An Auckland couple who own a $2 million leaky home in an upmarket Auckland suburb have an "arguable case" in their lawsuit against the pair that sold them the property, a High Court judge says.
Patrick and Colleen Edwards bought a 4-bedroom St Heliers home in 2011 from previous owners Nelson and Elizabeth Cull for $1.95 million.
Two years later the Edwards discovered "significant water ingress problems" at the property and say there are numerous defects that need fixing. They estimate this will cost about $750,000 and say they also have suffered $160,000 in other losses.
The Edwards have sued a string of people who they claim are responsible for these losses, including the Culls. Other defendants named on court documents include the Auckland Council, a building firm, a plastering company, a set of engineers and a building inspector.
The Edwards say the Culls are liable to them for damages for alleged misrepresentation in reports provided by a building inspection firm.
The Culls, according to a High Court judgement released this month, engaged a company called Dwell Healthy Homes to provide an inspection report before they put the property on the market.
This was prepared to advise the Culls and any potential purchasers whether there would be any significant moisture issues in the house.
Although there were some disclaimers, this report appeared to give the property a clean bill of health, the court judgement said.
While reassured by the statements in this report, the Edwards got a separate company to make another inspection.
This company, in a report, identified some moisture stains and recommended further investigations be done.
Dwell Healthy Home's Anthony Winter responded to this second report in a letter with a "dismissive" tone, the court judgement said.
After receiving this letter, the Edwards then bought the St Heliers house at auction in March 2011.
The Culls say the weathertightness issues raised in the court action have come as a complete surprise and earlier this month applied for summary judgement against the Edwards, in essence arguing their claims could not succeed.
The Culls' lawyer, Tim Rainey, said for his clients to be personally exposed they would have to know themselves the building had water ingress problems and allowed the report disclaiming any issues to go ahead.
Or, Rainey said, the Culls would be liable if they actually endorsed the statements made by Dwell Healthy Homes.
The Edwards' lawyer, Tim Allan, said it was wrong to think of the inspection company as an independent expert and that the company was part of a strategic plan for the sale of the property.
In his decision, Associate Judge Roger Bell said it was arguable that Dwell Healthy Homes had gone beyond being a disinterested expert and had become part of the sales force and an agent of the Culls.
"The role he [Winter] had taken on was to smooth away difficulties between parties trying to come to an agreement for sale and purchase," Associate Judge Bell said.
"His conduct was directed at encouraging the Edwards to attend the auction and bid. On that basis, Mr Winter and his company were no longer simply disinterested experts supplying information at the request of the vendors, but had become part of the sales force," the judge said.
Associate Judge Bell dismissed the Culls' summary judgement application.
"I find that, notwithstanding the matters raised by Mr and Mrs Cull, the Edwards have an arguable case against Mr and Mrs Cull for misrepresentation under s 6 of the Contractual Remedies Act," he said.
The judge awards costs to the Edwards and made it clear he was only dealing with issues between the Culls and the Edwards:
"Nothing I say in this decision should be treated as making any findings as to any rights or liabilities applying either between the Edwards and Dwell Healthy Homes Ltd and Mr Winter or between the Culls and Dwell Healthy homes Ltd and Mr Winter," he said.