Squadrito v Theodosi

[2023] NSWCATCD 173

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

Squadrito v Theodosi [2023] NSWCATCD 173

Hearing dates:

29 September 2023

Date of orders:

11 October 2023

Decision date:

11 October 2023

Jurisdiction:

Consumer and Commercial Division

Before:

Graham Ellis SC, Senior Member

Decision:

1   The respondent is to pay the applicants $45,271.00 immediately.

2   The respondent is to pay the costs of the applicants, on the ordinary basis, as agreed or assessed.

3   If either party wishes to contend that a different costs order should be made, order 2 ceases to have effect and the following orders apply:

(a)   Any application for a different costs order, supported by submissions (not exceeding five pages in length) and evidence, is to be filed and served within 14 days of the date of these orders.

(b)   Any submissions (not exceeding five pages in length) and evidence in response are to be filed and served with the following 14 days.

(c)   Any submissions in reply (not exceeding two pages in length) and evidence in reply are to be filed and served within the following 7 days.

(d)   Each party’s submissions should indicate whether they agree that costs should be determined on the papers, ie without the need for a further hearing.

Catchwords:

CONUMER CLAIM – Failure to exercise due care and skill – assessment of damages

Legislation Cited:

Australian Consumer Law (NSW)

Civil and Administrative Tribunal Act 2013 (NSW)

Civil and Administrative Tribunal Rules 2014 (NSW)

Competition and Consumer Act 2010 (Cth)

Fair Trading Act 1987 (NSW)

Cases Cited:

Ashby v Slipper [2014] FCAFC 15

Bellgrove v Eldridge [1954] HCA 36

Bonita v Shen [2016] NSWCATAP 159

Jones v Dunkel [1959] HCA 8

Latoudis v Casey [1990] HCA 59

News v Cotes [2019] NSWCATAP 186

Oshlak v Richmond River Council [1998] HCA 11.

Plastics Pty Ltd v Demir (1975) 132 CLR 372

Thompson v Chapman [2016] NSWCATAP 6

Texts Cited:

None cited

Category:

Principal judgment

Parties:

Applicants – Bianca Squadrito and Julian Gennusa
Respondent – Andrew Theodosi

Representation:

Solicitors:
Applicants – D Sattout, Sattout Legal Pty Ltd

Respondent – B Smith (insurer’s representative)

File Number(s):

GEN 23/24111

Publication restriction:

Nil

REASONS for decision

Outline

1. The applicants engaged the respondent to provide them with a pre-purchase inspection report which failed to include matters, notably termite activity, which it was alleged should have been disclosed. A claim for damages was made. The primary defence was that the termite activity was only able to be detected by invasive testing which the respondent was not obliged to conduct.

2. It was determined that the respondent had not exercised due care and skill and that the applicants were entitled to damages of $45,271.00.

Procedural history

3. After the application was lodged on 24 May 2023, a directions hearing was held on 29 June 2023. On that occasion, the applicants were granted leave to amend their claim and directions were made for the provision of the documents upon which the parties intended to rely at the hearing. A notice dated 27 July 2023 advised the parties of the allocated hearing date.

Hearing

4. The following documents were admitted as evidence:

Exhibit A   Applicant’s documents (pages 1-557)

Exhibit R   Respondent’s documents (pages 1-182)

Exhibit 1   Copy of AS 4349.1 – 2007 (Pre-purchase inspections …)

Exhibit 2   Copy of AS 4349.3 – 2010 (Timber pest inspections)

5. There was no cross-examination of Ms Squadrito but there was cross-examination of the applicants’ expert, Mr Saleh, followed by the respondent’s experts, Mr Hosey and Mr Brook. Rather than rely on an inference based on the failure of the respondent to provide a witness statement, statutory declaration, or affidavit, in accordance with the decision of the High Court in Jones v Dunkel [1959] HCA 8, Mr Sattout sought and obtained leave to question the respondent.

6. That was followed by oral, closing submissions which followed the usual sequence of applicant then respondent then applicant in reply so that each party had an opportunity to speak both in support of their own case and in response to the case of the other party. The written and oral submissions of both parties are summarised below.

Jurisdiction

7. By reference to the provisions of the Fair Trading Act 1987 (the FTA), it is clear that the applicants are consumers (within section 79D) bringing a consumer claim (within section 79E), for a supply of services (within section 79F), and that the supply was made in New South Wales (within section 79K). Section 79L of the FTA limits the time within which a claim can be made and section 79L(1)(a) requires that the cause of action first accrued not more than three years before the commencement of these proceedings. As the events which are the subject of these proceedings occurred earlier this year, these proceedings have been commenced within that time limit. Section 79I of the FTA entitles the applicants to have this claim determined by the Tribunal. Accordingly, the Tribunal has jurisdiction to hear and determine these proceedings under the FTA.

Relevant law

8. The effect of s 28 of the FTA is that the provisions of the Australian Consumer Law (ACL), which is Schedule 2 to the Competition and Consumer Act 2010 (Cth), are part of the law of New South Wales and apply to these proceedings. In the ACL, s 60 provides:

If a person supplies, in trade or commerce, services to a consumer, there is a guarantee that the services will be rendered with due care and skill.

9. In Ashby v Slipper [2014] FCAFC 15 at [77] it was said that:

… as a general proposition, evidence, which is not inherently incredible and which is unchallenged, ought to be accepted: Precision Plastics Pty Ltd v Demir (1975) 132 CLR 372 at 370-371 (per Gibbs J, Stephen J agreeing, Murphy J generally agreeing). The evidence may of course be rejected if it is contradicted by facts otherwise established by the evidence or the particular circumstances point to its rejection.

Applicants’ documents

10. Exhibit A included:

1. statements of the first applicant, Ms Squadrito,

2. photographs,

3. a copy of the respondent’s report (A254, ie from page 254 in Exhibit A or R15, ie from page 15 in Exhibit R), which was the result of an inspection on 20 March 2023, including an unsigned a copy of his pre-inspection agreement (A294/R8),

4. a pest inspection report prepared by Ms Lehkre, based on a 16 May 2023 inspection (A424/R57),

5. Mr Saleh’s reports, based on his 18 May 2023 inspection (A301/R67 and A396/R161),

6. Mr Hosey’s report, based on his 22 June 2023 inspection (A326/R91),

7. Mr Book’s report, based on his 22 June 2023 inspection (A346/R111),

8. quotations,

9. a summary of the amounts claimed by the applicants (A455), and

10. written submissions (A69).

Respondent’s documents

11. Exhibit R contained written submissions (R2). Each of the remaining documents duplicated documents included in Exhibit A, as indicated above. Having checked to ensure the documents are identical, it is therefore convenient to refer to the evidence by reference to Exhibit A.

Oral evidence of Mr Saleh

12. It was confirmed that Mr Saleh’s sole inspection was on 18 May 2023. He also confirmed his opinion that termite damage in the timber sleeper was obvious from a visual inspection, without the need for any invasive testing. He did not accept the contended possibility that the sleeper was disturbed from when the respondent inspected the premises.

13. Mr Salleh also said he saw mud trails between the sleeper and the slab, where the termites entered the slab. His evidence was that what he saw was old damage, indicating termite activity for more than two months and he noted that the timber in question was hardwood. Accordingly, he did not accept that the termite activity had commenced after the respondent’s inspection (which was on 20 March 2023), before his inspection (which was on 18 May 2023) – two days short of two months later.

14. In relation to the tree that was found to have termite activity, Mr Saleh did not accept that such activity was only apparent when the bark was scraped back. Mr Saleh also said that, after seeing matters such as the tree, the sleeper, moisture readings, and inadequate drainage - which were “alarm bells” to him - he examined the window frame in the laundry which revealed termite activity that had not been detected by the respondent. He firmly denied that such activity could have arisen during a period of “two to three months”, and gave clear evidence that, even if any damage had been covered by paint, it was still apparent by tapping that timber as the resulting sound indicated termite activity.

Oral evidence of Mr Hosey

15. When cross-examined, Mr Hosey conceded that access was not entirely obstructed and that it was possible to get “a good look around”. He also conceded that he had to work from photos in the respondent’s report to ascertain the position at the time of the respondent’s inspection due to work that had been subsequently carried out.

16. Mr Hosey contended that the termite damage in the laundry area could not have been detected without invasive investigation. He said he was not able to do moisture measurements and referred to what the respondent said in his report on that topic.

17. This witness also suggested that termites work in a sheltered area so as not to become prey with the result that timber would need to be moved to see them. Further, he suggested that timber decay still gives a drummy sound.

Oral evidence of Mr Brook

18. Mr Brook also suggested termite in the laundry without conducting invasive testing which was beyond what was required by AS 4349 (Exhibit 1). He accepted that the laundry was different by the time he viewed it, as was the condition of the tree. He conceded that termite damage to the timber boundary fence was noticeable. However, he suggested that the damage to the sleepers was “wood decay or fungi”.

19. When asked to explain why different views could be expressed, Mr Brook suggested two reasons, circumstances had changed or incorrect diagnosis, but was not prepared to accept there had been misdiagnosis. It was not until re-examination that Mr Brook suggested that Mr Saleh had his moisture meter on an incorrect setting, and that moisture levels could change over time, between May and June.

20. In view of the late allegation relating to Mr Saleh’s use of a moisture meter, Mr Sattout was permitted to ask both Mr Brook and Mr Saleh questions in relation to that matter. Mr Brook indicated that his view was based on a photo in Mr Saleh’s report at R78 (or A312). Mr Saleh suggested that the meter was set accurately for that photo and explained that the settings had to be different, depending on the surface being tested, such as whether the surface was plasterboard or brick. He maintained that he used the correct settings throughout his inspection.

Oral evidence of the respondent

21. The respondent was taken to the pre-inspection agreement (A372/R8) which contained a list, under the heading “We’ll report on the following significant items”, one of which was “the presence or absence of live termite and timber pest activity”. His attention was also directed to the section headed “Areas for inspection” (A374/R10). He accepted that the laundry was not mentioned in his report but suggested that was because it was part of the dwelling, and not an adjoining structure that needed to be specifically described.

22. It was also noted that the respondent’s report ticked the “Not found” column for both “Live Timber Pest Activity” and “Timber pest Damage”. When asked if damage to wood caused by termites would sound different, the respondent said: “If I could access it”. As to the window frame in the laundry, the respondent claimed he tapped on that timber but did not hear anything different.

23. The respondent agreed that he had access to the floors. When asked how he tested the floor, his answer was “generally visual”. In relation to the sub-floor, the respondent claimed he inspected the significant parts and suggested there was nothing of significance to note, other than debris that should be removed.

Applicants’ submissions

24. The applicants’ written submissions (A69) noted the findings in the respondent’s report and it was suggested they relied on that report by proceeding to purchase the subject property. Reference was made to the reports obtained from Ms Lehkre and Mr Saleh. After noting the minimum standards for property inspections and inspection reports set out in AS 4349, various breaches were alleged. Submissions were made in relation to the reports of Mr Brook and Mr Hosey. Causes of action in contract, negligence, and breaching s 60 of the ACL were said to have been established. A claim for damages was made under eight headings (considered below) and a claim for costs was also made.

25. Oral submissions made the following additional points:

1. The failure to refer to the laundry was a failure to comply with paragraph (b) cl 4.2.3 in AS 4349.1 (Exhibit 1).

2. There was a failure to comply with paragraph (d) of AS 4349.3, which required “An opinion regarding the susceptibility of the building to timber pests” since a suggested absence of termite activity was still an opinion.

3. The fact that invasive work revealed termite activity does not address the question of whether that activity could/should have been discovered without any invasive work.

4. In the respondent’s report, there is no indication of the areas inspected: only of the areas where he found matters on which he reported.

5. It was contended that matters such as sagging floorboard or deformation could and should have been detected visually.

6. There was a failure to report on termite activity in the fence, tree, sleeper, and the laundry.

7. The termite activity in the laundry was said to be detectable by donging, ie tapping with either bare knuckles or a screwdriver and it was suggested that Mr Saleh’s inspection of the laundry included areas not touched since the respondent’s inspection.

8. Termite activity in the tree was seem visually by Mr Saleh and should have been seen by the respondent. The distance from the tree to the house was said to be three metres and from the fence to the house was said to be four metres.

9. Termite activity in the sleeper was discoverable visually and could have been confirmed by tapping that timber.

Respondent’s submissions

26. The written submissions for the respondent (R2) noted that the respondent’s report noted minor defects, noted conditions conducive to termites, and made recommendations. After setting out a chronology, submissions were made in relation to the respondent’s reports, including that: “There was no evidence to suggest the Respondent failed to detect visible evidence of termite activity”. That was followed by submissions in relation to the applicants’ expert reports. The focus of the respondent’s submissions was that live termite activity was not detectable at the time of the respondent’s inspection and could only be discovered by invasive means. Reference was also matter to the matters which were included in the respondent’s report. Submissions were also made in relation to each of the claims for damages made by the applicants (considered below).

27. Additional matters raised in oral submissions were:

1. Any flooring out of level was outside the scope of inspection.

2. The respondent gave evidence that he did inspect the laundry and did sound the laundry window frame.

3. When inspected by Mr Saleh, the property was not in the same condition as when it was inspected by the respondent. Reference was made to the inspections by the respondent on 20 March 2023, Mr Saleh on 18 May 2023, Mr Hosey on 25 June 2023, and Mr Brook on 25 June 2023.

4. High moisture levels are not evidence of termite activity – they are only a matter that is conducive to termite activity.

5. The amounts claimed by the applicant were reasonable, but the respondent should not be held liable because the termite activity was concealed, and reliance was placed on the matters raised in relation to those amounts in the respondent’s written submissions (R6).

Submissions in reply

28. It was contended that any difference in the condition of the premises between the inspections of the respondent and Mr Saleh were minor, especially in relation to the laundry. Further, it was noted that the respondent’s experts had relied more on photos than on their own inspection. There was a submission that the laundry was not part of the main building, and that the laundry was built on a slab whereas the house was built on piers. It was also contended that Mr Brook agreed with Mr Saleh that subsidence was a major defect.

Consideration

Chronology

29. From the evidence, the following chronology of relevant events occurring in 2023 may be prepared:

20 Mar       Respondent conducted inspection and provided report to applicants

23 Mar       Applicants exchanged contracts with the vendor of the property

04 May       Settlement of applicants’ purchase of the property for $870,000

13 May       Laundry renovations commenced

16 May       Pest inspection by Ms Lehrke

18 May       Inspection by the applicant’s expert, Mr Saleh

24 May       Tribunal application lodged

30 May       The respondent re-inspected the property

10 Jun       Demolition of the laundry structure commenced

25 Jun       Inspection by the respondent’s experts, Mr Hosey and Mr Brook

Assessment of witnesses

30. The first applicant provided a witness statement (A82) but was not cross-examined. As her evidence was not contested, and as there is no discernible reason to reject it, her evidence is accepted.

31. There was a suggestion that Mr Saleh did not correctly use his moisture meter but (1) his qualifications and experience weigh against that, (2) his oral evidence in response adequately addressed that allegation, and (3) his finding of high moisture readings was confirmed by the evidence of Ms Lehrke (A427 at [2.5]). Mr Saleh presented as a truthful witness and his evidence is accepted.

32. Ms Lehrke provided a “Visual Termite Inspection Report” (A426) which was not the subject of any challenge or adverse comment, and which is accepted as providing accurate evidence.

33. The respondent did not provide any witness statement, statutory declaration, or affidavit. He only gave oral evidence because the applicant’s solicitor sought and obtained leave to ask him questions. Although accepting that timber damaged by termites would sound different if tapped, the respondent suggested he did tap on the laundry architrave/frame, but it did not sound different. That evidence differs from the evidence of Mr Saleh on that point. To the extent that there is a conflict between the evidence of the respondent and Mr Saleh, the evidence of the independent expert, Mr Saleh, is preferred.

34. The evidence of the respondent is not considered reliable, noting that his evidence was that he inspected a significant part of the sub-floor but did not recall finding anything significant enough to report.

35. Mr Hosey conceded that “There is evidence of termite damage to multiple areas in the fence, this should have been detected and reported on by the Respondent” (A329 at [7.2]). His report suggested that, while conducting his inspection, he did not detect any high moisture in the kitchen or in the wall between the master bedroom and the second bedroom (A330 at [7.5]). As his oral evidence included that he was not able to do moisture measurements, the Tribunal views his evidence with caution since his oral evidence removes any factual foundation for that opinion as to not detecting any high moisture in his report.

36. Mr Brook said, in his report, that “Pre-existing visible termite damage was located to the rear and LHS timber fencing and timber sleepers within the garden bed.” (A355 at [5.10]). He also said that “foundation movement “cracking” has occurred due to the surface water drainage being inadequate” and he agreed with Mr Saleh that was a major defect (A357). Those were the sort of concessions that an independent expert should make.

30. The suggestion if this witness that the damage to the sleeper was due to wood decay or fungi does not help the respondent whose report said there was no evidence of either of those matters (A277).

31. There are two further matters which need to be noted. First, the probative value of the evidence of Mr Hosey and Mr Brook is restricted by the unavoidable fact that the premises were not in the same condition when they inspected, on 25 June 2023, compared to when the respondent inspected, on 20 March 2023.

32. Secondly, to the extent that Mr Hosey and Mr Brook expressed an opinion that the termite activity was not evident without invasive work, their opinions were based on what was revealed after invasive work was done. Such opinions lack probative force by reason of not being based on the factual foundation of how the premises appeared at the time of the inspection by the respondent. In other words, the question of whether the respondent could and should have observed termite activity must be determined by reference to what was visible to him at the time of his inspection and not with the benefit of hindsight, after invasive work was carried out.

33. However, the extent of the damage at the time when Mr Hosey and Mr Brook inspected the premises does stand in the way of any suggestion that the revealed termite activity was recent, such as to be not evident to the respondent on 20 March 2023 but evident less than two months later, to Ms Lehrke on 16 May 2023 and to Mr Saleh on 18 May 2023.

34. It is convenient to here note that a question asked in cross-examination is not evidence, unless the witness agrees with what was put in that question. Accordingly, the suggestion made in the last question in the cross-examination of Mr Saleh, which put a proposition to the effect that the termite activity he saw may have commenced after the inspection by the respondent, is no more than an unsubstantiated allegation. Indeed, such an allegation is contradicted by the nature and extent of the termite activity that was discovered by the applicants on 13 May 2023, one week short of two months after the respondent’s inspection on 20 March 2023.

Findings of fact

42. The Tribunal makes the following findings of fact:

1. The applicants engaged the respondent to conduct a building, termite and timber pest inspection and provide them with a pre-purchase report in relation to a property at Seven Hills. That inspection and report were the subject of a pre-inspection agreement.

2. On 20 March 2023 the respondent inspected the premises and provided a report later that day.

3. After conducting his inspection, the respondent verbally advised the second applicant that no serious defects had been found.

4. That report recorded that there was no Termite Management Notice and that “it appeared as though no termite management system had been installed”.

5. That report did not disclose any major defect, any live timber pest activity, or any timber pest damage and, in relation to each of those three matters, recorded “No evidence was found”.

6. In relation to “Evidence of fungal decay activity and/or damage” and “Evidence of wood borer activity and/or damage”, the report recorded “No evidence was found” in each case.

7. The report said that trees were “susceptible to hidden termite activity” and noted that “Any untreated timbers in direct contact with the ground are likely to be subject to premature rot and decay as are exposed to rain and damp conditions against the timbers, providing an opportunity for termite attack”.

8. The report did recommend that “A termite treatment is required”.

9. At the time of that inspection there was visible evidence of termite activity in a timber fence, located about four metres from the house.

10. At the time of that inspection there was visible evidence of termite activity in a tree, located about three metres from the house.

11. At the time of that inspection there was evidence of termite activity in the window frame in the laundry, which was ascertainable by knocking or tapping that window frame.

12. At the time of that inspection there was evidence of foundation subsidence due to inadequate site drainage, amounting to a major defect under AS 4349.1.

13. The respondent failed to detect or report any of those four matters (ie (9) - (12)).

14. Being unaware of that termite activity, on 23 March 2023 the applicants exchanged contracts with the vendor.

15. On 4 May 2023 the applicants’ purchase of the property was settled.

16. On 13 May 2023, when the applicants commenced renovations of the laundry, they discovered significant evidence of termite activity.

17. That termite activity did not commence after 20 March 2023, when the respondent inspected the premises but had commenced well prior to that inspection.

18. On 16 May 2023 Ms Lehrke conducted a pest inspection and provided a report and on 18 May 2023 Mr Saleh inspected the premises and provided a report.

19. On 30 May 2023 the respondent re-inspected the property.

20. On 10 June 2023 demolition of the laundry structure commenced.

21. Prior to 25 June 2023 invasive work was carried out to determine the extent of the termite activity and damage.

22. On 25 June 2023 Mr Hosey and Mr Brook inspected the premises.

Liability

43. The Tribunal is satisfied that the respondent breached s 60 of the ACL by failing to exercise due care and skill both when inspecting the premises and when preparing his report for the following reasons.

44. First, matters such as the absence of a Termite Management Notice (A270), the apparent absence of any termite management plan (A270), and the high moisture readings referred to in his report (A254) both individually and collectively put the respondent on notice of the prospect of termite activity and termite damage.

45. Secondly, based on the evidence of Mr Saleh, Ms Lehrke and Mr Brook, the respondent failed to detect damage due to termite activity in the fence and sleeper adjoining the laundry. Further, the replacement of timber posts in the fence with metal posts should have attracted the respondent’s attention since that observation would have raised the clear inference of timber damage.

46. Thirdly, based on the evidence of Mr Saleh and Ms Lehrke, the respondent failed to detect damage due to termite activity in the tree.

47. Fourthly, based on the evidence of Mr Saleh and Ms Lehrke, the respondent failed to detect damage due to termite activity in the interior of the premises, notably in the laundry, which damage would have been evident from tapping the laundry window frame. The respondent’s failure to detect that aspect was due to him either (1) not inspecting the laundry, (2) not tapping the window frame, or (3) tapping it but misdiagnosing the sound. It is of no moment which of those three alternatives is correct since they each involve a failure to exercise due care and skill.

48. Fifthly, based on the evidence of Mr Saleh and Mr Brook, the respondent failed to detect, and record as a major defect, evidence of foundation subsidence due to inadequate site drainage.

49. To the extent that the respondent’s report included recommendations and warnings, they do not override the matters listed above as they are matters relating to the prospect of termite activity which cannot excuse a failure to detect termite activity. Put another way, including in a report matters which address the chance of termite activity do not excuse a failure to detect and report actual termite activity.

50. It is accepted that compliance with the relevant Australian Standards did not require the respondent to conduct invasive testing. However, the matters referred to above did not require invasive tests. Further, as indicated earlier, it does not follow from the fact that significant termite activity was revealed by invasive tests that termite activity could not be revealed without such tests.

Damages

51. By reason of s 267(4) of the ACL, quoted below, the applicants are entitled to recover damages provided the amounts claimed are caused by the breach of s 60 and are reasonably foreseeable:

The consumer may, by action against the supplier, recover damages for any loss or damage suffered by the consumer because of the failure to comply with the guarantee if it was reasonably foreseeable that the consumer would suffer such loss or damage as a result of such a failure. (emphasis added)

52. The applicants are clearly entitled to the cost of rectification of defects that should have been identified by an inspector such as the respondent. However, it must be borne in mind that Bellgrove v Eldridge [1954] HCA 36 establishes that the rectification method must be both necessary and reasonable and the rectification cost must be reasonable.

53. The applicants listed seven claims in Exhibit A (A455). Eight claims were made in the applicants’ written submissions (A78). However, the last of those claims was said to be no longer pressed during closing oral submissions. Each of the seven claims which are pressed by the applicants is considered below, noting that the respondent provided written submissions in respect of each claim (R6).

Demolish and rebuild laundry: $30,536 claimed, $30,536 allowed

54. The amount claimed was based on a detailed quote that was provided (A418). That quote covered the cost of demolishing and rebuilding the laundry and the photos included in the applicants’ evidence clearly suggest that work is both necessary and reasonable. Having regard to the work detailed in that quote, the amount claimed appears to be reasonable and the respondent did not challenge the reasonableness of the amount claimed: the only defence to this claim was that the termite activity within the laundry walls was neither visible nor evident at the time of the respondent’s inspection. Since that defence has already been rejected, the Tribunal awards the amount claimed.

Removal of gum tree: $2,500 claimed, $2,500 allowed

55. Again, there is a quotation for the amount claimed (A421) and the work covered by that quote is (1) removal of the tree with termites, (2) stump grinding, and (3) rubbish removal. A similar defence was mounted to this claim, namely that the damage was only identified by invasive testing: scraping back the bark and test drilling. However, as noted above, both Ms Lehrke and Mr Saleh observed termite activity without invasive testing. Again, it does not necessarily follow from the fact that invasive testing revealed termite activity that such activity could not be detected without invasive testing. Having accepted the evidence of Mr Saleh, and the unchallenged evidence of Ms Lehrke, the Tribunal awards the amount claimed as it appears reasonable and there has been no submission to the contrary.

Termite elimination: $5,520 claimed, $5,520 allowed

56. A quote dated 20 June 2023 was provided in support of this claim (A434). The work covered by that quote was for the eradication of termites, said to have been carried out on 27 June 2023. That quote was not for the installation of a termite management system, as recommended by the respondent, being a system that is likely to be required in future, if only as a precaution. The cost of removing the termites which the respondent failed to detect is allowed.

Mortgage repayments: $4,762.95 claimed, no amount allowed

57. The first applicant provided evidence that her family had intended to move into the premises at the beginning of June, but it was not considered safe to do so until the rectification work was undertaken (A83 at [11]). It was also said that the repayments for a two-month delay would amount to $9,525.90 (A83 at [12]). The amount claimed is for half that amount since it was suggested that the applicants were unable to occupy the property during the month of June.

58. The respondent contended that the applicants had not provided evidence that the property was uninhabitable, and that the property contained a fully functional bathroom.

59. It is reasonable to not occupy a property while significant termite eradication work is undertaken and a one month claim for June 2023 is considered reasonable. However, while a business record was provided in support of the claim for $4,762.95 (A443), there is no indication of the amount borrowed, the interest rate, or whether that amount covers only interest or interest and principal.

60. The Tribunal notes there was a claim for $3,600, said to arise from the need to rent a property for three months at a cost of $1,200 per month. However, no rental agreement was provided and that claimed was not pressed.

61. As the applicants bring this claim, they bear the onus of proof. They have not provided sufficient evidence of their loss. It follows that this claim must be rejected.

Repair wall crack: $2,970 claimed, no amount allowed

62. This claim was for the cost of repairing a wall crack, indicated by a quote (A444). However, as was noted in the respondent’s submissions, the respondent reported on cracking and this cost does not appear to have been caused by a breach of s 60 of the ACL by the respondent. Hence, this claim is rejected.

Repair subsidence: $6,985 claimed, $6,985 allowed

63. This claim relates to the repair of foundation subsidence due to inadequate site drainage, an issue that was not identified by the respondent as a major defect and has been found to involve a breach of s 60 of the ACL. The respondent’s submission in relation to this claim was that soil conditions were excluded from the scope of the inspection.

64. As the amount sought is based on foundation subsidence, which should have been recorded as a major defect, the applicants are entitled to be awarded the amount claimed, which appears to be reasonable for the work involved.

Concrete cancer repair: $2,000 - $3,000 claimed, no amount allowed

65. The applicants’ submissions conceded that they did not have a quote for this work. Even if this claim could be linked to a breach of s 60 of the ACL, to provide a basis for the respondent being liable, there is no suitable evidence in support of the amount claimed. Accordingly, this claim is rejected.

Summary

66. Adding the amounts which the Tribunal considers the applicants are entitled to be awarded as damages, namely $30,536, $2,500, $5,250, and $6,985, gives a total of $45,271.

Costs

67. In the Civil and Administrative Tribunal Act 2013, the effect of s 60 is that each party is to bear their own costs unless there are special circumstances which warrant an order for costs.

68. However, s 35 of that Act operates to make s 60 subject to Rule 38 of the Civil and Administrative Tribunal Rules 2014 which provides as follows:

1. This rule applies to proceedings for the exercise of functions of the Tribunal that are allocated to the Consumer and Commercial Division of the Tribunal.

2. Despite section 60 of the Act, the Tribunal may award costs in proceedings to which this rule applies even in the absence of special circumstances warranting such an award if:

1. the amount claimed or in dispute in the proceedings is more than $10,000 but not more than $30,000 and the Tribunal has made an order under clause 10(2) of Schedule 4 to the Act in relation to the proceedings, or

2. the amount claimed or in dispute in the proceedings is more than $30,000.

69. When rule 38 applies there is a general discretion to award costs and it is well established, by decisions such as News v Cotes [2019] NSWCATAP 186, Bonita v Shen [2016] NSWCATAP 159 and Thompson v Chapman [2016] NSWCATAP 6, that: (1) the starting point is that the usual order for costs should be in favour of the successful party, (2) the award is not to punish the unsuccessful party but to compensate the successful party for the costs incurred in the proceedings, and (3) departure from the usual order is permissible if the circumstances favour that course of action.

70. Simply stated, when rule 38 applies it is not necessary to establish special circumstances and the usual order is that costs follow the event (ie follow the outcome of the case) unless there is disentitling behaviour by the successful party: Latoudis v Casey [1990] HCA 59, Oshlak v Richmond River Council [1998] HCA 11.

71. As the applicants claimed more than $30,000, it would appear they are entitled to an order that the respondent pay their costs. However, since the question of costs was not the subject of submissions during the hearing, the practical course is to make an order for costs that will apply unless there is an application for a different order and to make directions that will apply if there is such an application.

Orders

72. For the reasons set out above, the following orders are made:

1. The respondent is to pay the applicants $45,271.00 immediately.

2. The respondent is to pay the costs of the applicants, on the ordinary basis, as agreed or assessed.

3. If either party wishes to contend that a different costs order should be made, order 2 ceases to have effect and the following orders apply:

1. Any application for a different costs order, supported by submissions (not exceeding five pages in length) and evidence, is to be filed and served within 14 days of the date of these orders.

2. Any submissions (not exceeding five pages in length) and evidence in response are to be filed and served with the following 14 days.

3. Any submissions in reply (not exceeding two pages in length) and evidence in reply are to be filed and served within the following 7 days.

4. Each party’s submissions should indicate whether they agree that costs should be determined on the papers, ie without the need for a further hearing.

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I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.

Registrar

Decision last updated: 09 August 2024