The appellant Edwards and Froud Building Services Pty Ltd was retained by the respondents Mitchel Hulst and Malcolm Jull to conduct a pest and building inspection on a property consisting of a block of three residential units for the purpose of a prospective purchase. The respondents brought an application in the Consumer and Commercial Division of this Tribunal claiming the sum of $40,000 compensation against the appellant. The application alleged that the building which they had purchased, relying on the report, "had systemic, ongoing and current water leaks that are not highlighted in the pest and building report." They asserted that waterproofing in four bathrooms/ensuites "had broken," resulting in water seeping under the bathrooms and saturating the floor joists throughout the complex.
A hearing of the application was conducted by a Member of this Tribunal who made orders on 31 August 2021 that the appellant pay to the respondents the sum of $39,942.20 being the cost of rectification of water leaks and associated damage. Written reasons for decision issued that day said that "The evidence provided in this matter has been reviewed and considered but will not be recited within these Reasons". We observe that ordinarily the recitation of relevant facts is essential in reasons for decisions, but fortunately in these proceedings their absence does not affect the outcome of the appeal.
The Member based his decision on a failure by the appellant to comply with the provisions of s 61 of the Australian Consumer Law.
61 Guarantees as to fitness for a particular purpose etc.
(1) If:
(a) a person (the supplier) supplies, in trade or commerce, services to a consumer; and
(b) the consumer, expressly or by implication, makes known to the supplier any particular purpose for which the services are being acquired by the consumer;
there is a guarantee that the services, and any product resulting from the services, will be reasonably fit for that purpose.
(2) If:
(a) a person (the supplier) supplies, in trade or commerce, services to a consumer; and
(b) the consumer makes known, expressly or by implication, to:
(i) the supplier; or
(ii) a person by whom any prior negotiations or arrangements in relation to the acquisition of the services were conducted or made;
the result that the consumer wishes the services to achieve;
there is a guarantee that the services, and any product resulting from the services, will be of such a nature, and quality, state or condition, that they might reasonably be expected to achieve that result.
(3) This section does not apply if the circumstances show that the consumer did not rely on, or that it was unreasonable for the consumer to rely on, the skill or judgment of the supplier.
(4) This section does not apply to a supply of services of a professional nature by a qualified architect or engineer.
In his reasons for decision the Member said
4. It was reasonable in the circumstances of this matter to the applicants to rely upon the professional skill and judgement of the respondent in inspecting the property and reporting as to its condition. The clear purpose of the inspection and report was to allow the applicants to make their decision whether or not to purchase the subject property and, if so, upon what terms, upon a properly informed basis.
5. The respondent seeks to rely upon the liability exclusion provisions which are set out in fine print at the end of the subject report. However, such exclusions cannot operate to exclude statutory liability such as the guarantee provided by section 61 of the Australian Consumer Law.
6. The evidence establishes that there were significant defects in the nature of water leaks and absence of waterproofing at the property which were present at the time of the inspection and the report, which were reasonably discoverable. The resulting report did not properly identify these problems and indicated the evidence of water ingress related to "past" issues.
The Member concluded that the service provided by reason of the inspection and report did not meet the guarantee provided in s 61, and the evidence established that the respondents had incurred loss and expense in the amount claimed.
We note that in his oral submissions Mr Harmon, solicitor for the appellant, specifically stated that his client did not challenge the finding of the Member set out in par [6] of the decision. We were asked to consider the appeal in this context. We shall return to this matter later in these reasons for decision.
[2]
The grounds of appeal
The appeal has two bases. The most important is that there are qualifications contained in the report that clearly indicated that the respondents should not rely on certain aspects of it without obtaining a builder's report. The second is that any loss sustained by the respondents was limited to the cost of the report, namely $750.
[3]
Directions for the preparation of the appeal hearing
On 29 September 2021 a Deputy President of this Tribunal made a number of orders and directions in connection with the preparation of the hearing of the appeal. In particular, the appellant was required to lodge with the Tribunal and give to the respondent by 21 October, 2021.
1. All the evidence given to the Tribunal below which it is intended to rely;
…
1. The sound recording or transcript of the hearing at first instance, if oral reasons were given and/or what happened at the hearing is being relied on and a typed copy of the relevant parts.
None of this material was provided by the appellant. Accordingly, we do not have available to us the nature and extent of all of the evidence before the Member to assist us in determining whether he fell into appellable error, and to enable us to properly consider the merits or otherwise of this appeal.
[4]
The narrowing of the grounds of appeal
When we questioned Mr Harmon concerning the failure to provide a transcript and the evidentiary material tendered in the proceedings, he informed us that the appellant's appeal was confined to a consideration of whether the exclusion provided in s 61(3) applied. It was the contention of the appellant that the respondents did not rely upon the report provided by the appellant in determining to proceed the purchase the property.
We shall examine the available evidence concerning this matter shortly. However, we note for completeness that during the course of the hearing Mr Jull, one of the respondents, told us that he and his fellow respondent had informed the Member at the hearing that they had in fact relied upon the appellant's report. Furthermore, they had provided to the Member during the course of the hearing a number of builders' reports concerning the state of repair of the property being acquired, which they said justified the conclusion of the Member that "there were significant defects in the nature of water leaks and absence of waterproofing at the property which were present at the time of the inspection and the report, which were reasonably discoverable ...".
Before considering this matter it is necessary to have regard to the provisions of the report, because they formed the basis of the complaint made by the respondents and the submissions of the appellant that the respondents had not relied upon the report, by way of defence under s 61(3).
[5]
The provisions of the report
It was uncontroversial for the purpose of the appeal proceedings that the respondents approached the appellant to procure a pre-purchase inspection report to enable them to consider whether to acquire the property, especially as they were purchasing it "sight unseen".
The Pest and Building Inspection Agreement contained 10 pages in small print describing the scope of the inspection and report and concluded with a further page of small print once more describing the scope and limitations of the inspection and report. We summarise the salient features of this material as follows:
1. the inspection was confined to the "Building Elements as outlined in Appendix C of AS 4349.1-2007" was said to be available from a number of designated sources;
2. the purpose of the inspection was to identify "major defects, the incidence of minor defects and safety hazards associated with the property at the time of the inspection";
3. inspection comprised a visual assessment "of the items listed in Appendix C to AS 4349.1-2007";
4. subject to access inspection would normally report on the condition of the interior, exterior, the roof exterior, the roof void and the subfloor;
5. the inspector "will report individually on Major Defects … evident and visible" at the time of inspection;
6. where a Major Defect has been identified, the inspector would give an opinion as to why it is a Major defect and specify its location;
7. the inspection will be a "non-invasive visual inspection" limited to accessible areas and sections of the property and will not involve any invasive inspection "including cutting, breaking apart, dismantling, removing or moving objects …";
8. "Where our report recommends another type of inspection including any invasive inspection and report then you should have such an inspection carried out prior to the exchange of contracts … ." A failure to do so will operate as an indemnity in favour of the appellant.
9. "This report is NOT an all-encompassing report dealing with the building from every aspect. It is a reasonable attempt to identify any obvious or significant defects apparent at the time of the inspection…. It is not a structural report. Should you require any advice of a structural nature you should contact a structural engineer".
[6]
The relevant matters noted in the report
Before considering the matters identified in the report which are relevant to these proceedings, we note that in the first instance proceedings the respondents claimed as against the appellant the cost of stripping the ensuite shower in each of Units 3 and 2, laying a new bed, waterproofing and retiling and the cost of stripping the main bathroom shower with consequential work in Unit 2.
The report identified as a Significant Item in Unit 1 water penetration to the ceiling of the laundry, corroborated by a photograph depicting moisture staining on the ceiling. It described the significance of this defect as:
May become worse over time period should be monitored for any change
Further investigation required by a qualified builder.
Appears to relate to past leaks in the shower in the ensuite or waterproofing on the rear veranda above.
There is then a reference to "See Ensuite, Page 15", which refers to an inspection of the shower in the Ensuite in Unit 1 describing "Visual signs of Leakage, Screen, Broken Glass, Water supply to be turned on and the shower operated". There is then a reference to "No Significant Items" identified by way of defects with a comment "The shower has been redone".
When dealing with Unit 2 the report noted water penetration to the laundry ceilings and made identical comments with respect to the significance of these defects to those referred to in [16] and [17] save that the reference to the shower was that "the base has been replaced".
When dealing with Unit 3 the report noted water staining in the laundry ceiling and made the exact same comments with respect to the significance of these defects as those referred to in [16] and [17] save that the reference to the shower was that "the base and part of the walls has (sic) been replaced".
Our reading of these parts of the report indicate that the respondents were not alerted to any particular problem of an urgent nature. The defects were described as possibly becoming worse over time and required monitoring. Even though there was a reference to further investigation being required by a qualified builder, this was in turn qualified by observations that the water penetration appeared to relate to past leaks or waterproofing. This is a matter to which we shall return when considering the merits of the appellant's appeal in the context of the unchallenged finding made by the Member referred to in [4] of his reasons above.
The evidence is to the effect that the respondents accepted the contents of the report, and did not pursue the recommendation to retain the expert advice of a builder. In submissions, Mr Harmon argued that their failure to do so was evidence that they had not relied upon the report, and therefore the defence available in s 61(3) had been made out. That is, the respondents had not relied upon the "skill and judgement" of the appellant in supplying the report.
We reject this submission. The respondents were entitled to purchase the property relying upon the "skill and judgement" of the appellant because there was nothing in the report that alerted them to any particular imminent problem concerning the state of repair of the bathrooms, which is at the heart of these proceedings. We have previously concluded that the respondents were entitled to read the report in this manner.
Furthermore, this submission is inconsistent with the unchallenged finding of the Member that there were significant defects in the nature of water leaks and absence of waterproofing of the property that they were present at the time of the inspection and the report and, significantly, they were "reasonably discoverable".
It follows that the Member was entitled to conclude that the report did not properly identify these problems, and that there was a consequent breach of s 61. Our conclusion that it was reasonable for the respondents to rely on the professed skill and judgement contained in the report, and that by purchasing the property on the basis of that report, necessitates a finding that the appellant is not entitled to rely upon the defence contained within s 61(3). Accordingly, the appeal must fail.
Mr Harmon drew our attention to a decision of Garling J in the NSW Supreme Court in Moore v Scenic Tours Pty Limited (No. 2) [2017] NSWSC 733 and sought to rely upon that decision to sustain the appellant's case. That decision examines in great detail what can go wrong when booking a luxury river cruise in adverse weather conditions in Europe. The facts pertaining to those proceedings are entirely different to those which we are considering in these proceedings. However, we apprehend that the approach which we have taken to the application of the provisions of s 61 including subsection (3) are consistent with the approach of Garling J. We do not consider it necessary to examine this 946 paragraph decision in any detail, with no intended disrespect to his Honour.
The appellant did not provide detailed submissions challenging the basis or rationale for the compensation ordered by the Member to be paid to the respondents. We regard the compensation as adequately reflecting the loss suffered by the respondents and reject the appellant's appeal in this regard.
[7]
Conclusion
For the reasons set out above we conclude that notwithstanding the failure of the appellant to comply with the Tribunal directions for the preparation of these appeal proceedings, the appeal lacks merit. It follows that leave to appeal should be refused and the appeal dismissed.
[8]
Orders
We make the following orders
1. To the extent that leave to appeal is necessary, it is refused;
2. The appeal is dismissed.
[9]
I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.
Registrar
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Decision last updated: 17 December 2021