A Wellington family trust was ordered to pay $592,000 damages after marketing material prior to auction of a commercial building highlighted a ‘good NBS rating’ when later seismic surveys identified the building was an earthquake risk.
Wellington sits on a recognised earthquake fault. Purchasers are wary of potential costs to bring buildings up to standard. Buildings in Wellington assessed at less than 67 per cent of New Building Standard (NBS) are treated as an earthquake risk.
The High Court was told Ruth Weine Family Trust sought to allay purchaser concerns by including a seismic report in its marketing pack when selling by auction in 2017 a three-storey commercial building on Queens Drive in Lower Hutt. This included an engineering report assessing the building at 60 per cent NBS and the later addition of a covering letter which said a 70 per cent NBS assessment was possible following a more detailed assessment.
Tadd Management Ltd bought at auction, paying $1.22 million. It intended to upgrade the building. Engineering reports Tadd Management subsequently obtained assessed the NBS rating at time of purchase as being between ten per cent and thirty per cent. Tadd Management sued. It was awarded damages for both misrepresentation and mistake.
Justice Gwyn ruled the Ruth Weine Family Trust was liable for misrepresentation by stating in publicity material as an ‘investment highlight’ that the building had a ‘good NBS rating.’ This was a misstatement of fact, entirely independent of the engineering report and covering letter supplied in the publicity pack, she ruled.
The Trust was also liable in mistake. Both the Trust and Tadd Management as parties to the sale were labouring under the common mistake that the NBS was at least 60 per cent. The result of this mistake was that Tadd Management paid too much.
Damages of $592,000 were assessed as the difference between the price paid by Tadd Management and the actual value of the building when sold.
Tadd Management Ltd v. Ruth Weine Family Trust – High Court (5.04.23)
23.042