Having a letter from builder of their high-end Queenstown home to get release of bank funding did not give owners Simon and Judith Davies grounds to sue when the letter understated completion costs, the Court of Appeal ruled.
The court was told the Davies were under financial pressure in 2016 to complete construction of their architect designed home on a lifestyle block at Closeburn Station. It was not a fixed price contract; the Davies were paying for labour and materials. During construction, there were multiple alterations to draft plans at the Davies’ request with inclusion of what builder Kerry Smith described as more expensive products than normally included in an average high-end build. The Davies were under pressure; they needed release of bank funding. The builder was under pressure; he needed progress payments from the Davies.
Evidence was given that Mr Davies requested a letter from their builder stating that the estimated costs of completion would be $700,000. The builder was told this was needed for release of bank funding. The content of this letter subsequently led to a Fair Trading Act claim. The Davies said the builder’s letter was inaccurate; building costs to completion proved to be well in excess of $700,000. They sued. Mr Davies accepted the letter was inaccurate as a statement of final costs; not all labour costs and subcontractor costs were included, and the extent and design of hard landscaping were yet to be agreed.
In the High Court, the trial judge ruled it was disingenuous of the Davies to claim the builder had represented $700,000 to be the final completion costs when this was a figure put forward by the Davies themselves in order to uplift bank funding. Dismissal of the Fair Trading Act claim was upheld by the Court of Appeal. The letter was not a promise by the builder that completion costs would not exceed $700,000; it was an estimate of completion costs to release bank funding. The letter was not deceptive or misleading from the Davies’ perspective, the Court of Appeal ruled.
The court was told Kerry Smith stopped work after the Davies moved in with the project not fully complete. To this point, build costs had reached $3.6 million. The High Court ordered the Davies pay $99,300 for the builder’s remaining unpaid invoices. Against this, the Davies were permitted to deduct $4400 for faulty work.
Davies v. K M Smith Builder Ltd – Court of Appeal (15.08.22)
22.145