Shannon & Anor v Residential Reports Pty Ltd & Anor [2026] ACTSC 66 | Case summary | Zoe

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Shannon & Anor v Residential Reports Pty Ltd & Anor [2026] ACTSC 66

[2026] ACTSC 66

Supreme Court of the ACT|2026-02-26|Before: Loukas-Karlsson J

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At a glance

Source facts

Court

Supreme Court of the ACT

Decision date

2026-02-26

Before

Loukas-Karlsson J

Catchwords

CIVIL LAW – COMMON LAW– Duty as to reasonable care and
skill – misleading or deceptive conduct – inspection report –
where that inspection report was made without due care and skill – where
that inspection report was deceptive and or misleading

Source

Original judgment source is linked above.

Catchwords

CIVIL LAW – COMMON LAW– Duty as to reasonable care andskill – misleading or deceptive conduct – inspection report –where that inspection report was made without due care and skill – wherethat inspection report was deceptive and or misleading– expert evidence– breach of statutory duty – causation – quantum ofdamages

Judgment

Source: the ACT Courts (www.courts.act.gov.au). Converted to plain text by ZoeLaw. Not the official version.

SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

Case Title: Shannon & Anor v Residential Reports Pty Ltd & Anor

Citation: [2026] ACTSC 66

Hearing Dates: 29 April 2024 – 2 May 2024, 8 May 2024

Decision Date: 26 February 2026

Before: Loukas-Karlsson J

Decision: See [753]

Catchwords: CIVIL LAW – COMMON LAW – Duty as to reasonable care and skill – misleading or deceptive conduct – inspection report – where that inspection report was made without due care and skill – where that inspection report was deceptive and or misleading – expert evidence – breach of statutory duty – causation – quantum of damages

Legislation Cited: Civil Law (Sale of Residential Property) Act 2003 (ACT) ss 9(1)(h)(iv), s 19 Civil Law (Sale of Residential Property) Regulations 2003 (ACT), regulation 10 Competition and Consumer Act 2010 (Cth) Sch 2 – Australian Consumer Law, s 3, s 18, s 60, s 61, s 137B, s 236, s 237, s 267 Court Procedures Rules 2006 (ACT), rr 407(1)(m) Australian Standard 4349.1 – 2007 Australian Standard 4349.3 – 2010 Australian Standard 3660.1 Australian Standard 3660.2 – 2017 Civil Law (Wrongs) Act 2002 (ACT), s 41, s 43, s 45 Civil Liability Act 2002 (NSW) Legislation Act 2001 (ACT) Trade Practices Act 1974, s 82

Cases Cited: Browne v Dunn (1893) 6 R 67 Ashell Homes v Kobus [2024] ACTCA 32 Let’s Go Adventures Pty Ltd v Barrett [2017] NSWCA 243 Rogers v Whitaker (1992) 175 CLR 479 Adeels Palace Pty Ltd v Moubarak [2009] HCA 49; 239 CLR 420 Benic v State of New South Wales [2010] NSWSC 1039 South Sydney Junior Rugby League Club Ltd v Gazis [2016] NSWCA 8 Wheeler v Ecroplot Pty Ltd [2010] NSWCA 61 Swan v Residential Reports Pty Ltd [2020] ACAT 76 (Swan No 1) Swan v Residential Reports Pty Ltd [2021] ACAT 7 (Swan No 2) Global Sportsman Pty Ltd v Mirror Newspapers (1984) 2 FCR 82 at 88 Johnson & Johnson Pacific Pty Ltd v Unilever Australia (No 2) [2006] FCA 1646 Hatt v Magro [2007] WASCA 124; 34 WAR 256 Alexandrou v Pacific Pest Control Ltd [2016] NSWDC 193 Self Care IP Holdings Pty Ltd v Allergan Australia Pty Ltd [2023] HCA 8; 277 CLR 186 National Exchange Pty Ltd v Australian Securities and Investments Commission [2004] FCAFC 50; 49 ACSR 369 Butcher v Lachlan Elder Realty [2004] HCA 60; 218 CLR 592 Invisalign Australia Pty Ltd v SmileDirectClub LLC [2023] FCA 395 Wardley v Western Australia (1992) 175 CLR 514 at 525 Henville v Walker [2001] HCA 52; 206 CLR 459 Dominelli Ford (Hurstville) Pty Ltd v Karmot Auto Spares Pty Ltd (1992) 38 FCR 471 at 483 Barnes v Forty Two International Pty Ltd [2014] FCAFC 152 Lean v Cosmorex Coffee Pty Ltd [2016] ACTSC 309 Amaca Pty Ltd v Booth [2011] HCA 53; 246 CLR 36 Ford Motor Company of Australia Ltd v Arrowcrest Group Pty Ltd [2003] FCAFC 313; 134 FCR 522 Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; 238 CLR 304 Corkhill v Commonwealth (No 3) [2018] ACTSC 87 Marks v GIO Australia Holdings Ltd [1998] HCA 69; 196 CLR 494 Sweetman v Bradfield Management Services Pty Ltd (1994) ATPR Gould v Vaggelas (1985) 157 CLR 215 at 221-2 De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) [2011] FCA 645; 200 FCR 253 De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) [2012] FCAFC 28 Keys Consulting Pty Ltd v CAT Enterprises Pty Ltd [2019] VSCA 136 Potts v Miller (1940) 64 CLR 282 O’Kelly Holdings Pty Ltd v Dalrymple Holdings (1993) 45 FCR 145 at 157, 159 Makings Custodian Pty Ltd v Orchid Avenue Realty Pty Ltd [2018] QCA Johnson v Perez (1988) 166 CLR 351 McCrohon v Harith [2010] NSWCA 67 Chep Australia Ltd v Bunnings Group Ltd [2010] NSWSC 301 Viterra Malt Pty Ltd v Cargill Australia Ltd [2023] VSCA 157 Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1997] AC 245 Manwelland Pty ltd v Dames & Moore Pty Ltd [2001] QCA 436; ATPR 41-485 HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54; 217 CLR 640

File Number: SC 92 of 2022 INDEX: Introduction .........................................................................................................................7 Background Facts ...............................................................................................................8 The Inspection Report.......................................................................................................12 The pleadings ...................................................................................................................22 Issues at hearing ..............................................................................................................23 AS4349.3 – 2010 ..............................................................................................................27 Evidence ...........................................................................................................................35 Evidence of the first plaintiff and the second plaintiff .........................................................37 Ms Theresa Shannon ....................................................................................................37 Ms Jennifer Westacott ...................................................................................................59 Consideration of the evidence of the plaintiffs ...............................................................73 Conclusion of consideration concerning the evidence of the plaintiffs............................75 Evidence of the Second Defendant ...................................................................................76 Consideration of the evidence of the second defendant ................................................81 Conclusion ....................................................................................................................83 Expert Witnesses ..............................................................................................................84 Dr Don Ewart ................................................................................................................84 Statement 1 ..............................................................................................................84 Statement 2 ..............................................................................................................85 Statement 9 ..............................................................................................................86 Cross-examination ....................................................................................................87 Opinion .....................................................................................................................89 Extreme ....................................................................................................................89 Five years of termite attacks .....................................................................................89 Inevitable ..................................................................................................................89 347 Days ..................................................................................................................90 Significant Attack at the date of sale .........................................................................91 Inspection Report did not properly explain moisture risk ...........................................93 The second defendant is caught by not properly interpreting the evidence he reported .................................................................................................................................96 Dr Ewart on other reports ..........................................................................................97 Minimum Standards ..................................................................................................98 Mr Shane Clarke ...........................................................................................................98 Expertise...................................................................................................................99 Inspection .................................................................................................................99 Photographs .............................................................................................................99 The new owner did not receive the required advice ..................................................99 Other Reports .........................................................................................................100 Review of the Inspection Report by Mr Clarke ........................................................101 Statement 1 ............................................................................................................102 Use of terms “previous” and “old” is misleading ......................................................102 Statement 2 ............................................................................................................103 Statement 3 ............................................................................................................103 Statement 4 ............................................................................................................104 Statement 5 ............................................................................................................104 Statement 6 ............................................................................................................105 Statement 7 ............................................................................................................105 Statement 8 ............................................................................................................105 Statement 9 ............................................................................................................105 Statement 10 ..........................................................................................................106 Cross-examination ..................................................................................................110 Use of the term “moderate” .....................................................................................111 Biflex Duo ...............................................................................................................112 Inspection Report not prepared with the appropriate care and skill required ...........112 Moisture Testing .....................................................................................................118 Splinter Test............................................................................................................121 Damage ..................................................................................................................122 Inspection Report is deficient ..................................................................................122 Photographs ...........................................................................................................124 Not a consumer advocate .......................................................................................125 Photographs Viewed ............................................................................................... 125 Termite risk .............................................................................................................125 Conclusion ..............................................................................................................126 Mr Nicholas Broadhurst ............................................................................................... 126 Consideration of expert evidence ................................................................................138 Conclusion on the expert evidence ..............................................................................143 Statutory Framework.......................................................................................................144 Australian Consumer Law – s 18 .................................................................................148 Australian Consumer Law – s 60 and s 61 ..................................................................150 The Defendants breached their statutory duties .............................................................. 154 Was the Inspection Report prepared without the exercise of reasonable skill (CL(SRP) Act s 19)? ....................................................................................................................154 The Defendants engaged in misleading or deceptive conduct under s 18 of the ACL ..182 The Defendants contravened the guarantees in ss 60 and 61 of the ACL ...................190 Conclusion on Breach .....................................................................................................192 Causation .......................................................................................................................192 Conclusion on Causation Consideration ......................................................................201 Quantum of Damages .....................................................................................................203 Applicable Law ............................................................................................................204 First head of claim – difference in value ($560,000.00)................................................208 Second head of claim – stamp duty and legal fees ($86,833.95) .................................214 Third head of claim – wasted expenses / renovations ($ 319,210.39)..........................215 Fourth head of claim – wasted rent ($183,224.87).......................................................217 Overall Conclusion ..........................................................................................................218 Duty............................................................................................................................. 218 Breach.........................................................................................................................218 Causation ....................................................................................................................218 Damages.....................................................................................................................220 Summary of Final Conclusion .........................................................................................221 Orders............................................................................................................................. 222 ANNEXURE A: The Inspection Report ............................................................................223 ANNEXURE B: Consolidated Table ................................................................................248 LOUKAS-KARLSSON J:

Counsel for the first defendant then took Ms Westacott to the sale contracts for the two apartment units that the plaintiffs were purchasing, exhibited as Exhibit 14 and 15 413 respectively. Ms Westacott did not object to counsel for the first defendant’s suggestion that the properties carried a stamp duty burden of $72,419.00 and 414 $72,413.00 respectively. As such, Ms Westacott agreed that the total liability for the 415 new units was $3,313,918.00.
Ms Westacott was queried as to whether Ms Westacott saw this as a financial hardship, given Ms Westacott’s previous evidence that a major factor in the decision 416 to sell the property was the cost of building and paying rent simultaneously. Ms Westacott noted that in the period of 31 March 2022 and 14 April 2022 the plaintiffs were only required to pay a 5% deposit and that there would be delay in settlement 417 as the units were off-the-plan properties.
Ms Westacott further clarified that, while it was a considerable purchase, the nature of the hardship was that the plaintiffs were paying rent and a mortgage at the same 418 time in relation to a property the plaintiffs could not live in. Ms Westacott also noted in cross-examination that the plaintiffs bought the property as it allowed them to secure a property in a place where Ms Khavari’s son, who Ms Westacott considered 419 to be her grandson, could live in safely without having to service a mortgage.
In cross-examination, Ms Westacott noted that as the plaintiffs only had an estimate, Ms Westacott feels unable to answer whether the cost of the new units were higher 420 than the build and holding costs for the property. Ms Westacott also noted that the plaintiffs do not have a formal quote regarding the build costs of the property if they 421 were to rebuild the building in the property.
Nevertheless, Ms Westacott noted that the cost of the kind of house they wanted to 422 build in the property was considerable and that it would be on-top of the mortgage. While Ms Westacott could not say whether the cost of acquiring the new property would be higher, Ms Westacott noted that in her view the cost of building in the 423 property in addition to the mortgage would be “more substantial”. Ms Westacott

Mr Maher gave evidence that, prior to inspecting the property, he had inspected 445 roughly a thousand houses. In cross-examination, Mr Maher stated that he had prepared “a large number” of reports and estimated he would average around 10 to 446 15 reports per week.
Mr Maher gave evidence that the inspection of the property took around 1 hour and 30 minutes to 1 hour and 45 minutes and covered energy ratings, the building report, 447 compliance, and timber pests. During the inspection, Mr Maher confirmed that he inspected the interior and exterior of the house, as well as the property more generally 448 (including the land). In cross-examination, Mr Maher gave evidence that he also 449 completed another one or two other property inspections on the day. Relevantly, Mr Maher confirmed that he did not inspect all of the subfloor, as there was not enough 450 room for access due to low clearances and duct working running through the area.
In cross-examination, Mr Maher was questioned on the process of creating the 451 Inspection Report. Mr Maher was taken to the “Job Preparation Writing Protocol” for the first defendant, which was apparently the procedure that is generally adopted 452 in preparing reports for the first defendant. Mr Maher agreed that this is a 453 description of the software the first defendant’s inspector used to generate reports. Mr Maher agreed that he travelled to the property with an electronic tablet, which had 454455 the report generating software installed on it, which consisted of dropdown menus 456 for Mr Maher to select from. Mr Maher also confirmed that he took photographs during the inspection, and that upon the completion of the inspection Mr Maher 457 returned to the first defendant’s office to provide the completed outcome.
In cross-examination, Mr Maher then gave evidence that the Inspection Report was then proofed by a team of proofers, who checked for typos and went through the 458 photographs to see if there was anything to discuss with the inspectors. Mr Maher

In preparing his report, Mr Broadhurst noted that he has read other reports including that of Mr Clarke and Dr Ewart, as well as viewed the photographs from the inspection 699 of 18 October 2019. Mr Broadhurst’s brief was also separately tendered in this 700 proceeding.
In cross-examination by counsel for the plaintiffs, Mr Broadhurst conceded that he did not list being a termite and timber pest inspector as his core competencies in his 701 report. Mr Broadhurst agreed that his primary experience and qualifications are in building, Mr Broadhurst noted in his report that he had completed 1,500 combined inspections, being termite and timber pest inspections where the person requesting 702 inspections was also getting inspection reports on another subject. Mr Broadhurst also noted that he would also check the work of other inspectors, and that he 703 encourages people to do the same with his own results.
Counsel for the plaintiffs took Mr Broadhurst to cl 3.2 of the AS 4349.3 – 2010, which covers the qualifications for timber pest inspector. Mr Broadhurst agreed that he has 704 experience in construction. As to whether he is informed on “ecology, behaviour and identification of timber pests” and “familiarity with the damage [termites] cause and procedures required for management and control”, Mr Broadhurst stated that he 705 has completed a course in TAFE South Australia in 2014. Mr Broadhurst noted that this was the course recommended by his insurance company, as Mr Broadhurst 706 cannot be registered in the ACT without insurance.
As with the plaintiff’s experts, Mr Broadhurst was not substantively asked questions in examination. As such, it is convenient to set out portions of the Broadhurst report in this discussion of his evidence.
Mr Broadhurst was first asked to comment, after reviewing other expert reports in the matter, on the findings of termite damage and locations. Mr Broadhurst was also 707 asked to opine whether there was termite damage or active termite activity.
Mr Broadhurst opined (at 6.3) that it appears that there had been termite damage and active termite activity at the time of the inspections conducted for the Ewart report and

I underline that cl 2.3.1 of AS 4349.3 – 2010 required that a pre-purchase pest inspection be undertaken in accordance with the standard. Additionally, reg 10 of the 870 CL(SRP) Regulations required such compliance.
Counsel for the first defendant submitted that the plaintiffs’ statement of claim and ASOC originally proceeded almost entirely on the basis that it was in the preparation of the Inspection Report, not in the conduct of the inspection itself, that the defendants 871 engaged in any breach or wrong. The only exception was the allegation that no sounding of exposed timbers took place, although counsel for the first defendant noted the evidence by Mr Maher that he did sound exposed timbers in the parts of the 872 subfloor that he was able to and did access. As such, counsel for the first defendant submitted that this case turns on the information contained within the Inspection 873 Report and not the inspection itself. At the hearing, counsel for the second 874 defendant also made a similar submission.
I do not accept that submission. The Inspection Report is a report of the inspection. The submission therefore posits a distinction without a difference. The submission, in my view, is a spurious submission. It is a submission without any forensic foundation.
Further, counsel for the first defendant submitted that, in so far as the Inspection Report provided an opinion, such as when the Inspection Report noted the overall degree of risk is moderate to high in page 16, the Inspection Report did no more than state the fact that such opinions were held (as long as the opinions were honestly held): Global Sportsman Pty Ltd v Mirror Newspapers (1984) 2 FCR 82 at 88; Johnson & Johnson Pacific Pty Ltd v Unilever Australia (No 2) [2006] FCA 1646 at [177]; Hatt v Magro [2007] WASCA 124; 34 WAR 256 at [33]. As an example of an opinion, counsel gave the example of the statement that “it is our opinion that the overall degree of risk of timber pest infestation to the property is MODERATE to HIGH” given 875 in the Inspection Report. I do not accept this submission. This submission simply

Essentially, counsel for the first defendant characterised the plaintiffs’ claims in negligence as being that the information which the plaintiffs took from the Inspection 876 Report was different to what it actually said, either in isolation or as a whole. Counsel submitted that this is to be addressed by misleading or deceptive conduct, and not duty of care. A duty of care does not, in counsel’s submissions, include a “duty not to engage in misleading and deceptive conduct” such an analysis conflates 877 wrongs. This submission of the first defendant does not assist the Court. This submission is something of a reductio ad absurdum; it follows a false premise to an extreme conclusion positing conflating wrongs. The submission, in my view, is wrong.
In any case, it was submitted that it was not foreseeable under s 43 of the Wrongs Act that the plaintiffs would read the Inspection Report in the “selective” manner as the plaintiffs supposedly did in “such a serious transaction”. I do not accept, on the evidence before me, that the plaintiffs read the Inspection Report in a selective manner.
Nor was it foreseeable, in counsel’s submissions, that having read the disclaimers and qualifying information the plaintiffs would have disregarded them because they 878 were disclaimers which the plaintiffs did not consider applied to them. A risk that a prospective purchaser would have read the Inspection Report in that manner, was submitted to be insignificant, and as such a reasonable person in the defendants’ position would have done no more than what was already done in preparing the 879 Inspection Report. Again, this submission ignores the evidence of the experts. I accept the evidence of the plaintiffs’ experts concerning this matter.
Counsel for the first defendant also referred to the second defendant’s written submissions in so far as it identifies limitations of an inspection report compared to a 880 report detailing treatment and remedial action. Counsel noted that the latter category of care and skill cannot be said to arise from the scope of contract in this 881 case. Again, this submission does not grapple with the expert evidence of Dr Ewart

For his part, counsel for the plaintiffs submitted in reply that both defendants were the entities who “prepared” the Inspection Report for the purposes of s 19(2) of the CL(SRP) Act. Counsel noted that the evidence was that the second defendant inspected the property and the second defendant was also a director of the first defendant. The Inspection Report also went through the first defendant’s proofing system was issued by the first defendant without the second defendant seeing it 887 again. I accept the submissions that both defendants were entities who prepared the Inspection Report for the purposes of 19(2). So much is clear from the evidence and my acceptance of the foregoing plaintiffs’ submissions
At any rate, counsel for the plaintiffs submitted that whether the second defendant was the one that “prepared” the Inspection Report did not matter in terms of the 888 outcome of this case. Counsel submitted that there was an admission in the defendants’ pleadings that the second defendant was involved in the first defendant’s 889 misleading conduct, if such a finding is made out. As such, the second defendant would regardless still be liable as an accessory for misleading or deceptive conduct 890 given that he is a director of the first defendant. As will be seen in the next section, however, counsel for the first defendant cavilled with the characterisation of this “concession” in the pleadings.
Returning to the first defendant’s submissions, counsel for the first defendants relatedly submitted that the case against the second defendant was “artificial”, in the sense that the plaintiffs supposedly constructed a distinction between the “standard” text of the report against “non-standard” information inputted by the second 891 defendant. Counsel submitted that it was standard industry practice for pest inspection reports to be prepared using templates as opposed to “unique text” for 892 every individual property. Counsel for the first defendant noted that the defendants’ expert, Mr Broadhurst, did not appear to understand the significance of a “summary”

I pause to interpolate that the pinpoints to Dr Ewart’s oral evidence provided by the first defendant do not appear, in my view, to support the first defendants’ latter submission.
Counsel for the first defendant submitted that it was artificial to submit that the second defendant had committed a wrong by contributing to a report – as an employee – using a pre-set system and templates set by the first defendant that did not “significantly depart from general industry practice”. As such, in counsel’s submission, the second defendant committed no wrong given his lack of control in such matters in 895 making the contribution to the Inspection Report. In any event, I note, that it was conceded by both defendants that the first defendant published the report, and that the first defendant pleaded that the second defendant was indemnified by the first defendant; see paragraphs [12]-[13] of this judgment.
Counsel for the second defendant first noted that due to the alleged breaches in appendix A not being raised with the second defendant in cross-examination, the Court should “exercise a high degree of a caution” before making any findings that impugn the second defendant’s degree of care and skill exercised in connection with 896 the Inspection Report. I note that this matter is discussed and dealt with earlier in this judgment at paragraphs [277]-[282].
As previously foreshadowed, counsel for the second defendant referred to the evidence of Dr Ewart in cross-examination, reproduced above at [319], that “[w]e mustn’t ask too much of the inspector”. In counsel’s submission, Mr Clarke had done so; Mr Clarke was submitted to have held the second defendant to a standard of care exceeding the standard of care of a reasonable person in the second defendant’s 897 position. It is clear from my judgment and it is a matter I underline, that I reject the proposition that the expert Mr Clarke had held the second defendant to a standard of care, exceeding the standard of care of a reasonable person in the second defendant’s position.

Further, counsel for the second defendant submitted that AS 4349.3 did not require a pest inspection report to contain recommendations for remedial work. Counsel submitted that the only recommendations required by cl 4.2.6 of AS 4349.3 is for further inspection, and that a pest inspection report is not obliged to contain recommendations to remove conducive environments for pests. Counsel also submitted that AS4349.3 requires an inspection report to contain observations of elevated moisture content only. As such, in counsel’s submissions, the Inspection Report actually went beyond the requirement of AS 4349.3 in making 898 recommendations for remedial work. In my view, the critical aspect here is that a further inspection was not recommended. A further inspection should have been recommended as underlined in the evidence of both Dr Ewart and Mr Clarke.
At the hearing, counsel for the second defendant also referred to cl 2.2 of AS 4349.3, which noted that the purpose of the inspection is to provide advice “within the agreed scope”. Counsel submitted that this case is unlike Rogers in that there was not a general duty for the second defendant to advise within his expertise. Rather, there 899 was a “very precise” scope of agreement. Yet again, this submission does not grapple with the expert evidence of Dr Ewart and Mr Clarke. I have accepted the evidence of these two acknowledged experts in this regard.
In any case, counsel the second defendant also submitted that Dr Ewart has failed to 900 follow his own “sensible” suggestions. As an example, counsel highlighted Dr Ewart’s view in his first report that the Inspection Report “did not properly address the risks at the property”, and that he “would have expected greater detail of explanation of the importance and weight to be placed on the factors which contributed to the susceptibility including the presence of shelter tubes, poor ventilation, raised soil levels, concealed access paths and evidence of prior chemical reapplication”. Counsel for the second defendant submitted that the AS 4349.3 does not require an inspector to provide a “great detail of explanation” about those matters.
Further, counsel for the second defendant submitted that AS 4349.3 merely requires, with respect to the reporting of “risk”, that a report “include an opinion from the inspector regarding the susceptibility of the subject property to sustaining damage from timber pests.” Counsel submitted that the second defendant have done so by expressing the opinion that there was a “moderate to high” risk of timber pest

In so far as the Inspection Report recommended further inspection where there is evidence of timber pest activity, counsel for the second defendant noted it is a good recommendation made to all who received a report from the defendants. The recommendation was good as, in counsel’s submission, the Inspection Report makes clear that there was no way the second defendant could know the extent of the 924 damage as he did not perform an invasive inspection.
Further, counsel for the second defendant also submitted that the Inspection Report 925 met what is required by cl 4.2.7 of the AS4349.3 – 2010. Counsel in particular noted that the standard gave an example of the opinion of the inspector regarding the presence of timber pests, not the likelihood or even whether or not timber pests were in the property. Counsel noted that the scope of the agreement between the first defendant and the vendor was not for the first defendant to determine the presence 926 of pests. Nor is it something the inspector can do. All the defendants were required to do, in counsel’s submission, was to look at the accessible areas of the property and 927 provide opinions which was relevant to timber pests. Counsel submitted that the plaintiffs were putting forward an obligation which went far beyond what AS4349.3- 928 2010 required the defendants to do. Again, the submission set out in paragraphs [575]-[580] are at the level of assertion without responding in terms to the clear expert evidence on the inadequacy of the Inspection Report insofar as the Inspection Report concerned termites.
In relation to the reference in cl 4.2.7 as to the extent to which further inspection would improve reliability of inspection outcomes, counsel for the second defendant submitted that the warning in page 25 to assume the possibility of further structural damage where timber pest evidence is reported (and a strong recommendation to 929 obtain an invasive timber inspection) meets this clause. Counsel noted that it was perfectly justified that this does not appear in page 16 of the Inspection Report instead, as it is type of a recommendation that would “apply to anyone” and no active 930 timber pest infestation was observed in the property. I do not accept this submission. I prefer the expert evidence of the experts Dr Ewart and Mr Clarke on this point.

I interpolate at this stage to note that, later in closing submissions, counsel for the first defendant submitted that they seek to correct the second defendant’s submissions in so far as it may suggest that pages 24 and 25 of the Inspection Report are “specific” to the property. Rather, counsel for the first defendant submitted that the defendants are saying that the Inspection Report should be read as a whole, and that the warning 931 and the risks contained in the Inspection Report are linked “very directly”. I find this submission to be somewhat perplexing, as I did not understand counsel for the second defendant to have necessarily submitted what counsel for the first defendant contended for.
With respect to the “summary” in the Inspection Report, counsel for the second 932 defendant submitted, that the section contained all the requirements of cl 4.2.4, 4.2.6 and 4.2.7. Counsel also submitted that there were relevant references in the body of the Inspection Report in a more detailed section dealing with specific 933 inspections or parts of the property. I do not accept this submission as it does not accord with my review of the Inspection Report and nor does it accord with the evidence of the plaintiffs’ experts.
With respect to the cl 4.2.8(c), counsel for the second defendant submitted that this clause does not oblige an inspector to recommend that further investigations be performed to determine extent of damage. However, the recommendation contained in page 25 of the Inspection Report was such a recommendation; one that was not 934 technically required by the standard. As such, while the “summary” in page 16 does not recommend further inspection, this is in compliance with AS 4349.3 – 2020 as, at the time the Inspection Report was written, it was not apprehended that there was a 935 current infestation. Again, I do not accept this submission as the evidence of the plaintiffs experts answer this assertion.
As for the risk rating, counsel for the second defendant submitted that the second 936 defendant’s rating of “moderate to high” was “perfectly reasonable”. Counsel noted the limitations in cl 4.3.1 of the AS 4349.03 – 2010, which proscribes inspectors from expressing an opinion on the likelihood of termites in areas no inspection, and does 937 not oblige the inspector to give an assessment on termites other than what he saw.

Therefore, counsel for the first defendants submitted that, even if the defendants’ conduct was misleading in isolation, the sufficiently prominent and otherwise 963 unambiguously worded disclaimers would have neutralised the conduct’s effect. Again, I disagree as the submission does not accord with the evidence in the case.
With respect to the disclaimers, in any event, I accept the submission of counsel for the plaintiffs that the statements were not “engaged” as they were predicated with the 964 words “if”. That is, these disclaimers cannot be read consistently with the detail of the Inspection Report as the Inspection Report noted that there were no live termites 965 and treatment was not necessary. I pause to note that this echoed the evidence given by Ms Westacott, which I have reproduced at [197].
In any event, counsel for the plaintiffs noted that if the defendants sought to rely on the disclaimers to negate the effect of the front of the Inspection Report, the Inspection 966 Report remains misleading. I accept this submission. The Inspection Report was likely to mislead and did in fact mislead the plaintiffs. In my view, more must be done so that there is no room for misunderstanding. Counsel correctly submitted that there was a failure to make it clear to the reader, on the face of the Inspection Report, that the back of the Inspection Report applied and contradicted the front of the Inspection 967 Report.
The Inspection Report, in counsel for the second defendant’s submission, does not state that there were no active termites in the property. Counsel submitted that no reasonable person would construe that the second defendant stated that he detected no live termites as representing that there were no live termites. I reject this submission as it does not deal with the evidence in a holistic form but rather in a selective fashion.
Counsel for the first defendant also submitted while it was accepted that the second defendant was “involved” in the first defendant’s conduct, this should not imply an acceptance that the second defendant was “involved” within the meaning of the ACL.

As a general reply to these submissions, counsel for the plaintiffs cavilled with the first defendant’s submissions that the plaintiffs needed to prove that there was an actual 1014 or present infestation in October 2019.
In particular, counsel for the plaintiffs submitted, and I accept this submission, that it is sufficient for the plaintiffs to prove that the Inspection Report fell short of the standard AS4349.3 – 2010 and that had the standard been met the plaintiffs would 1015 not have purchased the property. These matters, in my view, have been proven. In other words, the Inspection Report should have warned the plaintiffs of any damage caused by termites, its extent, and exposure to further infestation. Whether a termite 1016 infestation was actually active, is ultimately not the point. Additionally, the evidence 1017 of both experts was that termites come and go in any case. Taking into account the extent of termite damage in October 2020 and the evidence of Dr Ewart, in my view, on the balance of probabilities, it is likely that that a further inspection would have found damage in 2019 if the plaintiffs had commissioned such a further 1018 inspection. In my view causation is established on the balance of probabilities.
Counsel for the first defendant submitted that the Inspection Report or any information within it “by no means can be said to be” calculated or intended to induce a person to 1019 enter into a contract of sale for the property. This was submitted to be because the contract to supply the Inspection Report is between the vendor of the property and the supplier.
It is convenient to note at this juncture that, page 18 of the Inspection Report is titled “Warranty & Use of Our Reports” stated that the Inspection Report was written for the 1020 use and benefit of both the vendor and the purchaser of the property.
Additionally, counsel for the first defendant submitted that, in this case, there appears to be “no reliable evidence” from the plaintiffs that they relied on the Inspection Report in entering into the contract in any case: see Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; 238 CLR 304 at [147] (Gummow, Hayne, Heydon and Kiefel JJ) (Campbell). This submission in my view does not accord with the evidence.

Cheshire and Fifoot Law of Contract observed that the terms “because of” in s 236 renders it necessary to show that the misleading conduct has led a party into error and the error either caused loss or induced a contract with the plaintiff: at [11.127]. Further, given that the normal principles of causation applies, the authors observed that it is always open for a defendant to argue a break in causation at some stage: at [11.127]. For example, the chain would have been broken if a party would have entered into the contract in any case: Sweetman v Bradfield Management Services Pty Ltd (1994) ATPR 41-290.
It is also necessary to discuss the “inference of inducement” and the need for reliance on the part of the plaintiffs. In a case highlighted by the first defendant, the Full Court of the Federal Court (Lander J, Hill and Jacobson JJ agreeing) in Ford Motor Company observed that Wardley (among other cases) is not authority for the proposition that a plaintiff does not need to establish reliance for a claim relying on ss 82 of the TPA: see [107] in particular and [107]-[122]. While the misrepresentation need not play the sole role in inducing a party to enter into a contract (indeed, it may play only a minor part), it does need to play some role in the formation of the contract: see [110], citing Gould at 236 (Wilson J). That is, causation cannot be established in a misrepresentation case without proof that the misrepresentations were relied upon: at [123]. In my view, this is not such a case. The misrepresentations were relied upon.
The principles were also usefully discussed by Stone J in De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) [2011] FCA 645; 200 FCR 253 at [54]-[73] (De Bortoli Wines) appeal dismissed in De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) [2012] FCAFC 28.
For the foregoing reasons, causation is established. That is, the causal connection between the breaches and the loss suffered by the plaintiffs. I accept, on the evidence, 1023 the submissions of counsel for the plaintiffs that:

I note that s 45 is within ch 4 of this act.
I note that while similar in nature, the test for causation within s 45 is different to that which applies at common law. The question then becomes whether s 19 of the Civil Law (Sale of Residential Property) Act sits within this framework. 19 Compensation to buyer for false report etc (1) This section applies if— (a) a person buys residential property under a contract; and (b) a statement or report mentioned in section 9 (1) (h) (ii), (iii) or (iv) or in section 10A (7), definition of later required documents, paragraph (a) (iv), (c) (i) or (ii), is made available to the buyer; and (c) the statement or report is false or misleading in a material particular or is otherwise prepared without the exercise of reasonable skill and care; and (d) because of that, the buyer incurs loss or expense. (2) The person who prepared the statement or report is liable to compensate the buyer for the loss or expense.
Unfortunately, this question is not easily answered. The operative provision within this section, being (c) in the above excerpt, imports the exact terms of the definition of negligence as in s 40 (which is within ch 4 of the Wrongs Act), but additionally refers to the report or statement being “false or misleading in material particular”, which would not fall within ch 4. It is therefore unclear as to what test for causation applies, and whether two different tests of causation apply to the two different variations of conduct that sit within s 19.
As to the correct test of causation to apply, counsel for the plaintiff submitted that the common law test would apply to all the causes of action, while counsel for the defendants expressed agreement on this approach and identified legal nuances as to the applicability of s 45 of the Wrongs Act to part of s 19 of the SORP Act.
Ultimately, in my view, the material difference between the two tests for causation is minimal. Further, in my view, the same result is produced on either test, in this case. On either test there is no material difference. In my view, causation is established.

This issue largely relates to the selection of the method by which damages are to be calculated. The two options here are first, as in Potts v Miller, (calculated by reducing the ‘real’ value of the asset from the price paid for the asset plus associated consequential losses), and second, the ‘in hand’ approach (which is that considered in the case of HTW Valuers and consists of a consideration of the overall financial position of the plaintiff in respect of the transaction at the time of the hearing). It is also clear that it is not necessarily a binary choice, and difference approaches could arguably apply for different heads of damage.
The main reason for the differing proposed methods of calculating damages is due to the sale of the residence by the plaintiffs in June 2022. The house was sold at this time for $2.475 million, on the basis that the residence would been to be knocked down (and the real estate listings from this time have the residence blurred out in photos). This is a capital gain. Under the plaintiff’s proposed method of calculating damages, such a capital gain is irrelevant to the calculation. Alternatively, under the defendant’s proposed method of calculation, such a capital gain is considered, and so the quantum of damages is significantly reduced.
The Potts v Miller approach to damages requires a determination as to the condition of the property as at the time of purchase in 2019. A similar finding is made in the consideration of causation. A further finding was argued to be required that the damage was so significant at the time of the purchase that the building was uninhabitable. I do not accept the submission that there is a further element to causation. I have made the finding that causation is established, see paragraph [676].
The first defendant proposed that the damages should be calculated on the basis of what remains in the hand of the plaintiffs. The reason for this is that the property was sold for a capital gain in June 2022.
While the plaintiffs did make a capital gain on the sale of the property, the house was clearly sold on the basis that the building would need to be knocked down, and so even where the plaintiff did in fact receive a total capital gain on the basis of the sale price of the purchase, such price would have been higher (and so the capital gain would have been even higher), but for the termite damage. Indeed, expert evidence before the Court demonstrates the difference between the value of the land with and without a residence at the time of purchase in November 2019. In my view, there is nothing in the evidence to suggest that a gap as to the value of the property, with and without the residence would not have existed in June 2022.

No Statement Alleged Breach Plaintiff Defendants’ Response 1 The “REPORT The “REPORT • The “REPORT SUMMARY” should, it • The Inspection Report did SUMMARY” states that SUMMARY” failed was submitted, include an overview state that there was no no evidence of live to warn that of the contents of the Inspection evidence of live termites in 1085 termites was found at termites and Report, including whether there was page 3. the time of the inspection extensive termite damage detected that was (Statement 1) damage could be apparently due to the activity of • However, the Inspection present in areas timber pests, whether timber pests Report also noted in the that had not been were detected, whether further same page that, among other accessed by the inspections were recommended and things, the Inspection Report inspector and that the inspector’s opinion regarding the is intended to be read it is 1088 further susceptibility of the property to timber entirety emphasised in investigations pests. blue text. were required • The “REPORT SUMMARY” • It is submitted that any breached the requirements of “alleged deficiency or paragraph 4.2.8 of AS4349.3 as it deficient effect” of the supposedly failed to: Inspection Report’s summary is effectively cured by this o note the evidence of termite passage and other activity referred to later in the information in the Inspection Inspection Report. Evidence of Report which said the same termites is invariably associated thing that could have been with damage caused by termites; included in the summary. o recommend further • On the alleged breach, inspections to determine the counsel also referred to extent of any termite activity and responses to statement 2. the extent of any damage; o identify that there was a high or extreme risk that the property was susceptible to timber pests due to the presence of mud trails, which the Inspection Report refers to later, indicates the house had been undergoing attack by termites before the inspection and further when a building has been attacked by termites, it is much more likely to be attacked again in the future because termites will readily access the network of galleries abandoned by other termite colonies and so will be guided directly to the building and the timber it contains. • The “REPORT SUMMARY” should, it was submitted, have focused on what was found rather than reporting what was not found. Evidence of timber pest attack is submitted to be evidence that live specimens are likely to be present. The non-finding of live specimens was submitted to be evidence of anything. o Counsel for the plaintiff submitted that the concept of ‘live termite activity’ is not helpful and is not useful when assessing the risks

1085 The phrased used by the first plaintiff “no evidence of active subterranean termites (live species)”. 1088 PTB 1, page 4. Inspection Report 3. No Statement Alleged Breach Plaintiff Defendants’ Response applicable to a house for sale. Termites are said to be subterranean and are only rarely visible. As such, it would be extremely rare to come face to face with a live termite when doing a non-invasive timber pest inspection unless surfaces were broken to expose them. Termites construct earthen shelter tubes over non-food surfaces and while these tubes are readily visible it is submitted that it is not possible to visually assess a tube and know for certain whether it has been used by termites on the day. • Counsel for the plaintiffs also referred to the evidence of the defendants’ 1086 expert, Mr Broadhurst, who gave evidence that while it is possible to make a representation that the property had no existing or ongoing termite activity, such a representation cannot be categorical and would have been noted as a degree of risk. Mr Broadhurst would have said “it is possible, it is also unlikely”. • Counsel for the plaintiffs also noted Mr Broadhurst’s agreeing that further investigations for ongoing termite activity did need to be made on the evidence found on the 18 October 1087 2019 inspection. 2 The Inspection Report The Inspection • Counsel submitted that the • The Inspection Report represented that there Report allegedly Inspection Report impliedly neither stated nor were no live termites in failed to warn that reassures the reader that there are represented that there were 1089 the Property live termites could no live termites. Counsel submitted no live termites in the (Statement 2) be present in that it was not possible to know when property. Counsel submitted concealed areas termites had last visited the area that it is not open to say so. that the inspector where the evidence is located; it is could not inspect, not possible to know if the galleries • Counsel noted that: or that, even if the are active or not. It is said that infestation was in termites will often come and go from o The Inspection Report the past, damage any particular area of their network of stated that “no evidence must have existed galleries, and the fact that termites of active subterranean in concealed were seen is not evidence that the termites (live species) areas. infestation is old or in the past. The was found at the time of Inspection Report assumed the latter. our inspection” in pages 1090 3 and 16. • Counsel submitted that even if the infestation was in the past and had o The Inspection Report been adequately managed, damage noted that “no live must exist in the concealed areas. termites were 1091 The only reason termites construct sighted”. mud tunnels up foundation walls is, it o The Inspection Report was submitted, to access timber to noted in page 16 that remove and transport back to their “having conducted a colony. It is submitted to be normal visual inspection only, industry practice to warn the reader of [the defendants] are the need to carry out further unable to confirm that investigations to determine the full there is no termite and extent of the damage to the property. borer activity or

1086 CB 342, Broadhurst report page 2 [6.8] d 1087 CB 342, Broadhurst report page 3 [6.8e]. The plaintiff’s amended statement of claim nominated 19 October, but the chronology, the Inspection Report and page four of the plaintiff’s tender bundle nominated 18 October. 1089 PTB 1, page 17; Inspection Report page 16. 1090 PTB 1, page 4, 16, 1091 PTB 1, page 16. No Statement Alleged Breach Plaintiff Defendants’ Response • Counsel submitted that any extensive timber decay competent timber pest inspector occurring beyond the would assume the likelihood of exposed surfaces. No concealed or undetected live live species were sighted infestation and damage where at the time of inspection. several mud trails are seen going into the building. The fact that the second o The Inspection Report defendant says his inspection of the assessed the risk of subfloor was limited made the need timber pest infestation as for further inspection more important. “moderate to high”. Counsel submitted that no conclusion o In page 24, the other than further investigations were Inspection Report noted required could have been arrived at that in all instances in this by any competent inspector in this Inspection Report the situation. second defendant is • Counsel also referred to paragraph referring to accessible 4.2.6 of AS4349.3. areas only and that “ [a]reas that were not accessible at the time of inspection or were concealed from-view are not covered by this 1092 [R]eport ” and that the second defendant does not imply that the inaccessible or partly inaccessible areas of the property were not or have not been infested by timber pests. o The Inspection Report noted in page 25 that timber pests, particularly termites, may have gained entry to the property since the 1093 inspection date. 3 The Inspection Report Inspection Report • Counsel submitted that it is far better • Counsel noted that the referred to evidence of should not have to monitor the affected timber recommendation was to old termite activity in recommended because this is where termites are remove and replace the some fencing timbers removal of the most likely to return. Baits could have affected timber, and a natural and recommended affected timber. been installed to the affected timber. reading of this is that the removing and replacing By removing the affected timber timber should be replaced the affected timber termites are more likely to be with a new timber as 1094 (Statement 3) disturbed and leave this area and opposed to a new, non-become active in other areas. timber fence that the plaintiffs did. o In this case, counsel noted that the plaintiffs have followed this • This alleged breach was bad advice by removing the submitted to have not been affected timber and installing pleaded, not put to the colour bond fencing. This means plaintiffs in evidence in chief, that feeding is likely to have and unclear what connection increased in other areas of the it is said to have to the gallery system constructed by the plaintiff’s loss. termites as a result of removing this food source for the colony or colonies. This has effectively increased the risk of further infestation and resultant damage to the house. 4 The Inspection Report The Inspection • Decay or rot was submitted to be an • Counsel noted that the noted evidence of timber Report failed to important timber destroying pest as evidence of Mr Clarke was of decay to the bathroom note the extensive more houses are affected by it than conditions when Mr Clarke timber decay to even termites. Further, a large performed his inspection,

1092 PTB 1, page 25 1093 CB page 26, Inspection Report page 25. 1094 CB page 17, Inspection Report page 16 No Statement Alleged Breach Plaintiff Defendants’ Response 1095 window sill and the subfloor area amount of decay is both a pest in its and not when the defendants fencing, some fencing of the house. own right and also highly conducive did so. timbers and tree trunks or Large mycelium to termite attack. tree stumps (Statement growths of fungus • Counsel noted that Mr Clarke 1096 • Counsel submitted that the plaintiff was “briefly” shown the 4). were present to the flooring with notes that the ventilation in the photographs of the subfloor sections of the subfloor is inadequate. This was said taken by the first defendant particle board to be the cause of the moisture that and was asked whether there falling on the provides the conditions for decay was any change to the ground. fungus to grow and so the second opinions he expressed of the defendant should have known that Inspection Report. decay to the flooring was likely. 1097 o The portions of the • Counsel submitted that a non- Clarke report referred to reporting of the widespread decay to by the plaintiffs was not the flooring shows a high degree of expressing an opinion, incompetence as all the flags are but factual findings of Mr present to warn the inspector of its Clarke’s investigation. presence even before he entered the subfloor area. • Counsel submitted that there is no evidence before the o Counsel submitted that from the Court that there was exterior it can be seen that the extensive timber decay to the ventilation was blocked in front of subfloor at the time of the the house by garden beds, down inspection of first defendant, the side of the house by the or that there was extensive pavers and at the rear of the timber decay in the areas of house by the concrete slab the subfloor inspected by the extension. Normally vents are second defendant. provided on all four sides of the 1098 house to provide a cross flow. • The photographs taken by Mr Clarke do not appear at all o At the house, working vents only similar to the photographs of existed on one side of the house. the second defendant. Any competent inspector should, in the plaintiff’s submission, have • It was not put, in the seen this and known decay defendant’s submissions, to would be found under the house. the second defendant that the condition of the bathroom decay or the subfloor area of the house was the same as evidenced by Mr Clarke’s investigation. • This alleged breach was submitted to have not been pleaded, not put to the plaintiffs in evidence in chief, and unclear what connection it is said to have to the plaintiff’s loss. 5 The Inspection Report The Inspection • Counsel submitted that the • Counsel referred to a noted that ventilation in Report failed to ventilation in the subfloor was poor warning in the Inspection the subfloor was poor explain: because ventilation was blocked in Report at page 25 “ventilation 1099 (Statement 5) front of the house by garden beds, of the sub-floor region is • why the down the side of the house by the important in minimising the ventilation pavers and at the rear of the house opportunity for subterranean was poor; by the concrete slab extension. termites to establish Counsel submitted that vents are themselves. If the ventilation • why normally provided on all four sides of is found t0 be inadequate, ventilation the house to provide a cross flow. At remedial measures should was the house, working vents only existed be taken improve the cross important; on one side of the house. flow of air within the subfloor to produce ventilation equivalent to 8400 sq mm net

1095 The Inspection Report itself uses the term “bathroom window frame”. [KT Note: Only included the term “bathroom window frame” as our description diverts from it. “Fencing timbers” were used in the appendix A] 1096 CB page 17, Inspection Report page 16 1097 Namely [9.14.1]- [9.14.2] and [9.14.5] 1098 Contained in page 66 of the Court Book. 1099 CB 17; Inspection Report page 16 “Subfloor drainage & ventilation”. No Statement Alleged Breach Plaintiff Defendants’ Response • that the • Counsel submitted that poor subfloor ventilation area per lineal ventilation ventilation makes the building a lot meant metre on external and should be more susceptible to termite attack internal walls”. improved; or because of the moisture that accumulates in the subfloor. Termites • This alleged breach was • that major was said to have soft bodies and are submitted to have not been works were very susceptible to desiccation. The pleaded, not put to the required to purpose of mud tunnels is to allow plaintiffs in evidence in chief, improve the termites to keep their environment at and unclear what connection ventilation. the appropriate moisture level. These it is said to have to the tunnels are extensions of the next plaintiff’s loss. that reach for food sources remote to 1100 the colony. They continually manage the temperature and humidity inside the gallery system. o When a subfloor of a house is damp, counsel submitted that termites will attack far more aggressively than if it is dry. The importance of this is not highlighted at all by the Inspection Report. • Counsel submitted that any competent inspector would also advise the purchaser to consult with a ventilation expert to provide advice and costs for rectification prior to proceeding any purchase of the property. Clear, simple advice to lower the external levels back to the original level below the ventilation system should have been provided, in the plaintiffs’ submissions. 6 The Inspection Report The Inspection • Counsel submitted that further • Counsel noted that: stated that the inspection Report did not investigations should have been of the subfloor was recommend commenced as required paragraph o The Inspection Report 1101 recommended in pages limited (Statement 6). further 4.2.6 of AS 4349.3 – 2010. investigations 16 and 24 that a full pest inspection be undertaken every 6 to 12 months. o The Inspection Report also noted that the defendants strongly 1102 recommend that an invasive timber pest

1100 Presumably a reference to termites. 1101 The full statement as it relates to the subfloor is as follows for context: “There is insufficient crawl space in part of the sub-floor and therefore some areas were viewed from a distance due to restricted access. Please refer to our Scope and Limitations section at the end of this report under the heading “Safe and Reasonable Access”. This later heading, titled “Safety & Reasonable Access” quoted AS4349.1 – 2007 and AS 4349.3: “Australian Standard 4349.1 — 2007 3.2.2 The extent of accessible areas shall be determined by the inspector at the time of inspection, based on the conditions encountered at the time of inspection. The inspector shall also determine whether suffici ent space is available to allow safe access. The inspection shall include only accessible areas and areas that are within the inspector's line of sight and close enough to enable reasonable appraisal. The Australian Standard 4349.3 defines reasonable where access as “areas where safe, unobstructed access is provided and the minimum clearances are available; or, these clearances are not available, areas within the consultant's unobstructed line of sight and within arm’s length. NOTE: Reasona ble access does not include removing screws and bolts to access covers.” 1102 The relevant recommendation in page 25 of the Inspection Report reads: This concealed damage may only be found when invasive procedures are applied to reveal previously concealed timbers. In the case of Timber Pest activity and/or damage WE STRONGLY RECOMMEND an invasive Timber Pest Inspection is undertaken and a qualified person such as a Builder, Structural Engineer, or Architect be engaged to carry out a structural Inspection to determine the full extent of the damage and repairs that may be required. No Statement Alleged Breach Plaintiff Defendants’ Response inspection is undertaken in case of timber pest activity and/or damage. 7 The Inspection Report The subfloor • Counsel submitted that due to the • Counsel noted that “fair” is stated that the subfloor drainage was not high external ground levels, water not a positive term, and it can drainage was generally fair. run-off from the exterior foundation mean “neither good or bad” in 1103 fair (Statement 7). walls enters the subfloor area. the context and is similarly defined as such in page 4 of • Counsel noted that the paving around the Inspection Report. the house was not falling away from the building, directing water into the • Counsel also noted a 1104 sub-floor. Marks on the foundation statement in page 21 of walls indicate that this was an issue the Inspection Report for this house. Counsel submitted regarding dampness in the that the second defendant should subfloor, and have understood that. This was recommendation that the submitted to be a long-term problem. subfloor area be monitored if dampness is detected to ensure that surface and subsurface ingress is not an issue. The Inspection Report also recommended that consideration should be given to upgrading the subterranean and surface drainage system to ensure that moisture is directed away from the foundations. • This alleged breach was submitted to have not been pleaded, not put to the plaintiffs in evidence in chief, and unclear what connection it is said to have to the plaintiff’s loss 8 The Inspection Report The Inspection • Counsel submitted that trees are a • Counsel referred to a 1106 stated that there was Report failed to major harbourage for termite colonies statement in the timber pest damage recommend and are often rendered unsafe due to Inspection Report in page 25 sighted to some tree further termite attack or decay affecting the headed “Determining Extent trunks or tree stumps but investigations of structural integrity of the trees. The of Damage”. Among other that, having conducted a the trees. Inspection Report was submitted to things, that the reader should visual inspection only, the should have recommended further assume that there may be Inspection Report was Trees surrounding investigations of the trees in further concealed structural unable to confirm if there the house should accordance with the AS 4349.3. damage if timber pest activity was any termite activity have raised and/or damage is reported in or extensive timber decay warnings even • Counsel submitted that should have the structure(s) or grounds of occurring beyond the without the focused on what was found rather the property. Such concealed exposed services, but reporting of any than reporting what was not found. damage may only be found that no live termites were evidence of timber Instead, the Inspection Report when invasive procedures sighted at the time of the pest damage to reassures the reader by stating that are applied, and that in case inspection (Statement the trees. no live species were found. of such timber pest activity or 1105 8). damage the defendants strongly recommend that an

1103 CB 17, Inspection Report page 16 1104 The statement in page 22 reads: Dampness, debris, drainage, ventilation, cracked or leaking pipes; TIMBER CONSTRUCTION: bearers & joists, framing, piers/stumps; SUSPENDED CONCRETE FLOOR CONSTRUCTION: concrete condition, cracking If moisture is noted, it is recommended that the sub-floor area be monitored to ensure that surface and sub-surface moisture ingress is not an ongoing issue. If the area remains damp, consideration should be given to upgrading subterranean and surface kept drainage systems to ensure that moisture is directed away from the building foundations and the sub-floor area is dry. A qualified drainage expert should be consulted with regard to drainage issues. 1105 CB 17, Inspection Report page 16 “Timber Pest Evidence”. 1106 The full statement in page 25 of the Inspection Report is: If evidence of Timber Pest activity and/or damage is reported in the structure(s) or the grounds of the property, then you must assume that there may be further concealed structural damage within the building(s). This concealed damage may only be found when invasive procedures are applied to reveal previously concealed timbers. In the case of Timber Pest activity and/or damage WE STRONGLY RECOMMEND an invasive Timber Pest Inspection is undertake No Statement Alleged Breach Plaintiff Defendants’ Response • Counsel submitted that evidence of invasive timber pest timber pest attack is evidence that inspection is undertaken. live specimens are likely to be present, and that the non-finding of • This alleged breach was any live specimens is not evidence of submitted to have not been anything. pleaded, not put to the plaintiffs in evidence in chief, and unclear what connection it is said to have to the plaintiff’s loss 9 The Inspection Report The Inspection • Counsel submitted that an • Counsel referred to a refers to there being a Report fails to: application of a chemical treatment statement in page 25 of the chemical treatment was not likely to be successful as a Inspection Report under the notice being posted in the • warn of the form of prevention or control because heading “Important meter box to the effect risk that any any treated soil would contain gaps of Information”: that Biflex Duo was chemical untreated soil that would allow applied to the perimeter treatment termites to pass into the house o If the Inspection Report on 5 February 2011 was not likely despite the treatment. Counsel indicated the presence of (Statement 9) to be submitted that it is simply not possible termites, termite successful to treat all the soil. damage, previous as a form of activity or treatment, or prevention or • Counsel submitted that the presence recommends a control; of paving also renders any chemical treatment, the Inspection application to the soil at the house Report noted that the • advise that perimeter obsolete. Even if all of the reader should obtain the presence soil was treated from the base of the copies of the treatment of paving paving to the foundation on the proposal, any certificates renders any external foundation wall, counsel of treatments carried out, chemical submitted that termites can bridge details of all repairs application this treatment by tracking between including copies of to the soil at the pavers themselves. Counsel put quotations, invoices and the house forward that any competent timber any other reports. The perimeter pest inspector would know this and Inspection Report noted obsolete; respond with appropriate that it is strongly recommendations. recommended that the • warn of the reader arrange for an risk that • Counsel also noted that the inspection in accordance termites application to the perimeter also with AS 4349.3 to verify could be could not prevent any termite attack that the treatment has attacking the from the subfloor of the house. The been successful and house from Inspection Report notes evidence of carried out in accordance below the termites to the subfloor and reported with AS 3660.2 and concrete evidence of chemical treatment to the arrange for a further slab permitter. There was submitted to be building inspection in extension at no reference in the Inspection Report accordance with AS the rear of that the subfloor area has any 4349.1. the property; chemical protection. • warn that • Further, counsel noted that chemical any chemical applications require maintenance. treatment to Counsel noted that when soil moves the bridges of untreated material are perimeter created. If soil is disturbed by would not gardening or movement of water, prevent any counsel submitted that retreatment is termite required. A chemical treatment attack from carried out as far back as 2011 the subfloor; would, in the plaintiff’s submissions, require at least some level of • recommend reapplication. No comfort would be that the full gained, it was submitted, from any history of the chemical application to the perimeter chemical in 2011 with the aim of deterring treatment be termite ingress. provided by the vendors; • warn that the purchasers should take no comfort from a chemical application to the No Statement Alleged Breach Plaintiff Defendants’ Response perimeter in 2011.

10 The Inspection Report: There • Counsel submitted that the reference • Counsel submitted that the recommendations to AS 3660.1 is incorrect – the Inspection Report did not • recommended that were wrong. reference ought to have been to AS conclude that no termite a treatment in 1108 3660.2. At the hearing, counsel management beyond accordance with AS noted that AS 3660.1 applies to new inspections were required. 3660.1 to control or buildings. prevent • Counsel referred to a subterranean • Further, counsel submitted that the statement in page 25 of the termites from conclusion that no termite Inspection Report discussed infesting or causing management other than inspections in the response to statement damage to the was required was clearly wrong. 9. property was not considered • Counsel submitted that the • Counsel noted that the necessary. Inspection Report should have stated Inspection Report mentioned that extensive termite damage could in page 24 that it is not a • represented that the be present in areas that had not been guarantee that an infestation risk of future timber accessed and that further or future infestation and/or pest infestation to investigations were required. damage does not exist in any the house was inaccessible or partly moderate to high; • Finally, counsel submitted that the inaccessible areas. Inspection Report should also • recommended that contain the conclusions and warnings • Counsel also referred to the regular inspections of the Clarke report. statement under the heading be undertaken; “Determining Extent of Damage” in page 25 of the • represented that, Inspection Report that: even if the risk factor was high, this o The Inspection Report was not intended to will not state the full deter an intending extent of any timber pest purchaser it was damage and that the simply encouraging defendants may provide awareness that comment on the damage increased vigilance for the reader’s was warranted and information. any recommendations o That the reader should regarding reducing assume that there may conducive be further concealed conditions or structural damage if frequency of there was evidence of inspections should timber pest activity or 1107 damage reported in the be observed. structures or grounds of (Statement 10) the property. o That this concealed damage may only be found when invasive procedures are applied. o That the Inspection Report “STRONGLY RECOMMENDS” such invasive procedures and that a qualified person (eg. builder, structural engineer or architect) be engaged to carry out a structural inspection.

Shannon & Anor v Residential Reports Pty Ltd & Anor [2026] ACTSC 66

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