JOHNSTON v COLLIERS INTERNATIONAL NZ LTD [2019] NZHC 2711

JOHNSTON v COLLIERS INTERNATIONAL NZ LTD [2019] NZHC 2711 [23 October 2019]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2019-404-000496[2019] NZHC 2711BETWEEN HEIDI JOHNSTON and BRUCEJOHNSTON as trustees of the SQUADRONINVESTMENT TRUSTPlaintiffsAND COLLIERS INTERNATIONAL NEWZEALAND LIMITED t/a COLLIERSINTERNATIONAL AUCKLANDCENTRALDefendantHearing: 18 September 2019Appearances: K J Robinson and J Kent-Johnston for PlaintiffsR C Woods and S M Paisley for DefendantJudgment: 23 October 2019JUDGMENT OF ASSOCIATE JUDGE P J ANDREWThis judgment was delivered by Associate Judge Andrewon 23 October 2019 at 4.00 pm.pursuant to R 11.5 of the High Court RulesRegistrar / Deputy RegistrarDate..Introduction[1] The plaintiffs, Heidi and Bruce Johnston, are the trustees of the SquadronInvestments Trust. In 2017, they purchased two properties in Franklin Road,Ponsonby. The respective purchase prices were recorded in the agreements for saleand purchase as "$1,430,000 plus GST (if any)" and "$1,200,000 plus GST (if any)".[2] When the plaintiffs settled, they incurred a liability to the vendor for GST inthe sum of $394,500. They say that the first time they became aware of that liabilitywas at the time of settlement. They did not receive any legal advice on the issue ofGST prior to signing the agreements for sale and purchase.[3] The defendant, Colliers International New Zealand Ltd (Colliers), is a licensedreal estate agency that is said to be vicariously liable for the actions of one of its realestate agents, Mr Ongley, who acted for the vendor in respect of the sale of the twoFranklin Road properties.[4] The plaintiffs sue the defendant in negligence and for breach of s 9 of the FairTrading Act 1986 (FTA). It is contended that the real estate agent failed to give theplaintiffs correct and adequate GST advice about the implications of the purchases andfailed to advise them to seek legal advice about GST before finalising any offer. Theyfurther say that the agent's advice to them that the price for the properties would be"plus GST, if any" constitutes misleading and deceptive conduct under s 9 of the FTA.[5] The defendant seeks orders:(a) Striking out the cause of action in negligence, on the basis that thedefendant owed no duty of care to the plaintiffs and that the statementof claim therefore discloses no arguable cause of action; and(b) Granting the defendant summary judgment to the plaintiffs' claims, onthe basis that none of the causes of action in the statement of claim cansucceed.[6] At issue is whether a real estate agent, the agent for the vendor, owes a duty ofcare to the purchasers in a residential property transaction.Factual background[7] In early 2017, Colliers was engaged by the then owner of five propertiessituated on Franklin Road to market the properties for sale. Mr Ongley, a salespersonemployed by Colliers, was assigned to the marketing campaign.[8] On 27 February 2017, Ms Johnston contacted Mr Ongley expressing an interestin purchasing one of the properties. They spoke by telephone on 7 March 2017, duringwhich Mr Ongley noted that the price would be "plus GST, if any".[9] On 8 March 2017, Ms Johnston submitted offers for three of the properties,each being conditional on the other two offers not being accepted. That is, she wasoffering to buy only one of the properties. Her offers were submitted using templatesale and purchase agreements which had been pre-prepared by the defendant inrelation to each of the properties. The first page of that template had been pre-formatted to indicate that:(a) the vendor was GST-registered; and(b) the price would be "plus GST, if any".[10] Schedule 2 of the agreements, which provides fields in which the parties are torecord GST information, had not been pre-formatted with the vendor's GST details.[11] Ms Johnston's offers were initially rejected in favour of an offer over all fiveof the properties. However, that transaction did not proceed, and Ms Johnston re-presented her offers on 3 April 2017 over two of the properties. Followingnegotiations, Ms Johnston purchased:(a) 88 Franklin Road for $1,430,000 plus GST, if any; and(b) 90 Franklin Road for $1,200,000 plus GST, if any.[12] The plaintiffs assert that they were not aware that they would be liable to payGST of $394,500 at the time of settlement. As purchasers, they ultimately paid to thevendor GST on both transactions.Complaints Assessment Committee (CAC)[13] On 12 April 2018, following a complaint lodged by the plaintiffs, the CACmade a finding of unsatisfactory conduct, holding that Mr Ongley:1(a) fell short of the standard that a reasonable member of the public isentitled to expect from a reasonably competent licensee;(b) contravened provisions/rules of the Real Estate Agents Act 2008; and(c) was incompetent or negligent.[14] The CAC found unsatisfactory conduct on the basis that Mr Ongley:2(a) was aware of the complexity and risk associated with the GSTimplications of the transaction of the purchaser family trust;(b) did not adequately advise Ms Johnston about the GST implications ofthe agreements under r 5.1 of the Real Estate Agent Act (ProfessionalConduct and Client Care) Rules 2012;(c) failed to complete sch 2 to the agreements, which was a significant errorand a failure to exercise the proper level of skill, care and competence;(d) should have ensured Ms Johnston initialled deletions/cross outs in theagreements, and not doing so was a failure to exercise the proper levelof skill, care and competence; and1 Complaints Assessment Committee decision C20618 (12 April 2018) at [3.1].2 At [3.56].(e) did not advise Ms Johnston to seek legal advice before she signed theagreements pursuant to r 9.7 of the Rules.3The statement of claim[15] The plaintiffs claim that the defendant is vicariously liable to pay damages inthe amount of the GST liability on the basis that:(a) Mr Ongley owed the plaintiffs a duty of care and breached that duty byfailing to:(i) meet with the plaintiffs to discuss the agreements;(ii) give the plaintiffs correct GST advice about the transaction;(iii) understand the GST implications of the transaction or enquireas to the plaintiff's GST issues;(iv) advise the plaintiffs to seek legal, technical or other advicebefore finalising any offer; and(v) ensure that the agreements were completely appropriately.(b) Mr Ongly's conduct was misleading or deceptive, in breach of s 9 ofthe FTA, in that he:(i) failed to complete sch 2 of the agreement;(ii) advised the plaintiffs via Ms Johnston that the price of theproperties would be "plus GST, if any"; and(iii) failed to ensure the plaintiffs initialled deletions and cross-outsin the agreements.3 At [3.48].Relevant legal principlesStrike-out application[16] The Court may strike out all or part of a pleading, if, among other things, itdiscloses no reasonably arguable cause of action.4[17] The general principles applicable to the exercise of the Court's powers aresummarised in the Court of Appeal's decision in Attorney-General v Prince,5 asendorsed by the Supreme Court in Couch v Attorney-General.6 These include:(a) Pleaded facts, whether or not admitted, are assumed to be true. Thisdoes not extend to pleaded allegations which are entirely speculativeand without foundation.(b) The cause of action or defence must be clearly untenable.(c) The jurisdiction is to be exercised sparingly and only in clear cases.(d) The jurisdiction is not excluded by the need to decide difficult questionsof law, requiring extensive argument.(e) If a defect in the pleading can be cured by amendment, the claim shouldnot be struck out.[18] Importantly, the Supreme Court noted that the courts should be slow to strikeout claims in any developing area of law, such as where a duty of care is alleged in anew situation.7 A claim which raises a novel category of duty requiring assessment ofpublic policy considerations may require expert evidence only available at trial.84 High Court Rules 2016, r 15.1(1)(a).5 Attorney-General v Prince [1998] 1 NZLR 262 (CA).6 Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [33].7 At [33] per Elias CJ and Anderson J.8 Attorney-General v Prince, above n 5.Summary judgment[19] Rule 12.2(2) of the High Court Rules 2016 provides:12.2 Judgment when there is no defence or when no cause of action cansucceed(2) The court may give judgment against a plaintiff if the defendantsatisfies the court that none of the causes of action in the plaintiff'sstatement of claim can succeed.[20] The principles relevant to defendant summary judgment were discussed by theCourt of Appeal in Westpac Banking Corp v M M Kembla New Zealand Ltd:9[61] The defendant has the onus of proving on the balance of probabilitiesthat the plaintiff cannot succeed. Usually summary judgment for a defendantwill arise where the defendant can offer evidence which is a complete defenceto the plaintiff's claim. [62] Application for summary judgment will be inappropriate where thereare disputed issues of material fact or where the material facts need to beascertained by the Court and cannot confidently be concluded from affidavits.It may also be inappropriate where ultimate determination turns on a judgmentonly able to be properly arrived at after a full hearing of the evidence.Summary judgment is suitable for cases were abbreviated procedure andaffidavit evidence will sufficiently expose the facts and legal issues. [N]ovel or developing points of law may require the context provided by trialto provide the Court with sufficient perspective.[63] Except in clear cases, such as a claim upon a simple debt where it isreasonable to expect proof to be immediately available, it will not beappropriate to decide by summary procedure the sufficiency of the proof ofthe plaintiff's claim. [64] At the end of the day, the Court must be satisfied that none of theclaims can succeed. It is not enough that they are shown to have weaknesses.The assessment made by the Court on interlocutory application is not one tobe arrived at on a fine balance of the available evidence, such as is appropriateat trial.[21] Importantly, under s 12.2(1), a plaintiff may obtain summary judgment on oneof several causes of action ("no defence to a cause of action"); however, for summaryjudgment to be granted under sub-r (2), the defendant must show that none of theclaims can succeed. If the defendant is only able to show that some of the causes ofaction cannot succeed, the proper course will be to apply to strike out those causes of9 Westpac Banking Corp v M M Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA).action. So, defendant summary judgment should be granted only where the defendanthas a clear answer to all of the plaintiff's claims.Issues[22] Against that background, the critical issues I must determine are:(a) Does the plaintiffs' pleading disclose a reasonably arguable cause ofaction in negligence?(b) If not, is the plaintiff's cause of action under s 9 of the FTA such that itsimilarly cannot succeed? That is, can none of the causes of actionsucceed such that this Court should grant summary judgment for thedefendant (and against the plaintiffs)?Issue one: Is there a reasonably arguable cause of action in negligence?[23] As a preliminary matter, I note that whilst the plaintiffs pleaded their claim innegligence, their claim is better characterised as one of negligent misstatement. Bothcounsel, in their submissions, rely on the negligent misstatement factors of assumptionof responsibility by Mr Ongley and reasonable reliance by the plaintiffs. Thus, I willfocus my analysis on the tort of negligent misstatement rather than general negligence.The law of negligent misstatements[24] The Court of Appeal noted in Carter Holt Harvey Ltd v Minister of Educationthat "the courts have struggled to identify the precise parameters of the tort" — thatremains especially true for the duty analysis for misstatements.10[25] The Court of Appeal majority in Invercargill City Council v Southland IndoorLeisure Centre Charitable Trust noted the following in relation to the duty analysis:11[175] The majority in The Grange emphasised throughout that the Council'sproper claim lay in negligent misstatement, not in general negligence. In thatcontext, Blanchard J (writing also for McGrath and William Young JJ)10 Carter Holt Harvey Ltd v Minister of Education [2015] NZCA 321 at [112].11 Invercargill City Council v Southland Indoor Leisure Centre Charitable Trust [2017] NZCA 68,[2017] 2 NZLR 650.reinforced the conventional two-stage inquiry common to both species of thetort, based first upon considerations of foreseeability and proximity and thenthe policy question of whether it was fair, just and reasonable to impose a duty.However, a critical feature of distinction within the first stage is that the courtmust be satisfied in a negligent misstatement claim of the existence of aspecial relationship between the parties from which it can be said one partyhas assumed a responsibility as a matter of law to the other party for thequality of its work.(emphasis added) (footnotes omitted)[26] Accordingly, the Court of Appeal in Southland Indoor held that:[85] The elements of the cause of action in negligent misstatement may beframed in this way:(a) Proximity: the parties must be in a relationship of proximity, or a"special relationship". This requires that the adviser knew for whatpurpose the advice was wanted, knew the advice would go to theplaintiff or an ascertainable class that included the plaintiff, and knewthe advice would likely be acted on without independent inquiry.Knowledge may be imputed, the court having found that the adviserought in the circumstances to have known or foreseen what wouldlikely happen.(b) Policy: wider policy reasons must not exclude a duty of care in thecircumstances. For example, a court may exclude a duty for risk ofindeterminacy, or for conflict with some other duty or the publicinterest.(c) The ultimate question: whether, having regard to (a) and (b), a duty isfair just and reasonable.(d) Specific reliance and loss: the plaintiff actually relied on the adviceand suffered loss in consequence.(emphasis added)[27] That Court, in its earlier decision of Carter Holt Harvey, also noted that:[113] Whether the courts will impose a duty of care in a given case requiresconsideration of the same two questions already discussed: proximity andpolicy questions. The establishment of requisite proximity required to imposea duty of care in the context of careless words is particularly important. Theconcern is that statements have the potential to give rise to indeterminateliability to an indeterminate number pf people.[115] The concepts of assumption of responsibility, foreseeability andreasonable reliance therefore operate as checks on the extension of liabilityunder the enquiry of proximity. [119] In terms of whether a statement was reasonably capable of beingrelied upon, the focus is on both the assumption of responsibility by thestatement maker and the foreseeability of the person who might be expectedto rely on the statements. In essence, a defendant will only be found to beunder a duty to take care to prevent loss occasioned by a misstatement whenthe defendant knows or ought to know that the words are such to engender areasonable reliance thereon by a specific person or group of people (the class),and when the defendant accepts (or by his or her actions, can be deemed toaccept) the consequences of making that misstatement.(emphasis added) (footnotes omitted)[28] Palmer J in Cygnet Farms Ltd v ANZ Bank New Zealand Ltd held that:12[78] In Carter Holt Harvey v Minister of Education the Supreme Courtrecently cited the summary by the majority in The Grange of the requirementsthat must "typically" be met before a plaintiff can say it is entitled to rely ona statement or advice:13The necessary relationship between the maker of the statement andthe recipient will typically arise where:(a) the advice is required for a purpose that is made known (atleast inferentially) to the adviser;(b) the adviser knows (at least inferentially) that the advice willbe communicated to the advisee specifically or as a memberof an ascertainable class;(c) the adviser knows (at least inferentially) the advice is likelyto be acted on without independent inquiry; and(d) the advisee does act on the advice to its detriment.[79] I note three points about the elements of negligent misstatement:(a) The nature of the relationship in all its aspects must beexamined in determining whether there is a prima facie duty;(b) Negligent misstatement cases usually proceed on the basisthat the plaintiff is required to have reasonably relied on thedefendant. (c) Chambers and McGrath JJ in the Supreme Court stated inSpencer on Byron that, if a defendant owes a duty of care inpure negligence, a negligent misstatement cause of actionmay add nothing but may just put an additional hurdle in theplaintiff's way (establishing reliance, if that is an additionalrequirement).12 Cygnet Farms Ltd v ANZ Bank New Zealand Ltd [2016] NZHC 2838, [2017] 2 NZLR 538.13 Carter Holt Harvey Ltd v Minister of Education [2016] NZSC 95, [2017] 1 NZLR 78 at [80].(emphasis added) (footnotes omitted)[29] It is clear from the above authorities that in determining whether there is a dutyof care, and particularly in addressing the first step of identifying a sufficientlyproximate relationship, that an assumption of responsibility by the defendant adviserand foreseeable and reasonable reliance by the plaintiff advisee, are keyconsiderations. Similarly, a known purpose, an ascertainable plaintiff (or class) andknowledge that the advice is likely to be acted on without independent inquiry are alsorelevant considerations. There is, however, uncertainty as to whether thoseconsiderations are necessary requirements for, or merely relevant indicators of, a dutyof care (or at least proximity). The Court of Appeal in Southland Indoor used the word"requires" whereas the Supreme Court in Carter Holt Harvey described those factorsas "typically" being met in recognising a duty of care. Neither court discussed thematter further. However, for present purposes, whether those factors are necessary ormerely relevant is not a matter I need to determine; the question on a strike outapplication is whether the pleading discloses a reasonably arguable cause of action.Submissions[30] Applying those principles to the present facts, the first step to address iswhether there is a sufficiently proximate relationship between the defendant and theplaintiffs, and in particular whether Colliers (or Mr Ongley) assumed responsibilityfor the statement "plus GST, if any".[31] The plaintiffs submit there was an assumption of responsibility both in generalterms, prescribed by the Real Estate Agents Act 2008 and the Real Estate Agents Act(Professional Conduct and Client Care) Rules 2012, as well as specifically through thegiving of advice ("if any").[32] As to the general assumption, the Act and Rules govern the relationshipbetween real estate agents (licensees) and purchasers (customers). The Act has aconsumer-protection focus. The practical reality is that real estate agents, althoughagents for the vendor, will have regular contact with the purchaser. So, agents assumesome responsibility for information provided and steps taken. And, the plaintiffs say,the information provided by Mr Ongley was incorrect – Ms Johnston deposes in heraffidavit that Mr Ongley was "aware" that GST was payable. He was thereforenegligent in failing to delete the "if any" caveat, the effect of which was that theplaintiffs were under the erroneous impression that GST might not be payable. So, theplaintiffs say, first, that assumption of responsibility by the defendant can be deemedfrom the nature of the relationship and reinforced by the Act and Rules, which providecontext to that relationship.[33] Next, the plaintiffs submit that there was specific assumption of responsibilityin that Mr Ongley chose to give advice to the plaintiffs. The words "if any" amountedto advice as to the GST liability. The plaintiffs say that Mr Ongley, in choosing to giveadvice, assumed responsibility for the correctness of that statement.[34] In response, the defendant submits there was no assumption of responsibility(or that such assumption cannot be deemed) for the following reasons:(a) The defendant had no contractual or fiduciary relationship with theplaintiffs. Mr Ongley was an agent of the vendor, not the purchasers.(b) The words "if any" are inoperative as to the plaintiffs' GST position.The effect of those words is simply to indicate that if GST is payable,it will be payable in addition to the stated purchase price. That is, thatthe price is exclusive of GST, if any. It does not indicate that GST isnot payable or that it is unlikely to be payable. This is supported by thefact that Mr Ongley first made the statement before Ms Johnston evenmade an offer to purchase the property.Additionally, "plus GST, if any" clauses are common, and evenrecommended, in property transactions.14 The purpose and effect ofthose words are to indicate whether the purchase price is inclusive orexclusive of GST, not to indicate a purchaser's GST liability.14 See Roger Thompson and Maurits van den Berg A Practical Guide to Taxing PropertyTransactions (6th ed, CCH Ltd, New Zealand, 2016) at 407–408 and 413.(c) There was an implied disclaimer in the standard form contract, whichprovided that both parties should obtain independent legal adviceregarding GST liabilities. So, Mr Ongley did not assume responsibilityfor the correctness or otherwise of any statement as to the plaintiffs'GST position.[35] Secondly, still dealing with proximity, was it foreseeable and reasonable forthe plaintiffs to rely on the defendant's statement without independent inquiry?[36] The plaintiffs submit that, as against the above statutory regime, reliance onthe statement was foreseeable. There is inevitably overlap with the factors indicatingan assumption of responsibility. If one party assumed responsibility for a statement,then it will usually be reasonable for the other party to rely on that statement. In thepresent case, the defendant prepared the draft versions of the sale and purchaseagreement, failed to complete sch 2, facilitated the signing of the agreement and, inthat context, provided, what the plaintiffs say is, specific advice to the plaintiffsregarding GST ("if any"). Mr Ongley allegedly knew the plaintiffs did not haveindependent legal advice. In these circumstances, it was foreseeable that the plaintiffswould rely on the defendant's statement.[37] Additionally, the plaintiffs say that reliance was reasonable. They say they arethe trustees of a family (rather than commercial) trust and that the GST positionrepresented to them, related to the purchase price, a fundamental part of the sale andpurchase agreement, which the defendant drafted. Furthermore, the alleged failure toadvise the plaintiffs to obtain legal advice before finalising any offer, is only one aspectof the alleged negligence; the plaintiff also alleges that the defendant:(a) failed to properly draft the agreement, providing incorrect, information,contradictory information and failing to complete some sections at all;(b) did not attend to the signing and initialling of the agreement withreasonable skill and care; and(c) was negligent with the manner in which GST was dealt with byproviding incorrect GST advice.[38] Viewing those circumstances in totality, the plaintiffs say, it was reasonable forthem to have relied on the advice of Mr Ongley, that is the "if any" statement.[39] On the other hand, the defendant submits that it was neither foreseeable norreasonable for the plaintiffs to rely on the defendant's statement without independentinquiry as the transaction involved two properties, each valued over $1,000,000.Moreover, the agent, Mr Ongley, was engaged by the vendor, not the plaintiffpurchasers; it was not reasonable for the plaintiffs to expect Mr Ongley togratuitously15 give advice regarding their GST position. In any event, the defendantsays the fact that the standard form contract clearly provided that both parties shouldobtain legal advice, specifically as to GST, means that any reliance by the plaintiffs onthe statement, without independent inquiry, was not reasonable.[40] Finally, I turn to the policy factors. The defendant raises three policy factorsthat it says weighs against the finding of a duty of care in this case.(a) Competing fiduciary duty: Agents owe a fiduciary duty to the principal.That principle equally applies for real estate agents, as confirmed bythe Real Estate Agents Act and Rules, which requires agents to act intheir client's best interests.16 The courts have held that, as a matter ofpolicy, it will generally not be appropriate to impose a duty of care ona fiduciary which might conflict with their fiduciary duties.17 In thiscase, an obligation on the vendor's agent to advise potential purchasersin relation to the implications of the transaction would potentiallyconflict with the agent's duty to his or her client.The plaintiffs reply that the existence of a fiduciary relationshipbetween the defendant and vendor cannot be a factor against a duty of15 The defendant/applicant uses "gratuitously" in two senses: (a) that the advice was not requestedby the plaintiffs/respondents; and (b) that it was not paid for by the plaintiffs/respondents.16 Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012, r 9.1.17 See Brownie Wills v Shrimpton [1998] 2 NZLR 320 (CA).care when that duty has been prescribed by statute. The Real EstateAgents Act and Rules impose certain obligations on agents towardsnon-clients. These obligations include that agents should adviseprospective parties to an agreement that they should obtain legal advicebefore entering into the contract18 and that they are able to obtaintechnical advice in relation to the transaction.19 The plaintiffs say theduties owed under the Act and Rules favour the finding of a duty.20(b) Disproportionate/indeterminate liability: If the statutory obligation toadvise non-clients to seek legal and/or technical advice creates anactionable common law duty of care, there is the risk of indeterminateor disproportionate liability. Agents would potentially becomeguarantors in relation to matters ranging from tax or valuation to thestructural integrity or boundaries of the property, all of which could beidentified if appropriate technical or legal advice were sought beforeentering into the transaction. Such liability would potentially bedisproportionate to the agent's fault, especially given that such areasare beyond the agent's field of expertise. This is evident in the presentcase where the defendant accepts that no one involved with thetransactions appreciated the GST implications, including the lawyersinvolved (at least until close to settlement).The plaintiffs respond that the duty is not to advise potential purchasersof their GST position, but rather to advise them to obtain legal ortechnical advice. That is not as onerous a duty as the defendant makesit out to be. The obligation on the agent is to provide accurateinformation on the draft agreements for sale and purchase. The agentdoes not have to become a guarantor in relation to tax matters assuggested by the defendant. An agent simply has to exercise reasonableskill and care. Here, Mr Ongley knew that GST was payable, yet failedto delete the "if any" caveat, and he was negligent in failing to do so.18 Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012, r 9.7(a).19 Rule 9.7(b).20 South Pacific Manufacturing Co Ltd v New Zealand Security Consultants & Investigations Ltd[1992] 2 NZLR 282 (CA) at 297–298.Additionally, the concern of indeterminate liability is quelled by thefact that the duty is owed to parties to the transaction, a limited class.(c) Other forms of deterrence: An actionable duty of care in common lawis not necessary to maintain professional standards and competence asthere is an adequate deterrent in the form of statutory disciplinaryprocesses, which Mr Ongley has already been subjected to.In response, the plaintiffs rely on s 110(3) of the Real Estate Agents Actwhich preserves common law rights against an agent for misconduct.[41] The plaintiff, in further support of a duty of care, referred to the English caseof McCullagh v Lane Fox & Partners Ltd.21 There, it was held that real estate agentsmay owe a duty of care to non-client purchasers (in that case, an over-estimate as tothe size of the property when the agent knew the plaintiff was attracted to the sitebecause of size and description). However, the defendant in the instant case alreadyaccepts the general proposition that a duty of care can arise in some circumstances.What the defendant disputes is, first, that real estate agents owe a duty to gratuitouslygive advice to the purchaser regarding their GST liabilities and, second, it contendsthat there was a disclaimer (implied), in any event, which was fatal to the negligenceclaim brought in McCullagh.Analysis and decision[42] The transactions at issue, including the GST component, involved significantsums of money and the properties were purchased by the plaintiffs in their capacity astrustees. On the face of it, it is extraordinary that the plaintiffs did not obtain legaladvice before signing the agreements for sale and purchase. A number of documentsgiven to the plaintiffs by Mr Ongley, including the agreements for sale and purchase,expressly included a recommendation that they obtain legal advice and specificallywith respect to GST.21 McCullagh v Lane Fox & Partners Ltd [1996] 1 EGLR 35 (CA).[43] These matters provide important context for assessing whether the defendantassumed responsibility and whether the plaintiffs reasonably relied upon therepresentations made by Mr Ongley. Such factors are also relevant to the issues ofcausation and/or contributory negligence.[44] There is some obvious merit and force in the submissions of Ms Woods thatthe defendant did not, in the circumstances here, owe the plaintiffs a duty of care.However, the defendant's applications are to be determined on the basis that the factualallegations in the statement of claim are presumed to be correct and the jurisdiction tostrike out is to be exercised sparingly.[45] While perhaps unusual, there is authority, namely McCullagh v Lane Fox &Partners Ltd, to support the contention that a real estate agent may in particularcircumstances owe a duty of care to a purchaser. In viewing all matters at issue, I donot regard this as a clear case where the plaintiffs cannot succeed.22 The strike outthreshold has not been established.[46] As was the case in Couch v Attorney-General, whether the circumstances reliedon by the plaintiff are capable of giving rise to a duty of care is the question for thecourt.23 If a duty of care cannot confidently be excluded, the claim must be allowedto proceed. It is only if it is clear that the claim cannot succeed as a matter of law thatit can be struck out. Those findings apply equally here; it is not clear that the claimcannot succeed as a matter of law.[47] I further note that the Supreme Court in Couch held that particular care not tostrike out is required in areas where the law is confused or developing.24 Again, thecautionary approach has application to this case.[48] I find that the plaintiffs have established a reasonably arguable case that thedefendant owed them a duty of care. In addressing the arguable case threshold, andthe twin considerations of assumption of responsibility and reliance in particular, it isimportant to identify and focus on the particular manner in which the plaintiff frames22 McCullagh v Lane Fox & Partners Ltd, above n 21.23 Couch v Attorney-General, above n 6.24 At [33].the duty of care. The plaintiffs allege that Mr Ongley knew that GST was payable:he knew that the vendor was GST-registered, that the purchaser was purchasing forresidential purposes, that the purchaser was not GST-registered and that the purchasersdid not have independent legal advice. I also note that Mr Ongley has been criticisedby the CAC for not advising Ms Johnston to seek legal advice.[49] Framed in this manner, the plaintiffs' allegations are not necessarily anallegation of deceit or dishonesty of some kind by Mr Ongley. It is tenable to argue,as Mr Robinson submitted, that although Mr Ongley knew that GST was payable, hewas careless rather than dishonest in his use of the words "plus GST, if any" in theagreements for sale and purchase. The point, however, about Mr Ongley's allegedknowledge that GST was in fact payable provides some support for the contention thathe assumed responsibility to ensure that the GST description was correct – and incircumstances where his role was to complete the GST provisions of the agreement(including an accurate description of the purchase price) and, where he knew that theplaintiffs did not have legal advice, it was both foreseeable and reasonable that theplaintiffs would rely on his representations.[50] Against that background, I reject the submission of Ms Woods that theMcCullagh case can be distinguished on the basis that there was, in that case, apositive, inaccurate representation and thus a basis for concluding there had been anassumption of responsibility. In my view, it is arguable that Mr Ongley, in preparingthe agreement for sale and purchase and recording "plus GST, if any", incircumstances where he knew that the plaintiffs did not have independent legal advice,(can be deemed to have) assumed responsibility.[51] For similar reasons, I reject the defendant's reliance on the Court of Appealdecision of Brownie Wills v Shrimpton, where it was held that a non-client of asolicitor, unaware that the solicitor's client had requested that he be advised, could notexpect advice without giving any indication of that to the solicitor.25 There was, theCourt held, an insufficient closeness of relationship or proximity. Here, there isarguably a special relationship, one of sufficient proximity or closeness, for the25 Brownie Wills v Shrimpton, above n 17.purposes of a cause of action in negligent misstatement. The alleged misstatementwas a representation made directly to Ms Johnston as purchaser and it, arguably, didconvey an erroneous suggestion that GST may not be payable (in circumstances wherethe plaintiff alleges that Mr Ongley knew that GST was payable). Furthermore, andunlike Brownie Wills, this is not solely an omission case but allegations of commissionconsidered in the context of relevant omissions.26[52] Ms Woods further argued that Mr Ongley was entitled to hedge his bets as towhether GST was payable or not. The words used ("plus GST, if any") were entirelyconsistent with his doing so. Ms Woods contended that the allegation that Mr Ongleyhad a duty to ascertain the correct legal position and then to state it accurately is insubstance an allegation that he had a duty to advise the plaintiffs about the GSTposition and that is clearly going too far, especially when he is the agent for the vendorand not for the purchaser. There can be, Ms Woods submitted, no duty on an agent toprovide technical GST advice to a purchaser but simply to record whether the vendoris GST-registered. However, and despite the force of that submission, the duty of carecontended for by the plaintiffs arguably does not go as far as Ms Woods claimed. It isnot alleged that Mr Ongley had a duty necessarily to advise the plaintiffs about theGST position but, in circumstances where he knew that it was payable and failed in anallegedly elementary way to represent the correct position (and in circumstanceswhere he failed to complete the relevant sch 2, failed to ensure that the plaintiffsinitialled the deletions and cross-outs, particularly those pertaining to GST and wherehe knew they did not have legal advice), the relevant assumption of responsibility hasbeen made out.[53] The points raised by Ms Woods will need to be tested against the evidence andfactual findings made by the trial Judge. This might sensibly include evidence as tostandard and best practice for real estate agents when dealing with GST issues.[54] The allegation that the agent knew that GST was payable is not in the statementof claim but is made in the affidavit of Ms Johnston of 28 June 2019. The statementof claim at 2.4(f) alleges that the agent failed to properly understand the GST26 At 32 Tipping J noted that, traditionally, the law of torts has been cautious in recognising liabilityfor negligence in cases involving an omission to act.implications of the transaction. On the face of it, that allegation is inconsistent withMs Johnston's assertion in her affidavit as to the agent's state of knowledge.[55] However, in a strike out proceeding, if a defect in a pleading can be cured byamendment, the claim should not be struck out. In determining that there is anarguable duty of care here, I proceed on the basis that the claim that Mr Ongley knewthat GST was payable, can be established.[56] It seems likely in this case that the pleadings will need to be amended and ifthe plaintiff continues to place importance and reliance on the allegation that the agentknew that GST was payable, then such allegation ought properly to be the subject ofa specific pleading/particular.[57] As to policy factors, I find that there are no clear or compelling policy factorsthat the defendant can rely on at this summary stage to establish that a duty of carecannot arise. The McCullagh case does of course provide support for the plaintiffs'contention that the competing fiduciary duties owed by a real estate agent to thevendor, do not, in appropriate factual circumstances, prevent the imposition of a dutyof care owed to a purchaser.[58] In Couch v Attorney-General, the Supreme Court held that proper andnecessary limits to liability and negligence do not require blanket immunity throughover-restriction of the circumstances in which a duty of care arises.27 It held that thereis particular risk of such over-restriction on summary consideration on strike out wherepolicy considerations are said to preclude a duty of care. It added that policyconsiderations arise and overlap at all three inquiries in a claim for negligence: dutyof care, breach and remoteness of loss.[59] In relation to the policy limb of the duty inquiry, I accept Ms Woods'submission that a duty of care needs to be established at common law independent ofany statutory duty. However, I find that the statutory regime here might neverthelessbe relevant in informing the proximity and policy arguments under the duty analysis.27 Couch v Attorney-General, above n 6, at [34].That will be especially the case where the statutory standard mirrors the tortiousstandard, that is an obligation to exercise reasonable care and skill, as in this case.[60] I now turn briefly to address breach and causation issues.[61] I accept Ms Wood's contention that the plaintiffs cannot rely on the allegedoral representation of 7 March 2017 as a cause of their loss because it was made beforeany formal offer had been submitted by Ms Johnston and Mr Ongley had noinformation about the purchaser at that time. Likewise, I accept the submission thatany representation made after the agreement for sale and purchase agreements hadbeen signed cannot be an operative cause of any loss. However, as Mr Robinsonsubmitted, the representation in the agreements for sale and purchase is arguablyactionable and a material representation. As already noted, the representations needto be considered in the context of a number of allegedly serious omissions specificallyin relation to GST. These are said to have been factors which would have potentiallyalerted the purchasers to there being a GST issue and the need to get legal advice aboutit.[62] I accept Ms Woods' submission that the CAC's finding that the agent wasobliged to orally advise Ms Johnston about the need to get legal advice will notnecessarily provide an answer to the defendant's contention that there was no breachof any obligation to do so (that is, no breach of the standard of care). This is becausethe information sent to the plaintiffs clearly spelt out the need for legal advice and thesale and purchase agreements themselves, and the particular reference to GST, madeit very clear that the purchasers should get legal advice about GST issues.[63] However, questions of breach and causation often involve disputed questionsof fact, and that is certainly the case here.28 Despite the force of Ms Woods'submission, these matters ought to be tested at trial.[64] Finally, I note the evidence suggests that the vendor's solicitors were unawareuntil late in the process (just before settlement) that GST was payable on the two28 See Sew Hoy & Sons Ltd (in rec and in liq) v Coopers & Lybrand [1996] 1 NZLR 392 (CA) at407 as cited in Sinclair v New Zealand Racing Board [2015] NZHC 2067, [2016] 2 NZLR 186 at[99].transactions. That may provide some support to the plaintiffs' contention, asMr Robinson submitted, that the plaintiffs were misled and that it was reasonable inthe circumstances for them to have relied upon Mr Ongley. Equally, it might be saidthat if the vendor's solicitors were unaware of the GST liability, then it is not fair orreasonable to bestow an obligation on the real estate agent (who in any event is theagent of the vendor). The factual circumstances all need to be tested at trial.[65] For the above reasons, I decline to strike out the cause of action in negligence(or, more properly, negligent misstatement).Issue two: Should the Court grant summary judgment for the defendant?[66] In light of the above finding, I deal with this issue briefly. Under r 12.2(2) ofthe High Court Rules, this Court will only grant defendant summary judgment wherethe defendant satisfies the Court that none of the plaintiffs' causes of action cansucceed. Having already found that the negligence cause of action might succeed (thatis, that there is a reasonably arguable case on the pleadings), the defendant's summaryjudgment application must necessarily also fail.[67] I am therefore not required, and do not propose, to address the FTA issue.Result[68] The defendant's applications for striking out the claim in negligence and forsummary judgment in its favour on both their negligence and Fair Trading Act 1986causes of action are dismissed.[69] As to costs, I am of the preliminary view that the defendant should pay costsand disbursement to the plaintiffs on a 2B basis. If costs cannot be agreed, thenmemoranda are to be filed within 14 days.__________________________Associate Judge P J Andrew