Weine v Tadd Management Limited
[2024] NZCA 323
•17 July 2024 at 11.00 am
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA239/2023 [2024] NZCA 323 |
| BETWEEN | RUTH RENTON WEINE AND MICHAEL DAVID HOFMANN-BODY AS TRUSTEES OF THE RUTH WEINE FAMILY TRUST |
| AND | TADD MANAGEMENT LIMITED |
| Hearing: | 7 March 2024 (further memorandum received on 14 March 2024) |
Court: | Ellis, Gault and Cull JJ |
Counsel: | M Freeman and R A Bull for Appellants |
Judgment: | 17 July 2024 at 11.00 am |
JUDGMENT OF THE COURT
AThe appeal is allowed.
BThe judgment in the High Court is set aside.
CThe respondent must pay the appellants’ costs for a standard appeal on a band A basis and usual disbursements.
DCosts in the High Court are to be fixed in that Court in light of this judgment.
____________________________________________________________________
REASONS OF THE COURT
(Given by Gault J)
Table of contents
Para no
Factual background
High Court judgment
Approach on appeal
Issues
Misrepresentation
Mistake
Contractual misrepresentation
Applicable principles
The context
ISA — “60% NBS”
Mere conduit?
Information Memorandum — “Good NBS rating”
Representations in totality
Common mistake
Applicable principles
Discussion
Result
The trustees of the Ruth Weine Family Trust (the Trustees) appeal against the High Court’s decision that they made an actionable misrepresentation to Tadd Management Ltd (Tadd) in respect of the seismic capacity of a building for sale and, in the alternative, that the parties were induced into the contract for sale and purchase of the building on the basis of a common mistake that the seismic capacity of the building was 60%.[1]
Factual background
[1]Tadd Management Ltd v Weine [2023] NZHC 764, (2023) 24 NZCPR 1 [High Court judgment].
The factual background is not in dispute.
The Trustees owned a three-storey commercial property at 134 Queens Drive, Lower Hutt (the building) which they decided to sell. They engaged an entity from the Bayleys Realty Group (Bayleys) to market the building. A representative from Bayleys advised the Trustees to obtain an Initial Seismic Assessment (ISA) of the building to provide to potential purchasers.
On or about 15 August 2017, the Trustees obtained an ISA from a firm of chartered engineers, New Zealand Consulting Engineers Ltd (NZCE). The ISA gave the building a seismic rating of 60% New Building Standard (NBS), placing it within a band category identified as “earthquake risk” but not “earthquake prone”, as indicated in the Initial Evaluation Procedure (IEP) Assessment used to prepare the ISA. In particular, the Assessment Outcomes section in the ISA report stated:
4. Assessment Outcomes Assessment Status
(Draft or Final)
Final Assessed %NBS Rating 60%NBS (IL2) Seismic Grade and Relative
Risk (from Table A3.1)Alpha rating C
5 to 10 times the risk of a new buildingFor an ISA: Describe the Potential
Critical Structural
WeaknessesTorsional behaviour of the building will attract forces in the front columns.
Heavy spandrel beams along front increase introduced shear forces in column, this needs to be investigated further. It has not been taken into account and could be checked via detailed assessment If required.
Does the result reflect the
building's expected
behaviour, or is more
information/ analysis
required?Yes – the ISA is sufficient If the results of this ISA
are being used for earthquake prone
decision purposes, and elements rating <34%NBS have been identified:Engineering Statement of Structural Weaknesses and Location
Transverse direction weak, just moment frames
Irregularity in stiffness due to rear wall
Front columns short due to spandrel beams
Cantilevered blockwork wall at top however supported by steel frames
Mode of Failure and Physical Consequence Statement(s)
Due to stiffness irregularity of this building the front columns will sway and this will lead [to] shear failure.
Recommendations Undertake Detailed Assessment could proof it is better than 60% NBS.
On 6 October 2017, NZCE also provided a letter (NZCE letter) to one of the Trustees (Ms Weine) in relation to the building, which referred to the 60% NBS rating in the ISA and said it could probably be bettered with more input by way of Detailed Seismic Assessment (DSA):[2]
This is just a note to cover our recent discussion.
You asked us to carry out an initial seismic assessment on your building at 134 Queens Drive. Basically, it is a 3 storey building, triangular in plan, constructed around 1986.
An ISA (Initial Seismic Assessment) is a relatively coarse process to simply assess a building to give an approximate %NBS. It is not as sophisticated nor as accurate and usually more conservative than DSA (Detailed Seismic Assessment).
The result of the ISA was a 60% NBS on your building.
Normally, a building which rates around that with an ISA is probably going to exceed 70% NBS if a more detailed analysis or DSA is carried out.
Therefore, it is most likely, but not guaranteed, a better assessment (more costly and detailed) will give a higher rating on the building.
The main problem with the building is that the columns are “weaker” than the beams and therefore can lead to column hinging under a code earthquake. The design and analysis methods have moved on a long way from the 1984 code to which this building was designed.
In summary then the 60% NBS can probably be bettered with more input.
[2]In the High Court judgment, this is referred to as the “Covering Letter”.
In early November 2017, Bayleys put together an information package for prospective purchasers, which included:
(a)an Information Memorandum — a coloured sales brochure about the building for marketing purposes, which recorded, on a page entitled “Investment highlights”, that the building had a “[g]ood NBS rating”;
(b)the ISA;[3] and
(c)the certificate of title and tenancy information (information that is not relevant for this appeal).
[3]Including the IEP.
The NZCE letter was also provided by the Trustees to Bayleys and it was made available to prospective purchasers in the information package.[4]
[4]At least after 16 November 2017, although Mr Collins said it was included in the material that Tadd downloaded on 14 November 2017.
Before purchasing the building, Tadd had:
(a)obtained the Information Memorandum, the ISA and the NZCE letter, as well as other material made available by Bayleys;
(b)inspected the building, reviewed the ISA and identified various building elements which would need to be strengthened in order to improve the building’s seismic capacity;[5] and
(c)self-assessed that the seismic strengthening work would be straightforward. Tadd budgeted $1.3 million for refurbishment work, including seismic strengthening.[6]
[5]High Court judgment, above n 1, at [47].
[6]At [48].
On 7 December 2017, the building was sold at auction. There were multiple bidders. Ultimately, Tadd was the successful bidder and bought the building for $1,427,000 with the price being set by the auction process.[7]
[7]In the High Court judgment, the amount is misstated as $1,227,000 at [44].
The purchase settled on 19 January 2018.[8]
[8]At [44].
On 7 May 2018, Tadd obtained a DSA for the building from Certa Engineering Ltd. The conclusion of that DSA was that the building had a seismic rating of 10% NBS.[9] In August 2018, Tadd obtained another DSA for the building from Spencer Holmes Ltd, another engineering firm. The conclusion of that DSA was that the building had a seismic rating of 30% NBS.[10]
[9]At [64].
[10]At [65].
Tadd commenced proceedings and pursued two causes of action against the Trustees:
(a)contractual misrepresentation; and, in the alternative
(b)common mistake.
Tadd’s case was that it was induced to purchase the building by the Trustees’ misrepresentations as to the percentage NBS rating. Alternatively, Tadd said both parties acted under the common mistake that the building had a 60% NBS rating in entering the contract for sale and purchase.
The Trustees’ case was that the ISA contained the engineer’s opinion only and that was not actionable as a misrepresentation. The Trustees denied that the opinion was incorrect and said there was a reasonable basis for the opinion. They also denied that Tadd was induced by the marketing material or the pleaded mistake to purchase the building and said that the mistake was not as to the essential nature of the contract. The Trustees also raised affirmative defences and, in the alternative, brought a third-party claim against NZCE.
High Court judgment
In a detailed judgment following a four day trial, Gwyn J found for Tadd on both causes of action.
Before addressing the background and facts, the Judge explained the statutory and policy framework, including the ISA and DSA methods and the nature of a percentage NBS rating, according to The Seismic Assessment of Existing Buildings: Technical Guidelines for Engineering Assessments (the Guidelines).[11] An earthquake rating is the rating given to a building as a whole to indicate the seismic standard achieved. The NBS percentage is intended to reflect the expected seismic performance of a building relative to the minimum human life safety standard required for a similar new building on the same site by cl B1 of the New Zealand Building Code.[12] The Judge noted that the Guidelines clarify that a building rated less than 34% NBS is an earthquake-prone building,[13] and an earthquake-risk building is a building that falls below the threshold for acceptable seismic risk, as recommended by the New Zealand Society for Earthquake Engineering — that is, less than 67% NBS or two thirds NBS.
[11]Ministry of Business, Innovation and Employment, jointly with the Earthquake Commission, the New Zealand Society for Earthquake Engineering, the Structural Engineering Society and the New Zealand Geotechnical Society The Seismic Assessment of Existing Buildings: Technical Guidelines for Engineering Assessments (July 2017) [Guidelines].
[12]Building Regulations 1992, sch 1. See also Guidelines, above n 11, at [A3.2.4]. The Guidelines recommend that, in addition to the percentage NBS earthquake rating, the corresponding seismic ‘grade’ and relative risk is indicated to provide context. The Guidelines set out the grading system that was developed by the New Zealand Society for Earthquake Engineering in 2000 and a relative risk description as it relates to life safety.
[13]Guidelines, above n 11, at [A6.5].
After addressing the (undisputed) facts, evidence and legal principles, the Judge turned to the misrepresentation cause of action under s 35 of the Contract and Commercial Law Act 2017 (CCLA) and summarised the parties’ submissions and the relevant legal principles. Applying these principles to representations that: the building had a seismic rating of 60% NBS, that this was a “[g]ood” rating and an “Investment highlight”, and that the rating would likely improve on a more detailed assessment, the Judge considered that the statements in the ISA were not in the nature of opinions only. She concluded the ISA was an expert report containing statements of fact — and a representation.[14] She also accepted that in providing the ISA, the Trustees were doing more than simply passing on the seismic assessment.[15]
[14]High Court judgment, above n 1, at [145].
[15]At [146].
The Judge then referred to the NZCE letter. She said the statement that the result of the ISA was 60% NBS was a representation and it reinforced the representation in the ISA.[16] However, the other statements in the letter that related to possibly improving the percentage NBS rating were statements of opinion for which there was a reasonable basis so they were not actionable, although the letter would have had the effect of reinforcing that the 60% NBS rating in the ISA was soundly based.[17]
[16]At [147].
[17]At [148]–[153]. On appeal, there was no attempt to uphold the High Court judgment on other grounds based on the other statements in the NZCE letter that related to possibly improving the percentage NBS rating.
The Judge then addressed the Information Memorandum. She considered the Trustees endorsed the ISA by stating that, as an “Investment highlight”, the building had a “[g]ood NBS rating” and that this was an unqualified statement of fact that stood independently of the ISA.[18]
[18]At [156].
The Judge found that the representations that the building had a 60% NBS rating and that this was a good rating were incorrect,[19] based on the subsequent DSAs.[20] However, the Judge went on to accept that there was a reasonable basis for NZCE’s conclusions in the ISA.[21]
[19]At [157].
[20]At [158]–[165].
[21]At [167].
The Judge considered the warnings in the ISA did not have a material impact on the Trustees’ liability in misrepresentation.[22] Taking into account the context, the Judge concluded there were representations that the building had a 60% NBS rating and this was a good rating, and that those representations were incorrect.[23]
[22]At [168]–[170].
[23]At [171]–[175].
In relation to inducement, the Judge inferred from the sequence of events that Ms Weine provided the ISA to give potential purchasers assurance about the seismic rating of the building and directed the NZCE letter be provided in order to give additional comfort.[24] The Judge considered that the Trustees intended that prospective purchasers be induced by the NBS representations and they had a material effect on Tadd’s decision to purchase.[25] Tadd’s own enquiries did not negate that inducement.[26]
[24]At [190].
[25]At [191].
[26]At [192]–[194].
In relation to the alternative claim of common mistake under s 24 of the CCLA, after referring to the parties’ submissions and the legal principles, the Judge said the core issue was whether the parties were influenced to enter the contract by a mistake that the building was 60% NBS as at the date of sale. Having already discussed the influence on Tadd in relation to the misrepresentation claim, the Judge said that the Trustees were influenced to enter into the contract by a mistaken view that the building was 60% NBS.[27] The Judge also concluded there was an asymmetry of information in favour of the vendor Trustees, the mistake was as to the essential nature of the contract, and Tadd did not bear responsibility for it.[28] Thus, both parties were influenced by a common mistake and the other requirements of s 24 were made out.[29]
[27]At [225]–[228].
[28]At [229]–[232].
[29]At [233]–[236].
As for relief, the Judge said it was difficult to pinpoint what in fact the percentage NBS was at the date of sale.[30] Thus, rather than calculate loss on a cost of cure basis, the Judge did so on the basis of difference in value of the building. The Judge said that was $592,000 plus the cost of an additional DSA (and interest).[31]
[30]At [255].
[31]At [257]–[259].
In relation to the Trustees’ third-party claims against NZCE, the Judge concluded that the ISA itself was not “erroneous” or “wrong”; it was prepared correctly with the skill, care and diligence normally expected of a competent professional and thus the claim of negligent breach of contract was not made out.[32] Nor was there an implied term in the contract of engagement that the NBS rating would be correct. The Judge considered this was not inconsistent with her finding that the representations made to Tadd were incorrect.[33]
[32]At [315]–[319].
[33]At [320]–[322].
The Judge also concluded that the Trustees’ third-party claims in negligence and under s 9 of the Fair Trading Act 1986 (FTA) failed. Relevantly, in relation to the FTA claim, the Judge reiterated that statements of opinion are not actionable if they are reasonably held, reasonably based opinions.[34]
Approach on appeal
[34]At [329], citing Premium Real Estate v Stevens [2008] NZCA 82, [2009] 1 NZLR 148 at [54].
On a general appeal, the appellate court has the responsibility of considering the merits of the case afresh.[35] The appellate court must be persuaded that the decision is wrong,[36] but the weight it gives to the reasoning of the court below is a matter for the appellate court’s assessment.[37] Those exercising general rights of appeal are entitled to judgment in accordance with the opinion of the appellate court, even where that opinion is an assessment of fact and degree and entails a value judgment. If the appellate court’s opinion is different from the conclusion of the tribunal appealed from, then the decision under appeal is wrong in the only sense that matters, even if it was a conclusion on which minds might reasonably differ.[38]
Issues
[35]Kacem v Bashir [2010] NZSC 112, [2011] 2 NZLR 1 at [31].
[36]Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [13].
[37]Kacem v Bashir, above n 35, at [31]. No deference is required beyond the customary caution appropriate when seeing the witnesses provides an advantage because credibility is important; see Austin, Nichols & Co Inc v Stichting Lodestar, above n 36, at [13]; and Green v Green [2016] NZCA 486, [2017] 2 NZLR 321 at [31]–[32].
[38]Austin, Nichols & Co Inc v Stichting Lodestar, above n 36, at [16]; and Kacem v Bashir, above n 35, at [32].
The issues to be determined are:
Misrepresentation
(a)Was the 60% NBS rating in the ISA a statement of opinion, and as such, not actionable as a misrepresentation under s 35 of the CCLA?
(b)Did the Trustees, in providing the ISA and NZCE letter to potential purchasers, act as a mere conduit for that information, rather than adopting them as their representations?
(c)Was the statement that the building had a “Good NBS rating” a statement of opinion, and as such not actionable as a misrepresentation under s 35 of the CCLA?
Mistake
(d)Were the parties influenced to enter into the contract on the basis of a common mistake that the seismic rating for the building was 60% NBS?
Contractual misrepresentation
Applicable principles
Section 35 of the CCLA requires a misrepresentation. As misrepresentation is not defined in the CCLA, the common law tests continue to apply. It is common ground and well established that a contractual misrepresentation is an untrue statement of present or past fact.[39] However, a statement as to future events or as to the opinion of the maker may be taken to imply that there is a reasonable basis for the statement so as to amount to a representation about a present fact.[40] Lord Justice Bowen explained a classic example in Smith v Land and House Property Corp:[41]
… it is often fallaciously assumed that a statement of opinion cannot involve the statement of a fact. In a case where the facts are equally well known to both parties, what one of them says to the other is frequently nothing but an expression of opinion. The statement of such opinion is in a sense a statement of a fact, about the condition of the man's own mind, but only of an irrelevant fact, for it is of no consequence what the opinion is. But if the facts are not equally known to both sides, then a statement of opinion by the one who knows the facts best involves very often a statement of a material fact, for he impliedly states that he knows facts which justify his opinion. Now a landlord knows the relations between himself and his tenant, other persons either do not know them at all or do not know them equally well, and if the landlord says that he considers that the relations between himself and his tenant are satisfactory, he really avers that the facts peculiarly within his knowledge are such as to render that opinion reasonable. Now are the statements here statements which involve such a representation of material facts? They are statements on a subject as to which primâ facie the vendors know everything and the purchasers nothing. The vendors state that the property is let to a most desirable tenant, what does that mean? I agree that it is not a guarantee that the tenant will go on paying his rent, but it is to my mind a guarantee of a different sort, and amounts at least to an assertion that nothing has occurred in the relations between the landlords and the tenant which can be considered to make the tenant an unsatisfactory one. That is an assertion of a specific fact.
[39]Ware v Johnson [1984] 2 NZLR 518 (HC) at 537.
[40]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(c)] [Burrows, Finn and Todd]; and K R Handley Spencer Bower & Handley Actionable Misrepresentation (5th ed, LexisNexis, London, 2014) at [2.21] [Spencer Bower & Handley]. Counsel for the respondent referred us to this section of Spencer Bower & Handley in his memorandum of 14 March 2024. Although it was suggested that we might, on the strength of this extract, call for further submissions on whether a seismic assessment is a matter of opinion, we did not consider it necessary to do so.
[41]Smith v Land and House Property Corp (1884) 28 Ch D 7 (CA) at 15.
It is important to assess statements in their context. As this Court said in the weathertightness case of Ridgway Empire Ltd v Grant:[42]
[11] Whether there has been a misrepresentation of fact is not determined merely by considering the literal meaning of the words used without regard to the context. The enquiry is what a reasonable person would have understood from those words in all the circumstances.[43] Relevant considerations will often include the nature and subject-matter of the transaction, the respective knowledge of the parties, their relative positions and the words used.[44] Where a party with superior knowledge takes it upon itself to make a representation of fact without qualifying it by reference to the basis for its assertion, it will generally have to accept the consequences of being wrong.[45] However, each case will ultimately turn on its own facts.
[42]Ridgway Empire Ltd v Grant [2019] NZCA 134, (2019) 20 NZCPR 236. The Supreme Court refused leave to appeal: Ridgway Empire Ltd v Grant [2019] NZSC 85.
[43]IFE Fund SA v Goldman Sachs International [2006] EWHC 2887 (Comm), [2007] 1 Lloyd’s Rep 264 at [50].
[44]Bisset v Wilkinson [1927] AC 177 (PC) at 183.
[45]Re Reese River Silver Mining Company, Smith’s Case (1867) LR 2 Ch App 604 at 611.
The need to consider what a reasonable person would have understood from the words used in their context — that is, in all the circumstances — is particularly apposite in relation to statements that imply quality such as, that something is good.
The context
The context for the representations here was the marketing and prospective sale of the Trustees’ commercial building. As Mr Collins, for Tadd, submitted, the correct approach referred to by this Court in Ridgway is to look at the representations — the rating and that the rating was stated to be “good” — in totality, not in isolation from the character of the transaction and the overall conduct of the vendors. Keeping that in mind, like the Judge, we address each component of the misrepresentation claim before standing back and reviewing the totality.
ISA — “60% NBS”
Mr Freeman, for the Trustees, submitted that the Judge erred in finding that the 60% NBS rating in the ISA was a statement of fact rather than an engineering opinion.
Mr Collins submitted that whether the ISA NBS rating is an opinion or a statement of fact depends first and foremost upon what impression is given by the content of the brochure and supporting information to the statement that the NBS rating was good.
We consider that NZCE’s engineering assessment of the percentage NBS rating in the ISA was a matter of expert opinion — a predictive assessment of how the building would respond to an earthquake, as the Guidelines explain — but we agree with the Judge that the statements in the ISA were not in the nature of opinions only. The ISA was an expert report containing statements of fact. Taking into account the context, however, we consider the relevant statements of fact conveyed in the ISA were that: NZCE had calculated the building’s assessed rating as 60% NBS applying the ISA (initial seismic assessment) methodology, acting honestly and reasonably; or, as it was put in Smith v Land and House Property Corp, that NZCE had knowledge of facts which justified its opinion. Those statements of fact were true. The Judge concluded that not only had NZCE calculated the building’s assessed rating as 60% NBS, but also that the ISA was prepared correctly with the skill, care and diligence normally expected of a competent professional. We would have agreed with the Judge that there was a misrepresentation if those statements were untrue.
We disagree with the Judge that there was a statement of fact in the ISA that the building was 60% NBS in any different or absolute sense, even taking into account the NZCE letter and the separate representation in the Information Memorandum that the building had a good NBS rating (considered next). In particular, we do not consider that the ISA contained a statement of fact that the building was 60% NBS applying the different evaluation procedure required for a DSA, even though the ISA stated that its result was sufficient to reflect the building’s expected behaviour. The ISA concluded with a recommendation to undertake detailed assessment, which it said “could [prove] it is better than 60% NBS”. Also, as the Judge noted, the ISA contained a disclaimer warning on each page (of the IEP).[46] This made clear it was an ISA and that “[d]etailed inspections and engineering calculations, or engineering judgements based on them, have not been undertaken, and these may lead to a different result or seismic grade”. As the Guidelines state, a DSA is used to confirm an earthquake rating for a building, particularly when a higher degree of reliability than considered available from a qualitative ISA rating is required. The fact that the auction date did not allow time for a DSA in this case does not change the essential character of the ISA.
[46]High Court judgment, above n 1, at [105].
Expert engineers are needed to conduct a percentage NBS rating in an ISA or DSA. As the Guidelines state:[47]
Due to the nature of the seismic assessment process, it should not come as a surprise that, in some circumstances, assessments of the same building by two or more experienced engineers may differ – sometimes significantly.
[47]Guidelines, above n 11, at [A9].
The Guidelines also say that this will particularly be the case for earthquake ratings determined using the ISA process, but can also happen should multiple DSAs be completed for the same building, referring to such disagreements as “differences in opinion”.[48] That reflects the predictive and contestable nature of such a professional engineering assessment involving judgement as well as factual and mathematical input, as opposed to the underlying statements of fact that we have identified. We accept, as Mr Collins submitted, that an NBS rating has immediate applicability, both in terms of legal requirements on the owner of the building, and insurance. It is an assessment of the state of the building’s current condition. However, this does not change the character of the assessment.
[48]At [A9].
Treating an ISA rating itself as a statement of fact without reflecting this context would mean that any statement of a building’s ISA rating, correctly calculated according to the IEP, would be a misrepresentation whenever the building’s subsequent DSA rating is different. Indeed, any significantly different assessments by experienced engineers would be problematic in this respect, contrary to the statement in the Guidelines. An ISA rating is not wrong simply because a DSA rating is different. The difficulty with that approach is highlighted when seeking to reconcile the Judge’s conclusion that the representation in the ISA — that the building was 60% NBS — was “incorrect”,[49] whereas the ISA itself was not “erroneous” or “wrong”.[50] In this case, even the two DSAs reached significantly different assessment outcomes. The Judge ultimately said that while it was possible to conclude that the 60% NBS was not correct, it was difficult to pinpoint what the percentage NBS was at the date of sale and she did not do so. This also indicates that “60% NBS” was a statement of opinion. The position may well have been different if the Trustees had represented that the building was “60% NBS” without providing, and without any reference to, the ISA.
[49]High Court judgment, above n 1, at [157] and [174]–[175].
[50]At [317].
The Judge was influenced by her view that there was nothing in the ISA as provided to prospective purchasers to suggest that the rating was in the nature of an opinion only. We consider the ISA itself, and its context, conveyed that the rating was an assessment, despite not explicitly stating it was an “opinion”, and that the ISA was an initial assessment. Further, stating that the assessed rating was “60% NBS” would only have meant something to prospective purchasers if they understood the nature of a percentage NBS rating according to the Guidelines; that is, to reflect the expected seismic performance of a building relative to the minimum human life safety standard required for a similar new building on the same site by cl B1 of the New Zealand Building Code, as explained by the Judge.[51] Prospective purchasers would therefore have understood that the representor was not in a position to know the truth of a “60% NBS” statement as if it were a statement of fact.[52]
[51]See [16] above.
[52]Burrows, Finn and Todd, above n 40, at [11.2.1(c)].
Also, in this context, we consider that the Trustees’ ownership of the building did not give rise to any relevant asymmetry of information in the Trustees’ favour. Accepting that Ms Weine had contracted with NZCE previously in relation to commercial properties, Tadd’s directors also had relevant experience as property developers who had carried out earthquake strengthening on multiple projects. But more importantly, neither the Trustees nor Tadd had relevant knowledge undermining the ISA.
We acknowledge that the Trustees also provided Tadd with the NZCE letter of 6 October 2017 sent by NZCE’s principal, which repeated the statement that the result of the ISA was an assessed rating of 60% NBS. But this too was not a statement of fact that the building was 60% NBS in any different, absolute sense (irrespective of Ms Weine’s purpose in seeking the NZCE letter and the earlier correspondence she had with an employed engineer at NZCE).
Although the Judge said the NZCE letter was unusual because it differed from the recommended standard cover letter in the Guidelines, she did not suggest that NZCE’s failure to provide such a cover letter for the ISA amounted to a breach. Nor did the evidence indicate the Trustees understood that what they had received was unusual or that the NZCE letter stated anything other than its principal’s view, honestly and reasonably held. In any event, there was no attempt to uphold the High Court judgment on other grounds based on the separate statements in the NZCE letter that related to possibly improving the percentage NBS rating,[53] which we agree were statements of opinion. Nor was this a case where a vendor had obtained competing expert reports from different firms and selectively provided only the more favourable one to prospective purchasers.[54]
[53]As indicated at n 17 above.
[54]See, for example: Sipka Holdings Ltd v Merj Holdings Ltd [2015] NZHC 1980.
We conclude that the statement in the ISA (and repeated in the NZCE letter) that the building was “60% NBS” was a statement of opinion, and the statements of fact it conveyed, were true.
Mere conduit?
Accordingly, it is unnecessary to decide whether the Judge erred in finding that the Trustees adopted the seismic assessment advice in the ISA (and the NZCE letter) by obtaining and making it available to Tadd, rather than being mere conduits of that information. We merely note that there is some force in the argument, in relation to the stated “60% NBS” rating in the ISA (as opposed to the “[g]ood NBS rating” statement considered next), that the Trustees only passed on the ISA and the mere conduit defence may have been available to them.[55] We acknowledge that s 35 captures innocent misrepresentations. However, absent some additional relevant knowledge on the part of those passing on the ISA expert assessment (beyond that referred to above), we doubt that passing it on involved a misrepresentation when the ISA assessment itself was not “erroneous” or “wrong” (and was not actionable under the FTA).[56]
Information Memorandum — “Good NBS rating”
[55]Red Eagle Corp Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at [38] (in the Fair Trading Act 1986 context); Mainland Products Ltd v BIL (NZ) Holdings Ltd HC Auckland CIV-2002-404-1889, 8 June 2004 at [125]. See also Burrows, Finn and Todd, above n 40, at [11.2.2].
[56]This finding in relation to the ISA (as opposed to the separate statements in the NZCE letter) appears to be based on a finding of asymmetry of information, which we have addressed above.
Mr Freeman acknowledged that the Information Memorandum contains representations about the building by the Trustees through their agents, but he submitted that the representation that the seismic rating was good was an opinion and only referred to the engineering material passed on.
Mr Collins submitted that the representation of a “[g]ood NBS rating” was a representation of fact and was overstated given that subsequent detailed assessments obtained by Tadd determined that the building was in fact earthquake prone.
We agree that the Trustees’ statement in the Information Memorandum that, as an “Investment highlight” the building had a “[g]ood NBS rating”, was a separate representation. As Mr Collins submitted, it was the leading statement made by the vendor Trustees. There was no suggestion this statement was made as a mere conduit. We also agree that stating the building had a good NBS rating was a statement of fact, not merely an opinion. However, we do not agree with the Judge that this was an unqualified statement of fact that stood independently of the ISA. It too needs to be considered in the context of the ISA which was provided. In context, this statement was a reference to the building’s assessed rating of 60% NBS in the ISA, opining that this ISA rating was good. It was not conveying that this rating was good in any other sense. It was not a representation that the building was 60% NBS applying the different evaluation procedure applicable for a DSA. Nor did it convey that the building did not need seismic strengthening, even though it is accepted that the Information Memorandum was being provided to prospective purchasers rather than engineers. Indeed, as the Judge said, Tadd had noted several points regarding necessary seismic strengthening.
Moreover, in the sense represented, the evidence did not indicate that it was incorrect to state that an ISA rating of 60% NBS was good. As with the “60% NBS” statement itself, the Judge appears to have considered that describing the rating as good was incorrect based on the subsequent DSA ratings. While accepting that a 10% or 30% NBS DSA rating could not be described as good, we do not consider that is what the Trustees represented for the reasons already given.
Representations in totality
Standing back and taking the statements together, and accepting the marketing context, we consider there was no misrepresentation by the Trustees as to the NBS rating. In essence, stating that the NBS rating in the ISA was good did not convert the ISA rating itself from a professional engineering opinion to a statement of fact about a DSA rating, which would effectively be in the nature of a guarantee. The words “[g]ood NBS rating” did not have the decisive significance sought by Tadd.
For these reasons, we conclude there was no misrepresentation by the Trustees.
Common mistake
Applicable principles
Section 24 of the CCLA relevantly provides:
24Relief may be granted if mistake by one party is known to another party or is common or mutual
(1) A court may grant relief under section 28 to a party to a contract if,—
(a) in entering into the contract,—
(i)…
(ii)all the parties to the contract were influenced in their respective decisions to enter into the contract by the same mistake; or
(iii)…; and
(b)the mistake or mistakes resulted, at the time of the contract,—
(i)in a substantially unequal exchange of values; or
(ii)in a benefit being conferred, or an obligation being imposed or included, that was, in all the circumstances, a benefit or an obligation substantially disproportionate to the consideration for the benefit or obligation; and
…
A mistake under s 24 can be a mistake of fact or law.[57] When Parliament was enacting the previous Contractual Mistakes Act 1977, it was proposed that mistake include an “erroneous opinion” and an “erroneous calculation”, but these terms were deleted before enactment.[58] A mistaken “belief” is sufficient to amount to a mistake for the purposes of the CCLA, but the requirement of “belief” will exclude cases where the parties are aware that the factual situation is uncertain and information imperfect.[59]
Discussion
[57]Contract and Commercial Law Act 2017, s 23.
[58](8 September 1977) 413 NZPD 2804. See Burrows, Finn and Todd, above n 40, at [10.3.1].
[59]Burrows, Finn and Todd, above n 40, at [10.3.1], citing Cooper-Davies Trustees Number 6 Ltd v Cooper Trustees Number 11 Ltd [2013] NZHC 3526 at [141]–[143] (an appeal on other grounds was allowed by this Court in Cooper-Davies Trustees Number 6 Ltd v Cooper Trustees Number 11 Ltd [2015] NZCA 197).
Mr Freeman submitted that the Judge erred in finding that both parties had been influenced to enter into the contract by a common mistake that the building had a seismic rating of 60% NBS, under s 24(1)(a)(ii) of the CCLA. He submitted that the analysis of the ISA — and the rating of 60% NBS — as a statement of fact or opinion, is relevant here as well.
Mr Collins submitted that, on the evidence, the vendors and purchaser believed that the building was at least 60% NBS at the time of the auction and they were both mistaken as it was in fact earthquake prone. He submitted that resulted in a substantial unequal exchange of value — the vendors received far more consideration than the building was worth, and Tadd overpaid by the same amount.
The Judge appears to have assumed there was a “mistake” that the building was 60% NBS as at the date of sale — presumably on the basis of the misrepresentation analysis — and focused on the need for the parties to have been influenced by the mistake.[60]
[60]High Court judgment, above n 1, at [223]–[224].
Relief may be available for common mistake where misrepresentation is not made out. In relation to Magee v Mason, where the misrepresentation claim ultimately failed,[61] Professor David McLauchlan has said that there was another possible avenue for legal redress available on the basis that the parties entered into the contract under a common mistake — they both wrongly thought that the house did not suffer from weathertightness defects.[62] Similarly, in Shen v Ossyanin the parties were found to have been mistaken in thinking the house did not leak when there were in fact defects present at the time of purchase.[63] In such cases, however, the mistake was that the house in fact suffered from weathertightness defects at the time of purchase.
[61]Magee v Mason, [2017] NZCA 502, (2017) 18 NZCPR 902..
[62]David McLauchlan “Misrepresentation? Or was it a case for relief on the ground of common mistake?” [2018] NZLJ 13.
[63]Shen v Ossyanin [2019] NZHC 2430, (2019) 20 NZCPR 590.
Here, we consider there was no contractual “mistake” that the building was (at least) 60% NBS at the time of the auction, for similar reasons to those given for concluding that there was no representation of fact that the building was 60% NBS under the ISA. Accepting that both parties believed the ISA rating was 60% NBS, neither party was mistaken in that belief. That was the ISA rating. Nor was the ISA rating a mistake just because the later DSA ratings were different. As indicated, the ISA (as the initial assessment) was prepared correctly with the skill, care and diligence normally expected of a competent professional. The evidence did not indicate a common mistake that the building had an ISA rating of at least 60% NBS at the time of the auction, nor any common mistake about areas of seismic structural weakness in the building. This is not a case of unknown defects.[64]
[64]We do not address what the requirements of common mistake would be in cases where there are such unknown defects.
The position is not materially different from a reasonably prepared valuation or predictive legal opinion that is ultimately not borne out. The ultimate result does not mean that reliance on the prediction is a mistake, just as it does not mean the prediction is a misrepresentation.
It is therefore unnecessary to address whether a mistake influenced the Trustees as well as Tadd to enter into the contract and resulted in a substantially unequal exchange of values. It is also unnecessary to consider the issue of the appropriate relief for mistake under s 28 of the CCLA, which the Judge did not separately address.
Result
The appeal is allowed. The judgment in the High Court is set aside.
The respondent must pay the appellants costs for a standard appeal on a band A basis and usual disbursements. Costs in the High Court are to be fixed in that Court in light of this judgment.
Solicitors:
Thomas Dewar Sziranyi Letts, Lower Hutt for Appellant
Braun Bond & Lomas Ltd, Hamilton for Respondent
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