Aistrope v South Australian Housing Trust
[2018] SASC 33
•20 March 2018
SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
AISTROPE & ANOR v SOUTH AUSTRALIAN HOUSING TRUST
[2018] SASC 33
Judgment of The Honourable Justice Kelly
20 March 2018
TORTS - NEGLIGENCE
TORTS - NEGLIGENCE - ESSENTIALS OF ACTION FOR NEGLIGENCE - DAMAGE
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH
DAMAGES - GENERAL PRINCIPLES - MITIGATION OF DAMAGES - PLAINTIFF'S DUTY TO MITIGATE
LIMITATION OF ACTIONS - EXTENSION OR POSTPONEMENT OF LIMITATION PERIODS
The plaintiffs purchased a residential property from the defendant in 1996. A contract for sale and purchase was signed on 22 October 1996. The plaintiffs allege that some years after purchase they discovered defects in the property. The plaintiffs allege that statutory duties contained in the Builders Licensing Act 1986 (SA) were incorporated into the contract for sale. The plaintiffs claim damages for breach of contract and negligence arising from the alleged defects. The plaintiffs claim that if they are out of time in bringing their action by virtue of the Limitation of Actions Act 1936 (SA) then the Court ought to exercise its discretion to grant an extension of time. The defendants deny the claims for breach of contract and negligence. In the alternative, the defendant claims that the plaintiffs have been contributorily negligent and failed to mitigate their losses.
Held:
1. Claim dismissed.
2. The statutory warranties contained in the Builders Licensing Act 1986 (SA) were not incorporated into the contract for sale.
3. The plaintiffs' claims for breach of contract and negligence are out of time pursuant to the Limitation of Actions Act 1936 (SA). An extension of time pursuant to s 48 of the Limitation of Actions Act 1936 (SA) is refused. However, on the assumption that a duty of care was owed by the defendant to the plaintiffs either in contract or in tort, the defendant did not breach its duty of care.
4. The plaintiffs have failed to prove that any of the alleged defects in the property have been caused by the defendant.
5. The plaintiffs have been contributorily negligent and failed to mitigate their losses.
Builders Licensing Act 1986 (SA) s 4, s 27, s 34; Limitation of Actions Act 1936 (SA) s 35, s 36, s 48; Building Act 1971 (SA); Building Work Contractors Act 1995 (SA) s 32; Building Regulations 1973 (SA) reg 3, reg 4, reg 5, reg 6, reg 16; Building Code of Australia 1990 (Cth); Supreme Court Civil Rules 2006 (SA); Development Act 1993 (SA) s 73; Land and Business (Sale and Conveyancing) Act 1994 (SA) s 5, s 7; South Australian Housing Trust Act 1995 (SA) s 7; Civil Liability Act 1936 (SA); Wrongs Act 1936 (SA); Development Regulations 1993 (SA) reg 106; Law Reform (IPP Recommendations) Act 2004 (SA); Encroachments Act 1944 (SA), referred to.
Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541; Bryan v Maloney (1995) 182 CLR 609; Forlyle Pty Ltd v Tiver [2007] SASC 464; Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515; Astley v Austrust Ltd (1999) 197 CLR 1; Duke Group Ltd (In Liq) v Arthur Young (Reg); Peat Marwick Hungerfords (Third Party) (No 4) (1991) 55 SASR 24; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, applied.
Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 (2014) 254 CLR 185, distinguished.
Australian Stations Pty Ltd (2002) 211 CLR 317; Jones v Dunkel (1959) 101 CLR 298; Koehler v Cerebos (Australia) Ltd (2005) 222 CLR 44; Mount Isa Mines Ltd v Pusey (1970) 125 CLR 383; Prince Alfred College Incorporated v ADC (2016) 258 CLR 134; Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd [1973] QB 27; Tame v New South Wales; Annetts v Harriton v Stephens (2004) 59 NSWLR 694, considered.
AISTROPE & ANOR v SOUTH AUSTRALIAN HOUSING TRUST
[2018] SASC 33Civil.
KELLY J.
Introduction
The plaintiffs, Mrs Elizabeth Jean Aistrope (“first plaintiff”) and Mr John Raymond Aistrope (“second plaintiff”), claim damages against the defendant, the South Australian Housing Trust, for breaches of contractual warranties and duty of care.
In 1996 the plaintiffs purchased a residential property from the defendant. A contract for sale and purchase was signed on 22 October 1996 (“Contract”). The property is located at 13B Lynette Avenue, Hectorville, South Australia. I shall refer to that property as “13B”. 13A Lynette Avenue, Hectorville, South Australia is an adjoining property that to this day is owned by the defendant. I shall refer to that property as “13A”. Collectively, I shall refer to both 13A and 13B as the “Properties”.
The Properties were constructed in 1994 by a builder engaged by the defendant. They suffered damage in a fire on or around 22 August 1995. The fire damage was repaired in 1995/1996 by a company engaged by the defendant. The plaintiffs say they had little or no knowledge of this fire prior to purchasing 13B. At the time of purchase the plaintiffs did not obtain a building inspection report.
The plaintiffs claim to have first become aware of the extent of the damage when a contractor of the defendant fell through the roof of 13A on 9 January 2004. The plaintiffs say that from this date they progressively became aware of a number of hidden defects in their property. They allege that over the years these latent defects have resulted in further consequential damage to their property. They claim damages for economic loss, personal injury and mental harm.
The plaintiffs rely on a number of statutory warranties contained within the Builders Licensing Act 1986 (SA) (“Builders Licensing Act”) which they allege were incorporated into the Contract. The plaintiffs also allege that the defendant owed them a duty of care at the times when the original works and the fire repairs were conducted. They claim that the defendant breached both the contractual warranties and the duty of care at those times.
The defendant denies that the statutory warranties were incorporated into the Contract and denies owing the plaintiffs a duty of care, relying on the principle of caveat emptor. In the event that the statutory warranties were incorporated into the Contract, the defendant says that under the provisions of s 27(5) and s 27(6) of the Builders Licensing Act, the action was out of time in either 1999 or 2000/2001 (five years after the initial construction and the fire repairs were conducted respectively). The defendant argues that an extension of time should not be granted by the Court exercising its discretion pursuant to s 48 of the Limitation of Actions Act 1936 (SA) (“Limitation of Actions Act”).
Summary of my conclusions
I have reached the conclusion that none of the plaintiffs’ claims can succeed.
Indeed, after my review of the evidence I am satisfied that most, if not all, of the damage about which the plaintiffs complain has been caused or contributed to by their own conduct since purchasing 13B in 1996. I am not satisfied that the plaintiffs have proven that any loss or damage suffered by them has been caused or contributed to by any act or omission for which the defendant is responsible.
The impasse between the plaintiffs and the defendant, which I set out in detail in my reasons, has prevented the defendant from carrying out necessary repairs to the roof of 13A for a period now of some 14 years.
The explanation for the state of affairs which has brought the matter to this Court for determination in my view lies more in the state of mind of the first plaintiff than in the state of the property.
Indeed, the only explanation for what I find to have been the unreasonable, irrational and intransigent conduct of the plaintiffs over many years lies in the evidence given by Dr Michael Clarke, a psychiatrist and witness whose evidence for reasons I later discuss, I unreservedly accept.
The impasse between the parties has resulted effectively in public housing being tied up and unable to be rented since 2011. This unacceptable state of affairs cannot be permitted to continue.
My detailed reasons follow.
Background
The construction and purchase of 13B
In 1994 the defendant engaged a builder, Rolf Juergen Werner Franck (“RJ Franck”), to construct the Properties following a tender process.
On or around 22 August 1995 a fire caused damage to 13B. There are scant records of the fire and the extent of the damage that it caused. It is not disputed however that the defendant engaged Solid State Constructions Pty Ltd to undertake repairs to rectify the fire damage.
The first plaintiff moved into 13B in February 1996 as a tenant of the defendant. She had been living there for around five months when she decided she wished to purchase the property. After some negotiations the defendant agreed to sell 13B to the plaintiffs.
The Contract was signed on 22 October 1996,[1] and settled on 18 December 1996. Whilst the negotiations appear to have been conducted mainly by the first plaintiff, both plaintiffs are listed on the Contract as purchasers and on the Memorandum of Transfer as transferees. The plaintiffs were married prior to settlement on 14 November 1996.
[1] P13.
After settlement was completed, the plaintiffs made a number of improvements to 13B, including erecting a carport and pergola, building a swimming pool in the backyard, paving the backyard with bricks, installing a new kitchen, roller shutters, carpet and tiles inside the house, and improving the garden. In the course of these improvements, the plaintiffs replaced the rectangular downpipes on their property with round downpipes.
The plaintiffs then lived at 13B for some seven years without issue. 13A has been owned by the defendant since its construction and was tenanted up until around 2011.
The plaintiffs become aware of alleged defects
The plaintiffs say they became aware of the extent of the damage to their property, and that of 13A, in early 2004. The defendant had engaged a contractor to investigate the guttering of 13A. During the course of the contractor’s investigations, the contractor fell through the roof. The contractor came to the door of 13B and expressed a view to them that the Properties had been damaged by a fire.
That same day the first plaintiff contacted the defendant with regards to the fire damage. In evidence, the first plaintiff said that during this telephone conversation an employee of the defendant denied having any record of the fire.
The plaintiffs obtained incident reports from the South Australian Metropolitan Fire Service.[2] The reports are not overly comprehensive. They disclose that there was a fire at 13B on 22 August 1995 in the main bedroom and in the roof. On arrival the South Australian Metropolitan Fire Service detected there was smoke in the lounge, rear bedroom and roof void well. The fire crew extinguished the fire. The smoke and heat damage was recorded as effecting the whole unit.
[2] P5 and P6.
Documents tendered during the trial show the defendant entered into a contract with Solid State Constructions Pty Ltd at some time between November 1995 and January 1996 to repair the fire damage. Solid State Constructions Pty Ltd was deregistered as a company on 16 May 2004.[3]
[3] P129.
The plaintiffs contacted the Campbelltown City Council with respect to the fire damage. The Council advised the plaintiffs via a letter dated 10 February 2004 that their records indicated there had been no application with the Council for the repair of the fire damage at that time.[4]
[4] P7.
The first plaintiff contacted the defendant in early 2004 in an attempt to have the fire damage repaired. Following this, the plaintiffs and the defendant negotiated for many years over the terms of the repairs to be undertaken by the defendant. I will consider these negotiations in more detail later. From the outset I make it clear that I find the defendant made genuine attempts to resolve the dispute, however these were stalled or refused by the plaintiffs on multiple occasions. The defendant made multiple attempts to repair the Properties but was refused access by the plaintiffs. On 24 November 2009 the plaintiffs filed a statement of claim in the Supreme Court. After this the defendant continued to make attempts to resolve the dispute but those attempts ultimately failed.
Issues which arise on the pleadings
There are a number of issues which arise on the pleadings which must be determined in order to resolve the plaintiffs’ claims.
First, were the statutory warranties in s 27 of the Builders Licensing Act incorporated into the Contract such that the defendant owed the plaintiffs contractual warranties regarding the condition of 13B?
Second, if the defendant owed the alleged contractual warranties, is the plaintiffs’ claim out of time by virtue of the five year limitation period contained in s 27(5) of the Builders Licensing Act?
Third, if the plaintiffs’ claim is out of time, should the Court grant an extension of time under the Limitation of Actions Act within which to commence either the claim based on contract or tort in light of any prejudice suffered by the defendant?
Fourth, did the defendant owe the plaintiffs a duty to take reasonable care in relation to the original construction of the premises in 1994 and the fire repair carried out on the premises in 1995/1996 with regards to economic loss, consequential economic loss, ordinary physical injury and/or mental harm?
Fifth, if the defendant owed the plaintiffs either contractual warranties or a duty of care, were either the warranties or the duty of care breached? This requires a determination of whether the alleged defects actually exist. Further to that issue, an analysis is required whether the Building Code of Australia 1990 (“BCA”) or the Building Act 1971 (SA) and the Building Regulations 1973 (SA) (“Building Regulations 1973”) apply to the building work in question.
Sixth, have the plaintiffs suffered any damages? And if so, have those damages been caused by the defendant’s breaches of contractual warranties or duty of care?
Seventh, if the plaintiffs have suffered damages, have the plaintiffs been contributorily negligent in respect of any loss which they claim to have suffered and/or have they failed to mitigate any loss?
Before turning to deal with each of those issues in turn, I will say something about the witnesses who gave evidence at the trial.
The witnesses
The first plaintiff, Mrs Aistrope
Of the two plaintiffs only the first plaintiff chose to give evidence.
The first plaintiff gave evidence in chief that she had noticed fire damaged bricks to the outside of 13B prior to negotiations with the defendant for its purchase. She said that at the time she did not think anything of it. Later in her evidence she claimed to have been in “total shock” when she read the two reports from the South Australian Metropolitan Fire Service and could not believe that her home had been “burnt down”. I note that the reports do not disclose that the property had “burnt down” as claimed. However, I accept there was significant damage to some parts of the property.
The first plaintiff said that thereafter for them the process of finding out about the fire damage and the extent of what had been “covered up” by the defendant was all part of a “never-ending journey”.
I was not impressed by the first plaintiff as a witness. I take into account everything which Dr Clarke and Mr Laurence Field, a registered psychologist, said about the first plaintiff’s fragile psychological state. I also take into account the known psychiatric history of the first plaintiff which includes the records of her general practitioner, Dr Rodney Pearce, and various reports from psychiatrists who treated her over the years.
It is plain that the defendant exercised a degree of compassion in finally acceding to the first plaintiff’s insistent request that she be able to purchase what was otherwise rental stock for the defendant. It is plain that this occurred in light of her prior history of enduring what appears to have been an unfortunate marriage in which she was subjected to domestic violence and was evidently in fear for her life at various times.
In cross-examination the first plaintiff conceded that what she told her general practitioner in 1997 about feeling suicidal was accurate. Those records reveal that the first plaintiff has suffered from serious anxiety and depression issues for a very long time and certainly during the 1990’s. She also conceded that she had a stressful period after her son choked on a dummy. She became involved in a dispute with the manufacturers of the dummy which was ultimately taken off the market. She experienced further stress in relation to her son and ended up taking him out of the primary school that he had been attending. She said she was unhappy about the lack of supervision at the school. She eventually made a decision to home school her son and despite a dispute with the Education Department succeeded in doing so.
The history of psychiatric problems of the first plaintiff confirms in my mind the opinion of Dr Clarke that it left her vulnerable to further psychiatric problems in the face of adversity. I have formed this view despite the first plaintiff’s own description of her mental state being quite stable in the period immediately prior to 9 January 2004.
Elsewhere I have explained why I accept unreservedly Dr Clarke’s evidence in relation to the cause of the first plaintiff’s current psychological and psychiatric condition. Suffice to say that I consider that the first plaintiff’s evidence was affected by her view, long held, that the defendant has been involved in some type of cover-up as to the state of 13B at the time when she purchased it. For reasons I discuss elsewhere, that belief of the first plaintiff is unreasonable. I consider that as a witness the first plaintiff frequently gave non-responsive answers to the questions asked and became argumentative and discursive in giving other answers. Her frequent references to the topic of a cover-up in her evidence and in correspondence tendered during the trial confirms the views of Mr Field that the first plaintiff continues to ruminate on her perception that the defendant has engaged in a cover-up as to the state of 13B.
This has not only affected her psychiatric condition but in my view has affected in a material way the reliability of the evidence which she gave. In particular, I cannot accept the first plaintiff’s evidence about her knowledge of the extent of the fire before she purchased 13B. I accept the defendant’s submission that the documentary evidence during the sale negotiations and the whole of her dealings with the defendant throughout 1996 are inconsistent with any assertion by the first plaintiff that she was unaware of the scope of the fire damage to 13B. I find that the first plaintiff was aware that there had been a substantial fire to 13B. Furthermore, she used that knowledge to bargain for a lower purchase price. In the end she was successful in that endeavour.
For these reasons I find that the first plaintiff was not a reliable witness. I do not accept her evidence concerning the knowledge she and the second plaintiff had prior to the purchase of 13B about the extent of the fire damage. In respect of other matters, I do not accept her evidence as to her observations at the property where it is in conflict with the evidence of the expert witnesses who attended at the property and made their own inspections.
The second plaintiff, Mr Aistrope
I was informed at the beginning of trial that the second plaintiff, Mr Aistrope, would not be giving evidence due to ill health.
Mr Field and Dr Clarke gave some evidence about the psychological state of the second plaintiff. I have not heard any evidence explaining precisely why the second plaintiff would be unable to give evidence. The Written Closing Submissions of the Plaintiffs state:
It is submitted that Mr Aistrope’s mental health prevented him from presenting evidence before the Court. To require him to do so would have caused him considerable stress and anxiety.
Counsel for the defendant has submitted that I should draw an inference in accordance with Jones v Dunkel[5] that the evidence of the second plaintiff would not have assisted the plaintiffs’ case. Counsel pointed particularly to the second plaintiff’s personal knowledge regarding the state of 13B prior to its purchase and the fire damage.
[5] (1959) 101 CLR 298.
I do not consider it necessary to accede to that submission in light of the findings I make regarding the first plaintiff’s knowledge of the fire damage, which are detailed later in my reasons.
Mr Colin Rettos
I turn now to the evidence given by Mr Colin Rettos, a drafting consultant in his own practice of CR Planning and Drafting Consultants. In the curriculum vitae tendered by the plaintiffs’ counsel, the following statements appear:[6]
During those early years whilst my practice was at Tusmore I became a friend of The Premier Don Dunstan, his wife Adele Koh in which during that friendship helped them with building issues at their houses.
The Labor movement was strong (not like the incompetent people elected by the people today) When you make friends with people like Geoff Virgo, Ron Payne, Ralph Jacobi: strong Labor people with integrity who call a spade (a spade not a shovel) i supported them and intern [sic] they helped myself in my business practice and also my late parents. (Dad was a Union junkie at Chrysler (later Mitrubishi) [sic].
In conclusion I would like to say that Thomas Playford dream of setting up The Housing Trust was a great success for the battlers of this State but of recent times it has become a nightmare: (totally incompetent) THOMAS PLAYFORD WOULD BE TURNING IN HIS GRAVE.
…
[6] P116.
The plaintiffs called Mr Rettos as an independent expert.
Mr Rettos’ report tendered as P116 was admitted over objection. Counsel for the defendant submitted that the report was inadmissible as the witness did not have sufficient knowledge of the subject to render his opinion properly as an expert opinion. Counsel submitted that the report was deficient both as to the form required under the Supreme Court Civil Rules 2006 (SA) and as to the content, most of which the defendant submitted was irrelevant and/or not apparent as to what basis the witness was qualified to make the comments he did.
Mr Rettos gave evidence that the footing design was poor causing issues which were compounded by water problems with a leaking roof creating a site not fit for human habitation in its present state. In his opinion “poor footing design, movement in the soil creating massive unstability [sic], roof timbers that are weak from previous fire damage” are all issues which have transpired to cause damage to the building. Mr Rettos’ conclusion was simple; demolish both dwellings on the site and create a vacant block of land. He estimated the costs of demolition and rebuilding a dwelling of similar size to be upwards of $200,000.
Mr Rettos disagreed with the opinion of Mr John Goldfinch that the footing systems to the dwelling were designed slightly in excess of BCA requirements at the relevant time. He also disagreed that the footings were appropriately designed having regard to the heave factor in the soil, about which there has been some disagreement.
Although in the end I received the report of Mr Rettos dated 8 November 2011, I have not been greatly assisted by the contents of that report.
Mr Rettos conceded that he has not been involved in designing footings and in respect of footing design he would rely upon a structural engineer. It was not apparent during his evidence what the basis for many of his opinions were. For example, he acknowledged that he had not inspected the roof space. In expressing his opinion about the water damage, Mr Rettos did not purport to advise as an expert on that matter, nor did he provide the Court with any material on which it is possible to infer that he possessed sufficient expertise or knowledge to make the comments which he did.
He frankly conceded that his estimate in relation to the demolition and building costs could be “miles out”.
I was not assisted by the evidence of Mr Rettos. His expertise is questionable and he commented on many subjects which were not relevant or outside his claimed field of expertise. Where his opinion differs from either Mr Goldfinch or Mr Peter Jankovic, I prefer the opinions of the latter two experts.
Other witnesses called by the defendant
In addition to the plaintiffs’ witnesses, I also heard from Mr John Goldfinch, a structural, civil, geotechnical and forensic engineer; Mr Peter Jankovic, a building consultant; Mr Ronald Lochert, a qualified structural engineer; and Ms Shirley Trebilcock, an employee of the defendant during the relevant period.
I make it clear at the outset that I accept the evidence of each of the defendant’s witnesses. Each of those witnesses gave evidence in a straightforward manner. Little of their evidence was in fact challenged. I am satisfied that each of those witnesses gave thoughtful and honest evidence to the best of their recollections. I have no hesitation in accepting unreservedly the opinion evidence of both Mr Jankovic insofar as it was within his field of expertise and Mr Goldfinch insofar as it was within his field of expertise. I reject the suggestion that Mr Goldfinch’s observations about the state of the trusses in the Properties should be rejected because he relied on an assistant’s observations with regards to the separation of nail plates and their state of repair.
Where the evidence of Mr Goldfinch, Mr Jankovic or Mr Lochert differs from the evidence given by the first plaintiff and Mr Rettos, I prefer the evidence given by the former three.
Elsewhere in my reasons I have explained why I accept the evidence of Dr Clarke. Where his opinion differs from the evidence given by Mr Field, I prefer the evidence given by Dr Clarke.
I turn now to consider each of the issues which arise on the pleadings.
Were the statutory warranties in s 27 of the Builders Licensing Act incorporated into the Contract such that the defendant owed the plaintiffs contractual warranties regarding the condition of 13B?
The plaintiffs allege that by virtue of cl 10 of the Contract the statutory warranties arising under s 27 of the Builders Licensing Act were incorporated into it by reference. Clause 10 of the Contract reads as follows:[7]
The Purchaser agrees to take the property in the condition in which the property is at the time the deposit is paid. The Purchaser accepts that previous occupiers might have carried out building work on the property, and that such work might have defects of which the Trust is not aware. The Trust will be under no liability in respect of the property, except in relation to statutory warranties which apply under Section 27 of the Builders Licensing Act 1986 to work carried out by the Trust.
[7] P13.
By reason of that clause the plaintiffs allege that the following statutory warranties apply in respect of the defendant’s building work:
a.that the defendant’s building work had been performed in a proper and workmanlike manner;
b.that all materials supplied by either the builder or the defendant for use in the defendant’s building work was good and proper;
c.that the defendant’s building work was performed in accordance with the Building Act 1970 (SA) (repealed) and all other statutory requirements; and
d.that the property was reasonably fit for human habitation.
The statutory warranties
Before dealing with the issue of whether these warranties were incorporated into the Contract, it is necessary to set out something of the history of s 27 of the Builders Licensing Act.
The statutory warranties arose under the Builders Licensing Act which is now repealed. They were not materially amended during the period 1986 to 2005.
Section 27(2) of the Builders Licensing Act provided:
(2)The following warranties on the part of the builder shall be implied in every domestic building work contract:
(a) a warranty that the building work will be performed in a proper and workmanlike manner and in accordance with the plans and specifications agreed to by the parties;
(b) a warranty that all materials to be supplied by the builder for use in the building work will be good and proper;
(c) a warranty that the building work will be performed in accordance with the Building Act, 1970, and all other statutory requirements;
(d) where the contract does not stipulate a period within which the building work must be completed—a warranty that the building work will be performed with reasonable diligence;
(e) where the building work consists of the construction of a house—a warranty that the house will be reasonably fit for human habitation; and
(f) where the building owner expressly makes known to the builder, or a servant or agent of the builder, the particular purpose for which the building work is required, or the result that the building owner desires the building work to achieve, so as to show that the building owner relies on the builder’s skill and judgment—a warranty that the building work and any materials used in performing the building work will be reasonably fit for that purpose or of such a nature and quality that they might reasonably be expected to achieve that result.
By virtue of s 34 of the Builders Licensing Act no person could contract out of their obligations under the Act. Section 34 relevantly provided:
34.Any purported exclusion, limitation, modification or waiver of a right conferred, or contractual condition or warranty implied, by this Act shall be void.
Section 4(1) of the Builders Licensing Act defined “builder” to mean:
(a)a person who carries on the business of performing building work for others; or
(b)a person who carries on the business of performing building work with a view to the sale or letting (whether by lease, licence or other agreement) of land or buildings improved as a result of the building work.
“Building work” was defined to mean:
(a)the whole or part of the work of constructing, erecting, underpinning, altering, repairing, improving, adding to or demolishing a building;
(b)the whole or part of the work of excavating or filling a site for work referred to in paragraph (a); or
(c)work of a prescribed class.
“Perform” was defined in relation to building work to include:
(a)cause building work to be performed; or
(b)organize or arrange for the performance of building work.
“Domestic building work” was defined to mean:
(a)the whole or part of the work of constructing, erecting, underpinning, altering, repairing, improving, adding to or demolishing a house;
…
The plaintiffs acknowledge that the defendant is not a builder as provided by the Builders Licensing Act. The defendant would therefore not be liable for a breach of the statutory duties provided by s 27(2) of the Builders Licensing Act unless they were incorporated into the contract. The defendant submits that, in any event, if it were a builder to whom the statutory warranties applied, then the claim would be out of time. I consider this question in more detail later.
With that background in mind I turn now to consider whether by virtue of cl 10 of the Contract those warranties contained in s 27 of the Builders Licensing Act were incorporated into it.
The Court when construing a contract is required to determine what a reasonable person, having all of the background knowledge of the surrounding circumstances, would have understood the language in the contract to mean.[8] The Court may have objective recourse to the history, background and context of the transaction to assist in identifying the purpose and object of the transaction.[9]
[8] Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165.
[9] Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at 117.
The plaintiffs argue that given the unique history and context of the transaction between the plaintiffs and the defendant, the purchase by the plaintiffs should be regarded as importing some warranty as to the quality of the property. In addition, the plaintiffs argue that the warranty was explicitly imported into the Contract by the express words of cl 10.
I turn now to consider what the relevant surrounding circumstances were.
From about 1993 the first plaintiff was a tenant of a property owned by the defendant. In January 1996 she requested an urgent relocation as she felt unsafe due to an issue with a neighbour. The defendant agreed to the relocation.
On 2 February 1996 the first plaintiff signed a condition of tenancy for 13B and received a property condition report. The tenancy commenced on 3 February 1996. At that time the property condition report stated that all aspects of the property, except the garden which was in fair condition, were in good condition.
In a letter received by the defendant on 10 April 1996 the first plaintiff requested a front fence for 13B in which she wrote:[10]
As you are aware the property, I have moved into recently, has been burnt to the ground by previous tenents [sic], or vandels [sic]??
[10] P103.
In cross-examination at the trial the first plaintiff denied that she knew that there had been a significant fire at the property before she had moved in. She said that she put the question marks at the end of that sentence in her letter received by the defendant on 10 April 1996 because she had noticed fire damaged bricks to 13B and the question marks were about them. She agreed she never made any further enquiries about the scope of the fire damage to the property nor did she obtain a building inspection report prior to purchasing 13B from the defendant.
At some stage during the first few months of her tenancy the first plaintiff decided she wanted to purchase 13B from the defendant. On 25 June 1996 an intention to purchase form was signed by the first plaintiff containing the following handwritten notation at the bottom of the page:[11]
P.S. Tenant knows house was burnt – rafters burnt. Walls and doors bowed – but wants to go ahead – will talk to a builder.
In evidence the first plaintiff denied that the handwritten notation appearing on that document was there when she signed it. She said after she received a copy of that document allegedly altered by May 2009, she immediately visited the Norwood Police Station and gave a statement about it.
[11] P104.
The defendant initially refused to sell the property and wrote to the first plaintiff on 9 August 1996 advising that 13B was not for sale.
The first plaintiff requested that the defendant reconsider selling the property in a letter which was received by the defendant on 12 August 1996. She concluded the letter with the following statement:[12]
Even though I know this property has fire damage, I have made it my home and never want to move again. Please consider my special circumstances before making any final decision, as the future and well being of my entire family depend on it!!!
[underlining in original]
[12] P9.
Once again, the first plaintiff reiterated in evidence when questioned about this that the fire damage she was referring to there was a number of burnt bricks she had observed on the exterior walls of 13B and some melted plastic in the backyard. She explained that she believed the bricks may have been seconds or that they may have been burnt in a kiln in the process of making them.
The defendant reconsidered its position. By letter dated 19 August 1996 the defendant offered to sell the property to the first plaintiff for $88,537.[13] The offer was to remain open for 30 days and was subject to conditions expressed in the letter including a condition that the purchasers would sign a form that 13B was in a condition suitable to them.
[13] P10.
During negotiations concerning the price of 13B the plaintiff more than once referred to the fire damage. A letter dated 30 August 1996 from Iren Jakubowicz, the plaintiffs’ real estate agent, to the defendant states:[14]
Please find enclosed letter received from Liz Rochester of 13b Lynette Ave., Hectorville in relation to the offer she received for purchasing her rental property.
As you can see she feels the price offered in a little too high in comparison to other homettes in her area on the market at the moment, particularly in view of the fact that her property has been fire damaged.
…
[14] P11.
In the enclosed handwritten letter written by the first plaintiff she suggested that the price the defendant was asking seemed “a little high” compared to similar two bedroom homettes in the area and added:[15]
Please take the fact this homette has been fire damaged and has none of the above features and is also in need of repair. I am sure the reconsidered price will enable me to sign a contract to purchase without delay.
[underlining in original]
[15] P11.
By letter dated 16 September 1996 the defendant made a further offer to sell the property for the sum of $87,709. In that letter the defendant stated:[16]
It should be noted that: -
…
●the valuation of your property has been based on the house in its present condition and you will be responsible for any further maintenance and repairs to the property, (except in relation to Statutory Warranties which apply under Section 27 of the Builders Licensing Act, 1986).
…
If you wish to proceed with the purchase of your property, you will be asked to sign a form stating that you understand that it is your responsibility to ensure that the condition of the property is acceptable to you. You may want to engage a qualified person to help you make a decision on the condition of the property.
[16] P12.
The Contract was signed on 22 October 1996 by both of the plaintiffs. The contract relevantly included cl 10 (already referred to in [63] herein). Clause 10 also contained the statement that the purchaser took the property “in the condition in which the property is at the time the deposit is paid”.
Sykes Bidstrup Solicitors acted for the plaintiffs in respect of the conveyance of 13B. The Contract contains a handwritten amendment to cl 11 initialled by the plaintiffs. Ms Trebilcock, an employee of the defendant, gave evidence about the valuing practice during 1996 and the practice of the defendant to sign such an agreement after it had been signed by the tenants. She said the amendment was not in her writing and it is probable that the handwritten amendment was made by the solicitors acting for the plaintiffs. The first plaintiff agreed that she relied on her solicitor’s advice during the sale process.
On 19 November 1996 the first plaintiff signed an acknowledgement form regarding the condition of 13B. Relevantly that document stated as follows:[17]
[17] P108.
ACKNOWLEDGEMENT FORM 1 (SINGLE UNITS)
The purchaser:
1)agrees that he/she has relied solely on his/her own judgement and view of the said land and its improvements in making a decision to enter into this contract, and understands that it is the Purchaser’s own responsibility to ensure that the condition of the property is acceptable to him/her;
2)agrees to take the said land and its improvements in the condition in which they are at the time of making this contract and to be responsible for any further maintenance and repairs to the property (except in relation to statutory warranties which apply under Section 27 of the Builders Licensing Act, 1986);
3)acknowledges that he/she has been given the following information in relation to soils and drainage:
● the main factor causing South Australian soils to act in a somewhat unpredictable manner relates to their varying moisture content. It is because of this that the drainage around a house is perhaps the main factor in keeping it stable. The utmost care should be taken in grading gardens, paths, etc., away from the house; and any storm water drains should be kept carefully in position to stop an accumulation of water near the foundations.
● drainage holds the key to the preservation of the asset which is a house; and
● in many instances, it has been found that the making of gardens, or planting of large shrubs adjacent to the house foundations has been a contributing factor towards wall fractures.
and that THE TRUST SHALL NOT BE LIABLE IN ANY WAY FOR (OR TO MAKE GOOD) ANY CRACKS OR OTHER DEFECTS CAUSED BY ANY SETTLEMENT OF THE FOUNDATIONS OR ANY OTHER PART OF THE STRUCTURE CAUSED BY SOIL SETTLEMENT, SHIFTING OR MOVEMENT OR ANY SALT DAMP WHETHER PAST, PRESENT OR FUTURE.
This acknowledgement form is dated 19 November 1996 and therefore postdates the Contract which was signed on 22 October 1996. However the acknowledgement form bears the same date as the Form 1[18] issued pursuant to s 7 of the Land and Business (Sale and Conveyancing) Act 1994 (SA). By virtue of s 5 of that Act, a purchaser had a statutory right to rescind a sales contract by providing the vendor with written notice before the end of the second clear business day from the date on which the Form 1 was served. Accordingly the plaintiffs could have chosen to rescind the Contract within two days following the signing of that acknowledgement form.
[18] P107.
Settlement was effected on 18 December 1996.
The first plaintiff maintained in her oral evidence that she did not know the house had been significantly damaged by fire at the time of the purchase. She maintained that the first time she knew the house had burnt down was when she obtained the fire incident reports from the South Australian Metropolitan Fire Service.
I do not consider that the oral evidence of the first plaintiff can stand with the evidence contained in the contemporaneous documents signed by her. In particular, the first plaintiff’s assertion in the letter received by the defendant on 10 April 1996 that the property had been burnt to the ground by previous tenants or vandals is inconsistent with her explanation that all she noticed was some fire damaged bricks she believed had suffered fire damage in the kiln. I cannot accept her explanation about why she placed question marks at the end of the sentence in that letter. That explanation flies in the face of the plain meaning of the words she wrote.
On the basis of the whole of the evidence I find that the first plaintiff knew that at the time when she purchased 13B that it had been subject to substantial fire damage and required repair. Moreover, I find that she used that knowledge to negotiate a reduced price for the property.
Neither is there any basis in the evidence to support the plaintiffs’ submission that the sale of 13B was a unique and special transaction outside the usual practice of the defendant.
I find that the final sentence in cl 10 of the Contract is a statement by the defendant merely acknowledging that statutory warranties exist under s 27 of the Builders Licensing Act. It is an acknowledgement of the statutory liability that arises to the extent that the defendant had conducted building work as a builder. It acknowledged that the statutory warranties could not be waived.
This interpretation is consistent with the balance of cl 10 which excludes any liability on the part of the defendant for the condition of the building at the time of the Contract. It is also consistent with the defendant providing the acknowledgment form and ensuring that the plaintiffs were aware at the time of the purchase of their limited right in respect of claiming with regard to the condition of the property.
This interpretation is further reinforced by the fact that in the letter dated 16 September 1996[19] the defendant advised the first plaintiff that as purchaser they were responsible for any further maintenance and repairs to the property except in relation to statutory warranties which apply under s 27 of the Builders Licensing Act. The signing of the acknowledgement form[20] by the plaintiffs is an explicit acceptance of that responsibility.
[19] P12.
[20] P108.
In my view the revised offer and the acknowledgment form both make it clear that each of the parties knew that the intended purpose of cl 10 of the Contract was an explicit acknowledgment that the purchaser was responsible for further repairs except in relation to any claim for a statutory warranty. Clause 10 was not in itself an adoption of the statutory warranties to create any new or additional contractual liability on the part of the defendant.
The statement contained in cl 10 of the Contract regarding the purchaser accepting the property in its current condition is inconsistent with any assumption of the defendant of liability as to the state of the property.
If the defendant owed the alleged contractual warranties, is the plaintiffs’ claim out of time by virtue of the five year limitation period contained in s 27(5) of the Builders Licensing Act?
Whilst I have found that the statutory duties contained in s 27 of the Builders Licensing Act were not incorporated into the Contract, I will consider whether the plaintiffs’ claim would be out of time if they had been incorporated. I note that such a consideration would also be necessary had I found that the defendant were a builder for the purposes of s 27(2) and therefore subject to the warranties contained in that section with regard to the building work.
By virtue of s 27(5) of the Builders Licensing Act the statutory warranties were subject to a strict time limit:
(5)Proceedings for breach of a statutory warranty must be commenced within 5 years after completion of the building work to which the proceedings relate.
Pursuant to s 27(6) of the Builders Licensing Act the limitation period “shall not be extended”.
Section 27 of the Builders Licensing Act was replaced by s 32 of the Building Work Contractors Act 1995 (SA) which is, in all material respects, the same. In Forlyle Pty Ltd v Tiver,[21] Debelle J (Sulan and Vanstone JJ agreeing) considered the mischief behind the enactment of s 32:[22]
[15]… Examination of the second reading speech (Hansard, House of Assembly, 5 August 1976 [re the Defective House Act 1976]) shows that the intention of the predecessor of s 32 was to replace the warranties implied at common law with statutory warranties and to ensure that those statutory warranties could not be excluded by agreement or waiver. The intent was to protect building owners from unscrupulous builders who might seek to avoid the obligations flowing from the statutory warranties by inducing the building owner to contract out of them. … In addition, Parliament intended to protect a subsequent purchaser who purchases the house within five years of the date on which the building work was completed. The predecessor of s 32 therefore extended the operation of the statutory warranties to such a purchaser.
[16]There is, I think, a further consideration stemming from the fact that s 32(5) provides a limitation period of five years from the completion of the building work. It is common knowledge that some consequences of defective workmanship do not become apparent for some time. In my view, Parliament took the view that a period of five years was a reasonable time to allow for that possibility. … The intent of the Act, as an instrument of consumer protection, is to prevent building owners from entering into contracts which prevent them from recovering adequate compensation to remedy future defects.
[21] [2007] SASC 464.
[22] Forlyle Pty Ltd v Tiver [2007] SASC 464 at [15]-[16].
I agree with those remarks. The clear policy behind the enactment of both s 27(6) of the Builders Licensing Act and its successor, s 32(5) of the Building Work Contractors Act 1995 (SA) is to allow builders certainty regarding their liability after the completion of building work.
A non-extendable time limit with respect to statutory warranties is also consistent with s 73 of the Development Act 1993 (SA) which relevantly provides as follows:
73—Limitation on time when action may be taken
(1)Despite the Limitation of Actions Act 1936, or any other Act or law, no action for damages for economic loss or rectification costs resulting from defective building work (including an action for damages for breach of statutory duty) can be commenced more than 10 years after completion of the building work.
(2)This section does not affect an action to recover damages for death or personal injury resulting from defective building work.
(3)The period prescribed by subsection (1) cannot be extended.
Accordingly, in my view, whilst I have found that the statutory warranties were not incorporated as contractual warranties, any claim which the plaintiffs had must have been commenced within five years after the building work was completed and could not be extended. Even on the assumption that the defendant is a builder to whom the statutory warranties apply, on the basis of s 27(5) and s 27(6) a party cannot commence proceedings for breach of statutory warranties after the expiration of five years after the building work was completed.
It follows that the plaintiffs’ claim is out of time. The relevant building work was carried out in 1994 and 1995/1996, thus the limitation period expired in 1999 and 2000/2001 respectively. Some of the alleged defects pleaded were first identified in 2004, others after 2004. The limitation period expired before the defects were discovered and cannot be extended.
If the plaintiffs’ claim is out of time, should the Court grant an extension of time under the Limitation of Actions Act within which to commence either the claim based on contract or tort in light of any prejudice suffered by the defendant?
I have found that the time limitations under s 27 of the Builders Licensing Act do apply. Assuming that I had found the statutory warranties were validly incorporated into the Contract, I will consider whether the plaintiffs are entitled to an extension of time to commence the claim for breach of contract beyond the time prescribed by the Limitation of Actions Act.
I will also consider whether the plaintiffs are entitled to an extension of time to commence the claim for negligence.
Section 35(a) of the Limitation of Actions Act provides that proceedings for a cause of action for breach of contract must be commenced within six years of the cause of action accruing.
In Woolcock Street Investments Pty Ltd v CDG Pty Ltd McHugh J observed:[23]
[103]The now accepted doctrine is that, in the case of defective premises, damage does not occur until the defect manifests itself. No cause of action arises in tort until the plaintiff suffers damage. Consequently, those concerned with the design and construction of a building may be required to defend themselves against an action in tort many years after completing the task that now gives rise to the claims against them. On the other hand, a cause of action in contract arises when the contract is breached. Time runs from the breach, not the sustaining of damage. …
[footnote omitted]
[23] (2004) 216 CLR 515 at [103].
McHugh J went on to make the following observations which are apposite to the issue I have to decide here:[24]
[24] Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515 at [104]-[105].
[104]Moreover, imposing duties in respect of pure economic loss in building cases creates other problems. As I pointed out in Brisbane South Regional Health Authority v Taylor, the policy of the law for nearly 400 years has been to fix definite time limits (usually six but often three years) for prosecuting civil claims. These time limitations have been driven by the general perception that “[w]here there is delay the whole quality of justice deteriorates”. In Taylor, I went on to say:
The effect of delay on the quality of justice is no doubt one of the most important influences motivating a legislature to enact limitation periods for commencing actions. But it is not the only one. Courts and commentators have perceived four broad rationales for the enactment of limitation periods. First, as time goes by, relevant evidence is likely to be lost. Secondly, it is oppressive, even ‘cruel’, to a defendant to allow an action to be brought long after the circumstances which gave rise to it have passed. Thirdly, people should be able to arrange their affairs and utilise their resources on the basis that claims can no longer be made against them. Insurers, public institutions and businesses, particularly limited liability companies, have a significant interest in knowing that they have no liabilities beyond a definite period. As the New South Wales Law Reform Commission has pointed out:
The potential defendant is thus able to make the most productive use of his or her resources and the disruptive effect of unsettled claims on commercial intercourse is thereby avoided. To that extent the public interest is also served.
Even where the cause of action relates to personal injuries, it will be often just as unfair to make the shareholders, ratepayers or taxpayers of today ultimately liable for a wrong of the distant past, as it is to refuse a plaintiff the right to reinstate a spent action arising from that wrong. The final rationale for limitation periods is that the public interest requires that disputes be settled as quickly as possible.
In enacting limitation periods, legislatures have regard to all these rationales. A limitation period should not be seen therefore as an arbitrary cut off point unrelated to the demands of justice or the general welfare of society. It represents the legislature’s judgment that the welfare of society is best served by causes of action being litigated within the limitation period, notwithstanding that the enactment of that period may often result in a good cause of action being defeated.
[105]To allow an action in tort to be brought more than six or even twelve years after the negligent act has occurred when it could not have been brought in contract flies in the face of these rationales of the statutes of limitation.
[footnotes omitted]
Accordingly, the asserted breach of contract in this case arose at the time of the sale of 13B in 1996 and therefore the plaintiffs were out of time in any contractual claim by 2002.
In relation to the claim for negligence, s 36 of the Limitation of Actions Act provides:
36—Personal injuries
(1)All actions in which the damages claimed consist of or include damages in respect of personal injuries to any person, shall be commenced within three years next after the cause of action accrued but not after.
(1a)However, in the case of a personal injury that remains latent for some time after its cause, the period of 3 years mentioned in subsection (1) begins to run when the injury first comes to the person’s knowledge.
(2)In this section—
personal injuries include any disease and any impairment of a person’s physical or mental condition.
The plaintiffs’ claim in negligence includes damages in respect of personal injuries. The plaintiffs were therefore obliged to commence that claim within three years of the cause of action being complete. The defendant asserts that any cause of action in negligence was complete when the plaintiffs first became aware of the property damage on 9 January 2004 and began allegedly suffering psychiatric symptoms. The plaintiffs were therefore out of time in January 2007. The plaintiffs did not commence the claim until November 2009.
Accordingly the plaintiffs must establish the three threshold factual issues which would enliven the Court’s discretion to extend time and then persuade the Court that it ought to extend time under the provisions of s 48 of the Limitation of Actions Act. Section 48 provides:
48—General power to extend periods of limitation
(1)Subject to this section, where an Act, regulation, rule or by-law prescribes or limits the time for—
(a) instituting an action; or
(b) doing any act, or taking any step in an action; or
(c) doing any act or taking any step with a view to instituting an action,
a court may extend the time so prescribed or limited to such an extent, and upon such terms (if any) as the justice of the case may require.
(2)A court may exercise the powers conferred by this section in respect of any action that—
(a) the court has jurisdiction to entertain; or
(b) the court would, if the action were not out of time, have jurisdiction to entertain.
(3)This section does not—
(a) apply to criminal proceedings; or
(b) empower a court to extend a limitation of time prescribed by this Act unless it is satisfied—
(i)that facts material to the plaintiff’s case were not ascertained by him until some point of time occurring within twelve months before the expiration of the period of limitation or occurring after the expiration of that period and that the action was instituted within twelve months after the ascertainment of those facts by the plaintiff; or
(ii)that the plaintiff’s failure to institute the action within the period of the limitation resulted from representations or conduct of the defendant, or a person whom the plaintiff reasonably believed to be acting on behalf of the defendant, and was reasonable in view of those representations or that conduct and any other relevant circumstances,
and that in all the circumstances of the case it is just to grant the extension of time.
(3a)A fact is not to be regarded as material to the plaintiff’s case for the purposes of subsection (3)(b)(i) unless—
(a) it forms an essential element of the plaintiff’s cause of action; or
(b) it would have major significance on an assessment of the plaintiff’s loss.
Example—
In a case involving personal injury, a fact might qualify as a fact material to the plaintiff’s case if it establishes—
(a)a substantial reduction of the plaintiff’s capacity to work; or
(b)that the plaintiff will require substantially more medical care than previously expected; or
(c)a significant loss of expectation of life.
(3b)In determining whether it is, in all the circumstances of a case, just to grant an extension of time, the court should have regard to—
(a) the period of extension sought and, in particular, whether the passage of time has prejudiced a fair trial; and
(b) the desirability of bringing litigation to an end within a reasonable period and thus promoting a more certain basis for the calculation of insurance premiums; and
(c) the nature and extent of the plaintiff’s loss and the conduct of the parties generally; and
(d) any other relevant factor.
(4)Where an extension of time is sought pursuant to this section in respect of the commencement of an action, the action may be instituted in the normal manner, but the process by which it is instituted must be endorsed with a statement to the effect that the plaintiff seeks an extension of time pursuant to this section.
(5)Proceedings under this section may be determined by the court at any time before or after the close of pleadings.
(6)This section does not derogate from any other provision under which a court may extend or abridge time prescribed or limited by an Act, regulation, rule or by-law.
The plaintiffs assert that the breakdown of settlement negotiations between the plaintiffs and the defendant in about May 2009 constitute the necessary material fact for the purpose of s 48(3)(b)(i) enlivening the discretion.
Counsel for the defendant during final submissions did not dispute that assertion and in light of that concession I will assume, without deciding, that the discretion is enlivened. I will now consider the application for an extension of time having regard to the interests of justice in accordance with the requirements of s 48 of the Limitation of Actions Act.
In exercising the discretion I have had regard to the most recent remarks of the High Court in Prince Alfred College Incorporated v ADC:[25]
[99]In considering the exercise of the discretion under s 48(3) of the Limitations Act, two fundamental propositions established by this Court’s decision in Brisbane South Regional Health Authority v Taylor must be borne in mind. First, an applicant for an extension of time must prove the facts which enliven the discretion to grant the extension and also show good reason for exercising the discretion in his or her favour. An extension of time is not a presumptive entitlement which arises upon satisfaction of the pre-conditions that enliven the discretion. The onus of persuasion is upon the applicant for an extension of time. The exercise of the discretion to grant an extension of time must take account of the reasons for the limitation regime, and the discretionary nature of the decision to be made must be respected when conducting appellate review of a primary judge’s decision. In Brisbane South Regional Health Authority v Taylor, McHugh J said:
The enactment of time limitations has been driven by the general perception that ‘[w]here there is delay the whole quality of justice deteriorates’.
[100]Secondly, the purpose of the legislative conferral of the discretion is to ensure a fair trial on the merits of the case. The loss of evidence which will tend against the prospects of a fair trial will usually be a fatal deficit in an argument that good reason has been shown to exercise the discretion to grant an extension. As McHugh J pointed out in Brisbane South Regional Health Authority v Taylor, the justice of a plaintiff’s claim is seldom likely to be strong enough to warrant a court reinstating a right of action against a defendant who, by reason of the delay, is unable fairly to defend itself or is otherwise prejudiced. His Honour had earlier observed that, in cases of long delay, prejudice may exist without the parties or anyone else realising that it exists.
[footnotes omitted]
[25] (2016) 258 CLR 134 at [99]-[100].
Here, the dwellings the subject of the action were constructed in 1994 and the fire repair work was carried out at the latest by 1996. That is a period now of over 20 years. The first complaint which was ever made by the plaintiffs did not occur until 9 January 2004 when the contractor fell through the roof, some seven years after they had purchased the property. During that time the plaintiffs had made major alterations and renovations to 13B.
I find that the defendant has suffered real prejudice in defending this claim.
The real estate agent, Ms Jakubowicz, who wrote to the defendant at the time when the first plaintiff was negotiating to purchase 13B and enclosed the handwritten letter of the first plaintiff requesting a reduction in price due to the fire damage, is not now available to give evidence about those negotiations. An affidavit was filed at the hearing, and not disputed, that she now suffers from dementia.
The company which undertook the fire repairs in 1995/1996 is now deregistered. There is very little documentary evidence available about the relationship between the defendant and the company Solid State Constructions Pty Ltd who undertook that repair work.
Although the Campbelltown City Council advised that it did not have an application for development approval for the fire repair work, there is limited information about the scope of the work that was performed. What is known is that Solid State Constructions Pty Ltd was a South Australian Housing Trust registered contractor for carpentry and provided a certificate of insurance to the defendant. There are a number of invoice records for a total cost of $22,659 which simply record “repairs as quoted-directed”.[26] As the company was deregistered in May 2004 it is not now possible to obtain any further information.
[26] P128.
There is therefore a dearth of information as to the state of the Properties in 1996 after the fire repair work had been carried out. There is also very little information beyond the documents already referred to and the first plaintiff’s oral evidence, which I am reluctant to accept, regarding what the defendant told the plaintiffs about the fire damage prior to the purchase of 13B.
The plaintiffs have submitted that the Court should find there was an inadequate budget for the construction of the Properties and that the defendant inadequately managed and supervised the initial construction and fire repair works.
The plaintiffs’ assertion that the defendant failed to arrange and record adequate site inspections during the construction of the dwelling is not supported by the evidence which exists that progress payment certificates were issued on a regular basis. The fact however that there are no records held by the defendant of the site inspections demonstrates the practical prejudice to the defendant in defending the claim. I do not consider that the absence of records after a period of 10 years after construction is a basis for criticising the defendant.
This claim is based on the alleged actions of the defendant over 20 years ago. I consider that the defendant has demonstrated actual prejudice of the nature identified by the High Court in Brisbane South Regional Health Authority v Taylor.[27]
[27] (1996) 186 CLR 541.
In relation to the claims in contract, the plaintiffs require an extension of time of some seven years. In relation to the claim in tort, the plaintiffs require an extension of time of some two and a half years.
By reason of the demonstrated prejudice to the defendant, in all of the circumstances and given the plaintiffs’ conduct since 9 January 2004, which I address in detail later, I consider that an extension of time should not be granted.
Did the defendant owe the plaintiffs a duty to take reasonable care in relation to the original construction of the premises in 1994 and the fire repair carried out on the premises in 1995/1996 with regards to economic loss, consequential economic loss, ordinary physical injury and/or mental harm?
The plaintiffs plead that the defendant breached their duty of care owed to them. Whilst I have found that an extension of time should not be granted for such a negligence claim, I will nevertheless consider the question of whether a duty of care was owed.
The pleadings at [8] are set out below:
8.The Defendant was responsible for the management, supervision and certification of the original works and the fire repair works and as such, owed to the Plaintiffs a duty to take reasonable care in relation to the Trust’s Building Work to ensure that:
8.1. it had been performed in a proper and workmanlike manner;
8.2. the materials supplied by either the builder or the Trust for use in the Trust’s Building Work were good and proper;
8.3. the Trust’s Building Work was performed in accordance with the Building Act 1970 SA (repealed) and all other statutory requirements; and
8.4. the Property was reasonably fit for human habitation.
(“the duty of care”).
Particulars
(a)It was foreseeable that negligence on the part of the Defendant in the Trust’s Building Works would cause physical and economic loss to the Plaintiffs.
(b)The Plaintiffs were vulnerable to negligence by the Defendant and had no effective way to protect itself against the same.
(c)The imposition of such a duty of care to take such reasonable care is consistent with the contractual relationship between the Plaintiffs and the Defendant.
The alleged duty is said to arise from the fact that it was foreseeable that negligence on the part of the defendant would cause “physical and economic loss to the plaintiffs”.
The plaintiffs further plead that they were vulnerable to the negligence of the defendant and had no way to protect themselves against the defendant’s negligence. Finally, the plaintiffs plead that the imposition of a duty of care is consistent with the contractual relationship they had with the defendant.
The actual breach of duty pleaded is the failure of the defendant to properly manage, supervise and certify the original works and the fire repair works such that at the time of the sale and purchase the property was defective.
The pleaded defects in the claim for negligence are the same defects relied on by the plaintiffs as constituting the breach of contract. The plaintiffs allege that as a result of the breach of contractual warranties and duty of care by the defendant, the plaintiffs have and will suffer loss and damage.
It is important to note that the plaintiffs allege that a duty of care was owed by the defendants to prevent both “physical and economic loss to the Plaintiffs”.
The duty to take reasonable care to prevent physical injury to a person or property must be distinguished from the duty of care with respect to economic loss. The law has little trouble in recognising a duty is owed when there is physical damage and consequential loss.[28] However when a plaintiff claims other forms of damage in negligence the Court must identify whether a duty is owed outside the well-established duties of care.
[28] Tame v New South Wales; Annetts v Australian Stations Pty Ltd (2002) 211 CLR 317 at [15].
In Bryan v Maloney[29] the High Court held that a builder owed a duty of care to a subsequent purchaser for latent defects in the property. In that case the High Court said:[30]
Clearly enough, a relationship of proximity existed between Mr. Bryan and Mrs. Manion with respect to ordinary physical injury to Mrs. Manion or her property with the consequence that Mr. Bryan was under a duty to exercise reasonable care in relation to the building work, including the footings, to avoid a foreseeable risk of such injury. A more difficult question is whether that relationship of proximity and consequent duty of care with respect to the building work extended to mere economic loss by Mrs. Manion of the kind ultimately sustained by Mrs. Maloney when the inadequacy of the footings became manifest.
[29] (1995) 182 CLR 609.
[30] Bryan v Maloney (1995) 182 CLR 609 at 622-623.
Spigelman CJ in Harriton v Stephens[31] said that the preferable starting point in establishing whether a duty of care is owed in a claim for negligence is “the identification of the loss which the [plaintiffs] have suffered and the determination of whether there was a duty with respect to that kind of loss”.[32]
[31] (2004) 59 NSWLR 694.
[32] Harriton v Stephens (2004) 59 NSWLR 694 at [11].
The loss and damage claimed by the plaintiffs is set out at [13] of the Third Statement of Claim:
13.As a result of the breach of Contractual Warranties and duty of care by the Defendant, the Plaintiffs have and will suffer loss and damage as follows:
13.1. the Plaintiffs have suffered physical loss and damage to the Property by reason of the latent defects and consequential damage;
13.2. the Plaintiffs have suffered economic loss by reason of the latent defects and the consequential damage; and
13.3. the Plaintiffs have suffered physical and psychiatric illness by reason of the latent defects and consequential damage.
The particulars of the loss and damage are set out from [13.3.1] to [13.3.3] of the Third Statement of Claim:
13.3.1.Particulars of the loss and damage to property
13.3.1.1.The latent defects have not been rectified.
13.3.1.2.The consequential damage has been caused by the latent defects.
13.3.1.3.In August 2012, the Plaintiffs received a report from a structural and civil engineer recommending that:
●the existing footings be replaced;
●all roof members, stud walls or other wall framing that is charred from the fire needs to be replaced;
●the top plates of the stud wall need to be replaced;
●adequate new paving with fall away from the house and open grated sumps around the building perimeter connected to a new stormwater network with flexible connectors was required;
●re-building of the party wall to comply with Australian standards and to be capable of resisting fire was required;
●replacement of the ceiling; and
●replacement of the roof drainage system.
13.3.1.4.The repairs required are such that rectification of the latent defects and consequential damage can only be adequately achieved by demolition and re-building the Property to the relevant Australian Standards.
13.3.2.Particulars of Economic Loss
13.3.2.1.As a result of the latent defects and/or the consequential losses, the Plaintiffs have sustained and continue to sustain economic loss, including:
13.3.2.1.1.The loss of food and other perishables due to unreliable or non-existent electricity connection to the Property;
13.3.2.1.2.The inability to obtain loans and/or other financial support due to the uninsurable condition of the Property;
13.3.2.1.3.The inability to obtain a current valuation on the Property;
13.3.2.1.4.The loss of investment opportunities; and
13.3.2.1.5.The loss of opportunity to improve or otherwise alter the Property.
13.3.2.2.Further particulars of the Plaintiffs’ economic loss will be provided to the Defendant prior to the trial of this action.
13.3.3.Particulars of the personal injuries sustained by the Plaintiffs
13.3.3.1.As a result of the Property’s condition, the Plaintiffs have sustained the following physical and/or psychiatric injuries:-
13.3.3.1.1.Post-Traumatic Stress Disorder (“PTSD”) with co-morbid anxiety and depression (collectively, “the psychiatric injuries”);
13.3.3.1.2.emotional dysregulation;
13.3.3.1.3.croup sustained by the Plaintiffs’ son due to the damp conditions in the Property;
13.3.3.1.4.the development of asthma by each of the Plaintiffs and the Plaintiffs’ son due to the damp conditions in the Property.
13.3.3.2.The psychiatric injuries sustained by the Plaintiffs first manifested themselves on or about 9 January 2004 when the Plaintiffs observed a worker fall through the ceiling of their property;
13.3.3.3.The psychiatric injuries were subsequently diagnosed by Mr Laurie Field, clinical psychologist;
13.3.3.4.The psychiatric injuries sustained by each of the Plaintiffs are ongoing;
13.3.3.5.In or about late 2004 the Second Plaintiff attempted to suicide. As a direct consequence both the First and Second Plaintiff required emergency psychological treatment and ongoing psychological treatment;
13.3.3.6.The physical injuries sustained by the Plaintiffs were diagnosed by Dr Pearce in or about 2005 and are ongoing;
13.3.3.7.Further particulars are being obtained and will be provided prior to trial.
Particulars of pain and suffering and loss of enjoyment of life
13.3.3.8.The Plaintiffs have endured pain, discomfort, loss of enjoyment of life and inconvenience by reason of the ongoing condition of the Property and the consequential psychiatric injuries, medical treatment and ongoing disabilities sustained by the plaintiffs and particularised herein by the following:-
(a)frustration and stress associated with the ongoing condition of the Property and arising from the latent defects and/or the consequential damage;
(b)frustration and stress arising from and associated with difficulty participating in social and recreational activities, including in particular an inability to entertain friends and family at the Property due to the Plaintiffs’ concerns for their physical safety;
(c)ongoing fear relating to the dangers of living in the Property, inter alia:-
(i)that the roof of the Property could collapse at any time;
(ii)that the electricity in the Property could become “live” due to its interaction with water and cause physical harm to the Plaintiffs or attendees at the Property;
(iii)that the contents of the Property will be destroyed if it is left unattended for even a short period, as the Property has been deemed uninsurable;
(iv)that the neighbouring abandoned property will catch fire and/or will attract vandals due to leaking gas and its derelict state;
(d)poor sleep and nightmares;
(e)poor hygiene and living conditions including but not limited to:-
(v)the need to boil household water, including for the use of showers, by kettle due to electrical problems in the Property despite pre-existing physical injuries;
(i)chopping wood for a wood stove to provide all heating and cooking facilities due to electrical problems in the Property, despite pre-existing physical injuries sustained by both Plaintiffs;
(ii)the inability to have a telephone line in the Property due to inadequate telecommunications cabling;
(iii)no electricity in winter and even when available only sporadic access to electricity;
(iv)frequently flooded conditions due to inadequate and/or damaged stormwater piping at the Property;
(v)the loss of food and other perishable items due to ongoing electrical problems and a consequential refrigeration problem;
(f)significant impairment in the Plaintiffs’ social, psychological and occupational functioning and, in particular, in their relationship with their son;
(g)social isolation and withdrawal;
(h)inability to leave their home without significant psychological stress;
(i)anxiety that the house will collapse or catch fire as a result of the latent defects and consequential damage;
The Plaintiffs’ capacity to enjoy life, and amenities of life, has been substantially reduced, as a result of living at the Property with the latent defects and consequential damage.
Particulars of treatment
13.3.3.9.As a result of the psychiatric injuries the Plaintiffs have required the following treatment:-
13.3.3.9.1.Reviews by their general practitioner;
13.3.3.9.2.Regular and ongoing psychological treatment with a clinical psychologist;
13.3.3.9.3.Regular treatment with antidepressant medication; and
13.3.3.9.4.Emergency treatment for acute episodes of depression and/or suicidal ideation.
13.3.3.10.As a result of the physical injuries the Plaintiffs have also required treatment for asthma and croup due to the damp conditions in the Property.
13.3.3.11.Further particulars are being obtained and will be provided prior to trial.
To summarise, the plaintiffs claim damages for physical loss and damage to their property (economic loss), consequential economic loss, personal injuries including asthma, croup, pain and suffering and mental harm.
Counsel for the defendant in her closing address submitted that the duty of care owed by the defendant to the plaintiffs ought to be viewed as a pure economic loss claim. The plaintiffs submit in their written closing submissions that “the pleaded duty of care relates to pure economic loss”.
For the sake of completeness I will consider the alleged duty of care owed by the defendant with respect to each type of loss claimed by the plaintiffs.
Physical damage to 13B – Economic loss
The losses claimed for the physical damage to 13B arising from the alleged defects, outlined from [13.3.1.1] to [13.3.1.4] of the Third Statement of Claim, can be quite properly characterised as pure economic loss.[33] This physical damage cannot properly be treated as ordinary physical injury to property.[34] In Woolcock Street Investments Pty Ltd v CDG Pty Ltd[35] the majority of the High Court said:
[19]The damage for which the appellant seeks a remedy in this case is the economic loss it alleges it has suffered as a result of buying a building which is defective. Circumstances can be imagined in which, had the defects not been discovered, some damage to person or property might have resulted from those defects. But that is not what has happened. The defects have been identified. Steps can be taken to prevent damage to person or property.
[20]A view was adopted for a time in England that, because there was physical damage to the building, a claim of the kind made by the appellant was not solely for economic loss. That view was questioned in Sutherland Shire Council v Heyman and rejected in Bryan v Maloney. It was subsequently also rejected by the House of Lords in Murphy v Brentwood District Council. There is no reason now to reopen that debate and neither side in the present matter sought to do so. The damage which the appellant alleges it has suffered is pure economic loss.
[emphasis in original; footnotes omitted]
[33] Bryan v Maloney (1995) 182 CLR 609 at 617.
[34] Bryan v Maloney (1995) 182 CLR 609 at 617.
[35] (2004) 216 CLR 515 at [19]-[20] per Gleeson CJ, Gummow, Hayne and Heydon JJ.
In the current case, the plaintiffs claim as rectification the amount to demolish and rebuild the property in light of the alleged defects.
The plaintiffs have accepted that their pleading in relation to the duty of care to prevent economic loss is a novel duty of care which arises out of the relationship between the plaintiffs and the defendant as purchaser and vendor. In so pleading the plaintiffs rely on Bryan v Maloney.[36]
[36] (1995) 182 CLR 609.
By parity of reasoning the plaintiffs allege here that the defendant owed them a duty of care because the risk of harm to the plaintiffs was reasonably foreseeable, as purchasers they were vulnerable to the risk of harm and the defendant had actual knowledge of the risk of harm. Finally the plaintiffs submit that there is no inconsistency between provisions of the Contract and the pleaded duty of care, nor is there any issue of indeterminate liability about which the Courts have been weary of finding in cases involving pure economic loss.
The defendant denied that any duty of care arose in the context of its vendor/purchaser relationship between the plaintiffs. The defendant sought to distinguish the decision of Bryan on the same basis as the subsequent High Court decision of Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288.[37]
[37] (2014) 254 CLR 185.
In Brookfield the plurality distinguished Bryan on the basis that there were material distinctions between the two cases. These distinctions included the detailed prescriptions in the development and construction contract in Brookfield in contrast to the simple obligations in the contract between the builder and the owner in Bryan. The Court further took notice of the expressed defects rectification provisions in the sales contracts that were present in Brookfield but not in Bryan.
As to the cause of the first plaintiff’s current mental health condition, the Doctor further opined:[77]
I do not consider that the alleged defects in the construction and repair of her home and the incident on 9 January 2004, are in themselves, the predominant causes of her current condition. In my opinion, Ms Aistrope’s psychiatric conditions have been caused by the ongoing dispute regarding the repair of the alleged defects and the subsequent problems with the home which she said was due to water getting into the home and the footings as well as the loss of the utilities. A major preoccupation is what she sees as a “cover up” by the SAHT and a failure to make amends over the past 10 or more years.
…
I consider that the management of the ongoing legal proceedings is a major contributor to Ms Aistrope’s depression probably more so than her anxiety.
[77] P141.
It is evident that Dr Clarke drew a clear distinction between the subject matter of the proceedings and the continuation and management of the proceedings themselves.
Although Dr Clarke also provided an opinion in relation to the second plaintiff, the second plaintiff did not give evidence and to that extent the opinion of Dr Clarke has not been supported by any evidence in these proceedings. Nevertheless I note that Dr Clarke’s assessment of the second plaintiff was that he is suffering from a mild to moderate adjustment disorder which is likely to continue until there is a more satisfactory outcome in relation to his living circumstances.
Neither of the plaintiffs were interested in taking any medication or treatment for their psychological and mental conditions. In relation to the second plaintiff, Dr Clarke’s conclusion was:[78]
I consider that the cause of Mr Aistrope’s symptoms associated with his Adjustment Disorder as I have diagnosed is not so much the alleged defects in the construction and repair of Unit 13B and the incident on 9 January 2004, it is what has occurred subsequent to that with the failure to repair the problems discovered at that time. He described his distress about the further damage to the home causing a loss of the normal comforts one expects in a home and causing Mr Aistrope and his family to be living under very difficult circumstances. Mr Aistrope making choices to remain living under such circumstances would appear to have contributed to the difficulties that he faces.
[78] P142.
I accept the evidence of Dr Clarke. He gave evidence in a careful, cautious and balanced manner. Dr Clarke was asked a number of questions in cross-examination which elicited a thoughtful and considered analysis which may well provide the key to the answer as to why the plaintiffs have been unable to resolve this matter after so many years. He said, in answer to questions from the plaintiffs’ counsel:
A.… So that’s - all I’m saying is that cognitive impairment is not one of them - not one of her problems. But I certainly think that her obsessive approach is an inability to actually perhaps approach this problem in a more conciliatory way or perhaps try and work out some - negotiate some settlement before now, has been contributed to by that obsessional nature that she is - and with that is an anger and a distrust that goes with it - that she has obsessively gone down a path of that ‘This is the solution and there is no other way, there’s nothing that can happen that would satisfy me’. So that’s part of what I’m talking about in terms of an obsessive approach and it would - and therefore documents or information or advice to the contra of that that is going to be disregarded, whoever it comes from, because her view is that ‘This is what I know is right and this is a solution that I want’ and that is contributed to by a somewhat obsessional approach.
Elsewhere I have explained why I have found that the plaintiffs have unreasonably failed to mitigate their damage and unreasonably refused to repair or allow others to repair the damage to the roof caused by the contractor’s fall in January 2004. That refusal as I have already found, has been ongoing, protracted and unreasonable. In the end, I am not able to conclude that either of the plaintiffs’ conditions, whether they be major depression or anxiety disorders or post-traumatic stress disorders, have arisen as a consequence of any act or omission of the defendant. In my view the evidence clearly points to the failure of the plaintiffs to allow and effect repairs to the home as the predominant cause of the psychological and mental condition or conditions from which they now suffer.
With regards to the claim for the physical injuries of asthma and croup, counsel for the defendant pointed to the very limited information before the Court in assessing this claim. The only evidence I have heard is from the first plaintiff that she and her family suffer from asthma and that she had to rush her son to hospital with croup when he was young. The medical reports referred to merely recount that this is the same information given by the first plaintiff to each of the writers. None of those medical reports actually consider the question of whether the alleged physical injuries have been caused by the alleged defects. Furthermore, in cross-examination the first plaintiff conceded that she is a smoker and that she smokes around 15 cigarettes a day.
On the balance of probabilities I cannot be satisfied that the physical injuries complained of actually exist or that they have been caused by any alleged defects in their property.
As I have found that none of the psychiatric illnesses or physical injuries have been caused by the alleged defects, it follows that the claims for pain and suffering and loss of amenities must also fail.
Have the plaintiffs been contributorily negligent in respect of any loss which they claim to have suffered and/or have they failed to mitigate any loss?
If, contrary to my conclusion that the defendant was not negligent, the defendant did breach its duty of care to the plaintiffs, I will turn now to the question of whether the plaintiffs have been contributorily negligent and/or have failed to mitigate any damage.
Contributory negligence
The test of contributory negligence was enunciated by the High Court in Astley v Austrust Ltd:[79]
At common law, contributory negligence consisted in the failure of a plaintiff to take reasonable care for the protection of his or her person or property. Proof of contributory negligence defeated the plaintiff’s cause of action in negligence. Although conduct amounting to contributory negligence may also constitute the breach of a duty which the plaintiff owes to the defendant, a plaintiff can be guilty of contributory negligence notwithstanding that he or she owes no duty to the defendant or any third person. A pedestrian, for example, owes no duty to a speeding driver to avoid being run down but is guilty of contributory negligence if he or she fails to take reasonable care to keep a proper lookout for speeding vehicles. Similarly, if a plaintiff fails to take care of its property, it may be guilty of contributory negligence although it owed no duty to the defendant in respect of the property. Thus, in Smith v Badenoch where a fire started by the defendant damaged an adjoining property, the Supreme Court of South Australia held that the plaintiff was guilty of contributory negligence because he had failed to call out the local fire service promptly. A person may also be guilty of contributory negligence even though the negligence of the plaintiff did not contribute to the accident which caused the damage. That is because contributory negligence is concerned with the failure of the plaintiff to protect his or her person or property against damage and not with whether the failure contributed to the accident.
[footnotes omitted]
[79] (1999) 197 CLR 1 at [21] per Gleeson CJ, McHugh, Gummow and Hayne JJ.
The defendant pleads that in the event that the plaintiffs have sustained loss or damage which is denied, any loss or damage sustained by the plaintiffs is as a result of their own negligence and/or contributory negligence. The particulars of which are set out in the following subparagraphs of the defendant’s Defence to the Third Statement of Claim:
14.1the plaintiffs failed to obtain a building inspection report by a qualified building inspector either prior to purchase of the Property or during the cooling off period;
14.2the plaintiffs failed to inspect the dwelling on the Property in circumstances where they had agreed to take the Property in the condition it was in at the time when the deposit was paid;
14.3the plaintiffs failed to maintain the dwelling on the Property by regularly clearing the gutters and roof valleys of leaf debris, thereby causing the gutters to overflow;
14.4the plaintiffs caused or permitted holes to be cut in the gutters of the dwelling on the Property and have not repaired those holes, causing rainwater to drain to the footings of the building; and
14.5the plaintiffs damaged the dwelling on the Property by removing interior wall cladding and plasterboard in order to expose wiring and alleged dampness.
Factual findings
The Contract on its face included a term that the plaintiffs took 13B in the condition in which it was in at the time the deposit was paid. I have previously discussed this clause of the Contract elsewhere (at [63]). I have found elsewhere that the first plaintiff referred to fire damage in the property and the fact that the property required repair during her negotiations in order to bargain for a lower price for the purchase of the property. The defendant advised the first plaintiff on two occasions that she was responsible for ensuring the condition of the property was satisfactory to her.
In particular, after the plaintiffs had signed the Contract but during the cooling off period, the plaintiffs signed the acknowledgment form stating that they relied “solely on his/her own judgment and view of the said land and its improvements in making a decision to enter into this contract, and understands that it is the Purchaser’s own responsibility to ensure that the condition of the property is acceptable to him/her”.[80]
[80] P108.
In addition, the first plaintiff had been a resident at 13B from 3 February 1996 until the date of settlement. The second plaintiff at that time was spending a lot of time at 13B with the first plaintiff and her son and he moved in from around November 1996.
Notwithstanding these facts the first plaintiff admitted in evidence that she did not obtain a building inspection before purchasing the property.
I consider that any reasonable person would have obtained a building inspection, or at the very least have inspected 13B. Had the first plaintiff done so, many of the alleged defects including the roof encroachment, the number of downpipes and the alleged problem with the height of the party wall could have and would have been identified at the time of purchase.
As I have discussed in another context, the evidence establishes that after purchase of 13B the plaintiffs replaced the downpipes from rectangular downpipes to round downpipes with the consequence that the installed downpipes had lesser capacity and were less efficacious for carrying water away from the property.
Since 2004 the plaintiffs have permitted the roof to be covered by a tarpaulin. In addition insofar as there has been any evidence of overflow of water in heavy rain events since 2004, it is more likely that the discharge of water onto the paths near the footings has been caused by the significant holes drilled in the gutters by the State Emergency Service rather than any inadequacy in the downpipes.
In June 2008 during Mr Jankovic’s inspection he observed leaf debris in the gutters. It was his view at that time that leaf debris was more likely the cause of overflowing gutters than any defect.
The plaintiffs have been on notice of this issue since at least 2008 when Mr Jankovic provided his report concerning the minor sagging at each of the roof hip overhangs which caused minor dropping of the fascias at the corners and the gutters to hold water as a consequence. Notwithstanding that fact, the plaintiffs have failed to repair or otherwise rectify the damage.
There is no evidence which satisfactorily explains how water has been entering into the roof space or indeed if water has been entering into the roof space and the walls of 13B. Insofar as there is evidence of water entering 13B, in Mr Jankovic’s view it is more likely that it has been caused by roof valleys overflowing due to being blocked with leaves and at the rear elevation due to the temporary roof cover installed where the roof tiles are damaged.
The plaintiffs chose in 2005 to remove the interior wall cladding and leave it in that condition for many years. To that extent their actions have also contributed to any evidence suggesting ongoing overflow of water into the property.
I find that the plaintiffs’ actions since 2004 have contributed significantly to the ongoing problems with water entering into the roof space of 13B. To this extent, had I found any liability on the part of the defendant, I would significantly reduce any damages on account of what I find to be significant contributory negligence on the part of the plaintiffs.
Failure to mitigate property damage
The defendant says that the plaintiffs have failed to mitigate their loss by, among other things, refusing reasonable offers by the defendant (made as early as 2004) to repair damage to the property. The defendant says the plaintiffs have also failed to repair 13B. This failure has caused further consequential damage, particularly from water ingress. The consequential damage has also caused or contributed to the alleged psychiatric injuries suffered by the plaintiffs.
The defendant says that the plaintiffs cannot rely on an absence of money to fund the repair work and that their refusal of repeated reasonable offers to repair property damage demonstrates the unreasonableness of their failure to mitigate. It contends that in an attempt to prevent ongoing damage to 13B, the defendant repeatedly over a number of years:
a.offered to pay the plaintiffs’ the cost of repairs as quoted by a builder of their choice;
b.was prepared to rectify roof and stormwater issues separate to any footings issues; and
c.engaged experts chosen by the plaintiffs to identify necessary works.
The defendant says that on each occasion that an agreement was reached, the plaintiffs failed to respond, identified further issues that they claimed required rectification or refused to adhere to the terms of the agreement.
The duty to mitigate loss was explained in the following terms by Perry J in Duke Group Ltd (In Liq) v Arthur Young (Reg); Peat Marwick Hungerfords (Third Party) (No 4):[81]
… the principle as one imposing on a plaintiff “the duty of taking all reasonable steps to mitigate the loss consequent upon the breach and debars him from claiming any part of the damage which is due to his neglect to take such steps”. Although that statement of principle is expressed in terms apt for the law of contract, it applies equally in tort.
The question whether a plaintiff has failed to act reasonably is a question of fact, not of law: see Halsbury’s Laws of England (4th ed, 1975), vol 12, p 478, par 1194:
The plaintiff is only required to act reasonably and whether he has done so is a question of fact in the circumstances of each particular case, and not a question of law: …
[81] (1991) 55 SASR 24 at 32-33.
It is plain that the duty arises as soon as the plaintiff realises that an interest of his has been injured either by a breach of contract or a tort, and he is then bound to act as best he may, not only in his own interests, but also in those of the defendant.[82]
Factual findings
[82] Halsbury’s Laws of England (3rd ed) Vol 11 at 289.
In this case I find that the plaintiffs have been on notice of the nature of the alleged defects in 13B, the consequent property damage and their alleged psychiatric injuries for at least 10 years. The extra reports which they obtained from Mr Combe in 2006 and from Mr Jankovic in October 2008 are evidence that the plaintiffs have known of all of the defects they now assert to be present in 13B since then. Insofar as the first plaintiff asserted that the discovery of the defects was progressive, there can be no doubt that that process was largely complete by October 2008 when the Jankovic report was made available. The asserted defects have not changed significantly since that date.
I find that the defendant made significant and repeated offers to attempt to repair the damage to 13B and to get access to the roof space in order to repair the damage to both properties. I find that the plaintiffs’ approach to the defendant’s requests has been obstructive, argumentative and unreasonable. The first plaintiff has not provided any reasonable explanation for the failure to facilitate repairs to the roof damage of the Properties. Her assertion that the engineers did not agree on what repairs were to be done is, in all of the circumstances, disingenuous.
On the basis of the evidence I make the following findings about what happened between 2004 and 2014.
By letter dated 16 April 2004 the defendant offered to pay for the plaintiffs to engage their builder of choice. That offer was subject to conditions that the plaintiffs instruct the contractor to undertake the work within a reasonable period, that both sign the offer, that the first plaintiff ceased to claim that she did not know 13B was fire damaged before she moved into it and that the payment was in full settlement of any claims in relation to 13B. The defendant was to undertake any work required to 13A after the repairs had been completed.
In his evidence Mr Lochert explained that it was the defendant’s policy to give proprietors the money to pay for repairs themselves in order for the defendant to avoid any potential liability arising out of those repairs.
Although the first plaintiff claimed not to understand why she had been asked to get a quote to repair damage to 13A, she conceded that repairs to the roof of either property required access to her property. Notwithstanding the letter of 16 April 2004 the defendant did not receive any response. The solicitors then acting for the plaintiffs, S.R.G. Lawyers, later claimed to have sent a letter in May 2004.
In July 2004 lawyers then acting for the plaintiffs recorded a conversation when the defendant confirmed it required a quote for approval to agree to payment for repairs and an engineer commissioned by the defendant would need to inspect the property. At that time the plaintiffs advised the defendant that they had received advice from a structural engineer that the roof would need to be rebuilt.
Accordingly on 6 July 2004 Mr Lochert attended at 13B to inspect the damage. On that occasion he recorded that there were two separate issues, the issue of the eave overhang that has burnt timbers and needs replacing and the movement in the unit and issues with the gutter falls. Mr Lochert considered the front bedroom wall felt damp but he could not detect any dampness in the rear walls.
On 13 July 2004 the defendant wrote to the plaintiffs’ solicitor identifying that there was an impasse between the parties. At that stage the defendant denied any negligence and indicated it could not progress the matter further until the information requested was provided by the plaintiffs. The defendant did not receive any response to that letter.
On 9 September 2004 the defendant again made an open offer to pay for repairs to fix the fire damaged roof, that any payment was to be in full settlement of any claims relating to fire damage but would not be in full settlement of any claims in relation to 13B, that if the plaintiffs’ later received a report saying that the footing problem was the defendant’s fault then the defendant would deal with this matter separately, and insofar as there were issues regarding an encroachment the defendant could grant mutual rights. In this letter the defendant noted that the first plaintiff had been calling talkback radio shows to complain about the situation.
The plaintiffs’ solicitor responded to this letter advising that the plaintiffs intended to seek an engineer’s report from Mr Combe. That report was received on 6 December 2004.
On 8 December 2004 the defendant reiterated its offer of 9 September 2004.
On 19 January 2005 the plaintiffs’ solicitor advised that the plaintiffs were seeking a detailed quote from a builder of their choice and would be seeking the costs of rectification work including reports and legal fees. Mr Combe in his report dealt in relation to specific defects as follows:
a.Wet walls and wall framing in bedroom 1 and 2;
b.Footing movement that required repainting of the ceiling and cornice (but not any other repair and remedial work once roof repair had been undertaken);
c.Roof trusses installed with “minimal clearance” and resting on the ceiling cornice causing cornice cracking;
d.Roof frame encroachment at the front and rear of the dwellings, which did not provide fire isolation;
e.Overhanding eaves framing and gutter sag; and
f.Roof framing not approved by Council.
On 18 March 2005 a quote for rectification work was received from Mr Graham Watson. That estimate for repairs was $66,000 including GST.[83]
[83] P25.
On 22 April 2005 Mr Combe, Mr Lochert, Ms Venning (a solicitor from the Crown Solicitor’s Office) and the plaintiffs met at the property.
Mr Lochert gave evidence before me that he considered the parties had a basic agreement to move forward and get on with things on that date in that the defendant was to pay for the repairs to the hip rafters, the adjustment to the gutters and the burnt out timbers and there would be ongoing assessment of whether there was deflection of the trusses or rise of the wall frames.
By letter dated 17 May 2005 Mr Combe also recorded that a course of action was agreed at the meeting.[84] The letter records that they had agreed to monitor the dampness in the internal walls, repair the sagging eave to the party wall and install further downpipes. The defendant had agreed to review the price for the repairs that had been submitted by the builder nominated by the plaintiffs and to review the scope of works prepared by Mr Combe.
[84] P26.
After the meeting on 22 April 2005, the plaintiffs removed the plasterboard from the walls inside the house because they thought the defendant was “hiding something”.
Subsequently Mr Combe again inspected 13B and provided a further revised scope of works identifying repairs which were more extensive than previous versions. The removal of the plasterboard had revealed for the first time fire damaged timbers in the wall framing in the bedrooms in 13B and in the reworked valley and eave construction, a lack of fire separation to the open eave between the two residences, a lack of closure of the cavity between the brick party wall and power cables and electrical fittings in the party wall without fire enclosure or separation.
At that time Mr Combe said he had prepared a submission with plans and details of the roof framing and truss calculations for approval from the Campbelltown City Council. The defendant did not receive approval there referred to.
On 15 and 16 June 2005 the plaintiffs were issued with non-compliance notices from the Australian Communications Authority and the Office of the Technical Regulator, respectively. On 27 June 2005 the defendant again wrote to the plaintiffs’ lawyers seeking a fee submission from Mr Combe for works to be done. That fee submission was not provided. In that letter the defendant also asked how the interior walls were getting wet and whether there were broken tiles. The defendant also advised that it was seeking clarification from the Office of the Technical Regulator about the notice which had then been issued by the Regulator. No reply was received by the defendant to that letter.
After that the plaintiffs’ then lawyer ceased acting for them. I have received little evidence of negotiations for the rest of 2005 and the whole of 2006.
By 2007 the plaintiffs had ceased to retain S.R.G. Lawyers and had retained Lynch Meyer Lawyers. No negotiations occurred via Lynch Meyer and after a brief period that firm ceased acting for the plaintiffs, apparently due to a conflict.
Between September 2007 and September 2009 the plaintiffs were represented by another solicitor from Fisher Jeffries. At that time the parties engaged in sustained negotiations by correspondence in an attempt to fix the asserted defects in 13B culminating in a heads of agreement which the plaintiffs ultimately refused to sign.
On 27 November 2007, the Crown Solicitor wrote to Fisher Jeffries proposing:
a.the plaintiffs have an engineer measure the roof framing and prepare detailed plans for council approval to repair the roof and ceiling, install downpipes and gutters;
b.the plaintiffs or their project manager arrange for three qualified builders of their choice to prepare written quotations on the cost of carrying out this work for the defendant’s consideration; and
c.following completion of the works on the roof, ceiling and guttering, the plaintiffs arrange for three qualified builders of their choice to inspect the walls and plasterboard, using a moisture meter and providing photographic evidence, and provide quotations of their estimates of replacing any plasterboard and if necessary, timbers for the defendant’s consideration; and allow for qualified officers nominated by the defendant to inspect the property to verify the work that may be proposed.
The Crown Solicitor’s Office did not receive a response to that letter
On 8 February 2008, the defendant offered to meet the cost of remedial work necessary to obtain a certificate of compliance satisfactory to the Office of the Technical Regulator and asked the plaintiffs to obtain quotes for the work. Alternatively, the defendant offered to arrange for the work to be done.
The Crown Solicitor’s Office did not receive a response to that letter.
The defendant made an offer to the plaintiffs on 17 March 2008 to pay for works required to repair:
a.the damage to the roof;
b.the notice of non-compliance from the Office of the Technical Regulator and the Australian Communications Authority;
c.the gutters, downpipes and footings; and
d.any consequential work necessary (to be identified and scoped by FMG Koukourou);
insofar as that repair was required as a result of non-compliant construction or sub-standard repairs in 1995/1996.
The works would be undertaken by a builder selected by the defendant from three builders selected by the plaintiffs. The offer required the plaintiffs to provide unobstructed access to the property to the builders and FMG Koukourou by written consent.
The plaintiffs sought clarification of the offer on 31 March and compensation for any relocation required to allow the works to take place. The defendant agreed to those amendments by letter of 4 April 2008. The plaintiffs subsequently referred to this as a “settlement agreement” reached between the defendant and the plaintiffs.
Subsequently, the plaintiffs objected to using FMG Koukourou to identify the work required. The defendant agreed to use Mr Jankovic instead. Mr Jankovic’s report was dated 3 October 2008.
On 13 November 2008 the plaintiffs’ solicitors wrote to the Crown Solicitor proposing that a scope of works with drawings be prepared for specific identified defects (with reference to the Jankovic report) concurrently with investigations by an expert engineer as to the cause of movement cracking in both properties.
On 10 December 2008, the defendant put a counterproposal to the plaintiffs. The defendant offered to meet the cost of remedial work to specific listed defects and set out reasons why it would not meet the costs of others. The plaintiffs through their solicitors responded on 22 December 2008 to the effect that they were agreeable to that subject to some qualifications.
On 3 March 2009 the defendant provided the plaintiffs with a draft heads of agreement to record the position. On 7 May 2009, the defendant provided an amendment agreement to the plaintiffs which incorporated some of the plaintiffs’ proposals communicated by phone. In the amended draft heads of agreement the defendant offered to pay for the following items:
a.bracing of hips and fascia;
b.repair of fire damaged roof timbers;
c.replace fire damaged timbers in bed 2;
d.replace damaged/missing roof tiles, hip and ridge cap tiles and misaligned, cracked tiles;
e.undertake work to seal gaps and reinstate power points with OTR compliance;
f.install a parapet wall between buildings;
g.clip electrical cables in roof; and
h.clip LV cables apart from consumer cabling.
At that time the defendant made it clear it would not pay for replacement gutters, installing additional downpipes, movement cracking, plasterboard lining or bathroom tiles.
It is apparent that the plaintiffs signed the heads of agreement and then retracted their agreement before it was sent to the defendant. On 3 June 2009 the defendant’s solicitor wrote to the plaintiffs’ solicitor confirming her understanding that the plaintiffs had amended the agreement and asking that the signed agreement be provided as soon as possible.
On 14 September 2009 Fisher Jeffries wrote to the defendant’s solicitor enclosing documents prepared by the first plaintiff identifying further issues to be resolved before the matter could be resolved. They also recorded their expectation that their instructions would be terminated.[85]
[85] P91.
Fisher Jeffries’ instructions were terminated sometime in late 2009. The plaintiffs were then self-represented. Negotiations stalled. Whilst unrepresented the plaintiffs filed a statement of claim in the Supreme Court on 24 November 2009.
Sometime after this the plaintiffs retained Johnston Withers. A letter from the Crown Solicitor to Johnston Withers dated 9 June 2011 would suggest that the Crown was at that time attempting to arrange a date for Mr Jankovic to once again inspect the property.[86] The parties also engaged in a mediation in or around November 2011.
[86] P92.
It appears that another two years passed with little or no negotiations taking place. The plaintiffs engaged Moore Law briefly and then retained yet another law firm to act for them, Gilchrist Connell.
The first plaintiff in evidence said she had called the police in 2009 in relation to a workman one day being on the roof at 13A. She conceded that she has never been prepared for the defendant to permit its contractors on the roof of 13A without notifying the plaintiffs.
The defendant attempted to negotiate a consensual resolution in order to rectify some of the property damage. I find that the defendant was consistently faced with unreasonable refusals by the plaintiffs. As the defendant considered it could not access the property in order to effect repairs, Ms Trebilcock of the defendant arranged for staff to inspect the tarpaulin once or twice a year to ensure it was in place to avoid any further damage insofar as it might be possible to the properties.
By letter on 10 December 2013 the defendant again sought consent for independent contractors to attend at 13B to inspect the damage to the roof, take measurements and photographs and inspect the area generally for the purpose of preparing a detailed scope of works. The plaintiffs refused access by email dated 11 December 2013 from their solicitors to the Crown Solicitor.
At the plaintiffs’ request, on 27 October 2014, another site meeting was held at the property with representatives of the Master Builders Association, Campbelltown City Council and the Office of the Technical Regulator. Mr Brendan Corby of the Master Builders Association emailed Mr Lochert on the same day outlining the issues he alleged the defendant had a duty to repair. Mr Reardon from the defendant responded that the defendant had been willing to make repairs. He said they had not been granted access to the property and if the Master Builders Association were able to assist the defendant in that regard, the defendant would be pleased to complete the repairs.
Subsequently the Crown Solicitor wrote again to the plaintiffs on 30 October 2014 referring to that site visit and enquiring as to whether the plaintiffs would now be prepared to allow the defendant’s contractors on site to effect necessary repairs. After an exchange of a significant number of letters, the plaintiffs still did not provide permission.
In the end, the Crown Solicitor wrote to the plaintiffs on 20 November 2014 advising them that it interpreted the whole of their correspondence as a refusal to allow access for the purpose of preparing a scope of works with a view to effecting repairs to 13A.
On the basis of this evidence I find that the defendant did make a number of reasonable offers from as early as 2004 to resolve the property damage to the property. I find that the plaintiffs unreasonably refused.
This is so even in light of the fact that the defendant was prepared for the plaintiffs to use the builder of their choice, that the defendant was prepared at that time to rectify roof and storm water issues separate to consideration of any footing issue which it continued to deny liability, that the defendant engaged experts chosen by the plaintiffs to identify the necessary works and that on each occasion that an agreement was reached, the plaintiffs then identified further issues that they claimed required rectification or refused to adhere to the terms of the agreement.
In my view the defendant’s reasonable attempts to repair the damage to the roof of the properties has been obstructed by the unreasonable failure by the plaintiffs to permit the defendant access.
I find in these circumstances that the plaintiffs have failed to mitigate their loss and insofar as any of the consequential damage since 2004 includes any economic loss, physical injury or psychiatric injury, I would deny the plaintiffs any damages in respect of those injuries or losses.
Summary and conclusion
For the reasons I have given I find that the statutory warranties in s 27 of the Builders Licensing Act were not incorporated into the Contract. Even if they were, the time limitation period of five years has expired and cannot be extended.
The limitation period under the Limitation of Actions Act in respect of the plaintiffs’ claims based on contractual duties allegedly owed by the defendant as vendor or in tort expired before the plaintiffs’ claim was brought.
In the exercise of the discretion I decline to extend the time within which to make a claim.
On the assumption (without deciding the issue) that the defendant owed a duty of care to the plaintiffs either on the basis of contract or in tort, I find that duty has not been breached by the defendant.
None of the pleaded defects, if they exist, are defects for which the defendant is responsible to the plaintiffs.
To the extent that any defects were caused or contributed to by the defendant (contrary to my findings), the plaintiffs have been contributorily negligent and have failed to mitigate their losses.
Finally, any damages suffered by the plaintiffs were not caused or contributed to by any act or omission for which the defendant is responsible.
For these reasons I dismiss the plaintiffs’ claims.
There are however important reasons why the defendant’s application under the Encroachments Act 1944 (SA) should be granted. The conduct of the plaintiffs over a protracted period of time has prevented the defendant from carrying out necessary repairs to 13A. That has resulted in 13A being unable to be utilised for many years. This scandalous state of affairs must not be allowed to continue. The plaintiffs must be free to get on with their lives and the defendant must be free to perform its role which is to make available scarce public housing to those who can least afford it. To enable that to occur I propose to make orders compelling the defendant to remove the encroachment. Before making final orders I will hear from the parties as to the terms of the order I propose to make under the Encroachments Act 1944 (SA).
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