The initial seismic assessment was an expert opinion, not a factual misrepresentation
The Court of Appeal overturned a High Court decision that found misrepresentation and common mistake regarding a building's seismic capacity, ruling that the initial seismic assessment was an expert opinion, not a factual misrepresentation.
The Ruth Weine Family Trust owned a three-storey commercial property in Lower Hutt, which they decided to sell. They enlisted Bayleys Realty Group to market the property. Bayleys advised obtaining an Initial Seismic Assessment (ISA) from New Zealand Consulting Engineers Ltd (NZCE), which rated the building at 60% of the New Building Standard (NBS). This rating indicated the building was an "earthquake risk" but not "earthquake prone."
Bayleys included this ISA in the marketing materials provided to prospective purchasers, alongside a letter from NZCE suggesting that a more detailed assessment (DSA) could yield a higher seismic rating. Tadd Management Ltd. purchased the building at auction in December 2017 for $1,427,000. After the purchase, Tadd obtained two DSAs, which rated the building at 10% and 30% NBS, respectively. Tadd then initiated legal proceedings against the Trustees, claiming misrepresentation and common mistakes regarding the building's seismic capacity.
The High Court ruled in favour of Tadd, stating that the trustees had misrepresented the building's seismic capacity as 60% NBS and that both parties were under the common mistake that the building's seismic rating was 60% NBS at the time of sale. The judge awarded Tadd $592,000 plus costs for an additional DSA and interest.
On appeal, the Court of Appeal reconsidered the High Court's findings. The appellate court determined that the ISA was an expert opinion rather than a statement of fact and that the Trustees' reliance on this ISA did not constitute a misrepresentation. The court emphasised that seismic assessments involve professional judgment and can vary significantly between experts. It noted that the ISA was conducted with the skill, care, and diligence expected of a competent professional.
The Court of Appeal also found that the trustees' statement in the Information Memorandum describing the building's seismic rating as "good" was contextually linked to the ISA and not an independent factual assertion. The court concluded that the trustees did not misrepresent the NBS rating.
Regarding the common mistake claim, the Court of Appeal ruled that both parties' belief that the ISA's 60% NBS rating was accurate did not constitute a mistake. The court noted that the differing DSA results did not imply that the ISA rating was incorrect at the time of sale, reinforcing that the ISA was a professionally conducted predictive assessment.
Ultimately, the Court of Appeal allowed the trustees' appeal, setting aside the High Court judgment. The appellate court awarded the trustees' costs for the appeal and directed that costs in the High Court be reassessed in light of this judgment.
