Vanifatova v Wang
[2025] NZHC 1532
•16 June 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-000622
[2025] NZHC 1532
BETWEEN ANGELINA VANIFATOVA
Plaintiff
AND
WEIGUO WANG (AKA WEI GUO WANG)
First Defendant
XIAOYUE WANG (AKA CRYSTAL WANG)
Fourth Defendant
HE WANG (AKA WILSON WANG)
Fifth Defendant
Hearing: 24 – 28, 31 March 2025 Appearances:
G R Grant and M C Frogley for Plaintiff
P L Rice and B Han for First, Fourth and Fifth Defendants
Judgment:
16 June 2025
JUDGMENT OF ANDREW J
This judgment was delivered by me on 16 June 2025 at 12 pm
pursuant to r 11.5 of the High Court Rules 2016 Registrar / Deputy Registrar
Date: ……………………………………
VANIFATOVA v WANG [2025] NZHC 1532 [16 June 2025]
TABLE OF CONTENTS
Introduction [1]
Factual background[10]
88G Selwyn Street [10]
EIFS cladding system utilised on the property [16]
Relevant events during Mr Wang Snr’s ownership [17]
The purchase by Ms Vanifatova [43]
Events since settlement [50]
The pleadings [57]
The issues [60]
Issue (a) – What was the nature of the works carried out in 2015 and what
are the remedial works for which Wilson is responsible? [61] Issue (b) – What did the Wangs know and what did they not disclose? [65] Issue (c) – Was the failure to disclose deliberate? [86]
Issue (d) – Did any material omissions induce Ms Vanifatova to enter into
the ASP? [94]
Issue (e) – Is the dishonesty/fraudulent element of the tort of deceit
made out? [100]
Issue (f) – Was Mr Wang, the first defendant, “in trade” for the purposes
of s 9 of the Fair Trading Act 1986? [108] First cause of action against Mr Wang Snr – misrepresentation [115] Second cause of action against Mr Wang Snr – breach of the Fair
Trading Act 1986 [128]
Third cause of action against Mr Wang Snr – breach of contractual
warranty [130]
First cause of action against Crystal and Wilson – deceit [139]
Second cause of action against Crystal and Wilson – breaches of
ss 9 and 43(1)(d) of the Fair Trading Act 1986 [141]
Issue (g) – What is the scope of damages? [145]
Damages [149]
Conclusion and result [152]
Introduction
[1] The plaintiff, Ms Angelina Vanifatova, is the owner of the property at 88G Selwyn Street, Onehunga (the property). She purchased the property in 2021 as a first-time home buyer. She was very concerned not to purchase a leaky home. However, six months later she discovered that the property has significant weathertightness defects.
[2] The first defendant, Mr Weiguo Wang (Mr Wang Snr), is the previous owner. He owned the property for seven years until he sold it to Ms Vanifatova in 2021. He is retired and lives in China. He has never lived in the property; it was rented out to tenants throughout his ownership.
[3] The fourth defendant, Ms Xiaoyue Wang, is Mr Wang Snr’s daughter. She is also known as Crystal Wang. She is married to the fifth defendant, Mr He Wang. He is also known as Wilson Wang.1
[4] Ms Vanifatova sues the first defendant for misrepresentation, misleading and deceptive conduct in trade, and breach of a contractual (vendor) warranty in the agreement for sale and purchase (ASP). She sues the fourth and fifth defendants for deceit and for breach of the Fair Trading Act 1986 (the FTA). She says that when she bought the property, Mr Wang Snr and his New Zealand-based agents (i.e. Crystal and Wilson) did not disclose that the house had experienced weathertightness problems in the past with leaking from the deck into the downstairs bedrooms. She says they deliberately concealed defects. She also alleges that they did not disclose that they had done remedial work on the house – without a building consent – to address those problems.
[5] This is not a case of misrepresentation by positive assertions. Rather, Ms Vanifatova alleges misrepresentation by concealment, omission and half-truths. She relies upon the following principle stated in Spencer Bower & Handley on Actionable Representations:2
1 For ease of reference, I shall refer to the fourth and fifth defendants as Crystal and Wilson.
2 KR Handley Spencer Bower & Handley on Actionable Representations (5th ed, LexisNexis, London, 2014) at [4.17].
To state a thing which is true only with qualifications known to, but withheld by, the representor, is to say something which is false. Such a statement is a “lie”, in a most dangerous and insidious form.
[6] Ms Vanifatova says at the time of sale, the defendants were in possession of a June 2020 building report which said that water ingress appeared to be present where elevated moisture levels were found on the exterior walls of the downstairs bedrooms below the deck. That report recommended that further investigation and invasive testing be done. Ms Vanifatova says the existence and the contents of that report were not disclosed to her.
[7] Ms Vanifatova further says that the defendants’ non-disclosure of these key matters arose during the three days of her due diligence period under the ASP. She says that during that time she made “unrelenting” enquiries about these issues. She relies on the defendants’ undertaking in the ASP to “provide to the purchaser any information held relating to the property relevant to the due diligence investigation.”
[8] Ms Vanifatova seeks remedial damages in the sum of $495,190, namely the cost of repairing the weathertightness defects. She also seeks general damages of
$35,000 and consequential losses, such as lost rent and income. She acknowledges that she is required to account for an earlier settlement with the second and third defendants responsible for a flawed pre-purchase inspection report she obtained from them.
[9] The defendants deny all claims of misrepresentation and/or deceit. They say that the property never leaked (except following a storm event in 2019) and that they always honestly believed that there were no weathertightness issues with it. They further say that no building consent was required for the works carried out in 2015 and that, since then, there has been regular maintenance of the dwelling as is always required with buildings of this kind. They also say that Ms Vanifatova has not established the damages she claims; they cannot be liable for the full extent of the remediation works.
Factual background
88G Selwyn Street
[10] The property is one of 16 similarly constructed townhouses on the site, which is a unit title development. The buildings were constructed in around 2001 and completed in early 2002.
[11] The dwelling is a semi-detached, four-bedroom, two-bathroom townhouse across two storeys. It is timber framed. The laboratory analysis of timber samples taken confirms the original timber framing was untreated. That was common at the time of the original construction.
[12] The exterior cladding is painted and texture coated monolithic clad polystyrene known as Exterior Insulation and Finishing System (EIFS), which is directly fixed to lightweight timber framing.
[13] There is a deck extending out from the living areas and master bedroom on the first floor in the south-western elevation. It is constructed over timber joists with a plywood substrate which is coated with a liquid applied membrane. Over the top of the deck is a floating slatted timber overlay.
[14] The deck is enclosed, with the exterior deck walls of the same EIFS cladding. The interior face of the deck walls is clad with texture coated and painted fibre cement sheet, directly fixed to the timber parapet. The deck has two outlets in the far corners at either end.
[15] The deck sits above three downstairs bedrooms and a bathroom below. Ms Vanifatova says that all three downstairs bedrooms leaked during Mr Wang Snr’s ownership. I shall refer to the three bedrooms as the rear, the middle and the front bedrooms. The front door leads to a central hallway and, to the left-hand side, there are a front bedroom, a middle bedroom, a stairwell to upstairs, a bathroom and then a rear bedroom at the far end of the hallway.
EIFS cladding system utilised on the property
[16] I accept and adopt the following evidence of expert witness and Chartered Building Surveyor, Mr Gerard Ball:
(a)In the 1990s and early 2000s, EIFS became synonymous in New Zealand with the “leaking building” crisis. This issue arose from a range of issues, including improper installation, design flaws, and inadequate maintenance, but also because, like other monolithic systems, it had no capacity to manage any moisture that penetrated its outer layer of painted textured plaster. This was a significant issue for a cladding system being used in a country with comparatively high rainfall.
(b)Early investigations into buildings clad with EIFS cladding in New Zealand highlighted a number of vulnerabilities with the system. Most of these were associated with inadequate flashing systems around joinery penetrations, but also other cladding penetrations and interfaces with other building elements. Most builders of that period endeavoured to resolve these high-risk areas using externally applied sealant, which almost always failed.
(c)Where water was able to penetrate past the face-sealed outer layer of the cladding, joints between the polystyrene sheets acted as conduits, channelling the water by gravity downwards where it would become clamped between the rear of the polystyrene sheet and the (often untreated) timber framing. The result would be the prolonged saturation of the timber framing and eventual destruction through decay.
(d)By 2014, New Zealand’s historic weathertightness issues, and in particular those associated with the use of EIFS cladding systems (as described above), were publicly well-known and widely understood within the property and construction industry.
Relevant events during Mr Wang Snr’s ownership
[17] When he purchased the property in 2014, Mr Wang Snr obtained a pre-purchase inspection building report from Visual Audit Consultants Ltd (Visual Audit). That report did not identify any weathertightness issues with the property.
[18] Shortly after the purchase, Mr Wang Snr entered into a residential rental management agreement with Village Rentals & Property Management (Village Rentals). They were appointed as property managers. Village Rentals has acted as property managers for Mr Wang Snr and, more recently, for Ms Vanifatova.
[19] Approximately every three months, Village Rentals sent a property inspection report to Mr Wang Snr.
[20] In October 2014, Village Rentals, following a property inspection, recorded that the tenant had complained about a leak and musty odour in the rear bedroom below the deck. The email to Crystal read:
While at the property in the rear downstairs bedroom there was a slight musty odour, the tenant pointed out some dry mould on the carpet and said he had noticed the smell and pulled out the bed and found this strip along the wall. The carpet was not wet but there has obviously been a small leak most likely over the winter months. The area matched up with the drainage pipe on the exterior wall so it might be a good idea to get someone in to check it.
[21] In September 2015, Village Rentals emailed Crystal, advising that the tenant had informed them of a “bad smell”, again in the rear bedroom. Village Rentals asked Crystal whether she could arrange for her husband or someone else to come and have a look at the property again.
[22] In October 2015, Wilson arranged for cut-outs to be made to the deck parapet wall and the rear bedroom ceiling and wall. This exposed a drainage pipe in the ceiling void and wall framing. The cut-outs, exposing the insulation and timber framing, were not re-gibbed until some three months later.
[23] In December 2015, Wilson engaged Superior Waterproofing 2000 Ltd (Superior Waterproofing) to undertake remedial work on the deck. After the deck panels were reinstated, large amounts of sealant were applied to the top of the fibre
cement sheets where there was a gap between the fibre cement sheets and the timber cap flashing. The extent and nature of the work carried out by the defendants in October and December 2015 is at issue. There is also a dispute about whether a building consent was required.
[24] On 7 December 2015, the tenant, Mr Bruce Fruean, sent a text to Wilson noting that he had been sleeping in the living room for three months while the work on the deck was being carried out. In a further text sent on 10 December 2015, Mr Fruean stated:
It has also come to my attention that the other room also has mould and smell caused by leakage, this is a health risk and I’ve been pushing you guys to get it done asap.
[25] On 29 January 2016, Mr Fruean sent a text message to Wilson describing the leaking into the rear bedroom as having been “a long-term problem for [the] house” since they had moved in (i.e. nearly two years at that point).
[26] Mr Fruean moved out of the property on 31 January 2018. On 1 February 2018, Village Rentals completed a full inspection report, which noted for the middle bedroom that there was a mark where there had been a previous leak.
[27] On 16 August 2018, Village Rentals sent a routine inspection report to Crystal. The first image in that report is a note from the then tenant advising that, when raining, the “bottom room by the bathroom” (i.e. the rear bedroom) leaked in the corner and the “front room by the front door” (i.e. the front bedroom) also leaked.
[28] In February 2019, Mr Carl Hockings and three flatmates moved into the property as new tenants.
[29] In February 2019, new carpet was installed at the property, except for the rear bedroom. That rear bedroom was re-carpeted in 2015 upon completion of the works done at that time.
[30] On 14 July 2019, Mr Hockings sent a text message to Wilson advising of a leak into the front bedroom. Mr Hockings emailed a short video clip to Wilson showing water dripping from the lintel above the window.
[31] At the request of Wilson, Mr Ping Zhang inspected the property in July 2019. He found the roof gutters blocked with leaves and unblocked them.
[32] In 2020, Mr Wang Snr decided to sell the property. He appointed Bayleys as the real estate agent. In March 2020, Bayleys instructed a building inspection company, API Property Service Ltd, to prepare a report on the condition of the property. In summary, the report (dated 12 March 2020) found that the property was in average to generally good condition for its age and had been well maintained. Non-invasive moisture testing around areas of possible concern showed moisture readings to be of an acceptable level.
[33] During Bayleys’ agency, four conditional agreements for sale and purchase were entered into. All four fell over, including one involving the prospective purchaser, Mr Dillon Sue. His contract was subject to a pre-purchase inspection report which he obtained from Mr Grant Tibbits of The Property Inspectors 2010 Ltd (the Dillon Sue report). That report, dated 15 June 2020, found that there were elevated moisture levels on the wall linings and skirting to exterior walls below the balcony deck. It noted there was rust on the carpet smooth edge and the skirting was moisture- damaged, “indicating moisture.” The report recommended further investigation “to establish the condition of the wall and deck framing, this may require invasive testing.”
[34] Mr Sue decided not to purchase because of the report. Upon being advised of that report by Bayleys, the defendants instructed their solicitor to immediately seek a copy of it. A copy of the report was sent to the defendants’ solicitors on 19 June 2020.
[35] In an email to Mr Sue dated 22 June 2020, Ms Dianne Burt of Bayleys advised Mr Sue that she had met with Wilson and the Wang’s builder, Mr Paul Savage, to go through the Dillon Sue report. The email advised that the Wangs were going to make improvements to the property, including the following: clean all the gutters; seal the fixings on the downpipes; seal the interior of the drain removing water from the deck;
put saddle flashings on the deck handrail; put a flashing on the top of the meter box; lift the boards from the deck and clean and thoroughly inspect the deck membrane with the builder and “address any imperfections”.
[36] On 23 June 2020, Wilson went to the property and carried out some remedial work. He lifted the deck boards, water-blasted the top of the deck and applied silicone sealant. Again, the extent of the works carried out is at issue.
[37]On 1 October 2020, Bayleys withdrew as the selling agents for the property.
[38] On 15 October 2020, Village Rentals sent a routine inspection report to the Wangs. The report noted damp in the first two bedrooms downstairs. The tenant had complained of damp in the front and middle bedrooms.
[39] On 21 December 2020, the property was re-listed with Barfoot & Thompson. The real estate agents were Mr David Wang and Ms Xiaomin Fu. At [21.1] of the agency agreement, the vendor ticked “No” and initialled next to the seller’s acknowledgment which reads:
Is the client aware of any past or present water penetration issue(s) affecting the property and/or complex?
[40] In December 2020, Barfoot & Thompson advised the Wangs to paint the deck and interior in preparation for sale. Over the Christmas period, Wilson painted the interior of the property, including the three downstairs bedrooms. He also installed new LED downlights, internal wall-lights, switches and power points. Before painting, he injected silicone into the mitred joints and nail holes of the cap flashings on the deck balustrading.
[41]On 13 January 2021, Wilson sent a text message to Mr David Wang:
For the house viewing this afternoon, if possible, could you please arrive five minutes early and help move the dehumidifier and the fan in the room at the far end downstairs to the garage? To avoid any misunderstandings from the potential buyers
[42]Mr David Wang agreed to do so. Wilson then texted back:
I extracted for a whole day and night and only extracted 1 litre of water, the house is now relatively dry.
The purchase by Ms Vanifatova
[43] On 13 January 2021, Ms Vanifatova saw the property listed on Trade Me and subsequently viewed the house with an agent from Barfoot & Thompson.
[44] Ms Vanifatova engaged a solicitor who reviewed all the documents that had been provided by the agents, Barfoot & Thompson, prior to any offer being made. Those documents included the title, LIM report, pre-contract disclosure statement and Body Corporate minutes. Ms Vanifatova obtained three years of Body Corporate minutes, which were read by her solicitor. They contained no indication there had been past weathertightness issues at the site and the pre-contract disclosure statement confirmed the property had never been the subject of a claim relating to water penetration at the building. That was consistent with the LIM report.
[45] Ms Vanifatova obtained a building inspection report, which was carried out by Action Home Inspections Ltd.3 Mr Ryan Clifford carried out the building inspection on 15 January 2021 and delivered his written report to Ms Vanifatova on the same day. That report was also checked by her solicitor. The report did not identify any weathertightness issues with the property.
[46] On Monday 18 January 2021, Ms Vanifatova made a written offer to purchase the property for $773,000. The offer was conditional upon the purchaser confirming finance and completing due diligence within three working days. The vendor, Mr Wang Snr, accepted the offer on 18 January 2021.4 The due diligence clause in the ASP provided as follows:
24.0 Due Diligence
This agreement is conditional upon the purchaser being satisfied with the results of a due diligence investigation of the property and the purchaser’s intended development of it by 5pm on the 3 working days after the date of this agreement.
3 The ASP provided at cl 9.4(1) that the agreement was conditional upon the purchaser (Ms Vanifatova) obtaining a report on the condition of the building and any other improvements on the property that is “satisfactory to the purchaser, on the basis of an objective assessment.”
4 The ASP was signed by Mr Wang Snr’s wife, Ms Jinmei Niu, under power of attorney.
…
The vendor undertakes and agrees to:
(a)allow the purchaser together with consultants employed by the purchaser full access to the property for the purposes of the due diligence investigation; and
(b)provide to the purchaser any information held relating to the property relevant to the due diligence investigation.
[47] The ASP also contained the standard vendor warranties at cl 7, including the warranty at cl 7.3(5)(a) in relation to work carried out by the vendor:
7.3The Vendor warrants and undertakes that at settlement:
(5)Where the vendor has done or has caused or permitted to be done on the property any works:
(a)any permit, resource consent, or building consent required by law was obtained; and
(b)to the vendor’s knowledge, the works were completed in compliance with those permits or consents; and
(c)where appropriate, a code compliance certificate was issued for those works.
[48] The ASP also contained the following special condition, inserted by the real estate agent:
21. The Purchaser acknowledges and accepts that neither the vendor or the agent hold themselves out to have any expertise as to the weather tightness, condition or integrity of the exterior cladding to the dwelling (which is monolithic and/or with no cavity) nor have the vendor and/or agent made any representation in relation to such matter. The Purchaser acknowledges that in entering into this agreement they have verified such aspect/matter to their entire satisfaction and have based their decision in reliance solely on their own judgement and enquiry. In this clause “agent” means the real estate agent or licensee.
[49] The due diligence took place over 18 – 20 January 2021. During that time, there was significant text and email correspondence between the various parties, including Mr David Wang, the real estate agent. Those communications are set out in Annexure A. They are critical to understanding and analysing the claim of misrepresentation, in particular what the plaintiff, Ms Vanifatova, requested and whether the information provided was misleading or “half true” as alleged.
Events since settlement
[50] Settlement took place on 26 February 2021. Ms Vanifatova moved into the house the next day. She now lives in Sydney, having moved there in August 2022. She says she moved there to earn a higher salary in order to pay the costs of this litigation and to save towards the repair costs.
[51] Ms Vanifatova says that within a few months of moving into the house, water began leaking into one of the downstairs bedrooms. She initially engaged a company called Moisture Detection to investigate the leaks. She was then referred to a specialist weathertightness building surveyor and engaged Babbage Consultants Ltd (Babbage) to investigate.
[52] Relevant paragraphs of the executive summary of the Babbage report of 1 February 2022 read:
The investigation concluded that there has been a weathertightness failure of the first floor enclosed deck which has caused decay damage to the structural timber framing of the external walls to the property. This failure is due to poor design of the timber framed parapet which now requires recladding in its entirety. Failure to remediate the parapet and subsequent adjoining framing with immediate effect will result in exacerbated deterioration to existing framing, increasing the cost of the remedial works.
Upon review of the extent of damage and the condition of the paintwork, cross-referenced against photographs provided by the client, it is believed that the damage would have been apparent to the previous owner of the property, and has been remediated on a superficial level only prior to the sale.
The proposed remedial solution is full replacement of the external walls, joinery, and parapet surrounding the enclosed deck and areas beneath. Internal walls and ceiling linings are to remain as existing. A new cladding system installed over a ventilated cavity is proposed to the new structural framing of the external walls and parapet.
[53]These proceedings were issued in April 2022.
[54] In April 2023, Ms Vanifatova reached a settlement with Action Home Inspections Ltd and its pre-purchase inspector, Mr Ryan Clifford. The settlement sum was $75,000.
[55] In October 2024, Ms Vanifatova offered to sell the property back to the defendants for the original purchase price. No response was received.
[56]It is proposed that remedial works will proceed from September 2025.
The pleadings
[57] There are five causes of action in the second amended statement of claim of 21 June 2024.
[58]There are three claims against the first defendant, Mr Wang Snr:
(a)Misrepresentation under s 35 of the Contract and Commercial Law Act 2017 (CCLA). It is alleged that Mr Wang Snr misrepresented the true condition of the property to the plaintiff at the time of her purchase and misrepresented that the building did not have, and had not in the past had, any issues with weathertightness. The representations relied on include providing “positive” information about the property’s condition, not disclosing the information the defendants were aware of about weathertightness problems existing in the building, and by carrying out work on the building which masked its true condition at the time of sale.
(b)Misleading and deceptive conduct in trade (as a landlord and property investor) in breach of s 9 of the FTA.
(c)Breach of contractual, vendor warranty for carrying out unconsented building work on the house contrary to cl 7.3(5)(a) of the ASP.
[59] As against Crystal and Wilson (the fourth and fifth defendants), the plaintiff’s claims are:
(a)The tort of deceit for fraudulent misrepresentations when marketing and selling the property to the plaintiff. It is alleged that Crystal and Wilson misrepresented the true condition of the property by concealing
the tell-tale signs of water ingress and by answering the plaintiff’s due diligence questions with half-truths.
(b)Breach of the FTA, as principal parties, or alternatively under s 43(1)(d) of the FTA as parties “directly and knowingly concerned in” and party to Mr Wang Snr’s contravention of s 9.
The issues
[60]I need to determine the following issues:
(a)What was the nature of the remedial works carried out in 2015 and what are the remedial works for which Wilson is responsible?
(b)What did the Wangs know and what did they not disclose?
(c)Was the failure to disclose deliberate?
(d)Did any material omissions induce Ms Vanifatova to enter into the ASP?
(e)Is the dishonesty/fraudulent element of the tort of deceit made out?
(f)Was Mr Wang Snr, the first defendant, “in trade” for the purposes of s 9 of the FTA?
(g)What is the scope of damages?
Issue (a) – What was the nature of the works carried out in 2015 and what are the remedial works for which Wilson is responsible?
[61] At [12] of the second amended statement of claim, the plaintiff alleges that Mr Wang Snr (through his agent, Wilson) carried out or arranged for various building works, collectively described as “the concealment works”. These are alleged to include, but are not limited to:
(a)sealant repairs to the membrane upstand around the perimeter of the first-floor deck;
(b)targeted repair work to the parapet wall on the first-floor deck to stop it from leaking;
(c)patched plasterboard and H1.2 timber framing in the rear bedroom ceiling;
(d)painting to the interior of the dwelling to repair and conceal signs of water ingress; and
(e)installation of new carpet, curtains and lights.
[62] The defendants admit the interior painting and installation of new carpet, curtains and lights (items (d) and (e)). They say that this maintenance was well overdue.
[63] The remaining alleged works (a) and (c) are at issue. In relation to (b), the defendants admit that the parapet wall on the first-floor deck was opened up, but only to investigate for evidence of water ingress. No evidence was found, they say, and no repairs were undertaken.
[64] I find that the plaintiff has proven each of the disputed items. I find that when Wilson and Mr Zhang made their investigations in 2015, they would have observed and likely seen visible decay to the timber studs and nogs, and likely observed water damage in other areas of the downstairs bedrooms. I reject the defendants’ evidence that they found no evidence of water ingress and that no repairs were undertaken at that time. On the contrary, insulation was removed, and two new pieces of timber framing were installed to connect the replacement plasterboard. On these issues, I find the evidence of the plaintiff’s expert, Mr Ball, to be compelling and persuasive. Mr Ball noted that in the course of his inspections, he found clear evidence of repair work to the interior facing side of the deck parapet above where the moisture ingress problems had been identified. He also noted the presence of new treated H1.2 timber
in the ceiling, whereas all other timber in the dwelling was untreated. He noted the H1.2 timber treatment was first introduced into New Zealand in 2003; at least one year after the date of issue of the code compliance certificate for this dwelling.
Issue (b) – What did the Wangs know and what did they not disclose?
[65] In Anderson v De Marco,5 this Court held that whether half-truths involve a misrepresentation will depend on the circumstances, including the extent of the representor’s knowledge.6
[66] The defendants’ knowledge is also important because of the onerous contractual, due diligence obligations they had. Pursuant to cl 24 (the due diligence clause of the ASP), the defendant, Mr Wang Snr (i.e. the vendor), undertook and agreed to provide to Ms Vanifatova “any information held relating to the property relevant to the due diligence investigation.”
[67] The parties accept, and I agree, that the special condition at cl 21 (no holding out by the vendor as to expertise about weathertightness) has only retrospective effect and did not impact on the due diligence undertaking to provide information. However, the special condition clause provides important context and supports my finding that, as a matter of objective interpretation, the parties under the ASP reasonably contemplated that due diligence would involve investigation of weathertightness issues.
[68] As a principal defence to the claims against him, Mr Wang Snr contends that he did not know that the dwelling had any significant water ingress problems. He lives in China and does not speak English. He says that at all material times he was residing in China and relied on Village Rentals to keep him informed as to the condition of the property.
[69] Mr Wang Snr accepts that the knowledge which his agents acquired relating to the subject matter of the agency while acting within the scope of their authority will
5 Anderson v De Marco [2020] NZHC 2679.
6 Anderson v De Marco, above n 5, at [77].
be imputed to him.7 In this case, I find that the relevant agents include not only Mr David Wang, the actual real estate agent, but both Crystal and Wilson, who were the agents for Mr Wang Snr in New Zealand. It was Crystal and Wilson who stood in the shoes of Mr Wang Snr and sold the property essentially as the vendor. They had full and largely unrestricted authority to do so. They were the ones who communicated with Mr David Wang and provided the relevant information and instructions to him and to the solicitors. Wilson, in particular, had the most comprehensive and relevant first-hand knowledge of the history of repairs to the building and was the best placed to provide information about what had happened.
[70] Mr Rice submitted that, even accepting that Mr Wang Snr would have the knowledge of his agents imputed to him, this knowledge amounted to an understanding that the property was in generally good condition for its age. That is consistent with the evidence that Wilson gave, which was very much to deny that there were any real or significant water ingress issues that he ever dealt with.
[71] I reject the defence claims on this critical issue of knowledge. I find that Crystal and Wilson knew that there were significant water ingress problems with this dwelling. They knew that at the time of the ASP and had known about these problems for some considerable time. I prefer and accept the evidence of the plaintiff’s witnesses on critical factual events, including the history of leaking problems – which all goes to demonstrate that Crystal and Wilson were very aware of the issue. The plaintiff’s witnesses include the tenants, Mr Fruean and Mr Hockings, those from Village Rentals who compiled reports about the state of the property, and the plaintiff’s expert witness, Mr Ball.
[72] There was a considerable history of complaints from the various tenants about leaks. I reject Mr Rice’s submission that the complaints were “occasional”. His submission that the only reported incident of water ingress during Mr Wang Snr’s seven-year ownership occurred on 14 July 2019 (during a severe storm in Auckland) very much minimises and mischaracterises what I find on the facts actually occurred. In 2014, the tenant, Mr Fruean, noticed a water leak only five months after having
7 Hickman v Turn & Wave Ltd [2011] NZCA 100, [2011] 3 NZLR 318 at [192]–[197].
moved in. His evidence was that the water leak seemed to match the exit point for the outlet point on the deck above. During 2015, Mr Fruean continued to complain about the leak, mould and musty smells in the rear bedroom. He demanded (and later obtained) a refund of rent. That same year, Wilson and his painter/plasterer removed the gib board off the wall and ceiling in the rear bedroom. It was left for two months to air out. Mr Fruean had to sleep in the living room for three months while the repair work was undertaken. It is implausible to suggest that Crystal and Wilson were unaware of these ongoing complaints as they were each corresponding with Village Rentals and the tenant respectively. In any event, as husband and wife, acting collectively on behalf of Mr Wang Snr, it is most likely that they mentioned the issues raised with each of them to the other.
[73] Mr Fruean produced a photo he had taken on 16 October 2015, showing the wall and ceiling which had been exposed in the rear bedroom. Having studied the photograph, expert witness, Mr Ball, observed that, from his extensive experience and “hundreds” of weathertightness investigations, there was:
(a)water damage on the upper face of the plasterboard ceiling;
(b)visible decay damage to the timber studs and nogs, water staining, mould growth and severely blackened timber at the lower one-third of the studs;
(c)a bracing tie which confirmed that the wall is a bracing element and an important part of the building’s structural design; and
(d)water staining and discolouration of the synthetic building wrap, associated with mould growth.
[74] Mr Ball was of the view that Mr Fruean’s photograph was “indisputable evidence” that this rear bedroom wall was subject to significant visible damage from the weathertightness failure of the deck and/or the balustrade at the time it was opened up in 2015.
[75] I accept and adopt the evidence of Mr Ball on this issue.8 I reject the evidence of Wilson and Mr Zhang that they did not find any damage in the open wall or ceiling. As Wilson acknowledged in cross-examination, the issue really was that they could not find the source of the leak – but there is no real doubt that there was a leak.
[76] My decision to reject Wilson’s account on these critical issues is based on the following factors:
(a)He blamed all three tenants for dampness issues because of what he described as “poor ventilation” (i.e. a tenant responsibility);
(b)In his evidence, he made no mention of blackening until the photograph from Mr Fruean was discovered;
(c)He tended to blame various translations;
(d)He denied that the Dillon Sue report was unsatisfactory;
(e)No corroborative evidence was called from Mr David Wang,
Mr Savage, or the plasterer; and
(f)His explanation about the dehumidifier being put there for paint fumes is at best half-true. In my view, it was also there very much for moisture issues. That is apparent from the text exchange that he had with Mr David Wang of 13 January 2021 (extracting for “a whole day and night” and “the house is now relatively dry”).
[77] I likewise reject Mr Zhang’s evidence on the grounds of credibility. It is implausible that they did not observe visible signs of timber decay in 2015.
[78] It is also important to note that there were ongoing complaints from the tenants about water ingress issues after every attempt at repair. I find that Wilson was actively
8 There is merit to Mr Rice’s criticism of Mr Ball going too far in attributing motive to the defendants. However, that does not detract from my finding that he was a highly persuasive and competent witness.
involved on most occasions and used sealant in an attempt to repair the leaks. However, the complaints kept coming. As the expert witness, Mr Ball, noted, silicone is a common “go to repair solution” for weathertightness problems but almost always fails.
[79] The fact that Wilson obtained a quote from Superior Waterproofing in 2015 for “deck remedial work” is further evidence of his knowledge that there was a problem.
[80] Further information available to both Wilson and Crystal was the Dillon Sue report. As noted above, their solicitors sought a copy of it as soon as they became aware of it. I reject Wilson’s attempt to downplay his awareness of the contents of that report. They treated it seriously, and then called in their trusted adviser on building matters, Mr Savage, to review the contents of the Dillon Sue report page by page. Wilson was directly involved.
[81] By this time, the Wangs knew that the water ingress problems had not been fixed and actual damage caused by water ingress existed in the house.
[82] Mr Savage recommended six action points and at least some of them were carried out by Wilson. He lifted the deck boards, water-blasted the top of the deck and applied sealant to the top of the cap flashing of the balustrades. I reject Wilson’s attempt during cross-examination to try and minimise work carried out at that time.
[83] Even after that work was done, only four months later, on 15 October 2020, Village Rentals sent a routine inspection report to Crystal, advising her that it was damp in the first two bedrooms downstairs.
[84] I acknowledge Mr Rice’s submission that none of the building inspection reports concluded that the dwelling was in a poor state with weathertightness issues – although it is important to record that the Dillion Sue report, which recommended further investigation or intrusive testing, stated that water ingress “appeared to be present where elevated moisture levels found to exterior walls.” The elevated moisture levels recorded in the Dillon Sue report were those in wall linings and skirtings of the exterior walls below the balcony deck. In any event, the firsthand knowledge that the
defendants had about the state of the building, the level of complaints about leaking, and the remedial works carried out, was not information available to the writers of the building inspection report. I thus reject Mr Rice’s submission that if professional building inspectors were not able to identify significant weathertightness problems, it would be surprising if Wilson was expected to have known of it. Ordinarily, that might be the case, but not on the facts here.
[85] I note also that the limits of pre-purchase inspection reports were discussed by Mr Ball in his evidence. There appears to be substantial merit in his criticism of the unregulated pre-purchase property inspection sector and the many poor-quality reports produced. Mr Ball stated, as follows:
In New Zealand, the pre-purchase property inspection sector is entirely unregulated. Formal qualifications, membership of a professional institution or indemnity insurance are not mandatory requirements and therefore anyone who is so-minded can set-themselves up a pre-purchase inspector and produce reports. New Zealand Standard 4306:2005 (Residential Property Inspection) sets out the minimum requirements for the visual inspection of residential buildings, and for the preparation of the appropriate property inspection reports but adherence to this standard is not mandatory.
Notwithstanding the foregoing, pre-purchase inspections are entirely visual and therefore subject to significant limitations. Those undertaking inspections are predominantly reliant upon their personal knowledge and experience but there are also a small number of non-invasive tools at their disposal with which to assist with their observations such as moisture meters, infrared cameras and borescopes. All of these devices also come with limitations. In the case of moisture meters, these provide indicative results only and are highly dependent upon prevailing local conditions.
Issue (c) – Was the failure to disclose deliberate?
[86] I find the plaintiff, Ms Vanifatova, to be a credible witness. I accept her account that she made “unrelenting” enquiries of the defendants about weathertightness issues during the critical due diligence period. That is apparent from the timeline of the email, text message, and WeChat correspondence in Annexure A.
[87] At the time the ASP was signed, the property had been on the market for some considerable time. A number of deals had fallen over, including the conditional agreement of Mr Sue. As noted, the Dillon Sue report, once obtained, was closely
examined by the defendants and they then undertook further remedial works in response to it.
[88] As I have concluded above, the defendants were aware that there were significant weathertightness issues. They had known that for some considerable time. They also knew that Ms Vanifatova was very focused on seeking information about weathertightness issues. I accept that the majority of Ms Vanifatova’s requests about weathertightness issues were made to the Body Corporate, but the seven addressed to the vendor cannot be dismissed as having no consequence. The critical seventh and final request, sent at 1.38 pm on 21 January 2021, was very clear and focused on this particular dwelling.
[89] While Wilson may not have had much knowledge about these matters when his father-in-law first purchased the property back in 2014, by the time of the ASP his understanding and knowledge would have been, and I find was in fact, considerably greater. By that time, he had applied a great deal of sealant to the deck and would have understood and been concerned at complaints about ongoing leaking. He was directly involved in the remedial works carried out in 2015.
[90] In cross-examination, Wilson was, in my view, largely in denial about the issue of leaks. I reject his attempt to try and downplay the issue and suggest that the works he undertook were simply more in the nature of routine maintenance. I accept that Crystal and Wilson were genuinely trying to assist their father/father-in-law, Mr Wang Snr, and that the sale of the house would be important for his retirement. However, in my view, they were clearly under some pressure to sell, and in all the circumstances, I find that the decision not to disclose all of the information which they had and knew about the weathertightness issues, including the Dillon Sue report and the nature and extent of the remedial works carried out in 2015, was deliberate.
[91] In addressing this issue, it is also important to note and record that the defendants had the benefit of legal advice from solicitors and advice from an experienced real estate agent.9 Against the background of cl 21 of the ASP (i.e. the
9 Mr David Wang initiated the inclusion of the weathertightness disclaimer clause in the ASP (cl 21
— special condition).
disclaimer clause in relation to weathertightness issues) and the decision of the real estate agent, Mr David Wang, not to include in the email message to Ms Vanifatova of 20 January 2021 at 4.20 pm, the line “We are not aware of any weathertightness issue of the property”, it is highly likely that the defendants’ advisers were very alive to weathertightness issues. I make no criticism of the role of the solicitors. However, the decisions of the defendants have to be assessed against the backdrop of the defendants’ onerous due diligence obligations which required them to provide to Ms Vanifatova any information held relating to the property relevant to the due diligence investigation (i.e. cl 24(b) of the ASP). That is the standard or test against which to assess their non-disclosure.
[92]I conclude that the non-disclosure was deliberate.
[93] The partial non-disclosure of the Superior Waterproofing quote is a vexed issue. The critical part that was not disclosed included the details of the work that had been undertaken. Wilson believes that the reason Ms Vanifatova received only the top half of the quote “may be a software problem.” He says his understanding is “that antivirus software sometimes interferes with the transfer of picture files.” However, no evidence was called on that issue and the real estate agent who forwarded the quote to Ms Vanifatova did not give evidence. On its own, this piece of evidence might not be that significant. However, considered in context, it is very troubling; Ms Vanifatova’s contention that the critical part of the quote was deliberately withheld is entirely understandable. Nevertheless, suspicion is not, of course, proof. I am not satisfied that Ms Vanifatova, as plaintiff, has proven the full quote was deliberately withheld.
Issue (d) – Did any material omissions induce Ms Vanifatova to enter into the ASP?
[94] It is clear that inducement is a necessary element of the cause of action of misrepresentation under s 35 of the CCLA.
[95] The issue of inducement was discussed by Hardie Boys J in Savil v NZI Finance Ltd10 as follows:
10 Savil v NZI Finance Ltd [1990] 3 NZLR 135 (CA) at 145–146.
At general law, inducement involves purpose as well as result. Not only must the representation have caused the representee to enter into the contract but also the representor must, either in fact or in contemplation of law have intended to cause him to do so … In Ware v Johnson …, Prichard J, referring to fraudulent misrepresentation, expressed the view that the Act has done away with this requirement; whilst in Shotover Mining Ltd v Brownlie … McGechan J left the point open. I cannot think that the legislature intended such a change, which would make the test of inducement a purely subjective one, judged from the point of view of the representee. Not only is there no spelling out of an intention of that kind; but the familiar verb “induce”, which has always had its two aspects, has been retained. Therefore I consider that it remains the law that it is not enough for a party to say that a representation caused him to act in a particular way. He must also show either that the representor intended him to do so, or that he “wilfully used language calculated, or of a nature to induce a normal person in the circumstances of the case to act as the representee did”… To view the [Contractual Remedies Act 1979] in this way is to be consistent with the objective approach generally taken in regard to the law of contracts.
[96] The defendants submit that Ms Vanifatova was anxious to purchase the property and so much so that she changed the due diligence period from five days to three days. She then received the positive building report from Action Homes Inspections Ltd, coupled with the reassuring text from the report writer that there was not any evidence of weathertightness issues. The defendants say that these were the factors which effectively induced her to make the contract unconditional. They contend that any omissions on their behalf (which they deny) were not material. Mr Rice referred to the decision Magee v Mason11 for the proposition that a purchaser’s independent enquiries may bring reliance to an end, so negating the effect of a misrepresentation.
[97] I acknowledge that Ms Vanifatova was a keen purchaser. However, she made extensive enquiries of the defendants (i.e. the vendor) as to weathertightness issues. Having found out that there were weathertightness issues associated with the deck on the nearby property at 88K Selwyn Street (in the same complex), she made further enquiries to ascertain whether there were similar issues with this property. Despite having had the benefit of the positive report, Ms Vanifatova continued to make enquiries of the vendor. She approached the task in a very diligent and disciplined manner.
11 Magee v Mason [2017] NZCA 502 at [48(c)], citing Attwood v Small (1838) 7 ER 684 (HL) at 730–731.
[98] I also acknowledge that the due diligence period was shortened from five days to three days at Ms Vanifatova’s request. That is indicative of her enthusiasm to purchase. However, she remained focused on her task of seeking information about weathertightness issues and nothing turns on the reduction in the due diligence period.
[99] The law is clear that if there is more than one inducing cause, then it is immaterial that it was not the only inducing clause.12 The omissions here did induce Ms Vanifatova into making the contract unconditional – even if she also relied on her own pre-purchase inspection report.
Issue (e) – Is the dishonesty/fraudulent element of the tort of deceit made out?
[100] It is the fourth and fifth defendants, Crystal and Wilson, who are the defendants in the deceit cause of action. They were not parties to the contract (i.e. the ASP).
[101]The tort of deceit is summarised in Clerk & Lindsell on Torts13 in these terms:
The tort involves a perfectly general principle: where a defendant makes a false representation, knowing it to be untrue, or being reckless as to whether it is true, and intends that the claimant should act in reliance on it, then in so far as the latter does so and suffers loss the defendant is liable.
[102] As to the state of the defendants’ mind, the leading authority is still Derry v Peek:14
First, in order to sustain an action of deceit, there must be proof of fraud, and nothing short of that will suffice. Secondly, fraud is proved when it is shewn that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false. … To prevent a false statement being fraudulent, there must, I think, always be an honest belief in its truth.
[103] If the defendant knows the statement to be untrue, that defendant will be responsible, irrespective of his or her motives:15
12 Vining Realty Group Ltd v Moorhouse [2010] NZCA 104 at [51(b)], approving New Zealand Motor Bodies Ltd v Emslie [1985] 2 NZLR 569 (HC).
13 Andrew Tettenborn (ed) Clerk & Lindsell on Torts (24th ed, Thomson Reuters, London, 2023) at [17-01] (footnotes omitted).
14 Derry v Peek (1889) 14 App Cas 337 (HL) at 374 per Lord Hershell.
15 Bradford Third Equitable Benefit Building Society v Borders [1941] 2 All ER 205 (HL) at 211 per Viscount Maugham; also see generally Hazel Carty An Analysis of the Economic Torts (2nd ed, Oxford University Press, Oxford, 2010) at ch 9.
If, however, fraud be established, it is immaterial that there was no intention to cheat or injure the person to whom the false statement was made.
[104] It is, of course, necessary to consider the dishonesty/fraudulence element in relation to Wilson and Crystal individually. Having said that, they are husband and wife and, in my view, acted very much together in providing the information to the real estate agent and to Ms Vanifatova.
[105] Both Crystal and Wilson knew that Ms Vanifatova was anxious and insistent about seeking information about weathertightness issues. They were aware of the Dillon Sue report, and they knew that the reason Mr Sue had not concluded his purchase was because of the report he received. They knew there was a history of leaking with the property that had not been resolved. They both knew that the ongoing attempts to remedy the problems had not been successful. They knew that the remedial works carried out in 2020, upon receiving the Dillon Sue report, were an attempt to try and eliminate any evidence of weathertightness issues. They were aware that another property in the same complex, namely 88K, had had leaking problems with its deck. They knew that Ms Vanifatova was aware of that issue and that she had sought assurances in relation to their property because of it. They were aware also that the other pre-inspection reports had not raised issues. I also find it reasonable to infer that they knew that the contractual obligations of Mr Wang Snr were to disclose all relevant information – and they knew that he was dependent on them in the provision of that information.
[106] The incomplete information that was provided to Ms Vanifatova at 4.20 pm on 20 January 2021 (i.e. forwarded by Mr David Wang from the WeChat message he had received from Crystal at 3.44 pm that day) but with the omission of the words “We are not aware of any weathertightness issue of the property” gave a material and significantly different impression as to the nature and extent of the remedial works that the defendants had done. The bulk of the information conveyed in those crucial messages related to interior, non-structural work, which would not give rise to any concern about weathertightness issues. Their reference to “deck deep clean” and “waterproofing” in 2015 is fundamentally different from the significant remedial works actually attempted at that time. As I have found above, that included structural
remediation, for which a building consent should have been obtained (i.e. timber replacement, a very clear sign of water ingress).
[107] I find that the partial and limited disclosure of detail about the remedial works carried out in 2015 and subsequently (i.e. multiple applications of sealant) was deliberate and dishonest. So, too, was the withholding of the Dillon Sue report. These omissions were intended to and did create a false impression about the state of the dwelling and its history. The necessary element of dishonesty for the tort of deceit is thus made out.
Issue (f) – Was Mr Wang, the first defendant, “in trade” for the purposes of s 9 of the Fair Trading Act 1986?
[108] Ms Vanifatova alleges that Mr Wang Snr was in trade as a property investor in the business of buying and selling properties and as a landlord renting out residential properties, including the one at issue here.16
[109] I find that there is no evidence that the conduct complained of occurred in the context of a business or undertaking engaged in by Mr Wang Snr. He had retired from business. He was not carrying on business as a property investor. Rather, at the time of the ASP, he was living in China. The evidence establishes that this is the only property ever purchased outside of China. I accept that he bought it for personal reasons; as a home for himself and his wife, close to their children and grandchildren. He sold it for personal reasons (COVID-19 prompted a review of his plans and he wished to reduce the burden on his son-in-law of looking after the property).
[110] I also find that the property being rented out pending his arrival in New Zealand does not alter the essentially non-commercial nature of its acquisition and sale.
[111] In Cashmore v Sands,17 it was held that a one-off sale of property can be “in trade” for the purposes of s 9, but whether it is or not is a question of fact to be determined on the facts and circumstances of the particular case. In that case, Clifford J held, in relation to the sale of a farm property by a family trust:
16 Second amended statement of claim dated 21 June 2024 at [55].
17 Cashmore v Sands (2007) 8 NZBLC 101,897 (HC).
[219] … The sale of the land was motivated by personal (family) reasons. There is no suggestion that the sale proceeds were to be used to engage in further activities of commerce, as for example by the defendant, or even his son, buying another farm. There was not any continuity of farming activities (or any broader indication that the defendant had commercial aspirations for the use of the sale proceeds) such as to give the transaction a commercial flavour.
[112] I find that this case is similar. Mr Wang Snr did not have commercial aspirations for use of the sale proceeds; they are his retirement savings and are likely to be applied for personal retirement purposes.
[113] I find that the plaintiff, Ms Vanifatova, has not established that Mr Wang Snr was “in trade” for the purposes of s 9.
[114] Before addressing the final issue, namely the scope of damages, I will apply my findings on the liability issues addressed above to each of the causes of action.
First cause of action against Mr Wang Snr – misrepresentation
[115]Section 35(1) of the CCLA reads:
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)A is not, in the case of a fraudulent misrepresentation, or of an innocent misrepresentation made negligently, entitled to damages from B for deceit or negligence in respect of the misrepresentation.
[116]The elements of this cause of action are:18
(a)a representation as to a matter of past or present fact;19
18 Wrenn v Boughen [2023] NZHC 2494 at [65].
19 A representation must be a statement, whether oral or in writing or by conduct. See Stephen Todd and Matthew Barber Burrows, Finn and Todd on the Law of Contract in New Zealand (7th ed, LexisNexis, Wellington, 2022) at [11.2.1(a)].
(b)the representation properly interpreted in light of all the circumstances must be false or misleading;
(c)the representation must be made by or on behalf of the defendant;
(d)the defendant must have intended the representation to be relied upon;
(e)the plaintiff was induced by the representation to enter into the contract; and
(f)it was reasonable for the plaintiff to rely on the representation and the plaintiff suffered loss as a result of that reliance when they entered into the ASP.
[117] A helpful summary of the general principles relating to falsity by omission, silence or inaction is found in Halsbury’s Laws of England:20
747. When silence constitutes falsity
There are two main classes of case in which reticence may contribute to establish a misrepresentation: (1) where known material qualifications of an absolute statement are omitted; and (2) where the circumstances raise a duty on the representor to state certain matters, if they exist, and where, therefore, the representee is entitled as against the representor to infer their non-existence from the representor’s silence as to them.
748. Omission of qualifications
Any omission from a statement of reference to qualifying or supplementary facts and circumstances, such as to make what is stated so one-sided, or so absolute, a version of the entirety of the facts as to amount to a travesty, and not an accurate summary, is enough to establish a misrepresentation. A statement which omits such matters is a lie in one of its most dangerous and insidious forms. However, mere incompleteness is not a factor in misrepresentation; it must always be proved clearly that it rendered what was stated fallacious and false.
[118] Burrows, Finn and Todd on the Law of Contract in New Zealand describes the position as follows:21
20 Halsbury’s Laws of England (5th ed, 2024, online ed) vol 76 Misrepresentation (footnotes omitted).
21 Burrows, Finn and Todd on the Law of Contract in New Zealand, above n 19, at [11.2.1(g)] (footnotes omitted).
As a general rule, mere silence cannot amount to a misrepresentation. If silence distorts a positive representation, however, then this may amount to misrepresentation for the purposes of s 35. A party to a contract may be legally justified in remaining silent about some material fact, but if he or she ventures to make a representation upon the matter, it must be a full and frank statement, and not such a partial and fragmentary account that what is withheld makes that which is said false. A half-truth may in fact create a misleading impression because of what it leaves unsaid.
[119] I find this is very much a case of half-truths, where the incomplete nature of the disclosure gave a false impression about the state of the building and, in particular, gave the false impression that there had not been any real weathertightness issues.
[120] As I have found above, the defendants knew that there were significant weathertightness defects with this building.
[121] The defendants did disclose a Visual Audit report of 2014, but that did not disclose any problems and was, of course, significantly out of date. They failed to disclose the Dillon Sue report (in breach of cl 24(b) of the ASP), and they failed to disclose, critically, the full extent of the building work carried out in 2015. They made representations about remedial works, but they were not full and frank. The details given about remedial works were about superficial and routine maintenance matters, disguising the more significant works actually carried out. The half-truths clearly created a misleading impression because of what was unsaid. Ms Vanifatova was entitled to infer that there were no further remedial works carried out and that there were no weathertightness defects the defendants were aware of. She was contractually entitled to rely on the positive obligation of Mr Wang Snr as vendor to provide “any information held” relating to the property and relevant to her due diligence investigation (which was clearly focused on weathertightness issues).22 Here, the partial silence (the withholding of known material qualifications) constituted falsity.
[122] I reject Mr Rice’s submission that it was incumbent on Ms Vanifatova, having received the list of work done, to refine her enquiry if she required more information. Having deliberately omitted the substantial investigative and remedial work undertaken (which constituted a breach of contract), the duty or burden did not then somehow shift to Ms Vanifatova to make a further enquiry. She had diligently pursued
22 Agreement for sale and purchase, dated 18 January 2024, cl 24.
the issue of weathertightness and asked very clear and comprehensive questions about it.
[123] The first defendant, Mr Wang Snr, is liable, as the principal, for the misrepresentation of his agents, Wilson and Crystal and the real estate agent, Mr David Wang. As noted in Halsbury’s Laws of England:23
Any person by whose express or implied authority a representation was made is accountable to the representee, if it should turn out to be false, and a claim for damages may be brought against the principal or the agent or against both.
[124] Ms Vanifatova, as plaintiff, has established that the “concealment works” were carried out and that they were done in order to mitigate and/or disguise the weathertightness defects and damage. They, too, were a misrepresentation of the true condition of the dwelling.
[125] It is clear that, if a seller deliberately conceals the true condition of a property, caveat emptor (i.e. let the buyer beware) does not apply. The text, Sale of Land states:24
Though there is no duty to draw a purchaser’s attention to defects in quality, the vendor may not deliberately conceal a defect, as by plastering and painting over cracks in walls, thereby making latent an otherwise patent defect. This and any other conduct intended to prevent discovery by the purchaser of a defect in quality is fraudulent misrepresentation.
[126] At the time of sale, the defendants knew there had been significant weathertightness issues with the property and that they had carried out significant remedial steps to try and remedy those defects. They knew that such steps had been unsuccessful. This included the multiple sealant repairs (including to the membrane upstand around the perimeter of the first-floor deck carried out by Wilson, the replacement of the timber framing, the painting of the interior of the dwelling to repair (and conceal signs of) water ingress, and the installation of new carpet, new curtains and lights). I accept that, ordinarily, the installation of new carpet, new curtains and lights would be unlikely to qualify as an act of concealment. However, those factors need to be considered in context and as part of an overall attempt to present the
23 Halsbury’s Laws of England, above n 20, at [725] (footnotes omitted).
24 Donald McMorland Sale of Land (4th ed, Cathcart Trust, Auckland, 2022) at [2.04].
dwelling (particularly the downstairs) in good condition, against a known background of a history of leaks.
[127] I also find that the withholding of the critical details of the Superior Waterproofing quote, albeit not proven to be intentional, is an actionable misrepresentation. Section 35 of the CCLA makes it clear that there is liability whether a representation is innocent or fraudulent. Accordingly, it does not matter whether the withholding of the full quote was intentional or accidental. As the defendants knew the content of the Superior Waterproofing quote, it was incumbent on them to communicate the issues highlighted in the quote to Ms Vanifatova. As Venning J held in Clarkson v Whangamata Metal Supplies Ltd,25 half-truth cases involve both silence and positive representation. The defendants’ silence, intentional or otherwise, on the works undertaken by Superior Waterproofing constitutes a misrepresentation, especially when assessed against the positive obligation of the vendor to make full disclosure.
Second cause of action against Mr Wang Snr – breach of the Fair Trading Act 1986
[128] This cause of action is not made out. As I have found above, Mr Wang Snr, was not acting “in trade”.
[129]This cause of action is accordingly dismissed.
Third cause of action against Mr Wang Snr – breach of contractual warranty
[130] The leading case on breach of vendor warranty is the recent decision of Watson v Zhou,26 in which the Court of Appeal held:
[71] The starting point for assessing the remedy for a breach of a contractual warranty is the normal approach for breach of contract. When a party has warranted that a particular matter is true, a breach of contract is established by the plaintiff … showing that the matter is not true. The plaintiff need not show that the defendant was fraudulent or negligent in making the
25 Clarkson v Whangamata Metal Supplies Ltd HC Auckland CIV-2003-404-6869, 8 June 2006 at [53]; and see Burrows, Finn and Todd on the Law of Contract in New Zealand, above n 19, at [11.2.1(g)].
26 Watson v Zhou [2024] NZCA 417 (footnotes omitted).
relevant statement, only that it is false. The obligation of the defendant is strict
– liability flows from non-performance.
[131] The Court of Appeal further held that where a consent is required but has not been sought, it is a question of assessing what would have happened if it had been sought.27
[132] Ms Vanifatova alleges that the first defendant, Mr Wang Snr, breached the standard vendor warranty in cl 7.3(5)(a) of the ASP. That clause reads:
7.3 The vendor warrants and undertakes that at settlement:
…
(5)Where the vendor has done or has caused or permitted to be done on the property any works:
(a)any permit, resource consent, or building consent required by law was obtained; and
(b)to the vendor's knowledge, the works were completed in compliance with those permits or consents
(c)where appropriate, a code compliance certificate was issued for those works.
(emphasis added)
[133] There is clear and compelling evidence from Ms Vanifatova’s expert building surveyor, Mr Ball, that a building consent was required by law for the remedial works carried out in 2015. No consent was in fact obtained and I find that Mr Wang Snr was in clear breach of cl 7.3(5)(a).
[134] Mr Ball has extensive qualifications and is well qualified to give opinion evidence on the issue of assessment and remediation of leaky homes. His evidence was that the building works carried out by the defendants in December 2015 (which I have found to be significant) required building consent at the commencement of those works. That is because the deck had failed the durability requirements within 15 years of construction.28 The discovery by Wilson and others of water damage and timber
27 Watson v Zhou, above n 26, at [67].
28 See Building Regulations 1992, sch 1, cl B2.
decay (which I have found would have been visible) would also have required a building consent to remedy.
[135] In the opinion of Mr Ball, the 2015 remedial works were not exempted by Schedule 1 of the Building Act 2004. They went beyond any repair and maintenance that might be considered exempt building work. That is because the works included repair or replacement of components that had failed to satisfy the provisions of the Building Code for durability.29 They also failed to comply with the external moisture requirements of the Building Code.30 This all meant that a building consent was required by law.
[136]I find that the non-exempted works included:
(a)removal and replacement of the gib board in the rear bedroom (because it was a bracing wall) in 2015;
(b)removal and replacement of the gib board ceiling in the rear bedroom, which included the addition of H1.2 treated timber in 2015;
(c)destructive testing for the inspection of the timber framing in 2015;
(d)removal and replacement of the insulation in 2015;
(e)the waterproofing works performed by Superior Waterproofing in 2015;
(f)the removal and replacement of a fibre cement panel on the deck balustrade after December 2015;
(g)the application of sealant to the deck edge perimeter following the report in July 2019 of leaking in the front downstairs bedroom;
29 See above n 28.
30 Building Regulations, sch 1, cl E2.
(h)the application of sealant to the deck after the property inspectors had reported elevated moisture readings on the exterior bedroom walls in June 2020 (i.e. the Dillion-Sue report).
[137] I note that Mr Ball’s opinion on these issues was reinforced after he had studied the photographs produced by Mr Fruean. Mr Ball was of the view that anyone, whether layperson or a professional builder, would have recognised that there was a leaking problem from the deck and/or balustrade above the bedroom wall. The fact that Wilson obtained a quote from Superior Waterproofing for “deck remedial work” also suggests that Wilson knew that there was a problem.
[138] Much of the defence of this breach of warranty claim is premised on the contention that, in 2015, only investigative work was carried out (which they say did not require a building consent) and the limited application of silicone and overcoating of the pre-existing waterproof membrane was simply maintenance. However, for reasons given above, those contentions are rejected. The dicta therefore in Watson v Zhou31 about routine repair work not requiring building consent does not apply here. Here there has been a failure of the weathertightness system with significant leaking causing damage to the building interior.
First cause of action against Crystal and Wilson – deceit
[139] Based on my above findings, I conclude that the plaintiff, Ms Vanifatova, has proven the necessary elements of the tort of deceit as against both Crystal and Wilson. They made false representations knowing them to be untrue with the intention that Ms Vanifatova should act on them – and Ms Vanifatova did in fact act on such representations.
[140] As I have concluded, Wilson misrepresented the true condition of the property by concealing the tell-tale signs of water ingress. I also find that both Wilson and Crystal answered the plaintiff’s due diligence questions with half-truths, knowing that the information provided was incomplete and with the intention that it should deceive Ms Vanifatova. Neither Wilson nor Crystal honestly believed that the incomplete
31 Watson v Zhou, above n 26.
information provided was a full and accurate picture of the remedial works that had been carried out – and they knew that the remedial works (not disclosed) that had in fact been carried out were indicative of significant weathertightness defects. As I have discussed above, they both also knew that the defects that they attempted to repair in 2015 had not in fact addressed the problem. There have been ongoing leaking problems, and this had been documented (in part) by the Dillon Sue report. However, Wilson and Crystal did not disclose the Dillion-Sue report; the disclosure of the Visual Audit report only was, in the circumstances, dishonest. It was sent in direct response to a question from Ms Vanifatova to ask the vendor for documentation: “anything they have to show there is no weathertightness issue.”
Second cause of action against Crystal and Wilson – breaches of ss 9 and 43(1)(d) of the Fair Trading Act 1986
[141] Neither Wilson nor Crystal were acting “in trade” for the purposes of s 9 of the FTA. The cause of action pleaded at [74] of the second amended statement of claim therefore cannot succeed.
[142]There is an alternative pleading as follows:
78.Alternatively, [Crystal and Wilson] are liable under s 43(1)(d) of the Fair Trading Act for being directly and knowingly concerned in, or party to, [Mr Wang Snr’s] contravention of s 9 of the Fair Trading Act.
[143] In my view, this alternative pleading likewise cannot succeed. There has been no contravention of s 9 by Mr Wang Snr; there is no primary wrong to which Wilson and Crystal might be a party.
[144] I now turn to address the question of remedy and the remaining key issue of the scope of damages.
Issue (g) – What is the scope of damages?
[145] The Court of Appeal in Watson v Zhou held that the basis for the award of damages for breach of warranty was the same as for other contractual breaches:32
32 Watson v Zhou, above n 26 (footnotes omitted).
[72] The basis for the award of damages for breach of warranty is the same as for other contractual breaches. A plaintiff is entitled to be put in the position they would have been in had the contract been performed. So Mr Zhou and Ms Zhang were entitled to an award that put them in the position they would have been had the relevant work been conducted with any required building consents. Usually, an award of damages would be based on the diminution in value, but the approach is not inflexible.
[146] Mr Rice submitted that the plaintiff has not proven that the entire cost of remediation claimed was caused by the breach of warranty. He submitted that it has not been shown that any cost flowed from the warranty breach. He also submitted that if a building consent had been sought for the waterproofing work in 2015, it is unlikely that Auckland Council would have insisted on further investigative work in relation to the balustrading. Thus, he said, the Council would not have identified the real cause of the weathertightness issues – water entering through the top of the balustrading – and the damage would have occurred anyway.
[147] I agree with Mr Rice’s submission that the warranty at issue was not a warranty that the house did not leak; the plaintiff is only entitled to damages that flowed from the work being undertaken without a building consent. However, Mr Rice’s submissions as to the likelihood of the Council insisting on further investigative work is premised on a flawed factual basis and one which I have rejected. The investigative work that was carried out in 2015 did find water ingress issues and the defendants attempted unsuccessfully to address them. I find that if a building consent had been sought (which it ought to have been) then the real cause of the weathertightness defects would have been discovered – namely water entry through the top of the balustrading. There is clear support for that finding in the expert evidence of Mr Ball, which I accept and adopt. Mr Ball referred to the “chain reaction” that would arise if a building consent had been obtained for the unconsented building work. This would have included a repair plan from a suitably qualified building surveyor (a Council requirement), properly considered remedial plans, an inspection regime by the Council, an independent assessment by a building surveyor about the condition of framing, and the issue of a code of compliance certificate following a proper investigation, identification and remediation of water ingress.
[148] I find that the plaintiff, Ms Vanifatova, has proven the cost of repairing the damage to the property in the sum of $495,190 (including GST), being damage caused
by the work not being up to the standard that would have been required if a building consent had been sought.33
Damages
[149] In relation to the misrepresentation, breach of contractual warranty, and tort of deceit causes of action that I have found established, the plaintiff is entitled to her estimated remedial cost of $495,190 including GST. There is no expert evidence from the defendants challenging the plaintiff’s quantum or scope evidence and no basis for me to reject the expert evidence of Mr Trevor Henry on this issue. He was a competent and professional witness.
[150]I also find that the plaintiff should be awarded the following further damages:
(a)Consequential losses for lost rental income of $15,355 (based on the property being vacant for 20 weeks in advance of and during the remedial work being carried out (20 weeks at $767.75 per week, net of property manager’s 6.5 per cent fee) together with expert/consultant investigation costs of $11,225.45 (a total of $26,580.45)).
(b)General damages of $30,000.34
[151]Ms Vanifatova responsibly accepts that she will have to deduct the sum of
$64,048 for her settlement with the second and third defendants (being $75,000 less scale costs of $10,952). My impression is that a settlement in that sum might have been on the light side, but I have heard no evidence or argument on that issue. I accept that Ms Vanifatova was legally represented by competent solicitors and I am in no position to fully assess the issue. I accept that the sum of $64,048 is the appropriate sum to deduct.
33 Watson v Zhou, above n 26, at [88].
34 As awarded in similar such as Bharga v First Trust Ltd [2022] NZHC 1710 and MacFarlane v Informed House Inspections Ltd [2023] NZHC 934. I decline to award the further additional damages sought at [91] of Ms Vanifatova’s brief of evidence. There is insufficient proof to support those claims.
Conclusion and result
[152] I enter judgment for the plaintiff, Ms Vanifatova, against the first defendant, Mr Wang Snr, in respect of the first cause of action (misrepresentation) and the third cause of action (breach of contractual warranty). I dismiss the second cause of action (breach of the FTA).
[153] I enter judgment in favour of the plaintiff, Ms Vanifatova, against the fourth and fifth defendants, Ms Crystal Wang and Mr Wilson Wang, in respect of the deceit cause of action.35
[154] I dismiss the FTA causes of action against Ms Crystal Wang and Mr Wilson Wang. This includes the alternative claim under s 43(1)(d) of the FTA.
[155] The first defendant, Mr Wang Snr, and the third and fourth defendants, Ms Crystal Wang and Mr Wilson Wang, are to pay damages to the plaintiff, Ms Vanifatova, in the following amounts:
(a)Remedial costs of $495,190;
(b)Consequential losses (loss of income and expert consultant costs) in the sum of $26,580.45; and
(c)General damages of $30,000.
[156]I also award interest under s 10 of the Interest on Money Claims Act 2016.
[157] My preliminary view on costs is that having succeeded, the plaintiff, Ms Vanifatova, is entitled to costs on a 2B basis plus disbursements. The parties are to confer on both interest and costs and, if they cannot agree, I direct that:
(a)The plaintiff is to file and serve a memorandum of no more than three pages within 20 working days of this judgment;
35 Second amended statement of claim, dated 21 June 2024 at [67]–[69].
(b)The defendants are to file a memorandum in response of no more than three pages within a further 10 working days;
(c)I will then resolve matters on the papers.
[158] The sum of $64,048 is to be deducted from the total judgment sum to reflect the plaintiff’s settlement with the second and third defendants.
Andrew J
Annexure A
Date and time
Narration
18 January 2021
at 10.13 am
The ANZ Bank (Ms Vanifatova’s mortgagor) requested Mr David Wang to send the pre-contract disclosure statement.
18 January 2021
at 10.45 am
Ms Vanifatova sent two emails to Mr David Wang citing her ANZ mortgage lending condition: We’ll need written confirmation, to our satisfaction, from the Body Corporate that the property has not in the past and does not now have any problems with, or caused by, the weather tightness of the property (eg water ingress). We’ll also need confirmation there are no levies, charges, or other contingency costs
associated with weather tightness problems.
18 January 2021
at 11.18 am
Mr David Wang sent the pre-contract disclosure statement to the ANZ (copy to Ms Vanifatova).
18 January 2021
at 11.22 am
Ms Vanifatova sent a text message to Mr David Wang: The bank is also asking for info from body Corp, like their minutes for the past 5–10 years to make sure it’s not a leaky building. I’ve sent you an email.
18 January 2021
at 3.00 pm
Ms Vanifatova requested Mr David Wang to reduce the time for
satisfaction of the building inspection condition from five days to three days.
18 January 2021
at 5.31 pm
Mr David Wang forwarded Ms Vanifatova’s email of 10.45 am to Ms Crystal Wang.
18 January 2021
at 5.48 pm
Ms Crystal Wang emailed Ms Vanifatova’s due diligence request to the Body Corporate manager.
18 January 2021
at 8.17 pm
The Body Corporate manager sent an email to Crystal Wang which says the pre-contract disclosure statement provides the confirmation requested by the purchaser. Ms Crystal Wang forwarded the email to Mr David Wang at 10.16 am on 19 January.
18 January 2021
at 8.52 pm
Ms Vanifatova sent an email to Mr David Wang referring to issues noted in the building subsection of the LIM report and sought details regarding what work was carried out on the deck, asking: Can you please ask the vendors if there’s been any work carried out on the outside deck and cladding since they have owned the property. And if so, what exactly in detail was carried out?
Mr David forwarded this email to Ms Crystal Wang at 9.02 pm.
19 January 2021
at 11.26 am
The ANZ emailed Mr David Wang concerned that the pre-contract disclosure statement was only signed by the vendor and required a letter from the Body Corporate confirming that: the property has not in the past and does not now have any problems with, or caused by, the weather tightness of the property (eg water ingress).
Mr David Wang then forwarded this email to Ms Crystal Wang.
19 January 2021
at 11.31 am
Ms Vanifatova sent a text message to Mr David Wang saying it was very important to the bank that the Body Corporate sign the confirmation
letter.
19 January 2021
at 11.57 am
Ms Crystal Wang sent an email to Mr David Wang:
Hi David
The previous owner have made new floating deck and we have done deck deep clean and waterproof in 2015. We are not aware of any
weathertightness issue of the property.
19 January 2021
at 1.14 pm
Ms Vanifatova sent an email to Mr David Wang seeking a response to her enquiry: Can you please ask the vendors if there’s been any work carried out on the outside deck and cladding since they have owned the property? And if so, what exactly in detail was carried out?
19 January 2021
at 4.16 pm
Mr David Wang advised the ANZ that the Body Corporate had signed on the first page but would not sign the last page of the pre-contract disclosure statement. The Body Corporate took the position that the last
page only needed a vendor to sign.
20 January 2021
at 10.03 am
Ms Vanifatova sent a text message to Mr David Wang seeking either that the Body Corporate sign the last page of the document or confirm in writing that there was nothing wrong with the building as per the bank’s email.
20 January 2021
at 12.39 pm
Ms Vanifatova emailed Mr David Wang again asking for a response to her enquiry made at 1.14 pm on 19 January.
20 January 2021
at 12.57 pm
Ms Vanifatova sent a text message to Mr David Wang: I need the vendor to send an email with information about what work has been done to the
building. Get the body Corp to review and sign it as well.
20 January 2021
at 2.59 pm
Mr David Wang forwarded Ms Vanifatova’s text to Ms Crystal Wang.
20 January 2021
at 1.41 pm
Ms Vanifatova sent an email to Mr David Wang requesting the Body Corporate sign the pre-contract disclosure statement at 10.2 to show that the building has never had and doesn’t now have any weathertightness issues. She also requested the vendor and Body Corporate to send an
email listing all of the work that had been done to the building.
20 January 2021
at 3.44 pm
Ms Crystal Wang sent a WeChat message to Mr David Wang:
Hi David
The previous owner have made new floating deck and we have done deck deep clean and waterproof in 2015. We are not aware of any weathertightness issue of the property. We also down new interior painting, washed fence, new deck painting, new led downlights, walllights, new switches, powerpoints, 3 in 1 heats and 1 year new
carpet curtains and curtains!
20 January 2021
at 4.06 pm
Ms Crystal sent an email to Mr David Wang. The content was the same as the entry above. It was sent in English and in the name of Weiguo Wang. The above WeChat message was in Mandarin.
20 January 2021
at 4.20 pm
Mr David Wang emailed Ms Vanifatova: The vendor just wrote what the works they did in this building. Mr David Wang forwarded to Ms Vanifatova the above email from Ms Crystal Wang describing the work the vendor had done on the property. The email did not include the sentence in the WeChat message which read: We are not aware of
any weathertightness issue of the property.
21 January 2021
at 7.28 am
Ms Vanifatova emailed Mr David Wang asking if he could get anything from the Auckland Council or the builder to confirm what work had been done. Mr David Wang responded at 7.35 am: I will ask the vendor.
But I don’t think they have.
21 January 2021
at 8.18 am
Ms Vanifatova emailed Mr David Wang: Can they request it? They would have received something from the builder once the work was done.
21 January 2021
at 11.58 am
Mr David Wang emailed Ms Vanifatova that the waterproofing had been done by “SW 2000 limited” in 2015. He attached the top part only of the quotation from Superior Waterproofing 2000 Ltd (that did not contain the details of the work which were recorded in the remainder of
the quotation that was not sent to Ms Vanifatova).
21 January 2021
at 12.12 pm
Ms Vanifatova emailed an extract from the LIM report to Mr David Wang asking whether building consent BCO12081204 related to the property.
21 January 2021
at 1.00 pm
Ms Crystal Wang emailed Mr David Wang: We don’t know about that.
21 January 2021
at 1.16 pm
Mr David Wang forwarded the above email to Ms Vanifatova (i.e. We don’t know about that). His email stated: From the vendor, I think your lawyer would be help you find out. Thanks.
21 January 2021
at 1.32 pm
Mr Wilson Wang sent Mr David Wang a full copy of the Superior Waterproofing 2000 Ltd quotation via WeChat.
21 January 2021
at 1.38 pm
Ms Vanifatova sent a text to Mr David Wang: To confirm, ask the vendor to send you a report or any documents from builders or the council confirming the work they have done to the property. Ask the vendor for the documentation from when they purchased the property
– building inspection, council consents, anything they have to show there is no weathertightness issue.
21 January 2021
at 1.39 pm
Ms Crystal Wang sent the 2014 property condition report by Visual Audit Consultants Ltd to Mr David Wang. He then forwarded it to Ms Vanifatova at 1.49 pm.
21 January 2021
at 3.39 pm
Ms Vanifatova received a text message from Action Home Inspections Ltd: Hi Angelina [the plaintiff] I spoke to Ryan he believes there isn’t any evidence of weather tightness issues. Please note that we did not carry out a weather tightness report however all the moisture reading levels on the external wall had dry readings at the time of the inspection. I would advise requesting copies of the body corporate meeting minutes to look at any issues that may have arisen on regular maintenance checks and perhaps speak to the body corporate chair person to see if
any of the owners had issues in the past. Dina.
21 January 2021
at 4.26 pm
Ms Vanifatova’s solicitor declared the sale and purchase agreement unconditional.
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