Bhargav v First Trust Ltd
| Jurisdiction | New Zealand |
| Judge | Hinton J |
| Judgment Date | 20 July 2022 |
| Neutral Citation | [2022] NZHC 1710 |
| Court | High Court |
| Docket Number | CIV-2021-404-1260 |
And
[2022] NZHC 1710
Hinton J
CIV-2021-404-1260
IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA
TĀMAKI MAKAURAU ROHE
Property, Tort — claim against the vendor, building inspection company and real estate company cornering the purchase of a house that turned out to be a leaky building — misleading and deceptive conduct — damages for cost of repairs and consequential losses, diminution of value and general damages — effect of disclaimer clause — Fair Trading Act 1986
S E Wroe for Plaintiffs
No appearance by or on behalf of Defendants
This judgment was delivered by me on 20 July 2022 at 10.00 am pursuant to Rule 11.5 High Court Rules.
Registrar/Deputy Registrar
Ameet Bhargav and Renu Khajuria claim against six defendants in relation to the plaintiffs' purchase of what it transpires is a leaky home at 1/5 Ribbonwood Crescent, Goodwood Heights, Auckland (the property). The first to fourth defendants were served but did not file a statement of defence. The plaintiffs proceed against them by formal proof.
The claims against the fifth and sixth defendants will be the subject of a four-day defended hearing beginning on 23 February 2023.
The plaintiffs are the owners of the property.
The first defendant, First Trust Limited (FTL) is the previous owner of the property. It sold the property to the plaintiffs.
The second defendant, Mr Rahal, is a director and shareholder of FTL along with his wife, Jivan Jyoti Rahal.
The third defendant, Metsons (NZ) Limited (Metsons), is a building inspection company and provided a pre-purchase inspection report on the property to the plaintiffs.
The fourth defendant, Mr Mehta, is a building inspector and a director and shareholder of Metsons. He carried out the pre-purchase inspection of the property.
The fifth defendant, Local Realty Limited (Local Realty), is the holder of a Century 21 franchise for its business as a real estate agency. FTL engaged Local Realty as its agent in the sale of the property to the plaintiffs.
The sixth defendant, Mr Bal, is a real estate agent and a director and shareholder of the fifth defendant. Mr Bal was the real estate agent in relation to the sale to the plaintiffs.
Against FTL, the plaintiffs claim:
-
(a) breach of contractual warranty for unconsented building work; and
-
(b) misleading and deceptive conduct in breach of the Fair Trading Act 1986 ( FTA), s 9.
In relation to the claim for breach of contractual warranty, the plaintiffs seek by way of damages for breach of contract:
-
(a) the estimated cost of remedial work ($749,080 GST inclusive) or in the alternative, the diminution in the value of the property and lost capital gain ($480,000);
-
(b) consequential losses including the cost of expert reports, the cost of alternative accommodation, moving and storage costs and loss of income from boarders ($88,543);
-
(c) general damages ($30,000);
-
(d) interest pursuant to the Interest on Money Claims Act 2016; and
-
(e) costs ($25,693) plus disbursements ($11,274.81).
The claim in relation to misleading and deceptive conduct in breach of the FTA, s 9, is also advanced against the second to fourth defendants.
For the claim in relation to the FTA breaches, the plaintiffs seek: 1
-
(a) damages pursuant to s 43(3)(f) of the FTA ($749,080 for remedial work, and $88,543 for consequential losses);
-
(b) general damages ($30,000);
-
(c) interest; and
-
(d) costs ($25,693) plus disbursements ($11,274.81).
The first defendant, FTL, purchased the property in July 2019. At that time weathertightness issues and building defects were disclosed to FTL and Mr Rahal by the real estate agent acting on the sale, Vivek Punj.
Between July 2019 and December 2019, FTL and Mr Rahal carried out building work which included:
-
(a) work for which a building consent was required because it was intended to address issues including failures of structural durability in the house:
-
(i) installing pillars to support the first floor balcony;
-
(ii) installing bitumen tape at the base of the cladding where it meets the upper deck; and
-
(iii) replacement of the downstairs bathroom including opening up the wall and replacing timber, installing a new bottom plate and laying new tiles.
(together the building work)
-
-
(b) work which concealed evidence of leaks, namely replacing the ceiling gib in the downstairs room.
(covering up the defects)
Around February or March 2020, the plaintiffs were looking to purchase their first home. They approached Mr Bal enquiring about properties in the area within their budget. He invited them to view the property on or around 3 March 2020.
In the course of the viewing Mr Bhargav says he noticed the bitumen tape on the deck and asked Mr Bal about it. He says Mr Bal replied that it was part of the vendor's renovation and was “nothing to worry about” (the first representation). 2 Mr Bhargav says Mr Bal also told the plaintiffs that the downstairs bedrooms would be suitable for boarders (the second representation).
On 4 March 2020 the plaintiffs entered into a sale and purchase agreement for the property with FTL. The purchase price was $665,000. The agreement was conditional on obtaining finance, a LIM, and a building report.
Relevantly, cl 7.3(6) of the sale and purchase agreement states:
(6) Where the vendor has 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 compliance certificate was issued for those works.
On or about 5 March 2020 the plaintiffs became aware that plaster homes such as the building at the property, may be prone to leaking. They met with Mr Bal who made the following representations (together the third representation):
-
(a) If this house were a leaky home, he would not have sold it to them as they were his good friends.
-
(b) The plaintiffs should trust him and buy the property.
-
(c) The property had not yet been put on the market and it was a “good deal.
-
(d) The plaintiffs should not think twice about purchasing the property.
-
(e) The plaintiffs were not allowed to be present during the pre-purchase inspector's inspection.
Mr Bal gave the plaintiffs the names of two building inspectors. One of them was Mr Mehta of Metsons.
Metsons' website stated: (a) We specialise in Pre-Sale and Pre-Purchase building inspections and reports; (b) We can correctly identify and isolate issues pertaining to your home so you can buy or sell with confidence; (c) We inspect both the interior and exterior of the property to ensure that we will cover all areas including roofing and cladding, insulation, fixtures and fittings, moisture and weather tightness.
On 13 March 2020 Mr Bhargav asked Mr Mehta to provide a: “weathertightness report (including moisture readings) … from a NZS 4306:2005 compliant building inspector, confirming that there is no evidence of weather tightness issues.” Mt Mehta confirmed that he could do so.
On or about 16 March 2020 Mr Mehta inspected the house. The third and fourth defendants subsequently provided a written inspection and weathertightness report to the plaintiffs. Under a heading “Moisture” the report stated: “Levels were found to be accepted. […] Possible causes for moisture — N/A. Further investigations recommended? No”. Under the heading “Summary Continued” the Report stated:
The house is generally in good condition. No moisture detected any place in the house. Moisture readings are under 5-15% at other places. Acceptable limit is 19%.
[…]
External cladding is in good condition… Any Joints with cladding (like pipes) are properly sealed. Chances of water ingress are almost nil.
Ground clearance is more than required.
Thermal imaging shows no risk of any moisture ingress.
The third and fourth defendants provided a “Certificate of Inspection in Accordance with NZS 4308:005”. The certificate stated:
Certification: I hereby certify that I have carried out the inspection of the property site at the above address in accordance with NZS 4306:2005 Residential property inspections — and I am competent to undertake this inspection.
On 18 March 2020, in response to a query from Mr Bhargav by text message seeking confirmation that “there are no present or likelihood of future weathertightness issues”, Mr Mehta stated at 12.28 pm, “no issues for weathertightness. Absolutely no worries” (fourth representation).
The agreement was made unconditional at 2.28 pm on 18 March 2020.
On 1 May 2020, the plaintiffs settled the purchase of the property and became the registered owners.
On 2 May 2020, the plaintiffs visited the property for the first time since becoming the owners. It was raining heavily and they observed water coming through the joinery of the ranch sliders in the downstairs bedrooms.
When contacted via the respective conveyancing lawyers the first defendant denied any knowledge of leaks and any responsibility for weathertightness issues.
The plaintiffs have filed affidavits by:
-
(a) themselves;
-
(b) Patrick Henshall, a process server;
-
(c) Benjamin Matthew Foster, a solicitor;
-
(d) Vivek Punj, the real estate agent who sold the house to FTL;
-
(e) Arnold Lal, a previous occupant of the property prior to its purchase by FTL;
-
(f) Sean Lee, a quantity surveyor from Kwanto...
To continue reading
Request your trial