Darling v Carol Clark & E Marcel Estates Pty Ltd T/As LJ Hooker West Lakes

[2006] SADC 56

DISTRICT COURT OF SOUTH AUSTRALIA

(Civil)

DARLING v CAROL CLARK & E MARCEL ESTATES PTY LTD T/AS LJ HOOKER WEST LAKES & ORS

Judgment of Her Honour Judge Simpson

1 June 2006

TRADE AND COMMERCE - TRADE PRACTICES AND RELATED MATTERS - CONSUMER PROTECTION - MISLEADING, DECEPTIVE OR UNCONSCIONABLE CONDUCT - CHARACTER AND ATTRIBUTES OF CONDUCT - SILENCE AND CONCEALMENT

TORTS - NEGLIGENCE - ESSENTIALS OF  ACTION FOR NEGLIGENCE - DUTY OF CARE - SPECIAL RELATIONSHIPS AND DUTIES

CONTRACTS - PARTICULAR PARTIES - VENDOR AND PURCHASER - GUARANTEES CONTAINED IN CONTRACTS AND COLLATERAL PROMISES

DAMAGES - GENERAL PRINCIPLES - DIFFICULTY OF ASSESSING DAMAGES

Defendant vendors offered house for sale through defendant agent - promotional flyer prepared by agent - house described in flyer as a 'quality built residence' - vendors' agent presenting promotional flyer to plaintiff as a prospective purchaser - house subject to salt damp - signs of dampness repaired by vendors to agent's knowledge - neither vendors nor agent advised purchaser of dampness - whether description of house in flyer amounted to collateral warranty to contract for sale and purchase of house by plaintiff - whether conduct of vendors and agent misleading and deceptive - whether misrepresentation by vendors and agent - whether vendors' agent owed and breached duty of care to purchaser to ensure material in flyer was accurate - whether purchaser relied on conduct of vendors and agent - Held - no misrepresentation - omission to advise plaintiff of problem of damp in the house and other conduct of vendors and agent not misleading and/or deceptive - no duty owed to purchaser by vendors' agent and no breach - purchaser not relying on conduct of vendors and/or agent in any event - evidence did not establish loss caused by reliance on vendors' or agent's conduct - assessment of damages notwithstanding - no evidence of true value of property as at time of purchase - valuation as at date of trial - damages assessed in accordance with available evidence.

Trade Practices Act 1974 (Cth) ss 52, 75B(1), 82; Fair Trading Act 1987 (SA) ss 56, 84; Misrepresentation Act 1972 (SA) s 7, referred to.
De Lassalle v Guildford [1901] 2 KB 215; Heilbut, Symons & Co v Buckleton [1913] AC 30; Oscar Chess Ltd v Williams (1957) 1 All ER 325; Cutts v Buckley (1933) 49 CLR 189; Butcher v Lachlan Elder Realty Pty Limited (2004) 218 CLR 592; Mitchell & Anor v Valherie (2005) 93 SASR 76; Demagogue Pty Ltd v Ramensky & Anor (1992) 39 FCR 31; Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; Ellul and Ellul v Oakes (1972) 3 SASR 377; JJ Savage and Sons Pty Ltd v Blakney (1970) 119 CLR 435; Yorke v Ross Lucas Pty Ltd (1985) 158 CLR 661; Slinger & Anor v Southern White Pty Ltd (2005) 92 SASR 303; Lam v Austintel Investments Australia Pty Ltd (1989) 97 FLR 458; Neilsen v Hempston Holdings Pty Ltd (1986) 65 ALR 302; Sutton v A J Thompson Pty Ltd (in liq) (1987) 73 ALR 233; Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) (1988) 39 FCR 546; Gould v Vaggelas (1985) 157 CLR 215; Wardley Australia Ltd v Western Australia (1992) 175 CLR 514; March v Stramare (E & MH) Pty Ltd (1991) 171 CLR 506; Marks v GIO Australia Holdings (1998) 196 CLR 494; Smith v State Bank of NSW Limited [2001] FCA 946; Frith v Gold Coast Mineral Springs Pty Ltd (1983) 65 FLR 213; State of SA v Simionato & Ors (unreported) 2 November 2005, Full Court [2005] SASC 412; Bellgrove v Eldridge (1954) 90 CLR 613; Corporation of Adelaide v Port Adelaide Enfield City Council [2000] SASC 271; Software Integrators Pty Ltd v Roadrunners Couriers Pty Ltd (1997) 69 SASR 288; Yorke v Ross Lucas Pty Ltd (1985) 158 CLR 661; Fencott v Muller (1983) 152 CLR 570; Dominelli Ford (Hurstville) Pty Ltd v Karmot Auto Spares Pty Ltd (1992) 38 FCR 471, applied.
Andrews v Hopkinson [1957] 1 QB 229; F Jones & Co Pty Ltd v C G Grais & Sons Pty Ltd [1962] NSWR 22, distinguished.
Bryan v Maloney (1994-1995) 182 CLR 609, discussed.

DARLING v CAROL CLARK & E MARCEL ESTATES PTY LTD T/AS LJ HOOKER WEST LAKES & ORS
[2006] SADC 56

1. The plaintiff in this action, Ms Rosemary Darling, is the registered proprietor of a property, Certificate of Title Register Book Volume 5242 Folio 168, situated at 7 Beeston Way, West Lakes in South Australia.  The plaintiff’s claim is against the previous owners and vendors of the property, Mr and Mrs Taylor (‘the vendors’), and a real estate agency, the company Carol Clark and E Marcel Estates Pty Ltd, trading as LJ Hooker-West Lakes.  In 1987, Ms Carol Clark joined the property management business of E Marcel Estates Pty Ltd which then became the defendant company Carol Clark and E Marcel Pty Ltd.  There is no dispute that the first defendant (‘the agent’) was at material times a body corporate engaged in trade or commerce.

   The Plaintiff’s Case

2. It is the plaintiff’s case[1] that when the property at 7 Beeston Way, West Lakes was offered for sale in late 2000, the house was described in a flyer distributed by the real estate agent to prospective purchasers, including the plaintiff, as a ‘quality built residence’.  In fact, on the plaintiff’s case, the house was not a quality built residence.  It had a longstanding and extensive structural problem with salt damp as a result of inappropriate installation and subsequent breaching of a damp-course membrane.  The vendors undertook work to conceal the salt damp prior to the sale of the house. The agent did not mention the salt damp or the concealing work to the plaintiff, who did not recognize the presence of salt damp, or work done to conceal it, on her inspection of the house.

   [1] Amended Statement of Claim filed 20 October 2004

   Misrepresentation and/or Misleading and Deceptive Conduct

3. It is the plaintiff’s case that the vendors and the agent described the house as a ‘quality built residence’ in the advertising material handed out to the plaintiff, representing thereby that it was in fact quality built and by implication that it was a house free of salt damp.

4. There was salt damp in a number of internal walls of the house because the damp-course had been improperly laid at the time of construction and/or the damp-course had subsequently been breached.

5. The vendors knew that there was salt damp in the house and performed work to conceal it.  The agent knew of the salt damp and the work done to conceal it. The agent did not say anything about the presence of salt damp or the concealing work done by the vendors to the plaintiff.

6. The representation made by the agent that the house was a quality built residence was false and/or misleading and constituted misleading and deceptive conduct, contrary to section 52 in Part V of the Trade Practices Act 1974 (Cth), which provides:

   (1)     A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

   (2)     Nothing in the succeeding provisions of this Division shall be taken as limiting by implication the generality of subsection (1).

7. Section 82 of the Trade Practices Act relevantly provides:

   (1)     … a person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part IV, IVA, IVB or V or section 51AC may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.

8. The plaintiff also relies on the provisions of section 56 of the Fair Trading Act 1987 (SA). Section 56 in Part 10 of the Act provides:

   (1)     A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

   (2)     Nothing in the succeeding provisions of this Division limits by implication the generality of subsection (1).

9. Section 84 of the Fair Trading Act provides:

   (1)     A person who suffers loss or damage by conduct of another in contravention of a provision of Part 10 (other than section 57) may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.

   (2)     An action under subsection (1) may be commenced at any time within three years after the date on which the cause of action accrued.

10. Further, or in the alternative, the plaintiff relies on section 7 of the Misrepresentation Act 1972 (SA), which provides:

    (1) Where a contracting party is induced to enter into a contract by a misrepresentation made--

    (a)by another party to the contract; or

    (b)     by a person acting for, or on behalf of, another party to the contract; or

    (c)by a person who receives any direct or indirect consideration or material advantage as a result of the formation of the contract,

    and any person (whether or not he or she is the person by whom the misrepresentation was made) would, if the misrepresentation had been made fraudulently, be liable for damages in tort to the contracting party subjected to the misrepresentation in respect of loss suffered by him or her as a result of the formation of the contract, that person is, subject to subsection (2), so liable to that contracting party, in all respects as if the misrepresentation had been made fraudulently and were actionable in tort.

    (2)     It is a defence to an action under subsection (1)--

    (a)     that the person by whom the representation was made had reasonable grounds to believe, and did believe, that the representation was true; or

    (b)     that the defendant was not the person by whom the representation was made and did not know, and could not reasonably be expected to have known, that the representation had been made, or that it was untrue.

    (3)Where in any proceedings before a court, it is proved that a party to a contract has rescinded, or is entitled to rescind, the contract on the ground of misrepresentation, the court after consideration of the consequences of rescission, and the consequences of a declaration under this section, in the circumstances of the case, may, if it considers it just and equitable to do so, declare the contract to be subsisting and award such damages as it considers fair and reasonable in view of the misrepresentation.

    (4) A declaration under subsection (3) has effect according to its terms and is a bar to rescission.

    (5) Where a contract has been rescinded but is subsequently declared to be subsisting under subsection (3), the respective rights and liabilities of the contracting parties will be determined in all respects as if the contract had never been rescinded.

    (6) In assessing any damages under this section, a court must take into consideration any award of damages under any other provision of this section, or of damages or compensation under any other law, and in assessing damages or compensation in any proceedings under any other law relating to a contract, a court must take into consideration any award of damages under this section.

11. The plaintiff says she was induced to enter into a contract for the sale and purchase of the house by the representation made to her by the defendants that the house was a quality built residence.

12. The plaintiff’s case is that the vendors are vicariously liable for the misrepresentation made by the agent and for the misleading and deceptive conduct of the agent, and by performing work to conceal the defects in the house and by their silence, the vendors aided and abetted the representation made by the agent in contravention of section 52 of the Act.

13. Section 75B(1) of the Trade Practices Act provides that:

    A reference in this Part to a person involved in a contravention of a provision of Part IV, IVA, IVB, V or VC, or of section 75AU or 75AYA, shall be read as a reference to a person who:

    (a)    has aided, abetted, counselled or procured the contravention;

    (b)has induced, whether by threats or promises or otherwise, the contravention;

    (c)has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; or

    (d)    has conspired with others to effect the contravention.

    Collateral Warranty

14. In addition, the plaintiff claims that the representation made by the vendors in the flyer distributed to her as a prospective purchaser constituted a collateral warranty to the contract that the house was a quality built residence, and by implication, that it was free of salt damp.  In breach of the collateral warranty, the house was not a quality built residence in that the damp-course had been improperly laid in the course of its construction and subsequently breached, resulting in salt damp in the internal walls of the house.

    Negligence

15. Further and in the alternative, it is the plaintiff’s case that the agent owed her a duty of care to ensure that information provided to the plaintiff concerning the house was accurate.  By failing to ensure that the description in the flyer was accurate, and by failing to ensure that the plaintiff was aware of the concealed defects and concealing works, the agent was negligent and in breach of the duty to the plaintiff.

16. The plaintiff claims for loss and damage she has suffered as a result of the misrepresentation made by the defendants and/or the misleading and deceptive conduct of the defendants and/or the breach of the collateral warranty and/or the negligence of the agent.

    The Defence[2]

    [2] The defendants did not file a defence in response to the plaintiff’s Amended Statement of Claim.  No point was taken by the plaintiff at trial regarding the pleadings.

17. By its defence filed on 30 May 2003, the agent denies the plaintiff’s claim and entitlement to relief.  In particular, the agent denies that a misrepresentation was made and that the plaintiff relied on any representation, including the material in the flyer, which was true, or alternatively, should be regarded as ‘mere puffery’.  The plaintiff could have but did not arrange for an independent inspection of the house before purchase.

18. The agent denies it was negligent and denies any knowledge of the presence of salt damp in the house, or of work concealing it.

19. The vendors, by their defence filed on 25 June 2003, deny the plaintiff’s claim and her entitlement to relief. In particular, the vendors deny that the description in the flyer of the house sold to the plaintiff as a ‘quality built residence’ meant by implication that it was free of salt damp, and in any event the description was ‘mere puffery’.  The vendors deny undertaking work in order to conceal defects in the house, which were apparent on visual inspection.

20. The defence filed by the vendors did not address the allegation that the representation was a collateral warranty to the contract for the sale and purchase of the house.  It was understood and the trial was conducted on the basis that the allegation was denied.

    The Witnesses

21. The plaintiff, Ms Darling, gave evidence.  The plaintiff also called:

    ·       Mr Douglas Wallace, a friend and former partner of the plaintiff

    ·       Ms Hollingworth, a friend of the plaintiff who attended an open inspection of the property at 7 Beeston Way, West Lakes

    ·       Mr Ronald Hancock, a builder

    ·        Mr Nicholas Bell, a property valuer

    ·       Mr Henry Kordek, a stonemason/builder with experience in the repair of salt damp damage

    ·       Mr Peter Jankovic, building consultant and

    ·       Mr Glen Birchby, architect and building consultant.

22. The agent called Mr Ezio Marcel, the sole director of the company, Ms Carol Clark, now Mrs Marcel, a principal of the company, and Mrs Doris Markin, a real estate agent engaged in the agent’s business.

23. Mr Marcel appeared on behalf of the agent.  He wished during the course of his evidence to give his opinion, based on his own practical experience of building houses in the 1970’s, regarding the method of construction used by the builder in this case, the installation of dampcourses generally and also methods of salt damp rectification.

24. An objection to Mr Marcel giving evidence of his opinion on building practices was upheld.  Mr Marcel had provided no expert report to the other parties, nor disclosed that he had expertise as a builder and held opinions about building practices, which might bear on an issue in this matter.  In my opinion, it was not appropriate to allow Mr Marcel to give expert evidence, without warning to other parties and without compliance with the rules of procedure.  In my view, it was not going to be of assistance to the court to allow Mr Marcel to give expert evidence without any proper opportunity for his qualifications to give the evidence, and the substance of his evidence, to be considered by the other parties. (Corporation of Adelaide v Port Adelaide Enfield City Council [2000] SASC 271 per Bleby J)

25. The vendors, Mr and Mrs Taylor, gave evidence.  They also called Mr Kym Buckley, a building consultant.

26. All of the witnesses, including the parties, did their best to relate what they knew, and in the case of the witnesses with expertise, their opinions, in a straightforward way.  There was little dispute regarding the objective facts associated with the sale and purchase of the house at 7 Beeston Way, West Lakes.  With the exceptions referred to below in relation to subjective matters, I have accepted the evidence given by witnesses.

    The construction of the house

27. The house constructed on Lot 50, Beeston Way, West Lakes, was built in 1976 by WG Henderson & Co Pty Ltd.  An application dated 22 December 1975[3] for approval for the construction of a dwelling and garage was submitted to the Woodville City Council on behalf of the owners at the time, Mr and Mrs Henderson.  The estimated cost of the building work was $35,000.  Drawings to scale and a floor plan of the proposed residence were attached to the application.[4]

    [3] P9

    [4] P11

28. The specifications[5] submitted to the council on behalf of Mr and Mrs Henderson provided details of footings, damp-proof courses, walling materials, solid floors, windows and windowsills, door frames, roof, plastering, ceilings, second fixing, cupboards, doors and door furniture, wall tiling, and particulars of fittings, fixtures and internal finishes.

    [5] P10

29. The particulars in relation to damp-proof courses were as follows:

    Three base courses to be laid in damp-proof mortar.

    Provide viscourse membrane at base of all walls.
    Provide second viscourse membrane raised 150mm above foundation level in wet areas.

    Provide membranes stepped up approximately 150mm where Concrete floors.

30. The Schedule attached to the specifications included the following details:

    Damp-Proof Course

    Place an embossed polythene sheet damp-course at plate level full width of all walls, including across cavities.  Tar and sand shall not be used.

    Damp-proof course shall be continuous throughout the building and may be of:

    (a)    One part cement, two parts emulsified bitumen, and ten parts sand.

    (b)Approved integrally waterproofed and coloured cement mortar used in three successive courses.

    NOTE: Provide additional damp-course immediately above solid floors.

31. A soil inspection and footing report dated 8 January 1976[6] was provided to the builder by Mr R D Steel, Engineering Geologist and Soil Consultant.  The report included the following observations and recommendations:

    [6] P12

    Relevant foundation properties

    The soils present at site are estuarine type sediments and these extend to the full depth of the testing (1.6 metre).  The top part of the profile at least (probably 1.1 metre) is fill, consists of sandy soils, with small to large pockets of silty clay.

    Such materials are essentially non-expansive i.e. they do not undergo shrinking and swelling movements of any significant amount when water evaporates or is absorbed.

    The top zone (up to 100mm) is somewhat loosely compacted, but below this, soils appear on superficial evidence at least, to be well compacted.  It is understood also that all fill used in West Lakes Project is placed and compacted under laboratory control and there is little likelihood of long-term consolidation and settlement.  Bearing strength is also suitable for the type of building proposed.

    The natural soils below fill are here mainly silty clays.  These are only firm and very moist and would have relatively low strength.

    Footing recommendation

    The building proposed for site is a single storey house of solid brick construction and concrete floors.  The footing considered most suitable is a continuous rigid strip beam, seated a min. 150mm below soil surface.

1. Specifications for beam dimensions, reinforcing bars, ligatures, concrete and gussets followed, together with recommendations that:

   Any carports, garages, verandahs etc attached to the proposed building which also directly support the common roof … should be on footings (continuous beams, pads etc.) seated at the same minimum depth as the other footings.

   A min. 150mm of internal ground clearance is required for concrete floors at ground level, after removal of grass etc.  This would be made up of a min. 50mm of granular base (preferably compacted quarry sand or rubble) and 100mm for concrete slab. Slab and footing beams should be underlain by plastic sheeting (.008” on 200 micron) and all joins taped to ensure watertightness.  Mesh reinforcing will be required.  Slab can be:

   …Poured together with footing beams to form a thickened edge raft, total thickness, slab + beam + 380mm.  Reinforcing mesh is placed approx. 25mm from top of concrete and extends to at least centre rod of perimeter edge beam: slab should be thickened where adjoining beams, e.g. by triangular section of concrete, at least 150mm to underside of slab and top edge of all beams: a recessed edge, 50mm deep x 150mm wide cut into outer rim of perimeter footing beam – (e.g. for external leaf brickwork, wall cavity etc.) will assist in preventing moisture penetration to underfloor areas.  One additional rod may be required in the top of the external footing beam. (Further details on request.)

   …Poured separately inside footing beams at a later stage.

2. While the use of other footing designs was not necessarily excluded, the footings which were recommended were considered to be the most suitable for the foundation conditions assessed as present at the site.  The consultant recommended footings which were likely to prevent or minimise subsequent damage to the building superstructure from any known property of the foundation materials under normal conditions of management.  Attention was drawn to the following matters, amongst other things, to ensure the long-term success of the footings used:

   ….Soil should be banked up against the footings as soon as possible after pouring and be graded to allow water to drain freely away from building areas.

   ….All surplus surface water, roof run-off etc., should be diverted away from building areas in drains of adequate capacity and preferably to street drainage systems.

   ….Concrete pavements constructed around building perimeters, will further assist in reducing moisture access to the subsoil under building and should be graded to allow water to drain away from footings at all times.

   ….Lawns and gardens when established should generally be kept clear of building areas and excess watering avoided.

3. Council approval for stormwater drainage on the allotment and for the construction of the vehicular footpath crossover, subject to some conditions, was provided to the owners, Mr and Mrs Henderson, by letter dated 19 January 1976.[7]

   [7] P13

4. The concrete footings for the residence were poured on 29 January 1976.  They were certified on the same day as complying with the Building Act and acceptable to the Woodville Council.[8]

   [8] P14

5. The evidence given by Mr Peter Jankovic at trial and his report, dated 23 January 2004[9], suggest that the building specifications for the house built at 7 Beeston Way, West Lakes, in particular, in relation to damp-proof courses, were in accordance with Building Regulations and that the house was constructed in accordance with the specifications submitted to the local Council for approval.

   [9] P1 document 24

6. Mr Jankovic has extensive experience in the building industry, initially qualifying as a carpenter and joiner.  He obtained his Building Certificate and Local Government Building Inspectors Qualifying Certificate in 1975. Mr Jankovic has worked in the building industry since the early 1970’s, as a building supervisor, construction and building manager, building consultant and advisor to building and housing industry committees.  He is a training lecturer in the Housing Industry Association Building Supervisor’s Course and a member of a number of professional institutions and committees.  His qualifications to give evidence of his opinions in relation to the construction of the Beeston Way house were not challenged. 

7. Mr Jankovic had regard to the building standards which applied when the house was constructed in 1976.  The Building Regulations required either the installation of a physical barrier of a minimum specified thickness, or damp-proof mortar to be laid in mortar joints at least three bricks high, to prevent dampness from rising to the brickwork.  The Code also required a secondary visqueen barrier to be installed in the brickwork in wet areas, which at that time were not required to be waterproofed.

8. The relevant Regulations pursuant to the Building Act 1970-1971 provided as follows:

   Damp-proof courses and Damp-proof mortars

   Use

   47.9 (1)     Except in a building that is subject to an exemption granted by the council pursuant to sub-regulation (3) of Regulation 47.1 damp-proof courses shall be laid or damp-proof mortars used in masonry walls and piers in such a manner that moisture from the ground –

   (a)    shall be prevented from reaching the lowest floor timbers;

   (aa)shall be prevented from reaching the walls above the damp-proof course; and

   (b)in the case of any suspended floor constructed of a material other than timber, shall be prevented from reaching the underside of such floor or the supporting beams or girders.

   …….

   Overlap of Damp-proof Courses

   (4)     Where, pursuant to subregulation (1), a damp-proof course is used it shall be overlapped not less than 120 mm at any joins.

   …….

9. Regulation 47.10a provided for a number of different materials which could be used as a damp-proof course, but the most common in use at the time was polyethylene film not less than 254μm thick.  The product invariably supplied was in fact 300mm thick.

10. The Australian Standard Rules – Brickwork in Buildings, known as the SAA Brickwork Code (Metric Units) – AS 1640-1974, also provided for:

    ·       materials to be used for damp-proof courses, including polyethylene sheet,

    ·       type of damp-proof courses, including membrane type, e.g., polyethylene sheet, and mortar type, and

    ·       prevention of moisture penetration.

11. In particular, section 3.7 relevantly provided:

    3.7     PREVENTION OF MOISTURE PENETRATION

    3.7.1  General (See Commentary)

    Where the passage of moisture through the brickwork is to be prevented, either from an external source into the fabric of the building, or from one part of the structure to another, barriers shall be provided by means of one or more of the following:

    …

    (b)    Damp-proof courses in accordance with Rule 3.7.3.

    3.7.3  Damp-proof Courses

    3.7.3.1 Ground Level

    A damp-proof course shall be provided at least 150mm above the finished level of the external ground or paving. (see Fig. 1) (See Commentary)

12. Section 5.6, CAVITY BRICKWORK, provided amongst other things that the cavity shall be maintained free from mortar droppings or other material which may bridge the cavity.

13. Section 5.8, DAMP-PROOF COURSES, provided:

    Any course upon which a sheet of damp-proof material is to be laid shall be carefully flushed up with mortar to form an even bed.
    Where joints in the sheet cannot be avoided, damp-proof material shall be lapped not less than the width of the leaf on which it is laid.  Joints shall be avoided in the vicinity of weepholes.
    The damp-proof materials shall be protected from injury.  In tooling the joints, damp-proofing material shall not be bridge or damaged.

14. The Commentary on the Australian Standard Rules for Brickwork in Buildings included section 2.3.2 on damp-proof courses as follows:

    2.3.2         Damp-proof Courses

    2.3.2.2Mortar Type  Mortars used as damp-proof courses in the bottom of a wall are intended to prevent the passage of moisture by capillary action.  Whilst no SAA test exists for measuring this property, a simple test may be carried out by jointing two bricks with the mortar to be used, placing the lower brick in a shallow dish filled with water and observing whether the upper brick becomes damp.

    In practice most mortar type damp-proof courses are water resistant rather than waterproof.  They depend in part on there being an alternative and easier path than through themselves for water to be dissipated.  Successful mortar damp-proof courses have been known to become defective when filling below the damp-proof course on one side of the wall has substantially reduced the surface area of the wall from which the water can evaporate, as well as delivering more water to the wall.

15. There was no evidence of who had been responsible for the various stages in the construction of the house and the external paving.  The company which built the house at 7 Beeston Way, West Lakes, WG Henderson  & Co Pty Ltd, was the subject of a winding-up order on the 27 September 1994.[10]  The company was dissolved on the 21 November 1997.

    [10] P18

    The agent’s knowledge of the house

16. The first defendant, Carol Clark and E Marcel Estates Pty Ltd, carried on business as Real Estate Consultants and Property Managers under the name of LJ Hooker – West Lakes. 

17. Mr Marcel has worked in the building industry since 1978 and before that as an electrical contractor.  He moved to West Lakes in about 1980.  He has held a general Builders Licence since 1978.  He has built about 60 homes. 

18. Mr Marcel first went into the real estate business in 1987 trading as E Marcel Estates Pty Ltd.  His business was merged with that of Ms Carol Clark in December 1987 and became Carol Clark & E Marcel Estates Pty Ltd on the 4 April 1988.  Mr Marcel and Ms Clark married. Mrs Marcel said that she began working with Delfin Realty, the developers of the West Lakes scheme and she had worked in the West Lakes area for about twenty-five years. 

19. Mr Marcel was a principal and the sole director of the company and  Mrs Marcel a co-principal of the business between 1988 and 2002.  The business traded as LJ Hooker – West Lakes until September 2002, when the business was sold. 

20. Mr Marcel said that the company had a substantial property management portfolio, which was built up over the years.  The company managed high quality properties, which were in demand as rental accommodation, for example, for employees of the Submarine Corporation.  For a number of years Mrs Marcel was the rental manager and Mr Marcel was the sales manager.  At one time, they managed up to fourteen sales people, although generally they used an average of four to six sales people. The sales representatives were independent agents, who worked on the basis of a commission only. 

21. Mrs Doris Markin joined the first defendant company in 1988 or 1989 and remained with it until the business was sold, when she moved to Bernard Booth Real Estate.  Mrs Markin was employed under a letter of appointment.  She was responsible for her own marketing, although the company trained its sales people in matters of law, ethics and code of conduct in accordance with Real Estate Institute standards.  Mrs Markin had been in the Real Estate business for thirty-three years. 

22. Mr Marcel knew of the property at 7 Beeston Way, West Lakes, although until the litigation he had never been inside it.  He knew the builder, Mr Henderson, personally.  He had worked for him as a sub-contractor and was familiar with his methods of construction.  He was a competitor of his at one time. Mr Marcel personally held Mr Henderson in high regard as a builder.  He knew that he had won awards in the building industry. 

23. The first defendant managed the property at 7 Beeston Way, West Lakes as a rental property on behalf of the owners, then a Mr and Mrs Iliou, for a period of time. Mrs Marcel was the manager of the property from November 1987 to April 1990.  The property was rented out to employees of the Submarine Corporation.  Mrs Marcel said it was considered a high calibre property and attracted good tenants.  It was rented for $500 per week for the whole period over which she managed it.  She regarded it as a high quality property.

24. Mr Marcel produced from records a Residential Tenancy Agreement entered into by the owners, Mr and Mrs Iliou, in October 1987.  The additional conditions which formed part of the agreement included, amongst other things, the following item to be addressed by the owner/landlord before the tenants occupied the premises on the 21 November 1987:

    2.Organise a building inspector to check whether leaking pipes are causing the problem of the dampness in the lower walls near the bathrooms.  The cause of the problem to be found and rectified before 21 November, 1987.

25. A handwritten note on the agreement  recorded:

    Item 2 above has been fixed but if the problem re-occurs, the owner agrees to have it attended to forthwith.

26. There was a problem with dampness on walls adjoining the bathroom.  Mrs Marcel said that the landlord did have the leaking pipes fixed, although the property inspection sheets do indicate that dampness recurred on walls adjoining the bathrooms, near the leaking pipes.

27. Mrs Marcel completed an Inspection Sheet on 21 November 1987, on behalf of the landlord.[11]  The Inspection Sheet noted a crack in the middle of one of the showers and ‘dampness’ in painted walls, which were described as ‘slightly marked’.  Mrs Marcel also identified a Notice of high water consumption in relation to the property, dated 27 April 1988, which was forwarded by the tenant to the first defendant as property manager.[12]  It was suggested that the high water consumption reflected a problem with leaking pipes.  It is not possible on the evidence, in my opinion, to draw any conclusion from the Notice.

    [11] P1 document 2

    [12] D1-40

28. A report by the agent to the owners following a routine inspection on 13 July 1989 included the Special Comments:

    Some front tiles cracked on verandah. Slight dampness passage wall near laundry – Panels on shower off laundry not fitting properly as with ensuite. 1 Panel cracked in Main Bath shower alcove. Property is being well maintained generally.

29. Mrs Marcel said that during the time the property at 7 Beeston Way was under management by the first defendant, no lessee spoke to her about any salt damp problem and she knew of no problems with salt damp.  A Residential Property Inspection Sheet dated 28 September 1989, noted again a crack in the middle of the shower, but no comment is made about dampness on any wall.[13]

    [13] P1 document 3

30. On 13 October 1989, the agent wrote to the Woodville Council notifying the council that it was the property manager of 7 Beeston Way, West Lakes on behalf of the landlord.[14]  The agent received the Notice of Rates for the property. The Notice dated 9 July 1990 contained a Capital Value Assessment for rate purposes for the property of $297,000.  While the Notice of Rates dated 1 July 1991 tendered in evidence is illegible in parts, it appears and it is not disputed that the Capital Value Assessment for the property was then set at $310,000.  The Capital Value Assessment for rate purposes appears to have remained unchanged in 1992 and 1993.[15]

    [14] P1 document 8

    [15] P1 document 6

    The vendors’ knowledge of the house

31. In January 1994, the property was advertised for sale by a Real Estate Agent, Bernard Booth, under instructions from the mortgagee.

32. The advertisement in The Advertiser newspaper on 22 January 1994[16] read as follows:

    ABSOLUTE LAKE FRONTAGE
    APPEALING SPACIOUS FAMILY RESIDENCE
    EIGHT VERY WELL PROPORTIONED MAIN ROOMS – DOUBLE GARAGE UNDER MAIN ROOF
    NEEDS REDECORATING/REFURBISHING

    The family home offers expertly designed family living with excellent outlooks over the wide lake expanse from indoors and the superb outdoor patio pergola and alfresco living.  This home will suit those who wish to add their own taste because it needs a major refit in the kitchen, carpets, curtains etc. but this does allow the opportunity to put ones own taste and decoration into the home. FOR DEFINITE GENUINE SALE

    AUCTION FRIDAY 28 JANUARY AT 12.30 PM

    [16] P1 document 9

33. At the time of the auction, the house was presented without carpet and the kitchen fittings.  The stove, the sink and kitchen cupboard doors had been removed.  Plaster was missing in places from the walls.  Wallpaper was hanging off the walls and there were no curtains.  Some signs of dampness were visible on the wall under the bench near the kitchen sink[17], on the walls of the second bedroom behind the bathroom, and the hallway, and the northern wall of the family room.[18] 

    [17] P8

    [18] P3

34. Mr Hancock lived in the West Lakes area.  He was working as a builder.  He had a look at the property in 1994 with the idea of purchasing it for renovation and resale.  On inspection, he saw dampness, in particular, behind cupboards in the kitchen, where the owner had removed the kitchen cupboard doors, and in the passage walls.   Mr Hancock went to the auction, but he did not put in a bid. Mr Hancock did see Mr McKenzie there.  Mr McKenzie was a land agent who lived next door to the property.  He was at the auction apparently bidding for a client. 

35. Although she was never responsible for managing it as a rental property, Mrs Markin lived next door to 7 Beeston Way, West Lakes, for twenty-five years.  She knew it as a Henderson-built home.  Her own home was built by Mr Henderson.  She knew that there had been five owners, although she did not know the first two or three.  At the time of the auction in 1994, Mrs Markin had only looked at the house through a window.  She saw no sign of any salt damp.

36. Mr and Mrs Taylor saw the advertisement for the property.  They went to look at it.  They were interested in the property and encouraged to buy it by Mr Taylor’s employer, who lived nearby.  They attended the auction with a large number of other people.  In the event, Mr Taylor was the successful bidder at the auction.

37. On 21 February 1994, the property was transferred to the second and third defendants, Mr and Mrs Taylor, by the mortgagee exercising a Power of Sale.[19]  The consideration for the property was $281,500.  Mr and Mrs Taylor had a mortgage to the Commonwealth Bank of Australia in the sum of $251,000.[20]

    [19] P1 document 10

    [20] P1 document 11

38. Major renovations were required.  Mr and Mrs Taylor undertook repairs soon after they purchased the house.  Much of the work they did themselves.  Mr and Mrs Taylor lived in the garage while work was being done inside the house. The renovations continued over a number of years.  I accept that the work that was done was at a cost to and considerable personal effort on the part of Mr and Mrs Taylor.

39. Kitchen fittings and doors were recovered from the previous owner and re-installed.  The main bathroom was upgraded. Wallpaper was removed. Some painting was done.  Tiles were replaced on the front verandah.  Photographs of the work in progress were taken by a friend.[21]

    [21] P8

40. Mr and Mrs Taylor accepted that soon after they purchased the house they undertook repairs to some internal walls.  They could see the signs of dampness on some walls of the house.  Mr Taylor removed plaster where dampness was observed and tradesmen were engaged to replaster various walls and to remove and replace tiles in the bathroom. An area of the passageway wall was replastered.  Although she helped generally with the work Mr Taylor was doing, I accept that Mrs Taylor did not become involved with the detail of the repairs to the house.

41. Mr and Mrs Taylor were advised that any unsightly staining on the walls had been caused by rising moisture and would not re-occur.[22]  They did not understand that advice to mean that the house was subject to widespread rising damp or salt damp, in the sense that there was a serious problem involving the failure of the damp-course installed when the house was built.

    [22] P3

42. I accept that neither Mr or Mrs Taylor specifically observed or registered the presence of what is now known to be a widespread problem with rising damp or salt damp in the internal walls of the house.  I accept that they believed that any dampness in the internal walls of the house was a minor problem which could be, and had been, appropriately attended to by replastering and painting.

    The sale of the house by Mr and Mrs Taylor

1. Mr and Mrs Taylor made a decision in October/November 2000 to sell the house at 7 Beeston Way.  Mrs Taylor said that her health had been very bad during the year.  She had been working hard and she weighed only 45 kg.  Her relationship with her husband had deteriorated and she had left Mr Taylor for a number of weeks, staying at the house of their best friends.  She and her husband had then talked things over.  She agreed to give the marriage another chance.  It was Mrs Taylor who suggested that they sell the house, to make a fresh start.  Although he was reluctant at first, Mr Taylor finally agreed to the proposal. 

2. Mrs Taylor appeared to be distressed, emotional and to an extent defensive, when she gave her evidence. I had the impression that Mrs Taylor’s evidence was affected by her blaming herself for persuading Mr Taylor to sell the house, a sale which had led to the litigation.

3. Mr and Mrs Taylor decided to let Mrs Markin handle the sale for them.  She was their next-door neighbour and the Taylors knew that she was a real estate agent.  Mrs Markin had visited Mr and Mrs Taylor for coffee, which they had in the lounge room or on the patio.

4. Mr and Mrs Taylor accepted that between 1994, when they purchased the house, and 2000, when they offered the house for sale, they were aware of some dampness, in particular, some dampness in the main bedroom, limited to the area of the walk-in robe, immediately behind the bathroom.  Mrs Taylor said there had been blistering of the paint in the front bedroom, shortly before the house was sold.  There was dampness evident in some parts of the external walls of the house, particularly to the western and front elevations.

5. In preparation for the sale, the areas where there was blistering paintwork, in the walk-in wardrobe and in the front bedroom, were re-plastered.  Mrs Taylor had shown Mrs Markin some dampness in the walk-in robe and asked if they should have it fixed.  Mrs Markin advised them to have it fixed before the open inspection.  Mr Taylor undertook sanding and painting of some of the internal walls.[23]  Mrs Taylor arranged for new carpets to be laid.

   [23] P3

6. On 16 November 2000, Mrs Markin completed a Listing Advice Sheet and Mr and Mrs Taylor entered into a Sales Agency Agreement.[24] The agreement was for a sole agency for a period until three months after the date of the auction. A reserve price in the high $400,000’s was set. 

   [24] P1, document 15, P21

7. Particulars of the property, including services and improvements, were noted by Mrs Markin. The wood heater and the new carpets were mentioned.  Of relevance, no reference was made under services and improvements to a security system.  Mrs Taylor said there was a discussion with Mrs Markin about the security system, which was old and had never been connected, and about the timber used in the kitchen cupboards.  She said they were not sure that the timber was blackwood and therefore it was decided that no reference should be made in the advertising material to ‘blackwood’ cupboards.  Mrs Taylor said that Mrs Markin told them that care was necessary in describing the property accurately.

8. Mrs Marcel saw the property at 7 Beeston Way again in 2000 when Mrs Markin listed it for sale.  The office policy at the time was that newly listed properties were inspected by the sales team, to give the sales person an opinion about the price which could be achieved and also to make any suggestions to the vendor to improve the presentation of the property. There were about seven or eight people in the sales team which inspected the property when it was listed by Mrs Markin.  After the inspection by the team, each person’s opinion of the price the property should sell for is compared.

9. Mrs Marcel said that when she inspected the property, she did not notice any salt damage to the exterior of the house.  She first met the vendors, Mr and Mrs Taylor, on that day. Mrs Marcel said that in her opinion the property was beautifully presented. A price in the high four hundred thousands was agreed on by the team as the recommended price.

10. Under the terms of the Sales Agency Agreement, the vendor warranted:

    1.That the Vendor has good authority and full capacity to sell the property;

    2.That all information detailed in the Agency Agreement and otherwise provided to the Agent is accurate and correct; the Vendor shall promptly advise the Agent of all changes to the information given which shall come to the Vendor’s knowledge or attention;

    3.That there is no other information material to the sale which the Vendor is aware of and should be brought to the attention of the Agent.[25]

    [25] P21

11. Mrs Markin prepared a flyer for the property at 7 Beeston Way, West Lakes.[26]  The house was to be open for inspection on 22, 25 and 29 November and on 2, 3, 6, 9 and 10 December 2000.  The auction was to be on 13 December 2000 in the agent’s rooms.

    [26] P1, document 12

12. The flyer read:

    ABSOLUTE FRONTAGE MAIN BOATING LAKE

    A SPLENDID SPACIOUS 8 ROOM FAMILY HOME AND ENTERTAINER

    From the moment you step inside this quality built residence, you will be impressed by the space, practical floor plan, views and stylish feel.  Elegant entrance foyer with tiled floors leading down the passage, a light filled formal lounge and formal dining room complete with built-in bar and a sliding door inviting you to a terraced verandah with a sensational vista of the lake.  A solid timber & leadlight kitchen with pantry, insinkerator, Dishlex dishwasher & a large Eurolec gas stove.  A large family room, again with sliding door to pergola outdoor entertaining area with those spectacular views.  Fish & swim off the pontoon.

    Master bedroom with ensuite and walk-in robe & lakeview – three other excellent bedrooms, two with built-in robes.  Double auto garaging under the main roof with internal access.  Extras include new quality carpets, gas heater, air conditioner, ducted cooling, combustion heater, security system.

    The added bonus – the property is within a short stroll to
    West Lakes Mall, Football Park, cafes and all the desirable extras.

    RESORT STYLE LIVING

13. Mrs Markin was responsible for the wording on the brochure for the property.  It was the practice in the office for the sales people to prepare their own brochures in conjunction with the vendors.  She may have used some of the wording from other flyers, in particular, the flyer promoting a property at Antigua Grove, West Lakes, prepared by the Unley office. She said that was often done.  Her photograph and her contact details appeared on the flyer.  Mrs Marcel said that she would have looked at the flyer before it was printed.  She believed the words and presentation were correct.  She had inspected the property and she approved of the wording.

14. Mrs Taylor did not recall looking at the flyer itself, or any advertisement for the property.  She did not recall checking the wording with Mrs Markin.  Mr Taylor remembered being shown the flyer by Mrs Markin.  He agreed with the wording of it, except for the reference to a security system, which was not working.

    The purchase of the house by the plaintiff

15. The plaintiff was self-employed for sixteen years in her own business of international shipping and airfreight/freight forwarding.  In December 2000 her business had nine staff. 

16. The plaintiff had owned a number of different properties since around 1982, when she and her then husband bought a contemporary house at Woodville South.  In 1986, Ms Darling bought an older style bungalow at Cheltenham.  In 1993, she bought her parents’ home at Semaphore Park.  In 1994, the plaintiff bought a modern house, which had been built at West Lakes in the 1970’s.  In 1995, she bought a contemporary home at North Haven as a rental property for investment purposes.

17. The plaintiff said that she had experience of house renovations from some time ago. She had been responsible for the maintenance of various properties she had owned, including the repair of damage resulting from a leak in a shower at two of the properties.

18. In 1997, the plaintiff bought a Tudor style house on the Esplanade at Largs Bay, opposite the beach.  It had since been sold.  That house required high maintenance because of its position on the sea front and because it was surrounded by pine trees. The plaintiff said that the house she owned at Largs Bay and the house at Cheltenham were older style homes and both suffered from rising damp.  Before purchasing the house at Largs Bay, the plaintiff arranged for a building inspection and report, which described rising damp on the walls.  The dampness at the Largs Bay and Cheltenham properties was external only.  No treatment of the external damp was undertaken.

19. Apart from those houses, the plaintiff had owned the building in which she had an office, an older style building in Port Adelaide.  She and other members of her family owned a shack at Pine Point, near Ardrossan.

20. The plaintiff had made some plans in the second half of 2000 to move with her partner at the time, Mr Doug Wallace, into a house which was large enough to accommodate them and Mr Wallace’s two teenage daughters.

21. She went with Mr Wallace to look at a house at Antigua Grove, West Lakes.  She said it was there that she met Mrs Doris Markin.  She was given a flyer about the Antigua Grove property.  It read:

    YOUR KEY TO ABSOLUTE PARADISE

    A genuine 4 bedroom (plus study) family home and entertainer - stunning in-ground pool and spa - lake frontage

    From the moment you step into this quality built residence, (built in 1981), you will be impressed by the space, practical floorplan, views and stylish feel.

22. Ms Darling did not recall whether she had noticed the sentence appearing at the bottom of the flyer in small print, which she could not read without glasses:

    The particulars supplied are for information only and shall not be taken as a representation in any respect on the part of the Vendor or his Agent.

23. In any event the house at Antigua Grove, West Lakes, did not suit the plaintiff’s purpose.  It was sold at auction in August 2000.

24. Sometime after looking at the house at Antigua Grove, West Lakes, the plaintiff telephoned LJ Hooker – West Lakes to register her interest in buying a property.  The plaintiff gave particulars of the type of house she was looking for over the telephone.  She said she was looking for a modern house on the lakefront with no work to be done, in good condition and in a price range of between $400,000 and $600,000.  She gave her contact details to the agent.  The plaintiff was not sure whether she spoke to Mrs Markin, or to someone else.  She already owned properties in the area and so she knew some of the agents there.

25. Mr Marcel said that his company generally handled enquiries from prospective purchasers of properties in the area, although no register of prospective purchasers was kept.  If an intending purchaser contacted the office with an inquiry for a particular type of home, the inquiry would be referred to the sales person who was a specialist in the area.  In October/November 2000, the first defendant had two or three agents specialising in the West Lakes area, including Mrs Markin and a Ms Maxwell.

26. Mrs Marcel said that it was office practice to refer any inquiry for a house on the lakefront at West Lakes to either Mrs Markin or Ms Maxwell.  If neither were in the office, a message with the client’s details would have been entered into the sales person’s message book.  If a property came on the market matching the description provided by an intending buyer, it was likely that the agent handling the property would contact the client.

27. The plaintiff said that about three weeks after her contact with the first defendant by telephone, Mrs Markin rang the plaintiff to tell her she had a house for her to look at.  It was coming onto the market the following weekend.  By that time, the plaintiff and Mr Wallace had changed their plans and had decided not to move in together.  The plaintiff told Mrs Markin that the house she had in mind would therefore be too large.  Mrs Markin told her that it was a lovely house and the plaintiff should come and have a look at it anyway.

28. Mrs Markin had no recollection of a message from the plaintiff regarding an inquiry about purchasing a property at West Lakes.  Mrs Markin was quite firm in her evidence that she had not had a conversation with the plaintiff about the property at 7 Beeston Way, West Lakes coming on the market.  Her recollection was that she met the plaintiff at the first open inspection for 7 Beeston Way, West Lakes.  It has not been necessary to resolve the conflict in the evidence on that topic.

29. Mr Wallace looked over the house at Beeston Way with the plaintiff on the first occasion.  The plaintiff said that she went with Mr Wallace to look at the house simply out of general interest, rather than with any intention to purchase it.  Mr Wallace was a carpenter by profession.  He had a restricted Builder’s Licence.  The plaintiff said that when they arrived at the house at 7 Beeston Way, they found that they knew the person who lived next door, Mr Bob McKenzie.  He had been the agent when the plaintiff had purchased a house at West Lakes. Mr Wallace knew him from the Semaphore Surf Lifesaving Club.  They were talking to him socially outside.  The plaintiff asked Mr McKenzie, “By the way, Bob, do you know of anything wrong with this house? That’s when he said – he said it with such confidence – ‘they had salt damp at one stage but I know it’s all been fixed years ago.’”  The plaintiff was not sure whether Mr McKenzie had said ‘salt damp’ or ‘dampness’, but she accepted that he had told her the house had salt damp.[27]

    [27] T56, 88

30. The plaintiff went inside to have a look at the house, although she did not intend to buy it. Her friend Mr Wallace was only there with her because he had an interest in real estate and liked looking at properties.  The plaintiff found that it was larger than she had expected from its outside appearance.  It appeared to be a lovely home, in pristine condition.

31. The plaintiff noticed the problem in the hallway behind the bathroom wall.  She could see in the passage, backing onto a bathroom, where plastering had been done.  The size of it was about equivalent to half a doorway.  She said that there was definitely no visible blistering of the paintwork.  She said to Mr Wallace, or he said to her, “This is where they must have had a dampness problem.”  The house looked to her to be in good condition with nothing to be done on it and nothing to spend.

32. The plaintiff took a flyer from Mrs Markin and asked her about the price for the property.   The flyer referred to a security system, but the plaintiff could not find a code pad for it.  Mrs Markin told her that there was no code pad and the vendors had mislaid the key, which meant that the system was not in working order.  The reference to a security system was crossed out.  A second flyer for the property contains no reference at all to a security system.[28] The plaintiff spoke to Mrs Markin about the evaporative air-conditioning.  It was a very hot day and it did not seem to be working. 

    [28] P1, document 13

33. The plaintiff did not ask Mrs Markin about dampness in the property on the first visit because she had no intention of buying the house. She did not ask Mrs Markin about dampness in the property at all.[29]  Ms Darling said that the house looked of good quality, an above average house, ‘the building, the bricks’, and it looked to her in pristine condition. 

    [29] T89

34. The plaintiff took the flyer Mrs Markin had given her home.  The plaintiff said that she read the flyer on a number of occasions, including the reference to quality built home and the resort style living on the lake.

35. The floor plan of the house appeared on the back of the flyer. [30]

    At the bottom of the floor plan, the following note appeared:

    This drawing is for illustration purposes only. Measurements are approximate and details intended to be relied on should be independently verified.

    [30] P24

36. Mrs Marcel said that the state manager for the franchisor, LJ Hooker, had a practice of auditing files at random every three months.  The state manager examined documentation, including contracts and brochures, to ensure adherence to the policies of the franchise or, LJ Hooker.  There were standard disclaimer clauses which had the approval of LJ Hooker and were used by the first defendant in its brochures.  This was one of them.  It is clear, in my opinion, that the statement applies only to the floor plan on the back of the flyer.

37. The plaintiff said that she took some measurements of her furniture, in particular, her dining room furniture, because her main concern was that the dining room furniture might not fit into the house.

38. The following week, the house was open for inspection again.  The plaintiff was not able to go, but her parents and one of her friends went to have a look.

39. Ms Darling told her friend, Ms June Hollingworth, that she had looked at a nice house at 7 Beeston Way, West Lakes and that Ms Hollingworth should go and have a look at it.  Ms Hollingworth was interested in it any way, because she used to walk past it.  She went to an open inspection.  There was a crowd of people there.  She just had a quick look and then went out the front to have a look at the lake view.  She saw no sign of any peeling paintwork and she thought it was a very nice home.

40. The plaintiff did go back to have another look at the house herself before the auction.  On the second visit, the plaintiff was at the house for about fifteen minutes. She spoke to Mrs Markin again about the air-conditioning.  She was told that it was an older style system which would need repairs or possibly replacement. 

41. She also asked Mrs Markin if there were any problems with the fireplace. Mrs Markin told her that the fireplace definitely worked.  Mrs Markin told Ms Darling that she had visited the house to watch the football “and the house gets very hot.”  Mrs Markin made a comment that she would be losing some good neighbours.  

42. During the inspection, the plaintiff also had a conversation about the other house she had seen at Antigua Grove, West Lakes.  Ms Darling asked Mrs Markin why the house at 7 Beeston Way was more expensive than the one she had previously seen at Antigua Grove.  She said that Mrs Markin told her that the house at Beeston Way was a much better house.  Ms Darling agreed that the Antigua Grove house did need painting and appeared to be older and more run down than the Beeston Way house, which appeared to the plaintiff to be a beautiful home.

43. On 11 December 2000, Mr Buckley, a building inspector, inspected the property at 7 Beeston Way, West Lakes for some unrelated prospective purchasers.[31]  He had with him the floor plan of the house provided by the agent.[32]  He described the various areas he inspected by reference to the floor plan.  He prepared a Home Inspection Report in the standard form used by his building consultant business, ‘Housewise’.  Under the heading general information, the report referred to ‘rising (salt) damp’.  After describing in general terms how salt damp damage occurred, the following suggestion was made to the potential home buyer:

    [31] D20, D20A

    [32] P24

    The distribution of the damage is dependant on the amount of water available to the afflicted material, with greater volumes of water allowing for greater spread up walls and across floors.

    However, as the time taken for the action of the ‘salt damp’ to destroy bricks, stone or concrete, is so very long (typically decades) generally one can reduce the impact of this defect to issues of termite, damage repair, and health, with the salient question being ‘for me, what level of maintenance-expenditure is too much?’

    While the cost of eradication can easily be in the tens of thousands of dollars, ‘salt damp’, when mild enough to represent only a ‘maintenance issue’, may not warrant elimination.  Where moisture levels are low and the effects localized and not strident, it will be far more cost-effective to simply attend to them from time to time.

    On the report sheets, when a number followed by a % symbol is used, it represents the highest moisture reading gathered from testing accessible parts of that wall.

    “HOUSEwise” uses the following reporting regime…

    (1)     readings of 15% or less, being common and acceptable, will not be reported.

    (2)     while results of 17% through 22% (characterized as ‘high’) are unacceptable they do not normally produce the classic ‘salt-damp’ damage of peeling paint and fretting plaster.  While uncontrolled moisture may assist termites to attack, one may notice only minimal damage to masonry.

    (3)     the presumption is that the bottom of the ‘bad range’ is 23% (‘very high’) at which one might experience need to repair surfaces every 4^th year.

    (4)     thereafter, at 28% (‘extreme’), the rate of deterioration may have accelerated to showing damage at every 2^nd year.

    (5)     for results of above 28% (‘extreme’) one should consider that the adverse impact will be manifested annually.

1. The observations Mr Buckley noted particularly, relevant to this case, are set out below in table form[33]:

   [33] D20, D20A

Area	Item	Condition	Comment
Garage[34]	Masonry walls	Major defect[35]	High, very high, extreme moisture readings of 19% - 23%, low-stratum patching and fretting[36] to south and north (resp) west @ 22%; scarring, patching, minor in places, cracking - recurring, average to windows: indicates lintel movement
Wall paint	Undecided magnitude defect[37]	Damaged - fretting, peeling, blistering, patching to walls and ceiling

[34] D20; pages numbered 2

[35] ‘Major defect’ = unable to properly perform its function for a significant reason

[36] Fretting – i.e. visible evidence of surface damage – peeling paint and/or plaster which is powdering

[37] ‘Undecided magnitude defect’ = either a minor fault that will become more serious or indicates lack of information

Entry Hall[38]	Masonry walls	Major defect	Very high, extreme moisture readings of 23% - >60% - fretting to south & west respectively: indicates salt damp
Wall paint	Undecided magnitude defect	Damaged - fretting, peeling, blistering to walls (esp. s/w, low)
Bedroom 4[39]	Masonry walls	Major defect Untested[40]	Incomplete test – limited access due to occupier effects, furniture/fixtures – high, extreme moisture readings of 22% - >60% - low-stratum patching – fretting to south and west (resp) (nth x 26%): indicates severe salt damp
Wall paint	Undecided magnitude defect	Damaged - fretting, peeling, blistering to walls (esp. low)
Bedroom 2[41]	Masonry walls	Major defect	Very high moisture readings of 25% - 26% - fretting to south & west respectively: indicates salt damp
Wall paint	Undecided magnitude defect	Damaged, fretting, peeling, blistering to walls (especially low)
Passage adjoining Bedrooms 2 & 4[42]	Masonry walls	Major defect Untested	Incomplete test – limited access due to furniture/fixtures - extreme moisture readings of 45% - 55%; fretting to west + east: indicates severe salt damp
Wall paint	Undecided magnitude defect	Damaged, fretting, peeling, blistering to walls, esp. low
Bathroom 1[43]	Masonry walls	Major defect Untested	Incomplete testing due to furniture/fixtures/tiling.  High - very high moisture readings of 22% - 25% to south + north (respectively): indicates leaking shower and salt damp
Bedroom 3[44]	Solid masonry walls	Major defect and untested	Incomplete test limited access due to occupier effects furniture/fixtures –very high extreme moisture readings of 19% - 28% + low-stratum patching + fretting to east + west (north + south – 25%) indicates leaking shower and/or severe salt damp, scarring, patching minor in places
Wall paint	Undecided magnitude defect

[38] D20; pages numbered 1

[39] D20; pages numbered 6

[40] ‘Untested’ = unable to comment fully due to lack of adequate access – none the less may be subject to serious faults, requiring further inquiry

[41] D20; pages numbered 7

[42] D20; pages numbered 5

[43] D20; pages numbered 8

[44] D 20; pages numbered 9

Lounge[45]	Masonry walls	Major defect	Extreme moisture readings of 22% - > 60% + low-stratum patching + fretting to west & east (resp) south @ 42%: indicates salt damp; scarring, pronounced patching in places, cracking, recurring – average to windows: indicates lintel movement
Wall paint	Undecided magnitude defect	Damaged, fretting, peeling, blistering to walls esp. s/w + east, low
Dining Room, including Bar[46]	Masonry walls	Major defect	Very high - extreme moisture readings of 25% - 38% + low-stratum patching + fretting to south + east + north (west @ 26%): indicates severe salt damp
Kitchen and Meals[47]	Masonry walls	Major defect Untested	Incomplete test - limited access due to occupier effects, furniture/fixtures/tiling – high – extreme moisture readings of 25% - 45% + low-stratum patching + fretting to west + north (respectively): indicates salt damp
Wall paint	Undecided magnitude defect	Damaged, fretting, peeling, blistering to walls esp. low
Family Room[48]	Masonry walls	Major defect	Very high moisture readings of 23% - 25% + fretting to west & south + east (resp): indicates salt damp
Wall /ceiling paint	Undecided magnitude defect	-
Passage No. 2 (between Laundry and Bedroom 1)[49]	Masonry walls	Major defect	Extreme moisture readings of 28% - 38% + low-stratum patching + fretting to south + north (respectively); reverse of shower: indicates leaking shower and severe salt damp – scarring, pronounced patching in places
Wall paint	Undecided magnitude defect	Damaged, fretting, peeling, blistering; Poor preparation to walls (esp. low)
Bedroom 1[50]	Masonry walls	Major defect	Very high, extreme moisture readings of 23% - 38% + low-stratum patching + fretting to south + north + west (east approximately 33%) – severe salt damp
Wall paint	Undecided magnitude defect	Damaged, fretting, peeling, blistering to walls (especially low)

[45] D20; pages numbered 3

[46] D20; pages numbered 4

[47] D20; pages numbered 10

[48] D20; pages numbered 11

[49] D20; pages numbered 12

[50] D20; pages numbered 13

Vanity Room – Ensuite[51]	Masonry walls	Major defect Untested	Incomplete test - limited access due to occupier effects furniture/fixtures/tiling; very high, extreme moisture readings of 26% - 33% + low-stratum patching + fretting to west + east (resp) (north @ 28%) indicates leaking shower and/or severe salt damp
Wall paint	Minor defect	Damaged in places
Shower and taps	Undecided magnitude defect	Not impervious to water at floor, wall; Tap penetration gaps not sealed; Floor tiles do not underlay wall tiles, floor too high; Potential to leak to adjoining rooms; Grout missing, cracked; Flexible sealant, none, not as required; Taps, water hammer
External[52]	Concrete pavement	Undecided magnitude defect	Too high against footings, walls; Potential for breaching dpm and salt damp attack + edge dampness to interior rooms + unseen entry of termites to walls.

[51] D20; pages numbered 14

[52] D20; pages numbered 18

1. Mr Buckley observed, by simple visual inspection, areas of fretting, blistering and peeling paintwork on a number of internal walls.   In particular, he noticed low fretting, blistering and peeling paintwork in the entry hall, bedroom 4, bedroom 2, the passage between bedrooms 2 and 4, the lounge, kitchen, the passage between the laundry and bedroom 1, and in bedroom 1.  It was plain for him to see as an expert but, in his opinion, which I accept, it would have been visible to anyone prepared to spend the time looking carefully.[53]

   [53] T748

2. The plaintiff did not arrange for a building inspection of the property at 7 Beeston Way, West Lakes.  Ms Darling said that she had no real intention of buying the property.  When she first went to look at it, she was not inspecting the property as a prospective purchaser at all.  She was there out of curiosity.  She did not see the report prepared by Mr Buckley for other prospective purchasers until after she had bought the house. 

3. The plaintiff said that she was positive that Mrs Markin did not advise or suggest to her that she obtain a building inspection report.  The plaintiff said that in any event she did not consider obtaining a building inspection report:

   ·       she could see no reason to have a building inspection done

   ·       the house was ‘a modern home’ and it looked fantastic

   ·       the flyer described it as a quality built home and she relied on the words ‘quality built residence’

   ·       it looked to her to be a quality built home and

   ·       there was no need for her to question any structural details.

4. Although Mr McKenzie had told her the house had had a problem with salt damp, he said that it had been fixed years ago.  The plaintiff had seen the area in the passage where plastering work had been done. She and Mr Wallace had commented that that was evidence of where the dampness problem had been.  Ms Darling said she had assumed that there had been dampness from the adjacent bathroom and it had all been repaired.  She assumed it was repaired to a quality standard and she did not expect any further problems.

5. The auction for the property was held on the 13 December 2000 at the West Lakes Resort Hotel.  Ms Darling attended the auction.  A few days before the auction, the plaintiff thought she should obtain finance just in case she did buy the house.  The bank manager had been ill, and by the time of the auction, she had not been able to obtain approval for finance.  She thought, “Oh well, I probably won’t buy it anyway.”  Nevertheless, Ms Darling put in a couple of bids at auction, when the house appeared to be going for less than she expected.  In the event, the property was passed in.

6. The plaintiff had a conversation with Mrs Markin after the auction.  Mrs Markin rang her.  She told Mrs Markin she thought that she had been the only bidder.   Mrs Markin came to her office to continue negotiations.  Mrs Markin suggested that she offer $5,000 over and above the bid that she had made at auction.  Ms Darling was not willing to do that, taking into account the possible problem with the air-conditioning.  Mrs Markin may have advised her to obtain some advice about the air-conditioning, but Ms Darling had decided not to spend money getting an expert in to have a look at it.  She took it into account in deciding on a price for the house.

7. Mrs Markin told her that she wanted a good neighbour next door. The plaintiff said that Mrs Markin came across to her as friendly and honest and as soon as she found out that Mrs Markin lived next door, that gave her extra confidence in dealing with her.  Ms Darling discovered that she knew Mrs Markin’s son and daughter-in-law.  She felt as if she had a connection with her.  She had a picture of a beautiful home and good neighbours and she thought it was a good price and so she decided to purchase it.

8. No thought was given to obtaining a building inspection report at that stage.  Ms Darling said that she felt more confident when she knew that the agent was living next door and she had been a frequent visitor to the house. She assumed the agent would have known of any problems.

9. The plaintiff’s offer to purchase the house was accepted.  She signed a contract on 15 December 2000 for the sale and purchase of the house for the sum of $480,000.

10. The standard contract for the sale of land used by LJ Hooker – West Lakes contained the following acknowledgement after the purchaser’s signature:

    The Purchaser acknowledges that it has inspected the property or had the opportunity to do so and/or declines to, and purchases the property in the condition it is in as at the date of the contract.[54]

    [54] P1, document 16

11. Settlement was on 21 December 2000.  The plaintiff wanted the advantage of having her staff Christmas party there, in particular because of the position on the lake, which allowed Father Christmas to arrive at the Christmas party by boat.  The plaintiff also was anticipating having her family Christmas day there, because the house had the extra entertaining room. She was looking forward to it.

12. The plaintiff moved into 7 Beeston Way, West Lakes on the 22 December 2000.  She noticed nothing out of the ordinary about the condition of the house.  Her friend, Ms Hollingworth, helped her move into the house.  She saw no sign of blistering or flaking paint on that occasion.

13. On the 30 January 2001, the plaintiff first noticed a problem in the condition of the walls.  There was blistering paint on the wall in the walk-in wardrobe backing onto the shower, in bedroom 1.  In another bedroom, there was a problem with blistering paint on the wall and in the wardrobe.  There was blistering paint on the wall behind the doorway from the entry hall.  It was quite obvious.

14. Ms Hollingworth said Ms Darling had rung her in an upset state.  As a result, Ms Hollingworth went back to the house and she was shown flaking paint and possibly plaster on the carpet, floor and inside the wardrobe of bedroom 4.

15. The plaintiff saw Mrs Markin in the garden next door and asked her about the damp.  She said that Mrs Markin replied that she knew there had been problems in the walk-in robe and she had told the vendors to fix it.  Ms Darling told Mrs Markin that she would be contacting her lawyers.

16. In around February 2001, the plaintiff asked Mr Glen Birchby, a qualified architect and building consultant, to inspect the house for her.  He prepared a report dated 13 February 2001.[55]  In his report, Mr Birchby described the method of construction of the house as one using strip footings with masonry walls and with concrete floors poured on fill between the walls.  He found that the damp-proof course had been in most cases bridged by foundation render or paving, and almost all internal walls showed dampness at the base up to about 300mm.  Most floors were damp in areas tested adjacent to the walls.  In his opinion, the problems with dampness were the result of poor construction practices, rather than building movement or physical damage.  Mr Birchby’s recommendations were that further investigation be undertaken to ascertain the extent of remedial work required.  In his opinion, demolition of the base of the internal walls and possibly the floors and complete replacement of the damp-proof membrane might be necessary.

    [55] P1, document 19

17. The report of Koukourou Engineers to the plaintiff dated 26 February 2002[56] is to similar effect.

    [56] P1, document 21

18. Mr Jankovic inspected the house on 21 November 2003 at the request of the plaintiff’s solicitors.  From his experience and from his own observations, Mr Jankovic said that the house was constructed with concrete floors, using strip footings.  Footings were poured level with the ground and brickwork built up to a horizontal level.  Soil would have been used as fill. The concrete floor slab would have been poured between the walls to the height of, or just below, the brickwork.

19. Mr Jankovic said that the method of construction used for the house was one adopted by many builders until the 1980’s, when it was learned that there were problems with movement in the floor and with rising damp in the walls.  Mr Jankovic explained that rising damp is a term used to refer to moisture being drawn up into masonry by capillary action.  Salt damp is a term used when the signs of dampness appear as salts which are activated in the masonry, crystallizing and causing damage to the surface of the masonry.  Adelaide has a particular problem with rising damp and salt damp.

20. While his inspection of the house did not allow Mr Jankovic to be certain that the builder had complied with the specifications submitted to council, it appeared, from what he was able to observe, that the builder had complied with the specifications.  Mr Jankovic said that council approval would have required compliance with the Building Rules and it appeared to him that the builder had used both of the damp-proof method alternatives provided for in the Regulations, that is, a damp-proof or viscourse membrane, 300mm thick, and also a chemical admixture in a mortar type damp-proof course.

21. On the inspection of the house, Mr Jankovic identified visible signs of salt damp.  He took photographs of the areas in which salt damp was identified.  Mr Jankovic took moisture readings on the site and set out the results of those readings in the table attached to his report.  Excessive moisture (22 per cent to 25 per cent) was identified in internal walls in the entry/hall, lounge, bar area, dining room, kitchen, family room, main passage, the bedrooms, bathroom, laundry, shower and garage.  Medium moisture readings, requiring investigation, were identified on external walls.

22. The worst affected areas were in the bedroom closest to the garage, in the passageway outside the bathroom and the second bedroom and in the walk-in robe next to the main bedroom.

23. In his report, Mr Jankovic noted:

    1During the inspection, there was evidence discovered that certain works had been carried out to certain parts of the internal walls which indicated repairs to the render above the skirting boards.  This may not have been readily noticeable to the layman but was certainly noticeable to the trained eye.  The simple act of running a hand over the render above the skirtings for a height of approximately 200mm generally highlights any repairs (horizontal joint between old and new and undulations) to the render.

    2When viewing those areas which were generally in the study, bedroom one/robe, and bedroom two, family room and in the main passageway, destructive testing was carried out to the passageway eastern wall opposite the bathroom and to the southern study wall.  …(shown on photographs)

    3Study

    It was observed on the southern wall that the render work besides being patched had been coated with a type of epoxy coating for a height of approximately 300mm.  This coating appears to have been placed over the affected or repaired render to prevent the rising damp blistering through the paintwork.  The method used has not been successful as is clearly detailed on photographs 1, 2 and 4.  I am not aware of what the coating, in fact, is, and a chemical analysis may be required to determine the coating material used.

    Mr Jankovic said in his report that, in his opinion, the work carried out in the study was a temporary repair, an unsuccessful damp-proofing method or an attempt to conceal the effects of rising damp.

    4      Passage (Main)

    It was observed that the eastern wall in the area of the bathroom had the render replaced at some stage with a strong render mix, possibly a 3:1 mix.  This method is often used to slow down the passage of salts through the render, however, will not prevent the ultimate break-down of the render due to rising damp and salts.

    In Mr Jankovic’s opinion, the work carried out in the main passage was either a temporary repair or an attempt to conceal the effects of rising damp.

    5Bedroom 1 robe

    It was observed that render repairs had been carried out to the bedroom 1 robe walls … and that these repairs were now breaking down with render blistering and fretting.

24. Mr Jankovic said that it was not possible to say when the repairs had been done.  In his experience, when rising damp or salt damp caused fretting and blistering to paintwork, laymen will rub back the render and apply fillers to the wall.   When the fretting does not return immediately, because the wall is allowed to breathe, the render is painted and within a short space of time, fretting and blistering return. The methods he described were typically used to conceal salt damp.

25. Mr Jankovic said that there were also signs of salt damp externally.  There were no signs of any attempts to remedy those.

26. In Mr Jankovic’s opinion, notwithstanding general compliance with the specifications and building rules, unfortunately, the damp-proofing of the house had failed and moisture had been able to rise into the brickwork from the soil. The construction of the house therefore did not meet the performance requirements of the Building Code. Regulation 47.9(1)(aa), referred to in paragraph [39] above, provided that the damp-proof courses should be laid, or damp-proof mortars used in masonry walls and piers, in such a manner that moisture from the ground was prevented from reaching the walls above the damp-proof course. As a result of the concrete slab, paving and the internal wall render extending over, or bridging, the damp-proof membrane, there was direct access for moisture to travel from the soil between the footings and the edge of the slab into the brickwork. Dampness was therefore able to rise into the walls.

27. Mr Jankovic produced a diagram to illustrate the process by which moisture was able to enter the brickwork.[57]

    [57] P30

1. The statement in this case appeared in the agent’s promotional advertising distributed by the agent to anyone attending an open inspection.  While the vendors did not contradict the description used by the agent in the promotional flyer, the term ‘quality built residence’ was primarily used by the agent, not the vendors. 

2. The agent’s description of the house as a ‘quality built residence’ was the agent’s own subjective assessment based on:

   ·the agent’s knowledge of the reputation of the builder who constructed the house;

   ·Mrs Markin’s owning a house next door built by the same builder;

   ·the outward comparison of comparable properties and the agent’s experience in real estate.

3. The description of the house as a ‘quality built residence’ in a flyer, which included other phrases recommending the property to a potential purchaser, such as ‘elegant entrance foyer’, ‘light-filled formal lounge’, ‘sensational vista of the lake’, ‘spectacular views’, and ‘resort style living’, relates to a subject on which the plaintiff could be expected to have an opinion and to exercise her own judgment. She did form her own opinion on her inspection of the house.  She thought the house - ‘the building, the bricks’- looked of good quality and in pristine condition and was a beautiful home. 

4. While the vendors may be taken to have adopted the description used in the flyer on account of their not objecting to it, the fact that the description appeared only in the agent’s flyer is relevant to whether the vendors intended to warrant its technical accuracy as a term of the contract for the sale and purchase of the house.   It could not have the same character as a representation from a person likely to have specific knowledge of the matter, such as a qualified builder, architect or engineer.  

5. The plaintiff did not ask the agent or the vendors about the construction of the house.  The plaintiff did not ask about the dampness in the house, although the plaintiff knew about it. 

6. It is unlikely in my opinion, that the words used to describe the house as a ‘quality built residence’ were operative in the mind of the plaintiff as an inducement to enter into a contract at the time she decided to purchase the property and signed the contract for it. (Cutts v Buckley (1933) 49 CLR 189 at 202)

7. The contract contained no reference to a ‘quality built residence’. The contract executed by the parties included an acknowledgement by the purchaser that she had inspected the property, or had had the opportunity to do so and/or declined to, and purchased the property in the condition it was in at the time of contract. 

8. In the circumstances, in my opinion, it is not appropriate to characterise the description of the house in the promotional flyer as a ‘quality built residence’ as a promise or warranty on the part of the vendors by which they intended to be contractually bound and on the basis of which the plaintiff, after the property was passed in at auction, entered into a contract for the sale and purchase of the house.

9. In my opinion, the plaintiff’s claim of a collateral warranty to the contract for the sale and purchase of the property must also fail.

   Damages

10. In this case, the liability for the offending conduct is that of the agent, and also of the vendors if, contrary to my findings, the vendors were involved in the contravening conduct, or were responsible for the representation made by the agent or for the negligence of the agent.

11. I have found that the plaintiff did not suffer damage by the conduct of the defendants or any of them in contravention of either the Trade Practices Act or the Fair Trading Act, and that the plaintiff was not induced to enter into the contract for the sale and purchase of the Beeston Way house by a misrepresentation made by the agent or by the vendors, or by the negligence of the agent.

12. In case I am wrong in the conclusions I have reached, I assess the damages which would otherwise be associated with the claim made by the plaintiff.

13. The measure of damages in a claim related to misleading or deceptive conduct is generally the difference between the true value of the property at the time of purchase and the price paid for it, together with additional loss attributable to the conduct which contravened section 52 of the Trade Practices Act or section 56 of the Fair Trading Act, that is, those losses which are the immediate result of the offending conduct and also consequential losses if sufficiently direct. (Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 525; Frith v Gold Coast Mineral Springs Pty Ltd (1983) 65 FLR 213 at 232; Slinger & Anor v Southern White Pty Ltd (2005) 92 SASR 303 at 327, referring to Marks v GIO Australia Holdings (1998) 196 CLR 494 at [38])

14. In the case of misrepresentation, as in an action of deceit:

    …a plaintiff is entitled to recover as damages a sum representing the prejudice or disadvantage he has suffered in consequence of his altering his position under the inducement of the fraudulent misrepresentations made by the defendant. When what he has been induced to do is to make a purchase from the defendant and part with his money to him in payment of the price, then, if the transaction stands and is not disaffirmed or rescinded, what is recoverable is "the difference between the real value of the property, and the sum which the plaintiff was induced to give for it" per Abbott L.C.J. Pearson v. Wheeler (1825) Ry & Mood 303, at p 304 (171 ER 1028, at p 1029). As Sir James Hannen P. in Peek v. Derry (1887) 37 ChD 541, at p 594; cf (1889) 14 App Cas 337 pointed out, the question is how much worse off is the plaintiff than if he had not entered into the transaction. If he had not done so he would have had the purchase money in his pocket. To ascertain his loss you must deduct from the amount he paid the real value of the thing he got.

    (Toteff v Antonas (1952) 87 CLR 647 at 651, 652 and 654)

15. The damage sustained by the plaintiff by the conduct of the defendants, leaving liability to one side, is to be assessed as the difference between the true value of the house at Beeston Way at the time of purchase on account of the presence of widespread salt damp, and the price actually paid for it by the plaintiff, together with any sufficiently direct consequential loss.

16. Alternatively, provided that the cost of restoration is not disproportionate to the difference in value, damages may be assessed by reference to the cost of restoring the house to a condition in which the cause and signs of salt damp are rectified.  The appropriate test is the reasonableness of the plaintiff’s desire to reinstate the property, if at an extra cost to the defendant, rather than for damages to be calculated by reference to the difference between the true value of the property at the time of purchase and the price the plaintiff paid for it. (Simionato v State of SA, unreported, (Full Court, SA Supreme Court) 2 November 2005 [2005] SASC 412; Public Trustee v Hermann (1968) 88 WN (Pt 1) (NSW) 442; McGregor on Damages Sweet & Maxwell Limited, London (2003) 17^th ed at [34-010])

17. The amount of the loss suffered by the plaintiff is supported by the following evidence:

    ·       the reports of Mr Nicholas Bell, a certified practising valuer, dated 10 December 2003[58], 27 May 2005[59] and 2 June 2005[60]

    ·       the evidence given by Mr Bell at trial

    ·       the quotations obtained from Abex Restorations, dated 6 March 2001[61], Ace Waterproofing Pty Ltd dated 15 March 2002[62], Paul J Gardiner, Designer Builder, dated 23 October 2002[63], John Baxter, Salt Damp and General Maintenance, dated 29 September 2003[64], Coromandel Valley Construction Enterprises Pty Ltd, dated 10 June 2005[65], Westside Construction, dated 10 June 2005[66], Grace Removals Group, dated 10 December 2003[67]

    [58] P1, document 26

    [59] P4

    [60] P6

    [61] P1, document 20

    [62] P1, document 22

    [63] P1, document 23

    [64] P1, document 25

    [65] P36,

    [66] P37

    [67] P15

18. The defendants called no evidence on the question of valuation of the property at the time of purchase by the plaintiff, or at all, or alternative quotations for the actual cost of work to rectify the problem of rising damp in the house.

19. In Mr Bell’s opinion, taking into account the costs of repairing the damage due to widespread salt damp and preventing its reoccurrence, at the time of trial the market value of the house at 7 Beeston Way, West Lakes, in its unrepaired condition, was $610,000.  On the assumption that the house had never had a salt damp problem, the market value at the time of trial would have been $725,000.

20. Even if the signs of salt damp in the house were repaired and a new damp-proof course installed, in Mr Bell’s opinion, the value of the house is nevertheless likely to be affected adversely by the history of the presence of salt damp.  Mr Bell allowed a reduction in the value of the house of about 5% for that, producing a market value for the house, after salt damp repair, in the sum of $690,000.

21. At the time of trial, the difference between the true value of the house with widespread salt damp, and the market value of the house, without a history of salt damp, was $115,000.  That is the sum the plaintiff claimed.  It includes a component for capital gain.

22. There is no evidence of the true value of the property at the time of its purchase by the plaintiff. It is therefore not possible to make any precise estimate of the difference between the true value of the house at the time of purchase and the price paid for it by the plaintiff.  The valuations prepared by Mr Bell suggest that the market value of the house is currently diminished by about 16% on account of the salt damp in the property.  Acknowledging the imprecision in drawing an inference on the evidence called, it might nevertheless be inferred that the difference between the true value at the time of purchase and the sum the plaintiff paid was about 16% of $480,000, that is, a sum of about $77,000.

23. The plaintiff also called evidence of the cost of the rectification work, that is, the cost to repair damage to the house caused by salt damp and to prevent its reoccurrence, and the consequential cost of relocating while extensive repairs are carried out.

24. In Mr Jankovic’s opinion, the walls should be treated to prevent the rising damp continuing any further.  Salts should be removed from the wall and then the walls repaired.  The two most common and effective methods to treat rising damp, are undersetting or chemical injection.  Both methods must be carried out by professional qualified licensed companies who can offer long-term guarantees.

25. Mr Jankovic estimated that repairs to the internal walls would cost approximately $27,000 and repairs to external walls, approximately $13,860, subject to quotations being obtained.[68]  Associated with any repair of the effects and cause of dampness, there is likely to be other work required, including removal of fixtures, removal of tiles from the bathroom, removal of carpets, disconnecting electrical services, re-pointing brickwork, replastering, replacing tiles, refitting skirtings and repainting, amongst other things.

    [68] P1, document 24

26. Mr Henry Kordek, from Abex Restorations, provided a quotation for salt damp repair work inside the house.  Mr Kordek’s quotation, dated 6 March 2001, in the sum of $3146, was for work undersetting the base of the walls, removal of affected masonry, installation of new damp-proof course and replacement of walls with new bricks, in the hallway, and the front bedroom.  Mr Kordek gave a twenty-year guarantee against recurrence of salt damp in the area where he replaced the damp-proof course.  An additional sum of $748 was required for the removal of an area of plaster and replastering with waterproof plaster in the shower and walk-in robe.  The quotation did not include painting and re-tiling.

27. A second quotation for the repair of salt damp was provided to the plaintiff by Ace Waterproofing Pty Ltd on the 15 March 2002.  The method proposed by Ace Waterproofing involved the removal of skirtings and the injection of a chemical, Tech-Dry, into the walls immediately above the floor and externally immediately above the dampcourse.  In effect, the treatment provides a new injected liquid dampcourse into the lowest mortar course.  The process requires allowing a minimum of three months for walls to dry out before replastering.  Replastering would include using a salt retarder in the plaster mix.  The cost of the dampcourse injection and the replastering, would be $25,069, including GST.  The salt damp rectification work would be guaranteed for 30 years.  All other work, including re-pointing external walls to cover holes, replacement of tiles, refitting of skirtings after plastering and repainting would be at an extra cost to the plaintiff.

28. Mr Paul J Gardiner, a builder, provided a quotation, dated 23 October 2002, for the building works required after rectification of the salt damp.  The quotation of $73,646, including GST, covered insurance, removal of cupboards and fittings, removal of panelling and skirtings, disconnecting and reconnecting services, removing and storing floor coverings, removing floor and wall tiles, removing wet area fixtures and fittings, re-pointing external core holes, replacing fixtures and fittings, fixing new skirtings, repainting walls and skirtings, retiling laundry, toilet, en-suite, bathroom and kitchen, site clean and removal of builders rubbish, replacement of existing floor coverings and final clean of floor coverings, tiles, surfaces and windows.

29. Mr Jankovic was taken through the quotation item by item in cross-examination.  In Mr Jankovic’s opinion, building prices have risen at least 10 per cent since 2002, when Mr Gardiner’s quotation was obtained.  He was asked if he agreed that the quotation appeared high.  Mr Jankovic said that it did appear high, but in his experience in the building trade, rectification work in existing homes is very dear.  Not all builders were prepared to undertake it.  He could not determine whether the cost of the work as quoted was too high, unless he prepared a full estimate himself.  For example, he was not certain that building indemnity insurance would be required for the sort of work proposed.  His practice would be to obtain at least three quotations.  In his experience in building work worth around $100,000, quotations might vary by up to $20,000.

30. By comparison, Coromandel Valley Construction Enterprises Pty Ltd provided a quotation, dated 10 June 2005, to the plaintiff for building rectification work following salt damp repair, in the sum of $78,916.00, including GST.

31. The quotation, also dated 10 June 2005, provided to the plaintiff by Westside Constructions (SA) Pty Ltd in the sum of $93,500, included the cost of the contract for the work, stripping the interior of the house to make ready for salt damp treatment, making good after completion of salt damp repair, removal of rubbish and cleaning the house prior to handover to the plaintiff.

32. If extensive work is undertaken to repair the salt damp and install a new damp-proof course, in particular if the chemical injection method is used, the plaintiff is likely to find it necessary to move out of the house for a period of about three months while the work is being done.  The plaintiff obtained a quotation from Grace Removals Group, dated 10 December 2003, for removal of her household effects, and their subsequent return to the house. 

33. The cost associated with removal of household effects to storage while work was carried out was a total sum of $4818.00, plus the cost of storage rental and insurance at a weekly rate of $88.44 and handling charges of $369.60.  Rental accommodation was estimated by the plaintiff to cost between $500-$850 per week in the interval in which the plaintiff would be unable to live in the house.  The return of household effects would be at an additional cost. It is not appropriate to speculate on the quantum of costs not provided for in evidence, for example, any increase in removalist costs since 2003 and the cost of the return of household effects by the removalist.

34. The vendors called Mr Buckley to give an opinion regarding an alternative method of repair of salt damp.  Mr Buckley’s opinion was that the repair of salt damp, the reinstatement of an appropriate damp-proof course and building work to make good could be undertaken for a lesser sum than that quoted by the firms approached by the plaintiff.  In his report dated 11 June 2005[69], Mr Buckley proposed a method of salt damp repair which appeared to be less well known and to some extent untried.  He had not been asked to give a quotation for the work himself, or to examine the quotations obtained by the plaintiff in detail.  His observations about them were therefore necessarily general.

    [69] D34

35. The amount by which the costs of rectification might be reduced by the use of an alternative method of salt damp treatment and less expensive labour costs was not quantified by the defendants.

36. Where Mr Buckley’s opinion regarding the method of salt damp rectification work which could be undertaken on the house differs from that proposed by Ace Waterproofing and Abex Restorations, which are in accordance with the opinion of Mr Jankovic, I prefer the evidence given by Mr Jankovic.  In my opinion, the plaintiff should not be required to be satisfied with an untried and doubtful method of remedying the salt damp and its cause as adequate compensation. (Bellgrove v Eldridge [1954] 90 CLR 613 at 620; Lodge Holes Colliery Co v Wednesbury Corporation [1908] 323; McGregor on Damages Sweet & Maxwell, London (2003) 17^th ed at [34 – 007])

37. The cost of restoring the house at Beeston Way to a condition in which signs of salt damp are rectified and installing a damp-proof course to prevent a further problem with rising damp is in the following range:

Salt Damp Rectification
Mr Jankovic (internal walls only)	$27,000
Abex Restorations	$3,894
Ace Waterproofing Pty Ltd	$25,069
Building Works
Paul J Gardiner (quote + 10%)	$81,010
Coromandel Valley Constructions Pty Ltd	$78,916
Westside Constructions (SA) Pty Ltd	$93,500
Removal Costs
Grace Removals Group (Removal + 12 weeks storage + handling)	$6,249	$6,249	$6,249
Accommodation
Rent (12 weeks)	$6,000	$8,000	$10,200
TOTAL	$95,059	$120,328	$136,949

1. The court may award the higher cost of the reinstatement of the property if it is reasonable in the circumstances.  Relevant factors to the question of what is reasonable include the claimant’s desire to reinstate the property, the difference between the diminution in value and the cost of reinstating the property, any unique features of the property, and the availability of comparable properties. (McGregor on Damages Sweet & Maxwell Limited, London (2003) 17^th ed at [34 – 001] – [34 – 018]; Simionato v State of SA, unreported, Full Court, 2 November 2005 [2005] SASC 412 at [92]-[94])

2. The position of the property on the lake at West Lakes is a relevant factor, as is the potential difficulty of finding a comparable property.  The cost of rectification, in my opinion, is not out of proportion to the difference in the true value of the property at the time of purchase and what the plaintiff paid for it, having regard to the comparative valuations placed on the property at the time of trial, and bearing in mind that it is not unreasonable, in my view, to quantify the cost of repair as at the time of trial.

3. In my opinion, it would be reasonable to allow the plaintiff the costs of rectification work and replacement of a damp-proof course, including by the injection method if the plaintiff chose it, together with the costs of the building works required to restore the house to a reasonable appearance, and the associated expenses of relocation while work is undertaken, in an amount around the mid-range of the estimates or quotations in evidence.

1. There is no evidence of the true value of the property at the time of purchase.  Having regard to the fact that the difference in capital value now between the house as it is and the same house without a problem with salt damp is a sum of $115,000, I would allow no more than that sum for rectification work and consequential costs.  In the circumstances, I make no further allowance for the fact that even after rectification work has been carried out, there is likely to be a loss in capital value associated with the property having a history of salt damp, or for interest.

2. I would assess the plaintiff’s damages in the sum of $115,000.

3. The plaintiff has however been unsuccessful in the claim.  The action is dismissed.  I will hear the parties as to orders for costs.