Steel v Spence Consultants Ltd - [2017] NZHC 398

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2015-409-000672 [2017] NZHC 398

BETWEEN
EMMA JOY STEEL AND

SARAH NANCY OTT

AS TUSTEES OF THE NINFIELD TRUST

Plaintiffs

AND

SPENCE CONSULTANTS LIMITED First Defendant

GARY BRENT SPENCE Second Defendant

Hearing: 14-16 November 2016

Appearances:

G A Cooper and S Cowan for Plaintiffs
H C Matthews and K Graham for Defendants

Judgment:

9 March 2017

JUDGMENT OF GENDALL J

STEEL v SPENCE CONSULTANTS LIMITED [2017] NZHC 398 [9 March 2017]

Table of Contents

Para No

Introduction [1]

Background facts

[4]

First cause of action

Breach of the Fair Trading Act 1986

[23]

(a) Have the defendants engaged in misleading and deceptive conduct in breach of s 9 of the FTA?

[23]

-     Positive representations in the report?

[31]

-     Misrepresentation by omission?

[40]

(b) Applicability of the disclaimer clause?

[46]

(c) Is Mr Spence personally liable under FTA?

[54]

(d) Measure of loss under the FTA?

[65]

Second cause of action

Negligent misstatement

[87]

-     What was the purpose of the advice known to the defendants at the time of the assessment?

[93]

-     Did the defendants know (at least inferentially) that their advice would be communicated to the plaintiffs in order that it could be used by the plaintiffs for the purpose of considering a purchase of the property?

[94]

-     Did the defendants know (at least inferentially) that the advice was likely to be acted on without independent inquiry?

[96]

-     Did the plaintiffs act on the advice to their detriment?

[98]

-     Breach of duty of care?

[100]

-     Reasonable reliance and the defendants’ disclaimer?

[106]

-     Measure of loss for negligent misstatement?

[111]

Result

[112]

Costs

[113]

Introduction

[1] The plaintiffs seek damages from the defendants in two claims they bring in

this proceeding as a result of a “moisture assessment” property report dated 16 April

2013 (“the report”) the defendants prepared on a residential property at

36A Brookside Terrace, Christchurch (the property), which the plaintiffs were purchasing. The plaintiffs say the report (which they describe as a form of “pre- purchase report”) was misleading in terms of s 9 of the Fair Trading Act 1986 (FTA) as it misrepresented the condition of the property when instead it should have alerted them to signs the house on the property was a “leaky building” in that there was moisture damage to the house and associated concerns. As a result the plaintiffs contend first, the report was false as to weathertightness issues and therefore it was misleading and deceptive, secondly they relied on it and were misled, and thirdly this caused them loss or damage.

[2] As an alternative, the plaintiffs contend the defendants breached a duty of care owed to them as prospective purchasers of the property. This was because the report made representations about the property which were incorrect and it omitted matters concerning moisture which should have been reported upon, thus rendering the report false. Again, the plaintiffs say the house was a “leaky building” in…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2017] NZHC 398
Decision Date: 9 March 2017

CaseChat Overview and Summary

The High Court of New Zealand ruled in Steel v Spence Consultants Limited [2017] NZHC 398 that the defendants engaged in misleading and deceptive conduct in breach of section 9 of the Fair Trading Act 1986. The plaintiffs, Emma Joy Steel and Sarah Nancy Ott as trustees of the Ninfield Trust, purchased a residential property at 36A Brookside Terrace, Christchurch. The defendants, Spence Consultants Limited and Gary Brent Spence, prepared a moisture assessment report on the property which the plaintiffs relied on during their purchase. The plaintiffs claimed that the report was misleading and deceptive, and they suffered loss as a result.

The court found that the report was misleading and deceptive as it failed to disclose visible signs of moisture damage and associated concerns. The report was also found to be misleading by omission, as it did not mention obvious signs of moisture damage which were noticed by Mr Spence during his inspection. The court held that the disclaimer clause attached to the report did not absolve the defendants from liability under the Fair Trading Act.

The court also found that Mr Spence was personally liable under the Fair Trading Act, as he was the sole director and 75 per cent shareholder of Spence Consultants, and he had a significant degree of involvement in the governance and management of the company. The measure of loss under the Fair Trading Act was determined to be $85,000, representing one half of the total $170,000 loss incurred by the plaintiffs. The plaintiffs were also awarded interest on the $85,000 amount at 5 per cent per annum from 5 May 2015 to the date of final payment.

The court briefly addressed the second cause of action, which was the claim of negligent misstatement. However, the court found that the defendants' disclaimer might be determinative insofar as the negligent misstatement cause of action was concerned, and therefore, the defendants were not liable for the negligent misstatement. The court entered judgment in favour of the plaintiffs against the first and second defendants but only under their first Fair Trading Act cause of action. The defendants were ordered to pay the plaintiffs $85,000, plus interest on this sum from 5 May 2015 to the date of final payment at the rate of 5 per cent per annum. Costs were reserved for further consideration.

Orders