Magee and Others v Mason and Others

• Jurisdiction: New Zealand
• Judge: Miller,Gendall JJ,Miller J,Courtney J
• Judgment Date: 08 November 2017
• Neutral Citation: [2017] NZCA 502
• Docket Number: CA69/2017
• Court: Court of Appeal
• Date: 08 November 2017

Between

Andrew Hamilton Magee and Sharon Lee Magee

Appellants

and

Steven Philip Mason and Katharine Mary Mason

Respondents

[2017] NZCA 502

Court:

Miller, Courtney and Gendall JJ

CA69/2017

IN THE COURT OF APPEAL OF NEW ZEALAND

Leaky Building — Appeal against a High Court (“HC”) decision which found the appellant vendor was liable for a pre-contractual misrepresentation that a house was not leaky which induced the respondent purchaser to buy the property.

Counsel:

M Freeman for Appellants

DJS Parker and J T Wollerman for Respondents

• A The appeal is allowed.

• B The judgment in the High Court is set aside.

• C The respondents must pay the appellants costs for a standard appeal on a band A basis and usual disbursements.

• D Costs in the High Court are to be fixed in that Court in light of this judgment.

JUDGMENT OF THE COURT

REASONS

Miller and Gendall JJ	[1]
Courtney J (dissenting)	[57]

Miller AND Gendall JJ

(Given by Miller J)

TABLE OF CONTENTS

The negotiations and contract	[7]
The house and the parties	[7]
Pre-contractual negotiations	[10]
Contract and settlement	[16]
Defects	[19]
The claim	[21]
The result below, and the appeal	[22]
Misrepresentation	[26]
What is the misrepresentation?	[28]
What is the evidence?	[32]
Was the statement fairly capable of bearing the alleged meaning?	[36]
Inducement to contract	[41]
Did the ABI report preclude inducement?	[44]
Did the Masons reasonably rely upon the representation for meaning 3?	[51]
Result	[55]

1 Sharon Magee twice stated, when asked by an intending purchaser, Katharine Mason, that her house at 13 Karekare Rd, Raumati South, was not a leaky building.

2 Mrs Magee's statement was honestly made and true at least in part. She and her husband, Andrew Magee, had purchased the house in 2009, some six years after it was built, in their two years of ownership it had not revealed weathertightness defects, and she had no reason to believe that its design and construction made it prone to leak.

3 However, the house was in fact prone to leak, the result of a number of original design and construction defects, and it subsequently did leak. The parties agree that it is a “leaky building” as that term is commonly understood.

4 In the High Court the Magees were found liable for a pre-contractual misrepresentation that induced Mrs Mason and her husband, Steven Mason, to buy the property. 1

5 The principal question on appeal is whether Mrs Magee's statement conveyed a misrepresentation about the building's design or construction. It is said that her statement conveyed only that it had not leaked while she owned it, and perhaps that she knew of no facts establishing that it was prone to do so; further, if the statement conveyed anything about its propensity to leak this was an opinion from which no representations of fact about design or construction were or could reasonably be taken.

6 A secondary question is whether the statement induced the Masons to buy the house. The statement was not reduced to writing and incorporated into the agreement for sale and purchase, but the agreement was conditional on the Masons obtaining a building report to their satisfaction. They did obtain such report and they found it acceptable. Regrettably, the report failed to identify the weathertightness issues. Its author, Ian Hall of All Building Inspections Ltd (ABI), has settled, but we were given to understand that ABI's liability was limited, presumably by contract, to $68,000, a small part of the agreed loss of value ($537,000) and even smaller part of the remediation cost ($940,000).

The negotiations and contract

The house and the parties

7 13 Karekare Rd is a standalone two-storey dwelling situated on a high-wind coastal site. It is constructed of a monolithic insulated cladding known as EIFS over timber framing, some of which is untreated. The house features three balconies with timber balustrades and timber-framed parapets protected by metal cap flashings. The exterior joinery is aluminium.

8 Mrs Magee is an interior designer and Mr Magee a plumber. They are not said to have claimed to possess knowledge about leaky buildings, although the Masons say they assumed the Magees would know whether the house leaked. The Magees have bought and sold homes regularly, decorating and reselling them. At 13 Karekare Rd they installed walk-in showers, repainted the interior and had the exterior re-coated with Nuplast in accordance with the manufacturer's guidelines, which recommend recoating every eight to 10 years. Some windowsills that had bowed were replaced under warranty. A leak in a media room was attributed to a blocked drainage hole in the aluminium window and repaired.

9 Mrs Mason is a Bowen massage therapist and Mr Mason an IT service delivery manager. They were sensitive to the risk that the property might be leaky. Its monolithic cladding and eaveless design suggest that possibility. They had also previously sold a property of their own and had the buyer, Paul Berryman, subsequently assert that they failed to disclose a leak, although no claim was brought. By coincidence, Mr Berryman was the real estate agent for the Magees on the sale of 13 Karekare Rd.

Pre-contractual negotiations

10 The Masons met the Magees on 28 October 2011, at a dinner party at the home of mutual friends. At that time the Masons had a conditional contract to purchase another property, but they expressed interest in 13 Karekare Rd, which they had earlier viewed on the real estate agent's website, and arranged to inspect it the next day.

11 The Magee's neighbour, Steven Hudson, was also at the dinner. He mentioned that he had seen the house shrouded in scaffolding earlier in the year and wondered whether it was undergoing repair. In Mrs Mason's presence he asked Mrs Magee whether it was leaky, and she said that it was not. The Judge's findings are:

[17] Also present at the dinner party that night was the Magees' neighbour Steven Hudson from 21 Karekare Road. He said in evidence that he had seen 13 Karekare Road shrouded in scaffolding from the beginning of 2011 and wondered whether the house was being repaired because it was leaky. Katharine said that Steven Hudson in fact mentioned the scaffolding to Sharon Magee, but Mr Hudson did not recall doing so. In any event Steven Hudson said he asked Sharon directly whether 13 Karekare Road was a leaky home. He said her response was “No. It isn't a leaky house.” Sharon accepted in cross-examination that they may not have been the exact words but the words were to that effect. Katharine confirmed Mr Hudson's evidence. She said that Mr Hudson asked his question in the context of a discussion at the dining table between her and Sharon over the relative qualities of 13 Karekare Road and Seaview Road, with Sharon suggesting that Karekare Road was the superior property. Sharon denied that this was the sort of thing she would say. According to Katharine, Sharon's response to the question was a firm “no” and her tone had the effect of shutting down that line of inquiry.

[18] Neither of the Magees remembered the exchange at the dinner table, but Sharon was frank, and in my view, honest in her narrative.

For the record if I had been asked directly if our house was a leaky home, I would almost certainly have said ‘no’. That is because until these proceedings, I had no idea that this was a leaky home. I have never noticed anything (other than the leak at the media room window which we fixed and did not appear to be a big deal) that would make me think it was.

12 On the following day the Masons arrived at 13 Karekare Rd about 4 pm and left in the evening. They toured the house and shared a bottle of wine. The Judge found:

[20] … Katharine said it was a very sunny day and after the tour, the four of them sat around a table outside chatting about other things. She said:

During our chat I took the opportunity to ask Sharon about the leaky home question that was raised the previous night. I asked Sharon outright if the property was leaky or had any known weathertightness issues. I said ‘all I want to know is that this property is not a leaky house because we couldn't cope with that’ or words to that effect.

[21] Katharine said:

Sharon replied that the house definitely was not leaky and I recall her responding ‘absolutely not. We have never had any issues with this house’ (or words to that effect).

[22] Sharon, who provided the primary narrative from the Magees' point of view, said she did not recall being asked whether Karekare Road was a leaky building. But she made it clear that if she had been asked her response would have been emphatic:

“No it's not a leaky house is exactly what I would have said.

…

I wouldn't have said I don't think. I would have said no.

13 Williams J noted that these discussions were held against the backdrop of the Mason's conditional agreement to purchase another property. Nonetheless, he found, the parties understood that the house was being promoted for sale. 2

14 The Masons attended an open home at 13 Karekare Rd on 30 October. Mrs Mason says she asked Mr Berryman whether the home was leaky and he replied that it was a quality build. It appears that the subject of monolithic cladding was raised, because he gave them copies of warranties for the cladding and recommended they get a building report.

15 Mrs Mason visited the property again on 15 December 2011. By that time their conditional agreement to buy another property had lapsed. It appears that Mrs Magee allowed her to look around the house by herself.

Contract and settlement

16 On 20 December the parties entered an agreement for sale and purchase at $785,000. The agreement was in the standard REINZ/ADLS form (8 ^th edn). It was conditional relevantly on the...