Wyman v R.T. Edgar Bellarine Pty Ltd
[2013] VCC 567
•21 June 2013
| IN THE COUNTY COURT OF VICTORIA | Revised (Not) Restricted |
AT MELBOURNE
COMMERCIAL LIST
GENERAL DIVISION
Case No. CI-12-04210
| NICHOLAS WYMAN | Plaintiff |
| v. | |
| R.T. EDGAR BELLARINE PTY LTD & ORS | Defendants |
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JUDGE: | His Honour Judge Anderson | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 14, 15, 16, 17, 20, 21 & 22 May 2013 | |
DATE OF JUDGMENT: | 21 June 2013 | |
CASE MAY BE CITED AS: | Wyman v. R.T. Edgar Bellarine Pty Ltd & Ors | |
MEDIUM NEUTRAL CITATION: | [2013] VCC 567 | |
REASONS FOR JUDGMENT
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Catchwords: Negligence – Real estate agent letting property – Whether adequate checks undertaken – Tenant and his associates used the property for criminal activities – Consequential diminution in the value of the property – Whether the tenant and his associates were concurrent wrongdoers – Part IVAA Wrongs Act 1958 (Vic).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr T. Wodak | Tisher Liner FC Law |
| For the First Defendant | Mr G. Harris | Lander & Rogers |
| For the Second to Fifth Defendants | No appearance |
HIS HONOUR:
1The plaintiff owns a rural property in regional Victoria. In 2011 he engaged the first defendant to obtain tenants for the property. An application from Jacob Gilmour was processed by the first defendant and Mr Gilmour was recommended to the plaintiff as a suitable tenant.
2A lease was entered into and Mr Gilmour went into possession of the property. About two months later, police raided the property. Mr Gilmour and his associates had been using the house on the property as a laboratory to manufacture methamphetamines. A dismembered body was discovered in a car parked at the property.
3These events attracted extensive media attention, both nationally and particularly in the local area. This caused considerable distress to the plaintiff and his family. It took some months for the police investigation to be completed and for the property to be decontaminated. Through the plaintiff’s insurers, work has been carried out to attempt to restore the property. This work is largely complete. The plaintiff intends to sell the property as soon as he can.
4In the proceeding, the plaintiff sued the first defendant for breach of the engagement to let the property claiming, principally, that the first defendant had made inadequate checks in relation to the tenancy application by Mr Gilmour. In fact, Jacob Gilmour was not the applicant’s correct name. Both Mr Gilmour (by his correct name, Kris Kaje), and the third, fourth and fifth defendants have been convicted, or have indicated an intention to plead guilty to serious criminal offences related to their activities on the plaintiff’s property.
5The damages claimed against the first defendant include:
a.the diminution in the value of the property as a result of the criminal activities at the property and the resulting publicity;
b.the costs associated with works carried out, or required to be completed, in relation to the restoration of the property;
c.loss of rental whilst the property has been unusable;
d.general damages for inconvenience, anxiety and distress suffered by the plaintiff.
6The first defendant joined the other defendants in the proceeding claiming that, if it were liable to the plaintiff, the other defendants were concurrent wrongdoers and any liability by the first defendant to the plaintiff should be apportioned pursuant to the provisions of Part IVAA of the Wrongs Act 1958 (Vic). No relief was sought by the plaintiff or the first defendant against the other defendants and they took no part in the trial.
7The issues for determination in the proceeding are:
a.whether the first defendant failed to take reasonable care in securing a tenant for the plaintiff’s property?
b.If the first defendant is liable to the plaintiff, what loss and damage has resulted from the first defendant’s conduct and what is the quantification of the plaintiff’s loss?
c.Are the other defendants concurrent wrongdoers and, if so, how should the plaintiff’s loss be apportioned between them?
Engagement of the first defendant
8The plaintiff has owned the property since 2004. His parents in law are neighbours. Previously, the plaintiff tenanted the property through another real estate agency. On that occasion, the property manager handling the tenancy was Mr Kenneth Ferrier. The plaintiff was very happy with the previous tenants.
9In 2011, the plaintiff engaged the first defendant to find a tenant for the property. The decision was made primarily because Mr Ferrier was now a senior property manager at the agency and the plaintiff had been pleased with the previous tenants he had secured.
10On 1 August 2011, the plaintiff sent an email to Mr Ferrier which read in part as follows: “We look forward to working with you again. With the cottage, we are probably interested in finding an A grade tenant like our last tenants. So what I am saying is we are prepared to wait for the right fit and hope it’s a longer term”. Thereafter, the dealings with Mr Ferrier were conducted by the plaintiff’s wife. She said that shortly afterwards, she reaffirmed with Mr Ferrier the matters raised in her husband’s email.
11On 12 August 2011, the plaintiff and the first defendant executed a general leasing and managing authority. In the authority, the plaintiff acknowledged “that the level of services to be provided by the Agent has been negotiated and is attached”. The attached document headed “Level of Service” included the items, “application checks” and “TICA database checks”.
12The property was advertised as available for lease. In late October 2011, the plaintiff’s wife contacted Mr Ferrier via the internet asking, “should we reduce the rent or put some internal photos on the internet?”. Mr Ferrier responded that it, “might be worth a try now”.
13On 12 November 2011, the first defendant received a completed tenancy application form with an email from “Jake Gilmour”. The email noted that, apart from the application, Mr Gilmour attached “a scan of my driver’s licence and my most recent bank statement”. The email continued, “Additionally, although there was no space on the form, as I’m self employed here are the contact details for my accountant [AB, XYZ accounting (02) ********] Thanks for your time. I can be reached via email at [[email protected]] or on [0413 *** ***]” [actual details omitted]. Mr Gilmour had also completed an authority for the agent to conduct a TICA database search.
14The tenancy application form was a standard form used by the real estate agency. The agency operates pursuant to a franchise arrangement. Other agencies are conducted under a similar name at other locations throughout Victoria, although different tenancy application forms are used. A number of application forms from other agents were tendered in evidence. There is some difference in the details required. However, there is little basis for suggesting that the first defendant’s form was inadequate when compared with what the general industry standard demanded.
15The application form disclosed the following information about Mr Gilmour:
a.personal details including his name, current address, date of birth, email address and mobile telephone number. Omitted were any landline telephone numbers or details of a motor vehicle;
b.details of the occupancy of his current address at Newtown in Sydney, including the name and landline of the “private” landlord, the rental and the reason for leaving [“moving interstate”];
c.details of his previous address, living with “family” in Gilgandra, with a contact name [Brendan Gilmour] and mobile numbers, the rental and reason for leaving;
d.employment details, noting that he had been a self employed financial consultant for 11 years with a net annual income of $180,000. No address or telephone number for the business was given;
e.referees included his brother, Brendan Gilmour, as a “professional” referee and a friend as a “personal” referee. Names, addresses and mobile telephone numbers were provided.
16Although the application form required “both sides” of the applicant’s driver’s licence to be supplied, Mr Gilmour only provided a scan of the front side. The reverse side would contain any address subsequent to the address shown on the front of the licence. The Newtown address on the front matched the address in the application form (in respect of which the details of the “private landlord” were provided), and the address of Mr Gilmour on the bank statement.
17Later, when Mr Gilmour attended the real estate agency on about 9 December 2011, Mr Ferrier confirmed that the photo on the scanned licence matched Mr Gilmour. Mr Ferrier asked Mr Gilmour to show him the original licence. Mr Gilmour said that he did not have the licence with him. Mr Ferrier did not pursue the matter.
18The bank statement was for an “access account” at the Newtown, NSW branch of the Commonwealth Bank. The statement was page 1 of 7 and covered 15 transactions in the period 1 to 17 August 2011. The statement ended on 31 October 2011. The balance as at 1 August was $304,318.84 CR and carried forward a balance on 17 August of $325,955.63 CR.
19The statement showed Netbank transfers on 8 August of $12,500 described as “bonus” and $10,800 described as “Pay//Gilmour0105”. A Netbank transfer on 10 August of $2,600 was described as being for “rent”. The statement noted a debit on 2 August of $2.59 for “debit int to 31 Jan”.
20Mr Gilmour informed Mr Ferrier that his “partner would also live at the property but was currently overseas and uncontactable”. Mr Ferrier said he told Mr Gilmour that his partner would also need to complete an application form before she moved into the property.
21Following receipt of the application form, Mr Ferrier carried out the following checks:
a.a TICA database enquiry was made on 17 November 2011. Mr Ferrier said that in response he received a “no record advice” indicating that there was no unfavourable recorded tenanting history;
b.he telephoned the “private landlord” noted on the application form at the number provided. Mr Ferrier left a message on 17 November and his call was later returned. Mr Ferrier noted that Mr Gilmour had a “very good report – rent and condition”;
c.Mr Gilmour’s brother, Brendan, who had been given as a professional referee told Mr Ferrier that Mr Gilmour had previously lived with him for a number of years and they had worked together as partners in, what was “indicated” was, a successful business;
d.Mr Ferrier telephoned the accountant whose name and telephone number Mr Gilmour had provided. The accountant confirmed that Mr Gilmour was a financial consultant and a successful businessman. Mr Ferrier conducted an ABN [Australian Business Number] search to satisfy himself that the name and firm name given by Mr Gilmour was that of an accountant. The ABN search confirmed that there was a current registration for the person named [AB] trading as “[XYZ] Accounting” [actual details omitted].
22Based upon the details provided with the application form and these further enquiries, Mr Ferrier recommended Mr Gilmour as a suitable tenant for the plaintiff’s property. There was then a period during which nothing further was heard from Mr Gilmour. However, on about 9 December 2011, Mr Gilmour attended the defendant’s office and signed a tenancy agreement at a weekly rental of $450 [$1,950 per month] for a period of 12 months.
23The street number of the property is slightly misdescribed in the tenancy agreement. The tenancy was intended to exclude part of the property upon which the plaintiff intended to erect another dwelling and which contained some recently planted olive trees.
24Further, the plaintiff’s wife had given Mr Ferrier a plan of the intended boundaries, information about what was included and excluded in the tenancy and details of works intended to be undertaken in relation to the new dwelling. Mr Ferrier said he passed this information onto Mr Gilmour. This is confirmed from the fact that copies of the plan and part of an email to Mr Ferrier were found by the police when they searched the property during their raid on 7 February 2012.
25The tenancy agreement did not, however, contain any details of the parts of the property which were excluded from the tenancy. Mr Ferrier said, however, that he had “walked the boundaries” of the tenancy property with Mr Gilmour in early December.
26Little activity was noticed at the property over the Christmas – New Year period when the plaintiff and his family were holidaying at his in-laws. Nevertheless, the January rental was apparently paid by Mr Gilmour attending the first defendant’s office and there was communication between Mr Ferrier and Mr Gilmour in mid January about the plaintiff’s electrician attending the property to carry out works relating to the new house development.
27On 7 February 2013, the police raided the property and Mr Gilmour and the third to fifth defendants were taken into custody. In paragraph 13 of the Statement of Claim, the plaintiff pleaded that, “After obtaining possession of the property, a group of criminals [the second to fifth defendants] used the property for the manufacture of methamphetamines and for the storage of some of the remains of a person who had been murdered”.
28In its Defence, the first defendant did not admit this allegation. At trial, the plaintiff sought to amend paragraph 13 to exclude reference to the third to fifth defendants. I refused that application on the basis of an undertaking by the first defendant that it would admit the original allegation in the Statement of Claim.
29The plaintiff alleged in paragraph 16 of the Statement of Claim that, “But for the [first] defendant’s breaches:
a.[the plaintiff] would not have entered into the lease;
b.Kris Kaje would have known that he and his criminal accomplices would not have the quiet enjoyment of the entirety of the property during the term of the lease, and would not have pursued his application to lease the property”.
30The plaintiff alleges that the first defendant breached the terms of the engagement or was otherwise negligent in the following respects:
a.the application form did not contain all personal or business details and Mr Ferrier should have sought further details;
b.Mr Ferrier did not sufficiently check Mr Gilmour’s identity or require appropriate proof of identity;
c.Mr Ferrier’s checking was inadequate in relation to Mr Gilmour’s business activities. ABN and ASIC searches of the business should have been conducted;
d.Mr Ferrier should not have accepted only one page of a seven page bank statement;
e.Mr Ferrier failed to pass on information to Mr Gilmour that would have made it clear that he would not enjoy uninterrupted occupation of the property;
f.Mr Ferrier should have required Mr Gilmour’s partner to complete an application form;
g.generally, Mr Ferrier should not have recommended Mr Gilmour as a suitable tenant.
Expert evidence on appropriate checking of applicants
31Each party called a real estate agent who was, by her training and experience, eminently qualified as an expert in the field of property management, including the background checking of tenancy applications. The plaintiff’s expert, Ms Sophie Lyon, conceded that on paper Mr Gilmour’s was a “solid application”. She agreed that with Gilmour’s record, he would be regarded as an “A grade” tenant. Both she and the defendant’s expert, Ms Leah Calnan, agreed that the purpose of checking the application was to confirm the identity of the applicant and to expose any negative information about the applicant’s employment or income, or their renting history, which would cast doubt upon their capacity to pay rent or to properly maintain the property. Ms Lyon said that the application is looked at “as a whole” and investigations are conducted until a “level of satisfaction” is reached which enables the agent to recommend the application.
32Both experts agreed that, in their experience of processing many thousands of applications, they had never encountered an instance, such as the present case, where an applicant supported the application with a “fake drivers licence” or other forged documents. Ms Lyon agreed that the events in this case were “out of the ordinary”. There was no issue between the experts that the TICA database and the alternative National Tenancy database were both appropriate search tools for an adverse tenancy history. They are both subscription services and most agencies use one or the other, although the TICA database is apparently used more in regional areas.
33Ms Lyon gave evidence that the common level of industry practice would require a property manager in dealing with an application like Mr Gilmour’s to:
a.carry out an ABN search to match up information about the applicant’s business;
b.obtain a landline telephone number and address for the business;
c.ensure that all pages of a bank statement are obtained with a fair number of transactions;
d.search the ASIC register of financial planners and consultants. Ms Lyon said that “Jacob Gilmour was not on the parts of the register she searched recently”;
e.require a person not a relative as a professional referee;
f.include in the tenancy agreement a copy of the owner’s information about the parts of the property not included in the tenancy;
g.obtain the details of all occupants and to request the applicant’s partner to complete a tenancy application.
34Ms Calnan gave evidence that:
a.an ABN would generally only be required if a company submitted a tenancy application. The ABN would be required for a TICA database search and for the service of VCAT proceedings, if required to be later issued;
b.the telephone number and address of an applicant’s work place should be stated. Approximately 40% of applications are incomplete, in which case more detail may be sought;
c.the remaining six pages of the bank statement should have been required in order “to confirm the frequency of further payments” of rental. However, this information was confirmed by the property manager contracting the landlord. The page of the bank statement supplied indicated that the applicant had sufficient money to pay the rent and sustain himself even if he were not in employment after he moved to Victoria;
d.ASIC searches were not standard practice;
e.a brother should not be accepted as a “professional” referee;
f.an application form should be obtained for each adult who will live at the premises, prior to the person “moving into the property”.
35Ms Calnan’s conclusion was that on paper and at face value, “it would not be unreasonable to deem this applicant…as a potential ‘A grade tenant’ [and the enquiries made confirmed] secure long term employment, money in the bank, a long term rental history and no record on a tenancy database”. Ms Calnan did “not believe the agency could have known that the applicant wasn’t who he said he was”.
36Plaintiff’s counsel, Mr Wodak, highlighted the critical features of the person described in the application, including:
a.he was 35 years old;
b.a self-employed financial consultant for 11 years;
c.net income of $180,000 (gross income of approximately $300,000);
d.never rented through an estate agent; always apparently lived in Sydney or New South Wales;
e.a hotmail email address; no address or landline given for his business;
f.his brother given as a professional referee and a friend as a personal referee – only mobile numbers given for them.
37Mr Wodak asked Ms Calnan, why would such a person want to rent a cottage in a rural setting in regional Victoria? However, both Ms Calnan and Ms Lyon were impressed with the strength of the application “on paper”. Ms Calnan’s advice on her blog for landlords who self manage or employ agents is that not all applications are “totally honest”. However, even with the experience that both she and Ms Lyon have, forged documents are not expected.
38The application form was incomplete in some respects. However, Mr Gilmour had, without being asked, provided a bank statement and contact details for his accountant. Mr Ferrier checked the accountant’s name and firm by an ABN search. He telephoned the accountant, the landlord and the applicant’s brother, as the stated professional referee. The information he obtained confirmed the details in the application.
39Mr Ferrier’s notes of these telephone conversations are sparse. However, there was no suggestion that the information he gained was other than as he stated in his evidence.
40There was no evidence that any other usual enquiry by a property manager would have revealed information that the applicant was not who he said he was or that he would be the sort of person who would not pay the rental or look after the property. Ms Lyon said that although in recent times the popularity of Google searches had increased, they were not done on a day to day basis and were usually confined to the upper end of the rental market.
41Both experts agreed that an application should be considered as a whole. Cross checking should be carried out with the information provided in the application form, the supporting documents and from the reference and other checks.
42The expert evidence does not support a conclusion that an ABN or an ASIC search would ordinarily be conducted to check the applicant’s business. Although Ms Lyon said an ASIC search would be appropriate, it may not have clarified the position of Mr Gilmour as a financial consultant without extensive searches. First defendant’s counsel, Mr Harris, submitted that a standard practice requiring confirmation of an applicant’s professional status by enquiry from the relevant professional organisation would be unlikely. Ms Lyon did not appear to disagree that this was not standard practice and that property managers may not even know of the requirement for financial consultants to be registered. Ms Calnan said that she was not aware before this case that such searches could be undertaken.
43Ms Calnan said that a landline telephone number and a business address would not necessarily be required. Referees should preferably have some degree of independence from the applicant. One page of a seven page bank statement may not be satisfactory. However, in this case, the one page was volunteered by Mr Gilmour and the assessment by Mr Ferrier was that, taken with the other information supplied with the application and through his telephone enquiries, no further confirmation of Mr Gilmour’s financial position was necessary. This was not an unreasonable conclusion. It is also very doubtful whether further “bank statements” would have cast any doubt upon the application.
44The checks made by Mr Ferrier in this case were concerned to establish the applicant’s liability to pay rent and maintain the condition of the property. As to Mr Gilmour’s identity, there was nothing to cast doubt on what was included in the application. The accountant, the landlord and the brother confirmed the essential details of “Mr Gilmour” and his reliability. Ms Lyon agreed that the telephone enquiries by Mr Ferrier and the ABN check of the accountant’s details had confirmed the “strength of the application”.
45The scanned driver’s licence and the name and address on the bank statement also confirmed Mr Gilmour’s identity. Ms Lyon said that she would be “comfortable” if the address on the application was the same as the address on the front of the driver’s licence. Mr Ferrier said that he knew banks required “100 points” of identification before an account could be opened. The applicant was apparently an experienced criminal who had previously rented properties using false identities. The scanned driver’s licence was a fake and the bank statement may also have been. Presumably, the persons from whom Mr Ferrier gathered information were simply posing as the persons they claimed to be. The police officer investigating the human remains found at the property, described the operations of the second to fifth defendants as “sophisticated”.
46The “tenant”, when he took possession of the property, was informed by the agent of the use that others, including the owner and tradesmen employed by him, would make of parts of the property. At the plaintiff’s request, Mr Ferrier discussed with Mr Gilmour whether he would use a shed where hay bales were stored. Mr Gilmour told Mr Ferrier he did not require hay to be shifted out of the shed. During the Christmas/New Year period, the plaintiff entered the non-leased portion of the property to place mulch around the olive trees. In the circumstances, there is no basis to conclude that it is likely the tenant would have been dissuaded from renting the property for fear that he would not enjoy “quiet possession”.
47The possibility of Mr Gilmour’s partner occupying the property in the future was dealt with by Mr Ferrier informing the tenant that his partner would need to complete an application herself, before she went into occupation. I do not accept that this was not standard practice.
48In the circumstances, there seems little that a property manager acting in accordance with the accepted standards in the industry should have done which might have prevented the unfortunate consequences which followed from Mr Ferrier’s recommendation to the plaintiff of Mr Gilmour’s tenancy.
49Accordingly, I am not satisfied that the plaintiff has established that the first defendant failed to take reasonable case in securing a tenant for the plaintiff’s property.
Quantum of damages
50It is appropriate however, that I express a view on the other issues which would need to have been decided if I had reached a different conclusion on the question of the first defendant’s liability.
51The plaintiff claimed as follows:
a.the diminution in the value of the property of $233,000;
b.restoration costs of $85,329.56 including:
i.exterior painting - $7,480;
ii.electrical work - $4,335.43;
iii.gardening and rubbish removal - $5,000
iv.septic tank replacement - $5,747;
v.damaged garage door - $715;
c.return of the letting fee of $887.38;
d.lost rental calculated at $450/week in respect of the period since 6 February 2012 and continuing;
e.loss in relation to a failed development including expenses of $22,750.78 in respect of the development planned at the property and loss of a chance to undertake a profitable development and sub-division of the property. This claim was not pursued;
f.general damages for inconvenience, anxiety and distress.
Diminution in the value of the property
52Both the plaintiff’s expert witness Mr Neil Laws and the defendant’s expert, Mr Geoffrey Buckingham, are experienced valuers of properties in the locality. Mr Laws has the additional expertise of having practiced as a licensed real estate agent
53There is little dispute between the two experts as to what the value of the property would have been had it not been subjected to the events that occurred between December 2011 and February 2012. According to Mr Laws’ report, the current market value of the property would have been $777,500. Mr Buckingham’s report found the market value of the property to be in the range of $725,000-$750,000. It is likely, however, that Mr Buckingham’s report did not allow for the improvements made to the property since an earlier inspection by him.
54In assessing the effect of the criminal activities at the property, both experts considered that the extensive media publicity given to the fact that the property had been used to manufacture illegal drugs and the body of a murder victim had been found at the property would, at least in the short term, have a detrimental effect on the likely sale price of the property.
55Mr Laws considered that the market value would be reduced by:
a.10% or $77,500 as a result of the use of the property as a methamphetamine laboratory and the storage of the remains of a murder victim; and
b.20% or $155,000 resulting from contamination of the property by its use for drug manufacturing.
56Mr Buckingham’s opinion was that, as a result of any “perceived stigma caused by the circumstances that occurred at the property” a discount range of approximately 3% to 6% (approximately $25,000 to $50,000) should apply.
57Mr Buckingham was asked to value the property on the basis that “there are no actual or potential contamination issues affecting the property” and his report contained a disclaimer reserving “the right to review and if necessary vary our valuation if any contamination or other environmental hazard is found to exist”. Although Mr Buckingham had apparently inspected the interior of the house in July 2011, Mr Buckingham had only conducted an external kerbside inspection of the property following the tenancy.
58Mr Laws was instructed that the property “cannot presently be inhabited as remediation works have not been completed”. When he inspected the interior of the house on the property on 30 April 2013, he noted an “unpleasant” acidic smell. The plaintiff gave evidence that when he looked through the house in late October 2012, there was a smell of “chemical odours”. He also described it as a “strong ammonia smell”. The plaintiff’s wife described the “chemical odour” as strong as “8 to 9 out of 10”.
59On 11 April 2012, an investigation and assessment of the property was conducted by Bio-Clean, a cleaning company specialising in cleaning and restoring crime or trauma scenes affected by the presence of biological, infectious or toxic waste. The subsequent report was tendered by plaintiff’s counsel. On the date of inspection, “Methamphetamine residues were detected indoors at the premises” at concentrations “above the Australian Investigations Levels”. The septic tank connected to the property was also tested. It is described in the report as “empty and dry” with “no evidence of contamination or the level of the tank, reaching the height of the drainage branch lines”. Under the heading “Observations”, in section 5 of the report, it is noted that “No solvent odours were detected in the residence and no [volatile organic chemicals] were detected”.
60Following the initial investigation findings, extensive cleaning of the property was performed by Bio-Clean. Under the heading, “Ceilings and Walls”, the report noted that “The bathroom sink, bath, shower and toilet were tested with pH strips during the initial assessment. These fixtures tested at an acceptably neutral pH and due to these findings we will wash these fixtures down with BIO-ADVANCE to neutralize the items”. In relation to electrical fixtures, the report noted, “All electrical fixtures MUST (original emphasis) be tested by a suitably qualified electrician prior to re-occupation”.
61A certificate was obtained from the City of Greater Geelong following the clean-up. The certificate states that the property had been satisfactorily decontaminated. Nevertheless, Mr Laws said that potential buyers would likely be put off by the possibility of lingering contamination. Mr Laws has extensive marketing experience. Some credence must be given to his evidence, particularly in respect of a sale in the near future.
62Both valuation experts agreed that the extensive media coverage of the events at the property would ensure that many, if not most people in the region, would presently be aware of the property’s history. Whilst Mr Harris, doubted that the plaintiff would be required to disclose the criminal activities during the tenancy to potential purchasers, I consider that both legally and as a matter of sensible marketing, some reasonable disclosure would be required.
63In reaching their opinions, both experts had regard to comparative sales analysis of properties that had been sold following criminal activity on the premises. Mr Laws conducted extensive research into these matters including locally, interstate and overseas. There is a distinct lack of data. Crime statistics show that nationally, about 700 drug laboratories are uncovered by police each year, including a large number involved in the manufacture of methamphetamines . However, no statistical data or even anecdotal information was available as to the effect this activity had on later sales of the property where the drugs were manufactured.
64Mr Laws considered that despite the lack of data, that “the effect of the clandestine laboratory on the property’s value…causes more detriment…than…the discovery of body parts” and that both matters being present at the one location would “have the effect of exaggerating any detriment to the property’s value when compared to one of these issues in isolation”.
65Two properties where murders had been committed were analysed in detail by Mr Laws:
a.at a property in North Ryde, an inner Sydney suburb, a “highly publicised triple murder” by a brother of his sister and parents took place in 2001. In 2004, the property was sold for $800,000 without proper disclosure of the murders. The sale was discontinued and the property resold in 2005 for $720,000. Mr Laws said that “anecdotal evidence” indicated the market had improved between the sales by “around 5%” suggesting “an actual diminution in value of some 15%”;
b.a house in Mornington, Victoria was the location in 2004 of a double murder by a man of his wife and infant daughter. The wife’s body was buried in the yard and later the dismembered bodies were disposed of at a local transfer station. Prior to the murders, the property was purchased for $390,000. In March 2006, the property was sold, with proper disclosure, for $325,000, or a decrease of 16.6%. Mr Laws studied the movement in market values for the Mornington Peninsula Shire over the period between the sales which confirmed the diminution in value.
66Mr Laws consulted a number of colleagues. He said there was “a wide range of opinion” but little actually known of the effect of serious criminal activity on property values. Mr Laws said that there “appears to be a consensus around the fact that what sales evidence there is demonstrates a wide range in the degree of impairment suffered in each case”.
67Mr Laws analysed a number of factors which in his opinion may affect the impact of a murder, or other serious criminal activity. These include the general reputation of the specific locality of the property, the nature of the murder, the background of the victim, whether the offender had been convicted, the degree of publicity and the lapse of time since the events before the sale of the property. The range of factors meant that obtaining precise and accurate information was difficult and, therefore, making direct comparisons was “impossible”.
68Mr Laws considered that the first sale after a serious crime would be most affected and thereafter would diminish and likely have no effect after a period of time.
69Mr Buckingham also analysed the Ryde and Mornington properties. He also considered further properties, including:
a.at an East Geelong property a burglar was shot by police in 1995. This incident apparently had no effect on the sale price the following year;
b.at a property in Glenroy, where the burnt remains of a male were discovered, the property was later sold apparently “within the market range”;
c.at a property in Glen Iris where a tenant may have killed his parents, although their bodies were disposed of at a remote location. The property was sold over 5 years later, apparently “within the market range” although Mr Buckingham was not able to personally verify that opinion.
70Mr Buckingham’s view was that “as no one was murdered in the dwelling [on the plaintiff’s property], no discount for any perceived stigma attached to the property would be applied by a potential purchaser”. Further, both experts agreed that the fact that the dismembered body found at the plaintiff’s property had been murdered elsewhere would limit any diminution in value.
71Mr Laws considered that the use of the property as a drug laboratory and to store the body parts of a murder victim would particularly affect the sale price of a “rural lifestyle” property with the otherwise attractive features the plaintiff’s property had. He thought that although the property had been decontaminated, potential purchasers may remain unconvinced and would seek a discounted price.
72Mr Buckingham noted in his report the views of “a local selling agent” that “some potential purchasers of the property would not consider or be deterred by the circumstances that occurred on the property. Others would seek a discount based on the perceived stigma attached to the property and to release the current owners from the property. There are also potential purchasers who would not consider the property at all, once they were aware of the circumstances that occurred”.
73Mr Buckingham’s opinion was, “that at this point in time there is a degree of stigma attached to the property as the events that took place on the property are relatively recent [however] we believe this degree of stigma will dissipate over time and is likely to diminish significantly if the existing improvements are demolished and a new dwelling is built on the property, or the existing improvements are substantially altered and refurbished”.
74The opinions of both Mr Laws and Mr Buckingham are to a significant degree influenced by matters which they concede cannot be “validated” by the rigorous analysis usually undertaken by valuers. Even with appropriate comparable sales data, the valuers conceded that their valuations were estimates and a figure of 5% above and 5% below was “within range”.
75Both experts were influenced by local marketing expertise, Mr Buckingham by the views of “a local selling agent” and Mr Laws from his own considerable personal experience of more than 20 years selling properties in the area of the plaintiff’s property.
76Mr Harris submitted that the opinions of Mr Laws and Mr Buckingham were not admissible as no relevant “expertise” was involved and the statements of opinion were unable to be tested or weighed because of their “inexact” nature. Whilst there is some substance to this submission, I consider that there was a sufficient basis for the evidence to have been received and evaluated by the Court.
77If I were to award damages to the plaintiff for diminution in the likely sale price of the property, bearing in mind that he wishes to sell the property as soon as he can, I consider that a reduction in the sale price that would otherwise have been achieved, but for the criminal activities on the property, of 12.5% would be an appropriate measure of the plaintiff’s damages. Accepting the mid-point of the valuations by the experts (Mr Laws - $777,500 and the higher end of Mr Buckingham’s - $750,000) 12.5% of $763,750 would equal $95,468.75, which I would round off to $95,000.
Restoration costs
78$7,480 as the cost of painting the outside of the home: The plaintiff said in evidence that the occupiers of the property had created an outside fire pit up against the front of the house. He said that at the front of the house, all the paint had fallen off the walls. The exterior of the house at the left front and around the corner on the left side was covered in a black substance from smoke.
79At the back of the house the doors were unvarnished and there was damage around the window frames, with caulking and putty missing. The varnish around the timber doors was blistered. The plaintiff said that in the weeks before the tenant moved in, he had touched up the interior and exterior of the house. The plaintiff’s wife briefly visited the property at Christmas 2012. She said that she observed smoke damage to the walls but did not know whether there was cracking.
80Mr Laws was asked whether he had observed the outside paintwork during his inspection. He said that he had walked around the property. The paintwork looked “reasonably fresh” and “appeared in reasonably good nick”.
81A number of photographs taken of the exterior of the house are in evidence. None of them are clear enough to show whether damage is present. The painter who gave the quotation to repaint the house was not called to give evidence. I am disinclined not to accept the plaintiff’s evidence. It is possible that Mr Laws’ attention was not particularly focused on the exterior and he simply noted the colour, which he said he did not find presentable. I am satisfied that some smoke damage to the exterior paintwork was caused by a fire lit by the occupiers, and that the use of chemicals in the drug manufacturing or the clean up caused damage to doors and windows. I consider that, if damages were to be awarded to the plaintiff, the sum of $1,000 would be appropriate compensation.
82$4,335.43 as the cost of redoing trenching work for underground cabling: This work was carried out by an electrician in January 2012. It was unclear whether the trenching was damaged by the occupier or subsequently in the clean up. The electrician did not give evidence. In the circumstances, I am not satisfied that there are works which are necessary to be carried out as a result of the occupiers’ use of the property or in the clean up after they left.
83$5,000 as the cost of gardening and rubbish removal: The claim is based on an undated quotation from the local Jim’s Mowing. The person who prepared the quote was not called to give evidence. In the quotation, the “work needed to be done” is said to “include mowing, pruning, poisoning, weeding, rubbish removal and any other gardening requirements and purchase of any materials as well”.
84Pursuant to the tenancy agreement, the tenant had the usual responsibilities to “keep the premises in a reasonably clean condition during the period of agreement”, “to avoid damaging the premises and any common areas”, and “to maintain the garden (if any) of the premises including the lawn, trees, shrubs, plants, and garden beds in a neat and tidy condition”.
85The property was left in an appalling condition following the occupancy. The plaintiff said that last summer he undertook a significant clean up of the grounds, working 3 to 4 hours each week over a period of 4 weeks. A 6 metre skip was used to dispose of boxes, foam, broken glass, food, used gloves, cans and dead rats. The photographs in evidence give some idea of the extent of this work. The work performed by the plaintiff was not included in the quotation.
86This was not simply the standard maintenance of the property, which Mr Harris suggested had been carried out “all at once” rather than, as it ordinarily would have been, over a period of time. The tenant was obliged to keep the premises clean and undamaged and to maintain the garden. I consider that some allowance should be made. However, in the absence of a more detailed quotation, an allowance of $2,500 would, in my view, be appropriate.
87$5,747 – septic tank: The plaintiff relied upon an oral quotation by a plumber. The plumber was not called to give evidence. The make up of the quote is not known. The Bioclean report notes that an examination of the toilet in the house and of the septic tank showed no contamination by drugs. The plaintiff said he was reluctant to flush the toilet without further investigations being undertaken for fear that the effectiveness of the septic system may be compromised. In the absence of evidence of actual or likely contamination requiring rectification, it would not be possible to award damages for this claim.
88$715 damaged garage door: The door was damaged by the occupiers. The amount claimed is the figure quoted for the replacement door. If the plaintiff were entitled to damages, this item should be allowed
Return of the letting fee of $887.38
89If the first defendant had not properly carried out the work it contracted to in letting the property, it would also be required to repay the fee the plaintiff paid for the service.
Lost rental
90The restoration works had not been completed at the time of the trial. The electricity supply consistently trips. The restoration works could not be undertaken before the property was released from police custody and the decontamination works were completed. In the circumstances, the plaintiff would not have been able to rent the property to an appropriate tenant. The plaintiff’s damages should include loss of rental of $29,250 being 15 months from February 2012 to 6 May 2013 at $1,950 per month.
Inconvenience, anxiety and distress
91The effect on the plaintiff of the events at the property were very significant. They seriously affected his health and well being, his family life, the enjoyment they anticipated in developing the property for their future recreational purposes, his financial position and the distress of his property being associated very publicly with violent and despicable criminal activity. In my view, an award of $40,000 would be appropriate compensation.
92Mr Harris raised a technical defence based on s. 28LE of the Wrongs Act 1958 (Vic) which provides that, "A person is not entitled to recover damages for non-economic loss in any proceeding in a court in respect of an injury to that person unless caused by the fault of another person and unless the person injured suffered a significant injury". The process of obtaining an assessment of “significant injury” was not followed in the present case. Plaintiff’s counsel, Mr Wodak submitted that the contractual remedy of general damages for the plaintiff’s inconvenience, anxiety and distress was not conditional upon an assessment of significant injury under s. 28LE of the Act.
93In my view, the absence of a significant injury assessment would prevent the recovery of these damages by the plaintiff.
Proportionate liability
94 Is the claim an apportionable claim? In the event that liability were proven against the first defendant, the first defendant alleged that the second to fifth defendants were concurrent wrongdoers for the purposes of Part IVAA of the Wrongs Act 1958 (Vic), and that any liability the first defendant may have to the plaintiff should be apportioned between all defendants.
95 The liability of the first defendant can only be apportioned if the plaintiffs’ claim against them is an “apportionable claim”. The claim must be one “arising from a failure to take reasonable care”. The second to fifth defendants will be regarded as concurrent wrongdoers if their “act or omission caused…the loss or damage that is the subject of the claim”. The damage caused by their act or omission must be “the same damage” as the damage claimed against the first defendant.
96 The present claim is an apportionable claim under section 24AF of the Wrongs Act, as it was based on the first defendant’s alleged failure to take reasonable care and skill in the selection of a tenant for the plaintiff’s property.
97 Is there a cause of action against the second to fifth defendants? The second to fifth defendants will be considered “concurrent wrongdoers” if their acts caused the damage to the plaintiff’s property that is the subject of this claim.
98 There is no express requirement in section 24AH that the plaintiff must have a civil cause of action against a concurrent wrongdoer. The section requires that that the acts or omissions of all concurrent wrongdoers have caused the damage in question. In United Services Corporation Ltd v SPI Electricity Pty Ltd [2012] VSCA 158, Dixon AJA, delivering the main judgment of the Court of Appeal stated that, “In order to prove that another defendant is a concurrent wrong doer it is necessary that the defendant pursuing a proportionate liability defence establish that the plaintiff has an enforceable cause of action against other concurrent wrongdoers. If the plaintiff has not sued that wrongdoer or alleged that cause of action, then the defendant raising the defence must do so, including by joining that wrongdoer as a defendant. This is so because it is not the intention of the statute to reduce the plaintiff’s judgment on account of another against whom that plaintiff could never have had legal recourse; that is, a person who is not ‘liable for the same damage’. It is misconceived to suggest that the concept of a concurrent wrongdoer under s24AH(1) may extend to third parties who are causally linked to the claimed loss but ‘innocent’ in the sense that they have committed no legal wrong” (paragraph 43).
99 In Hunt & Hunt v Mitchell Morgan (2013) 296 ALR 3, French J, Hayne and Kiefel JJ in delivering the majority judgment stated, “There is no express limitation on the nature of the claim which might have been brought by the plaintiff against a concurrent wrongdoer, except the requirement of s 34(2) that the acts or omissions of all concurrent wrongdoers have caused the damage in question” (paragraph 18).
100 Mr Harris submitted the plaintiff would have a number of causes of action against the second to fifth defendants including intentional or negligent act, trespass and conversion. Where the damage to the property was caused by the intentional and criminal acts of the second to fifth defendants, it would be surprising if an apportionment of liability was not possible.
101 Mr Wodak submitted that the cause of action in trespass involves an injury to possession. To have standing to bring an action in trespass, the plaintiff must have an immediate right to possession of the property. However, despite the plaintiff not being in physical possession of the property, as it was leased to “Jacob Gilmour”, at the time of the trespass by the second to fifth defendants, the lease had been entered into upon a fraudulent basis and therefore was arguably void. In these circumstances, the possessory rights to the property would remain with or revert to the plaintiff, giving rise to a cause of action in trespass. Although not pleaded, the second defendant had clearly breached covenants in the lease which would also entitle the plaintiff to have “legal recourse” against him.
102 The physical presence of the second to fifth defendants on the plaintiff’s property for the purpose of operating a clandestine laboratory and to store body parts was a use of the property which, without the plaintiff’s permission, would constitute a trespass and probably other causes of action.
103 Causation of the ‘same damage’? For the claim against the defendant to be apportioned, it must be proved that the damage to the plaintiff’s property was, at least in part, caused by the second to fifth defendants.
104 The majority in Hunt & Hunt commented in regard to causation that, “in March v Stramare (E & MH) Pty Ltd, it was observed that courts are no longer constrained as they once were to find a single cause for a consequence and to adopt an “effective cause” formula. Courts today usually recognise that there may be wrongdoers whose acts or omissions occur successively, rather than simultaneously, and who may be liable for the same damage, even though one may be liable for only part of the damage for which the other is liable” (at paragraph 56).
105 Although it can be said that but for the first defendant’s negligence, the damage caused to the property by the defendants would not have occurred, the High Court judgment recognised that the test has its limitations as this approach to causation places too great a weight on the test to the exclusion of the common sense approach, which the law has always favoured. In the present case, it is clear that the second to fifth defendants’ actions were a cause of precisely the same damage to the plaintiff’s property as is claimed against the first defendant.
106 Apportioning liability: So far as concerns the first defendant, if its negligence were considered a cause of the plaintiff’s damage and it were held liable for this damage, it would not be appropriate, or consistent with the intention of the Act that the first defendant be held liable for the whole of the damage. Regard must be had to the part played by the second to fifth defendants’ conduct in contributing to the damage suffered by the plaintiff. If the first defendant were liable, the plaintiff should not recover from it any more than that for which it was responsible.
107 Liability must be apportioned between the defendants according to their respective responsibility. The authorities provide that when apportioning, the Court can:
a. have regard to issues of “blameworthiness and causative potency”;
b. treat similar concurrent wrongdoers as a group without dissecting their individual responsibility.
108 In the present case, the second to fifth defendants were co-offenders who deliberately engaged in very serious criminal conduct. At most, the first defendant negligently failed to conduct appropriate checking of the tenancy application. The second to fifth defendants should be regarded as a separate group of wrongdoers who had a high degree of culpability. The first defendant has significantly lesser blameworthiness although, if liability were found, its conduct would have set in train the unfortunate circumstances which resulted in the plaintiff’s loss.
109 In these circumstances, I consider that responsibility for the damage would appropriately be apportioned as to 20% to the first defendant and as to 80% to the second to fifth defendants.
Orders
110The appropriate order in the circumstances is that the plaintiff’s claim against the first defendant be dismissed.
111I will hear further from the parties in relation to the question of costs.
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Certificate
I certify that these 24 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 21 June 2013.
Dated: 21 June 2013
Catherine Kusiak
Associate to His Honour Judge Anderson
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