Cherie Marise Delaney and Kenneth John Cullinan v Terrence Ralph Winn
[2014] NSWDC 87
•10 April 2014
District Court
New South Wales
Case Title: Cherie Marise Delaney & Kenneth John Cullinan v Terrence Ralph Winn Medium Neutral Citation: [2014] NSWDC 87 Hearing Date(s): 25, 26, 27 February 2014 Decision Date: 10 April 2014 Before: Judge MJ Finnane QC Decision: See paragraph [68]
Catchwords: CONTRACT Law - engagement for reward - breach - negligent misstatement - negligence - duty
DAMAGES - loss of value of property - no causal link
TORT - mental harm - no evidence to establish claim
OTHER - purchase of property - defect - reliance on property reportCategory: Principal judgment Parties: Cherie Marise Delaney and Kenneth John Cullinan (Plaintiff)
Terrence Ralph Winn (Defendant)Representation - Counsel: Mr A Vernier (Plaintiff)
Mr M Pessman SC/ Ms A Power (Defendant)- Solicitors: JP Capsanis Solicitors (Plaintiff)
JS Meuller & Co (Defendant)File Number(s): 2012/259470
JUDGMENT
The plaintiffs, Cherie Marise Delaney and Kenneth John Cullinan have sued the defendant, Terrence Ralph Winn claiming damages for breach of contract arising from what they say was the negligent carrying out of an inspection report on some property the plaintiffs intended to buy.
The defendant, Terrence Ralph Winn was a building consultant employed by Facility Solutions Australia Pty Ltd, a company controlled by him. Facility Solutions contracted with Harding Industries Pty Ltd as trustee of the Graphic Property Trust, trading as Graphic Property Reports to provide to Graphic Property Reports building reports prepared by Mr Winn.
The plaintiffs were interested in buying a property at 21 Alison Road Springfield and approached a real estate agent who suggested that they obtain a property inspection report from Graphic Reports.
It seems to be common ground that the report he was to prepare was one that complied with the relevant Australian standard, AS 4349.1-1995.
A claim framed in contract
The statement of claim is framed in contract and alleges that on about 15 August 2006 the plaintiff agreed for reward to engage the defendant as their building consultant and the defendant accepted such engagement (Statement of Claim para 3).
The evidence at the hearing establishes, in my opinion that there was no such contract. There is no doubt that the defendant did carry out an inspection of the property and did make available to Graphic Property Reports the results of his inspection. He was doing that as the employee of Facility Solutions Australia Proprietary Limited contracting with Graphic Property Reports. He did not make any report himself at any time to the plaintiffs in writing.
The claim against him based on contract fails.
The claim based on negligent misstatement
There is no doubt that subsequently, the defendant, following a request by the real estate agent to Graphic Reports, did attend the premises in the presence of the first plaintiff and her father. The first plaintiff, who was the only one of the two plaintiffs to give evidence, claimed that he, the defendant, attended on two occasions. He denied attending on two occasions and I accept his evidence, in preference to the evidence of the first plaintiff, on this point.
The proceedings were conducted, as I saw it, on a type of tacit understanding that although there was clearly no contract between the plaintiffs on the one hand and the defendant, nevertheless the defendant appreciated that he was providing a report that would be provided to a potential purchaser of the property and that the purchaser would probably rely on that report to some extent in deciding whether or not to purchase the property. This could mean that the defendant had a duty of care to the plaintiffs that would render him liable to them if he negligently carried out an inspection and was the cause of a report that was wrong or inadequate AND that the loss which was suffered was causally related to the alleged breach of duty.
The loss claimed included financial loss and for being "put to great trouble, inconvenience, mortgage interest, mortgage expenses, other expenses and mental harm"(Statement of Claim para 15).
Some basis was put for financial loss arising from the plaintiffs purchasing the property, the claim being that they could have purchased other properties at a profit or at the very least they could expect damages being the difference between what they paid for the property, $318,000 plus the interest they had to pay on borrowing for this property and the costs they outlaid, less $274,621.00, the sale price for the property when it was sold by them 3 years later.
There was also a claim for mental harm.
Evidence of the plaintiff
The first plaintiff gave evidence in an affidavit supplemented by oral evidence.
She first spoke of the residence in which she lived before purchasing the property that is the subject of the litigation. That first property was at Wattle Street East, Gosford. She had discussions with the other plaintiff, her de-facto husband, the second plaintiff and they decided that they would purchase another property leaving Wattle Street as the first plaintiff's investment property. They decided to buy the new property in joint names.
A real estate agent showed them the property at 21 Allison Road. The property at the time was unoccupied and was a split-level house on a
steep slope with a garage on the land above the house.
The plaintiff and her husband went to look at the house, accompanied by the agent and they decided to make some further enquiries. Because of her previous experience in purchasing the house at Wattle Street, the first plaintiff decided that they should get a property inspection report. She then asked the agent to arrange for a property inspection. The agent arranged for an organisation known as Graphic Reports to carry out the property inspection and a report from that organisation was provided to the plaintiffs in due course. The second page of that report (Exhibit B to the affidavit of the plaintiff) showed that Facility Solutions Australia Proprietary Limited which had a particular builders consultants license actually carried out the report and the person doing the work was the defendant, Mr Winn.
The report that was obtained was clearly a report of Graphic Reports, because it had that name on the outside. Furthermore, there was an invoice from Graphic Reports (Ex D2) addressed to the two plaintiffs seeking a total of $418.00 for a pest report and a building report. The invoice states that the building inspection was carried out by Facility Solutions Pty Ltd and the charge for this report was $220.00. There can be no doubt that this bill was paid and equally, in my opinion, despite the evidence of the first plaintiff, that the first plaintiff was aware the services were carried out by Facility Solutions, on behalf of Graphic Reports. She knew the actual person conducting the inspection was Mr Winn, the defendant.
It was commonly agreed by the parties that the report to be prepared by Mr Winn required him to comply with the provisions of Australian standard 4349.1 - 1995. It was also agreed that Graphic Reports was asked to do a standard inspection. The Australian standard deals with the standard property inspection and a special purpose property inspection.
The inspection report sent to the plaintiffs was a standard property report which is defined in Clause 3.3 of Section 3 of the standard, namely "not be seen as an all encompassing report dealing with the building from every aspect. Rather it should be seen as a reasonable attempt to identify any significant defects visible at the time of the inspection. Whether or not a defect should be regarded as significant, depends to a large extent upon the age and type of building being inspected."
There is further provision in the same clause (3.3) for what should be included in such a report, namely:
"(a) A statement of who requested the report and the purpose for which it was requested or is intended.
(b) The date or dates of inspection.
(c) The scope of the inspection
(d) Any area or item which was not inspected and the reasons which prevented an inspection, and if appropriate, a recommendation for further investigation.
(e) A summary which includes an opinion as to the overall condition of the residential dwelling in the context of its age, type and general expectations of similar properties.
(f) A list of any significant matters which requires attention or rectification.
(g) If necessary, a recommendation that a further inspection or assessment be carried out by a suitably accredited specialist, e.g. pest inspector, electrical authority, water authority, structural engineer, geotechnical engineer, surveyor or solicitor".And further;
"The summary is possibly the most important part of the report. The important points should be extracted from the body of the report to provide the reader with a brief summary of the major faults found in the building. The summary should also put the overall condition of the building in the context of the average condition of similar buildings of approximately the same age".
There are some limitations and conditions. They are as follows:
"3.4.1 Limitations the standard property report should not contain any assessment or an opinion in relation to-
(a) any item which is the subject of a special-purpose property report. (See section 4;)
(b) any area or item which was not, or could not be inspected by the consultant.
(c) a matter which is not within the consultants expertise; or
(d) a matter, the inspection or assessment of which is solely regulated by statute.3.4.2 Conditions A standard property report may be conditional upon or conditional in relation to-
(a) the assessment of any apparent defect including rising damp and leaks, the detection of which may be subject to prevailing weather conditions;
(b) information provided by the person, the employees or agents of the person requesting the report;
(c) the specific areas of "expertise" of the consultant specified in the report;
(d) apparent concealment possible defects; or
(e) any other factor limiting the preparation of the report."(See Ex P3, Annexure II AS4349.1-1995)."Mr Winn, the defendant, said in his affidavit that he did not prepare the Graphic Report. Rather, when he had carried out the inspection he sat in his car and read his notes into a Dictaphone. He identified one omission in the report as a recommendation regarding the retaining wall and dictated in the following terms:
"I recommend that an engineer be engaged to assess any structural issues, including the structural issues I have observed, such as with respect to the retaining wall."
He then sent the dictated notes to Graphic Reports which prepared the written report and sent it to the plaintiffs.
Mr Winn also said that he did not see the Graphic Report until sometime in late 2012, when he received it from the plaintiff's solicitors at the time he had been served with the statement of claim. I accept the evidence of the defendant as being truthful and honest. I accept that he dictated a report but did not prepare the report any further than this.
He did carry out his inspection by attending the property and inspecting it for about one hour. Neither of the plaintiffs was present, but the owner of the property (the vendor to the plaintiffs) was present and gave him access to it.
The plaintiff in her affidavit said that she read the report when she received it and she contacted her real estate agent, asking him to arrange for a meeting with Mr Winn. That was agreed to a short time after and she and her de facto husband together with the agent met Mr Winn on the site. She had a copy of the report in her hand and at no time did Mr Winn refer to Facility Solutions.
She also said that there was a second meeting on the site, attended by her father and Mr Winn.
There is a dispute between the plaintiff and Mr Winn in evidence concerning the number of meetings between them and who was present. Mr Winn when he gave evidence, said there was one meeting only and it was attended by the plaintiff, her father, the real estate agent and himself. He denied attending another meeting. I prefer the evidence of the defendant on this matter. He gave evidence in a calm and considered manner and impressed me as being a witness of truth.
I accept that there was one meeting only and the first plaintiff and her father attended it with the defendant
The first plaintiff, on the other hand, was an aggressive and at times abusive witness. During an early part of her evidence, I had to remind her that I was a Judge and that she should behave towards me in a courteous fashion (See 25/2/14 T36.50-T37.04).
The report actually sent to her (Ex D1) was shown to her in cross-examination. The plaintiff identified her writing on the report by saying: "That's my writing. How did the other side get this?" (See 25/2/14 T33.47 & T34.08). This was another instance of her rude and offensive conduct.
Towards the end of the hearing, while Senior Counsel for the defendant was addressing, she interrupted him from the back of the Court and followed this up by directed crude language towards him. I excluded her from the court (See 25.2.14 T200.28-T200.46).
I formed the opinion that she was by nature a bully, hard to control and contemptuous of authority. I was not prepared to accept her evidence where it conflicted with that of the defendant, nor was I able to accept that she suffered 'mental harm", for which there was no real evidence.
The first plaintiff said that she and her father before the meeting (which she claimed was the second meeting), made notes of questions to ask the defendant and of some of his answers. Some of this was written on two sheets of paper, (although she claimed that the defendant's answers were not written on the two pages of notes during the meeting, but rather, later on). She also wrote notes on the Graphic Reports report, which she had in her possession at the time of this inspection. What was written on the report during this inspection was written entirely by her. It is clear to me that she wrote on the report during this inspection because the notes raise questions and contain answers. For example there is a question "explain and cost to fix" (against information in the report about door handles needing adjustment) and "explain? -What needs to be done? , How much?" Against an entry about the state of the windows. Her father wrote some entries on the two sheets of paper to which I have already referred.
She claimed that the other plaintiff was present at both meetings and her father was present at the second meeting. The second plaintiff was in court but gave no evidence. The only explanation for his not giving evidence was that he had not made an affidavit (See 25.2.14 T35.47-36.04). Her father was not called as a witness and her only explanation for not calling him was that she had had no contact with her father since 2010. My conclusion was that neither of these persons would have assisted the plaintiff's case if they were called.
She gave evidence that during the first inspection she told Mr Winn that they wanted to move in after settlement. She said that they went through the report and at one stage looked at the back brickwork retaining wall for the garden area and in particular, at a bow in the wall. Mr Winn, according to the plaintiff, said: "It looks like its been there for a while, but if you're concerned about it get a structural engineer to look at it, but they are expensive"
She went on to say in her affidavit (Ex P3 para 24)"In light of Mr Winn's advice, I didn't consider it to be a serious concern and wasn't worried about it". She also said that Mr Winn did not change anything in his report nor did he give her a business card.
She was cross-examined about this question of inspections and persisted in claiming that there were two inspections, not one. She was asked in particular about a note against item 1 in her two-page list in these words: "we to get a quote" and claimed that this was written in after she had moved into the house. In her affidavit, she claimed that everything written on this document was put there by her or her father after work was carried out following settlement of the house. Assuming this to have been what occurred, then it would seem quite clear that the plaintiff prepared a list seeking the answer to various questions and that her meeting with Mr Winn was to enable those questions to be answered. My reading of the notes that she placed on the report that she had in her possession indicate to me that many of the questions she had were in fact answered during this meeting.
It was also put to her in cross examination that Mr Winn had pointed out that she needed to get an engineer but her response to this question was that he only told her to do this once. He did not repeatedly tell her that she needed an engineer. When it was put to her that this was an important matter, she replied by saying: "it's all lies" (See 25/2/14 T38.07-38.46). I found this a very unsatisfactory answer.
It may well be that the list was written out in advance and the answers and other notes were put on after she had taken up occupation of the house. Some of the notes were put on by her father and he was not present to give evidence in court. I find it difficult to accept that her father put on notes at some time later than the meeting. It is possible it could have happened, but it would seem to me quite unlikely.
The first plaintiff in her affidavit claimed that following the meeting, her de facto husband and she calculated the cost of work to be carried out and approached the real estate agent to reduce the asking price of the property, seeking a reduction in price from $325,000-$310,000. Ultimately the vendor reduced the price to $318,000 and there was an exchange of contracts on 5 September 2006.
Thus, it is clear that the first plaintiff, as a result of discussions with the defendant, whether at one meeting or two meetings, worked out that there were defects that had to be fixed up and that this would give her the opportunity of buying the property for a lower price, something that was to her advantage. She also clearly decided, notwithstanding advice that she might need to consult a structural engineer, to go ahead with the purchase without consulting a structural engineer. The other important matter to be noted is that the property was purchased during a time that the area was dry, the house was on a very steep block and the inspection report dealt with what Mr Winn saw at the time he inspected the property. He did not purport to express an opinion about what might happen if heavy rain fell.
The plaintiff did not notice any defects until April 2007. On the weekend following Anzac Day in that year she noticed more cracks in the concrete floor near the per gala and water seepage coming through a sidewall. There had been very heavy rain just before this.
The Defendant's case
Mr Winn also made an affidavit and set out in the affidavit what he did to prepare a report. He made it plain that he did not in fact make out the report that was sent to the plaintiff. Rather he carried out his inspection and dictated from handwritten notes into a Dictaphone and sent off this material to Graphic Reports. He saw the report that was sent to her only subsequently, as I have already said.
When he dictated his report, he included in the report an observation in the following terms: "I recommend that an engineer be engaged to assess any structural issues, including the structural issues I have observed, such as with respect to the retaining wall." When he looked at the report at the time when given to him, it was obvious to him that this observation was not included in it. However, he did when talking about this wall, as I have already mentioned, suggest that the advice of a structural engineer should be obtained. The first plaintiff agreed he did give that advice.
He also said on affidavit that he had one site attendance only with the plaintiff and that was in the presence of the real estate agent and also the plaintiff's father. He thought it most likely to have been the Saturday following the date of the report (26 August 2006) or the Saturday after that. He cannot remember ever meeting the second plaintiff.
At this meeting, he could not recall the first plaintiff saying she wanted to move in immediately after settlement. Her father however wanted to clarify a few matters including the condition of the timber decking. He also wanted to look under the house, which all of them did. Mr Winn highlighted some issues under the house, specifically that there had been rectification to brickwork under the house which was cracking and had been patched. He also discussed some missing piers which had been replaced with steel columns that appeared to him to be adequate and he also indicated there was some old dry rot around the shower area.
In relation to the structural integrity of the retaining wall, he said that he gave advice on the following terms: "the wall has been there for a while. There is some movement and cracking, so I recommend that you get an engineer to inspect and do a report. It will be expensive though. I'm not a qualified engineer so I can't advise you further." He denied suggesting to her that she should only get an engineer if she were concerned. He could not recall the first plaintiff having a handwritten list with her at the time of the meeting and did not receive a copy of the list.
He gave an extensive response, he said, to complaints made by the plaintiff about cracks and defects and pointed out (Ex D3 para 46) that he noted the presence of cracks, ill-fitting doors, old water damage and various other items to which reference was made. He did not note excess water overflow from guttering because there was no rain at the time and this was not observed. As far as complaints about the electricity attachment were concerned, he pointed out that the installation of electricity appeared to be adequate but a qualified electrician should be consulted. He also recommended a plumber and drainer be consulted.
When he gave oral evidence he referred to the standard and the fact that he was doing a report in accordance with the standard. In my opinion he was correct in what he said.
Much of his cross- examination was concerned with pressing him about opinions expressed by Mr Dickinson, another building consultant, who was asked in May 2007, to " carry out a site inspection to assess building defects and deficiencies and prepare a detailed report in connection with an existing residence 21 Alison Road, Springfield."
It suffices to say that he, the defendant, does not agree with the reports of Mr Dickinson, nor with his opinions. Mr Dickinson assessed the property after a period of very heavy rain and expressed the opinion that the defects he discovered should have been discoverable by the defendant when he did his report. I accept the evidence of the defendant and of Mr Ransley, another building consultant that Mr Dickinson was wrong in his opinions. What Mr Dickinson was saying was that he could say from his inspection of damage occurring after very heavy rain, that this should have been apparent a year before when conditions were very dry and the damage was scarcely noticeable.
I listened very attentively to Mr Dickinson's evidence. It was clear to me that he did a very detailed report, far beyond that envisaged for a standard inspection. He carried out detailed measurements and investigated matters far beyond what was required for a standard inspection carried out in accordance with the Australian Standard. What he produced was in fact a special purpose report.
I would accept that much of the damage Mr Dickinson saw was caused by very heavy rain and the ingress of water onto the property from neighbouring properties as well as from the street above the property. The standard inspection did not require forecasts to be made of potential future damage from water, tree collapse, storm damage or any other source. What was required was a visual inspection and the expression of an opinion based on the visual inspection.
I do not accept that Mr Winn, one year before very heavy rain occurred, should have been able to forecast the likely extent of damage to the house. I reject Mr Dickinson's opinion.
I accept the opinion of the defendant and the opinion of Mr Ransley. To the extent that Mr Dickinson's opinion differs from Mr Winn, I prefer the opinion of Mr Winn because it was based on the requirements of the standard.
Conclusions on the evidence in the case
1. Breach of contract and/or negligent misstatement
In my opinion, the inspection carried out by Mr Winn complied with the Standard. He expressed a qualification in his report to Graphic Reports, that was not put in the written report submitted to the plaintiff. He cannot be blamed for that. His duty was to carry out an inspection complying with the Standard and to submit it to Graphic Reports. He complied with that duty.
Separately from his carrying out of this duty, he agreed to go to the site one or two weeks afterwards and to discuss his findings with the first plaintiff, her father and the real estate agent. He did this, but on one occasion only. He made her aware of the need to get engineering advice, plumbing and draining advice and advice from an electrician. He could do no more than give the advice. In the written report, he made it plain that a number of matters might require further advice from other skilled persons. The first plaintiff obviously questioned him closely. Her notes on the report indicate that and she concluded that she would need to spend money to rectify various defects.
She decided to use the information conveyed to her to bargain with the vendor to reduce the price, rather than to decide not to go ahead with the purchase.
The defendant did not give her negligent advice. He was not in breach of any duty of care to her in preparing the substance of the report, nor in speaking to her later on the site.
The claim against the defendant based on contract fails because there was no contract between the plaintiffs and the defendant. He was not guilty of making any negligent misstatement to the plaintiffs and the claim against him on that basis also fails.
Further, I also find that the plaintiffs did not enter into the contract to purchase the property relying on what was in the Graphic Reports report. Clearly they decided to go ahead:
Because of their acceptance of the presence of defects as disclosed in the Report,
In the knowledge of further advice from the defendant, rejected by them, about the need to get expert opinion on engineering, plumbing, draining and electrical matters, and
Having considered the answers given by the defendant to a series of questions raised by the first plaintiff and her father and
Because the first plaintiff could use the defects to bargain down the price of the property.The first plaintiff was sure she could get a bargain in this property and that was her main motivation in going ahead with the purchase.
Damages
In my opinion, there is no causal link between any statement or misstatement of the defendant and any loss suffered by the plaintiffs. The evidence does not establish that the price received by the plaintiffs on resale of the house was diminished because of anything said by the defendant. If the house was damaged by rain and flood, that damage was not caused by the defendant giving a report or commenting on it. Furthermore, no evidence was given to establish that the lesser price received was due to damage to the house.
2. Mental Harm
There was no evidence of the plaintiff suffering any "mental harm" caused by the plaintiff. Indeed, there is no evidence she suffered any mental harm at all that could possibly be compensable in these proceedings. She may have suffered some stress, but that would not entitle her to recover damages from the defendant. She cannot show he did anything to cause her stress or any form of mental injury.
I do not accept the plaintiff as a reliable and honest witness. I accept the evidence of the defendant in preference to that of the plaintiff wherever there is a contradiction between them.
I find a verdict for the defendant.
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