McWhinnie and Boston v Gainbrace Pty Ltd
[2011] QCAT 38
•4 February 2011
| CITATION: | McWhinnie and Boston v Gainbrace Pty Ltd [2011] QCAT 38 |
| PARTIES: | Mr Mark Andrew McWhinnie and Ms Ruth Edwina Boston |
| v | |
| Gainbrace Pty Ltd |
| APPLICATION NUMBER: | BD170-06 |
| MATTER TYPE: | Building matters |
| HEARING DATE: | 13, 14 October & 19 November 2010 |
| HEARD AT: | Brisbane |
| DECISION OF: | Alexander Crawford, Member |
| DELIVERED ON: | 4 February 2011 |
| DELIVERED AT: | Brisbane |
ORDERS MADE: | 1. The Respondent will pay to the Applicant the sum of one hundred and ninety six thousand four hundred and seventy seven dollars and ninety one cents ($196,477.91), by 4:00pm on 28 February 2011. 2. If either of the parties wish to apply for costs, they will file one copy in the registry and deliver to the other party one copy of written submissions as to costs, by 4:00pm on 14 February 2011. 3. The party against whom such costs are sought, will file one copy in the registry and deliver to the other party one copy of written submissions as to costs, by 4:00pm on 28 February 2011. |
| CATCHWORDS : | Bryan v Maloney (1985) 182 CLR 609 Claim for economic loss - subsequent owner - latent defects |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT: | Mr M Cooke of Counsel, instructed by Messrs Redchip Lawyers |
| RESPONDENT: | Mr J Wagner of Counsel, instructed by Messrs Thompson McNichol Lawyers |
REASONS FOR DECISION
Background
Mark Andrew McWhinnie and Ruth Edwina Boston (“the Applicants”) are the registered proprietors of premises situated at 15 Kestrel Crescent, Peregian Beach, Queensland (“the premises”), which comprise a domestic dwelling.
Gainbrace Pty Ltd (“the Respondent”) is a company which was the building contractor which in or about 2000 undertook construction of the premises.
By its Amended Statement of Claim filed 2 June 2010, the Applicants’ claim against the Respondents for the sum of $196,477.91 including $3,400.00 for loss of rent with interest, being damages suffered by the Applicants as a result of the Respondent’s negligence. The damages comprise the expenses associated with the rectification of defective building work and loss of rent due to the defective status of the building.
By its Amended Defence filed 22 June 2010, the Respondent says that the Respondent undertook construction of the premises for the then owners of the premises Kim and Pauline Smith, such work being undertaken pursuant to a Building Services Authority Building Contract for Residential Construction dated 17 January 2000.
The Respondent denies the Applicants’ claim. The Respondent further says that prior to handing the premises over to the previous owners all of the mandatory inspections had been conducted by the Noosa Shire Council with respect to the footings, slab, frame and final work performed by the Respondent pursuant to the contract and had been certified as having been done in accordance with the Building Act 1975 and the associated regulations and standards.
Further the Respondent says that it denies that it owed a duty of care to the Applicants as the duty of care was owed to the previous owners of the premises who engaged the services of the Respondent to construct the premises. Further the Respondent says that the Applicants purchased the property from the previous owners in about March 2003 and were responsible for carrying out their own pre-purchase inspection which they did on or about 26 November 2002, and a report, the Feekings Report, was obtained, which identified a number of problems with the property.
It is relevant to set out below the details of the notes or comments from the Feekings Report:
Notes or Comments
The Building Appears To Be Compliant With The Building Law.
The Building Appears to Be Structurally Sound.Building Maintenance
1. The ensuite toilet requires ventilation, recommend mechanical exhaust fan.
2. Cracked floor tiles to the upper verandah, & to the viewing deck.
3. Moisture present to the bedroom wall rear adjacent the window. Appears to be leaking from the column to the upper verandah, cracks to tile grout in this area.
4. Parapet roof over the verandah to the ensuite, has had leaks, dry at the time of the inspection, evidence of flexible sealant repairs to this area, monitor.
5. Landscaping step to the R/H side walkway, rise is high, maximum should be 190mm.
Recommendations
1. Seek advice for pool fence, the fence adjoining the neighbours property does not seem to be sufficient.
2. Stair to the upper viewing deck at the landing, recommend extra handrail to stop access to the front of the handrails from the landing. Safety.
Please read notes, terms & conditions carefully.
Any queries or questions please contact Garry 0407 946 741.
The Respondent further says that the Applicants have failed to mitigate any alleged damage suffered by the Applicants.
The Respondent seeks that the Applicants’ application be dismissed with costs.
The Law
[10] The Applicants’ claim in this case is for economic loss brought about by latent defects that are structural in nature and need to be rectified that were caused by the Respondent’s negligence. The principle authority is the High Court case of Bryan v Maloney (1985) 182 CLR 609.
[11] The Applicants submit and I accept that the test which ought to be applied to the facts of this Application is the test implemented by Mason CJ, Deane and Gaudron JJ at 617. Their Honours said:
“Under the law of negligence, a professional builder who constructs a house for the then owner of the land owes a prima facie duty to a subsequent owner of the house to exercise reasonable care to avoid the kind of foreseeable damage which Mrs Maloney, sustained in the present case, that is to say the diminution in value of the house when a latent and previously unknown defect in its footing or structure first became manifest”.
[12] Both counsel have provided written submissions in this Application, regarding the law at paragraphs 18 to 29 (Applicants’ counsel) and paragraphs 1 to 3.4 (Respondent’s counsel) which I have considered. In Bryan v Maloney, the majority said at 617 that “a duty of care arises only where there exists a relationship of proximity between the parties with respect to both the relevant class of act or omission and to the relevant kind of damage”. Issues of reliance, vulnerability of a subsequent purchaser, and an assumption of responsibility are inter alia taken into account regarding the duty of care. Whether the premises was a first major investment for the purchaser is also a significant factor according to the respondent’s counsels submissions.
Issues for Determination
[13] I consider the following issues require determination in this Application:
1. What were the latent defects, if any?
2. If so, were the latent defects structural in nature?
3. Were the latent defects caused by the Respondent’s negligence?
4. What is the economic loss alleged by the Applicants?
5. What is the significance of the Feekings Report?
6. The council’s liability, if any.
7. Should any award of damages be reduced by the Applicants’ alleged failure to mitigate such damage?
Chronology
| Date | Description |
| 2000 | The Respondent constructed the premises for Mr and Mrs K Smith. |
| 26 November 2002 | The Feekings Report. |
| March 2003 | The Applicants purchased the property from Mr and Mrs Smith. |
| March 2003 to 17 April 2004 | Mr and Mrs Smith rented the premises from the Applicants. |
| 17 April 2004 | New tenants rented the premises. |
| May 2004 | Complaint was made in relation to the leaks. |
| 18 May 2004 | Temporary rectification work was carried out on the deck and on the chimney by Mr R Kynenburg. |
| 20 July 2004 | Sunshine Coast Geotechnical Report “Any attempt to determine the quality of the original weatherproofing would prove costly and would require removal of the tiles adjacent to the areas of concern without a guarantee of an answer. In any instance where a gap has occurred between the decks and the adjacent walls, they should be filled with an appropriate weather and UV proof mastic sealant.” See: paragraph 25 of Mark McWhinnie’s Affidavit of 20 March 2007. |
| 3 June 2005 | Further inspection occurred. |
| 4 June 2005 | Third tenants - M and J Givvens moved into the premises. |
| 20 June 2005 | A complaint was made to the BSA in relation to the Respondent’s faulty workmanship. |
| 12 August 2005 | BSA Inspection Report saying BSA was not responsible for the problem. |
| 16 August 2005 | Coastline Constructions inspected the property. |
| 21 September 2005 | BSA carried out a further inspection. |
| 26 September 2005 | BSA letter acknowledging issues. |
| 27 October 2005 | Respondent by letter refused to undertake rectification. |
| 5 December 2007 | Joint report from the engineering experts Mr Fox and Mr Wright. |
Evidence
Mr Fritz
[14] The Applicants’ first witness was Mr Cecil Keith Fritz, building consultant, who relied upon his two reports dated 1 December 2005 and 15 December 2005 and also gave oral evidence. He said that he had attended the premises the previous Tuesday and all of the rectification work had been done. He said it was the builder’s responsibility to ensure the waterproofing membrane was laid properly and secondly the builder had the responsibility to make sure that the concrete footing goes onto solid foundations.
[15] He said the council inspector would be concerned that the pylon was the right size but he could not comment on the soundness of the footings.
[16] Regarding the small landing out from the deck he said he was concerned about the movement crack. He took photographs No. 14 and 15 in his first report.
[17] Regarding the cracking around the pier he said that the cracks were unrelated to the tiling but were related to the failure of proper waterproofing. He said that unless the waterproofing is correctly fixed to the pier it does not matter what you do to the tiling. He defined structural defect as “movement in the building” which if never corrected can become unsound. He said that he has been in the construction industry for 60 years.
Mr Wright
[18] The next witness for the Applicant was Mr Peter Geoffrey Wright, consulting engineer. He relied upon six reports dated 16/11/06, 23/04/07, 11/06/07, 23/10/07, 14/11/07 and 11/10/10. He was also involved with Mr Fox in the preparation of the engineers’ joint report dated 05/12/07[1].
[1] Exhibit 7.
[19] He said that he had attended the site at least 3 times and took a bundle of photographs.
[20] When referring to Photograph “A”[2] he said it was definitely structural damage and the area could no longer carry the load. There was a significant sagging of the floor. Photographs “B” and “C” show an interface between the deck and the column. He said there was no membrane around the column or membrane which continued up the column. The usual procedure is the membrane is placed across the floor and up the column.
[2] Exhibit 18.
[21] Mr Wright said that in relation to the landing, the foot steps supporting the column subsided and dragged the timber landing framing away from the main deck and despite repeated attempts to keep the joint sealed, it continued to rupture and water entered in there and damaged the framing below including bedroom 2. He said that the footings were not quite as per the design. There was relatively loose sand at the footings. If soil is not compacted for a footing there is a risk of subsidence. He said it is not usually the role of the council inspector to check and test the footings. He said the damage is structural damage. He said that if the outward movement of the landing pulling the joints apart had continued there was a serious risk of collapse.
[22] When asked to define what he meant by structural damage he said such damage as to lead to a collapse of a building or parts of it.
[23] In relation to Item 2 of the Feekings Report, Mr Wright said that two competent people had looked at it and had relied on sealant. He agreed that the application of silicone to the junction between the tiles and the column was a form of mitigation of damages. He thought an all up cost would be less than $1,000.00. He was referred to a quotation from Suncoast Waterproofing dated 20 May 2004 in the sum of $26,400.00 and asked whether that was a fair quotation to repair the matter because of the Respondent’s negligence. He replied that was excessive but was subject to the structural issues. The rotten joints had to be taken out.
[24] He said that his first visit was on 13 October 2006 and that he did a major investigation on 5 February 2007 which involved pulling pieces apart on the site.
Mr McWhinnie
[25] Mr Mark Andrew McWhinnie gave evidence, from Hong Kong and referred to his three Affidavits sworn 21 December 2006, 20 March 2007 and 10 May 2010. He said he and his wife purchased the property as part of an investment strategy for retirement.
[26] Regarding the Feekings Report his interpretation of the report was that the matters flagged were maintenance issues, some of which had to be monitored.
[27] In response to the Sunshine Coast Geotechnical Report he said that he carried out what was recommended in that report and that there was no water ingress for about a year from June 2004 to June 2005. He had the mastic sealant work done. To the best of his knowledge reports from the tenants were sent to him. Regarding the Feekings Report he said there was enough to suggest possible water issues but to what degree he could or could not say. He said that if he thought there was a serious defect he would not have purchased the property. He said that the broader issues were uncovered by an invasive search of the property. He said that the words “the building appears to be structurally sound” from the Feekings Report gave him confidence in terms of the purchase. The builder never indicated a structural issue to Mr McWhinnie.
Evidence on behalf of the Respondent
Mr Fox
[28] Mr Eric Fox, consulting engineer, gave evidence on behalf of the Respondent and referred to his report dated 13 November 2007, a letter dated 18 April 2008 and the joint report dated 5 December 2007[3]. He said that he was a member of the committee that wrote the BCA Volume 2.
[3] Exhibit 7.
[29] Mr Fox inspected the premises. When asked to define what structural concerns he had he said the damage to the framing at the rear left (lower bedroom) and the fact that the lower landing to the stairs had moved around.
[30] There was also rotting to the framing of the bedroom ceiling and the floor frame above that. He said, in some cases the timbers had lost their integrity caused by prolonged water penetration. When asked what caused this he said that he and Mr Wright did not know. Either the waterproofing was never present or had been present and had been damaged by later trades and screwing through the balustrades. They could not tell so they put down both in their report.
[31] He said in relation to Photograph “B”, Mr Wright poured over this photograph at length. Mr Fox said that he inclined towards the view that the original tiler had put a membrane up the column.
[32] Regarding the Feekings Report he said any water penetration into a house is alarming. This is the case in dry weather as well.
[33] Mr Fox said he first inspected the premises in 2008. He said he had not conducted an invasive investigation himself. He said that if a baby swing was there (and he did not know if this was the case) the collapse of the ceiling could have happened by the increasing load on the ceiling.
Mr Kelk
[34] The final witness for the Respondent was Mr Kelk, a builder for 35 years. When referred to Exhibit 6 in reference to the sum of $183,661.50 he said it would take him a week or so to cost the quotation. He was asked when the water leak was first raised with him and he said it was only when Mr McWhinnie wanted the work done. He said the BSA required him to do certain work in 2005 and it would have cost about $1,200.00. He removed all the silicone from the deck, the roof garden and the main deck near the landing. He found it hard to comment on the pricing for rectification. If Mr McWhinnie had notified him in 2002 when he bought the house he could have done something about it. He thought he was being screwed. When referred to the figure of $196,477.91 he said that he did not think half of this work was done.
[35] When referred to the quotation for $25,000.00 dated 07/05/2008 he thought that was a joke and overpriced. He did not think the floor was demolished. He would do the job for about $5,000.00 at the current prices. When referred to the observatory works at a cost of $12,000.00 he thought two men for one day would be about $1,600.00. When asked about Exhibit number 7 as to what were structural defects if any in terms of the Australian Building Code part 2.1 he said there were no structural defects.
Observations and Findings
[36] Having heard the evidence in this Application I make the following observations and findings regarding the issues set out in paragraph 12 above.
1. What were the latent defects, if any?
[37] I accept the Applicants’ submissions set out in paragraph 28(b) and find that the two areas which resulted in the damage are supported by the evidence as set out in that paragraph.
[38] I note that in relation to the footing the evidence was that Mr Kelk under cross-examination admitted that he did not supervise the pour of the footings and that he left that responsibility in the hands of a private contractor who was employed by him.
[39] Secondly, Mr Wright did extensive tests in relation to the footings and conducted a probe of the soil. The Tribunal accepts his evidence. There is no persuasive contrary evidence given by Mr Cox or by Mr Kelk. Mr Wright was not seriously challenged in relation to the inappropriate compaction of the soil. Mr Fritz also gave evidence from his experience in the building industry which confirmed and supported Mr Wright’s evidence.
[40] The Tribunal accepts the evidence of Mr Wright in relation to the compaction of the footings on the balance of probabilities.
[41] Further, the Tribunal finds that the footings and the rotation of the footings was a latent defect similar to that which was established in Bryan v Maloney (1985) 182 CLR 609.
[42] I find that the waterproofing was installed on the upper deck incorrectly.
[43] As to whether or not there was a waterproofing membrane placed near around and up the column, I prefer and accept the evidence of Mr Wright to the evidence of Mr Fox. Mr Wright appeared to be more certain in his evidence that there was no such membrane and that he could not find any evidence of the same in that area despite an intensive look whereas Mr Fox was more equivocal in his approach and concluded by saying that he inclined towards the view that there was a membrane and that it had been damaged. As mentioned I accept the Applicants’ submissions set out in paragraph 28(b).
[44] Accordingly, I find that the latent defects were the pouring of the footings and the rotation of the footing and secondly the waterproofing being incorrectly installed on the upper deck in that the waterproofing was not rolled up against the column identified in Exhibit 18A, B and C.
2. Were the latent defects structural in nature?
[45] I accept the submission by the Applicant that all witnesses agree that the defects (the footings and the waterproofing) were causing structural damage to the residence and that if left unrectified the building would become unsafe. The Tribunal accepts the evidence by Mr Kelk regarding structural damage set out in the second paragraph of page 11 of the Applicants’ submissions.
3. Were the latent defects caused by the Respondent’s negligence?
[46] I note that in the amended defence that the Respondent admits:
(1) That the Respondent owed a duty to take reasonable care in the construction of domestic dwellings;
(2) At paragraph 6(i) that it owed a duty to install or correctly install waterproofing to the standard to be expected of a reasonably competent domestic builder;
(3) At paragraph 7(i) that it owed a duty to install the footings supporting to the premises in a manner consistent with and to the standard to be expected of a reasonably competent domestic builder;
(4) At paragraph 8(i) that it has a duty to install or correct the installed timber framing and sheeting in a manner consistent with the standard expected of a reasonably competent domestic builder.
[47] I find that the Respondent owed a prima facie duty as set out in paragraph 11 above to the Applicants based on the persuasive evidence of the Applicants’ witnesses as compared with the less persuasive evidence of the Respondent’s witnesses. I find a sufficient relationship existed between the Respondent and the Applicants to give rise to a duty of care. I find the Applicants did place reliance upon the Respondent. For example, in October 2005 the Applicants were expecting the Respondent to rectify the areas that were allowing water penetration but Mr Kelk refused to do so[4]. An inference can be drawn that the Applicants relied upon his work prior to this time as well. I have considered the issue of vulnerability raised by the Respondent but I do not consider it to be such a significant factor in all the circumstances of this case to defeat the imposition of a duty of care. Regarding the assumption of responsibility I find that the Applicants did all they could in the circumstances bearing particularly in mind that the defects were latent. I accept the Applicants’ evidence that the premises was their retirement home.
[4] See paragraph 8 of Mr McWhinnie’s Affidavit 12/11/2007.
[48] In the Tribunal’s view the latent defects were caused by the Respondent’s negligence. Mr Kelk admitted that he did not supervise the pour of the footings. Regarding the footings and the waterproofing I prefer and accept the evidence of the Applicants’ witnesses to the evidence of the Respondent’s witnesses in relation to the Respondent’s negligence causing the latent defects. Mr Wright and Mr Fritz’s evidence I found to be more persuasive that the evidence of Mr Fox. I was impressed by the thoroughness of Mr Wright’s investigations and evidence in particular which I found to be more persuasive than the evidence of Mr Fox. I reject the Respondent’s submissions regarding the tiling. Mr Fritz said the builder is responsible to ensure the waterproofing membrane is laid properly and that tiling is a separate matter.
4. What is the economic loss alleged by the Applicants?
[49] The Tribunal accepts the Applicants’ submissions set out in paragraph 34 and in particular the contents of the Affidavit of Mr Mark McWhinnie dated 10 May 2010 setting out the details of two quotations received and the fact that the quotations refer to the rectification works outlined in the Hughes, Beal and Wright Report dated 23 October 2007. The Tribunal allows all of the variations in the Residential Building Contract dated 20 February 2008 and finds that both the contract and the variations were work that was needed to be undertaken for the purpose of rectifying the defects.
[50] The Tribunal accepts that Mr McWhinnie, Mr Wright and/or Mr Fritz were never seriously challenged in relation to the variations that were sought.
[51] Further at paragraphs 5, 6 and 7 of Mr McWhinnie’s Affidavit dated 10 May 2010 he provides the source documents confirming that invoices were provided and the payments made. None of those invoices were challenged nor was any reasonable evidence given as to alternative costing.
[52] The Tribunal prefers and accepts the evidence of the Applicants’ witnesses in relation to these matters to the evidence of the Respondent’s witnesses, particularly on the basis that there was no convincing evidence given as to alternative costing.
5. What is the significance of the Feekings Report?
[53] The notes or comments set out above in paragraph 7 from the Feekings Report commence with the words “The building appears to be compliant with the Building Law. The building appears to be structurally sound.” This evidence, in the Tribunal’s view supports the view that the defects were latent. Mr McWhinnie gave evidence that if he thought there was a serious defect he would not have purchased the property. He further said the words “the building appears to be structurally sound” gave him confidence in terms of the purchase and that Mr Kelk never indicated a structural issue to Mr McWhinnie.
[54] The Tribunal accepts the evidence of Mr Wright that he inspected the premises on a number of occasions and it took him some time to determine the actual cause of the problems after invasive tests were conducted.
[55] The Tribunal accepts the Applicants’ evidence that Mr McWhinnie saw the Feekings Report as concerning maintenance matters some of which had to be monitored.
[56] The final sentence contained in paragraph 5.12 of the Respondent’s submissions is incorrect. Both areas designated RR, being the verandah floor as well as the bedroom in which the moisture was found, are listed under the heading “Building Maintenance” on page 11 of the Feekings Report.
[57] On balance I prefer and accept the Applicants’ submissions to the submissions of the Respondent regarding the significance of the Feekings Report for the reasons set out above.
The Councils Liability, if any
[58] The Respondent at paragraph 2.11 of its submissions referring to Woolcock Street Investments Pty Ltd v CTD Pty Ltd [2004] ACA16 at 32 says that the council has some role to play in this matter.
[59] I prefer and accept the Applicants’ submissions in relation to this matter set out in paragraphs 31, 32 and 33 rather than the Respondent’s submissions. The Tribunal finds that any claim against the council would be inappropriate and any contributing liability the Respondent may seek to shoot home to them would be unfounded. This finding is also based on the Tribunal’s view of the evidence; for example, Mr Fritz’s evidence at paragraph 14 above and Mr Wright’s evidence at paragraph 18 above.
Should any award of damages be reduced by the Applicants’ alleged failure to mitigate such damage?
[60] The Respondent alleges that the Applicants have failed to mitigate damage and secondly that they have acted unreasonably in mitigating such damage. The Respondent says that Mr Wright agreed in cross-examination that the Applicants had failed to mitigate and that a lot of subsequent damage could have been averted, for instance, by having acted on the Suncoast quotation (Exhibit 23).
[61] On the other hand, the Applicants submit that if the fault was not located, because it was latent, the Applicants were not obliged to undertake any rectification work. Further, the Applicants submit that in fact professionals inspected the premises namely the real estate agent, the tenant and the pest inspection report.
[62] The Applicants accept that after the end of 2005 the pressure in relation to assessing the damages had increased but say rectification was achieved within two years.
[63] The difficulty the Tribunal finds itself in relation to this issue is that it has been provided with no real evidence for the Tribunal to make a reliable assessment in relation to the mitigation of loss. There is no quantity surveyor’s report, for example, which could be used to support the submission being made by the Respondent quantifying the difference in the costings from one year to the next.
[64] Without such evidence, the Tribunal finds it very difficult to make a reliable assessment in relation to mitigation of loss. Certainly Mr Kelk made some comments in relation to the works eventually conducted by Baxter Constructions as regards to what he considered to be inadequate particularisation in respect of items such as demolition work and observatory work and made some comments regarding the Scott Schedule.
[65] However, on balance, the Tribunal finds that there is insufficient evidence upon which to make a reduction in the damages award due to the Applicants’ alleged failure to mitigate such damage.
Interest
[66] The circumstances of this Application do not enliven the Tribunal’s jurisdiction to award interest on the amounts claimed.
Costs
[67] I make no order as to costs and call for submissions as to costs if the parties wish to do so.
Orders
[68] Accordingly, the orders are as follows:
The Respondent will pay to the Applicants the sum of one hundred and ninety six thousand four hundred and seventy seven dollars and ninety one cents ($196,477.91), by:
4:00pm on 28 February 2011.
If either of the parties wish to apply for costs, they will file one copy in the registry and deliver to the other party one copy of written submissions as to costs, by:
4:00pm on 14 February 2011.
The party against whom such costs are sought, will file one copy in the registry and deliver to the other party one copy of written submissions as to costs, by:
4:00pm on 28 February 2011.
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