"Is your house a leaky home?", "No, it isn't a leaky house". Here's what the courts thought.

Can you sue the person who sells you their leaky house because before you bought they told you it wasn’t? The answer is: no, though it may depend on what court you end up in.

The High Court said yes: Mason v Magee [2017] NZHC 51.

The Court of Appeal said no: Magee v Mason [2017] NZCA 502

Mrs. Mason said at a dinner party to Mrs. Magee (who subsequently bought their leaky house) in response to her question, “Is your house a leaky home”, “No. It isn’t a leaky house”.

The High Court held the Magees relied on this statement in buying the house and it was a misrepresentation. The Masons were liable for the difference in value between what they paid and what the house was worth with the defects, plus damages for their pain and suffering ($25,000), less a payment of $68,000 by a building inspector who failed to identify the defects, a total of $468,000.

The Masons appealed to the Court of Appeal.

Two judges of the Court held the statement was qualified by a subsequent statement by Mrs. Mason and meant that the Masons had not experienced any leaks when they had owned the property, not that the property did not leak. So the statement was not a misrepresentation, and the Masons’ appeal was granted.

One judge dissented and held that the response was specific and not qualified in any way as to the extent of knowledge on which it was based (e.g. “…as far as I know…”) so that she would have allowed the appeal. Unfortunately for the Magees, the majority rules in the Court of Appeal. Unless they are able to appeal successfully to the Supreme Court they will lose their case.

The case shows how subjective such decisions can be: for what it’s worth the writer thinks the dissenting judgment has the greater logic to it. Being told a house is not leaky surely only means one thing? But that won’t help the Magees. It also shows how careful vendors have to be in making statements when selling houses, and why personal contact with purchasers may best be avoided.