Most Read Contributor in New Zealand, September 2016
Follow your head not your heart when buying your dream home.
That is the effect of a
recent decision1 in which the High Court slashed the
claim of a couple who bought a multi-million dollar property
despite clear evidence that it had leaky building issues.
We explain the Court's thinking and set out the steps
purchasers should take to avoid finding themselves in a similar
The house was purchased in April 2009, by which time leaky
building issues were well-known. The plaintiff purchasers chose to
proceed despite the fact that:
the house was offered at a mortgagee sale with none of the
usual vendor warranties in the sale and purchase agreement
the style of construction was such the house was at a high risk
of containing weathertightness defects (stucco cladding, flat
roofs, no eaves and a number of enclosed balconies)
the house had earlier been completely re-clad without Council
sign-off (something apparent from the Council file)
there were obvious signs the house leaked, which the purchaser
saw during an open home (a musty smell, timber framing in visibly
poor condition and rusty steel beams)
the purchasers asked about weathertightness issues during the
open home and said the house seemed "risky" and
the purchasers had obtained independent legal advice but had
taken none of the further steps the Court inferred they should have
Almost immediately after they settled, the purchasers obtained
expert weathertightness reports all of which listed numerous
defects in the way the house had been built. Those defects were
visible at the time of purchase and required extensive repairs.
How the court saw it
Weighing up these factors, the Court decided that the purchasers
were largely the authors of their own misfortune and had been
careless in the way they went about the purchase. For that reason,
the Court reduced by 70% the damages to which they would otherwise
have been entitled.
An important factor influencing the Court was the
plaintiffs' attitude towards the purchase. It seems that this
property was their "dream home" and they decided to take
a "calculated risk" in purchasing it despite the obvious
The Court did not accept that the circumstances of the mortgagee
sale, which provided limited opportunity to carry out proper
investigations, excused the plaintiffs from taking steps to protect
themselves. They always had the option of simply not buying the
house if they felt it was too risky.
Nor did the Court agree that purchasers in the plaintiffs'
position are entitled simply to rely on code compliance
certificates instead of conducting their own enquiries,
particularly where there was clear countervailing evidence of
defects. The leaky building crisis has shown that these
certificates are not always reliable.
A 70% reduction is at the upper end of the contributory
negligence spectrum. While all cases of contributory negligence
turn on their own facts, this decision shows that the Court will
take a hard line where the circumstances justify it.
The Court agreed with conveyancing experts who said that
prospective purchasers should take the following steps to protect
themselves before committing to a sale:
obtain independent legal advice
search the Council file on the property and confirm that all
building work has been properly certified, and
obtain a pre-purchase building report from a suitably qualified
Where time or circumstance do not allow for proper
investigations, it is wise to submit a conditional offer or
consider not going ahead with the purchase at all.
This case also demonstrates that notwithstanding any negligence
committed by those involved in the construction of a home, the
Court will expect the purchasers to take realistic, sensible and
practical steps to assess the wisdom of their purchase.
Reckless blindness to available evidence will not generate much
sympathy. Nor will an emotional attachment to the property when it
overcomes a prudent assessment of risk.
Our thanks to Humphrey Glennie and Simon Elliot for
preparing this Brief Counsel.
1Johnson v Auckland Council 
The information in this article is for informative purposes
only and should not be relied on as legal advice. Please contact
Chapman Tripp for advice tailored to your situation.
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