Watson v Zhou

Case [2024] NZCA 417


IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

 CA552/2023
 [2024] NZCA 417

BETWEEN

ELIZABETH WATSON
Appellant

AND

LEI ZHOU AND QIUYING ZHANG
Respondents

Hearing:

17 June 2024

Court:

Cooke, Venning and van Bohemen JJ

Counsel:

D M Frandorfer for Appellant
J T Wollerman and D A Fry and Respondents

Judgment:

4 September 2024 at 10.30 am

JUDGMENT OF THE COURT

A        The appeal is allowed.

B        The cross-appeal is allowed in part. 

CThe proceedings are remitted to the High Court to address the further damages arising from the respondents’ claim for breach of warranty on the basis outlined in paragraphs [100]–[101].

DThe costs of the appeal and cross-appeal are to lie where they fall.

____________________________________________________________________

REASONS OF THE COURT

(Given by Cooke J)

Table of Contents

Para No
Introduction  [1]
Background  [4]
Misrepresentation  [13]
      Analysis  [17]
Mistake  [29]
      Arguments  [30]
      Analysis  [37]
      Conclusion  [56]
Breach of warranty  [60]
      Arguments  [66]
      Analysis  [71]

(i)What damages were recoverable?  [74]

(ii)The deck work  [78]

(iii)The drainage work  [80]

(iv)Was a consent required for the drainage work?  [83]

(v)Damage caused by the breach  [88]

Costs  [102]
Conclusion  [104]

Introduction

  1. The appellant, Mrs Watson, appeals from a decision of the High Court awarding the respondents, Mr Zhou and Ms Zhang, $271,600 for mistake under the Contract and Commercial Law Act 2017 (the CCLA) and $15,000 for breach of a vendor warranty in relation to the sale of a residential property on standard terms and conditions.[1] 

    [1]Zhou v Watson [2023] NZHC 2328 [judgment under appeal].

  2. Mr Zhou and Ms Zhang purchased the property from Mrs Watson. After settlement, they discovered that the property suffered from leaking issues. The High Court held that there was a common mistake between the parties that the property was sound and did not leak,[2] and that Mrs Watson was also liable for breach of warranty in connection with certain work undertaken on the property which required a consent which had not been obtained.[3]  Mrs Watson appeals against the High Court’s finding of common mistake, and alternatively, submits that the High Court erred in assessing the quantum of relief for the cause of action.

    [2]At [149].

    [3]At [48] and [71].

  3. Mr Zhou and Ms Zhang cross-appeal against the Court’s conclusion that there was no oral misrepresentation, and in relation to findings associated with the claim for breach of contractual warranty.

Background

  1. In 1969, Mrs Elizabeth Watson and her late husband, Mr Alan Watson, purchased a section on which a residential house was later constructed.  Mr and Mrs Watson had undertaken various alterations and repairs to the property over the years. 

  2. In early 2020, Mr and Mrs Watson listed the property for sale through their real estate agents, RedCoats Ltd.  The selling agent from RedCoats Ltd was Ms Christine Kibblewhite.  Ms Annie Liu also worked for RedCoats Ltd.  She assisted Mr Zhou and Ms Zhang with a possible purchase of the property.

  3. Mr Lei Zhou (sometimes known as “Rocky”) and Ms Qiuying Zhang (sometimes known…

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AGLC
Watson v Zhou [2024] NZCA 417
Case
[2024] NZCA 417
Decision Date

CaseChat Overview and Summary

In the case of Watson v Zhou, the Court of Appeal of New Zealand considered an appeal and cross-appeal arising from a dispute over the sale of a residential property. The respondents, Mr Zhou and Ms Zhang, claimed that the appellant, Mrs Watson, had misrepresented the property's condition, made a common mistake about the property's leakiness, and breached a warranty in relation to certain building works. The High Court had awarded damages to the respondents, and both parties sought to appeal the decision. The Court of Appeal found that the respondents' claim for misrepresentation was not upheld as there was insufficient evidence to prove that Mrs Watson had made the alleged statement. The Court also held that the common mistake claim was not valid under the Contract and Commercial Law Act 2017 (CCLA), as the belief that the property was sound did not meet the criteria for a qualifying mistake in the context of residential property sales. The appeal was allowed on this basis. However, the Court upheld the breach of warranty claim, finding that the respondents were entitled to damages for the cost of bringing the drainage work up to Building Code standards and remediating the water damage caused by the breach. The Court remitted the matter to the High Court to determine the quantum of these damages. Costs of the appeal and cross-appeal were ordered to lie where they fell.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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