Goulding & Anor v Kirby

Consideration of leave to appeal 8 I start with the salient facts. Mr and Mrs Goulding, the then Plaintiffs and now Appellants, purchased a house in Pymble from a Mrs Cole in 1997, after themselves inspecting the property. They were aware that the house had damp problems. They did not however have a pest or building inspection report carried out before exchange of contracts. Mr Goulding was an experienced architect and principal of a project home building company. His approach is clear from the evidence given by an architect, Ms Janet Grey, who was not cross-examined. She had called upon the premises on 8 February 1998 just over a year after the contracts had been exchanged. 9 The following was said in examination in chief about what Mr Goulding had said to her: "Q. Can you recall in direct speech what he said? A. 'The paint manufacturing industry is a very lucrative industry. Paint is very cheap to manufacture and very easy to manufacture and the paint manufacturing companies make a lot of money out of selling it and because I'm involved in project home development, they often practically throw paint at us from time to time to encourage us to buy their product. I know a lot about paint'. When he was pointing me to the various areas that he was complaining about in the house, he said, 'You can tell that the paint is peeling because it hasn't been properly prepared. It hasn't been sanded and it hasn't been properly cleaned down prior to it being painted.' There was another area downstairs in the living area about which he complained which was not peeling and I can't remember the nature of the complaint other than it wasn't good quality and he said he could tell that in the future it would peel." (Black, 207.20 to .36). 10 The significance of the evidence she gave about the state of the paint work is this. The Appellants' case on negligence ultimately turns upon whether the painter was liable in negligence. This was for economic loss suffered by reason of the Respondent having painted the house without properly preparing the surfaces and then subsequently applying a water-based paint giving insufficient adhesion to the oil-based paint that pre-existed. That was not immediately apparent without further testing, which the appellant did not undertake; see below for what the evidence indicates as to why. 11 While the evidence as to the amount spent on the painting deficiently carried out suffers from the lack of full records from the painter, the amount expended was significantly less than the amount of reinstatement. This was because of the difficulty of removing the water-based paint after its application over the earlier oil-based paint. The figure can be taken to be of the order of $10,000 or possibly a little more. In the Fair Claims Tribunal, in an action brought against the Defendant painter, the Appellant Mr Goulding initially claimed $12,500 (in addition to a $10,000 claim settlement offer), later $22,500 (having rejected that claim settlement offer) and ultimately $25,000; see affidavit of Mr Crennan dated 4 July 2002, para 7. It should be noted that the proceedings in the Fair Trading Tribunal were dismissed on 31 January 2000 and an order for costs made in favour of the Respondent after the First Appellant earlier on 21 June 2000, increased his claim in the Fair Trading Tribunal to $50,000. 12 The Appellants alleged breach of duty based on failure to use an oil-based paint, failure to assess whether the gloss needed to be removed from existing oil-based paint prior to washing it, failure to clean the surface properly, failure to remove the gloss and failure to apply an undercoat. 13 The vendor of the property, Mrs Cole, said at the time that the Respondent performed the work, there were no plans to sell the house and the decision was taken suddenly. That appears to have been accepted by the Trial Judge; Red, 10. The decision to sell the house appears to have been taken in September 1996 and the first inspection by the Appellants was some four months later in January 1997. Mr Goulding's evidence was that at the inspections, he inspected the house and the painting appeared to have been carried out by a professional painter with no signs that the paint had not properly adhered to the walls. That submission implies that he was misled into expecting a professionally competent job, because he himself was expert enough to see the signs of a professional painter at work (but not his shortcomings). Thus, so misled, and by reason of the intrusiveness of at least the former, he did not do the later described "scouring" or "impact" tests. A further possible reason is that only in retrospect did the quality of the painting come to occupy such importance for the Appellants, borne out by their failure to test the quality of the painting. 14 On 28 February 1997, the Appellants commenced living at the property. The evidence was that before the removalists moved furniture into the house, they noticed areas where the paint had come away from the stairwell walls. Over the next few days the Appellants noticed scratches to the paintwork and a large area of paint peeled over the kitchen wall. Mr Goulding called the former owner, Mrs Cole, and was given Mr Kirby's contact details. 15 Mr Goulding in his affidavit evidence of 29 March 2001, quotes his wife as having been told by Mr Kirby words to the following effect: "I have just done what I was told to do, freshen it up. I assume no responsibility." 16 Subsequently on 10 June 1997 Mr Goulding gives affidavit evidence that he took Mr Kirby into the kitchen first, where he asked, "why did the paint peel off" receiving the reply, "I was just told to put on a fresh coat for the sale of the house." 17 However, that evidence needs to be read with Mrs Cole's evidence, which does not appear to be disputed, that she did not "ever say to Mr Kirby that he should do anything less than a fully professional job"; Red, 202.39. 18 That evidence is born out by Mr Kirby's own oral evidence. He conceded that "at no time did Mrs Cole ever ask you to do a shoddy job in the paint work that you did in December 1995" and also that "you saw it as part of your job that you were meant to do all those things properly so that the paint would last for at least 7 to 10 years, didn't you"; Black, 217, 218. Furthermore, he agreed that "at the time you did the painting it did not matter to you who was the owner of the house, what mattered to you was the quality of the job you were doing."; Black, 218.25; and see also the Judgment at Red, 10G. 19 While the Statement of Claim does not, as it should have done, in clear terms plead that the defects in the painting were not observable upon a reasonable inspection, para 4(a) pleads that the Defendant "knew or ought to have known that: (i) if the Defendant failed to exercise reasonable care in painting the inside of the house, and defects in the painting work done by the Defendant may not appear, or be reasonably discoverable by the owner of the Land, till after the Land had been sold by Mrs Cole to a subsequent owner." 20 The Grounds of Appeal include at para 7 that "His Honour erred in finding that the Respondent was not likely to be in a better position than the Appellants to evaluate and guard against the harm of his faulty painting work". The Plaintiff in opening at trial records Mr Goulding's evidence that Mr and Mrs Goulding did not see any scratches or signs that the paint would fail or peel off from the walls and that "they assumed that the tradesman had done his job and properly prepared the walls such that there would be no need to repaint for at least 10 years"; Black, 3. 21 Though therefore such a vital matter going to whether negligence could be found at all should have been clearly and explicitly pleaded, the case was conducted on that basis. 22 There was expert evidence from both the Plaintiffs and Defendant at trial. The Plaintiffs' expert, Mr Dennis Berry, gave evidence that "a reasonable inspection of the house on 7 February 1997 would not have revealed to an ordinary purchaser that the surfaces onto which the recent paint had been applied, had not been properly prepared." That of course begs the question whether Mr Goulding was indeed an ordinary purchaser. 23 However, Mr Berry did somewhat qualify that evidence in cross-examination in the following question and answer: "Q. Do you accept that the scratch on the staircase was something which would have alerted a person such as Mr Goulding to the paint adhesion problems in that area? A. Yes. Another test, which I didn't do, but which is likely to be done, is an impact test and that would indicate whether the paint is able to resist impact. In other words, if it gets bumped." Black, 108.10 to .16. 24 Mr Berry had, in an earlier report, given evidence as to an earlier way of testing paint adhesion, by making six vertical cuts and six horizontal cuts into the overall paint system, some two millimetres apart or 11 cuts vertically and 11 cuts horizontally; see Blue, 28, para 2.3. 25 Thus it appears that the impact damage showing up the defective painting resulted from the movement of furniture, probably by the owner in moving out. 26 Mr Goulding was pressed in cross-examination on the checks he had made including removal of a bulkhead in the kitchen which had revealed the paint problem. He stated "I think that would have been considered invasive" in response to the suggestion that he might have made this check before buying the property; see Black, 44.15. 27 I have set this evidence out in some detail in order to provide the actual context in which the Trial Judge reached the conclusion that he did that no duty of care was owed by the Respondent to the Appellants. The Trial Judge distinguished Bryan v Maloney (1994-1995) 182 CLR 609 on four bases: (a) there was no structural defect in the present circumstances in contrast to Bryan v Maloney (supra); (b) there was no relevant relationship of proximity characterised by the kind of assumption of responsibility on the part of the painter and known reliance on the part of the subsequent building owner; this is in contrast to circumstances of Bryan v Maloney where the builder responsible for defective footings was taken, inferentially, to have assumed responsibility to subsequent purchasers for the life of the building; (c) here there was no danger of physical damage or loss on the basis that the painting was not, nor did it effect, a permanent structure of indefinite use, but was merely a decorative feature of limited life, as compared to the structural defects in Bryan v Maloney; and (d) there could be no real reliance by the subsequent owner on the painter in the present case, when that owner was an architect and principal of a building firm who chose to rely on his own knowledge and expertise and made no checks; contrast Bryan v Maloney. 28 In an argument ably presented, Counsel for the Appellants, Mr Ogborne, contended that it does not follow from the fact that the structural nature of the work was an important consideration in Bryan v Maloney, that the present case must fail because the work done by the Respondent was not structural. He attempted to demonstrate reliance or assumption of responsibility. He did so, relying upon the Respondent's concession that he would have painted the house so that the paint work would still be in good condition 7 to 10 years later, irrespective of who was the then owner of the property. He sought to rely upon the decision in Perre v Apand (1999) 198 CLR 180 contending that many of the factors there held to be relevant were applicable to the present case. These included that (a) Mr and Mrs Goulding were members of a limited and identifiable class of the immediate successors in title to Mrs Cole, so that the class was limited and distinct, (b) the claim was itself limited and specific in terms of value, (c) there was no conflict between the Respondent owing a duty to Mr and Mrs Goulding to take reasonable care in painting the house and his contractual duty to Mrs Cole to paint the house, (d) there was no conflict between the Respondent owing a duty to Mr and Mrs Goulding to take reasonable care in painting the house and his legitimate economic interests, and finally, (e) the assumption of responsibility as earlier mentioned. 29 He correctly pointed that Woollahra Municipal Council v Sved (1996) 40 NSWLR 101, while distinguishing the circumstances from Bryan v Maloney on a number of bases, saw no member of the court draw any distinction based on the nature of the defects. This was so, though some of the relevant building defects were not structural, such as the installation of a drainage sump and its pipes and pumps, and the damage suffered (water staining and efflorescence). 30 He attempted to distinguish the comments of Brooking JA in Zumpano v Montagnese [1997] 2 VR 525 at 530-533, where the latter comes close to concluding that the decision in Bryan v Maloney should be limited to defects as are at least sufficiently serious substantially to affect the overall value of the house rather than lesser defects which may have more marginal effect. He did so on the basis that his remarks were obiter and not directly approved by the other members of the court. 31 Counsel for the Respondent, Mr J S Coombs, QC emphasised that in Bryan v Maloney the High Court, dealing with pure economic loss, was asked to widen the scope of damages for negligence. This was to embrace a defect that was both latent and structural. Thus far intermediate appellate courts have not chosen to widen that scope even further. 32 In the present case, the factual circumstances do not point toward the Appellants being unable to take reasonable steps in their own protection. Rather it points to them choosing not to, possibly because they placed insufficient importance on doing so with mere painting work or thought in the case of Mr Goulding, his own expertise sufficed. In my judgment this Court as an intermediate appellate court, in such a case, should not attempt to extend Bryan v Maloney beyond structural defects or defects which have the potential to become such, being defects which are latent and not such as could reasonably be discovered by inspection. 33 It is primarily for the High Court to consider whether to extend Bryan v Maloney outside the realm of structural latent defects. Here we have an extension sought to cover negligently effected painting, when it had at best cosmetic function and was originally done at relatively modest cost. That is hardly a promising vehicle for such an extension. It evokes the caution expressed by the recent observations of Gleeson CJ in Tame v State of New South Wales; Annetts v Australian Stations Pty Ltd (2002) 76 ALJR 1348 at [6]: "[6] One of the reasons for the rejection of a general rule that one person owes to another a duty to take care not to cause reasonably foreseeable financial harm is that the practical consequence of such a rule would be to impose an intolerable burden upon business and private activity. Furthermore, such a rule would interfere with freedoms, controls and limitations established by common law and statute in various contexts. Unscientific as may be the distinction between "pure" economic loss, "parasitic" economic loss, and damage to property, the care which the law requires people to show for the person or property of others is not matched by a corresponding requirement to have regard to their financial interests. The distinction is not based on science or logic; it is pragmatic, and none the worse for that." 34 To this may be added the warning of McHugh J (at [101]): "Negligence law will fall - perhaps it has already fallen - into public disrepute if it produces results that ordinary members of the public regard as unreasonable." 35 It remains to be seen whether the High Court, operating incrementally and in the absence of any unifying principle, adopts some wider discrimen. There is that proposed by Mr Wallace, QC in 1995 Torts Law Review 231 at 238 based upon "habitability" of the premises, used as a controlling concept limiting the scope for economic loss negligence. It derives from the transferable warranty cases in the United States jurisdictions (as referred to in Bryan v Maloney). As a discrimen, it may be compared to the "health and safety" elements in Annes v Merton London Borough Council [1978] AC 728 in the United Kingdom. Neither of those extensions would avail the Appellants here, for whom nothing so incremental would suffice. Here the defect is small, and correctable by re-painting, albeit at greater cost than if the original work had been done properly. Whilst in one sense the defect was latent, it was amenable to testing had the signs of fresh paint evoked that caution from someone of this buyer's expertise. The painter may concededly have at least a first purchaser in contemplation as capable of being adversely affected by the defect though foreseeability is not enough. Mr Goulding, it should be remembered, was not a vulnerable, unsophisticated purchaser unsophisticated in these matters or unable to protect himself and his wife against such risks. To extend Bryan v Maloney to such a case is not necessarily warranted, and risks producing a result which "ordinary members of the public [may] regard as unreasonable". Such an extension is for the High Court in some future case to consider.

CONCLUSION AND ORDERS 36 For the reasons earlier stated, I consider that leave to appeal should not be granted. 37 I propose orders as follows: 1. Leave to appeal refused. 2. Appellants to pay Respondent's costs. **********

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