Wrenn v Boughen

[2023] NZHC 2494

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2020-485-000326

[2023] NZHC 2494

BETWEEN

PHILIPPA DALE WRENN MATTHEW NIGEL WRENN

and JOHN BAIRD CAMPBELL as Trustees of the Philippa Wrenn Family Trust
Plaintiffs

AND

BRENDA ANN BOUGHEN and BARRY SCOTT DAVEY

Defendants

Hearing:

13–24 February 2023, 1–2 March 2023 (submissions 21 March

2023) and 28 April 2023

Appearances:

P H Bremer and S C Howard-Brown for Plaintiffs T G H Smith and H Z Yang for Defendants

Judgment:

6 September 2023

JUDGMENT OF GENDALL J

WRENN v BOUGHEN [2023] NZHC 2494 [6 September 2023]

Table of Contents  [Para]

Introduction[1]

Factual background[6]

The parties[6]

The Property[8]

Ms Boughen’s ownership of the Property[16]

The sale process[17]

The Building Report[18]

The Alterations Email[25]

The Property Advertisement[26]

The sale to the plaintiffs[27]

Post-settlement – Discovery of Alleged Defects[39]

Causes of action  [51]

The trial and the evidence[53]

First cause of action - Misrepresentation[57] General misrepresentations relating to alleged water ingress issues and associated building works issues[73]

Misrepresentation relating to alleged fire damage in the roof ceiling and wall space[107]

Second cause of action – breach of contractual warranty in the SPA            [123]

Third and fourth causes of action – mistake[145]

Common mistake[150]

Unilateral mistake[169]

Relief and quantum[170]

Affirmative defences  [185]

Contributory negligence[186]

Betterment[189]

Failure to mitigate loss[193]

Voluntary assumption of risk[196]

Result[201]

Costs[204]

Introduction

[1]    The plaintiffs, as purchasers of a residential property at 33 Maarama Crescent, Te Aro, Wellington (the Property) bring this proceeding against the defendants as previous owners and vendors. In their claim, the plaintiffs essentially seek under their Second Amended Statement of Claim something in excess of $800,000 by way of damages for alleged failures to disclose various matters about a 110-year-old timber dwelling on the Property sold to the plaintiffs in 2014.

[2]    The plaintiffs say their claim here stems largely from two critical matters relating to the Property, discovered post-settlement of their purchase. The first is what is said to be the discovery of leaks in the western wall of the dwelling, four years after the purchase from the defendants was settled. This claim follows subsequent decisions taken by the plaintiffs essentially to replace that wall, along with an adjoining deck, and the entire lower level and foundations of the house in addition to other alterations.

[3]    The second matter stems from the subsequent discovery, some six years after settlement, of allegedly concealed and undisclosed fire damage to the roof/ceiling cavity in the dwelling.

[4]    The plaintiffs’ theory of the case is that: the first named plaintiff, Philippa Dale Wrenn (Ms Wrenn) was induced to enter into the purchase contract for the Property, based on the express and/or implied representations made by the first named defendant, Brenda Ann Boughen (Ms Boughen) as to the quality and soundness of the house. It is said those representations amounted to misrepresentations as they were false as outlined in the pleaded reasons in the statement of claim, and as a result the plaintiffs have suffered loss directly from the breach. Mistake and breach of contractual warranty are also pleaded by the plaintiffs here.

[5]    The defendants strongly oppose the present claim. They say no actionable misrepresentations occurred and the plaintiffs seek to place all the costs of the repair and upgrade of the house they chose to do, as well as consequential loss and general damages, on the defendants. The defendants’ position is that the plaintiffs do so essentially on the basis of what in reality are various assumptions the plaintiffs made about the quality of the house before purchase, these not being based in any way on

any actionable misrepresentation, mistake, or breach of contractual warranty as pleaded by the plaintiffs.

Factual background

The parties

[6]    The defendants are the trustees of the Boughen family trust, operated largely for the benefit of the first named defendant, Ms Boughen. Ms Boughen owned and lived in the Property for 25 years from June 1989 until 8 August 2014 when, on behalf of the vendor trust, she sold it to the plaintiffs.

[7]    The plaintiffs as purchasers of the Property are Ms Wrenn, Mr Matthew Wrenn who is Ms Wrenn’s brother, and Mr John Campbell who is Ms Wrenn’s stepfather. All three are trustees of the Philippa Wrenn Family Trust. Mr Campbell is a solicitor who acted on the purchase from the defendants.

The Property

[8]    The Property at issue in this proceeding, 33 Maarama Crescent, is a three- storey timber-framed house located in Aro Valley, Wellington. It is an old house. The Land Information Memorandum (LIM) report before the Court dated the original construction of the house to around 1901. This means the house was around 113 years old in 2014 at the time of sale.

[9]    Typically for houses in the hilly Aro Valley area, the house is on a steep-cut site, being built into the side of a bank that falls away from the street. The eastern side of the house, facing the street, appears as two levels, but the western side of the house appears as three levels where the ground is lower. The lower level is built into the bank below street level. As a result, the lower level is narrower than the middle and upper levels, with the eastern wall built right next to the earth bank.

[10]   The Property is positioned to receive all day sunshine, particularly the northern and western facades of the house. It is, however, situated in an area designated “Extra High Wind Zone,” and the prevailing northerly winds directly hit the exposed northern and western walls of the house.

[11]   Throughout the long history of the Property, the house there has undergone many changes over the years.

[12]   Prior to 1986 the house had been converted from a single dwelling into three flats. Later it was converted into two flats and then eventually back into a single dwelling again. It appears the original conversion into three flats took place around 1961. At this time the lower stairs, which as I will note are at issue in this proceeding, were first built.

[13]   It seems also from Wellington City Council files that prior to the 1961 conversion, there had been a fire which gutted parts of the upper level of the house.

[14]   According to the evidence of Ms Boughen, her understanding now is that there was also a second fire in the house, also in the upper floor, in around 1982. She states, however, that she only learned of this when she was told this by a neighbour after the present proceedings were commenced.

[15]   Ms Boughen’s evidence also is that at the time of the sale of the Property to the plaintiffs in 2014, all she knew of any historical fire in the house was limited. Essentially this was a casual remark at a party she attended before 1998, her observation of what she said were some “smoke markings” to wall linings in the existing dining room during renovations to the house she undertook in 1998, and a comment from her builder  after  he  sealed  a  manhole  in  the  kitchen  in  2013.  Ms Boughen, in her evidence, states that although photos of the roof and ceiling space show fire and smoke damage and soot, she had not seen the state of the roof space until these photos were produced in evidence in this proceeding. I will detail more on this matter later in this judgment.

Ms Boughen’s ownership of the Property

[16]   Ms Boughen purchased the Property with her then husband in 1989. By that time, she says, the house had already undergone major renovations, most recently under the ownership of Mr van Raat, a Wellington architect. More on this aspect later.

The sale process

[17]   In placing the house on the market for sale in late 2014, Ms Boughen engaged real estate agents Bayleys and Ms Judy Nicholls (Ms Nicholls) as her particular agent for the process. Ms Nicholls has provided evidence for Ms Boughen.

The Building Report

[18]   Ms Boughen engaged Barry Marsh (Mr Marsh), who was recommended to her by Ms Nicholls, to produce a pre-sale building inspection report just prior to the Property going on the market. Mr Marsh gave evidence before me. Ms Boughen says she never met or spoke to Mr Marsh, who inspected the house in January 2014. He provided a reasonably lengthy Building Report  dated  27 January 2014  (the Building Report), a copy of which was provided to Ms Wrenn prior to her purchase. The Building Report followed Mr Marsh’s completing a visual only non-invasive inspection of the house.

[19]   The plaintiffs note that this Building Report describes the Property as being in generally good condition throughout, given the age of it, with “some general maintenance and remedial work required.” It also included a specific condition under the heading “important information for vendors” which read as follows:

The vendor is required to notify the Inspector of any existing or previous conditions that may be or become an issue, at or before the time of the inspection.

[20]   The Building Report, however, did contain a number of caveats in the “policy” section at the back of the Report as to what was not covered.

(a)This included comments such as the following:

Any areas that are hidden or inaccessible due to permanent or temporary aspects of the property (such as walls, ceilings, floors, insulation, soils, vegetation, furniture, stored items, systems, appliances, vehicles, or any other subject) will not be inspected or included in the report.

(b)The Inspection excluded among other things:

Building Code violations, zoning violations, geological stability, soil conditions, structural stability, engineering analysis, insect or other infestations, asbestos, formaldehyde, water/air contaminants, toxic moulds, hidden rot…

(c)The report also excluded “latent or concealed defects”.

[21]   As to weathertightness considerations, the report stated that consideration of weathertightness would “not be measured against Appendix A of the standards, or to E2/AS1 of the Building Code, Matrix and Evaluation, as this is the domain of a specialist report”.

[22]   Also concerning the sub-floor area and the roof space area, the Building Report noted that Mr Marsh was “unable to get to all areas”. Photos were provided which included those simply showing the lowered ceiling space in the ensuite area.

[23]   In relation to living spaces and foundations, the Building Report also noted that:

Borer: only a small amount sighted where I could see.

And:

Some uneven floors noted but that will be some settlement over many years.

… timber piles, average old stumps, in use, settlement has occurred over many years.

[24]   Initially when she received the Building Report from Mr Marsh, Ms Boughen states in her evidence that, in order to be helpful, she also made handwritten notes where she felt she could add to or correct what had already been covered in that Report. This will be addressed later in this judgment.

The Alterations Email

[25]   On 10 February 2014, Ms Boughen emailed her agent Ms Nicholls, setting out what she described as a high-level overview of the alterations she had done to the Property (the Alterations Email). The email read:

Hi Judy,

As requested I have sorted the various alterations and plans we had drawn up over the last 24 years. They are all on the dining table.

The major alteration / renovation was approved on 1 Sept 1998 with the CCC issued 29/8/2000. The file also contains the structural report and calculations undertaken by Spencer Holmes at the time. 22/2/1999.

The deck addition was applied for on 14 Dec 1993 and CCC issued 1 May 2001. The delay in obtaining the CCC was due to some additional works we needed to undertake (washers on the bolts) and we had this done when the deck was completed but took us a long time to apply and complete the paper work of the CCC.

In addition to these alterations there are plans for alterations to the lower stairs Building Consent applied for and approved BC 105369 dated 19 August 2003. We didnt do this work.

There are plans for a kitchen renovation as well we completed the pantry and storage cupboards – as exist today.

I had plans drawn up and a BC 222213 approved to relocate the laundry from existing position to under the lower stairs – then went off the idea.

Over the last five 5 years or so I have re-gibbed the lower level north bedroom and the lounge and re-modelled the nib wall between the mid and lower level. The sub-floor under the basement void has aluminium foil paper along it and there is a tile drain along the bottom of the bank under the house. (The floor under the lower lounge and the south bedroom – I don’t know as the house was re-piled through the floor by the previous owners.) The western façade and the southern façade have been insulated as we carried out the works and I can provide some photographs of the extent of the recladding during renovations. The ceiling is also insulated.

I replaced the Brevis central heating unit / motor two years ago (approx.

$4500) – I have the invoice – the ducts were in good condition, as was the controller.

Lastly the bathroom was renovated late last year I can show you the invoices

– there was no plumbing changes and structural works that required a BC and this existing.

I replaced the roof with Colorsteel late last year and the roofing over the entrance porch at the front door was replaced.

The entire façade facing the street has been painted throughout Nov / Dec 2013 and the windows on the opposite side are being painted as well as the exterior door, to the deck and to the upper deck from the lounge.

The kitchen bench top and sinks, taps, floor covering and splashback were replaced in sept / oct/ nov 2013 and the whole of the upstairs interior has been painted. As was the stairwell and the entrance foyer.

Following the building inspection report I am programmed to replace the steps from the deck to the garden and the lock and hinges to the upper floor exterior french doors.

If there is anything else that you need to know please call me. Regards

Brenda

The Property Advertisement

[26]   When the Property was listed for sale, Bayleys’ online advertisement, amongst other things, included the following comments:

Delightfully refreshing, light and surprisingly bright throughout […] you’ll be charmed like the current owners, 25 years!

An old-fashioned ‘town-house’ with modern appeal, well-built and maintained over three centrally heated levels […]

Three living rooms offer the versatility you need for entertaining […] lower, casual ‘mess around’ living, relax on the sunny deck weekends and after work […]

Vendor has downsized. Call now for more detail!

The sale to the plaintiffs

[27]   In June 2014 Ms Boughen says she received a conditional offer from a third-party young couple for the Property, of $925,000. That offer was subject to finance and the sale of the couple’s own property, obtaining their own builder’s report and evaluation report, and other matters. The offer it seems was progressed, but confirmation of the contract was deferred when the couple sought extra time to arrange finance.

[28]   Some time later on Sunday 29 June 2014, Ms Wrenn and her partner viewed the Property with Ms Nicholls at around 5.15 pm.

[29]   They showed interest in a purchase. Specifically, Ms Nicholls explained to Ms Wrenn that the house had just come out of offer, but the other couple were preparing to put it back under offer with a shortened conditional time frame to the following week, so “there was an opportunity for Ms Wrenn”. Ms Nicholls said that she explained that Ms Wrenn would:

…have to move quickly, but get your team through, get your professional people through, get your builder through, we have a lot of information on this house.

[30]   Later that Sunday night, Ms Nicholls sent a follow-up email to Ms Wrenn enquiring whether they were serious about the Property and enclosing its LIM Report. From her reading of the LIM Report, Ms Wrenn noticed that there was a drain under the house, there had been stormwater problems in 2005 and 2007, and there had been some seepage under the house. The email from Ms Nicholls also noted “we have many of the architect/engineer plans and written documentation available at the house, should you wish to delve further” and mentioned again that Ms Wrenn may wish to arrange for her builder to view the Property.

[31]   Ms Wrenn did not retain a builder or building surveyor to look at the Property at that time.

[32]   At 10.25 pm on the same Sunday night, Ms Nicholls forwarded to Ms Wrenn the 10 February 2014 Alterations Email from Ms Boughen. This, as I have noted, referred to the alterations to the Property the vendors had made and the plans on the dining room table. Ms Nicholls’ email described this as the vendor’s account of their “alterations and maintenance”.

[33]   The next day, Ms Wrenn had a second viewing of the Property. Ms Nicholls also provided Ms Wrenn with  the  Building  Report.  This  was  the  version  with Ms Boughen’s handwritten notes on it. In her evidence Ms Wrenn says that she can recall that she “carefully read through” the Building Report and the material provided.

[34]   On that night, Monday 30 June 2014, just before 9 pm, Ms Wrenn forwarded the LIM Report she had received through Ms Nicholls to her stepfather and co-trustee, Mr Campbell. Ms Wrenn noted that she had a purchase offer for the Property drafted at $1 million and that the house was “north-facing and very sunny, warm and dry”.

[35]   The next  day,  Tuesday  1  July  2014  at  11.24  am,  Ms Wrenn  emailed  Ms Nicholls inquiring into:

(a)why there was no CCC issued for Building Consent 105369 to upgrade an   existing   stairway   (which   was   already   explained   in   the   10 February 2014 email that this was work not undertaken); and

(b)whether there was any stormwater information that could be provided.

[36]   That stormwater question, it seems, would have related largely to the Wellington City Council’s drains and not private drains.

[37]   Ms Boughen addressed these questions in an email forwarded to Ms Wrenn that day at 1.58 pm. She advised first, that the work to upgrade the stairs had not been carried out and secondly, that the stormwater pipe was replaced for the street about four or five years earlier when the Wellington City Council replaced the single street sump with a double one. She added that this worked well. Ms Boughen also said she understood the stormwater question to relate to Council drains.

[38]   It does seem that the plaintiffs did not ask any specific questions about “weathertightness, structural, or other significant issues that went beyond normal maintenance and usual wear and tear” of the Property. Nor did they make their purchase offer conditional on a report from their own builder or a building surveyor. Effectively it was an unconditional purchase offer.

Post-settlement – Discovery of Alleged Defects

[39]   Following settlement of the sale of the Property to the plaintiffs, which occurred around 8 August 2014, Ms Wrenn and her partner moved into the house as their home. It seems Ms Wrenn did not notice any issues while living in the Property, at one point in her evidence noting that the building was generally in good condition for a house of its age. Ms Wrenn and her partner lived at the Property for around seven months post-settlement. Then, in about March 2015, the two of them moved to the United Kingdom and the  house  thereafter  was  tenanted.  A  property  manager, Full House Management Ltd (FHM) to manage the tenancy, was engaged.

[40]   On 14 November 2016, the major Kaikoura earthquake struck, damaging some buildings in Wellington, among other places.

[41]   On 15 November 2016, FHM issued a post-earthquake inspection report for the Property, noting that it was generally in good condition and no leaks were evident, although the upper lounge ceiling had movement cracks through the middle. No further structural or other checks of the Property were undertaken at that time.

[42]   The tenancy of the house continued. Then in May 2018, just under four years after the Property was sold to the plaintiffs, it appears Wellington City was hit with severe thunderstorms and strong winds. Around three days into that inclement weather, the tenants at the Property for the first time noticed water leaking into the house, first from the western wall at the top of a lower lounge window and secondly, to a lesser extent, at the top of the lower north bedroom window. This was reported to FHM on 23 May 2018. Subsequently, FHM engaged Wellington Building Services Ltd (WBS) to investigate.

[43]   Although no dye testing of defects in order to identify the true source of the leaks was undertaken, the view expressed by WBS at the time was that installation of the adjacent deck flat against the exterior cladding of this wall and the lack of flashings to the north end window were causing the leaking. It does appear, however, that a windowsill in that area was also broken.

[44]   Some work in this area was undertaken by WBS around 1 August 2018. A project manager at WBS advised the plaintiffs (through FHM) that they had discovered “some bigger issues”. This involved, it was said, some rotten studs, bracing elements and bottom plates caused by water ingress due to the deck. From evidence provided for WBS, it was suggested that:

What we have also uncovered is that in recent years someone has done work in here and covered this issue up and done “dodgy” fixes which can also been seen in the photos.

[45]   What is clear, however, from many of the photos which were before the Court is that, unsurprisingly for a house then over 110 years old, significant borer damage was also apparent.

[46]   Other alleged defects in the house, the plaintiffs say, were identified through later inspections made by WBS employees.

[47]   As a result, the plaintiffs in their second amended statement of claim plead (at [5]) the following:

[5] During the time that Ms Boughen and/or the defendants were the registered owner(s) of the Property, the Property suffered from the following moisture and other issues:

(a)    Moisture in the subfloor area on the lower level;

(b)    Water ingress and/or moisture to the ground level of the dwelling;

(c)    Water ingress and/or moisture to the lower level of the dwelling;

(d)    Water damage to:

(i)    floor joists;

(ii)    framing timber;

(iii)    bottom plates;

(iv)    walling linings;

(v)    ceiling linings;

(vi)    insulation;

(vii)    skirtings;

(viii)floors/flooring substrate; and

(ix)    floor coverings.

(e)    Rotten:

(i)    bottom plates;

(ii)    framing timbers;

(iii)    joists;

(iv)    floors;

(v)    flooring substrate; and

(vi)  weatherboard.

(f)   inadequate structural support of the stairwell…from the ground to the lower level of the dwelling;

(g)    fire damage in the ceiling space; and

(h)   inadequately supported ceiling linings on top level below the fire damaged timbers above.

[48]   To date, the plaintiffs have undertaken considerable repair and remediation work to the house. They claim the majority of this is recoverable from the defendants.

[49]   In this proceeding, it appears the plaintiffs quantify their present claim on the following GST inclusive amounts, based on what they say are the actual and estimated costs involved with remediating the house:

(a)actual design work: $62,796.14;

(b)actual building work undertaken $491,606.29;

(c)actual architectural design work (for the roof area) $6,964.70;

(d)estimated building work: $149,156.69;

(e)loss of rental income: $64,028.60;

(f)alternative accommodation: $23,825; and

(g)moving and cleaning costs: $1,298.75.

These amounts total $799,676.17.

[50]Further claims are signalled by the plaintiffs as follows:

(a)For general damages of $30,000;

(b)For interest calculated in accordance with the Interest on Money Claims Act 2016;

(c)For recovery of legal and experts’ costs.

Causes of action

[51]The plaintiffs plead three causes of action:

(a)Pre-contractual misrepresentation relating to the Property under s 35 of the Contract and Commercial Law Act 2017 (CCLA).

(b)Breach of the vendor warranties in clause 6.2(5) of the Agreement for Sale and Purchase (SPA) between the parties because building consents were not obtained:

(i)for building work to repair or replace components of the dwelling that had failed to satisfy the New Zealand building code for durability (for example, through a failure to comply with the external moisture requirements of the Building Code (E2); and/or

(ii)for building work consisting of a complete or substantial replacement of any component or assembly contributing to the dwellings’ structural behaviour (B1 and B2 NZ Building Code).

(c)Contractual mistake under s 24 of the CCLA.

[52]   The defendants deny these causes of action and also plead affirmative defences in:

(a)contributory negligence;

(b)betterment;

(c)failure to mitigate; and

(d)voluntary assumption of risk.

The trial and the evidence

[53]   This proceeding has a long and complex history, having first been issued by the plaintiffs on 4 November 2021. The trial of this matter commenced on Monday 13 February 2023 and continued for its allocated two weeks until Friday 24 February 2023. Counsel then indicated that additional hearing time was required to complete the evidence and this took place on 1 and 2 March 2023.

[54]   Counsel then requested some time to formulate their final submissions and a further day on 21 March 2023 was allocated for this. This was followed by further written submissions provided from counsel (totalling 110 pages from counsel for the plaintiffs – including a 24-page outline of oral submissions – and 171 pages from counsel for the defendants – including a 6-page defendants’ chronology for closing) and a final hearing of one day on 28 April 2023.

[55]   Very extensive evidence was provided to the Court over the lengthy hearing time for this trial. Whether all this, and the voluminous material presented to the Court, was entirely necessary in this case is entirely debatable.1 But, in any event I need to record that, so far as the evidence called before the Court was concerned, the plaintiffs called six witnesses who were:

(a)Ms Wrenn – one of the plaintiffs and a registered owner of the Property. Ms Wrenn gave evidence of events leading up to the purchase of the Property, the discovery of the alleged defects and damage, steps taken to remediate the Property and the costs and other damages she says that the plaintiffs have incurred.

(b)Darren Young (Mr Young) – a director of WBS and also a director of Darren Young Consultants Ltd (DYC). He gave evidence relating to the alleged defects discovered and the remedial design and building works he said were required to remediate the dwelling.

1      Indeed, in her cross-examination evidence at trial at NOE 653 Lines 18–19, Ms Boughen said: “Had we been able to talk [in late 2019], Pip and I, we would have worked this out very quickly.”

(c)Anthony Muir (Mr Muir) – an engineering technologist and director of Ants Architectural and Engineering Design Services Ltd. Mr Muir prepared the structural design for the alleged remedial work and performed a role in the remediation itself. The plaintiffs claim that as an expert he is able to provide evidence in reply to the engineering evidence put forward on behalf of the defendants here.

(d)Barry Marsh (Mr Marsh) – a building inspector who undertook an inspection of the Property on 27 January 2014 for Ms Boughen and prepared the pre-sale report that was provided to prospective purchasers, including Ms Wrenn.

(e)Grant Hunt (Mr Hunt) – a registered building surveyor and quantity surveyor. He gave evidence as an expert regarding:

(i)the proposed remediation, scope and design, having regard to the alleged condition of the dwelling and, in particular, the suggested defects and damage discovered;

(ii)an assessment of the cost of the remediation, on the basis of the design and scope of work required; and

(iii)his reply to challenges to his evidence advanced by the defendants’ experts.

(f)Morris Jones (Mr Jones) – a former Council inspector. He provided expert evidence regarding general Council practices and procedures throughout building consent processes. This included when a building consent should be obtained and how a reasonably prudent Council officer would be likely to implement and enforce a proper inspection regime during building works and before a code compliance certificate was issued. Specifically, it seems his evidence was given in reply to the defendant’s evidence from Mr Saul, a former Council inspector called by Ms Boughen.

[56]   For the defendants, 12 witnesses were called. The defendants’ evidence was given by:

(a)The defendant – Ms Boughen, who gave evidence about her ownership of the Property, her knowledge of the works that occurred there during her ownership, the sale process and her role in it and other aspects concerning this proceeding.

(b)Anthony Christian van Raat (Mr van Raat) – an architect who owned the house before Ms Boughen, from 1986-1989. He gave evidence from his recollection of the works undertaken at the Property during his ownership.

(c)Benedict Maher (Mr Maher) – Ms Boughen’s builder who undertook work at the Property in 2007 to the lower level. He gave evidence about what he did and his recollection of that process.

(d)Jeffrey William Burnet (Mr Burnett) – a drainlayer who installed the sump and PVC pipe in the lower north bedroom, again around 2007. He provided evidence of this.

(e)Timothy Henderson (Mr Henderson) – a tenant of the Property who lived there around 2018 when the leak occurred. He gave evidence as to his experiences while living there as a tenant.

(f)Judy Nicholls (Ms Nicholls) – the real estate agent from Bayleys, who gave evidence about her recollection of the sales process.

(g)Dean Russell Spiers (Mr Spiers) – a former contractor for WBS, who gave evidence about his involvement with the Property.

(h)Haydon Miller (Mr Miller) – a chartered professional engineer who specialises in structural engineering. He worked at the Property on the 1998 alteration to the upper floor dining room. He gave a mixture of

both fact and expert opinion evidence in relation to engineering matters at the Property.

(i)Edward Kerrison Saul (Mr Saul) – a building consultant and the former consents officer at the Wellington City Council, who gave expert evidence about Council and Building Act matters.

(j)Grant Watkins (Mr Watkins) – a quantity surveyor, who gave expert evidence as to the appropriateness of remedial and other costs claimed by the plaintiffs here.

(k)Ronald Pynenburg (Mr Pynenburg) – a registered architect, who gave expert opinion evidence in response to witnesses put forward by the plaintiffs in relation to issues arising from the Building Act.

(l)John Clutha Wilson (Mr Wilson) – a chartered professional engineer specialising in structural engineering.

First cause of action - Misrepresentation

[57]   The plaintiffs’ first cause of action seeks damages from the defendants for misrepresentation under s 35 of the Contract and Commercial Law Act 2017 (CCLA). Section 35 provides:

35       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), then –

(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.

[58]   The term “misrepresentation” is not defined in the CCLA, so the common law definition applies.2 In Burrows, Finn and Todd on the Law of Contract in New Zealand, the learned authors explain that:

A misrepresentation is a representation of past or present fact that is false or misleading, and excludes statements of intention, opinion and law.3

[59]   A statement of opinion is, on its face, not a statement of fact, because it is a belief based on grounds incapable of proof and therefore usually not actionable as a misrepresentation. Generally, a person will only be liable for expressing an incorrect opinion where fraud is established or they do not honestly hold the opinion at the time it is expressed, and/or there is no reasonable basis for it.4

[60]But, as Potter J said in Aldridge v Boe:5

[194]    However, an expression of opinion contains an implied statement that:

(a)the representor actually holds the opinion; and

(b)there are reasonable grounds for such an opinion to be held, especially where the representor has greater knowledge of the situation than the representee.

[61]   The statement alleged to be a misrepresentation must also be fairly capable of the meaning which is now being alleged.6 The Court must consider the words used in context and what a reasonable person would have understood them to mean in all the circumstances. Relevant considerations include the nature and subject matter of the transaction, the respective knowledge of the parties, their relative positions and the words used.7

[62]   It is clear, too, that any reliance must be reasonable8 and a party to a contract is liable under s 35 of the CCLA for misrepresentations made by her/his agents.9

2      Ware v Johnson [1984] 2 NZLR 518 (HC) at [537]–[538].

3      Stephen Todd and Matthew Barber, Burrows, Finn and Todd on the Law of Contract in New Zealand, (7th ed, Lexis Nexis, Wellington, 2022) at [11.2.1].

4      David v TFAC Ltd [2009] NZCA 44 at [43].

5      Aldridge v Boe [2012] NZHC 277 at [194].

6      Magee v Mason [2017] NZCA 502.

7      Ridgway Empire Ltd v Grant [2019] NZCA 134 at [11].

8      Vining Realty Group Ltd v Moorhouse [2010] NZCA 104.

9      Wakelin v R H and E A Jackson Ltd (1984) 2 NZCPR 195 (HC).

[63]   It must be noted also that independent enquiries made by a purchaser may bring reliance to an end, so negating the effect of a misrepresentation (but that need not be so).10

[64]   Authorities have also held that in cases where all vendors of a property did was to make a report available to prospective purchasers, which expressly defined a limited scope of the inspection, this is not likely in the circumstances of the individual case to amount to misrepresentation.11

[65]In summary, the plaintiffs here must establish that:

(a)there was a representation of fact made by Ms Boughen;

(b)Ms Boughen’s representation properly interpreted in light of all the circumstances was false or misleading;

(c)it was made to the plaintiffs by or on behalf of the defendant;

(d)the defendant intended the representation to be relied on;

(e)the plaintiffs were induced by the representation to enter into the contract; and

(f)it was reasonable for the plaintiffs to rely on the representation and the plaintiffs suffered loss as a result of that reliance when they entered into the SPA.

[66]   In this case, prior to the sale of the Property, Ms Boughen either directly or through her agent Ms  Nicholls  provided  the  following  forms  of  disclosure  to  Ms Wrenn (collectively Ms Boughen’s disclosures):

(a)The Bayleys advertising material for the Property.

10     Magee v Mason, above n 6, at [48(c)].

11     Aldridge v Boe, above n 5, at [221]–[222].

(b)The Building Report from Mr Marsh which contained his opinions as a building expert. Whilst the Building Report included caveats such as being based on a visual-only inspection, and noted areas that could not be inspected, it also:

(i)included Mr Marsh’s company policy which contained a requirement for Ms Boughen to notify Mr Marsh of “any existing or previous conditions that may be or become an issue, at or before the time of the inspection”; and

(ii)included handwritten markups added Ms Boughen.

(c)The Land Information Report (the LIM) for the Property.

(d)An email Ms Boughen sent to Ms Nicholls on 10 February 2014 under the subject line “re: History of Alterations – 33 Maarama Cresent” (the Alterations Email). Ms Nicholls forwarded the Alterations Email to Ms Wrenn on 29 June 2014.

(e)A box containing plans drawn up for some of the works that occurred over the time Ms Boughen owned the Property.

(f)An email response from Ms Boughen on 1 July 2014 to questions asked by Ms Wrenn with the subject line “FWD: LIM feedback” (the LIM feedback email). As I have noted, after reviewing  the  LIM  report, Ms Wrenn sent Ms Nicholls an email asking questions about a building consent that had not received a code compliance certificate and stormwater  information.  Ms  Nicholls   forwarded   the   email   to Ms Boughen who responded by typing her answers in red below the questions in Ms Wrenn’s original email. Ms Nicholls then forwarded this response to Ms Wrenn.

[67]   From the plaintiffs’ pleadings, it is contended that Ms Boughen’s Disclosures to Ms Wrenn included the following express or implied representations of fact:12

(a)That Ms Boughen’s disclosures – in particular, the Building Report – accurately reflected the condition of the Property.

(b)That Ms Boughen was not aware of anything that suggested the house was not “well built and maintained” (as specified in the Bayleys online advertisement for the Property).

(c)That Ms Boughen was not aware of anything that suggested the house was not in “generally good condition throughout given the age of it” or required extensive work.

(d)That the roof of the  house  had  recently  been  replaced  in November 2013, and Ms Boughen was not aware of anything that suggested the roof frame supporting the roof was not in “generally good” condition.

(e)That the only relevant stormwater information that Ms Boughen could provide in addition to the LIM report was that “the stormwater pipe was replaced for the street around 4-5 years ago” and “the WCC dug up the single sump/grate and replaced it with a double one [that] works very well, and that work was undertaken when the WCC replaced the kerb and channel and resealed the entire length of the street”.13

(f)That Ms Boughen was not aware of anything that suggested the double sump installed by the Wellington City Council was not “working very well”.14

12 As pleaded at paragraphs 13–17 and 34 (a)–(g) along with further pleadings at 36 (a)–(e) of the plaintiffs’ second amended statement of claim. These latter pleadings also related largely to the alleged defects and damage in the house.

13     As specified in the LIM feedback email.

14     As specified in the LIM feedback email.

(g)That Ms Boughen was not aware of anything that suggested the exterior cladding or balconies of the house were not in “generally good” condition.

(h)That the works undertaken by (or on behalf of) Ms Boughen in the north bedroom and lounge located on the lower level primarily involved re-gibbing.15

(i)That  all  the  important  works  undertaken  by  (or  on  behalf  of)  Ms Boughen to the house had been disclosed.

(j)That any existing or previous defects known to Ms Boughen had been disclosed. This included an implicit representation that Ms Boughen had complied with the requirement to notify Mr Marsh, at or before the time of his building inspection, of “any existing or previous conditions that may be or become an issue” – so any condition of this kind was captured in the Building Report.

(k)That there were no other important disclosures that Ms Wrenn should have been made aware of.

(l)That the market value of the Property was around $1 million.16

[68]   As I have noted, to be actionable a representation must also be false or misleading.17 Generally mere silence cannot amount to a misrepresentation. It is clear, however, that a misrepresentation can occur if a person creates a false impression by disclosing part of the truth of a matter while failing to disclose other information that would correct the false impression.18 Silence can distort positive representations and a half-truth can create a misleading impression. This is because of what it leaves

15 As specified in the Alterations Email.

16 On this last aspect, which I find particularly dubious here, Ms Wrenn does note that the Bayleys advertisements for the property did specify that the rateable value for the property was $970,000, although the price was to be “by negotiation”.

17 Dodds v Southern Response Earthquake Services Ltd [2019] NZHC 2016 at [78](b).

18 Dodds v Southern Response Earthquake Services Ltd, above n 17, at [78](a) and Anderson v De Marco [2020] NZHC 2979 at [52].

unsaid. Given the basic common law rule for the sale and purchase of property of caveat emptor (let the buyer beware),19 a party may be legally justified in remaining silent about a material fact. If, however, that party chooses to make a representation on an important matter, it must be full and frank and not a partial and fragmentary account where what is withheld makes what is said false.20

[69]   In the present case, a large part of the essence of the plaintiffs’ claim is misrepresentation by omission. They allege a misleading impression of the Property was provided by the telling of half-truths. Significantly, this is in circumstances where Ms Boughen from the evidence repeatedly and expressly indicated she was happy to provide more information, both in the email upon which the alleged misrepresentation is partly based, and in response to the limited queries Ms Wrenn had made.

[70]   On this the basic premise in relation to silence is that a vendor has no obligation to disclose defects as to quality:

In normal circumstances, a statement cannot be implied from silence as to a particular matter; any such implication in the present context would subvert the application of caveat emptor and have the effect of placing the duty of disclosure on the vendors.21

[71]   As I note, the only circumstances in which silence may amount to a misrepresentation generally are where:

(a)the defendant has created a positive misconception by omitting part of the truth; or

(b)the defendant has adopted the truth of a misconception although they did not create it.22

[72]   Overall, the plaintiffs’ misrepresentation claim relates largely to two separate matters. First, there are alleged water ingress issues from an area of bank adjacent to

19     Dell v Beasley [1959] NZLR 89 (SC).

20     Elvidge v ASB Bank Ltd [2015] NZHC 44 at [165].

21     D W McMorland, Sale of Land (4th ed, Cathcart Trust, Auckland, 2022) at 2.03(b).

22     Dell v Beasley [1959] NZLR 89 (SC) at [95].

the lower area of the house, leaks from the upstairs balcony to the house and certain other building works issues. Secondly, there are alleged issues related to fire damage in the roof space. It is appropriate here to consider each of these separate misrepresentation areas in turn, which I now do.

General misrepresentations relating to alleged water ingress issues and associated building works issues

[73]   As I have noted, to be actionable a written representation must also be false or misleading. A statement of opinion generally can give rise to a misrepresentation if:

(a)the implicit representations of fact associated with that opinion were not true; and/or

(b)the opinion falsely implies that the representor honestly held that opinion.23

[74]   Generally, mere silence cannot amount to a misrepresentation, although the essence of much of the plaintiffs’ present case is misrepresentation by omission. The allegation here from the plaintiffs as I have noted is that misleading impressions were created by the telling of what are alleged to be half-truths.

[75]   Allegations of misrepresentation by omission, however, must be treated with some caution. The starting point and a basic premise in relation to silence is that a vendor has no obligation to disclose defects as to quality as the authors of Sale of Land noted:

In normal circumstances, a statement cannot be implied from silence as to a particular matter; any such implication in the present context would subvert the application of caveat emptor and have the effect of placing a duty of disclosure on the vendor.24

[76]   At the operative time, Ms Boughen did not meet or speak with Ms Wrenn or any of the other plaintiffs. Her specific statements before the Court were outlined in

23     Dodds v Southern Response Earthquake Services Ltd [2019] NZHC 2016 at [78](a) and Anderson v De Marco [2020] NZHC 2979 at [52].

24     D W McMorland, Sale of Land (4th ed, Cathcart Trust, Auckland, 2022) at [2.03(b)].

the written Alterations Email, her notes on the Building Report and other written communications before the Court.

[77]   To summarise, in this first general area, the plaintiffs’ alleged representations on which their pleadings are based are:

(A)the Building Report and the advertising material stated that the Property was in “generally good condition throughout given the age of it” with “some general maintenance and remedial work required”;

(B)again from the Building Report, the house was “well built and maintained”;

(C)there were no other important disclosures that a prospective purchaser should be aware of, including weathertightness or water ingress;

(D)the house did not have defects or risks relating to structure, weathertightness or others adversely affecting its value;

(E)the defendant was not aware of any existing or previous conditions that may be or become an issue at the time of inspection;

(F)where any works were done, any permit or consent required was obtained, and works were compliant; and

(G)the market value of the Property was approximately $1 million.

[78]   The overall misrepresentations alleged by the plaintiffs here focus largely on general alleged misrepresentations relating to water leaks in and works carried out to the lower north bedroom and lower lounge, the balcony and associated cladding and issues related to the bank and sumps.

[79]   In identifying the actual representations made, it is useful to note that no oral discussions took place at the relevant time between Ms Boughen and Ms Wrenn. The alleged representations, the subject of the plaintiffs’ complaint, were made in the

documentation provided to Ms Wrenn and, in addition as she maintains, by implication.

[80]   Turning to those alleged representations which I outline at paragraph [77] above, statements outlined as A and B that the Property was in “generally good condition throughout given the age of it” with “some general maintenance and remedial work required” and the house was “well-built and maintained” are direct quotes from the Building Report and the advertising material. As I see it, they are however broad comments as to the general quality of the house and as such they are usually regarded as statements of opinion. The house at the time was over 110 years old and, from the expert evidence before me, was generally seen as well-built using building techniques adopted in New Zealand at the beginning of the 20th century. Significant alterations made to the Property over the years and, particularly before Ms Boughen’s purchase, it seems were also generally well-built. Maintenance of the house, in particular since Ms Boughen’s purchase in 1988, I am satisfied from all the evidence was generally attended to in a reasonable manner.

[81]   Finally, at their highest, statements A and B noted above can imply little more than first, that Ms Boughen honestly believed the house was in good condition for its age, well-built and well maintained and, secondly, that in all the circumstances, there was a reasonable basis for her to have that opinion.

[82]   I note, too, that the Building Report itself stated that the house was “in generally good condition throughout given the age of it”, this being included in the Property Overview section of the Report. That Report also contained a range of opinions which must be considered in light of the detailed caveats set out in the Report itself which I have noted above.

[83]   I conclude there is nothing in the plaintiffs’ complaint regarding these representations noted as A and B above.

[84]   As to statements C and D, also noted at paragraph [77] above, these allege that Ms Boughen represented to the plaintiffs that there were no other important disclosures that a prospective purchaser should be aware of, including

weathertightness or water ingress, and further that the house did not have defects or risks relating to structure, weathertightness or other matters adversely affecting its value.

[85]   At this point I repeat that I will leave aside issues relating to the fire damage in the ceiling which I deal with below.

[86]   As to the weathertightness and water ingress damages alleged by the plaintiffs and the particular representations C and D, I am satisfied no such specific representations were expressly made here. At best they can therefore only be implied.

[87]   The Building Report itself clearly did not purport to be a comprehensive disclosure document of all “important” matters relating to the house, including weathertightness or structural defects. The Report expressly stated that no representation was given as to weathertight issues relating to the house. In particular, importantly it provided that “this report cannot give any waterproofing guarantee” and “the lack of moisture indicators does not confirm that a property does not have moisture issues” and “decay in framing can only be confirmed through invasive testing”.

[88]   The repeated caveats as to framing and hidden defects in the Building Report, as I see the position, must have highlighted that timber decay is an obvious risk in old New Zealand timber houses (such as this one).

[89]   Further, I am satisfied that when Ms Boughen made her annotations to the Building Report, there was no departure made from any of the important caveats in the Report itself.

[90]   I conclude that any reasonable purchaser who read the Building Report would not have understood it to be confirming that its purpose was to make detailed disclosures including on weathertightness issues, water ingress, structural issues, or other significant risks adversely affecting the value of the Property.

[91]   In my view, the present case is analogous in many ways to the decision in Overton Holdings Ltd v APN New Zealand Ltd in which it was alleged there was a representation that the premises at issue were structurally sound (albeit on the basis of behaviour rather than written communication). A problem in that case was that the Information Memorandum document provided by the vendor’s agents contained a specific disclaimer making clear that no undertaking was given as to the structural soundness of the premises (not unlike the present situation). There, the Court naturally found there could be no implied representation. The purchaser had simply made an assumption and had not received any representation.25

[92]   Importantly, in the present case as I see it, Ms Wrenn in her evidence accepted under cross-examination that she had assumed that everything had been disclosed to her and therefore in my view I am unable to conclude there was ever any specific representation as such.26

[93]   At best here, statements in the Building Report and elsewhere might only be read as a possible representation from the vendors and Ms Boughen in particular that she was not aware of any condition with the house that she honestly considered might be or become an issue. So far as weathertightness questions are concerned, at its highest in my view, a reasonable purchaser reading the Building Report could only expect that the vendor had disclosed to potential purchasers (and also to the building inspector who completed the Report) any conditions relating to the house that they honestly considered might be, or could become, an issue.

[94]   Again, there is nothing to support the plaintiffs’ pleaded position in these alleged representations noted as C and D above.

25     Overton Holdings Ltd v APN New Zealand Ltd (2014) 15 NZCPR 426 at [56] and [67]–[68].

26     In her evidence, Ms Wrenn answered questions as follows:

“Question: Now, I think it’s common ground that you didn’t retain a builder or building surveyor that’s right?

Answer: No, I didn’t because I had no concerns about weathertightness at the time. Question: Nor did you speak to the owners?

Answer: No but I –
Question: You didn’t try and have a discussion with Ms Boughen or…?

Answer: There was absolutely no indication that I needed to because I had been provided with such detailed information that I assumed it was all included.”

[95] I turn now to statement E at [77] above. This was to the effect that the defendant was not aware of any existing or previous conditions that may be or become an issue at the time of inspection, it seems the plaintiffs rely on the statement in their Building Report “that the vendor is required to notify the [Building] Inspector of any existing or previous conditions that may be or become an issue” in conjunction with the absence of notification from the defendant to the Building Inspector.

[96]   Again, this is a matter between Ms Boughen and the author of the Building Report. In any event as I see it, this condition, although somewhat vague, can only be seen as a representation Ms Boughen was not aware of any conditions with the house that she honestly considered might be or become an issue. At its highest therefore in my view, a reasonable purchaser reading the Building Report could only expect that the vendor had notified the report writer of any conditions they honestly considered could be or become an issue.

[97]   So far as weathertightness and water ingress issues relating to the house are concerned, Ms Boughen’s evidence was that she had no knowledge these were possible issues with the house (particularly given its age) and hence there was no failure on her part to disclose matters of which she was not aware.

[98]   Again, there is nothing in this representation E which would assist the plaintiff here.

[99]   Further, so far as representation F is concerned, this is specifically included as a term of the SPA under cl 6.2(5) and I will address it below.

[100]   Lastly, turning to representation G which alleges the market value of the Property was said to be approximately $1 million, again I find there is nothing in this assertion. There was no express representation here that the market value of the Property was $1 million. Nor did the advertising for the Property even specify a buyer enquiry over a figure of around $1 million. The rating valuation was simply listed correctly at its figure of $970,000.

[101]   It is true to say also that if acceptance of an offer (as the plaintiffs made here at their figure of $1 million) constitutes a representation from the vendor that the market value of the Property is that figure, then it would be open to every unwitting purchaser who made a bad bargain to sue a vendor for it and obtain a judgment later for alleged market value. That cannot be seen as appropriate.

[102]   Here, these alleged representations must also be viewed in the light of the broader context in which they were made and in particular the significant caveats included in the Building Report. From the evidence, I am satisfied no specific or unequivocal representations were made as to whether this house had leaked. And, as to whether any implied representations on this aspect had been made, in my view there are no clear words or conduct here to justify any such representation being implied. I note all this bearing in mind too the considerable age and history of the house. Nor were there any specific, unequivocal or implied representations made in relation to the quality of the deck junction which more than four years after settlement appeared to be the subject of some failure. Similarly, there were no specific representations about structural stability or otherwise relating to the western wall, its cladding, or the foundations of the house. Lastly, so far as the stairs in the house were concerned, it seems all that was said was from the Building Report recording their condition as generally “average”.

[103]   Again for completeness, I note at this point that I will leave on one side representations relating to the fire in the roof and wall space and damage from this which I will address below.

[104]   Overall therefore, the impression that the various documents  provided  to  Ms Wrenn would have given to a reasonable person in her position was that, on a reasonably superficial physical inspection of the house, it was in generally good condition given its age and Ms Boughen was not aware of any matters she considered could be a problem.

[105]   As I see it, having considered all the extensive evidence which was before me, any conclusions which may have been reached as to latent defects or the construction of the house are generally attributable to assumptions made by Ms Wrenn and not the

documentation provided to her. Ms Wrenn was clearly aware that the property she was looking to buy was a three-storey timber house over 100 years old built into the side of a bank in Aro Valley in a high wind zone that has faced the full force of northwest storms in Wellington for its entire life. The fact, too, that it was only some four years after the plaintiffs’ purchase of the Property that leaking was discovered is a further matter which must be placed into the mix here.

[106]   For all these reasons I find that (leaving aside the ceiling fire damage issue which I will address below), the representations which the plaintiffs complain of here did not constitute actionable misrepresentations. The plaintiffs’ claim under this part of their first cause of action must fail.

Misrepresentation relating to alleged fire damage in the roof ceiling and wall space

[107]   In both the Alterations Email from Ms Boughen and also in the Building Report provided to Ms Wrenn, it was noted that the roof of the house was recently replaced in late 2013 approximately six or eight months before sale. The Building Report also contained the comment the roof support structure was in “generally good” condition. In making these representations to Ms Wrenn, the plaintiffs say Ms Boughen implicitly represented that she was not aware of anything that suggested the roof frame supporting the roof and the ceiling space and adjacent wall were otherwise than in a “generally good” condition. Also, it is clear that while the roof had been replaced recently, Ms Boughen did not bring to Ms Wrenn’s attention the fire damage in the roof space supporting that new roof. The plaintiffs say this silence distorted what is said to be Ms Boughen’s positive representations about the roof and thereby she concealed the true position. Confirming that the roof had been recently replaced without more, it is said, was in one sense misleading because it gave the impression there were no material concerns with that area of the house.

[108]   In addition to remaining silent on the fire damage, the plaintiffs contend that Ms Boughen took steps to conceal the damage from the Building Inspector Mr Marsh and also from Ms Wrenn and other purchasers by removing the manhole allowing access to the ceiling area shortly before she placed the Property on the market.

[109]   It was not then until around May 2021 that Ms Wrenn discovered the fire damage in the roof space when the adjacent kitchen ceiling was sagging and a hole was cut in the roof to investigate. Several photographs of the fire damage were taken at that time and are before the Court.

[110]   In response, the defendants contend, and some of their expert witnesses argue, that the fire damage in the roof space is simply cosmetic and not particularly material. The plaintiffs strongly dispute this and their expert evidence suggests the fire damage is a significant issue.

[111]   From the photographs of the fire damage before the Court, I am satisfied that significant charring to elements of the roof structure is apparent. Arguably these damaged areas are not merely cosmetic but may indicate potentially a greater difficulty and perhaps even a problem of a structural nature. Further, there was no expert evidence of any appropriate testing undertaken for either party to suggest that the fire damage area was simply cosmetic and readily fixed as the defendants contend with the simple application of a paint surface.

[112]   On the dispute between the parties as to whether this fire damage in the roof space and potentially also to the adjacent wall or walls was material, there is a specific report before the Court from Ms Wrenn’s architectural designer and technologist, Mark Jerling (Mr Jerling), of Mark Jerling Architectural Design. Although he did not give oral evidence before me, in his report Mr Jerling assessed the structural integrity of the roof and roof space including, as I understand it, a calculation of the stress and strains in that space. His conclusion was that the roof needs remediation. He prepared a scope, a plan and a specification for this repair. As I understand it, a building consent was issued for this work but the work is still to be undertaken.

[113]   In further evidence before the Court, Mr Hunt, a registered building surveyor and quantity surveyor who gave expert evidence for the plaintiffs, reached a number of conclusions on this aspect. He:

(a)concluded that, given the fire damage, there was good cause to be concerned regarding the structural integrity of the roof framing and support;

(b)recommended remediating the damage with engineering input and under a building consent; and

(c)cautioned particularly that with fire damage it is only possible to tell so much from a visual inspection. You need to be alert to the damage that is unable to be seen (for example here in the adjacent wall spaces) because often, he maintained, a greater degree of damage is discovered during fire damage remediation works.

[114]   For the defendants, the evidence before the Court of Mr Jerling is questioned. Their position is that in fact there was and is no structural damage caused to the roof timbers as a result of the earlier fires.   The defendants point to the evidence of      Mr Wilson, their structural engineer, who contended that fire had not caused any structural problems in the roof. Mr van Raat, in his evidence as a previous owner of the Property, also appeared to say that many years ago when he owned the Property, he did not see any charred beams or any timber supports that he said were diminished in cross-section by the action of a fire. Most of the damage he suggested was only smoke damage in the ceiling.

[115]   Mr Saul, a building consultant and a previous Council Consents Officer, in his expert evidence for the defendants also confirmed in his evidence that:

“I have had the advantage of accessing the roof space and I noted that the roof structure does not appear to be structurally compromised and is certainly relatively straight and true for the age of the building.”

[116]   As to the first issue here over the materiality of the fire damage in the ceiling and wall areas, there was no dispute before me that damage of some description from a fire or fires (the date/s of which are uncertain) existed at the time Ms Boughen sold the Property to the plaintiffs. Although Ms Boughen alleged that a fire had not occurred during the time she had owned the Property, she did confirm she was aware

some time ago of having been told on more than one occasion of a prior fire or fires.27 On this aspect, it is interesting to note that Ms Boughen’s occupation for many years was that of a property valuer and property manager. It might be thought surprising given this, that Ms Boughen was not curious when learning of a previous fire or fires in the house, and did not inspect the nature and extent of the damage first hand, which she said she had not done.

[117]   It might also be thought that about the time Ms Boughen had the roof replaced in November 2013 or thereabouts, on her instructions she had the manhole to the ceiling space removed and re-lined to provide a seamless ceiling finish with gib board. This was also only shortly before she put the Property on the market. Her explanation that in 2013 she “had the manhole above the oven removed because it whistled in strong winds”, (but this was in light of the fact that she had not done so in the previous 25 years of her ownership of the Property), might be seen too as somewhat surprising.

[118]   Lastly, in cross-examination, again Ms Boughen maintained first, that she had never seen the fire damage in the ceiling space personally but secondly, and significantly she did acknowledge that, based on her experience as a property valuer, if she was valuing a house and saw fire damage in the roof or ceiling area, she would unquestionably have put that in her valuation report as it would have reduced the value of the Property by the cost to remediate that work.

[119]   At this point I leave on one side the fact that the LIM report referring to Wellington City Council records and a publicly available plan in a 1961 building permit buried in this documentation stated that “the interior of the existing floor has been completely gutted by fire”. It is contended by the defendants that Ms Wrenn could have discovered this had she completed a full search of the Council records. In my view, however, that makes little difference here. It is reasonable as I see it to assume that, unlike a building inspection report for example where existing issues are identified, issues noted in plans and specifications provided in support of a building permit application such as this have been and/or will be remediated.

27     From Ms Boughen’s evidence, she confirmed that builders she had employed in relatively recent years had also told her there was fire damage in the ceiling.

[120]   Overall, in my judgment, there is a real issue outstanding relating to the roof ceiling and wall space fire in the Property. I leave on one side whether there has been physical concealment of the fire damage in the ceiling area when the manhole was closed off. Ms Boughen emphatically denies there was any concealment on her part and I need not reach any definitive position on this. For present purposes I will put to one side the plaintiffs’ alleged physical concealment claim relating to the manhole advanced against Ms Boughen and presume that it has not been made out.

[121]   It is also a somewhat vexed question in light of all the circumstances I have outlined above, as to whether or not actionable misrepresentations concerning the fire damage to the roof ceiling and wall areas were made here. For present purposes only, I will conclude here that the plaintiffs have not been able to establish to the balance of probabilities that misrepresentations as to the hidden fire damage were made out.

[122] Even if I am wrong in that conclusion, in any event I am satisfied this makes little difference to the outcome in this case. As will appear later, these matters concerning the fire damage issues I am satisfied were the subject of a common mistake between the parties. As such, the work required to rectify this mistaken belief and the damage that has resulted has meant that a substantially unequal exchange of values occurred between the parties when the Property was sold which is actionable here. It is on this basis that I have reached the conclusion on these fire damage misrepresentation issues I note at [121] above.

Second cause of action – breach of contractual warranty in the SPA

[123]   The plaintiffs’ second cause of action is for breach of contractual warranty under cl 6.2(5) of the SPA which provides:

(5)Where the vendor had done or 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 compliant certificate was issued for those works.

[124]   Broadly, the plaintiffs allege that the defendants failed to obtain necessary building consents for work:

(a)to repair or replace components of the Property that had failed to satisfy the Building Code for durability through a failure to comply with the external moisture requirements (E2); or

(b)consisting of a complete or substantial replacement of a component or assembly contributing to the house’s structural behaviour.

[125] An appropriate starting point here is the general requirement under the Building Act 2004 (which was largely in force at the time work was undertaken) that building work is not to be carried out without consent in terms of s 40 of that Act. Section 41, however, provides that building consent is not required in certain cases. Here, relevant exemptions are provided for by ss 41(1)(b) and 42(A). Schedule 1 provides for the building work in question under these provisions for which a building consent is not required.

[126]   It is also important to note here that the warranty in cl 6.2(5) of the SPA applies only to those works that the vendors (the defendants here) have done or caused or permitted to be done. It does not apply to work done by predecessors in title. Thus, the only work done on the Property relevant here to the assessment under this cause of action is work carried out by the defendants and their contractors. The question here involves two issues – the first is whether cl 6.2(5) of the SPA is engaged in this case and the second concerns the consequences, i.e. what is to happen if the clause is so engaged?

[127]   In this case, the plaintiffs’ allegation is that cl 6.2(5) was breached as (a) the defendants as vendors have done or caused to be done works on the Property; (b) a building consent was required for those works; and (c) a building consent was not obtained.

[128]   On these aspects, the principal question in this case is whether a building consent was in fact required for the works done or permitted to be done by the vendors and for which none was obtained.

[129]   It appears here that the defendants were involved in the following works while Ms Boughen in particular lived at the Maarama Crescent property:

(a)Installing the main lower deck in 1994, under Building Consent 3693.

(b)Major renovations in 1998 under Building Consent 45600, including the replacement of weatherboards and timber framing on the western wall.

(c)Works in 2007-2008 to the lower level of the house which included:

(i)upgrading the sump and drain;

(ii)replacing the floor in the lower north bedroom;

(iii)replacing the eastern wall in the lower north bedroom;

(iv)re-lining the north wall of the lower north bedroom;

(v)re-lining the west, part north and part east walls in the lower lounge;

(vi)replacing skirtings and architraves;

(vii)removing a set of cupboards; and

(viii)re-carpeting.

(d)Upgrading the laundry/dressing room area and ensuite bathroom in 2013, which included:

(i)replacing the angled wall with a square one;

(ii)reconstructing the lowered ceiling;

(iii)re-lining the walls and ceiling;

(iv)replacing the bath, shower box, toilet, vanity and towel rails; and

(v)adding a heated mirror and shaving point.

(e)Upgrading the upper level kitchen, including the kitchen/dining view shaft, and removing the manhole in the ceiling in 2013.

(f)Re-roofing in 2013.

[130]   The only works at issue on this aspect are those listed under paragraphs (c)-(f) above as these were carried out without building consent.

[131] As I have noted above, under s 41 of the Building Act 2004, building consents are not required in relation to the types of work set out in Schedule 1 of the Act. Although this Schedule has undergone many changes since its enactment, the relevant version against which Ms Boughen’s works are to be assessed here is the version that applied at the time the works in question commenced.

[132] From the enactment of the Building Act 2004, a building consent was not required for the following works (amongst others):

“Any lawful repair and maintenance using comparable materials, or replacement with a comparable component or assembly in the same position, of any component or assembly incorporated or associated with a building, including all lawful repair and maintenance of that nature that is carried out in accordance with the Plumbers, Gasfitters and Drainlayers Act 1976…”

[133]   Unlike repairs and maintenance, replacement does not require the use of comparable materials but only a comparable component or assembly.28

28     Fairley v North Shore City Council HC Auckland CRI-2008-404-408, 4 May 2009 at (16).

[134] On 15 March 2008, certain exceptions were introduced to Schedule 1 such that a building consent was still required for work that otherwise fell into the repair and maintenance or replacement exemptions if it amounted to (among other things):

(a)Complete or substantial replacement of any component or assembly contributing to the building’s structural behaviour or fire safety properties (the structural exception); or

(b)Repair or replacement (other than maintenance) of any component or assembly that has failed to satisfy the provisions of the Building Code for durability, for example, through a failure to comply with the external moisture requirements of the Building Code (the durability exception).

[135] Before me, much argument was advanced over whether the works in 2007–2008 to the lower north bedroom and lower lounge area of the house fell within the 15 March 2008 exemptions introduced to Schedule 1. If the work in question had commenced in 2007 as the defendants contended, this exception would not apply. The plaintiffs endeavoured to argue, however, that these works were not commenced until some time in 2008 and that the exception did apply. The disputed issue here in my view is readily resolved. I am satisfied from all the evidence before me that the work in question was commenced in 2007 and the exceptions introduced to Schedule 1 did not apply at the time. Further, as I see the position, the overall issues involved in this alleged breach of contractual warranty, a claim brought by the plaintiffs here, are also readily resolved.

[136]   I find there was no breach of the warranty in cl 6.2(5) of the SPA because the works undertaken by Ms Boughen in 2007 and 2013 (being those outlined in paragraph

[129] (c)-(f)) all fell under Schedule 1 of the Building Act and did not require a building consent at the time.

[137]   First the works to the lower level of the house commencing in 2007 were exempt because:

(a)The sump and the drain installed were an assembly comparable to the earthenware pipe and connector previously in the same position.

(b)The new timber framed floor structure was an assembly comparable to the old timber framed floor structure in the same position.

(c)The new lined and insulated timber frame eastern wall was an assembly comparable to the old lined and insulated timber framed eastern wall in the same position.

(d)The linings to the various walls were comparable components to the old linings in the same position.

[138]   In any case, the evidence before me of both Ms Boughen and her builder at the time, Mr Maher, on both the timing aspect of this repair work, and the care taken with and quality of the work undertaken (confirmed by other experts) as I see it was straightforward and clear.

[139]   In any event, in my view these works too did not cause any of the plaintiffs’ claimed losses here. This is because they were not a cause of the leak that occurred in 2018, nor did they have anything to do with the understandably extensive borer damage to the framing (given the age of the house), or any other pre-existing issues that drove advice from the plaintiffs’ engineering technologist, Mr Muir, to replace amongst other things the foundations with a concrete slab.

[140] Secondly, reconstruction of the lowered ensuite ceiling in 2013 in my view also fell under Schedule 1. This is because it was either a necessary part of the replacement of an internal wall exempt under cl 1 (c)(a), or a replacement of a comparable component or assembly under cl 1 (a). The new strongback erected in the ceiling also, I am satisfied, did not contribute to the structural behaviour of the building.

[141]In any event, no damages are claimed in respect of the ensuite.

[142] Thirdly and finally, both the re-roofing and the treads and risers to the stairs in my view were clearly necessary repairs and maintenance work under Schedule 1.

[143]   In any event, as I understand it, the stairs have now been taken out for entirely unrelated reasons so no loss arises even if there may have been a breach here.

[144]   For all these reasons, the breach of warranty cause of action must fail. It is dismissed accordingly.

Third and fourth causes of action – mistake

[145]   I turn now to consider the plaintiffs’ third and fourth causes of action under   s 24 of the CCLA for unilateral and common mistake.

[146]Section 24 of the CCLA provides:

Relief 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)the party was influenced in the party’s decision to enter into the contract by a mistake that was material to that party, and the existence of the mistake was known to the other party or to 1 or more of the other parties to the contract; or

(ii)all the parties to the contract were influenced in their respective decisions to enter into the contract by the same mistake; or

(iii)the party and at least 1 other party were each influenced in their respective decisions to enter into the contract by a different mistake about the same matter of fact or of law; 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

(c)in a case where the contract expressly or by implication provides for the risk of mistakes, the party seeking relief (or the party through or under whom relief is sought) is not

obliged by a term of the contract to assume the risk that that party’s belief about the matter in question might be mistaken.

(2)The relief may be granted in the course of any proceeding or on application made for the purpose.

(3)For the purposes of subsection (1)(a)(i) and (iii), the other party or other parties must not be a party or parties who have substantially the same interest under the contract as the party seeking relief.

[147]   In terms of s 25 of the CCLA, relief is only available for mistakes about things outside the contract, being here the SPA rather than mistakes about the interpretation of the contract itself.

[148]   Mistakes must be such as to seriously distort the balance of the bargain between the parties (s 24 (1)(b)) and must fall within one of three categories:

(a)common mistake (both parties make the same mistake);

(b)unilateral mistake (one party made the mistake and the other knows about the mistake); or

(c)different mistakes about the same thing.

[149]   Relief for mistake is not available where the contract provides specifically that the party seeking relief was obliged to assume the risk of being mistaken.29

Common mistake

[150]   Considering first the pleaded common mistake ground, here, relevantly for present purposes, the plaintiffs say there was a common mistake in this case in that:

(a)both parties to the SPA believed that the house was free from significant and costly defects and damage at the time of sale in the sense as relevant here that in particular, the ceiling and affected wall space had (in the

29     Section 24 (1)(c) of the CCLA.

case of the defendants) suffered no fire damage that required repair and (in the case of the plaintiffs) suffered no fire damage at all;30

(b)that was a mistaken belief, and in particular was a mistake of fact as the affected ceiling and wall space in the house had suffered appreciable fire damage which required some significant repair;

(c)the mistake resulted in a substantially unequal exchange of values because the actual value of the house on the Property with the fire damaged ceiling and wall space was significantly less than the overall property purchase price indicated;

(d)alternatively, the mistake resulted in a benefit being conferred on the defendants as vendors (the entire purchase price) that was significantly disproportionate to the consideration for the benefit (a house not fire damaged);

(e)as a further alternative, the mistake resulted in an obligation being imposed on the plaintiffs (the obligation to significantly repair the fire damaged area) that was disproportionate to the overall price paid;

(f)the SPA did not oblige the plaintiffs to assume the risk of the mistake.

[151]   I address first the defendants’ response. They contend that common mistake is not applicable on the facts in this case. Their position is that the parties were not influenced in their respective decisions to enter into the SPA by the same or any mistake. Although the plaintiffs in their claim assert that their mistake was that they assumed the ceiling space area and the affected walls in the house were sound and entirely free from any damage (including potential fire damage), the defendants contend they were not influenced by any mistake as pleaded.

30 In their second amended statement of claim, the plaintiffs pleaded additional grounds for the common mistake here but in my view, given these relate to water ingress and other damage alleged to the house itself which I have found above is not justified, those aspects do not support any claim for common or unilateral mistake.

[152]   Nor do the defendants accept that the plaintiffs’ “mistake” was as to the essential nature of the subject matter of the SPA contract. The plaintiffs and, in particular Ms Wrenn, carried out due diligence on the Property as she wished. She also proceeded with the purchase on the basis of various assumptions she had made, thus taking a calculated risk as to the purchase price of the Property – a property which the defendants say she was “in love with”.

[153]   At the most, according to the defendants, the plaintiffs chose to proceed with their purchase of the Property with some haste and therefore to limit their enquiries or assessment of matters. They were therefore simply somewhat “ignorant” rather than “mistaken” here.

[154]   The legal principles relating to common mistake are well established and are usefully repeated here:

(a)The Court may grant relief if all the parties were influenced in their respective decisions to enter into the contract by the same mistake.

(b)The mistake or mistakes must have resulted, at the time of the contract, in a substantially unequal exchange of values, or in a benefit being conferred or an obligation imposed that was substantially disproportionate to the consideration for the overall benefit or obligation.

(c)The mistake must be as to the essential nature of the subject matter of the contract.31

(d)Both parties must have mistakenly accepted in their minds the existence of some fact which affects, to a material degree, the worth of the consideration given by one of the parties.

31     Ware v Johnson [1984] 2 NZLR 518 (HC) at [539].

(e)A party who gives no thought to whether a particular matter exists or not is ignorant of it rather than mistaken as to it.32

(f)A party is unlikely to seek relief unless it has been required to assume the risk of the mistake, and therefore some specificity and not merely a general assumption of risk is required.33

[155]The issues arising in the present case, therefore, are:

(a)What was the mistake?

(b)Were the plaintiffs and Ms Wrenn in particular on the one hand and the defendants and Ms Boughen particularly on the other, influenced by that mistake to enter into the SPA contract?

(c)Was the mistake as to the essential nature of the SPA contract?

(d)As a result of the mistake, has there been an inequality of exchange or disproportionate benefit between the parties?

[156]   If a qualifying mistake is identified, the Court has a broad discretionary power under s 28 to grant relief to achieve a just outcome. One of the mandatory considerations in deciding to grant relief is the extent to which the party seeking relief caused the mistake.34

[157]   The power to grant relief “must not be exercised in a way that prejudices the general security of contractual relationships”35 and, where carelessness on the part of one or both of the parties contributed to the mistake, that is likely to be taken into account. The relative carelessness of the parties may also affect final outcomes.

32     Ladstone Holdings Ltd v Leonora Holdings Ltd [2006] 1 NZLR 211 (HC) at [85]–[86].

33     Prattley Enterprises Ltd v Vero Insurance New Zealand Ltd [2016] NZSC 158 at [8].

34     Section 27 of the CCLA.

35     Section 21(2)(b) of the CCLA.

[158]   The mistake that I accept occurred in the present case is about certain physical characteristics of the house, the house obviously being a major part of the subject matter of the SPA. The plaintiffs and, in particular Ms Wrenn, wrongly thought the house was generally sound with an almost new roof and a properly supporting and roof structure undamaged by fire such that, notwithstanding the overall age of the house itself, this very recently replaced roof area was in good order. I am satisfied too that Ms Boughen, probably placing the best complexion on the evidence she has provided to this Court, wrongly thought that the fire or fires which she knew had occurred in the house at some time in the past had not caused major damage and were remedied as far as they needed to be. Ms Boughen was aware of the fact of those past fires in the ceiling and wall area of the house, but she thought in the main these had been fixed and the house therefore had no significant fire damage issues. A common mistake occurred here, the consequences of which as I see it, and will outline below, ought to be shared between the parties to some degree. I say more on this shortly.

[159]   And, as to the core issue whether the parties were influenced by that mistake to enter into the SPA, I am satisfied this was the case here. Ms Wrenn’s own inspections of the house and her various enquiries do not negate the influence on her and thus the plaintiffs of the mistake. The true factual position relating to the mistake, due to the sealing off of the manhole to the ceiling, was effectively undiscoverable. In all the circumstances here, I am satisfied too that this mistake was actually as to a reasonably important physical characteristic of the house including its possible soundness.

[160]   I am satisfied that the comments from Ms Boughen in her evidence indicate that for herself, and presumably for her co-defendant, she was also mistaken as to the implications of the general fire damage to the ceiling and wall area at the time of sale. This influenced her and her co-defendant too in entering into the SPA at what, it seems to be accepted, was a reasonably high market value achieved at the time.

[161]   In this case, as I see it, there has been an inequality of exchange (although perhaps only to a moderately limited extent) or a disproportion of benefit as a result of the mistake. This is a requirement of s 24(1)(b) of the CCLA. It is clear in my view that this requirement is satisfied here. The plaintiffs paid perhaps what might be said

to be a generous purchase price for a home with a virtually new roof area undamaged by fire. Instead, they received a home, somewhat damaged in this area, worth a reasonable amount less. Similarly, Ms Boughen and the defendants received more for the sale of their property than it was worth being a home with some actual unrepaired fire damage. This unequal exchange of value, which in all the circumstances I am of the view was sufficiently significant to require redress, has been something that has occurred here.

[162]   There does not appear to be any basis for suggesting too that any term of the SPA obliged the plaintiffs to assume the risk of the house being so fire damaged.

[163]   On this issue of common mistake, an argument advanced for the defendants is that, as Ms Boughen was not asked anything about any fire damage in the ceiling of the house, there is no evidence that she turned her mind to the issue or was operating under the same mistake as Ms Wrenn. It is suggested that Ms Boughen had no reason to turn her mind to the question of fire damage in the house which the defendants claim she assumed in any event was minor and had been largely fixed. It is suggested the defendants would have been aware that any prospective purchasers had done their own due diligence as to the Property and would have satisfied themselves as to its condition given that it was an old house, well over 100 years of age. Given this, the defendants maintain Ms Boughen simply did not turn her mind to any fire damage issues at all and therefore there can be no common mistake here. A complete failure to consider a matter is not a mistake nor can it be said these matters influenced Ms Boughen to enter into the SPA.

[164]   With respect, however, I disagree. Arguably as I see it, Ms Boughen as an owner and occupier of the Property for over 25 years, and as someone who knew there had been a fire or fires in the ceiling and wall area, was the party who largely “caused” the mistake here. She was able to provide information about the house and did so, but without specific mention of the fire damage to the ceiling. Indeed, she also made the decision only some months before the Property was listed for sale, that the manhole to the ceiling area would be sealed off. In addition, this sealing off was finished to such an extent that the fact the manhole ever existed in that position was thoroughly disguised. Interestingly, it was only some months after this occurred that the Property

was placed on the market for sale and then the sale to the plaintiffs proceeded. In my view this is also not a case where Ms Wrenn and the plaintiffs, as the parties seeking relief, could be appropriately described as having ignored advice or of being the authors of their own misfortune having failed to make enquiries when they were on alert to a potential problem.

[165]   The defendants advance a further argument that the alleged mistake relating to the fire damage in the ceiling was not as to the essential nature of the Property. I disagree, however. I accept the mistake here was as to the essential nature of an important aspect of the house on the Property. This related to the roof. It was described as an entirely new roof very recently replaced and thus clearly mentioned as a selling feature. The important supporting structure of this new roof was also a significant feature understandably. Clearly the plaintiffs did not bear any responsibility for that mistake nor did the SPA oblige them to shoulder any burden for the risk of the mistake. On this aspect too, in my view, a clear disproportionality of information in favour of the defendants existed. Ms Boughen had lived in the house for over 25 years and on a number of occasions carried out repairs and alterations right up until early 2014. The plaintiffs’ evidence before me is also clear on this aspect that in buying the house they did not want a renovation or “do-up” project.

[166]   The plaintiffs must also show that the mistake here resulted at the time of the SPA in a substantially unequal exchange of values. What amounts to that will always depend on the context. It can be determined based on a qualitative and/or quantitative assessment. Based on authorities in the past where relief has been given for mistake, it would appear that something above around 10-15 per cent difference in value is a current rough benchmark before liability attaches from a quantitative perspective. The difference here as  I  note  below  is  something  exceeding  $100,000  being  over  10 per cent.

[167]   The mistake in this case, which I am satisfied is a common mistake, resulted in what is, in my view, a significantly unequal exchange of values. The plaintiffs paid

$1 million for a property with a house that I am satisfied requires some significant remediation. That purchase price of $1 million was some $75,000 above what was effectively the next highest equivalent purchase offer for the Property the defendants

had received when they sold the Property and that other offer was indeed a conditional one. From all the evidence before me, it seems that the plaintiffs, no doubt with encouragement from the defendants’ sales agents, put together an urgent purchase offer in which they calculated and paid the $1 million purchase price on the basis that no significant remedial works in particular to the ceiling, roof and wall area of the house were required.

[168]   In my judgment, both Ms Wrenn on the one hand and Ms Boughen on the other, shared this common and essential mistake that the house being generally sound for its age did not have appreciable fire damage to the ceiling, roof and adjacent wall area that required repair, when that was not the case. On all the evidence before me, both parties here made a common mistake about these matters and this must be reflected in the result. Judgment in favour of the plaintiffs will follow.

Unilateral mistake

[169]   Given that I have found this is a clear case where a common mistake occurred, it is not necessary for me to consider the issue of unilateral mistake here. I leave it to one side.

Relief and quantum

[170]   The plaintiffs are entitled to relief for common mistake here by way of compensation under s 28 of the CCLA. That relief is discretionary, it is to take the form of any order that the Court “thinks just”, and its effect is to mitigate the arbitrary effects of the mistake.36 Conduct of the parties to some extent is relevant to relief. It is mandatory for the Court under s 27 of the CCLA to consider the extent to which parties seeking relief caused the mistake. Where a party has been careless and contributed to the mistake, it will be taken into account in any relief granted.37

[171]   In the present case, the defendants’ position is that Ms Wrenn was in a considerable hurry to put in an offer to purchase the Property and simply chose to proceed at her own risk to make a number of assumptions concerning the house of her

36     Shen v Ossaynin (No 2) [2019] NZHC 2430 at [29].

37     At [59]–[60].

own accord. It is said Ms Wrenn was well aware the house had been built over 100 years ago and in a very wind zone and, although appearing to be well presented at the time of sale, from the Building Report there were still usual maintenance and repairs required. It is true, too, that Ms Wrenn did not ask Ms Boughen or her agent specifically about weathertightness issues and any water leaks in the house itself and that, had Ms Wrenn wanted absolute surety over weathertightness issues, potentially she could have negotiated a specific written SPA warranty regarding this with the defendants as vendors.

[172]   I turn now to the issue of damages for the plaintiffs’ present loss. Although cost of cure is a usual response in building cases, Tipping J in Marlborough District Council v Altimarloch Joint Venture Ltd noted:38

[156] It is as well to remember at the outset that what damages are appropriate is a question of fact. There are absolute rules in this area, albeit the courts have established prima facie approaches in certain types of case to give general guidance and a measure of predictability. The key purpose when assessing damages is to reflect the extent of the loss actually and reasonably suffered by the plaintiff.

[173]   An alternative basis to calculate the plaintiffs’ loss here is the diminution in value approach. This represents the difference in value between the Property in a notionally undamaged condition as understood at the time of sale, and its diminished value then with the fire damage defects.39 In my view it is appropriate here to assess the plaintiffs’ loss largely on the basis of difference in value. This approach has the benefit of simplicity for this 100 plus year-old house with its many original elements. It also avoids potential uncertainty that may come from potential suggestions of betterment for the work carried out or even post-remediation stigma.40

[174]   In the present case, there is limited evidence before me specifically identifying the estimated cost predicted to be appropriate for repairing the fire damage to the ceiling and roof area. Broadly speaking, this full repair amount plus appropriate contingencies properly represents the difference in value for the house with and without the defects.

38     Marlborough District Council v Altimarloch Joint Venture Ltd [2012] NZSC 11 at [156].

39     Warren & Mahoney v Dynes CA49/88, 26 October 1988 at [10]–[11].

40     This was the approach taken by this Court in Tadd Management Ltd v Weine [2023] NZHC 764.

[175]   The evidence presented before me from Ms Wrenn on behalf of the plaintiffs regarding the estimated repair cost for this fire damage as at November 2021 was a figure of $115,406.53, although she noted at 12.12 of her Brief of Evidence: “However, the costs required to fix the roof are worrying…[and] an updated estimate will need to be obtained.” Adding to this figure, a further 13 per cent for increased costs and a necessary contingency gives a total estimated repair cost here of $130,408 which I round down to a broad figure of $130,000.

[176]   This broad amount is strongly questioned by evidence provided before me on behalf of the defendants. This suggests the fire damage in the ceiling is purely cosmetic and should cost something only in the region of between $3,000 and $10,000 to fix. With respect, I do not accept that is the likely full extent of repairs required for the reasons outlined above.

[177]   On all of this, a proper remedy to spread the loss occasioned in this case by the common mistake is required. As the learned authors of Burrows, Finn and Todd on the Law of Contract in New Zealand have noted,41 the reformers of the law of mistake contemplated:42

…that relief [for mistakes] should ensure that benefits conferred in pursuance of the contract should be returned or paid for, subject to a right to set off expenditure or other detriment which had been incurred under the contract, or to vary the consideration to reflect what the consideration might have been had the true state of affairs been known (emphasis added).

[178] The purchase price consideration in the SPA was $1 million. As I have noted, I have accepted the adjusted plaintiffs’ figures noted at [175] above for the estimated cost to rectify the fire damage. These figures, with my adjustment noted above, include a general risk contingency which is appropriate in this case. Until repair work begins to a significant degree the true extent of what is required is not certain given possible later discoveries.

[179]   I conclude, therefore, that a fair deduction from the purchase price consideration in the SPA here should be this sum of $130,000. Although this is not a

41     Todd and Barber, above n 3, at 10.5.2.

42     Contracts and Commercial Law Reform Committee, Report on the effects of mistakes on contracts

(1976) at [26] and [27].

case, but perhaps only by a reasonably small margin, of intentionally misleading conduct on the part of Ms Boughen, I am satisfied the defendants should bear the burden of the unequal exchange of value here which I total at the broad figure of

$130,000.

[180]   Accordingly, there will be judgment in this case for the plaintiffs which will follow for $130,000 representing the amount noted above.

[181]   For completeness I need also to address here certain additional claims the plaintiffs have made. First, the plaintiffs claim general damages here of $30,000. On this general damages question, a “tariff” of around $25,000 was set in the Sunset Terraces and Byron Avenue case.43 It is said this $25,000 should be adjusted to

$30,000 to allow for inflation and what is said to be stress and anxiety endured by the plaintiffs here.

[182]   I am not minded, however, to order general damages in the present case. In my view, like Whata J in Shen v Ossaynin (No 2), I agree the present case is one where:44

Inevitably there will be costs incurred by both parties because of the mistake, but I do not consider that accounting for them now is necessary in terms of doing what is just between them.

[183]   The plaintiffs also claim interest calculated in accordance with the Interest on Money Claims Act and this is a claim in my view which is justified here. An order regarding interest will follow.

[184]   Lastly, the plaintiffs claim amounts for recovery of legal and experts’ costs. The question of costs counsel requested should be the subject of further submissions from them and this will be provided for below.

43     North Shore City Council v Body Corporate 188529 [2010] NZSC 158 (Sunset Terraces and Byron Avenue).

44     Shen v Ossaynin (No 2), above n 36, at [60].

Affirmative defences

[185]   In addition to their general denial of the plaintiffs’ claims here, the defendants advance four affirmative defences – contributory negligence, betterment, failure to mitigate, and voluntary assumption of risk. In my view, there is little in these defences which is relevant here but for completeness I will address each briefly.

Contributory negligence

[186]   I leave on one side that part of the claim against the defendants for breach of contractual duty for which raising an affirmative defence of contributory negligence is not appropriate.

[187]   Here, so far as the fire damage and the ceiling and wall is concerned, there can be no question of contributory negligence on the part of the plaintiffs. The defects and damage relating to this were entirely undiscoverable, particularly given the closing off of the manhole in the kitchen area of the house some months prior to sale preventing any access to view the damage.

[188]This contributory negligence defence must fail.

Betterment

[189]   Given that a remedy for common mistake I accept applies here, betterment does not generally arise. Nevertheless, it must be noted that the defendants will bear any onus of proving betterment and I find that they have not discharged this onus in the present case.45 The remediation of the fire damage recommended and relied on for the quantum estimate here is generally a like-for-like repair of building elements.

[190]   Again, it is for the defendants to prove that replacement or repairs here are unnecessary. They have not proven this.

[191]So far as the fire damage repairs are concerned, this defence fails.

45     J and B Caldwell v Logan Retirement Home Ltd, [1999] 2 NZLR 99 (HC) at [10].

[192]   By way of an aside, however, I do need to comment that in my view some of the repairs and improvements to the house the plaintiffs have undertaken to date in any event might well have amounted to betterment. I say this bearing in mind that this is a 100 plus year-old home. In particular, the replacement of foundations with the new concrete floor, repairs and replacement to clearly borer-affected structural timber and weatherboards and the like, have improved this home to a significant extent such that a degree of value enhancement and betterment might well arise for the plaintiffs. I leave those comments on one side here, however.

Failure to mitigate loss

[193]   To establish a failure to mitigate loss, defendants are required to explain what reasonable steps the plaintiffs could have taken to mitigate the loss.46

[194]   In my view, there can be no question here that the plaintiffs have failed to mitigate their loss relating to the fire damage. As I have noted, this was undiscoverable until relatively recently.

[195]   Short of undertaking the remedial work recommended by the expert they have engaged, it is not apparent what reasonable steps the defendants say the plaintiffs should have taken to mitigate their loss further.

Voluntary assumption of risk

[196]   The onus of proving voluntary assumption of risk has occurred lies on the defendants here as the party alleging it. It is also to be determined subjectively.47

[197]It is true, also, as White J noted in Coughlan v Abernethy:48

It is well established that a person will not have voluntarily assumed a risk unless it is shown that he or she had full knowledge of the nature and extent of the risk and with that full knowledge, in fact incurred it.

46     Mitchell v Murphy [2019] NZHC 3262 at [279].

47     James v Wellington City [1972] NZLR 978 (CA).

48     Coughlan v Abernethy HC Auckland CIV-2009-004-2374, 20 October 2010, White J at [42].

[198]   Clearly, no voluntary assumption of risk on the part of the plaintiffs has occurred here.

[199]I conclude, too, that this defence is similarly without merit.

[200]   In summary, none of the affirmative defences advanced by the defendants have application here.

Result

[201]   For all the reasons I have outlined above, the claim by the plaintiffs against the defendants succeeds but only in part.

[202]   The defendants are liable too but only in common mistake. To receive a just outcome here, the defendants must pay to the plaintiffs:

(a)an amount being the difference in value in August 2014 between the Property in its fire damaged state and its value if it had been in an undamaged state which is broadly assessed at $130,000; and

(b)interest on that sum pursuant to the Interest on Money Claims Act 2016 from August 2014 (the date of settlement under the SPA) until such time as the judgment debt is fully paid.

[203]An order to this effect is now made.

Costs

[204]   The plaintiffs have succeeded in a part of their claim relating to fire damage in the roof ceiling and wall areas of the house, but they have failed in a major part of their claim against the defendants. Costs here are reserved. I expect the parties should be able to agree on costs based upon my findings in this judgment. If they are unable to do so, memoranda on costs (maximum five pages each) may be filed sequentially and a decision on costs and disbursements (to include both legal and experts’ costs) will be made by a Judge / Associate Judge of this Court based on the memoranda filed and all the other material which is then before the Court.

Gendall J

Solicitors:

Minter Ellison Rudd Watts for Plaintiffs
Treadwells – Wellington and Hannah Yang Barrister for Defendants