The plaintiffs' case
100The defendant neither designed, manufactured, supplied or installed the Termite Tite barrier at the plaintiffs' home. The plaintiffs' only recourse is to the Deed of Agreement to which I shall hereafter only refer as "the Deed". Paragraph 10 of the further amended statement of claim filed in Court on 21 May 2013 (hereafter "SOC") pleads that the defendant assumed liability for the installation of the Termite Tite Barrier System by recital C of the Deed. The defendant filed an amended defence in Court on 30 May 2013 (hereafter merely "the Defence"). Par 10 of the Defence is:
"The defendant denies the allegations pleaded in paragraph 10 of the claim as they are untrue because:
a. it was not a term of the Mediation Agreement that the defendant assumed the liability for the installation of the System by Termite Tite; and
b. on the assumption that "Recital C of the Deed" as particularised therein is intended to be a reference to Recital C of the Mediation Agreement, that recital is wrong and was drafted by the then solicitor for the plaintiffs."
The words "Mediation Agreement" take up words used in the SOC but those words are unnecessary. The Deed records the agreement reached at the mediation on 10 February 2009 when it is clear that the parties wished to have their "simple agreement" reduced to writing. That writing is the Deed. The "Mediation Agreement" and the Deed are the same thing. The recital is in fact erroneous. However, the defendant executed the Deed and there is no plea of "non est factum". The Deed was drawn by the plaintiffs' then solicitor and that can be used if there is a problem in interpreting the document - it would be construed "contra proferentem". However, there is no ambiguity in recital C. It clearly states that the defendant "was retained by the [plaintiffs] to install a termite barrier system for termite prevention within the home". If there be any ambiguity it can only be in the words "termite prevention".
101The plaintiffs rely on estoppel. This estoppel is pleaded in a reply filed in Court on 5 November 2013. Ms Smith relied on the following statement of the law in Halsbury's Laws of Australia/ 190 - Estoppel/ (3) ESTOPPEL BY DEED:
"Principle In an action on a deed, estoppel by deed prevents a party to the deed from disputing any distinct allegation of fact which he or she made in it. It is a rule of evidence founded on the principle that a solemn and unambiguous statement or engagement in a deed must be taken as binding between parties and their privies and therefore, as not admitting any contradictory proof. If on the true construction of a deed it is found that the parties agree, for the purpose of a particular transaction, to state certain facts as true, then, for the purposes of that transaction, there may be no question about those agreed facts. It is not necessary that the facts assumed by the parties for the purposes of the transaction be true. However, the statement of fact must be precise and unambiguous; it is not enough to show that it might be inferred from the deed. The principle extends to statements made in a recital, as well as in the operative part of the deed. It is not necessary to show reliance on the statement nor that the party relying on the estoppel would suffer detriment if departure from the statement were allowed.
The doctrine of estoppel by deed antedates, but is now considered to be a subset of, the doctrine of estoppel by convention."
That the principle extends to statements made in a recital is supported by Re Patrick Corp Ltd and the Companies Act [1981] 2 NSWLR 328; Cabouche & Bond v Ramsay (1993) 119 ALR 215 (FFCA) at 237 per Gummow J (as he then was).
102There are exceptions to this principle. One of them can be found in the decision of the House of Lords in Greer v Kettle [1937] 4 All ER 396 per Lord Maugham at 403E - 405A:
"It seems to be clear that, having so recently adopted the view that a recital might operate as an estoppel, the courts had not, at that time, worked out the qualifications which might prove to be necessary unless great injustice was to result. Subsequent cases laid down that the recital must relate to specific facts, must be certain, clear and un-ambiguous, and would not avail persons who were not parties or privies to the deed. In Stroughill v Buck, at p 787, following Young v Raincock, another, and a very important, qualification was laid down. Patteson J, in his judgment in Stroughill v Buck, stated it thus, at p 787:
'When a recital is intended to be a statement which all the parties to the deed have mutually agreed to admit as true, it is an estoppel upon all. But, when it is intended to be the statement of one party only, the estoppel is confined to that party, and the intention is to be gathered from construing the instrument.'
My Lords, in agreement with the Court of Appeal and with the opinion of my noble and learned friend Lord Russell of Killowen, I think that this statement of the law is correct; and I also agree with them in coming to the conclusion that, upon the true construction of the recital contained in the guarantee of 20 March 1929, read in conjunction with the charge of even date mentioned in the recital, the fair inference is that the recital is intended to be the statement of the Mercantile Marine, and not to be that of the Parent Trust and Finance Co. Ltd. The latter, accordingly, are not estopped from relying on the admitted fact that the charge was not secured on the 275,000 fully paid shares of Iron Industries Ltd, for the simple reason that these shares had never been issued.
My Lords, this conclusion is sufficient for the determination of the present appeal. But it is easy to imagine a deed framed, perhaps by inadvertence, in such a way that such a conclusion, as a mere matter of construction, might be impossible, even in a case of a common mistake, and it seems to me to be desirable to point out that there was another road, not depending on a possibly ill-framed recital, leading more certainly, in such a case, to the same result.
Estoppel by deed is a rule of evidence founded on the principle that a solemn and unambiguous statement or engagement in a deed must be taken as binding between parties and privies, and therefore as not admitting any contradictory proof. It is important to observe that this is a rule of common law, though it may be noted that an exception arises when the deed is fraudulent or illegal. The position in equity: is, and was always, different in this respect, that, where there are proper grounds for rectifying a deed, e.g., because it is bred upon a common mistake of fact, then, to the extent of the rectification, there can plainly be no estoppel based on the original form of the instrument. It is at least equally clear that in equity a party to a deed could not set up an estoppel in reliance on a deed in relation to which there is an equitable right to rescission, nor in reliance on an untrue statement, nor an untrue recital induced by his own representation, whether innocent or otherwise, to the other party. Authority is scarcely needed for so clear a consequence of a rectification order, or an admitted or proved right to such an order. The well-known rule of the chancery courts in regard to a receipt clause in a deed not effecting an estoppel if the money has not in fact been paid is a good illustration of the equity view: see the cases cited in Halsbury's Laws Of England (Hailsham Edn)Vol 10, pp 283-287. The decision of Lord Romilly MR in Brooke v Haymes is even more closely in point, and it may be added that the statement of the law in that case appears never to have been doubted. The head-note begins as follows:
'A party to a deed is not estopped in equity from averring against or offering evidence to contravert a recital therein contrary to the fact, which has been introduced into the deed by mistake of fact, and not through fraud or deception on his part.'
In a simple case of this kind, it would be unnecessary, as that case shows, to counterclaim for rectification, though, in a case of any complexity, it would certainly be desirable to do so.
Since the Judicature Act 1873, the rule in equity must prevail. It would seem to be clear that the case of Lainson v Tremere, if it were tried on the facts at the present day, would be differently decided, and that, in all those cases where the party against whom an estoppel by deed is sought to be raised has a right to rectification which would, so to speak, destroy the alleged estoppel, or a right to rescission on equitable grounds, he has an answer to the estoppel which would not have been open to him at common law. In the present case, apart from the ground on which the estoppel was held to fail in the Court of Appeal, I have myself no doubt that the same result might have been reached on the simple ground that the recital was inserted, so far as the shares in question were concerned, by a common mistake, not alleged to have been induced by the Parent Trust and Finance Co."
Lord Atkin, Lord Russel of Killowen and Lord Roche concurred. Their Lordships held that on the proper construction of the deed read in conjunction with a document referred to in the relevant recital, was the statement of one party only to the deed, not a statement which each party to it had agreed to admit. At common law, their Lordships were applying the parol evidence rule.
103Equity permits a party to adduce evidence to establish that the recital is untrue and it was introduced by mistake of fact. When I consider the deed now in question I see no internal inconsistency: the defendant undertook to do in clauses 1 and 6 that which one would expect an "installer" to do. On my reading of the Deed it appears ex facie to record what the parties mutually agreed to admit as true. If I look at the evidence outside the Deed itself, I reach the same conclusion.
104Who knew the truth? Who knew that the defendant was neither the designer, manufacturer, supplier or installer of the Termite Tite barrier system? Who knew that Termite Tite Pty Ltd and the defendant were completely different companies? The answer to these questions is, clearly, the defendant. Mr Robson was an owner/builder, a builder by occupation, not a lawyer, accountant or business analyst. For all he knew, Termite Tite Pty Ltd and the defendant might be the same company, there being only a change of company name or a change of business name. He had dealt with Mr Ron Jeffrey when the Termite Tite barrier was installed and he appears mainly to have dealt with the same gentleman in 2007. To whom Mr Robson initially reported his discovery of termites at his home is unclear. It may have been the "Head Office" or the "Northern Rivers" office (i.e. Mr Jeffrey's business). From his dealings with Mr Jeffrey and others between 2006 and 2010, Mr Robson could be forgiven for believing that he was dealing with the same organisation, the same company, which had designed, marketed and installed the Termite Tite barrier in his home. This would raise other forms of estoppel: estoppel by representation and estoppel by convention.
105Why did the defendant do what it did in 2007, 2008, 2009 and 2010? In [22] to [24] I record the initial interaction between Mr Robson and the defendant or its licensee, Mr Jeffrey. Mr di Betta gave this evidence-in-chief:
"Q. At the time of the socalled mediation, which is the meeting in February, had The White Ant Company formed a view about its liability under any warranty that may have been issued in respect of the Robsons' property?
A. Yes, we had.
Q. What was that view?
A. That the we were not responsible for the damage.
Q. Why was that?
A. Because the infestation had come over the top of the exposed slab edge in the garage, which is a constructed barrier not an installed.
Q. So can you tell his Honour why it is that The White Ant Company decided this socalled mediation at all?
A. In the lead up to that the company had offered service related to the termite problems which reoccurred and at that time the Robsons were clients of the installer, licensee manager in that area and it was done as an act of good faith. There were some fees that were paid for some work that was carried out that were sent people were sent from Brisbane down to do.
Q. When you say, "There were some fees", what does that mean?
A. There was some additional work carried out that was advised in in the schedule of things that were there related to some baiting work that our Brisbane technicians went down and carried that work out.
Q. When you say they were paid, can you
A. There was an invoice raised and the Robsons paid it."
Not only might the defendant's actions have been done "in good faith" but it may also have been good practice - to protect the Termite Tite barrier system's reputation, its "brand." In cross-examination Mr di Betta gave this evidence:
"Q. Mr Di Betta, you gave evidence yesterday that you were in attendance at a meeting at the Robson's home on 10 February 2009, is that correct?
A. Correct.
Q. That meeting was also attended by Mr Flynn, the plaintiff's solicitor at the time, Mr and Mrs Robson, Mr Monaghan, who was the general manager of The White Ant Company at that time. Is that right?
A. That's correct.
Q. Mr Jeffries, who is the local manager for The White Ant Company at Yamba?
A. That's correct.
Q. Is that everybody that was at that meeting?
A. Was not Mr Elder there?
Q. Well, I'm asking you. Was Mr Elder there?
A. I believe he was there.
Q. Would you accept that that meeting was to try to come to some arrangement or agreement about how to proceed in dealing with the termite infestation at the Robson's property?
A. That was the intention.
Q. As a result of that meeting, was it your understanding that The White Ant Company was to undertake some invasive investigations to try and establish how the termites had gotten into the Robson's residence?
A. That's quoted in the deed.
Q. Was that your understanding?
JOHNSTONE: Well, I object, your Honour. Whatever obligations The White Ant Company assumed are, for better or for worse, in the deed.
HIS HONOUR: Yes. But, I mean, this gentleman's belief as to what he was required to do doesn't affect the operation of the deed but it might be some indication of why he did subsequent things. I'll allow the question.
SMITH: Thank you, your Honour.
Q. So just to recap, as a result of that meeting, was it your understanding that The White Ant Company was to undertake some invasive investigations to establish how the termites had entered the Robson's property?
A. At a later date I was I was made aware of what was in the deed.
Q. No.
A. I didn't deal with the deed. I didn't arrange the deed. I didn't sign the deed.
HIS HONOUR
Q. Let's forget that. Forget about the deed itself. You were at the meeting. Did you leave the meeting with the understanding that The White Ant Company was going to carry out some invasive investigations to try and ascertain how the termites got in?
A. In short, yes.
SMITH: Q. I'll leave that. So did you leave that meeting the understanding that the nub of the agreement was that if it was your problem, you'd fix it and if it was the Robson's problem they'd pay for it?
A. That's correct."
In short, the Deed in substance records what the defendant agreed to do. Rectification of the Deed is not available to the defendant.
106I therefore hold that the defendant is estopped by recital C in the Deed from denying that it was the installer of the Termite Tite barrier system in the plaintiffs' home.
107Paragraph 10A of SOC is this:
"It was an implied term of the contract referred to in Recital C of the Deed that the work would be done with due care and in a workmanlike manner."
Paragraph 11 of the Defence is this:
"As to the allegations in paragraph 10A, the defendant:
a. admits that there was an implied term in the Installation Agreement to the effect pleaded therein;
b. otherwise denies the allegations pleaded therein because no contract is referred to in Recital C of the Mediation Agreement;
c. says further that to the extent that the plaintiff wishes to contend that Recital C of the Mediation Agreement is an operative term of that agreement, the execution of the agreement in those terms was a mutual mistake by the parties and the defendant is entitled to an order that the Mediation Agreement be rectified."
The admission of the implied term is welcome. Subparagraph (b) is pedantic and subparagraph (c) I have in substance already rejected.
108The plaintiffs then rely of par 21 of SOC, but only on particular (c):
"In the alternative, and pursuant to the Liability Term of the Mediation Agreement [clause 6 of the Deed], the installation was performed negligently and in breach of the contract referred to in Recital C and the defendant is liable to pay the plaintiffs the reasonable costs of rectifying the Dwelling [the residential dwelling to be erected on the plaintiffs' property in question] in the sum of $104,547.00
Particulars
(c) Failing to ensure that the joins in the Protection System were completely covered and bonded by sufficient adhesive."
The definitions supplied in the SOC are chaotic, but what is intended to be conveyed is clear. Paragraph 19 of the Defence is this:
"As to the allegations pleaded in paragraph 21 of the claim and notwithstanding that the matters pleaded as particulars to paragraph 21 are allegations of fact or mixed fact and law which should have been pleaded in the claim, the defendant denies those allegations as they are untrue because the defendant is not liable pursuant to the Liability Term of the Mediation Agreement to pay the plaintiffs' reasonable costs of rectifying the Dwelling in the sum of $104,547.00 because:
a. the so-called "Protection System" (which it is assumed means "the System") was properly installed by Termite Tite;
b. it was Mr Robson as the builder responsible for the installation of the termite barrier system which consisted of the Termite Tite barrier installation being properly cast in to a properly constructed slab;
c. if termites have gained access to the Dwelling other than over the termite inspection zone which was impeded by the act of the plaintiffs, then that access is as a consequence of the conduct of Mr Robson as the builder or his concrete subcontractor;
d. the Termite Tite barrier installation was bonded with sufficient adhesive;
e. the Termite Tite barrier installation is not constructed of material which allowed the development of holes through which subterranean termites could enter the Dwelling undetected;
f. Termite Tite:
i. had no obligation to "ensure that there was sufficient cleareance between the membrane and the Protection System at the time of the installation of the Protection System";
ii. could not have known of the manner in which Mr Robson as the builder, or his subcontractor intended to construct slab into which the Termite [Tite] barrier installation was to be cast;
g. whatever damage has been cause to the Dwelling by termites has been caused or substantially caused by termites entering the dwelling from the garage and therefore as a consequence of the actions of the plaintiffs;
h. the defendants do not admit that the reasonable costs of rectifying the Dwelling are not [sic] $104,547.00 but say further [and] in any event, that any damage caused to the Dwelling as a consequence of termite ingress is as a result of the actions of the plaintiffs."
Subparagraphs (e) and (f) of the pleading refer to particulars no longer pressed by the plaintiffs.
109Was the installation of the Termite Tite barrier system "done with due care and in a workmanlike manner" (the accepted implied term of the initial contract with Termite Tite Pty Ltd) or, alternatively, was it done negligently - a test to be applied under clause 6 of the Deed. In my view there is in the present case no distinction between those tests. I have clearly found that damage was caused to the plaintiffs' home by ingress of termites at sites (ii), (iii) and (iv) caused by termites passing though lapped joints which had not been sealed along the whole length of each joint. At [93] I quoted an opinion of Mr Elder, which I have accepted. The lapped joints should have been sealed along their entire length as has been the defendant's practice since January 2004. The installation work was done negligently. Turning to the defence:
(i)subpar (b) is not applicable because relevant damage resulted from inadequate sealing;
(ii)subpar (c) I have not accepted - [74] to [80] and [97];
(iii)subpar (d) I have just rejected;
(iv)subpars (g) and (h) go to quantum.
Accordingly, there is no valid defence to the plaintiffs' claim and they are entitled to succeed.
110SOC relies in par 11 on part of clause 1 of the Deed, which the SOC describes as "the Necessary Works Term" but termite activity had ceased in late April 2008 and the Deed operates from 9 April 2009, so it was not necessary for the defendant to do anything "to restrain and minimise any further termite activity" at the plaintiffs' home and, accordingly, there has been no breach of this particular obligation and no damage suffered by the plaintiffs.
111SOC relies in par 12 on another part of clause 1 of the Deed, which SOC describes as "the Investigation Term." The part of clause 1 of the Deed required the defendant "no later than 28 days from the date this Agreement commences ... undertake all such investigations to determine conclusively whether or not the termite infestation in the home is due to a breach of the termite tight [sic] barrier system." I have already found that the defendant breached that obligation: [43]. Paragraph 20 of Ms Smith's written submissions [MFI 10] is this:
"Your Honour, quite rightly in my submission, commented that for the issue of the cause of the termite infestation to be determined conclusively required both parties to be convinced by the results of the investigations as to the cause of the infestation. By the fact that these proceedings have been brought and defended it is obvious that the parties are not in agreement as to the cause of that infestation and it was not determined conclusively by any investigations carried out by [the defendant]."
However, it is hard to see any direct damage flowing to the plaintiffs as a result of that breach, other than, perhaps, the attendance of Mr Elder at the plaintiffs' home on 28 October 2009 and some work done by Mr Flynn prior to action, that would not be covered by an order for costs. The two heads of potential damage I have just mentioned were never quantified.
112SOC relies in par 13 on clause 6 of the Deed, which SOC describes as "the Liability Term". Ms Smith did not press any breach of clause 6, because it was not enlivened because of the defendant's breach of "the Investigation Term".
113Ms Smith also relied on "Common Law Estoppel" and relied on Halsbury's Laws of Australia pars [190 - 215] to [190 - 285] and, in particular, on Eslea Holdings Ltd v Butts (1986) 6 NSWLR 175. In light of my finding of estoppel by deed I do not need to consider further her submissions, other than to recite the detriment on which the plaintiffs' relied:
"40. The general principle of common law estoppel is that a party who induces another party to make an assumption for the purposes of their legal relations that a particular state of affairs exists is estopped from asserting the existence of a different state of affairs if the other party has acted in reliance on the assumption and would suffer detriment if the departure from the assumption was allowed.
a. In this case the Defendant has induced the Plaintiffs, by agreeing to accept liability under the Termite Tite warranty and by executing a Deed stating that they were retained to install the termite protection system at the Plaintiffs' residence, to assume that the Defendant was accepting liability for deficiencies, if any, in the termite barrier installation.
b. In reliance on that assumption, the Plaintiffs have not attempted to pursue Termite Tite for negligence or breach of contract and would now be statute barred from doing so.
c. Although Termite Tite is a deregistered company, it would still have been possible for that company to be restored for the purposes of litigation if investigations had suggest that was a prudent course.
d. The Plaintiffs have not, in reliance on that assumption, investigated any other legal avenues for rectification of the termite damage at their home. Instead, the Plaintiffs have, in reliance on the assumption, continued to negotiate and deal with The White Any Company in relation to the investigation and rectification of the termite problems at their home.
e. On the Defendant's own evidence (Oral Evidence Mr Di Betta 7 November 2013) prior to commencement of these proceedings Mr Di Better never told the Plaintiffs that, even if there was a proven failure in the barrier, [the defendant] would not be responsible for any rectification or repairs."