WEBER v HASTINGS DISTRICT COUNCIL [2022] NZHC 1405

WEBER v HASTINGS DISTRICT COUNCIL [2022] NZHC 1405 [15 June 2022]IN THE HIGH COURT OF NEW ZEALANDNAPIER REGISTRYI TE KŌTI MATUA O AOTEAROAAHURIRI ROHECIV-2020-441-11[2022] NZHC 1405BETWEEN TONY GRAHAM WEBER,ROBYN DELLE WEBER andLDP TRUSTEES NO. 4 as trustees of theFairview TrustPlaintiffsAND HASTINGS DISTRICT COUNCILFirst DefendantDONALD CHARLES GILBERTSON andMURRAY GEORGE GILBERTSON astrustees of the Peak Performance TrustSecond DefendantTREMAIN REAL ESTATEThird DefendantJILL BADDELEYFourth DefendantMURRAY PRINGLE andGEOFF ROTHWELLFifth DefendantHearing: 12 May 2022Appearances: P Drummond for the Plaintiffs/RespondentsA Challis and L Fernandez for Third and Fourth Defendants/ApplicantsJudgment: 15 June 2022JUDGMENT OF ASSOCIATE JUDGE JOHNSTONIntroduction[1] This is an interlocutory application by the third and fourth defendants pursuantto r 15.1 of the High Court Rules 2016, for an order striking out the plaintiffs' claimsagainst them.[2] Under r 15.1, the Court may strike out a pleading that does not disclose areasonably arguable cause of action. Counsel were on common ground as to theprinciples applying to applications to strike out pleadings on this basis. In anapplication made by a defendant, the essential issue is whether, assuming the plaintiffwill be able to establish the facts as pleaded, the defendant can satisfy the Court thatthe plaintiff cannot succeed on the claim or the relevant cause or causes of action. Thejurisdiction is exercised sparingly, for the obvious reason that the Court is dealingsummarily with a substantive matter. So, it must be clear that the claim or cause ofaction, as the case may be, cannot succeed.1Background[3] In mid-2015, the second defendants, Donald and Murray Gilbertson, in theircapacities as the trustees of the Peak Performance Trust, resolved to sell a residentialproperty situated at 192 Te Mata Peak Road in Havelock North.[4] They engaged a local real estate agency, the third defendant, Tremain RealEstate (2012) Ltd, to act for them. The responsible agent was the fourth defendant,Jill Baddeley. On 17 July 2015, the vendors and Tremain Real Estate entered into anagency agreement in which the former represented to the latter that they were unawareof any past or present weathertightness issues affecting the property, and undertook todisclose details of any such issues that they became aware of between the date oflisting and the date of sale. As will become apparent, the representation as to theirknowledge of any past weathertightness issues was clearly incorrect.[5] Ms Baddeley arranged an open home on 16 August 2015. Amongst those whoattended the open home were Tony and Robyn Weber, the first and second-named1 Couch v A-G [2008] NZSC 45 at [33].plaintiffs, and two of the trustees, along with L D P Trustees No. 4 Ltd, of theFairview Trust.[6] Seemingly at the request of Mr and Mrs Weber, under cover of an email dated19 August 2015, Ms Baddeley sent certain documentation relating to the property tothe Webers. This email was the only written communication between Ms Baddeleyand the Webers of any substance. It said:Good evening,It was lovely chatting again with you both this afternoon.I finally made it back to the office to enable me to scan the docs for you tolook at.Happy reading.[7] Attached to Ms Baddeley's covering email was the following:2(a) a copy of an index of documents held by the Hastings District Councilrelating to the property which appears to include records fromNovember 2004 through to November 2013;(b) correspondence involving the Hastings District Council and thevendors, Donald and Murray Gilbertson, in mid-2009 relating to theprocess of securing a code compliance certificate for the property.There are only two substantive items of correspondence, an email fromthe vendors to the Council dated 24 July 2009 and a letter from theCouncil to the vendors dated 21 September 2009. The former attacheda suggested remedial plan for the property. The latter included a list ofwork that the Council required before a code compliance certificatecould be issued;2 This description of the documentation is not that contained in the pleadings, the evidence orcounsel's submissions. The taxonomy is mine. However it appears to me to be the most logicalway of categorising and describing the documentation.(c) a copy of the code compliance certificate eventually issued by theHastings District Council on 22 March 2010, together with theCouncil's Building Maintenance Information Sheet; and(d) documentation prepared by the vendors and clearly intended to be usedin the marketing of the property. This is largely descriptive of featuresof the property. Importantly, it includes a description of the process thatthe vendors went through to secure the code compliance certificate.[8] The Webers having no doubt indicated that the trustees were interested in theproperty, a day later, on 20 August 2015, Ms Baddeley emailed to them a draft saleand purchase agreement and, separately, a copy of the certificate of title to the property.[9] Ms Baddeley also emailed a copy of the draft sale and purchase agreement tothe solicitors acting for the plaintiffs, Lloyd Dodson & Pringle. Clearly, Ms Baddeleywas only able to email the draft agreement to the solicitors because she had been toldwho the plaintiffs would be instructing to act for them in the transaction. Ms Baddeleydid not send any of the documentation referred to at [7] to Lloyd Dodson & Pringle.[10] The next day, 21 August 2015, Ms Baddeley emailed to Lloyd Dodson &Pringle a copy of a LIM report for the property. She did not send a copy of this to theWebers.[11] Later that day the agreement for sale and purchase was executed by or onbehalf of the trustees of both trusts.[12] It will be apparent from the above description of the background that therewere several opportunities for direct engagement between Ms Baddeley and theWebers prior to the execution of the agreement for sale and purchase. Notably, noallegation is made, and there is no suggestion in any of the affidavit evidence beforethe Court for the purposes of this interlocutory application, that Ms Baddeley madeany representation concerning the property other than by emailing the documentationalready referred to between 19 and 21 August 2015. Nor did Mr Drummond suggestin the course of argument that there was any prospect of the claim being expandedbeyond its current scope in this regard, which would, in any event, have beensurprising, as the extant statement of claim is the third iteration of that document.Thus, the plaintiffs' case against the third and fourth defendants is based exclusivelyon Ms Baddeley having emailed the documentation already described to them andtheir solicitors.[13] On the evidence, Tremain Real Estate and Ms Baddeley had no informationrelating to the property other than that contained in the agency agreement and thedocumentation emailed by Ms Baddeley to the plaintiffs and their solicitors.[14] It is fair to say that the documentation that was sent to the plaintiffs and theirsolicitors contained mixed messages. There were clear indications (in the HastingsDistrict Council's index and the correspondence between the vendors and the Council)that this was a property in respect of which there had in the past been significantweathertightness issues. Equally, there was material (in the documentation preparedby the vendors describing the process whereby a code compliance certificate wasobtained) from which a reader might reasonably infer that any weathertightness issueshad been addressed.[15] The terms of the sale and purchase agreement are neither remarkable norcontentious. For context I record that the sale and purchase price was $1,320,000.00and that the agreed settlement date was 28 October 2015. Otherwise, the agreementwas prepared on the ubiquitous REINZ form, and contained no material specialconditions.[16] By all accounts, the transaction settled on or about 28 October 2015 without ahitch. The Webers lived in the property from late-2015 until mid-2018, when theydecided to sell. There is no evidence that they encountered any difficulties with theproperty. However, the plaintiff trustees plead in their third amended statement ofclaim that:8. In mid-2018, the Plaintiff [sic] decided to put the dwelling on themarket for sale. A potential purchaser expressed interest in thedwelling and requested, as part of their due diligence, wood samplingof the exterior framing of the dwelling be undertaken. This woodsampling testing revealed that the dwelling had wood decay andelevated moisture levels in various locations, with damage arising asa result of water ingression into the dwelling.9. The plaintiff [sic] removed the dwelling from the market, as a resultof the wood sampling tests obtained.10. The plaintiffs subsequently had further extensive investigative testingundertaken and identified various construction defects as follows:[17] The pleading continues with a detailed description of defects, typical of thosegenerally associated with leaky homes.[18] The plaintiffs now sue for damages which they say reflect the cost of necessaryremedial work. They are claiming $1,735,712.00. The defendants are the vendors,Donald and Murray Gilbertson, in their capacities as the trustees of thePeak Performance Trust, Tremain Real Estate, Ms Baddeley and the Hastings DistrictCouncil.[19] It is unnecessary to set out the bases of the claims against the vendors or theCouncil.[20] In the pleadings, Tremain Real Estate and Ms Baddeley are treated as one partyon the basis that the former is vicariously liable for the actions of the latter.The plaintiffs' claims against the third and fourth defendants[21] The pleaded causes of action against Tremain Real Estate and Ms Baddeley arenot a model of clarity. Although not pleaded in quite these terms, they include at leastfour interrelated assertions against each of them. The first is misrepresentation, apleading that would be more at home in a contract case. The second is misleading ordeceptive conduct in terms of s 9 of the Fair Trading Act 1986. The third is negligence.The last is negligent misstatement.[22] Critically, though, the essential allegation that is repeated in each of the pleadedcauses of action, in more or less exactly the same terms, is that in emailing thedocumentation described earlier to the plaintiffs and their solicitors, the third andfourth defendants misled them "as to the dwelling's quality, condition and itsweathertightness together with the nature of work undertaken on the dwelling in orderto obtain a Code of Compliance".3[23] That appears to me to be the irreducible core of the plaintiffs' case againstTremaine Real Estate and Ms Baddeley.[24] The pleadings go on to say, in relation to all four causes of action, that theplaintiffs relied on the allegedly misleading documentation in acquiring the property,and thereby suffered the loss in respect of which they seek to recover damages.[25] In adopting what might be criticised as a reductionist approach to thepleadings, I have not ignored the drafter's attempts, most particularly in relation to thenegligence — related pleadings, to go beyond an assertion that the plaintiffs weremisled by the documentation.[26] However, it appears to me that focussing on the core allegation is unavoidable.As already said, in each cause of action, the plaintiffs ultimately assert that thedocumentation was misleading, that they relied on it being accurate and that theirreliance was the proximate cause of their loss. This being the route that the pleadingstake, it follows that, to succeed on any of their causes of action against the third andfourth defendants, the plaintiffs will have to be able to establish that by emailing thedocumentation to the plaintiffs and their solicitors as already described the third andfourth defendants misrepresented the position. In any event, that is the way in whichthe case was argued by both Ms Challis and Mr Drummond.The defendants' application[27] On behalf of Tremain Real Estate and Ms Baddeley, Ms Challis submits thatthe Court should strike out both causes of action pleaded against each of them, on theground that they do not disclose any reasonably arguable cause of action.[28] Although I infer from her submissions that the third and fourth defendantswould contend that their actions are not capable of being actionable on any basis3 This is the terms in which the allegation is pleaded in the plaintiffs' first cause of action againstthe third defendant.because they passed on all negative information they had concerning weathertightnessto the plaintiffs, Ms Challis did not put that contention at the forefront of her argument.Rather, her submission was that Tremain Real Estate and Ms Baddeley were mereconduits so that, even if the documentation was misleading, any misrepresentation wasthat of the principals, the vendors, for which only they can be liable. Ms Challis alsosubmitted that the plaintiff trustees will not be able to establish that Ms Baddeley'saction in emailing the documentation was causative of any loss, but, in the end, thatdoes not appear to me to add anything.Discussion[29] The leading authority in relation to s 9 of the Fair Trading Act 1986 isRed Eagle Corporation Ltd v Ellis [2010] NZSC 20. There, the Supreme Courtdescribed s 9 as imposing a broad prohibition on engaging in misleading or deceptiveconduct in trade.4 The Court continued:5That section is directed to promoting fair dealing in trade by proscribingconduct which, examined objectively, is deceptive or misleading in theparticular circumstances. Naturally that will depend upon the context,including the characteristics of the person or persons said to be affected.Conduct towards a sophisticated businessman may, for instance, be less likelyto be objectively regarded as capable of misleading or deceiving such a personthan similar conduct directed towards a consumer or, to take an extreme case,towards an individual known by the defendant to have intellectual difficulties.Richardson J in Goldsboro v Walker said that there must be an assessment ofthe circumstances in which the conduct occurred and the person or personslikely to be affected by it. The question to be answered in relation to s 9 in acase of this kind is accordingly whether a reasonable person in the claimant'ssituation – that is, with the characteristics known to the defendant or of whichthe defendant ought to have been aware – would likely have been misled ordeceived. If so, a breach of s 9 has been established. It is not necessary unders 9 to prove that the defendant's conduct actually misled or deceived theparticular plaintiff or anyone else. If the conduct objectively had the capacityto mislead or deceive the hypothetical reasonable person, there has been abreach of s 9. If it is likely to do so, it has the capacity to do so. Of course thefact that someone was actually misled or deceived may well be enough toshow that the requisite capacity existed.(footnotes omitted)[30] It is elementary that in order to succeed in a claim for negligence — includingnegligent misstatement — a plaintiff must establish that the defendant owed a duty of4 At [26].5 At [28].care, breached the same, and thereby caused damage of a sufficiently proximatenature. That a real estate agent can owe a duty of care to prospective purchasers iswell established.6 Mr Drummond submitted — correctly, in my view — that thecommon law obligations of real estate agents have been expanded by the statutoryobligations imposed on them in the Real Estate Agents Act 2008 and the Real EstateAgents Act (Professional Conduct and Client Care) Rules 2012. Notwithstanding thisexpansion, having regard to the view I take of the essential basis for the plaintiffs'claims, I am satisfied that the ambit of s 9 of the Fair Trading Act is materially widerthan any tortious duty that might exist. What that means is that, if the plaintiffs' causeof action based on s 9 cannot succeed, then neither can any negligence-based claim.[31] With respect to Ms Challis' primary submission concerning the status ofTremain Road Estate and Ms Baddeley, the leading case is Goldsbro v Walker. 7 Therethe Court of Appeal confirmed that an agent who is acting as a mere conduit, simplypassing on information from a principal, is not liable for misrepresentations arisingfrom that information. The principle is that it is the person whose conduct ismisleading who is liable, not a person through whom another's misleading conduct isconveyed, provided that the latter does no more than pass on the misleadinginformation without in any way adopting it as their own.[32] In Mainland Products v BIL (NZ) Holdings Ltd8, Cooper J adopted a passagefrom a decision of the Supreme Court of Queensland in Lake Koala Pty Ltd v Walker,where Connolly J had said:9The representation which is made in the case of the mere furnishing of areport, such as that prepared by Peat Marwick in this case, is that the documentis what it purports to be, namely the opinion of the expert, and that the vendorbelieves it to be honestly made and made in the exercise of professionalcompetence or, which amounts to much the same thing, that he has no reasonto believe to the contrary.6 Routhan v PGG Wrightson Real Estate Ltd [2021] NZHC 3585; McCullagh v Lane Fox andPartners Ltd [1996] 1 EGLR 35 (CA) at 45-48; and Johnston v Colliers InternationalNew Zealand Ltd [2019] NZHC 2711 at [42]-[46].7 Goldsbro v Walker [1993] 1 NZLR 394.8 Mainland Products Ltd v BIL (NZ) Holdings Ltd HC Auckland CIV-2002-404-1889, 8 June 2004.9 Lake Koala Pty Ltd v Walker [1991] 2 Qd.R 49, at 58; cited by Little v Warwick [2019] NZHC822.[33] In the course of argument, Ms Challis accepted that an agent who passes oninformation knowing it is inaccurate, or that it is inconsistent with other knowninformation, may be liable. However, as she submitted, and as already discussed, thereis no allegation in this case that Tremain Real Estate or Ms Baddeley had knowledgeof any negative information pertaining to the property that was not contained in thedocumentation provided to the plaintiffs and a few solutions.[34] This case appears to me to fall squarely within that category of case in whicha principal's agent has acted as a mere conduit between the principal and a third party.The primary considerations that have lead me to the conclusion are as follows:(a) It is not alleged and nor is there any evidence to the effect that TremainReal Estate and Ms Baddeley had any information concerning theproperty other than the information contained in the agency agreementand the documentation that was emailed to the plaintiffs and theirsolicitors;(b) The agency agreement aside, Tremain Real Estate and Ms Baddeleypassed on all documentation they had received to the plaintiffs and theirsolicitors;(c) The only relevant information in the agency agreement was thevendor's representation concerning weathertightness. This wasincorrect. However, the fact that this document or the informationcontained in it was not passed on to the plaintiffs or their solicitors byTremain Real Estate and Ms Baddeley does not appear to me to bematerial. The agreement contained false positive information, notcorrect negative information;10(d) I reject the contention advanced by Mr Drummond that it wasmisleading of Tremain Real Estate and Ms Baddeley not to provide allof the documents to both the plaintiffs and their solicitors. Once the10 There is a question mark of whether it was ever open to Tremain Real Estate and Ms Baddeley topass on this document, it being a contract between them and their clients, but it is not necessary toaddress that issue.plaintiff advised Tremain Real Estate and Ms Baddeley that they hadengaged Lloyd Dodson and Pringle to act for them in the matter, they— Tremain Real Estate and Ms Baddeley — were entitled, in my view,to treat the plaintiffs and their solicitors as one entity. On that basis,providing documentation to one was providing documentation to theother;(e) In my view, all the circumstances point to Tremain Real Estate andMs Baddeley being a mere conduit of this documentation.Ms Baddeley's email of 19 August 2015 contains no indication that shewas doing anything other than passing on documentation that TremainReal Estate and she had received from the vendors. There is no sensein which the email can be interpreted as Tremain Real Estate andMs Baddeley adopting the documentation or any information containedin it as their own, saying anything about the accuracy of the same, oradding to it in any way. Nor is there evidence that in any other wayTremain Real Estate and Ms Baddeley did or said anything prior theexecution of the agreement for sale and purchase that could beinterpreted as adopting the documentation or any information in thesame as their own;(f) The present situation may be contrasted with the circumstances inGoldsbro v Walker. In that case, the solicitors had forwarded on acontract for sale and purchase, and, in doing so, positively asserted thatthat document had been countersigned by their client and providedfurther explanatory material in relation to a change to the same, whenin fact, unbeknown to those solicitors, the initialling of the change wasa forgery by the named buyer's son-in-law;(g) This case may also be contrasted with a number of later cases to whichcounsel referred, in all of which the agent demonstratively adopted theinformation being passed on in one way or another;1111 Coory v ARI Realty HC Dunedin CP53/93, 4 August 1993; Cashmere Enterprises Limited vMathias HC Auckland CP573-SD/00, 19 November 2011 Hamid v England HC Wellington(h) Accordingly, in my view, any representation contained in thedocumentation was a representation made by the vendors and merelyconveyed to the purchasers through the medium of Tremain Real Estateand Ms Baddeley;(i) Nor do I see merit in the argument that Tremain Real Estate orMs Baddeley misrepresented the position by failing specifically todraw the plaintiffs' attention to the information which indicated therehad been weathertight issues with the property. In my view, if the thirdand fourth defendants are to be considered to have knowledge of thoseissues, then so too must the plaintiffs and their solicitors who receivedthe same documentation.Conclusion[35] For those reasons, I accept the submission made by Ms Challis on behalf ofTremain Real Estate and Ms Baddeley that the plaintiffs cannot succeed on any of thecauses of action pleaded against them, and I make an order pursuant to r 15.1 strikingthe same out.[36] Not having heard from counsel in relation to costs I reserve these. Mypreliminary view is that the third and fourth defendants as the successful parties areentitled to a costs award on a 2B basis. If counsel are unable to resolve costs, theymay file and serve memoranda in the usual way.Associate Judge JohnstonSolicitors:Wadham Partners, Palmerston North for PlaintiffsRice Speir, Auckland for First DefendantGifford Devine, Hastings for Second DefendantMcElroys, Auckland for Third and Fourth DefendantsCIV-2009-404-3697, 26 September 2011; Little v Warwick [2019] NZHC 822; and Routhan v PGGWrightson Real Estate Ltd [2021] NZHC 3585.