they must provide some service or amenity to property. These terms are not defined in the agreement. While Mr Jones submits that sewer and stormwater services could be considered equipment, systems or devices, I consider it would be strange use of language to regard them as equipment or devices, which more typically refer, in my view, to moveable items.

[51]   However, I accept that it is arguable that sewer and stormwater services (which include components such as sumps and pumps) can together be considered a system, in the sense that they are an interconnected network designed to achieve a particular purpose. It is also the case, in my view, that they provide obvious amenity to a property by way of sewer and stormwater drainage.

[52]   Mr McKessar’s primary argument appears to be that for the purpose of cl 7.3(1) a distinction must be drawn between what I would describe as an active system, which can be turned on and off, relies upon some external power source to function and does work, and a passive system, which does not have such features. In my view, at least three factors provide some support for this submission.

[53]   First, there is merit in Mr McKessar’s submission that if sewer or stormwater services are considered to be systems for the purpose of cl 7.3(1), then the warranty would be unreasonably wide in scope. It might be considered that interpreted in the way the plaintiffs assert, cl 7.3(1) would effectively be a general warranty of quality and expose vendors to unreasonable and unexpected liability.

[54]   Against this, I note that earlier editions of the REINZ/ADLS agreement have included a vendor warranty as to the quality of fixtures. M & L Moore Ltd v Beadle concerned, amongst other things, a claim for alleged breaches of warranties relating

to chattels and fixtures in what appears to have been the fifth edition of the REINZ form.18 At that time, the relevant clause read:19

6.1      The vendor warrants and undertakes that:

…

(2)At the giving and taking of possession:

(a) Any chattels and fixtures included in the sale are the unencumbered property of the vendor and, having regard to their age and condition at the date of this agreement, shall be in reasonable operational order when possession is given and taken.

[55]   The plaintiff purchasers alleged the vendors breached this warranty in respect to both chattels and fixtures including a driveway and a concrete and slat fence. Potter J noted the warranty ameliorated the harshness of the common law position and said the warranty had to be read in conjunction with another clause in the agreement20 giving the purchaser the right to inspect the chattels and fixtures included in the sale prior to settlement to ascertain their state of repair.21 She also noted that, while not relevant to the matter before her, a later edition of the standard from agreement had seen a return to the caveat emptor position by providing that the vendor warranty was limited to delivering the chattels “in their present state of repair (fair wear and tear excepted)…” reflecting a view that the warranty before her unreasonably exposed vendors to liability.22

[56]   The second matter concerns the fact that the vendor’s obligation under cl 7.3(1) is to deliver items (whether they be chattels or fixtures) in “reasonable working order”. Mr Jones relies upon this to support a submission that cl 7.3(1) is not uncertain or excessive in scope because it placed limits upon the vendor’s obligation. He too refers to the view expressed by Wylie J in Hosking v Bell, and submitted the warranty may indeed not apply to items that are passive, such as cladding systems. However, here, he submits the stormwater system was not passive because it was intended to do work,

18     M & L Moore Ltd v Beadle HC Auckland CP482/96, 4 December 1997.

19     At 10.

20     At 11-12.

21     That right exists under cl 3.2(1) of the agreement between the plaintiffs and the defendants.

22 At [15].

including by the use of a submersible pump, to discharge stormwater from a sump/chamber and through pipes down the driveway to the street.

[57]   The key point for present purposes is that I understood Mr Jones to accept that as far as cl 7.3(1) is concerned with “plant, equipment, systems or devices”, it may only apply to such items as could be considered to do work. However, I note that raises an immediate difficulty for the plaintiffs in that the evidence would suggest the stormwater services in question had operated without a pump since 2014 and could be considered a passive system when the parties entered into their agreement.

[58]   The third matter concerns the words “security, heating, cooling, or air- conditioning” in cl 7.3(1). Mr McKessar’s submission was that the ejusdem generis principle applies. I accept, strictly, that is not the case as the principle may be applied in circumstances where specific words precede general words and do not follow them.23 However, that does not mean the words have no role to play in the interpretation exercise. Those words describe, “without limitation”, services or amenities to the property and would involve the use of plant, equipment, devices or systems that have the attributes Mr McKessar identifies.

[59]   I am prepared to accept that the statutory and regulatory framework Mr Jones identified is relevant background, but I am not satisfied it takes matters far. The issue is not whether there were no suitable appliances for the disposal of refuse water or sufficient sanitary conveniences available, but whether they were in working order at the time of settlement.

[60]   I do, however, accept Mr McKessar’s submission that the aspects of the marketing material the plaintiffs rely upon do not greatly assist in the interpretation exercise. That material is concerned primarily with the location of the property, and it is drawing a long bow to suggest that this might bear on whether the vendor warranty extends to the sewer and stormwater drains. I also consider that such material may have a more limited role to play when a standard form agreement is used.

23     Restaurant Brands Ltd v Forsgren NZ Ltd [2019] NZHC 2375 at [55] citing Ambatielos v Anton Jurgens’ Margarine Works [1922] 2 KB 185 (CA) at 194.

[61]   I am not making any final decision as to whether cl 7.3(1) applies to the sewer and stormwater services. It is sufficient that I consider there is an arguable case that it does not, and I would require further evidence and submissions to decide that issue. While that is enough to decide this application, I turn now to consider the second issue as to whether the stormwater and sewer services were in reasonable working order at settlement.

Issue 2 were the sewer and stormwater services in reasonable working order?

[62]I will deal with each of the matters relied upon by the plaintiffs.

Sewer pipe down driveway collapsed and blocked

The evidence

[63]   Benjamin Reid says that after living in the house for “two weeks or so” the toilets stopped flushing properly and made a strange gurgling sound and he noticed a foul smell outside the eastern side of the house and alerted his father of the problem.

[64]   Mr Reid says that shortly after his tenants moved in he was advised of these issues. However, the first time that the issue was raised with the real estate agent,  Mr Joseph, was by email on 24 May 2022, which was over two months after settlement.

[65]   Mr Reid then says Mr Hamlyn and Gillion & Maher Plumbing were engaged and they provided a drainage and inspection report.  That  report was prepared by  Mr Hamlyn and is dated 12 September 2022, almost six months after settlement. I have already referred to the fact that Mr Hamlyn has not qualified himself as an expert and his report is of limited assistance to me. Relevantly, however, he does not record that it was reported to him that the toilets were not working. Rather, he says that gulley traps appeared to be slow draining and were foul smelling.

[66]   For the defendants, Mr Sunderland says that throughout his ownership of the property he never noticed any smells or had any other issues with the toilets and there

was never any indication of any potential problem with the sewer or the condition of the sewer pipes.

[67]   Mr Joseph says that during the period he was marketing the property, he used toilets on several occasions and they flushed with no issues.

[68]   Deane Brewer, a drainlayer, gives evidence that he has inspected the video footage and is able to locate two blocked areas in the sewer pipes, but that it is impossible to tell when the blockage occurred. Another drainlayer, Damian Unverricht, gives similar evidence.

The submissions

[69]   The plaintiffs submit the Court can infer the sewer was not in reasonable working order at the date of settlement because there is no evidence to suggest the blockages identified in June 2022 occurred following settlement, nor evidence of any event following settlement that might have caused them. Mr Jones submits there is no obligation on the plaintiffs to prove a negative; that is, that there was not an event after settlement that might have caused the blockages.

[70]   The defendants submit there was no issue with the toilets or smells of sewage or blockages at any time prior to settlement and also for a period after settlement. They argue the only evidence of a blockage is from video footage taken three months after settlement, and it is impossible to tell when that blockage occurred. They say it is arguable that at settlement, and for a period after, the sewer was in reasonable working order as people were residing in the property and they must have been able to use the toilets.

[71]   Mr McKessar submits there is no requirement that the sewer and stormwater be free from any defects whatsoever and referred to M & L Moore Ltd v Beadle, where it was found a driveway had sustained some damage after an agreement for sale and

purchase was entered into, but nonetheless was still in “reasonable operational order”.24 There, Potter J said:25

Reasonable operational order does not imply that a fixture or chattel is free from any defect or that it has been constructed to an exemplary standard … It had been used throughout [a ten year period] and has fulfilled its purpose over those years.

My assessment

[72]   I accept the sewer pipes were blocked in two places in June 2022 when inspected by Gillon & Maher Plumbing. However, there is evidence that the toilets and sewer worked without issue prior to settlement and for a period of weeks after settlement. It is not clear for how long exactly after settlement the toilets operated satisfactorily. The evidence of Benjamin Reid is not exact about when a problem with the toilets first occurred, but it was not until late May 2022 that the issue was raised with the real estate agent. Further, there is insufficient evidence as to what has caused the blockage. I cannot discount the possibility, on the evidence before me, that the blockage was caused after settlement. Related to this, the defendants’ witnesses, Messrs Brewer and Unverricht, both say it is impossible to tell from the video footage when the blockage occurred.

[73]   For those reasons, the plaintiffs have failed to satisfy me the sewer was not in reasonable working order at settlement.

Five stormwater pipes/risers discharging into pipework that was not connected to any stormwater system or soak pit

The evidence

[74]   There was confusion about this aspect of the plaintiffs’ case. Mr Reid says one of the defects causing the stormwater system not to function effectively was that “[f]ive stormwater risers were not connected to any system”. This appears to be based on advice received from Mr Hamlyn.

24     M & L Moore Ltd v Beadle, above n 18, at 16.

25     At 17.

[75]   However, Mr Jones acknowledges that Mr Hamlyn’s position is not consistent. In his report of 12 September 2022, Mr Hamlyn says the risers were connected to stormwater pipes but the pipes went nowhere. In his second affidavit he says the risers were not connected to the underground stormwater pipes and simply discharged the water into or onto the ground.

[76]   Initially, Mr Jones appeared in his written submissions to be asserting that the risers were not connected to the stormwater pipes as follows:

Regarding the stormwater system, Mr Hamlyn’s evidence that five stormwater risers were not connected to the underground stormwater pipes and simply discharged the water into or onto the ground (they were “for show”) is not contested by Messrs Sunderland, Brewer or Unverricht.

[77]   However, in the course of his oral presentation he accepted that the written submission was not entirely correct because Mr Sunderland did deny that the risers were only for show. Mr Sunderland says he installed the risers, and, as far he was concerned, they worked as there was no flooding in the front of the house where they are situated.

[78]   In relation to the submission that Messrs Brewer and Unverricht had not contested Mr Hamlyn’s evidence, Mr Jones accepts that they never had an opportunity to inspect the risers or the stormwater pipes before repair work was undertaken and were in no position to contest the evidence.

The submissions

[79]   Despite the confusion about whether or not the risers were connected to the stormwater pipes, Mr Jones submits the plaintiffs have shown the defendants have no defence to this aspect of the claim. This is because, he submits, whether the risers were connected or not, the stormwater pipes were not effectively discharging stormwater.

[80]   The defendants’ position is there was no evidence the risers have caused or contributed to flooding on the property, as those risers are away from the driveway where it is said the flooding occurred. There is no evidence of any flooding in the part of the property where these risers were installed.

My assessment

[81]   It appears the risers are connected to the stormwater pipes and reference to them is something of a red herring. The real complaint is that certain stormwater pipes discharge directly into the ground. The evidence as to how the stormwater system did or should operate was unsatisfactory. Mr Jones’s submission assumes stormwater pipes should not discharge into the ground. He may be correct about that, but there is no evidence before me to support it, and as Mr McKessar submits, such flooding as has occurred on the property does not appear to be in the region of the five risers or the stormwater pipes into which they discharge.

[82]   For these reasons, the plaintiffs have failed to satisfy me they are entitled to judgment on this aspect of the claim.

Sump pump missing

The evidence

[83]   The last matter is  the  absence  of  a  sump  pump.  This  is  referred  to  in Mr Hamlyn’s 12 September 2022 report where he says:

On inspection it was noted that the storm water was designed to flow into a soak pit at the back of the house and any residual water that the soak pit couldn’t handle would run into another sump/chamber and be pumped to the street via a submersible pump through an existing pipe under the driveway.

[84]   Mr Sunderland says he was not aware there was meant to be a pump or that it was missing and the absence of a pump did not prevent rainwater from draining away. As far as there was flooding on the property in or around July 2022, Mr Sunderland notes this was a particularly heavy period for rainfall.

[85]   There is evidence from Mr Unverricht that the correct manner in which to determine if a soak pit is working is by continuously running water through the pipes into the soak pit and assessing the time for the water to drain and whether there is any backflow into the pipe from the overfilled soak pit.

The submissions

[86]   Mr Jones’s submission was that a stormwater system which requires a sump pump is not in reasonable working order if the pump is missing.

[87]   Mr McKessar submits that regardless of whether a sump pump was removed, the stormwater system was in reasonable working order demonstrated by the fact there were no issues with it in the entire period that the defendants owned the property. He also relies upon the evidence of Mr Unverricht to argue that the system has not been properly tested in the manner that it should have been.

My assessment

[88]   While I do not understand it to be disputed that there had been a sump pump that was removed at some time (albeit the defendants did not have an opportunity to view that before the plaintiffs completed repairs), that does not of itself establish the stormwater system was not in reasonable working order. It overlooks Mr Sunderland’s evidence that he was not aware the pump was removed and there had been no noticeable issues with the stormwater system while the defendants owned the property. Accepting that evidence at face value, it must follow that the pump was removed prior to the defendants owning the property and the system had operated satisfactorily without a sump pump from 2014 and for some period after settlement.

[89]   There is also no expert evidence before me as to the effect that the removal of the sump pump would have on the operation of the stormwater system or that the absence of the pump was the cause of flooding.

[90]Again, I am not satisfied the plaintiffs have established their claim on this basis.

Result

[91]The plaintiffs’ application for summary judgment is dismissed.

[92]   I do not see any reason to depart from the usual practice to reserve costs, but if the defendants disagree with that, memoranda may be filed of no more than five pages.

[93]   The Registrar is to set the case down for a case management telephone conference with memoranda to be filed addressing all sch 5 High Court Rules matters three working days before the conference.

O G Paulsen Associate Judge

Solicitors:

Saunders & Co, Christchurch White Fox & Jones, Christchurch