Mitchell v Murphy & Ors – Leaky building claims revisited

In this month’s article I wish to review a December 2019 High Court decision of Mitchell v Murphy. This case concerned the sale of a townhouse (1 of a development of 7) to the plaintiff Mitchell. The claim was brought as against the widow of the person behind the original development. There was a history of claim and leaky problems with several of the other units, but this claim concerned Unit 7 which Mitchell had bought from Mr and Mrs Murphy. 

The Mitchells brought a claim in the High Court against Murphy seeking over $500,000 for leaky building issues. The thrust of the claim brought against Murphy was that she had sold the property with knowledge of leaky building issues. In particular, the Mitchells claimed the Real Estate agent specifically represented that Unit 7 was not a leaky building and had been built with extra care and included superior features as compared to other units in the development. 

The Plaintiffs allege that these representations were untrue, induced them to enter into the sale and purchase agreement, and were actionable pursuant to section 35 of the Contract and Commercial Law Act 2017 and the Fair Trading Act 1986. 

It is apparent that the Mitchells discovered significant leaky homes defects after they had purchased the property. 

The evidence was reasonably clear that Mrs Murphy knew at the time of the sale to Mitchell that other units in the development had suffered from leaky building defects and had been subject to claims. The evidence also appeared to establish that she had specific knowledge that Unit 7 in fact had some building defects, had in fact commissioned some repair works, and that she knew it was likely to be a leaky building. The Court therefore ruled that section 35 actionable misrepresentation was made out as against Murphy as follows:

  • A representation was made by Murphy’s Real Estate agent that the house was not a leaky building;

  • A further representation was made that the house had been built to a superior standard;

  • The “non leaky” representation was false based upon the expert evidence on defects present in the house, as was the representation that it had been built with extra care;

  • The Mitchells were induced by the Real Estate Agent’s “non leaky” building representation to enter into the sale and purchase agreement. It would have induced the reasonable person to enter into that agreement;

  • The Mitchells clearly relied upon the statement by the Real Estate agent as to the house not being a leaky building, and neither a subsequent conversation directly between Mitchell/Murphy, nor the building report itself, altered that reliance;

  • It was reasonable for Mitchell to rely upon Murphy’s representation.

The Court then had to consider the impact of a specific clause in the agreement for sale and purchase which placed responsibility for checking weathertightness issues upon the purchaser. It is best described as an “as is where is” clause. Murphy’s contention was that by the Purchaser signing an agreement that contained this clause, it overrode any claim for actionable misrepresentation now made. The Court ruled though that this clause was not sufficiently broadly drafted to exclude the vendor’s responsibility/liability for pre-contractual oral representations that were made as to the vendor’s knowledge of the state of construction. The key representations were ruled to remain still actionable despite this clause. 

A claim under section 9 of the Fair Trading Act 1986 was also brought but this was unsuccessful as the Court ruled that Mrs Murphy was not acting “in trade” when she sold the apartment. But for this missing element, the Court otherwise found that the misleading and deceptive conduct was made out against Mrs Murphy. She had not given Mr Mitchell the full leaky building  history of Unit 7 and the other townhouses in the complex. She had withheld material information despite asserting she had provided everything. She had also carried out works which created a misleading impression of the condition of the building. 

She was found liable as an accessory to the misleading and deceptive conduct of the Real Estate Agent pursuant to section 43(1)(d). The Real Estate agent had settled this proceeding with the Plaintiff well before it advanced to trial. 

Result. 
Ultimately the Plaintiff succeeded against the former owner in the sum of $443,070.80 representing the cost to repair the leaky building. The Plaintiffs also recovered $68,742 in consequential losses and general damages of $25,000. 

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. Barristers / Solicitors to anyone who relies on the information contained in this article. All copyright in this article is retained by TM Bates & Co.