The most common cause of action in WHT cases is negligence. In order for such a claim to be successful those parties who are alleged to be responsible for the damage/s must have owed a duty of care to the claimant. There must also be demonstrated negligence that has resulted in damage or loss. Therefore to be successful in a claim based on negligence the claimant must establish:

• That the respondent owed the claimant a duty of care;
• That the respondent acted in such a way as to breach the duty of care - i.e. they were careless or negligent;
• The damage suffered by the claimant was caused by the respondent's breach of duty - i.e. the leaks in the house were caused (or partially caused) by the respondent; and
• The damage was a likely consequence of the breach

Duty of Care in WHT claims

A duty of care arises out of a relationship between parties. There is no "all-embracing" test that can be applied in every case to determine the question of duty. However the courts have laid down some guiding principles which provide a reference point.

In particular a duty of care has been found to be owed by:

• A builder to a subsequent purchaser (Bowen v Paramount Builders (Hamilton) Ltd and DBH 01514, 02643 & 01086);
• A local authority to the owner (Mt Albert Borough Council v Johnson and Invercargill City Council v Hamlin and DBH 00277, 00376, 00134);
• A subcontractor to a purchaser (Bevan Investments Ltd v Blackhall & Struthers (No 2) and DBH 00465, DBH 02089);
• A manufacturer to a purchaser (DBH 00540);
• A designer to a purchaser (Bowen v Paramount Builders and DBH 01276, 02368, 01505).

The questions to address in a possible claim for negligence are:

• Does the respondent owe the claimant a duty of care?
• Was the respondent negligent or careless to the extent that they breached that duty of care?
• Did the respondent's breach of the duty of care cause the house to leak or was it a contributing factor to the causes of the house leaking?
• Are there any issues or defences that could reduce the potential liability of the respondent?

A breach of contract claim primarily focuses on the obligations that different people have under a given contract. The role then for the Tribunal is to determine whether or not a respondent did or did not breach their obligations under a contract. In order to make that determination the Tribunal must be satisfied that the Claimant has met certain requirements before pursuing a breach of contract cause of action. The diagram below outlines those requirements.

In a typical building project there are a number of parties involved and each of those parties are all linked together by a "web of contracts". Depending then on the size of the project, the web of contracts will either involve a relatively small and simple web of contracts (see Figure 1) whereas a larger project will involve a bigger and more complex web of contracts (see Figure 2).

Figure 1

Simple Web of Contracts

Figure 2

Complex Web of Contracts

The most important part of a breach of contract claim is the specific links or contracts (as shown by the arrows in the diagrams above) that connect one party to another party. This is because in order for a claimant to bring a breach of contract claim against a particular respondent, that respondent must be at the other end of the link. For example, using Figure 2, the "Owner" only has a link or contract with the Architect, the Building Company, the Painter, the New Owner, and the Real Estate Agent and so the Owner is entitled to bring a breach of contract claim against those parties only. That means then that the Owner cannot bring a breach of contract claim against the plasterer or the roofer for instance, because there the Owner does not have a direct link to those parties.

In order to bring a claim for breach of contract in the Tribunal there needs to be a building related contract relative to the causes of the leaks or an agreement for sale and purchase. The contract could be between the owner and a supplier of goods or services (for example a builder, an architect, or a contractor), a developer and a builder, a builder and a subcontractor, or an owner and a previous owner.

The contract may comprise one document or several. For instance it may be an invoice, a quotation letter, an exchange of correspondence or a more formal contract. Normally it will include some reference to plans and specifications. It can also be an oral contract although it can be more difficult to establish the terms of an oral contract. Take for instance when there is a dispute as to which actual plans and specifications were agreed upon, it would be a matter of deciding what the parties actually agreed to, particularly when these may be different to what was submitted to the territorial authority in obtaining a building consent.

The questions to address in a possible claim for breach of contract are:

• Was there a contract between the claimant (the person bringing the claim) and respondent? (the party or person against whom the claim is being brought)
• Is the claimant entitled to the benefit of a contract with the other party?
• What were the terms of that contract (express or implied)?
• Has there been a breach of those terms?
• What is a reasonable remedy for the breach?

The following are examples of WHRS decisions where the claim involved a breach of contract:

• DBH 03284: Not only did the builder in this case fail to carry out the work outlined in the contract plans and specifications, but he also failed to carry out the work in accordance with the Building Code. Leaks appeared in the house. The contract stated that the remedial work to stop those leaks must be carried out within a specific period of time. The builder failed to carry out that remedial work and therefore breached the contract.
• DBH 00765: The builder breached his contract because he did not carry out all the work that was quoted, and did not supervise his subcontractor to make sure that all the leaks were fixed.
• DBH 00134: The vendors were liable in contract for breaching the terms of the Agreement for Sale and Purchase in failing to ensure that the building work complied with the Building Code. The adjudicator found that it was foreseeable when the sale and purchase agreement was entered into that the claimants could suffer loss due to the vendors' failure to ensure that the work complied with the Code.
• DBH 0677: A developer breached the warranty in the Agreement for Sale and Purchase and was liable to the claimant for the reasonable cost of repairs.
• DBH 00692: A developer breached the terms of the Agreement for Sale and Purchase because the building work did not comply with the Building Act 1991 or the Building Code.

Implied Terms

In a breach of contract claim the claimant may rely on implied terms such as the quality of workmanship or details that are not expressed in the plans and specifications. Normal rules as to implied terms apply, namely:

• Is it reasonable and fair to imply such terms?
• Is it necessary to imply such terms in order to give the contract business efficacy? No term will be implied if the contract is effective without it.
• Does the term sought to be implied "go without saying"?
• Is the term capable of having clear expression?
• A term to be implied must not contradict any express term.

Privity of Contract

In general, to bring a breach of contract claim the claimant needs to have entered into a contract with the respondent they are bringing the claim against. However if a claimant is not a party to the contract but is seeking to take advantage of it the Contracts (Privity) Act 1982 might apply provided the contract confers a benefit on the claimant. Examples of this would be a supplier's guarantee on materials or workmanship.

Contractual Remedies Act 1979

The Contractual Remedies Act 1979 was designed to simplify the law relating to remedies for misrepresentation and breach of contract.

The main principles are set out in s6(1) of this Act which provides that if a party to a contract has been induced to enter into the contract by a misrepresentation, whether innocent or fraudulent, made to them by another party the party who has suffered a loss is entitled to damages from that other party as if the representation was a term of the contract that had been broken. However in saying that, that party shall not be entitled to damages from that other party for deceit or negligence.

The effect is that a representation that encourages or induces a person to enter into a contract is treated as a term of the contract and it can be enforced and compensated for in the same way as any other term.

Claims under the Contractual Remedies Act 1979 can be considered where a vendor has misrepresented weathertightness issues about a house and these representations encouraged the claimant to buy the property.

DBH 00939 is an example of where one of the causes of action was based on s6 of the Contractual Remedies Act 1979. The Claimants argued that the vendors misrepresented the condition of the house by failing to disclose that it was leaky because it was not built properly. However the Adjudicator held that the Claimants could not show that the alleged misrepresentation induced or caused them to enter into the contract to purchase the property, and so the claim failed.

The Fair Trading Act prevents certain conduct and practices in trade including:

• misleading and deceptive conduct;
• false representation;
• unfair practice;
• safety of goods and services; and
• other related matters.

A claim alleging a breach of the Fair Trading Act does not require the claimant to have a contract with the respondent. Section 9 of the Fair Trading Act prohibits any person engaging in misleading or deceptive conduct or conduct that is likely to mislead or deceive. This section has been used to bring claims against real estate agents who have misled purchasers about the condition of the property or some aspect of the agreement for sale and purchase.

Section 10 of the Fair Trading Act provides that no person shall, in trade, engage in conduct that is liable to mislead the public as to the nature, manufacturing procss, characteristics, suitability for a purpose, or quantity of goods.

The following are some examples of leaky home claims under the Fair Trading Act 1986:

• DBH 02109: A pre-purchase inspection report was held to be misleading primarily due to the fact that the matters expressed in the report were clearly contrary to the correct position and because the general tenor of the report was misleading overall.
• DBH 01240 (Partial Determination): A respondent who prepared a pre-purchase report was found liable for misrepresentation and deceptive conduct. This was because the claimant relied on that report in completing the purchase of the house.
• DBH 01993: A pre-purchase inspector who misrepresented his qualifications as a building inspector/consultant was not liable. This was because the Adjudicator held that the claimants relied on the contents of the report made by the inspector rather than the misrepresented qualifications of the inspector. In regards to the report the Adjudicator stated that it was as accurate as could reasonably be expected in the circumstances of the inspection and enquiry made by the inspector. Therefore because the report was not found to be misleading or deceptive, the claims against the inspector were dismissed.

This Act deals with the law relating to guarantees given or deemed to be given with the supply in trade of consumer goods and services that are ordinarily acquired for personal, domestic or household use or consumption. The Act does not apply if the goods or services are re-supplied in trade.

Trade is defined as "any trade, business, industry, profession, occupation, activity of commerce or undertaking relating to the supply or acquisition of good and services". Claims can be made against the manufacturer or the supplier of goods under this Act even when the manufacturer or supplier is not a party to the contract for purchase of the goods or services. For example, if a product such as timber or cladding is supplied under a contract with a builder a claim can be brought under the CGA against the builder for breach of any guarantees in respect of the services and goods supplied by the builder or against the builder for the services only and against a supplier or manufacturer for any breach of guarantee in respect of the goods.

It is important to note that the definition of "Goods" does not include a whole building attached to the land. However claims can be brought for components of the building or related services in certain situations.

The Act sets down a set of minimum standards for goods when they are supplied in trade. The guarantees for goods apply whether or not the goods were supplied in connection with a service. The main provisions relevant to this jurisdiction include guarantees as to:

• Acceptable quality;
• Fitness for a particular purpose;
• Complying with the description or sample; and
• Price

The guarantees for the supply of services are that they are:

• Performed with reasonable care and skill
• Fit for the particular purpose
• Completed within a reasonable timeframe
• Provided for a reasonable price where the price is previously agreed

The rights of redress against manufacturers and suppliers of goods and services under the Consumers Guarantees Act are set out in the Act. Most commonly within the WHT a claim will be for damages and can also include consequential loss.

An example of a claim made under the Consumer Guarantees Act 1993 is DBH 00792: A company specialising in the construction of solid timber log chalets was liable under sections 28 and 29 of the Consumer Guarantees Act. This was based on the finding that because the company did not use reasonable skill and care in respect of the building work, it was therefore clear that the product resulting from their services (the dwelling) was not, and is not reasonably fit for any particular purpose. This was based on the finding that the company was aware that the dwelling was going to be used as a dwelling, and it was not fit for that purpose, and never has been.

In some cases a director of a company that carried out building or development work can be sued personally. In general this can be done where the director either:

• Personally carried out the work that was either in breach of the contract or was negligent. In other words the director was the actual builder or plasterer that did the work (Dicks v Hobson Swan Construction Ltd), or
• Controlled or directed the work that directly resulted in the home being leaky (Hartley v Balemi & Ors).