White v Zadeh

• Jurisdiction: New Zealand
• Judge: Dobson J
• Judgment Date: 08 December 2020
• Neutral Citation: [2020] NZHC 3221
• Court: High Court
• Docket Number: CIV-2019-442-34
• Date: 08 December 2020

IN THE MATTER OF a property (residential dwelling) situated at 28 Blair Terrace, Richmond

Between

Glenda Leigh Jourdain White

Plaintiff

and

Firooz Eftekhar Zadeh and Bernadette Michelle Zadeh

Defendants

[2020] NZHC 3221

Dobson J

CIV-2019-442-34

IN THE HIGH COURT OF NEW ZEALAND

NELSON REGISTRY

I TE KŌTI MATUA O AOTEAROA

WHAKATŪ ROHE

Damages, Leaky Building, Tort — claim for damages relating to representations that a residential property was not a leaky home — whether the defendant's statements were merely an expression of his opinion as to what he considered the structural state of the building to be — inducement — reasonable reliance — measure of damages for breach of a representation — betterment — Contract and Commercial Law Act 2017

Counsel:

J C Ironside for plaintiff

G J Praat for defendants

RESERVED JUDGMENT OF Dobson J

Contents

Introduction	[1]
The background	[3]
The evidence	[39]
Contested factual matters	[46]
Ms White's first inspection, 7 December 2016	[46]
The second inspection, 8 December 2016	[68]
Legal effect of the representation	[95]
Inducement to purchase?	[106]
Reasonable reliance?	[109]
Damages — cost of cure	[112]
Damages — general damages	[129]
Costs	[133]

Introduction

1 This case is yet another sad tale involving an attempt to resolve the consequences of a residential property that has developed weathertightness issues. Not unusually, it is a case in which damages sought on a “cost of cure” basis exceed the plaintiff's original purchase price.

2 As is generally the case where a claim is brought in reliance on an alleged representation by the vendor that the property was not a leaky home, the critical factual issue is determining the precise terms and meaning of the disputed representation.

The background

3 There are a number of differences between the recollection of the plaintiff (Ms White) and the defendants (the Zadehs) as to the lead-up to the agreement (including, importantly, Ms White's inspections of the property prior to purchase), the agreement itself and actions post-agreement. I will briefly summarise the background to the case, and then consider the contested facts.

4 Ms White purchased the property from the Zadehs in December 2016. The property is situated in Richmond near Nelson. It was constructed in 1993 using monolithic cladding permitted pursuant to the relevant building standards. In 2002 and 2003, the then owners (the Kokcus) discovered weathertightness issues and achieved a mediated solution with the builder for remedial works to be undertaken. The local territorial authority, Tasman District Council (TDC) appears to have had some involvement in the settlement, and approved the extent of remedial work undertaken.

5 The Zadehs purchased the property in 2012, having had what they considered was full disclosure from the Kokcus about the previous weathertightness problems. The Zadehs bought in the belief that the problems had been completely resolved.

6 The Zadehs did not reside in the property. They rented it to a person who turned out to be a member of the Nomads gang, justifiably described as “the tenant from hell”. Apart from failing to pay rent, the tenant became seriously abusive and threatening towards the Zadehs when they attempted to re-take possession. They complained that the letting agent who had arranged the tenancy and assured them of the good character of the tenant was “useless”, and the Police were limited in what they could do to protect the Zadehs.

7 Eventually the Police served an eviction notice. Whilst still in the property, the tenant produced a sign which he displayed prominently on the side of the house facing the road frontage stating “LEAKY HOME FOR SALE AVAILABLE AUGUST”.

8 The Zadehs had been unable to conduct inspections of the property during the tenant's occupancy. Very shortly after he had been evicted they went to the property with a real estate agent, intending to have the property assessed as part of instructing the agent to market the property for sale on their behalf. On entering the property, the agent was immediately concerned that methamphetamine had been consumed there, and advised the Zadehs they should not further inspect the property or put it on the market until it had been assessed for methamphetamine contamination.

9 The Zadehs followed that advice. It transpired that some rooms in the house were very heavily contaminated consistent with the manufacture of methamphetamine, and other rooms were contaminated to lesser extents. On advice, the Zadehs had extensive decontamination work undertaken, which involved replacing floor coverings and curtains, washing all the internal surfaces, and replacing appliances. It transpired that the tenant had, deliberately or otherwise, slashed outlets serving a washing machine and a dishwasher, causing flooding in the laundry and kitchen areas of the house.

10 The Zadehs retained Mr Alan Snowden of Betta Inspect It, a Nelson building inspection firm, to provide a report on the state of the house. Mr Snowden undertook a number of tests for methamphetamine residue and produced separate reports after various cleaning steps were undertaken. The Zadehs discovered that the drains had been blocked. They deduced that had been done deliberately by the tenant to prevent detection of drugs in the waste water flowing from the property. Unblocking the drains alone cost $8,000 and the rest of the repairs cost the Zadehs approximately $65,000.

11 Once the remedial works recommended by Mr Snowden were substantially done, the Zadehs retained a real estate agent to market the property. However, they were not satisfied with the amount of interest generated by the real estate agent and Mr Zadeh then decided that he would attempt a private sale by advertising the property on TradeMe Property.

12 Ms White saw the property advertised on TradeMe and made contact with the Zadehs on 7 December 2016. On her version of the dealings between them (material aspects of which are contradicted by the Zadehs), Ms White arranged to visit the property that same day, and went there with her then 19 year old son, Niko, for a half hour viewing at 7.30 pm. The Zadehs recall her inspecting the property on that first occasion on her own.

13 Ms White's and Niko's evidence is that they liked the property. They were shown all around the house mostly by Mr Zadeh, who told them about the extent of remedial work they had done to repair damage caused by the tenant. Ms White recalls Mr Zadeh saying that the tenant had gang affiliations and had shown them a photo of the tenant outside the house wearing gang patches. She recalled Mr Zadeh saying that he was taking the tenant to the “Small Claims Court” because he owed thousands of dollars in rent, that the tenant had used P in the house, and that to comply with the recommendations in Mr Snowden's report they had replaced the heat pump, dishwasher, carpets and curtains throughout the house. Mr Zadeh also disclosed that the dishwasher and washing machine had leaked over the kitchen and laundry floors, creating damage that had been repaired.

14 Ms White recalls Mr Zadeh also telling them about the tenant hanging a banner from the deck on the front of the house, stating that it was a leaky home. After referring to that, her evidence was that Mr Zadeh said that the house was not a leaky home and that the tenant was telling lies about that as he had deliberately wanted to harm the Zadehs' interests.

15 Mr Zadeh also volunteered that he had a report from Mr Snowden on the state of the house and that any problems identified in that report had been or were being fixed. Ms White recalls being shown certain sections of the report with Mr Zadeh's handwritten comments endorsed at various points about the repairs that had been done or were being arranged. The report was a bulky document and Ms White's recollection is that Mr Zadeh kept control of it, showing her parts that, on her impression, he considered were relevant. She said Mr Zadeh would not let them take the builder's report away as he only had one copy and other people interested in the house would also want to see it.

16 Mr Zadeh also showed Ms White a separate report from Mr Snowden confirming that the levels of methamphetamine residue had been reduced to acceptable levels.

17 Mr Zadeh told Ms White that the house had been listed with an agent for some two months but the agent had not been proactive enough, and that now he was marketing it himself there was substantial interest and, if she wanted to buy, she would have to act fast.

18 At the time, Ms White worked at the Nelson Marlborough Institute of Technology (NMIT). A work colleague, Mr Huw Morgan, who was a carpentry and joinery tutor, had accompanied her when visiting other houses she had assessed for possible purchase. Before her initial meeting with the Zadehs ended, Ms White asked if she could bring Mr Morgan to the house the next day, and the Zadehs agreed to that.

19 The following morning, 8 December 2016, Ms White made arrangements with Mr Zadeh to go back to the property with Mr Morgan for a second inspection. For unrelated reasons, there was a measure of time pressure on this visit. As they arrived at the property, Ms White recalled seeing Ms Zadeh driving away from the property. The interactions on this occasion were only with Mr Zadeh.

20 Mr Zadeh met them at the door and Messrs Morgan and Zadeh introduced themselves to each other. Ms White's evidence was that she and Mr Zadeh talked in the living room of the house whilst Mr Morgan looked around the rest of the house and went outside to look at the exterior. After that, Mr Zadeh showed both of them around the house and made comments which Ms White recalled being directed to Mr Morgan. Mr Zadeh gave another explanation of...