Chong Hung Mok and Shui Ha Ho v Alan Richard Bolderson

• Jurisdiction: New Zealand
• Judge: Whata J
• Judgment Date: 20 April 2011
• Court: High Court
• Docket Number: CIV-2010-404-007292
• Date: 20 April 2011

BETWEEN

Chong Hung Mok and Shui Ha Ho

Appellants

and

Alan Richard Bolderson

First Respondent

And

Blake William Boyd

Second Respondent

CIV-2010-404-007292

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

Appeal against a decision of the Weathertight Homes Tribunal declining relief against respondent who prepared pre-purchase report — failed to detect defects — whether misrepresentation under s9 Fair Trading Act 1986 (misleading and deceptive conduct) and negligent misstatement — whether Tribunal erred in applying industry standards as threshold test for non-compliance with s9 — whether Tribunal erred by incorporating a negligence threshold into test for misleading and deceptive conduct under s9 — availability of relevant material at the time — “last man standing” apportionment of liability.

Counsel:

F R McLaren for Appellants

S R J Hamilton for First Respondent

No Appearance for Second Respondent

RESERVED JUDGMENT OF Whata J

Table of Contents

	Para No
Introduction	[1]
Background
Construction of house	[2]
Compliance assessment	[3]
Sale and purchase agreement: condition 20	[4]
Building report: scope and statements	[5]
Leaks	[10]
WHT assessment	[11]
Remediation	[12]
Claim lodged	[13
Evidence: Medricky, Dibley, Duffy, Bolderson	[14]
Tribunal decision	[21]
Grounds of appeal	[28]
Issues	[30]
Jurisdiction on appeal	[32]
Fair Trading Act 1986: Section 9 (Ground 1)
Issue 1: misleading and deceptive conduct — the threshold test	[44]
Discussion	[58]
Issue 2: the proper framework: misleading?	[66]
Step 1: was the conduct capable of being misleading?
Preliminary Issue	[68]
Appellants' core argument	[73]
First Respondent's core argument	[76]
Discussion	[81]
The “Misleading” Statements	[82]
The causes of the damage	[83]
Available information?	[85]
Observable Defects	[91]
Knowledge of leaky homes	[97]
Summary on available information	[111]
Correct statements of fact, omission or simply opinion	[115]
Steps 2 and 3: Reliance?	[125]
Conclusion on s9	[128]
Negligent Misstatement
Issues 3 and 4: standard of care	[129]
General damages (Issue 5)	[151]
Relief
Liability under FTA	[161]
Discussion	[171]
Benefit	[178]
Role	[179]
Nexus	[181]
Relationship	[183]
Liability for negligent misstatement	[186]
Directions	[189]
Costs	[192]

Introduction

1 The appellants, Chong Hung Mok and Shui Ha Ho, appeal the decision of the Weathertight Homes Tribunal declining to grant them any relief against the first respondent. They say the first respondent's report on a home they purchased in 1999 was misleading and negligent. The Tribunal said that the report complied with industry standards for the time and so was neither misleading nor negligent. The appellants contend that the Tribunal erred in applying industry standards as the benchmark for misleading conduct or negligence.

Background

Construction of house

2 The appellants, Mr Mok and Mrs Ho, purchased the leaky home in question in this appeal from the second respondent, Blake William Boyd, and Mrs Boyd in 1999. The property is situated at 2/55 Clovelly Road, Bucklands Beach. The Boyds had purchased the section on 5 September 1996, and applied for a building consent to the Manukau City Council. The house plans attached to this application had been prepared by architects Cook, Hitchcock and Sargisson Limited and approved by Approved Building Certifiers Limited (ABC). Upon the consent being granted, construction of the house occurred between October 1997 and May 1998.

Compliance assessment

3 ABC carried out ten building inspections during construction, all of which were approved. The Code Compliance Certificate was issued on 8 May 1998.

Sale and purchase agreement: condition 20

4 The appellants entered an agreement for sale and purchase for the property from the Boyds on 8 July 1999. This was conditional upon their being satisfied with the contents of a LIM report and a building report, in accordance with clauses 19 and 20. The building report is central to the present appeal, so clause 20 is set out in full as follows:

20.0: Conditional on Specialist's Report

This agreement is conditional on the Purchaser being satisfied with a report on House construction to be obtained from Builder. Should the Purchaser in good faith be dissatisfied with any matter contained in the report the Purchaser may terminate this agreement by notice in writing to the Vendor or the Vendor's Solicitor, such notice to be received by 4pm on 16th July 99. If notice is not received within time the Purchaser shall be deemed to have waived the Purchaser's rights under this condition, time being of the essence.

Building report: scope and statements

5 Mr Bolderson on behalf of his company, House Inspections Limited, prepared the pre-purchase inspection report for the appellants. Mr Bolderson is a qualified building surveyor who, at the time, had 30 years worth of building experience, had specialised in pre-purchase inspections for around 12 years and was a member of the Master Builder's Association. He visited the property on 13 July 1999 and carried out a visual inspection. He prepared his handwritten report onsite at the property and gave this to Mr Mok after explaining its contents. At the hearing, Mr Bolderson stated that when performing inspections he was generally onsite for 3 ¹/₄ to 3 ¹/₂ hours. Of this around 2 hours were spent inspecting the building, ¹/₂ to ³/₄ of an hour was spent writing up the report, and a further ¹/₂ to ³/₄ of an hour was spent with the client. For this he was paid $200 plus GST.

6 A statement of policies adopted by House Inspections Limited is attached to the report prepared by Mr Bolderson. It records that the report follows a “visual inspection only”, it is “not a structural survey”, and it makes “no representation that the building complies” with legislation.

7 Mr Bolderson's report observed that the house was generally in good condition and that defects were generally minor. The core allegedly misleading statements, as recorded in the appellants? submissions, are:

• 52.1 The cladding is identified as “ good” in the checklist. The comments section states;

  • “The exterior cladding appears generally sound … There is some minor cracking that can be expected from this type of cladding” :

• 52.2 The roof is also identified as “ good” in the checklist. The comments section states:

  • “The roofing appears generally sound … (Some water is ponding on this [the dining room] roof)”,

• And on the last page before the printed terms:

  • “Some sealant would be beneficial along the top roofing edge at the deck end (wind driven rain may enter)”;

• 52.3 The summary comments are:

  • “This house appears generally sound and well presented … The item's [sic] in this report are generally minor but do require attention in parts. There is also some unfinished work.” :

8 Specific alleged misrepresentations in the report are in turn set out by the appellant's first amended statement of claim as follows:

• (1) “ Flashing detailing has been used around the joinery”;

• (2) “ Cladding moisture breaks through most of the building except for the upper decking and some of the rear base cladding”;

• (3) “ There is some minor cracking that can be expected from this type of cladding”;

• (4) “ The house appears generally sound and well presented … The items in this report are generally minor but do require attention in part. There is some unfinished work”;

• (5) “ The exterior cladding, roof, spouting and down pipes in the exterior joinery were all described as being in good condition.”

9 The appellants sent a copy of Mr Bolderson's report to their solicitors, who wrote to the Boyd's solicitors to request that certain items be repaired before possession. Agreement was reached on most of these and the agreement for sale and purchase was declared unconditional. An issue with the external stairs delayed settlement, which proceeded on 18 October 1999.

Leaks

10 In about July 2005, the appellants noticed damp carpet in the house and a minor leak in the upstairs bathroom. Further leaks were discovered over the course of the next year, including leaks after heavy rain and a leak situated under a flatsection of the roof. An insurance claim was made, and minor repairs were carried out on the roof in March 2006. In April 2006 the appellants applied to the Weathertight Homes Resolution Service for an assessor's report.

WHT assessment

11 An assessment was carried out by David Medricky who issued his first report in September 2006. He concluded that water was entering the dwelling due to inadequately designed and installed flashing systems, cracks in the cladding, and plaster contact causing wicking of water into the walls. There was a delay in the appellants taking any action on this report due to Mr Mok's health problems, but a request for settlement or mediation was made to the Boyds in late 2007. Following their refusal, an addendum report was applied for to update the original report. This was issued on 7 April 2008 and recommended a complete reclad of the dwelling and repairs as necessary to the joinery and junctions.

Remediation

12 The appellants sought their own assessment and their expert, Mr Dibley, agreed that a full reclad was necessary. Tenders were sought for the remedial work, with Dibley and Associates Limited engaged to carry out the repairs. A building consent for this work was lodged on 29 October 2008 and...