Patterson & Anor v Mamou

Factual background

1. Mr Patterson deposed in his first affidavit that prior to 10 July 2018 he and his partner, Ms McGregor, engaged the defendant to act on their behalf on the proposed purchase. I note that the defendant deposed in her affidavit that she was only engaged on 11 July 2018. In his third affidavit, Mr Patterson agreed with that as being the correct date.
2. On 11 July 2018 (at 10:32am) the second plaintiff on-sent to the defendant a copy of the contract for sale which the first plaintiff had received (by email) from the vendor's agent.
3. On 11 July 2018 (at 10:55am) the defendant sent an email to the second plaintiff relevantly stating that "I have had a look at the contract and it seems fine to me". She went on to elaborate that: "Some of the matters I would note is considering the age of the property, council has adopted policies regarding the properties that may contain asbestos. We would suggest to get a specialist to look into that for you to ensure no asbestos is in the building. ….. also it mentions in this the contract that the particular council area makes provisions for the land may be acquired by a public authority."
4. On 11 July 2018, the plaintiffs attended the office of the vendor's agent. Ms McGregor recalled that this occurred at about 3pm. The plaintiffs signed the contracts with the vendor and paid a deposit. Contracts were exchanged; although Mr Patterson deposed that he and his partner did not see the vendor's signed version. He deposed that this was the first occasion where he and his partner were purchasing real estate. A cooling off period was scheduled to expire on 18 July 2018.
5. On 12 July 2018, the vendor's agent sent a letter to the defendant reporting on the exchange of contracts the previous day and enclosed a copy of the contract executed by the vendor. Mr Patterson says he asked the vendor's agent to forward the contract to Ms Mamou. Reference was made in the letter to the purchasers being informed of the then cooling off period of 5 days, set to expire on 18 July.
6. On 16 July 2018 (at 12:02pm), after the exchange of contracts and two days before the expiry of the then scheduled cooling off period, the defendant sent an email to the plaintiffs attaching, amongst other things, a letter on her firm's letterhead and, separately, a general advice. In the attached letter on her firm's letterhead, there was a section titled 'Reports,' under which it was stated: "If you have not already organised a building and pest report we can do this for you using contractors that have proven reliable for other clients… We do not profess any knowledge of building matters and you must satisfy yourselves that the reports are satisfactory…."
7. One part of the general advice attached to the letter carried the sub-title 'Pest and building reports' and the commentary under that part was as follows: "We will ensure that there are no adverse issues with the title to the property. You need to be sure that you are informed and happy with the condition and state of repair of the buildings. After exchange of contracts there is no recourse except in exceptional circumstances if the buildings are defective in some way. Hence the need for pest and building reports, which we strongly recommend. Please tell us whether or not you wish us to arrange a building and pest inspection. Even though we often arrange such reports with reputable contractors we must stress that we in no way accept responsibility for the content of any report …"
8. The defendant said that on or around 16 July, the plaintiffs instructed her to order a Building and Pest Inspection report.
9. On 18 July 2018, the (initial) cooling-off period expired. It was common ground that the period was extended as the purchasers were having difficulties acquiring the finance.
10. On 19 July 2018, the building inspector produced a pre-purchase report as to the condition of the Property.
11. Only limited aspects of the building inspector's report were brought to the Court's attention at the hearing.
12. First, the report had sections titled 'Summary of Major Defects and Safety Hazards' and 'Summary of Minor Defects.' The inspector's conclusions were, relevantly:

• "The incidence of major defects in this residential building as compared with similar buildings is considered LOW;"
• "The incidence of minor defects in this residential building as compared with similar buildings is considered LOW."

1. The Inspector generally classified the overall condition of the Property, having regard to its age, type and general expectations of similar properties as "Average"
2. Secondly, from pages 36 to 44 of the report, the inspector set out his 'Terms and Conditions'. Some of those are potentially pertinent: 1. at p 41 of the report, there was a paragraph with the heading '2D) Limitations of the exterior inspection', which stated: "This is a visual inspection limited in scope by the following conditions: A representative sample of exterior components was inspected rather than every occurrence of components … Screenings, shutters, awnings … are not inspected unless specifically agreed-upon and documented in this report." 1. at p 41 of the report, there was a paragraph with the heading '3) CONCEALED DEFECTS', which relevantly contained the following: "This report does not and cannot make comment upon: …. detection and identification of illegal building work .."
3. On 20 July 2018, the defendant emailed Ms McGregor the building inspection report. Both plaintiffs said that they read this report.
4. On 20 July 2018, and unbeknownst to the plaintiffs, correspondence was exchanged between the defendant and Low Doherty & Stratford the vendor's solicitor. This was in the nature of further requisitions about the Property and the vendor's solicitor's responses to them. The second requisition was "Has any additional or structural alterations been carried out to the property without council approval." The vendor's lawyer's response to this requisition was "We refer you to Special Condition 14 of the Contract". In her evidence in Court, the defendant explained that the second requisition was, in effect, generic or reflective of a template her firm had used for requisitions made of vendors.
5. The defendant deposed to having a telephone conversation with the second plaintiff on or about 20 July 2018 (and, contextually, after receiving the replies to requisitions). She deposed that she explained the contract terms and conditions with Ms McGregor. She recalled having a conversation with Ms McGregor which featured the following exchange: Ms Mamou said: "I have received replies to my enquiries and the vendors' solicitors have confirmed special condition fourteen as already disclosed being the works carried out without Council Approval and the vendor has agreed to the extension of the cooling off period. "The unapproved works include the garage used as a living space, rear awning & sun room." Ms McGregor said: "That is good we have some more time. We are most likely going to reconvert the garage back to a garage."
6. The defendant deposed that Ms McGregor had given instructions about the proposed conversion of the garage living space back into a garage on the day that she met Ms McGregor, being at her Liverpool office on 8 August 2018.
7. Both plaintiffs disputed ever having a conversation with the defendant about the contract terms and conditions. Specifically, Mr Patterson denied having a conversation with the defendant about converting the living area to a garage. Ms McGregor agreed with this. In addition, Ms McGregor denied any conversation about special condition fourteen was discussed with the defendant (on 20 July or at all)

"Harm"

1. In any viable action for professional negligence, a plaintiff must establish "harm." Under the common law, although breach of an implied term to exercise reasonable care and skill suffices to establish an action in contract [1] , for the action in negligence, damage is the gist of the action [2] . What constitutes damage has been described as "the injury itself and its foreseeable consequences" [3] , usually ascertained by some "difference to the plaintiff (which) must be detrimental." [4]
2. The notion of 'harm' is central to civil claims for damages, as is evident from a suite of other provisions, including amongst others, ss 5A, 5B, 5D, and other liability-limiting provisions in the CL Act (5F-5I, 5L- 5M) [5] . 'Harm' is defined in s 5 of the CL Act in a way that includes the suffering of economic loss and property damage.
3. During the course of closing argument at the hearing, I invited the parties to identify "the risk of harm" for the purpose of s 5B(1). The parties agreed that the relevant category of alleged harm was 'economic loss.' For the defendant, her Counsel verbally submitted that the risk was that the purchasers would enter a binding contract that was less valuable than what they understood that they were purchasing as a result of the presence of unapproved or illegal works on the Property. For the plaintiffs, their Counsel verbally submitted that the risk of harm was the risk of the plaintiffs buying a house with unapproved structures which itself entailed a foreseeable consequence that they might be defective.
4. After close of the hearing, however, and for the avoidance of doubt, I invited the parties to provide supplementary written submissions on what they contended was the "harm" the plaintiffs sustained, for the purposes of ss 5 and 5A of the CL Act.
5. In their supplementary submissions, the plaintiffs pointed to the inclusive definition of 'harm' in s 5 and characterised the situation here as involving multiple harms. First, there was economic loss arising from entry into a purchase of property that had unapproved building works and defective or unsafe structures on it. There was also (non-economic) harm in the sense of the plaintiffs' disappointment in purchasing a home that was different to what they expected in terms of quality and its 'usability.'
6. In her supplementary submissions, the defendant characterised the harm as economic loss of the purchasers paying at an overvalue; that is to say, paying more than what the property was worth at the time.
7. In Hawkins v Clayton (1988) 164 CLR 539 at 600-601, Gaudron J observed: "In actions in negligence for economic loss it will almost always be necessary to identify the interest said to have been infringed to determine whether the risk of loss or injury to that interest was reasonably foreseeable and whether a sufficient relationship of proximity referable to that interest was present so as to establish a duty of care. If the interest infringed is the value of property, it may be appropriate to speak of a cause of action in negligence for economic loss sustained by reason of latent defect as accruing when the resultant physical damage is known or manifest, for as was explained by Deane J. in Heyman (at p 505) it is only then that the actual diminution in market value occurs. If, on the other hand, the interest infringed is the physical integrity of property then there is a certain logic in looking at the time when physical damage occurs …."
8. That passage has been often approved [6] . Applying this passage, there are, in my view, two principal economic interests that could be said to be infringed in the circumstances of these plaintiffs. The first is a risk about the physical integrity or condition of their property: that is its safety or capacity of the plaintiffs to occupy it. Another may be the value of the property given the presence of unapproved (and unsafe or defective) works upon it that may be subject to an order by the Council for demolition; thereby entailing (at least) the prospective costs of demolition, removal and a potential rebuild. However, these interests are not mutually exclusive: property that is physically impaired when bought would be expected to have a diminished value; but so too latent issues (including the uses or legality of works) that are not as obvious as physical defects may diminish value too.
9. Further, under the common law, 'damage' is not confined to the harm directly inflicted, but may also include foreseeable consequences suffered by the plaintiff [7] .
10. In Mal Owen Consulting Pty Ltd v Ashcroft [2018] NSWCA 135 Basten JA noted (at [32] [8] ) that the definition of "harm" in s 5 in the CL Act as meaning "harm of any kind" was expansive; the three paragraphs which followed the definition were illustrative rather than exhaustive.
11. I find that 'harm' has been sustained. The complicating factor, for reasons to be elaborated, is that multiple economic interests I have identified have arguably become detrimentally affected: the plaintiffs purchased a property that has works not approved by council which are also defective. Their property is less valuable than what they thought they were bargaining for.
12. The ultimate question, posed by s 5A, is whether the plaintiffs' claim for damages for harm, in this proceeding, resulted from the defendant's negligence (it being immaterial to that question whether the plaintiff's claim is assessed in tort or in contract).

Scope of duty of care and breach of the implied term

Evidence

1. There was no serious disagreement about the scope of the defendant's duty of care (or implied term of reasonable exercise of skill).
2. The defendant herself accepted that:

• she was obliged to advise her clients, as purchasers, about material risks to them;
• she was obliged to advise her clients (as purchasers) about unusual or abnormal provisions in a contract for sale;
• special condition fourteen was one such unusual clause presenting a range of risks, including risks that: there was a non-compliance with BCA codes, defective or unsafe construction;
• special condition fourteen should have been brought to the attention of the building inspector.

1. The plaintiffs called a solicitor, David Jordan of Elliott Tuthill Solicitors, who produced a report dated 27 September 2021 (Exhibit B) on the issue of the duty owed by a conveyancer and what was regarded as generally acceptable conduct. Mr Jordan is a solicitor who has practised for 40 years; and for the most part, has practised predominantly in the area of property law and conveyancing. The defendant took no point that the content of a conveyancer's duty in this context substantially differed from that of a solicitor. [9]
2. Mr Jordan opined (at paragraph 5.6) that a conveyancer's duty was to inform the purchaser about the special condition and as to the effects of the condition. This included that the presence of unauthorised and illegal building work could result in rectification work having to be undertaken at the plaintiffs' expense; that when they proceeded to sell the Property in the future, if unauthorised and illegal work remained on the Property, they faced the prospect of losing value on the Property. He opined that accepted practice would have seen the conveyancer engage a building inspector to specifically report on the extent of unauthorised and illegal work and the rectification costs; and also to advise the purchasers of their opportunity to rescind before the expiry of the cooling off period (as it originally was, or as it came to be extended).
3. In a supplementary report (Exhibit C), Mr Jordan also opined, amongst other things, that a prudent conveyancer should also have advised her clients to instruct the building inspector to comment upon the structural soundness of the garage, rear awning and sun room.
4. These opinions were not challenged.
5. Under cross-examination, Mr Jordan partly accepted that, on the premise that the defendant had disclosed the special condition, albeit only in purely verbal fashion, that would be sufficient discharge of the conveyancer's duty. But he said that after such verbal disclosure, it would still remain appropriate for the conveyancer to warn the purchasers of the ramifications of illegal works being on the Property.
6. Also under cross-examination, Mr Jordan was asked whether, in lieu of disclosing special condition fourteen, it would be sufficient discharge for the defendant here to suggest (and even see to it) that the purchasers obtain a building inspection report. Mr Jordan believed that this would amount to a partial discharge of duty. I asked Mr Jordan who was responsible for the provision of information to the building inspector and his response was that, ordinarily, it would be that of the purchaser itself; however, in the circumstances that occurred here, he indicated that it was the conveyancer.

Submissions

1. The defendant contended that a conveyancer did not owe any obligation to specifically inform purchasers about defects in the Property, for which she had no actual expertise and held out no expertise. The defendant cited the express disclaimer of such expertise in the general advice sent by the defendant to the purchasers on 16 July 2018 and the recommendation contained therein, that the purchasers may wish to obtain a building inspection.
2. There is a factual question whether the defendant disclosed the special condition during a telephone call with Rachel McGregor. Counsel for the defendant argued that her client did disclose the condition; albeit only verbally.
3. Alternatively, the defendant submits that her obligation was discharged by inviting the purchasers to obtain a building inspection report. In this way, it was said, she took reasonable steps to bring to the purchasers' attention the possibility of defects on the Property.

Section 5O

1. Although the defendant pleaded (by bare reference) reliance upon s 5O of the CL Act in her Defence (paragraph 6), she did not furnish proof that she acted in a manner which, at the time, was "widely accepted (in Australia) by peer professional opinion". A defendant bears the onus of proof of that matter. [10] Mr Jordan, the plaintiff's liability expert, did address s 5O in section 7 of his first report, but that was only to pre-empt any contrary view that the provision was engaged that was presaged in the defendant's pleading.
2. The question of breach, therefore is determined by ss 5B and 5C of the CL Act. Counsel for the defendant submitted that if that is so, then s 5O was incorporated in s 5B(1)(c). I reject that submission as being contrary to authority. If, as I have found, the elements of s 5O are not established, it is ss 5B and 5C that determine the standard of care. [11] There is no reversion to s 5O. Even without s 5O, evidence of professional practice constitutes a "relevant" factor under s 5B(2), which is expressed to be non-exhaustive, and Mr Jordan's views have been taken into account in that way.

"Risk of harm"

1. I considered the 'harm' aspect earlier.
2. A formulation of the 'risk of harm' should try to encapsulate the true source of potential injury [12] and the general causal mechanism of the injury sustained [13] .
3. In my view, the risk of harm was that the purchasers might suffer economic loss by proceeding to bind themselves to the purchase of a property ignorant of the circumstance that it had works on it that were unapproved by Council and were defective or unsafe.
4. I consider that this risk of harm was foreseeable and not insignificant risk. There was no serious suggestion to the contrary.
5. In practical terms, however, the primary contest between the parties was whether Ms Mamou disclosed the existence and effect of special condition fourteen to the purchasers or, more narrowly, Ms McGregor. Counsel for the defendant accepted that if the existence of special condition fourteen was not disclosed, then that would amount to negligence. Counsel for the defendant was somewhat more equivocal as to whether other matters adverted to by Mr Jordan, concerning additional warnings about the effect or ramifications of the condition, would amount to negligence.
6. Another contest on breach was whether the defendant was obliged to disclose to the building inspector the special condition. The defendant submitted that it was not negligent for the conveyancer to omit to take that precaution. Counsel noted that the facts indicated that no instructions had been given to the building inspector and the defendant was entitled to rely upon the building inspector to identify visible defects to the Property. Where, in this case, the building inspector disclaimed inquiry into the question whether works were illegal or unauthorised, this was, in contrast a 'concealed' defect.

Credit

1. On the primary question of whether special condition fourteen was disclosed to the purchasers, resolution of the question is partly affected by my assessment of the parties as witnesses.
2. The plaintiffs and defendant generally tried to give honest evidence (neither Counsel suggested to the contrary). I thought Mr Patterson, in particular, was a good witness. I thought Ms McGregor was a trifle adamant about recollections. I also thought that, although it is fair to acknowledge that she made sensible concessions, Ms Mamou had engaged in a process of reconstruction evincing a greater confidence in her recollections of what she disclosed to Ms McGregor than what was justified. None of these witnesses were fundamentally unreliable.

Was special condition 14 disclosed?

1. I do not accept the defendant's evidence regarding her oral disclosure of special condition fourteen to the second plaintiff over the telephone and find that she was mistaken in her recollection about this.
2. Her evidence received no corroboration in any document. Notwithstanding that this omission may have amounted to a non-compliance with the obligation upon her, under the Conveyancing Licensing Regulation 2015 (NSW), to record material information of that kind in writing, that itself does not necessarily preclude acceptance of her recollection. But given the intervening passage of time and the range of clients and matters upon which she presumably acted since 2018, before she swore her affidavit in September 2022, I have no confidence that she had any actual recollection of what she said to the purchasers unassisted by contemporaneous records.
3. Relevant in my assessment, also, is the unshaken evidence of the plaintiffs that the matter was not discussed with them. This transaction was a much more pivotal moment in their lives than it was for the defendant. The connotation of a special condition like clause fourteen was the suggestion of illegal structures on the first property that they were considering purchasing with essentially borrowed funds; secured by guarantee given by Mr Patterson's parents. I find it probable that if the condition were verbally disclosed to Ms McGregor, it would readily have been recalled by her. Further, in that regard, if the verbal disclosure was made, the defendant's recommendation to both purchasers to obtain a building inspection report was likely to have taken on a much more focussed line of inquiry, along the lines suggested in Mr Jordan's supplementary report (Exhibit C, paragraph 3).
4. Consequences for acceptance of the defendant's evidence included that on 20 July she had requested a requisition about a matter which she was already aware of and that she had overlooked reference in her email to Ms McGregor on 11 July, reviewing the contract for sale, even though she was aware of the significance of the condition and had not directly informed Mr Patterson of it (and therefore could not reasonably assume that Ms McGregor would pass it on to him).
5. On the first point, I do not find persuasive the defendant's suggestion that on 20 July 2018 she was merely sending a template requisition. The other requisitions in the letter were quite specific and had evidenced her perusal and consideration of other special conditions. Read naturally, by requisition 2, she was inquiring or seeking confirmation from the vendor's solicitor that there were no other works carried out without council approval. It is also difficult to understand why, if in the conversation that occurred on 20 July 2018, reference was made to the condition, nothing was done to record that in an email (if only to supplement what had been indicated in the defendant's email on 11 July 2018 at 10:55am).
6. On the latter point, it is doubtful that within the narrow time period between receiving the contract and her advice to Ms McGregor on 11 July, she had sufficient time to process what she had read about the contract, including the fourteen special conditions to it, but that would be the effect of accepting her evidence that she became aware of special condition fourteen on 11 July. But if she did appreciate the special condition at that point, she would likely have mentioned this to Ms McGregor in the email to the latter at 10:55am that day.
7. I also agree with the plaintiffs' submission that had she had the conversation with Ms McGregor in which the matter was disclosed only verbally, it is inconceivable that the latter would not have passed on the information to Mr Patterson.
8. I find that the defendant did not disclose special condition 14 to the purchasers.

The reasonable precautions that should have been taken (s 5B(2))

1. Accepting, as I do, Mr Jordan's unchallenged evidence, the reasonable precautions that a person in the defendant's position would have taken included that the purchasers be warned of the special condition in the contract and the practical effects; including the purchasers' exposure to the prospect of having to demolish the works or loss of value on a potential resale if those works remained. Most obviously, the reasonable precaution would have been to alert the purchasers to the opportunity to rescind when they could, prior to the expiration of the cooling off period; or, alternatively, encourage them to try to re-negotiate the purchase price with the vendor (however improbable that prospect was; given the vendor's disclosure).
2. In addition, a reasonable precaution, given the circumstance that the defendant - but not the purchasers - knew of the special condition, was for the defendant to inform the building inspector of the parts of the Property that were illegal and unauthorised and to recommend to the building inspector give particular scrutiny to those parts of the works and the soundness of the works, including compliances with building standards.
3. The existence of unapproved structures itself indicated a probability that they were unsafe or defective in some way; which would mean that, at some point, purchasers may have to spend a significant amount of money, constituting (for them) a substantial financial detriment. The 'harm' was likely to be serious.
4. There was nothing to suggest that such precautions were impracticable, or expensive or that there could be any other reasonable objection to that course. (There was nothing in s 5C that bore on the reasonableness of taking the precaution).
5. In these respects, the defendant was negligent.
6. I would also find that even if the defendant's evidence of the conversation with Ms McGregor on 20 July 2018 was accepted, it would have remained inadequate: although it would have brought the existence of the fact of unapproved works to the purchaser's attention, that was not accompanied by disclosure of the matters referred to in sub-paragraphs 5.6.2 to 5.6.6 of Mr Jordan's report. The task of a conveyancer (no less than a solicitor) is to bring home to a client purchaser the practical ramifications of a risk, so that the purchaser can make an informed decision as to what course of action to take: Provident Capital Limited v Papa [2013] NSWCA 36 per Macfarlan JA (Allsop P and Sackville AJA agreeing) at [80].

Was the recommendation to obtain a building inspection report sufficient discharge of the standard of care?

1. In her outline of written submissions prepared before the hearing (MFI 1), Counsel for the defendant also advanced the argument, as a fallback position, namely, that the precaution that she took in recommending to the purchasers that they obtain a building inspection report was a sufficient response of a reasonable person in her position to the risk. This argument was not referred to in Counsel's closing verbal argument, but should nevertheless be addressed.
2. I do not accept that this was an adequate response of a reasonable person in the defendant's position in the circumstances. Following on from my earlier finding, the plaintiffs had been left ignorant about the special condition. They did not, and could not, inform the building inspector themselves about that circumstance. On the other hand, the defendant either did know, or should have known, of the existence of the special condition and ensured that fact was conveyed to the building inspector. As stated elsewhere, I consider the status of works as being unauthorised would have conveyed to a building inspector that there may be a concern as to why works were unauthorised and that could include the safety of the works and compliance with building standards. In other words, it was relevant information for the building inspector and there was no particular reason it should not have been passed onto him.

Causation

1. The defendant put in issue both elements of the statutory test for causation: being 'factual causation' (s 5D(1)(a) of the CL Act) and the 'scope of liability' or element (also known as 'legal causation') (s 5D(1)(b)).
2. Section 5E indicates it is the plaintiffs who bear the onus of proving, on the balance of probabilities, "any fact relevant to" the issue of causation.

Lay evidence

1. In the last of their respective affidavits, the plaintiffs spoke of their financial circumstances since the purchase of the Property. Both generally stated that they were not currently in a position to afford paying for rectification works.
2. In Mr Patterson's case, he deposed to working as a sole trader (audio-visual technician), and to his business suffering throughout the COVID-19 Pandemic. He explained that the Property he and Ms McGregor purchased was financed primarily through borrowing, secured by a guarantee given by his parents.
3. He described himself and his partner as living 'hand to mouth' after settlement. He referred to spare savings being used to pay off a credit card and a personal loan from his bank; and also a loan for his motor vehicle. He did not consider they could afford to borrow further. They also had two children.
4. In Ms McGregor's case, she deposed to ceasing work as a dental assistant in April 2019 and has not returned to work as she cares for her children.
5. This evidence from the plaintiffs was not challenged.
6. The defendant explained that she applied for the building inspection report, online; and that upon receipt of it (which, she recalled, was by email) she on-sent that email, with the attached report, to the plaintiffs. The defendant said that she thought she might have read it, but did not advise upon it.
7. Under cross-examination, both of the plaintiffs said that they had read the building report. Both of them also were also referred to (and re-affirmed as truthful) an allegation raised in their Local Court originating process against the building inspector, which was that "In reliance on the contents of the request from the defendant, and of other pre purchase investigations which the plaintiffs had ordered, the plaintiffs thereafter proceeded to enter into a binding contract for the purchase of the property."

The elements and principles relating to causation

1. Section 5D(1) refers to "particular harm" caused by negligence. This is an indication that there may potentially be multiple manifestations of harm. The Court's task is to apply s 5D for each item of harm claimed by the defendant [14] .
2. In this case, the plaintiffs claim that the particular harm caused by the defendant's negligence was the costs of rectifying unapproved and defective structures so as to be able to obtain local authority approval, to meet standards of generally accepted construction practice without displaying a significant loss of serviceability.

Factual causation

1. For the purposes of s 5D(1)(a), a plaintiff must establish that the harm that in fact occurred would not have occurred absent the negligence: Wallace v Kam (2013) 250 CLR 375 ("Wallace") at [16]. In a failure to warn case, the practical inquiry is what the plaintiff would have done if the warning had been given to the plaintiff. The practical result is that the plaintiff, with the receipt of that warning, would have conducted itself in a way that would not have resulted in the loss (or would have reduced the loss) that ultimately occurred. Factual causation is a retrospective inquiry.
2. By reason of s 5D(3)(b) there was a statutory limitation upon what the plaintiffs could say about the counterfactual that they had the special condition disclosed to them and statements made by both plaintiffs on this subject in their respective affidavits were not pressed after objection was taken to them. In this type of situation, a court may look to:

• evidence of statements made by a plaintiff before harm is suffered;
• other conduct by the plaintiff at or about the relevant time;
• the evidence of others in a position to assess the plaintiff's conduct and apparent motivations;
• other matters influencing the plaintiff [15] .

1. As to the level of proof of the element of factual causation, in Tabet v Gett (2010) 240 CLR 537 at [111], Kiefel J explained that: "All that is necessary is that, according to the course of common experience, the more probable inference appearing from the evidence is that a defendant's negligence caused the injury or harm. "More probable" means no more than that, upon a balance of probabilities, such an inference might reasonably be considered to have some greater degree of likelihood; it does not require certainty."

Arguments

1. The defendant submits that factual causation was not proven. First, if disclosure had been made to the purchasers, it would not have made any difference: the purchasers would have obtained a building inspection report from an entity qualified to opine on the matter. In the circumstances in this case, that report would still have shown that the Property had no relevant defects. Secondly, the plaintiffs were 'in love' with the Property; even in spite of the defects. They were significantly interested in the Property in terms of how they wanted to utilise the living spaces; including use of the relevant part of the Property as a garage. Even with the defects brought to their attention, they had still retained the Property. Thirdly, on their own evidence, if the disclosure had been made in a written form (as Mr Jordan said that it should have been), it could not be predicted that it was likely the purchasers would have read and acted upon it: they barely read the letter of advice that the defendant gave them or the terms of the contract. Fourthly, the purchasers were likely to rely upon the opinion of a building inspector; not the conveyancer, as to the state of the Property. That the purchasers would have relied upon a building report was demonstrated in the Local Court proceeding against the building inspector, when the plaintiffs pleaded their reliance upon the report prepared by Nova Home Developments Pty Ltd in deciding to enter into the purchase (Exhibit 2, paragraph 12). The special condition did not disclose that the work was unsafe, defective or dangerous; only that it was unauthorised and it was only the former conclusion that was likely to be influential to the purchasers' decision to proceed with the purchase of the Property.
2. There was no evidence as to what the local council would likely have done if apprised of the existence of illegal or unauthorised works. Counsel for the defendant invited me to draw a Jones v Dunkel inference from this circumstance.
3. For these reasons, the defendant contends that no harm was occasioned by the omission to disclose the special condition.

The significance of other factors to factual causation

1. One complicating feature of this case is that there are, in effect, two potential tortfeasors whose conduct (and consequences) needs to be considered. This is not just a matter for proportionate liability. It goes to the way that the plaintiffs, in particular, advance their case on factual causation. They say that the relevant question of what the plaintiffs would have done is to be weighed not just on the counterfactual that they had been informed by the conveyancer that the works were illegal but also that the works were not only illegal but also that the works were defective as well.
2. In Strong v Woolworths (2012) 246 CLR 182, the High Court determined at ([20]) that there may be more than one set of conditions necessary for the occurrence of particular harm and it follows that a defendant's negligent act or omission which is necessary to complete a set of conditions that are jointly sufficient to account for the occurrence of the harm will meet the test of factual causation within s 5D(1)(a). It follows that even if another condition is at play with respect to which it is contestable whether or not the defendant is responsible for (the plaintiffs being ignorant that the works were 'defective'), that does not mean that a condition for which it is plainly responsible for (the plaintiff being ignorant that that the works were illegal) is not sufficient for the purposes of the plaintiffs establishing the requirement in s 5D(1)(a). In this way, even if the defendant was not responsible for loss associated with the building inspector's failure to warn the purchasers of unsafe or defective works, she may still be liable for economic loss occasioned to the purchasers by her own negligence.
3. The matter may be tested this way. If hypothetically, the building inspector was a defendant in this proceeding, it may be anticipated that he would say that he was not responsible for loss arising from the conveyancer's negligence to warn of the existence of unapproved works. But if the conveyancer's arguments and the building inspector's arguments were both accepted, the plaintiff could not recover damages for economic loss against either. As Basten JA (at [57], Allsop P and Beazley JA agreeing) observed in Elayoubi v Zipser [2008] NSWCA 335 (a case where causation had been determined under the common law): "If the negligence of two tortfeasors each contributes to the indivisible harm suffered by the victim, each is liable for the harm suffered. If neither were negligent, no harm would have been caused. If either one were negligent and the other not, in each case the negligence would have caused the harm. But a conclusion that if both were negligent and the harm eventuated, neither was responsible for that harm, invites a question as to whether the reasoning process has gone awry."
4. It was well-established principle under the common law that where separate and independent acts of negligence by two or more persons contribute to the harm suffered by another, both persons are liable [16] . It is unlikely that s 5D would produce any different result.
5. A circumstance of significance to both factual causation and legal causation, which arises from the retrospective inquiry into causation, is, as earlier explained, multiple events potentially caused harm. The connection between unapproved works and unsafe and defective works is apparent in at least the following way. It is notorious that, in this state, occupation certificates for construction works, without which a purchaser cannot legally occupy property, and issued by a local council or certifier, depend upon satisfaction of safety and building standards. They follow development consent. In my opinion, the circumstance that there were unapproved works on the property that was purchased would have indicated to a reasonable conveyancer was a red flag that there was a real possibility, and even, high likelihood, that the unapproved works may not have met conventional building standards of safety.
6. The circumstances that the building inspector negligently failed to ascertain defects, contributing to a loss of value does not, in principle, relieve the defendant of liability at the point of factual causation.
7. Another complicating factor concerned the hypothetical position of the Council. Cases like Badenach v Calvert (2016) 257 CLR 440 illustrate the relevance of the attitude of third parties sometimes to counterfactuals in causation. I have noted that Counsel for the defendant submitted that a Jones v Dunkel inference could be drawn against the plaintiffs because of their failure to call any councillors. I reject that simply on the basis that in my view, councillors did not fall into either party's camp.
8. In this case, both parties' building experts' jointly opined on the cost of rectification works - featuring demolition, removal and rebuild - "so it can be approved by local authorities" (Exhibit D, par 1.10; Exhibit F). Both experts were vastly experienced and presumably that experience concerned dealings with councils in relation to construction works. They both apparently assumed that putting the works in the condition that they should have been without the defects would likely have garnered the Council's approval. I consider that assumption to be reasonably based. I refer also to the point raised earlier about the connection between works that are unapproved and what that circumstance might indicate about the safety of the works.
9. In Shoalhaven City Council v Pender [2013] NSWCA 2010, McColl JA (Barrett JA agreeing observed (citations omitted): "A plaintiff may discharge the onus of proof of causation imposed by s 5E by relying upon the inferences open on the facts of the case …. However, in order for the issue of causation to be established by inference, it is necessary that "according to the course of common experience the more probable inference from the circumstances that sufficiently appear by evidence or admission, left unexplained, should be that the injury arose from the defendant's negligence" … A court is entitled to draw inferences from "slim circumstantial facts that exist so long as that goes beyond speculation … The inference must be available and be considered to be more probable than other possibilities.
10. I infer that it is likely that, if the unapproved works had been rectified so as to remove the features concerning a lack of safety and other defects identified by the experts, the Council would have approved them. This inference is more probable than the possibility that the Council would trenchantly refuse to grant approval, even in the face of works that were safe and fit for occupation.

Causal significance of not disclosing/explaining the special condition to the plaintiffs

1. The defendant's other arguments on factual causation are not persuasive. The conveyancer's omission to disclose the special condition was material to the purchasers' decision to proceed with the contract. It was not suggested to the purchasers that they placed little or no reliance upon her advice. It may not have been the only consideration, but it was not necessary for the plaintiffs to establish that the reliance they reposed in the defendant was exclusive of other matters affecting their decision making when proceeding with the transaction.
2. In the stretched financial circumstances in which these purchasers faced, including security provided by Mr Patterson's parents for the loan, I do not accept that they would have knowingly acquired a property effectively encumbered by a prospective liability to demolish part of the works on it with a consequential likelihood of carrying further expense; no matter how much they 'loved' or were 'interested' in the Property. I do not accept the suggestion (perhaps implicit) that there were such exceptional features to this property, not otherwise available on the property market in 2018, that would have led the purchasers to take what I find would have been an irrational financial decision, of proceeding with the purchase of property with known illegal works on it.
3. In this regard, I consider the nature of the unapproved works. These included a kitchen (formerly a garage), the rear awning and a sunroom. All of these areas would have involved substantial use by the owners. These were not insignificant parts to the property, in comparison, say, to a back shed detached from the main part of a property.
4. I do not accept the defendant's unattractive argument that had the disclosure been in writing, it would likely have been overlooked. For one thing, I agree with the plaintiff's Counsel's argument that the likelihood is that it would have been referred to by the defendant in her (short) email to Ms McGregor on 11 July 2018; rather than tucked away in a template advice to prospective purchasers of the kind evident in the attachments to the defendant's email on 16 July. It is inconceivable that if the defendant had verbally disclosed the condition to her, Ms McGregor would not have alerted Mr Patterson to the issue for his consideration and their discussion. For another, it was not just the disclosure of the special condition for which the conveyancer was responsible: she needed to disclose the matters which Mr Jordan had identified in his first report (Exhibit B) and, in practical terms, that would have required the conveyancer to ascertain that the purchasers were aware of both the condition and the ramifications of it: a requirement that would not be satisfied by slipping in a reference to the matter in a generic or template advice to purchasers.
5. Whilst the test for causation is subjective, absent evidence to the contrary, there is no basis for the Court to infer that these purchasers would have acted in an irrational manner. Whilst I accept that the plaintiffs were excited about a prospective purchase, it was another thing to say that they desired to acquire it at all costs; including the prospective costs of demolishing an illegal structure and, if necessary, incurring costs of a rebuild or repairs. It was clear from the extension of the cooling off period that they were already stretched for finance and, what was worse, required financial assistance from Mr McGregor's parents to acquire the Property. It was not just the circumstance of illegal works on the Property but the heightened risks in relation to non-compliance with building requirements, defects and general safety that I have already referred to. It is most unlikely that in July 2018, they would want to continue to acquire the Property in the prospect that they would willingly shoulder a potential further significant financial burden down the line. I do not consider that these plaintiffs were so idiosyncratic or desperate to acquire this property that they would cast those concerns aside.
6. I find, on the probabilities, that if informed that the house they wanted to purchase had illegal structures on it, and the ramifications of that fact, they would not have proceeded with the exchange of contracts and not thereafter have suffered economic harm. Factual causation as to this particular breach is established.

Causal significance of not disclosing/explaining special condition to the building inspector

1. On the additional basis of breach, regarding the non-disclosure to the building inspector, the defendant submitted that the inspector would have been obliged to make his own independent inquiries and not look to the conveyancer. The inspector, in assessing defects, would likely have determined for himself that works were illegal.
2. As to this, the plaintiffs' response was that the defendant failed to instruct the building inspector, and/or recommend to the plaintiffs that the inspector be instructed, about the existence of the unapproved works on the Property; as disclosed by the special condition. That is, they say that any failure by the building inspector to identify defective work was the result of, or substantially contributed by, the defendant's negligent omission to provide (herself) or to instruct the plaintiffs to provide, to the building inspector, necessary instructions about the state of the unapproved works on the Property.
3. I am not persuaded by the plaintiffs that by the defendant pointing out to the building inspector the circumstances (including location of) the unapproved or illegal works would have meant that it was likely that the content of the building inspector's report on the condition of the Property (including those particular works) would have been different. Perhaps it might be inferred that he would exercise closer care, but it is speculative to find that his report, as to the state of those works, would have been any different. (Later in these reasons, when addressing proportionate liability, I touch upon the forensic significance of the building inspector not giving evidence in this case).
4. I am not satisfied that factual causation arises from the breach of failing to disclose the special condition to the building inspector.

Scope of liability

1. In Hudson Investment Group Ltd v Atanaskovic (2014) 311 ALR 290 at [106] [17] , the Court of Appeal, with reference to s 5D(1)(b), regarded as 'helpful' the approach taken by McHugh J in March v E & M H Stramare Pty Ltd (1991) 171 CLR 506 at 535 where his Honour said: "Starting with the proposition that a negligent person should be liable, within reason, for the consequences of his conduct, the extent of his liability is to be found by asking the one question: Is the consequence fairly to be regarded as within the risk created by the negligence? If so, the negligent person is liable for it: but otherwise not."

The parties' arguments

1. The defendant argues that the 'scope of liability' (or 'legal') element for causation was not established. There were at least three limbs to this argument. The first limb of the argument was that the 'particular harm' claimed - rectification costs for defective works - the defendant had no expertise, and did not hold out any expertise, in identifying building defects. She made no particular representation about defects on the Property. She should not be responsible for fulfilling what was effectively a representation by the building inspector that there were no material defects. Perhaps another way of expressing the same point, as I understood the defendant to submit, is to say that the conveyancer should not be an insurer for the building inspector.
2. The second limb was that the plaintiffs' receipt of the inspection report was an intervening event that broke the chain of causation.
3. The third limb was that the plaintiffs' own conduct in delaying making a claim against the defendant until November 2021 also severed a connection.
4. The plaintiffs argued that the existence of defects was or were an 'incident' of unapproved or illegal works on the Property. It was not possible that the Property that the plaintiffs acquired could be put back in the state that would have been met with the Council's approval unless all of the rectification works, as identified by the building experts were undertaken; and that would necessitate expense to the plaintiffs that should be recovered against the defendant. Moreover, the defendant's failure to draw the special condition to the building inspector's attention contributed to the latter's negligence. If he had been on notice of the special condition, his report could have addressed what might be done to put the unauthorised and illegal works in a state that was likely to be approved by the Council.

Consideration

1. In favour of the plaintiffs' position that responsibility for the harm should be imposed upon the defendant, is the defendant's own admission that the circumstance that there were unauthorised or illegal works left on the Property was an (objective) indication of a heightened risk that those works were also unsafe or defective. In other words, it was a foreseeable consequence that works that had not been approved might also be unsafe and defective.
2. Further, although conceptually there may be a distinction between harm concerning physical condition of the property and harm in the sense of a loss of expected value in the property, in the circumstances of this case, the two economic interests that have been infringed have practicably coalesced. The reduced value of the property was not solely a function of the works being unapproved; but was also a function of them being left in an unsafe and defective condition. The loss in value as between these separate conditions, contributed to by two wrongdoers, is indivisible or, to borrow from the parlance of personal injury law, not easily susceptible to being 'disentangled [18] .'
3. I am conscious of the force of the point identified by the High Court in Wallace (at [24]), that the scope of liability for the consequences of negligence is often (although not always) coextensive with the content of the duty of the negligent party that has been breached. That, as the Court explained, is because the policy of the law in imposing the duty on the negligent party will ordinarily be furthered by holding the negligent party liable for all harm that occurs in fact if that harm would not have occurred but for breach of that duty and if the harm was of a kind the risk of which was the duty of the negligent party to use reasonable care and skill to avoid.
4. The harm suffered here was a loss of value in what the plaintiffs purchased and although the defendant's contribution to that harm arose from a different duty to that of the building inspector, that does not mean that she should not be liable for the loss which has been caused by two separate wrongs in certain circumstances. As the High Court explained in Hunt & Hunt at [41], a wrongdoer's acts may be independent of those of another wrongdoer yet cause the same damage. At the 'scope of liability' stage, subject to other considerations, this should be sufficient to establish causation. The extent to which a defendant is responsible for the harm caused is determined under Part 4 of the CL Act.
5. Thirdly, an intervening event may be one matter that a court will consider in the assessment of the legal element of causation [19] . In this case, the building inspector noted in his report that he took no view as to whether part of the Property featured works that were unauthorised or illegal. Part of the loss of value - for which the inspector disclaimed responsibility - was the status of the works being unlawful. The status of the works, for being unapproved, is a factor that diminishes the value of the works per se.
6. The harmful effect of the defendant's negligence, in terms of its diminution in the value of the property, was not, in my view, obliterated by the building inspector's negligence.
7. I will now address the last point made by the defendant on causation, concerning the plaintiffs' delay in making a claim against her. In principle there is no reason a plaintiff's conduct which, although also amounting to a failure to mitigate, cannot also sever a causal connection between the defendant's negligence and loss. Usually however, the plaintiff's conduct has to be rather extreme or unreasonable. Arguably also, there is no novus actus where, as is said here, the plaintiff's own negligence comprises an omission [20] .
8. However, any delay by the plaintiffs goes to the extent of damages; it does not destroy the connection. I will consider this topic from another perspective later when I deal with the defendant's argument about a failure to mitigate.
9. I am satisfied that the 'scope of liability' element of causation is also established.

Facts

1. On 8 November 2019, the plaintiffs brought an application against the building inspector in the NCAT, in which they claimed the sum of $44,329 plus GST (Exhibit 1). On 19 June 2020, the case moved to the Local Court of New South Wales (Exhibit 2).
2. In this earlier litigation against the building inspector, the plaintiffs alleged that he was negligent in failing to report upon the suitability of lightweight metal patio style awnings to form the roof of the family room and the adverse effects of ceilings suspended below the lightweight metal structures of the family room and front and back verandahs.
3. On 3 February 2021, the plaintiffs settled their claim against the building inspector. Mr Patterson deposed that after deducting for legal and expert's expenses, the plaintiffs recovered only the sum of $5,500, which they deposited into their mortgage loan.

Expert evidence

1. In one of his reports (Exhibit 5) which had been originally intended for use in the NCAT and Local Court litigation, Mr Ransley (for the plaintiffs) opined that:

• the defects that were not reported by the building inspector would have been apparent to a competent inspector at the time of the inspector's inspection (par 5.8.1);
• several defects that were significant and likely to be present on 19 July 2018 included: a visible bow in the roof and ceiling; inadequate fall and drill holes in guttering; roof sheets that were not adequately overhanging gutters and generally poor roof condition (par 5.9.6);
• careful scrutiny of the roofs and associated componentry by a competent inspector would have determined the presence of defects that would cause leaking, irrespective of the weather conditions (par 5.10.4).

1. In his report, which was intended for use in this proceeding (Exhibit 3), Mr Donnellan (for the defendant) opined that:

• a professional and qualified building inspector should have identified numerous and serious defects to the sunroom, and both front and rear verandahs as part of compliance with AS-4349.1, 2007 (paragraphs 8.3 & 9);
• a competent building inspector should have identified the "SC14 defects" in the absence of being advised about the special condition (paragraph 11.4);
• a professional building inspector should have identified numerous and serious defects as part of a pre-purchase building inspection undertaken in accordance with AS-4349.1, 2007 (paragraph 11.5).

1. At paragraphs 8.5-8.10, Mr Donnellan specifically addressed major defects concerning what I understood to be the unauthorised and illegal works. This included: the inadequate pitch of the roof; the presence of mortar in the flashing at the junction between the sunroom and the main house; the presence of holes in the sunroom roof; major defects in the pergolas and incorrect ceiling heights.

Parties' arguments

1. Deploying the plaintiffs' arguments made against the building inspector in the NCAT in this proceeding, the defendant contends that this building inspector had represented his expertise in identifying or assessing defects to the Property and that the defects were patent; or at least ascertainable to a competent inspector at the time of inspection.
2. The defendant submitted that the building experts had both, in their individual reports, found that the building inspector had overlooked defects which someone in his position would have discerned. In this way, the building inspector committed a legal wrong against the defendants. Further, and noting the way that the plaintiffs put their case on damages, the building inspector's negligence caused the same damage as that which the plaintiffs alleged to have been caused by the conveyancer's negligence.
3. The plaintiffs' Counsel did not seriously contest the argument that proportionate liability was engaged. His point related to the apportionment exercise. This was that the defendant's negligence was at least as significant as, and perhaps more significant, than the building inspector's negligence. Counsel argued that the defendant's non-disclosure of special condition to the building inspector meant that he was kept ignorant.

Consideration

1. There is no dispute that, their claim being one for economic loss or property damage, the purchasers' claim is an apportionable one (CL Act, s 34(1)(a)). The defendant cited the building inspector, whose report was dated 19 July 2018, as a 'concurrent wrongdoer' (within the meaning of s 34(2)).

Is the building inspector a 'concurrent wrongdoer'

1. A defendant needs to prove that the concurrent wrongdoer is legally liable to the plaintiffs [21] . That is a legal question upon which the defendant carries the onus [22] .
2. Secondly, a defendant needs to establish the requirement that the damage or loss caused by the putative concurrent wrongdoer must be the same damage of loss caused by the defendant.
3. I am satisfied that both limbs of the definition of 'concurrent wrongdoer' are established.
4. On the issue of the building inspector's legal liability to the plaintiffs I am circumspect about making adverse reputational findings against a non-party to this proceeding. However, the Court can only proceed on the evidence as it is and the legislative regime expressly contemplates and indeed requires the Court to assess the defendant's proportionate responsibility with regard to the conduct of concurrent wrongdoers even where they are not parties to the proceeding [23] .
5. It would ordinarily have been open to the plaintiffs to apply to join the building inspector as a defendant in this proceeding, but that course was precluded once the Local Court proceeding against the building inspector was concluded [24] . Nevertheless, it was still open for the plaintiff to negotiate with the inspector, as part of a settlement, to call him in their own case to rebut the case made against him by the defendant, with a view to arguing that the responsibility of the conveyancer was greater than that of the inspector. An advantage of that would have been that, unlike the plaintiffs, the inspector would not have been prevented from saying what he would have done if, in conformity with her duty, the defendant disclosed to him the special condition. (This was significant also in relation to the issue of the casual significance of the additional breach of duty I found - see paragraph [121] above). In the end, the inspector did not give evidence in the plaintiffs' case.
6. These omissions left the door open to the defendant to rely upon proportionate liability in this case and effectively tilted the field in her favour on the questions whether the inspector was a concurrent wrongdoer and the extent of the defendant's responsibility without any real contradictor. Both experts agree that the building inspector was negligent. The inspector committed a legal wrong against the plaintiffs.
7. As to the second requirement, I have addressed arguments raised by the parties about the 'harm' sustained the plaintiffs earlier in these reasons and have found that the conduct of the defendant and the conduct of the building inspector caused the same damage.

Apportioning responsibility

1. In respect to the apportionment of responsibility, for the purpose of s 35 of the CL Act, I take into account the factors of comparative culpability and causal potency to the plaintiffs' loss [25] .
2. I place weight upon the plaintiffs' evidence in the prior litigation, about their reliance upon the building inspector's report. Of course, that does not mean that they did not also rely upon the conveyancer, but there is, in my view, a qualitative difference to a prospective purchaser, when considering whether to go through with a purchase, between a prospect of economic detriment - a potential need to demolish unauthorised works if required by the Council - and an urgent present need to rectify patent defects to make the family home safe to live in without distress and a loss of amenity. In my view, the defective and potentially unsafe condition of the property would have weighed more heavily on the plaintiffs' decision to proceed with the contract than the status of the works being unapproved.
3. I also place weight upon Mr Jordan's view that in the circumstances a prudent conveyancer should have specifically alerted the building inspector to comment on the structural soundness of the converted garage, rear awning and sunroom. Although I have found that the non-disclosure of the condition to the building inspector was not a cause of the harm, it did not help him either (as it might have done). That said, I place some weight upon the evidence of Mr Donnellan that had the building inspector been aware of the special condition, it is not obvious that the inspector's conclusions would have been any different. This was because the defects were so patent as to be suggestive of an unapproved structure.
4. I also take into account and accept the defendant's submission that the building inspector was plainly in a superior position to advise the purchasers on the real condition of the Property overall than the defendant.
5. Also relevant in this context is that the defendant did not assume responsibility for defect in the condition of the property but, to the contrary, she positively disclaimed it in her letter (on the firm's letterhead) of 16 July 2018 and in the 'general advice to purchasers' attached to that letter. For reasons indicated in the 'scope of liability' section, that does not exempt her from liability, having regard to the nature of the harm, to which her conduct contributed, but it does significantly lessen her culpability.
6. I would allocate responsibility to the building inspector at 70% and the defendant at 30%.

Lay evidence

1. In his primary affidavit Mr Patterson deposed that after rain fell on 13 October 2018, he observed rain coming through the downlights on the front pergola and the front pergola was showing noticeable bowing.
2. The plaintiffs made a claim on insurance but that, apparently, was rejected on account of pre-existing building defects.
3. Mr Patterson deposed that further damage was sustained to the Property after storms between October 2018 and March 2019. A considerable volume of water entered the sunroom in the home.
4. Since that period, Mr Patterson referred to other examples of damage: further bowing or cracking of the front deck ceiling; water-legged decking in the front deck and rear alfresco, further water ingress in the front sunroom creating a mould issue for the whole home; cracked ceilings or walls in the front sunroom and cracked ceilings in the rear alfresco.

The Tyrrells report

1. The plaintiffs relied upon the expert evidence of Tony Ransley, of Tyrrells Property Inspections. Mr Ransley is a builder of over 50 years' experience in the construction industry and his experience entails, relevantly, the renovation of existing residences and assessment and reporting of the condition of "many thousands" of established residences.
2. The defendant relied upon Mr Tansley's report after his earlier inspection of the Property on 3 February 2020 (Exhibit 6). The plaintiffs had relied upon this report in NCAT proceedings. Mr Tansley had been asked to opine on whether the building inspector had exercised reasonable care when inspecting the property on 19 July 2018. Amongst other conclusions expressed, Mr Tansley found that the plaintiffs were not put in a better position when it came to negotiating price based on repairs. Mr Tansley found that the plaintiffs would incur costs to rectify defects that should have been reported by the building inspector of approximately $94,983 to rectify the awning roofs, ceilings and family room. At paragraph 9.2, Mr Tansley summarised in detail major defects in relation to patio style awning roofs.
3. The plaintiffs relied upon Mr Tansley's report of 20 April 2022 (Exhibit D), which reported on a later inspection of the Property undertaken on 16 April 2022. Mr Tansley opined that the main residence and verandah attachments had "stood largely unchanged" from what he saw on 3 February 2020; although he added that the building costs had increased significantly. Part of his report (in section 10) indicated his revised costs estimates. His general conclusion was that the reasonable costs for rectification of the building "so it can be approved by local authorities, meet(s) standards of generally accepted construction practice and doesn't display significant loss of strength and serviceability, will be $136,989.00."
4. Mr Ransley prepared a supplementary report (Exhibit E) dated 15 December 2023 in which he reviewed his estimate of rectification costs. He updated that estimate to $157,057, which reflected a monthly increase in costs since his earlier report to be 0.7% a month. On the basis of that rate of increase, by the time of this hearing, he estimated the rectification costs would be $179,815.

The BAC report

1. Mr Donnellan, of Acclaimed Building Consultancy Pty Ltd, prepared a recent report dated 14 February 2024 (Exhibit 4).
2. Mr Donnellan assumed that there would be a demolition and rebuilding of the annex, front and rear verandahs.
3. He noted that construction costs had risen by as much as 37% since pre COVID-19 levels, although the industry had started to settle down as building materials had become more readily available.
4. Mr Donnellan opined that as at September 2022, a reasonable cost to demolish, remove and rebuild the illegal building works was $125,000. As at February 2024, he estimated that the reasonable cost had increased to a range between $125,000 and $130,000, assuming timber construction.

Joint report

1. On the first day of the hearing, the parties' building experts conferred. They produced a short joint report (Exhibit F). They agreed that Mr Ransley had described the work that was required to rectify the defective works and that the present costs would be approximately $146,000.

Concurrent evidence

1. Virtually all of the questioning when the experts gave evidence concurrently consisted of the defendant's Counsel teasing out of Mr Ransley what components of his estimated rectification costs, at different points of time, were included. I say something more about this later when considering the defendant's 'betterment' point.
2. It suffices to say that the estimates were intended to put the Property in the condition where it could comply with building standards.

Consideration

1. I accept that, in principle, the quantum of the costs would reflect the conclusion agreed by the experts, but that presupposes that I accept the costs of rectification works as the appropriate measure of damages.

Measure of damages

1. The plaintiffs submitted that effect should be given to the prevailing principle that the award should place the purchasers in the position they would have been in if the tortious conduct had not occurred. They say that even if, ordinarily, in a context of property being acquired that is affected by problems, the appropriate measure is one of diminished value, that is not always so [26] .
2. The defendant submits that the exclusive measure of compensation should reflect the difference between what they paid for the property and what (allowing for the defects and unapproved works) its value. She argues, further, that the plaintiffs have not proven that the plaintiffs did in fact pay more than what it was worth. It was suggested that the purchase price may have factored in the presence of unapproved works having regard to the presence of the special condition and there is no evidence of current value.
3. In my view, the plaintiffs' submissions should be accepted. The defendant's submissions erect a false dichotomy when it is often the case that reinstatement costs reflects a diminution in value. In addition to the authorities cited by the plaintiffs, in Talacko v Talacko (2021) 272 CLR 478 a unanimous High Court recently observed: "Where a defendant's tort impairs the value of a plaintiff's rights to tangible property, this will constitute loss or damage. The normal measure of damages in such cases is the diminution in the value to the plaintiff of their rights to tangible property, usually measured by the cost of repair, where it is reasonable to repair, or the cost of replacement[. As the Supreme Court of the United Kingdom recently said: "If a claimant suffers damage to property, such as a vehicle or a ship, as a result of the tortious actions of a defendant, it can claim as damages the diminution in value of the damaged property, usually measured by the cost of repairing the property, and consequential loss".
4. This approach is also apposite in the case where, like here, an issue affecting the value of the property - the unapproved works - was not discovered by the plaintiffs until some substantial time down the line from the date of acquisition. As was noted by Gaudron J in Hawkins v Clayton [27] and emphasised in Wardley [28] , in economic loss cases, the diminution in value is not always self-evident at the point of acquisition. Subsequent events can be relevant to establish the real value at the time of acquisition. [29] At any rate, as the authorities cited by the plaintiffs indicate, the 'rule' in Potts v Miller is not inflexible [30] .

Credit for 'betterment'

1. In exchanges with Mr Ransley during the concurrent evidence, Counsel for the defendant sought to elicit admissions from the expert that the scope of rectification works which he had determined (and which Mr Donnellan later agreed) could lead to the situation that the plaintiffs could be compensated for more than if they were simply compensated on the basis of putting the Property in the state that it would have been approved by the local council. That is, to use Mr Donnellan's colourful description, the estimate of costs for rectification works was for (all the) 'bells and whistles.' Thus, one early exchange sought to elicit Mr Ransley's agreement that there was a difference between rectification work that made the Property 'habitable' and that which made it compliant with building standards. Mr Ransley found difficulty with that distinction and so did I. I indicated my view during the concurrent evidence, that questioning of that kind went beyond the proper scope of questioning of experts giving concurrent evidence; since it put Mr Ransley on the spot (ie without notice) about a matter - by how much the quality of the works would have been improved by the plaintiffs' delay in bringing their proceeding against the defendant - that neither expert had considered in their reports. I did not regard it as fair to Mr Ransley that evidence that he gave on questions of that kind without a decent period of reflection was useful. At any rate, I place little weight on what was said in response to questions of that ilk.
2. Further, I agree with the submission of the plaintiff's Counsel that in the ordinary course of things, rectification works are naturally likely to improve the condition of the Property. That would not mean that plaintiffs would obtain an impermissible windfall, or that some discount should be applied to an award of compensation. It is impracticable to suggest that rectification works undertaken would reproduce exactly the same condition of the Property at the time when the works were originally undertaken. For example, the selection of building materials will likely improve over time.
3. I also accept the plaintiff's submission that there is no obvious dichotomy between rectification works being 'habitable' and such works satisfying Council requirements. I infer that the Council would not approve works that would not comply with recognised building standards.

Expert Evidence

1. In his report, Mr Donnellan, the defendant's building expert, noted the quote that the plaintiffs received, which was referred to in the claim in the NCAT; a sum which, he thought would have 'gone a long way' to repairing or replacing the verandahs and annex and specifically could have covered roof coverings, flashings, ceilings and insulation.
2. As at 3 February 2020, Mr Ransley estimated that the costs of rectifying defects which, at that point in time, he considered should have been reported by the building inspector as being approximately $94,983.
3. I referred earlier in the reasons to the plaintiffs' evidence of their financial circumstances. When they were cross-examined, both plaintiffs indicated that they had not:

• approached a bank or financial institution to seek finance to pay for rectification of defects;
• approached a builder for a quote to fix the defects on a deferred payment plan, or out of the proceeds of the Property being sold;
• approached a real estate agent to sell their property.

1. To repeat, Mr McGregor also deposed in his last affidavit that after payment of legal and expert expenses, the balance of the settlement of the claim against the building inspector (in terms of a monetary sum) was $5,500, which sum was paid into the mortgage.

Arguments

1. The defendant submits that after their home insurance claim was rejected, the plaintiffs had done nothing more to address their problems concerning defects.
2. They did not join the defendant as an additional party to their claim in the NCAT. At the time that claim was made, the estimated loss was approximately $45,000. When that claim was settled, they did not use the proceeds from a settlement of their claim against the building inspector to pay for repairs. The proceeding commenced against her on 5 November 2021.

Consideration

1. It is the defendant who bears the onus of proving that the plaintiffs failed to mitigate their loss. [31] I accept the plaintiff's submission that given that the defendant is a wrongdoer, the 'standard' of reasonableness is not high. [32]
2. The test is objective - what the reasonable plaintiff would do - however the standard takes into account the circumstances of the plaintiffs as they existed at the time [33] .
3. That includes a plaintiff's impecuniosity. A similar argument to the one raised by the defendant was determined by the New Zealand Court of Appeal in Bevan Investments Ltd v Blackhall & Struthers (No.2) [1978] 2 NZLR 97 when another plaintiff building owner, in the face of financial difficulties and opposition from the defendant in contested litigation, elected to defer rectification until after the conclusion of litigation; which had the effect of increasing the rectification costs. The Court of Appeal determined that the impecuniosity of the plaintiff could be taken into account when considering mitigation.
4. In this case, I generally accept that the plaintiffs have not been in any real position to enter into further borrowings to meet the cost of rectifications. The circumstance that they received approximately $5,500 from their settlement of the claim against the building inspector, clear of legal and expert expenses, is neither here nor there.
5. I further agree with the plaintiffs' submission that they did not, as it were, 'sit on their hands.' A substantial part of the delay about which the defendant complains was the time that it took for the plaintiffs to learn of the existence (and effect) of the special condition that the defendant had the duty to bring to their attention. The defendant has always denied that she failed to disclose the condition and by this judgment she has been found to be wrong. Given that it was the defendant who was responsible for not informing the plaintiffs of the condition, she can hardly complain about the delay that occurred when the plaintiffs learnt of the matter from another source.
6. Another difficulty for the defendant is that there is no indication that, had the plaintiffs taken the steps that she argues that they should have taken, the result would likely have been any different. There was no evidence that given the financial position and circumstances of the plaintiffs after completion of the Property in late August 2018, and thereafter, a lender would have been willing to lend more to them in their circumstances. There was no evidence to indicate whether there was any equity in the owners of the Property that had accumulated against which further borrowings might be made. There was also no evidence that there was a builder willing to undertake rectification works on a 'deferred payment' basis. Finally, the suggestion that the plaintiffs could have tried to sell their property in order to make improvements strikes me as being something like a 'scorched earth' policy: selling an impaired asset - the family home which the defendant repeatedly emphasised that the plaintiffs 'loved' - in response to damage to the asset. They were not developers looking for a quick purchase, willing to undertake a demolition and rebuild and sell for profit. That is to say, it was not unreasonable for the plaintiffs to want to retain ownership of their property. At any rate, I am not persuaded that the omission by the plaintiffs to adopt any of these suggestions was unreasonable.
7. The defendants' case on a failure to mitigate fails.

SUMMARY AND ORDERS

1. The plaintiffs have made out their case for damages to be assessed at $43,800. I see no reason costs should not follow the event, but the parties should have the opportunity to make submissions to the contrary. The plaintiffs also claimed interest. It is unclear whether that claim is opposed and at any rate, what the quantum is.
2. The Court directs the parties to confer upon appropriate orders and for the plaintiffs to bring short minutes of order in conformity with these reasons within 7 days. If the parties are in disagreement, that fact should be notified and further directions will be made.

Endnotes

1. In the action in contract, the claimant must establish loss or damage caused by breach if she is to be entitled to a judgment for substantial damages.
2. Tabet v Gett (2010) 240 CLR 537 ("Tabet") per Kiefel J at [108]-[110]; Alcan Gove Pty Ltd v Zabic (2015) 257 CLR 1 at [8]
3. Tabet per Kiefel J at [135]
4. Tabet per Hayne and Bell JJ at [66]
5. Although curiously s 34(2) uses the concept of 'damage'
6. eg Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 527; Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd (2013) 247 CLR 613 ("Hunt & Hunt") at [25] - [26]
7. Mahony v J Kruschich (Demolitions) Pty Ltd (1985) 156 CLR 522 at 527; applied in Hunt & Hunt at [24]
8. The other two members of the Court (Macfarlan JA and Barrett AJA) did not address the point.
9. This relieves me of the need to consider an issue apparently left unresolved by the Court of Appeal in Benson v MacLachlan t/as Sterling Conveyancers (2002) NSW ConvR 55-995. Other decisions touching upon that issue are Perpetual Trustee Company Pty Ltd v Ishak [2012] NSWSC 679 at [178] and D Capital 2 Pty Ltd v Western [2022] NSWSC 1064 at [303].
10. South Western Sydney Local Health District v Gould (2018) 97 NSWLR 513 ("Gould") per Leeming JA (Basten and Meagher JJA agreeing) at [30], [123]
11. Gould at [123]
12. Roads and Traffic Authority of NSW v Dederer (2007) 234 CLR 330 at [60]
13. Perisher Blue Pty Ltd v Nair-Smith (2015) 90 NSWLR 1 at [98]
14. Monaghan Surveyors Pty Ltd v Stratford Glen-Avon Pty Ltd [2012] NSWCA 94 ("Monaghan Surveyors") at [67]
15. Neal v Ambulance Service (NSW) [2008] NSWCA 346 per Basten JA at [40]
16. Bennett v Minister of Community Welfare (1992) 176 CLR 408 at 429; RTA v Royal (2008) 245 ALR 653 at [91]
17. Per Sackville AJA (Beazley P and Ward JA agreeing). His Honour cited Paul v Cooke (2013) 85 NSWLR 167 per Leeming JA at [105]
18. Watts v Rake (1960) 108 CLR 158 at 160
19. Monaghan Surveyors at [70]
20. H.Luntz & S.Harder, Assessment of Damages for Personal Injury and Death (5th ed, 2021 Lexis Nexis) [2.3.30], p 368
21. Hunt & Hunt at [47], [91]; Symond v Gadens Lawyers Sydney Pty Ltd [2013] NSWSC 955 per Beech-Jones J at [430], [446] (an appeal from this decision was confined to the assessment of damages: Gadens Lawyers Sydney Pty Ltd v Symond [2015] NSWCA 50)
22. Symond at [429]
23. CL Act, ss 35(3) & (4)
24. CL Act, s 38
25. These were identified as relevant factors to the apportionment exercise in Reinhold v NSW Lotteries Corporation (No. 2) (2008) 82 NSWLR 762 at [50]-[53]
26. The plaintiffs cited Sved v Council of the Municipality of Woollahra (1995) 86 LGERA 222, Livingstone v Mitchell [2007] NSWSC 1477 at [24]-[39] and Oates v Anthony Pitman & Co [1998] PNLR 683 at 694-5 to support its 'reinstatement' approach
27. (1988) 164 CLR 539 at 601
28. (1992) 175 CLR 514 at 528; Hunt & Hunt at [31]-[32]
29. PPK Willoughby Pty Ltd v Baird [2021] NSWCA 312 per Leeming JA (Basten JA and Simpson AJA agreeing) at [49]-[50]
30. PPK Willoughby at [57]
31. Arsalan v Rixon; Nguyen v Cassim (2021) 274 CLR 606 at 624-5
32. Joseph v Harvest Grain Co (1996) 39 NSWLR 722 at 738 C-D
33. Sherson & Associates Pty Ltd v Bailey (2001) Aust Torts Rep 81-591 at [77]

Amendments 01 March 2024 - Amended formatting, paragraph numbering and deleted duplicate footnote 1 01 March 2024 - Amended footnote numbering 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: 01 March 2024