New South Wales District Court CITATION: Wood & Anor v Balfour & Anor [2010] NSWDC 139 HEARING DATE(S): 15, 16, 17, 18, 19, 22, 23, 24, 25, 26, 29 March and 27 April 2010 JUDGMENT DATE: 9 July 2010 JURISDICTION: Civil JUDGMENT OF: Levy SC DCJ 1. Verdict and judgment for the defendants; DECISION: 2. The plaintiffs are to pay the costs of the defendants on the ordinary basis unless otherwise ordered; 3. The exhibits may be returned; 4. Liberty to apply on 7 days notice if further orders are required. CATCHWORDS: TORTS – action framed in deceit – purchase of domestic dwelling – premises affected by past termite activity – purchasers claimed vendors acted fraudulently to cover up and conceal damage due to past termite activity to induce purchasers to buy – whether deceit established – relevance of maxim of caveat emptor – operation of Special Condition 3 of contract for sale – standard of proof required to establish deceit – equivalent to an allegation of fraud - DAMAGES – measure of damages – valuation of property assuming no termite damage compared to valuation taking into account termite damage. LEGISLATION CITED: Evidence Act 1995, s 135 AIC Ltd v ITS Testing Services (UK) Limited [2006] EWCA Civ 1601; [2007] 1 All ER (Comm) 667 Akerhielm v De Mare (1959) AC 789 Angus v Clifford [1891] 2 Ch 449 Armstrong v Strain [1951] 1 TLR 856 at 871 Australian Steel & Mining Corporation Pty Limited v Corben [1974] 2 NSWLR 202 Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 Civil Service Co-operative Society of Victoria Ltd v Blyth [1914] HCA 17; (1914) 17 CLR 601 Clancy v Prince & Ors [2001] NSWSC 85 Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 CASES CITED: Derry v Peek [1889] UKHL 1; (1889) 14 AC 337 Edgington v Fitzmaurice (1885) 29 ChD 459 Gould v Vaggelos [1985] HCA 85; (1984) 157 CLR 215 Jennings v Zilahi-Kiss (1972) 2 SASR 493 John McGrath Motors (Canberra) Pty Ltd v Applebee [1964] HCA 1; (1964) 110 CLR 656 Krakowski v Eurolynx Properties Pty Ltd [1995] HCA 68; (1995) 183 CLR 564 Luxton v Vines [1952] HCA 19; (1952) 85 CLR 353 Oraka Holdings Pty Ltd v Leda Holdings (1997) ATPR 41-558 Oudaille v Lawson [1972] NZLR 259 Vairy v Wyong Shire Council [2005] HCA 62; (2005) 223 CLR 442 TEXTS CITED: Spencer Bower, Turner and Handley, Actionable Misrepresentation, 4th ed (2000) Butterworths Stonham, Vendor and Purchaser, (1964) Law Book Co and Williams, Vendor and Purchaser 4th ed, Lightwood, Sweet & Maxwell Lee Darryl Wood (First plaintiff) PARTIES: Lesley Jayne Wood (Second plaintiff) David John Balfour (First defendant) Judith Yvonne Balfour (Second Defendant) FILE NUMBER(S): 4285 of 2008; 2008/319042 COUNSEL: Mr E White (Plaintiffs) Mr D Rayment (Defendants) SOLICITORS: Robilliard & Robilliard (Plaintiffs) Redmond Hale Simpson (Defendants) Table of Contents A. INTRODUCTION Nature of the case [1] Factual background [2] – [6] Issues for determination [7] – [8] Elements of the tort of deceit [9] – [13] Credibility of testimony [14] Summary of findings [15] – [19] B. EVIDENCE REVIEW Overview of evidence [21] – [24] Pre-purchase pest and building inspection report [25] – [56] Overview of exhibits [57] – [59] Summary of oral and affidavit evidence [60] – [247] Non-expert evidence [61] Mr Lee Wood [62] – [133] Mrs Lesley Wood [134] – [149] Mrs Christine Doyle [150] – [151] Mr David Balfour [152] – [220] Mrs Judith Balfour [221] – [231] Mr John Balfour [232] – [235] Mr John Redding [236] – [239] Ms Kim Balfour [240] – [241] Mr Nick Rubbi [242] – [244] Mr Alan Green [245] – [247] Expert evidence [248] – [317] Mr Shane Clarke [249] – [266] Mr Anthony Capaldi [267] – [294] Mr Geoffrey Doble [295] – [307] Mr Kenneth Adams [308] – [317] C. FINDINGS ON ISSUES CALLING FOR DECISION Consideration of Issue 1 – Discovery by plaintiffs of termite damage [319] – [333] Consideration of Issue 2 – Covering works carried out by defendants [334] – [382] Consideration of Issue 3 – Whether covering work was concealment [383] – [410] Consideration of Issue 4 – Whether there was a relevant representation [411] – [421] Consideration of Issue 5 – Identity of representees [422] – [429] Consideration of Issue 6 – Whether defendants had a duty to disclose [430] – [448] Consideration of Issue 7 – Whether non-disclosure was a representation [449] – [476] Consideration of Issue 8 – Caveat Emptor and Special Condition 3 [477] – [491] Consideration of Issue 9 – Alleged false representation [492] – [498] Consideration of Issue 10 – Knowledge of termite damage by defendants [499] – [515] Consideration of Issue 11 – Intention of the defendants [516] – [527] Consideration of Issue 12 – Alleged reliance by plaintiffs on representation [528] – [548] Consideration of Issue 13 – Quantum of damages [549] – [556] Conclusions concerning alleged deceit [557] – [562] D. DISPOSITION & ORDERS Disposition [563] Orders [564] A. INTRODUCTION Nature of case 1. The plaintiffs, Mr and Mrs Wood, claim damages in tort for alleged deceit on the part of the defendants, Mr and Mrs Balfour, in connection with the purchase of a domestic dwelling : Derry v Peek [1889] UKHL 1; (1889) 14 App Cas 337. Factual background 2. On 13 August 2004 the Woods purchased from the Balfours a domestic dwelling house in Kareela, NSW. The house in question had been owned, and continuously occupied by the Balfours, for 24 years from the time it was built in 1980 until the time it was purchased by the Woods. Following the sale and purchase, the Woods discovered that the house was considerably more affected by termite damage than they originally thought might have been the case. 3. The Woods claimed that key indicators to the termite damage that they ultimately found to affect the house had been deceitfully concealed prior to the sale. That claim was denied by the Balfours, who acknowledged that there had been past termite activity in the house which had been treated, and that there had been cosmetic work undertaken to cover the damage. 4. The Woods claimed that before the sale to them, the Balfours had undertaken "non-genuine" cosmetic repairs in three areas of termite damage to timbers within the house. The Woods claimed that, with fraudulent intent, the Balfours concealed from view the nature and extent of the termite damage to the house, such that the Woods were induced into purchasing the property for a valuation that was in excess of the true market value. The Balfours denied any such fraudulent conduct. 5. In their defence to the claim by the Woods, the Balfours relied upon a number of factual matters, as well as upon the maxim of caveat emptor. They also rely upon Special Condition 3 of the contract for sale which acknowledged that the Woods relied upon their own inquiries and not any representations that may have been made to them. The Woods had previously taken proceedings to recover damages from the author of a pre-purchase pest and building report that had been commissioned by them before they entered into the contract for sale to the purchase of the house, claiming they had been misled by that report. 6. In view of the allegations of fraud made by the plaintiffs, this has necessarily required that I incorporate into my judgment a detailed exposition of the factual and opinion evidence given by the respective witnesses, before setting out my findings on the issues calling for decision. Issues for determination 7. I consider that the following distillation of the issues pose the relevant questions for determination in this case: Issue 1: The timing, nature and extent of the termite damage found on the serial inspections carried out on the premises after the purchase of the property by the plaintiffs. My findings on this issue are set out between paragraphs [319] to [333] of these reasons; Issue 2: The timing, nature and extent of the work undertaken by the defendants to cover the visibility of termite damage in the premises before the sale to the plaintiffs. My findings on this issue are set out between paragraphs [334] to [382] of these reasons; Issue 3: Whether the work undertaken by the defendants to cover the visible signs of termite damage to the affected parts of the premises should be characterised as concealment work, and if so, in what sense should it be described as concealment work. My findings on this issue are set out between paragraphs [383] to [410] of these reasons; Issue 4: Did the alleged concealment work in the three particularised areas of the premises constitute a representation by the defendants that those parts of the premises were free from termite damage, and if so, when did the claimed representation relevantly arise. My findings on this issue are set out between paragraphs [411] to [421] of these reasons; Issue 5: Identification of the relevant representees of the claimed representation. My findings on this issue are set out between paragraphs [422] to [429] of these reasons; Issue 6: On a consideration of the timing of the work carried out by the defendants, and assuming the defendants reasonably believed that repairs had been carried out adequately, were the defendants under any legal duty to disclose the repairs of the termite damage to the plaintiffs. My findings on this issue are set out between paragraphs [430] to [448] of these reasons; Issue 7: Whether non-disclosure by the defendants that they had carried out the alleged concealment work amounted to the alleged representation. My findings on this issue are set out between paragraphs [449] to [476] of these reasons; Issue 8: Does the principle of caveat emptor or Special Condition 3 of the contract for the sale of the property operate to exclude or to otherwise abrogate any duty, which might otherwise have arisen on the part of the defendants to disclose the repairs to the termite damage. My findings on this issue are set out between paragraphs [477] to [491] of these reasons; Issue 9: If the representation was made as claimed, was it false, having regard to the condition of the property as at 13 August 2004. My findings on this issue are set out between paragraphs [492] to [498] of these reasons; Issue 10: If the claimed representation was false to the knowledge of the defendants, did the defendants know that the premises had any serious termite damage; if so, did the defendants know that they were making a representation to the contrary; did the defendants believe that there was any problem with the work that they had performed on the premises to cover visible signs of termite damage. My findings on this issue are set out between paragraphs [499] to [515] of these reasons; Issue 11: If the representation was made by the defendants as is claimed by the plaintiffs, was it made with the intention that it be relied upon by the plaintiffs. My findings on this issue are set out between paragraphs [516] to [527] of these reasons; Issue 12: Did the plaintiffs act in the reliance of the alleged representation; what was the effect on the plaintiffs of the retention by them of a pest inspector prior to entry by them into the contract for sale for the purchase of the property; what was the relevance of the pest inspector's pre-contract report which revealed that he suspected the existence of "concealed termite damage" to the dwelling. My findings on this issue are set out between paragraphs [528] to [548] of these reasons; Issue 13: Did the plaintiffs suffer damage caused by reliance on the alleged representation. My findings on this issue are set out between paragraphs [549] to [556] of these reasons. 8. Each of these issues bears close examination. Elements of the tort of deceit 9. The tort of deceit is a form of misrepresentation that "has been held to lie whenever one person, by a knowingly false statement, intentionally induced another to act upon it to his detriment" : Fleming, JG, The Law of Torts, 9th ed, 1998, p 695. In this case there was controversy over the role of silence as a form of representation in the tort of deceit. 10. The principle in Derry v Peek has been consistently followed and applied with re-statement and refinement. A recent UK Court of Appeal re-statement appears in AIC Ltd v ITS Testing Services (UK) Limited [2006] EWCA Civ 1601; [2007] 1 All ER (Comm) 667, where at [256]-[257] Rix LJ stated: "256. As for the element of dishonesty, the leading cases are replete with statements of its vital importance and of warnings against watering down this ingredient into something akin to negligence, however gross. The standard direction is still that of Lord Herschell in Derry v. Peek (1889) 14 App Cas 337 at 374: "First, in order to sustain an action in deceit, there must be proof of fraud and nothing short of that will suffice. Secondly, fraud is proved when it is shown that a false representation has been made (1) knowingly, (2) without belief in its truth, or (3) recklessly, careless whether it be true or false." 257. In effect, recklessness is a species of dishonest knowledge, for in both cases there is an absence of belief in truth. It is for that reason that there is "proof of fraud" in the cases of both knowledge and recklessness. This was stressed by Bowen LJ in Angus v. Clifford [1891] 2 Ch 449 where he said (at 471): "Not caring, in that context, did not mean not taking care, it meant indifference to the truth, the moral obliquity of which consists in a wilful disregard of the importance of truth, and unless you keep it clear that that is the true meaning of the term, you are constantly in danger of confusing the evidence from which the inference of dishonesty in the mind is to be drawn – evidence which consists in a great many cases of gross want of caution – with the inference of fraud, or of dishonesty itself, which has to be drawn after you have weighed all the evidence." 258. And in Armstrong v. Strain [1951] 1 TLR 856 at 871 Devlin J, after a full citation of passages in earlier authorities which stress the need for dishonesty (also called actual fraud, mens rea, or moral delinquency), said this about the necessary knowledge: "A man may be said to know a fact when once he has been told it and pigeon-holed it somewhere in his brain where it is more or less accessible in case of need. In another sense of the word a man knows a fact only when he is fully conscious of it. For an action of deceit there must be knowledge in the narrower sense; and conscious knowledge of falsity must always amount to wickedness and dishonesty. When Judges say, therefore, that wickedness and dishonesty must be present, they are not requiring a new ingredient for the tort of deceit so much as describing the sort of knowledge which is necessary." 259. Moreover, whether it is in the matter of identifying the relevant misstatement or in the finding of a dishonest mind, it is necessary to bear in mind the heightened burden of proof which bears on the claimant…" 11. Another re-statement appears in Clancy v Prince & Ors [2001] NSWSC 85, where at [61], Santow J conveniently summarised the principles for proof of a fraudulent misrepresentation as follows: "(1) To constitute a fraudulent misrepresentation, there must first be found all the elements of a misrepresentation. (2) The elements of misrepresentation are as follows: (i) there must be a statement or conduct conveying a representation which is false in not according with the true facts, past or present; (ii) thus a promise or assurance for the future cannot be presently true or false, and does not of itself constitute a misrepresentation; see, for example, Civil Service Co-operative Society of Victoria Ltd v Blyth (1914) 17 CLR 601; (iii) however statements of intention or opinion are capable of being a misrepresentation and indeed fraudulent, where the state of the maker's mind is not consistent with them, so that the person does not hold the opinion professed; Edgington v Fitzmaurice (1885) 29 ChD 459 where Bowen LJ said (at 483) "a misrepresentation as to the state of a man's mind is, therefore, a misstatement of fact"; (iv) a statement of law is not a representation of fact and could not therefore constitute a misrepresentation unless in stating what is necessarily an opinion (as to law) a person does not genuinely hold that opinion; falsely stating something as if it were one's opinion when it is not, is to make a misrepresentation of present fact, namely that one presently holds that opinion; see Oudaille v Lawson [1972] NZLR 259; (v) while mere non-disclosure of facts, even facts material and important, is not itself a misrepresentation, a misrepresentation is capable of being found not only in some positive statement but also in conduct intended to convey a particular impression which is false or where a statement is literally true but, because it does not tell the whole truth, gives a false impression; see for example Jennings v Zilahi-Kiss (1972) 2 SASR 493 per Bray CJ at 507-8 who held that a fraudulent misrepresentation was found where units were described as flats without revealing that they were registered as a lodging house and governed by a requirement which precluded cooking on the premises for "a flat in which one cannot lawfully cook is not, in my opinion, a flat at all"; (vi) the representor must have intended the representee to rely upon the representation, as for example in inducing the representee to enter into a contract, reliance being a question of fact with the burden of proof resting upon the person claiming the misrepresentation; and (vii) the representation must be of a material fact such that, in the case of fraud, the representation must be a real inducement to the party claiming reliance; see for example, Australian Steel & Mining Corporation Pty Limited v Corben [1974] 2 NSWLR 202." (3) For a misrepresentation to be also fraudulent, it must be shown that, "a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false"; Derry v Peek (1889) 14 App Cas 337 at 374 per Lord Herschell. (4) So if a representor deliberately shuts his eyes to a fact or purposely abstains from its investigation, the representor is not honest and he is just as liable as if he had knowingly stated a falsehood; Derry v Peek (supra) at 376. (5) Fraud must be distinctly alleged and proved according to a civil standard of proof, with the standard of proof rising with the gravity of the imputation." 12. I shall respectfully follow these statements of principle. 13. The standard of proof of deceit, as with fraud, is the civil standard on the balance of probabilities. In the context of this case, proof of an allegation of fraud will require a high degree of satisfaction on the civil standard : Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336. Credibility of testimony 14. In my assessment, all of the witnesses who gave evidence in the proceedings, including the interested parties, did so truthfully and honestly, to the best of their respective abilities and knowledge of the relevant facts. The determination of the issues in this case was dependent on the interpretation to be placed on the juxtaposition of events and circumstances. The differing perspectives of the events in question have obviously influenced the respective positions the parties adopted towards the issues in the litigation. At the outset, counsel for the defendants identified the ultimate issue to be that one man's repair is another man's concealment. I have analysed these differing perspectives when arriving at my findings on the issues calling for decision. Summary of findings 15. I have summarised my findings on the matters calling for decision as follows. 16. During the course of carrying out renovations to the house, the Woods discovered termite damage to beams, joists and to a rafter. That damage had beforehand been concealed and was not apparent on a superficial non-invasive visual inspection of these structures. The work on these structures in the house was carried out by Mr Balfour in the period 1999-2000. Whilst the work in question could be properly characterised as work carried out in order to conceal termite damage, in the circumstances, I do not consider that such concealment work amounted to a representation, either generally, or to the Woods in particular, that the house was free of termite damage. 17. I have concluded that the work in question was reasonably described as repair work. I have concluded that, in the circumstances, the Balfours were under no legal duty to disclose to the Woods, the fact that such work had been undertaken. In my view, the maxim of caveat emptor or buyer beware applied to the circumstances to negate any such claimed legal duty, as did Special Condition 3 of the contract for sale of the property, which specifically acknowledged that the Woods were not relying upon any representations made to them by the Balfours. 18. I have concluded that no false representations were made to the Woods as has been claimed, either with the intention to deceive as claimed, or otherwise. I have found that the Woods relied on their own judgments and interpretation of the expert pest control advice they had commissioned, and therefore in the legal sense, as distinct from the factual sense, I have found that the Woods have suffered no recoverable loss. For these reasons I have determined the issues calling for decision in favour of the defendants. 19. My review of the oral and affidavit evidence is located between paragraphs [60] to [317] of these reasons. B. EVIDENCE REVIEW 20. In the paragraphs that follow, I set out my summary of the review of the evidence. Overview of evidence 21. The evidence was largely presented in affidavit form but there was extensive cross-examination. The case proceeded over 12 days, including a day set aside for the reading of the voluminous tendered materials, photographs and reports that were tendered. In addition to the compendious exhibits and numerous photographs exhibited to these affidavits, the parties relied upon the contract for sale entered into between them. There were 14 affidavits read. Affidavit evidence 22. The 7 affidavits read in the case for the plaintiffs comprised: (a) The affidavit of Lee Darryl Wood, sworn on 13 February 2009; (b) The affidavit of Lee Darryl Wood, sworn on 9 September 2009; (c) The affidavit of Lesley Jayne Wood, sworn on 15 February 2009; (d) The affidavit of Anthony Capaldi, a builder, sworn on 16 February 2009; (e) The affidavit of Shane Maxwell Clarke, a pest inspection expert, sworn on 10 September 2009; (f) The affidavit of Kenneth Adams, a valuer, sworn on 4 February 2009; (g) The affidavit of Geoffrey Doble, an engineer, sworn on 4 September 2009. 23. The 7 affidavits read in the case for the defendants comprised: (a) The affidavit of David Balfour, sworn on 17 April 2009; (b) The affidavit of Judith Balfour, sworn on 17 April 2009; (c) The affidavit of John Balfour, the defendants' son, sworn on 13 April 2009; (d) The affidavit of Kim Balfour, the defendants' daughter, sworn on 9 April 2009; (e) The affidavit of John Redding, sworn on 14 April 2009; (f) The affidavit of Alan Green, sworn on 14 April 2009; (g) The affidavit of Nick Rubbi, sworn on 5 February 2009. Oral evidence in plaintiffs' case 24. Not all of the affidavit evidence was the subject of challenge by cross-examination. Oral evidence was adduced from the following 12 witnesses: (a) Mr Lee Darryl Wood, the first plaintiff; (b) Mrs Lesley Jayne Wood, the second plaintiff; (c) Mrs Christine Doyle; a resident in a neighbouring property; (d) Mr Anthony Capaldi, a consultant builder engaged by the Woods; (e) Mr Jeffrey Doble a consultant civil engineer engaged by the Woods; (f) Mr Kenneth Charles Adams, a consultant valuer engaged by the Woods; (g) Mr Shane Maxwell Clarke, a pest consultant engaged by the Woods; Oral evidence in defendants' case (h) Mr David John Balfour, the first defendant; (i) Mrs Judith Yvonne Balfour, the second defendant; (j) Mr John Balfour, the eldest son of the defendants; (k) Mr John Redding, a neighbour and cousin of Mr Balfour. Pre-purchase pest and building inspection report 25. The affidavit of Mrs Wood, sworn on 6 July 2006, annexed a report from Ausinspect dated 11 August 2004. That report was described as a "non-destructive property and pest inspection report." That report, which followed the pre-purchase inspection of the house by Mr Stephen Koelewyn, comprised 65 pages of closely typed comments arising from the inspection of the house carried out at the request of the Woods. The report was printed in different coloured inks at various sections. 26. The sections of the report that were printed in green ink denoted the area so described to be satisfactory. Sections printed in black ink were denoted to be acceptable, or alternatively, where improvements were recommended but not necessarily required. Sections printed in blue ink denoted a need for monitoring and repair and denoted a fair or below average standard. Sections printed in red ink denoted that components of the house were either poor and well below average and needing attention, or were of major concern, denoting significant deficiencies or defectiveness requiring correction or denoting safety issues where a component or condition of the house was considered to be unsafe and in need of attention. In some ways this colour-coded system created some scope for confusion to the reader of the report. There were considerable portions of the report printed with red text. 27. Since the Ausinspect pest inspection report looms large in the consideration of the issues in this case, despite the detail necessarily involved in the exercise, I consider it relevant and important to set out in the paragraphs that follow, the relevant references within the report to suspected or concealed termite damage, together with the context of those references. 28. The pest inspection report comprised two parts. The first part was entitled "Pre-purchase Property Inspection Report" and was located between pages 3 and 25 of the report. The second part was entitled "Non-destructive Structural Pest Inspection Report" and was located between pages 39 and 56 of the report. The remaining pages of the report comprised captioned photographs, some generalised pest information and a detailed glossary of terms. 29. The first page of the pest inspection report, which comprised a summary page, relevantly stated : "These are brief summaries only and should not be relied upon without reading the full detailed report and the full detail of each item in the body of the report." Within that brief summary there was printed in red ink, terms such as "Termite Damage – Apparent"; "Termite - Conducive conditions observed", "Termite treatment – Recommended" and "Ant Capping - Partially Unsatisfactory." 30. These items on the summary page were annotated with cross-references to particular pages located within the report. In addition, the second bullet point on the summary page was printed in black ink and stated : "The structure appears to have settled over time and is not plumb and square, concealed termite damage suspected." 31. Page 6 of the report comprised a table of contents that noted 76 sections to the report. There were numerous references within the report to termite issues. 32. Page 8 of the report made reference to "concealed termite damage suspected" in juxtaposition to a reference to the structure of the building having settled over time and not being plumb and square : Paragraph 4.2. On the same page the report stated "Mature well-established trees and stumps within close proximity (50 metres) of inspected structures should be test drilled for inspection and the possible location of termite nests": Paragraph 5.1. 33. Page 9 of the report referred to the kitchen flooring being in need of repair and stated "conceded (sic for concealed) termite damage is suspected" : Paragraph 5.21. 34. Page 10 of the report made mention of the possibility of moisture in some locations being possible sites which could attract termite damage : Paragraphs 5.46 and 5.47. On the same page, reference was made to timbers attached to the external walls having direct contact with the ground, suggesting that "termites could go undetected" : Paragraph 5.71. 35. Page 11 of the report referred to the finished level of paths attached to the external walls as being finished above the damp course and the internal floor levels, the suggestion being that "termites could go undetected" : Paragraph 5.77. Similar termite related remarks were made with respect to the location of a metal garden shed against the western wall of the house : Paragraph 5.78. On the same page reference was made to some ant capping, variously described as being incompletely soldered and being corroded, suggesting that termites could gain concealed entry to flooring timbers in the house : Paragraphs 5.84 and 5.85. On the same page reference was made to "…Markings that are similar to markings of termite mod (sic for mud) trails that have been cleaned were observed within the sub-floor": Paragraph 5.88. On the same page, reference was made to plant roots and other plant matter having been observed under the building and it was noted that termites "could use roots or other plant matter to gain, concealed entry and/or to breach existing termite barriers" : Paragraph 5.90. 36. Also on page 11, reference was made to significant amounts of creosote which was suspected as having been "used to control termites and possibly concealed past termite workings" : Paragraph 5.92. Again, on the same page, reference was made to the north wall of the sub-floor of the premises having "a significantly higher risk of concealed termite entry to timber framing of dwelling" as well as a reference to the possibility that "termite damage may have gone undetected to the high side of the sub-floor" : Paragraphs 5.95 and 5.96. 37. Page 12 of the report referred to a stump under the front timber decking as having "evidence of past termite damage" and having been "coated with creosote" : Paragraph 5.98. On the same page reference was made to "decking timbers have ground contact and termites could go undetected" : Paragraph 5.99. On the same page there was a reference to the effect that the "sandstone retaining wall against the base of front wall could provide termites with concealed entry points" : Paragraph 5.101. On the same page, referring to timber floor framing that had been treated with creosote in numerous areas the report stated "It is suspected that attempts have been made to conceal the fact that past termite damage exists" : Paragraph 5.102. 38. Page 12 of the report also made reference to the fact that although actual termite activity was not observed at the time of inspection, past termite damage was in fact observed at the time of inspection and "it is suspected that concealed termite damage may exist and further invasive inspection should be considered to determine if termite damage and/or termite activity exists" : Paragraphs 5.103 to 5.105. Page 12 of the report also made reference to the results of thermal imaging carried out by the pest inspector. It was noted that "Walls had multiple thermal inconsistencies and the "timber joists of rear timbre (sic for timber) decked balcony have deep decay apparent in timber sections when viewed thermally" : Paragraphs 5.111 and 5.112. 39. At page 13 the report stated "Termite damage to the concealed wall frames is suspected" : Paragraph 9.5. In this regard, the pest inspector annotated the report to state that it was not possible to comment upon the condition of the concealed timber wall frames, noting that it was possible that concealed damage to the timber frames may exist and would only become evident if or when linings were removed, or where possible, with the aid of non-destructive inspection equipment to gain access to those areas. 40. Page 14 of the report referred to the kitchen as having cork flooring with evident bounce and creaks of concern, noting that "concealed termite damage is suspected" : Paragraph 14.3. 41. Page 16 of the report referred to the surrounds of the ensuite shower tap spindles needing proper sealing because "Moisture to this location could attract concealed termite damage" : Paragraph 19.9. 42. Page 20 of the report identified timbers attached to the external walls having direct contact with the ground and suggested that this was a site where "termites could go undetected". Attention was also drawn to the dampcourse soil levels at the external wall where "termites could go undetected" and where there was an area of accumulated silt at a drainage place that needed to be cleared because there was "a high risk of termite entry to the timbers of building" : Paragraph 31. On the same page, attention was drawn to the sub-floor timbers needing to be removed because this was a location which "could attract and/or conceal termite damage and/or activity" and where it would be prudent to consider "a termite preventative treatment because if termite activity is concealed in timbers these termites may cause future damage". In addition, attention was also drawn to the limited access available to the high side of the sub-floor due to limited clearance, suggesting "termite damage may have gone undetected at the time of inspection" : Paragraph 35. 43. Page 21 of the report made the observation that "Timber framing has direct contact with the ground and termites could go undetected" and the presence of creosote was noted to have been used, it having been a form of termite treatment. Attention was also drawn to the south/east corner of the sub-floor having damaged timber sections and being in need of repair. Reference was again made to problems with the ant capping where "termites could go undetected." Reference was again made to plant roots and plant matter observed under the building, which could be a means by which termites could "gain concealed entry" to the premises. On that page, attention was also drawn to the timber floor framing having been treated with creosote in numerous areas, noting the suspicion that "attempts have been made to conceal the fact that past termite damage exists" : Paragraphs 35.6 to 35.20. 44. Page 22 of the report identified settlement of the building over time as having occurred and as having been considered to be excessive, leading to the recommendation that the ground stability should be tested by a geo-technical engineer : Paragraph 36.6. On the same page, attention was drawn to the presence of timber garden sleepers and/or timber retaining walls having direct contact with the ground and in places where termite activity could be concealed, as these places would naturally attract termites. On the same page, attention was also drawn to plant growth over the carport area which "could have provided termites with concealed entry to carport timbers" : Paragraph 40.3. 45. Page 23 of the report identified the external timbers of the decking having "ground contact and termites could go undetected" : Paragraph 42.3. On the same page, the stump under the front deck was identified as having "evidence of past termite damage, the stump has been coated with creosote" : Paragraph 42.5. 46. Between pages 25 and 38 of the pest inspection report, there are many photographs of the property with incorporated captions that illustrated the observations made by the pest inspector, and which were detailed in the report. Some of those photographs variously make mention of possible or suspected or undetected termite activity, or the risk of such activity : Pages 27, 29, 30, 34, 35, 36 and 37. 47. In the non-destructive structural pest inspection section of the report, paragraph 54 identified and explained those areas of the dwelling which were either not inspected, or where visual inspection was limited, because of the nature of the access due to its design and construction. 48. Relevantly, paragraph 55, which dealt with visual evidence of dormant/inactive subterranean termites, stated: " 55 Visual Evidence Of Dormant /Inactive Subterranean Termites: 55.1 Termite Damage –Apparent 55.2 Visible evidence of dormant/Inactive termite activity was sighted at the time of the inspection, due to our observation of conditions conducive to termite activity and/or concealed termite entry at the time of our inspection, a real possibility exists that termite damage does exist as documented research carried out in 1982-83 shows that at least 1 in 5 New South Wales properties have a history of termite damage (Hadlington & Gerozisis), if aged termite damage is inactive and dry then current termite detection technology is generally unable to detect this dormant/inactive termite damage ." 49. At page 41, the report stated that there was no visual evidence of current termite activity found at the time of inspection : Paragraph 56. The annotations to that paragraph made it clear that where visual evidence of inactive termite workings and/or damage was located, it was possible that termites may still be active in the immediate vicinity. 50. At page 42 the report outlined the limitations of the inspection undertaken because of covered or exposed but inaccessible parts of the woodwork within the dwelling. On the same page, the report "strongly recommended" an invasive termite inspection due to termite damage having been observed, highlighting the need for a determination of "the full extent of the termite damage and to determine the location of entry points and to endeavour to locate any termites nest." In this regard the report highlighted that "Damage may only be found when wall linings, cladding or insulation are removed to reveal previously concealed timbers" : Paragraphs 56.4.5 and 56.4.6. 51. Page 43 of the report referred to the dwelling being at "a higher than normal risk of possible termite activity at sometime in the future" : Paragraph 57.1. On the same page, it was noted that there were areas in the house that were conducive to subterranean termites : Paragraph 59. In particular, the report stated that all areas "not accessible and/or obstructed for inspection are to be considered as conducive" to termite activity : Paragraph 59.3. 52. Within the 47 sub-paragraphs of paragraph 59 of the report, there was repeated mention of termite related issues ranging from conditions conducive for termites, suspected termite damage, conditions possibly attractive to termites, conditions that may permit termites to go undetected, conditions obstructing visual inspection to detect termites, the potential high risk for termite entry into the timbers of the building, markings consistent with termite trails having been cleaned away from the sub-floor, the past use of creosote so as to control termites and to possibly conceal past termite workings, concealed entry points for termites and observed termite damage. That observed damage was stated to relate to the tree stump located under the front deck. 53. Of particular interest in paragraph 59 of the report were the following matters : " 59.39 Timber framing has had what appears to be creosote applied in numerous areas. It is suspected that attempts had been made to conceal the fact that past termite damage exists . 59.40 It is suspected that concealed termite damage may exist and further invasive investigation should be considered to determine if termite damage and/or termite activity exists. … 59.44 Concealed termite damage to framing of dwelling is suspected. 59.46 Kitchen flooring appears to have concealed termite damage when viewed thermally. 59.47 Walls had multiple thermal inconsistencies ." [ Emphasis added ] 54. Page 49 of the report made reference to a recommendation for a more invasive physical inspection of the house. The report indicated the availability of such an inspection for a fee. The report indicated that there were many limitations to an inspection that was only non-destructive in nature. The more invasive types of inspection were described as involving tapping, testing, forcing or gouging of suspected accessible timbers, including by cutting access holes to relevant structures. That sort of testing required the consent of the owner of the property and involved extra expense, ranging from an extra $600 to an extra $1500, apparently not including any make good costs : Paragraph 62.1. 55. Page 51 of the report indicated that many types of construction styles could not enable the ready detection of termites, as the design of some properties were such that detection of termites by a pest inspector was made difficult, if not impossible : Paragraph 64.8. 56. The report indicated that the visual inspection revealed no apparent borer activity : Paragraph 66 on page 52. The report went on to identify the presence of localised wood decay fungi on some external timbers, some partially unsatisfactory and corroded ant capping, as well as inadequate sub-floor ventilation : Paragraph 67 on page 53, paragraph 70 on page 54 and paragraph 71 on page 55. Overview of exhibits 57. The Woods' exhibits were tendered in the series "A" to "Y". The defendants' exhibits were tendered in the series "1" to "11". 58. The Woods tendered a number of pieces of timber and related structures that had been removed from the house during the course of the post-purchase investigation of the extent of the termite damage. In addition a number of pre and post-purchase photographs were tendered, as were pre and post-purchase pest inspection reports. 59. The Balfours tendered a number of photographs, the Contract for Sale of the property, two pre-purchase pest inspection reports and a list of works undertaken by the plaintiffs since the purchase of the property. The defendants also tendered as Exhibit "10", a piece of timber that was removed by the plaintiffs and which formed part of the plaintiffs' Exhibit "F". Summary of oral and affidavit evidence 60. In the paragraphs that follow I set out my overview summary of the non-expert and the expert evidence. Non-expert evidence 61. My review of the non-expert evidence proceeds in the order in which that evidence was adduced. Mr Lee Wood – first plaintiff 62. The first plaintiff, Mr Wood, stated that he inspected the house before the contract for sale was exchanged on 13 August 2004. Mr Wood believed that he had inspected the house twice before the purchase. He had signed the contract for sale on 11 August 2004, which was about a week after first seeing the house. He stated that he liked the position of the house, its location, the particulars of the house and the fact that it was close to friends who lived in the area. He also agreed that his wife liked the house because of what it had to offer their family. He agreed that before deciding to buy the house, they considered and decided upon carrying out some renovations to it, with the assistance of his father. He swore three affidavits and he also gave oral evidence. 63. Mr Wood is a civil engineer. At the time of the exchange of contracts, he had some 26 years of experience in civil engineering projects as a project manager. In that capacity his work involved him in carefully reading reports on construction-related matters. It emerged by way of background that Mr Wood had some experience of termites, having used preventative termite treatments in the form of termite sprays before July 2004. He stated that he was aware that termites could be difficult to detect, that they ate wood, lived within wood and that they could travel along the stand of a piece of wood. 64. The first affidavit from Mr Wood was sworn on 13 February 2009. That affidavit annexed another affidavit that he had previously sworn on 6 July 2006 in earlier proceedings that he and Mrs Wood had taken against the pest and building inspector who carried out the pre-purchase inspection on the house. The 6 July 2006 affidavit of Mr Wood annexed a series of 4 photographs showing views of timber within the house. The 13 February 2009 affidavit also annexed a builder's plan of the house and 42 coloured photographs of the timbers and structures of the house that are relevant to the issues in the case. There was a further affidavit from Mr Woods sworn on 9 September 2009, which he had prepared in response to the affidavits sworn by the defendants. Mr Wood also gave oral evidence. He was extensively cross-examined. First affidavit of Mr Wood – 6 July 2006 65. In the 6 July 2006 affidavit from Mr Wood, which was prepared for the purposes of pursuing his earlier claim against the pest and building inspector, he set out the background to the purchase of the house from the defendants. Mr Wood said that it was in late July 2004 when he became aware, from his wife, of the house being for sale. After inspecting the house with his wife and with his father, who was a retired carpenter, he obtained a pest and building inspection report and reviewed the detail of that report. His assessment of the report at the time was that it appeared to be professional, well set out and contained a good deal of information that would allow him to come to an understanding of possible faults and repairs required for the house. The report, which numbered 65 pages, was printed in a colour-coded style of presentation. 66. Mr Wood said that from his reading of the report, he gained an understanding, amongst other things, that the inspector had reported that concealed termite damage in the house was suspected. He stated that the manner in which he read the report, by which he saw that there were no references, printed in red ink, to actual termite damage to the house, he assumed that no serious defects or concerns were identified because otherwise, they would have been written up in red, according to his understanding of the style of the construction of the report. He noted that the report had described termite damage to the sub-floor area and suspected damage to the kitchen floor area but that description was given without an indication as to severity of damage. To the extent that the report identified rotting in timber balconies, Mr Wood stated that he did not regard that to be significant, as he had already formed the intention to remove and replace those parts of the timberwork of the house during proposed renovations he had planned. 67. At paragraph 20 of his 6 July 2006 affidavit, Mr Wood set out some references to the places in the pest inspection report where past and possibly concealed termite damage was mentioned. He explained that he assumed from the report that the extent of the termite damage was limited to the sub-floor area of the house, and that it may have extended up into the joists of the kitchen floor. He inferred from this that the non-identification of termite damage to other areas in the house, such as the exposed timber beams, gave him comfort that these elements must have been inspected and found not to contain termite damage or evidence of termite activity. 68. Furthermore, Mr Wood stated that he understood that as termite damage was suspected to be present in the kitchen floor, he expected that some concealed termite damage would have occurred to the timber frame of the house, but as the extent of the damage identified appeared localised, he believed that the extent of any wall damage would, in turn, also be localised. 69. Based upon these beliefs, Mr Wood reasoned to himself that because of his experience in the building industry, and because he intended to himself perform much of the rectification work he had planned, he estimated the maximum budget of $10,000 to cover the cost of materials and labour for the rectification of any termite damage. He and Mrs Wood had also budgeted approximately $30,000 for renovations for a new kitchen, a new bathroom and to repair the termite damage to the lower level floor and some walls. The assumptions behind these budgetary allowances were not identified, explained or explored, and it was therefore not possible to reach any conclusion as to the reasonableness or otherwise of this estimated expenditure. 70. Mr Wood explained that the foregoing reasoning lay behind his negotiations by which the original asking price for the house was reduced from $830,000 to $775,000, which was the contract sum ultimately agreed upon between the parties. 71. Mr Wood stated that after the sale was completed, and after he and his family moved into the house, he commenced renovations in early January 2005. He stated that at that time he found termite damage in the sub-floor joists directly in the centre of the rumpus room and in an area that was not noted in the pest inspection report as having been affected by termite damage. 72. Once he became alerted to the problem of concealed termite damage in the house, Mr Wood then started upon a course of invasive investigation for termite damage. This involved him removing internal walls, timber cladding of beams, and the removal of and refitting of joists. At that stage, he decided to remove the entire ground floor ceiling and associated structures to properly inspect the property to determine the true extent of the termite damage. It was then discovered that the termite damage was extensive and had affected every third joist of the entire first floor timbers. During these investigations, which were extensive, Mr Wood found no evidence of any live termites or any live termite nests. 73. Mr Wood said that in about mid-June 2005, he decided to embark upon a course of tapping the entire exposed timber beam in the lounge or family room of the house. He then tapped all of the beams in the kitchen, main bedroom, entry room, the main roof supporting beams within the family room and the upstairs bedroom and bathroom beams. He said he detected hollow sounds, by which he said he identified the presence of termite damage. He then formed a strong suspicion that all of these timbers were all termite damaged. He said that he then realised that the termite damage had extended from the sub-floor of the house through every level of the structure to the roof. These events led Mr Wood to seek out and confront the pest and building inspector who had prepared the pre-purchase inspection report that he had commissioned. 74. These events led Mr Wood to believe that the termite damage in question had occurred before he had purchased the house. It was those events that led Mr Wood to commence proceedings against the author of the pre-purchase pest and building inspection report. 75. The remainder of the 6 July 2006 affidavit of Mr Wood was directed at matters and issues connected with that earlier litigation against the pest inspector. No evidence was led by the plaintiffs concerning the rationale behind, or the reasons for, or the reasonableness of, the settlement of the proceedings that had been initiated and resolved against the author of the pre-purchase pest and building inspection report. Second affidavit of Mr Wood – 13 February 2009 76. In his 13 February 2009 affidavit, Mr Wood annexed a copy of his 6 July 2006 affidavit, along with a series of 42 printed pages of colour photographs of various aspects of the exposed timberwork within the house, showing different areas and degrees of termite damage. Also annexed to that affidavit was an annotated draftsman's plan of the original building, with various areas of termite damage highlighted by Mr Wood in different colour-coded highlighter markings. 77. In his 13 February 2009 affidavit, Mr Wood again explained the understanding he had gained from his reading of the pre-purchase pest and building inspection report, re-iterating the explanation he gave in his 6 July 2006 affidavit. He also reiterated the course of events by which he discovered the termite affected areas of the house when he embarked upon the course of the renovations he had planned. 78. Mr Wood then went on to detail what he described as four areas of concealment of termite damage to the structures of the house. The first such area was the exposed bedroom beam which supported the roof. The second such structure was the exposed beam in the family room, which ran across and above the windows. The third such area was a rafter in the upstairs bathroom. The fourth such area concerned the veranda joists. Mr Wood gave detailed descriptions of the termite damage to these structures, including cross-references to the photographs that were exhibited to his second affidavit. 79. Mr Wood described a telephone call in which he spoke to Mr Balfour about the termite damage and in which he sought to question Mr Balfour about some details. He recounted his version of a conversation with Mr Balfour, in which he descended into the vernacular, following which Mr Balfour terminated the call. 80. In his 13 February 2009 affidavit, Mr Wood stated that had he been aware of the damage to the bedroom beam, the bathroom rafter, the family room beam and the veranda joists, he would have known that the termite damage to the house was more extensive than that which he believed had been notified to him in the pest inspection report. Mr Wood also stated that if he had been aware of this concealed damage, he would have requested an invasive investigation to determine the full extent of the damage to the property. He concluded by stating that if he had known of the full extent of damage to the property, he would not have purchased it from the defendants. Third affidavit of Mr Wood – 9 September 2009 81. In his 9 September 2009 affidavit, Mr Wood described the work that he had undertaken on the premises since he had sworn his last affidavit. In particular, he described removal of timber cladding that had been affixed to the beams in the upstairs bedroom and in the family room. He had carried out that work on 17 May 2009. 82. In his 9 September 2009 affidavit, Mr Wood set out his specific responses to the 17 April 2009 affidavit of the first defendant Mr David Balfour. In the course of setting out his responses to Mr Balfour's affidavit, Mr Wood annexed 55 prints of coloured photographs of relevant structures in the premises to which he referred in making his responses. Mr Wood stated that this series of photographs was variously taken on May 5, 13, 17, and 6 September 2009. I will refer to the detail of this affidavit following my review of Mr Balfour's affidavit that was sworn on 17 April 2009. Oral evidence given by Mr Wood 83. In the paragraphs that follow I set out a summary of the oral evidence given by Mr Wood. 84. In his oral evidence, Mr Wood was taken through the detail of the work he carried out on the house in removing the cladding timbers and coverings from the relevant points where they had been installed. These cladding timbers were in the upstairs bedroom and the family room. Mr Wood described the removal of the painted filler plug located in the upstairs bathroom rafter. Mr Wood also described the process of removal of the pieces of flooring joists and related timbers located under the house at the abutment point of the front timber deck. Serial photographs of these areas, once uncovered, were largely self-explanatory once this background evidence was understood. In his evidence, Mr Wood related these photographs to the building plan of the house. That plan was located at Tab 2 of Mr Wood's affidavit sworn on 13 February 2009. 85. Mr Wood agreed that he was aware that one could walk into a living area of the house and see no blemish on timbers, yet it could still be possible for the interior of the cladding of the walls to be affected by termites. He qualified his pre-purchase knowledge of termite activity as being minor knowledge. In this regard, he agreed that he knew, before the contract had been entered into, that termites could get into wood and migrate from one piece of timber into another piece in the surrounding area. 86. Mr Wood also agreed that he was aware, before he entered into the contract, that if there was some termite damage in one area of a house, it was quite possible that termites could have migrated and caused damage to some other area of the house. He acknowledged that this could be so despite a walk-through visual inspection giving no indication of the existence of termite damage. He agreed that even though he had inspected the house and couldn't see any termite damage within the house, it was quite possible that the various timber beams inside the walls could have been riddled with termite damage. 87. In this regard, his evidence was as follows: "Q. And so it was quite possible, as far as you were aware, pre-contract, that if there was some termite damage in one area of the house, it was quite possible that the termites could have migrated and caused damage to some other area of the house. A. Correct. Q. And that would all be without anyone walking through the living parts of the house, knowing that. A. That could be. Q. So as far as you were concerned, before contract, that was quite possible. A. Possible, yes. Q. So in other words, it was quite possible, as far as you were concerned, when you first inspected the house, that even though you couldn't see any termite damage inside the house, it was quite possible that the various timber beams inside the walls could have been riddled with termite damage. A. Possible. Q. And you wouldn't have known about it, just by looking at the seemingly unblemished surfaces of the living areas of the house. A. That's why I engaged a pest expert. Q. Yes. So you knew that it was possible, on your own visual inspection, that while you could see nothing, there could be plenty of termite damage to the house. A. That's why I engaged the pest expert, to undertake an inspection for me. Q. It was for that very reason that you retained the pest inspector. A. Correct. Q. And in fact, you knew the reason that you retained the pest inspector was because you knew you couldn't rely on your own visual inspection. A. I relied on his expertise. Q. Could you focus on the question. The reason that you retained the pest inspector was because you knew you couldn't rely on your own inspection. A. Correct. Q. And you knew that an unblemished interior in a house did not mean that the house was free from termite damage. A. Correct. Q. And you knew that it did not mean that termite damage was in a localised area. A. Based on the information given to me by the pest inspector-- Q. No, no. This is pre-pest inspection. Let's just wind it back a minute, okay. Pre-contract, pre-pest inspector, you knew, didn't you, that an unblemished interior in a house did not mean that any termite damage to the house was in a limited area. A. Correct." 88. In cross-examination Mr Wood was taken through the detail of the 11 August 2004 pest and building inspection report which arose from his retainer of the pest inspector who had inspected the house for him. He initially acknowledged that he had read the report carefully as the following evidence shows: " Q. All right. Did you read the report? A. Yes, I did. Q. It was in two parts, wasn't it? A. Yes, I believe. Q. Did you read both parts? A. Yes, I did. Q. Did you read them carefully? A. Yes, I did. Q. Did you read them in their entirety? A. Yes, I did. Q. Did you look at the photographs? A. Yes, I did. " 89. Mr Wood confirmed that he did not take steps to speak with the pest inspector after reading the pest inspector's report. Mr Wood sought to qualify his process of reading, interpretation and understanding of the pest inspection report by reference to the colour-coded format of the report, which provided the reader with different types of emphasis to various aspects of the report. I shall return to these matters of qualification when dealing with the relevant issues calling for consideration regarding Mr Wood's pre-purchase knowledge of termite activity within the house. 90. A good deal of the cross examination of Mr Wood was taken up with questions concerning his interpretation of the content and meaning of the pre-purchase pest inspection report he had commissioned, including the basis for his subsequent decisions and actions concerning the intention to purchase the house after he had read that pest inspection report. 91. In the course of that cross-examination, Mr Wood explained his interpretation of clause 5.107 of the pest inspector's report as suggesting "the house hadn't been affected dramatically by termite infestation". He further explained "There's not the warning signs saying 'you've got damage everywhere'. He couldn't find it otherwise he would have wrote it. I believe he would have wrote it and that's why he identified the only place he had found it was in the tree stump". Mr Wood denied that his explanation of his interpretation of the pest inspection report was not genuine. In denying the falsity of his interpretation, he also denied that his interpretation was tortuous and involved contextual contortions. 92. In explaining his interpretation of the pest inspector's report, Mr Wood placed emphasis upon mention within the report of the suspicion of concealed termite damage rather than actual damage from termite activity. In this regard his evidence was: "WITNESS: I read that report that a building and pest expert would actually identify all the areas of damage or concern so I could actually read them and actually find out exactly where they all are. RAYMENT Q. All right. A. He only identifies in that whole report is the tree stump. Otherwise I ask why hasn't he identified anywhere else. Q. What I want to suggest to you, sir, is that the reason that he included the general comment at 5.105 as distinct from the specific reference to the stump was because he was putting you on notice that this property was termite damaged? A. I can't come to that conclusion based on the information that he's put in the report. Q. And that in fact on a fair reading of it you as an engineer ought to know that if someone has made a general comment like that you should make proper inquiries? A. I read the report and on the basis of what he had actually put in the written word was on the understanding that it had damage in the stump. Otherwise he would have identified it otherwise. Q. It's a bit tortured, your interpretation, isn't it, sir? A. I don't think so. Q. And the reason I want to put to you that it's tortured is because you were trying to explain away in proceedings against the inspector the fact that he put you on notice that this house was termite damaged, weren't you? A. No. Q. And you're in all sorts of contextual contortions to explain your interpretation of the report? A. No. Q. See clause 5.103 didn't give you any cause for concern about your interpretation of clause 4.2? A. He suspects concealed damage. He says a further inspection should be considered to determine if termite damage and/or termite activity exists. So he doesn't-- Q. So he considers-- A. So he doesn't know if it's there or activity has happened. Q. He also doesn't know that it's not there, does he? A. Well, if he doesn't know, I would expect him to tell me otherwise and that's why - that's why I have an expert. Q. In other words, he doesn't know that it's not there, does he? A. I can't - I can't assume for him. Q. He's your expert, sir, isn't he? A. He was engaged by me, yes. Q. And you're the one saying he was misled by my clients' alleged representation, aren't you? A. I'm saying that-- Q. Aren't you, sir? A. I am saying that the pest expert was denied the opportunity to have or inspect various aspects of this building, because of the cladding put against those accessible timbers and had they had the opportunity, he may have come to a different conclusion. Q. Your case is that there was a representation made and it misled you and it misled the inspector, isn't it? A. Correct. Q. In this case here, in 5.103, you have him saying something which is irreconcilable with the representation you say my client has made. A. I don't understand the question, sorry. Q. He is saying that he can't discount the possibility of concealed termite damage, isn't he? A. Correct. Q. He's saying that in order to know, you have to have an invasive test. A. He's suggests an invasive but he has found no other evidence except for the tree stump." 93. When Mr Wood was asked to explain his thought processes that lead him to discount the need for an invasive pest inspection of the house he stated: "Q. Where it says at 5.107 "concealed termite damage to framing of dwelling is suspected", are you able to recall now what your thought processes were that led you to discount the need for an invasive inspection? A. When I go through the report, the pest inspector came to an indication that it was in the sub-floor area, only in the sub-floor area, and possibly in the kitchen floor area. From there, I came to the conclusion, because we were going to renovate that area, that if he couldn't find any damage in those areas, he couldn't find any other damage in any of the exposed timber beams throughout the house, I was of the belief that as he said in his report "one in five homes get affected by termites", the house hadn't been affected dramatically by termite infestation. They may have come, yes, they may have damaged something, but there is no tell tale signs. There's not the warning signs saying, "You've got damage everywhere." He couldn't find it, otherwise he would have wrote it. I believe he would have wrote it and that's why he identified the only place he had found it was in the tree stump." 94. Mr Wood confirmed that pre-purchase, he knew it was possible to have an extreme case of termite damage without the structure in question collapsing. He also acknowledged that, as an engineer, suspected (termite) damage to the framing of a dwelling, as was adverted to in clause 5.107 of the pest inspection report, could be a reason why a structure would be described as not being plumb and square. 95. Mr Wood agreed that because the pest inspector could not find the extent of termite damage in the house, but found indicators of termite activity, namely the tree stump, he had been put on notice that there could be damage inside the framework that the pest inspector could not see. Mr Wood explained that he did not ignore this indication. He stated that he took this into account when he put the price together to make an offer to the Balfours, thus taking on board the risk that there could be damage inside the framework of the house. 96. Relevantly, Mr Wood stated: "Q. You have your expert here saying that he suspects concealed termite damage to the dwelling. You see that. A. I've think I've gone through that, yes. Q. To the framing of the dwelling. A. Yes, he does say that. Q. He actually says concealed termite damage is suspected in many occasions in this report, doesn't he? A. He suspects termite damage in the sub-floor area and then goes about writing a concealed termite damage to the frame. He mainly references the sub-floor area and that of the kitchen floor. Q. Mainly. You say "mainly", sir. Does that mean you acknowledge that there are other areas where he makes a general comment? A. The only areas I can see as the general comment is what you've just read, 5.107. Q. All right. Mind turning over the page. A. To which page? Q. Page 13. A. Page 13, yes. Q. Look at 9.5 A. 9 - yes. Yes. Q. You've got walls not just in the sub-floor area, don't you? A. Yes. Q. You've got walls in every level of the house, don't you? A. Yes. Q. He's telling you here that termite damage to concealed wall frames is suspected. A. Yes. Q. So as far as you're aware, he's telling you he can't discount the possibility that there is concealed wall damage behind the wall frames throughout the house. A. Correct. Q. You want to just consider then for a minute your thesis that he was saying that there was only concealed termite damage suspected to the sub-floor area. A. That was my understanding from the reading of the report." 97. This question of concealed termite damage was examined in some detail. Mr Wood conceded that he had been told about suspected concealed termite damage to the framing of the dwelling, as well as suspected concealed termite damage to the walls and frames of the house. Although he acknowledged that the inspection report made reference to possible concealed termite damage in some of the walls, he stated that he drew the inference that termite damage would be localised to the area identified, namely the sub-floor and the kitchen. 98. Mr Wood acknowledged that he did not think to contact the pest inspector to confirm any of these matters with him. Mr Wood stated that he did not disregard the prospect of termite damage, he simply thought that if there was identified damage, such damage would have been described in the report and it was not. He stated that he believed the damage was localised and although it could have extended out further, there "were no indicators that showed that it went further anywhere else." 99. It became apparent that Mr Wood had taken this view because the termite inspector had not found any damage in the exposed timber beams at the highest point of the house, which is where he understood termites to habitually travel, namely from the ground level to the roof. Mr Wood explained that this led him to believe that termite damage was a localised infestation in the sub-floor and in the kitchen area of the house. When questioned on this further, Mr Wood conceded that when he read the pest inspector's report before he purchased the house, he knew there was a possibility that there was termite damage from the bottom of the house to the top of the house. He acknowledged that he could not have thought that the house was free from termite damage because of the pest inspector's report and findings concerning suspicions as to the presence of concealed termite damage in the sub-floor and kitchen floor areas. 100. Lengthy cross-examination then continued concerning Mr Wood's interpretation of various aspects of the pest inspector's report. The focus of Mr Wood's answers to such cross-examination was the distinction between actual termite damage that was visible, and the emphasis to be placed on the possibility of there being concealed damage due to termite activity. 101. Part of the cross-examination focused on the significance of clause 35.20 of the pest inspector's report. Mr Wood acknowledged that the inspector's report would have given him a cause for suspicion that attempts had been made to conceal the fact that past termite damage existed. In the cross-examination of Mr Wood there was much verbal fencing over the significance to be attached to the word "suspected": "Q. What I've put to you, sir, was that there were a large number of incidences where your inspector suspected the existence of concealed termite damage. A. I don't read that because - what I'm reading here, he is saying he couldn't find termite damage. Otherwise, he was obliged to write in his report that he has found it and this is the location of it. Q. Okay. Let's put it this way. A. He suspects it and he keeps repeating that word "suspect" because of what he has found to date. Q. And you keep ignoring it, sir. A. I'm not ignoring it. I'm reading the word of an expert who's telling me of whether he has found termite damage or has not. He has not found it, except in a tree stump. That's the only place in this whole 65-page report that he goes in - verbatim - and very much detail, one thing: a tree stump. That's where he was categorically certain he found termite damage. Q. Let's return to the proposition. What I'm putting to you is that, on a large number of occasions, your expert expressed the view that concealed termite damage was suspected in this report. Do you agree or disagree with that proposition? A. I agree. Q. Right. As many as 25 times in this report, the expert says that concealed termite damage is suspected. A. I don't know where you get the number 25 from, sorry. You'll find that there's duplication throughout the report in the Pest and the Building section, and they're verbatim. Are you classifying-- Q. You've read this report a dozen times, haven't you? A. Yes. I know - I've read the report because I was required to. Q. You've read it and re-read it and re-read it many times over, haven't you? A. I've read it a couple of times, yes. Q. And you've done that in contemplation of being cross-examined about it? A. Actually, no. Actually, no. Q. All right. If you look at clause 5.102, you agree that that is an expression of the suspicion that attempts have been made to conceal the fact that past termite damage exists. A. It is suspected, yes. Q. Yes. You agree that it's a suspicion. So that's number 4. If you look at-- A. Number 4 of? Q. That's the fourth expression of suspicion? A. Yes. He's suspecting attempts of being - again, he couldn't find any damage, yes." 102. It was clear from the evidence of Mr Wood that he had concluded that he did not need to seek to clarify the pest inspector's report because the inspector "didn't categorically state where the damage was or how bad the damage was, merely suspected" damage. 103. Mr Wood explained his recollection of reading the pest inspector's report in the following terms: "Q. I just want to be clear on that answer. You prefaced it by saying, "Well, yes." Does that mean that you had an actual recollection of reading it or is it an assumption you make? A. Your Honour, I can't recall every specific clause or dot point that's referenced. I can remember sitting down and going through the body of the - sitting down and reading the report on the pretence that I read the front page, I read the third page, the red one - all the different colours. I then read through the body of the reports. I can't recall specifically a clause or a phrase, or a wording, but I read the report to the best of my knowledge. Q. One of the impressions I gained from one of your earlier answers, which I am now outlining to you, sir, that you have an opportunity to address it, is that you read areas marked in red or printed in red as areas of concern. A. It was my major concern because when I go through to page 3, the expert is telling me, "These are - this is how I've rated or scaled my concerns and these are the areas you should actually concentrate and focus a lot of attention on because they are possible issues." So I started reading the report. I first of all go through the building section of the report, see of all those red highlighted areas. Say, what are the major issues I should be concerned about with this house? I go through the building section of the report and I use that. I then go through then the next section through and start reading the summary, the general observations, and then I actually then go into each section of the report in the building section from that." 104. Against the background of Mr Wood's pre-purchase understanding of the potential for termite damage to cause structural problems to a house, and his understanding that termite damage could render a structure dangerous, the following questions and answers reveal the focus that Mr Wood had adopted in considering the report of the pest inspector, as well as relying upon his own understanding of the significance to him of the distinction between suspected termite damage and actual termite damage : "Q. Okay. But you know that termites can cause structural problems in dwellings. Surely as an engineer you knew that. A. Yes. Q. So you knew that it was possible that termites could have rendered the structure dangerous, didn't you, before you purchased the house? A. Possibly, yes. Q. So when you read this section were you worried? A. Of? Q. The fact that-- A. Of termite activity or termite damage? Q. Termite damage. Were you worried? A. I read the report. Yes. Q. 55.1 says it's apparent? A. Correct. Q. Without qualification? A. Correct. Q. Without specificity? A. Correct. Q. Weren't you worried? A. That's why I read the rest of the report in the pest section for, to find out where the pest expert found the damage. Q. Did you read 55.2? A. Yes. Q. That's in red, isn't it? A. It is. Q. "Visible evidence of dormant/inactive termite activity was sighted at the time of inspection. Due to our observation of conditions conducive to termite activity and/or concealed termite entry at the time of our inspection, a real possibility exists that termite damage does exist." Do you see that and it continues on? A. Yes. Q. He is talking about the whole house there, isn't he? A. He's talking about areas possibly yes of the house. It could have extended into areas that he could not see, yes. Q. At this level of generality, as far as you knew when you read this report he could have been speaking about the entire dwelling, couldn't he? A. He was putting me on notice that termites could have gone through the portions of the house, yes. Q. Whole house? A. Possibly, yes, and that's why I referred to the body part of the report to actually find where he found damage. Q. So the body part of which report? A. Of the pest part of the report. Q. Which part gave you comfort? See, your affidavit doesn't say anything about reading the pest report, does it? Does it? A. I've said earlier on that I read both - both reports." 105. The evidence continued: "Q. You're there told by your expert that the dwelling is considered to have a higher than normal risk of possible termite activity? A. Yes. Q. Do you see that? A. Yes. Q. Immediately underneath that you're told that there's no evidence of previous termite treatment? A. Yes. Q. Did you put the two together and wonder if the place was riddled with termites? A. No, I did not. Q. So you're told by your expert that it's got a higher than normal amount of risk and that there's no evidence of previous termite damage? A. That's correct. Q. And your evidence to this court is you weren't worried? A. No, I didn't say I was not worried. I then looked at the report and Mr Coellen could only suspect to find damage in the subfloor space or suspect to find it in the kitchen floor." 106. Mr Wood acknowledged that the effect of parts of the pest inspector's report was to draw to the attention of the reader the possibility that there were various aspects of the house that could provide an environment that was conducive for termites. 107. At the time of purchase, Mr Wood knew of the possibility that termite damage could extend into the frames of the house. The basis of that knowledge was the pest inspector's report. However, Mr Wood stated that because the pest inspector's report did not identify any accessible areas as being damaged by termites, he formed the view that any such potential for termite damage was limited to the areas the pest inspector had identified, which included the framing of the dwelling. Mr Wood agreed that the pest inspector's report had placed him "on notice of the potential of damage suspected in the frames." In considering the pest inspector's report, Mr Wood stated that he understood that the inspector could not see behind the walls or in the sub-floor space, and therefore he had been placed on notice of possible concealed damage, because the inspector could not see where termites might have travelled. Mr Wood agreed that he had been placed under notice of suspected termite damage in the framing of the house. 108. When Mr Wood was asked about what he had gained from his first reading of the pest inspection report, and in particular the annotation next to the second photograph on page 37 of the report where it was stated "Concealed termite damage to framing of dwelling is suspected", he interpreted the reference to suspected termite damage to mean, that the inspector was "not confident" about there being suspected damage as he had not found other visible evidence of termite damage to the accessible timbers in the house. When Mr Wood was asked what significance he placed on the caption to that particular photograph, he stated that he read the parts of the report that were printed in black ink and interpreted this style to mean that there weren't structural concerns. He explained that when he read through the remaining part of the report, which was printed in red ink, he focused on the fact that the inspector had only found suspected damage, and had not identified any actual damage in the house, or damage to any of the accessible timber beams in the house. 109. Mr Wood stated he therefore concluded from the pest inspection report that "infestation may have been limited to a localised area and Mr and Mrs Balfour had caught the damage, had it treated, it didn't go any further from within the sub-floor or possibly to the first floor" because the pest inspector didn't identify any further damage beyond those areas. Mr Wood conceded that in such circumstances, the pest inspector had to suspect that damage could have gone into the walls because he was not able to see behind the walls. Mr Wood stated that he placed some significance on the pest inspector's expression of "concealed termite damage" and that it was of some concern to him, including as a safety issue, but he was not concerned about the extent of termite damage because the pest report was quite specific in that context and he believed the purpose of the report was "to find significant defects" and the report never identified any such defects, only suspected defects. 110. Mr Wood denied the suggestion that he was offering a "contorted construction of the report" in order to assist his claim in these proceedings. 111. Mr Wood explained that he moved into the house in about November 2004 and in about January 2005 he started to do some clearing of the downstairs areas in preparation for renovation work. In the course of that work he discovered some termite damage in the framework of the downstairs area. He then embarked upon a more extensive course of cutting, dismantling and investigation of the timbers of the house, including tapping on the beams in the house. 112. I have summarised the detail of his investigation work at paragraphs [320] to [328] in my consideration of Issue 1. 113. Mr Wood described the extent to which he had been carrying out renovation and alterations to the house and to the garden of the premises, including replacing the rear balcony and making preparations for the installation of an aboveground swimming pool. He said he had also replaced beams in the kitchen area and in the main bedroom. He said he had taken up the floor and had replaced joists including in the rumpus room and in the workshop area. He had also carried out some concreting in the backyard. A detailed list of the work that he had undertaken on the house appears in Exhibit "11". That list, which comprised some 80 items, was explored in some detail in the cross-examination. 114. Mr Wood was challenged in his view as to structural concerns over some of these 80 items on his list of works. It was put to Mr Wood that he was not concerned about structural adequacy of these beams until he had embarked upon renovating his house. He stated that until the cladding from the beams had been taken off, no one had fully ascertained the extent of the termite damage. He stated that he had proceeded according to expert advice that he had obtained. He agreed that he had not yet removed the termite damaged beam in the family room. He stated that it had been propped up and stated that it had formed a part of these proceedings. He denied a suggestion that he was running this case in order to fund the continued renovation of his house. 115. Mr Wood agreed that he understood that his case was based on the proposition that because the Balfours were silent about the concealment work that they had carried out on the house, they were said to have committed a fraud. 116. Mr Wood agreed that on 11 August 2004 he had signed the contract for sale of the property, including the Special Conditions part of the contract. He stated that he could not recall his solicitor taking him through the terms of the contract. In the course of cross-examination, Special Condition 3 of the contract for sale was read to Mr Wood. He acknowledged that the existence of Special Condition 3 was a clause of interest in these proceedings. He acknowledged that this clause indicated that in purchasing the property, he was relying only on his own enquiries and not upon any representation made to him by the Balfours. Mr Wood indicated that the pest inspection report was part of his own enquiries. 117. When Mr Wood was taken to the substance of the case he was seeking to make against the Balfours, he acknowledged that the case was based on the proposition that the Balfours, by their silence, allegedly misled him into making the purchase of the house. 118. Mr Wood explained that if the Balfours had been aware that the beams that were underlying the cladding had been affected by termites or were structurally affected, this ought to have been disclosed to him prior to the sale. He further explained his view that the Balfours should have actually advised him or any potential purchaser who had taken out a contract for sale, of the inherent defects within the building of which they were aware. When that view was explored with Mr Wood, he explained that the kind of defects which he thought did not involve an obligation to disclose certain matters, for example, such as cracked gyprock, a broken door, a broken tile, a blocked sewer and those types of issues. In contrast he thought the termite issues that had been covered up, and which could not be found using reasonable inspection, or by asking experts to find them, such as damage behind walls, foam filling and the like that a pest inspector engaged to inspect the property would not be able to find, ought to have been disclosed. 119. Mr Wood further stated that he further believed that if the Balfours had been uncertain as to what should have been disclosed, he felt that they should have made enquiries to find out about such matters. He said he believed this contended obligation extended to disclosure concerning a beam known to have been repaired, and where the vendor knew something had been concealed and was inaccessible from view on inspection. When asked to reconcile that view with the acknowledgement in the contract for sale to the effect that he had agreed not to rely on anything said to him by the vendors, he stated that the contended obligation ought to be extended in this way because the vendors knew about the damage that had been repaired or covered up, and which he was not able to find, and which experts could not find. 120. Mr Wood explained that his view was based on the proposition that because the pest inspector he had engaged had advised him of suspected damage to beams, he formed the belief that the beams were not damaged. The reasonableness of that belief was a matter that featured prominently in the submissions of the parties. 121. Mr Wood agreed that he became aware of the existence of a report from Copes Pest Control as a result of a copy of that report having been left on the kitchen bench on the day of the settlement for the purchase of the house. That report became Exhibit "7" in the proceedings. 122. Mr Wood agreed that he understood that it was part of his claim that the Balfours in some way misled the pest inspector, and that the pest inspector should have found the discoverable damage in the accessible beams. I infer from the explanation given by Mr Wood, that what he was seeking to convey was that because the damaged beams had been covered, the fact that they were damaged and covered should have been disclosed, so that in the circumstances, some form of inspection could have been devised and achieved by the pest inspector. 123. Mr Wood acknowledged that the pest inspection report drew attention to the fact that an invasive physical inspection of the house was available to him if required, and was recommended. He agreed that his expert advised him that the more invasive test or inspection should be considered. He agreed that he did in fact consider this, but, on his reading of the pest inspector's report, he rejected the recommendation. He did so because he did not think such a course was warranted or required. 124. Mr Wood was asked to acknowledge that the pest inspector had made two recommendations and that he had ignored both of them, namely, to obtain a geotechnical inspection and an invasive pest inspection. Mr Wood again explained that he did not think that these steps were required. He explained that he had taken proceedings against the pest inspector who had carried out the pre-purchase inspection of the house because he believed that pest inspector had failed to identify damage to accessible timbers of the house, and had also failed to advise him of this fact in his report. Mr Wood further explained that when he had read the pest inspector's report, he was operating under the assumption that none of the beams had been damaged or compromised, and he believed that the damage was in the sub-floor space. It appears that this was the basis for his view that a more invasive physical inspection was not required or justified. 125. Mr Wood agreed that if he had accepted the recommendation to have a more invasive physical inspection carried out, it was likely that something of the extent of the termite damage in the house would have been uncovered, and in those circumstances, he would have been in a position to either decide to proceed or not to proceed, with the purchase of the house. 126. Mr Wood made the point that because neither he nor the pest inspector had been able to ascertain the damage inside the beams, this gave an entirely different picture of the extent of the termite damage in the house, and it explains why the house had been more badly damaged than he had been led to believe. He explained further, that because the pest inspector could only inspect the beams and come to a conclusion on an inspection of the accessible beams in the house, he wasn't able to determine the existence of any damage that may have been behind the cladding. He stated that he did not believe that the pest inspector could be held liable or responsible for that part of the damage. 127. Mr Wood explained that if the pest inspector had advised him that the accessible beams in the house were damaged, he may have requested an invasive inspection, but he didn't do so. He further elaborated and said that if he had been advised that the timber beams were damaged, he "would have requested an invasive test inspection." 128. Mr Wood was cross-examined about his opinion concerning the physical appearance of Exhibit "K" which was an assembly of part of a timber joist that he had removed from under the house, and which is shown in photograph 28 of the photographs annexed to his first affidavit. The core theme of that part of the cross-examination was the topic of concealment. In this regard Mr Wood gave the following evidence : "Q. You think that that was a perfect act of deception, do you? A. Yes." 129. When Mr Wood was asked about the circumstances in which he had removed the sections of timber that comprised Exhibit "K" and which he had previously thought was an assembly with attached chicken wire designed and located in order to prevent vermin from entering an under-house cavity in the wall, he stated : "A. I never came to any conclusion that there was damage there. I never would have thought there was damage there, until I actually started pulling this and with dismay and horror I find someone would actually do that." 130. Mr Wood agreed that if he had known about this area of work on the house he would have asked the vendors some questions about it. I shall return to this evidence when stating my findings after analysing the evidence of Mr Balfour. 131. In the context of agreeing that it was his understanding of the case he was seeking to make against the Balfours, that they had allegedly fraudulently covered up something which was not truly a repair, in order to trick him into purchasing the house, he agreed that he did not "give… a moment's doubt" that perhaps the work in question, no matter how badly performed, was nevertheless intended to be a proper repair, which was the contention of the Balfours in the litigation. 132. Mr Wood stated that his decision to buy the house was based on information that was contained in the 65 page pest inspection report he had commissioned. He said that because the report contained advice that termite damage had been found to be present in a tree stump, it was suspected that there was damage in the sub-floor and in the kitchen floor area. He said it was his understanding that because damage was suspected, it must have been minor damage because the author of the report couldn't actually say anything about the extent or the location of any such damage. Mr Wood stated that he had assumed such suspected damage was minor. It is clear from Mr Wood's evidence, that it was this assumption that had led him to also assume that the suspected damage had not extended throughout the house. Mr Wood stated that he drew great confidence from the report because it didn't identify any of the beams as being damaged. It was because he believed that these beams were not damaged that he "took the inference that the damage hadn't gone far from the floor through up into the structure, otherwise he would have identified it, and that would actually have given me a completely different picture of the house." 133. Mr Wood re-iterated that if he had understood the report to mean that the house was badly affected by termite damage, he would not have bought the house. Mrs Lesley Wood – second plaintiff 134. In addition to her oral evidence, the second plaintiff, Mrs Wood, swore two affidavits relied upon by the plaintiffs in the proceedings. The first affidavit was sworn on 6 July 2006. That affidavit was relied upon by the plaintiffs in their pursuit of the earlier proceedings they brought against the pest inspector. The second affidavit, sworn by Mrs Wood on 15 February 2009, annexed a copy of that earlier affidavit. 135. The 6 July affidavit sworn by Mrs Wood set out some relevant background description of the circumstances of the decision to purchase the house. Mrs Wood had inspected the house first and then later inspected it again with her husband. They also had an inspection with the father of Mr Wood because he was a retired carpenter and they envisaged carrying out some alterations and wanted an idea of the feasibility of their ideas for the house before making a commitment to purchase it. On a recommendation made by friends, they engaged the pest and building inspector, who promptly provided a report. Mrs Wood left the consideration of much of the resulting report to her husband. She had some concerns over some termite damage that was mentioned in that report and stated there was a lot in that report that she did not understand. The effect of the pre-purchase conversations she had within her family concerning the house was that they had a perception that the general maintenance issues and termite damage under the house could be fixed between Mr Wood and his father and they decided to proceed with the purchase for the sum of $775,000. 136. The 15 February 2009 affidavit sworn by Mrs Wood confirmed the truth of the content of the affidavit sworn on 6 July 2006. In addition, Mrs Wood also described some further matters. These were first, a reference to the circumstances of the discovery of termite damage in the house during some undescribed renovation work carried out by her husband in about April 2005, such damage being in addition to the underfloor damage that had been known at the time of purchase as a consequence of the pre-purchase inspection report, and secondly, the effect of a telephone conversation that Mrs Wood had with the first defendant, Mr Balfour. 137. The effect of the conversation concerning termite damage involved Mrs Wood asking Mr Balfour questions about some patched wall area that was thought to be an inspection point for termite activity. Mrs Wood's account of the conversation attributed to Mr Balfour the explanation that there was nothing to worry about, as what she was referring to was a wall patch required to repair damage caused by John Balfour's flag collection. Mrs Wood recounted some further discussion in which she stated that Mr Balfour reassured her there was nothing to worry about as the termites that had been encountered some 6 or 7 years previously, had been sprayed and eradicated after a nest had been located under the carport. 138. In her 15 February 2009 affidavit, Mrs Wood also described how, several months after that conversation with Mr Balfour, her husband had uncovered some damage to a beam in another bedroom, which then led to the discovery of further damage to a rafter in the upstairs bathroom, the main beam in the family room and damaged joists to the front and rear balconies. 139. In her 15 February 2009 affidavit, Mrs Wood stated that had she been aware of the further damage as described in the preceding paragraph, which she described as being "concealed by the defendants," she would have requested the pest inspector to investigate and determine the full extent of the damage to the property. She also stated in that affidavit that had she known of the full extent of the termite damage to the property, she would not have purchased the property from the defendants. 140. In the paragraphs that follow, I set out a summary of the oral evidence given by Mrs Wood. 141. Mrs Wood agreed that she had liked the house very much, it was in the same suburb of Kareela where they had previously lived for 10 years, and they had a lot of friends in the area. She agreed that by the time it was decided to obtain a pest inspection report, she had a strong interest in the house. She agreed that she was not personally in a position to determine whether the house had termite damage and she agreed that she knew an unblemished interior was not indicative of whether there was termite damage to the house. She said that she had not thought about whether there could have been termite damage to hidden parts of the house. She agreed that a pest inspector had been retained so that reliance could be placed upon his inspection rather than upon her own inspection. 142. Mrs Wood confirmed that on 10 August 2004 she had arranged for the pest inspection to be carried out on the following day. The resultant report was dated 11 August 2004. Her signature on the contract for sale was appended on 11 August 2004 with a proviso concerning the pest inspection report. The contracts were then exchanged on 13 August 2004. 143. Mrs Wood described having felt somewhat overwhelmed by the Koelewyn report when she received it. She regarded it as having the appearance of being a very professional report. She said she did not read it in its entirety. She said that she had briefly read the summary pages. She did not comprehend all of what she had read and she stated that she had greatly relied upon her husband's understanding and interpretation of the report. 144. Mrs Wood agreed that if before the purchase she had read the portion of the pest inspection report that stated "Concealed damage to framing of dwelling is suspected" this would have caused her some concern. In this regard it was clear from her evidence that she would have relied upon her husband's reading and interpretation of the pest inspection report in any event. 145. Mrs Wood was taken to some of the detail within the pest inspection report and asked to consider the content. Her impression from her limited reading of the report was that there was visible evidence of "dormant, inactive termite activity." Mrs Wood confirmed that her reading of the pest inspection report was influenced by its colour-coded structure by which, on her reading, the portions printed in red seemed to be more important, although she agreed that she had read the summary pages. She said she regarded a lot of the issues raised as being maintenance and prevention issues. She stated that she discussed her concerns over the content of the report with her husband who allayed her concerns, by which she meant that the level of her concern had then reduced. 146. Mrs Wood agreed she was aware that there was a pre-purchase suspicion of termite damage to the kitchen and sub-floor of the house. When some of the detail within her affidavit was explored in cross-examination she made some explanatory corrections, by which she changed the emphasis from termite damage under the house to suspected termite damage under the house. It was plain that any understanding she had acquired concerning any problems with the house derived from her discussions with her husband on the subject. She gained the impression from those discussions that any suspected damage would not cost much to fix. She said that her understanding was that the only termite damage evident on the property was in relation to a tree stump under the front balcony of the house. 147. Mrs Wood explained that her method of coping with the stress of living with the day to day problems caused by the unfinished building works in the house was to just concentrate on dealing with matters to do with the family and the children and to entrust to her husband the tasks associated with the problems concerning the structure and repairs to the house because she had wholehearted confidence in his thorough approach to the project. 148. Mrs Wood confirmed that she was excited to be moving into the house and to follow through with the plans for renovating parts of it, including the kitchen, bathroom, and to open up parts of the house by taking out some walls. In this regard she was reliant upon her husband's extensive experience as an engineer as well as the abilities of her father-in-law who was a carpenter. 149. Mrs Wood could not recall that the pre-purchase pest inspection report had contained a recommendation for an invasive pest inspection to be carried out. Mrs Wood also confirmed that according to her understanding, neither she nor her husband had contacted the author of the pest inspection report or the Balfours before the purchase of the house. Mrs Christine Doyle – a neighbour 150. Mrs Christine Doyle, the owner of an adjoining property, was called as a witness in the case for the plaintiffs. She stated that on a date she now could not recall in July 2004, from the vantage point of her front garden, she recalled overhearing part of the conversation with someone whom she assumed was a pest control tradesman. The other party to that conversation was said to be Mrs Balfour. She could recall hearing something about there being some trouble or a problem with pests in the premises. She had refreshed her memory from a statutory declaration that she had prepared in her own handwriting at the request of Mr Wood in late 2005. Her evidence in that regard was along the following lines: "Q. Mrs Doyle, I'm asking you to recall in July 2004, do you recall an incident that occurred in your front garden at your house? A. Yes, as per my stat dec. Q. You haven't got the stat dec in front of you at the moment and without the reliance upon the stat dec for the moment-- A. Okay. Q. –could you tell the court what that incident was? A. Okay. I just overheard part of a conversation between the Balfour's and a tradesperson, who I identified as a pest control person by his van. There was a logo on his van and the conversation was along the lines of that there were troubles and I didn't hear the whole conversation. I was just passing by and I remember being concerned that perhaps there would be trouble in our property as well and that's basically it. Q. Did you hear any words that were spoken, or the effect of any words that were spoken, by either of the people on the other side of the-- A. I did. But I only really recall them by re-reading my stat dec, which I gave. Q. What were those words? A. Can I read from my stat dec? Q. I'd prefer you didn't. If you can recall the words without reliance upon your stat dec, I would prefer if you can. HIS HONOUR: You don't have to remember them verbatim. But if you can give us words to the effect; it would be preferable if you could put it in the first person, such as he or she, identifying the person said what. WITNESS: Okay. Well, I believe it went – it's over – it's about six years ago, but I believe that Mrs Balfour was saying to the pest inspector something along the lines of do we need to notify someone and he was saying no, you're not required to do so ." 151. In my view, although I am satisfied that Mrs Doyle was doing her best to truthfully recount her recollection of the matters on which she was called to give evidence, nevertheless, her evidence was, by its limited detail and the lack of specificity within its content, of very limited, if any, probative value to the issues calling for decision in this case. Mr David Balfour – first defendant 152. The first defendant, Mr David Balfour, swore a single affidavit on 17 April 2009. He also gave oral evidence and he was extensively cross-examined over a number of days. Affidavit of Mr Balfour – 17 April 2009 153. Mr Balfour's affidavit outlined the history of work he had carried out on the house, the events leading to the sale of the house, and his responses to the affidavits of Mr and Mrs Wood. Exhibited between Tabs A to L of his affidavit, Mr Balfour annexed copies of a series of 46 coloured photographs showing various aspects of the exterior and interior of his former house. Those photographs were taken from Mr Balfour's memory books of photographs of the house, having been taken prior to the sale of the house to Mr and Mrs Wood. 154. In his affidavit, Mr Balfour stated that over the 24 or so years of his residence at the house from Easter 1980, at various times, he had carried out maintenance, improvements, and repair work on the house. 155. Mr Balfour explained that in about 1982-1983, he decided to extend the balcony at the front of the house so that it could be used as a deck. In the course of this work he noticed what he then described as some dry rot on a timber beam that was beneath the deck, which was at that time, narrow. He described how he extended the deck by cutting back the timber beam where dry rot had been found and attaching another piece of timber beam to extend the deck. At that time he knew to apply creosote in order to prevent wood rot. He applied creosote in this area to try and prevent what he thought was wood rot from returning. He also placed some vermin mesh over the area to prevent other pests from entering under the house. It was this assembly of work that Mr Wood had removed during his subsequent work on the house. That portion of the removed assembly became Exhibit "K" in these proceedings. 156. Mr Balfour stated that following these events, having found what he understood to be dry rot, he went under the house and tried to locate any other areas that may have been similarly affected. He stated that he did not find any such further areas, but sprayed creosote in a number of places under the house, thinking that this would prevent dry rot. He did so based on what he understood to be common knowledge at the time that exposed Oregon timber should be treated with creosote. 157. Mr Balfour described how, over time, he regularly performed maintenance work on the house. He maintained an ample workshop with tools and equipment in conjunction with his hobby concerning making model aircraft and other activities, and was therefore well equipped to carry out maintenance and repairs himself. His profession as an aircraft maintenance engineer also made him well placed to carry out his own maintenance and repairs. 158. Mr Balfour stated that in 1995, whilst under the house, he first found some termite damage. He called in a pest control company to deal with this. He believed this company to have been Steve Copes Pest Control. He also stated that company performed a treatment of the property, the details of which he did not exactly recall, but understood this to have involved drilling holes and the spraying of chemicals. 159. Mr Balfour recalled that in 1997 he called the same pest company to carry out further treatment on the property by placing chemicals into certain areas for termite prevention. He said that he recalled being asked to dig a trench for this treatment and he recalled the pest controller used an organo-chloride chemical which was poured into that trench. 160. In respect of the period 1999-2002 in the house, Mr Balfour described his subsequent encounter of problems associated with termite damage in three separate areas of the house. These areas were the upstairs bedroom, the timber beam over the windows in the family room, and a piece of timber in the upstairs main bathroom. 161. With regard to the upstairs bedroom, which was formerly occupied by his son, Mr Balfour explained that in about 1999, when helping his son tidy-up his upstairs bedroom, he started to sand back the timber beam in preparation for filling the holes in it and repainting the beam in order to restore damage from earlier decorations. Mr Balfour stated that whilst sanding, he noticed a piece of split timber that differed in its appearance to the rest of the damage on the beam. He prodded it and found termite damage. He estimated that the hole to be about the diameter of a pencil and about 5cm in length. He said he then decided to attach a timber beam which was cut to length and glued to each side of the existing beam, using liquid nails as the chosen method of fixation. He said he then painted it the same colour as the beam had previously been painted, namely, mission brown. Mr Balfour's reasoning behind this approach to dealing with the problem was that he had assessed the damage as being so minor that it was not worth doing anything else to the beam. He stated that thereafter, his son John continued to occupy the room until he moved out of the home in 2002. 162. With regard to the beam in the family room, Mr Balfour stated that whilst in the year 2000, during the time when the Olympic Games were in Sydney, he was carrying out some painting work in the house and had intended to paint the timber beam that ran across the western side of the family room. He had taken the curtain track down for this purpose, and on removing the track he noticed that there was a split in the timber. He investigated this by prodding and digging into the timber, and when he did so, he noticed there was some termite damage to this beam. He said he then called the pest controller whom he had previously used, and following the inspection by the pest controller, it was determined that there were no active termites, so the approach that was taken was to apply arsenic dust to the area. Mr Balfour said he had observed the pest controller pump a small amount of arsenic dust into the damaged area of the beam. Mr Balfour stated that the pest controller had advised him to fill the void in the beam with expanding foam to prevent the entry of spiders and insects into the house. 163. Mr Balfour stated that he followed the advice given by the pest controller and removed the eaves from the outside to gain access to the timber beam, following which he filled the gap with foam and allowed it to dry before covering it with a 4cm thick piece of milled timber beam which had been counter-bored and fitted with recessed bolt heads to fix it to the existing beam. He said he then replaced it and repainted the timber beam on the inside the same colour as it had previously been painted. He explained that he took this approach because the family room had a timber theme and protruding screws and bolts would have appeared out of place in such a scheme. 164. With regard to the upstairs bathroom, Mr Balfour stated that whilst painting the house, he noticed a small split in the timber in one of the beams of the upstairs bathroom. He said that he recalled the damage had been quite small and he then decided to fill the area with a small amount of foam or silicone, and he then continued painting all of the beams, as he had previously planned. 165. With regard to the timing of the decision to sell the house, Mr Balfour explained that his children moved out of the house in February 2002. Thereafter his brother-in-law Alan Green and his two daughters came to live in the house in May 2002 and they stayed there for about seven months until about December 2002. Mr Balfour explained that he retired from his employment with Qantas on 1 April 2002 and towards the end of 2003, he and his wife decided that they should move permanently from their house in Kareela to Albury. In the lead-up to that decision they had been staying in Albury for periods of up to six weeks at a time, to be with their daughter and their grandchildren. Having made the decision to sell, Mr Balfour stated that they then placed their house on the market for sale, in about January of 2004. 166. Mr Balfour stated that in preparation for the sale, he painted the internal doors with white enamel to freshen up their appearance as they had yellowed over time. He stated that a new carpet was also laid in the lounge/dining room and main bedroom areas not long before they moved out of the house. 167. Mr Balfour stated that in early 2004, his agents had advised that there were buyers for the property. He said that on or about 3 February 2004, those buyers arranged for a pest inspection of the property. He said that he met the pest inspector, which he now knows to have come from the company Themen & Associates. Mr Balfour stated that he provided access to the house for the pest inspector so that he could carry out the inspection. He said the real estate agent was present during the inspection. Mr Balfour stated that at that time, he was not aware of any recent damage that may have occurred to the property, the last time he had made any repairs was in about 2000, as has previously been described. 168. With regard to this particular pest inspection, Mr Balfour stated that he recalled being asked whether there had been any termite damage in the past. Paragraphs 63 and 64 of Mr Balfour's affidavit stated: "63. … I didn't really know anything that had happened past 2000. I remembered that from my dealings with the pest controller that I used years ago there was some damage to the floor and the rear left side of the house. I told the pest inspector all that I could think of at the time. I also showed the pest controller how to get under the house. I then let the pest controller do his job. 64. That pest inspector did not report to me or identify any problem areas. I kept out of the pest inspector's way while he was there. I did not see the report or hear from that pest inspector again." 169. Those particular purchasers exchanged contracts for the sale of the property, however, after a further inspection, the contract for sale was rescinded during the cooling off period. The property was left on the market for a while longer, but in the absence of any further expressions of interest, it was taken off the market until about July 2004, when it was placed in the hands of another agent for a more active approach to marketing for sale. Mr Balfour stated that in the period from July 2004, he and his wife were not staying at the house as they were staying with their daughter in Albury, and agents were showing prospective purchasers through the property. 170. Mr Balfour said he became aware that Mr and Mrs Wood had expressed interest in purchasing the property but they wanted to pay $750,000. Eventually a negotiated purchase price was agreed at $775,000. Mr Balfour explained that he did not have any contact with the Woods prior to exchanging contracts for sale. Thereafter, he said that the agreed settlement date for early December 2004 was moved forward and he moved his furniture and effects out of the house on 20 October 2004. At that time he and Mrs Balfour were continuing to stay in Albury pending readiness to move into another house in that area. 171. In answer to the claims made by the plaintiffs, Mr Balfour stated that he did not intend to mislead anyone by doing any of his repairs to the property or in relation to the property during the process of sale. He said that he carried out the repairs he had described, (other than the painting and the carpeting that had been effected shortly before sale), so that he and his family could continue to live in the house. 172. In response to the affidavit of Mr Wood, Mr Balfour stated that he recalled receiving a telephone call on his mobile telephone whilst driving the car. He did not specify the date on which he received this call, he recalled Mr Wood was yelling down the phone and was being rather abusive on a topic to do with the house but Mr Balfour could not remember the precise words being yelled at him. He said that he then hung up on the caller because he felt he was not going to get a word in the conversation. He said he did not hear from the Woods again until June 2008, when he received a letter of demand from the solicitors for the plaintiffs. 173. In response to the affidavit of Mrs Wood, Mr Balfour stated that he recalled Mrs Wood had rung him not long after he had left the house in Kareela. He recalled that the conversation was amicable but he did not remember having a conversation with her about a "patch on the eastern wall". Mr Balfour further stated that he did not recall whether in that conversation he had discussed termite damage with Mrs Wood. Oral evidence of Mr Balfour 174. In the paragraphs that follow I set out a summary of the oral evidence given by Mr Balfour. 175. Mr Balfour firstly corrected a typographical error in his affidavit as to the timing of the work involved in carrying out extensions to the front deck. This was corrected from 1980 to about 1983 onwards. He said this work proceeded over several weeks. 176. Mr Balfour identified his qualifications as comprising a certificate in aircraft maintenance engineering. He had completed his apprenticeship in that trade in 1966. Thereafter, he worked in his trade for about nine years and then entered the management stream of aircraft maintenance engineering for Qantas. 177. Mr Balfour confirmed that whilst he lived at the property, he maintained a very well equipped toolshed and workshop. He confirmed that he carried out most of the maintenance work on the house himself. 178. In cross-examination he was taken to a number of issues. Principally, these comprised the history of his work on the house, especially in connection with the repair and replacement of timberwork in the house and his experience of termite activity in the house. 179. It appeared from Mr Balfour's evidence that his knowledge of the activities of termites and the damage that they could cause, increased over time. It is convenient to deal with Mr Balfour's awareness of timber problems in the house in the chronological order in which such awareness arose. 180. After moving into the house in 1980, Mr Balfour stated that in 1983, he noticed what he understood to be some dry rot damage in a timber beam beneath the narrow deck at the front of the house. He said he noticed such damage in a particular beam on the far western side of the front deck but said there was also dry rot evident in other areas. He said he then addressed the problem that he understood to be dry rot by cutting back the timber in the areas where such damage was manifest. He said that he recognised the manifestation of dry rot by the appearance of spongy and wet timber decking, which he understood to be an indicator of that problem. 181. It is relevant to note that Mr Balfour's knowledge of the phenomenon of what he understood to be dry rot in timber was different in 1983, compared to his knowledge of such matters at the time when he gave his evidence in these proceedings. 182. Mr Balfour stated that he addressed the problem of dry rot in the timber beam underneath the front deck by cutting back timber affected by dry rot and by attaching a new beam to the remnants of the previous beam that he had cut during the course of extending the front timber deck. In this regard, he was shown the assembly of timber and chicken wire that comprised Exhibit "K" and he acknowledged that this was a construction which he had carried out on the house, but he had no actual recollection of all the details of this work. 183. Mr Balfour agreed that at the time he carried out this work, and at that time he applied creosote to that area, he did so with the intention of preventing the spread of what he had understood to be dry rot. He said that until he was shown the photographs and this exhibit, he had totally forgotten that this was termite damage that he had seen, and which he had addressed some 25 years earlier. Apparently, there had been no interrogatories pursued on this issue. He explained that whilst at the time he thought that the damage to the timber was due to dry rot, he now realised that this was termite damage. He stated that at the time he had carried out the described work, he applied creosote to the repairs he had effected, in order to prevent dry rot returning. 184. Mr Balfour stated that when he performed this work, the position in which the work was located was not obvious to be viewed due to overlaying decking timbers. However, he said it was not his intention to conceal this work from anybody. He said that he applied a timber covering to the end grain of the cut piece of joist in order to tidy up what he described as "a very ugly end of a beam". 185. Mr Balfour stated that the chicken wire that had been applied to the area was to keep vermin from gaining access to the premises from under the house. He also said that he sealed the end of the beam with silicone in order to prevent the entry of moisture at that location because it was located in a very moist area. 186. At trial, Mr Balfour agreed that the damage that was evident in the timbers that were tendered in evidence, was in fact termite damage. The effect of his evidence was that it was not until 1995, when he had arranged for his first pest treatment of the house, that he first realised the damage in question was due to termite activity. He traced the subsequent history of termite treatment and related issues in the years 1983, 1995, 1997, 1999 and 2000. In relation to the work he had undertaken on the house, he acknowledged that what was shown in the photographs in evidence, was work that he "would have done". 187. Mr Balfour agreed that in 1983 he had cut off the beams that were now recognised as having been termite damaged. He was asked to recall the details of these events, but said he had difficulty in doing so because the events had occurred some 25 years earlier, and it appeared that some of his evidence was based on assumption rather than actual recollection of carrying out the work. 188. In connection with the work carried out in 1983, he agreed that with the exception of a pest inspector, he would not have expected anyone crawling around on their hands and knees looking at the end of the timber beam which he had cut, would necessarily see the silicone he had used to fill the end of the beam, which he said was placed there to keep out moisture, vermin and spiders. He explained that with regard to the repaired timbers under the deck, he did not coat these timbers with paint because the decking timber would have covered this area. He said that when he had attended to the works in connection with that beam, he did not seek to investigate the distance or depth of the damage to that beam. He stated that he had painted creosote on the timber and on the silicone he had placed in that location in order to prevent further damage. He said that it had not been painted on, with the intention of misleading anybody. 189. Mr Balfour agreed that the damage he saw in 1983 was subsequently recognised to be termite damage and not damage from moisture. He explained that he had applied silicone to the beam because the house had a moisture problem across the front deck near the front door. He explained that the maintenance work he performed on the deck involved him in taking up and replacing two or three decking timbers at a time when those timbers had become cracked. He said that after he applied the silicone he also treated the area with creosote because he believed this to have been good practice at the time. He said that he did so at a time when he believed that there were no active termites in the house. He had not observed any active termites at that time and he said he therefore felt he did not need to contact a pest controller for advice or assistance. He said there was only ever one occasion when live termites were found on the property. This was in the damp formwork timbers that were left laying on the ground under the house, and which had been left in that position by the original builders. 190. Mr Balfour said that in 1995, in the company of the pest inspector, he had found live termites on the premises. Before the live termites were found, he had found some damage at the lower ground floor level, which had then led him to call the pest controller. 191. Mr Balfour was asked questions about his awareness of the ability of termites to travel up the surface of brick walls and across other surfaces. He stated that at the time, namely 25 years earlier, he had very little if any knowledge of termites. He was asked as to why, in 1997, he had asked Copes Pest Control to return to the house following the earlier termite treatment carried out to the house by that company, 2 years earlier, in 1995. He said that he had called them back because he had been carrying out some inspection work himself under the house and he had found some termite mud trails and did not know whether these were original or new trails. He found these trails as part of an inspection programme he had been carrying out himself on an irregular basis. 192. Mr Balfour explained that in 1999, whilst carrying out some repair and maintenance work in his son's bedroom, he found evidence of termite damage, which he believed to be "old workings". This evidence obviously related to the beam in that bedroom. 193. Mr Balfour was asked questions about how it came to be that he was able to produce a copy of a 1995 report from Copes Pest Control and not other reports. He explained that he no longer had other reports in his possession. Neither party called upon any subpoenas that may have been issued to Copes Pest Control on this issue, however, I draw no adverse conclusions from that circumstance. 194. Mr Balfour was asked questions about the telephone conversation that Mrs Wood described as having taken place with him. He said he recalled a very friendly and amicable conversation with her in which he said he vaguely recalled her asking if he had known of termite damage in the roof, to which he had replied that he had no idea of roof damage because of the cathedral ceilings. He said he had no recollection discussing a patch on the east wall, as was stated by Mrs Wood. He said he had no recollection of speaking about his son's flag collection and the damage that had been patched up, as was recounted by Mrs Wood. He agreed that it was possible that Mrs Wood might have had such a conversation with him, but he said he had no actual recollection of such a conversation. 195. In relation to the termite nest found under the concrete of the rear veranda in 1995, Mr Balfour recounted how the house had been treated for termites fairly extensively both in 1995 and in 1997. 196. Mr Balfour described how, in 1999, whilst endeavouring to clean up the timber beam in his son's bedroom prior to painting, he assessed the damage to the surface of the beam as being very localised. He said that after a limited attempt at sanding, he made no attempt to fill holes in the timber work, and instead changed his original plan from filling those holes and repainting the timber, to applying timber cladding to the beam in his son's bedroom. In doing so, he said that at the time, he did not know about swarm cuts caused by termite activity, and said he had only learned of this through hearing the expert evidence of Mr Clarke, whose evidence he described as "most illuminating". 197. Mr Balfour denied any knowledge of there having been a termite swarming event in the location of his son's bedroom in 1997. He denied undertaking the cladding of the beam in his son's bedroom for purposes other than repair. He stated that it was his intention to restore the external appearance of the beam by cladding. He said that in the course of undertaking this work, he had no idea as to how badly affected the timbers were, until the work was underway. In this regard he gave the following evidence : "Q. Mr Balfour, if your intention was to simply restore the surface of that beam, why is it that you attached timbers that extend past the bottom of the beam? A. I believe that it looked better. If I was to have the timber planks butted up at the bottom, you would see two distinct lines along the bottom. I thought it was untidy. It looks a bit better if it just overlaps, and it would also match beams in other parts of the house." 198. Mr Balfour said that in carrying out the described work, he wanted to improve the appearance of the beam, in order to match it with other beams in the house. He stated that repairs to the beam in his son's bedroom were only intended as a cosmetic repair. 199. Mr Balfour stated that the only reason he carried out repairs to be beam in his son's bedroom was in order to cover the surface imperfection that he had found on the beam when he discovered that it had been affected by termite damage. 200. Mr Balfour stated that with regard to the beam in the family room, in 2000, he noticed a defect in the timber of that beam and he recognised this to be termite damage. Mr Balfour stated that he spoke to the pest controller about this damaged beam and said he was advised to fill the void in the timber with expanding foam in order to prevent the entry of spiders and insects into the house. He denied using expandable foam in the hope of being able to effect a cosmetic repair to the termite damage. He explained that as he was intending to place a heavy beam over the top of the existing beam in the family room, any use of foam to fill the void in the original beam would not have been visible from inside the family room. He explained : "I just thought it was good practice to fill such a void." 201. Mr Balfour stated that he regarded the beam in the family room as requiring a substantial repair rather than a cosmetic repair, which is why he set about placing another beam over the original beam in the family room. Although he agreed that he took no steps to determine the structural integrity of the beam he had repaired in the manner he had described, he nevertheless considered it to require a substantial repair, and he believed the work he had carried out, had comprised such a substantial repair. 202. Mr Balfour was taken to the relevant events of August 2004. He agreed that prior to that time, he had some experience in the house concerning previous damage from a termite nest. He also agreed that he knew about termite mudding and the distinction between active and old termite damage. He argued that he also knew, in August 2004, that termites could travel through timber beams in a house. He also agreed he knew these things in 1999 when he clad the upstairs bedroom beam. That acknowledgement extended to knowing that by covering a termite damaged beam with cladding, a pest inspector would not be able to see the damage that had been covered by such cladding. 203. With regard to the damaged beam in the family room, Mr Balfour agreed that before he had foam filled the void in the beam and before he had clad the beam, that he knew it had been badly damaged by termite activity. He said that he believed that by bolting another timber beam onto the full length of the original beam, he was providing some rigidity to the beam. He agreed that he took no independent structural engineering advice in relation to that activity. He said that when he bolted the cladding timber onto the original timber beam, he was not aware that the bolts had gone through a void. He said that he had drilled the holes in the timber himself, and in that process he had not detected any voids. 204. Whilst acknowledging his own engineering background as an aircraft maintenance engineer, Mr Balfour did not claim any special structural engineering qualifications, and believed that what he was doing was "okay" and that it constituted "a genuine repair." He agreed that as a result of cladding the beam in the fashion that he had undertaken, he had effectively concealed from a pest inspector the visible damage that he had seen on the beam before it was clad. He clarified his use of the word "concealed" to mean hidden from view. Mr Balfour stated that at the time he clad the beam in the family room, it was not his intention to prevent a pest inspector from seeing termite damage to the beam. 205. Mr Balfour stated that he was not present at the house when Mr Koelewyn came to the house to carry out his pest inspection on behalf of Mr and Mrs Wood. He also stated that he was not present at the house when Mr and Mrs Wood attended the house for their inspection of the premises. 206. Mr Balfour was asked questions as to whether he could recall placing the cladding beam over the underlying beam in the family room. He stated that at the hearing, some 10 years after the event, he could not recall anyone helping him with the task nor could he recall how he achieved this task. When he was asked to explain how he thought it could have been possibly achieved, he postulated that it could have been propped up at one end, then lifted at the other and then lifted again from either end. 207. Mr Balfour was asked questions about the split rafter that he had noticed in the upstairs bathroom in about 1999. He said that he recognised this damage when carrying out some decorating work at the upstairs level. He said that he recognised the damage in question to be termite damage and he said that he then filled and painted over it with matching paint to match other exposed timberwork in the house. He described this damage as an isolated hole, with no other damage to the beam. He said after he investigated this, he decided to fill the hole. He stated that he believed the filler to have been a silicone-based acrylic filler. 208. Mr Balfour was asked some questions about the prospective purchasers who had attended to inspect the house in February 2004. He stated that the prospective purchasers came with a real estate agent. He also stated that when a pest inspector came to the house to carry out an inspection on behalf of those prospective purchasers, he gave the inspector full access to the house so that the inspector could prepare what Mr Balfour believed was a comprehensive report for those intending purchasers. He said that he left the inspector to his own devices to carry out his inspection but agreed that when asked a question, he told the inspector that he was not aware of any recent damage that may have occurred to the property. He understood the time frame of three to four years, but not five years, as being recent. He stated that when that pest inspector came to the house in February 2004, a particular conversation took place as the pest inspector was trying to get under the house. He explained that when asked the question, he had told the pest inspector all that he could think of at the time concerning past damage. He said that this conversation took place over the course of a few seconds and he had not escorted the inspector around the house nor did he have anything like a long conversation with him. 209. Mr Balfour agreed that in February 2004 when he told the inspector all that he could think of at the time of the inspection concerning termite damage, he was aware of a number of incidents that had arisen in relation to termite damage in the house in 1983, 1995, 1997, 1999 and 2000. However, he reiterated that at the time, during the short conversation he had with the pest inspector, he told him all that he could think of with regard to damage to the house. Mr Balfour stated that when he swore his affidavit in April 2009, there were aspects he could recall of a conversation he had with a pest inspector but could not remember the precise terms of the conversation. That pest inspector was not called by either party to give evidence of the terms of any such conversation. 210. Mr Balfour agreed that he didn't volunteer information to that pest inspector and had only answered the questions that were asked of him. In this regard, in cross-examination, he denied his account of events had been made up at court on the day he gave his evidence. He stated that he had no further conversations with the pest inspector. He explained that at the time of his brief conversation, he had not thought to tell that pest inspector of the damage he had ascertained to have affected the family room beam in the house as he had not been thinking along those lines during the course of the time during which the pest inspector was present at the house. 211. Mr Balfour described the house as being a fairly large house, spanning over three levels with five bedrooms and a guest area downstairs. He agreed that in about 1999, it was apparent to him that it would not be long before he and his wife would consider downsizing their home. The house was built on a rather steep slope and there were some 28 stairs within the house over the three levels within it. He agreed that at some stage his wife was becoming frustrated with the steps, but did not agree that she was having difficulty with the steps within the house. He agreed that there was a distinct possibility that within a time span of between 5 and 10 years from 1999, it was contemplated that the house may be sold. He acknowledged that in 1999 he was aware of the possibility of selling the house within the next 5 to 10 years. 212. Mr Balfour said he had managed to secure an early retirement from employment in 2002 as a result of an internal restructure within his employer's organisation. 213. Mr Balfour agreed that in 1999, he was aware that purchasers of properties customarily obtained pre-purchase building and pest inspection reports. He said he was also aware of this in 2004. He said that he was aware, in 1999, that a pest inspector and building inspector would be looking for evidence of damage to the house, including termite damage. He agreed that between 1995 and 2000, at a time after he had ascertained that termites had been in his house, he was concerned about that fact. He agreed that this was the reason why he had engaged Copes Pest Control to deal with this problem. He also agreed that in 1999, when he clad the beam in the upstairs bedroom with timber, the effect of this was to hide termite damage from view on that original beam. He also agreed that the work undertaken on the beam in the family room had the same effect of hiding the termite damage to that beam. 214. Mr Balfour, agreed that in 1999, recognising termite damage had occurred to the upstairs bedroom beam and to the beam in the family room, he decided that rather than go to the expense of replacing those beams, he would instead carry out cosmetic repairs. In this regard, when he was asked whether he was aware, in 1999, that if a potential purchaser had found the termite damage which he had covered by those cosmetic repairs, such a purchaser may well not buy the property. He stated that the prospect of this occurring had not entered his mind. 215. Mr Balfour agreed that he knew, in 1999, that termites had travelled through timbers in the house and that they generally entered a house from ground level. He also agreed that if termite damage was found in an upper level of the house, they could only have got there by coming up from a lower level. He also agreed that the determination of whether a timber beam had structural damage, or voids within it, could be simply ascertained by tapping on the outside of the beam, the assumption being that if something was hollow, it made a resonant sound when tapped. 216. Mr Balfour agreed that he was aware when he clad the upstairs bedroom beam and the family room beam in 1999 and 2000, that beforehand, these beams had been damaged due to termite activity. He agreed that the cladding had the effect of concealing the termite damage. He did not agree that he knew, in 2004, that the pest inspector engaged by the plaintiffs would carry out a tap test on the beams that he had clad. 217. Mr Balfour was asked some questions about his awareness of the pest inspector who undertook inspection of the property in February 2004 for the prospective purchasers who were interested in buying the property at that time. The reports that emanated from that inspection which was carried out in February 2004 were tendered as Exhibits "V" and "W". He stated that he could not recall the pest inspector, Mr Strongfield, attending his property to make a pest inspection in July 2004. He agreed that he became aware that an inspection had been carried out by Mr Strongfield but he did not remember the name of the person who carried out the inspection. He did not remember the inspection taking place. He assumed that he was at home at the time but had no direct memory of this. Neither did he have any recollection of his wife speaking with Mr Strongfield in the manner described by Mrs Doyle. He denied that Mr Strongfield said to him words to the effect that he didn't have to disclose termite damage to any potential purchaser. He said he did not remember paying for the report of Mr Strongfield. 218. Mr Balfour stated that after the sale to the prospective purchasers fell through, in early 2004, he took the house off the market for a few months as there appeared to be no interest in the house. He changed real estate agents and whilst the house was off the market he said that he thought it would be a good idea to get another pest inspection report to make sure the house was clear of termites. He stated that he did this for the information of the purchaser. It was common ground that he did not give a copy of the resultant report from Mr Strongfield to the Woods until after the settlement of the transaction. When asked about this issue, he said he hadn't really thought of giving them the report beforehand. He stated that he left the report at the house for them because he thought it was of no further use to him after the house was sold, and that those persons may be interested in the report and its results. He agreed that he had not given the report to the Woods prior to entering into the contract for sale of the house. He said he had not thought about passing it on to a potential purchaser through his agents. There was no obligation on him to do so. He explained that he had never thought about this and was mainly concerned to ensure that he was not likely to have any "nasty surprises" if a purchaser found termites in the property. 219. Mr Balfour identified 2 photograph albums being his memory albums of the house before it was sold. These were tendered in evidence and were marked as Exhibits "X.1" and "X.2". 220. In re-examination, Mr Balfour denied that in carrying out the described work to the house, this being work on the veranda, the upstairs eastern bedroom and the family room, that he did so with the intention to deceive anybody. He also denied that in carrying out the work, it was his intention to deceive anyone about the extent of termite damage that had been occasioned to the house. He denied he had turned his mind to the idea of selling the house at the time he was carrying out those works on the house. He stated that he carried out the work to maintain the amenity of the house for his family and for himself. He stated that at the time of the work, they were living in the house. He said he had planned to continue living in the house at that stage. Mrs Judith Balfour – second defendant 221. Mrs Balfour's affidavit was sworn on 17 April 2009. Her affidavit stated that Mr Balfour carried out regular maintenance work around the house after they moved into it after Easter 1980. In her affidavit, she stated that she could not recall being present when pest inspections or treatments were carried out at the house. She said she had not paid much attention to what may have been fixed at any particular time. 222. Mrs Balfour described the history of the living arrangements in the house. The family moved in shortly after Easter in 1980 and continued living there. Thereafter, in February 2002 their son John Balfour moved out. In the same week their daughter Kim moved out. She said at that stage they had no intention of moving out of the house. Between May 2002 and December 2002 her brother Alan Green and his two daughters came to stay in the house with them pending changes to their living arrangements. 223. Mrs Balfour noted that her husband had retired from his work in April 2002. At the end of 2000 she had a period of leave without pay, from her work as a teacher. This was apparently because she did not accept a transfer to a remote location. Between 2001 and 2003 Mrs Balfour was engaged in some casual teaching assignments. She stated that in 2003, she and her husband had decided to move from their house. At that time she noticed that she was starting to have difficulty with the steps in the house, which were some 28 in number. She and her husband decided to downsize their residence and move closer to their daughter who lived in Albury. 224. Mrs Balfour stated that the house was placed on the market in early 2004. She stated that the only preparatory work for the sale of the house was to paint the inside of the doors and to lay new carpet in the lounge / dining area and in the main bedroom. 225. Mrs Balfour stated that she was not at home when the first prospective purchasers arranged for a pest and building inspection to take place. She also said that she was not at home when the Woods had arranged for their pest and building inspection to take place. Neither was she at home when the Woods inspected the house themselves. She stated that the settlement was originally planned for December 2004, but this was brought forward to November 2004, and she and her husband moved out of the house on 20 October 2004 in order for them to travel to Albury. 226. Significantly, Mrs Balfour said she did not remember having "many" conversations with pest inspectors because her husband usually dealt with such matters. She could not recall having any conversation with any particular pest inspector about termite damage to the front of the house. 227. Mrs Balfour was cross-examined on some aspects of her affidavit. She confirmed that she had not paid particular attention to what particular repairs or work her husband was carrying out in the house at any particular time, however she recalled seeing what was described as minor termite damage. 228. Mrs Balfour acknowledged that she had seen some wood splits in the beam in her son's bedroom. She was shown some photographs of the beam in question and indicated she was confused as the photographs of the beam show more extensive damage than that which she remembered. At the time she first considered the damage and was told of the nature of the damage by her husband, she did not know it was termite damage. She had presumed it was termite damage, and unless she had been told, she would not have interpreted it as such. She did not have a good recall of the events of being told of the existence of the termite damage. 229. Mrs Balfour stated that she recalled her husband repairing the beam located at the front of the deck very shortly after they had moved into the house. 230. Mrs Balfour did not have a recollection of Copes Pest Control coming to the house in 2000. Similarly, she could not recall a pest inspector coming to the house in 1995 or 1997. She said that on these occasions she probably wasn't at home and said it was highly likely that she was at work. She stated that by July 2004 she was no longer working full-time but could not remember a pest inspector from Copes Pest Control attending the property on or about 15 July 2004. She did recall her husband arranging a pest inspector to attend in July 2004 but had no recollection of the pest inspector being in attendance. 231. Mrs Balfour had considered the suggestion made in the evidence of Mrs Doyle to the effect that she had overheard a snippet of a conversation between Mrs Balfour and a pest inspector and stated that she had no recollection of the suggested conversation ever taking place. Specifically, when she was taken to the terms of that alleged conversation, she could not recall saying to the pest inspector words to the effect "I suppose we should notify someone." Mrs Balfour could not suggest why Mrs Doyle would give such an account of the conversation to which she had been referred. She stated that Mrs Doyle had never approached her or had never spoken to her about the question of termite damage or any concerns over termite damage. Mr John Balfour – eldest son of the defendants 232. Mr John Balfour is the eldest son of the defendants. He is a former police officer and now works as a police and military consultant for the film and television industry. His affidavit was sworn on 13 April 2009. He stated that during the years before 1999 when he occupied his room in the house he had a system of hanging flags and caps on a string across he timber beam in his bedroom. He described how, in 1999, he pulled down these decorations and decided to re-decorate his room but this required repairs because of nail and screw holes that had been applied to the timber beam that went across the room. There were also sticker remnants on this beam. 233. Mr John Balfour stated that in the course of preparing to sand and paint the timber beam in question, his father had found and had pointed out to him some termite damage evident on the beam. He recalled the beam being clad by the affixing of glued cladding timber and then being painted the same colour as the previously exposed beam. Mr Balfour moved out of the house in 2002 when he completed his training as a police officer. 234. Mr John Balfour was cross-examined on aspects of his affidavit. He confirmed that when he lived in the upstairs bedroom of the house he had fixed speakers and a dowel rod to the timber beam in that bedroom from which he had hung a flag and cap collection. He had drilled a hole of approximately 20mm in thickness into the timber beam for that purpose. He described having also driven some nail and screw holes into that timber beam as well as applying stickers to that beam over the time he lived in the house. He said that at some point in 1999 these were all taken down and the beam was cleaned. He said that in the course of these events Mr Balfour had commenced to sand back the timber when he found what appeared to be termite damage. 235. Mr John Balfour recalled his father pointing out some splitting of the timber beam in his bedroom. He was unable to recall the location of the split some 11 years after the events in question. He was shown a series of photographs of the beam with the cladding removed. He had not participated in the process by which the cladding had become affixed to the beam and could not comment on the glue residue shown in the photographs. He denied the suggestion that there were stickers that had previously been placed on the beam in question. Mr John Redding – a neighbour and cousin of Mr Balfour 236. Mr Redding is a cousin of the first defendant, Mr Balfour. His affidavit was sworn on 14 April 2009. He stated that in about 1981 he had moved into the downstairs granny flat located within the Balfours' house, where he remained living until about October 2003, when he moved to live in the property situated across the street from the home of the Balfours. 237. His recollection was that at around the time he had moved from the home of the Balfours to the house across the street, he observed Mr Balfour was carrying out work that had the effect of extending the deck at the back of the house. 238. His affidavit also stated that he had recalled a passing conversation with Mr Balfour on the subject of termite damage at the house at a time which he placed to be about 15 years before he swore his affidavit, which indicates this to have occurred at around 1984. He stated that he had not personally seen the termite damage that had been the subject of that discussion. His affidavit also recorded an observation he had made concerning the presence of a pest controller drilling holes at the house and apparently applying some chemicals. Mr Redding's affidavit also stated that shortly before the Balfours had moved, he was told of their intention to do so on account of wanting to be closer to their daughter living in Albury. 239. Mr Redding was cross-examined on some aspects of his affidavit. He confirmed that some 10 or 15 years previously, he had seen a pest inspector at the Balfour home drilling holes near the carport area. He was cross-examined about a conversation he had with Mr Balfour concerning a termite nest in the sub-floor of the carport. He said that he could not recall the mention "of those sort of words" but he recalled mention of termites having been found. He took no particular note of the event, but as a consequence, he thought that he should have his own place checked. He did not agree with the proposition that Mr Balfour had told him that live termites had been found at the site. He recalled that in the particular conversation under consideration, Mr Balfour had said something to the effect that "We've got some termites." Ms Kim Balfour – daughter of the defendants 240. Ms Kim Balfour is the adult daughter of the defendants. She is a retired police officer. Her affidavit, which was sworn on 8 April 2009, was not the subject of cross-examination. She had lived at the house between 1980 and 2002, at which time she moved to live in Albury. Her evidence was that during the Olympic Games held in Sydney in the year 2000, her father, the first defendant was carrying our repair works to the timber beam in the family room in the house. 241. These unchallenged observations assumed some importance concerning the assessment of the credibility of aspects of the testimony given by Mr Balfour and Mrs Balfour. Mr Nick Rubbi – a neighbour 242. Mr Rubbi, an engineer, lives at the property that adjoined the property that was formerly owned by the Balfours, and which is the subject of these proceedings. His affidavit, which was sworn on 5 February 2009, was not the subject of cross-examination. His affidavit annexed a statement that he had prepared on 5 October 2005 and which set out his knowledge at the time concerning his knowledge of termite activity at the home of the Balfours, as well as knowledge of repairs to the premises that were carried out by the Balfours. That statement had been prepared at the request of the Woods. 243. The statement from Mr Rubbi was obviously based upon conversations he had with the first defendant, Mr Balfour, over the "3-4 years" before 5 October 2005. Some aspects of the statement also appear to be based upon Mr Rubbi's own observations as to pest control work that had been undertaken at the property. That work related to the smell associated with the use of creosote on the timbers of the premises, admissions concerning the presence of a termite mound underneath the house, termite activity under the carport slab, the termite treatment of the house by drilling of timbers, the application of chemicals to the timbers and to the grounds to treat termites, and admissions concerning the presence of termite activity in the timbers of an upstairs bedroom. 244. The significance of this evidence is, its relevance to the timing of these events, namely at an imprecisely identified time somewhere in the 3 to 4 years prior to 5 October 2005. Mr Alan Green – brother of Mrs Balfour 245. Mr Green, a train driver, is the brother of the second defendant, Mrs Balfour. His affidavit, which was sworn on 14 April 2009, was not the subject of cross-examination. He described how, in about May 2002, at a time when his own house had been sold, he and his children lived at the home of the Balfours for an unspecified time. 246. The substance of his evidence was that he had made a number of observations concerning timberwork in the house. The first such observation was that work on the front timber deck of the house had been completed at some time during the 1980's. The second observation was that the timber beam in John Balfour's former room which was where he had stayed, had been changed by what I interpret to be timber cladding over what had been the original beam, and that the room "had been painted and fixed well before" he had moved into the room. 247. These unchallenged observations assumed some importance concerning the assessment of the credibility of aspects of the testimony given by Mr Balfour and Mrs Balfour. Expert evidence 248. The only expert evidence that was adduced in the proceedings was commissioned on behalf of Mr and Mrs Wood. This evidence was in the form of affidavits that annexed the reports of the respective experts, namely from a pest inspector, a builder, a civil engineer and a valuer. That affidavit evidence was augmented by oral evidence. Mr Shane Clarke – consultant pest inspector and controller 249. In the paragraphs that follow, the opinions from within Mr Clarke's pest inspection and building reports are summarised. 250. Mr Clarke prepared two expert reports concerning termite infestation of the property. His first report was dated 27 September 2005. This was addressed to the solicitor who formerly acted for the plaintiffs in connection with their claim against the pest inspector who prepared the pre-purchase inspection of the property on 11 August 2004. His second report was dated 31 August 2009. These reports were annexed to Mr Clarke's affidavit sworn on 10 September 2009. Mr Clarke attended to inspect the premises on three occasions, namely 3 July 2005, 14 September 2005 and 11 August 2009. 251. Mr Clarke was an impressive witness whose evidence thoughtfully reflected the depth of his knowledge and experience of the activity, habits and behaviour of the termite species coptotermes acinaciformis, the species with which this case was concerned. 252. Mr Clarke was asked to assume that there had been no termite activity detected at the premises since the purchase of the house by the Woods. He had also assumed that no treatment of termites had taken place in the house since the purchase. He also assumed that no termites had been detected as a result of monitoring systems placed in the grounds and around the house since the purchase. 253. The opinions of Mr Clarke focused upon three areas of timberwork in the house. These were the exposed beam in the upstairs bedroom, the exposed beam in the family room, the upstairs bathroom timbers and the joist timbers of the external front veranda or deck. Mr Clarke included numerous demonstrative photographs with arrowed descriptive text inserted to highlight matters arising within his commentary. He concluded his report with a statement to the effect that the addition of timber cladding to the original timber beams in the living room of the house, the upper bedroom and the front patio/deck would have prevented a pest inspector from detecting termite damage to those areas concealed from view by the cladding. 254. With regard to the termite damage to the exposed beam visible in the upstairs bedroom, Mr Clarke noted that this beam had previously been clad with timber that had been removed shortly before his inspection. His opinion was that the cladding in this area would have prevented the discovery of damage to the original beam until the cladding timber had been removed. He stated that the cladding timber had effectively concealed the termite damage to this beam. 255. With regard to the beam in the family room, Mr Clarke stated that it had all the appearance of a normal timber beam. He said that upon inspecting or sounding the beam, no evidence of the condition of the original beam beneath the cladding would have been detected through the normal means of inspection. He proffered the view that the cladding effectively concealed the original beam from view to a timber pest inspector. 256. With regard to the upstairs bathroom, Mr Clarke noted that the beam in question had been filled with silicone and painted over. He observed that silicone had filled a void in the timber beam caused by a termite attack. He also observed other residue of termite activity in that area after removal of the cladding. 257. With regard to the external front veranda joist beams, Mr Clarke examined a number of timbers, which were said to have previously formed part of the decking attached to the front of the house. He observed that damage to these parts was consistent with termite damage. He stated that this damage had occurred to the original timber before the affixing of the covering timber. He proffered the view that the material used to fix the beam to the original beam had penetrated into the termite galleries, which indicated to him that these galleries existed before the affixing of the covering timber. When he examined another timber joist he also observed termite damage, and visible residue of termite activity. He expressed the opinion that someone had carried out "repair work" to the joist, including by the use of liquid nails, which had penetrated the termite galleries thus demonstrating that the affixing of the cladding had taken place after termite damage had already occurred. He also observed that silicone had been used to conceal the termite galleries and that the silicone in question had been applied after the termite damage was already in existence. 258. In the paragraphs that follow the matters of clarification that emerged from Mr Clarke's oral evidence are summarised. 259. He explained that if termite activity was noticed in one location in a building, then from the viewpoint of a pest inspector's perspective, it is advisable to make a thorough search throughout the entire building for termite activity. He agreed this principle held good to the extent that if an infestation has occurred at or above ground level of premises, all of the upper floors and roofing frame should be subjected to thorough scrutiny. 260. Mr Clarke agreed that even in the event of a full inspection, termite activity may be very difficult to detect, even to the trained eye. He also described the capacity of termites to extend their tunnels over rocks and exterior surfaces in their journey from timber to timber. He described the extreme but rare possibility of a home built over a termite nest having its timbers eaten by termites to the point of demolition within two years. 261. Mr Clarke agreed that the closer a building was to the ground the higher was the termite risk. He also agreed that the higher the exterior level of ground proximity around the building, whether it be soil, pavers or garden beds, the greater was the risk of termite activity. He also agreed that the more steep the slope of a block of land, the greater was the risk of termite activity. He also agreed that all tree stumps within a 50m radius of the building required investigation for the presence of termite colonies. 262. Mr Clarke explained that it took some 5-7 years for a termite colony to reach maturity. He described how these colonies started, developed and matured. 263. Mr Clarke agreed that termites may at times be extremely difficult to find, even to the experienced observer. He agreed that even in houses where timber beams appeared to have an unblemished finish, one could not assume the absence of concealed termite activity in such timbers that were concealed from view. This was stated to be the basis for additional investigations, such as invasive tests, that are on occasions recommended by termite inspectors. 264. Mr Clarke stated that when he first inspected the subject premises in 2005 he observed the presence of a deck in proximity to the house, the steep sloping block, a stump under the deck and he concluded that there was potential on this block for termite damage to occur. He concluded that there were plenty of nesting sites for termites on the block. He also indicated that the suburb of Kareela was an area that was renowned for termite activity because of the prevailing geomorphic conditions and vegetation. 265. Mr Clarke agreed, after viewing the series of 46 pre-purchase "memory" photographs of the house that were annexed to the affidavit of Mr Balfour, that the timber construction of the house revealed some scope for hidden termite damage within the concealed timber structures shown in those photographs. He confirmed that termite damage was an ever-present risk in domestic dwellings. He confirmed that in the circumstances he would have recommended an invasive inspection that would have meant seeking the required consent of the owner: "A. Well, there's obviously a lot more timber in this house that's concealed than isn't concealed, and so any pest inspector would recommend invasive inspection, whether or not they found any moisture or termites, simply because there's so little timber accessible for inspection compared to what is there. The problem is that, you know, the architects of the 70s and 60s and 80s have got a lot to answer for because there are so many houses with these conditions and this is perhaps why so many houses get termites." 266. Mr Clarke also agreed it was a known phenomenon that whilst some parts of the timbers of a house would become subject to termite damage, at the same time, some parts of those timbers would never be touched by termites. He agreed that this was something that was somewhat mysterious to those who studied and understood the behaviour and activity of termites. Mr Anthony Capaldi – consultant builder 267. Mr Capaldi inspected the premises on three occasions at the request of the solicitor for the plaintiff. The dates of those inspections were 7 January 2009, 9 January 2009 and 10 February 2009. He then prepared a report dated 13 February 2009. That report was annexed to his affidavit sworn on 16 February 2009. 268. Mr Capaldi was asked to inspect the premises in order to provide his opinion and comment concerning whether or not the termite damage would have been visible during a standard pre-purchase pest inspection, whether or not termite damage was visible due to timber sections being fixed to the structural members, and whether or not the termite damage to structural timbers had been concealed rather than just repaired. Mr Capaldi was also asked for an opinion on the likely cost of repairs of the termite damage. The report of Mr Capaldi was prepared after he took into account a number of reference documents. These were listed and numbered 1 to 15 at paragraph 1.5 of his report. Some of these documents were, by agreement, not tendered in evidence. 269. After reviewing some assumed matters of fact, which he listed in paragraph 1.7 of his report, Mr Capaldi expressed the opinion that there had been "acts of concealment". In this regard he referred to the termite damage in the family room beam which had been timber cladded and painted to match, the bedroom beam which had been similarly cladded and painted, a bathroom rafter that had been silicone filled and painted to match other rafters and the front veranda joists which a had been cut, filled with silicone and extended with new timbers. These areas of damage were discovered, after some invasive dismantling work had been undertaken by the Woods. Mr Capaldi noted that the Woods became aware of the termite damage to the family room beam in about March 2006, to the bathroom rafter in about February 2007 and to the veranda joists in about January 2008. 270. Mr Capaldi considered that since no active or live termites had been discovered between February 2004 and February 2007, it was safe to assume that the termite damage in question occurred before February 2004. Mr Capaldi noted that the damage was extensive, and extensive demolition and rectification work was required to the building. 271. Mr Capaldi expressed the opinion that the cost of demolition of the sections needing repair was $23,875.62, and the cost to reconstruct the damaged portions was $199,513.14. 272. Critically, Mr Capaldi stated in his report that the ultimate termite damage found by the plaintiffs would not have been visible during a standard pest inspection undertaken in accordance with Australian Standard AS4349.3 because the previous exposed timber beam in the bedroom had been clad with softwood timber and had been painted to match existing colours. He said that the timbers in the building and the family room had been filled with expandable foam. He identified a timber section on the exposed side which had been painted to match existing timbers. Further, he said that the building inspection process of tapping of the timber veneer in the beams would not have necessarily alerted the inspector that there had been termite damage because of the presence of expandable foam that had been applied. He expressed the view that termite damage to the bathroom rafter would not have been discoverable on inspection because the damaged area had been filled with silicone and painted to match. He described the veranda joists as having been cut off to the external face of the building with new timber sections bolted to the existing damaged joists. The cross-section of the new timbers had been filled with silicone and painted to match. 273. Mr Capaldi's report incorporated explanatory photographic illustrations for his opinions. 274. It was clear that the investigative perspective of Mr Capaldi's report was one of suspicion of the motives of the persons who had undertaken the works in question. It was from that perspective that Mr Capaldi stated that he was of the view that his inspection revealed termite damage that had been hidden or concealed behind timber cladding boards and timber sections in bedroom number two and in the family room. At section 3.2.10 of his report, Mr Capaldi concluded that since the timber cladding to the beams did not provide the opportunity for the transfer of loads, the motive of the previous owners in affixing cladding veneers was "an action of concealment and likely to mislead any purchaser and/or inspector". 275. At sections 3.2.11 and 3.2.12 of his report, where Mr Capaldi respectively dealt with the silicone filled bathroom rafter and the appearance of the veranda joists, he concluded that the actions of the previous owners constituted "an action of concealment and would deceive any purchaser and/or inspector". 276. These opinions by Mr Capaldi were contested by the Balfours. 277. At section 3.3 of his report Mr Capaldi went on to examine further areas of damage to bedrooms numbered 2, 3 and 4 in the house where, after partial demolition by invasive testing, more extensive damage due to past termite activity had been revealed. It was this further damage which led Mr Capaldi to the view that partial demolition and rebuilding of the upper section of the house was required. 278. It is of some significance to the analysis, that the termite damage considered by Mr Capaldi, which was found during invasive inspections, was identified only after the concealment had been identified and exposed. 279. In his answers to cross-examination, Mr Capaldi clarified a number of matters he had set out in his report. He confirmed his basic premise was, that he believed the termite damage to the house in question had been concealed by the previous owners. He also confirmed that he regarded his brief as being to consider whether or not the works that had been undertaken by the Balfours, should be considered to be repair work, or work that should be viewed as having been aimed at concealment. 280. In his oral evidence Mr Capaldi helpfully explained some of the complexities and intricacies of termite behaviour. He agreed with the proposition that simply because interior timbers appeared on inspection to be unblemished, the possibility of termite damage should not be ruled out without going through the required inspection procedures according to industry practices. He noted that the Australian Standard for inspection for termites was for visual inspection only. He stated that the appearance of the house itself was not an indicator. He explained that the protocol was for an inspection to start outside the home, looking at fences, trees and the like and to then continue the inspection inside from that point onwards. He agreed that unblemished surfaces within the interior of a house provided no reassurance concerning whether or not the property was damaged by termites. 281. Mr Capaldi confirmed that the presence of a tree stump under a house, which showed signs of termite damage, would be a source of concern to a pest inspector. He agreed that once termites had been detected in the basement area of a house, an inspector would be on notice that there might be termites in other parts of the structure of the house. He agreed that termites were very destructive creatures and were at times very hard to detect. He also agreed with the general proposition that where there was visual evidence of inactive termite workings in an area where damage had been located, it was possible that termites were still in the immediate vicinity, and may continue to cause further damage. He agreed with the proposition that if termite activity was noticed in one location in a building, it was advisable to make a thorough search of the entire building for other such damage. He agreed this was a recommendation that pest inspectors always make. 282. Mr Capaldi stated that the time frame for the destruction of house timbers by termites depended upon the relative size of the termite colony and the number of lead tunnels that emanated from the termite nest and led to the house. 283. Mr Capaldi was taken through the critical structures and beams with which this case is concerned. He was shown selected photographs and pieces of removed timbers that were in evidence. 284. It emerged from Mr Capaldi's evidence that there can be no question that the work of applying cladding timbers and surface treatment to cover evidence of termite damage to existing timbers and beams within the house was work aimed at concealing termite damage to those structures. Having taken that view, I do not consider it necessary to go through and catalogue in detail all of the damage pointed to by the plaintiffs. In my view it is sufficient to simply refer to the generic overview of such work, as has been identified by Mr Capaldi in his report, because the critical enquiry really comes down to a consideration of the intention of the person who carried out the concealment work in question. 285. Mr Capaldi agreed that in making his judgment as to whether the work in question was concealment work or was simply repair work, he had tried to place himself in the position of the person who had carried out the work in order to try and determine that person's intention. 286. In this regard, as a general proposition, Mr Capaldi conceded that there was a varying range of possibilities regarding the standards of workmanship that could be expected for the work in question. He agreed that a home handyman's repair job might not be as skilled as that which might have been carried out by a builder. In the context of the evidence in this case he agreed that it was possible, having regard to the work carried out in the family room beam, that it could be inferred from the proportions of the timber used to cover the damaged areas, being 4.5cm deep, that it could have been intended by a home handyman to be a genuine repair. 287. Mr Capaldi also agreed that it could be inferred from the affixing of such a beam using bolts instead of a thin veneer using glue, that the intention of the person carrying out the work was to lend structural support to the original beam. He also agreed that where, for example, a gash in a piece of timber was evident (I interpolate this to include termite flight cuts), it was good practice to cover such a gash where the intention was to paint over it. He also agreed that it was also not good practice to leave a damaged timber surface unattended without filling it, although as a building consultant and builder, he considered that filling up holes that had been caused by termite damage would not benefit the timber in question. 288. Mr Capaldi agreed that the use of arsenic dust was intended to stop the continuation of any termite damage from termite activity. That had already been established. The effective action of arsenic dust was to kill termites. He disagreed with the proposition that the use of arsenic dust, which left residue that could be viewed by an inspector, was an activity that was inconsistent with the intention to merely conceal termite activity. In that context, he explained that arsenic dust, which was red in colour, did not strengthen timber. Mr Capaldi explained that the purpose of using arsenic dust was so that termites would pick up the dust, take it back to the nest, and this would have the effect of killing termites in the nest. 289. Mr Capaldi went on to explain that the use of arsenic dust was the first part of a two-part treatment system aimed at eliminating termite activity from a building. The first part was aimed at killing off the termites in the nest. The counterpart of the treatment was to treat the perimeter soil around the home to prevent further termite infestation. Mr Capaldi agreed that the use of arsenic dust was not the kind of thing to be expected from a fraudster or a person acting as an "evil genius." Presumably this was because the use of arsenic dust left a discernible red residue and the resultant holes that were created to treat termite affected timbers by the dust would be left in a drilled state, which could be readily detected and interpreted by pest inspectors looking for evidence of termite activity. 290. Mr Capaldi was asked to consider the significance of the use of expandable foam in some of the places which had been worked upon by Mr Balfour. He agreed that in the places where expandable foam had been used to fill holes or voids within timber but then covered up by cladding timbers, that foam did not serve any concealment purpose. 291. Mr Capaldi agreed that in the family room, the use of cladding timber, fixed by bolts rather than using a thin veneer applied with liquid nails or glue, taken together with the use of expanding foam which had been covered, appeared to be an activity inconsistent with someone merely trying to conceal evidence of termite damage. 292. When Mr Capaldi was asked to consider the combination of timber structures that comprised Exhibit "K", he agreed that the work displayed in that exhibit did not represent a professional finish. He agreed that as a pest inspector looking at this structure, it would have been evident that the deck of which that structure formed a part, was potentially problematic insofar as termite damage was concerned. 293. Mr Capaldi stated that he did not know that substantial proportions of the sub-floor and the ceiling of the sub-floor, also known as the middle floor of the house, had been replaced prior to 2009. He had understood that work had been carried out to the lower floor areas. 294. When Mr Capaldi's attention was directed to his assertion that there was substantial termite damage to the top floor of the house, and in connection with being asked what evidence he had to support that contention, he implied that short of stripping out all the ceiling and wall linings, rather than just relying upon the several inspection holes which had been cut into the plasterboard at different sections of the home, that there was termite damage in every section. He identified those sections as being the top plate, the studs and the beams. He also stated that he had observed termite damage in the upstairs bedrooms as well as the bathroom, damage to the structural timber beam in the family room, as well as damage to the structural timber beams in the bedrooms and bathrooms, as well as termite damage to the structures of the studs, top plates, bottom plates and exposed rafters. He indicated that his inspection was not yet complete. Nevertheless, Mr Capaldi offered the view that the most economical option was to demolish and rebuild the affected upper portion of the house. Mr Geoffrey Doble – consultant civil engineer 295. In the paragraphs that follow, the opinions from within the civil engineering report of Mr Doble are summarised. 296. Mr Doble, a consultant civil engineer, prepared two site inspection reports. These reports were dated 23 January 2007 and 11 August 2009. Each of these reports was annexed to Mr Doble's affidavit sworn on 4 September 2004. Mr Doble was asked to inspect the premises to report upon the effects of white ant damage on the structural integrity of the building. 297. In his first report Mr Doble concluded that the house had been significantly affected by white ant damage. He viewed a DVD produced by Mr Wood which he believed clearly showed the extent of the damage to be severe. In his first report, Mr Doble indicated that it was not possible to certify which sections of the existing building were structurally adequate. This was so because the extent of the white ant damage had, at that stage, not been fully determined. He expected that upon further investigation, elements of the building, in addition to the initial beam that he had assessed, would be condemned. He foreshadowed that the extent of the further damage could only be confirmed once each of the member beams was assessed. 298. Subsequently, Mr Doble prepared his second report following the removal of timber cladding that had been affixed to the surfaces of the beams that he had previously inspected. 299. With regard to the first area he assessed in his second report, Mr Doble expressed the view that the beam in the upstairs bedroom was badly affected by termites. He explained that this was evident in photographs numbered 1-8 which were appended to his report. He noted that the beam had been deflected by about 10mm. He noted that the original pest damaged beam had been recently re-supported with two further beams and timber props. 300. With regard to the second area he assessed in his second report, Mr Doble expressed the view that rafters on the northern side of the bathroom had been affected by termites, as was evident in photographs numbered 18-20. 301. With respect to the third area he assessed in his second report, namely the beam in the family room, Mr Doble noted that cladding had been applied to the pest damaged beam with bolts. He also noted that the timber structure of the original window head had been filled with self-expanding foam that had no structural value and which could have been penetrated by a pointed object. He noted that the original beam had been severely affected by pest damage, as was evident in photographs numbered 13-17. He noted that beam had been deflected and had caused a vertical load from the roof to be carried on the mullions for the windows, as was evident in photographs number 12-13. He said this resulted in the window frame being distorted, which prevented the windows from opening and closing properly. 302. With respect to the inspected beam in the second bedroom, Mr Doble expressed the view that the damaged beam was structurally inadequate and was non-compliant with code requirements regarding bending or crushing because of pest damage that had reduced the density of the member beam. He noted that the timber cladding that he had inspected had been glue-fixed to the original beam but this process did not add significantly to the structural capacity of the damaged beam. He also stated that this would not prevent it from crushing at the top, directly under the rafters it was designed to support. 303. With respect to the inspected beam in the family room, Mr Doble noted that it was structurally adequate in its undamaged condition, and was code compliant, but in its pest damaged condition, it was not structurally adequate and it did not comply with the code requirements in respect of bending or crushing at the top of the member, where pest damage had reduced the density of the timber member. Mr Doble expressed the view that the Oregon beam fixed to the inside face of this beam with bolts was a grossly inadequate fixing system to transfer loads from the original beam to the cladding beam. He stated that at the bolted sites, because of the presence of pest damage, there was almost no capacity in the beam to transfer its load. Mr Doble identified the fact that the timber-cladded beam did not make contact with the roof structure or the vertical support members. This meant that the load transferred from the original beam to the cladding beam relied entirely on the bolted connections, and this was an in-effective connection system in this case. He also noted that the damaged beam was susceptible to crushing at the point where the rafters transferred load from the structure into the original beam. 304. In the paragraphs that follow, some matters of clarification that emerged from the oral evidence of Mr Doble are summarised. 305. Mr Doble inspected the premises on 23 January 2007 and 11 August 2009. For the purpose of preparing his reports he had the benefit of a DVD taken by Mr Wood, which revealed the course of an inspection of the timber work within the premises. At the time he gave his evidence, Mr Doble had no recollection of ever viewing the DVD and he could not explain why he no longer had a copy of it. In his report, he stated that it was his impression that although he had placed some reliance upon the DVD, such reliance was very limited. 306. On his inspection he recognised extreme deterioration within some of the timbers in the house due to termite damage. It was his view that these timbers might fail and his personal opinion was that he would not live in the house in view of these findings. He stated that the beams in question did not comply with the required Australian Standard due to the damage that was evident. The beams in question were identified as those numbered 2.09 and 2.16. He acknowledged that in the undamaged state, these beams would have been compliant with the requisite standard. 307. Mr Doble confirmed his view that serious consideration should have been given to removal of the upper two levels of the house to ensure that the termite damage was rectified. He said that if the house was his, he would have demolished it, as the cost of repair and rebuilding following inspection of the damage, would have been an uneconomical exercise. Mr Kenneth Adams – consultant valuer 308. In the paragraphs that follow, the opinions from within Mr Adams' valuation report are summarised. 309. Mr Adams was a licensed property valuer. Mr Adams prepared a valuation report dated 28 June 2006. That report was annexed to his affidavit sworn on 4 September 2009. Mr Adams was instructed to determine the fair market value of the property as at August 2004 on the basis that all termite damage to the property at that time would have been known. He was also asked to compare the current fair market value of the property as at 28 June 2006 on the assumption that there would have been no such damage. 310. After reviewing the details as to the location of the property, its title particulars, it's zoning, the topography of the land, the nature of improvements, the construction of the premises on the property, area of the dwelling and other site improvements, he expressed the opinion that if the termite damage to the structure as at August 2004 would have been known, the value would have been assessed at a figure of the order of $550,000. In comparison, he assessed the fair market value of the property as at the date of his report as being $510,000. 311. Since the property was purchased in August 2004 for $775,000, the plaintiffs' claim was therefore identified as being the difference between the purchase price and the fair market value, had the termite damage been known at the time, namely $550,000. These figures revealed the potential amount of the claim to be in the sum of $225,000. 312. In support of his opinion, Mr Adams attached a series of photographs of the subject property and a series of photographs and details of other relevant sales evident in about August 2004 and again in 2006, for comparison purposes. 313. In the paragraphs that follow, the matters of clarification that emerged from Mr Adams' oral evidence are summarised. 314. In his oral evidence Mr Adams explained that he inspected the property on 26 June 2006 at a time when it was evident that there were some incomplete repairs, alterations and renovation work still outstanding. He was shown some termite damaged floor frames and some termite damaged timber in an upper level storeroom. He agreed that he had not gone to the house in order to discover termite damage. Noting the works in progress he assumed, for the purpose of his valuation, that the house would have been in what he imagined, would have been its original condition without wall linings and flooring removed and without walls taken down. 315. He identified his valuation methodology as what is known in his industry as the summation method. When that method was explained it became quite clear that the methodology of property valuation was largely visceral in approach, involving the consideration of inexact and intuitive processes, particularly where comparisons were involved. For example, he used the details of a house in the less expensive neighbouring suburb of Engadine as a basis for comparison. 316. Using the summation method of valuation, he ascribed a 90 per cent discount for the value of the building comprising the house of the Woods on the basis that it was severely damaged by termite activity through each floor in its structure. He said this factor would be likely to have a severe impact on the sale of any such property. He resisted the proposition that his estimation was in truth a "guesstimate" and instead described it as a best estimate made upon a number of factors, the known evidence and comparisons with other properties in the area. 317. What clearly emerged from this evidence was that property valuation was a very uncertain process involving many variables that were difficult to allow for in the estimation process as subjective factors were involved, including the great variable of market forces. This made the task of achieving a reliable retrospective valuation a somewhat imprecise undertaking. In my view it was of particular significance that the valuation was necessarily constructed with an element of hindsight bias in the baseline of the calculations. The biased assumption was that the property had a fair market value of $775,000 at the time of sale, in circumstances where it did not go to auction and had been marked down by the vendors, for whatever reason, from an asking price of $850,000, before a quick inspection was arranged by the Woods following which a quick sale was achieved at a price that incorporated a discount of about 9 per cent from the original asking price. C. FINDINGS ON ISSUES CALLING FOR DECISION 318. I now turn to consider the issues calling for decision. Consideration of Issue 1 – Termite damage discovered by plaintiffs after purchase 319. The consideration of Issue 1 requires identification of the nature, timing and extent of the serial inspections undertaken by the plaintiffs where termite damage to the premises was discovered. 320. Shortly after the Woods took occupation of the premises, they embarked upon their planned renovation works. In the course of those works, they uncovered past works of a cosmetic nature which had covered signs of past termite activity and damage. This discovery led to a more invasive and progressive investigation and inspection process, which Mr Wood then staged over time. As a result, more extensive evidence was located of past termite activity in the house. 321. The Woods moved into the house in about November 2004. In about January 2005, Mr Wood started clearing out some of the downstairs areas and began pulling down some of the walls to open up that area. In doing so he came across some termite damage in the framework of the downstairs area. Mr Wood then formed the opinion that he could not assume that the damage had not travelled, so he started to remove the ceilings of the downstairs area in order to find out how far the termite damage had actually extended. In the course of those works, he came across what he described as a significant amount of termite damage to the floor joists on the first level. 322. That discovery led Mr Wood to believe that before going too much further with his planned renovation work, he had to actually remove the ceiling of the downstairs area in order to make an assessment, and to repair and replace the affected floor joists. This work took him through to about mid-2005. At that time he became concerned as to how far the termite damage had progressed. In view of the termite damage that he had found downstairs, he then started tapping on the beams in the house out of concern that they may have been compromised or affected by termites. 323. It was those events that led Mr Wood to consider taking proceedings in negligence against the pest inspector. He called in a number of experts to advise and to assist him. The reports of some of those experts are in evidence in these proceedings. In this process Mr Wood undertook the partial dismantling of timbers and timber cladding in the house. Some of these pieces of timber were preserved and tendered in evidence as exhibits in these proceedings. 324. In about September 2005, after Mr Wood had engaged experts, and was in the process of preparing to pursue proceedings against the pre-purchase pest inspector whom he had engaged, Mr Wood began a top to bottom search of the house to try to find out the extent of the damage from termite activity in the house. This search involved cutting holes in the walls to find out how far the termites had travelled and to determine the extent to which the timbers of the house had been damaged or compromised. Mr Wood then proceeded to carry out investigations in the upstairs bedroom. It was at this stage that he learned that the beam in that bedroom, which he thought was a timber clad steel beam, was in fact a timber beam that had in fact been clad with non-original timber. The removal of the timber cladding to that beam revealed to Mr Wood what he considered to have been the worst affected termite damaged beam in the house. 325. By this time, Mr Wood recognised that a more invasive investigation of the timbers of the house was required. He then set about "cutting the house apart bit by bit, because no one could tell how far it had gone." 326. These events led to the removal of timber cladding from other beams in the house. In the course of these events Mr Wood progressively found extensive signs of damage from termite activity affecting the timberwork in the house. This damage was found to have affected underfloor joists of the house, timber clad beams in the family room and upstairs bedroom, and rafters in the upstairs bathroom. 327. In this process, by early 2006, by which time quite a number of building and pest experts had been consulted by Mr Wood to assist him to try to ascertain the extent of the damage to the house, he took down the external eaves outside the family room and in doing so he found some protruding bolts, washers and nuts behind those eaves. He then realised that the beam in the family room had been clad with timber. When he took off the eaves, he started using a screwdriver to prod the surface of the family room side of the timber beam that had been uncovered in this way, and in doing so, he located termite damage. It was at this time that he observed the presence of some foam filling inside the beam. It then became apparent to him that the pest experts whom he had previously consulted, had not been able to find this concealed damage that he had uncovered by these means. 328. The extent of the termite damage, revealed by partial dismantling of the house, has been assessed by a number of experts engaged on behalf of the plaintiffs. 329. Mr Doble, the structural engineer engaged by the plaintiffs, described the damage as affecting timber beams, rafters, wall studs and floor plates of the dwelling. He expressed the opinion that the structural integrity and safety of the upper levels of the house had been compromised. He said that the damage was so extensive that serious consideration should be given to removing the upper two levels of the house to ensure that the termite damage was rectified. In this regard, he stated that some beams and rafters in the house were likely to fail under design loads, which in turn raised safety issues. 330. Mr Capaldi, the building expert engaged by the plaintiffs, described the extent of the termite damage as being such that, economically, demolition was required for rectification work to proceed. He estimated the demolition costs as being $23,875.62 and the cost of rectification as being $199,513.14, the total amounting to $223,388.76. These estimates will be revisited in my consideration of the quantum of the plaintiffs' claim for damages. 331. Mr Clarke, the pest inspection expert engaged by the plaintiffs, expressed the opinion that the termite damage to the structures he had examined, after the cladding and covering materials had been removed, namely from the beam in the upstairs bedroom, the beam in the family room and the joists under the front balcony or deck, all these were damaged by termites prior to the application of cladding and covering materials. He also stated that from his inspection of the timbers, there was no indication of termite damage having occurred since the cladding and covering material had been applied. There were no opinions to the contrary. 332. I accept the opinions of Mr Doble, Mr Capaldi and Mr Clarke as summarised above concerning the nature and extent of the termite damage. I do so because the opinions they expressed, in the terms I have summarised, seem inherently reasonable and are based on their described factual observations that accord with the evidence. Furthermore, the defendants do not contest these aspects of the opinions of these experts. 333. These experts, and Mr and Mrs Wood, have, from varying perspectives, offered opinions on how the intentions of the defendants should be characterised when the cladding and covering works were carried out. Those opinions require separate analysis in connection with Issue 3. Consideration of Issue 2 – Earlier work by defendants to cover the termite damage 334. Having identified the circumstances in which evidence of past termite damage in the house was discovered by the Woods in the course of their renovations to the house, it becomes important to examine Issue 2 to understand the timing and manner in which the work was carried out by the Balfours. This is required in order to determine whether there is a basis for the claim made by the plaintiffs that there was a fraudulent misrepresentation or deceit perpetrated against them by the defendants, as alleged. 335. Although the plaintiffs conceded that the extent of the covering work was not in substantial dispute, the plaintiffs argued that the timing of this work was contentious and claimed it was aimed at deceiving purchasers. The attack made by the plaintiffs on the evidence of Mr Balfour concerning the timing of the works was based on the submission that there was "no independent evidence to corroborate when this work was done". In this regard, in my view, the submission made on behalf of the plaintiffs incorrectly identifies the terms upon which evidence may or may not be accepted. In the absence of an adverse credit finding, the test for acceptance is not that of independent corroboration. 336. It becomes important to identify the motivation of the Balfours for carrying out the works by which visible signs of termite damage was covered up and concealed, before the house was sold to the Woods. The issue of Mr Balfour's motivation is in my view linked to the manner in which the work was carried out, as well as the timing of those works. 337. Having considered the evidence of Mr Balfour, as to the manner in which the work covering the termite damage was carried out by him, and despite the doubts expressed on behalf of the plaintiffs, I accept Mr Balfour's evidence as to how he carried out that work. 338. It is convenient to first factually describe the manner in which that covering work took place as a necessary precursor to determining Mr Balfour's motivation for carrying out that work. I will reserve a more detailed examination of Mr Balfour's motivation for carrying out the works in question to the consideration required for the determination of the matters calling for analysis concerning Issue 3. 339. I will review the submissions of the plaintiffs concerning the timing of the works in connection with each segment of the works. 340. Over the 24 years during which the Balfours lived in the house following its completion, Mr Balfour undertook a number of home maintenance and repair tasks. Some of that work was directed at covering visible signs of termite damage. 341. Although Mr Balfour's recollection of some of the detail of the work that he had carried out was to a degree limited by the effluxion of time, he was nevertheless able to provide a reconstructed overview of the work he had carried out. In dealing with the issue under present consideration, I will restrict my analysis to deal only with the work relating to the issues in the case. 342. In the paragraphs that follow I set out an outline of my assessment of the chronology of timing of the works carried out by Mr Balfour, along with some of the detail of those works. 1983 – Work on timber joists 343. Mr Balfour described, and I accept, that in about 1983, whilst he was carrying out routine maintenance around the house, he observed some damage to the deck timbers of the front veranda. I accept that at the time Mr Balfour made these observations, he did not know much about termites and their activities. As a result, he thought the timber damage that he had seen was due to what he then knew as dry rot, which, as the evidence disclosed, was due to a fungal condition affecting timber located in wet conditions. Mr Balfour described the damaged timber decking as being wet and spongy. Mr Balfour understood the damage in question to be due to dry rot because of the wet conditions that prevailed on that particular part of the veranda. In my view, that explanation is reasonable, and I accept it. 344. I make these findings as stated above notwithstanding the submissions made by the plaintiffs. One such submission was that there was "no independent evidence to corroborate when [the work on the veranda joints] was done". That submission assumes, incorrectly in my view, that corroboration is a necessary pre-condition to acceptance of Mr Balfour's evidence. Corroboration is not the required standard of proof, there was no evidence called to contradict Mr Balfour's evidence on the timing of the work he carried out on the veranda joints in question, and his evidence as to the timing of the works not only seemed reasonable and truthful, but it did not seem to be glaringly improbable. 345. The plaintiffs made another submission seeking to cast doubt upon Mr Balfour's evidence as to the timing of the joists works being 1983. The plaintiffs submitted that in the context of the Balfours having moved into a new home in 1980, it was "difficult to believe that such damage [to the veranda joists] was evident in 1983 and the defendants did not consider claiming against their builder or undertaking a thorough inspection or contacting a pest controller". 346. I do not accept that submission for a number of reasons. 347. First, although, Mr Balfour did say he thought that the original builder of the house had some responsibility for the problem, he said that this had only crossed his mind after these proceedings had commenced. That evidence was not contradicted or followed up by further questions in cross-examination aimed at exposing the evolution of his thought processes on this issue. In my view the submission wrongly assumes that a claim, or the contemplation of litigation, is the naturally occurring reaction to such events. I do not consider Mr Balfour's explanation to have been unlikely or glaringly improbable. 348. Secondly, it does not necessarily follow, that the discovery of damaged timbers, located in a wet environment such as the front balcony of the house, would have necessarily led to a successful claim against the builder. 349. Thirdly, Mr Balfour's explanation to the effect that at the time he was not very knowledgeable about termites, and that he thought the problem was resulting from rot due to the wet environment in which the timbers were located, is not only a plausible one, but it is one that is not glaringly improbable or unreasonable. 350. Fourthly, the suggestion that a thorough inspection was required, or that a pest controller should be contacted in 1983, assumes the problem was due to pest activity when that was not what Mr Balfour had understood at the time. Accordingly, in my view, the submission made on behalf of the plaintiffs in this regard represents a counsel of perfection driven by an impermissible hindsight analysis : Vairy v Wyong Shire Council [2005] HCA 62; (2005) 223 CLR 442 per Hayne J at [105]. 351. The position may have been different if, for example, Mr Balfour had seen live termites in the vicinity of the problem area he was dealing with, but there is no evidence that he did. The circumstances that confronted Mr Balfour may have perhaps motivated a homeowner acting reasonably to consult a pest controller. Against that argument is the fact that not all homeowners, in acting reasonably, would respond in the same way, and their responses would be governed by their levels of confidence in their understanding of the problem before them, and perhaps other priorities, including financial priorities. The question is whether such steps were mandated, as has been submitted. In my view, when looking back on these events but applying the forward looking analysis required by Vairy, they were not. 352. Mr Balfour saw what he understood at the time to have been dry rot. This was revealed on his inspection of the timber. In my view, as a non-tradesman homeowner, he was not expected to know more than this. There is no evidence that an aircraft maintenance engineer would have been expected to know more than this. 353. The hindsight gained by present knowledge reveals that the damage he saw then was in fact termite damage. Given the evidence that it is difficult for pest inspectors to at times detect the actual presence of live termites, and given the evidence that the habits of termites are such that they are very adept at concealing themselves from view, I consider the submission made on behalf of the plaintiffs amounts to a counsel of perfection beyond the standard reasonably required of Mr Balfour in the circumstances. 354. For these reasons, I reject the submissions which suggest that I should not accept Mr Balfour's evidence concerning the timing of the veranda joist works as having occurred in 1983. This is so particularly where no evidence has been called to suggest it was improbable that the works in question were carried out in 1983. 355. I find that at around the time Mr Balfour recognised that timbers on the front veranda of the premises were damaged, he had formed the intention of extending the width, manner of construction and ground support of the front veranda of the house, beyond the parameters of its original construction. This is evident from a comparison of the original plans and the end result of his work. I find that in the course of carrying out the work to achieve the proposed extension of the balcony, Mr Balfour removed some of the decking timbers, and in doing so, he recognised that there was damage evident to the joists that supported the flooring and the deck structures. I find that at the time Mr Balfour understood this damage to be due to dry rot. Mr Balfour's remedial work that followed, was evident in the photographs that Mr Wood had taken during the process of dismantling the front deck timbers in the course of his investigations and renovations. That work was also evident in the portion of the timber assembly that comprised Exhibit "K", which Mr Wood had later excised from the joist structures of the house. 356. There is no dispute that in the course of carrying out the remedial works in question, Mr Balfour removed portions of damaged timber joists and bolted new joists onto the under-house remnants of those partly removed joists, to not only replace the damaged parts of the joists, but to also extend the structure of those joists to project out beyond their original span, in order to extend the balcony into a larger decked area. To achieve this, Mr Balfour had to remove some fixed deck timbers, saw off portions of the damage affected portions of the joists, and then attach new sections of joists by means of bolts. 357. Critically, as was apparent from the structure of Exhibit "K", and from the juxtaposition of its various component parts, together with a consideration of the in situ photographs of that exhibit before it was cut out of its location, Mr Balfour covered the end grain of the remnant portion of the cut joist with a small piece of timber. He also filled and covered the lower surface of the remaining portion of the damaged and cut joist with some silicone filler material, and he also painted or splashed creosote around these timbers and over the silicon filler. Additionally, some chicken wire was then fixed into position on this structure by nailing a piece of 4" x 2" timber over the wire to achieve the effect of holding the chicken wire in place. That chicken wire was then bent or folded into position to cover the opening of an access hole in the nearby brickwork in a manner that would have led a reasonably informed viewer of this work, to believe that this configuration of timber and wire in that location served to keep vermin from gaining access to the hole that was evident in the brickwork cavity wall. These timber and silicone components of that structure were not painted, but the application of the creosote had stained them with the result that the timbers that were treated in this way, no longer appeared to be new. 358. Once the decking timbers had been nailed into place above these structures, it was plain that the effect of these modifications and repairs meant that the modifications to the joists below were not readily visible on external viewing of the house, except by illumination by torchlight in the course of an under-house inspection of the area. In this context, I consider that concealment was a relative term. 1995 – Termite inspection and treatment of the house 359. I find that in 1995, Mr Balfour arranged for a pest inspection of the house to be carried out by Copes Pest Control. Mr Balfour arranged for this inspection because by this time he had found some termite damage to the lower level of the house. In the course of that inspection he and the pest inspector from Copes had found a live termite nest under the carport slab on the premises. The premises were then extensively treated for termites with a view to eradicating them. Following such treatment, having learnt something about the activities of termites, as a home handyman, Mr Balfour subsequently began to intermittently, albeit irregularly, carry out his own inspections of the house, aimed at the detection of termite activity. Mr Balfour's evidence in this regard was not challenged and I accept it as being a reasonable account of the events surrounding the 1995 termite inspection and treatment of the house. 1997 – Further termite inspection and treatment of the house 360. I find that in 1997, in the course of his own inspections of the house, Mr Balfour found some termite mud trails. He was uncertain as to whether these mud trails were trails from the original termites that had already been treated in 1995, or whether they were new trails due to new termite activity. In response to this finding, reasonably, Mr Balfour again called upon the services of Copes Pest Control to effect further termite treatment of the house. Neither side called witnesses from Copes to give evidence concerning these matters. Mr Balfour's account of the termite treatment and advice provided by Copes was not effectively challenged or contradicted. I see no reason why I should not accept that account, as it appears to be a reasonable and plausible description of those relevant events and it was not glaringly improbable. 1999 – Cladding of timber beam in the upstairs bedroom 361. Mr Balfour described how, in 1999, after his son John Balfour had taken down his flag and cap collection and some speakers and other materials that were attached, along with some stickers, to a timber beam in John Balfour's upstairs bedroom, the need arose to undertake some repairs, painting and redecoration to that room, including to the relevant timber beam that was located near the ceiling in that room. 362. I find that in 1999, after some limited attempts by Mr Balfour at lightly sanding a small area of the timber beam in the upstairs bedroom of the house, he realised the timber beam in that room had an area of splitting in it. I find that he then decided that instead of replacing that damaged beam, he set about placing some timber cladding over the beam. After cladding the underlying timber beam in this way, Mr Balfour then painted over that cladding in order to match the colours of the other visible timbers in the house. In doing do, Mr Balfour obviated for himself the need to further repair, sand and paint the underlying beam. In doing so, he also achieved the objective of covering up an area on the beam where the timber appeared split. 363. I make these findings notwithstanding the submissions made on behalf of the plaintiffs that there is no evidence to independently corroborate when this work was done. I do not accept the submission from the plaintiffs in this regard as a proper basis upon which to discount the evidence given by Mr Balfour. I have come to this view for the reasons that follow. 364. First, as previously explained, I do not consider that independent corroboration is the required standard by which Mr Balfour's evidence should be assessed. Secondly, the timing of the work carried out by Mr Balfour was to an extent corroborated by the evidence of Mr John Balfour. Whilst he was not present when the concealment work was undertaken, he lived in the house at the relevant time and he stated, believably, that he was aware that the work had been carried out at around that time. Given that the work was carried out in his bedroom, I consider that he was in a good position to give this evidence. That evidence was not relevantly contradicted and I accept it as being truthful. 365. I also make these findings notwithstanding the criticisms made on behalf of the plaintiffs with regard to Mr Balfour's attempt at sanding the timber before deciding to clad it. In my view those criticisms involve the imputation of too high a standard in the approach a home handyman, even a skilled home handyman, would take to the planning and execution of such a task. I do not consider that the evidence contradicts Mr Balfour's claim that he had lightly sanded a part of the beam before deciding to clad it. 366. I consider that the evidence of Mr Balfour, as to the timing of the upstairs beam cladding work having been done in 1999, was not inherently improbable, and I accept it as a reasonable account of the timing of those works. 367. There was no dispute that following the demolition by Mr Wood of the cladding work carried out by Mr Balfour, and following the subsequent examination of the original timber beam that was underneath the removed timber cladding, a trained eye was able to recognise some of the splitting of the timber that had earlier been observed and described by Mr Balfour before he carried out the cladding work. There is no dispute that this area was damaged by termite swarming cuts in the timber. Mr Clarke explained that those cuts would have been made by termites to enable the mass release of immature winged termite alates from within termite galleries underlying the surface of the timber beam. 368. The plaintiffs submitted that it was simply not credible that the mass swarming flight of escaping winged termite alates, which the plaintiffs' submissions described as "spewing" from the timber, could have gone on unnoticed in the house. This was in the context of Mr Balfour's evidence as to the timing of his cladding works in 1999. I do not accept that submission for the reasons that follow. 369. First, it does not necessarily follow that the swarming and escape of termite alates occurred in daylight hours or at a particular time when it could have been observed. In the absence of more specific evidence describing how, when and with what result such swarming occurs, I do not need to engage in speculation as to whether the swarming termites would have found an open window or other means through which to fly out of the house, although I consider it to have been a possible explanation. Secondly, there is no evidence to suggest that if a termite swarm had flown out of the house en masse and unobserved, apart from the swarming cuts themselves, there would have necessarily been some residual signs of those events left behind, for example, on the floor, to indicate that such an event had occurred. 370. I therefore see no cogent reason for rejecting the evidence of Mr Balfour as to the timing of his cladding and covering works that he described as having been carried out in 1999. In my view the submission that a termite alate swarm must have been observed "spewing" out of the timber, implying that the evidence of Mr Balfour was untruthful because he had not referred to it, is not the only inference available, and in my view it involves unwarranted speculation : Luxton v Vines [1952] HCA 19; (1952) 85 CLR 353. 1999 – Repair to defect in timber rafter in upstairs bathroom 371. I find that in 1999, whilst in the course of carrying out some painting and decorating work on the interior of the house, Mr Balfour observed that there was some damage to a portion of an exposed timber rafter of the raked cathedral ceiling of the upstairs bathroom. On investigating that damage, reasonably, Mr Balfour came to the conclusion that the damage he had detected, was due to termite activity. 372. I find that Mr Balfour came to the conclusion that as the damage to the rafter was localised, he should apply a filling substance, and then paint over the surface of the area, after it had been repaired in this way. He then set about doing this, as planned. The result was that when the repaired area was viewed from a distance, the previous area of timber defect due to termite damage, was no longer readily apparent to the observer. A portion of that repair, once excised, became Exhibit "H". 373. The plaintiffs submitted that there was no independent corroboration, as to when this work was undertaken by Mr Balfour. In my view, that submission should not and does not militate against an acceptance of Mr Balfour's evidence as to the timing of that work. I have taken this view for the same reasons outlined with regard to the independent corroboration point raised by the plaintiffs in connection with the 1999 cladding work to the timber beam in the upstairs bedroom. I do not consider that Mr Balfour's account of this work was unlikely, or glaringly improbable, and I accept it as a truthful account. 2000 – Cladding of timber beam in the family room 374. I find that in 2000, whilst watching television in the family room of the house, Mr Balfour observed some damage to the overhead timber beam located over the windows of that room. On inspection of that beam he realised that damage had been caused by termite activity. Rather than replacing the damaged beam, Mr Balfour soon afterwards set about cladding that beam with timber. He did so in order to cover the visible signs of termite damage, as he had done with the previously treated timber beam in his son's bedroom, albeit in this instance, he did so on a larger scale, and by using a heavier and a much larger piece of cladding timber. 375. I find that to achieve this, Mr Balfour placed a very heavy, 5.4m long piece of timber in over the lateral surface of the existing beam. He also fitted a cladding timber to the downward facing surface. Fitting the lateral cladding timber involved drilling and counter-boring some bolt holes in the cladding timber and making corresponding drill holes through the existing timber beam through which the securing bolts were fitted. To achieve this, Mr Balfour had to somehow lift the cladding beam into place. 376. The fitting of the cladding timber also involved some other work. Mr Balfour filled a void comprising a termite gallery in the existing beam with expandable filling foam. To achieve this Mr Balfour had to remove the external eaves from the exterior of the house to expose the other side of the existing beam in the family room. This step was also required to fit the fixing bolts and the associated nut and washer assemblies that served to keep the internal lateral cladding timber secure and in place in juxtaposition to the structure of the house. On the internal side, or family room side of these works, Mr Balfour had to then fill and sand the counter-bored holes in the timbers in preparation for painting the cladding timber. When these component tasks of the works were completed, Mr Balfour painted the cladding timber to match the colour of the other exposed timbers in the house. 377. By these means, the termite damage on the existing beam was no longer visible. 378. I make the above findings notwithstanding the plaintiffs' submissions that there was no evidence to corroborate Mr Balfour's evidence that he had carried out this work at the time of the Sydney Olympics in 2000. I also make the above findings notwithstanding that the plaintiffs submitted that it was "inconceivable" that Mr Balfour had carried out this work by himself and notwithstanding the submission that it was "inconceivable" that he could not recall carrying out this work. 379. In my view the submission concerning the absence of corroboration is misplaced, as corroboration is not the required standard of proof. I am persuaded of the truthfulness of Mr Balfour's account without corroboration. Further, I consider the unchallenged and uncontradicted evidence of Kim Balfour to the effect that the work in the family room was carried out during the Sydney Olympics in the year 2000, tends to corroborate Mr Balfour's evidence. Her unchallenged evidence in this regard was "I was working [at the Sydney Olympics] when he was fixing it". Additionally, Mrs Balfour's evidence on this issue was not effectively challenged. 380. I do not accept the submission that it was "inconceivable" that Mr Balfour undertook the work of cladding the beam himself nor do I accept the submission that it was "inconceivable" that he could not recall carrying out the work. 381. The lack of recollection of the detail of a job carried out 10 years earlier is not necessarily "inconceivable". There is no measurable yardstick that requires the retention of such matters in human memory. On the contrary, common experience indicates that even allowing for individual differences between the capacity for individuals to recall past events as they age, memory is fallible and memory fades for a variety of reasons. The question of Mr Balfour's memory generally was not explored so as to enable the "inconceivable" submission to be reasonably made or to render Mr Balfour's lack of recollection, 10 years on, as to exactly how he achieved the work that he described, incredible. 382. Despite his lack of actual recollection, as someone experienced in engineering and maintenance issues, Mr Balfour was able to explain in some credible detail as to how the work could have been achieved without assistance. I do not consider his explanation to be "inconceivable", unreasonable or incredible and I accept his reconstructed explanation as to how the work could have been done without assistance as a reasonable one, notwithstanding his limited recollection of the events in question. The readiness of his explanation in my view enhances the probability of him having undertaken the work in the manner he explained could have been the case. Consideration of Issue 3 – In what sense was the termite damage concealed from view 383. The consideration of Issue 3 requires an evaluation of the sense in which concealment work was carried out on the premises as this is relevant to the question of whether or not there was a relevant misrepresentation as claimed. 384. Having identified the fact that Mr Balfour carried out work on the timbers of the house to cover over the termite damage, and that such work had the desired effect of covering such damage from ordinary visibility, as was conceded by Mr Balfour, it is necessary to consider Mr Balfour's motives for carrying out the work, in order to identify the sense in which concealment of termite damage took place. 385. On behalf of the plaintiffs, it was submitted that the sense in which the work should be described as "concealment work" is that it was intended to conceal a patent defect in the quality of the property, so that the effect of the work misrepresented to the plaintiffs that the bedroom beam, the family room beam, the bathroom rafter and the front balcony joists, were free of termite damage, and that the house was otherwise structurally sound, and not extensively damaged by termites. 386. On behalf of the Balfours, it was submitted that the concealment of visible signs of termite damage in the house was undertaken innocently and not nefariously, to simply cover it for cosmetic or aesthetic purposes to do with the use, enjoyment and amenity of the house, and as such, it was not intended to be concealment in the base or turpitudinous sense of the word. The defendants denied there was deception or an intention on their part for the purpose of misleading purchasers such as the plaintiffs. 387. These two views are polarised and are irreconcilable. The views put forward on the part of the defendants were based on asserted facts and the contrary views put forward on behalf of the plaintiffs were based on a retrospective interpretation of events which was in turn based on observations obtained in the course of taking the house apart. 388. It was clear that the perspectives and the opinions adopted by the Woods concerning motivation of the Balfours in concealing the evidence of termite damage was fuelled by suspicion. I consider such suspicion to have been naturally fuelled by the circumstances and by the extent of their progressive discovery and sense of "dismay" at progressively seeing the detail of the evidence of termite damage in the house revealed, as different parts of the timberwork structures of the house were exposed, dismantled, and analysed. 389. Within those events, as they unfolded, there was little room for doubt that the concealment work was carried out purposefully and deliberately to conceal from view the visible signs of termite damage to accessible timbers in the house. 390. This leads to the question of the intentions of Mr Balfour that lay behind the execution of this concealment work 391. In support of their contention that the concealment work should be characterised as deceptive, in the form of a pleading, the plaintiffs pointed to a submitted combination of 13 aspects of the work which they argued, provided sound reasons for characterising the work as "concealment work." 392. In order to avoid oversimplification of those 13 reasons by summarisation, I set them out in full in sub-paragraphs (a) to (m) as follows: (a) The work covered visible termite damage which would otherwise have been a patent defect discoverable by the plaintiffs or their pest inspector. (b) At all material times, the defendants knew that the visible damage was termite damage. (c) At all material times, the defendants knew that the plaintiffs would inspect the Property prior to entering into a contract and that one of the things that the plaintiffs would be concerned about and searching for would be evidence of termite damage or termite activity. (d) At all material times, the defendants knew that the plaintiffs would instruct a building and pest inspector to visibly search the Property looking for evidence of termite damage or termite activity, and provide a report about any such evidence to the plaintiffs. (e) At all material times, the defendants knew that by covering up the termite damage they would prevent the plaintiffs and the plaintiffs' pest inspection from physically viewing the termite damage. (f) At all material times, the defendants knew that a method of detecting whether a timber beam was solid was to tap the beam and listen for any inconsistent sound. (g) At all material times, the defendants knew that by affixing the cladding to the bedroom beam and the family room beam the plaintiffs and their pest inspector would not be able to determine whether those beams were solid as a result of tapping the beams. (h) The defendants affixed the cladding to the bedroom beam to cover up the termite damage, there was no alleged 'repair' element in carrying out that work. (i) The defendants affixed the cladding to the bedroom beam in such a manner as to make it match another beam in house being a steel clad beam. (j) The defendants knew that by so affixing the cladding to the bedroom beam to match an existing steel clad beam in the family room, the plaintiffs and their pest inspector would assume that the bedroom beam was a steel clad beam and not a timber clad beam. (k) The work undertaken by the defendants to cover the visibility of the termite damage to the bathroom rafter and the front balcony joists had no element of repair but simply covered the termite damage. (l) By affixing the bolted on beam to the family room beam the defendants carried out no 'repair' to the family room beam or alternatively never held an honest belief that they had effected any genuine repair. (m) Any submission that there was a conscious decision by the first defendant that using bolts would 'spread the load' ought to be rejected as there was no other method by which the defendant could have attached the cladding. 393. In support of the argument mounted by the plaintiffs that the motive behind, and the effect of, the covering works, had been to deceive them, the plaintiffs relied upon a series of photographs that were exhibited to the affidavits of Mr Wood. They also relied upon the inherent appearance and construction evident in the dismantled pieces of timber that comprised Exhibits "A", "B", "C", "D", "E", "F" and "K", as well as the piece of painted silicone filler that comprised Exhibit "H" which had been excised from the upstairs bathroom rafter. The plaintiffs also relied upon the content of the expert opinions tendered in evidence in the proceedings. 394. When the 13 points of argument raised by the plaintiffs are analysed, it becomes plain that the plaintiffs seek an inference, by the various formulations expressed in (a) – (m) above, that the work was carried out not only with the intention that the termite damage be concealed from view, but that this was done to deceive them and their pest inspector by misrepresenting the true position with regard to the extent of termite damage in the house, so as to induce the plaintiffs to buy the property. 395. All of these points so raised depend upon the assumption that at the time the covering work was undertaken by the Balfours, it was intended by that work to conceal the underlying damage from purchasers, particularly the plaintiffs. 396. In my view the plaintiffs' submissions on this issue are flawed. I do not consider that the plaintiffs have correctly characterised the motives of the Balfours in carrying out the works that concealed the termite damage from view. 397. In my view, when the evidence in support of the proposition relied upon by the plaintiffs is examined, it falls well short of proof of the imputed intentions of the Balfours as argued by the plaintiffs. 398. In my view, in the light of the fact that the relevant work was undertaken in 1983, 1999 and 2000, and in the absence of evidence that it was done at a time when the defendants specifically contemplated selling their house, the argument relied upon by the plaintiffs cannot be sustained to support the contended inference. I therefore decline to draw that inference. In my view, the highest the argument can rise is that the covering work was capable of preventing a non-invasive inspection arranged by future purchasers from revealing the concealed termite damage. 399. In my view this position falls far short of establishing the motives relied upon by the plaintiffs. In this regard I consider that the plaintiffs have failed to demonstrate by evidence, admissions or reasonably drawn inferences from available evidence, that at the time the work was carried out, the defendants did so with the intention to deceive, either prospective purchasers generally, or the plaintiffs in particular with regard to the extent of termite damage to the timbers of the house. 400. In my view, a difficulty with the plaintiffs' submission as outlined above is that it is couched in terms of generality by its reliance on the pleading expression "at all material times": Sub-paragraphs (b) – (g). In a case where, to succeed, the plaintiffs must prove an intention to misrepresent or deceive, which is tantamount to asserting that a fraud has been perpetrated against them, I consider that a greater measure of particularity rather than resort to generality is required to sustain the submission that a fraud has been committed on the purchasers : Briginshaw v Briginshaw [1938] HCA 34; (1934) 60 CLR 336. 401. There is no doubt that if the termite damage had been left unconcealed, it would have constituted a patent defect that would have been discoverable by either the plaintiffs or their appointed pest inspector. However, the fact that it was concealed does not necessarily mean that it was concealed with the intention of deceiving purchasers. 402. In my view, in seeking to make their argument that the defendants concealed the termite damage with the intention to deceive purchasers, the plaintiffs have failed to demonstrate an essential element of their argument that the claimed deceit, namely, actual knowledge on the part of both defendants at the time the covering works were undertaken, that the method of detecting whether a timber beam was solid or not was to tap on it for inconsistent sounds, in the context of the timber being tested or inspected for evidence of suspected termite damage. 403. Whilst an elementary understanding of basic physics, as would be expected from an aircraft maintenance engineer such as Mr Balfour, would support a conclusion that differing resonant sounds emerging from a tapped timber beam could base suspicion of hollowness or non-uniform solidity, this is a very different notion to assuming that firstly, Mr Balfour actually obtained such an understanding, secondly, that he knew the differing sounds were due to termite activity and thirdly, that he deliberately withheld knowledge that he had done these things and achieved such an understanding. 404. There were no interrogatories issued on this point. No specific admissions were made during cross-examination of the Balfours that would compel a conclusion that the concealment work was undertaken to prevent or avoid detection by a standards based pest inspection of the timbers of the house. 405. In my view, the argument put forward on behalf of the plaintiffs conflates the knowledge that was acquired after the termite damage was discovered with an assumed state of knowledge on the part of the defendants at the earlier time, when the covering work was variously carried out. In my view, that argument was advanced on behalf of the plaintiffs without evidence to justify the conflation relied upon. Instead, for its acceptance, the argument requires what I consider to be an unproven inference or suspicion as to the state of knowledge and the intentions of the Balfours in carrying out the described concealment work. I consider the evidence to be insufficiently substantial to enable such an inference to be drawn. This falls well short of proof of the requisite knowledge, let alone providing a basis for finding fraud. 406. The elements of the plaintiffs' argument embodied in the quoted sub-paragraphs (h) – (m) of the submission under present consideration are in my view based on a series of unfounded assumptions. Those assumptions all relate to the timing of the concealment works being evidence of an intention to deceive purchasers. The assumptions relied upon by the plaintiffs make no affirmative counter-assertions as to when the works were carried out by the Balfours, and simply contend by argument that the works, are by their nature, style and the steps taken for affixing cladding to the bedroom and family room beams, filling the defect in the bathroom rafter, and covering the visibility of the front balcony joints, had "no element of repair but simply covered the termite damage". The contention was that the nature and extent of these concealment works took them outside of the category of "any genuine repair" and compelled the conclusion that the respective concealments were effected by the Balfours with the intention to deceive intending purchasers, including the plaintiffs. 407. The argument made on behalf of the plaintiffs to the effect that the defendants were reckless in not enquiring as to the extent of the damage before covering it from view, is in my view unpersuasive. I have come to this conclusion as a result of my impression of the useful and methodical manner of Mr Balfour's work and his description of his motives in carrying out that work. I do not consider he was duty bound to undertake investigations of the kind undertaken by Mr Wood. 408. In my view it is incumbent on the plaintiffs to put forward some evidence to support the contention that the works in question were timed to deceive purchasers. Instead, all that has been put forward by the plaintiffs are assertions in the nature of opinions or suspicions of the absence of an honest belief of the genuineness of repairs, assertions which I consider to have been convincingly denied by the defendants. 409. In the circumstances, I have concluded that the work carried out by Mr Balfour, which had the effect of concealment of the visible signs of the termite damage to the timbers of the house, was carried out without turpitudinous or nefarious intent. I do not accept that the work, by its nature and detail, was intended to deceive, misrepresent or induce prospective purchasers to buy the property. 410. I find that the conceded concealment work was carried out for reasons of cosmetic amenity and enjoyment of the appearance and aesthetics of the structures that were covered. I construe the concealment work to have been carried out with the intention that it covered the termite damage from ordinary everyday view to add to the amenity and enjoyment of the occupancy of the house whilst the Balfours continued to live there. I find that the work was not undertaken for the nefarious purpose of concealment of the termite damage aimed at deceiving prospective purchasers. I do not accept submissions made on behalf of the plaintiffs to the contrary, for the reasons I have outlined. Consideration of Issue 4 – Whether the concealed damage amounted to a representation 411. Consideration of Issue 4 involves an examination of whether or not a relevant representation arose in the circumstances as contended by the plaintiffs. 412. The plaintiffs have argued that the conduct of the defendants, in cladding the upstairs bedroom beam, thereby giving it the appearance of a steel clad beam matching the appearance of other steel clad beams in the house, meant that the defendants thereby represented that the beam in question was in fact a clad steel beam which, by its appearance and by its nature, was termite free when it was not, or alternatively, it hid the termite damage. 413. The plaintiffs have also argued that the conduct of the defendants, in cladding the beam in the family room in the same manner as they did in the upstairs bedroom, and by counter-sinking and concealing with filler and matching paint, the embedded boltheads that held the cladding timber in place in the family room, thereby represented to the plaintiffs or to their pest inspector, upon viewing the cladding, that they were in fact looking at a solid beam in the family room, thus concealing termite damage that was patent underneath the cladding, and representing by its appearance, that the structure was termite free. 414. The plaintiffs also argued that the defendants, by their conduct in affixing a piece of 4" x 2" timber, and another piece of vertical timber to the end of the cut joists at the western end of the front balcony, represented that the timber joist in question was free of termite damage. 415. The plaintiffs further argued that the defendants, by filling the termite damaged sections of the joist at the western end of the front balcony with silicone, and then staining it with creosote to disguise the damage and the related covering work, represented that the joists were free of termite damage. 416. The plaintiffs contend that these representations all arose at the time when the plaintiffs and their pest inspector inspected the property. 417. For the reasons that follow, I do not accept these submissions. 418. The defendants were not present when the plaintiffs and their appointed pest inspector attended the premises to carry out a view and inspection of the premises. They were not required to be present, and after the various viewings and the pest inspections, no questions were asked of the defendants by anyone concerning any aspect of the state of the premises. 419. For the plaintiffs' argument concerning the existence of a representation to succeed as claimed, it must be held that not only silence on the part of the defendants, but also their deliberate absence from the premises during inspections was contrived to avoid questioning or making unsolicited disclosures, so as to also amount to a representation. There is no evidence that vendors commonly remain on the premises at times of viewing by prospective purchasers or when pest inspectors engaged on behalf of prospective purchasers attend to carry out their inspections. Common experience suggests the contrary. 420. There is no evidence that anyone on behalf of the plaintiffs ever drew to the attention of the defendants that the plaintiffs were, by the circumstances of their own viewings and as a result of the pest inspection they had commissioned, acting in reliance of an impression or a gained understanding of the absence of visible signs of termite damage to the premises, when taken together with the silence of the defendants on that subject, constituted reasonable basis for an assumed representation. I consider that proposition to be fundamentally untenable in the context of a vendor/purchaser transaction for the sale and purchase of land, involving as it did, specific contractual terms which are in evidence. 421. For the foregoing reasons, I have concluded that the concealment work in the affected areas of the house, as described in the plaintiffs' submissions, did not constitute the contended representation that those areas were free from termite damage, as has been argued on behalf of the plaintiffs. For the same reasons I do not consider the concealment works to constitute a conscious misrepresentation of the termite status of the premises. Consideration of Issue 5 – Identification of the representees 422. With regard to Issue 5, the plaintiffs contended that they were the relevant representees for the representation they contend had been made to them by the defendants. They also claim that indirectly, the representation they allegedly relied upon, was also made to their pest inspector, who was at all times acting on behalf of, and reporting to, the plaintiffs. In this context I take the reference to an "indirect" representation to be a reference to an uncontroversial relationship of agency between the pest inspector as agent and the plaintiffs as principals. 423. I have difficulty accepting the submission that the plaintiffs became the representees of the defendants when they inspected the house and when their agent, the pest inspector, reported back to them. There are two obvious difficulties with such a submission in the context of a sale of real property. 424. First, Special Condition 3 in the contract for sale specifically excludes the existence and the availability for reliance of a representation so based. 425. Secondly, the very terms of the pest inspector's report, which makes numerous references to suspected or possible concealed termite activity, in my view totally undermines the claimed existence or reasonable availability of such a representation. 426. Thirdly, in my view, a fundamental obstacle in the path of the plaintiffs' argument that they were relevant representees, is the fact that the works in question, and upon which the plaintiffs rely for the existence of the representation, were carried out and left static years before the house was marketed for sale. In those circumstances, where there were no active steps taken by the Balfours to assert the house was free of termite damage, and their silence on the subject could not reasonably in the circumstances amount to a representation, I am compelled to the view that no relevant representation arose, as asserted by the plaintiffs. 427. Accordingly, I find that there were no relevant representees. In my view, the evidence does not support the proposition that in the circumstances of this case, work carried out years before a house was marketed for sale would be a sufficient basis for a dormant state of representation to become enlivened at the time the house was marketed for sale. For such a position to arise, I consider that as a pre-requisite, a solid basis for finding a fraudulent intent must first be shown to exist on the part of the defendants. Such a finding has to be based on the requisite standard of proof which I consider to be absent in this case. 428. I find that at the time the work was undertaken by Mr Balfour, there were no relevant representees for an alleged representation. I also find that this remained the position once the house was placed on the market for sale. In this latter regard, I consider that Special Condition 3 of the contract for sale, to which I will later refer in greater detail, confirms this position as it makes clear to prospective purchasers, the terms on which the defendants were selling their house, including the term that the purchasers would be relying on their own inquiries as to the state of the premises. 429. I shall return to this topic in further detail in my consideration of Issue 7. Consideration of Issue 6 – Duty to disclose repairs to termite damage 430. The consideration of Issue 6 involves an alleged duty on the part of the defendants to disclose the concealment works. 431. The plaintiffs have submitted that the defendants were only ever under a duty to disclose the repairs of the termite damage to the timbers of the house because the manner of the repairs that had been carried out on the house had the effect of concealing a patent defect. 432. The plaintiffs further submitted that if, as a result of concealing a patent defect, the work carried out thereby, amounted to a proper or genuine "repair", then the duty to disclose would not arise. 433. As to what constitutes a proper or genuine "repair", the plaintiffs submitted that the test that best applied in the circumstances is as was outlined in John McGrath Motors (Canberra) Pty Ltd v Applebee [1964] HCA 1; (1964) 110 CLR 656 at 659. 434. The plaintiffs submitted that the defendants have conceded that the work undertaken to the bedroom beam did not contain any element of "repair." 435. In my view that submission made on behalf of the plaintiffs makes too much of that so-called concession. I consider this to be so because in my view, the work of covering the termite damaged timbers to conceal the damage from view, plainly constituted a repair. Whilst such a repair is not a renewal, much like a panel-beater filling and then painting over a dent in an automotive body panel is a repair, as distinct from renewal by the installation of a new replacement panel, I consider that changing the aesthetic state of the surface of termite damaged timbers on view in order to improve the amenity of the house, constitutes a repair. 436. I do not accept the plaintiffs' semantic argument that the work involved in covering of the termite damage was not a repair, notwithstanding the concession by Mr Balfour that was adverted to on behalf of the plaintiffs. 437. The submissions on behalf of the plaintiffs as to whether Mr Balfour's work comprised a "genuine repair" are in my view, unrealistic. The submissions were to the effect that with the exception of the family room beam, the non-genuine nature of the repair can be inferred from the fact that Mr Balfour made no efforts to determine the extent of the termite damage to the bedroom beam, the bathroom rafter or the family room joists. The underlying and untenable assumption of that submission is that Mr Balfour had not formed an opinion on the matter or, alternatively, any opinion he held on the extent of the damage was by its nature, fundamentally unreasonable. There is no adequate foundation in the evidence for such assumptions. 438. Further, the argument advanced on behalf of the plaintiffs also proceeded on the premise of Mr Balfour's concession that he knew that termites entered a house from the ground and could travel through the timbers of a house. The essential criticism upon which that argument proceeded was that because the defendants took no steps to determine the damage to the timbers of the house, this must be seen as the indication of the non-genuineness of the repairs that were undertaken by Mr Balfour. 439. In my view the plaintiffs' submission on this issue is flawed for at least two reasons. 440. First, by this argument the plaintiffs seek to impose on a home handyman repairer the same, if not a higher duty, than might apply to a professional or tradesman repairer. In this regard, the argument relied upon by the plaintiffs ignores the reality that not only does a repair task involve a range of options and potential costs associated with the task, but ultimately, it is entirely a matter for the owner as how to proceed to effect the repair. Paradoxically, this very same point was acknowledged and relied upon by the plaintiffs in their submissions concerning the formulation of the quantum of their claimed damages. 441. Secondly, the submission made on behalf of the plaintiffs entirely ignores the effect of the evidence of Mr Balfour, which I accept, to the effect that after he had arranged for the pest inspection treatments of the house for termites in 1995 and especially in 1997, he understood that the termites had been eradicated, with the result there was no longer any active infestation of the timbers of the house. The reasonableness of Mr Balfour's understanding has been confirmed by the experts called in the plaintiffs' case, who confirmed that the damage evident on the post-2004 invasive examination, was due to past termite activity. 442. In my view, Mr Balfour was entitled to believe, reasonably, that at the time he carried out the works which had the effect of concealing from view the damage due to termite activity in the bedroom beam, the bathroom rafter, and the front balcony floor joists, that the result of the pest extermination work he had commissioned had resulted in the eradicating of active termites. In these circumstances, I do not consider it was necessarily incumbent upon him, as was argued on behalf of the plaintiffs, that he should have taken steps to determine the extent of the termite damage before effecting the repairs that have been described. I do not accept he was under any such duty. It was entirely up to him as to how he might approach the task of effecting repairs, both as to the nature of the repairs and also as to the extent of the repairs. In doing so, I do not consider that Mr or Mrs Balfour had any fraudulent intent or the intention to misrepresent the structural integrity of the premises. 443. Having reached these conclusions, I reject the submission made on behalf of the plaintiffs that the repairs in question that were undertaken by the Balfours, were not genuine. 444. In my view, it follows that the defendants were not under a legal duty to disclose to the plaintiffs the nature, extent, or rationale behind such repairs, unless they had been specifically asked to do so, either by questions from the plaintiffs, or through questions asked by persons acting on their behalf, namely their conveyancing solicitor, or the pest inspector whom they had engaged to inspect the premises. 445. There was no reason as to why the plaintiffs or someone acting on their behalf could not have asked questions concerning the history of repairs to the structures of the house, including any repairs that might have been made due to past termite damage. No such questions were pursued either by, or on behalf, of the plaintiffs either before the contract for sale was entered into, or by interrogatories issued during the preparation of the case for trial. 446. I do not accept that the defendants ever believed that the repairs they had effected to the premises were not genuine repairs. I come to this view based not only on my assessment of the truthfulness of the evidence given by Mr and Mrs Balfour, but also on an objective consideration of whether a reasonable person in the position of the defendants would have honestly believed the repairs undertaken were truly genuine : John McGrath Motors (Canberra) Pty Ltd v Applebee [1964] HCA 1; (1964) 110 CLR 656 at p 659, following Akerhielm v De Mare (1959) AC 789 at p 805. 447. On that assessment, I find that the Balfours honestly held the view that the repairs they had effected over time, were genuine repairs. I find that belief to have been based on Mr Balfour's understanding, which was proven to be correct, to the effect that the termites which had caused the damage, had been successfully eradicated from the premises. The plaintiffs have not persuaded me that the affected structures, which were the subject of repairs, were to Mr Balfour's understanding at the time, structurally unsound due to termite damage such that the repairs in question could not be reasonably considered to be genuine and as such, required disclosure to purchasers. 448. Accordingly, since I have found that the repairs in question were genuine, I also find that no duty reasonably arose for the defendants to make the disclosures that are now contended for on behalf of the plaintiffs. Consideration of Issue 7 – Whether non-disclosure of repairs amounted to the alleged representation 449. Consideration of Issue 7 concerns whether non-disclosure of the repairs amounted to a representation as claimed on behalf of the plaintiffs. 450. On behalf of the plaintiffs it was submitted that by the silence of the defendants, at the time of, or shortly prior to, the time of the parties entering into the contract, the defendants represented that the relevant timber sections of the house were free from termite damage. 451. In developing this argument, on behalf of the plaintiffs it was asserted that whilst the defendants were not obliged to remove the cladding they had applied, or to undo any concealment work they had previously undertaken, or to take any other action to disclose that the subject timber sections were termite damaged, nevertheless, by their silence, the defendants must be taken to have misrepresented the true position which, but for the concealment work, amounted to a patent defect. 452. In response to those submissions, the primary position of the defendants was that there was no representee for the claimed representation attributed by the plaintiffs to the defendants, as asserted. In support of that position Mr Rayment referred to Spencer Bower, Turner and Handley, Actionable Misrepresentation, 4th ed (2000) Butterworths at para 11 p 4: "A representation is a statement made by, or on behalf of, a person (the representor) to, or with the intention that it shall come to the notice of, another person (the representee) which relates, by way of affirmation, denial, description or otherwise to a matter of fact. Thus there are two essential elements in a representation: (i) a communication between two or more persons (ii) relating to a fact, past or present." 453. Mr Rayment also referred to the following elaboration by the learned authors of the first of the above requirements, namely the element of communication, as follows: "It takes two to make a representation just as it takes two to make a contract. A statement is a soliloquy which is overheard, or in a diary or other private document which is surreptitiously read, has not been made to the eavesdropper or busybody and is therefore no representation. There must be two parties, a representor and a representee." 454. It is against that background that I have approached the analysis of the claims made on behalf of the plaintiffs. In doing so, for the reasons that follow, I have reached the conclusion that the submissions made on behalf of the plaintiffs are necessarily flawed in a number of material respects. 455. First, silence of itself cannot constitute a representation, especially where the alleged representors were not present in order to choose whether or not to remain silent at the times the claimed representees were said to have been the recipients of the claimed representation. The undisputed evidence is that the Woods never saw the Balfours at the premises before entering into the contract. Similarly, neither did the pest inspector who had been engaged by the Woods. In both instances, the undisputed evidence is that no enquiries were made by or on behalf of the Woods of the Balfours, nor were there any enquiries made of anyone acting on their behalf. There were no relevant interchanges between them prior to entering into the contract. Therefore, the existence of any alleged representation has to be determined from an examination of the relevant conduct of the Balfours. In my view their conduct on the facts as I have found them, did not reveal or amount to a representation as claimed. 456. Secondly, as I have already found, the works concealing the visible signs of termite damage were undertaken over a number of years in 1983, 1999 and in 2000, which was well before the Balfours contemplated actually selling their home so as to trigger a representation of the kind that has been asserted on behalf of the plaintiffs. The facts of this case are therefore quite different to a situation where, for example, a vendor might take steps to effect temporary repairs such as wallpapering over cracks in a wall, knowing full well that this would only temporarily serve to hide structural defects, doing so with the specific intention of inducing a sale to a purchaser who remained in ignorance of the underlying problem. In contrast, in this case, the defendants effected the works which concealed the damage from past termite activity for the specific purpose of improving the amenity and enjoyment of their house by covering up the sight of that damage. They did so with the intention of continuing to live in it for some time, and they did just that. The only thing that changed was that the new owners started effecting alterations which led them on a path of more invasive and destructive investigations, a course they were advised to follow before the sale, but declined to pursue. 457. Thirdly, the only evidence of the appearance of the premises being specially prepared for sale, was the laying of new carpet and the repainting of the internal doors to freshen up the appearance of the paint on those doors prior to marketing the house for sale. I consider that this latter work was much more remote in time to the concealment work relied upon by the plaintiffs, which suggests to me that the intentions behind the these two different categories of work were quite different, the first being to improve the amenity of the house to continue to live in it, and the second being to improve the prospects of the house being sold at a suitable time and for a suitable price. In coming to this view I recognise the possibility that these two categories of work could have been connected by a common motive, but I have discounted that possibility because in my view, the time interval that separated when these works were carried out, renders the prospect of a relevant connection between them, to be somewhat remote. 458. Accordingly, using the nomenclature adopted by the defendants from the learned authors of Spencer Bower, Turner and Handley, I find that the relevant works undertaken by the defendants, or more precisely, Mr Balfour, to conceal from view the past activity of termites, remained a soliloquy falling short of a relevant conversation between the parties so as to amount to a representation capable of being relied upon by the plaintiffs, as claimed. 459. When the claimed representation, as relied upon by the plaintiffs is analysed, I consider that it is revealed to be of a constructive nature rather than being of a factual character. This is evident from paragraphs 6 and 6A of the amended statement of claim, which states: "6. The Concealment Work was conduct that amounted to a representation by the defendants that the Property was free of termite damage or alternatively that any damage to the Property caused by termites was of a minor nature limited to the sub-floor area of the lower ground floor, and that the structural integrity of the Property was not compromised, (the Representation). 6A. Alternatively, in failing to disclose that they had carried out the Concealment work, the defendants conduct by their silence amounted to the Representation." [Amendments emboldened] 460. On behalf of the defendants, I consider that the submissions made by Mr Rayment have correctly broken down the essential elements of the claimed representation as follows: "… the Property was free from termite damage [" the first element "] or alternatively that the damage to the property caused by termite damage was of a minor nature limited to the sub-floor area of the lower ground floor [" the second element "], and that the structural integrity of the Property was not compromised [" the third element "]." 461. When the effect of the claimed silence of the defendants is examined in the light of the pleaded claim, some important features of the formulated claim emerge. 462. The first feature is the absence from the evidence of a factual basis within the evidence for all three elements of the pleaded claim. Correctly, the pleading must assert facts, and it does so. However, when the evidence is examined, the facts relied upon by the plaintiffs are only revealed to be facts drawn as inferences, namely a construction of facts. In my view, in this case, this represents an insufficient basis upon which to infer fraudulent intent. 463. The first element to the effect that the premises were free from termite damage was never actually stated as a fact by the defendants, or by anyone acting on their behalf. It is a conclusion sought to be relied upon by the plaintiffs by way of construction of the circumstances in order to provide the foundation for an asserted representation that the premises were free of termite damage. It is a construed fact, not a fact conveyed as a representation. In that context, silence ought not be construed as a representation. The situation might be different if a question or discussion had been raised to the effect of whether or not, in the past, to the knowledge of the defendants, the premises had ever been affected by termites. If the response of the defendants in the situation of that example was one of silence, then such silence could arguably give rise to a claimed representation that the premises were free of termite damage. However, that example was not the case here. 464. The second element namely, the alternative allegation to the effect that the degree of termite damage was minor, and limited to the sub-floor of the lower ground floor, is in my view, a conclusion drawn by Mr Wood, rather than being an actual statement made by the defendants or by anyone acting on their behalf, to the effect that only the sub-floor area was affected by termites and only to a limited degree. This much is clear from the evidence of Mr Wood by which he explained his interpretation of the pest inspection report he had commissioned. This second element is simply a re-iteration of Mr Wood's selective interpretation of what he took to be the meaning of the pest inspection report. That is a constructed view which he has concluded. It was not a factual assertion by the Balfours to him, or not denied in his presence, in circumstances where it was clear to the parties that any words uttered, or any silence maintained, would form the basis of a reliance on such conduct, as a prelude to, or an inducement to, enter into a contract. 465. The third element, being an alleged representation received by a civil engineer in the position of Mr Wood, to the effect that the structural integrity of the premises was not compromised, is, in my view, an incredible allegation. This is so particularly since before he entered into the contract, Mr Wood had before him the pest and building inspection report which he commissioned. Page 8 of that report, made reference to the inspector's opinion that the structure of the building had settled over time and was not plumb and square. I find it difficult to see how, on a fair reading of the pest and building inspection report, other than through an artificially formulated and inappropriately selective legal construction of events, it could be reasonably said that Mr Wood, upon whom Mrs Wood was reliant, could have seriously maintained a credible opinion that by silence, a representation had been conveyed to the effect that the property was structurally sound. 466. The defendants did not concede the work that was carried out to conceal from view the damage to timbers from past termite activity, constituted a representation that in respect of the four areas of the house where such work was carried out, the house was free from termite damage, or that any termite damage was limited to the sub-floor area of the house or that the structural integrity of the house was not compromised. 467. The defendants have submitted that the allegations so made by the plaintiffs have been cast too widely for the context and do not arise from the conduct alleged, in that covering up the damage to the described areas could not amount to a representation about the rest of the house. For the reasons I have outlined, and in view of the evidence given by Mr Clarke and Mr Capaldi to the effect that an unblemished timber surface says nothing to the observer about the extent of, or existence of, termite damage to other timbers in the house, I accept those submissions. 468. On the specific question of the significance of silence in the context of a claim for misleading and deceptive conduct, silence can be a matter of significance, as was stated by Black CJ in Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at p 32 in the following terms: "Silence is to be assessed as a circumstance like any other. To say this is certainly not to impose any general duty of disclosure; the question is simply whether, having regard to all relevant circumstances, there has been conduct that is misleading or deceptive or that is likely to mislead or deceive. To speak of mere silence or of a duty of disclosure can divert attention from that primary question. Although "mere silence" is a convenient way of describing some fact situations, there is in truth no such thing as mere silence because the significance of silence always falls to be considered in the context in which it occurs. That context may or may not include facts giving rise to a reasonable expectation, in the circumstances of the case, that if particular matters exist they will be disclosed." 469. In this case, a number of salient features inform the question of whether a duty to speak arose on the part of the Balfours, so as to provide a context for an evaluation of the effect of silence on their part. 470. The first such factor is that the present circumstances under consideration are a transaction for the sale of land that was conducted at arm's length, to which all the parties should be taken to have appreciated that the doctrine of caveat emptor was to have application. Furthermore, a real estate agent was acting for the Balfours, both the vendors and purchasers were independently represented by solicitors, and the parties had expressly acknowledged Special Condition 3 of the contract for sale of the land in question. 471. The second such factor is that there were no dealings between the Woods and the Balfours personally, and specifically there were no questions asked by the Woods, regarding the extent of any past termite damage or if there was any present termite activity. Furthermore, there was a reasonable expectation, which was fulfilled in this case, that interested purchasers would arrange, consistent with the relevant provision of the contract for sale, for a professional pest and building inspection in order to inform themselves of any relevant matters relating to the activity of termites or structural problems that might impact on risks associated with the purchase of the property. 472. The third such factor was that at the time the property was marketed, there was no evidence of current termite activity. This served to confirm the reasonableness of the Balfours' understanding that at the time they effected the covering works, there was only ever past termite activity, which had been successfully treated and eradicated. It was in this context that the relevant concealment works relied upon by the plaintiffs as evidence of the representation in contention, respectively occurred beforehand, in 1983, 1999 and in 2000, which was well before the date on which the parties entered into a contract for sale of the property. 473. The fourth such factor was Mr Balfour's understanding that the bedroom beam had as much termite damage then, as has now been revealed to be the case after destructive investigation. Mr Balfour considered the family room beam to have been properly repaired and the Balfours themselves saw fit to live in the property for a number of years, during which time it was in the same condition in which it was sold to the Woods. This was in circumstances where it is evident that Mr Balfour and Mrs Balfour were house proud people and had fastidiously kept their home well maintained, rendering it unlikely that they would have had any misgivings about the adequacy of the repairs that they had undertaken, or concerning the condition of the property at the time of sale. 474. On behalf of the defendants, Mr Rayment addressed the question of the significance of silence concerning the spectre of what repairs, or to use a more neutral term, what work, must be disclosed to prospective purchasers when selling land on which a dwelling house has been constructed. He submitted that there was no clearly defined line of demarcation as to what must be disclosed, and what need not be disclosed. He submitted that it was this very reason that the doctrine of caveat emptor has been held to apply in all cases short of deliberate and active concealment. That submission is undoubtedly correct. 475. Guided by the remarks of Black CJ in Demagogue Pty Ltd, and by the foregoing analysis of the facts and the applicable principles, in my view, in the circumstances of this case, silence on the part of the defendants concerning the matters relied upon by the plaintiffs, did not constitute a relevant representation. Accordingly, there was no obligation on the part of the defendants to make the disclosures now contended for by the plaintiffs in this litigation. 476. Accordingly, I find that the non-disclosure by the Balfours, of the repairs and covering works that they had carried out on the timbers in question, did not amount to a relevant representation as alleged by the plaintiffs. Consideration of Issue 8 – The effect of caveat emptor and Special Condition 3 on the claimed duty to disclose 477. The consideration of Issue 8 involves an evaluation of the effect of caveat emptor and Special Condition 3. 478. In their defence to the claim by the plaintiffs, the Balfours argued that the maxim of caveat emptor applied to the transaction by which they had sold the house to the Woods, as did Special Condition 3 of the contract for sale. As a result, the Balfours claim by way of defence, that in this particular transaction, the Woods acknowledged that they were reliant on their own inquiries, rather than being reliant upon anything that might have been represented to them by, or on behalf of, the Balfours. 479. The Woods submitted that these defence arguments were effectively answered by their claim that a fraud had been perpetrated against them, the contended fraud being the non-disclosure of the concealed termite damage having the effect of rendering such defences unavailable to the defendants. 480. The plaintiffs concede that the rule of caveat emptor applies to contracts for the sale of land and in their written submissions, they cite Stonham, Vendor and Purchaser, (1964) Law Book Co and Williams, Vendor and Purchaser 4th ed, Lightwood, Sweet & Maxwell. In this regard paragraphs [510] to [514] of the plaintiffs' written submissions on this issue stated: " 510. The rule of caveat emptor (let the buyer beware) and 'latent & patent defects' is described in Stonham Vendor and Purchaser (Law Book Co 1964) as follows at page 228 and following: The rule of caveat emptor applies to contracts for the sale of land. The purchaser takes that which he sees, or which, as a prudent and diligent purchaser, he ought to have seen, and is not entitled to have anything better. He is bound to exercise a reasonable degree of caution and, therefore, if there be anything in the representation made by the vendor calculated to excite suspicion, or to require explanation, or investigation, the purchaser is put upon his guard, and must bear the consequences of his own neglect in not making further investigations. Latent and patent defects A patent defect is a defect that a purchaser is likely to discover if he inspects the property with ordinary care. A latent defect is one which a purchaser, inspecting the property with ordinary care, would not be likely to discover. Whether a defect is latent or patent is a matter of degree. It is not enough that there exists on the land on object of sense, that might put a careful purchaser on inquiry, but in order to be a patent defect, the defect must either be visible to the eye, or arise by necessary implication from something visible to the eye. What the vendor must disclose The vendor is under no obligation to disclose patent defects in the quality of the property, whether such defects be pure defects of the physical condition or quality of the property, or defects of title; but the vendor's title being a matter which is, or ought to be within his knowledge, he is bound to disclose to a purchaser other defects of title, at any rate, if he is, or ought to have been aware of them. 511. At page 231 Stonham continues regarding patent defects with regard to the quality of the land as opposed to title: Concealment of patent defects by Vendor The vendor must not actively conceal defects in quality that would otherwise be patent, (Shirley v Stratton (1785) 1 Bro CC 440 128 ER; Fry, s.715), as for example plastering up a defect in a wall and papering it. A representation by the vendor that a house is substantial and well built relieves the purchaser from the necessity of inspecting the house for himself, although the defect is patent. A vendor must not lull a purchaser's suspicions, if inquired of respecting defects known to the vendor, by giving misleading answers, or answers lacking in frankness. Conduct calculated to mislead a purchaser regarding some material fact, or to divert him from inspection or inquiry, which would discover a defect, known to the vendor, may be fraudulent, and may be ground for avoiding the contract at law, as well as resisting specific performance. 512. In Williams 'Vendor and Purchaser' 4th Ed, by John Lightwood, Sweet & Maxwell at page 759, the author refers to caveat emptor : With regard to mistakes in what may be termed the quality of the land sold, as for example, whether it is fit for growing corn, grazing cattle, or for building, or whether a house or other building is in good repair or well drained, the reader must bear in mind the following distinctions: The rule is caveat emptor . The purchaser should inspect and make inquiries concerning the property which he is buying. If he omits this precaution, he buys at his own risk and cannot complain of the defects in the quality of the thing, unless they are not discoverable by inspection and materially interfere with the enjoyment promised by the contract, or offered by any representation which induced the contract, or are fraudulently concealed. And further at page 761: In equity however, the rule has been suggested that a latent defect of quality, which is not discoverable by any inspection or inquiry that a prudent purchaser might reasonably be expected to make, and is known to and not disclosed by the vendor, is a good ground for refusing to grant specific performance at the vendor's suit. But it is submitted that this rule is too broadly stated, and is properly subject to the qualification that the defect must be such as will materially interfere with the enjoyment promised by the contract or the vendor's representation, or the concealment must be fraudulent And at page 764: … … If the vendor represents that a house is in good repair, or is not damp, or that the drains are in good order, or the cellars dry, or that a farm is in a high state of cultivation, or sells land as being fit for building purposes, or as business premises, then any latent defect, which prevents this representation from being fulfilled, will be a good ground of objection by the purchaser to his completing the contract. If however, the defect was patent or obvious, then the purchaser may be obliged to perform the contract, notwithstanding the representation, on the ground that he must be taken to have bought with notice of the defect. But any active concealment of defects which would otherwise be discoverable by inspection is a fraud; and if a purchaser is deceived thereby he may avoid the contract accordingly. Thus if cracks in the walls of a house are papered or painted over with intent to conceal them, and the house is then sold, though without any warranty or verbal representation as to its state of repair, to a purchaser who has inspected it, the contract is voidable for fraud. And any conduct calculated to misled a purchaser with respect to some material fact, or to divert him from inspection or inquiry, which would discover a defect known to the vendor, is equally fraudulent, and may be a ground for avoiding the contract at law as well as resisting its specific performance. And at page 766: Not only is there no legal obligation upon a vendor of land to disclose to the purchaser any defects known to him in the quality of the thing sold, but further the vendor is not bound to disabuse the purchaser of any erroneous belief, which the purchaser has formed, and which the vendor knows the other has formed, as to the quality of the purchased property. A vendor may well sell a house, which has got dry rot in all the woodwork and is badly drained, to a purchaser, who knows nothing of these defects, but believes to the knowledge of the vendor that the house is in good repair and well drained, and yet the purchaser will not be entitled to claim the rescission of the contract; provided always that the vendor made no representation as to the quality of the thing sold, and did not actively conceal the defect. 513. Accordingly it is submitted that active concealment of a patent defect is an exception to the doctrine of caveat emptor . 514. If the plaintiffs can prove to the Court that the defendants actively concealed a patent defect, as pleaded, the defence of caveat emptor , is not available." 481. It is clear from the foregoing submissions that for the plaintiffs to succeed in this case, they must show the defendants have acted fraudulently in actively concealing the visible signs of damage from termites with the intention of deceiving a prospective purchaser. 482. Consequently, on behalf of the plaintiffs it was argued that the principle of caveat emptor will not apply to defeat the claim of the plaintiffs in the circumstances under consideration as there has been a fraudulent concealment perpetrated against them. Consistent with that submission, the plaintiffs claim that Special Condition 3 of the contract for sale will not protect the vendor in circumstances where the "purchaser buys the property relying on his own inspection" if the inspection is effectively restricted by the vendor having actively concealed patent defects. 483. In my view the foregoing submission contains a fallacy in that the plaintiffs were aware of the "restricted" nature of an inspection in that any non-invasive inspection would be limited to a visual inspection, and after that visual inspection they were advised to seek an invasive inspection. They declined to pursue that course. 484. The plaintiffs have submitted in answer to the reliance by the defendants on Special Condition 3 of the contract for sale, that they rely upon the decision of Burchett J in Oraka Holdings Pty Ltd v Leda Holdings (1997) ATPR 41-558 at page 43,717 where his Honour stated: "It cannot be thought that the very agreement that was obtained by a misrepresentation can be made good by incorporating in it a further misrepresentation falsely asserting that it was not procured by the means which were in fact employed. The agreement that so seeks to sustain itself was obtained by a misrepresentation, and no verbal magic of an added clause can change that. Many authorities have made this clear." 485. In view of the factual findings I have made, to the effect that the Balfours did not engage in the conduct of actively concealing patent defects with the intention of deceiving purchasers, including the plaintiffs, I conclude that the foregoing submissions on the authority cited are of no assistance to the plaintiffs in this case. 486. First, Special Condition 3 of the contract for sale provided: "The property together with the appurtenances thereto is sold in its present state of repair and the purchaser acknowledges that he buys the property relying on his own inspection, knowledge and enquiries and that he does not rely on any warranties or representation made to him by or on behalf of the vendor. The purchaser shall not call upon the vendor to carry out any repairs whatsoever in relation to the property hereby sold." 487. This necessarily means that the purchasers were on clear notice that they had to make their own inquiries as to the condition of the premises. Such potential inquiries were not necessarily restricted to visual inspection, but also contemplated the possibility of asking relevant questions, including of the vendors and their own pest and building inspector. The one important inquiry that they made was to obtain the pest inspection report. In my view the commissioning of that report was evidence of the fact that Mr and Mrs Wood understood the importance of Special Condition 3 of the contract. 488. Secondly, on 11 August 2004 Mr and Mrs Wood signed the acknowledgment embedded in Special Condition 3 of the contract for sale and on 13 August 2004 they agreed to buy the house on these terms which included Special Condition 3. They have not sought to argue that they did not understand the meaning and effect of that condition. 489. Thirdly, I consider that Mr Wood, and therefore Mrs Wood who was relying upon Mr Wood's judgment, dismissed without adequate consideration, the obvious and repeated warnings and alerts contained within the pest inspector's report they had commissioned concerning suspected concealed termite damage. It is clear that they relied upon their own, or more accurately, Mr Wood's judgment, on the state of repair and structural integrity of the house, and the risk of the extent to which the house may be affected, including structurally, by concealed termite damage. In my view, a fair reading of the pre-purchase pest and building inspection report placed the Woods on clear notice of the potential for the timbers of the house to be affected by concealed termite damage. The plaintiffs made no other inquiries after being placed on notice by the terms and content of that report, and clearly relied upon the very limited, and in my view artificial, interpretation that Mr Wood had placed on the pest inspector's report. 490. Fourthly, the argument based on the cited passage by Burchett J in Oraka involves a circular argument. It pre-supposes the existence of a misrepresentation at the outset. In this case I have found there was no such misrepresentation. I am not persuaded that the decision in Oraka has any application to this case. 491. I have concluded that the plaintiffs have failed to establish fraud on the part of the defendants. They have failed to demonstrate that the defendants set about to actively conceal visible signs of termite damage with the intention to deceive purchasers. Accordingly, I find that in this case, neither Special Condition 3 nor the operation of the maxim caveat emptor have been abrogated or displaced. Accordingly, I find there was no relevant duty that arose to oblige the defendants to disclose the fact of earlier termite activity in the premises and the extent of the damage that may have arisen from that termite activity. Consideration of Issue 9 – Alleged falsity of the claimed representation 492. Consideration of Issue 9 involves an evaluation of the alleged falsity of the claimed representation. 493. The plaintiffs have submitted that the defendants not only represented that the subject timbers of the house were not termite damaged at the date of the contract, but they also submitted that such representation was false, as the expert evidence was that the subject timbers were extensively damaged before 1997. 494. The basis of that submission was that after the sale of the premises to the plaintiffs, both the plaintiffs and their experts found the property to have been extensively damaged by termite activity, such damage having most probably arisen before 1997. 495. In my view, this argument by the plaintiffs invokes and introduces impermissible considerations of hindsight gained from a retrospective analysis of the relevant events. The only logical basis upon which a submission could proceed to the effect that the property was "extensively damaged by termites" would be from the retrospective analysis obtained through the substantial destructive inspection undertaken by the plaintiffs and their engaged experts after the purchase of the premises in August 2004. 496. In my view, in these circumstances, it is entirely impermissible to use the knowledge gained by the plaintiffs in this way to impute to the defendants, knowledge of extensive damage, especially in the context of allegations of fraudulent conduct. In this regard, I consider that analysis of the question of whether or not the defendants were aware of extensive damage from termite activity so as to fairly base an allegation that they falsely represented to the contrary, should be guided by looking forward or prospectively along the lines discussed by Hayne J in Vairy v Wyong Shire Council at [126], p 461, and not with considerations of hindsight, which is the manner in which the submissions made on behalf of the plaintiffs have proceeded. 497. This means that any assessment of the state of the knowledge of the defendants as to the extent of termite damage to the house should be made on the basis of what the defendants were likely to have known prior to the sale to the plaintiffs, and not according to what was later found to be the case by the plaintiffs on a destructive investigation of the timbers of the house, which in effect involved the house being partly dismantled and cut apart. 498. On taking the Vairy approach that I have identified, I reject the plaintiffs' submission that the defendants falsely represented to the plaintiffs that the subject timbers were not termite damaged as alleged. I find that the Balfours did not make the alleged, or for that matter, any false representations to the Woods, as to the condition of the timbers of the house as at 13 August 2004. Consideration of Issue 10 – Knowledge and belief of defendants concerning termite damage concealment 499. Consideration of Issue 10 is based on the premise of there being a false representation and relates to whether the defendants knew the house was affected by serious termite damage, and if so, did they know they were making a representation to the contrary. 500. The plaintiffs drew attention to the historical context in which the defendants had discovered termite damage to the house, namely in the years 1983, 1995, 1997, 1999 and 2000. In their submissions, the plaintiffs also pointed to some of the detail of the degree of knowledge the defendants were "at all material times" asserted to have had concerning termite activity. 501. It was upon these foundations that the plaintiffs sought to mount an argument that the defendants knew they were making a representation that the subject beams were not termite damaged. The argument was that when the defendants had acted in the manner alleged by the plaintiffs, they also knew that such a representation was contrary to their knowledge or honest belief, such that the alleged representation should be characterised as a misrepresentation, having been made fraudulently, because there were problems associated with the concealment works in question, namely, they were "not genuine repairs". 502. In making that argument, the plaintiffs seek to bring the circumstances of their case within the application of the principles enunciated in the authorities concerning cases of deceit : Derry v Peek [1889] UKHL 1; (1889) 14 App Cas 337 and the authorities which have been earlier identified as having followed and interpreted that decision. 503. In the paragraphs that follow, I set out my analysis of this submission, and my analysis of the basis on which it has been made. 504. The plaintiffs submitted that the overheard statement attributed to Mrs Balfour by Mrs Doyle to the effect "I suppose we should notify someone" is evidence that "suggests a strong inference that the defendants were aware the house had termite damage". 505. I have given careful consideration to the inference sought by the plaintiffs concerning the evidence of Mrs Doyle. In my view the inference sought is not the only such inference that arises. The statement recounted in the evidence of Mrs Doyle was not specific, and could have referred to a number of things, even allowing for the possibility that it was said to have been made to someone Mrs Doyle assumed was a pest control tradesman. I consider the snippet of conversation relied upon by the plaintiffs to be too flimsy a basis upon which to infer the foundations for fraudulent conduct. The incompleteness of the recalled remark is prone to be taken out of context and there was no evidence of the full or a fuller context. 506. Accordingly, in my view, the submission relied upon, being based only on a snippet of a conversation, does not rise above mere speculation : Luxton v Vines [1952] HCA 19; (1952) 85 CLR 352. I do not consider the imprecise and imprecisely recalled evidence of Mrs Doyle to represent a sufficient basis for discrediting the evidence of the defendants in order to base a contrary finding of fraud to the required standard : Briginshaw v Briginshaw [1938] HCA 38; (1938) 60 CLR 336. 507. Having reviewed the evidence of Mrs Doyle I conclude it has no probative value. Had I come to the opposing view I consider that her evidence is of such a limited ambit, without an adequate context, it being only a snippet of a conversation she claims to have overhead. I consider that it is the kind of evidence that ought to be excluded under s 135 of the Evidence Act 1995 because its potential for prejudice on account of its limited scope, outweighs any potential probative value. 508. In my view the submission made by the plaintiffs on the issue under analysis relies upon an incorrect interpretation of the evidence of Mr Balfour, who stated that in 1983, when he was repairing the front balcony timbers and extending that balcony, he thought he was dealing with a dry rot problem created by the moist conditions in which those timbers were located. Paragraph 40 of the plaintiffs' submissions dated 14 April 2010, which addressed the issue under present analysis refers to an awareness on the part of the defendants of "damaged termite joists in the front balcony three years after constructing their home". That summation is an incorrect one, as Mr Balfour's evidence was that he only realised the front balcony problem was due to termites rather than dry rot much later. 509. The submissions made on behalf of the plaintiffs criticise the defendants for having "purposely abstained from enquiring as to the extent of termite damage in the house" so as to preclude "any honest belief about the extent of termite damage" in the house after 1999, apparently basing that submission on the acknowledgment by Mr Balfour that he understood, when he found the termite damage in the upstairs bathroom rafter, that termites wrought their damage by working their way from the ground up to the highest point in the house. The plaintiffs also rely on these same matters for their assertion that "in failing to determine the extent of the damage the defendants could not have had an honest belief that they had effected genuine repairs" and, claiming there was no "repair" element associated with the front balcony joists and the upstairs bathroom rafter, and that the repair to the upstairs bedroom beam was not "adequate". The plaintiffs' submissions were also critical of whether the work carried out to the family room beam "can amount to a repair". 510. In my view, the submissions on behalf of the plaintiffs are flawed, and should be rejected for the reasons that follow. 511. First, in relation to the work on the front balcony joists, the submissions made on behalf of the plaintiffs on the issue under present analysis ignore completely the fact that the work undertaken by Mr Balfour on the front balcony joists was not simply repair work as was asserted. That work also relevantly involved extensions to that balcony and decking timbers. This fact casts an entirely different complexion on the appearance of Exhibit "K" and the surrounding joist extensions from which that exhibit was cut. The criticisms made on behalf of the plaintiffs also appear to proceed upon the incorrect premise that Mr Balfour's work should have been performed to the standard expected of a tradesman. That cannot be the standard to which a home handyman must be held to be accountable in circumstances such as these. 512. Secondly, I consider that the plaintiffs have approached the analysis of the adequacy of the repairs in question undertaken by the defendants from the perspective that might have been expected in a case alleging negligence rather than fraud. In this regard they seek, inappropriately in my view, to criticise the extent of the work and the approach taken by the defendants to the work, as if the defendants were under a duty to carry out the work of repairing the visible signs of termite damage by way of renewal or replacement of the affected structures rather than by covering the damage, as was the case. In my view that approach is incorrect. It was open to the defendants to carry out the repairs in any reasonable manner they sought fit, and in my view they did just that. This is why a purchaser should proceed with the maxim caveat emptor in mind. 513. Thirdly, it appears that the plaintiffs are seeking to sustain an allegation of fraud by reference to a failure to make enquiries in the face of termite damage. I consider that approach entirely ignores the evidence of Mr Balfour, to the effect that after the termite treatments in 1995 and 1997 he believed, correctly according to the subsequent expert evidence commissioned by the plaintiffs, that the termite infestation of the property had been properly and effectively treated. On that basis, which I accept on the facts of this case, it was open for Mr Balfour to regard the termite activity on the premises as having been eradicated, leaving him free to cover the visible signs of damage. He was not then obliged in those circumstances, to carry out an investigation of the extent of the damage in the manner and to the extent that was subsequently undertaken by Mr Wood – or at all. It was entirely up to him as to how he sought to cover the visible signs of such damage particularly as it has not been demonstrated that Mr Balfour knew that there were structural problems to do with safety as a result of the termite activity. It is noteworthy that the opinions to this effect were only enabled by a partial dismantlement of the house, which revealed far more detail than was available to Mr Balfour. 514. Fourthly, I consider that the plaintiffs have sought to characterise the motives behind the repair works in question through the prism of suspicion fuelled by a methodologically flawed retrospective analysis in the context of litigation rather than applying a measured forward looking rational analysis of the kind required by Vairy. The analysis advanced on behalf of the plaintiffs has been informed by knowledge acquired after the events, but used by the plaintiffs to impugn the conduct of the defendants in retrospect, in an impermissible way. 515. I therefore reject the plaintiffs' attack upon the defendants concerning their state of knowledge and belief of the extent of termite damage to the premises and the characterisation as inadequate, of the repair works carried out by the defendants that covered the visible signs of such damage. I reject the submission that these circumstances amounted to fraudulent concealment or misrepresentation on the part of the defendants, as has been alleged. Consideration of Issue 11 – Whether the defendants intended that the plaintiffs would rely upon the claimed representation 516. The consideration of Issue 11 proceeds upon the premise that there was a relevant representation and that it was made with the intention that it would be relied upon by the plaintiffs. 517. The plaintiffs have submitted that the alleged representation made by the defendants was made with the intention that it be relied upon by the plaintiffs. 518. In developing this particular submission, the plaintiffs contended that it was open to the defendants at all times, either by them personally, or through their agent, to disclose the termite damage to the subject beams, or to disclose the fact that they had carried out work to clad the subject beams, prior to contracting with the plaintiffs. 519. The argument advanced on behalf of the plaintiffs draws upon the evidence of Mr Balfour to the effect that before he contracted with the plaintiffs he had told the pest inspector from the firm Themen about damage to the sub-floor of the premises. The plaintiffs also draw upon Mr Balfour's evidence that he had disclosed this fact to the pest inspector from Themen so that Themen could "provide a thorough report". The plaintiffs point to the evidence of Mr Balfour where he stated that he had "told Themen all that I could think of at the time", as the proffered explanation for not disclosing details of the other works he had carried out. 520. The plaintiffs have seized upon this evidence and have sought to cast it into a turpitudinous light, claiming that this allegedly incomplete disclosure by Mr Balfour provided evidence of his intention to conceal the evidence of termite damage in the house. In seeking that construction on these events as a finding, the plaintiffs also drew upon the evidence of Mr Balfour having engaged Copes Pest Control prior to contracting with the plaintiff, arguing that this engagement was something of a "dummy run" or a test inspection to ascertain whether the other termite damage to the timbers of the house would be discovered on a purchaser's pest inspection. I assume that the presumed motive for such a course, although unstated in the submission, is that such a course would result in a more advantageous sale price being achieved. 521. On behalf of the plaintiffs, it was contended that this evidence, together with the evidence of Mrs Doyle, gives rise to a compelling inference that Mr Balfour intended to convey the representation that there was no termite damage to the remainder of the timbers in the house and that he intended that the plaintiffs rely upon that representation. 522. For this submission, the plaintiffs relied upon the decision of Krakowski v Eurolynx Properties Pty Ltd [1995] HCA 68; (1995) 183 CLR 564 and submitted that the sense in which a representation is understood by the representee, is relevant to a determination of the question of whether the representation induced the representee to act upon the representation. 523. The plaintiffs also rely upon the decision in Gould v Vaggelos [1985] HCA 85; (1984) 157 CLR 215, particularly the remarks by Wilson J at [3] p 236 which summarises the 4 elements required to show a misrepresentation, citing paragraphs [1028] and [1029] of Cheshire and Fifoot on the Law of Contract, 4th Australian ed Butterworths. These elements are reliance on a representation calculated to induce the representee to enter into the contract, not relevantly rebutted by the representee's own knowledge and comprising a relevant contribution to the formation of the contract. 524. I consider that the submissions made by the plaintiffs on this issue are flawed, for the reasons that follow. 525. First, in my view, the cited authorities of Krakowski and Gould are of no assistance to the plaintiffs in this case because it also requires an examination of the intentions of the person making the claimed representation. In that regard, I have found that there was no intention on the part of the defendants to convey the claimed representation and I have also found that the circumstances do not justify the inference that a representation was made. It was common ground that Mr Balfour left a copy of the Copes report, Exhibit "W", at the house after the settlement for the information of the plaintiffs. In my view that action is inconsistent with an intention on his part to perpetrate a deceit. Further, the construction the plaintiffs seek to have placed on the evidence of Mrs Doyle for proof of the knowledge of the falsity of the claimed representation, involves impermissible speculation which requires rejection. Neither of these circumstances support a conclusion that Mr Balfour, as a claimed representor, intended that the Woods, as representees, would rely upon the contended representation. 526. Secondly, for its acceptance, the submission pre-supposes the existence of a duty to disclose the fact of termite damage to purchasers and/or pest inspectors engaged on behalf of purchasers. On the contrary, I have found that the maxim of caveat emptor and the effects of the agreed Special Condition 3 of the contract for sale negates the existence or the operation of the contended representation. I have also found that the plaintiffs have failed to demonstrate, on any standard of proof, that the defendants acted fraudulently to render the effects of caveat emptor and Special Condition 3 inoperative in this case. I have also found that in the circumstances, the claimed silence on the part of the defendants did not amount to a representation that the house was free of termite damage, as was contended by the plaintiffs. 527. I therefore reject the submission made on behalf of the plaintiffs to the effect that the defendants intended that the plaintiffs rely upon the contended representation. Consideration of Issue 12 – Whether the plaintiffs acted in reliance on the alleged representation 528. A consideration of Issue 12 presumes the existence of a relevant representation and an alleged reliance by the plaintiffs on such an alleged representation where they obtained their own pre-purchase pest inspection report which revealed the suspected existence of "concealed termite damage". 529. On behalf of the plaintiffs it was submitted that they had in fact relied upon the contended representation. They claim such reliance arose because their pest inspector had not discovered the extent of the termite damage in the house, and in turn, their reliance on their pest inspector's report led them to enter into the contract for sale with the defendants. The claim is that they would not have contracted to buy the house from the defendants if they had known of the extent to which the house was affected by termite damage. 530. The plaintiffs developed that submission to assert that the effect of their retention of a pest inspector was that they relied upon that inspector to discover any termite damage to the property and to advise the plaintiffs accordingly. [Emphasis added] 531. It appears to me that this submission on behalf of the plaintiffs has been overstated, as the pest inspector engaged by the plaintiffs was engaged to carry out a non-invasive visual inspection according to the Australian Standard. As such, he could have only ever identified visible signs of termite activity and pointed to suspected concealed termite activity, which is precisely what the plaintiffs' pre-purchase pest inspection report did. That report could not have identified "any termite damage", as has now been contended on behalf of the plaintiffs. [Emphasis added] 532. The plaintiffs have submitted that although their retained pest inspector did not discover the relevant damage, his failure to do so does not sever the causal nexus between the alleged deceit on the part of the defendants, and the damage sustained by the plaintiffs. 533. In making that submission the plaintiffs referred to the report prepared by their pest inspector and claimed that their interpretation of that report was reasonable. In this regard they claim it is not open to the defendants to avoid their liability to the plaintiffs on the basis that the plaintiffs should have interpreted that report differently. 534. The plaintiffs submitted that but for the concealment of the termite damage, the pest inspector engaged on their behalf would have seen the visible damage located on the two relevant levels of the house, as well as the suspected damage in the sub floor, and the inspector would then have notified the plaintiffs that the house was "extensively" termite damaged. It is difficult to accept that submission in the absence of evidence being called from the pest inspector in question, as to what was likely to occur in those hypothetical circumstances. 535. The plaintiffs further argued that but for the alleged concealment, the termite damage to the house would have been obvious, and an invasive inspection would not have been necessary. They further argued that in any event, there is a compelling inference that an invasive inspection would have been refused by the defendants if it had been requested. The basis of the submission is not clear as that question was not asked of the defendants in those terms during cross-examination of them in these proceedings. 536. In the circumstances outlined, I find that the submission that the pest inspector relied upon the alleged representation must be rejected. The pest inspector was not called by the plaintiffs to support that contention and I conclude from the terms of his report that he relied upon his own skills and stated observations, and not on any alleged representation. Otherwise, the basis for his rejected recommendation for an invasive inspection would be difficult to understand. 537. Although I have found that there was no relevant representation as was contended on behalf of the plaintiffs, it is nevertheless necessary that I address the question of alleged reliance by the plaintiffs. In this regard, for the reasons that follow, I have concluded that I do not accept that there was any relevant reliance as alleged on behalf of the plaintiffs. 538. In this regard, I accept the submission made by the defendants that the plaintiffs were so keen to buy the property in question that they did not rely upon the warnings evident within the pest inspector's report which they had commissioned. I find that instead, they relied upon the very limited, and in my view artificial interpretation placed on that report by Mr Wood. 539. In view of the contents of the pest inspector's report, which I have summarised between paragraphs [25] to [56] of my reasons, I conclude that the reading and interpretation of that report by Mr Woods unfortunately ignored numerous, significant and clearly expressed warnings that ought to have alerted him to the fact that concealed termite damage could be present in the house, and that in order to address this risk, an invasive inspection was recommended. I find that Mr Wood exercised his own judgment in considering and assessing the risk that the house may have been affected by termite damage, and in this regard he chose to act in reliance of his own judgment, rather than on any alleged representation. 540. I have come to this view because it is clear that the plaintiffs not only did not seek to ask any questions of the pest and building inspector whom they had engaged, but also chose not to seek to ask the Balfours anything about the termite history or other structural history of the house. In my view it is clear that Mr Wood based his judgment on his own interpretation of the pest and building inspection report. In my view, these circumstances clearly confirm that Mr Wood had made up his mind to go ahead with the purchase based on his own judgment. 541. In my view, the correctness of this analysis is confirmed by the evidence of the plaintiffs that they were planning to carry out extensions and alteration works to the house, and had assumed, incorrectly as things turned out, that any termite damage they believed may have been present in the house, could have been manageably dealt with according to their intended renovation plans and within the renovations budget they had allocated at the time they formulated their offer to purchase the property. 542. I also consider that the correctness of my view that Mr Wood was determined to proceed with the purchase and to take the risk regarding the extent of any termite damage to the house, is demonstrated by the relative speed with which the purchase proceeded. 543. In this regard, the contract for sale was initially signed by the parties on 11 August 2004, with a proviso that allowed for a pest inspection report to be obtained by the plaintiffs. The contemplated pest inspection took place on the same day, and the resultant report, which was very compendious, was also issued on 11 August 2004. The contract for sale was then perfected on 13 August 2004, which then bound the plaintiffs to the sale. I consider that the relative rapidity of these events, having regard to the very detailed content of the 65 page pest inspection report, indicated that Mr Wood was determined to proceed with the transaction, notwithstanding the warning signs and indications of concealed termite damage that were clearly evident within the pest inspection report he had commissioned. 544. Accordingly, I find that there was no causal nexus between any asserted representation that was said to have been made by the defendants, and any asserted reliance on such alleged representation. 545. Instead, I find that the plaintiffs took upon themselves the risk that termite damage might be encountered in the premises, as is evident from their awareness that the pest inspector, whom they had engaged on their behalf, had found evidence of termite damage in the sub-floor area and had, correctly as things turned out, drawn attention to the possibility of there being other concealed damage from termite activity. In deciding to proceed with the purchase, I find that the plaintiffs took upon themselves the risk that they might encounter termite damage in the house. I find that unfortunately for them, the risk they undertook later materialised when they started their renovations, with devastating financial consequences for them. 546. The fact remains that the plaintiffs had made their own enquires before the purchase, and it was their own enquiries, and their own interpretation of the results of those enquiries, which ultimately led them to the decision to buy the house. 547. In any event, even if I am in error in my findings interpreting the relevant events concerning whether or not there was a relevant deceit or fraudulent misrepresentation on the part of the defendants, I nevertheless find that the Woods did not rely on the alleged misrepresentation. Instead, I find that Mr Wood relied upon his own interpretation of the pest and building inspector's report, and on his own judgment about the extent of any likely termite damage to the premises. I find that Mrs Wood relied upon her husband's judgment on the issue. As a result, I find that there was no relevant reliance as claimed, and as a result, there is "no case" of inducement or reliance on any misrepresentation as alleged : Gould v Vaggelos, per Wilson J at [3], p [236], citing Cheshire and Fifoot on the Law of Contract, 4th Australian ed, Butterworths. 548. In view of these findings, it is unnecessary for me to address and analyse the authorities relied upon by the plaintiffs in the remainder of their submissions. Consideration of Issue 13 – Whether the plaintiffs have suffered damage 549. A consideration of Issue 13 relates to the quantum of the claimed damages. 550. The plaintiffs claim that they have suffered damage as a result of paying a price for their house equivalent to a property unaffected by termite damage, or at least affected by termite damage to a limited extent, in circumstances where the house they purchased was in fact badly affected by termite damage. 551. The plaintiffs claimed the quantum of their loss was the difference in value between such properties. Their claimed loss was quantified in the amount of $225,000, based on proper valuation principles. This roughly coincided with Mr Capaldi's estimate of the cost of demolition and repair in the sum of $223,388.76. 552. In making this claim the submissions made on behalf of the plaintiffs highlighted the fact that such damages for diminution in value will not come close to providing the plaintiffs with a new house. This measure of claimed damages does not provide "new for old". It was submitted that the plaintiffs were entitled to repair the termite damage to the house as and how they see fit. The fact that they have done so with the assistance of the first plaintiff's father, a carpenter, and the labour of the first plaintiff, which may have saved them money whilst also saving the cost of renting elsewhere if the house had been demolished, cannot have any bearing on the quantum of damages if they succeed. 553. I accept that the submitted method by which the plaintiffs seek to have their quantum of damages assessed is a reasonable method for assessment in this case. I accept this method notwithstanding the inherent guesswork and uncertainties evident within the valuation method introduced into evidence by the plaintiffs' expert, Mr Adams. Whilst the contended method of valuation involves a considerable number of uncertainties, and is necessarily imprecise, I consider that it nevertheless serves as a reasonable guide to form a basis upon which the claimed loss should be measured in this type of case. 554. That said, an outstanding quantum question nevertheless remains concerning the earlier settlement of the claim the plaintiffs brought against the pest inspector whom they had engaged to inspect the premises before the purchase. In that case, the character of the damages claimed by the plaintiffs was for the diminution in the value of the house due to the effect of undetected termite damage. Similar damages are now claimed in these proceedings, yet the plaintiffs received damages from the settlement of a claim in the earlier proceedings against the pest inspector. 555. A question has arisen concerning whether, by settling the claim against the pest inspector, the plaintiffs have received their measure of damages such that they are estopped from pursuing similar damages against the defendants. The plaintiffs have in effect acknowledged the force of that question by only claiming the difference between the sum of $225,000 and the conceded amount that was identified as having been received when they compromised the earlier proceedings they brought and resolved against the pest inspector. 556. As I have determined the issues calling for decision in this case against the plaintiffs, it becomes unnecessary for me to decide this last question. However, if it is ultimately found that I have erred in deciding the earlier questions arising in these proceedings, it is plain from my reasons, that if required, any residual quantum question can be readily resolved in an appeal as a consequence of my earlier finding on the reasonableness of the approach taken to the valuation issue. Conclusions concerning alleged deceit 557. I have concluded that whilst the work Mr Balfour had carried out on the house in response to detecting damage from past termite activity effectively concealed from view and visual inspection that there was such termite damage, except to the lower sub-floor area, he did so for aesthetic purposes, and not with the intention of deceiving prospective purchasers. 558. I have concluded that there were no relevant representations as claimed by the plaintiffs. 559. It is plain that when the Woods received a pest and building inspection report, they were on notice that there was suspected concealed termite damage in the house. I have concluded that in their enthusiasm to purchase the house, Mr and Mrs Wood chose not to follow up the recommendation made by their pest inspector that they have an invasive pest inspection of the house. I have concluded that they did so as a result of a limited and selective understanding of the contents of the pest inspector's report which recommended an invasive pest inspection as concealed termite damage to the timbers of the house was suspected. 560. I find that in taking that course, Mr and Mrs Wood undertook to themselves carry the burden of the combined effect of the maxim caveat emptor and the burden of the disclaimer within Special Condition 3 of the contract for sale of the property. This meant that they bore the risk that the house may have been affected by concealed termite damage, a risk that materialised from a state of latency to a state of patency, as became evident when they later commenced and proceeded to progressively undertake renovation work on the house. 561. Accordingly, although the extent of the termite damage ultimately uncovered in the house has become financially detrimental and burdensome to the Woods, in the context of the requirements for showing legal causation, I find that such financial detriment does not amount to damage caused or materially contributed to by, or arising from the alleged conduct of the Balfours, which the Woods have unsuccessfully sought to impugn as being a fraudulent misrepresentation, or deceitful. 562. The plaintiffs have failed to establish fraud, and therefore deceit, on the part of the defendants : Derry v Peek. In this regard, I have found that the defendants were neither fraudulent, reckless, careless or in any way dishonest, as is required to be shown according to the authorities I have cited at the outset of my judgment. D. DISPOSITION AND ORDERS Disposition 563. On the foregoing conclusions, I find that the plaintiffs have not made out their case of alleged deceit. The proceedings must therefore be resolved in favour of the defendants. It necessarily follows that the plaintiffs must pay the costs of the defendants. Orders 564. I make the following orders: (a) Verdict and judgment for the defendants; (b) The plaintiffs are to pay the costs of the defendants on the ordinary basis unless otherwise ordered; (c) The exhibits may be returned; (d) Liberty to apply on 7 days notice if further orders are required. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.