Jared Savage

Jared Savage is the New Zealand Herald's investigations editor.

Leaky home buyers blamed

Judge says couple took 'calculated risk' but ratepayers still have to stump up $380,500.

Ross and Linda Johnson paid $3.9 million for this Takapuna home at a mortgagee sale, then had to spend $1.9 million fixing the leaks. Photo / Supplied
Ross and Linda Johnson paid $3.9 million for this Takapuna home at a mortgagee sale, then had to spend $1.9 million fixing the leaks. Photo / Supplied

A wealthy couple who bought a leaky home have failed in a $2 million court case against the Auckland Council.

But ratepayers will have to pay them $380,500, despite a High Court judge saying they were largely "the authors of their own misfortune".

Ross and Linda Johnson bought the Takapuna property for $3.9 million at a mortgagee sale in April 2009.

Their "dream home" was then discovered to have "weathertightness problems" and the couple spent $3.7 million on remedial work and interior renovation. The repair bill alone was $1.9 million.

The Johnsons then took legal action against the Auckland Council, as its predecessor the North Shore City Council issued a code of compliance certificate in 2004 for significant alterations to the house.

The previous owners had resource consent to construct new rooms and an underground basement - but not the recladding of the entire house that took place.

The cladding was later found to be defective and the Auckland Council accepted the Johnsons' legal claim that the council was negligent in signing off the code of compliance.

They sought $1.9 million from the council to cover the cost of the repairs, as well as hundreds of thousands of dollars in damages.

But lawyers for the council argued that the Johnsons failed to take reasonable steps before buying the house, such as a pre-purchase building report, a legal term known as "contributory negligence". The Johnsons' lawyer said the couple should have been able to rely on the code of compliance certificate.

Evidence was given at the High Court hearing that the Johnsons were aware of possible "weathertightness problems" but did not seek expert advice on whether the home was leaky before making an offer.

In a judgment released this week, Justice Peter Woodhouse said he was satisfied the financial loss suffered by the Johnsons was partly their fault - and the Auckland Council was partly to blame.

He said the Johnsons were experienced owners of valuable property who had been investigating the purchase of a new home, during a time when widespread problems with leaky buildings were well publicised.

Yet they went ahead with the purchase without taking any of the prudent steps.

"I am satisfied they took a calculated risk," said Justice Woodhouse.

"In my judgment the [Johnsons] were in substantial measure the authors of their own misfortune."

He said the clear impression he formed was that Mrs Johnson was determined to purchase her "dream home" at what was considered a bargain price.

"I am satisfied that the [Johnsons'] approach to risk was materially influenced by the fact it was a mortgagee sale," the judge said. "I am satisfied that there was a belief that the price being paid contained a buffer in respect of risk."

He ruled that damages sought by the Johnsons be reduced by 70 per cent.

But instead of using the $1.9 million repair bill sought by the Johnsons, Justice Woodhouse said the starting point for damages should be the difference between the $3.9 million purchase price and what the house was truly worth as a "leaky home" at the time of sale.

He chose the mid-point of two market valuations of the home at $2.675 million - $1.235 million less than the Johnsons paid.

The couple were awarded 30 per cent, or $370,500, plus a further $10,000 in general damages.

- NZ Herald

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