Introduction to Commercial Law Essay

QUESTION 1
Watkin v. Black (High Court of New Zealand).
Mrs Watkin purchased a home unit from Mr Black. Shortly after Mrs Watkin took possession of the unit, problems became evident with water coming into one of the rooms, described as a sun room or store room. The room in question had initially been constructed (before the unit had been purchased by Mr Black) as a store room. Mr Black had personally carried out the work of extending the room substantially and converting it into a sunroom. No building permit was applied for, or granted, in respect of this work.
The parties agreed that it was an implied term of the agreement for sale and purchase that the defendant would pass good title to the land on settlement. The local municipal council issued Mrs Watkin with a notice requiring that the extension be demolished and replaced to make it comply with the by-laws.
When Mrs Watkin took the matter to court, Henry J found that the extension had, in fact, been constructed without a building permit, did not comply with the municipal by-laws, had been constructed contrary to good building practice in several respects and was not in a fit and habitable condition.
Counsel for the plaintiff relied in particular on two Australian cases in which it had been held that the susceptibility of a building to a local authority requisition constituted a defect in title.
In his judgment Henry J said
“The objection to title does not relate to any requirement of the Land Transfer Act 1952 and, accordingly, the common law rule is to be applied. That rule puts a vendor under a duty to make good title to the estate or property he has contracted to sell.
The contract here embraced land and buildings. Counsel argued that good title to the building was not given because portion of it had been erected without a permit and did not comply with the relevant by-laws. I find as a fact that such was the position, and I am satisfied on the evidence that council can require demolition of the addition in question. Here is a latent defect in title in respect of a part of the subject matter of the contract.

A similar conclusion was reached by Connor J. in Vukelic v Sadil (1976) 13 ACTR 3 and by Powell J in Maxwell v Pinheiro (1979) 46 LGRA. 310. I do not consider that there was merely a defect in quality, as is usually the position in respect of a town planning restriction (Dell v. Beasley (1959) NZLR 89) or a building line restriction as in Harris v. Weaver (1980) NZLR 437, where the ownership of the land could be vested in the purchaser although its use was restricted.

These are to be compared with Moss v PTA Company Ltd (1982) NZLR 264, where a frontage set-back requirement was held to be a defect in title because the vendor was obliged to dedicate a strip of land in question. The susceptibility of part of the building to a demolition order was not something known to the plaintiff nor was there anything that required her to make enquiry of the local authority and ascertain the existence of the defect. There has therefore, in my view, been a breach of the implied term that good title would pass on settlement.”

His honour further held that the defendant was liable to the plaintiff in negligence. He said:
“It was accepted by Counsel for the defendant that it is now established law that an owner/builder has a duty of care to a subsequent purchase. I have found that there was a breach of duty, in that the addition to the sunroom, to the conversion of the old store room into a sunroom, was carried out negligently in the respects already detailed....This cause of action is not one based on a contract of sale, but on a breach of the duty of care imposed by the common law on a builder in favour of a subsequent owner. The plaintiff is therefore entitled to the relief under this head of claim.”

The damages awarded to the plaintiff included the cost of demolition and reconstruction of the sunroom and general damages for inconvenience.
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