Tan v Hii
[2013] NSWDC 118
•03 May 2013
District Court
New South Wales
- Amendment notes
Medium Neutral Citation: Tan v Hii [2013] NSWDC 118 Hearing dates: 30 April, 1, 2, 3 May 2013 Decision date: 03 May 2013 Jurisdiction: Civil Before: P Taylor SC DCJ Decision: 1. Dismiss the plaintiff's claim.
2. Order the plaintiff pay 70 per cent of the defendant's costs.
Catchwords: CONTRACT - negligence - pre-purchase inspection - apartment - common property defects - causation - damages Legislation Cited: Civil Liability Act 2002, s 5D Cases Cited: Wardley Australia Ltd v Western Australia [1992] HCA 55 Category: Principal judgment Parties: Janice Tan (plaintiff)
John Hii (defendant)Representation: Mr G R Graham (plaintiff)
Young and Muggleton (plaintiff)
Michael Vassili Lawyers (defendant)
File Number(s): 2012/44815 Publication restriction: No
ex tempore Judgment
Janice Tan was interested in buying her first home. In the course of her enquiries she came across a unit in Beach Road, Bondi Beach. She decided to make an offer. Her first offer was not accepted but ultimately the vendor agreed to accept $455,000.
Michael Kiang was a friend of Ms Tan. Mr Kiang operated the law firm known as Sydney Legal Practice. Ms Tan retained Mr Kiang to act for her on the conveyance of the unit. She authorised him to get the standard searches and to get a pre-purchase inspection.
Mr Kiang sent an email to John Hii, who operated a business known as PacRicon Consultants. Dr Hii is an engineer with a PhD. He conducted building inspections. The email from Mr Kiang to Dr Hii reads as follows (exhibit F):
"Dear John
Can you please order a building, pest and strata report for [particular unit specified] Beach Road Bondi Beach 2026. Folio ID is ...
Strata Management is Abadeen Strata...
Vendor's agent is Raine & Horne - Kensington...
Vendor Details are..."
Dr Hii said that he sent back to Mr Kiang a building and timber pest inspection agreement. That document had an agreement number, a blank space opposite "client" and gave the client's address as care of Sydney Legal Practice with the address, phone number and email of Mr Kiang's firm. It also left blank the details of "purchaser" but recorded the address at Beach Road, Bondi Beach. It made no reference to the name of the vendor. The agreement document stated (exhibit 3):
"Inspection and Report: The inspection will be of the Building Elements as outlined in Appendix C of AS4349.1-2007 except for Strata title properties where the inspection will be according to Appendix B of AS4349.1-2007 and AS4349.3-1998 Timber Pest Inspection.
A copy of the appropriate Standard with Appendices may be obtained from Standards Australia at Your cost.
Upon receipt of the copy of the Agreement, We will carry out the inspection and report ordered by You in accordance with this agreement and You agree to pay for the inspection and the report on delivery of the report.
In ordering the inspection, You agree that the inspection will be carried out in accordance with the following clauses, which define the scope and limitations of the inspection and the report.
SCOPE OF THE INSPECTION & THE REPORT
1. The Inspection will be carried out in accordance with AS4349.1-2007 & AS4349.3-1998. The purpose of the inspection is to provide advice to a prospective purchaser regarding the condition of the property at the date and time of inspection. Areas of Inspection shall cover all safe and accessible areas." [Emphasis in original]
The agreement document also stated certain limitations including:
"6. The Inspector will conduct a non-invasive visual inspection which will be limited to those accessible areas and sections of the property to which Safe and Reasonable Access ... is both available and permitted on the date and time of the inspection. Areas where reasonable entry is denied to the inspector, or where safe and reasonable access is not available, are excluded from and do not form part of, the inspection. Those areas may be the subject of an additional inspection upon request following the provision of reasonable entry and access.
7. The Inspection WILL NOT involve any invasive inspection including cutting, breaking apart, dismantling, removing or moving objects including, but not limited to, roofing, wall and ceiling sheeting, ducting, foliage, mouldings, debris, roof insulation, sarking, sisalation, floor or wall coverings, sidings, fixtures, floors, pavers, furnishings, appliances or personal possessions."
The agreement document also had an arbitration clause, although no party raises this as an issue. There was also a disclaimer in the following form:
"24. Third party disclaimer:
We will not be liable for any loss, damage, cost or expense, whatsoever, suffered or incurred by any Person other than You in connection with the use of the Inspection Report provided pursuant to this agreement by that Person for any purpose or in any way, including the use of this report for any purpose connected with the sale, purchase, or use of the Property or the giving of security over the Property, to the extent permissible by law. The only Person to whom We may be liable and to whom losses arising in contract or tort sustained may be payable by Us is the Client named on the face page of the Agreement."
As I said, no client was named on the front page. The agreement document defined "client" in the following terms:
"Client means the person(s) or other legal entity for which the inspection is to be carried out. If ordered by the person(s)'s agent then it is agreed that the agent represents the person(s) and has the authority to act for and on their behalf ..."
The agreement document was not signed or dated but it included a clause which said:
"If You fail to sign and return a copy of this agreement to Us and do not cancel the requested inspection then You agree that You have read and understand the contents of this agreement and that We will carry out the inspection on the basis of this agreement and that We can rely on this agreement."
Mr Kiang did not recall receiving the agreement document. He had used the services of Dr Hii many times, although he had not met him. Mr Kiang said that he had received on earlier occasions agreements in the same or similar form but could not be sure that they were in precisely the same terms as the agreement document referring to the unit.
Dr Hii performed an inspection at the unit on 3 March 2010. He forwarded a report of that inspection and a statement of account to Mr Kiang on that date. The report listed the property address and the name of the vendor on its coversheet. On the second page it listed the following details (exhibit 1):
"Account to: C/O Sydney Legal Practice
Phone: ... Fax: ... Email address: ...
Client: Sydney Legal Practice
Invoice No: 204864
Purchaser: N/A
Vendor: ...
Re: Building at: ... Beach Road, Bondi Beach 2026".
The report also stated (at pp 2-3 of exhibit 1):
"Details of the Inspection Agreement
Agreement No. B2720P2674 Date of Agreement: 01.03.10. Time Agreement: 5pm
The Purpose of the Inspection: The purpose of the inspection is to provide advice to a prospective purchaser or other interested party regarding the condition of the property at the time of the inspection. The advice is limited to the reporting of the condition of the Building Elements in accordance with Appendix C AS4349.1-2007"
and
"The Scope of the Inspection was to cover: The subject unit and the common area in the vicinity of the subject unit ...
1. The Areas Inspected were: The subject unit ... interior and the common area in the vicinity of the subject unit ...
...
2. The Area*(s) NOT Accessible for any Inspection and the Reason(s) why were: The common area except in the vicinity of the subject unit ...of the Strata Plan ... could not be inspected".
The report also contained the following recommendation (at p 4 of exhibit 1):
"Other Inspections and Reports Required:
It is Strongly Recommended that the following Inspections and Reports be obtained prior to any decision to purchase the Property, so that the purchaser can be well equipped to make an informed decision. These Inspections and Reports fall outside the guidelines for a Standard Property Report as specified in AS4349.1-2007 and are excluded from this Report".
There followed a list of a number of inspections, 21 in all, some of which had no connection to the relevant property, such as a "Swimming Pool Inspection", although others might have had some particular relevance, such as "Durability of Exposed Surfaces".
The report contained a schedule of areas inspected. Some of the problems identified included sagging kitchen cupboard doors, loose wall tiles, loose tile grouting and severe corrosion of a laundry metal tub. The report identified that the balustrades on the top landing represented a safety hazard as they allowed a spacing between upright members of 210 millimetres, whereas the maximum allowed under the building code was 125 millimetres. There was a specific reference to the need for a licensed electrician to be consulted and to install a safety switch, "otherwise it is a safety hazard". The absence of smoke alarms was noted and was the subject of a warning.
The report also commented on "brick mortar joint erosion in some sections of the external brick walls" and recommended repair. No other comments were made about external walls.
The report also noted a crack in the car space concrete and recommended repair, and noted the paling fence and the cracked concrete pathways needed repair.
The report also contained a statement as follows (at p 25 of exhibit 1):
"Important Advice: -
Note: In the case of strata and company title properties, the inspection is limited to the interior and immediate exterior of the particular unit being inspected. The Exterior above the ground floor level is not inspected. The complete inspection of other common property areas would be the subject of a Special-Purpose Inspection Report which is adequately specified".
There were other clauses in the report noting that it was a visual inspection only and was limited in a number of respects. The final clause of the report was a disclaimer in the following terms (at p 28 of exhibit 1):
"DISCLAIMER OF LIABILITY TO THIRD PARTIES: - This Report is made solely for the use and benefit of the client named on the front of this report. No liability or responsibility whatsoever, in contract or tort, is accepted to any third party who may rely on the Report wholly or in part. Any third party acting or relying on this Report, in whole or in part, does so at their own risk".
Above Dr Hii's signature at the end of the report was this statement (at p 30 of exhibit 1):
"CONTACT THE INSPECTOR
Please feel free to contact the inspector who carried out this inspection direct on [phone number provided]. Often it is very difficult to fully explain situations, problems, access difficulties, building faults or their importance in a manner that is readily understandable by the reader. Should you have any difficulty in understanding anything contained within this report then you should immediately contact the inspector and have the matter explained to you. If you have any questions at all or require any clarification then contact the inspector prior to acting on this report".
The report contained a number of photos showing, among other things, the trip hazard on the pathway, the defective balustrade, the fence in need of repair, and corrosion of the sewer pipe in the unit's car space.
The statement that accompanied the report sought payment of $350. It was addressed as follows (exhibit 4):
"c/o Sydney Legal
[address of Sydney Legal]
Attention: Michael Kiang".
In evidence Mr Kiang said he forwarded the report on to Ms Tan within hours of receiving it. Ms Tan said she read the report and spoke to the solicitor about some of the matters. Mr Kiang confirmed this conversation and said he advised Ms Tan that if she had any concerns about the report to contact the inspector. Ms Tan could not recall contacting the inspector and appeared to accept that she did not. She did not instruct Mr Kiang to get any further reports. She said she was told other reports were not standard.
Ms Tan also said that she did not understand at the time of reading the report that the report was limited in scope to the unit alone, and that it did not cover the common property. She conceded that she now understood that limitation. She was not sure if she saw the report before the cooling-off period ended but concluded that she must have done so.
I mentioned earlier that the statement issued by Dr Hii dated 3 March 2010 was for $350, apparently a discounted amount. It was not a tax invoice and contained no Goods and Services Tax ("GST"), nor did it identify an Australian Business Number ("ABN"). Dr Hii suggested that the omission of the ABN was an oversight. Ms Tan gave evidence that she paid $440 for the report.
There is a letter from Mr Kiang dated 14 April 2010 to Ms Tan enclosing settlement figures. The letter sought $1,520 "in cash", being $800 for "legal fees plus disbursement", $280 for "strata report", and $440 for "building and pest report". Alike with Dr Hii's statement, this letter made no mention of GST, contained no ABN and was not a tax invoice.
Ms Tan's counsel also sought to rely on a bank statement of Dr Hii to prove payment for the report by Ms Tan. That bank statement recorded two payments on 11 March 2010, one for $200 with the words "Janice Tan" against it and another for $350 with the word "Janice" adjacent to it.
Given the 14 April letter to Ms Tan from Mr Kiang seeking payment for the report, and Ms Tan's evidence that she paid $440 for the report, these entries in March cannot be evidence of payment by Ms Tan but are likely to be payment by the Sydney Legal Practice to Dr Hii, with Ms Tan's name noted as a reference.
It was common ground that Dr Hii conducted an inspection of the strata records and that they revealed no problems.
Ms Tan went ahead with the purchase of the unit principally through the use of mortgage funds. She purchased the unit under the First Home Owner's scheme. This scheme required her to live in the unit for a period after buying it. She intended to live in the unit for an indefinite period after the purchase.
About four months after the inspection conducted by Dr Hii, a resident of the unit block raised a question about cracks above a window. The body corporate decided to have the building's exterior professionally inspected by Bellmont Façade Engineering Pty Ltd ("Bellmont").
Bellmont undertook an inspection on 12 July 2010, which it called a "preliminary visual inspection to assess and report on various structural concerns which have developed within the complex". It issued a report. The report said that it was not a pre-purchase property report and stated "nor should it be relied upon by any third party as a form of building report". There were no objections to its tender.
The Bellmont report noted "[s]evere cracking and spalling observed to concrete slab edges". The precise location of this feature was not identified in the report. The report concluded that there was "substantial evidence of reinforcement corrosion" and said that this was "as a result of 'concrete cancer'". The report also noted that the external balustrades appeared "unlikely to comply with the CURRENT BCA" although there was said to be no obligation for retrospective compliance. The report recommended repair of the corroding reinforcement and concrete, cleaning of servicing pipes, the raising of the balustrades and "[f]urther investigation into possible brick tie deterioration which is common for this area".
The Bellmont report contained a number of photos indicating cracking to concrete slab edges. The photos also indicated corrosion of the reinforcement, although in each case that appeared to be after the "spalling concrete" was removed. The precise location of the photographs was not identified.
As a result of the Bellmont report, the body corporate decided to engage a builder to repair the concrete cancer problem. Documents from Remedial Building Services Australia Limited evidenced that the total cost of the works was $222,640. There may have been other costs including costs for engineering work by Bellmont.
The body corporate imposed a special levy on the unit holders. Ms Tan said that in respect of the levy she made four payments in 2011 of respectively $13,251, $11,500, $1,000 and $900. This amount totals $26,651. No invoice was tendered to prove these amounts, although Ms Tan's bank records evidence the first three payments as "building works" whereas the final payment was described as "building N strata". I infer that only part of the final payment was in respect of the special levy for building works as the statement of claim alleged the cost of the remedial work to be $26,125.
As I mentioned earlier, Ms Tan intended to remain in occupation of the unit. She gave evidence that once the problem with the building was discovered and she was informed of the likely cost to her, she decided that she needed to rent out the unit to obtain funds to pay for the special levy imposed upon her in respect of her share of the building works (some 9.5 per cent of the total). She moved out of the unit in August 2010 to stay with her boyfriend, paying $200 a week as her share of his rent but receiving $450 a week from her tenant. She said the tenant moved out during the time of the building works in 2011. She said she did not immediately attempt to secure another tenant. She gave as a reason that another unit owner in the building had spoken to her about the difficulty of attempting to find a tenant while the building works on the exterior of the building were continuing. The unit was vacant for about 16 weeks, until she moved back in. She lived there until about September 2012. Since that date she has rented the unit for $505 per week.
On 10 February 2012 Ms Tan commenced these proceedings against Dr Hii in contract and negligence, claiming damages of $36,125, comprising $26,125 for the costs of the remedial works and $10,000 for 20 weeks lost rent plus interest.
I found Ms Tan to be a very satisfactory witness. She was willing to make concessions when appropriate. Indeed her concession that she could not clearly remember whether she read the report before the conclusion of the cooling-off period under the contract showed that she was willing to make concessions against her interests. I accept her as a witness of truth.
Dr Hii was not such a witness. He continually resisted answering questions and often prefaced his responses to questions by saying "you have to understand this". He was combative and argumentative, even after having been given repeated advice that his role was to answer the questions asked of him. This had the result that his evidence became quite unhelpful to his case.
Mr Kiang was also a satisfactory witness, although his recollection of details of the events was unsurprisingly affected by the passage of time.
Against this background, I assess the claim by Ms Tan. She claims that she was a party to a contract with Dr Hii, perhaps with Michael Kiang as well. Dr Hii claims that the contract was between himself and Sydney Legal Practice and that Ms Tan was not a party. This issue may determine whether Ms Tan has any rights in contract.
It is commonly known and not disputed by Dr Hii that almost invariably pre-purchase inspection reports are obtained on the instructions of the purchaser. This was certainly the understanding of Mr Kiang and Dr Hii. In these circumstances, I would infer that the intention of the parties would be for there to be a contract between Dr Hii, on one side, and Mr Kiang and his client on the other, in the absence of some particular correspondence.
In this case the request for the report by Mr Kiang nominates the title reference, the strata manager, the vendor's agent and the vendor. I do not regard the reference to the vendor as a nomination that the vendor is the client.
It was common ground that Dr Hii provided the report and the statement of account. But whether the inspection agreement document was sent was a matter of dispute. It may be that it was not sent, or it was sent but was not delivered, or it was delivered but forgotten by Mr Kiang. The fact that it was not signed by either party is some slight evidence in favour of Mr Kiang's account.
Given my findings about the witnesses, I have concluded that the agreement was not received. Mr Kiang denied receiving the document, although he conceded that he had received others like it in earlier times. He was not asked to produce his file to prove what he had received.
The difficulty with this conclusion is that the agreement does contain details of the particular property and the agreement document is identified in the report. Notwithstanding my findings about the evidence of Dr Hii, these facts indicate to me that the agreement was prepared prior to, or at, the time of the report but, as I have found, it was not received by Mr Kiang.
However, Mr Kiang had received a number of reports and agreements from Dr Hii previously. This past conduct of the parties indicates that there was an agreement in a form similar to that prepared by Dr Hii in respect of this matter which regulated the transactions between Dr Hii and Mr Kiang. It is true that the inspection report alone cannot, after the making of the contract, render the terms of the agreement applicable. But the past practice of the parties, where terms were circulated at the time of the contract or referred to in a subsequent report, persuade me that there was a common understanding that an agreement such as the agreement document, containing the standard terms, regulated the transaction. That is sufficient for those terms to be part of the agreement.
Accordingly, I find that the contractual documents comprise the request by Sydney Legal Practice and the agreement number B2770P2674.
This agreement does not provide much assistance to Dr Hii on the question of the parties. As I have noted, it left blank the identity of the client. The definition of the "client" in the terms of the agreement is "the person ... for whom the inspection is to be carried out" and contemplates that it be ordered by "the person's agent". In those circumstances, Ms Tan is the client as she is the person for whom the inspection was carried out and it was ordered by her agent, Mr Kiang.
Accordingly, in my view Ms Tan has a contractual relationship with Dr Hii.
Mr Vassili, who appeared for Dr Hii, argued that the payment by Ms Tan of $440 rather than $350 for the report suggests that payment was not a mere disbursement and that as a result Dr Hii was a contractor of Mr Kiang only. He claimed support for this proposition from Mr Kiang's evidence that Mr Kiang would not charge any premium on disbursement costs. As Mr Kiang charged more than the disbursement on this occasion, Dr Hii must have been retained by Mr Kiang personally rather than as agent for Ms Tan, or so the argument goes.
I do not think these matters are determinative of who is a contracting party to the arrangement. Everyone involved in this transaction understood that a purchaser, who was in fact Ms Tan, had instructed that a report be obtained and would ultimately be the person who paid for it. The fact that only part of the discount given to Mr Kiang by Dr Hii was passed on to Ms Tan when she paid Mr Kiang for the report some weeks after he had paid for it is a separate issue from who was a party to the agreement with Dr Hii.
It follows from my finding that the terms of the agreement are reflected in the agreement document prepared by Dr Hii. This finding is not of great significance in determining the standard of care required by Dr Hii. The contents of the report read as a whole and the proper construction of the applicable Australian standard lead to the same conclusion. This was a strata unit. The report, the agreement, the standard and indeed the common practice in the industry, as evidenced by the report and testimony of Mr Worthington, all evidence that the inspection of a unit is not the same as the inspection of a house and that a pre-purchase inspection of a unit does not require an inspection of the whole unit block. It required only an inspection of the "immediate exterior" of the unit, to quote appendix B of the applicable Australian standard (AS4349.1-2007) and the terms of the agreement document, or, to quote the report, it was the common area in the "vicinity" of the unit.
In my view, this means that Dr Hii was under no obligation to inspect the common property other than the inside of the unit, the car space and the common property which is accessible and in the immediate vicinity of the unit and car space. There is evidence that Dr Hii did more than this, such as noting the defective fence and the pathway. Neither were in the immediate vicinity of the unit but he has photographed them and identified necessary repairs. But I do not think that some inspection of the common property outside the ambit of his obligation gives rise to an obligation to inspect other areas of the common property.
Accordingly, I do not accept the plaintiff's contention that Dr Hii was obliged to conduct a visual inspection of the whole building or to use a ladder to view the whole building to a height of 3.6 metres, or that Dr Hii needed to tap the concrete on the whole lower floor or to a height of 3.6 metres to test whether there was any drumminess. In my view, the reference to a 3.6 metre ladder in the Australian standard operates to limit rather than extend the obligation of Dr Hii. If the immediate exterior of the unit can be inspected with a 3.6 metre ladder, then it should occur. If it cannot - if inspection is not possible by that method - then it is excused. The reference to a 3.6 metre ladder in the Australian standard is no basis to extend Dr Hii's obligation to inspect the unit to encompass inspection of the whole building (so far as can be done with a 3.6 metre ladder).
Although the area to be inspected is limited by appendix B of the standard, the nature of the inspection to be carried out by Dr Hii is indicated by appendix C of the standard. It includes inspection of interior walls for "drummy ... render", "bulging" and "nails popping", and also inspection of the exterior walls of the unit for integrity of the external cladding of "suspended concrete floors" for "structural integrity, looseness safety issues".
Two expert witnesses prepared reports in the proceedings, John Maglis of Macquarie Building Consultants Pty Ltd and John Worthington of John Worthington & Associates Pty Ltd.
Although required for cross-examination, I was informed that Mr Maglis had taken ill and was unable to attend. No medical certificate was tendered and no adjournment was sought. In those circumstances, I decided to admit his report but be cautious in respect of its contents because the author had not been questioned. Counsel for Ms Tan accepted that this was an appropriate approach and Mr Vassili for Dr Hii did not demur.
Mr Maglis concluded that Dr Hii should have identified the spalling concrete to the exterior of the building and the bowing of the perimeter external walls. His summary reasons were as follows (at pp 3-4 of exhibit G):
"3.1.2.1 My site inspection revealed readily visible widespread severe spalling of exposed concrete surfaces to the building exterior including slab edges, soffit of slab/beams and columns;
3.1.2.2 Spalling concrete surfaces to the building exterior and bowing of external walls would have been visible at time of the PacRicon site inspection;
3.1.2.3 It is considered common knowledge for building practitioners to be aware of the increased risk of accelerated building material degradation in coastal regions such as the subject site;
3.1.2.4 The author of the PacRicon report should have been aware of the increased potential for the presence of spalling concrete to the building structure and potential for cavity brick tie failure, given the age of the building (built in the 1970's) and proximity to the coast;
3.1.2.5 The PacRicon report includes limitations on the extent of common areas covered within that report, however the extent of spalling concrete and neglect of maintenance apparent to the building exterior materially affect the structure and the buildings value, consequently it would be considered incumbent on a Building Inspector to bring these issues to a clients attention for their consideration."
Mr Maglis included a number of photographs in his report. Mr Worthington helpfully included in his report a number of those photographs of Mr Maglis', coupled with corresponding photographs of the same subject matter taken by Dr Hii. It is apparent that the condition of the building and its visual appearance were substantially different on 23 June 2011, when Mr Maglis performed his inspection, and on 3 March 2010, the date of the photographs of Dr Hii. The difference may in part be due to the worsening of the concrete cancer but in many instances they are the result of significant works to remove concrete to reveal the reinforcing. The extent of the changes meant that reliance upon his inspection has resulted in Mr Maglis relying on observations of a building quite different from that inspected by Dr Hii. Indeed, the extent of the difference indicates not only that the building was significantly different in June 2011 but the rate of change might suggest that even in July 2010, when Bellmont did their inspection, the problem of the concrete cancer was substantially more evident than it was in March 2010.
Thus, Mr Maglis, relying upon his site inspection, may have been misled as to the condition of the building in March 2010. He says that the spalling concrete and bowing external walls would have been visible at the time of Dr Hii's inspection but does not identify the reasons why he is able to reach that view. The bowing on the external wall was not obvious to me in the photograph that supposedly displayed it, and counsel for Ms Tan did not contend otherwise.
I accept Mr Maglis' conclusion that there is a greater likelihood of accelerated building material degradation in coastal regions such as on this site. I also accept that inspectors would be aware of this as a more likely problem in this particular beachside location.
The final reason given by Mr Maglis suggests that because the building's value and structure is affected by the concrete spalling, it should have been brought to the client's attention. In this conclusion Mr Maglis has made no reference to the agreement or appendix B of the standards. The documents made available to Mr Maglis according to his report did not include these two documents.
I do not think that a person retained to perform a pre-purchase inspection of a unit and its immediate exterior is necessarily what Mr Maglis intended by his reference to "building inspector". In any event, I do not think that effect on the structure or value of a building is a matter that causes the ambit of a unit inspection to be enlarged to the whole building. It may be a matter that requires a solicitor to advise the client that a building report of the whole exterior of the unit block should be obtained. Indeed, Dr Hii's report makes a recommendation to similar effect.
Mr Worthington, consistent with the obligation I have earlier noted from appendix C of the standard, stated (at p 11 of exhibit 8):
"3.10 As stated in 3.2.2 [of the standard] 'areas that are within the inspector's line of sight and close enough to enable a reasonable appraisal'
3.11 I interpret this as the inspector being able to touch or check areas such as the edge of suspended concrete slabs where cement rendered (and in most cases painted) for drummy cement render which may appear to be intact but gives a drummy sound when tapped. Considering the height above ground level the cement render to these units would not be able to be checked by tapping."
Mr Worthington adds the following explanation of the reference to "drummy" (at p 11 of exhibit 8):
"'Drummy' or 'drumminess' is a hollow sound given when cement render is tapped because it is not adhered to the surface on which it is applied. Drummy cement render in many cases does not appear to be defective until tapped."
In these circumstances, I accept there is an obligation on Dr Hii, as part of his contractual obligation to inspect the unit and the reasonably accessible common area in its vicinity, to tap "suspended concrete slabs ... for drummy cement render".
Ms Tan also claimed relief in negligence. Neither party suggested that the content of the duty of care in tort was any different from that in contract.
This brings me to the question of breach. Dr Hii gave no evidence that he inspected the external concrete render for drumminess or the slabs for looseness or structural integrity. I have rejected any obligation that he do so in respect to the whole building, but I accept that he undertook an obligation to do so in the "immediate exterior" of the unit owner's property. This would include an inspection of the underside of the concrete slab immediately above the car park space and the end of the slab where it adjoins the unit's car parking space. There is no evidence that Dr Hii did this and I conclude that he did not.
Mr Worthington says (at pp11-12 of exhibit 8):
"3.12 The first defendant has addressed the possibility of defective cement render on page 4 of their report with a strong recommendation for an inspection to determine the 'Durability of Exposed Surfaces' which is reproduced hereunder".
Although I accept Mr Worthington's evidence generally and his conclusions, I am unable to accept this one. Dr Hii cannot avoid an obligation to inspect a certain item by merely recommending, even strongly, that the client retain another person to inspect that item. Dr Hii was obliged to conduct the inspection, as Mr Worthington states, by tapping the render or cement to check if it was loose or drummy. To not do so was a breach of his obligations. Accordingly, I find that Dr Hii failed to perform his obligation in that particular respect.
But what flows from this breach? There is no evidence of loose concrete or drummy render in the area where I have concluded Dr Hii was obliged to check. Even the photographs of Mr Maglis do not indicate that the area bordering the unit's car space was affected by the loose concrete or drummy render.
In those circumstances, I am not satisfied that if the breach by Dr Hii had not occurred - if Dr Hii had inspected the concrete and render in the immediate vicinity of the unit - it would have resulted in any material difference to his report. It follows that the negligence of Dr Hii was not a necessary condition of the cause of harm and under s 5D of the Civil Liability Act 2002 the necessary causation would not be established.
There are other problems with causation. Section 5D(3)(b) of the Civil Liability Act 2002 renders any statement by Ms Tan about what she would have done in the absence of the negligence inadmissible unless it is against her interest. She says she would not have bought the unit. That statement does not appear to be contrary to her interest, but no objection was taken. I think I should be cautious about relying upon this evidence because it is not an observation of Ms Tan but is really speculation about what she would have done in other circumstances.
In any event, Ms Tan did not contact the inspector as Mr Kiang suggested. Nor did she follow the "strong recommendations" of Dr Hii to get other reports. Nor did she take any steps in respect of the other defects that were identified in Dr Hii's report. In those circumstances, I think it is unlikely that a different result would have occurred if Dr Hii had both conducted the tapping test on the render and warned in the report of the possibility of a problem with the concrete of the slab in the carport. Any inspection Dr Hii conducted in the area of the carport would, at best, have identified the problem there rather than a problem with the whole building.
In these circumstances, I think that the breach was almost de minimus and, in any event, would not have materially altered the content of the report or, even if it did, it would not have altered the conduct of Ms Tan.
In case I am wrong, I have considered the issue of damages. Ms Tan's case is pleaded on the basis that, if properly advised by Dr Hii, she would not have purchased the unit. Accepting this to be true, it does not assist in her case. At least, it does not support her claim to recover damages for a special building levy and lost rent. Had Ms Tan not purchased the unit she would not have incurred the cost of the unit, some of the legal expenses of purchase, the special levy cost and the interest on the mortgage. On the other hand, she would not have owned the unit and she would not have received the rent that she received.
All of these matters have to be taken into account in assessing her loss. That is why the assessment of damages in the case of a property purchased as a result of negligence requires a comparison of the price paid with the value of the property at the time of the purchase. In Wardley Australia Ltd v Western Australia [1992] HCA 55 at [21]:
"In the case of a fraudulent or negligent misrepresentation which induces the plaintiff to enter into a contract to purchase property, the plaintiff's loss, apart from any question of consequential damage, is measured by the difference between the price paid or payable under the contract and the value of the property at the date of the contract".
The proper assessment of the damage of Ms Tan, if the conduct of Dr Hii had caused her to purchase the unit that she would not have otherwise purchased, would involve a comparison at the date of judgment between the sum of the value of the property she purchased and the money she received as a result of its purchase as against the expenses she incurred. As there is no evidence of the value of the unit at or near the date of judgment, or even after the expenditure of the building repairs, I cannot determine whether she has lost or gained from her decision to purchase the unit.
Counsel for Ms Tan submitted that she would have bought another unit, but Ms Tan's evidence was that she would have "looked around" for another unit. In any event, there is no evidence that she would have done better or worse with an alternative purchase.
Further, the particular costs which Ms Tan claimed may not ultimately have been losses for her. She claims losses of rent but her evidence indicated that had the building repairs not been required she would not have received any rent and she may well have stayed in occupation of the building. In that event, she would also have received no taxation benefits consequent upon her being able to claim deductions for interest on her mortgage costs.
Secondly, her evidence of lost rent is unsatisfactory given that she took no steps to obtain a further tenant when her first tenant departed from the unit.
Finally, she claims for the cost of the building works, but it is evident that the building works have not merely repaired the problem but have, at least possibly, improved the building. The whole of the building has now been rendered and the balustrades have been replaced. The building has taken on a more modern, newer appearance and it is at least possible and perhaps likely that the building itself is valued at much more than it was at the time of her purchase. Her unit may also have correspondingly increased in value.
Dr Hii cannot be expected to pay for these improvement costs.
In any event, I have concluded that the proper manner of assessing damages is not to look at the particular expenses but to assess the position of Ms Tan comparing what she has now with what amount she paid. The evidence does not allow me to assess that she has incurred any loss.
For those reasons, I dismiss the plaintiff's claim.
In respect to the matter of costs, the plaintiff did have some success on the question of a breach of contract and some elements of the claim in negligence, but otherwise lost. I think there should be some credit for those issues that she won, in particular because she did prove the existence of a contract and breach which is sufficient to establish a cause of action in contract. However, the credit she receives for those successes does not outweigh the fact that Dr Hii has succeeded in the proceedings in resisting the claim.
In those circumstances, I propose to order that the plaintiff pay 70 per cent of the defendant's costs.
The orders of the Court are:
1. Dismiss the plaintiff's claim.
2. Order the plaintiff pay 70 per cent of the defendant's costs.
**********
Amendments
01 August 2013 - Amended to remove references to the particular unit for privacy reasons.
Amended paragraphs: 1, 2, 3, 4, 9, 10, 11, 20, 69, 72
Decision last updated: 01 August 2013
0