Blecher v Zou

The relevant facts

1. Prior to 11 August 2022, the Plaintiff was the registered proprietor of the Property on which was located a house, attached double garage, swimming pool, and garden.
2. In about February 2020, a severe rainstorm blew off about three quarters of the roof of the house on the Property which in turn lead to water damage to the internal walls and floors. The Plaintiff was insured for such damage, a claim was made, and certain repair works were carried out, including the replacement of the entire roof of the house. The guttering and downpipes were also apparently replaced at this time at the cost of the Plaintiff, as opposed to being covered by the insurance claim and repaired by the Plaintiff's insurer.
3. The Plaintiff subsequently decided to sell the Property and on 8 February 2022, contracts were exchanged for the Defendants to purchase the Property from the Plaintiff for the sum of $5.8 million.
4. Relevantly for the purposes of this dispute, the Contract contained two relevant clauses: 1. Standard condition 10.1.4 which provided that the Purchaser could not make a claim or requisition or rescind or terminate in respect of any change in the property due to fair wear and tear before completion; and 2. Special condition 3 whereby the Purchaser acknowledged that they were purchasing the property and its improvements: 1. in its present condition and state of repair; 2. subject to all defects latent and patent; 3. subject to any infestation and dilapidation.
5. Completion was to take place six months after the date of the Contract, being 8 August 2022.
6. A pre-completion inspection by the Defendants took place at about midday on 8 August 2022, the scheduled date for completion.
7. At 1.37pm on 8 August 2022, the Plaintiff's conveyancer sent an email to the Defendants' solicitor seeking completion to take place at 2.00pm on that day. At 2.49pm the same day, the Defendants' solicitors responded in the following terms: "Dear Sir/Madam, We are instructed that a number of issues in respect of property [sic] have been revealed upon our clients' inspection of the property today. Please see attached pictures provided by our client. We are still confirming instructions as to the extent of the required repairs/rectification works/associated costs in respect of such issues, especially regarding the extent of water damage in the roof. Regardless, our clients instruct that, to avoid any further delay of your client's simultaneous settlement and moving, we are instructed to request for $100,000.00 to be withheld in the depositholder's trust account for the time being pending the resolution of the same, either by way of abatement pursuant to s66M of the Conveyancing Act 1919, or for the vendor to rectify these issues within a fixed timeframe and obtain quotations accordingly. Please urgently confirm your client's agreement towards the request to withhold the above funds. We will sign off on PEXA immediately once the request to withhold funds is agreed to. We also note that our client is currently at the property in person and we are instructed that your clients have not vacated the property, in the absence of vacant possession available to the purchaser at completion, our clients reserve all rights and obligations pursuant to the contract. Yours faithfully, Luminous Legal" (The pictures purportedly attached to this email were not placed in evidence.)
8. Over the ensuing couple of days there was correspondence between the parties respective legal representatives in relation to the alleged issues and the proposal to withhold $100,000.00. The detail of that correspondence is not relevant for present purposes.
9. An agreement was ultimately reached between the parties to allow settlement to occur. The agreement is reflected in a letter from the Defendants' solicitor to Laing & Simmons Double Bay dated 10 August 2022 (August Agreement) which is in the following terms: "Dear Sir/Madam, Re: Zou & Shen purchase from Blecher Property: 26 Myuna Road, Dover Heights NSW 2030 We confirm that the above matter is settled today. We advise that prior to the settlement the parties have reached the following agreement in relation to the deposit hold in your trust account and the claimed damage over the property: • The sum of $100,000.00 to be withheld in the agent's trust account for 2 months (the withholding period); • The vendor to do all things necessary to have the damages repaired during that withholding period. The damages to the property are leaking roof (at the bedroom and the garage), outdoor wall lights, 1 x pool light, 1 x chipped and cracked basin; • The purchaser to reasonably cooperate with the vendor's task above, including permitting reasonable access to tradepersons and assessors; • When the repair works are complete to the reasonable satisfaction of both parties, the $100,000.00 withheld is to be released to the vendor; and • Should the repair works not be completed within the withholding period, the withheld sums may be released to the purchaser to the extent required to complete the repairs themselves. As such, you are to hold $100,000.00 from the deposit in your trust account pursuant to the agreement. You are otherwise authorised to release the balance of the deposit held by you to the vendor. Please release keys for the subject property to the purchasers. Yours faithfully, Hudson Lu Solicitor Luminous Legal"
10. It appears that completion occurred on 11 August 2022 when the keys to the Property were provided by the Plaintiff to the Defendants.
11. A good deal of evidence was adduced by both parties as to what occurred post completion up until the time of the hearing in an attempt to fix the defects identified in the August Agreement.
12. As events have transpired, the two defects identified in the August Agreement which remain in dispute are the "leaking roof", which is the roof of the garage, and the "pool lights". I set out below the relevant chronology as to what occurred post completion in relation to these two items.

The Leaking Garage Roof

1. After the Defendants raised issues in relation to the leaky roof on 8 August 2022, it would appear that the Plaintiff contacted Dak-Wal Constructions Pty Ltd (Dak-Wal), which was the entity which had carried out repairs to the Property in 2020 pursuant to the insurance claim I have referred to above. Dak-Wal agreed to inspect the Property. That inspection was carried out on or about 10 August 2022 and on that date, Dak-Wal sent an inspection report to the Plaintiff. In relation to the garage area, the report stated under the heading "Cause/Circumstances (How damage occurred and causes)": "1. Garage ceiling has been damaged from internal down pipe connection in the box gutter failing."
2. In relation to what issues were required to be dealt with, the report relevantly stated, under the separate heading "Any Maintenance Issues/Any Prior Damage": "1. Box gutter at the southern end of garage to prevent further water ingress."
3. The Plaintiff gave that report to TomKat Roofing (TomKat) which was the entity which carried out the work at the expense of the Plaintiff in 2020/2021 in relation to the guttering and downpipes. On 16 August 2022, TomKat quoted the Plaintiff $935 for a downpipe spreader. A subsequent invoice was issued on 1 September 2022 for a deposit on work on a downpipe spreader, apron flashing, and downpipe replacement.
4. On 13 September 2022, TomKat contacted the Plaintiff asking for the Plaintiff to arrange a roof inspection of the Property on 14 September 2022. The Plaintiff sent an email to the First Defendant, attaching documents to give the First Defendant the history in relation to the guttering and requesting a roof inspection. The First Defendant responded saying he was only available on 15 or 16 September 2022. On 15 September 2022, a variation quotation was provided by TomKat to the Plaintiff. Apparently in response to being advised by TomKat that unless work commenced immediately there would be a significant delay in TomKat being able to commence work, the Plaintiff emailed the First Defendant on 24 September 2022 informing the First Defendant that TomKat would be attending in two days' time. The First Defendant replied on 25 September 2022 saying that the notice time was too short.
5. TomKat attended the Property on 27 September 2022 and carried out certain work. On or about 27 September 2022 the Plaintiff received an invoice for TomKat's work to completion which was dated 28 September 2022 and which was paid. That invoice (which was paid by the Plaintiff) totals $5,296.50 and deals (relevant to the present dispute) with two subjects: "Downpipe Spreader - Above Garage - Extend downpipe spreader directly to gutter below using 90mm downpipe - Painted in White. - Includes all fixings and sealants … Downpipe replacement - internal garage - Remove existing downpipes - Supply and install 1 x 100 - 75 new downpipes - Supply and install new downpipe nozzle - Includes all associated fixings and sealants"
6. On 28 September 2022, the First Defendant sent an email to TomKat. The email stated: "That's great, the job has been fully completed between your company and prior owner. Are we able to move on? As I am the current owner of the property. Are you able to do me quote for fixing the current leaking issue. Please quote base on condition of my roof and your expertise. NOT base on other company's report."
7. The First Defendant was cross-examined in relation to this email and agreed that at the time he sent this email, he did not know whether there was still a leak and was simply referring to the purpose of TomKat's repair.
8. On 29 September 2022, the First Defendant emailed the Plaintiff in the following terms: "Please refer to the email below between ma and Tomkat. I been have difficulty obtaining the work report for Tomkat in regarding to the other defects found on the roof during the work which carried out on the 27th. I am kindly asking you to authorise Tomkat to disclose all the information of the work they have completed and the defects found."
9. The Plaintiff was cross-examined on this email and whether she had provided the authorisation to TomKat for the disclosure of information, sought by the First Defendant. The Plaintiff said that she could not recall whether she did give authorisation and that she didn't think it was necessary to do so.
10. On 4 October 2022, the First Defendant sent a further email to the Plaintiff asking for the Plaintiff to authorise TomKat to disclose information in relation to the roof.
11. By email dated 10 October 2022, but having regard to the time settings on the First Defendant's computer, was agreed to having been sent on 10 October 2022 AEST, the First Defendant sent to the Plaintiff an email containing two videos and three photographs made or taken on 9 October 2022. One video depicts the internal downpipe in the garage with a paper towel becoming wet when placed onto it. The other video shows a drip emanating from a steel rod attached to the ceiling of the garage and which appears to be part of the garage door opening mechanism. The Plaintiff immediately forwarded this to TomKat. The Plaintiff also sent emails to the First Defendant on 10 October 2022 advising the First Defendant that she had "asked TomKat to attend the property urgently to resolve the issue in the garage".
12. On 20 October 2022 a representative of TomKat sent a text message to the Plaintiff to the effect that they had attempted to inspect the work on the day before at the Property but could not obtain access. It would appear that another attempt was made on 26 October 2022 by TomKat to inspect the work, but the First Defendant would not permit this to occur. Access to the garage by TomKat was also sought for 27 October 2022 but refused. The First Defendant indicated to the Plaintiff that he regarded the Defendants as being allowed to complete the repairs and that he was going to use his own roofers.
13. TomKat provided a quotation to the First Defendant dated 24 August 2023, pricing the work set out in the report which the Defendants had obtained from a roofing inspector, Chunsheng Hou, dated 28 June 2023. The quotation totals $23,782.00.
14. The First Defendant subsequently sought a further quotation from TomKat to carry out certain works to the garage roof and by email dated 24 October 2023, TomKat indicated to the First Defendant that it was no longer interested in submitting a quotation for this work. The email also stated: "In regards to the downpipe, we attempted to return to complete this as the garage was locked on our previous visit, however our team were refused access to site. We are happy to return to replace this free of charge upon request."
15. Having regard to this email it appeared to be a common ground at the hearing that the internal downpipe replacement work included in the TomKat quotation dated 28 September 2022 has not been carried out although the Plaintiff has paid for this work. TomKat's offer to the Defendants to return to the Property to carry out the work has not been accepted by the Defendants.

The Pool Light

1. At the time of the pre-completion inspection, one of the pool lights appears to have become detached from the pool wall and was lying on the bottom of the pool, connected to the pool only by its electrical wiring.
2. Thereafter, the Plaintiff arranged for an electrician to attend the Property on or about 19 August 2022 to repair the pool light. The repair work was not able to be carried out on that day because apparently the Defendants' prior permission for the electrician to attend was not obtained, the police were called and the electrician was required to leave the Property. In any event, it would appear that the electrician completed repair work to the pool light by late September 2022. The electrician issued an invoice to the Plaintiff which records that both swimming pool lights were replaced.
3. In response to an email from the Plaintiff to the First Defendant sent on 2 October 2022, which contended that all of the defects have been repaired and requesting release of the $100,000.00, the First Defendant responded by email on 3 October 2022 contending that he was not satisfied with the repair of the pool light. Six matters were raised in that email as follows: "(1) The worker access property and completed without my consent. (2) The lights are larger in size, so one of the lights cannot set to the wall very well. (3) Cabling is very unprofessional. (4) Transformer is not unprofessional installed. (5) Transformer look 2nd hand. (6) Lights not able to turn on after refill the pool water."
4. The Plaintiff then forwarded that email to the electrician for his comment. It would appear that in response to this, the electrician attended the Property on 9 October 2022 and carried out certain works. He then invoiced the Plaintiff for that work. The invoice totals $352.00 and was paid by the Plaintiff.
5. There was no suggestion in the evidence filed prior to the hearing by the Defendants that the pool lights (as installed by the electrician) are not working. Rather the Defendants' complaints, as set out in their written submissions repeated the matters raised in the 3 October 2022 email above, going to the quality of the light installed and its aesthetics. In cross-examination of the First Defendant, it emerged that the First Defendant has in fact arranged for the light to be replaced. I deal with this claim further below.

Evidence Adduced at the Hearing

1. The Plaintiff relied upon an affidavit in chief and an affidavit in reply of the Plaintiff as well as an expert report of a building expert, Mr Scott of Best Building Solutions. That building report was relied on by the Plaintiff in response to a report obtained by the Defendants from Chunsheng Hou of AH Roofing Services dated 28 June 2023. Mr Hou's report, unlike that of Mr Scott, was not served as expert evidence by the Defendants and it is apparent on the face of the report that it has not been prepared in accordance with the Expert Code of Conduct contained within Schedule 7 of the Uniform Civil Procedure Rules (NSW) 2005 (UCPR). Rather, it was included as an Exhibit to the First Defendant's affidavit dated 7 August 2023. The First Defendant also relied on an affidavit made by him on 24 January 2024 and tendered some additional documents.
2. The hearing occupied a full day on 1 February 2024. The Plaintiff was cross- examined by the First Defendant and the First Defendant was cross-examined by counsel for the Plaintiff.
3. Mr Scott was also cross-examined by the First Defendant.
4. The Plaintiff initially objected to the Defendants' relying on Mr Hou's report on the basis that, inter alia, it was not prepared or served in accordance with the requirements of the Expert Code of Conduct in the UCPR. I was also advised that Mr Hou was not available for cross-examination as he was apparently overseas, although counsel for the Plaintiff candidly advised the Court that it was only recently that the Plaintiff raised the need for Mr Hou to be present at the hearing and made attempts to contact him.
5. At the hearing of the matter, I indicated to the parties that in the circumstances of the case, I proposed to admit the report of Mr Hou and to give the report such weight as I was able to, having regard to its contents, particularly as the Plaintiff had responded to that report through Mr Scott and was proposing to rely on that report regardless of whether I admitted Mr Hou's evidence. The Plaintiff did not object to this course.
6. Both the Plaintiff and the Defendants served extensive written submissions and addressed me orally on 1 February 2024.

The Expert Evidence

1. As set out above, the Defendants relied upon a report of Mr Hou of AH Roofing Services dated 28 June 2023. All that is apparent on the face of that report as to Mr Hou's qualifications is that he is a licensed inspector. Mr Hou was engaged by the First Defendant to inspect the roof of the Property, the First Defendant having indicated to Mr Hou the following issues: 1. Water leakage on the first floor. 2. Water leakage in the garage. 3. Loud noise from the roof during storm/windy days. (The third of those issues is of no relevance in the present case.)
2. Mr Hou's report consists primarily of a series of photographs that were taken by Mr Hou on his inspection of the Property - the date on which this occurred not being disclosed - together with various comments or opinions being made in relation to those photographs.
3. Mr Scott's report took the form of responding to each group of photos contained in Mr Hou's report.
4. The Hou report contains photographs of certain cracked tiles and pointing and bedding which I infer to be contained on the roof above what was described in the proceedings as level 1, being the structure above and to the rear of the garage. The report also contains photographs of mould on the garage ceiling and walls. In relation to the Colorbond roof above the garage, the report states: "During the inspection, we observed that the Colorbond components, including the roof covering, flashings, gutters, and downpipes were significantly aged and rusty. We also noted extensive holes and missing screws, which have resulted in water ingress into the garage. These deteriorated elements require immediate attention to prevent further water damage and potential structural issues. We recommend a comprehensive replacement the affected Colorbond components to ensure proper water drainage and to maintain the integrity of the garage."
5. Separately, on page 8 the report identifies "that the connection between the box gutter and downpipe showed signs of aging with failed silicon", with the opinion being asserted that this "compromised connection has allowed water ingress into the garage."
6. Also on page 8, next to a photograph of the extension roof, Mr Hou expresses the opinion that the "extension roof had no downpipe, hence water could overflow and seep into the adjacent ceiling".
7. Finally, on page 9, next to photographs of the pipe from the tiled roof to the garage ceiling, Mr Hou states: "The pipe from the tiled roof was not spread so water could splash into the garage ceiling when high volume of water was to be discharged."
8. The report ultimately contains five recommendations as follows: "(1) The cracked tiles and pointing & bedding should be repaired. (2) A downpipe should be installed to the extension room. (3) The colorbond roof including downpipes and gutters etc have failed and shall be replaced immediately. (4) The downpipe from tiled roof should be relocated and spread to avoid overflow. (5) Sealing the western side of the house between the tiled roof and colourbond [sic]."
9. It is not readily apparent to me what in the earlier part of the Hou report supports the third recommendation, namely that the roof, including downpipes and gutters etc, have failed and should be replaced immediately. I have set out above what was observed in relation to the Colorbond components - namely extensive holes and missing screws. No further detail is set out in the report as to the number of holes, or missing screws, their location, and the like. The recommendation to replace the roof is to maintain the integrity of the garage, rather than being as a result of a complete failure at present.
10. Mr Scott did not agree that there was any need to replace the roof. At [6.3] of his report, Mr Scott stated: "All of the areas of alleged defects raised in Chunsheng Hou's report are in my opinion not related to any non-compliance with build but in fact due to the homes proximity adjacent ocean front which results in consistent salt within atmosphere which is highly corrosive to any metal. This location is also exposed to high winds due to cliff face and ocean nearby."
11. The First Defendant, in his closing submissions on behalf of the Defendants, criticised this opinion of Mr Scott, suggesting that his opinions were inaccurate or biased. As I understand it, the criticism based on Mr Scott's concession in cross-examination that according to part 7.2.2 of the National Construction Code, formerly referred to as the Building Code of Australia (NCC), that the metal used on the garage roof is not compliant with the current NCC, but that he failed to mention this matter in his report.
12. This is not a proper basis to criticise Mr Scott's evidence. As I read paragraph 6.3 of his report, he is seeking to make the point that the defects raised in Mr Hou's report are not, in the opinion of Mr Scott, due to any issues with the way in which the roof has been built, but rather are due to its location, principally being next to the ocean. Mr Scott was not directing himself to whether the material complies with the NCC as it is at present. Whether the material used was compliant at the time the garage was built was not addressed in the evidence.
13. Mr Scott appeared to me to be an expert doing his best to assist the Court and I accept his evidence.
14. Mr Scott's response to the other observations made in the Hou report may be summarised as follows.
15. In relation to the cracked tiles and cracked pointing and bedding, Mr Scott stated that although he did not access the level 1 tiled pitched roof for safety reasons, he viewed roof tiles at the street end of level 1 from the roof of the garage and from the driveway of the home and did not observe any cracked tiles or any cracks to the tile pointing or bedding. He also observed that a cracked tile, such as that observed in the Hou report is not uncommon to be present on any tiled roof of this age, as is the case for hairline cracks in pointing and bedding on ridge and hip tiles which is due to expansion and contraction. He then expressed the opinion that there is no water ingress to the interior of the home as a result of the cracks identified by Mr Hou.
16. In relation to the rusty water marks found on the soffit of the level 1 external wall, Mr Scott expressed the opinion that this is not a structural defect, but in fact general weathering as a result of salt deposits within the atmosphere due to the proximity of the home to the ocean/coastline. Mr Scott identified that this is typical weathering of a home of this age.
17. In relation to the extension mould and water marks found on the garage ceiling and walls, Mr Scott said that he did not observe mould or water stains to walls and did not identify any water stains on ceilings. He did, however, identify mould to the eastern side of the garage ceiling which he tested for moisture content and found that a nil moisture reading was present. Mr Scott pointed out in his oral evidence that the existence of mould was not necessarily consistent with water ingress but could simply be because the area is in a damp environment.
18. In relation to the extensive holes and missing screws and the aged/failed connection between the box gutter and downpipe, the effect of Mr Scott's response is that while there were some small holes, minor surface rust, and six missing pop rivets, he did not observe any evidence of current water ingress into the ceiling or walls of the garage and the garage structure has not been compromised in any way, as was suggested by Mr Hou. Mr Scott's recommended remediation in relation to these matters is for the property owner, namely the First Defendant, to maintain the roof cladding by replacing the missing six pop rivets and treat two rust holes with anti-rust paint, then seal these holes with silicon at an estimated cost of $280.00 plus GST.
19. In answer to some questions which I asked him at the hearing, Mr Scott explained that the missing pop rivets were at the western end of the garage and some five to six metres away from the observed mould. He later said that it was, in his opinion, "highly unlikely that water would penetrate that unless it was an extreme heavy rainfall for a long period of time". I took this to mean that Mr Scott could not rule out water ingress as a result of the missing rivets or rust holes.
20. In relation to the connection between the box gutter and the downpipe, Mr Scott stated that the silicon sealant has not delaminated and that the mould on the silicon is common.
21. In relation to the overall condition of the garage roof, Mr Scott expressed the opinion that it was common for its age and location. The photos attached to Mr Scott's report appear to show a roof, gutters, and flashing in good order with minimal rust. Although Mr Scott was not cross-examined to this effect, the First Defendant, in closing submissions, criticised Mr Scott's evidence in relation to the condition being consistent with its age and location. As I understood the submission, the effect of it was that there was a logical flaw in the approach taken by Mr Scott because he estimated the age of the roof having regard to its condition and then expressed the opinion that the condition of the roof was consistent with its age.
22. Even putting to one side the fact that this criticism was not put to Mr Scott for his response, it is not a fair criticism of his evidence. Mr Scott agreed in cross-examination that no one had told him the age of the roof and that he had estimated the age of the roof based on his experience and the condition he saw. He otherwise observed that it was a house built many years ago. Mr Scott was not asked anything about what age he did estimate in relation to the roof. As I understand Mr Scott's evidence, he was saying no more than that the current condition of the roof was, having regard to his experience, consistent with a roof of some age located next to the sea. In any event, Mr Scott was not expressing the opinion that because of the age of the roof there was nothing wrong with water ingress such that there was no defect to repair.
23. In relation to the absence of a downpipe from the triangular shaped roof to the garage roof, Mr Scott observed that the gutter has never had a downpipe or splitter outlet installed, but that one could be installed at a cost of $450.00 plus GST. Again, in answer to questions from me, Mr Scott said that in his opinion water was unlikely to overflow from the gutter and seep into the adjacent ceiling. Rather, because the outer edge of the gutter was lower than the edge of the gutter that met the building, as I understood the evidence, the overflow would be away from the ceiling to the roof below, and therefore was unlikely to cause any water ingress issues. As such, the absence of the downpipe and splitter is not the cause of any water ingress.
24. In answer to another question from me as to whether, in his opinion, there is anything that could explain water ingress into the garage, Mr Scott expressed the opinion that, in substance, any water ingress into the garage would likely be due to, what I would describe as a maintenance issue, being a failure to clean debris away from the box gutter. As set out above, I also regard Mr Scott's evidence that the missing rivets etc could result in water ingress to the garage in extreme heavy rainfall for a long period of time.

Conclusion on expert evidence

1. The principal substantive difference between the reports of Mr Hou and Mr Scott was whether the Colorbond roof has failed and needs to be replaced immediately. I prefer the opinion of Mr Scott on this issue and do not accept the opinion of Mr Hou. As set out above, although this was a recommendation made by Mr Hou, it does not seem to be supported by any of the earlier observations in his report. Mr Scott's report also contains a number of photographs of the garage Colorbond roof and associated gutters and flashings which show, in the opinion of Mr Scott, a roof, gutters, and flashings in good order with minimal rust present.
2. I also accept the evidence of Mr Scott as to the likely cause of water ingress being poor maintenance of the box gutter and in this regard, reject the opinion of Mr Hou that the cracked tiles, pointing, and bedding are likely to lead to water ingress. In relation to the missing rivets etc there appears to be a small chance, having regard to Mr Scott's opinion, that this may lead to water ingress in extreme heavy rainfall for a long period of time. The appropriate repair is that outlined by Mr Scott at an estimated cost of $280.00 plus GST.
3. The internal downpipe in the garage did not receive much attention in the reports of either Mr Hou or Mr Scott or the oral evidence of Mr Scott. Mr Hou appears to contend that the connection between the box gutter and the downpipe has failed but Mr Scott does not agree. There was no cross-examination of Mr Scott on this aspect. It also does not appear that Mr Hou or Mr Scott were shown the videos and photos produced by the First Defendant on 9 October 2022. It is not clear to me whether the depiction of the water on the downpipe in the video is due to some failure of the downpipe or poor maintenance of the box gutter above. The report of Dak-Wal dated 10 August 2022 (referred to above) refers to the "internal connection in the box gutter failing". I do not, however, need to reach a concluded view in relation to whether water is entering the garage through the internal downpipe in circumstances where TomKat has quoted for the replacement of that downpipe, the Plaintiff has paid TomKat for this work, and the only impediment to it being carried out is the Defendants' refusal to allow TomKat to attend the Property to carry out the work free of charge. As set at later in this judgment the Defendants are not entitled to claim the cost of replacing the downpipe given this refusal.

The Plaintiff's Case

1. As refined in closing submissions, the Plaintiff's case may be summarised as follows, setting out the descending order of alternatives from best to worst case. 1. The purchase price under the Contract is $5.8 million and the Plaintiff is entitled to the full amount of the purchase price unless it can be demonstrated there is some basis to reduce the price, but no basis has been demonstrated; 2. It has not been demonstrated by the Defendant that any of the defects identified on 8 August 2022 remain and as such, the Plaintiff is entitled to the release of the $100,000.00 fund held pursuant to the August Agreement; 3. Properly construed, the two-month period set out in the August Agreement should not be regarded as of the essence, in the sense that on and from 11 October 2022, if the defect has not been repaired, the Defendants thereafter are free to arrange for the repairs to be carried out and to be paid for those repairs from the $100,000.00 fund; 4. TomKat should have been allowed back onto the Property on and from 10 October 2022 to investigate whether any roof leak remained. The Defendants refusal to allow this to occur is in breach of the August Agreement, and as such, the Defendants are not entitled to make any claim on the $100,000.00 fund. As I understand it, a further aspect of this point, was the Defendants failure to accept the offer from TomKat to attend and replace the internal downpipe in the garage at no charge; 5. If the Court is not satisfied that all of the defects have been repaired, the only work which the Court would require to be carried out is the repair of the missing rivets and holes identified by Mr Scott in his report and costed by him at $280.00 plus GST. Nothing should be allowed for the pool light; 6. If the Court concludes that the garage roof should be replaced, the Court should adopt the quotation provided by TomKat dated 24 August 2023, totalling $23,782.00.

The Defendants' Case

1. The Defendants' contentions may be summarised as follows: 1. Two of the defects identified as at 8 August 2022, being the leaking garage roof and the pool light, were not repaired to the Defendants satisfaction at the end of the two month period set out in the August Agreement. The two month period set out in the August Agreement was of the essence, it having been negotiated between the parties; 2. The leak in the garage roof remains and the appropriate fix is to replace the entire roof. The replacement must be carried out in accordance with the current requirements of the NCC. As set out in the Defendants' written submissions, the Defendants contended that the appropriate replacement material is Colorbond Ultra - being the material priced in the TomKat quotation dated 24 August 2023. At the hearing, the Defendants contended that the appropriate material to comply with the relevant part of the NCC was Colorbond Stainless Steel, which the Defendants contended was an additional $19,138.68 to the total cost of repair. 3. The pool light was defective because it was the wrong size and it did not sit flush with the pool wall and the Defendants were entitled to recover $1,370.78 based on a verbal quotation from the Defendants' local pool shop.

Consideration

1. Having regard to the respective cases put by the parties, the following issues arise: 1. The proper construction of the August Agreement, including: 1. Whether the August Agreement modifies the rights of the parties under the Contract for Sale of Land. 2. Whether the two-month time period is of the essence in the sense that on its expiry the Defendants are free to go about arranging for the repair of any defects and to recover from the $100,000.00 fund the cost so incurred. 1. Whether the defects identified in the August Agreement have been repaired to the reasonable satisfaction of the parties. 2. To the extent any defects remain, whether the Defendants, by reason of their own conduct, are not entitled to claim on the $100,000.00. 3. The appropriate quantum of any defects found to still exist.

Proper Construction of the August Agreement

1. The Plaintiff's counsel eschewed during the hearing any suggestion that the August Agreement was anything other than binding on the parties. In particular, it was made clear that the Plaintiff's contentions of entering the August Agreement under duress, expressed both in correspondence at the time of completion and in her affidavit evidence, will not give rise to a legal basis to say the August Agreement was not binding.
2. The August Agreement was obviously entered into at the time when completion under the Contract was due to occur and was, in my view, modifying the rights which the parties would otherwise have had under the Contract or at law. I do not accept the contention which I understood to be made by the Plaintiff that the rights of the parties under the Contract remained unaffected and it fell to the Defendants to demonstrate some entitlement to all or part of the $100,000.00 fund withheld under the August Agreement.
3. In my view the August Agreement operates to confer rights and impose obligations on both parties. The nature of those rights and obligations is to be determined in accordance with the well understood principles of contract construction.
4. In circumstances where the August Agreement was modifying the rights that would otherwise exist under the Contract, the terms of the August Agreement are to be construed against the background of the terms of the Contract. Those terms include those which I have set out above, being that the Defendants purchased the Property in the condition that it was in as at 8 February 2022, including all defects whether latent or patent, and could not make a claim in respect to any change to the Property due to fair wear and tear before completion. This is important in considering, assuming the damages identified as at 8 August 2022 have not been rectified, the appropriate method of repair and, in particular, whether the Defendants are entitled to insist on the repairs complying with the current NCC standard. In my view, the provisions of the original Contract tell against the appropriate method of repair, which, assuming a defect to the garage roof still exists, would be a replacement of the entire roof so as to comply with the current NCC standard. Such a conclusion would, in my view, fly in the face of the original Contract and there is nothing in the terms of the August Agreement to make it clear that the parties intended such a significant shift in the parties position.
5. In turning now to the issue of the essentiality of the two-month time period. The Plaintiff submitted that I would not regard the two-month period as being essential by reference to a number of decisions, including Kyrwood & Ors v Drinkwater & Ors [2000] NSWCA 126 at [136]-[137] and Hewitt v Debus [2004] NSWCA 54 at [77]-[78]. I do not regard these decisions as much assistance having regard to the provisions of the August Agreement. Reliance was also placed by the Plaintiff on the word 'may' in the last bullet point of the substantive obligations set out in the August Agreement, relating to the release of funds to the purchaser to the extent required to complete the repairs. It was suggested that 'may' is permissive rather than mandatory. In my view, it would be reading too much into the word 'may' to suggest that somehow it provides a standalone qualification on the ability of the Defendants to drawdown on the fund to pay for repairs arranged by themselves. The ordinary meaning of 'may' in the context in which it appears is simply to allow the Defendants to draw down on the fund to the extent that they need to complete the repairs.
6. It was obviously important to the parties to have some certainty as to the time that the Plaintiff would have to repair the identified defects. The difficulty with the Plaintiff's contentions in this regard, is that the clear two-month period set out in the August Agreement is replaced with a period of uncertain duration.
7. In my view, the terms of the August Agreement make it clear that the withholding period is to be two months and, that if the damages are not repaired during that withholding period, the withheld sums may be released to the Defendants to the extent required to complete the repairs themselves. However, the August Agreement also imposes an obligation on the Defendants to 'reasonably cooperate' with the Plaintiff's duty to repair the damages. In my view the obligation to 'reasonably cooperate' does not immediately expire at the conclusion of the two-month period. This is especially true where, as is the case here, there is a suggestion made during the two-month period that the repair works that had been carried out by the Plaintiff through TomKat to the roof of the garage had not been effective and in response the Plaintiff was seeking to attend the Property to investigate whether there still was any issue. Indeed, TomKat, in October 2023, offered to return to the Property to replace the internal downpipe in the garage at no cost but the Defendants have refused this offer.
8. The Defendants are not, in my view, entitled to complete the repairs themselves and make a claim on the $100,000.00 accordingly in circumstances where the Defendants have not reasonably cooperated in relation to the repair works and subsequent investigations as to adequacy of the repairs.

The Garage Roof

1. On the evidence before me I am satisfied, save for the repair of the six missing rivets and two rust holes, that the damages identified as at 8 August 2022 and as set out in the August Agreement have been repaired. Any dissatisfaction which the Defendants have with those repairs is not, in my view, on the evidence, reasonable.
2. Dealing first with the leaking garage roof, it is clear, as set out above, that repair work was carried out by TomKat in late September 2022 and paid for by the Plaintiff.
3. There is no probative evidence before me that would enable me to conclude that the repairs have not been adequately carried out, save for the repair of the missing rivets and the two rust holes.
4. As set out above, the Defendants put into evidence three photographs taken and two videos made, by the First Defendant on 9 October 2022. The videos depict: 1. In one of them the internal downpipe to the garage with paper towelling being applied to the downpipe so as to demonstrate that the downpipe is damp; 2. Some water dripping from a steel rod which I take to be attached to the ceiling of the garage and part of the roller door opening mechanism.
5. The three photographs show bubbled paint on the gyprock in the garage ceiling.
6. Whilst this material would appear to show some sort of water ingress into the garage on 9 October 2022, being after the most recent repairs were carried out, the only evidence as to the likely cause of that water ingress was that evidence provided by Mr Scott. Mr Scott's clear evidence, having examined the roof structure and the like, was that the means by which such water ingress could occur was because of poor maintenance in and around the box gutter, such as failing to remove leaf debris. I also regard Mr Scott's evidence as permitting the possibility that water could enter through the six missing rivets and two rust holes, although I accept it would need to be extremely heavy rainfall for a long period of time.
7. Further, insofar as it may be suggested that there is some ingress related to the internal downpipe in the garage, it is clear on the evidence that the Plaintiff has paid TomKat to replace that downpipe and, whilst it appears that TomKat has not in fact done so, TomKat has offered to the Defendants to complete the repair at no charge, which the Defendants have refused. As is apparent from the chronology set out above, at the expiry of the withholding period, TomKat was seeking to access the Property so as to investigate the claims that had been made by the Defendants, but access was not made possible by the Defendants. The Defendants, in my view, have not reasonably cooperated with the Plaintiff in having the damages repaired, and accordingly, in these circumstances are not entitled to make a claim on the $100,000.00: see, in this regard, Ruthol Pty Ltd v Tricon (Australia) Pty Ltd [2005] NSWCA 443 at [10]-[22] per Giles JA (Santow JA and Hunt AJA agreeing).

The Pool Light

1. In relation to the pool light, it is also clear from the chronology set out above that, after 8 August 2022, the Plaintiff arranged for the electrician to attend the Property and ultimately, repair works were carried out and new pool lights were installed. There is no suggestion, as I understand it, that the end result of the work carried out by the Plaintiff's electrician was inoperative pool lights. Rather, the Defendants' complaint appears to be that the replacement light was of an incorrect size. The Defendants put into evidence a photograph of the new pool light which they contended showed the pool light did not sit flush with the pool wall.
2. It is to be remembered that the original complaint in relation to the pool light, as depicted in the photographic evidence before me, was that one of the pool lights had become detached from the wall and was lying on the bottom of the pool. The end result, after the Plaintiff's electrician had carried out repairs, was a working pool light, attached to the pool wall. Prima facie, the damage has been repaired.
3. I am not satisfied that the evidence relied upon by the Defendants shows that the damage has not been repaired. Put another way, any dissatisfaction which the Defendants have with the repair is not, in my view, a reasonable one. Whilst the photograph of the new pool light does show a gap between the light and the pool wall, there is no material before me to enable me to conclude that the damage has not been repaired or that the dissatisfaction that the Defendants have with the repair is reasonable.
4. Any complaint by the Defendants that the electrician arranged by the Plaintiff entered the Property without the Defendants' permission is irrelevant, particularly in circumstances where permission was ultimately granted and work carried out. Any complaint as to the quality of the new light installed by the electrician arranged by the Plaintiff fails for want of proof. There is no evidence before me to demonstrate that the replaced light was of an inferior quality to the original light.
5. A further difficultly for the Defendants in relation to the pool light is that, as emerged in the First Defendant's cross-examination, he has arranged for the pool light to be repaired. It also emerged in closing address that this repair was carried out by a friend of the First Defendant at the time that that person was performing other electrical work and the First Defendant did not pay anything for the installation of the new pool light. Furthermore, the Defendants have not put into evidence what the actual cost to them was of the new pool light.
6. The terms of the August Agreement only permit, assuming the damage has not been repaired and the Defendants are entitled to take over the repair and do it themselves, the Defendants to recover the actual cost of repair where that has in fact occurred. If I was satisfied that the pool light was damaged and the Defendants were entitled to repair it themselves, there is no evidence before me as to the cost of that actual repair.

Conclusion

1. The Plaintiff is entitled to $99,692.00 of the $100,000.00 held in escrow by Laing & Simmons Double Bay and the Defendants are entitled to $308.00. I will make a declaration accordingly.
2. The Plaintiff also sought interest on any sum it was entitled to from the date of the August Agreement being 10 August 2022.
3. In my view, the Plaintiff is entitled to interest on $99,692.00 but not from 10 August 2022. Interest should run from 11 October 2022, being the date of the expiry of the two month period under the August Agreement. In circumstances whether the Plaintiff had agreed under the terms of the August Agreement to the $100,000.00 being held in escrow by Laing & Simmons Double Bay in what I was told by the parties was a noninterest bearing account, I do not see why interest should run from the date of completion of the Contract. Rather, interest should run from the date when the monies should have been released to her under the terms of the August Agreement. Interest at Court rates until judgment on $99,692.00 is $9,553.94.

Costs

1. At the commencement of the hearing, I queried the reason for commencing these proceedings in the Supreme Court, given the small quantum in issue. The Plaintiff's counsel responded briefly that it was out of concern as to whether the District Court has declaratory power to give the equitable relief sought by the Plaintiff and I said I would likely deal with the issue in due course. I remain concerned about this issue.
2. The Defendants also sought an opportunity to be heard on costs.
3. I propose to give the parties an opportunity to be heard briefly in writing on the question of costs and will otherwise deal with the issue on the papers. This includes whether any costs should be allowed having regard to UCPR r 42.34. I will make directions accordingly.

Orders

1. The Court makes the following declaration and orders: 1. The Court declares that of the funds held in escrow by Laing & Simmons Double Bay in respect of the sale of 26 Myuna Road, Dover Heights on or about 10 August 2022, the Plaintiff is entitled to $99,692.00 and the Defendants are entitled to $308.00. 2. The Court orders the parties to notify Laing & Simmons Double Bay to release the funds in accordance with the declaration set out at Paragraph 1 above. 3. The Court orders the Defendants to pay to the Plaintiff pre-judgment interest in the sum of $9,553.94. 4. The Court orders the Plaintiff file and serve by no later than 15 February 2024 any material and submissions on which she intends to rely on the question of costs, such submissions to be no longer than three pages in length. 5. The Court orders the Defendants to file and serve by no later than 22 February 2024 any material and submissions on which they intend to rely on the question of costs, such submissions to be no longer than three pages in length. 6. The Court orders that the question of costs be determined on the papers.

Amendments 12 March 2024 - Correct coram DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 12 March 2024