Roberts v Jules Consultancy Ltd
[2019] NZHC 555
•25 March 2019
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2017-485-130
[2019] NZHC 555
UNDER the Fair Trading Act 1986 BETWEEN
MICHAEL DOUGLAS ROBERTS
Plaintiff
AND
JULES CONSULTANCY LIMITED
First Defendant
JULES LELOIR
Second Defendant
Hearing: 18-19 and 21 February 2019 Counsel:
B M Easton and H E T Thomson for Plaintiff
Second Defendant in Person (with Mr Leloir assisting)
Judgment:
25 March 2019
JUDGMENT OF THOMAS J (LIABILITY)
[1] On 10 March 2014, the plaintiff, Michael Roberts, declared his agreement to purchase Unit 812 in the Sirocco Apartments in Wellington City (the Apartment) unconditional. Just prior to that confirmation, Mr Roberts’ lawyers spoke to the second defendant, Jules Leloir, who is a director of the first defendant, Jules Consultancy Limited (Jules Consultancy), which provides body corporate management and consultancy services to the Sirocco Apartments Body Corporate. There was a discussion involving the weathertightness of the Sirocco Apartments.
[2] Shortly after he purchased the Apartment, Mr Roberts became aware of significant weathertightness defects in the Sirocco Apartments. He claims Mrs Leloir
ROBERTS v JULES CONSULTANCY LIMITED [2019] NZHC 555 [25 March 2019]
and Jules Consultancy made false representations and engaged in misleading and deceptive conduct when responding to queries as to whether there were weathertightness issues in the Sirocco Apartments. Mr Roberts claims the need for remedial works to the Sirocco Apartments means he has suffered and will suffer loss, including an $11,460 special levy he has paid, $456,916 for his share of the estimated cost of the remedial works, consequential losses for storage and alternative accommodation, and general damages of $30,000.
[3] The defendants deny making any misleading representations and say it was not reasonable for Mr Roberts to rely on any representations which might have been made.
[4] Although not pleaded in their initial statement of defence, I gave the defendants leave to file an amended statement of defence to include the affirmative defence of contributory negligence.1 The defendants now plead that Mr Roberts’ contributory negligence needs to be taken into account. In particular, in that he failed to obtain a building report before purchasing the Apartment, failed to request and obtain further information from the defendants which may have alerted him to weathertightness issues, and misinterpreted Mrs Leloir’s responses to questions in relation to the weathertightness issues at the Sirocco Apartments.
[5] Furthermore, the defendants say that any loss the plaintiff may have suffered has not yet crystallised. The Body Corporate has not determined what, if any, action it will take in relation to the defects in the Sirocco Apartments and the options include demolition of the building. The problems are exacerbated by seismic strengthening which is likely required.
[6] The hearing into Mr Roberts’ claim will take place in two parts, first dealing with liability and, secondly, damages. This decision deals with the first part only: whether or not the defendants are liable to Mr Roberts for a breach of their respective duties under the Fair Trading Act 1986 (the Act).
1 Roberts v Jules Consultancy Limited CIV-2017-485-130, 19 February 2019.
The claim
[7] Mr Roberts claims the defendants breached ss 9 and 14 of the Act, which relevantly provide:
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.
14False representations and other misleading conduct in relation to land
(1) No person shall, in trade, in connection with the sale or grant or possible sale or grant of an interest in land or with the promotion by any means of the sale or grant of an interest in land,—
…
(b) make a false or misleading representation concerning the nature of the interest in the land, the price payable for the land, the location of the land, the characteristics of the land, the use to which the land is capable of being put or may lawfully be put, or the existence or availability of facilities associated with the land.
…
[8] Both defendants admit that they were acting “in trade” and owed duties pursuant to ss 9 and 14 of the Act.
[9] Section 9 involves an objective test of fact, having regard to the circumstances in which the conduct occurred and the persons likely to be affected by it.2 The conduct must have had the capacity to mislead or deceive and it must have been reasonable for the plaintiff to have been misled.3 It is not necessary to prove the defendant’s conduct actually misled or deceived the plaintiff or anyone else. The fact that someone was actually misled or deceived may well be enough to show that the requisite capacity existed.4
2 Red Eagle Corporation Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at [28].
3 At [28].
4 At [28].
[10] There is no requirement that the person engaging in the conduct must do so intending to mislead or with the purpose of persuading the person affected by the conduct.5
[11] A causal nexus between the misleading conduct and the loss or damage suffered is required.6 The impugned conduct does not need to be the sole cause of the plaintiff’s loss or damage but it must be an effective cause.7 The fact a claimant may have contributed by carelessness to his or her own downfall does not disqualify the claim.8
[12] For a claim under s 14 to succeed, the false misrepresentation or misleading conduct must have occurred in relation to the sale, grant or possible sale or grant of an interest in land.
[13] Mr Roberts claims that Mrs Leloir’s responses to queries about the Sirocco Apartments, as recorded in an email from his lawyers to him dated 10 March 2014 (the March email), were misleading and/or deceptive, and therefore, in breach of the Act.
[14] Mr Roberts claims that Mrs Leloir made the following representations (the Representations):
(a)the Sirocco Apartments had weathertightness issues;
(b)the weathertightness issues related only to the walkways; and
(c)the issues with the walkways had been rectified.
Issues
[15]The following issues require determination:
5 Goldsboro v Walker [1993] 1 NZLR 394 at 401 and 406.
6 Savill v NZI Finance Ltd [1990] 3 NZLR 135 (CA) at 143.
7 Red Eagle Corporation Ltd, above n 2, at [29].
8 At [30].
(a)Did Mrs Leloir make the Representations?
(b)Were the Representations misleading and/or deceptive?
(c)Was it reasonable for Mr Roberts to have been misled? and
(d)If so, are both defendants liable?
Background
[16] The Sirocco Apartments contain 44 apartments in an eleven-story building, comprising five levels of parking with six levels of apartments above. The building is considered to have many complicated external design features, notably external balconies adjoining all of the apartments, either as projecting steel-framed balconies or enclosed rooftop structures. The cladding to the Sirocco Apartments is a direct fixed monolithic cladding.
[17] Construction of the Sirocco Apartments was completed in March 1999 when the Wellington City Council (the Council) issued code compliance certificates. It is a unit title development.9
[18] Cedar Management Services Limited and its officer, Kerry Duncan, provided property management services to the Sirocco Apartments Body Corporate, Body Corporate 85928 (the Body Corporate), until the appointment of Jules Consultancy on 1 December 2007.
[19] A review of the Body Corporate’s records reveals references to leaks into some of the apartments as early as 4 March 2003. Various reports were called for.
[20] At the Body Corporate Annual General Meeting (AGM) on 17 June 2007, there was discussion about extensive work required to the deck of apartment 815, following a report the waterproof membrane had broken down, causing water to leak through to apartments 818 and 817. There was reference to a leak from apartment 804 and a new
9 Unit Titles Act 2010.
rain head from the deck of apartment 815 having been fitted, and associated water damage repaired. The minutes record:
Owing to the continuing problems with the building, Anne Bell asked if there was any redress from the Territorial Authority as they had signed the building off. Kerry to approach Wellington City Council on this issue.
[21] On 1 August 2007, Mr Duncan wrote to the Council as follows (the Council Notification):
Over the last few years there have been a number of leaks within the Sirocco building complex. The majority of these leaks have been through structural areas within the complex. I.e. where exterior cladding joins together, where rain heads may not have been installed correctly, decks not constructed or tiled correctly, sealing of the decks on open walkways where they enter into an apartment not sealed correctly etc.
Some repairs that have been carried out have been very expensive for the owners concerned and insurance claims have been significant.
These issues were raised at the last Annual General Meeting in June 2007 and the owners have requested that the Body Corporate obtain copies and results of all building inspections carried out by the Wellington City Council Building Inspectors during the construction of this building.
[22] At the Body Corporate Committee meeting on 28 November 2007, the Committee agreed that Jules Consultancy was to be appointed as the new secretary and manager to the Body Corporate and that Mr Duncan was to hand over the files to Jules Consultancy.
[23] The management contract between the Body Corporate and Jules Consultancy requires Jules Consultancy to provide secretarial and building management services to the Body Corporate, including building maintenance, both planned and reactive.
[24] A review of the Body Corporate Committee minutes confirms that reports of water leaking into apartments was a constant theme from the time Jules Consultancy was appointed.
[25] In January 2011, Mrs Leloir was contacted by Doran Wyatt, a solicitor for a prospective purchaser, regarding a Land Information Memorandum (LIM) notation referring to weathertightness issues in the Sirocco Apartments. The Council had
referred him to the Council Notification. Mrs Leloir supplied a copy of the Council Notification to Mr Wyatt, saying:
No problem – once I went into the archived documents I found the offending letter and also the Minutes from the 2007 AGM – no weathertight issues mentioned per se – just a query as to whether the WCC had signed things off and if so, could they provide copies of their inspection reports.
Kind Regards Jules Leloir
Body Corporate Secretary Manager Company Secretary Manager
Jules Consultancy Limited
[26]Mrs Leloir then wrote to the Council on 17 January 2011, saying:
Thank you for the time spent discussing the LIM issues this morning.
Further to the letter dated 1 August 2007 written by Kerry Duncan of Cedar Property Management Ltd (the former Body Corporate Secretary of Sirocco Apartments) I wish to advise that I have only become aware today of the notation on a LIM report for an apartment in the building that there may potentially be weathertight issues in the building.
I was appointed the Body Corporate Secretary Manager on 1 December 2007 following dissatisfaction with the performance of Kerry Duncan. At no time was I made aware of his letter to the WCC and there is no mention in the June 2007 Minutes of any concerns with weathertight issues nor any instructions from the owners to advise the WCC that they were concerned about weathertightness in the building or the possibility of there ever being a claim against Weathertight Homes in this regard.
Indeed on reading the letter dated 1 August 2007, it is clear that Kerry Duncan was not stating that there were potentially weathertight issues in the building, but merely requesting copies of previous Council reports and inspections.
There have definitely been some issues with membranes breaking down on some balconies and there have also been issues with the Level 8 and Level 6 walkways being insufficiently covered in membranes to cope with the amount of water being deposited on it when there is rain. The carpeted walkways did not have sufficient run-off to remove excess water and over the 10 year period since the building was constructed there has been a large amount of water left sitting in the carpets which has eventually destroyed some of the membrane and the underneath ply.
To remedy this the Body Corporate began a repair project on the walkways in 2009 and this work will be finished in February 2011. The walkways have been replaced with 18 ml ply (the original was 12 ml ply) and three coats of membrane followed by the top coat which has a very long life against the elements. We have had gutters and downpipes constructed which feed into the waste water system for the building, thus removing the bulk of water which
had historically caused the continued wetness on the carpets. We have not replaced the carpets.
The Body Corporate Committee of Body Corporate 85928 would appreciate the WCC adding a notation to all LIM reports for all apartments in the building that to the best of their knowledge there are no weathertight issues at Sirocco Apartments.
[27]A representative of the Council responded, saying:
Please be advised that any future LIM will also state the following:
“Council has been advised by the Body Corporate that they undertook remedial work. The Council had no involvement in this remediation and is unable to comment on the scope of repair. We would suggest you seek advice from the Body Corporate re this matter.”
[28]Mrs Leloir then forwarded that email to Mr Wyatt, saying:
Hopefully this helps with your decision making and the fact that to my knowledge there are no weathertight issues at Sirocco Apartments.
[29] In the management report to the Body Corporate Committee dated February 2011 in the name of Mrs Leloir, leaks in apartments 611, 613, 616 and 617 were noted. The leaks into apartments 613, 616 and 617 were reported as being a result of issues with the walkway, whereas the leak into the living room of apartment 611 was from the balcony of the apartment above.
[30]The report then referred to Mr Wyatt’s enquiries and said:
Following further investigation and discussion with the Council, it transpired that Kerry Duncan wrote to the WCC in August 2007 requesting information on the sign offs in the building so they could research whether everything had been managed appropriately when the building was built. The WCC took this to mean there was a weathertight issue in the building and promptly made the notation. To my knowledge this must have been the first LIM requested since that time as this was the first I knew of it.
[31] Mrs Leloir’s letter to the Council and the Council’s response were attached to Mrs Leloir’s report.
[32] The minutes of the Body Corporate Committee meeting of 15 February 2011 noted the works being done on various apartment leaks and that the bulk were as a result of the breakdown in the level 6 walkways.
[33] The Committee endorsed the actions taken by Mrs Leloir as regards the Council and then recorded:
Post Meeting Note: In an email sent by Bruce Weller but only received after the meeting, Bruce has recommended that we request a wording change on the LIM. As Bruce rightly points out the WCC were trying to distance themselves from any potential future claim for damages against inappropriate/inferior inspections by their Building Inspectors within the last ten years.
I have forwarded our request to the WCC Compliance Department, with the following suggested wording on the LIM:-
Wellington City Council has been advised by the Body Corporate that it sought professional advice and undertook the necessary work to remedy any potential weathertight issues. The Council had no involvement in this remediation and is unable to comment on the scope of remedial work completed with regard to any potential weathertight issues. We would suggest you seek advice to your (and the Body Corporate’s) satisfaction regarding this matter.
and the WCC have confirmed they will use the above on all LIM reports from now on.
[34] Mrs Leloir’s management reports to the Body Corporate Committee continued to note “leaks in the building”. For example, the November 2011 report referred to a leaking toilet cistern as well as other leaks as follows:
Apartment 818: We have not as yet got to the bottom of the leaks from #815’s balcony into the living room below. The recommendation from my contractors is to lift the whole deck but of course this is not a popular move with the owners of #815 following the chaos caused last time work was done on the balcony. I would be pleased if we could discuss this further at the meeting on how best to manage this.
Events pre-purchase
[35] The above sets out in a general way the background to the events the subject of the claim, which occurred in February 2014.
[36] The immediate background to these events included the Body Corporate Committee meeting held on 21 August 2013, the minutes of which record:
4.02Jules advised that she had notified the owners of Apartments 806 and 811 that following exhaustive investigations, that the common area wall between their decks was deemed responsible for leaking down
into an apartment below. As a courtesy Jules had advised both owners of the required work to be carried out and asked for their approval. …
The Body Corporate Committee has instructed Jules to proceed to have this work carried out nonetheless and Jules will follow up with the appropriate contractors.
4.03It was noted that the owner of Apartment 811 was disputing his liability for carrying out repair work caused by leaks from his deck into two apartments. He has requested owners contribute to the cost of repair work. The Body Corporate will keep a watching brief on this.
[37] The management report in the name of Mrs Leloir for the Body Corporate Committee meeting in December 2013 updated the Committee on apartment 811 and then addressed leaks into apartment 807 as follows:
4.04Leaks down into Apartment 807
For a number of months we have been trying to identify the cause of the leaks down into Apartment 807. A number of years ago it was established that a part of the deck of Apartment 806 was the cause and that area of the deck was replaced. About 7 months ago leaking returned into Apartment 807.
Some water testing was done earlier in the year with inconclusive results.
Both our contractors and the contractor for Apartment 811 identified possible problems with the common area wall between the two decks (in fact the #811 contractor suggested the wall was completely rotten) and your approval was given to investigate inside the wall and carry out the necessary repairs, assuming that this was the cause of the leaking.
This work was delayed by inclement weather for a number of months, however towards the end of November the contractors were able to get on and carry out the investigative work. The common area wall showed no signs of degradation. The gutters were resealed and the perimeter of the common area on both decks was sealed.
Heavy rains and wind arrived and after a couple of days of no water ingress, water then began trickling down and into Apartment 807 again. It also continued after the rain had stopped giving rise to the thinking that the problem lies somewhere on the higher part of the deck, possibly under the spa pool which is trapping water and slowly releasing it.
…
Under the new Unit Titles Act, as the roof forms part of the structure of the unit below, it is now the body corporate’s cost to effect all repairs, rather than just to the common area walls as was previously the case under the old Act.
[38] On 22 January 2014, Mrs Leloir, as Body Corporate Secretary Manager for the Sirocco Apartments, issued the pre-contract disclosure statement,10 for prospective buyers of the Apartment. As required,11 the disclosure statement addressed whether the Apartment or common property was or had been the subject of a claim or proceedings in respect of water penetration. The statement said:
10.The unit or the common property is not currently, and has never been, the subject of a claim under the Weathertight Homes Resolution Services Act 2006 or any other civil proceedings in relation to water penetration of the buildings in the unit title development.
[39] The pre-contract disclosure included copies of the minutes of the Body Corporate AGMs for the years 2011 to 2013 inclusive. In respect of a motion to approve the annual accounts for the year ending 31 March 2013, the 2013 AGM minutes record an owner querying what was covered under general repairs. Mrs Leloir is reported as explaining that the budget line included “interior apartment repairs as a result of leaks from other apartments”.
[40] On 20 February 2014, Mr Roberts signed a conditional agreement to purchase the Apartment (the SPA). The purchase price was $397,000. The SPA specified that the purchaser did not require a building report. The SPA was conditional upon purchaser financing, approval of title, and the provision of a LIM satisfactory in all respects to Mr Roberts within 12 working days. It was also conditional upon the purchaser reviewing to his entire satisfaction Body Corporate information, including “the Body Corporate minutes”, the vendor being obliged to provide them within five working days.
[41] A Body Corporate Committee meeting attended by Mrs Leloir took place on 26 February 2014. The minutes record the following:
Leak into Apartment 807
The whole balcony of Apartment 806 has been lifted, the tiles removed and it has been rebuilt and resealed which should resolve any more issues with water ingress into the apartment below. It is important to note that as this balcony forms the whole of the roof of an apartment below, that any remedial issues become the responsibility and the cost of the Body Corporate under the Unit Titles Act 2010. Under the previous Act, all balconies were deemed to form
10 As required under the Unit Titles Act 2010, s 146.
11 Unit Titles Regulations 2011, reg 33.
part of the interest of the apartment and therefore the responsibility of the owner of the apartment.
[42] On 27 February 2014, the legal executive at the firm of solicitors acting for Mr Roberts (Ms Samson) emailed Mrs Leloir at Jules Consultancy with some queries in respect of the Long Term Maintenance Plan for the Sirocco Apartments, a copy of which had been supplied to Mr Roberts. A note to the Long Term Maintenance Plan stated that the rebuilding of the level 8 and level 6 walkways was not included in the original Long Term Maintenance Plan. It described the work as beginning in late- 2009 and carrying on until anticipated completion in March 2012 at a cost of approximately $105,000. Ms Samson asked:
- What caused the walkways to breakdown and be repaired? Was it a design defect or a maintenance issue and is the Body Corporate satisfied that the matter is now rectified and no further expenditure will be required?
[43] Ms Samson also requested a copy of the Chairperson’s report, referred to in the 2013 AGM minutes. That was supplied. It referred to “small bathroom and deck leaks”.
[44] Ms Samson’s inquiry was discussed in a telephone conversation between her and Mrs Leloir. Ms Samson then emailed Mr Roberts on 27 February 2014 (the February email) saying:
The Body Corporate Secretary just called me to discuss the requests we put to her. …
She also mentioned that she can not guarantee that there will never be any further issues with the walkways, but they were completely replaced and it was not just a cheap and basic patch up so hopefully there will be no further problems. Apparently the original design was ridiculous - the two walkways are apparently open air on the sides, but they were carpeted so every time it rained the carpet was soaked. As the carpet was wet for such long periods of time it rotted and the water broke down the membranes underneath which caused leaking issues. This issue has now hopefully been rectified and the walkways replaced so there should not be any further issues, but you never know what may happen in the future.
[45] Ms Samson then received the LIM. Under the heading “Weathertightness”, the LIM recorded that this section of the LIM would be completed only when the Council had received formal notification of possible water ingress issues at the property from
one of five sources, including “written notification from the owner of the property or their agent”. The LIM then said:
If you have any concerns we recommend that you seek independent advice from a suitably qualified person such as a building surveyor, and/ or speak to the owners of the property.
Wellington City Council has been advised by the Body Corporate that it sought professional advice and undertook the necessary work to remedy any potential weathertight issues. The Council had no involvement in this remediation and is unable to comment on the scope of remedial work completed in respect of any potential weathertight issues. We would suggest you seek advice to your (and the Body Corporate's) satisfaction regarding this matter.
[46]Ms Samson sent the LIM to Mr Roberts and, in her email dated 7 March, said:
The LIM report has arrived from the Council and a copy is attached. I do not see any significant issues, but I do comment as follows:
1. The Council noted they had been advised by the Body Corporate of a possible weather tightness issue. The LIM goes on to say the issue was rectified by the Body Corporate and the Council was not involved, so they have no further information. I suspect this will be the issues with the walkways which have now been fixed, but I recommend we sent a note to the Body Corporate to confirm that this is what the Council is referring to.
[47] Both Ms Samson and Mr Roberts reviewed the LIM. Mr Roberts emailed Ms Samson on 10 March, saying:
Thanks for your review of the LIM. I've checked it out too.
I agree with your suggestion in point 1 that we enquire about the weather tightness issue. I suspect there isn’t much to it given that the BC's preliminary disclosure statement says there are no issues but worth checking.
[48] Following a discussion with Mrs Leloir that morning, Ms Samson then sent the March email to Mr Roberts, which said:
I have spoken to the Body Corporate Secretary. She said the only issue she could think of that the Council would be referring to is the walkways which have now been prepared [sic]. She also stated that it was not Body Corporate who originally notified the Council of the issue with the walkways, but that is the only possible weather tightness issue that she is aware of within the building.
I sent a copy of the information through to Jules so that she could see the reference and confirm that she was not aware of anything else that the Council could be referring to.
[49] Although Ms Samson intimated that she would seek confirmation from Mrs Leloir of what Ms Samson maintained was discussed in the telephone call, she simply sent her a copy of the LIM. Mrs Leloir made no note of that telephone conversation.
[50] Later that same day, Mr Roberts’ purchase of the Apartment was declared unconditional. Settlement took place on 3 April 2014.
Events post-purchase
[51] As noted in Mrs Leloir’s December 2007 management report, apartment 806’s deck, which forms the whole of the roof of apartment 807, was leaking down into apartment 807’s living room. By February 2014, the owners of apartment 806 had the tiles removed and the deck resurfaced with a membrane. Around 20 April 2014, when the contractor was (apparently still) working on the deck, areas of exterior cladding to the right of the deck were repaired. As the guttering also required repair, Mrs Leloir organised scaffolding to be erected. While the scaffolding was in place, Mrs Leloir arranged for the Body Corporate’s maintenance contractor to inspect some rain heads and exterior cladding in the area. While the rain head alongside apartment 806 was being checked, some of the cladding around it was opened for inspection. Rotten timber was apparent. Photographs of the revealed areas were taken and the contractors immediately raised their concerns with Mrs Leloir.
[52] Various contractors then reported on potential defects in the Sirocco Apartments. They identified significant issues with the cladding and serious water ingress problems. The possibility that the cantilevered balconies were not structurally sound was raised. The reports concluded there had been water ingress and significant deterioration to parts of the building.
[53] Beginning in March 2015, Maynard Marks Ltd, property and building consultants, carried out comprehensive investigations and, in July 2015, issued a
weathertightness review report which identified serious structural defects in the Sirocco Apartments.
Building defects
[54] The Maynard Marks report summarised the main weathertightness defects in the Sirocco Apartments as follows:
1.3Main Weathertightness Defects Identified
The main weathertightness defects resulting in moisture ingress and visible decay damage, include, but are not limited to, the following summary:
• Inadequately weatherproofed roof to wall junctions, including to projecting fire spandrels
• Steel framed balcony penetrations to fire spandrels and balcony to wall junctions
• Inadequate cladding clearance above external surfaces, including a lack of drainage at cladding base details
• Unprotected fibre-cement cladding sheets to the horizontal surfaces of the balustrade and inter-tenancy walls
• Poorly formed cappings to the balustrade walls adjoining the enclosed rooftop balconies
• Unprotected retaining wall junctions with inter-tenancy balustrade walls to lower level apartments on the west elevation
• Inadequately weatherproofed joinery openings, including a lack of visible jamb and sill flashings
[55] The damage relating to the defects was described as including, but potentially not limited to:
• Raised moisture levels and visible decay damage to the timber wall framing throughout the elevations, lightwells, the main roof and the external balconies.
• Localised corrosion of some additional areas of structural steel framing.
[56]As to remedial works required, the report said:
Considering the deficiencies that exist with the installation of the external cladding, the roof coverings and the balconies, the damage found throughout the building and the risk of future likely moisture ingress and decay damage, we believe the only repair option viable to achieve long term weathertightness and compliance with the New Zealand Building Code, is to undertake a full reclad of the development, including roofs and balconies.
[57] Maynard Marks also strongly recommended that design changes should be considered as part of the proposed remediation to remove “significant and numerous high risk weathertightness features”.
[58] The costs to carry out the work on a like-for-like basis were estimated, at that time, as $10,102,691.35 including GST.12
[59] Patrick Hanlon, quantity surveyor and director of The QH Limited, a quantity surveying firm, has considered the Maynard Marks and other reports. He gave evidence and estimated the cost of repairing the Sirocco Apartments based on price levels in November 2018 as $20,471,150. On the basis the Sirocco Apartments are unoccupied during the repair, he considered it will take 19 months to carry out the works, including demolition.
[60] Andrew Gray, building surveyor and director of the building consultancy firm GBC Group, has reviewed the relevant documents, including the Maynard Marks report. He has visited the Sirocco Apartments, visually inspected the exterior, carried out moisture testing and destructive testing to the Apartment, viewed areas where previous investigations have been carried out and identified weathertightness defects. In his evidence, he described the Sirocco Apartments as one of the more complex designed buildings he has come across in his experience as a building surveyor. He said it displays countless high risk weathertightness features and junctions. He considered the defects discussed in the Maynard Marks report and commented on other defects he identified whilst onsite. He said:
56.In my experience, all of the above defects especially when installed/constructed in conjunction with a direct fixed monolithic cladding have a history of systemic failure.
57.Based on:
(a)my training as a registered building surveyor;
(b)experience investigating hundreds of leaking buildings throughout New Zealand (with the same claddings with the similar or the same junctions) and
(c)my visual inspection
12 Giles Ingham of Maynard Marks gave evidence that any significant seismic upgrading will often have to be done at the same time as any remediation works as a requirement of the building consent and compliance with the Building Code.
The Sirocco Apartments have all of the hallmarks commonly associated with a leaky building.
58.After carrying out testing to Unit 812 and reviewing Maynard Marks’ report I am in no doubt that a full re clad is required.
[61] In cross-examination, Mr Gray was asked whether, had a pre-purchase building inspection been carried out, the issue of weathertightness would have been identified. He said the state of knowledge in 2014 was that the type of construction of the Sirocco Apartments was no longer considered an acceptable solution under the Building Code and that the monolithic cladding system was a high-risk cladding system or a cladding system with a history of failure. A reasonably competent pre-purchase building report writer would note that.
Did Mrs Leloir make the Representations?
[62] When Ms Samson gave evidence, she said the March email accurately recorded her conversation with Mrs Leloir. It was put to her in cross-examination that there was no discussion around any weathertightness issues other than the walkways. Ms Samson rejected that proposition, saying the question was whether Mrs Leloir was aware of any other issues and she responded she was not.
[63] Ms Samson’s evidence was supported, in my view, by the email exchange she had with Mr Roberts prior to her telephone conversation with Mrs Leloir. Ms Samson alerted Mr Roberts to the entry on the LIM, said she suspected the entry related to the walkways but recommended seeking confirmation. Mr Roberts agreed.
[64] Given the LIM entry referred to “possible water ingress issues”, in my view any reasonably competent legal adviser and any prospective purchaser would be concerned to clarify what the entry related to, as the email exchange confirms. It can therefore fairly be inferred that Ms Samson made the telephone call to Mrs Leloir in accordance with her instructions from Mr Roberts and with the purpose of establishing whether the LIM entry related only to the walkways.
[65] Mr Roberts instructed Ms Samson to make the enquiry in his email at 9.04 am on 10 March 2014. The March email from Ms Samson was timed at 10.29 am. The March email must therefore have been written within one and a half hours of
Ms Samson’s conversation with Mrs Leloir. The March email is the only written record of the conversation. That it was written so close in time to the conversation supports a finding of its accuracy.
[66] Notably, Mrs Leloir’s responses to Mr Wyatt in 2011, when she was asked about the Council Notification, include her saying:
… to my knowledge there are no weathertight issues at the Sirocco Apartments.
[67] The fact Mrs Leloir made a representation in 2011 similar to that she is alleged to have made in 2014 and which also arose out of the Council Notification further supports the accuracy of the March email.
[68] Mrs Leloir’s position as to whether or not she made the Representations is somewhat difficult to clarify. In the statement of defence, the defendants admit that the telephone conversation of 10 March 2014 took place and that it concerned the LIM notification. The statement of defence then says:
7.2Ms Leloir avers that she would have informed Ms Samson of all relevant information understood by her with respect to that part of the LIM referred to in paragraph 6 of the claim.
7.3Further, any representation made by Ms Leloir with respect to the walkways was made with reference to that part of the LIM referred to in paragraph 6 of the claim, and represented only her reasonable and honestly held opinion at that time, formed on the basis of information provided by others, and should not have been taken as a present fact or general guarantee of weathertightness of the Sirocco Apartments.
7.4Except as expressly admitted, they deny paragraph 7 of the claim.
[69] I asked Mrs Leloir to explain what she maintained she had said to Ms Samson in that telephone call. The following exchange took place:
A. I can’t tell you exactly what I said, Your Honour. I have no recollection of the phone call. My recollection is only by having read her notes. I mean, I get a lot of phone calls about things so I’m sorry, I just simply can’t be honest and tell you what I said.
Q. But you’re disputing her recollection of what you said?
A. No, I don’t think I’m disputing it. I’m just wondering if I would have said more but I can’t be guaranteed of that.
Q.So is your case that, if you look at what Ms Samson said in her email to Mr Roberts, that a proper interpretation of that means that the query was limited to whether the work on the walkways had been done?
A.That’s what I think but I can’t be guaranteed about that. I just simply can’t. I’m assuming that she only asked me about the walkways. She recorded it as being only on a walkway query and I’m assuming she’s correct.
[70]Notably Mrs Leloir made no record of the telephone conversation.
[71] Mrs Leloir sought to import into the March 2014 conversation a qualification she made to Ms Samson in their earlier telephone conversation of 27 February 2014. Mrs Leloir’s evidence was that she “would have” informed Ms Samson that she could not guarantee no further issues would be experienced, in the same way she had made that qualification in February when Ms Samson had asked about work to the walkways.
[72] A number of points arise. First, that proposition was not put to Ms Samson so I do not have the benefit of her comment on it. Secondly, the fact Ms Samson recorded Mrs Leloir’s February qualification supports an inference that Ms Samson would have done likewise had Mrs Leloir made a similar qualification in the March telephone conversation. Thirdly, Ms Samson’s query in the March conversation was not about the future weathertightness of the Sirocco Apartments. She asked about their weathertightness history in the context of the LIM notation.
Did Mr Roberts misconstrue the March email?
[73] Mrs Leloir suggested that Mr Roberts misinterpreted both the February and March emails. She maintained they related solely to leaks from the walkways and not to any other weathertightness issues at the Sirocco Apartments. While the February email responded to a query about the walkways, the March email arose from a conversation about the LIM notation as to “possible water ingress issues”. The author of the email, Ms Samson, confirmed that the March email which recorded her conversation with Mrs Leloir was not limited to the walkways. The March email records Ms Leloir’s saying, “the walkways … [are] the only possible weathertightness issue that [she] is aware of within the building”.
Conclusion
[74] In light of these factors, I am satisfied that Mrs Leloir made the Representations.
Were the Representations misleading or deceptive?
[75] The Representation to the effect that the weathertightness issues at the Sirocco Apartments related only to walkways was demonstrably untrue and misleading. That is evident from a review of the Body Corporate Committee minutes before and after the defendants’ involvement and, importantly, immediately before the Representation was made.
[76] Mr Gray reviewed the Body Corporate records and, over some 17 pages of his brief of evidence, summarised references to leaks. In his opinion, the leaks referred to were “in no way proximate to or otherwise related to the walkway leaks that have been referred to”. Furthermore, he said that the minutes and other records “clearly showed widespread systemic weathertightness issues unrelated to the walkways at the Sirocco Apartments”.
[77] Mr Gray produced a table showing 23 of the 44 units at the Sirocco Apartments had leaks, both pre and post the appointment of the defendants. Some 17 had leaks recorded post the engagement of the defendants.
[78] Importantly, records proximate to the Representations highlighted leaking problems. The August 2013 Body Corporate Committee meeting minuted Mrs Leloir’s advice that the common area wall between the decks of apartments 806 and 811 was considered responsible for leaks into an apartment below. In her December 2013 management report, Mrs Leloir said there had been efforts to identify the cause of leaks into apartment 807 “for a number of months”. She recorded that “a number of years ago” it was established that part of the deck of apartment 806 was the cause. That deck was replaced but, about seven months prior to Mrs Leloir’s comments, leaking returned to apartment 807. A contractor suggested the common wall between the two decks “was completely rotten”.
[79] The December management report on its own could be considered proof of the claim. Authored by Mrs Leloir, it states that a leak which was fixed a number of years ago had returned and a common wall was rotten.
[80] It is therefore evident that Mrs Leloir’s submission to the effect that, prior to May 2014, there were no signals of a major water ingress problem is simply wrong.
[81] Mrs Leloir produced her own table in respect of leaks for the period December 2007 to May 2014. Although there are some references to leaks unrelated to weathertightness, for example leaks from showers, toilets or dishwashers, there were a large number of leaks into apartments from decks above. Some of the apartments had recurring leaking problems. For example, apartment 806 had its deck tiles lifted twice in 2009 to replace the membrane because of leaking down into apartment 807. There was a recurrence of that problem in 2012. In 2013, as discussed above, the common wall of the deck for apartment 806 and 811 had cracks in it, causing water ingress into apartments 810 and 807 and the wall required rebuilding. Similarly, apartment 810 suffered leaks from the deck wall of apartment 811 in 2009. There were further leaks from the deck of apartment 811 in 2010 and 2011. Apartment 818’s deck leaked into apartment 817 in 2009. In 2007 and 2008, apartment 815 leaked into apartments 817 and 818. This leak was again apparent in 2011 and in 2012 it was recommended that the whole deck be replaced.
[82] There is no dispute that the defendants attempted to isolate the cause of the various leaks and repair them. In some cases there may not have been signs of further leaking for some years, or at all, but in other cases there were clearly repeated problems with leaks. Mrs Leloir denied there was any “systemic” weathertightness issue. When the Body Corporate records are considered, it is impossible to escape the conclusion that there was a systemic problem with water ingress into the building.
[83] A related issue, perhaps, is what the defendants understand “weathertightness” to mean. Given the tenor of Mrs Leloir’s evidence, I asked her that question. She replied:
A.My understanding has always been that weathertightness was from the exterior envelope of the building and that if there were systemic,
if there were leaks that occurred and reoccurred in the same places on the exterior envelope then that was a real concern for the building. Leaks between, from, on a corner of a deck down into an apartment was not what I would ever have thought was a weathertightness issue. The committee didn't feel it was a weather, they were weathertightness issues either, and I report to them at every turn.
[84] I then asked Mrs Leloir whether it was correct that she did not consider a leak from one deck into an apartment underneath constituted a weathertightness issue. She replied:
A.I would have always just called it water ingress, but weathertightness, if that’s what it's now known as, fine.
Weathertightness issues prior to the defendants’ involvement
[85] Mrs Leloir sought to distance herself from any knowledge of problems in the Sirocco Apartments before Jules Consultancy assumed management. She contended that the evidence in relation to those leaks was hearsay and inadmissible. However, the documents were business records and admissible.13 Furthermore, the documents contained numerous references to leaks, thereby putting the defendants on notice that leaks had been recorded.14
[86] In August 2006, Mr Duncan suggested to the Body Corporate Committee that it was time to engage the services of an expert to investigate the building thoroughly. This was in the context of reported leaks. At the 14 February 2007 Body Corporate Committee meeting, in relation to a discussion about apartment 815 and leaks, one Committee member suggested the Sirocco Apartments needed to be registered as a “leaky building”.
[87] When Jules Consultancy assumed management of the Sirocco Apartments in late 2007, the problems with the leaks relating to apartments 815, 818 and 817 remained outstanding. By this stage, the Sirocco Apartments were eight years old. The Body Corporate had spent $67,000 in respect of the leaks from apartment 815’s deck.
13 Evidence Act 2006, ss 18 and 19. The prior manager of the Sirocco Apartments, Kerry Duncan of Cedar Management, is, it seems, unavailable as he lives in Australia but, in any event, I consider undue expense or delay would have been caused if he were required to be a witness.
14 Even if the documents were not offered to prove the truth of their content.
[88] Mr Duncan handed the records of Sirocco Apartments to Mrs Leloir in December 2007. She said they remained in her attic and she did not look at them until attending to discovery in these proceedings. Furthermore, that was the first time she discovered a USB stick (which presumably contained more records). However, there are two important documents of which Mrs Leloir was clearly aware in 2011. The first was the Council Notification and the second was the 2007 Body Corporate AGM minutes to which Mrs Leloir referred in her 2011 correspondence with Mr Wyatt. Whether or not what was said in the Council Notification was true, Mrs Leloir was clearly aware of it as early as 2011.
[89] Mrs Leloir attempted to deflect some responsibility to the Body Corporate Committee, saying that no Committee members had ever told her that there were reports prepared on weathertightness issues. She described the Body Corporate Committee as a responsible group of owners who, had they considered there to be weathertightness issues in 2011, would have had them investigated. There was no evidence from any Body Corporate Committee member to substantiate this statement. In any event, a reference to the records suggests the position is not quite so clear cut. Indeed, at the time of Mrs Leloir’s correspondence with the Council in 2011, Committee members were clearly mindful of potential Council liability in respect of construction defects.15
[90] Even if Mrs Leloir considered the Committee to be denying the contents of the Council Notification, she was more than simply a conduit, particularly given the information she possessed and the potential to access past records (whether or not she had chosen to take advantage of that).
[91] As the Supreme Court observed in Red Eagle, in order to be seen as a mere conduit, the conveyor of misleading or deceptive information must make it plain to the recipient that they are merely passing on information without giving the impression the conveyor has first hand knowledge of the information.16 Unless it is obvious that the information is second hand only, the conveyor must accept the risk that he or she
15 See for example [33] above and reference to a potential future claim against the Council.
16 Red Eagle Corporation Ltd v Ellis, above n 2, at [38].
will reasonably be taken by the recipient to have spoken from personal knowledge. Mrs Leloir made the Representations without any such qualifications.
[92] Conduct can be misleading and deceptive notwithstanding the honesty of the person whose conduct is at issue. In Red Eagle, the defendant, Mr Ellis, had acted honestly but on the basis of false information given to him by another when making the comments complained of.17 The Supreme Court nevertheless held he had engaged in misleading or deceptive conduct and breached s 9 of the Act. The defendants’ conduct in the present case was more serious than that of Mr Ellis. Not only did they have access to the history of the Sirocco Apartments, they were alerted to the Council Notification and had personal knowledge of the weathertightness issues at the Sirocco Apartments.
Were the Representations confined to the LIM notation and the walkways?
[93] The LIM notation was indisputably triggered by the Council Notification. Mrs Leloir had a copy of that letter and had cause to consider it in quite some detail in 2011. The Council Notification said there had been a number of leaks in the Sirocco Apartments and the majority were through structural areas. Tellingly, the problems Mr Duncan identified are reflected in the Maynard Marks report. The LIM notation was expressed in wide terms, “possible water ingress issues”. It was not limited to the walkways. Mrs Leloir knew that because she had seen the Council Notification.
[94] There is also some force in Mr Easton’s submission for Mr Roberts that Mrs Leloir had denied or diminished weathertightness issues with the Sirocco Apartments on earlier occasions in the context of an enquiry about the LIM notation. In her 2011 correspondence with the Council in respect of the Council Notification, she said there was no mention in the 2007 AGM minutes of any weathertightness issues, nor instructions to advise the Council of any such issues. That was not correct. The 2007 AGM minutes referred to “major work being done on 815, 818 and also 817”, as well as the waterproof membrane breaking down on Unit 815’s deck, causing leaks to the units below. Mr Duncan was instructed to approach the Council “owing
17 Red Eagle Corporation Ltd v Ellis, above n 2.
to the continuing problems with the building” and the possibility of “redress” from the Council.
[95] Likewise, in her 2011 email to Mr Wyatt, Mrs Leloir said there were no weathertightness issues of which she was aware, despite having read the Council Notification. That representation was not limited to the walkways.
Misleading by omission
[96] Mrs Leloir justified her approach on the basis she promptly dealt with, and ensured the repair of, any leaks. Crucially, however, at the time of the Representations, there was the unresolved and repeated problem of the leaks from apartment 806 into other apartments.
[97] Furthermore, silence may constitute misleading or deceptive conduct if objectively assessed as so in all the circumstances.18 The Act provides that engaging in conduct includes refusing or omitting to do an act.19 Case law confirms that the provision of information which the provider knows is incomplete can constitute misleading or deceptive conduct.20 As an example, in the context of a property transaction, an agent was found to have engaged in misleading or deceptive conduct by failing to tell a prospective purchaser that views advertised as magnificent could be adversely affected by a building proposal.
[98] These cases are apposite to the present case. Even if Mrs Leloir believed the LIM entry related only to the walkways, in the context of being asked about weathertight issues in the Sirocco Apartments, it was, in my assessment, misleading conduct to be silent on the other weathertightness issues of which Mrs Leloir was aware.
18 Des Forges v Wright [1996] 2 NZLR 758 at 764.
19 Section 2(2).
20 Rosgo Financial Services Ltd v Matrix Mortgages Ltd HC Auckland CIV-2010-404-6132, 15 February 2010; Steel v Spence Consultants [2017] NZHC 398.
Representations of fact
[99] Mrs Leloir appeared to contend that any representations she made were her honestly held opinion based on reasonable grounds. The Representations were not, however, expressed to be her opinion, they were representations of fact.
[100] Mrs Leloir stressed that she had no engineering, construction or building qualifications or experience and she had made that known to the Body Corporate Committee. There was, however, no evidence she made that known to Ms Samson when making the Representations. In any event, Mr Easton makes a valid point when he says a lay person is capable of concluding a building is not weathertight, despite not knowing the cause of, or solution to, the problem. Mr Duncan, the previous manager of the Sirocco Apartments, recognised the weathertightness failings.
[101] Even if the Representations were representations of Mrs Leloir’s opinion, that must be honestly held and there must be a reasonable basis for it.21 In the circumstances, as discussed above, I am satisfied there was no reasonable basis for an opinion that the Sirocco Apartments did not suffer from weathertightness issues except in relation to the walkways.
Conclusion
[102] In all the circumstances, I am satisfied that the Representations were misleading and deceptive.
Was it reasonable for Mr Roberts to have been misled by the Representations?
[103] I have no doubt that Mr Roberts in fact relied upon the Representations when he instructed Ms Samson to confirm the SPA as unconditional. His sworn evidence was that, had he known of the history of weathertightness issues of which he is now aware, he would not have purchased the Apartment. His evidence was not challenged and I accept it.
21 Hamid v England (2011) 13 TCLR 376.
[104] Mrs Leloir informed estate agents and purchasers to contact her with any queries in respect of the Sirocco Apartments. The defendants were the Body Corporate managers and had been so for over six years. Mrs Leloir was personally involved. Mrs Leloir acknowledged in evidence that she was the best source of information about the Body Corporate records.
[105] In these circumstances, I am satisfied it was reasonable for Mr Roberts to rely on the Representations. Whether he should have done so without taking other steps is a matter to be considered later, when contributory negligence is addressed.
Liability of the defendants
The law
[106] Both Jules Consultancy and Mrs Leloir accept they were in trade at the time the Representations were made. Mrs Leloir did not try to advance the argument that she was acting only as agent of Jules Consultancy and therefore that she had no personal liability under the Act. Nevertheless, it is necessary to address this aspect.
[107]“Trade” is defined in s 2 of the Act as follows:
trade means any trade, business, industry, profession, occupation, activity of commerce, or undertaking relating to the supply or acquisition of goods or services or to the disposition or acquisition of any interest in land
[108] Body Corporate 202254 v Taylor was a decision of the full bench of the Court of Appeal and remains the leading case on the issue of personal liability of directors and senior employees under the Act.22 Mr Taylor was “the principal” behind companies responsible for a residential development affected by leaky building syndrome. He was sued under the Act and for negligence. Mr Taylor denied having a hands-on involvement with the development, saying he left everything to others. In the context of a strike-out application, the Court of Appeal considered whether it was arguable that the “in trade” requirement of the Act was met, given Mr Taylor was acting only as an agent and director of his companies.
22 Body Corporate 202254 v Taylor [2008] NZCA 317, [2009] 2 NZLR 17.
[109] Although the full bench of the Court of Appeal were unanimous as to the result in respect of the strike-out application, they were not unanimous in their views on the proper approach to liability under s 9 of the Act. William Young P gave what can be regarded as the majority judgment on this aspect, writing for himself and Arnold J. Chambers J agreed with the result in respect of the Act, for the reasons given by the President. Glazebrook and Ellen France JJ agreed with the result in the context of the strike-out application, concluding that there were issues to be determined at trial. However, they preferred the narrow approach to s 9, confining it to the conduct of a person trading on his or her own account.
[110] William Young P addressed the policy of the Act and the approach taken in prior New Zealand decisions,23 saying:
[19] … there can be no doubt that consumer protection considerations underpin … s 9 of the Fair Trading Act. Unsurprisingly, therefore, the courts have not paid much heed to attempts by those in trade to distance themselves from liability to disappointed consumers. For instance, exclusion of liability clauses are not effective to limit liability under the Fair Trading act. As well, there is nothing in the legislation which confines liability to cases where there is a contractual or quasi-contractual assumption of responsibility by the defendant to the plaintiff. Further, and at least to date, the courts have not regarded corporate form (and particularly the separate legal identity of companies) as precluding personal liability on the part of senior employees who engage in misleading and deceptive conduct.
[111]He endorsed that approach, saying:24
Further, given the extraordinarily broad and untechnical language of s 9, there is no reason to suppose that a person who engages in misleading or deceptive conduct in trade is exempt from liability if that person was acting on behalf of another legal entity.
[112]The following principles can be distilled from William Young P’s judgment:
(a)Corporate form does not preclude personal liability for directors and senior employees who engage in misleading and deceptive conduct when acting on behalf of the corporate entity.25
23 And in the High Court of Australia at [74].
24 At [77(d)].
25 At [19] and [77(d)].
(b)A plaintiff must be able to point to conduct directly attributable to the director or senior employee which was in itself misleading and deceptive.26
[113] As to whether it was arguable that Mr Taylor’s conduct was misleading or deceptive, William Young P thought it reasonable to assume Mr Taylor had provided the information which formed the basis of the brochure containing the representations at issue and approved its content before it was released.27 He considered the corporate form through which Mr Taylor chose to conduct business was not of “controlling significance”.28 He also observed that the supplying of the information which was published in the brochure could, of itself, be considered misleading and deceptive, making Mr Taylor liable for a breach of s 9.29
[114] William Young P cited with approval the earlier Court of Appeal decision in Kinsman v Cornfields Ltd.30 The Kinsman case has parallels with the present case. The Court of Appeal considered an appeal from a High Court decision awarding damages under s 9 of the Act against a director of a company which had gone into liquidation. The facts concerned misrepresentations through profit and loss projections for a business made by the appellant as director of a company. On the strength of the inaccurate projections, the respondents entered into an agreement to purchase and operate a franchise and suffered loss. The Court of Appeal dismissed the appeal, saying:31
There was no doubt that in so far as his company was concerned, Mr Kinsman was its alter ego and the only person who could effectively act on its behalf.
[115]Furthermore that:
[27] There is nothing in the facts of this case to suggest that the utterances of Mr Kinsman should be taken as those only of his company or that he was a mere conduit. We think that the Judge's approach in finding personal liability was the appropriate one. It will be a rare case where a director who participates directly in negotiations as to his or her company’s business will be able to avoid s 9 liability simply on the basis that he was acting only on the
26 At [77(b)].
27 At [80].
28 At [20].
29 At [86].
30 Kinsman v Cornfields Ltd (2001) 10 TCLR 342 (CA).
31 At [22].
company's behalf. The Fair Trading Act is intended in our view to cast its net wider than that and in the circumstances of this case the representations made by Mr Kinsman must be regarded as “in trade”.
[116] The issue was considered recently in the case of Steel v Spence Consultants Limited.32 The plaintiffs in that case sought damages in respect of a moisture assessment property report the defendants had prepared on a residential property purchased by the plaintiffs. Gendall J found Mr Spence personally liable, given he was the sole director and 75 per cent shareholder of Spence Consultants; Mr Spence produced most of the building reports and in doing so clearly relied upon his own skills; Mr Spence himself had inspected the property, written and signed the report; although the report was on Spence Consultants letterhead, no one else had been involved in the inspection of the property or preparation of the report other than Mr Spence; Mr Spence was the alter-ego of Spence Consultants and was himself in trade for the purposes of the Act.
Discussion
[117] The contract for the provision of body corporate management and consultancy services was between the Body Corporate and Jules Consultancy. It was pursuant to that contract that Jules Consultancy and Mrs Leloir obtained information about the Sirocco Apartments and were in a position to respond to any queries from prospective purchasers.
[118] Mrs Leloir is the managing director and 50 per cent shareholder of Jules Consultancy. She accepts that she is the Body Corporate secretary of Sirocco Apartments and has been since December 2007. The Representations were made by Mrs Leloir.
[119] Jules Consultancy is deemed to have engaged in Mrs Leloir’s conduct.33 There is no dispute that Mrs Leloir was acting within the scope of her actual or apparent authority when she made the Representations.
32 Steel v Spence Consultants Ltd [2017] NZHC 398, (2017) 14 TCLR 624.
33 Fair Trading Act 1986, s 45.
[120] The roles of Jules Consultancy and Mrs Leloir appear to be interchangeable. Indeed, when she gave evidence, Mrs Leloir described herself as a sole trader, saying her accounts were prepared as Jules Leloir “trading as” [Jules Consultancy]. Many, if not all, of the management reports to the Body Corporate were in Mrs Leloir’s name solely. The precontract disclosure statement in respect of the Apartment was provided by “Jules Leloir Body Corporate Secretary Manager”. Ms Samson’s emails were to Mrs Leloir at [email protected]. Mrs Leloir responded to those emails with the following under her signature:
Jules Leloir
Body Corporate Secretary Manager Company Secretary Manager
Jules Consultancy Limited
[121] There is no doubt that Mrs Leloir is the alter-ego of Jules Consultancy and the only person who acts on its behalf. There was nothing to suggest the Representations should have been taken as only those of Jules Consultancy or that Mrs Leloir was a mere conduit. Mrs Leloir was the person who made the Representations and, in doing so, invited Ms Samson (and Mr Roberts as the prospective purchaser for whom Ms Samson acted) to believe her.34 Mrs Leloir’s conduct in making the Representations was misleading and deceptive. In the circumstances, I am satisfied Mrs Leloir was acting in trade when she made the Representations.
Conclusion
[122] I am satisfied that, prior to the Representations, Jules Consultancy and Mrs Leloir had information which would lead a reasonable person to believe that the Sirocco Apartments suffered from weathertightness problems which went beyond those which had affected the walkways. Indeed, on the basis of information possessed by Jules Consultancy and Mrs Leloir, there was no basis to conclude the Sirocco Apartments did not suffer from weathertightness issues. The defendants, in trade, engaged in misleading and deceptive conduct in breach of s 9 of the Act. They made false and misleading representations concerning the characteristics of the Sirocco Apartments in connection with the sale of the Apartment and therefore breached s 14 of the Act.
34 Body Corporate 202254 v Taylor, above n 22, at [82].
Result
[123] For the reasons given, I am satisfied that Jules Consultancy and Mrs Leloir engaged in misleading and deceptive conduct and made false and misleading representations in connection with the sale of the Apartment when Mrs Leloir made the Representations and, in doing so, breached ss 9 and 14 of the Act.
Thomas J
Solicitors:
Grimshaw and Co, Auckland for Plaintiff
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