Swan v Residential Reports Pty Ltd ACN 609 880 122

Case •

[2020] ACAT 76

•

28 September 2020

ACT CIVIL & ADMINISTRATIVE TRIBUNAL

SWAN & ANOR v RESIDENTIAL REPORTS PTY LTD ACN 609 880 122 (Residential Tenancies) [2020] ACAT 76

XD 912/2019

Catchwords:               CIVIL DISPUTE – dispute about building report provided for purchase of property – guarantees under Australian Consumer Law – whether there was a lack of due care and skill and not fit for purpose – whether misleading and deceptive conduct under the Australian Consumer Law - whether building report complied with statutory requirements and Australian Standards – damages awarded

Legislation cited:        ACT Civil and Administrative Act 2008 ss 39, 74

Australian Consumer Law ss 18, 60, 61, 236, 267

Civil Law (Sale of Residential Property) Act2003 ss 9, 19, 36

Subordinate

Legislation cited:        Australian Standard AS4349.1 – 2007 Inspection of Buildings (Pre-purchase inspections – Residential buildings)

Civil Law (Sale of Residential Property) Regulation2004 s 7

Cases cited:Alexandrou v Pacific Pest Control [2016] NSWDC 193

Delaney v Winn [2015] NSWCA 124
Selby v Expedia Australia Pty Ltd & Anor [2018] ACAT 124

Tribunal:  Senior Member L Beacroft

Date of Orders:  28 September 2020

Date of Reasons for Decision:         28 September 2020

AUSTRALIAN CAPITAL TERRITORY          

CIVIL & ADMINISTRATIVE TRIBUNAL           XD 912/2019

BETWEEN:

TIMOTHY LEONARD SWAN

JAMIE LOUISE SWAN

Applicants

AND:

RESIDENTIAL REPORTS PTY LTD ACN 609 880 122

Respondent

TRIBUNAL:     Senior Member L Beacroft

DATE:28 September 2020

ORDER

The Tribunal orders that:

  1. By 5:00pm Wednesday 28 October 2020, the respondent is to pay the applicants the sum of $2,225.96, comprising:

(a)$1,694 in compensation

(b)$106.96 interest

(c)$425 refund for the building report

  1. The USB in the possession of the applicants or Mr Bunn, of the inspection photos, be returned to the Tribunal by 5:00pm Monday 26 October 2020.

  2. A decision on costs is reserved, to allow either party to make submissions by 5:00pm Friday 27 November 2020 on the issue of compliance with Orders during the proceedings and costs, after which time the Tribunal will publish a decision on costs and any related issues.

  3. Order 8 of the orders dated 30 March 2020 restricting publication of evidence and information contained in documents in these proceedings is set aside from 28 September 2020.

The Tribunal notes:

The parties’ attention is drawn to sections 39, 48 and 49 the ACT Civil and Administrative Act 2008.

………………………………..

Senior Member L Beacroft

REASONS FOR DECISION

  1. The Tribunal makes the orders set out above. The reasons for the orders are set out in detail below. In summary, the onus is on the applicants to prove their case. There were two disputed issues: whether the respondent’s building report dated 22 October 2018 on a property that the applicants ultimately purchased breached legislative requirements, and if so, what damages are payable. The Tribunal finds that the respondent breached the Civil Law (Sale of Residential Property) Act2003 (the Act) in that the building report was prepared without the exercise of reasonable skill and care, predominantly because it was not compliant with legislative requirements under the Act. The Tribunal also finds that the respondent breached statutory warranties under the Australian Consumer Law (ACL) in that the building report was prepared without due care and diligence and not fit for purpose contrary to section 60 of the ACL, again predominantly because it was not compliant with legislative requirements under the Act. A key finding is that the respondent was required under the Act to appraise the windows and this included limited testing of the operation of the sash operations, but this was not done and there is no evidence that there were limitations to doing this at the inspection. These findings alone support consideration of what damages are payable to the applicant. Therefore, the Tribunal did not find it necessary to make findings about whether the respondent engaged in misleading or deceptive conduct contrary to section 18 of the ACL. The total sum of damages claimed by the applicant was not proved and the Tribunal awards the sum of $2,225.96.

Background

  1. Timothy and Jamie Swan (the applicants) sought orders for compensation from Residential Reports Pty Ltd (the respondent).

  2. The brief background to this matter is that various documents including a pest inspection, energy inspection and a building report, were prepared by the respondent and supplied to the applicants (the report) as part of the contract for sale for a property in Higgins ACT (the property) that the applicants later purchased. This report included a ‘required document’ for a contract for sale in the ACT, being a ‘building and compliance inspection report’ (the building report) under the Act. [1] The applicants only claim compensation in relation to the building report, not other contents of the report.[2]

    [1] Section 9(1)(h)(ii) and (iii)

    [2] Transcript of proceedings 15 May 2020, page 22

  3. Along with receiving the contract for sale which includes the respondent’s building report, the applicants and/or their representative, Peter Bunn, inspected the property on 17 and 24 November 2018. Mr Bunn attended the auction on 8 December 2018, and the applicants became the owners of the property on 4 April 2019. The applicants claim that they relied on the building report prepared by the respondent, and that after taking ownership of the property they discovered significant defects at the property not identified in the building report. They claim $23,972 for compensation. They also claim a refund of the cost of the building report being $1,225 (note, only $425 of this was for the building report), plus re-imbursement of the filing fee of $159.50, a search fee of $9, the cost of the Standard $113.12, the cost of two reports by tradespersons for $400 and $132, plus interest from 24 June 2019.[3]

    [3] Applicants’ Second Amended Civil Dispute Application 15 April 2020, page 3

  4. The respondent denies any liability and disputes the damages claimed.

History of proceedings

  1. The applicants first raised concerns about “significant defects in 8 windows and the external fascia corners” with the respondent in a letter dated 11 April 2019.[4] The matter did not get resolved. The applicants filed an application with the ACT Civil and Administrative Tribunal (ACAT or the Tribunal) on 18 July 2019. The ACAT conducted an initial hearing on 4 December 2019. Various exhibits were accepted into evidence at this hearing. At the conclusion of the hearing the Tribunal made further orders, in part to allow the parties to co-operate so that the respondent could conduct an inspection at the property if they wished. A further order was made on 31 March 2020 to enable the respondent to conduct an inspection at the property. Subsequently there were numerous hearings for interim orders and subpoenas, further submissions and evidence filed, and further hearings were conducted on 15 May and 11 June 2020.

    [4] Applicants’ Second Amended Civil Dispute Application 15 April 2020, Annexure 16

  2. During the proceedings there were issues raised by the respondent about a website that contained information about the proceedings. The Tribunal made an order on 30 March 2020 as follows:

    The parties are prohibited from the publication of evidence given at any hearing in these proceedings, and are also prohibited from the publication of matters contained in documents filed with the Tribunal or received in evidence by the Tribunal for any hearings in these proceedings (refer to s39 ACT Civil and Administrative Tribunal Act 2008). If either party or Mr Bunn has to date published material referred to in this Order on any website that they control, then they are required to make every reasonable attempt to stop its ongoing publication by removing it by COB 1 April 2020.

    This order is set aside as part of the final orders - no request for this order to continue was made and in any case the decision is public.

  3. After the order dated 30 March 2020 set out above was made, the respondent claimed at various times that the applicants were not complying with the order and the applicants have denied this.[5] The final orders therefore include an order reserving the Tribunal’s decision on costs, and to allow either party to make submissions on the issue of compliance with orders during the proceedings and costs.[6]

    [5] Transcript of proceedings 11 June 2020

    [6] Transcript of proceedings 15 May 2010, pages 9, 24, 30-32

  4. At the end of the first hearing on 4 December 2019 the respondent raised that it had not been able to conduct an inspection of the property during the proceedings,[7] and the Tribunal made orders and adjourned in part to enable this to occur. The Tribunal made further orders to enable an inspection on 13 January 2020. The respondent did not conduct an inspection. While the respondent stated in its final submission, dated 19 June 2020, that “access was denied by the applicant,”[8] the respondent stated in its earlier evidence and submissions that “on advice” it decided not to conduct an inspection.[9]

    [7] Transcript of proceedings 4 December 2019, pages 106-107, 114-118

    [8] Respondent’s Further Submission, at [19]

    [9] Respondent’s Submission, dated 1 May, page 14; Transcript of proceedings 15 May 2020, pages 72, 76

  5. It emerged during the first hearing on 4 December 2020 that not all the photos held by the respondent from the inspection conducted on 2 October 2018 had been filed and served. Subsequently, electronic copies of the photos were provided by the respondent. The photos included some showing parties outside these proceedings. On 30 March 2020, the Tribunal ordered that the applicants and Mr Bunn were not to copy or publish the photos and are to return the USB of these photos to the Tribunal at the end of the proceedings. The final Orders contain such an Order.

Building report

  1. The building report followed an inspection by Scott Maher of the property conducted on 2 October 2018. Numerous photos from the inspection were in evidence, and they show that the property was unfurnished at the time of the inspection and with limited window furnishings.

  2. Relevant parts of the building report are summarised or extracted below.

  3. In the building report summary, it states: “the dwelling’s…condition is commensurate with the era of construction, design, age and use.”[10]

    [10] Building report, page 3

  4. In the section titled “Property Access”, it states: “interior – our inspection of the interior was restricted by window treatments…[and] roof exterior – access was restricted…regulations required a top of ladder inspection.”[11]

    [11] Building report, page 4

  5. In the section “Property Report, Scope of Inspection,”[12] the building report states:

    It is our role to conduct a thorough visual inspection of the property and report only on areas of concern, identifying critical defects for an intending purchaser, insofar as an inspector can reasonably identify those defects. When reading this report, the age of the building must be taken into consideration. Some items may not have been detailed as they are considered a normal occurrence or general wear and tear for a building of this age…The report is not designed to quantify features of the property, generally, ongoing maintenance items, upgrading, cosmetic works and minor defects or faults will not be detailed.

    [12] Building report, page 5

  6. In that same section, Australian Standard AS 4349.1-2007, 2.3.1 is quoted as follows:

    The inspection shall comprise visual assessment of the property to identify major defects and to form an opinion regarding the general condition of the property at the time of the inspection.

  7. In a section titled “What our Inspector Examines”, relevant extracts of the building report are set out below:[13]

    [13] Building report, page 6-10

    Interior

    Entrance …doors and windows internal – good

    Bedroom One…doors and windows internal – good

    Bedroom Two…doors and windows internal – fair to good-there is minor impact damage to the door, repairs are considered discretionary

    Bedroom Three… doors and windows internal – good

    Bedroom Four… doors and windows internal – good, the cupboard doors are binding with the floor–adjustments are recommended

    Bathroom… doors and windows internal – good…

    Toilet… doors and windows internal – good…

    Laundry… doors and windows internal–good…

    Kitchen and Dining area… doors and windows internal – good…

    Living Room… doors and windows internal – good…

    Hallway… doors and windows internal – good…

    Exterior

    Roof waterproof integrity and roof drainage is not tested….it is not possible to determine the effectiveness of the roof cover and drainage system…

    Eaves, Fascia and Barge Ends- Overall condition: no significant defects…

    Doors and Windows external-Overall condition: no significant defects”

  8. Ratings used in the building report are defined in the building report as follows:[14]

    No significant defects: inspector has not identified any defects that are considered to be significant from a structural or functional perspective. The subject area may present with minor defects. Remedial action, if required, is discretionary,

    Good: The feature subject to comment is, in the inspector’s opinion, of sufficient standard to not require any significant remedial action. There may be imperfections”, and in a note “[T]he features and finishes considered ‘good’ in a 50 year old building are not necessarily going to be so in a modern dwelling, and

    Fair: The feature subject to comment is in the inspector’s opinion, is usable but has deteriorated and would benefit from cosmetic or remedial repair work. For instance, painting may be required, render may require patching, and door fittings may require adjustments or repair, and

    Poor: The feature subject to comment is, in the inspector’s opinion, requires remedial action. Repairs or replacement are considered necessary rather than discretional.

    [14] Building report, page 5

  9. In a section titled “Warranty & Use of Our Reports”, the report states the following:[15]

    The report is only an opinion of [the respondent] and is valid for [180 days] from the date of inspection…No liability will be accepted or claims considered after the expiration of this period of liability…If it is claimed that a defect has not been documented or it is claimed that there is any other omission…[the respondent] must be notified in writing before ANY action is taken, NO LIABILITY shall be accepted where costs for remedial action or professional advice are incurred by the claimant prior to [the respondent] receiving written notification of the defect or omission, given a reasonable opportunity to re-inspect the property, identify the defect or omission, obtain professional advice  and propose a resolution. Unless costs are specified and agreed in writing, no liability will be accepted…

    Please feel free to contact our inspector at any time if you have questions or require clarification prior to acting on this report.

    [15] Building report, page 15

  10. The relevant text in a section titled “What the Inspector Examines to Prepare a Property Report” is as follows: [16]

    [T]he following pages show (but do not limit) aspects of the property that may be examined where visual inspection is possible. These items have been extracted from the Australian standard AS4349.1-2007 Inspection of buildings (Pre-purchase Inspections – Residential buildings)…The Inspector did not move or remove any wall coverings, floor coverings, furnishings, equipment, appliances, pictures, or other household goods. In an occupied property, these items may be concealing defects…

    Internal & external Doors and Door Frames-Binding doors, defective hardware – significant, rotting. corroded frames, loose fitting doors, damage…

    …Metal Windows - …corrosion (metal) sills, fittings/hardware, damage. In most cases access to windows is restricted by window treatments or security locks…Sash windows sometimes require maintenance to the window balance mechanism or sash cords. We are not able to guarantee that windows will operate smoothly. Sometimes window runners, sashes and balance mechanisms will require maintenance or replacement…

    External …Fascias…barge ends- It is important to note that a visual inspection of the roof…may not identify roof leakages…Repainting of timber can mask the existence of timber rot. We cannot guarantee that all timbers are sound. A visual inspection may not in some circumstances, detect roofing affected by rot

    [16] Building report, page 16-17

  11. In the section titled “Scope and Limitations of Our Inspection” the report states:[17]

    This report has been prepared as a result of a VISUAL INSPECTION with reference to the requirements of Australian Standard AS4349.0-007 Inspection of Buildings (General requirements), AS4349.1-2007 (Inspection of Buildings (Pre-purchase inspections – Residential Buildings) [and another for pest inspections]. It is limited to the condition of those areas that were fully accessible (see Safety and Reasonable Access) and visible to the inspector at the time of the inspection

    [17] Building report, page 18

  12. The report then lists exceptions including “garage door opening mechanisms”, “window treatment”, and goes on to state: [18]

    The report is valid on the date of inspection. No responsibility is accepted for any matter not existing or evident or for any deterioration occurring after the inspection date…

    The inspection is completely visual. Concealed areas where access is unavailable are unable to be inspected and are not reported on; such defects could include but are not limited to …broken window mechanisms (sash cords)…

    No responsibility can be accepted for defects which are latent or otherwise not reasonably detected on a visual inspection without interference with or removal of any of the structure including fixtures, fittings, furniture, insulation or stored items within and around the building.”

Under the heading “Safety & Reasonable Access”, it sets out the following:[19]

The extent of accessible areas shall be determined by the inspector at the time of the inspection…. The inspection shall include only accessible areas and areas that are within the inspector’s line of sight and close enough to enable reasonable appraisal. Australian Standard 4349.3 defines reasonable access as ‘areas where safe, unobstructed access is provided and the minimum clearances are available, or, where these clearances are not available, areas within the consultant’s unobstructed line of sight and within arm’s length. Note, Reasonable access does not include removing screws and bolts to access covers.’

Reasonable access [to a roof exterior includes] accessible from a 3.6m ladder.

[18] Building report, page 18

[19] Building report, page 19

  1. Finally, in a section titled “Property Report” the report relevantly states the following:[20]

    The purpose of this Report is to identify major defects or faults in the building…Generally, ongoing maintenance items, upgrading requirements, cosmetic works and minor defects or faults have not been included.

    Visible timbers have not been destructively probed or hit

Law

[20] Building report, page 20

  1. The respondents in this case agreed that they owed a duty to the buyer, the applicants. The building report reflects provisions in the Act and states that it is written for both the client (the seller in this case) and the purchaser of the property (the applicants in this case).[21]

    [21] Building report, page 15

  2. The Australian Consumer Law, Schedule 2 to the Competition and Consumer Act 2010 (ACL), applies in this case. The applicants claim various breaches by the respondent of the ACL. In particular, the applicants claim that the building report coupled with the respondent’s website was misleading conduct, that the building report was not fit for a particular purpose and that it was prepared without due care and skill. Under section 18 of the ACL, conduct that is misleading or deceptive or that is likely to mislead or deceive is prohibited. Section 60 provides for a guarantee that services will be rendered with due care and skill, and section 61 provides for a guarantee that services will be reasonably fit for a particular purpose that the consumer expressly or by implication makes known to the supplier. Compensation for breaching these provisions of the ACL can be claimed under sections 236 and 267(4) of the ACL.[22]

    [22] Applicants’ Second Amended Civil Dispute Application 15 April 2020, Annexure 2

  1. The Civil Law (Sale of Residential Property) Act 2003 (the Act) and Civil Law (Sale of Residential Property) Regulation2004 (the Regulation) are applicable to this case. In some circumstances, under section 19 of the Act compensation can be claimed by the buyer against the person who prepared the building report. The Act provides for compensation to be payable where a buyer incurs loss or expense because a report or statement required under that Act is “false or misleading in a material particular” or is “otherwise prepared without the exercise of reasonable skill and care.”

  2. The Regulation requires the building report to be compliant with a standard developed by Standards Australia, as modified by the Regulation, and the applicant claims it was not compliant.[23] As explained above, under the Act the building report was a required document to be included in a contract for sale for the property. The Regulation sets out various requirements for the building report, including that it complies with the Standard, Australian Standard AS4349.1 – 2007 Inspection of Buildings (Pre-purchase inspections – Residential buildings) (the Standard) as modified under section 7.7.

    [23] Applicants’ Second Amended Civil Dispute Application 15 April 2020, Annexure 2

  3. The building report is dated 22 October 2018, and states that it is valid for 180 days and no liability will be accepted for claims made after that time has expired i.e. after 20 April 2019.[24] But the ACL and the Act cannot be excluded by the contract and there is no such time limits to making claims under those laws. However, the more time that has passed from the date of a report to the date that the claim is raised then the more evidentiary issues arise in proving it – the Act reflects this in that it requires any inspection to be conducted no more than three months prior to when a property is first advertised.[25] In any case, the applicants did first raise, in a letter dated 11 April 2019, their concerns about significant defects not identified in the report i.e. within the 180 days. But even if they had not, legally their claim would not have been barred by the respondent’s time limit set out in its building report.

The Standard

[24] Building report, page 15

[25] Section 9(1((h)(iii) of the Act

  1. The Standard referred to in the Act and the building report relevant in the case is the Australian Standard AS4349.1 – 2007 Inspection of Buildings (Pre-purchase inspections – Residential buildings). This is part of a series of standards referred to as AS4349 Inspection of Buildings that have been developed by and are available from Standards Australia.

  2. The building report that is the at the centre of these proceedings was required to meet requirements set out in the Act and Regulations, including that it complies with the Standard as modified (refer to paragraphs 26-27 above). The Standard that applies is the 2007 edition, which replaced the 1995 edition. According to the Standard, the current edition made a number of changes to the 1995 edition. The Standard sets out various limits, for example it states that complying with the standard is “not intended to include a rigorous assessment of all building elements;”[26] rather, it sets out the “minimum requirements for a visual inspection of buildings.”[27]

    [26] The Standard, Foreword, page 5

    [27] The Standard, Preface, page 2

  3. The inspector is required to be competent, although the appraisal is subjective.[28] Inspection refers to a “close and careful scrutiny of a building carried out without dismantling, in order to arrive at a reliable conclusion as to the condition of the building.”[29] The inspector must appraise the building elements, which includes the interior and the exterior as set out above, for the presence of defects[30] and record these.[31] An inspector may choose to report only on an exceptions basis,[32] and in the ACT the inspector must identify in the building report “each major defect observed”[33] but not minor defects. ‘Major defect’ is defined in the Standard as:

    A defect of sufficient magnitude where rectification has to be carried out in order to avoid unsafe conditions, loss of utility or further deterioration of the property.[34]

    [28] The Standard, Forward, page 5

    [29] The Standard, 1.4.7, page 8

    [30] The Standard, 3.3, page 13

    [31] The Standard, 3.4, page 14

    [32] The Standard, 4.1, page 15

    [33] The Standard, 4.2.4.1, page 16

    [34] The Standard, Definitions, 1.4.10, page 8

  4. The report must identify “any observed item that may constitute a present or imminent serious safety hazard”.[35] If an inspector cannot meet the minimum requirements summarised above, i.e. encounters a “limitation” – defined as “any factor that prevents full or proper inspection”[36] – then the report must identify what was not inspected and the factor that prevented inspection.[37] The inspection needs to be done safely, and is determined by the inspector and as provided for in the Standard. In addition, “the inspector shall inspect only accessible areas…within the inspector’s line of sight and close enough to enable reasonable appraisal”; for elevated areas, safe access means that which is “accessible from a 3.6m ladder placed on the ground.[38]

    [35] The Standard, 4.2.4.3, page 16

    [36] The Standard, 1.4.10, page 8

    [37] The Standard, 4.2.5, page 16

    [38] The Standard,3.2.2, page 12-13

  5. The Standard has commentary that the “report be clearly written.”[39] Facts, interpretations, and conclusions should be “clearly and comprehensively presented in the report”, and the report should demonstrate a “logical and rational approach.”[40] It notes the following about reports based on templates or ‘check box’ format:

    Where reports involving standard clauses are used…care should be taken to ensure that sufficient and unambiguous detail, relevant to the particular inspection, is included.[41]

Applicants’ contentions

[39] The Standard, C4.1, page 15

[40] The Standard, C4.1, page 15

[41] The Standard, C4.1, page 15

  1. The applicants claim compensation for breach of the statutory guarantees under the ACL, and also breach of the Act.

  2. The applicants claim that the respondent made statements on their website and Facebook page that promoted itself as a “premier presale building…inspection service”,[42] but that these sites did not explain the standard limitations to pre-sale building reports as presented by the respondent in these proceedings. Also, the respondent did not undertake the inspection with due care and skill, and in a manner consistent with the applicable Standard as required under the Act. Also, the building report was not fit for the purpose required by the Act including to provide pre-sale information about the property to the applicants, the buyers.

    [42] Applicants’ Second Amended Civil Dispute Application 15 April 2020, [2]

  3. During the purchase process the applicants confirmed that they or Peter Bunn inspected the property. At a critical inspection on 24 November 2018, the applicants contend that they used the respondent’s building report to double-check on the status of issues identified in the building report, and found that they were either rectified or not of a nature to dissuade them from purchasing the property.[43] They confirmed in their evidence that they did not personally test the operation of any of the windows or the doors when inspecting the property.[44] They confirmed in their evidence that they did not personally visually check the fascias during these inspections.[45] Mr Bunn estimated that he spent five minutes when inspecting the property on 17 November 2018 making sure that the property was consistent with the photos presented by the agent, but he did not personally have a copy of the building report at that time.[46] Mr Bunn estimated that the applicants spent at most 15 minutes, “it wasn’t a long time”, inspecting the house on 24 November 2019,[47] and Mr Swan estimated that he stayed about 30 minutes at that inspection.[48] Mr Bunn stated that he attended the auction on 8 December 2018, 15 minutes prior to it starting without the applicants,[49] and subsequently neither he nor the applicants participated in any pre-settlement inspection.[50] The applicants contend that the content of the respondent’s building report was a critical factor in their decision to purchase and the price they paid, being higher than they originally offered.[51]

    [43] Applicants’ Second Amended Civil Dispute Application 15 April 2020, [18] and Annexure 7B; Transcript of proceedings 15 May 2020, page 14

    [44] Transcript of proceedings 4 December 2019, page 14, line 47; Transcript of proceedings 15 May 2020, pages 13, 28

    [45] Transcript of proceedings 4 December 2019, page 23; Transcript of proceedings 15 May 2020, page 13

    [46] Transcript of proceedings 4 December 2019, page 48-49; Transcript of proceedings 15 May 2020, page 65

    [47] Transcript of proceedings 4 December 2019, page 48-49

    [48] Transcript of proceedings 15 May 2020, page 12

    [49] Applicants’ Second Amended Civil Dispute Application 15 April 2020, [22]

    [50] Transcript of proceedings 15 May 2020, page 66

    [51] Applicants’ Second Amended Civil Dispute Application 15 April 2020, [18.5, 22-23], Annexure 11

  4. The applicants’ evidence was that they and/or Peter Bunn reviewed the respondent’s website, Facebook pages, and also called the respondent around 26 November 2018 to better understand the building report and to obtain a copy of the Standard, given the weight they placed on the respondent’s building report in the pre-sale negotiations. The applicants’ evidence was that they were advised by someone at the respondent’s office that it was not necessary to read the Standard, and that it could be located by a Google search.[52] A later inquiry made by Peter Bunn of the respondent during these proceedings, where he used a pseudonym, returned a similar response in that the respondent’s staff member advised that the Standard could be located at Access Canberra or a Google search.[53] The applicants and Mr Bunn did not have a copy of or read the Standard until after the property was purchased. The applicants ultimately purchased a copy of the Standard for these proceedings, and free copies are not available.

    [52] Applicants’ Second Amended Civil Dispute Application 15 April 2020, [19]

    [53] Applicants’ Second Amended Civil Dispute Application 15 April 2020, [53]

  5. Upon moving into the property, the applicants became aware of problems with the operation of windows, a door to bedroom 1, and with the fascia corners of the house. Peter Bunn photographed these at this time.[54] The applicants wrote to the respondent in a letter dated 11 April 2019 advising of their concerns and referring to “significant defects in 8 windows and the external fascia corners.”[55] The applicants noted in their evidence that the building report described the “doors and windows – internal” as “good” except in bedroom 2 where they were described as “fair to good” due to some damage to a door.[56] Mr Bunn stated in his oral evidence that even on a visual inspection the problems with the windows, being gaps between the windows and the walls, rubber seals missing or degraded, were able to be detected. However, the respondent’s building report did not identify these.[57] Similarly, the applicants contend that the damage to the fascias was visible, not properly investigated, and a defect that should have been noted in the building report. After some communications between the parties the respondent advised the applicants in an email dated 24 June 2019 that the building report and inspection relates to “major maintenance and structural defects” and that its scope and limitations is that provided to the client prior to the inspection.[58] The applicants became aware then that the scope and limitations of the building report according to the respondent was that the inspection is a visual inspection only, the operation of windows is not within the scope of the report, and that only major defects are identified.

    [54] Applicants’ Second Amended Civil Dispute Application 15 April 2020, [27] Annexure 14

    [55] Applicants’ Second Amended Civil Dispute Application 15 April 2020, [30] Annexure 16

    [56] Applicants’ Second Amended Civil Dispute Application 15 April 2020, [28] and Annexure 15

    [57] Transcript of proceedings 4 December 2019, page 32

    [58] Applicants’ Second Amended Civil Dispute Application 15 April 2020, [35] and Annexure 19

  6. Mr Bunn stated in his oral evidence that the building report was written poorly such that it was hard to work out “what it is in and out [of scope]”, “it’s very much…you work it out for yourself, and that’s not the way it should be presented by a service provider under the [ACL].”[59]

    [59] Transcript of proceedings 4 December 2019, page 21

  7. The applicants confirm that the building report refers to it being the result of a visual inspection only.[60] However, they contend that what this involves is not explained in the report and must be interpreted in conjunction with the applicable Standard.[61] The applicants also contend that the building report itself suggests that the nature of the inspection involves some testing e.g. of tiles and doors.[62]

    [60] Applicants’ Second Amended Civil Dispute Application 15 April 2020

    [61] Applicants’ Second Amended Civil Dispute Application 15 April 2020, [47]

    [62] Applicants’ Second Amended Civil Dispute Application 15 April 2020, [48]; Transcript of proceedings 15 May 2020, page 29

  8. Regarding the windows, the applicants contend that an inspection if done consistent with the Standards should have led the inspector to identify the defects in the operation of all the window sashes and also all the window flashings.[63] Mr Bunn stated that despite the visible issues with the windows, there was nothing in the building report that “identified even a warning sign on the windows…even if you said ‘These windows are old’…but you said nothing except ‘good.” ’[64] According to the applicants, the defects with the flashing and seals, visible at the inspection, also support replacement.[65] The defects in the windows are such that they constitute a safety hazard which must be reported under the Standard, given advice from ACT Fire and Rescue that windows should be able to be unlocked and opened easily.[66]

    [63] Applicants’ Second Amended Civil Dispute Application 15 April 2020, [50-51]; Transcript of proceedings 15 May 2020, page 50

    [64] Transcript of proceedings 4 December 2019, page 65

    [65] Applicants’ Second Amended Civil Dispute Application 15 April 2020, page 70

    [66] Applicants’ Second Amended Civil Dispute Application 15 April 2020, [50], Annexure 28

  9. Regarding the fascias, the applicants contend that the rot in the fascias was visible at the time of the inspection, and the nature of these defects is such that they should have been noted in the building report.[67]

    [67] Applicants’ Second Amended Civil Dispute Application 15 April 2020, [52]

  10. Regarding the amount of their claim, the applicants contend that the advice they have received from tradespersons is that the window defects are such that the windows need replacing and the fascia and guttering need replacing. They submitted a Maintenance Inspection Report by ACT Property Inspections that involved an inspection on 19 June 2019 (API Report), which stated:

    the majority of the window runners were missing or damaged beyond repair, and the windows in bedroom 3 and the family room were not functional…the track to bedroom 3 window was also damaged…the lock on the family room window was not functional and a …security issue,….recommend installing a lock…to the family room window and undertaking repairs including replacement of the runners,… note: [t]he runners for these windows may no longer be available …there was timber decay to the corner of the fascia board, [r]ecommend repairs and repainting of this area.[68]

    [68] Applicants’ Second Amended Civil Dispute Application 15 April 2020, [38-39] and Annexure 20

  11. The applicants obtained a further assessment of the windows by P&M Maintenance Building Services dated 25 June 2019, which advised that ‘tracks’ and ‘sash fasteners’ of the windows are defective, windows unable to be locked, due to fair wear and tear, and need replacing, but “genuine parts are no longer available for these windows”; P&N Maintenance quoted $1,694 to adjust 11 windows, supply and install runners and keyed locks, however noted that genuine tracks are not available and this will limit the life of repairs to 12 months.[69] The applicants obtained two quotations to replace 11 windows, including windows in the laundry, toilet and kitchen that were not raised in their letter to the respondent dated 11 April 2019 and also including flyscreens that are not on all the existing windows. The applicants claim the average of the two quotations being $13,200,[70] although the cheaper of the two quotations is by Atlas Windows for $11,264.[71] They also claim the cost of replacing the timber reveals and painting the trims, and the cheaper of the quotations obtained by the applicants, Australia’s Premier painting, is for $3,300.[72]

    [69] Applicants’ Second Amended Civil Dispute Application 15 April 2020, [40-41] and Annexure 21, and Applicant’s Material in Reply, dated 3 May, Annexure 2 which is a missing page to Annexure 21 in the Applicants’ Second Amended Civil Dispute Application, 15 April 2020

    [70] Applicants’ Second Amended Civil Dispute Application 15 April 2020, [55]

    [71] Applicants’ Second Amended Civil Dispute Application 15 April 2020, [43] and Annexures 24 and 25

    [72] Applicants’ Second Amended Civil Dispute Application 15 April 2020, [44, 55] and Annexures 24 and 25,

  12. The applicants claim the cost of replacing the rotted fascia and associated guttering/downpipes and rely on the advice and quotation by MHJ Building & Constructions Pty Ltd dated 1 April 2020 in the sum of $6,247.[73]

    [73] Applicants’ Second Amended Civil Dispute Application 15 April 2020, [52, 55] and Annexure 33

  13. The applicants also claim a refund for the building report, being $1,225. They claim reimbursements of various costs and interest, as set out above (refer to [4]).

Respondent’s contentions

  1. The respondent denies it is liable under the ACL or the Act.

  2. The respondent confirmed that it has a duty to the purchaser, the applicants.[74] At the final hearing and in its further submissions dated 9 June 2020, the respondent clarified that its building report is consistent with the Act and the Regulation, and that it is consistent with the modified Standard that applies in this case. The Standard is modified by the Part 2 Section 7 of the Regulation. The respondent contends that this has the effect of deleting the “section which contains the terms of an Inspection Agreement…[enabling] each inspector to compile its own terms of reference for the inspection including with respect to the purpose, scope, areas for inspection, inspection process, limitations, extent of reporting and acceptance criteria.”[75] The respondent pointed to the various parts of the building report that set out its scope and limitations. Also, the Regulation has the effect of deleting a requirement to report on minor defects, and is only “legally required to identify Major Defects.”[76] The respondent contends that the building report sets out the scope and limitations of the inspection, in summary that the inspection:

    shall comprise a visual assessment of the property to identify major defects and to form an opinion regarding the general condition of the property…at the time of the inspection, and not as to some future date.[77]

    [74] Transcript of proceedings 4 December 2019, page 9

    [75] Respondent’s Further Submissions, 9 June 2020, [34-36]

    [76] Respondent’s Further Submissions, 9 June 2020, [14]

    [77] Respondent’s Further Submissions, 9 June 2020, [16, 37-40]

  3. The respondent pointed out that the phrase ‘visual inspection’ is repeated throughout the building report on numerous occasions.[78] The respondent contends that a special purpose building report is required for any operational issues to be assessed,[79] but the building report was a pre-sale report. The respondent also contends that the building report must comply with work health and safety requirements and that limitations can be a result of compliance with these requirements.[80] The respondent explained that it reviews its building report template and processes from time to time to ensure that they are “clearly defining for our reader what we do and what we don’t do, and [to] ensure that our systems and our processes deliver a quality document for our customers.”[81]

    [78] Transcript of proceedings 15 May, page 15

    [79] Transcript of proceedings 15 May, page 48

    [80] Transcript of proceedings 15 May, page 59

    [81] Transcript of proceedings 15 May, page 61

  1. The respondent contends that the API maintenance report obtained by the applicant is a special purpose report where the scope has been agreed between the parties and is not the same as what the respondent was required legally to do in its building report. Also, the API maintenance report was based on an inspection on 19 June 2019, some nine months after the inspection by the respondent and some two months after the applicants had occupied the home.[82] In any case, the respondent contends that the API maintenance report does not identify the issues of the fascia and windows as “major defects or indicating that replacement of all windows is required…it is not inconsistent with the statements contained in the [respondent’s] Building Report.”[83]

    [82] Respondent’s Further Submissions, 9 June 2020, [17-19]

    [83] Respondent’s Further Submissions, 9 June 2020, [17-19]

  2. The respondent contends that if they are found liable, the quantum claimed is not supported by evidence. Mr Collison advised that it “took me one phone call to find replacement parts” for the windows,[84] despite the applicants’ claim that these are not available. Mr Collison estimated that the windows would cost $25/window.[85] At the first hearing on 4 December 2019 the Tribunal asked the respondent to submit any evidence to support this claim.[86] At the hearing on 15 May 2020, Mr Collison repeated that the windows could be fixed with non-original parts, “retrospectively fit something that’s off the market”.[87] In its submission dated 1 May 2020 the respondent provided a document that sets out the cost of replacement parts (sourced from Lincoln Sentry and Clarke Rubber) and installation, which totals to $510.45, referred to as “minor maintenance to not exceed $1,000.”[88]  The respondent queried the credentials of P & N Maintenance Services to present views about fixing the windows, but Mr Bunn stated that he was referred to them by API.[89]

    [84] Transcript of proceedings 4 December 2019, page 18

    [85] Transcript of proceedings 4 December 2019, page 112

    [86] Transcript of proceedings 4 December 2019, page 111-112

    [87] Transcript of proceedings 15 May, page 55

    [88] Respondent’s Submission 1 May 2020, page 16

    [89] Transcript of proceedings 15 May 2020, page 68

  3. Mr Collison stated that there is no evidence that the fascia has to be replaced. Rather, the API Report indicates they can be repaired rather than being replaced.[90] The respondent submitted a video where Mr Collison demonstrates the utility of using filler products to treat rotted areas in old fascias, and also in its submission dated 1 May 2020 referred to the use of “metal brackets” to stabilise old fascias which cost $10-15 per unit.[91] Mr Collison suggested that some of the claimed damage arose post-inspection, might involve the property being “tampered” with, and referred to the difference in photos of the fascia at inspection and those taken by Mr Bunn at the time the original application was filed with the Tribunal.[92] Mr Bunn stated that the “filler may have fallen out.”[93] The respondent also contends that the applicants were remiss, negligent, in not taking more care in inspecting the property themselves, they had a “pretty cursory” view of the property given the time they were there.[94]

    [90] Transcript of proceedings 4 December 2019, page 19, 99; Transcript of proceedings 15 May 2020, page 80

    [91] Respondent’s Submission 1 May 2020, page 20

    [92] Transcript of proceedings 4 December 2019, page 59; Transcript of proceedings 15 May 2020, page 47

    [93] Transcript of proceedings 4 December 2019, page 59; Respondent’s Submission 1 May 2020, page 20

    [94] Transcript of proceedings 4 December 2019, page 63-64

  4. Scott Maher gave evidence for the respondent. He did the inspection and wrote the building report. He is a qualified carpenter, a class A building assessor and timber pest inspector. He stated that the building report identified a lot of items as defects and that the inspection is visual. He did use a device that was part of a visual inspection, a moisture meter, and nothing adverse showed up for this property.[95] He disagreed that his comment about drummy tiles involved a non-visual test, he stated that he could feel the tiles moving under his feet and did not use any device.[96] He confirmed that the building report noted fascias and barge ends as having “no significant defects.”[97] He stated that his photos taken the day of the inspection show that the fascias were damaged at that time but “freshly painted and repaired.”[98] He explained that damage to the fascias, rot, can be sealed, filled with filler which does not fall out, and is not a significant defect.[99] He stated that he only makes visual assessment of doors, but if they need to be opened for him to enter or opened so he can view an area inside a cupboard for termites, then he can make an observation about the operation of the door based on this.[100] He noted binding of the cupboard doors in bedroom 4 and damage to the door in bedroom 2 in the building report,[101] but not any binding of the door to bedroom 1 as raised by the applicants – he stated that he only can make comment about a door’s operation if he was required to open it. When asked if making a comment about one door might lead to someone being confused and thinking he is checking all doors, he answered “to some degree, yes.”[102]

    [95] Transcript of proceedings 4 December 2019, page 92, 95

    [96] Transcript of proceedings 4 December 2019, page 70

    [97] Building report, page 9

    [98] Transcript of proceedings 4 December 2019, page 73

    [99] Transcript of proceedings 4 December 2019, page 78-79

    [100] Transcript of proceedings 4 December 2019, page 70, 83, 96

    [101] Building report, pages 6-7

    [102] Transcript of proceedings 4 December 2019, page 85

  5. He did not test the operation of the windows, but he assessed them by a close visual inspection and thought they were “normal” for a 47 year old property; he stated that such windows usually hold their value.[103] He stated “probably 95 plus percent of all windows have gaps between the masonry and window frames…if it’s over 10mil I’d say that’s a significant defect.”[104] He stated that a window with a damaged rubber seal is not a significant defect.[105] When asked about a window at the time of the inspection that had no rubber seal remaining, he stated it was not a significant defect: “the brick masonry has still got coverage from the aluminium reveal…or window”, and not enough water would enter to do damage.[106] He and Mr Collison referred to the photos of the windows taken at his inspection and claimed that they show windows latched,[107] and a window open, suggesting the latches and windows were working. Mr Maher confirmed that he measured the windows for the purposes of the energy rating, which involved him getting close enough to them to do this. In doing this, as part of his usual practice he inspected the windows, gaps, latches, and looked for “anything that would raise suspicion that it’s not operating functionally.”[108] However, he cannot see the window runners located underneath the window so did not report on this.[109] He stated that when he rated the windows as ‘good’ he meant that “there’s no cracked glass, there’s no impact damage to the window, the reveal…the window is not deteriorating.”[110]

    [103] Transcript of proceedings 4 December 2019, page 72, 76

    [104] Transcript of proceedings 4 December 2019, page 72

    [105] Transcript of proceedings 4 December 2019, pages 73-74

    [106] Transcript of proceedings 4 December 2019, page 93

    [107] Transcript of proceedings 4 December 2019, page 73, 102

    [108] Transcript of proceedings 4 December 2019, page 72

    [109] Transcript of proceedings 4 December 2019, pages 76-77

    [110] Transcript of proceedings 4 December 2019, page 95

  6. He stated that it is his usual practice to write the report including the building report on a tablet as he does the inspection and using the respondent’s template report.[111]

Issues

[111] Transcript of proceedings 4 December 2019, page 87

  1. Has the respondent breached the ACL or the Act?

  2. If there is a breach, what compensation is payable?

Findings

  1. The findings are set out below. In making these findings the Tribunal has had to make a determination about what are the minimum legal requirements for the building report.

  2. The Tribunal has considered whether in the ACT, the Act and the modified Standard particularly Appendix C, require testing and reporting on major defects in window operations, and finds that this is required. The minimum requirements under the Act and the modified Standard include inspecting the interior and the exterior. These elements are to be inspected in accordance with Appendix C.[112] Appendix C is titled “Building Elements and Services to be Inspected” and in its heading states that the “item shall be visually inspected and limited testing of operation shall be undertaken as indicated.”[113] Table C1 titled “Interior of the Building”, has a first column that includes an item “Metal-frame-windows”, the related second column includes as an inspection area/field ”sash operation, sash fittings and hardware,”[114] and the related third column titled “Example and/or inspection consideration” is blank. A sash of a window is commonly understood to refer to “the sliding frame” in a window.[115] The respondent contends that “there is not a legal requirement for the respondent to test the operation of the window sashes because there is no corresponding requirements ‘indicated’ in the third column of the table.”[116] But the Tribunal does not agree. There is nothing in the wording of Appendix C to suggest that any “limited testing of operation” is only that listed in Column three. While Column 3 is blank for metal windows, other items in Table C1 have text in Column 3. For example for bathroom and tiles, the text in Column 3 is “drummy” suggesting that Column 3 serves to provide examples of defects and/or what an inspector should especially assess, but it does not limit what is required under columns 1 and 2.

    [112] The Standard, 3.2.1, page 12

    [113] The Standard, Appendix C1, page 20

    [114] The Standard, Appendix C1, Table C1, page 20

    [115] Collins Dictionary Online

    [116] Respondent’s Submissions, dated 9 June, [46]

  3. The respondent also contends that the content of the building report excluded testing of window operations, but the Tribunal finds that it did not provide sufficient and unambiguous detail about what was in scope in regard to the operations of windows. In the respondent’s submissions and evidence there was emphasis given to various sections in the building report that it contends put the applicants on notice that the report did not test the operation of the windows. Sections of the building report that the respondent particularly referred to on this point are set out below:

    Sash windows sometimes require maintenance to the window balance mechanisms or sash cords. We are not able to guarantee that windows will operate smoothly. Sometimes window runners, sashes and balance mechanisms will require maintenance or replacement…

    Concealed areas where access is unavailable are unable to be inspected and are not reported on; such defects could include but are not limited to …broken window mechanisms (sash cords).[117]

    [117] Building report, page 16

  4. In the Tribunal’s view, these are generic statements that do not contain information about the inspection of the windows in this case and they offer little assistance in clarifying ambiguity about whether the windows in this case were tested or not. These statements are examples of a ‘standard clause’ that the Standard warns require care in their use, but which was lacking here:

    Where reports involving standard clauses are used…care should be taken to ensure that sufficient and unambiguous detail, relevant to the particular inspection, is included.[118]

    [118] The Standard, C4.1, page 15

  5. Further, the Tribunal finds that in stating that there can be no guarantee that windows “operate smoothly” the building report suggests that window operations are tested, but that such testing is not to a degree that can guarantee the quality of window operations. Similarly, the Tribunal finds that in stating that there can be unreported defects due to access issues and that this “could” include “window mechanisms”, the building report suggests that window operations are tested unless access prevents it. In this case, given the limited window furnishings and that the property was unfurnished at the date of the inspection, there are no obvious access limitations to testing the window operations. The building report states that “our inspection of the interior was restricted by window treatments”[119] – however, this comment is not specific enough to displace the latter conclusion that the windows were accessible to test their operations.[120] There is nothing in the building report that clearly states that there is no testing of window operations in the property, whereas there are clear statements about other matters not inspected or tested, for example roof drainage.[121] The Tribunal therefore finds that it was reasonable for the applicants to conclude after reading the building report that all the window operations were tested and found to be “good” i.e. no significant remedial action required. In any case, even if the building report had limited the scope of the building report such that window operations was clearly not included, the building report cannot exclude what is required by the Act and under the modified Standard.[122] As set out above (refer to [59]), the Act requires limited testing of the sash operations and this was not done.

    [119] Building report, page 4

    [120] Building report, page 11

    [121] Building report, page 9

    [122] Section 36 the Act

  6. The respondent contends that even if the operation of the windows should have been tested, the issues with them are not ‘major defects’. The issues with many of the windows is such that they require repairs in order that they can be easily opened or indeed to be functional. In the Tribunal’s view these defects meet the definition of ‘major defect’ in the Standard in that rectification is required to avoid unsafe conditions, loss of utility or further deterioration, and therefore should have been identified in the report.[123]  Also, some or all these defects should have been identified in the building report as safety issues as is required under the Standard as modified. These issues were not reported because the window operations were not tested by the respondent at all.

    [123] The Standard, Definitions, 1.4.10, page 8

  7. The building report, in not being compliant with the Act and the modified Standard, also breaches the ACL. The Tribunal has concluded that the respondent’s key officers and inspectors did not understand that the building report must comply with the Standard as modified. The inspection was conducted, and the building report written, using templates, on the mistaken basis that the Standard is an optional guide only. The lack of compliance is not a one-off error, rather the evidence is that it is the product of a lack of understanding by respondent’s officers and the inspector about the legislated requirements for building reports of this type. While the submissions of the respondent in June 2020 that were prepared by legal counsel state that the respondent accepted that the building report was required to meet the requirements of the Act and the modified Standard,[124] up until then the consistent evidence of the respondent’s key officers and inspector was to the contrary. This inconsistency in the respondent’s evidence and submissions was canvassed in its final submission, and the respondent contends that any statement made by the respondent’s witnesses about the building report not being consistent with the Standard was made on the basis that it is only the modified Standard that the respondent must comply with.[125] However, , in the Tribunal’s view this is not supported by the evidence.

    [124] Respondent’s Submissions dated 9 and 19 June 2020

    [125] Respondent’s Further Submissions 19 June 2020, at [9]

  8. There is ample evidence of the mistaken view as set out above held by the respondent’s key officers and the inspector. The Australian Standard AS 4349.1-2007, 2.3.1 is quoted in the building report to assist the reader to understand its approach and focus, but this section does not legally apply.[126] The Tribunal notes that the building report uses a variety of terms to describe the level of defect it reports on, i.e. ‘critical defects’, ‘major defects’ and ‘significant defects’, but only defines ‘significant defects’ (refer to [15] – [23] above). The definition of ‘significant defects’ falls short of what is required to be reported under the definition of ‘major defects’ – in the Tribunal’s view the plain meaning of the definition of ‘major defects’ goes beyond significant structural and functional issues and includes defects that require rectification due to safety, loss of utility and further deterioration. The non-alignment of the building report to such a critical definition under the modified Standard is further evidence, in the Tribunal’s view, that the key officers and the inspector were mistaken about the legislated requirements of the building report.

    [126] Building report, page 5

  9. Further evidence of this mistaken view held by the respondent is in its submission dated 1 May 2020 where the respondent again refers to 2.3.1 and 2.3.3 of the Standard,[127] yet these sections of the Standard according to its later submissions in June 2020 do not apply to the building report. At the hearing on 15 May 2020 Mr Collison agreed that the building report was not compliant with the Standard, although he did not agree that the respondent must comply with the Standard as modified:

    we’ve now realised that there are certain requirements within the process that we weren’t compliant with…for instance, mechanical testing…limited testing…We haven’t been doing that…we have amended our processes to take that into account.[128]

    [127] Respondent’s Submissions dated 1 May 2020, page 24

    [128] Transcript of proceedings 15 May, pages 46-47

  10. Ms Hill made it clear in her evidence that she did not agree that the Standard as modified must be complied with:

    So there isn’t legislation that says, ‘A pre-sale building report in Canberra has to look like this’. Therefore, it’s to the discretion of each building inspector to make a decision about what their document and therefore the contract will look like between ourselves and our clients…[With the 2007 Standard] there were very few changes, so we’ve worked to the same document…for the last…20 years…I can’t find any…law that dictates how we should write our report and what our processes and procedures should be…we cannot inspect to the letter… because… there are some variables in the standard…[O]n one aspect they’re talking about a visual inspection. On another they talk about sash operation…We are letting people know the mechanisms of windows isn’t part of what we [do] – it is a visual inspection [referring to Building Report page 16].[129]

    [129] Transcript of proceedings 4 December 2019, page 53, 98, 100-101

  11. Some explanation of why the understanding of the respondent’s key officers and the inspector was and perhaps remains out of step with the current law was provided at the hearing on 4 December 2019 when Mr Collison stated:

    we’ve basically used the same format for almost 20 years…And what we say very clearly is that we referenced the Australian standard – not that its written to the Australian standard…We’ve been basically using the same formula for almost 20 years…And we have made very little change to our format. We will occasionally work out a way that we can say it better.[130]

    [130] Transcript of proceedings 4 December 2019, page 20, 98

  12. That the key officers and the inspector were mistaken about the legislated requirements of the building report is a serious lack of due care and skill. It resulted in a building report that was not compliant with the Act, not prepared with due care and skill and not fit for its legislated purpose.

  1. The respondents cite the case of Delaney v Winn [2015] NSWCA 124 in support of its denial of any liability. But this case has little relevance here – a building consultant who provided a report based on a visual inspection was found not to have breached his duty when a retaining wall developed problems for the new owners after rain. The latter case is distinguishable because the applicable Standard was the 1995 Standard and the building consultant had specifically advised the purchaser to obtain another specialist report on the retaining wall during a site visit.

  2. The applicant raised other issues with the windows that it contends also should have been identified as major defects in the report, concerning gaps around windows and damaged or missing seals and flashing. On this point, under Table C2 titled ‘Exterior of the Building’ is an inspection item ‘walls’, which includes an inspection area/field ‘Doors and windows’, and the example/inspection consideration includes ‘flashing.’[131] The Tribunal accepts the evidence and submissions of the respondent that these were appraised by the inspector, indeed the photos from the inspection capture some of these. The Tribunal has to consider if the issues raised by the applicants about the external features of the windows are ‘major defects’. The Tribunal finds that they are not major defects of “sufficient magnitude to require rectification”[132] and therefore did not need to be identified in the building report. The strongest argument in support of them being ‘major defects’ is that they require rectification to avoid the entry of moisture, however the evidence is that even with these issues the moisture test showed no moisture problem.

    [131] The Standard, Appendix C1, Table C2, page 22

    [132] The Standard, Definitions, 1.4.10, page 8

  3. Another issue raised by the applicants is a binding door in bedroom 1. Under the item ‘Doors and frames’ the inspection area/field includes “binding doors” and “loose or badly fitting doors.”[133] The respondent’s evidence was that the inspector did a visual appraisal unless he needed to open a door to gain access in which case he was able to also assess the operation of the door and issues about whether it is binding – the inspector found a minor issue of damage to one door that he opened and he reported this in the building report. In the Tribunal’s view, the Standard as modified requires all doors to be assessed to determine if they are binding, and if this involves opening and closing them then this is required. Even if the Tribunal is incorrect about this, the building report implies that all doors were opened and closed to check for binding issues, as the applicants point out. On this basis the Tribunal finds that it was reasonable for the applicants to conclude that all doors had been so checked. However, a binding door is not necessarily a major defect – in the Tribunal’s view it depends on the level of its defect. If the door is difficult to open, then it will raise safety issues and be a major defect. The applicant’s evidence is that the door in bedroom 1 requires considerable force to open so the Tribunal accepts that in this case the binding door is a major defect and should have been identified – it was not identified in the building report.

    [133] The Standard, Appendix C1, Table C1, page 21

  4. Issues were raised by the applicants about rotted fascias and barge ends. The Table C2, ‘Exterior of the Building’, includes an ‘inspection item’ that includes “fascias and barges.”[134] The Tribunal accepts the evidence of the respondent that the inspector appraised the fascia and barges without dismantling them, indeed some of the photos taken at the inspection are of the corner fascias. In the Tribunal’s view this visual inspection of the fascia and barge ends is consistent with the Standard as modified. Also, the building report made it clear that the inspector was not required to find concealed rot under paint or tape. The respondent formed the view that the damage to the facias and barge ends that he observed were not major defects because some rectification had occurred. Mr Bunn was critical of the repairs that had been done:

    There is choices to be made about how you repair something…A botch repair is just slap a bit of bog into it, paint over it and hope for the best which is obviously what’s been done before…the proper repair is to remove the fascias and replace them.

    [134] The Standard, Appendix C1, Table C2, page 23

  5. While a property owner might choose to take the action Mr Bunn prefers, the Tribunal accepts the evidence of the inspector that the rectification works that had been done were such that the observable damage to the fascia and barge ends at the time of the inspection were not major defects. As such, they did not need to be identified in the building report. The applicants discovered on 4 May 2020 that a fascia corner on the north-west front corner did not have filler in it, is rotting on both edges, had masking tape covered with paint on one edge. But Mr Bunn discovered this by cutting open the area, however the inspector was not required to do this.[135]

    [135] Applicants video, filmed 4 May 2020, Annexure AMR

  6. Given the findings above, that the respondent has breached the Act and the ACL by not identifying in the building report the major defects about the defective operation of the windows and the binding door in bedroom 1, damages are payable to the applicant. Therefore, it is not necessary for the Tribunal to make findings about whether the respondent engaged in misleading or deceptive conduct contrary to the ACL. If a finding was necessary, the content of the respondent’s website and Facebook at the time of the purchase of the property would be relevant. The making of statements and representations on a website can be misleading and deceptive if any reasonable member of a class of person at whom they are directed would be led into error. In Selby v Expedia Australia Pty Ltd &Anor [2018] ACAT 124 the Tribunal dismissed the claim by WOTIF that the content of its website was mere puffery, a sales pitch. In Selby the Tribunal found that the content was misleading and deceptive, induced the consumer to enter into a contract, and damages were payable. In the case before the Tribunal here, the Tribunal notes that there was not clear evidence provided by the applicants about the content of the respondent’s website and Facebook at the time of the purchase of the property. However, evidence about the current content suggests that it makes significant claims about the respondent’s expertise and exercise of care.

If there is a breach, what compensation is payable?

  1. The Tribunal accepts the evidence of the applicants that they relied on the building report to make the decision to purchase the property. The annotated copy used by the applicants during a pre-purchase inspection submitted as evidence by the applicants is strong evidence of this reliance. The building report breached the Act and the ACL, and its cost should be refunded – the cost of the actual building report was $425.[136]

    [136] Respondent’s Final Submission dated 1 May 2020, page 25

  2. The Tribunal finds that most of the windows have operational issues. As set out in their letter to the respondent dated 11 April 2019, the property has eight windows that had functionality issues.[137] The report by API which involved an inspection on 19 June 2019 confirmed that “the majority of the windows” have parts that are “missing or damaged beyond repair” and that three windows in the lounge/living room and bedroom three are not functional.[138] While there has been a passage of some months from the date of the respondent’s inspection to the date that the applicants raised these issues and API conducted its inspection, given the nature of the issues with the windows the Tribunal finds that the state of the windows would not have materially changed from the date when the respondent inspected the property. Similarly, the Tribunal finds that the passage of time has not materially changed the issue with the binding door in bedroom 1.

    [137] Applicant’s Second Amended Application, Annexure 16

    [138] Applicant’s Second Amended Application, Annexure 21

  3. The applicants claim damages for rectification works. A basic rule in common law is that a claimant is entitled to that sum of money which will put the party who has been injured in the same position as they would have been in if they had not sustained the wrong for which they are now getting compensation. The applicants need to be compensated such that they are in the position of having windows that operate, but to a standard consistent with windows in a house of almost 50 years of age, not new windows.[139] During the proceedings the applicants confirmed that depreciation may be applicable in the calculation of damages.[140]

    [139] Alexandrou v Pacific Pest Control [2016] NSWDC 193

    [140] Transcript of proceedings 4 December 2019, page 13

  4. The applicants contend that all the windows need to be replaced. However, this is in part based on their unsuccessful contention that the respondent should have identified defects about the window flashings and seals, which the Tribunal has dismissed. It is also based on their contention that parts for the windows cannot be sourced. However, the two reports that the applicants rely on to support this point appear to be stating in the Tribunal’s view that the genuine branded parts for these windows may not be able to be sourced. One of the applicants’ tradespersons provides a quotation to fix the windows of $1,694. The respondent has provided evidence that the parts can be sourced and estimates that the costs of fixing all the windows to be not more than $1,000. The Tribunal prefers the quotation from the applicants’ tradesperson to the estimate of that of the respondent. But the Tribunal notes that the respondent’s estimate is not widely different from that of the applicant’s tradesperson. The Tribunal further notes that there have been no quotations provided by the applicant to fix the door. In any case, even though this is a major defect, in the Tribunal’s view the cost of rectifying it is minimal. On this basis no damages are awarded for the binding door.

  5. The Tribunal therefore awards damages to the applicants of $1,694 plus interest on this amount from the application date of 18 July 2019 of $2,225.96, plus a refund of the cost of the building report being $425. The applicant claimed interest from the 24 June 2019 when the respondent responded to the applicant prior to the application being filed; however the date when the issue clearly became a dispute is the date of the application,18 July 2019, and interest applies from this date.

  6. Usually the successful party is entitled to have certain costs reimbursed, however a decision about costs is reserved as set out earlier.

    ………………………………..

    Senior Member L Beacroft

HEARING DETAILS

FILE NUMBER:

XD 912/2019

PARTIES, APPLICANT:

Timothy Leonard Swan & Jamie Louise Swan

PARTIES, RESPONDENT:

Residential Reports Pty Ltd ACN 609 880 122

COUNSEL APPEARING, APPLICANT

N/A

COUNSEL APPEARING, RESPONDENT

N/A

SOLICITORS FOR APPLICANT

N/A

SOLICITORS FOR RESPONDENT

Proctor Legal

TRIBUNAL MEMBERS:

Senior Member L Beacroft

DATES OF HEARING:

15 May 2020

Most Recent Citation
Cases Cited

3

Statutory Material Cited

6

Delaney v Winn [2015] NSWCA 124
Selby v Expedia Australia Pty Ltd [2018] ACAT 124
Alexandrou v Pacific Pest Control Pty Ltd [2016] NSWDC 193