Tim Bates and Fiona Dobroshi of Auckland legal firm TM Bates & Co assess the High Court decision in Stott v Uplifting Homes Ltd, where the plaintiffs claim the defendant company’s relocation and building work was substandard.
In this case, the plaintiffs sought to cancel their contract with the defendant company, alleging there was a breach of contract, statutory warranties and statutory guarantees, by relying on the Building Act 2004 (the BA), Consumer Guarantees Act 1993 (the CGA), and Contract and Commercial Law Act 2017 (the CCLA).
Facts
On July 22, 2019, Mr Stott and Ms Savageau (the plaintiffs) entered a contract with Uplifting Homes Ltd (the defendant). The defendant was designated to uplift, transport and re-site a house from Remuera to Katikati.
The contract price was $158,000 inclusive of GST, and accounted for the building consent plans to be drawn and submitted to the local council on the plaintiff’s behalf, with “no changes to the original floor plan” and using “existing roofing materials”.
An issue that stemmed in the relocation process was that the house was transported from a low wind zone to a high wind zone, which became a concern for the plaintiffs.
Due to the shift in environment, the Western Bay of Plenty District Council (the council) building consent requirements required the council to impose specific requirements for the relocated house in terms of the foundations, internal bracing and roof structure.
The house was placed on temporary foundations until the building consent was issued. The plaintiffs were distraught at the state of the house upon its arrival and establishment, and believed damage would continue to ensue while remaining on the temporary foundations.
The defendant assured the plaintiffs that the damage was a normal part of relocating, and would not affect the re-siting of the house on permanent foundations.
The defendant tasked Prestige Removals Ltd to complete the work, and on May 13, 2020, a building consent was issued for the relocation.
The works were done sporadically, and by January 2021, the plaintiffs’ builder raised concerns about the quality of the building works.
Consequently, the plaintiffs engaged a registered building inspector and surveyor, with both highlighting substantial issues with the works done, and providing recommendations.
Quantity surveyors estimated remedial works would exceed $520,000, with alternative demolition and make-good costs equating to between $24,000 to $33,000.
Despite attempts made by the defendant to assert its right to remedy under the CGA, the plaintiffs were intent on cancelling the contract, relying on breach of the BA warranties, CGA guarantees and contract, and sought to pursue legal action.
Provisions relied on by the plaintiffs
The plaintiffs alleged various breaches of the Building Act 2004 and, in particular, the implied statutory warranties. Specifically, section 362I (1) provides:
a) that the building work will be carried out:
(i) in a proper and competent manner, and
(ii) in accordance with the plans and specifications set out in the contract, and in accordance with the relevant building consent.
(d) that the building work will:
(i) be carried out with reasonable care and skill, and
(ii) be completed by the date (or within the period) specified in the contract or, if no date or period is specified, within a reasonable time.
Section 362M(2)(b) entitles the home owner to cancel the contract if the builder fails to remedy the breach of warranty within a reasonable period.
Similarly, the plaintiff also alleged breaches of the CGA including:
• Section 28 Guarantee as to reasonable skill and care,
• Section 29 Guarantee as to fitness for particular purpose, and
• Section 30 Guarantee as to time for completion.
Ruling
The High Court ruled that Uplifting failed to carry out its building work for the plaintiffs in a proper and competent manner, in accordance with the building consent and within a reasonable time in breach of the Building Act 2004 warranties implied into the contract.
The High Court also ruled that Uplifting had failed to comply with the Consumer Guarantees Act guarantee as to completion.
It also ruled that the plaintiffs were entitled to cancel the contract. The test applied in assessing this was as follows:
“In my assessment, a reasonable client fully acquainted with breaches of that magnitude would not have entered into the contract. The breaches accordingly being substantial, the Savageau/Stotts were entitled to cancel the contract, as they did.”
The High Court ruled that the relief sought was to be considered on compensatory, rather than damages principles, namely from identification of what the innocent party “actually lost by reason of the breach” rather than their position if the contract had been performed.
The court ultimately found in favour of the plaintiff, although judgment was not entered for the full sum sought.
Note: This article is not intended to be legal advice (nor a substitute for legal advice). No responsibility or liability is accepted by TM Bates & Co nor Building Today to anyone who relies on the information in this article.
