By: Richard Flinn and Isaac Black
Ruth Renton Weine and Michael David Hofmann-Body as Trustees of the Ruth Weine Family Trust v Tadd Management Limited [2024] NZCA 323
At a glance
- The Court of Appeal has released a decision that provides helpful clarification for professionals as to the actionability of statements of opinion.
- Overturning the first instance decision, the Court in Ruth Weine Family Trust v Tadd Management Limited found that a vendor who had provided a seismic assessment and associated marketing statements was not liable for misrepresentation to the purchaser relying on those statements, even though the NBS rating mentioned in the report turned out to be overstated.
- The Court emphasised that statements passed on to prospective purchasers must be considered in the overall context to determine whether they comprise representations of fact that are actionable as misrepresentation. A statement of engineering opinion as to the seismic strength of a building should not be taken as a statement of fact as to the correctness of the opinion, particularly where the report is an initial assessment only. For similar reasons, the Court also found that an incorrect opinion cannot by itself find a claim of common mistake under s24 of the Contract and Commercial Law Act 2007 (CCLA).
- Professionals writing or passing on reports should ensure that their remarks are appropriately qualified and expressed in terms to clarify the basis of the conclusions reached. Appropriate disclaimers should also be considered to protect against third party liability.
The facts
The claim related to the sale of a Lower Hutt commercial building by the Ruth Weine Family Trust (the Vendor) to Tadd Management Ltd (the Purchaser).
During marketing for the sale of its building, the Vendor, through its agent, provided information to prospective purchasers about the building’s seismic strength. This information stated that an initial seismic assessment (ISA) found the building to have a seismic strength, when compared against the strength of a new building (NBS), to be 60%. There was a letter included alongside this from the engineer who undertook this assessment which said that this was “good”.
The Purchaser entered the contract for the sale of the building in light of this information. Following the settlement, the Purchaser engaged two other engineers to provide detailed seismic assessments (DSAs) who respectively concluded that the building’s seismic strength was 10% and 30% that of a new building. This rating placed the building’s seismic strength as being much less than understood at the time of sale.
High Court decision
At the High Court, the Purchaser successfully claimed against the Vendor for misrepresentation under s35 of the CCLA on the basis that the ISA was an expert report containing statements of fact. The Vendor did more than simply “pass on” the ISA in providing it to the Purchaser during marketing. The comment by the engineer that this rating was “good” was endorsed by the Vendors and was an “unqualified statement of fact that stood independently of the ISA”. These were representations which were incorrect.
The trial judge found that relief was also available in mistake under section 24 of the CCLA because the misapprehension as to the seismic strength of the building comprised a common mistake which induced both parties to enter into the contract.
The High Court also dismissed third party claims against the engineer.¹
Court of Appeal decision
The Court of Appeal overturned the decision of the High Court, concluding that there was no misrepresentation and no common mistake.
Misrepresentation
A misrepresentation requires an untrue statement of present or past fact. The Court focused on the context of the ISA to determine whether its conclusions and ancillary comments by the engineer amounted to statements of fact when presented as marketing material for the sale of the building.
The Court held that the statement that the building had a “60% NBS” was not a statement of fact but rather a “matter of expert opinion”.
It was relevant that this statement was made in the context of an initial assessment. The fact that later detailed assessments proved a different result did not negate the veracity of the initial assessment. Detailed assessments had different assessment guidelines and a different purpose. The information provided alongside this statement contained disclaimers that this rating could change with a detailed assessment.
Regarding the representation that the ISA was “good”, this needed to be considered in the overall context. A qualitative statement of that kind did not stand independently from the ISA. It was a comment about the conclusions reached in the ISA, rather than an independent comment verifying the resilience of the building. An initial assessment that a building had a 60% NBS was indeed “good” in the sense contemplated.
With the representations considered in their whole context, especially that the ISA was an initial assessment prepared with skill and care, there were no misrepresentations made by the vendors.
Common mistake
The Court noted that relief for common mistakes can still be available even where no misrepresentation occurs. However, there was no common mistake here. There was no evidence that the parties had a common mistaken belief as to the actual seismic performance of the building. The common belief held by the parties was that the ISA rating was 60%, which was correct.
The implications
This case provides some reassurance to professionals engaged in seismic assessments or providing other kinds of professional reports to property owners, as well as to real estate agents involved in the marketing of property where such reports have been obtained. The Court of Appeal has reiterated that there is no misrepresentation for the purposes of s35 of the CCLA solely because a statement of expert opinion is provided to a purchaser (or commented on by a vendor or its agent).
Report writers should ensure that their advice sets out the assumptions and limitations applicable to their conclusions to avoid any inference that the conclusions reached are statements of fact as opposed to qualified opinion. They should also ensure that their advice is provided with appropriate disclaimers protecting against third party liability. Such disclaimers should be included prominently in the body of their reports.
Finally, real estate agents would be well-advised to avoid their assessments as to the conclusions reached in any reports or opinions provided to prospective purchasers. If any such comments are made, care should be taken that they cannot be interpreted as independent qualitative assessments or statements of fact regarding the property.