Weber v Hastings District Council
[2022] NZHC 1405
•15 June 2022
IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY
I TE KŌTI MATUA O AOTEAROA AHURIRI ROHE
CIV-2020-441-11 [2022] NZHC 1405
BETWEEN TONY GRAHAM WEBER,
ROBYN DELLE WEBER and
LDP TRUSTEES NO. 4 as trustees of the Fairview Trust
Plaintiffs
AND
HASTINGS DISTRICT COUNCIL
First Defendant
DONALD CHARLES GILBERTSON and MURRAY GEORGE GILBERTSON as
trustees of the Peak Performance Trust Second Defendant
TREMAIN REAL ESTATE
Third Defendant
JILL BADDELEY
Fourth Defendant
MURRAY PRINGLE and GEOFF ROTHWELL
Fifth Defendant
Hearing: 12 May 2022 Appearances:
P Drummond for the Plaintiffs/Respondents
A Challis and L Fernandez for Third and Fourth Defendants/ Applicants
Judgment:
15 June 2022
JUDGMENT OF ASSOCIATE JUDGE JOHNSTON
WEBER v HASTINGS DISTRICT COUNCIL [2022] NZHC 1405 [15 June 2022]
Introduction
[1] This is an interlocutory application by the third and fourth defendants pursuant to r 15.1 of the High Court Rules 2016, for an order striking out the plaintiffs’ claims against them.
[2] Under r 15.1, the Court may strike out a pleading that does not disclose a reasonably arguable cause of action. Counsel were on common ground as to the principles applying to applications to strike out pleadings on this basis. In an application made by a defendant, the essential issue is whether, assuming the plaintiff will be able to establish the facts as pleaded, the defendant can satisfy the Court that the plaintiff cannot succeed on the claim or the relevant cause or causes of action. The jurisdiction is exercised sparingly, for the obvious reason that the Court is dealing summarily with a substantive matter. So, it must be clear that the claim or cause of action, as the case may be, cannot succeed.1
Background
[3] In mid-2015, the second defendants, Donald and Murray Gilbertson, in their capacities as the trustees of the Peak Performance Trust, resolved to sell a residential property situated at 192 Te Mata Peak Road in Havelock North.
[4] They engaged a local real estate agency, the third defendant, Tremain Real Estate (2012) Ltd, to act for them. The responsible agent was the fourth defendant, Jill Baddeley. On 17 July 2015, the vendors and Tremain Real Estate entered into an agency agreement in which the former represented to the latter that they were unaware of any past or present weathertightness issues affecting the property, and undertook to disclose details of any such issues that they became aware of between the date of listing and the date of sale. As will become apparent, the representation as to their knowledge of any past weathertightness issues was clearly incorrect.
[5] Ms Baddeley arranged an open home on 16 August 2015. Amongst those who attended the open home were Tony and Robyn Weber, the first and second-named
1 Couch v A-G [2008] NZSC 45 at [33].
plaintiffs, and two of the trustees, along with L D P Trustees No. 4 Ltd, of the Fairview Trust.
[6] Seemingly at the request of Mr and Mrs Weber, under cover of an email dated 19 August 2015, Ms Baddeley sent certain documentation relating to the property to the Webers. This email was the only written communication between Ms Baddeley and the Webers of any substance. It said:
Good evening,
It was lovely chatting again with you both this afternoon.
I finally made it back to the office to enable me to scan the docs for you to look at.
Happy reading.
[7]Attached to Ms Baddeley’s covering email was the following:2
(a)a copy of an index of documents held by the Hastings District Council relating to the property which appears to include records from November 2004 through to November 2013;
(b)correspondence involving the Hastings District Council and the vendors, Donald and Murray Gilbertson, in mid-2009 relating to the process of securing a code compliance certificate for the property. There are only two substantive items of correspondence, an email from the vendors to the Council dated 24 July 2009 and a letter from the Council to the vendors dated 21 September 2009. The former attached a suggested remedial plan for the property. The latter included a list of work that the Council required before a code compliance certificate could be issued;
2 This description of the documentation is not that contained in the pleadings, the evidence or counsel’s submissions. The taxonomy is mine. However it appears to me to be the most logical way of categorising and describing the documentation.
(c)a copy of the code compliance certificate eventually issued by the Hastings District Council on 22 March 2010, together with the Council’s Building Maintenance Information Sheet; and
(d)documentation prepared by the vendors and clearly intended to be used in the marketing of the property. This is largely descriptive of features of the property. Importantly, it includes a description of the process that the vendors went through to secure the code compliance certificate.
[8] The Webers having no doubt indicated that the trustees were interested in the property, a day later, on 20 August 2015, Ms Baddeley emailed to them a draft sale and purchase agreement and, separately, a copy of the certificate of title to the property.
[9] Ms Baddeley also emailed a copy of the draft sale and purchase agreement to the solicitors acting for the plaintiffs, Lloyd Dodson & Pringle. Clearly, Ms Baddeley was only able to email the draft agreement to the solicitors because she had been told who the plaintiffs would be instructing to act for them in the transaction. Ms Baddeley did not send any of the documentation referred to at [7] to Lloyd Dodson & Pringle.
[10] The next day, 21 August 2015, Ms Baddeley emailed to Lloyd Dodson & Pringle a copy of a LIM report for the property. She did not send a copy of this to the Webers.
[11] Later that day the agreement for sale and purchase was executed by or on behalf of the trustees of both trusts.
[12] It will be apparent from the above description of the background that there were several opportunities for direct engagement between Ms Baddeley and the Webers prior to the execution of the agreement for sale and purchase. Notably, no allegation is made, and there is no suggestion in any of the affidavit evidence before the Court for the purposes of this interlocutory application, that Ms Baddeley made any representation concerning the property other than by emailing the documentation already referred to between 19 and 21 August 2015. Nor did Mr Drummond suggest in the course of argument that there was any prospect of the claim being expanded
beyond its current scope in this regard, which would, in any event, have been surprising, as the extant statement of claim is the third iteration of that document. Thus, the plaintiffs’ case against the third and fourth defendants is based exclusively on Ms Baddeley having emailed the documentation already described to them and their solicitors.
[13] On the evidence, Tremain Real Estate and Ms Baddeley had no information relating to the property other than that contained in the agency agreement and the documentation emailed by Ms Baddeley to the plaintiffs and their solicitors.
[14] It is fair to say that the documentation that was sent to the plaintiffs and their solicitors contained mixed messages. There were clear indications (in the Hastings District Council’s index and the correspondence between the vendors and the Council) that this was a property in respect of which there had in the past been significant weathertightness issues. Equally, there was material (in the documentation prepared by the vendors describing the process whereby a code compliance certificate was obtained) from which a reader might reasonably infer that any weathertightness issues had been addressed.
[15] The terms of the sale and purchase agreement are neither remarkable nor contentious. For context I record that the sale and purchase price was $1,320,000.00 and that the agreed settlement date was 28 October 2015. Otherwise, the agreement was prepared on the ubiquitous REINZ form, and contained no material special conditions.
[16] By all accounts, the transaction settled on or about 28 October 2015 without a hitch. The Webers lived in the property from late-2015 until mid-2018, when they decided to sell. There is no evidence that they encountered any difficulties with the property. However, the plaintiff trustees plead in their third amended statement of claim that:
8.In mid-2018, the Plaintiff [sic] decided to put the dwelling on the market for sale. A potential purchaser expressed interest in the dwelling and requested, as part of their due diligence, wood sampling of the exterior framing of the dwelling be undertaken. This wood sampling testing revealed that the dwelling had wood decay and
elevated moisture levels in various locations, with damage arising as a result of water ingression into the dwelling.
9.The plaintiff [sic] removed the dwelling from the market, as a result of the wood sampling tests obtained.
10.The plaintiffs subsequently had further extensive investigative testing undertaken and identified various construction defects as follows:
…
[17] The pleading continues with a detailed description of defects, typical of those generally associated with leaky homes.
[18] The plaintiffs now sue for damages which they say reflect the cost of necessary remedial work. They are claiming $1,735,712.00. The defendants are the vendors, Donald and Murray Gilbertson, in their capacities as the trustees of the Peak Performance Trust, Tremain Real Estate, Ms Baddeley and the Hastings District Council.
[19] It is unnecessary to set out the bases of the claims against the vendors or the Council.
[20] In the pleadings, Tremain Real Estate and Ms Baddeley are treated as one party on the basis that the former is vicariously liable for the actions of the latter.
The plaintiffs’ claims against the third and fourth defendants
[21] The pleaded causes of action against Tremain Real Estate and Ms Baddeley are not a model of clarity. Although not pleaded in quite these terms, they include at least four interrelated assertions against each of them. The first is misrepresentation, a pleading that would be more at home in a contract case. The second is misleading or deceptive conduct in terms of s 9 of the Fair Trading Act 1986. The third is negligence. The last is negligent misstatement.
[22] Critically, though, the essential allegation that is repeated in each of the pleaded causes of action, in more or less exactly the same terms, is that in emailing the documentation described earlier to the plaintiffs and their solicitors, the third and fourth defendants misled them “as to the dwelling’s quality, condition and its
weathertightness together with the nature of work undertaken on the dwelling in order to obtain a Code of Compliance”.3
[23] That appears to me to be the irreducible core of the plaintiffs’ case against Tremaine Real Estate and Ms Baddeley.
[24] The pleadings go on to say, in relation to all four causes of action, that the plaintiffs relied on the allegedly misleading documentation in acquiring the property, and thereby suffered the loss in respect of which they seek to recover damages.
[25] In adopting what might be criticised as a reductionist approach to the pleadings, I have not ignored the drafter’s attempts, most particularly in relation to the negligence — related pleadings, to go beyond an assertion that the plaintiffs were misled by the documentation.
[26] However, it appears to me that focussing on the core allegation is unavoidable. As already said, in each cause of action, the plaintiffs ultimately assert that the documentation was misleading, that they relied on it being accurate and that their reliance was the proximate cause of their loss. This being the route that the pleadings take, it follows that, to succeed on any of their causes of action against the third and fourth defendants, the plaintiffs will have to be able to establish that by emailing the documentation to the plaintiffs and their solicitors as already described the third and fourth defendants misrepresented the position. In any event, that is the way in which the case was argued by both Ms Challis and Mr Drummond.
The defendants’ application
[27] On behalf of Tremain Real Estate and Ms Baddeley, Ms Challis submits that the Court should strike out both causes of action pleaded against each of them, on the ground that they do not disclose any reasonably arguable cause of action.
[28] Although I infer from her submissions that the third and fourth defendants would contend that their actions are not capable of being actionable on any basis
3 This is the terms in which the allegation is pleaded in the plaintiffs’ first cause of action against the third defendant.
because they passed on all negative information they had concerning weathertightness to the plaintiffs, Ms Challis did not put that contention at the forefront of her argument. Rather, her submission was that Tremain Real Estate and Ms Baddeley were mere conduits so that, even if the documentation was misleading, any misrepresentation was that of the principals, the vendors, for which only they can be liable. Ms Challis also submitted that the plaintiff trustees will not be able to establish that Ms Baddeley’s action in emailing the documentation was causative of any loss, but, in the end, that does not appear to me to add anything.
Discussion
[29] The leading authority in relation to s 9 of the Fair Trading Act 1986 is Red Eagle Corporation Ltd v Ellis [2010] NZSC 20. There, the Supreme Court described s 9 as imposing a broad prohibition on engaging in misleading or deceptive conduct in trade.4 The Court continued:5
That section is directed to promoting fair dealing in trade by proscribing conduct which, examined objectively, is deceptive or misleading in the particular circumstances. Naturally that will depend upon the context, including the characteristics of the person or persons said to be affected. Conduct towards a sophisticated businessman may, for instance, be less likely to be objectively regarded as capable of misleading or deceiving such a person than similar conduct directed towards a consumer or, to take an extreme case, towards an individual known by the defendant to have intellectual difficulties. Richardson J in Goldsboro v Walker said that there must be an assessment of the circumstances in which the conduct occurred and the person or persons likely to be affected by it. The question to be answered in relation to s 9 in a case of this kind is accordingly whether a reasonable person in the claimant’s situation – that is, with the characteristics known to the defendant or of which the defendant ought to have been aware – would likely have been misled or deceived. If so, a breach of s 9 has been established. It is not necessary under s 9 to prove that the defendant’s conduct actually misled or deceived the particular plaintiff or anyone else. If the conduct objectively had the capacity to mislead or deceive the hypothetical reasonable person, there has been a breach of s 9. If it is likely to do so, it has the capacity to do so. Of course the fact that someone was actually misled or deceived may well be enough to show that the requisite capacity existed.
(footnotes omitted)
[30] It is elementary that in order to succeed in a claim for negligence — including negligent misstatement — a plaintiff must establish that the defendant owed a duty of
4 At [26].
5 At [28].
care, breached the same, and thereby caused damage of a sufficiently proximate nature. That a real estate agent can owe a duty of care to prospective purchasers is well established.6 Mr Drummond submitted — correctly, in my view — that the common law obligations of real estate agents have been expanded by the statutory obligations imposed on them in the Real Estate Agents Act 2008 and the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012. Notwithstanding this expansion, having regard to the view I take of the essential basis for the plaintiffs’ claims, I am satisfied that the ambit of s 9 of the Fair Trading Act is materially wider than any tortious duty that might exist. What that means is that, if the plaintiffs’ cause of action based on s 9 cannot succeed, then neither can any negligence-based claim.
[31] With respect to Ms Challis’ primary submission concerning the status of Tremain Road Estate and Ms Baddeley, the leading case is Goldsbro v Walker. 7 There the Court of Appeal confirmed that an agent who is acting as a mere conduit, simply passing on information from a principal, is not liable for misrepresentations arising from that information. The principle is that it is the person whose conduct is misleading who is liable, not a person through whom another’s misleading conduct is conveyed, provided that the latter does no more than pass on the misleading information without in any way adopting it as their own.
[32] In Mainland Products v BIL (NZ) Holdings Ltd8, Cooper J adopted a passage from a decision of the Supreme Court of Queensland in Lake Koala Pty Ltd v Walker, where Connolly J had said:9
The representation which is made in the case of the mere furnishing of a report, such as that prepared by Peat Marwick in this case, is that the document is what it purports to be, namely the opinion of the expert, and that the vendor believes it to be honestly made and made in the exercise of professional competence or, which amounts to much the same thing, that he has no reason to believe to the contrary.
6 Routhan v PGG Wrightson Real Estate Ltd [2021] NZHC 3585; McCullagh v Lane Fox and Partners Ltd [1996] 1 EGLR 35 (CA) at 45-48; and Johnston v Colliers International New Zealand Ltd [2019] NZHC 2711 at [42]-[46].
7 Goldsbro v Walker [1993] 1 NZLR 394.
8 Mainland Products Ltd v BIL (NZ) Holdings Ltd HC Auckland CIV-2002-404-1889, 8 June 2004.
9 Lake Koala Pty Ltd v Walker [1991] 2 Qd.R 49, at 58; cited by Little v Warwick [2019] NZHC 822.
[33] In the course of argument, Ms Challis accepted that an agent who passes on information knowing it is inaccurate, or that it is inconsistent with other known information, may be liable. However, as she submitted, and as already discussed, there is no allegation in this case that Tremain Real Estate or Ms Baddeley had knowledge of any negative information pertaining to the property that was not contained in the documentation provided to the plaintiffs and a few solutions.
[34] This case appears to me to fall squarely within that category of case in which a principal’s agent has acted as a mere conduit between the principal and a third party. The primary considerations that have lead me to the conclusion are as follows:
(a)It is not alleged and nor is there any evidence to the effect that Tremain Real Estate and Ms Baddeley had any information concerning the property other than the information contained in the agency agreement and the documentation that was emailed to the plaintiffs and their solicitors;
(b)The agency agreement aside, Tremain Real Estate and Ms Baddeley passed on all documentation they had received to the plaintiffs and their solicitors;
(c)The only relevant information in the agency agreement was the vendor’s representation concerning weathertightness. This was incorrect. However, the fact that this document or the information contained in it was not passed on to the plaintiffs or their solicitors by Tremain Real Estate and Ms Baddeley does not appear to me to be material. The agreement contained false positive information, not correct negative information;10
(d)I reject the contention advanced by Mr Drummond that it was misleading of Tremain Real Estate and Ms Baddeley not to provide all of the documents to both the plaintiffs and their solicitors. Once the
10 There is a question mark of whether it was ever open to Tremain Real Estate and Ms Baddeley to pass on this document, it being a contract between them and their clients, but it is not necessary to address that issue.
plaintiff advised Tremain Real Estate and Ms Baddeley that they had engaged Lloyd Dodson and Pringle to act for them in the matter, they
— Tremain Real Estate and Ms Baddeley — were entitled, in my view, to treat the plaintiffs and their solicitors as one entity. On that basis, providing documentation to one was providing documentation to the other;
(e)In my view, all the circumstances point to Tremain Real Estate and Ms Baddeley being a mere conduit of this documentation. Ms Baddeley’s email of 19 August 2015 contains no indication that she was doing anything other than passing on documentation that Tremain Real Estate and she had received from the vendors. There is no sense in which the email can be interpreted as Tremain Real Estate and Ms Baddeley adopting the documentation or any information contained in it as their own, saying anything about the accuracy of the same, or adding to it in any way. Nor is there evidence that in any other way Tremain Real Estate and Ms Baddeley did or said anything prior the execution of the agreement for sale and purchase that could be interpreted as adopting the documentation or any information in the same as their own;
(f)The present situation may be contrasted with the circumstances in Goldsbro v Walker. In that case, the solicitors had forwarded on a contract for sale and purchase, and, in doing so, positively asserted that that document had been countersigned by their client and provided further explanatory material in relation to a change to the same, when in fact, unbeknown to those solicitors, the initialling of the change was a forgery by the named buyer’s son-in-law;
(g)This case may also be contrasted with a number of later cases to which counsel referred, in all of which the agent demonstratively adopted the information being passed on in one way or another;11
11 Coory v ARI Realty HC Dunedin CP53/93, 4 August 1993; Cashmere Enterprises Limited v Mathias HC Auckland CP573-SD/00, 19 November 2011 Hamid v England HC Wellington
(h)Accordingly, in my view, any representation contained in the documentation was a representation made by the vendors and merely conveyed to the purchasers through the medium of Tremain Real Estate and Ms Baddeley;
(i)Nor do I see merit in the argument that Tremain Real Estate or Ms Baddeley misrepresented the position by failing specifically to draw the plaintiffs’ attention to the information which indicated there had been weathertight issues with the property. In my view, if the third and fourth defendants are to be considered to have knowledge of those issues, then so too must the plaintiffs and their solicitors who received the same documentation.
Conclusion
[35] For those reasons, I accept the submission made by Ms Challis on behalf of Tremain Real Estate and Ms Baddeley that the plaintiffs cannot succeed on any of the causes of action pleaded against them, and I make an order pursuant to r 15.1 striking the same out.
[36] Not having heard from counsel in relation to costs I reserve these. My preliminary view is that the third and fourth defendants as the successful parties are entitled to a costs award on a 2B basis. If counsel are unable to resolve costs, they may file and serve memoranda in the usual way.
Associate Judge Johnston
Solicitors:
Wadham Partners, Palmerston North for Plaintiffs Rice Speir, Auckland for First Defendant
Gifford Devine, Hastings for Second Defendant McElroys, Auckland for Third and Fourth Defendants
CIV-2009-404-3697, 26 September 2011; Little v Warwick [2019] NZHC 822; and Routhan v PGG Wrightson Real Estate Ltd [2021] NZHC 3585.
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