To'o v Wellington City Council
[2025] NZHC 216
•20 February 2025
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2024-485-142
[2025] NZHC 216
UNDER the Contract and Commercial Law Act 2017 IN THE MATTER
of claims in negligence and for relief under the Contract and Commercial Law Act 2017
BETWEEN
JULIUS MAXWELL TO’O and JOANNA TO’O
Plaintiffs
AND
WELLINGTON CITY COUNCIL
First Defendant
BRUCE ALEXANDER WELSH
Second Defendant
CLARE MARIE BUTLER and MARIE CLARE TRUSTEE LIMITED
Third Defendants
Hearing: 4 November 2024 Appearances:
D Parker and E McLean for Plaintiffs M Freeman for Third Defendants
Judgment:
20 February 2025
JUDGMENT OF ASSOCIATE JUDGE SKELTON
[1] The third defendants in these proceedings, Ms Clare Butler and Marie Clare Trustee Ltd, apply to strike out all causes of action against them and/or seek summary judgment against the plaintiffs. They argue that none of the plaintiffs’ causes of action against them can succeed because the plaintiffs could not have been assigned any
TO’O v WELLINGTON CITY COUNCIL [2025] NZHC 216 [20 February 2025]
claims against the third defendants. In any event, they submit that the claims are time-barred by the Limitation Act 2010.
Background
[2] The plaintiffs, Mr Julius To’o and Mrs Joanna To’o, are the registered proprietors of a property located in Melrose (the property). The property was constructed between 2002 and 2004, with a Code Compliance Certificate (CCC) being issued on 8 September 2004. Around October 2004, Ms Butler purchased the property. She remained a registered owner of the property until May 2016, when she sold the property to Anastasia To’o (Ms To’o) for $675,000. Ms To’o then sold the property to the plaintiffs (her son being Julius To’o) in August 2017 for $675,000.
[3] The property has weathertightness issues. Ms Butler noticed the water ingress issues from the time she moved into the property in 2004. She made a number of unsuccessful attempts to resolve the weathertightness issues, which eventually led her to pursuing a claim with the Weathertight Homes Resolution Service (WHRS) in 2011. As part of her claim, she commissioned a report from Ron Thurlow Building Consultant Ltd in 2011. The report identified widespread weathertightness defects and damage to the north, west and south elevations of the property. The final WHRS assessor’s report in March 2012 identified construction defects, water entry and damage and provided a schedule of remedial work, which included work to all elevations.
[4] The claim was eventually settled for $60,000. The settlement agreement obliged Ms Butler to carry out all repairs necessary to remedy the defects to the building and/or ensure that the repairs were carried out. If she sold the property, she warranted to include a special condition in the agreement requiring the purchaser to acknowledge the claim and the settlement.
[5] Ms Butler says that the consensus between the experts was that the problem was the north wall and in particular the north wall patio. Remedial work was undertaken in 2014 and a CCC was issued for that work on 9 June 2014.
[6] As noted, in 2016 Ms Butler sold the property to Ms To’o. The plaintiffs assisted Ms To’o with the purchase of the property. The plaintiffs had returned to New Zealand after living overseas, and planned to move into the home with Ms To’o and eventually purchase the property from her. The plaintiffs were aware of the previous weathertightness issues as the following clause was included in the agreement for sale and purchase:
The vendor was a party to a Settlement Agreement following a claim by the vendor to the Weathertight Homes Tribunal. It was a part of the Settlement Agreement that the vendor would carry out repairs to the dwelling. The vendor has carried out the repairs and a Code of Compliance Certificate for the work was issued by the Council on 9th Day of June 2014. A copy is attached.
It was a term of the settlement Agreement that if the vendor sells the property that the following clause be inserted in any Sale and Purchase Agreement:
The purchasers acknowledge that a claim has been made by Claire Marie Butler against the Wellington City Council and other parties in respect of alleged defects in the building, and the Council and other parties have by a Settlement Agreement dated 10 May 2013 paid compensation to settle the claim. The purchasers agree that in the event they sell the property or otherwise assign their beneficial interest in the property to another party, they will include a condition on the same terms as this condition, including the requirement by subsequent purchasers or assignees to include this condition.
[7] When the property was sold to the plaintiffs in 2017, an identical clause was included in the sale and purchase agreement.
[8] In or about July 2022, the plaintiffs say they became aware of leaks at the property when they observed water ingress. They made an Official Information request to Wellington City Council (WCC) and received the final WHRS assessor’s report. In or about September 2022, the plaintiffs engaged a building surveying company, Helfen Ltd (Helfen), to review the documents obtained from WCC and to investigate the water ingress. The plaintiffs received a final report from Helfen on 11 April 2023. Helfen opined that there were water ingress defects on the north, south and west walls. Helfen also considered that the 2014 remediation was inadequate to resolve all the issues identified through the WHRS claim.
[9] In October 2023, the plaintiffs entered into an agreement with Ms To’o to take an assignment of alleged causes of action against the defendants named in the proceedings. The agreement relevantly provides:
F.In September 2022, the Assignee discovered leaking issues at the Property. The Assignee has received expert advice that the Property is subject to weathertightness defects and damages requiring extensive remediation. The cost of the remediation is currently estimated to be $1,136,538.10.
G.The Assignee has instructed lawyers to file legal proceedings to recover losses suffered by the Assignee in relation to defects and damage at the Property.
H.The Assignee has a claim available against the Assignor for contractual mistake under sections 24–26 of the Contract and Commercial Law Act 2017. In turn, the Assignor has claims available against Clare Marie Butler and Marie Clare Trustee Limited for contractual mistake under sections 24-26 of the Contract and Commercial Law Act 2017 and for misrepresenting the extent of remedial work caried out at the property and the condition of the property.
I.In consideration for the Assignee not suing the Assignor for losses suffered by the Assignee in relation to the Property arising from the Sale and Purchase of the Property on 3 August 2017, the Assignor has agreed to assign all her causes of action, rights, entitlement to the proceeds of any damages/compensation for losses suffered in relation to the Property.
[10] In February 2024, the plaintiffs brought legal action against three defendants, which include the third defendants. With regard to the third defendants, the plaintiffs brought a cause of action for misrepresentation and two causes of action for mistake under the Contract and Commercial Law Act 2017 (CCLA). They seek damages for the cost of remedial work estimated to be approximately $1.136 million (or, in the alternative, loss of property value), the costs of building consultants, architects and engineers engaged to inspect and report, consequential losses, damages for stigma, general damages, interest and costs.
[11] During the course of the hearing, Mr Parker, counsel for the plaintiffs, advised that the plaintiffs would be filing an amended statement of claim including an additional (fourth) cause of action for negligent misstatement against the third defendants. The amended statement of claim was filed on 5 November 2024. The negligent misstatement claim is not an assigned claim, but the third defendants have
filed a statement of defence alleging that the claim is time-barred under the Limitation Act 2010.
Legal principles
Strike out
[12] With regard to the defendant’s application for strike out, r 15.1 of the High Court Rules 2016 relevantly provides:
15.1 Dismissing or staying all or part of proceeding
(1)The court may strike out all or part of a pleading if it—
(a)discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or
…
[13] The principles pertaining to this provision are well-established. The principles were summarised by the Court of Appeal in Attorney-General v Prince, which has been most recently endorsed by the Supreme Court in Smith v Fonterra Co-operative Group Ltd:1
[38] We [address each cause of action] through the lens of well-established strike out principles. That is to say, we assume the pleaded material facts are true save for those that are entirely speculative and without foundation and we also bear in mind that the strike out jurisdiction is to be exercised sparingly and only in clear cases. We must be certain the claim is so untenable it cannot succeed and slow to strike out claims in any developing area of law. The fact a claim involves a complex question of law which requires extensive argument should be no bar provided we have the requisite materials and assistance to determine the matter. We must also be mindful of the well-established principle that if any deficiencies can be cured by an amendment to the pleadings, allowing the claim to proceed on condition the necessary amendments are made, is preferable to strike out.
[14] As the Supreme Court in Smith v Fonterra emphasised, a measured approach is appropriate. The Court held that:2
1 Attorney-General v Prince [1998] 1 NZLR 262 (CA) at [38] as cited in Smith v Fonterra Co-Operative Group Ltd [2024] NZSC 5, [2024] 1 NZLR 134 [Smith v Fonterra] at [74]–[75]. See also Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [33] per Elias CJ and Anderson J.
2 Smith v Fonterra, above n 1, at [84]–[85] citing Couch v Attorney-General, above n 1, at [37] per Elias CJ and Anderson J (footnotes omitted).
[84] Such an approach is consistent with fully informed access to civil justice by those who have a tenable case that they have been harmed and who will otherwise go without remedy based on a pre-emptive evaluation only. And as was observed in Couch, a refusal to strike out a cause of action “says little about its eventual merit”. That is to say, it is not a commentary on whether or not the claim will ultimately succeed.
[85] Pre-emptive elimination is only appropriate where it can be said that whatever the facts proved, or arguments and policy considerations advanced at trial, a case is bound to fail.
Summary judgment
[15]Rule 12.2 of the High Court Rules relevantly provides:
12.2 Judgment when there is no defence or when no cause of action can succeed
…
(2)The court may give judgment against a plaintiff if the defendant satisfies the court that none of the causes of action in the plaintiff’s statement of claim can succeed.
[16] The approach to an application for summary judgment by defendants was discussed in the Court of Appeal’s decision in Westpac Banking Corp v MM Kembla New Zealand Ltd, which was later summarised by the Court of Appeal in Stephens v Barron:3
[9] … Summary judgment may be given under that rule if the defendant satisfies the Court that none of the causes of action in the plaintiff's statement of claim can succeed. This Court's decision in Westpac Banking Corp v M M Kembla New Zealand Ltd makes it clear that a defendant seeking summary judgment has a considerable burden to discharge. Elias CJ delivering the judgment of the Court, made the following points:
(a)The defendant has the onus of proving on the balance of probabilities that the plaintiff cannot succeed. Usually this will arise where the defendant can offer evidence which is a complete defence to the plaintiff's claim.
(b)An application for summary judgment will be inappropriate where there are disputed issues of material fact or where material facts need to be ascertained by the Court and cannot confidently be concluded from affidavits. It may also be inappropriate where ultimate determination turns on a judgment able to be properly arrived at only after a full hearing of the evidence.
3 Stephens v Barron [2014] NZCA 82, (2014) 21 PRNZ 734 at [9] citing Westpac Banking Corp v M M Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA) at [61]–[62], [64], [66] and [68] (footnotes omitted).
(c)The Court must be satisfied that none of the claims can succeed. It is not enough that they are shown to have weaknesses. The assessment is not to be arrived at on a fine balance of the available evidence as would be appropriate at a trial.
(d)The residual discretion of the Court to refuse summary judgment would be properly invoked to avoid the oppression which would otherwise result if an application by a defendant for summary judgment would pre-empt a plaintiff exercising the right to amend the pleadings.
(e)Summary judgment should not be applied for unless the substantive merits of the case are clear and capable of summary disposal.
[17]As the Privy Council noted in Jones v Attorney-General, summary judgment:4
… should not be given for the defendant unless [the defendant] shows on the balance of probabilities that none of the plaintiff’s claims can succeed. That is an exacting test, and rightly so since it is a serious thing to stop a plaintiff bringing his claim to trial unless it is quite clearly hopeless.
[18] The courts have observed the similarity between a defendant’s application for summary judgment and an application for strike out.5 The applications, however, are not interchangeable. In a summary judgment application, affidavit evidence can be provided and, therefore, judgment can be obtained on the basis of material outside of the pleadings. Further, as Elias CJ noted in Body Corporate No 207624 v North Shore City Council, if the dispute is essentially a legal question, striking out is likely to be the appropriate cause of action.6
Issues
[19] The applications for strike out and/or summary judgment raise two key issues that must be determined:
(a)was the assignment of Ms To’o’s claims for misrepresentation and mistake to the plaintiffs valid?
4 Jones v Attorney-General [2003] UKPC 48, [2004] 1 NZLR 433 at [10].
5 See Ferrymead Tavern Ltd v The Christchurch Press Co Ltd [1999] NZAR 529 (HC) at [10]–[12]; Body Corporate No 2076624 v Northshore City Council [2012] NZSC 83, [2013] 2 NZLR 297 at [4]; and Bernard v Space 2000 Ltd (2001) 15 PRNZ 338 (CA) at [19]–[21].
6 Body Corporate No 207624 v North Shore City Council, above n 5, at [4] as cited in Jessica Gorman and others McGechan on Procedure (online looseleaf ed, Thomson Reuters) at [HR12.2.07].
(b)are the plaintiffs’ claims against the third defendant time barred under the Limitation Act 2010?
Was the assignment valid?
[20]In Trendtex Trading Corporation v Credit Suisse, Lord Roskill stated:7
The court should look at the totality of the transaction. If the assignment is of a property right or interest and the cause of action is ancillary to that right or interest, or if the assignee had a genuine commercial interest in taking the assignment and in enforcing it for his own benefit, I see no reason why the assignment should be struck down as an assignment of a bare cause of action or as savouring of maintenance.
[21]The legal principles applicable to assignments were recently summarised in
Ingenious Asset Management Ltd v McConnon:8
[23] Assignment of a debt is permissible and specifically provided for in s 50 of the Property Law Act, even where litigation will be necessary to recover the debt.
[24] However, assignments of bare causes of action in tort and other personal actions are, with certain exceptions, not permitted in New Zealand. The recognised exceptions are an assignment to a party with an antecedent commercial relationship with the assignor, or an assignment by a liquidator.
[25] When determining whether there has been an impermissible assignment of a bare cause of action, the Court should look at the totality of the transaction. If the cause of action is ancillary to a property right that has been assigned, then it is not an assignment of a bare cause of action.
[22] The rule on assignments has its origins in the torts of maintenance and champerty.9 These torts, in essence, prevent litigation being used as a commodity to be bought and sold.10 Leading commentators consider that “[t]he modern trend is to
7 Trendtex Trading Corporation v Credit Suisse [1982] AC 679, [1981] 3 WLR 766 (HL) at 779. See also National Mutual Property Services (Australia) Pty Ltd v Citibank Savings Ltd & Ors (1995) 132 ALR 514 (GCA) at 540.
8 Waterhouse v Contractors Bonding Ltd [2013] NZSC 89, [2014] 1 NZLR 91 at [57]; PricewaterhouseCoopers v Walker [2017] NZSC 151, [2018] 1 NZLR 735 at [78]; and Trendtex Trading Corporation v Credit Suisse, above n 7, at 779 as cited in Ingenious Asset Management Ltd v McConnon [2024] NZHC 624 (footnotes omitted).
9 Waterhouse v Contractors Bonding Ltd, above n 8, at [57].
10 See discussion in Stephen Todd and Matthew Barber (eds) Burrows, Finn and Todd on the Law of Contract in New Zealand (7th ed, LexisNexis, Wellington, 2022) at [17.1.8]; and Stephen Todd and others (eds) Todd on Torts (9th ed, Thomson Reuters, Wellington, 2023) at [22.13].
water down long-standing arguments based on maintenance and champerty and to favour facilitating access to justice and the promotion of settlements.”11
[23] Mr Freeman, for the third defendants, submits that statutory remedies for contractual misrepresentation and mistake under the CCLA are personal statutory causes of action which are not assignable.12 Turning first to misrepresentation, as expressed in s 35 of the CCLA, Mr Freeman submits that the language used in the section is the same as the language used in s 43(1) of the Fair Trading Act 1986 (FTA); which has been held to be not assignable.13 Section 35 of the CCLA provides:
35 Damages for misrepresentation
(1)If a party to a contract (A) has been induced to enter into the contract by a misrepresentation, whether innocent or fraudulent, made to A by or on behalf of another party to that contract (B),—
(a)A is entitled to damages from B in the same manner and to the same extent as if the representation were a term of the contract that has been breached; and
(b)…
[24] Mr Freeman argues the elements of s 35 of the CCLA point to the section being personal to the contracting parties. The assessment of misrepresentation is focussed on how it was reasonably understood by the contracting party. Reliance, although assessed objectively, is assessed against the circumstances and attributes of the person relying on the misrepresentation. Accordingly, he submits the action is not capable of assignment.
[25] Mr Freeman raises a similar argument in respect of the cause of action for contractual mistake. He contends that the language contained in ss 21–32 of the CCLA supports an interpretation that a claim in contractual mistake is a personal cause of action and thus cannot be assigned. He submits that the purpose of the contractual mistake sub-part of the CCLA is to mitigate the arbitrary effect of mistakes.14 The
11 Todd and others, above n 10, at [22.13].
12 Mr Freeman relies on Body Corporate 160361 (Fleetwood Apartments) v BC 2004 Ltd and BC 2009 Ltd [2014] NZHC 1514 [Fleetwood Apartments] at [120].
13 See Grain Processors Ltd v Bluebird Foods Ltd HC Auckland CP260/98, 24 August 1999; and
Swindle v Withers [2014] NZHC 578 at [68].
14 Contract and Commercial Law Act 2017, s 21(1).
powers should be exercised in a way that does not prejudice the general security of contractual relationships. Mr Freeman says that these purposes would be undermined if remedies for contractual mistake were assignable.
[26] He also argues that the sub-part is a code, replacing the common law for parties to contracts and persons who claim through or under a party to the contract.15 Mr Freeman submits that s 29 of the CCLA clarifies that “a person claiming through or under a party to a contract” is relevant only to the powers of the Court to grant relief to parties affected under the contract, in addition to the contracting parties.
Are the claims assignable?
[27] There is some authority that strictly personal statutory causes of action are not assignable, for example claims under legislation such as the FTA, Consumer Guarantees Act 1993 and possibly the Building Act 2004.16 With regard to the FTA, it seems that the reason that a cause of action is not assignable is that “the award of compensation must be to the person who actually suffered the loss”.17
[28] However, the issue may depend on the provisions of the statute in question.18 Mr Parker, for the plaintiffs, submits that, unlike the FTA, the CCLA makes provision for assignees.
[29] With regard to the assigned causes of action for mistake, s 29 of the CCLA provides that:
29Court may grant relief to person claiming through or under party
If, under sections 24 to 26, the court has power to grant relief to a party to a contract, it may grant relief not only to that party but also to any person claiming through or under that party.
[30] Burrows, Finn and Todd consider that this wording includes parties who have been assigned, or otherwise acquired, rights in relation to the subject matter or the
15 Section 22.
16 Fleetwood Apartments, above n 12 at [120]; and Swindle v Withers, above n 13, at [50]–[68].
17 Fair Trading Act 1986, s 43(1) and (3)(f); Swindle v Withers, above n 13, at [67]; and Todd and others, above n 10, at [22.13].
18 Todd and others, above n 10, at [22.13].
consideration for the mistaken contract.19 Arguably, this would include a person in the position of the plaintiffs who has been assigned a cause of action in relation to a defective property which is the subject matter of the mistaken contract.
[31] Therefore, I consider there is a tenable argument that the statutory cause of action for mistake is assignable.
[32]Further, s 54(1) of the CCLA which applies to sub-pt 3 of the CCLA provides:20
54 Remedies enforceable by or against assignee
(1) If a contract, or the benefit or burden of a contract, is assigned, the remedies of damages and cancellation are enforceable by or against the assignee (except to the extent that it is otherwise provided in the assigned contract).
…
[33]Section 56 also provides:
56 Assignee indemnified by assignor
(1)The assignee is entitled to be indemnified by the assignor against any loss suffered by the assignee and arising out of—
(a)any term of the assigned contract that was not disclosed to the assignee before or at the time of the assignment; or
(b)any misrepresentation that was not so disclosed.
…
[34] Mr Freeman submits that s 54(1) applies when there is assignment of a contract and choses in action “go with it”. However, the point is that this section contemplates assignees of the benefit of a contract pursuing statutory claims for damages and cancellation under sub-pt 3 of the CCLA.21 This indicates that such claims are not strictly personal statutory claims and therefore are assignable.
[35] Mr Freeman submits that the indemnity in s 56(1)(b) in respect of “any misrepresentation” indicates that any claim for damages or cancellation in respect of
19 Todd and Barber, above n 10, at [10.5.1].
20 See discussion at [17.3].
21 At [17.3].
a misrepresentation does not run with the contract on an assignment. However, the indemnity section only applies to loss suffered by the assignee arising out of any terms of the assigned contract or any misrepresentation not disclosed to the assignee before or at the time of the assignment. Further, it is not clear whether the “misrepresentation” referred to in s 56(1)(b) is a misrepresentation by the assignor (in respect of which the assignee may be liable) or the other contracting party. Even if it encompasses the latter, the entitlement to an indemnity from the assignor does not preclude the assignee’s entitlement to invoke the statutory remedies for damages or cancellation conferred by s 54(1). In my view, there is a tenable argument on the basis of s 54(1) that statutory claims for misrepresentation are assignable.
Genuine commercial interest in the claims
[36] The next issue is whether there is a tenable argument that the assignment of these causes of action comes within the recognised exceptions to the prohibition on assignment of a bare right of action. In this case, the assignment of the causes of action occurred separately from the transfer of the property to the plaintiffs.22 Therefore, it seems to me the validity of the assignment turns on whether the plaintiffs have a genuine commercial interest in the claims.
[37] Mr Freeman submits the plaintiffs do not have a genuine commercial interest in the assignment of the claim. He submits that the pleaded interest is that they own the property and intend to repair it. He submits that this does not articulate a genuine commercial interest in Ms To’o’s statutory rights and remedies related to the formation of the contract with the third defendants. Mr Freeman submits that for there to be a genuine commercial interest in an assignment, a pre-existing stake in actual or imminent litigation must exist and an important policy consideration is that assignment must settle a party’s exposure but not create litigation.23 Mr Freeman submits that here there is no pre-existing litigation between the plaintiffs and Ms To’o or Ms To’o and the third defendants which would give rise to a “genuine commercial interest”. Mr Freeman submits that “evidently” there was no contemplation of any
22 Compare Body Corporate 326421 v Auckland Council [2015] NZHC 862 at [283].
23 Mr Freeman relies on Fleetwood Apartments, above n 12; and Auckland City Council v Auckland City Council [2008] 1 NZLR 838, (2007) 18 PRNZ 785 (HC) at [47]–[53].
claim by the plaintiffs against Ms To’o, the statements in the deed of assignment are “not true”, and the third defendants were always the intended target of the litigation.
[38] However, it seems to me that there is a tenable argument on the evidence that the plaintiffs have a genuine commercial interest in taking the assignment and in enforcing it for their own benefit.24 The plaintiffs are the current owners of the property and have an antecedent commercial relationship with the assignor (Ms To’o). They assisted Ms To’o with the purchase of the property from the third defendants and then purchased the property from Ms To’o. Allegedly, they relied on and were influenced by the same alleged misstatements by the third defendants that were included in the sale and purchase agreement between Ms To’o and the third defendants.
[39] Arguably, the property is defective, and the plaintiffs had a claim against Ms To’o (or now her estate). The deed of assignment records that the plaintiffs had instructed lawyers to file legal proceedings to recover losses suffered by the plaintiffs in relation to defects and damage to the property, so arguably there was imminent litigation (if required). The effect of the deed of assignment is settlement of the plaintiffs’ alleged claims against Ms To’o and assignment of her causes of action against the third defendants to the plaintiffs. This did not create litigation which would not otherwise inevitably exist and involve the third defendants, either as third parties or defendants. The alternative for the plaintiffs was to pursue their claims against Ms To’o, requiring Ms To’o to pursue her claims against the third defendants (as third parties). Alternatively, the plaintiffs could have sued the third defendants in tort for negligent misstatement.25 There is no clear evidential basis at this stage for the submission that the statements in the deed are “not true”. That will be a matter for trial.
[40] Further, Mr Freeman says the assignment gives the plaintiffs more extensive rights than they otherwise had, allowing them to profit. He submits the plaintiffs have full control over the litigation of Ms To’o’s claims, and the assignment is designed to
24 Trendtex Trading Corporation v Credit Suisse, above n 7, at 779.
25 As discussed above, this cause of action has now been added as a fourth and alternative cause of action in the amended statement of claim dated 4 November 2024.
create litigation where it would not otherwise exist. This, he contends is contrary to public policy and, in essence, champertous.
[41] However, it is not apparent that the assignment gives the plaintiffs more extensive rights than they otherwise would have had and allows them to profit. As discussed above, the assignment does not create litigation where it would not otherwise exist. The assigned claims are for misrepresentation and mistake. The plaintiffs seek the estimated costs of remedial work required or, alternatively, the diminution in value of the property. They also seek the costs of consultants, and other consequential costs (costs of relocation), damages for stigma and general damages. The plaintiffs could arguably have claimed such costs and damages against Ms To’o.26 However, the plaintiffs have taken an assignment of Ms To’o’s claims against the third defendants. In this regard, Mr Parker acknowledges that, in respect of the assigned claims, the plaintiffs are unable to pursue and obtain general damages.27
[42] With regard to the level of control the plaintiffs have over the litigation of the claims, concerns over control have been raised in the context of litigation funders,28 but the level of control does not appear to be significant factor in the context of assignments being taken by subsequent purchasers of defective property.29 It does not seem to me that the level of control in this case should invalidate the assignment where the plaintiffs are current owners of the subject property allegedly requiring remediation and have a tenable argument for a genuine commercial interest in the claims.
Do the assigned claims have value?
[43] Although not strictly relevant to the validity of the assignment, Mr Freeman also raises the accepted position that the assigned claims pursued by the plaintiffs are only as good as the claims that could have been made by Ms To’o.30 Mr Freeman submits Ms To’o’s claims have no evidential basis as there is no evidence about her understanding of the express or implied misrepresentation, what induced her to enter
26 Todd and Barber, above n 10, at [10.5.1].
27 See Body Corporate 326421 v Auckland Council, above n 22, at [276]–[278].
28 PricewaterhouseCoopers v Walker, above n 8, at [83]–[88].
29 Body Corporate 326421 v Auckland Council, above n 22, at [272]–[284].
30 At [272].
the contract, or any mistake she made. Mr Freeman notes that Ms To’o has passed away and it appears that no evidence has been obtained from her in affidavit form.
[44] However, the amended statement of claim alleges the necessary elements of reliance, inducement, understanding and influence. The plaintiffs’ affidavits make clear that they (in particular Joanna To’o, who assisted Ms To’o with the purchase of the property and corresponded with real estate agent throughout) will give evidence on these issues at trial.31 It is also apparent that there is contemporaneous documentary evidence that will be adduced in relation to these issues. For example, email correspondence which copied in Ms To’o is available. Issues of admissibility and weight are for trial.
[45] Mr Freeman submits that Ms To’o has not suffered any loss as she sold the property for the same price she paid for it. However, the plaintiffs’ amended claim alleges that Ms To’o’s loss was in continuing to rely on the misrepresentations and labour under the mistake in selling the property which caused her to incur liability to the plaintiffs under the CCLA. Mr Freeman submits that this is “artificial”. Even if it were not, he submits that Ms To’o’s loss in respect of the assigned claims for mistake would be confined to a “substantially unequal exchange of values”. In the circumstances, he submits that must be an amount less than $675,000 rather than the
$1.136 million the plaintiffs are claiming from the third defendants. However, it seems to me that the plaintiffs have a tenable argument that Ms To’o’s loss was the liability she incurred to the plaintiffs. The issue of the quantum of loss is an issue for trial.
[46] Further, I consider the plaintiffs also have a tenable argument to invoke the principles recognised in Darlington Borough Council v Wiltshier Northern Ltd.32 These principles may allow an assignee of causes of action in the position of the plaintiffs to recover their loss from the third defendants even though the contracting party and assignor (Ms To’o) may have suffered no loss.
31 See Evidence Act 2006, s 18.
32 Darlington Borough Council v Wiltshier Northern Ltd [1995] 1 WLR 68 (CA) at 79–81.
Conclusion – assignment
[47] Overall, I am satisfied the plaintiffs have a tenable argument that the statutory causes of action are assignable and that the plaintiffs have a genuine commercial interest in the claims. I am not satisfied that the validity of the assignment is so untenable that the plaintiffs’ assigned claims cannot succeed.
[48] Nor am I am not satisfied that the issues raised regarding evidential basis and loss render the plaintiffs’ assigned claims so untenable that they cannot succeed.
Limitation
[49] Mr Freeman submits that all the plaintiffs’ claims against the third defendants are time barred under the Limitation Act 2010. The claims against the third defendants are money claims and, accordingly, need to be brought within six years after the date of the act or omission on which the claim is based (primary period).33 The third defendants sold the house to Ms To’o in May 2016, which is when the alleged mistake, misrepresentations and/or misstatements were made. The claimants did not file their claim until February 2024, outside the primary period. The third defendants contend that the new cause of action for negligent misstatement filed on 5 November 2024 is further outside the primary period.
[50] Mr Freeman submits that none of the factors in s 14 of the Limitation Act support a late knowledge date. Mr Freeman submits the assigned claims are in contract. He contends that, in contract, the acts or omissions in s 14(1)(a) and (b) are knowledge of the terms of the contract and the parties to the contract, which is known when the contract is formed.34 He submits that s 14(1)(c) is not applicable because a contractual cause of action is not dependent on a claimant suffering loss,35 and s 14(1)(d) and (e) are not relevant or applicable.
[51] Mr Freeman also submits that the relevant date for late knowledge is not the date all relevant facts are known but the date when an enquiry should have been
33 Limitation Act 2010, s 11(1).
34 Mr Freeman relies on Rea v Auckland Council [2024] NZCA 313 at [56]–[57].
35 Gedye v South [2010] NZCA 207 at [44].
made.36 He submits that where a contract records that a property has been subject to a WHRS claim and settlement, and contains a due diligence condition, the purchaser should have made further enquiry before entering the contract.
[52] Mr Parker submits that the late knowledge provision under s 14 of the Limitation Act applies. He submits the late knowledge date is when a claimant has actual or constructive knowledge of an act or omission attributable to the defendant, and of noticeable loss or damage that is more than minor.37 He contends that the plaintiffs did not have knowledge of the act attributable to the third defendants, being inducing Ms To’o to enter into the contract by mistake or misrepresentation, until they received the Helfen report in April 2023. At that time, they discovered that not all of the necessary repairs had been completed and they had suffered loss or damage that is more than minor. Mr Parker submits this fact is recognised under s 14(1)(e) of the Limitation Act. The late knowledge period is 3 years after the late knowledge date.38 Accordingly, the claims are not time-barred.
Discussion
[53]In Murray v Morel & Co Ltd, the Supreme Court observed:39
… in order to succeed in striking out a cause of action as statute-barred, the defendant must satisfy the Court that the plaintiff’s cause of action is so clearly statute-barred that the plaintiff’s claim can properly be regarded as frivolous, vexatious or an abuse of process. If the defendant demonstrates that the plaintiff’s proceeding was commenced after the period allowed for the particular cause of action by the Limitation Act, the defendant will be entitled to an order striking out that cause of action unless the plaintiff shows that there is an arguable case for an extension or postponement which would bring the claim back in time.
[54] There is no dispute that all the plaintiffs’ causes of action against the third defendant have been made after the expiry of the claims’ primary periods. In respect of the claims for misrepresentation and mistake, the close of the start date for the primary periods was May 2016. In respect of the negligent misstatement claim, the close of the start date for the primary period was August 2017.
36 Rea v Auckland Council, above n 34, at [67].
37 At [56]–[57] and [62]–[63].
38 Section 11(3)(a).
39 Murray v Morel & Co Ltd [2007] NZSC 27, [2007] 3 NZLR 721 at [33].
[55] The issue is whether the plaintiffs had late knowledge of the claims. Section 14 of the Limitation Act relevantly provides:
14 Late knowledge date (when claimant has late knowledge) defined
(1)A claim’s late knowledge date is the date (after the close of the start date of the claim’s primary period) on which the claimant gained knowledge (or, if earlier, the date on which the claimant ought reasonably to have gained knowledge) of all of the following facts:
(a)the fact that the act or omission on which the claim is based had occurred:
(b)the fact that the act or omission on which the claim is based was attributable (wholly or in part) to, or involved, the defendant:
(c)if the defendant’s liability or alleged liability is dependent on the claimant suffering damage or loss, the fact that the claimant had suffered damage or loss:
(d)if the defendant’s liability or alleged liability is dependent on the claimant not having consented to the act or omission on which the claim is based, the fact that the claimant did not consent to that act or omission:
(e)if the defendant’s liability or alleged liability is dependent on the act or omission on which the claim is based having been induced by fraud or, as the case may be, by a mistaken belief, the fact that the act or omission on which the claim is based is one that was induced by fraud or, as the case may be, by a mistaken belief.
(2)A claimant does not have late knowledge of a claim unless the claimant proves that, at the close of the start date of the claim’s primary period, the claimant neither knew, nor ought reasonably to have known, all of the facts specified in subsection (1)(a) to (e).
…
[56] I now turn to address recent case law interpreting s 14(1). I then assess the reasonably arguable application of the paragraphs under subsection 14(1) to the causes of action in this proceeding. I then examine when the plaintiffs gained knowledge, or ought reasonably to have gained knowledge, of the relevant facts.
Interpretation of s 14(1)
[57] The Court of Appeal recently interpreted the paragraphs under subs 14(1) in Rea v Auckland Council.40 The Court confirmed that the provisions in ss 11(2), 11(3) and 14(1) of the Limitation Act do not distinguish between contractual and tortious claims.41
[58] In Rea, the plaintiffs alleged the Auckland Council was negligent in issuing a CCC in 2013. The Court of Appeal held that:
(a)In respect of s 14(1)(a), the words “act or omission on which the claim is based” have their plain and ordinary meaning.42 All the plaintiffs needed to know under s 14(1)(a) was that a CCC had been issued. The plaintiffs did not need to know all the facts necessary to allege that the Council had breached the duty to exercise reasonable skill and care in the performance of its building-control functions.43
(b)For the purposes of s 14(1)(b), all the plaintiffs needed to know was that the issuing of the CCC was attributable to the Council.44
(c)For the purposes of s 14(1)(c), the Court of Appeal held that damage will exist if there are defects that are noticeable, and not minor.45 There is no requirement for knowledge of a causal link between the defendant’s act or omission and the loss or damage.46
[59] A relevant case post-Rea is Baxter v Building Inspection Company Ltd.47 In that case, the parties entered into a sale and purchase agreement for a property dated 29 October 2014 with the purchase settling on 5 December 2014. The third defendant warranted that if she had done, or caused to be permitted to be done, any work on the
40 Rea v Auckland Council, above n 34, at [45]-[57] and [58]-[63].
41 At [51].
42 At [56].
43 At [56].
44 At [57].
45 At [63].
46 At [62].
47 Baxter v Building Inspection Company Ltd [2024] NZHC 2652.
relevant property then any building consent required for that work was obtained. She also warranted that, to her knowledge, the works were completed in compliance with such building consents and, where appropriate, a CCC was issued. The plaintiff claimed that work had been carried out in August 2014 without a building consent, despite the warranty. The plaintiff claimed in contract for breach of warranty and sought damages for the repair costs to the property. The plaintiff identified defects in the property in July 2021. The proceeding was commenced on 1 December 2023. The third defendant raised a limitation defence. It was acknowledged by the plaintiff that the primary period (six years) had expired as the breach of warranty had occurred at the date of settlement of the purchase.48 The issue was whether it was beyond argument that materials provided to the plaintiff prior to purchase would have led a reasonable person in the plaintiff’s position to discover the absence of a building consent in 2014. If that was not so, it was accepted that the plaintiff could rely on late knowledge of the breach of warranty when she identified the defects in July 2021.49
Subsections 14(1)(a) and 14(1)(b)
[60] Regarding claims for damages for misrepresentation, the “act or omission on which the claim is based” is arguably the entry into the contract induced by an alleged misrepresentation.50 Therefore, it is arguable that the acts on which the statutory claims for misrepresentation and mistake are based is entry into the agreements induced by the alleged misrepresentations made by the third defendants or influenced by a mistake arising from the alleged misrepresentations.
[61] Ms To’o and/or the plaintiffs obviously had knowledge of the alleged representations and entry into the agreements at the relevant times. However, under s 14(1)(a) and 14(1)(b), it is arguable that they were also required to have knowledge
48 Gedye v South [2010] NZCA 207, [2010] 3 NZLR 271 at [41]-[44]; Klinac v Lehmann HC Whangarei AP15/01, 6 December 2001 at [52].
49 J C Corry, Limitation Act Handbook (LexisNexis, Wellington, 2011) at [14.1.14, fn 180]; where the author states that in a claim for breach of contract, the act or omission on which the claim is based is the breach of contract, and the late knowledge date is the date when knowledge of the breach is gained. I note that, otherwise, in breach of warranty claims, where the breach occurs at the time of completion of the contract containing the warranty, there could never be late knowledge for the purposes of s 14(1) as the defendant’s liability is not dependent on the claimant suffering loss, so s 14(1)(c) is not applicable.
50 Rea v Auckland Council, above n 34, at [46]; Klinac v Lehmann HC Whangarei AP15/01, 6 December 2001 at [50] and [52].
that the representations were false (that is, they were misrepresentations and/or misstatements).
Subsection 14(1)(c)
[62] The statutory cause of action for misrepresentation under s 35 of the CCLA is a claim for “damages for misrepresentation”. However, the liability of the defendant is not dependent on the claimant suffering damage or loss, so s 14(1)(c) is not applicable.51
[63] Arguably, the defendant’s liability for the statutory causes of action for mistake is dependent on the claimant suffering a form of damage or loss, so s 14(1)(c) is arguably applicable. This is because s 24(1)(b) of the CCLA requires a “substantially unequal exchange of values” or “a benefit being conferred or an obligation being imposed or included” that was “a benefit or an obligation substantially disproportionate to the consideration for the benefit or obligation”.52
[64] Liability for the fourth cause of action for negligent misstatement is dependent on the plaintiff suffering damage or loss, meaning s 14(1)(c) applies.53
Section 14(1)(e)
[65] With regard to the causes of action for mistake, there is a tenable argument that Ms To’o and/or the plaintiffs were required to have gained knowledge of the fact in s 14(1)(e). That is, they needed to have gained knowledge, or ought reasonably to have gained knowledge, that the entry into the contracts had been induced or influenced by a mistaken belief resulting from the third defendants’ alleged misrepresentations.54
51 Todd and others, above n 10, at [4.8.6(4)].
52 Contact and Commercial Law Act, s 24(1)(b). See NZX Ltd v Ralec Commodities Pty Ltd
HC Wellington CIV-2011-485-1299, 22 November 2011 at [13].
53 Todd and others, above n 10 at [4.8.4].
54 Corry, above n 49, at [14.1.22]-[14.1.25].
[66] Arguably, therefore, s 14(1)(e) is also applicable to the statutory cause of action for misrepresentation in that entry into the contract has been induced by a mistaken belief resulting from the third defendants’ alleged misrepresentations.55
When did the plaintiffs gain “late knowledge” for the purposes of s 14(1)?
[67] For s 14(1)(a) and 14(1)(b), I have found that it is arguable that the acts on which the statutory causes of action for misrepresentation and mistake are based are entry into the agreements induced by the alleged misrepresentations or misstatements made by the third defendants. It is, therefore, arguable that the plaintiffs were required to have knowledge that the alleged representations were false. This requires assessment as to when Ms To’o and/or the plaintiffs’ gained knowledge or ought reasonably to have gained knowledge that the representations were false.
[68] I have found that s 14(1)(c) applies to the cause of action for negligent misstatement and that it is arguable that it applies to the causes of action for mistake. For those causes of action Ms To’o and/or the plaintiffs were required to have gained knowledge or ought reasonably to have gained knowledge that they had suffered damage or loss. As noted above,56 damage exists if there are defects that are noticeable and not minor.
[69] I have found that it is arguable that s 14(1)(e) applies to the statutory causes of action for mistake and misrepresentation. This requires assessment as to when Ms To’o and/or the plaintiffs gained knowledge or ought reasonably to have gained knowledge that they had been induced to enter into the agreements by a mistaken belief resulting from the alleged misrepresentations/misstatements.
[70] The plaintiffs contend that they were first aware of leaks at the property when they observed water ingress around July 2022. They subsequently made an Official Information request to WCC and received a copy of the final WHRS assessor’s report. In or about September 2022, the plaintiffs engaged Helfen to investigate the water
55 It is apparent that inducement by fraud in s 14(1)(e) is not applicable to the statutory claim for damages for misrepresentation because the liability of the defendant does not depend on proof of fraud; all that matters is that the representation is false – see Corry, above n 49, at [14.1.21].
56 See above at [58](c).
ingress and report. The plaintiffs submit that they did not have knowledge of the alleged misrepresentations/misstatements by the third defendants until they received the Helfen report in April 2023.57
[71]In Rea, the Court of Appeal held that:58
[67] For the purposes of s 14(1), a claimant will have constructive knowledge of the requisite facts if they have information which would lead a reasonable person to begin investigating whether a right to claim exists. They cannot close their eyes to the obvious. They cannot postpone taking action if a reasonable person in their circumstances would take action.
[72] Mr Freeman contends that Ms To’o and/or the plaintiffs should have investigated and made enquiries at the time of entering into the contracts. He argues this because the contracts recorded that the property had been subject to a WHRS claim and settlement, and contained a due diligence clause. However, the clause referred to in [6] above stated that the “vendor has carried out the repairs” required by the settlement and a CCC had been issued for the work. Ms To’o and the plaintiffs were provided with a copy of the CCC. No further information was provided at the time which may have put them on enquiry, for example the WHRS assessor’s report.
[73] The pre-sale disclosure indicated that “historical” moisture issues to the lower-level bedroom had been addressed with the involvement of the Council. It also suggested an issue with the carpet abutting the north facing exterior wall was historical and had been remediated. The building report prepared for the third defendants, dated 21 January 2016, found no major issues of concern but noted some areas would benefit from attention being general maintenance issues only. The Land Information Memorandum (LIM) referred to the settlement of the WHRS claim and stated that “[a] settlement does not necessarily mean the property has been repaired”. However, as noted, the clause included in the agreements for sale and purchase confirmed that the repair work had been carried out and a CCC had been issued for the work. The plaintiffs have a tenable argument that there was no reason to doubt the information provided. Arguably, the information would not have led a reasonable person to make enquiries at the time of entering into the agreements.
57 See above at [8].
58 Rea v Auckland Council, above n 34, at [67].
[74] In Baxter v Building Inspection Company Ltd, the defendant argued the claim was barred on limitation grounds.59 This argument was advanced on the basis that the plaintiff had information when purchasing the property that should have led her to make enquiries. From those enquiries, she would have discovered a breach of warranty in that the defendant had not obtained a building consent for weathertightness works. The Court found that:60
[80] It does not sit well with providing the Information Pack to reassure purchasers in the way I have described for [the defendant] to nonetheless say that the same material would have put a reasonable person on notice that the steps set out at [68] including undertaking invasive tests et cetera, would have been taken by a reasonable person.
[81] Accordingly, as I have said, I am not satisfied that it is beyond argument a reasonable person in [the plaintiff’s] position should have discovered [the defendant] had not obtained building consent for the August 2014 remedial work when the essence of the material provided was to reassure [the plaintiff] that work had been carried out satisfactorily.
[75]In my view, the same points apply in this case.
Conclusion – limitation
[76] On the evidence before me, it is arguable that the earliest that the plaintiffs and/or Ms To’o had actual or constructive knowledge of the relevant facts in ss 14(1)(a), 14(1)(b), 14(1)(c) and 14(1)(e) would have been around July 2022. This was when they say they first became aware of leaks and water ingress in the property. This led them to obtain the final WHRS assessor’s report from WCC and then engage Helfen to investigate. The proceedings were issued in February 2024 and the fourth cause of action for negligent misstatement was added in November 2024. There is a tenable argument that the earliest late knowledge date for all the plaintiffs’ causes of action is July 2022. The claims were filed within three years after that date. I am not satisfied that any of the plaintiffs’ causes of action are so clearly stature-barred that their claims can be regarded as frivolous, vexatious or an abuse of process.
59 Baxter v Building Inspection Company Ltd, above n 48.
60 At [80]–[81].
Result
[77] The third defendants’ application for strike out of the plaintiffs’ causes of action against them and/or for summary judgment against the plaintiffs is dismissed.
[78] I have not heard fully from the parties on costs. My preliminary view is that the plaintiffs have been successful in opposing the third defendants’ application and are entitled to costs on a 2B basis and reasonable disbursements. The parties should endeavour to agree costs. However, if agreement cannot be reached, memoranda may be filed not exceeding three pages (excluding costs schedules) and costs will then be determined on the papers.
[79] The matter is to be listed in the next available Associate Judge’s Chambers List for Wellington for a case management conference. The parties are to file a joint memorandum or separate memoranda three working days in advance of the conference addressing all relevant outstanding matters in sch 5 to the High Court Rules 2016 and seeking appropriate directions.
Associate Judge Skelton
Solicitors:
Dalzell Wollerman, Wellington for Plaintiffs
Thomas Dewar Sziranyi Letts, Lower Hutt for Third Defendant
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