Pisano v Dandris - [2014] NSWSC 1070

Supreme Court

New South Wales

Medium Neutral Citation: Bruno Pisano -v- Georgia Dandris [2014] NSWSC 1070
Hearing dates: 23, 24, 25, 26, 30 June & 1, 2, 3, 4 July 2014
Decision date: 08 August 2014
Jurisdiction: Equity Division - Technology and Construction List
Before: Hammerschlag J
Decision:
Verdict for the plaintiffs against the first and second defendants

Catchwords:
BUILDING AND CONSTRUCTION - Home Building Act 1989 (NSW) ss 18B and 18E - defective work - claim for breach of statutory warranties by owner-builder - whether work performed in a proper and workmanlike manner - whether materials used in construction were suitable for the purpose for which they were used - whether dwelling reasonably fit for occupation as a dwelling - assessment of damages for breach of statutory warranties

TRADE PRACTICES - Competition and Consumer Act 2010 (Cth) - Australian Consumer Law s 18 - misleading or deceptive conduct - whether conduct consisting of the making of misrepresentations as to the qualities of a domestic residence sold to the plaintiffs was in trade or commerce - whether the conduct viewed in the light of disclaimers in advertising material, acknowledgments in the contract of sale and opportunities given to the purchasers to inspect the residence was misleading or deceptive or broke the chain of causation between the conduct complained of and the damages suffered

DAMAGES - quantification of damages for misleading and deceptive conduct consisting of misrepresentations inducing the plaintiffs to purchase a defective dwelling TORTS - negligence - pure economic loss - existence of duty of care - whether owner-builder's husband owed purchasers a duty of care to avoid causing pure economic loss by ensuring work not defectively done
TORTS - negligence - pure economic loss - existence of duty of care - whether owner-builderâ€™s husband owed purchasers a duty of care to avoid causing pure economic loss by ensuring work not defectively done
Legislation Cited: Home Building Act 1989 (NSW)
Competition and Consumer Act 2010 (Cth)
Civil Liability Act 2005 (NSW)
Cases Cited: Bellgrove v Eldridge (1954) 90 CLR 613
Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272
Hadley v Baxendale (1854) 9 Exch 341
Fink v Fink (1946) 74 CLR 127
Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594
Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592
Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304
Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514
I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109
Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1
Henville v Walker (2001) 206 CLR 459
Actic Pty Ltd v Cabool [2004] NSWSC 302
Butcher v Harkins [2001] NSWSC 15
Argy v Blunts & Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112
Franich v Swannell (1993) 10 WAR 459
O'Brien v Smolonogov (1983) 53 ALR 107
Nelson v Bellamy [2000] NSWSC 182
ACCC v Gary Peer & Associates Pty Ltd (2005) 142 FCR 506
Kelly v Wilson [2012] WASC 146
Rasch Nominees Pty Ltd v Bartholomaeus [2013] SASCFC 23
Houghton v Arms (2006) 225 CLR 553
Baxall Securities Ltd v Sheard Walshaw Partnership [2002] EWCA Civ 9
Caltex Refineries (Qld) Pty Ltd v Stavar (2009) 75 NSWLR 649
Perre v Apand (1999) 198 CLR 180 at [118]
The Owners - Strata Plan No 61288 v Brookfield Australia Investments Ltd [2013] NSWCA 317).
Texts Cited: Rawlinsons Australian Construction Handbook 2012 (30th ed, Rawlinsons Publishing)
Category: Principal judgment
Parties: Bruno Pisano - First Plaintiff
Sia Pisano - Second Plaintiff
Georgia Dandris - First Defendant
Patrick Francis Williams - Second Defendant
Angus Levitt Pty Limited - Third Defendant
Representation: D.S. Weinberger - Plaintiffs
J.A. Jobson - First Defendant
S. Jacobs - Second Defendant
Gadens Lawyers - Plaintiffs
Zelden Solicitors - First Defendant
Alexanders Lawyers - Second Defendant

File Number(s): 2012/283119

Judgment

INTRODUCTION

HIS HONOUR: On 25 January 2012, Mr Bruno Pisano, the first plaintiff ("Pisano"), and his wife, Mrs Sia Pisano ("Sia Pisano") (together, "the Pisanos"), completed the purchase of a house at 53 Blake St in the upmarket eastern suburb of Dover Heights from the first defendant, Georgia Williams, also known as Georgia Dandris ("Dandris"), and her husband, Patrick Francis Williams ("Williams"). The house had been substantially renovated. Dandris was the owner-builder within the meaning of that term in the Home Building Act 1989 (NSW) ("the Act").

The house was, and is, profoundly defective in its construction.

The sale was preceded by false information given by Dandris and Williams to their real estate agent and passed on, with their authority, to the Pisanos. This information played a significant part in the Pisanos' decision to buy.

The Pisanos sue Dandris and Williams for damages equivalent to the reasonable cost of remedying the defects.

For the reasons which follow, the Pisanos are entitled to succeed.

FACTUAL BACKGROUND

The renovations

Dandris and Williams originally bought the house, then a modest three-bedroom residence, in about December 2003.

Dandris says that when they bought it was her intention to live in the house as their family home and to renovate it in the future for that purpose. She says that it was not until 2008 that serious consideration was given to beginning renovations.

Williams is the managing director of a medical device company. He says that he and Dandris wanted to be consistent with their neighbours and friends in the long term, that he was often required to entertain clinicians including specialist doctors and other professionals, and wanted to have an "entertainer's home" so as to accommodate such guests.

Williams says that he had heavy business travel commitments and the renovations were a project for his wife. He says his visits to the property throughout the renovation were rare and brief, occurring only on the weekends when he was not travelling or working.

Dandris obtained an Owner-Builder Permit from the Department of Fair Trading on 25 February 2010.

The house was extensively renovated into a double-storey five-bedroom house. It now has a tiled rooftop terrace with views of Sydney Harbour. The rooftop terrace has a glass balustrade on three sides. There is a swimming pool with a waterfall feature. There are Murano glass bi-fold and sliding doors leading to a patio in the pool area and from first-floor bedrooms to a balcony.

The house features a floating staircase from the ground floor to the first floor. The stair treads are timber and extend out at the wall individually. From the third tread up they are attached on the outer edge to a glass balustrade.

The rooftop terrace is accessed via a tiled staircase. This staircase has a winder close to the outlet on which there has been constructed (as it happens, unlawfully) a glass doorway which protrudes above the level of the terrace. Glass panelling has been affixed to the concrete structure of the building around the doorway to make over the exit what might be described as a "cockpit".

Dandris employed an architect, Sue Whelan, to prepare development application documents for the Waverley Council, including the necessary plans. Dandris retained a consulting structural and hydraulic engineer, Mr Prabu Yoganathan, to prepare structural and stormwater design. Mr Yoganathan's structural drawing identifies the client as "G & P Williams". The structural drawing required certain walls to be demolished and reconstructed. On 6 August 2010, following a site inspection, he noted in a memorandum that some of the internal walls were underpinned and preserved, not renewed as shown in his structural drawings, and that bricks in those walls were loose. He expressed the opinion that parts of those walls needed to be reconstructed "as instructed at the site". This did not occur. Mr Yoganathan's retainer was terminated. Dandris gave unconvincing evidence that she did not know whether the relevant walls were demolished and reconstructed.

The general building work was done by a builder named Dirk Schulze. On 13 May 2010, Mr Schulze gave a quote, addressed to both Dandris and Williams, for a basic price of $511,500 plus an allowance on PC items of $341,700, plus GST of $34,170, totalling $887,370. However, in the quote, Mr Schulze said that "The most efficient way of achieving a lower cost is do and charge an hourly rate Builder - $90.00 Labourer - Carpenter $40.00 plus GST". Dandris elected for the lower cost option.

The glass, including the bi-fold and sliding doors, was supplied and installed by Murano Walls Pty Ltd ("Murano") pursuant to a quote, dated 9 November 2010, addressed to both Dandris and Williams. Murano has a standard requirement that door installations have a grated drain at the external threshold of the door assembly to prevent water ingress. As a cost-cutting measure, Dandris decided to omit the grated drains.

The building work was executed without the benefit of detailed architectural plans or architectural supervision.

The Waverley Council issued an Interim Occupation Certificate on 2 November 2011 and a Final Occupation Certificate on 14 November 2011. On 15 November 2011, NSW Self-Insurance Corporation issued to Dandris, as owner-builder, a Certificate of Home Warranty Insurance complying with s 95 of the Act. She says that as owner-builder she arranged for all works to be carried out and she contracted with all tradespersons.

Both Dandris and Williams gave evidence that they intended the house to be their family home long term. They moved into the house some time after 2 November 2011. Due to the unexpectedly high cost of the renovations, they decided to sell it. There was hired furniture in the house of the type commonly put in place for the purposes of selling.

The sale

Dandris and Williams retained the third defendant, a real estate agent ("the agent") to sell. The agent advertised the sale on a property sales website known as "Domain", which Pisano accessed on 6 December 2011 ("the web advertisement").

On 19 December 2011 the Pisanos inspected the house in the presence of a Mr Sloane from the agent. During the inspection, Pisano was handed an advertising brochure ("the brochure") for the sale. Both it and the web advertisement contain the following words:

Dover Heights 53 Blake Street

BRAND NEW CUTTING EDGE CONTEMPORARY FAMILY RESIDENCE

Offering every conceivable luxury for your absolute comfort and security, this stunning suburban oasis showcases state of the art technologies with fixtures and finishes of the highest standard. Offering 400sqm of seamlessly integrated indoor/outdoor living, no detail has been spared with this meticulously designed and built home.

Featuring:● Unique rooftop viewing deck capturing city & harbour views

● Master built full double brick and concrete slab construction

● Frameless glass embraced interiors with Tasmanian Vic Ash floating staircase

● Calcutta marble kitchen with European appliances, induction cook top

● European appointed marble bathrooms, ensuite with double shower

● Relaxing pool, built in external BBQ, Vintech fridge and

shower

● Private, tropical landscaped rear garden enjoying warm

afternoon sun

● Double remote garage with dual internal residence & kitchen pantry access plus 2 carspaces

The reverse of the brochure has a floor plan and, in somewhat small print, the following disclaimer:

DISCLAIMER CLAUSE: The information contained in this brochure has been furnished to us by the vendors. The plan is provided as a guide only. While we trust it to be correct, we cannot guarantee its accuracy. Sizes and areas indicated are approximate only. We have not verified whether or not that information is accurate and do not have any belief one way or another in its accuracy. We do not accept any responsibility to any person for its accuracy and do no more than pass it on. All interested parties should make and rely on their own enquiries in order to determine whether or not this information is in fact accurate.

The web advertisement has the same disclaimer.

Pisano says that Sloane told him that the house was built above and beyond the standard home, that the builder was a real professional and was very meticulous as one could see, that the house had been built for the builder to live in with the builder's family, that it had been master-built, that they had listed it at $3.8M but had come back to $3.6M hoping to sell before Christmas and that he thought they could not afford to hold it and were a bit emotional about parting with it.

At some time during this period, Dandris handed Pisano a business card describing her as an "Interior Designer" (she maintained that her ambitions in that direction were never realised).

The Pisanos decided to make an offer of $3.3M for the house. Later that evening, Pisano sent an email setting out the essential terms of their offer. It included a 5% deposit and a cooling off period until 10 January 2012 to enable bank valuation and searches to occur, having regard to holiday season closures. The agent told Pisano that the vendors needed more time to think about the offer.

The following day, Sloane sent Pisano an email advising that Dandris and Williams would accept $3.4M. Later that day, the Pisanos offered, and Dandris and Williams accepted, a sale price of $3.35M.

Contracts were exchanged on 22 December 2011. A solicitor, Mr Antoun of Uther Webster & Evans, acted for the Pisanos on the sale. The contract contained special conditions including a cooling off period until 10 January 2012. Special Condition 1 is headed "PURCHASER'S ACKNOWLEDGMENT" and is in the following terms:

The purchaser acknowledges that he/she is buying the property relying on his/her own inspections, knowledge and enquiries and not relying on any representation, warranty, statement or promise other than as set out in writing in this contract. This clause shall not merge on completion.

Attached to the contract was a Certificate of Home Warranty Insurance which referred to a defects inspection report undertaken by DS Building Consultants ("the DS Report"). The DS Report, dated 8 November 2011, was also attached. It records, amongst others, that "it was only a visual inspection". Under the heading "Scope of Inspection" it contains the following:

The purpose of this inspection is to identify any areas where poor workmanship, incomplete works or rectification works are required and have been identified within this report.

A further and concise report should be requested to investigate in greater detail prior to purchase or committing himself/herself to further expenditure. It is not intended to provide a report in absolute detail. It is strongly recommended that a more comprehensive service be sought on areas/queries in this report.

It contains, amongst others, the following disclaimer:

No liability shall be accepted on account of failure of the Report to notify any problems in area(s) or section(s) of the property physically inaccessible for inspection, or to which access for the inspection is denied to the Inspector (including but not limited to any area(s) or section(s) so specified by the Report).

This report is NOT an all encompassing report dealing with the building from every aspect. It is a reasonable attempt to identify any obvious or significant defects apparent at the time of the inspection. Whether or not a defect is considered significant or not, depends, to a large extent, upon the age and type of the building inspected. This report is not a Certificate of Compliance with the requirements of any Act, Regulation, Ordinance or By-Law. It is not a structural report. Should you require any advice of a structural nature you should contact a structural engineer.

It identifies only the following items as requiring attention:

The ground floor dining room recessed door track was found to have water ponding.

It is recommended that the track be sealed water tight and a grated drain be installed to the external threshold of the door assembly.

It records that the inspection was carried out by "Elias John Sokias, B.Sc Dip. Arch. (BDA) NSW, Member of the MBA, Accredited Building Consultant" and gives his telephone number. Attachment A to the report contains relevantly, the following:

SUMMARY OF REPAIRSThe ground floor dining room recessed door track was found to have water ponding. This is due to the external tiled landing blocking the frame drain holes. Water is seeping through the recessed door frame causing moisture penetration to the side return skirting board.

It is recommended that the track be sealed water tight and a grated drain be installed to the external threshold of the door assembly.

INCOMPLETE WORKS

All other works were found to be completed in a good workmanship like manner and finished in good order.

The sale of the house was completed on 25 January 2012 and the Pisanos moved in with their infant daughter.

Defects emerge

Immediately, problems began to emerge:

the air conditioning did not operate properly;
the temperature of the hot water system was not controlled;
the garage door malfunctioned;
blinds dislodged from brackets;
the pool waterfall feature did not work;
linen cupboard doors chaffed on the carpets;
poolside tiles were excessively slippery;
stormwater drain covers were not fixed in;
the front garden path light did not work;
glass doors would not open and close properly;
locks on Murano doors unlocked themselves;
the pantry sliding door fell off;
the front door was difficult to open and close because of warping;
fumes emanated from the fireplace and a crack appeared in the mantle above the fireplace whilst it was in operation;
the bathroom and laundry doors leaked; and
mould appeared in various places.

The Pisanos complained to Dandris. She took some steps to rectify some of the problems. For example, she unsuccessfully applied anti-slip agent to the poolside tiles and had a new hot water system installed. When she took the old one away she told Pisano that she would use it on her next project.

But far worse was still to come.

On 16 April 2012, following rainy weather, there was significant water penetration into the house via the doors in the master bedroom and the upstairs family room. The stairwell to the rooftop terrace, a linen cupboard, the laundry, garage, and upstairs bathrooms were, as Pisano describes it, inundated with water. Carpets had to be pulled up.

Pisano called Dandris, who arrived carrying a bundle of bath towels. According to him, Dandris said she did not know how the water was coming in from the front, that there had previously been leaks in the back bedrooms but her and Williams had thought they had been fixed.

By early May 2012, water was penetrating through the cavity walls.

On 29 May 2012, the Pisanos engaged Mr Peter Ellis of Tyrell's Property Inspections to provide a preliminary report on the defects and to identify any other problems.

Pisano gave unchallenged evidence that on 11 June 2012 there was, as he describes it, a water flooding event with the following consequences: the carpets were drenched and needed to be pulled up; water went through the linen cupboard and onto the electrical components and power points; the power tripped and the alarm stopped working; he removed a panel from the top and one from the side of the linen cupboard to reveal water leaking from the roof down to the linen cupboard; water penetrated the ceiling to the kitchen downstairs; water came through the garage side entry door, laundry door, downstairs bathroom door, dining room doors and the upstairs atrium window; rain penetrated the pool pumps and mud flowed through the water outlets into the pool.

Pisano gave evidence that 19 out of the 23 windows in the house leak.

Pisano gave unchallenged evidence that on 11 June 2012 Dandris told him that she and Williams had agreed to take the property back. However, the following day she said they had changed their minds but would ensure that tradespeople fixed the problems. He says he told her he needed a plan detailing how they were going to fix the house and a proposed schedule, which she promised to, but never did give.

Sia Pisano gave unchallenged evidence that every time it rains, and regularly in the middle of the night during bad storms, Pisano and her are forced to get up and place buckets and towels under the leaking areas and pull up carpets, and that Pisano has to venture outside into the stormy weather to empty the pool in fear that it will overflow and flood the entire ground floor. The Pisanos have not been able to go on holidays or leave the house unattended for fear of flooding. They have been without heating or cooling for the entire time they have resided in the house as the air conditioning system does not work properly and the doors and windows are not adequately sealed.

Sia Pisano gave unchallenged evidence that they require a four-bedroom house as alternative accommodation. She gave evidence of rentals for furnished and unfurnished homes in the area.

THE PROCEEDINGS GENERALLY

On 11 September 2012, the Pisanos sued Dandris and Williams in the District Court of New South Wales. The proceedings were transferred to this Court on 18 October 2013. An amended Summons and a Technology and Construction List Statement were filed on 11 November 2013.

On 11 March 2014, I attended an inspection of the house in the presence of the parties' legal representatives and experts. I observed clear evidence of water ingress.

The trial commenced on Monday 23 June 2014 and took nine hearing days. The Pisanos were represented by Mr D.S. Weinberger of counsel, Dandris was represented by Mr J.A. Jobson of counsel and Williams by Mr S. Jacobs of counsel.

I attended a further inspection of the house on the second last day of the trial.

The trial should have been of much shorter duration. Despite numerous irrefutable instances of defective construction and workmanship, Dandris and Williams did not, until a late stage in the trial, make concessions which clearly they should have made earlier. At the start of the trial, they made only one concession, namely that the air conditioning is defective. The quantum in respect of this item is agreed at $4,500.

The Court's task was also not made any easier by the fact that the Pisanos produced unworkable Scott Schedules and the parties operated on different item numbering systems, the reconciliation of which became the sole burden of the Court.

The proceedings have three distinct but overlapping components. First, the Pisanos claim damages from Dandris for breach of statutory warranties under the Act. Second, they claim from both Dandris and Williams damages suffered by conduct engaged in by Dandris and Williams in trade or commerce which conduct was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the Australian Consumer Law. Third, they sue Williams in negligence.

Until a late stage in the trial, the Pisanos motivated a claim that Williams was, together with Dandris, an owner-builder and was bound by the statutory warranties. This was correctly abandoned. A claim for misrepresentation at law was also correctly abandoned. So too was a claim that a requisition on title had been misleadingly answered. For their part, Dandris and Williams correctly abandoned a contention that the Pisanos had not mitigated their loss because they had not been willing to allow Dandris back in to carry out repairs.

The agent was also sued but is now insolvent and without insurance. At the commencement of the trial the claim against it was dismissed with no order as to costs.

The Pisanos gave evidence and were cross-examined at some length. Although very little, if any, of their evidence was challenged, submissions were made that they should not be believed, amongst others, because on Pisano's business website there is a statement that Sia Pisano has a university qualification which she does not have. She unhesitatingly accepted that the information was incorrect. I do not consider that this issue has any bearing on the substance of the Pisanos' evidence in the case.

The Pisanos were truthful witnesses and I accept their evidence.

In contrast, neither Dandris nor Williams were credible witnesses. Their evidence was coloured by their obvious desire to put distance between each other so as to burden Dandris with liability (if any) and correspondingly protect Williams. This was readily apparent in the manner in which the proceedings were conducted; for example, counsel for Dandris foreshadowed a submission (against her own interest) that she and not Williams was the owner-builder and Dandris did not put anything in contradiction to a submission by Williams that she should bear a greater proportion of any liability as a concurrent wrongdoer than should he.

I do not accept their evidence that at the time that they embarked upon the renovation it was on the footing that they intended that the renovated house would be their permanent home. I am satisfied that from the time when they embarked on the renovation, and probably from much earlier, and until they sold the house, they regarded it as an investment property and renovated it, as a project supervised by Dandris, in order to sell it.

THE DEFECTS CLAIM

The relevant statutory enactments

Section 18B and s 18C of the Act provide, relevantly, as follows:

18B Warranties as to residential building work

The following warranties by the holder of a contractor licence, or a person required to hold a contractor licence before entering into a contract, are implied in every contract to do residential building work:

(a) a warranty that the work will be performed in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract,

(b) a warranty that all materials supplied by the holder or person will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract, those materials will be new,

(c) a warranty that the work will be done in accordance with, and will comply with, this or any other law,...

(e) a warranty that, if the work consists of the construction of a dwelling, the making of alterations or additions to a dwelling or the repairing, renovation, decoration or protective treatment of a dwelling, the work will result, to the extent of the work conducted, in a dwelling that is reasonably fit for occupation as a dwelling,

18C Warranties as to work by others

(1) A person who is the immediate successor in title to an owner-builder, a holder of a contractor licence, a former holder or a developer who has done residential building work on land is entitled to the benefit of the statutory warranties as if the owner-builder, holder, former holder or developer were required to hold a contractor licence and had done the work under a contract with that successor in title to do the work.

(2) For the purposes of this section, residential building work done on behalf of a developer is taken to have been done by the developer.

The claim

Dandris does not contest that she is bound by the warranties and that the Pisanos, as successors to her as owner-builder, have the benefit of them.

The Pisanos assert that Dandris breached the warranties in that the residential building work was not performed in a proper and workmanlike manner, that materials supplied were not good and suitable for the purpose for which they were used, and that she failed to carry out the work so as to result in a dwelling reasonably fit for occupation as a dwelling.

Where a builder breaches a building contract with an owner by departing from the specifications, the measure of damage is the cost, in excess of any amount of the contract price unpaid, of reasonable and necessary work to make it conform to the contract plus consequential losses suffered by reason of the breach: Bellgrove v Eldridge (1954) 90 CLR 613 at 618.

The rule is subject to the qualification that not only must the work undertaken be necessary to produce conformity but it must be a reasonable course to adopt. What remedial work is both necessary and reasonable in any particular case is a question of fact: Bellgrove v Eldridge at 619; Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272 at 288.

Consequential losses are claimable if they satisfy what is commonly referred to as the rule in Hadley v Baxendale (1854) 9 Exch 341. The rule has two limbs. The first limb is that loss is recoverable if it may fairly and reasonably be considered as arising naturally, that is according to the usual course of things, from the breach. The second limb is that loss is recoverable if it may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it.

A plaintiff bears the onus of proving its loss. The fact that quantification may be a difficult exercise does not relieve the Court of the obligation to do its best: Fink v Fink (1946) 74 CLR 127.

There is no issue that the quantum of damages for breach of the warranties is the amount which is reasonable and necessary to:

(a) remedy work which has not been performed in a proper and workmanlike manner;

(b) provide materials which are suitable for the purpose for which they are to be used; and

(b) expend so as to result in a dwelling that is reasonably fit for occupation as a dwelling.

The experts

The principal expert witness called on behalf of the Pisanos was Mr Peter Ellis, who has forty years' experience in the building industry and has undertaken a wide variety of building consultancy activities including detailed investigations into water penetration.

He gave evidence as to the existence of defects and also as to the reasonable and necessary rectification works required.

Mr Ellis was an impressive and restrained witness. He was entirely untouched in cross-examination.

The Pisanos called a quantity surveyor, Mr Ian Tucker, to cost the rectification works opined upon by Mr Ellis. He too was an impressive witness. He has extensive practical experience in costing work of this type and gave evidence as to the market prices that work of this type would command. He calculated quantities using his measurements from the architectural drawings available. He applied his experience from current and past projects he has worked on as well as published cost and price records including Rawlinsons Australian Construction Handbook 2012 (30th ed, Rawlinsons Publishing) to the extent that he considered them reasonable for the type of work in question. His calculations included a margin of 12% for preliminaries, a 20% contractor's margin and a construction contingency of 5% (totalling 37%). The preliminaries allowance includes the cost of supervision, site establishment, contract insurances, home owner's warranty insurance and sundry plant and equipment required for the project. The contractor's margin is the percentage Mr Tucker considers appropriate to be allowed as the main contractor's profit margin on rectification projects such as this. The construction contingency is to allow for the final development of the design rectification work and unforeseen costs during construction that would not have been apparent during tender.

The Pisanos called a fenestration industry expert, Mr Craig Brennan, who gave evidence that the Murano glass installations did not meet Australian Standards.

The Pisanos read a statement of an expert plumber, Mr Hamish McGill, who specialises in providing performance, compliance, and witness reports to facilitate resolution of defects attributable to plumbing system design and installation. He was not cross-examined.

The Pisanos also relied on a specialist report of Mr Martin Daniel who carried out slip resistance tests and determined that the tiles around the swimming pool do not meet the Australian Standards for slip resistance. Mr Daniel was not cross-examined.

In response to both Mr Ellis and Mr Tucker, Dandris called Mr Edward Brincat. He provided four reports. Mr Brincat has engineering qualifications and lengthy experience across the building and construction industry. He is no longer involved in any hands-on activities in the building industry but now operates as a consultant, predominantly providing expert advice to lawyers in building and construction litigation, giving seminars, preparing applications under the Building and Construction Industry Security of Payment Act 1999 (NSW) and providing adjudication, mediation and expert determination services.

In contrast to Mr Ellis and Mr Tucker, Mr Brincat was an entirely unconvincing witness who adopted the cause of Dandris and Williams as if it were his own. This caused him to give and adhere to opinions which were unsustainable, some manifestly so. As the matter proceeded, a chasm between his evidence and objectivity grew ever wider. For example, Dandris and Williams concede that the nosings of the stairs from the ground floor to the first floor are deflecting and thus the stairs have inconsistent risers. Mr Brincat expressed the view, which may euphemistically be described as counterintuitive, that this is not a defect because in the middle of the stairs there is consistency and people can or should walk down the middle of the staircase. In answer to a question whether, if he was the builder, that is how he would have constructed the staircase, he said "I could have, yes, because the stair down the centre complies".

Another example concerns the source of an obvious leak into the first-floor bathroom. The western side of the rooftop terrace is walled to about low chest height. The roof to the west of that is a metal deck roof. Where the wall meets the metal deck roof there are flashings. The metal deck roof incorporates a box gutter system established to drain to two side outlets formed by a metal channel at the respective ends of the box gutter. The joints between the box gutter and the outlet channels have not been properly sealed and are defective.

Mr Ellis conducted a number of water tests. He played water in the area of the metal deck roof and flashings at the eastern end. After fifteen minutes he observed water penetrate the concrete slab within the ceiling void about the bathroom. Separate water testing was undertaken to the dividing wall between the rooftop terrace stairs and the metal deck roof. After fifteen minutes, water penetrated through the wall into the ceiling of the bathroom.

Mr Brincat, on the other hand, undertook no water testing but confidently opined that the two areas objectively determined by Mr Ellis to be the source of the leak were not the source of the leak. Rather, he opined, the source of the leak into the bathroom was at the point in the area of the cockpit where, on the eastern side of it, glass is directly fixed to concrete.

He gave evidence, based on photographs, that a rear wall of the house is not out of alignment, which it undoubtedly is, and later he had so to concede. He took the untenable position that there was no defect because the wall, albeit out of alignment, is perfectly well constructed.

In at least one of his reports he said "...I bear in mind that I have an overriding duty to assist the Court on matters relevant to my experience". I reached the conclusion that in the giving of his evidence he did not bear this in mind (or if he did, he chose to ignore it).

Other unsatisfactory aspects of Mr Brincat's evidence are described below. In general, I do not consider that reliance can safely be placed on his evidence.

With a few exceptions, which appear below, where Mr Ellis and Mr Brincat and Mr Tucker and Mr Brincat conflict, I prefer and accept Mr Ellis and Mr Tucker respectively.

The Pisanos' claims involve multiple defects, some very substantial and some relatively minor.

Mr Brincat does not agree that the 12% margin for preliminaries for this particular project is justified. He says that for residential projects the norm is a builder's margin of 30% which includes preliminaries, profit and overheads. On this basis he and Mr Tucker are 2% apart.

As to the construction contingency of 5%, Mr Brincat takes the view, in relation to many defects, that the scope of works is clearly defined to the extent that no construction contingency is warranted. I agree with this in relation to a number of defects. But others are so significant, and the work involved so extensive, that I consider that a contingency is appropriately to be provided. Where I consider that the contingency applied by Mr Tucker should be disallowed, I have described the amount otherwise allowed for the defect as being "after the contingency adjustment" and have reduced the amount allowed accordingly.

Dandris called a plumbing and hydraulics consultant, Mr Rhys Edwards, who agreed with much of Mr McGill's assessment. Mr Edwards provided costings of work he opined to be necessary. His expertise was challenged in this respect. His response was, and I accept, that he has had lengthy practical experience of costing. However, he agreed that in questions of costing he would defer to an expert quantity surveyor.

The defects

I find that the defects described below, which are the consequence of work not being performed in a proper and workmanlike manner and materials supplied not being good and suitable for the purpose for which they have been used, have been established. I find that the reasonable and necessary cost of remedying them is as set out below. The figures are exclusive of GST and have been rounded down to eliminate cents.

I find that by reason of the defects which cause significant water ingress, the house is presently not reasonably fit for occupation as a dwelling.

I note that where Dandris made concessions, Williams made the same concessions.

References to item numbers are references to the Scott Schedule, which was admitted into evidence as Exhibit X2.

The expert witnesses made, and these reasons make, reference to the Building Code of Australia ("the Building Code") and various Australian Standards. The Building Code is an instrument, produced by a Board on behalf of the Federal and State and Territory governments, intended to achieve nationally consistent minimum necessary standards including for structural safety and amenity. It contains technical provisions for the design and construction of buildings and other structures. Australian Standards are published by a non-government standards organisation and are guidance documents to ensure quality over a wide spectrum of activities including construction and engineering. The proceedings were conducted on the footing that the Building Code and applicable Standards represent acceptable practice. To avoid prolixity, I have not quoted from any of these instruments, however what they require, and where construction or products in this case have departed from them, is apparent from these reasons.

Rooftop terrace Stair risers from the first floor to the rooftop terrace vary in height between 130mm to 190mm - Item 1(a)

These stairs do not comply with the Building Code which requires the nominal dimension of risers of a stair to be consistent throughout. They are a safety hazard.

As testified by Mr Ellis and observed by myself, the bottom riser is 195mm and the general risers are between 170mm and 175mm. In addition, the riser at the point where the glass door is constructed is over 200mm high and the next riser is correspondingly shorter (130mm). This is because where the glass door is constructed the height of that riser is increased by the door frame which rests on it.

Mr Brincat first gave evidence that the very bottom riser was 190mm, and that each other riser (apparently with the exception of the riser at the glass door) was exactly 185mm. This was clearly wrong. Later he gave evidence that they were between 185mm and 190mm and that there was a bit of "tolerance".

In final submissions, counsel for Dandris correctly conceded the defect.

Doorway installed part way up the flight of stairs is in an inappropriate location - Item 1(b)

The doorway is installed in an inappropriate and dangerous spot and is not in accordance with Council requirements. Dandris conceded this defect.

Water penetration from the rooftop terrace - Item 1(c), Item 1(d), Item 1(e), Item 18

Water penetration is evident on the wall in the stairwell below the doorway to the rooftop terrace. It is also evident below the dividing wall separating the metal deck roof from the stairwell leading to the rooftop terrace. There has also been water penetration into the upstairs bathroom, which has damaged the ceiling. Water penetration is also evident from horizontal cracking and calcification to slab edges of the rooftop terrace. Dandris partially conceded this defect.

Mr Ellis and Mr Brincat differed as to what was required to remedy these defects.

Mr Ellis' opinion is that having regard to the combination of water penetration to the bathroom, the poorly constructed stairs, calcification to the rooftop terrace slab edges, the necessity to achieve matching of balcony tiles and to facilitate a builder being able to provide a warranty for the waterproofing, an integrated waterproofing and tiling solution is required. Mr Ellis provided costings for this integrated solution which includes removing the existing doorframe, all tiling to the rooftop terrace and the glass balustrade; construction of a concrete hob to the rooftop terrace at the perimeter of the stair opening; adjusting the riser heights; installing appropriate waterproof membranes; retiling with matching tiles; providing a new glass structure over the stairs (with lift up and opening hatch to be designed by an architect) and reinstallation of the glass balustrading.

Mr Brincat takes a different view. He describes the water penetration as minimal and propounds, if it is found that this is a defect, a different solution. He accepts that the present door must be removed. His solution is either the installation of a retractable vertical screen (which he described as a "crim-safe door") or the installation of a hatch-type roof on gas arms. As a waterproofing solution, he suggests the installation of waterproof "angles" along the edges where the rooftop terrace meets the stairwell.

To my own observation, the water penetration cannot be described as "minimal" and even if it could be, it is a significant defect. The hatch-type roof on gas arms will require construction above the Council-permitted height of the structure and the crim-safe door, if it is waterproof, would be aesthetically unacceptable and not in keeping with the house.

Mr Tucker costs the necessary work at $130,899. Mr Brincat costs the work he proposes at $37,421. I prefer Mr Ellis' evidence. Mr Tucker's costing is to be adopted.

Stairs from ground level to first-floor level are out of alignment - Item 2

There is inconsistent alignment of the nosings to the stair treads. There is a notable deflection of the outer end of the stair treads to sections of the steps. The sixth tread from the bottom is 25mm out of alignment with the stair treads at the front edge. Treads 3, 4, 5, 6, 7, 8 and 9 are up to 15mm out of alignment. The stairs creak at junctions between cantilevered stair treads and the glass balustrading. The stairs are a safety hazard and do not comply with the Building Code.

In his report dated 9 August 2013 (having inspected the house on 20 March 2013), Mr Brincat states that the stairs have been installed in a proper and workmanlike manner and comply with the Building Code. His view is that "the centre of the stair treads, where a person travels, is constant and thus complies". He opines that "In fact it is more reasonable that a person will use the wall edge of the stairs when using the handrail attached to the wall. Thus the stairs are fit for purpose and as approved by Waverley Council in the Occupation Certificate". These unsustainable propositions need only be stated to be rejected and Dandris correctly now concedes that the stairs are defective.

Mr Ellis' solution and Mr Tucker's costing is for the removal of the plaster board lining adjacent to the misaligned treads, removal of the glass balustrading, removal and repositioning of the stair treads and making good. Mr Tucker costs the necessary work at $10,866.

Mr Brincat describes Mr Ellis' solution (which is to rectify the stairs so as to comply with their design in a non-defective fashion) as involving "extreme methods".

Mr Brincat's solution is to correct the extreme tread edge deflection by installing a stainless steel post and stiffening plate under the stair treads, which he views as both aesthetically acceptable and structurally sound. His costing is $2,113.

Leaving aside Mr Brincat's perception of the aesthetics (with which in this instance I respectfully disagree) his solution would adversely affect the nature of the floating staircase so as to no longer accord with its original design.

Mr Ellis' solution is the reasonable and necessary one. Mr Tucker's costing is to be adopted.

Glass windows and doors - Item 3 and Item 22

The consensus is that the house has a total of 23 glass windows and doors. Pisano gave evidence that 19 of them leak. This is not surprising.

The glass bi-fold doors installed on the southern end of the house are exposed to wind pressure from the south and south-east with little shielding from homes close by. The house is subject to direct exposure to sea breezes directly off the Bondi northern headland.

Various glass panels on the doors have seals between them which are failing and are thus not watertight.

The bi-fold and sliding doors do not have proper sills and are only slightly raised above ground level. The operable door panels only have a brush dirt and dust seal from the bottom of the glass panel rail to the sill. The heads of the doors have the same arrangements. Mr Brennan opined, and I find, that these seals would not stop water ingress under design wind pressure and the product would leak regularly when exposed to poor weather.

The sliding door to the patio is not impervious to water penetration because the sill track groove has insufficient self-draining capability. As mentioned earlier, Dandris dispensed with the grated drain requirement.

Mr Ellis established that the cavity flashings are not satisfactorily stop-ended. The cavity flashings below the external balcony are not satisfactorily stop-ended at least near bedrooms 1 and 3. There are no visible sill flashings to the base of the window to bedroom 5 (downstairs). This explains moisture in the walls.

Cavity flashings positioned below the external balcony are not satisfactorily stop-ended to the upstairs sitting room. Water has penetrated under the carpet and there is swelling to skirtings on both sides of the balcony doors.

The sub-sill is not fitted to the door frame of the upstairs sitting room

There are no or insufficient sub-sills under the base of door openings and window frames. In some places the exterior level is the same as, or even higher than, the interior level of the house.

There is minimal rebate to door jambs.

Locking mechanisms do not hold in the wind.

Australian Standard AS2047 cl 8 requires all window manufacturers to label their windows with their identification mark, the window rating and water penetration resistance. Australian Standard AS1288 requires glass in a door or panel which might be mistaken for a doorway or opening, and is not made apparent in some other way, to be marked to make it visible. These requirements have not been met.

There was a debate as to whether there was in existence a valid certification of the performance rating of the glass used. The only document in evidence was one purportedly brought into existence by Murano and signed on its behalf by a person identified as Yari Joensuu. It made reference only to AS1288. Dandris foreshadowed that Mr Joensuu would be called but this did not occur. It may be inferred that his evidence would not have assisted Dandris.

Mr Ellis concluded that the solution requires removing all exterior windows and doors, ensuring that all cavity flashings and sill and head flashings adjacent to openings are satisfactory so as to redirect water to the exterior of the building, installing hobs at the balcony door openings and waterproofing to the balcony substrates where applicable, providing waterproofing at cavity flashing junctions to the balcony and door sub-sills and fitting new framed doors and windows complying with AS2047. This, in my opinion, is the reasonable and necessary solution.

I record that notwithstanding that the doors and windows are failing, Mr Brincat gave evidence that on the basis of the Murano certificate earlier referred to and the fact that Waverley Council provided an Occupation Certificate, the glazing is fit for purpose. His view was that there were issues with only the installation of the doors and not the windows and that doors were leaking around the frames and not at their base. His solution is to apply joint sealer, install aluminium drains in front of the bi-fold doors and the entire edge of that wall and to reseal around frames of the doors. I reject this as being neither reasonable nor appropriate in the circumstances.

Mr Tucker costs the necessary work at $181,815.

It is manifest that more than three of the window and door installations are failing. However in his report, Mr Ellis dealt specifically with only three particular windows as examples. On this footing, I understood it to be put on behalf of Dandris that rectification costs for only three windows should be permitted. If, however, all windows and doors must be replaced, Dandris contends that the cost will be $103,989.

I reject the approach that the work should be costed on the basis of only three windows. It is out of accord with reality.

Mr Tucker's costing is to be adopted.

The rooftop terrace has a roof window (of the nature of a skylight) which forms part of the floor of the deck. The glass is at least 25mm thick and is a laminate. Mr Brennan gave evidence (and it is observable) that the laminate has taken in water between the two sheets of glass and the interlayer that make up the panel. His evidence is that the laminate will continue to deteriorate with the advent of both cold and hot weather conditions and water will continue to gain entry.

He also made provision for the engagement of a structural engineer to inspect the roof window and provide a report into the adequacy of the glazed roof structure and recommendations, which he costed at $5,000. The time for such a report, if a claim was to be based on it, was during these proceedings. This aspect of the claim has not been made out.

Undulations to first floor level - Item 4

There are the following undulations to the first floor level of the house:

In front of the linen cupboard there is a variation in floor level of about 20mm over 2.0m. The variation to the floor substrate is 13-15mm over 1.2m.

There are humps in the hallway between the bedroom 3 doorway and the bathroom doorway and adjacent to bedroom 1.

Mr Ellis drew attention to AS3600-2009 which deals with concrete structures. Clause 17.5.2.4 provides that the deviation of any point on a surface of a member, from a straight line joining any two points on the surface, shall not exceed 1/250 times the length of the line. This requirement has not been met.

Mr Ellis' solution requires the carpet to be lifted, the concrete floor to be ground and made level, the carpet to be relaid and all finishes made good.

Mr Brincat did not concur that this was a defect and no concession was made. In his opinion, the undulations are within acceptable tolerances when walking across the carpeted areas but if considered unacceptable, additional underlay or ardit could be installed.

Leaving aside that they do not conform with accepted standards, my attention having been drawn to, and having walked over, the uneven areas, they are not acceptable. Neither is Mr Brincat's suggested patch-up solution.

Mr Ellis' solution is the reasonable and necessary one.

Mr Tucker costs the work at $5,680.

Mr Brincat costs the work at $1,602.

Mr Tucker's costing is to be adopted.

Kitchen island - Item 5

The kitchen island is out of parallel with the cupboards and bench tops on the western wall in the kitchen. This is noticeable when one's attention is drawn to it.

In a house of the standard to which this one aspires, this is undoubtedly a defect.

Yet no concession was made, presumably because Mr Brincat's opinion was that this is aesthetic only and does not affect the functionality of the kitchen; that is, the kitchen is fit for purpose. Under cross-examination, he referred to an example, being a friend of his whose benchtop was 30 degrees out of alignment. He apparently considers this acceptable.

The only reasonable solution is to realign the island.

Mr Tucker costs this at $3,443. This includes repositioning and refitting plumbing "as necessary" for which he allows $260.

Mr Brincat makes no allowance to fix consequential damage to the finishes on the footing that there would be no damage or whatever damage there was would be covered by the carcass. I consider this to be unrealistic.

Mr Brincat says that no plumbing refit is required and costs the realignment at $525.

Mr Ellis' opinion did not establish that refitting plumbing was necessary and this item is to be removed from Mr Tucker's costings. Save with respect to the plumbing refit, Mr Tucker's costing is to be adopted.

Deducting the amount for the plumbing refit and after the contingency adjustment, the amount to be allowed is $3024.

First-floor linen cupboard - Item 6

There is water penetration into the first-floor linen cupboard. Dandris concedes this.

Mr Ellis identified that the water ingress is evidently through electrical penetrations (holes) which have been made in the overhead metal deck roof and sealed with silicone. The linen cupboard finishes have been damaged. Mr Ellis noted that water damaged cabinetry requires replacement and that an electrician will need to remove existing power points and reinstall them.

Mr Ellis makes an allowance of $2,201 which includes $280 for making good all consequential damage including contents of the cupboard. The evidence did not establish the nature and value of the damaged contents of the cupboard. No amount for consequential damage is allowed.

Mr Brincat would allow only $390, as I understood it, because his view is that the water penetration comes from the stairwell to the roof terrace, rectification of which he has already allowed, rather than from defectively sealed electrical penetrations through the overhead metal deck roof.

To the extent that there is a conflict as to the source of the water ingress, and having inspected the metal roof deck penetrations and their method of sealing as well as the point at which water has entered into the stairwell to the rooftop terrace, I prefer Mr Ellis' evidence. It may be accepted that there has been penetration through the area identified by Mr Brincat, but it is more probable than not that there has also been penetration through the area identified by Mr Ellis.

Deducting the amount for consequential damage and after making the contingency adjustment, the amount of $1825 is to be allowed.

Laundry - Item 7

There is water penetration into the laundry with damage to skirtings on both sides of the laundry external door. No cavity flashings or weepholes on either side of the laundry doorway are visible.

Mr Ellis opined that the skirtings are made of an inappropriate material not fit for purpose for use in a wet area and have suffered water damage as a consequence.

Dandris concedes this defect.

Mr Ellis allows for replacing the damaged skirting with tiles and making good consequential damage. Mr Tucker costs this at $677.

Mr Brincat would allow $279. His allowance includes a painter for less than half an hour.

I prefer Mr Tucker's costing. After the contingency adjustment, $643 is to be allowed.

Gas fireplace in the lounge room - Item 8

There is a gas fireplace in the lounge room. Sia Pisano gave evidence that, when switched on, the fireplace emitted toxic fumes. Villaboard, a cement-based product, has been installed to the surrounds of the firebox. It has cracked significantly above the firebox in the region of the fireplace chimney. There is an obvious defect.

In coming to his conclusion as to what work is required, Mr Ellis assumed, on information provided to him, that the fireplace had not been installed in accordance with the manufacturer's instructions and relied upon a specialist report by a Mr Brett Osborne. The report, however, was not admitted as evidence of the accuracy of any representation made in it or opinion expressed in it.

The Pisanos have not established that the fireplace itself has been incorrectly installed. As to the cracking, Mr Brincat says (somewhat euphemistically) that "there is an issue with the installation of the fireplace in that the cracking has occurred to the material installed to the fireplace chimney".

Mr Ellis' allowance is for the removal of the fireplace, demolition of the existing enclosure, construction of new structural framing, installation of new linings and reinstallation. Mr Tucker's costing of this is $15,952.

The Pisanos have not established that work to the extent described by Mr Ellis is reasonable and necessary.

Mr Brincat's costing entails removing linings only to the head of the firebox and reusing existing structural framing.

I find that the reasonable and necessary work is as opined by Mr Brincat, and that subject to the inclusion of allowances for preliminaries, contractor margins and construction contingency, Mr Brincat's costing of $3401, should be adopted. It follows that the amount of $4659 should be allowed.

Garage - Item 9

Mr Ellis opines, and I find, that the internal skin of the garage wall and the external brick skin are not adequately weatherproofed. The inner skin of brickwork has been clad with plasterboard which is susceptible to moisture damage and which is not fit for the purpose for which it has been used.

Water has penetrated, and there is dampness, along the base of the western wall of the garage. No cavity flashing is evident at the base of the western wall. Mr Ellis took moisture readings which disclosed high levels of moisture at the base of the wall.

The relative levels on Mr Yoganathan's stormwater drainage plan, dated 1 February 2010, have the internal finished floor level 150mm higher in elevation than the external finished ground level at the rear of the property adjacent to the building. The flow arrows show that the intended surface water overland flow path travelling around the perimeter of the building was from west to south then south to east and finally east to north with discharge into an above-ground stormwater detention basin.

The stormwater design also indicates that the internal finished floor level will be 330mm higher than the external finished turf area. The stormwater detention basin is constructed at a higher elevation than nominated in the design documentation and has a negative impact on the documented proposed overland stormwater path.

According to Mr McGill's unchallenged report of 19 July 2012, the design for the safe disposal of overland flow has not been satisfied, there being an absence of any defined flow path affording the internal ground level habitable areas free board protection.

Mr McGill's report includes a Plan of Heights (or survey) carried out by Proust & Gardner Surveyors and Planners on 15 July 2013. The survey establishes the absence of sufficient grade falling away from the buildings. This, together with the absence of any step down between internal and external levels results, he says, in no provision for surface overland flow to travel around the building without causing damage internally from water penetration.

Mr McGill observes that the internal finished floor level is only 170mm higher than the detention basin water ponding level or overflow level which means that the detention basin overflow level has been raised by approximately 160mm from the elevation intent documented on the design. This has been replicated with the turfed area forming the detention basin storage level referred to immediately below.

The external turfed area in the northeast corner of the front yard of the house incorporates a stormwater discharge control pit. The turfed area is at an elevation approximately equal to the retaining wall separating it from the entry pathway. According to Mr McGill's unchallenged evidence, the stormwater detention basin is at a higher elevation than nominated in the design documentation impacting the documented overland stormwater flow path.

Mr Ellis' solution requires upgrading to the drainage and waterproofing to the wall below ground level, the installation of cavity flashings, repair of the walls and rendering and painting.

Mr Tucker's allowance is $12,565.

Mr Brincat observed, on a first inspection, severe mould and dampness along the base of the western wall to the garage. His view is that this was due to the build-up of soil and vegetation to the rear of the wall by the neighbour and that removal of the soil and vegetation would solve the problem. Mr Brincat apparently takes the view that because the garage is classified as a wet room under the Building Code, the presence of mould does not involve any loss of amenity. On a later view, on 11 March 2014, the soil and vegetation had been removed and his observation was that water ingress and mould on the inside of the garage had stopped. As a preventative measure, he would apply a waterproofing sealer to the rear of the wall to stop any further ingress of water.

Mr Brincat's view recognises neither the absence of appropriate cavity flashings nor that inappropriate materials have been used. Hence, his allowance is only $562.

Mr Ellis' approach reflects what is reasonable and necessary. Mr Tucker's cost is to be adopted.

Ceiling area water penetration - Item 11, Item 25, Item 26, Item 27, Item 28, Item 29, Item 30, Item 31, Item 32, Item 33, Item 34 and Item 35

There has been water penetration to the floor of a walk-in wardrobe in bedroom 1, to the kitchen ceiling and internal kitchen walls, and to the internal walls and floor tile thick bed of the garage and laundry.

Dandris concedes these defects.

But in any event, Mr McGill's unchallenged report establishes that the water penetration is due to a series of defects in the roof cladding and gutter system, in particular, defective roof joints. The metal box gutter has been constructed without fastened and sealed metal lap joints and is not watertight in accordance with the requirements of the Building Code. Also, in non-compliance with the Building Code, the box gutter has a flat lap joint without an anti-capillary break to prevent water access by capillary action, and at the southern end the downturn of a parapet flashing does not overlay the upturned face of the box gutter and there is a visible gap. Lap joints incorporated into the roof cladding system's barge flashings and apron flashings have not been fastened or sufficiently overlayed. Lap joints have been sealed with silicone without appropriate joint fixings. The absence of fasteners securing a lap joint fails to support it from thermal induced metal expansion which can result in joint failure, compromising the flashings and allowing water penetration. Plasterboard screws with no corrosion protection and no rubber sealed grommet to prevent water penetration have been used to secure roof sheet apron flashings to the rib of roof sheets.

Following his investigations, which included some invasive testing to ascertain the presence or otherwise of necessary and appropriate flashings, Mr Ellis concluded that, in breach of the Building Code, cavity flashings do not extend the entire width of the external leaf of the masonry walls, which allows water to enter the brickwork under the cavity flashing via holes in the extruded brickwork. In various places cavity flashings are positioned less than 50mm above paved tile areas. There are numerous areas where water has penetrated the building structure causing damage to finishes including skirtings and carpeting. There are places where there should be weepholes but there are none. In other places weepholes are blocked.

Mr Ellis' solution requires installation of new cavity flashings in accordance with the Building Code to the north, west and southern walls of the first-floor level, adjacent to the garage laundry door openings, the south sides of the dining room and north walls of bedroom 5. He says that an integrated waterproofing solution is required and the works should be undertaken in conjunction with Item 3.

According to Mr Ellis this requires bonding of balcony waterproofing to the cavity flashings and door sill flashings, water testing the balcony waterproofing before retiling, retiling, rendering the base of walls, painting and making good.

Mr Brincat opines that "the evasive [sic] works completed by Ellis...was not warranted" and that there was and is "no evidence of water entry due to the as constructed works to the walls in relation to the cavity flashings". He takes the view that the as constructed works are fit for purpose. If any weepholes are blocked they are to be made good and free from obstructions.

I prefer Mr Ellis' opinion.

It is difficult to see how Mr Brincat can reasonably hold his opinion having regard to the absence of appropriate flashings coupled with clear evidence, observed not only by Mr Ellis but also by me, of multiple areas of water penetration.

Relevant to the integrated waterproofing solution recommended by Mr Ellis, is the fact that Mr Edwards gave evidence that the rainwater outlets on the rooftop terrace, which are not recommended for use on rooftop terraces, are constructed using a slotted infilled tile commonly used in internal wet areas for floor relief. His recommendation is that the rainwater outlets be replaced with a flat grated-style outlet suitable for external roof terrace applications. The installation of this type of grate requires deconstruction of the tiles in the immediate vicinity of each outlet to allow the appropriate grate to be installed.

Mr McGill's evidence is that the reasonable and necessary works to address these defects entails deconstructing all metal lap joints incorporated into the box gutter and reconstructing them with a polyurethane sealed lap joint with intermittent fasteners, removing the parapet capping and replacing it with a new one incorporating a fold providing an anti-capillary break, removing the roof sheet perimeter flashings and replacing them with new flashings and cappings that incorporate overlayed lap joints adequately fastened and sealed to meet Building Code requirements, removing all existing fasteners securing roof sheet flashings and replacing them with fixings that incorporate corrosion treatment in accordance with the Building Code, removing the box gutter rainheads, modifying and reinstalling them with steel joints and adequate overflow protection, and fitting the parapet wall with a new parapet capping incorporating vertical faces overlaying the roof sheet apron flashing in accordance with the Building Code.

Mr Brincat said very little of these defects. He took the view that there was no defect with regard to the rainheads to the guttering system and that Mr Ellis' scope of works was excessive and not warranted. He referenced Mr Edwards' report.

Mr Edwards agreed with much and also did not disagree with much of Mr McGill's report. In his opinion, the rainheads comply with the Building Code. In his opinion, it is difficult to pinpoint the cause of damage from water ingress directly to the sealing of lap joints and opined that the lap joint in the box gutter should be replaced with a stop end.

Mr Edwards was unable to determine the fall gradient of the box gutter but it appeared to him to be flat whereas the minimum fall, according to the applicable Australian Standard is 1:200. He agreed that due to the opposing falls of two sections in the box gutter, the lap joint could not be reinstated and is non-compliant. He agreed that the omission of fasteners at lap joints compromises the Australian Standard. He took no issue that fasteners should be treated for corrosion. He did not inspect certain aspects of the box guttering system as he assessed accessibility to the roof as unsafe. He agreed that the box gutter's interconnected rainheads are without overflow provision to accommodate the rainwater inflow generated from the upper roof catchment area during a one in one hundred year average recurrence interval with five minute duration, as is required by the Building Code.

The unchallenged evidence of Mr McGill that there are numerous defects across the roof cladding and box gutter system, together with the concessions made by Mr Edwards, leave little room for doubt that the scope of works assessed by Mr Ellis together with Mr McGill is necessary and reasonable.

Mr Edwards candidly admitted that he would defer to an expert quantity surveyor in the matter of costings.

Mr Tucker costs the rectification of these defects at $226,939, made up as follows:

making good the consequential damage to the walk-in robe cabinetry, replacement of the wall and ceiling linings as necessary, paint finishing and repairs to carpet and door jambs: $15,551 (Item 11)
installing new cavity flashings, repairing walls, painting and rendering finishes, bonding balcony waterproofing and cavity flashings and doorsill flashings, and retiling: $121,924 (Item 18)
removing box gutter flashings and box gutter and fitting new box gutter and suitable flashings, ensuring ends of roof sheets are satisfactorily turned down (Item 25); removing existing parapet capping, altering it to provide drip line/capillary separation, reinstalling parapet capping including sealed fasteners and sealed and fastened lap joints (Item 26); removing and replacing approximately 23 lineal metres of barge capping and approximately 9.6 metres of apron flashing (Item 27); removing and replacing existing roof sheet fasteners (Item 28); increasing mailbox-style overflow slots and repositioning (Item 29); installing parapet capping (Item 30); providing balcony infill grates (Item 31); modifying perimeter glazing to accommodate installation of an overflow channel (Item 32); enclosing the stairs to the rooftop terrace with an appropriate structure (Item 33); excavating the external paved area to the south and east and either lowering the ground level or providing a pipe overflow system (Item 34); establishing the installed relative levels by survey to ensure appropriate relative levels are achieved (Item 35): $89,463.

I interpolate that Mr Brincat costs Item 18 at $14,627. I have no confidence in this assessment.

In my opinion, Mr Tucker's costings reflect the necessary and reasonable cost of the works assessed by Mr Ellis and are to be adopted.

Blinds - Item 12

Mr Brennan records that the Murano bi-fold doors (or full-height pivot windows) on both floors do not open fully as blinds have been installed too close to them and obstruct them. These doors have been dealt with above in relation to their inability to withstand water ingress under pressure given that they have brush seals at both head and sill. They also do not have manifestation. However, in any event the blinds clearly need to be removed and reinstalled in an appropriate place, for which Mr Tucker allows $6,265.

In his report of 9 August 2013, Mr Brincat states "Defect not properly identified?". In his report of 8 May 2014, he states "There is no evidence of the alleged evidence [sic] that blinds are not fit for purpose and operation has resulted in injury? I reserve my opinion on this issue of further evidence is provided for this item [sic]".

Mr Brincat's attention was apparently not drawn to Pisano's unchallenged evidence that when, on or about 24 February 2012, he tried to open the outside doors to the family room, the blinds dislodged from their brackets and hit him heavily on the head and that in about early March 2012, when he tried to operate the doors in the main bedroom, the blinds fell, hit him, and then bounced off him onto the side drawers. Mr Brincat's position, that no defect is manifested by the blinds which (even when pulled up) inhibits the opening of doors which they shield, is another reflection of his lack of objectivity.

Mr Tucker costed the work of removing the installed blinds, reinstating them in an appropriate new location and repairing the finishing at $6,265.

Mr Brincat would allow the manifestly inadequate figure of $507.

Mr Tucker's allowance should be adopted.

Runner on sliding doors - Item 13

Pisano gave unchallenged evidence that on 29 May 2012 whilst walking from the garage through to the pantry and holding his infant daughter, as he opened the pantry sliding door, it fell off onto him. Mr Ellis observed that the nylon surround to the wheel runner had failed, causing the door to detach from the track, and that the runner fitted to the top of the door is not suitable for the door, which weighs 42 kilograms. The door runner has a maximum load rating of 30 kilograms according to the manufacturer's information.

On Mr Brincat's first inspection, the door was not in place. His report states that the reason for removal had still to be determined but if found that the door is too heavy for the sliding mechanism, he proposes the supply and installation of a door of 30 kilograms or less.

Dandris concedes this defect.

Mr Tucker costs the refit using appropriate hardware at $2,250.

In his report of 8 May 2014, Mr Brincat's estimate was $380 to install new hardware ready for painting, to supply a new door mechanism and paint, and $360 to install a new door ready for painting and paint. However, his report of 14 May 2014 appears to cost this item at a total of $360. Dandris concedes $468.

I consider that Mr Tucker's costing represents the reasonable and necessary cost and it is to be adopted. After the contingency adjustment, $2138 is to be allowed.

Rear ground floor balcony soffit - Item 14

Mr Ellis observed (as did I) that the ceiling lining along the underside of the outer edge of the balcony soffit is sagging. According to his report, there is corrosion to the edge of the steel lintel over the east end of the family room bi-fold doors, indicating that its anti-corrosive coatings (if any) are not fit for purpose. He says there are ceiling-mounted audio loudspeakers which are showing signs of corrosion.

Mr Brincat's opinion is that the soffit lining is not sagging and "has not detached from the substrate that it is attached to [but] there is a minor deviation in the lining as constructed from the horizontal" but in his opinion it is within tolerance for the work as a whole. In his opinion there is no detriment to the visual aspect of the ceiling as installed and if it is to be repaired the subject area only of the lining can be removed and reinstalled level. He says that the lintel is rusting in that location only and that no water has penetrated from above because if this was the case the other side of the lintel would be rusting as well.

Mr Ellis' opinion is that the rectification works should include stripping the render above the lintel, grinding back affected steel work to remove all evidence of corrosion, applying epoxy coatings to all surfaces of the steel lintel and re-rendering. He considers that all soffit linings and associated trims should be removed, checks for water penetration from the underside of the balcony should be made, new soffit linings and associated trims should be installed and the loudspeakers replaced with a product that is fit for purpose.

According to Mr Ellis this will cost $9,168.

I agree with Mr Ellis that the sagging results in poor aesthetics. It is not in keeping with the standards to be applied to a house of this nature. I disagree with Mr Brincat that the deviation is within tolerance for the works as a whole but I consider that it is reasonable and necessary in the circumstances that only the subject area of the lining should be removed and reinstalled level. Mr Brincat costs this solution. His figure of $2,335 should be adopted.

Dining room rear wall - Item 15

The rear wall, when measured from the floor tiles, is approximately 100mm out of square over approximately 3.8m in length (it is further out on the eastern end). The upstairs ensuite wall is correspondingly also out of square. The misalignment of the wall is visible when observed against the alignment of the dining room and ensuite floor tiles. This would not have occurred had accepted but basic building techniques and workmanship been applied. As Mr Brincat conceded, this would have required no more than a string line.

Initially Mr Brincat denied the misalignment.

Having regard to the nature of the house, I would have had little difficulty in concluding that bringing significant walls into alignment at points where right angles are intended is reasonable and necessary.

Nevertheless, Dandris hotly contested this, perhaps in reliance on Mr Brincat's untenable position that this was not a defect because the wall, albeit out of place, was well constructed. He also expressed the opinion that there is no diminished value as a result of this out of square construction.

However, in final submissions, counsel on behalf of Dandris correctly conceded that demolition and reconstruction was warranted.

Mr Tucker's costing is $169,344. His approach is based on allocating provisional sum allowances because of what he describes as the enormous, but not clearly defined, scope of works.

Mr Brincat's assessment leaves out of account the demolition and reconstruction of the first floor rear wall because of his then view that, contrary to the now established fact, the wall is not out of square. His report allows only $16,060. However, at the hearing, the amount of $41,756 was conceded, although it was not made clear to the Court how this figure was arrived at. He expressed the view that no construction contingency was required because the works had been clearly defined.

I prefer Mr Tucker's assessment. The general nature of the work is specified but precisely what that will entail is not clearly defined. Clearly a significant and somewhat delicate operation is called for. Mr Tucker's estimate is not precise but, in the circumstances, it cannot be. His costing is to be adopted.

Swimming pool surrounds - Item 16

The swimming pool surrounds and external walkways do not meet the recommended requirements for slip resistance in the Australian Standards. So much is conceded by Dandris.

Mr Tucker costed the removal of the tiles from the ground level patio, walkways, pool surrounds and balconies and the supply and installation of compliant non-slippery tiles where necessary, at $54,613.

Mr Brincat gave evidence that the problem can be resolved by a process of etching, that is the application of acid to the tiles. Mr Brincat says that acid etching chemically changes the structure of the tile surface but because the entire external tiled area is being treated "the overall affect [sic] is consistent and in keeping with the product already installed at the property". He says there are specialist companies who carry out this treatment. He accepts that the process will affect the cleanability and feel of the tiles. Mr Brincat accepted that this is not a process which would be adopted for a new installation.

According to Mr Brincat, and Dandris concedes, this will cost $11,297.

In my opinion, the proposed etching process would not reflect the reasonable and necessary course in the context of this house. The reasonable and necessary course is to bring the defective area into compliance with appropriate standards in a manner consistent with and sympathetic to the originally intended installation and the aesthetics that go with it.

It follows that Mr Tucker's costing is to be adopted.

Outdoor ground level cupboards - Item 17

Cupboards made out of medium density fibreboard ("MDF") have been constructed around an external barbeque at the rear of the house. Moisture damage is evident to the cupboard frame and doors. Mr Ellis gave evidence that MDF is an inappropriate material for this application.

(d) they afforded the Pisanos the opportunity to inspect the house before the Pisanos bought it, which opportunity was taken up;

(e) the Pisanos elected not to have their own professional pre-purchase inspection; and

(f) the Pisanos were represented by an experienced solicitor on the purchase.

Third, they submit that the Pisanos have not proved that they suffered any loss by the conduct complained of. They submit that the Pisanos caused their own loss because they had a "cavalier approach to their own rights" and because they failed to get a pre-inspection report which, had they got, would have put them in a position to exercise their "cooling off rights and rescind as of right".

Fourth, they submit that the Pisanos have not proved the amount of any loss. They submit that the only appropriate measure for damage in the circumstances is the difference between the market value of the house without the defects and its value with them. Whilst they accept that the market value without the defects can be taken as the price paid, they put that there is no evidence as to the effect the presence of the defects had on that value.

Finally, Williams submits that the claim against him and Dandris is an apportionable claim within the meaning of s 87CB of the Competition and Consumer Act 2010 (Cth) and that her responsibility is greater than his. Williams submits that Dandris was the owner-builder, she (not he) supervised, coordinated and was in day-to-day control of the works, he did not know about the corners she cut or of any of the defects other than the window referred to in the DS Report and the fact that the pool tiles were slippery, his role was largely passive, he did no physical work and he relied on others including the licensed builder Mr Schulze. No contradictory submissions were put by Dandris. This reflects the fact that despite separate representation, Dandris and Williams are in the same interest.

Consideration

Whether the sale itself was conduct in trade or commerce is not the true issue here. The true issue is whether the conduct complained of, namely misrepresentations which played a part in inducing the sale, thereby causing the Pisanos' loss, was in trade or commerce.

If the sale itself is conduct in trade or commerce, advertising it would undoubtedly also be. If, however, the sale itself is not in trade or commerce, it does not necessarily follow, in my view, that advertising it is also not.

In this case I am satisfied that the sale itself was a transaction in trade or commerce. It follows, from this alone, that so was the conduct complained of.

However, and separately, I am satisfied that, on its own, the advertising of the sale, at least by way of the web advertisement, was also conduct in trade or commerce.

As to the sale of the house itself, in support of his submission that the sale by an owner of his or her private dwelling is not in trade or commerce, counsel for Williams referred to two decisions: Actic Pty Ltd v Cabool [2004] NSWSC 302, in which Smart AJ said at [126]: "Sale of a residential property by an individual is not a transaction in trade or commerce" and Butcher v Harkins [2001] NSWSC 15 in which Austin J concluded that the sale of the domestic residence in that case was intrinsically not conduct in trade or commerce.

The unqualified articulation by Smart AJ in Actic, that sale of a residential property by an individual is not a transaction in trade or commerce, is clearly wrong. So too, I respectfully suggest, is Austin J's statement in Butcher v Harkins that the sale of a domestic residence is not in trade or commerce because of some intrinsic quality.

In Argy v Blunts & Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112 at 119, Hill J considered that "[i]t could scarcely be said that a person who sells his home, whether by private treaty or by auction and whether he conducts the negotiations personally or by real estate agent, is undertaking what he does in the course of a trade or business or in a business context".

In Franich v Swannell (1993) 10 WAR 459, Seaman J, at 479, (with whom Murray J agreed) considered that the sale of a private house without any business character was not in trade or commerce. At 481 Ipp J said, after referring to O'Brien v Smolonogov (1983) 53 ALR 107, that "the sale by an owner of his private house, unconnected with any larger transaction or series of transactions or business operation, is not in trade or commerce".

In Nelson v Bellamy [2000] NSWSC 182, Simos J concluded that the sale of a private dwelling in which the vendor lived which was specifically built for resale at a profit, albeit that the profit was used to reduce the debts of the vendor, and where the vendor lived in it for a limited period of time but always with the intention of living in another building, was activity in trade or commerce.

In ACCC v Gary Peer & Associates Pty Ltd (2005) 142 FCR 506, Sundberg J found that there was nothing in the evidence to suggest that vendors were doing anything more than attempting to sell their family home because, at the time, they no longer wished to reside in it and that this did not establish conduct in trade or commerce.

In Kelly v Wilson [2012] WASC 146, Beech J considered that whether the sale by a private owner of his or her residence is in trade or commerce turns on "whether there are elements in the transaction and the activities and character of the parties that import a trading or commercial character to the negotiation for the sale of the property". His Honour was satisfied that the seller's conduct there was in trade or commerce. The transaction was not a conventional sale and purchase by exchange. It involved vendor finance for more than half of the purchase price; the property did not simply comprise a home, it had six chalets that had been rented out by the seller, both the seller and the buyers employed a caretaker of the property, and the parties discussed the prospect of developing the property in the period before entering into the contract.

More recently, in Rasch Nominees Pty Ltd v Bartholomaeus [2013] SASCFC 23 at [69] and [86], Gray J (with whom Sulan J and Stanley J agreed) considered that there is no principle that a vendor of domestic land does not engage in trade or commerce unless in the business of doing so and that the relevant question is how to characterise the conduct in each particular case and whether the dealings concerned of their nature bear a trading or commercial character.

On the approach taken in these authorities, a transaction involving the sale of a domestic residence will be in trade or commerce if, in all of the circumstances in which it occurs, it discloses a commercial or business character. This is a question of fact in each case and involves characterising the particular conduct in question.

As to the facts, I am satisfied that Dandris and Williams renovated not to create a house for their personal use but because they viewed it as an investment property. I find that their intention was to improve the house for resale for financial gain and I find that the sale, including its advertising, was the carrying into effect of their investment strategy.

I do not believe them when they say that they intended to live in the renovated house long term as their domestic residence. Their objective conduct is at odds with this.

I find that Dandris and Williams never intended to live in the renovated house for any meaningful period of time and certainly not permanently.

Under cross-examination, Dandris accepted that if it was going to be their family home she would want to ensure that it was going to be constructed properly and without any shortcuts. One might think that this would particularly be the case if they intended the house to be the "entertainer's home" which Williams says he had in mind. Yet, Dandris cut important corners for financial reasons.

She took the cheap option offered by the builder, she dispensed with necessary drainage grates in front of glass walls and doors, she did not demolish walls which Mr Yoganathan directed should be demolished and she did not obtain the survey required by the local authority as at the date of commencement of construction.

In 2008, as soon as they obtained development consent, they listed the house for sale (they were, however, unable to sell it).

In applications for mortgage finance in 2010 they described the house as an investment property (I do not believe their evidence that this was in error).

Pisano gave evidence, which I accept, that in March 2012 when he complained about the faulty hot water system, Dandris replaced it and said of the old hot water system "I'll just use this on my next project".

Dandris described herself on her business card as an interior designer. In a testimonial for a kitchen construction company she referred to herself as having done interior design for houses. She must have had this house in mind because, according to her evidence, it was the only candidate.

The house was furnished only with hire furniture of the type commonly used or put in place for the purposes of selling. They occupied the house for a very short period of time.

Although they say the house was sold because of financial pressure, barely six months later, Dandris and Williams purchased another house at 178 Military Rd Dover Heights for $2,090,000 which had a development approval which they sought to amend so as to carry out renovations.

Williams tendered a tax return which reflected no deductions claimed for costs incurred in carrying out the renovations, on the footing, as I understood it, that this was an indication that he did not have a profit motive. The absence of such a claimed deduction says nothing of the absence of a profit motive if, as one would ordinarily expect with a house, the expected profit is of a capital nature.

Additionally, I am satisfied that the project was part of an interior design business that Dandris wanted to develop and that the conduct complained of, both by her and Williams, was in furtherance of that endeavour. This, on its own, is sufficient to render their conduct in trade or commerce.

As to the web advertisement, it is to be observed that O'Brien v Smolonogov was decided more than 30 years ago, Argy v Blunts nearly 25 years ago and Franich v Swannell nearly 20 years ago. At that time, advertising of residential properties on the worldwide web either did not exist or was not the norm as it is now.

Houghton v Arms (2006) 225 CLR 553 establishes that a representation can be made in trade or commerce, even though it is not in the trade of the person making the representation, so long as it is in the trade of the person to whom the representation is made.

The representations in the web advertisement were made by Dandris and Williams via a commercial website to which the world at large, including those who would read it in their trade or business, has access. In my view, this is conduct in trade or commerce. I consider that this is so irrespective of the fact that those who were attracted, to their detriment, by the advertisement, read it or relied upon it albeit not in the course of any trade or business of their own.

In coming to their view that a sale by private treaty or auction does not involve conduct in trade or commerce despite it being negotiated by an agent, neither Hill J in Argy v Blunts nor the members of the Bench in Franich v Swannell had this type of pre-sale advertising in mind.

I should add that although, because of the findings I have made it is not necessary to consider it further, it is not readily apparent, I respectfully suggest, why the sale of a domestic residence by way of an advertised arms' length transaction at full price is not in any event a transaction in commerce.

The falsity of the representations has been established.

The two overlapping questions which arise are: first, when viewed together with the disclaimers, the conditions of the contract, the DS Report, the Pisanos' inspection, their election not to have their own professional pre-purchase inspection and the fact that they had an experienced solicitor, was the conduct of Dandris and Williams misleading or deceptive? Second, do all or any of those matters evidence non-reliance and the want of a causal link between the misrepresentations and the loss or damage flowing from the Pisanos entering into the contract?

In my opinion, the first question is to be answered in the affirmative and the second question is to be answered in the negative.

The mis-statements made in the advertising material are direct and undoubtedly intended positively to influence the reader to buy.

The disclaimers are barely noticeable, let alone prominent. Pisano gave evidence, which I accept, that he did not see the disclaimer on the online version and did not read the disclaimer on the brochure. It was not established that Sia Pisano read either disclaimer.

The disclaimers are by the agent, not the vendors. The agent's oral misstatements were not accompanied by any disclaimer. The agent reports that the information provided has been furnished by the vendors and that "all interested parties should make their own enquiries in order to determine whether this information is in fact accurate". Dandris and Williams were the source of this information. Had the Pisanos enquired of them, it can be inferred that they would have been given the same information.

I should add that I am satisfied that Dandris and Williams knew that the house leaked before they sold it. Apart from what she told Pisano, she installed awnings to shelter the house from prevailing rain and winds. Dandris knew that important details had been spared and significant corners had been cut to save costs. She was the one that determined that this should be so. She and Williams knew that she was no master builder. Indeed, they knew that she was no builder at all.

In all the circumstances, it can scarcely be said that the disclaimers denude the misinformation, disseminated by Dandris and Williams, of its misleading character.

The same can be said with respect Special Condition 1 and the DS Report.

The misleading conduct preceded, and was a material factor inducing the Pisanos to enter into, the contract.

Special Condition 1 records that the Pisanos relied on their own inspections. This, to some extent, they undoubtedly did. But the perceptions of the house which they gained via their inspections were coloured by the misleading and deceptive conduct of Dandris and Williams.

Pisano gave unchallenged evidence that based on the brochure and what was said by the agent he was under the impression that the home was meticulously built by a professional master builder who had experience in building the sort of home that was being presented to them and that no expense had been spared. Sia Pisano gave unchallenged evidence that based on the brochure and the agent's statements she formed the view that the home was solid, well built and something she could be proud of for a long time. She believed it was newly built by a professional builder as their family home. She gave unchallenged evidence of a conversation with Pisano that the house was brand new and there was nothing for them to do.

Special Condition 1 acknowledges non-reliance on statements other than as set out in the contract. The DS Report is incorporated into it.

The DS Report, misleadingly, discloses only one minor defect; namely, water ponding in the ground floor dining room recessed door track. It recommends that the "track be sealed water tight and a grated drain be installed to the external threshold of the door assembly". In Attachment A, which is entitled "Home Owner's Warranty Defects Report Carried Out For 53 Blake Street, Dover Heights for Mrs G. Williams" the only repairs identified as being necessary are the same repairs. Immediately below the report goes on to say that "All other works were found to be completed in a good workmanship like manner and finished in good order".

Paragraph 2.0 of the DS Report recommends that "a more comprehensive service be sought on areas/queries in this report", but apart from the minor water ponding, the DS Report identifies none. It describes itself as a "reasonable attempt to identify any obvious or significant defects at the time of inspection" and goes on to identify only the one minor defect. It can be scarcely be said that Special Condition 1, or for that matter the DS Report, denude the misinformation of its misleading character. If anything, they exacerbate it.

In general, where there is a reasonable opportunity for inspection which would unearth the defect this may break the chain of causation: Baxall Securities Ltd v Sheard Walshaw Partnership [2002] EWCA Civ 9. But that is not this case.

Leaving aside questions of taste, the house at first blush gives the impression of no expense having been spared. However, very significant defects, in particular those which make the house pervious to water, are not visible to the naked eye. One cannot see that flashings inside cavity walls have been omitted. It is not apparent that 19 out of the 23 windows would leak or that the relative levels will not ensure appropriate run-off.

The misrepresentations, backed up by the misleading DS Report, provide a reasonable and rational explanation for why the Pisanos forwent any further pre-inspection report in relation to what was held out to be a newly master-built, no-expense-spared house.

The matters relied upon by Dandris and Williams including that a solicitor acted for the Pisanos on the sale, neither assuage their misleading and deceptive conduct nor bring about any break in the chain of causation between that conduct and the actions of the Pisanos in reliance upon it.

The actions of the Pisanos can hardly be described as cavalier. It does not fairly lie in the mouth of Dandris and Williams to describe it as such.

I turn to the question of damages.

I have found that the misrepresentations of Dandris and Williams played a significant part in inducing the Pisanos to buy the house.

I have made findings as to the reasonable and necessary cost of fixing it.

The Pisanos claim this as the loss suffered because of the misrepresentations.

However, Dandris and Williams submit that this is not the quantity of the actual loss suffered. They submit that the only appropriate quantification is the difference, in financial terms, between the position the Pisanos are now in and the position they would have been in had they not bought. This, they put, is the difference between the price which the Pisanos paid (which they accept would have been the market value of the house free of defects) and the true market value of the house with the defects. They put that the Pisanos have not established the second component (having led no evidence as to the market value of the house with the defects) and have therefore not established the amount of the loss they suffered.

I reject this submission.

That the justice and equity of this particular case requires the Court, in my opinion, to select as the measure of damages the reasonable and necessary cost of fixing the house, is demonstrated by the following.

The Pisanos bought the house to live in and intend to continue living in it. But for the defects, they could do so. It will cost $1,171,124 to fix. They bought the house for $3,350,000.

If the market value of the house with the defects is less than $3,350,000 minus $1,171,124, awarding them the difference between that figure and the purchase price paid would give them a windfall because they would have more than the sum of what they paid for the house and the amount they need to fix it. If the market value of the house with defects is greater than $3,350,000 minus $1,171,124, awarding them the difference will not give them enough to pay for the necessary repairs.

Additionally, no basis was put as to why the true market value of the house was not the price the Pisanos paid less what it will cost to fix it.

The factors identified by Williams as warranting apportionment against Dandris relate to Williams' lack of participation in the renovation itself rather than anything relevant to the misleading conduct in which he engaged. In this, he was an equal participant with Dandris. Those factors may, perhaps, have been relevant to an apportionment against Dandris in the negligence claim referred to below.

Williams made precisely the same misrepresentations as Dandris. Intention is not an element of his liability. They were both vendors of the house.

Each bore equal responsibility for the Pisanos' loss and damage. Justice does not require that Williams be treated differently and more beneficially than Dandris.

THE CLAIM IN NEGLIGENCE

The Pisanos' pleaded case includes a claim in negligence against both Dandris and Williams. They persisted in only the claim against Williams.

The basal propositions contended for by the Pisanos are that Williams owed them a duty of care to avoid causing them economic loss by taking reasonable care in carrying out the renovations and that he breached this duty by: failing to competently supervise the work, failing to select competent sub-contractors, failing to select appropriate materials, fixtures and finishes and inspecting and approving the residential work carried out by sub-contractors where the work was defective and in breach of the statutory warranties.

Williams put in issue both the existence of the duty of care and breach. In addition, he put that if liable, Dandris was a concurrent wrongdoer and there should be an apportionment in his favour on the basis of the same factors identified above in relation to the misleading or deceptive conduct claim. Section 34 of the Civil Liability Act 2005 (NSW) (which is an analogue to s 87CB of the Competition and Consumer Act 2010 (Cth)) would permit such an apportionment.

I am not satisfied that, in the particular circumstances here, Williams owed any such duty to the Pisanos.

Determination of whether there is such a duty and, if so, its scope, requires a close analysis of the facts bearing on the relationship between the plaintiff and the putative tortfeasor by reference to salient features or factors affecting the appropriateness of imputing a legal duty to take reasonable care to avoid harm or injury: Caltex Refineries (Qld) Pty Ltd v Stavar (2009) 75 NSWLR 649 at 676 [102]-[103].

Vulnerability of a plaintiff to harm from a defendant's conduct is a key factor in identifying the scope of a duty of care for pure economic loss: Perre v Apand (1999) 198 CLR 180 (more recently, see The Owners - Strata Plan No 61288 v Brookfield Australia Investments Ltd [2013] NSWCA 317).

There are two critical salient features present here which lead me to conclude that there is no such duty in this case.

First, Williams was a passive participant in the actual construction activity constituting the risk. Whilst I do not accept Williams' evidence as to the extent of his detachment from the project, given that a number of the quotes were addressed jointly to him and Dandris and that he did take some part in the selection of finishes, in substance it was Dandris and not him who was involved with the residential building work. No breach of duty by him, in leaving it to Dandris, was pleaded.

Second, the Act imposes statutory warranties on Dandris as owner-builder. The imposition of a duty of care separately on Williams, as a non owner-builder (and indeed non-builder), does not sit easily with this.

Given my conclusion that Williams did not owe the asserted duty of care to the Pisanos, it is not necessary to deal either with whether Williams breached any such duty or whether, if he was liable, there should be an apportionment between him and Dandris.

CONCLUSION

The Pisanos are entitled to a verdict against both Dandris and Williams.

I calculate the amount to be $1,064,659 plus GST of $106,465, totalling $1,171,124.

I will give the parties an opportunity to consider my calculations and to draw to my attention any arithmetical adjustments that may be necessary. I will stand the matter over to a date to be fixed to enable the parties to address on costs and bring in short minutes.

The exhibits are to be returned.

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Decision last updated: 08 August 2014

Medium Neutral Citation:	Bruno Pisano -v- Georgia Dandris [2014] NSWSC 1070
Hearing dates:	23, 24, 25, 26, 30 June & 1, 2, 3, 4 July 2014
Decision date:	08 August 2014
Jurisdiction:	Equity Division - Technology and Construction List
Before:	Hammerschlag J
Decision:	Verdict for the plaintiffs against the first and second defendants
Catchwords:	BUILDING AND CONSTRUCTION - Home Building Act 1989 (NSW) ss 18B and 18E - defective work - claim for breach of statutory warranties by owner-builder - whether work performed in a proper and workmanlike manner - whether materials used in construction were suitable for the purpose for which they were used - whether dwelling reasonably fit for occupation as a dwelling - assessment of damages for breach of statutory warranties TRADE PRACTICES - Competition and Consumer Act 2010 (Cth) - Australian Consumer Law s 18 - misleading or deceptive conduct - whether conduct consisting of the making of misrepresentations as to the qualities of a domestic residence sold to the plaintiffs was in trade or commerce - whether the conduct viewed in the light of disclaimers in advertising material, acknowledgments in the contract of sale and opportunities given to the purchasers to inspect the residence was misleading or deceptive or broke the chain of causation between the conduct complained of and the damages suffered DAMAGES - quantification of damages for misleading and deceptive conduct consisting of misrepresentations inducing the plaintiffs to purchase a defective dwelling TORTS - negligence - pure economic loss - existence of duty of care - whether owner-builder's husband owed purchasers a duty of care to avoid causing pure economic loss by ensuring work not defectively done TORTS - negligence - pure economic loss - existence of duty of care - whether owner-builderâ€™s husband owed purchasers a duty of care to avoid causing pure economic loss by ensuring work not defectively done
Legislation Cited:	Home Building Act 1989 (NSW) Competition and Consumer Act 2010 (Cth) Civil Liability Act 2005 (NSW)
Cases Cited:	Bellgrove v Eldridge (1954) 90 CLR 613 Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272 Hadley v Baxendale (1854) 9 Exch 341 Fink v Fink (1946) 74 CLR 127 Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514 I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 Henville v Walker (2001) 206 CLR 459 Actic Pty Ltd v Cabool [2004] NSWSC 302 Butcher v Harkins [2001] NSWSC 15 Argy v Blunts & Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112 Franich v Swannell (1993) 10 WAR 459 O'Brien v Smolonogov (1983) 53 ALR 107 Nelson v Bellamy [2000] NSWSC 182 ACCC v Gary Peer & Associates Pty Ltd (2005) 142 FCR 506 Kelly v Wilson [2012] WASC 146 Rasch Nominees Pty Ltd v Bartholomaeus [2013] SASCFC 23 Houghton v Arms (2006) 225 CLR 553 Baxall Securities Ltd v Sheard Walshaw Partnership [2002] EWCA Civ 9 Caltex Refineries (Qld) Pty Ltd v Stavar (2009) 75 NSWLR 649 Perre v Apand (1999) 198 CLR 180 at [118] The Owners - Strata Plan No 61288 v Brookfield Australia Investments Ltd [2013] NSWCA 317).
Texts Cited:	Rawlinsons Australian Construction Handbook 2012 (30th ed, Rawlinsons Publishing)
Category:	Principal judgment
Parties:	Bruno Pisano - First Plaintiff Sia Pisano - Second Plaintiff Georgia Dandris - First Defendant Patrick Francis Williams - Second Defendant Angus Levitt Pty Limited - Third Defendant
Representation:	D.S. Weinberger - Plaintiffs J.A. Jobson - First Defendant S. Jacobs - Second Defendant Gadens Lawyers - Plaintiffs Zelden Solicitors - First Defendant Alexanders Lawyers - Second Defendant
File Number(s):	2012/283119