Buyer Beware (continued)

In an article written for our Summer 2013/2014 edition entitled “Buyer Beware – Property Purchaser’s responsibility to make inquiries”, we discussed the High Court decision of Johnson & Ors v Auckland Council and the responsibility that purchasers have to make their own inquiries when buying a property. In this case the High Court found that the purchasers of a leaky building had contributed to their loss through their own negligent conduct in failing to take appropriate steps that a prudent purchaser would have taken when purchasing a property. Ultimately, the Court held the amount recoverable by the purchasers was the difference between the purchase price and the market value of the property in its defective state less 70 per cent for contributory negligence, not the cost of repairs as contended by the purchasers.
The purchasers then appealed that decision, the basis of their argument still being that the Code of Compliance Certificate (‘CCC’) should not have been issued by Auckland Council and represented to them that the property had been built properly.
The Court of Appeal was required to consider whether the award made by the High Court was appropriate in the circumstances and reflected the correct amount. There was no doubt in the Court of Appeal that the purchasers' own negligence contributed their loss. The major issue for determination was whether the purchasers were ‘alert’ to weathertightness problems and if so were aware of the need to make further enquiries. Ultimately the Court of Appeal found that the High Court was incorrect in their findings as to the scope of work covered by the CCC. Further the Court of Appeal was of the belief that “while the [purchasers] were not certain that the property was a leaky building, they were aware of the possibility and chose to gamble against that possibility” (at [68]). The end result being in favour of the purchasers, that the damages recoverable be based on cost of repairs less 40 per cent for contributory negligence.
The purchasers were only partially successful in that the Court of Appeal found that the purchasers should have made further inquiries before allowing the Agreement for Sale and Purchase to become unconditional. Generally, purchasers should not solely rely upon the accuracy of Council documentation. They should make their own further inquiries such as obtaining a comprehensive Builder's Report. Let the buyer beware.