New Zealand Courts Wellington City Council v Dallas  NZCA 631
At issue was a leaky house built by Kingdom Residential Housing Ltd (Kingdom). The home owners sued Wellington City Council for defects in the house's construction. The Council in turn sued third parties involved in the construction process, including Mr Dallas, the former managing director of Kingdom. It alleged that Mr Dallas had been misleading by stating that the kick outs on the house had been completed by a Kingdom plumber and that the house complied with the Building Act 1991.
The High Court found that Mr Dallas did not breach s 9 of the Fair Trading Act.
But the Court of Appeal reversed the High Court's decision, saying that the High Court had not asked the right question. It had asked whether the Council's reliance on Mr Dallas was reasonable but the test, under s 9 of the Act, is whether a reasonable person in the Council's position and with characteristics which Mr Dallas knew or ought to have known the Council to have, would likely have been misled or deceived by the relevant statements.
Mr Dallas raised the "mere conduit" of information defence but the Court rejected this argument on the basis that Mr Dallas did not make plain that he was merely passing on information. Mr Dallas' letter responding to the Council's questions began with the sentence, "I have worked through your letter and have numbered your points along with the information needed as follows". The Court found that, through this statement, Mr Dallas presented "himself as having worked through the issues and as having personal involvement in or knowledge of the solutions to the Council's requirements".
The Court concluded that there should be a 50% reduction in liability because the Council failed to follow its usual process of checking that the kick outs were actually installed.
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