Zhou v Watson - [2025] NZSC 89

IN THE SUPREME COURT OF NEW ZEALAND

I TE KŌTI MANA NUI O AOTEAROA

SC 27/2025
[2025] NZSC 89

BETWEEN	LEI ZHOU AND QIUYING ZHANG Applicants
AND	ELIZABETH WATSON Respondent

Court:	Ellen France, Williams and Kós JJ
Counsel:	D Wang for Applicants D M Fraundorfer, A G Needham and H J O Lewis for Respondent
Judgment:	24 July 2025

JUDGMENT OF THE COURT

AThe application to adduce new evidence is dismissed.

BThe application for an extension of time to apply for leave to appeal is granted.

C The application for leave to appeal is dismissed.

D The applicants must pay the respondent costs of $2,500.

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REASONS

Introduction

The applicants purchased a home from the respondent. Almost immediately after settlement they discovered it had weathertightness issues. They brought proceedings in the High Court against the respondent. They succeeded in part.[1] The High Court held there was a common mistake between the parties that the property was sound and did not leak. The High Court also found Mrs Watson liable for breach of warranty in relation to work undertaken on the property, regarding a retaining wall, which needed a consent where the consent had not been obtained. The High Court concluded there was no oral misrepresentation. The other aspects of the claim in relation to breach of contractual warranty were dismissed.
[1]Zhou v Watson [2023] NZHC 2328 (Gendall J) [HC judgment].
Mrs Watson appealed to the Court of Appeal against the finding there was a mistake in terms of the Contract and Commercial Law Act 2017 and alternatively against the quantum of damages ($271,600 plus interest). The applicants cross‑appealed against the High Court’s conclusion that there was no oral misrepresentation and in relation to the findings associated with the unsuccessful parts of the claim for breach of contractual warranty.
The Court of Appeal allowed Mrs Watson’s appeal in relation to the finding of contractual mistake.[2] The cross‑appeal in relation to the oral misrepresentation was unsuccessful. The Court of Appeal also agreed with the High Court there should be no award in relation to the deck work however, the cross‑appeal succeeded in relation to the drainage work. This aspect was remitted back to the High Court to determine the quantum of damages. The applicants seek leave to appeal from this decision to this Court.

Background

[2]Watson v Zhou [2024] NZCA 417 (Cooke, Venning and van Bohemen JJ) [CA judgment].

In 1969, Mrs Watson, now in her 80s, and her late husband bought the section on which they built their home.[3] They undertook various alterations and repairs to the property over the years. They listed the property for sale in early 2020.
[3]Mr Watson passed away after the sale, before the High Court hearing.
The applicants went to see the Watsons’ property in February 2020. Other than the alterations and repairs, it was largely in its original condition. They viewed the property on three occasions before making an offer to purchase. On their viewing on 10 February 2020, they had arranged…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Zhou v Watson

Details

AGLC: Zhou v Watson [2025] NZSC 89
Case: [2025] NZSC 89
Decision Date: 24 July 2025

CaseChat Overview and Summary

Lei Zhou and Qiuying Zhang appealed against the decision of the Court of Appeal in relation to their proceedings against Elizabeth Watson. The applicants sought leave to appeal to the Supreme Court of New Zealand. The applicants sought to appeal the Court of Appeal's decision to allow Mrs Watson's appeal against the High Court's finding of a common mistake in terms of the Contract and Commercial Law Act 2017 and, alternatively, the quantum of damages awarded. The applicants also sought to cross-appeal against the Court of Appeal's decision in relation to the oral misrepresentation claim and the unsuccessful claims for breach of contractual warranty.

The Court considered three grounds of appeal. The first concerned the oral misrepresentation claim. The second concerned the Court of Appeal's decision in relation to the common mistake. The third concerned the Court of Appeal's approach to damages in relation to the deck. The Court considered the first two grounds to be without merit. The Court found that there was no error in the Court of Appeal's approach to the oral misrepresentation claim. The Court found that there were concurrent findings of fact on the question of whether Mrs Watson made the misrepresentation. The Court also found that the Court of Appeal had correctly considered the purpose of s 21 of the Contract and Commercial Law Act. The Court found that the Court of Appeal was correct to treat inadvertence as not amounting to a mistake. The Court also found that the Court of Appeal was correct to formulate the belief as a belief the property was "sound" rather than "sound and did not leak". The Court found that the third ground of appeal in relation to the deck was also without merit. The Court found that there was no definitive finding that a breach of the vendor warranty had in fact occurred.

The Court dismissed the application for leave to appeal. The applicants were ordered to pay the respondent's costs of $2,500. The Court also dismissed the application to adduce new evidence and the application for an extension of time to apply for leave to appeal was granted.

Orders