Clarke & Clarke v Prime Building & Pest Consultants Pty Ltd
[2014] QCAT 325
| CITATION: | Clarke & Clarke v Prime Building & Pest Consultants Pty Ltd [2014] QCAT 325 |
| PARTIES: | Alexander John Clarke Amanda Heidi Clarke (Applicants) |
| v | |
| Prime Building & Pest Consultants Pty Ltd (Respondent) |
| APPLICATION NUMBER: | BDL314-13 |
| MATTER TYPE: | Building Matters |
| HEARING DATE: | 19 June 2014 |
| HEARD AT: | Brisbane |
| DECISION OF: | Member Hughes |
| DELIVERED ON: | 7 July 2014 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | Prime Building & Pest Consultants Pty Ltd pays to Alexander Clarke and Heidi Clarke the sum of $5,695.00 by 21 July 2014. |
| CATCHWORDS: | BUILDING INSPECTION REPORT – whether breach of Agreement – whether report failed to comply with Australian Standards – where report purports to be structural only – where report failed to report certain issues – whether failure to report caused loss – where buyer failed to enquire – where measure of loss is loss of chance to negotiate reduction in purchase price Queensland Building and Construction Commission Act 1991, ss 75, 77, Schedule 2 Aldridge v JHA 09 Pty Ltd [2012] QCAT 440 Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd (1987) 10 NSWLR 468 Lewis v Jeffrey Hills & Associates Pty Ltd [2011] QCATA 241 |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT: | Mr Alexander John Clarke and Mrs Amanda Heidi Clarke in person |
| RESPONDENT: | Mr Mark Rentoul, Director for Prime Building & Pest Consultants Pty Ltd |
REASONS FOR DECISION
What is this Application about?
Home buyers often engage building and pest inspectors to report on building and pest issues before completing their purchase.
Mr Alexander Clarke and Mrs Heidi Clarke paid $410 to Prime Building & Pest Consultants Pty Ltd to report on building and pest issues for 139 Kent Road, Wooloowin.[1]
[1]Tax Invoice 42531 of Prime Building & Pest Consultants Pty Ltd dated 19 October 2012.
Mr and Mrs Clarke then completed their purchase of the property. Mr and Mrs Clarke have since discovered issues not identified in Prime’s building and pest reports. They claim that had Prime identified these issues, they would not have completed the purchase.
Mr and Mrs Clarke limited their claim to $50,000 to ensure it is within the Tribunal’s jurisdiction.[2]
[2]Queensland Building and Construction Commission Act 1991, ss 75(1)(g), 77 and Schedule 2 definitions of “building dispute”, “minor commercial building dispute”, “commercial building dispute”, “reviewable commercial work” and “tribunal work”.
The Tribunal may therefore award damages, interest thereon, restitution and costs.[3]
[3]Ibid s 77.
What was the Agreement?
Prime’s Report comprised a building report[4] and pest report[5]. Prime claims that the parties agreed that the building report was limited to a structural report only.
[4]Prime Building & Pest Consultants Pty Ltd Building Inspection Report of Marc Ellis dated 19 October 2012.
[5]Prime Building & Pest Consultants Pty Ltd Visual Timber Pest Inspection Report of Marc Ellis dated 19 October 2012.
I do not accept this was the Agreement because of the below considerations.
Agreement with structural limitation not signed
The Agreement and Report Definition purporting to limit the inspection and report to ‘readily visible structural defects’ is not signed or dated by any of the parties – this in itself is a breach of the Australian Standard AS4349.1.[6] An inference can therefore be drawn that this does not reflect the Agreement between the parties.
Tax Invoice without limitation
The Tax Invoice[7] refers to ‘Building and Pest + free Ultrascan House 4’ without fetter or qualification.
Post-Contract limitation only
Although the Prime Report purports to limit the inspection to ‘any significant and obvious structural defects’[8], the Prime Report is provided after the inspection. It therefore cannot form part of the pre-contractual negotiations between the parties or contractual terms agreed upon between the parties. Mr and Mrs Clarke did not know of the purported limitation until they received the report from Prime. They therefore could not have agreed to the limitation.
[6]AS4349.1 – 2007 at paragraph 2.1.
[7]Tax Invoice 42531 of Prime Building & Pest Consultants Pty Ltd dated 19 October 2012.
[8]Prime Building & Pest Consultants Pty Ltd Building Inspection Report of Marc Ellis dated 19 October 2012 at page 3.
Report content beyond structural only
A structural report is limited in its scope to identifying major defects of the building structure[9] and should not contain any assessment or opinion of any non-structural element including roof plumbing and roof covering, cabinetry, windows, doors, trims, fencing, non-structural damp issues, ceiling linings, floor coverings and decorative finishes such as plastering, painting and tiling.[10]
Yet the Report extends to and comments on items including ‘Cladding’, ‘Eaves’, ‘Fascia’, ‘Gutters & Valleys’, ‘Downpipes’, ‘Site Drainage’, ‘Hot Water System’, ‘Kitchen’, ‘Laundry’, ‘Bathroom’, ‘Ensuite’, ‘Doors’, ‘Door Furniture’, ‘Windows’, ‘Paintwork’ and ‘Plaster / Sheeting’. The Report specifically notes the cabinets in the kitchen, bathroom and ensuite are ‘generally in good condition’.
These items are not consistent with a mere structural report but are consistent with items to be inspected and commented on in a full building inspection report[11]:
There is a difference between a structural inspection report and a building inspection report. The difference is set out in AS4349.1. A structural inspection report should not contain any assessment or opinion regarding any non-structural element, any component that cannot be seen or requires testing, general maintenance or serviceability issues, or damp defects unless there is a structural change. A structural report is… a very basic report.[12]
[9]AS4349.1 – 2007 at paragraphs 2.2 and 2.3.1 and Appendix A, Paragraph A3.
[10]Ibid Appendix A, paragraph A3.
[11]Ibid at Appendix C.
[12]Aldridge v JHA 09 Pty Ltd [2012] QCAT 440 at [10].
I therefore find that Mr and Mrs Clarke engaged Prime to conduct a pre-purchase building and pest inspection that was not limited to structural defects.
Did Prime breach the Agreement?
Mr and Mrs Clarke claim that the Prime Report failed to identify a number of issues as required by the Australian Standard. During the hearing, Mr and Mrs Clarke conceded the following items were not supported by the Building Service Authority Reports[13] or any quantum evidence or were beyond the scope of the Prime Reports: Brisbane City Council Approvals ($791.00), Electrical ($836.90), Engineer Drawings ($962.50), Plumber ($929.50), Fences ($1,800) and Floor to Main Bedroom ($1,700). Mr and Mrs Clarke therefore did not proceed with those claims.
[13]Building Services Authority Pre-Purchase Inspection Investigation Report of Michael Hulme dated 5 April 2013 and Building Services Authority Pre-Purchase Pest Inspection Investigation Report / Statement Of Reasons of Michael Hulme dated 30 August 2013.
The Australian Standards prescribe the minimum requirements for a pre-purchase building and pest inspection report. The Report incorporates references to those Standards in its title.[14] The purpose of engaging a licensed builder to inspect the property is to identify defects in the property.[15] The types of defects to be identified are prescribed in the Standards. I am therefore satisfied that compliance with the Standards is an implied term of the Agreement:
Terms can be implied by law (as a legal incident to a particular class of contract, regardless of the intention of the parties) or by necessity to give business efficacy to a particular contract. Those implied by law are deemed necessary by implication; otherwise the whole of the transaction would be futile.[16]
[14]The Building Report is entitled “Building Inspection Report Special Purpose Report –
Australian Standards (AS4349.1)”. The Pest Report is entitled “Visual Timber Pest Inspection Report Visual Timber Pest Inspection – Australian Standards (AS4349.3)”.
[15]Lewis v Jeffrey Hills & Associates Pty Ltd [2011] QCATA 241 at [16].
[16]Spargo v Katz [2010] QCATA 94 at [13], per Wilson J applying Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd (1987) 10 NSWLR 468 at 487-489, Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 345-346 (per Mason J), Liverpool City Council v Irwin & Anor [1976] 2 All ER 39 and Miller v Hancock [1893] 2 QB 177 at 180 and 181 (per Bowen LJ).
The Prime Report purports to limit its scope to ‘significant and obvious structural defects’.[17] Contrary to this purported limitation, the Prime Report then reports on items[18] that are beyond the scope of a structural inspection[19] but within the scope of a building inspection[20], consistent with the Agreement. Purporting to limit the scope of the report to a structural report is a breach of the Agreement.[21]
[17]Prime Building & Pest Consultants Pty Ltd Building Inspection Report of Marc Ellis dated 19 October 2012 at page 3.
[18]Ibid at pages 4B (Cladding), 7 (Eaves, Fascia), 12 (Gutters & Valleys, Downpipes), 13 (Site Drainage, Hot Water System), 15 (Kitchen, Laundry), 16 (Bathroom, Ensuite), 17 (Doors, Door Furniture, Windows), 18 (Paintwork, Plaster / Sheeting).
[19]AS4349.1 – 2007 at paragraphs 2.2 and 2.3.1 and Appendix A, Paragraph A3.
[20]Ibid at Appendix A, paragraph A3.
[21]A similar finding was made in Aldridge v. JHA 09 Pty Ltd [2012] QCAT 440 at [18] to [20].
It was not until the hearing that Mr and Mrs Clarke verbally correlated their claim with an amount for each issue with the property. The below table itemises these issues with the corresponding Prime Report description, BSA Report finding and quantum evidence.
| Area | Prime Report Description[22] | BSA Report Finding[23] | Cost to rectify[24] | Invoice / Quote |
| Carport | · Not applicable / Not reported | · AS4349.1 does not require Prime Report to identify unauthorised building work or work not compliant with building regulations · Boxed out section with damp proof course fixed to wall cladding to prevent water ingress is installation defect (AS4349.1 – Table F1 Item F) · Prime Report does not note defective guttering system evident at time of inspection | · Cut back to legal size ($957.00) · Replace leaking roof to conform with code ($2,420.00) · Install down pipes and gutter to meet code ($1,083.50) | Josh Olsen Carpentry Pty Ltd Quote 534 of dated 24 July 2013 |
| Front Awning / Pergola | · Timber beam to roof is bowed · Maintenance recommended · Good ground clearance to timber post is recommended · Good to fair condition | · Prime Report clearly advises timber beam is bowed · Damp proof course fixed to timber fascia to prevent water ingress is installation defect · Prime Report does not note defective installation of damp proof course evident at time of inspection | · Pull down entire pergola rebuild using correct tie down and construction and install flashings and replace warped head ($4,059) · Remove soil to below base of posts as per code – paint and finish ($3,146) | Josh Olsen Carpentry Pty Ltd Quote 534 of dated 24 July 2013 |
| Back Awning / Veranda | · Not applicable / not reported - but generally in good to fair condition | · Sealant to timber support posts through tiled and metal roof to prevent water ingress is installation defect · Timber support post is out of plumb · Prime Report does not note sealant and support post being out of plumb evident at time of inspection | · Replace support posts to conform with code ($3,173.50) · Install roof flashings ($698.50) · Install beadings to suffits ($308) · Install tie down to rafters and head ($561) · Paint & Finish ($726) | Josh Olsen Carpentry Pty Ltd Quote 534 of dated 24 July 2013 |
| Front Low Deck | · No access to under decking / veranda · Property considered to have no termite protection | · Over-sized for council regulations and possible white ant threat with proximity to ground · AS4349.1 does not require Prime Report to identify unauthorised building work or work not compliant with building regulations · Prime Report does not note breaching of visual physical barrier from ground being in close proximity to timber deck and deck connection to garage / carport / dwelling concealing access to building | · Remove illegal structure as requested by council ($1,001) · Install suitable landscaping as per plan ($1,650) · Subterranean termite treatment to house and decks ($1,331) | Josh Olsen Carpentry Pty Ltd Quote 534 dated 24 July 2013 Qld Termite Reports Australia Pty Ltd Tax Invoice C123 dated 5 December 2012 |
| Ensuite | · Generally in good condition · Weather boards cladding – paintwork is in good condition | · Damp proof course fixed to wall cladding to prevent water ingress is installation defect · Polycarbonate cladding wrapped from roof onto wall to form wall cladding to prevent water ingress is installation defect · Prime Report does not note defective installation of damp proof course and polycarbonate cladding evident at time of inspection | · Repair wall cladding ($1809.50) · Remove and replace roof to key into existing roof ($20,086) · Connect into existing guttering ($696) | Josh Olsen Carpentry Pty Ltd Quote 534 dated 24 July 2013 |
| Side wall outside kitchen | · Weather boards cladding – paintwork is in good condition | · Damp proof course fixed to wall cladding to prevent water ingress is installation defect · Prime Report does not note defective installation of damp proof course evident at time of inspection | · Remove damp-course covering holes, install weather boards to match house ($385) | Josh Olsen Carpentry Pty Ltd Quote 534 dated 24 July 2013 |
| Brick sub-floor | · Sub-floor was inspected – access was fair · Conditions which can increase the likelihood of timber infestation include poor ventilation and inadequate drainage in subfloor area · Areas which are susceptible to termite activity - Subfloor | · Prime Report does not note enclosed sub-floor under kitchen and main bedroom where no access is available and does not note that area not inspected and provide reason for exclusion from inspection | · Subterranean termite treatment to house and decks ($1,331) | Qld Termite Reports Australia Pty Ltd Tax Invoice C123 dated 5 December 2012 |
| Timber boxing for concrete pathway | · Property considered to have no termite protection | · Prime Report does not note breaching of visual barriers between ground and dwelling on right side and rear of dwelling where boxing used for concrete pathway and rear timber support post in contact with concrete concealing access to building | · Remove timbers in contact with soil to stop termites ($3575) | Josh Olsen Carpentry Pty Ltd Quote 534 dated 24 July 2013 |
[22]Prime Building & Pest Consultants Pty Ltd Building Inspection Report of Marc Ellis dated 19 October 2012 and Prime Building & Pest Consultants Pty Ltd Visual Timber Pest Inspection Report dated 19 October 2012.
[23]Building Services Authority Pre-Purchase Inspection Investigation Report of Michael Hulme dated 5 April 2013 and Building Services Authority Pre-Purchase Pest Inspection Investigation Report / Statement Of Reasons of Michael Hulme dated 30 August 2013.
[24]Including GST.
Based on the findings of the independent expert evidence[25], I accept that the Prime Report fails to comply with the Australian Standard where noted in the above Table, in breach of the Agreement.
[25]BSA Report of Mr Michael Hulme dated 5 April 2013.
Did Prime’s breach of the Agreement cause Mr and Mrs Clarke’s loss?
Mr and Mrs Clarke claim that had they known of these issues, they would have terminated the Contract to buy the property and not proceeded with the purchase.
Prime claims that Mr and Mrs Clarke could not have terminated the Contract in any event. This is because Mr and Mrs Clarke did not pay for the Prime Report until after business hours on 19 October 2012 and therefore did not receive the Report until 22 October 2012, after the date of inspection in the Contract of Sale[26].
[26]Contract of Sale dated 13 October 2012.
The Contract of Sale is dated 13 October 2012 with an Inspection date of ‘7 days from date of Contract’. Although terms of the Contract relating to calculation of time were not submitted in evidence, it is a usual condition that if an inspection date falls on a day that is not a business day, then it falls on the next business day. Seven days from 13 October 2012 is 20 October 2012. 20 October 2012 fell on a Saturday. The next business day was Monday 22 October 2012. This means that Mr and Mrs Clarke had until 22 October 2012 to terminate the Contract.
Mr and Mrs Clarke had the Prime Report on that day. The Prime Report had sufficient detail that should have at least raised questions for Mr and Mrs Clarke:
· The scope of the Prime Report purports to be limited to ‘significant and obvious structural defects… apparent at the time of inspection’;
· The Prime Report ‘relates only to that which is readily viewable. No opinion or warranty is made on that which cannot be readily seen’;
· The Prime Report notes ‘No inspection available under floor coverings – infrared thermal imaging is recommended for concealed areas or areas of no access’;
· The Prime Report notes ‘Gutters and Valleys – where there is no access to the roof the related comments are from the ground only. Joints to all valleys on the roof structure should be maintained with waterproofing material such as silicone’;
· The Prime Report notes ‘Downpipes – visual inspection not possible due to height restrictions. Recommendations: maintain silicone to joins’;
· The Prime Report notes ‘Visual inspection of gutters, eves and fascia, viewed from ground due to height restrictions’;
· The Prime Report notes ‘Internal – high moisture was found; Recommend to improve ventilation to subfloor’;
· The Prime Report notes ‘Front Low Deck - No access to under decking / verandah – High Risk Area to which access should be gained, or fully gained, since they may show evidence of Timber Pests or Damage’;
· The Prime Report notes ‘Interior inspected but with some restrictions - High Risk Area to which access should be gained, or fully gained, since they may show evidence of Timber Pests or Damage’;
· The Prime Report notes ‘Furnishings in dwelling have restricted inspection – of walls and timber finishings of doors and windows - High Risk Area to which access should be gained, or fully gained, since they may show evidence of Timber Pests or Damage’;
· The Prime Report notes ‘No access to roof due to OH&S height restrictions’;
· The Prime Report notes ‘No inspection was made, and no report is submitted, of inaccessible areas. These include, but may not be limited to, cavity walls, concealed frame timbers, eaves, flat roofs, fully enclosed patio subfloors, soil concealed by concrete floors, fireplace hearths, wall linings, landscaping, rubbish, floor coverings, furniture, pictures, appliances, stored items, insulation, hollow block/posts etc.’;
· The Prime Report states that the property is ‘considered to have no termite protection’;
· The Prime Report recommends ‘a TermiteScan – Infrared Thermal Imaging to find relative thermal patterns associated with termite nesting in concealed areas ie inside walls that can not be visually accessed by the inspector’;
· The Prime Report notes under ‘Areas Which Are Susceptible To Termite Activity’: ‘Conditions which can increase the likelihood of timber infestation include poor ventilation and inadequate drainage in subfloor area’; ‘Air conditioning leaking next to dwelling’; ‘Good clearance between ground level and bottom of weep holes is recommended for unrestricted visual inspection of termite entry into dwelling. Australian standards recommends 75mm clearance’; ‘Subfloor’; ‘High moisture areas’; and
· The Prime Report notes the carport as ‘Not applicable / Not reported’.
Mr and Mrs Clarke did not explore these caveats within the Prime Report with Prime, did not enquire about access to, or attempt to arrange more intrusive inspections such as infrared thermal imaging of, restricted areas as recommended, or revisit the property to clarify these caveats.
The Prime Report’s content makes it clear that it is not comprehensive. I therefore do not accept that it was reasonable for Mr and Mrs Clarke to rely upon the Prime Report to proceed to completion of the purchase of the property without further enquiries or inspections.[27]
[27]Similar reasoning was applied in Aldridge v JHA 09 Pty Ltd [2012] QCAT 440 at [33].
Specifically, I do not accept the Prime Report is causative of the below items.
Carport
The Prime Report is clear that this is not reported.
Front Awning / Pergola
That the Prime Report fails to note the defective installation of damp proof course does not warrant the entire rebuilding of the pergola or removing the soil to below base as claimed. The costs of rebuilding the pergola are attributable to the need for correct construction and not any failure of the Prime Report – the Prime Report specifically notes the timber beam is bowed. The cost of removing the soil is not attributable to any failure of the Prime Report – the Prime Report specifically recommends good ground clearance and maintenance.
Back Awning / Verandah
The defective sealant referred to in the BSA Report appears not clearly visible from ground height. This suggests it was “not readily viewable” and “cannot readily be seen” due to height restrictions. These cannot be attributed to any failure of the Prime Report.
Front Low Deck
The Prime Report clearly notes no access and that the property has no termite protection. The costs of termite protection cannot be attributed to any failure of the Prime Report.
Ensuite
The defective cladding referred to in the BSA Report is visible only from the roof. The Prime Report clearly notes no access to roof due to occupational health and safety (OH&S) restrictions. The costs of repairing the cladding and removing and replacing the roof to key into the existing roof and connecting into existing guttering cannot be attributed to any failure of the Prime Report.
Brick sub-floor
The Prime Report clearly notes the subfloor as susceptible to termite activity. The costs of treatment cannot be attributable to any failure of the Prime Report.
This means that the only inaccurate items in the Prime Report reasonably relied upon by Mr and Mrs Clarke were as follows:
· Back Awning / Verandah – the Prime Report failed to note the timber support post out of plumb (replacement cost - $3,173.50);
· Side wall outside kitchen – the Prime Report failed to note the defective installation of the damp proof course (rectification cost - $385.00); and
· Timber boxing for concrete pathway – the Prime Report failed to note the breaching of visual barriers (removal cost - $3,575.00).
I am satisfied that Mr and Mrs Clarke suffered loss because of Prime’s failure to properly identify these issues.
What is the measure of Mr and Mrs Clarke’s loss?
Mr and Mrs Clarke’s loss is not the cost of rectifying these three issues.[28] This is because the purpose of damages is to restore Mr and Mrs Clarke to the position they would have been in had the wrongful act not occurred.[29] This means assessing the true measure of loss flowing from Prime’s negligence or breach of contract.[30]
[28]See for example Lewis v Jeffrey Hills & Associates Pty Ltd [2011] QCAT 241 at [20] to [22] and Aldridge v JHA 09 Pty Ltd [2012] QCAT 440 at [41].
[29]Robinson v Harman [1848] EngR 135.
[30]Lewis v Jeffrey Hills & Associates Pty Ltd [2011] QCATA 241 at [20].
Mr and Mrs Clarke claim that the measure of their loss is the difference between the amount they paid for the property of $585,000[31] and the amount it was worth, with a proper building and pest inspection, of $525,000 as noted in the valuation report[32], plus a refund for the cost of the Prime Report ($410).
[31]Contract of Sale dated 13 October 2012. The purchase price is amended from $585,000 to $600,000. However, Mr and Mrs Clarke stated they negotiated a reduction to $585,000 because of issues from searches of the property. Regardless, the Tribunal’s jurisdiction is limited to $50,000.
[32]Valuation Report of Herron Todd White dated 11 February 2014 at pages 5 and 6.
The Tribunal has previously refused to accept this method where the loss is not solely attributable to the failure to report:
In my view it is not appropriate to adopt the diminution in value… some of the costs assumed in the valuation are costs in respect of work found to be other than because of a failure to properly report.[33]
[33]O’Connell v JHA No. 11 Pty Ltd [2013] QCAT 710 at [156].
The valuation is assessed ‘as at the date of purchase … as if all those faults were known to a potential purchaser’.[34] This refers to all the faults forming Mr and Mrs Clarke’s claim. However, Mr and Mrs Clarke would or should reasonably have known of most of these faults had they undertaken further enquiries or inspections. Mr and Mrs Clarke elected not to attempt further inquiries or inspections or to terminate the Contract but continued with the purchase. Most of these faults are therefore not attributable to a failure by Prime to properly report.
[34]Valuation Report of Herron Todd White dated 11 February 2014 at page 5 under “General Comments”.
I therefore do not accept the difference between the actual purchase price and valuation of the property as noted in the valuation report to be a true reflection of Mr and Mrs Clarke’s loss.
It was reasonable for Mr and Mrs Clarke to rely upon the Prime Report to the extent that it failed to identify the out of plumb timber post on the back awning and verandah, the damp proof course on the kitchen wall and the breaching of visual barriers. However, there is no evidence of what Mr and Mrs Clarke would have done had they known of these three issues alone.
Mr and Mrs Clarke essentially had three options:
… if the buyer is not satisfied with the building report (the applicant) could have elected to terminate. Secondly, she would have been in a position to negotiate a reduction in price… Thirdly, if the vendor was resistant to any further negotiation, she could have completed and waived reliance on the building inspection report.
There is no evidence from (the applicant) as to what she would have done had she known the pool did not comply because she was never in a position to consider her options. However, she was clearly placed in a position of disadvantage due to the inaccuracy of the report. One therefore has to assess damages having regard to all of the above factors and apply a discount on the basis that she may have completed the transaction in any event without a discount on the purchase price.[35]
[35]Lewis v Jeffrey Hills & Associates Pty Ltd [2011] QCATA 241 at [21] and [22].
I am not satisfied that Mr and Mrs Clarke could have terminated the Contract of Sale had Prime reported on these three issues. A buyer must act reasonably.[36] The cost of rectifying these items represents a small portion of the purchase price. I therefore do not consider these items to be sufficiently serious for a buyer acting reasonably to terminate a Contract of Sale.
[36]Contract of Sale dated 13 October 2012, Condition 4.2(a).
Instead, Mr and Mrs Clarke could have attempted to negotiate a reduction in the purchase price because of these issues. There is no way of knowing whether and the extent to which this might have succeeded. Effectively, the measure of their loss is the loss of chance for Mr and Mrs Clarke to negotiate a discount for these three issues.
Mr and Mrs Clarke’s purchase was subject to finance. This suggests that the property was appropriately valued and unlikely to be discounted:
I note that (the applicant’s) purchase was subject to finance. Presumably, the property came up to valuation, otherwise finance would have been declined. If the bank valuer inspected the property and it came up to valuation, then without further evidence, I find it unlikely that the seller would have renegotiated the purchase price.[37]
[37]Aldridge v JHA 09 Pty Ltd [2012] QCAT 440 at [40].
However, there is evidence here that at the time of sale, market conditions did not favour the seller. The valuation report relevantly notes:
2011 was typified by relatively slow market conditions resulting in historically low sale volumes… some improvement in market conditions was experienced over the first quarter of 2012, with increased interest and enquiry reported, however there was no significant increase in market values. Market sentiment remained subdued.[38]
[38]Valuation Report of Herron Todd White dated 11 February 2014 at page 5 under “Market Commentary”.
This suggests that Mr and Mrs Clarke may have had some success in negotiating a reduction in the purchase price had they brought to the seller’s attention the out of plumb timber post on the back awning and verandah, the damp proof course on the kitchen wall, and the breaching of visual barriers. However, I am not satisfied that this would extend to a discount equating to the full cost of rectifying these issues.
The cost to rectify these issues exceeds $7,000.00.[39] Mr and Mrs Clarke gave evidence during the hearing that the seller agreed to a $15,000.00 discount from $600,000.00 to $585,000.00 three days before settlement due to compliance issues. There is therefore evidence that the seller was willing to negotiate.
[39]I do not accept that the breaching of visual barriers is remedied simply by a termite management plan recommended by the Prime Report. Removing the visual barriers themselves is integral to the success of any termite management plan, equating to a cost of $3,575.00 as noted in the Josh Olsen Carpentry Pty Ltd Quote 534 dated 24 July 2013.
Applying all these factors, I consider an award of $5,000.00 damages is appropriate. Mr and Mrs Clarke are also entitled to a refund for the cost of the Prime Report of $410.00 plus their filing fee of $285.00[40].
[40]Queensland Civil and Administrative Tribunal Act 2009, s 102.
What are the appropriate orders?
The appropriate order is that Prime Building & Pest Consultants Pty Ltd pays to Alexander Clarke and Heidi Clarke the sum of $5,695.00 by 21 July 2014.
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