Marlborough District Council v Altimarloch Joint Venture Ltd

• Jurisdiction: New Zealand
• Judge: Elias CJ,Blanchard,Tipping,McGrath,Anderson JJ
• Judgment Date: 05 March 2012
• Neutral Citation: [2012] NZSC 11
• Docket Number: SC 33/2010 SC 41/2010
• Court: Supreme Court
• Date: 05 March 2012

BETWEEN

Marlborough District Council

Appellant

and

Altimarloch Joint Venture Limited

First Respondent

and

D S And J W Moorhouse

Second Respondents

and

Vining Realty Group Limited

Third Respondent

and

Gascoigne Wicks

Fourth Respondent

BETWEEN

Vining Realty Group Limited

Appellant

and

Gascoigne Wicks

First Respondent

and

D S And J W Moorhouse

Second Respondent

and

Altimarloch Joint Venture Limited

Third Respondents

and

Marlborough District Council

Fourth Respondent

BETWEEN

Gascoigne Wicks

Appellant

and

Altimarloch Joint Venture Limited

First Respondent

and

D S And J W Moorhouse

Second Respondents

and

Marlborough District Council

Third Respondent

and

Vining Realty Group Limited

Fourth Respondent

[2012] NZSC 11

Court:

Elias CJ, Blanchard, Tipping, McGrath and Anderson JJ

SC 33/2010

SC 40/2010

SC 41/2010

IN THE SUPREME COURT OF NEW ZEALAND

Appeal from Court of Appeal's decision which confirmed appellant was liable for negligent misstatement in a LIM provided under s44A Local Government Official Information and Meetings Act 1987, and that it was liable for contribution — respondent purchased rural land from second respondents on the basis of a representation in the LIM concerning water rights — vendors, real estate agency and vendor's solicitors held liable under s6 Contractual Remedies Act 1979 (damages for misrepresentation) — whether appellant owed respondent duty of care in providing LIM — whether appellant had not caused respondent loss because damages could be recovered from other parties — whether the correct measure of damages was cost of cure or diminution in value.

Counsel:

D J Goddard QC, M A Cavanaugh, and J H Morrison for Marlborough District Council

M E Casey QC and R N Dunningham for Altimarloch Joint Venture Limited

M R Ring QC and A B Darroch for Vining Realty Group Limited

F B Barton and M B Couling for Gascoigne Wicks

• A The appeal by the Marlborough District Council from the liability judgment given against it in favour of Altimarloch Joint Venture Limited is dismissed.

• B The appeal by the Marlborough District Council from the contribution judgment given against it in favour of D S and J W Moorhouse is allowed. That judgment is set aside and judgment in favour of the Council is entered in respect of that claim.

• C The appeals by Vining Realty Group Limited and Gascoigne Wicks against the amount of the judgment entered in favour of Altimarloch Joint Venture Limited against the Moorhouses are dismissed.

• D Costs:

  In the Supreme Court

  • (a) The Council is to pay Altimarloch costs of $10,000.

  • (b) Vining Realty and Gascoigne Wicks are to pay the Council costs of $5,000. They are to pay in the proportions fixed in the Court of Appeal, namely 60 per cent by Vining Realty and 40 per cent by Gascoigne Wicks.

  • (c) Vining Realty and Gascoigne Wicks are to pay in the same proportions costs of $10,000 to Altimarloch.

  • (d) In each case where costs are awarded, disbursements shall be added as agreed or fixed by the Registrar.

  In the Court of Appeal

  • (a) The Council is to pay Altimarloch such costs as agreed or fixed by the Court of Appeal.

  • (b) Vining Realty and Gascoigne Wicks are to pay in the same proportions costs to the Council as agreed or fixed by the Court of Appeal.

  • (c) As between Vining Realty and Gascoigne Wicks on the one hand and Altimarloch on the other, Order F made by the Court of Appeal stands.

  • (d) All orders made in the Court of Appeal that are inconsistent with the foregoing orders are set aside.

  • (e) In each case where costs are awarded, disbursements shall be added as agreed or fixed by the Registrar.

  In the High Court

  • (a) All costs orders are set aside and all matters of costs are to be as agreed or as fixed by the High Court in the light of the ultimate outcome of the case.

JUDGMENT OF THE COURT

REASONS

	Para No
Elias CJ	[1]
Blanchard J	[60]
Tipping J	[78]
McGrath J	[175]
Anderson J	[233]

ELIAS CJ

1 Although the appeal also concerns the important question whether a duty of care is owed by a territorial authority to someone who obtains from it a Land Information Memorandum, I write separately only on the questions concerning the measure of damages and contribution when a contract is induced by misrepresentation by both the vendors and a non-contracting party. The misrepresentation made was as to the quantity of water rights held by the vendors on the sale and purchase of 145.5 hectares of rural land, part of which was intended by the purchaser for planting in grape vines. 1 Under the agreement, all water rights held by the vendors were to be transferred to the purchaser, Altimarloch Joint Venture Limited. The same erroneous information as to the quantity of the water rights held by the vendors was given separately to the purchaser by agents for the vendors and by the Marlborough District Council in a Land Information Memorandum.

2 The vendors (whose agents are required to indemnify them) are liable to pay damages to Altimarloch under s 6 of the Contractual Remedies Act 1979 “in the same manner and to the same extent as if the representation were a term of the contract that has been broken”. In the lower Courts 2 damages have been assessed against the vendors on the basis of the cost of achieving “functional equivalence” 3 in the water represented to be available. This “cost of cure” has been assessed by adding the price paid by Altimarloch after settlement to an unrelated seller to obtain part of the shortfall in water rights and the estimated cost of construction of a dam for the storage of sufficient water to make up the balance of the shortfall. (It appears to have been accepted in the lower Courts that no further water rights are available for purchase.) The effect is that the vendors are liable to pay damages of

$1,055,907.16 arising out of a contract in which the purchase price of the land was $2.675 million and its value without the water rights was put at $2.55 million

3 The Marlborough District Council has been held liable in the High Court for negligent misstatement about the extent of the water rights. Its appeal was dismissed by the Court of Appeal. The Council's misstatement was contained in a Land Information Memorandum obtained by Altimarloch from the Council under s 44A of the Local Government Official Information and Meetings Act 1987. Damages against the Council were assessed in the High Court at $400,000, representing the difference between the value of the property without the rights represented ($2.55 million) and the value of the property on the basis that the full rights represented had been available to be transferred ($2.95 million). 4 The Judge found this to be the appropriate award of damages against the Council:

The Court of Appeal held that the High Court had adopted the contractual measure of damages which was not appropriate for the Council's liability in tort. It accordingly reduced the damages against the Council to $125,000, representing the difference between the purchase price paid ($2.675 million) and the value of the land without the water rights ($2.55 million). 5

• [235] Had it known the true position prior to settling the agreement on 30 July, Mr McNabb's evidence was that the plaintiff would have either renegotiated the agreement down at least to the value of Altimarloch, or have cancelled the agreement. I accept Mr McNabb's evidence. The consequence is that the plaintiff has paid $400,000 too much for Altimarloch, and that is the appropriate award of damages to the plaintiff against the [Council].

4 In the first judgment in the High Court, the Judge apportioned liability between the vendors and Council at 66 per cent to the vendors and 34 per cent to the Council. 6 This was applied to the full cost of cure basis (assumed in that judgment to be $777,000 but subject to updating information then still to be provided). The proportions were set by the Judge to take account of the fact that the Council was

liable on his approach for damages of $400,000. 7 This part of the judgment was recalled by the Judge in his second judgment, in which he held that the damages of $400,000 were to be apportioned equally between the defendants on the basis that “equity is equality”. 8 He accordingly made an order for contribution of $200,000 against the Council. 9 The Court of Appeal upheld the High Court's equal apportionment of damages between the vendors and the Council, but only in respect of the Council's liability on the tortious measure of $125,000. 10 In the result, therefore, following the Court of Appeal determination, the Marlborough District Council would pay $62,500 and the vendors $993,407.16

5 The agents, Vining Realty Group Limited and Gascoigne Wicks, appeal to this Court against the damages of $1.055 million for which, subject to recovery of the contribution ordered against the Council, they must indemnify the vendors. 11 They contend that the proper measure of damages is the loss of value which would have been gained by Altimarloch in the bargain if the representation had been true ($400,000). Vining Realty and Gascoigne Wicks say that it was not correct to award damages on a “cost of cure” assessed in part by reference to the cost of building a dam to supply the eventual deficiency. They argue that such a measure is unreasonable in the circumstances.

6 The Marlborough District Council appeals the findings in the High Court and Court of Appeal that it owed Altimarloch a duty of care. 12 If wrong in that contention, it accepts that it breached the duty. In that event, it appeals the damages awarded on two bases which, however, substantially overlap. First, the Council claims that its negligence caused no loss to Altimarloch because it is accepted that Altimarloch will recover in full from the vendors, who are treated under s 6 of the Contractual Remedies Act as having warranted the truth...