Roberts v Jules Consultancy Ltd ((in Liquidation))

• Jurisdiction: New Zealand
• Judge: Gilbert J
• Judgment Date: 09 July 2021
• Neutral Citation: [2021] NZCA 303
• Docket Number: CA58/2020
• Court: Court of Appeal

[2021] NZCA 303

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

Court:

Gilbert, Mallon and Edwards JJ

CA58/2020

Between

Michael Douglas Roberts

Appellant

and

Jules Consultancy Limited (in Liquidation)

First Respondent

and

Jules Leloir

Second Respondent

Counsel:

B M Easton for Appellant

No appearance for First Respondent

J K Mahuta-Coyle for Second Respondent

Damages, Leaky Building, Negligence — appeal against a High Court decision which awarded damages for misrepresentation under the Fair Trading Act 1986 — damages were assessed as being the difference between the purchase price paid and the market value of the property at the time of sale if it had been properly described — weathertight issues — contributory negligence — assessment of loss — breach date rule for the assessment of damages

• A The appeal is dismissed.

• B The cross-appeal is allowed in part.

• C The reduction for contributory negligence of 15 per cent is replaced with a reduction of 40 per cent. This is also to apply to the award of general damages. The judgment in the sum of $93,500 plus general damages of $25,000 is set aside and replaced with a judgment for $66,000 plus general damages of $15,000.

• D Costs are to lie where they fall.

JUDGMENT OF THE COURT

REASONS OF THE COURT

(Given by Gilbert J)

Table of contents

Introduction	[1]
The facts	[9]
Liability judgment	[40]
Quantum judgment	[51]
Appeal	[54]
Cross-appeal	[56]
Did the Judge err in her assessment of damages prior to any reduction being made for contributory negligence?	[57]
General principles	[58]
Pleadings	[65]
Submissions	[67]
Assessment	[70]
Was the Judge wrong to deduct 15 per cent for contributory negligence?
Failure to obtain a specialist building report	[88]
Failure to obtain the body corporate minutes	[97]
Relative blameworthiness and causal potency	[104]
Overall assessment	[113]
Post-hearing issue	[122]
Costs	[123]
Result	[124]

Introduction

1 Misleading statements made by a body corporate secretary about weathertightness issues were relied on by a purchaser in proceeding with the purchase of an apartment in a multi-unit apartment building. It turned out that the building suffered from serious weathertightness defects. This appeal raises four issues in respect of the assessment of the damages awarded to the purchaser under s 43 of the Fair Trading Act 1986 (the FTA). The damages were assessed as being the difference between the purchase price paid and the market value of the property at the time of sale if it had been properly described. The first issue is whether this was the correct approach or whether the losses should have been assessed with reference to the value of the apartment had the building been constructed without defects. The second issue is whether there was any loss at all, assuming the Judge's approach to the assessment was the correct one. The third issue is whether the loss should have been assessed at the date of the hearing, rather than five and a half years earlier when the misleading statements were made and relied on. This matters because the estimated repair costs more than doubled during this period. The last issue is whether the damages should have been reduced for the contributory negligence of the purchaser in failing to obtain a specialist building report and the body corporate meeting minutes before unconditionally committing to the purchase and, if so, to what extent.

2 On 20 February 2014, Mr Roberts entered into a conditional agreement to purchase for $397,000 a three-bedroom apartment in Sirocco Apartments (Sirocco), an 11-storey, 44-apartment building in Wellington. Ms Leloir provided secretarial and management services to the Sirocco body corporate through her company, Jules Consultancy Ltd (now in liquidation). 1 In a liability judgment delivered on 25 March 2019, Thomas J found that, in declaring the agreement unconditional in March 2014, Mr Roberts relied on false and misleading representations made by Ms Leloir to the effect that Sirocco had experienced weathertightness issues, but these related only to the walkways and had since been rectified. 2 The Judge found these representations were false and Ms Leloir had breached ss 9 and 14 of the FTA. These findings are not challenged in the present appeal.

3 In a subsequent quantum judgment delivered on 17 December 2019, the Judge awarded damages to Mr Roberts pursuant to s 43(3)(f) of the FTA in the sum of $93,500 calculated as follows: 3

	Purchase price of the apartment	$397,000
Less	Assessed market value in 2014 if the property had been described properly 4	$287,000
		$110,000
Less	15 per cent for contributory negligence 5	$16,500
		$93,500

4 The Judge also awarded Mr Roberts general damages of $25,000 for stress and inconvenience. 6 This brought the total damages awarded to $118,500.

5 Mr Roberts contends on appeal that the damages should have been assessed at the date of the quantum hearing in late November 2019 as follows:

	Estimated value of the apartment in November 2019 if Sirocco had been built without defects	$721,000
Less	Estimated value as at that date with the defects unremedied	$49,170
		$671,830

6 Mr Roberts says the Judge should have also awarded an amount to cover the special levies incurred to assess the defects of $11,460.62, the estimated costs of moving to replacement accommodation of $2,702.50 and estimated conveyancing fees on resale of $1,500. This would bring the total damages award to $712,493.12 including the general damages of $25,000. Mr Roberts also contends that there should not have been any reduction for contributory negligence.

7 Ms Leloir cross-appeals. She says Mr Roberts suffered no loss given comparable apartments in Sirocco sold for similar prices in 2014, including sales that took place after Mr Roberts purchased his apartment. To the extent any damages are awarded, Ms Leloir argues the reduction for contributory negligence should have been 40 per cent, not 15 per cent.

8 The power to award damages under the FTA must be exercised in a manner that does justice to the parties in the circumstances of the particular case and in accordance with the policy of the FTA. 7 Questions of contributory negligence require careful evaluation of relative fault and contribution to the loss. It is therefore necessary to set out the relevant facts in some detail.

The facts

9 Sirocco was constructed between 1996 and March 1999. Like many buildings constructed during that period, it has a number of features that are commonly associated with weathertightness problems including monolithic cladding and inadequate waterproofing details.

10 The building has five levels of parking with six residential levels above. The complex roof comprises flat membrane sections together with pitched and vaulted structures with corrugated metal sheets. The building is clad with texture-coated fibre cement monolithic cladding with plywood rigid air barriers directly fixed to the timber framing of the external walls. External balconies adjoin all apartments. Most are projecting steel-framed curved balconies but several of the upper level apartments have rooftop balconies beneath vaulted roof coverings. There are numerous projecting fire spandrels and external inter-tenancy walls. Eight lightwells are located in the core of the building. Two open air walkways provide access to the main entrances of the apartments on levels six and eight.

11 Andrew Gray, an experienced building surveyor called by Mr Roberts at the liability hearing, said that, based on his visual inspection in May 2018, Sirocco has “all of the hallmarks commonly associated with a leaky building”. He stated that in conjunction with direct fixed monolithic cladding, these defects have a history of systemic failure. He said that at the time of Mr Roberts' purchase in 2014, this type of cladding system was no longer considered an acceptable solution under the Building Code (contained within the Building Regulations 1992) and he considered that a reasonably competent building expert carrying out an inspection at that time would have identified the high-risk junctions and reported the history of failure of these cladding systems.

12 On 18 February 2014, the real estate agent acting for the vendor sent pre-contract disclosure information to Mr Roberts' lawyers. This included the minutes of the annual general meetings of the body corporate for the last three years (held on 31 May 2011, 12 June 2012 and 12 June 2013), the financial statements for the financial years ended 31 March 2011 to 2013 and the long-term maintenance plan for the 10-year period commencing in 2009. A footnote to this plan, which appears to have been updated in 2011 or early 2012, referred to the rebuilding of the level six and level eight walkways and stated this work was not included in the original plan. It was noted that the work had commenced in late 2009 and was expected to be completed in March 2012. Costs of approximately $105,000 were recorded as having been incurred in carrying out this work. The financial statements showed amounts paid under the long-term maintenance plan of $31,887 in the 2013 financial year, $22,597 in 2012 and $86,470 in 2011. Other expenditure on repairs and maintenance was set out, but there was nothing significant. A pre-contract disclosure statement signed by the vendors (and Ms Leloir) was also provided as required by 146(1) of the Unit Titles Act 2010. This three-page statement dated 22 January 2014 included the following (correct) statement in accordance with reg 33(e) of the Unit Titles Regulations 2011:

The unit or the common property is not currently, and has never been, the subject of a...