Failing
to disclose during negotiations for the sale of a Parnell residential unit that
a threat of potential legal action had been made against the body corporate
cost the vendor damages of $50,000.
In May 2007, Western Park
Village Ltd agreed to purchase a residential unit at 30 Augustus Terrace,
Parnell in Auckland from Mr Baho at a price of $1.225 million. It later used a failure by Mr Baho to disclose
legal problems faced by the Augustus Terrace body corporate as grounds to try
and escape the contract.
To finance the purchase, part of the price was left in secured by a mortgage back to Mr Baho. Remaining payments were due in two lump sums. The Court of Appeal was told Western Park defaulted on payment of the second instalment. Discussions over rescheduling this debt failed. Western Park then sought to cancel its purchase, alleging breaches of contract by Mr Baho. By the time the case reached the Court of Appeal, the central issue was liability for rock and debris falling down a cliff from the Augustus Terrace property on to buildings below.
To finance the purchase, part of the price was left in secured by a mortgage back to Mr Baho. Remaining payments were due in two lump sums. The Court of Appeal was told Western Park defaulted on payment of the second instalment. Discussions over rescheduling this debt failed. Western Park then sought to cancel its purchase, alleging breaches of contract by Mr Baho. By the time the case reached the Court of Appeal, the central issue was liability for rock and debris falling down a cliff from the Augustus Terrace property on to buildings below.
Evidence was given that
rockfall debris had been an ongoing problem for at least a decade. A geo-textile net had been installed to catch
rocks falling, but this was damaged in a substantial slip. In 2006, the body
corporate controlling the Augustus Terrace development received a letter from
the neighbour’s solicitors requiring specified remedial work on the cliff face
to commence without delay. This was coupled
with a warning that legal action would be taken otherwise.
Western Park said it was not
told of this threat when buying the following year. Within months of this purchase, the Augustus
Terrace body corporate was sued in nuisance for damage caused by the ongoing
rockfall. The court was told the dispute
was settled out of court with Western Park paying some $33,600 as its share of
the body corporate’s remediation costs.
The Court of Appeal said the
failure by Mr Baho to disclose the fact of the ongoing dispute was a breach of
a specific clause in the agreement for sale of purchase where he stated he had
no knowledge of the possibility of any proceedings being issued against the
body corporate.
A prospective purchaser made aware
of this threatened legal action would make inquiries about the likely cost of
necessary remediation work and deduct this figure from the price offered, said
the court. Damages of $50,000 were awarded
to Western Park. This sum was to be set
off against the $204,070 owed to Mr Baho for the still unpaid second instalment
on the mortgage back.
Western
Park Village v. Baho – Court of Appeal (19.12.14)
15.004