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The complex world of seismic strengthening, negligence, deception, and misrepresentation

11 May 2023

| Author: Heidi Bendikson

Contract and Commercial Law Act 2017 – Fair Trading Act 1986 – claims against vendor for misrepresentation and common mistake relating to building’s seismic report – claims by defendant and third party engineering consultants for negligence, breach of contract and misleading and deceptive conduct – applicable principles – whether seismic report represents opinion or statement of fact – whether purchaser induced to purchase by seismic report – whether seismic report and statement regarding earthquake strength a misrepresentation – effect of disclaimer – contributory negligence – independent trustee liability – whether limitation of liability clause applies –

Tadd Management Limited v Weine [2023] NZHC 764 Gwyn J

Tadd Management Limited (Tadd) purchased a commercial property from Ruth Renton Weine and Michael David Hoffman-Body as trustees of the Ruth Renton Weine Family Trust (Weine) at auction. Neither trustee was a beneficiary of the trust.

Prior to the auction, Weine’s real estate agents provided Tadd and other potential purchasers an Initial Seismic Assessment (ISA) prepared by New Zealand Consulting Engineers (NZCEL) which rated the Property as having a 60% New Building Standard (NBS).  Real estate marketing materials described the property as having a “good NBS rating”.

Potential purchasers were also given a cover letter that said an ISA was usually more conservative than a detailed seismic assessment (DSA) and that a building which rates 60% NBS for an ISA would probably exceed 70% NBS in a more detailed assessment.

However, the letter was provided in response to specific questions by a trustee and not on the understanding it would be given to prospective purchasers. Other correspondence between the trustee and another NZCEL engineer (not provided to purchasers) said it was unlikely a detailed assessment would improve the building’s NBR rating.

After purchasing the property, two DSAs commissioned by Tadd assessed the building as having a much lower NBS rating (10% and 30%).  Tadd undertook significant strengthening and refurbishment to bring the property up to 100% NBS.

Tadd then brought a claim against Weine, saying it was induced to purchase the property by its incorrect representations about the NBS rating. In the alternative, Tadd submitted the parties acted under the common mistake that the property was 60% NBS when entering the agreement for sale and purchase (ASP).

Weine brought a claim against NZCEL (joined as a third party to the proceeding), which undertook the ISA, for breach of contract, negligence, and misleading and deceptive conduct under the Fair Trading Act 1986 (FTA).

Applicable principles – discussion of misrepresentation – whether ISA was an opinion or statement of fact – High Court found ISA was not an opinion, but covering letter was – High Court noted that while not separately actionable, the covering letter had the effect of reinforcing ISA – detailed analysis of misrepresentation precedent – High Court found “good NBS” representation in marketing material incorrect – High Court found ISA disclaimer did not have a material impact on Weine’s liability for misrepresentation as it was generic and tempered by covering letter – discussion of context of misrepresentation, including short time-frame to auction limiting opportunity to obtain a DSA prior to purchase – factual discussion of whether misrepresentation induced Tadd to purchase property – discussion of contributory negligence in context of contractual claim –  High Court found Tadd’s claim purely contractual therefore contributory negligence could not apply – discussion of legal principles relating to common mistake – noted the ASP did not expressly or by implication provide for the risk of mistakes – question of whether independent trustees liable, notwithstanding clause 18 of ASP, left open –  whether third party, NZCEL, liable for negligence, breach of contract or misrepresentation under FTA – High Court found covering letter was not misleading, but otherwise within scope of engagement and therefore included in NZCEL’s limitation of liability clause – discussion of evidence relating to breach of contract claim against NZCEL and whether ISA was prepared with due care – High Court found breach of contract and negligent breach of contract not made out – discussion of precedent on misleading conduct – whether NZCEL services acquired “in trade” – whether limitation of liability clause applied to FTA claim – High Court found (obiter) limitation clause wide enough to apply, fair and reasonable to be enforced.

HeldWeine is liable for contractual misrepresentation and in the alternative, a common mistake. Weine ordered to pay $592,000, being the difference in value between the property as represented and the actual value plus costs of DSA, plus interest.  Weine’s claim against NZCEL in contract and negligence and FTA was dismissed.


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