Turret Trustees Limited v Profit
[2025] NZHC 2066
•25 July 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2024-404-305
[2025] NZHC 2066
UNDER The Fair Trading Act 1986 and the Consumer Guarantees Act 1993 IN THE MATTER
of misrepresentation, negligent mis- statement, breach of warranty, negligence
BETWEEN
TURRET TRUSTEES LIMITED
First Plaintiff
SCOTT MEADS
Second PlaintiffAND
FRANCOIS MARIE PROFIT and LAURE JEZREEL TSOBNY
First Defendants
ANTHONY JOHN WINTER
Second Defendant
Hearing: 5 December 2024 Appearances:
C McLean and A Joubert for Plaintiffs No appearance for Defendants
Judgment:
25 July 2025
JUDGMENT OF BECROFT J
This judgment was delivered by me on 25 July 2025 at 4pm pursuant to r 11.5 of the High Court Rules 2016.
Registrar/Deputy Registrar
……………………………………
Solicitors:
McLean Law, Auckland
TURRET TRUSTEES LTD & ANOR v PROFIT & ORS [2025] NZHC 2066 [25 July 2025]
What this case is all about
[1]This is a formal proof hearing. It concerns a leaky home.
[2] In 2016, the first plaintiff (a trustee company for a family trust) purchased a house in Parnell, Auckland. At some stage later, it agreed to rent the property to the second plaintiff, a beneficiary of the Trust, and his partner. It was to be their family home.
[3] After the agreement for sale and purchase became unconditional, but before settlement, some issues with the warranties for work done to the roof by the vendors arose. The work was apparently non-consenting. Consequently, a complaint was laid with the New Zealand Law Society (NZLS). The NZLS appointee directed that
$175,000 be withheld from the purchase price awaiting the outcome of a final compensation determination of compensation.
[4] Some years later, after a detailed building inspection, the purchasers found that the home had been, and still was, a leaky home. They made two discoveries.
[5] First, while the vendors owned the house, they had attempted to remediate a variety of “leaky home” defects. This included not only installing a new roof, but also repairing some of the rotting interior timber wall framing and overcoating the whole exterior cracked walls of the house with a further thick plaster coating. A subsequent detailed building inspection revealed both the extent of the remediation and that it was wholly inadequate.
[6] Second, the whole house had ongoing underlying defects allowing ongoing moisture ingress which had caused, and was causing, serious damage and structural deterioration. Most of this, it is alleged, was missed by the pre-purchase building inspection.
[7] It also became clear that a significant part of the attempted remediation by the vendors had required building consents which had not been obtained, contrary to the warranties in the purchase agreement.
[8] The purchasers sued the vendor defendants in contract and in tort. Although it is not claimed in this way, effectively they seek either contractual expectation damages to remediate the defects attributable to the breach of contract. Or, they claim reliance damages in tort to restore them to the position they would have been in had they not purchased the house in the first place.
[9] I record that the formal proof hearing could not be completed within the allocated time. In a Minute, dictated at the close of hearing, I set out what remained to be addressed, and what further evidence would assist.1 Subsequently a memorandum varying the plaintiffs’ position and a further affidavit were filed. A resumed hearing was not required. I now decide the matter on the basis of all the evidence filed.
The parties
[10] The first plaintiff, Turret Trustees Limited (Turret), as trustee of the Turret Trust, is the registered owner and the purchaser of the 19B Cathedral Place, Parnell, Auckland (the house).
[11] Mr Scott Meads is the second plaintiff.2 He was the named purchaser in the agreement for sale and purchase but nominated Turret to complete it. Mr Meads was a shareholder and director of Turret from 2011 to 2019. His mother, Ms Meads, is now the sole director and shareholder.
[12] Mr Meads became the tenant of the house as the beneficiary of what, I understand, is a family trust. He paid a concessionary weekly rent of $1,000. He lived there with his then fiancé (now his wife) and their newborn daughter. In September 2024, they had to move out when rotting timber and dangerous mould was found in the baby’s room.
1 Turret Trustees Limited v Profit HC Auckland CIV-2024-404-305, 5 December 2025.
2 The first and second plaintiff will be referred to in the remainder of the judgment as the plaintiffs.
[13] Mr Francois Profit and Ms Laure Tsobny, the first defendants, were the vendors and former owners of the property.3 They sold the property to Turret.
[14] Mr Anthony Winter (Mr Winter), the second defendant, was the pre-purchase building inspector, retained by Mr Meads. The plaintiffs say they relied upon his report in making the decision to buy the house.
[15] After the hearing was set down for formal proof by Associate Judge Taylor on 16 October 2024, a third and fourth defendant were added to the plaintiffs’ claim. The third defendant is Allied Exteriors Limited (Allied Exteriors), a plastering and building company. The fourth defendant is Steven Jameson, a director of Allied Exteriors. This formal proof does not concern them. Nor does it concern the second defendant as discussed further below.
The house and the plaintiffs’ claims
Circumstances of the house purchase
[16] I accept, and am quite satisfied, that the following facts have been established through the affidavit evidence which has been filed.
[17] 19B Cathedral Place, Parnell, Auckland (the house), is a cross-lease title apparently one of three self-contained units on the property.
[18] The house is a direct fixed, timber framed, monolithic solid plaster-clad residential home originally constructed in the early 1990s under a building permit.
[19] I accept that this house has many of the high-risk membrane roof and direct fixed plaster cladding design elements and defects that are associated with leaky homes and weathertightness issues. It features the James Hardie external cladding system. It is important to emphasise that the direct fixing of the plaster on to the timber framing, means there is no cavity between the two, something which has been required in the New Zealand Building Code since 2004.
3 Mr Profit and Ms Tsobny will be referred to in the remainer of the judgment as the vendors.
[20] The agreement for sale and purchase was signed on 16 December 2015. It was subject to finance. The purchase price was $1,010,000.
[21] Mr Meads, as the original signatory to the agreement for sale and purchase, deposes that prior to the contract becoming unconditional, he carried out “due diligence on the property”. He engaged a building inspector, Mr Winter, the second defendant, to conduct a pre-purchase inspection.
[22] Mr Meads said there was one inspection of the house by Mr Winter prior to an offer being made. And then Mr Meads travelled overseas. Mr Meads deposes that he relied on the pre-purchase and other reports prepared and the information/warranties provided by the vendors.
[23] Mr Meads specifically deposes that before the contract became unconditional the vendors told him that they replaced the roof and that they had warranties for the work they did on the property. The evidence is unclear as to exactly when this information was conveyed to Mr Meads.
[24] In reliance on the vendors assurances, the vendor warranties, the assurances made by the real estate agent and the building inspector’s report, Mr Meads deposes that he instructed his lawyer to declare the agreement unconditional. On 20 January 2016, the agreement became unconditional.
[25] However, prior to settlement, Mr Meads and Turret became aware that the vendors’ remediation of roof issues had required a building consent which had not been obtained. Also, it became clear that the roof repairs were inadequate and would need further improvement to comply with Council requirements.
[26] After the agreement became unconditional, Mr Meads spoke to Allied Exteriors which had been responsible for organising the work done on the roof, by Total Waterproofing Limited.
[27] The director and founding owner of Allied Exteriors, Stephen Jameson, told Mr Meads that a building consent for the work on the roof was not required.
[28] On or around 10 February 2016, Mr Meads deposes that his lawyer received the first evidence to show the extent of the work the vendors had done on the roof. A photo that Mr Meads saw showed the roof structure being rebuilt. It would have meant the external wall linings and internal linings would have been visible from the roof. The extent of water ingress would also have been known.
[29] I note that Mr Meads is now of the view that the vendors, and Stephen Jameson from Allied Exteriors, deliberately did not tell him about the water ingress they had observed, the consequent damage, nor the extent of the work that they had carried out on the property. I understand the allegation against the vendors. Mr Meads is sure that the builders would have told the vendors of the (possible) extent of the weathertightness issues at that stage. However, on the evidence currently available to me that is a matter of speculation. I am not prepared to rule on it.
Law Society mediation prior to settlement
[30] In any event, because of what he learned, Mr Meads deposes that he lodged a complaint for breach of contract by the vendors with the NZLS. The NZLS appointee was to determine an interim amount to be held under s 6.2(5) of the sale and purchase agreement.
[31] The appointment was made by the NZLS on 16 February 2016, and the decision issued on 19 February 2016.
[32]Mr Meads deposes that estimates therefore had to be provided at short notice.
[33] I note that there was a vast gulf between the parties as to what was required to remedy the roof issue. Allied Exteriors, on behalf of the vendors, argued that it was only necessary to acquire what is known as a compliance certificate which, effectively, backdates approvals that should have been obtained through a building consent process. The vendors provided what was said to be a reasonable estimate of $37,000 to $42,000 plus GST. Mr Meads, on the other hand, submitted that the roof would need to be removed, and totally re-installed. He obtained resulting estimates, that were said to be entirely reasonable, totalling $303,638.64.
[34]In the event, the NZLS appointee concluded:
Accordingly, it would seem to me appropriate to determine that the amount that should be withheld and paid to a stakeholder for the purposes of awaiting the outcome of the final determination of compensation would be mid-way between the two figures and accordingly I determine that the amount to be so held is $175,000, in the full belief that the work for an area of 120m² should be able to be achieved within that figure.
[35] Penalty interest of $7,472.25 was retained due to late settlement by the vendors together with $175,000 for the roof issue.
[36] There is some dispute as to whether all the funds currently held in the Shieff Angland trust account, pending a final determination of the roof dispute, have been properly accounted for. In Mr Meads’ view, there appears to be $8,503.85 in interest missing. I am not able to resolve this issue. It is something that will need to be pursued by the plaintiffs’ lawyers in conjunction with those administering the Shieff Angland trust account. It ought to be readily resolved given that there will be a documentary trail showing what interest has accrued and what resident withholding tax (RWT) has been deducted.
[37] Settlement was delayed by nearly a month as a result—from 29 January 2016 until 23 February 2016. Turret settled the purchase as the nominated purchaser.
Leaky home discoveries
[38] As I understand the affidavit evidence, it was not until years after settlement that the plaintiffs discovered the full extent of all the leaky home/weathertightness issues.
[39] The vendors acquired the house in February 2012. Turret and Mr Meads allege, and I accept, that prior to the agreement for sale and purchase to the plaintiffs, the vendors carried out, or arranged to have carried out, various building works on the house to remedy water ingress and leaky home issues. This work is helpfully detailed in Mr Roberts’ affidavit including:
(a)full replacement of the original metal roofing. The roof was replaced and reconfigured with a new roof structure and substrates with a different membrane type roof coverings;
(b)installing metal cap flashings on the roof edge parapets surrounding the roof structure;
(c)targeted replacement of numerous decayed untreated timber stud wall framing behind monolithic plaster wall claddings and adjacent external joinery openings;
(d)replacement of large sections of moisture damaged timber particle board flooring in some bedrooms;
(e)replacement of steel structural components on a metal deck pergola with bamboo poles; and
(f)application of a new plaster coating over the original external plaster cladding on all elevations. The new surface coating was applied over the top of the original plaster that was already old and cracking.
[40] This work is all clearly depicted in pictures presented in evidence. I discuss later why the plaintiffs have established to my satisfaction it was the vendors who had this work done while they owned the house.
[41] I accept that the vendors did not specifically disclose to Mr Meads the full extent of the work done on the house, nor the water ingress problems they had previously experienced. However, on the evidence presented, I also find that Mr Meads did not ask them if they had experienced leaky home type problems.
[42] The statement of claim also alleges that the vendors deliberately sought to conceal the extent of the weather tightness issues by carrying out many superficial cosmetic repairs, and by installing sub floor insulation that hid the damaged floors. As it transpires, I do not make, and do not need to make, any findings on these allegations.
[43] The current position of the claim against the pre-purchase building inspector (the second defendant) is a little different. At the hearing I was informed that, by agreement, the pre-purchase building inspector has not yet filed a statement of defence and would not do so until this claim has been resolved. I understand that this position has changed, and a statement of defence was filed in early 2025.
Original causes of action against the vendors
[44] There were initially four causes of action against the vendors. I set them out in summary form below. The plaintiffs subsequently withdrew the first, second and fourth causes of action as set out in more detail later in this judgment.
[45] The first cause of action was for misrepresentation under the Contract and Commercial Law Act 2017. The plaintiffs allege that:
(a)misrepresentations were made by the vendors;
(b)the misrepresentations were made to induce entry into the contract; and
(c)the misrepresentations were relied on by the plaintiffs causing them loss.
[46] The second cause of action was for negligent misstatement. The plaintiffs allege that:
(a)the vendors owed them a duty of care in these circumstances;
(b)they breached that duty of care by omitting to disclose the water damage and repairs; and
(c)the breach has caused the plaintiffs loss.
[47] The third cause of action is for breach of contractual warranty. The plaintiffs allege that:
(a)a contractual warranty was provided in the agreement for sale and purchase that work done on the house had the necessary consent;
(b)that warranty has been breached; and
(c)as a result of that breach, the plaintiffs have suffered loss.
[48]The fourth cause of action was for negligence. The plaintiffs allege that:
(a)the vendors owed a duty of care in carrying out the building work to ensure that the work was done according to the standards and requirements of the Building Act 2004 and Building Code;
(b)that duty of care was breached in carrying out work which does not comply; and
(c)the breach has caused the plaintiff loss.
Relief
[49]The plaintiffs sought the following relief at the time of the hearing:
(a)damages for remedial and consequential losses (amounting to
$999,489.60 or $981,294.50);
(b)an award of general damages of $35,000 or a sum that the court determines is just;
(c)interest; and
(d)2B scale costs;
(e)expert costs;
(f)and disbursements.
[50] The plaintiffs have now adjusted their claim for relief to claim with respect to damages:
(a)damages for remedial work totalling $800,086.05;
(b)damages for lost rent of $53,000;
(c)an award of general damages of $35,000;
(d)penalty interest of $7,472.25 owed by the vendors due to late settlement by the vendors; and
(e)interest under the Interest on Monday Claims Act 2016.
Some causes of action against vendors abandoned
[51] Following the hearing, the plaintiffs advised by memorandum that they withdrew the first, second and fourth causes of action against the first defendants. There was good reason for doing so which I do not need to discuss further in the body of this judgment.4 That leaves just the third cause of action for me to address.
Difficulties with this formal proof
Vendors have left New Zealand
[52] Sometime after settlement of the sale, it appears that the vendors experienced relationship problems. Ms Tsobny is said to now reside in her native country, Cameroon. She is apparently separated from her former husband, Mr Profit. His whereabouts is unknown. At one stage, it is said, he lived in Parnell. But for the last three years it is suggested he may have been living in France. Substituted service on the vendors was required. Enforcement of any formal proof against the vendors will be very difficult.
4 During the hearing, I expressed some doubts as to each of the now withdrawn causes of action. In respect of the negligent misstatement claim (the second cause of action), there is certainly an issue as to whether in these circumstances, the omission to inform Turret and Mr Meads regarding the extent of the pre-existing leaky home problem, can constitute a misstatement. My preliminary view is that the formal proof evidence would not be sufficient to satisfy me of this claim. More evidence as the interaction with the first defendants would be required.
In respect of the negligence claim (the fourth cause of action), I am far from sure that the owners, as opposed to the companies and tradesmen that remediated the problem, have a general duty of care to the next purchasers.
Similarly, I am not certain that there has been an actionable misrepresentation to the plaintiffs by the vendors regarding the weathertightness of the house (the first cause of action).
These were all issues canvassed at the formal proof hearing. I record those reasons for the sake of completeness. They emerged during the hearing when the affidavit evidence was scrutinised. I regard Mr McLeans decision not to pursue them in this hearing as responsible.
Substituted service of amended statement of claim
[53] On 16 October 2024, this matter was set down for a formal proof hearing against the vendors. Substituted service orders had been complied with in respect of the original statement of claim, and other documents.5
[54] An affidavit by the second plaintiff dated 5 December 2024 confirms compliance with the substituted service order in respect of the first amended statement of claim. However, substituted service was not completed until 4 December 2024, a day before this hearing. I was unwilling to finalise formal proof until the time limit for responding to the amended statement of claim had expired. At most, the vendors had 25 working days to file a statement of defence after the amended statement of claim was filed. That time has now well passed, and I am satisfied it is appropriate to issue this judgment.
Implications of this judgment for the pre-purchase inspector (second defendant)
[55] I raised with Mr McLean, who carefully presented the case for the plaintiffs, the difficulty arising from the pre-purchase building inspector being alleged to be, amongst other things, a joint tortfeasor with the vendors. I indicated that my findings might be very relevant to his alleged liability. Given that the plaintiffs have discontinued all but their contractual warranty claim, that issue does not now arise.
[56] Mr McLean explicitly urged me to proceed with the formal proof hearing. In Mr McLean’s view, the pre-purchase building inspector would be free to raise whatever defences he wished, even contrary to any findings I might make in respect of the house and/or the vendors. He accepted that the case against the pre-purchase building inspector might turn out to be decided on quite different issues, and he may have quite different defences. In any case, Mr McLean confirmed that he accepted the risk of difficulties arising from this judgment in any subsequent hearing involving the pre-purchase building inspector. Were it otherwise, Mr McLean submits, in these circumstances, no formal proof hearing could ever proceed.
5 Turret Trustees Limited v Profit HC Auckland CIV 2024-404-305, 16 October 2024.
[57]With that reservation in mind, I proceed to the formal proof application itself.
Approach to formal proof
[58] The plaintiffs must file affidavit evidence establishing to a “Judge’s satisfaction” each cause of action relied on.6 “Satisfied” means the Judge makes up his or her mind—it does not import notions of the burden of proof and of setting a particular standard of proof.
[59] When damages are sought, as here, the plaintiffs must provide sufficient information to enable the Judge to calculate and fix damages.
[60]I turn now to the only remaining cause of action.
[61] In respect of the third cause of action, I must be “satisfied” that the affidavit evidence substantiates that there was a contractual warranty and that the warranty was breached causing loss. I then must be satisfied as to the appropriate quantum of damages. I rely on the affidavits filed by the plaintiffs.
[62] I received six affidavits filed before the formal proof hearing. I set them out as follows:
(a)Affidavit of Nicholas James Roberts, Director and Building Surveyor (Mr Roberts) on whether a building consent was needed, defects, damage and scope of remedial work.
(b)Affidavit of John Charles Gardiner, Building Surveyor (Mr Gardiner) on whether a building consent was needed.
(c)Affidavit of Alexander William Harris, Quantity Surveyor (Mr Harris) on the quantum for the remedial work.
(d)Affidavit of Carole Ann Meads (Ms Meads) director of one of the plaintiffs.
(e)Affidavit of Scott Bradley Meads (Mr Meads) one of the plaintiffs.
(f)Affidavit of Peter Desmond Bates, Valuer (Mr Bates) on diminution in market value or loss in value.
6 High Court Rules 2016, r 15.9(4).
[63]A further affidavit was filed after the hearing, as requested by the Court:
(a)Further affidavit of Mr Roberts on the remedial work that is triggered by each defect and whether a building consent was needed.
Third cause of action. Breach of contractual warranty – unconsented building work?
[64] Mr McLean submits this claim is the most straightforward of his original causes of action. I agree. I address the relevant matters for proof, in order, as follows.
The contractual warranty
[65] The second plaintiff, Scott Meads, originally entered into the agreement as purchaser on 16 December 2015. The then standard Auckland District Law Society Agreement for Sale and Purchase form was used. Clause 6.2(5) relevantly provides:
6.0 Vendor’s warranties and undertakings
…
6.2 The vendor warrants and undertakes that at settlement:
…
(5) Where the vendor has done or caused or permitted to be done on the property any works:
(i)any permit, resource consent, or building consent required by law was obtained; and
(ii)to the vendor’s knowledge, the works were completed in compliance with those permits or consents; and
(iii)where appropriate, a code compliance certificate was issued for those works.
[66] I note that it is this condition of the agreement upon which the plaintiffs rely for their third cause of action.
Was the contractual warranty breached?
[67] There are three aspects to this. I must be satisfied first that the vendors carried out work on the property; second, that some or all of that work required building consent; and third, that building consent was not obtained.
Were the remedial works carried out by or on behalf of the vendors?
[68] I accept that the vendors had carried out remedial work while they owned the property. This was done to fix what, at some stage, they must have come to know were weathertightness issues with their home.
[69] I have already set out these remedial works at [39], before. They were substantial.
[70] I draw the inference that it was the vendors who carried out this work (and not some prior owner) for two reasons. First, because of the comments that Mr Meads deposes were made to him by Mr Jameson, from Allied Exteriors, about the work he carried out. Secondly, and importantly, because of the evidence of Mr Roberts as to the 23 September 2014 date stamp observed on the timber used for the repairs.
Were building consents required for the vendors’ remedial work?
[71] Mr McLean first points to the evidence of the building surveyor Mr Gardiner, an expert engineer and former manager at the Ministry of Business Innovation and Employment where he had responsibility for making determinations under the Building Act for almost 13 years. For the last seven years, he has been managing director of Building Confidence Limited, a consultancy company, advising about obligations under the Building Act and related legislation. In my view, he qualifies as an expert.
[72] In Mr Gardiner’s opinion, the changes to the roof structure—by replacing the original metal roof with a butynol membrane and installing parapet flashings, together with a changed profile and slope, was work that was not exempt under the Building Act and required a building consent.
[73] Similarly, Mr Gardiner concluded the damaged timber framing, notably around the roof, but also around the windows, and comprising part of the internal walls was replaced—meeting the structural criteria under Schedule 1 of the Act. Significant damaged areas remained unreplaced. Therefore, the work overall did not qualify for an exemption and a building consent should have been obtained.
[74] However, Mr Gardiner noted that the position is different for the exterior original monolithic cladding which originally had a form of external plaster coating. It appears to have been totally re-covered with new plaster. This work typically falls under “maintenance work”. It is therefore exempt under Schedule 1 of the Building Act and, therefore, does not need a consent. However, in Mr Gardiner’s view this work has been done very poorly, well below acceptable standards, and needs replacing.
[75] Additionally, Mr Gardiner deposed that the replacement of the steel structural components in the pergola, with bamboo poles, is exempt from consent requirements and did not need a consent. However, the building work must still comply with the Building Code. Mr Gardiner’s conclusion was that the bamboo’s structural capacity does not meet the structure and durability requirements under the Act, specifying a 50- year lifespan. It is unlikely to demonstrate compliance.
[76] To substantially the same effect, at least initially, is the affidavit evidence of Mr Roberts, an experienced building surveyor with over 15 years’ experience in the construction industry across the United Kingdom and New Zealand. I accept that he qualifies as an expert.
[77] He has carried out a full inspection of the house. As set out at [39], he concludes that significant unconsented building work was undertaken by the vendors and their tradespeople that required a building consent.
[78] In Mr Roberts’ first affidavit, he noted that all this work required a consent other than the work to the pergola and the new plaster overcoating work. However, he noted that while exempt from a building consent, this work had the effect of concealing the true cracked and poor condition of the original plaster cladding from the purchasers.
[79] However, in his second affidavit, after reflecting on this evidence, he deposed that he had revised his view in respect of some of that work, as follows.
[80] First, he no longer believes the exterior re-plastering is “exempt work”. Upon review, he concludes a building consent was necessary. He deposes that the plastering covered visible cracking, which is a sign of moisture ingress and weathertightness failure. Further, as the house is monolithic plaster directly fixed onto the timber (with no cavity) the Council would have required further investigation. A building consent would have been required as a full reclad of the house would have been the only option. Simply plastering over cracks is not sufficient and would not have resolved the causes of failure, thereby necessitating a consent. He also said:
Additionally, the added thickness of four-five mm from the new plastering adds significant weight and depth to the structure which could have structural implications, further justifying the need for consent.
[81] Second, in respect of the framing replacement which required a building consent, he deposed that work would also have triggered the Council’s need for a full reclad. That is because the work related to replacing window double wall studs damaged due to water ingress; the replaced double studs were a component of the wall that provided structural stability; and the studs were more than moderately difficult to replace because that would involve removal and replacement of the exterior cladding and new plywood substrate which is far beyond normal maintenance repairs.
[82] I am prepared to infer from the evidence, that the vendors’ targeted replacement of the rotting particle board floor extending to and abutting the walls, would have also, and inevitably, resulted in the discovery of the water damaged wall studs. This too would have triggered the need for a consent to complete very significant remedial work to the framing for much of the house and that, in turn, would have necessitated recladding which would have required a consent.
[83] I have carefully considered Mr Roberts’ review. I see no reason to reject his revised opinion. He has thoroughly re-analysed and revised his initial opinions. Even given the evidence from Mr Gardiner to the contrary as to the plaster recoating, I prefer Mr Roberts more detailed, considered, and thoughtful reassessment.
[84] In the light of all this expert evidence, in my view, Council building consents were required for the work undertaken as described by Mr Gardiner and Mr Roberts. This includes the re-plastering of the house, the replacement of the timber walls and
“patching” of rotting floors. These are all part and parcel of the fundamental weathertightness problem which riddled the whole of the house, and, in that context, are far more than repairs or maintenance or internal restructuring exempt from consent. It is this wider approach, considering the defects as a whole, adopted by Mr Roberts in respect of the work upon which he has revised his view, which justifies his conclusion about the necessity for consents. In my view, it is plainly inappropriate to view all the different types of remediation in isolation.
[85] Therefore, it is an inevitable conclusion that building consent(s) should have been obtained for all of this work, except the work to rebuild the pergola and what I understand to be an associated deck.
Were building consents obtained?
[86] In accordance with the evidence of Mr Roberts, who has reviewed the Council Property File, I am satisfied that the requisite building consents were not obtained, deliberately or otherwise. The work was, and is, non-compliant.
Conclusion on the third cause of action
[87] Accordingly, I am satisfied that the third cause of action is made out in respect of the work done to the roof, wall framing, flooring and the plastering overcoat. It is clear that cl 6.2(5) of the sale and purchase agreement has been breached.
[88] I conclude by making one final point. Even if I accept Mr Gardiner’s evidence that only the replacement roof and damaged timber framing work would have required a consent, it does not much matter. That is because, consistent with Mr Roberts’ evidence, remediation of those defects would damage the existing plaster cladding/recladding and the particle board flooring to such an extent that a full replacement recladding of the house and replacement to the particle board flooring at the same time would have been inevitable. (I note that perhaps this might be considered a little fortuitous for the plaintiffs, but it is plainly the reality of the situation). I rely on this point, later, when assessing quantum of damages.
The current general condition of the house and the remediation required
[89] I am quite satisfied, that the house is currently in very poor and wholly unsatisfactory condition. It has significant weathertightness issues. The roof, internal timber framing, and cladding defects, as described, all require significant remediation. For the record, all those matters have been established to my satisfaction beyond any doubt.
[90]I summarise the current issues.
[91] There are significant issues arising from the unconsented membrane roofing, flashings and structure, including:
(i)missing roof vents;
(ii)inadequate surface falls (to allow for run off);
(iii)poorly formed roof edges;
(iv)defective roof to wall junctions; and
(v)chimney junction issues.
[92] There are also issues arising from the unconsented partial structural repairs to internal timber framing. These repairs were only a part of what was required. There is evidence of prolonged moisture exposure. Much of the wooden framing samples were visibly decayed. The extent of decay observed in the wood framing signifies severe and prolonged deterioration within the structure timber. Decayed timber left in situ has not been properly treated or removed and replaced, leaving extensive moisture damage in place behind the walls.
[93] Also, hazardous Stachybotrys mould on the timber framing was detected in three out of four samples tested, posing health risks (particularly to children) if inhaled, which is common in leaky buildings.
[94] The internal timber framing should have been completely replaced given its exposure to moisture. All of the damaged internal timber framing (which is extensive) now needs to be completely replaced. I accept the view of Mr Roberts that such
comprehensive replacement makes replacement of the plaster cladding inevitable. There cannot be one without the other, as the plaster is directly attached to the framing.
[95] Other current defects, some of which have arisen from inadequate works to remedy the original problems include:
(a)Monolithic external wall claddings defects, specifically
(i)the absence of adequate movement control joints, which can lead to cracking;
(ii)deterioration and cracking of the original plaster beneath the new coating, which has concealed long-standing leaks and damage. The recoating was inadequate, leaving decayed timber framing untreated;
(iii)local cracking in the new plaster at roof level indicates insufficient weathertightness;
(iv)inadequate clearances between the plaster and ground level, allowing moisture to enter and damage the timber framing, with the base of the plaster extending below ground without proper drainage; and
(v)multiple unflashed wall penetrations that rely on sealants for weathertightness, creating potential entry points for moisture, including areas around downpipes, gates, pipes, light fittings and vents.
(b)Inadequate external joinery openings in plaster, specifically
(i)the absence of suitable flashings;
(ii)inadequate window flashing detailing—junctions between the windowsills and jambs lack visible flashings, raising concerns about concealed metal window flashings that may or may not be present beneath the plaster; and
(iii)external joinery openings that are inadequately waterproofed, lacking flashings, tapes or air seals within plaster junctions.
(c)Inadequate waterproofing to external membrane decks, specifically:
(i)junctions between external deck and plaster walls poorly formed, resulting in leaks and damage to timber-framed walls; and
(ii)perimeter edge detailing and waterproofing of the membrane that is insufficient.
[96] These factors collectively compromise the overall integrity and weathertightness of the structure.
[97]Mr Roberts’ remediation recommendations, as per his detailed report, for all
these identified defects include:
(a)full recladding (roofing, external walls, joinery and external decks) under a remedial design with a building consent for that building work which is restricted; and
(b)full replacement of the roof structure and decayed internal wall framing and substrates.
Quantum of damages?
Legal principles
[98] In Marlborough District Council v Altimarloch Joint Venture Ltd, the Supreme Court noted that the key purpose when assessing damages is to reflect the extent of the loss actually and reasonably suffered by the plaintiff.7 A party who suffers loss on account of a breach of contract is, by means of damages, to be placed in the same situation as if the contract had been performed.8
[99] In that case, the Supreme Court considered whether damages on a diminution of value basis or a cost of cure basis were appropriate in a case of breach of contractual warranty. The majority found that in cases where the subject matter of the contract is
7 Marlborough District Council v Altimarloch Joint Venture Ltd [2012] NZSC 11, [2012] 2 NZLR 726 at [156].
8 Altimarloch, above n 7, at [157].
not readily substitutable, cost of cure or performance damages may be appropriate. In those cases, the damages are designed to require the defendant to pay the plaintiff enough money to enable the plaintiff to have the contract performed as fully as is reasonable and possible.
[100] That approach was recently applied in the leaky home context by Hinton J in Bhargav v First Trust Limited.9 In that case, First Trust Limited had breached a very similar contractual warranty contained in an agreement for sale and purchase. The house was subsequently discovered to be leaky. First Trust Limited had carried out building work that required a building consent without such consent. An expert in that case had deposed that:10
If the building work had been attended to properly under a building consent, then any repairs in the areas where FTL carried out work would have the knock-on effect of requiring timber replacement and an inspection of each elevation. That would have led a competent builder and any council inspectors to require a full reclad of the property. On this basis, if the contract had been performed FTL would have been in the position of selling a property that had already been reclad and did not suffer from the defects.
[101] Accordingly, the performance damages in that case were the costs of repairs. Hinton J found that it was appropriate to award performance damages as opposed to diminution in value because she was satisfied that the property was not readily substitutable for an equivalent alternative. Among other things, she mentioned that the plaintiffs had unsuccessfully attempted to find a comparable property in the area; they wished to remain in the area; and if they sold, they would likely have insufficient funds to buy a replacement.
[102] For completeness, I note that Hinton J also awarded damages for consequential loss; general damages for stress, anxiety and inconvenience; and interest under the Interest on Money Claims Act 2016.
9 Bhargav v First Trust Limited [2022] NZHC 1710.
10 At [42].
What damages should be awarded in this case?
[103] The plaintiffs claim “performance damages” being the costs of repair to the building. In order to consider whether this is the appropriate award of damages, I must address two questions:
(a)What is the appropriate quantum of performance damages for the breach in this case?
(b)Are performance damages the appropriate measure of damages in this case?
Appropriate quantum of performance damages
[104] From the outset, I must say it is somewhat difficult to tie breach of a warranty requiring building consent to damages for repair of defects in the house that were not caused by the non-consenting remedial work.
[105] At the hearing, I was concerned that claims were being made to remediate work by the vendors that had not required a building consent and therefore in respect of which there had been no breach of the contract.
[106] Specifically, I was concerned about the risk of damages being claimed to effectively remediate the leaky home problem for the whole house—rather than those problems that specifically arose from the vendors’ works which required building consents. For instance, at that stage there was a major claim for total re-cladding, when the vendors’ remediation of the cracked cladding did not seem to require a building consent—and therefore where there had been no breach of the contract.
[107] This issue is now resolved in two ways.11 First, Mr Roberts’ revised evidence establishes to my satisfaction that building consent would have been required for all the work carried out by the vendors, including their exterior, inadequate plaster overcoating, except replacement of the pergola. That work is not now part of the plaintiffs’ claim.
11 See the discussion on this point at [80]–[81].
[108] Secondly, I am now quite satisfied that the roof and wall framing replacement would necessitate a total exterior re-cladding and particle floorboard replacement. The former cannot happen without the latter. For instance, when the roof is replaced, the timber framing joining the roof is so rotten and damaged in parts that it needs to be replaced. As the plaster is direct fixed to the timber framing, with no cavity, when the timber is replaced, so inevitably must all the exterior cladding be replaced. The same logic applies to the floors, some of which are rotting and join the vertical framing. The partial and localised repairs carried out by the vendors were inadequate. It all needs replacing. This is what Hinton J described as the “knock-on” effect in Bhargav.
[109] To summarise my views on this point, I am satisfied that all of the remedial work suggested is necessary to bring the building back up to code. Had building consents been sought for the work the vendors carried out, my understanding is that obtaining building consent would have required the same, or at least very similar, works to those now proposed to remediate the underlying leaky building problems.
Exact quantum?
[110] The plaintiffs filed detailed evidence as to the costs of the necessary remedial work arising from the breach of contract—that is the vendors’ unconsented building work.
[111]The defects can be summarised into the following categories:
(a)unconsented membrane roofing, flashings and structure;
(b)monolithic external wall cladding defects;
(c)inadequate external joinery openings in plaster;
(d)inadequate waterproofing to external membrane decks; and
(e)timber wall framing and wall enclosures in poor condition.
[112] I specifically note the bamboo pergola alteration, which did not require building consent, and remediation of which is not triggered by remediation of the unconsented defects, is now outside of the scope of the breach of contract damages claim.
[113] The total cost to ensure that the building will comply with the building consents, which I accept from the evidence, is $800,086.05. This is set out in the affidavit of Mr Alexander Harris, an experienced quantity surveyor. Breaking that figure down is a little difficult.
[114] I note that each step required in the remedial works is neatly itemised in Mr Harris’ report. For example, the specific work on a new roof is broken down to
$66,841 before GST. However, that does not include costs to demolish the roof, or the preparatory steps needed to do the work such as scaffolding. Counsel for the plaintiffs has sought to incorporate those amounts into a total re-roof cost of
$163,413.38 including GST. By implication, the balance of the work would cost
$663,672.67.
[115] Ultimately, I do not need to be satisfied of the exact break down because I am satisfied that the works set out in Mr Harris’ affidavit are properly the works necessary to cure the breach of the contractual warranty. The works include re-cladding the roof and exterior walls, replacing exterior joinery and repairing damaged framing in floors, walls and ceilings.
[116] I am also satisfied that Mr Harris’ costing is reasonable. The total cost comes to $800,086.05. That would be the appropriate award of damages to cure the contractual breach.
[117] To be clear, I specifically exclude any costs for replacement of the bamboo pergola. This is specifically listed as excluded in Mr Harris’ costing.
Are performance damages the appropriate measure of damages?
[118] In Mr Bates’ view, the valuation of the property, if it were defect and damage free, without need of any remediation, is $1,375,000. The current valuation of the
property “as is”, in its current condition with defects and damage, is $850,000. This leaves a difference of $525,000. This is the diminution in value and may constitute an appropriate award of damages.
[119] However, as was Hinton J in Bhargav, so am I satisfied that the property is not readily substitutable. The evidence of Mr Bates is that if the plaintiffs sold the property as is they would be unlikely to find a suitable alternative (being a free standing four- bedroom house with double garage and a tree and bush backdrop in the suburb) for less than $2 million. The effect of that evidence is to say that there are not other properties worth approximately $1.4 million of similar specifications in the area that the plaintiffs could substitute into. I also accept that the plaintiffs are genuinely committed to retaining the property. In this case, I find that diminution in value would not be an appropriate measure of damages.
[120] On this point, I note that I also questioned whether it would be cheaper to demolish the house and rebuild. If so, in my preliminary view, it may have been more appropriate to award the cost of doing so as an appropriate mitigation of damages. However, Mr McLean directed me to evidence from Mr Bates that at least strongly suggested this option would be more expensive. While Mr Bates said he could not provide a full costing without a designed and planned full house, his evidence suggested that rebuilding on a cross-leased, steep section would be more expensive and difficult than undertaking the repairs. In these circumstances, I see no reason why the plaintiffs should not be allowed to pursue their chosen option of full repair.
Damages for consequential loss
[121] The plaintiffs also claim $53,000 in damages for lost rent. This is on the basis of $1,000 per week in rent since Mr Meads and his family had to move out of the property in September 2024. It is broken down into 15 weeks prior to the hearing, an estimated six weeks to get a judgment and to organise contractors and a further 32 weeks for the remedial work.
[122] Under this ground, I am satisfied that Mr Meads rightly moved out of the property to protect his young child’s health from risks associate with mould inside the walls of the house. Mr Roberts’ evidence on this point is:
7.0 HEALTH AND SAFETY ISSUES
The hazardous toxigenic mould Stachybotrys was also detected in 3 out 4 samples tested which are present in leaky buildings and are harmful to health if breathed in.
Due to the weathertightness failure and the harmful moulds, the house in its current condition is uninhabitable for the occupants and they have had to vacate the property.
[123] The evidence is that Mr Meads and his family were paying concessionary rent of $1,000 a week when forced to vacate the property. I am satisfied that Turret has consequently lost this amount per week since September 2024.
[124]Accordingly, I am prepared to award the $53,000 sought under this head.
General damages
[125] The plaintiffs seek general damages of $35,000 or such other sum as the Court determines is just. In Bhargav, Hinton J awarded $30,000 in general damages for stress, anxiety and inconvenience. Although not pleaded, I infer that is also what the damages are sought for in this case. It is well established that the purchaser of a defective premises can recover for distress resulting from the pressures of having to live in the premises or deal with the problem.12
[126] In Ms Meads’ affidavit she has deposed that the saga has been upsetting and, at times, extremely stressful. She has sought stress relief and assistance at a cost to her. In Mr Meads’ affidavit he has also deposed to a huge emotional toll of the unconsented roof issue on him. He sought professional counselling from 2016–2021 to deal with the stress of the unconsented roof issue. He also deposes that having to move out of the property in September 2024 has placed significant strain on his relationship with his partner.
[127] On that basis, I am prepared to award general damages to the plaintiffs, but I limit the amount to $30,000 maintaining parity with what was awarded in a similar situation in Bhargav.
12 Stephen Todd and Matthew Barber Burrows, Finn and Todd on the Law of Contract in New Zealand (7th ed, LexisNexis, Wellington, 2022) at 874.
Penalty Interest
[128] As well as the $175,000 in respect of the roof issue, a further $7,472.25 is held in the Shieff Angland trust account in respect of late settlement of the agreement for sale and purchase by the vendors in 2016. The plaintiffs seek an award of this amount in respect of that issue.
[129] The plaintiffs have provided evidence showing that the purchase of the property was due to settle on 29 January 2016. Due to the fault of the first defendants, the purchase was not settled until 23 February 2016. Under the terms of the sale and purchase agreement, penalty interest was therefore payable by the first defendants. I am prepared to order that the money held in the Shieff Angland trust account for this purpose, and any interest, is paid out to the plaintiffs as legitimate penalty interest.
Interest
[130] The plaintiffs also seek interest under s 10 of the Interest on Money Claims Act 2016. Section 9 of that Act provides:
9 Period for mandatory award of interest
(1) When giving a money judgment, a court must award interest under this Act for the period that—
(a) begins either—
(i) on the day on which the cause of action arose; or
(ii) if the amount on which interest is to be awarded was not quantified at the day on which the cause of action arose, on a later day that the court specifies in the judgment as the day at which that amount was quantified; and
(b) ends on the day on which the judgment debt (including all interest payable under this Act) is paid in full.
(2) Subsection (1) applies unless—
(a) this Act expressly provides that interest cannot be awarded under this Act; or
(b) the court, in accordance with this Act, specifies in the judgment any 1 or more shorter periods as the period or periods for which interest is to be awarded under this Act.
(3) Despite subsections (1) and (2), interest under this Act does not accrue after the date of payment on an amount paid,—
(a) after the proceeding has been commenced but before the date of judgment, in or towards satisfying a party’s liability; or
(b) after the date of judgment, towards satisfying a judgment debt.
[131] As was awarded in Bhargav. I am prepared to award interest from the date when the loss was quantified being the date of Mr Harris’ report. That date is 12 November 2024.
Funds in the Shieff Angland trust account
[132] I am prepared to order that all of the money held in the Shieff Angland trust account is paid to the first plaintiff as part payment of the damages award.
Costs
[133] I am satisfied that the plaintiffs are entitled to costs. As to the amount of costs, I direct that the plaintiffs file a memorandum setting out the specific costs they claim within 10 working days of the issuing of this judgment. I will then decide the matter of costs on the papers.
Result
[134]I find the third cause of action made out.
[135]I award the following amounts:
(a)$800,086.05 being the cost of repair;
(b)$53,000 for consequential loss of rent;
(c)$30,000 in general damages;
(d)$7,472.25 in penalty interest; and
(e)interest under the Interest on Money Claims Act 2016 running from 12 November 2024.
[136] All funds originally deposited in the Shieff Angland Lawyers Trust Account in the names of TSOBGNY L & PROFIT F & TURRET TRUSTEES have attracted interest. I direct that the full amount of principal and interest be paid out to the nominated account of TURRET TRUSTEES LIMITED as the Trustee for the Turret trust. These funds are to be paid out in partial fulfilment of the awards made in this judgment, to avoid double counting.
Becroft J
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