Alexandrou v Pacific Pest Control Pty Ltd [2016] NSWDC 193

District Court New South Wales

Medium Neutral Citation: Alexandrou v Pacific Pest Control Pty Ltd [2016] NSWDC 193 Hearing dates: 8 – 10 June 2016 and 4 August 2016 Date of orders: 26 August 2016 Decision date: 26 August 2016 Jurisdiction: Civil Before: Montgomery DCJ Decision: (1) Judgment for the defendants (2) Plaintiffs to pay the defendants' costs of proceedings Catchwords: Negligence – Pest Inspection Legislation Cited: Conveyancing Act (NSW) 1919 Civil Liability Act 2002 (NSW) Australian Consumer Law Uniform Civil Procedure Rules 2005 Cases Cited: Jones v Dunkell (1959) 101 CLR 298 HG v The Queen (1999) 197 CLR 414 Effem Foods Pty Limited v Lake Cumbeline Pty Limited (1999) 161 ALR 599 Astley v Austrust Limited (1999) 197 CLR 1 Category: Principal judgment Parties: Andreas Alexandrou (First Plaintiff) Katina Alexandrou (Second Plaintiff) Pacific Pest Control Pty Ltd (First Defendant) Con Francis (Second Defendant) Representation: Counsel: J Anderson (Plaintiffs) M Hutchings (Defendants)

Solicitors: Adams & Co Lawyers Pty Ltd (Plaintiffs) Sparke Helmore Lawyers (Defendants) File Number(s): 2014/285496

Judgment 1. The plaintiffs are a married couple presently living with their two children at xx Augusta Road, Punchbowl which property is the subject of the claims in these proceedings ("the property"). 2. Mrs Alexandrou is a homemaker and works part-time as an administration officer at Pickles Motor Auctions. At the time of hearing Mr Alexandrou had experience with building through his employment as a labourer with Meriton Apartments. However, at the time of the subject events, his experience was of working with motor mechanics, not in building. 3. Prior to their purchase of the subject property, the plaintiffs had some experience with property improvement. Together they had purchased and improved before sale a home unit in Bankstown which they sold in 2010 and a home unit at xxx Victoria Road, Punchbowl which they purchased in 2010 and sold with the benefit of its improvements in October 2012. At the time of the purchase of the property Mr and Mrs Alexandrou were renting xxx Victoria Road, Punchbowl from the investor to whom they had sold it and were paying $480.00 per week rent. 4. The property consisted of three bedrooms, one bathroom, a laundry with a second toilet, kitchen, dining and lounge rooms. Externally were a garage and a free standing shed. The home was located on a 515 square metre block of land. It is the physical house with which the claim is concerned and in these reasons reference to the "property" will almost invariably be a reference to the physical house upon the block. 5. Having inspected it, the plaintiffs, on 12 December 2013, executed the contract in the form of the 2005 edition of the Law Society of New South Wales Contract for Sale of Land. The vendors were Abdul and Nada Ghazal. The front page of the contract recorded numbers and lined-through numbers which on the evidence of Mrs Alexandrou recorded a course of negotiation to the agreed purchase price. The front page of the contract identified the plaintiffs' solicitor for the purchase as a Mr Kartsaunis [note the parties referred to the plaintiffs' solicitor in evidence as Mr Kartsounis but I will adopt the spelling of his name as appears on the first page of the Contract]. In consultation with Mr Kartsaunis at about the time of signing the contract, the plaintiffs determined not to complete the s 66W, Conveyancing Act (NSW) 1919 Certificate contained within the papers of the Contract for Sale of Land and thereby to enjoy the benefit of the Cooling-Off Period which would expire at 5pm on 19 December 2013 pursuant to ss 66S to 66U Conveyancing Act. 6. Mr Kartsaunis recommended the first defendant for the purpose of obtaining a pre-purchase building condition and pest inspection report. The second defendant, Mr Francis, is the alter ego and sole operator of the first defendant and in these reasons the defendants are dealt with as if they were one. 7. Mr Francis inspected the property on 16 December 2013 and delivered his report on that same date to Mr Kartsaunis. The report is Exhibit D in the proceedings. Mr Kartsaunis provided all instructions to Mr Francis and upon receipt of his report, provided it to the plaintiffs. Mrs Alexandrou confirmed that the plaintiffs read the defendants' report before the expiry of the Cooling-Off Period. 8. At the outset I reject the defendants' contest of the fact that the plaintiffs were unaware of the Cooling-off Period and so did not rely on the content of the defendants' expert report obtained during that period. In the second sentence of paragraph 6 of her affidavit made 4 August 2015 Mrs Alexandrou deposed of the plaintiffs' understanding from what was said by Mr Kartsaunis that they could " ….. buy the property subject to a Cooling-Off Period during which time [they] could obtain a building condition and pest report". At paragraph 13 she deposed "We instructed our solicitor that we did not wish to exercise our 'cooling-off' rights and that we wished to proceed with the purchase". I accept that evidence of what the plaintiffs understood their course to be. That course was entirely consistent with their having taken the precaution of obtaining the advice of Mr Kartsaunis both upon entering into the contract to purchase and in relation to his advice to obtain a building and pest inspection report from the defendants. It was an entirely normal and sensible precaution to take. They were, after all, persons of some experience in the buying and selling of property and therefore had experience of the Contract for Sale of Land. Mr Francis during cross examination (transcript pages 223 line 35 to 224 line 12) confirmed that he was contacted by Mr Kartsaunis on 12 December 2013 and instructed to provide a pre-purchase visual building and pest inspection. He recalled the conversation as: "Q. He said to you, "Andreas and Katina have exchanged contracts and paid the deposit. They are currently in a cooling-off period which ends 19 December 2013, so you will need to report quickly? … Q. That was what Mr Kartsaunis told you? A. Yes." 1. Mr Francis delivered the defendants' expert report to Mr Kartsaunis on 16 December 2013, being a date within the Cooling-Off Period. Mr Kartsaunis provided all instructions to Mr Francis. Mrs Alexandrou confirmed that the plaintiffs read the defendants' report before the expiry of the Cooling-Off Period. 2. The defendants' expert report is 58 pages in length containing photographs and recording features of the condition of the building relevant to its conditions and to the subject of pests. It was common ground that the defendants were retained to perform only a visual inspection and not an invasive inspection. At page 33 the report provides a conclusion and summary of the overall condition of the building compared to similarly constructed buildings of approximately the same age, where those buildings had enjoyed a maintenance programme implemented to ensure that the building structural members are still fit for purpose. That conclusion reads as follows: "The incidence of Major Defects and Minor Defects and overall condition in this Residential Building as compared with similar Buildings is listed below: The incidence of Major Defects - The incidence of Major Defects in this Residential Building as compared with similar Buildings is considered HIGH. The Overall Condition of This Dwelling – The overall Condition of the Residential Dwelling in the context of its age, type and general expectations of similar properties is BELOW AVERAGE." "HIGH" is defined to mean beyond the inspector's expectations when compared with similar buildings by type and age. "BELOW AVERAGE" is defined to mean that the building showed significant defects and/or very poor non-tradesmanlike workmanship and/or long term neglect and/or defects requiring major repairs or reconstruction of major building elements. "Major Defect" is defined as meaning the requiring of building works to avoid unsafe conditions, loss of function or further worsening of the defective item. Specifically in relation to the timber pest inspection component of the report (starting at page 37), Mr Francis reported that neither active termites nor termite workings or damage were found. Importantly, in the pest inspection part of the report, the "visual inspection" was described as follows (at page 38): "1. THIS IS A VISUAL INSPECTION ONLY in accordance with the requirements of AS 4349.3 Inspection of Buildings Part 3: Timber pest inspections. This visual inspection was limited to those areas and sections of the property to which reasonable access (See Definition) was both available and permitted on the date of Inspection. The inspection DID NOT include breaking apart, dismantling, removing or moving objects including, but not limited to, foliage, mouldings, roof insulation/sinsalation, floor or wall coverings, sidings, ceilings, floors, furnishings, appliances or personal possessions. The Inspector CANNOT see inside walls, between floors, inside skillion roofing, inside the eaves, behind stored goods in cupboards, in other areas that are concealed or obstructed. The Inspector DID NOT dig, gouge, force or perform any other invasive procedures …….. 4. LIMITATIONS: Nothing contained in the Report implies that any inaccessible or partly inaccessible areas or sections of the property being inspected by the Inspector on the date of the Inspection were not, or have not been, infested by Timber Pests. Accordingly this Report is not a guarantee that an infestation and/or damage does not exist in any inaccessible or partly inaccessible areas or ss of the property …… 7. DISCLAIMER OF LIABILITY: No liability shall be accepted on account of failure of the Report to notify any Termite activity and/or damage present at or prior to the date of the Report in any areas or section(s) of the subject property physically inaccessible for inspection, or to which access for Inspection was denied by or to the Licensed Inspector (including but not limited to any area(s) or section(s) so specified by the Report. Areas unable to be accessed or restricted should be made available to be inspected prior to purchasing the dwelling." 1. The report identified (at page 40) areas not inspected which included inaccessible areas including those concealed by (relevant to the matter) wall linings, floor coverings, furniture, pictures, appliances and insulation, including in the roof void. 2. The passages referred to above of the defendants' expert report are selected as examples of what throughout the report is a clear description of the parameters of the inspection being a visual inspection of the property, so far as it could be observed by Mr Francis at the time of his inspection and without him using force, such as to move furniture. Very relevantly, the property was tenanted and furnished at the time of Mr Francis' inspection on 16 December 2013. 3. The plaintiffs' intention was to carry out improvements to the property in order to make it liveable according to their expectations, so that they might move in with their young family soon after settlement. At paragraph 10 of her affidavit Mrs Alexandrou stated: "My husband and I decided that, although the property needed some repairs, much of the work could have been done by my husband while we lived in the property and also that it would be suitable for us if we could buy it at a price that reflected its condition and state of repair". 4. At paragraph 11 of her affidavit Mrs Alexandrou stated that the plaintiffs budgeted $45,000 to spend on renovation and repairs "which we thought were required on our inspection of the property and on the basis of the inspection report". 5. According to Mrs Alexandrou the planned improvement work was to include: 1. Removal of carpet and sanding back the timber flooring; 2. Repainting; 3. Installation of new light fittings; and 4. Fitting of new blinds. 1. At paragraph 3 of his affidavit Mr Alexandrou described the work as: "The only work we were going to do to the house was to paint the house, remove the carpets in the house and remove the vinyl floor in the kitchen and polish the timber flooring, change the doors to the bathroom and the front and back door and install a new toilet". 2. On the whole of the evidence it might be that this list was not precisely complete but their evidence was that the work which they would perform was more of the nature of decoration than of renovation or substantial refurbishment, as I understood it. 3. Of some importance in the case is that the plaintiffs only inspected the property on the one occasion just prior to signing the contract on 12 December 2013 and on that occasion, for only ten to fifteen minutes, which inspection included the whole of the block of land and its improvements. Indeed, as was properly conceded by counsel for the plaintiffs in closing oral submissions, the plaintiffs did not give evidence of features of the property which visual inspection by Mr Francis on 16 December 2013 ought to have observed but failed to do so. In this regard Mr Alexandrou gave the following evidence (transcript page 130 line 45 to 131 line 10): "Q: Because if you had walked past the bathroom when you inspected the place for 10 or 15 minutes, before 12 December 2013, and saw what you described [note: as discovered after completion of the purchase in January/February 2014] as obvious termite damage, you would have known there was a termite problem wouldn't you? A: No. Q: So is it the case that that damage wasn't there when you inspected the property? A: It was there when I took the photo [note: the photograph was taken in about early February 2014]. Q: That's not what I'm asking you. When you inspected it before 12 December 2013, was that damage there? A: I don't know." (Words within brackets inserted) The plaintiffs' photographs showed extensive termite damage to studs and noggins after internal wall linings had been removed and termite mud trails and activity in the roof void. 1. Following the settlement of the purchase on 24 January 2014 Mr Alexandrou collected the keys to the property from Ray White Real Estate Agency at Lakemba and attended the property for the purpose of commencing the work. 2. There was no contest in the case as to what was discovered by the plaintiffs when they attended the property for the purpose of commencing their planned works. Mr Alexandrou said in his affidavit: "3. That afternoon [24 January 2014] my father-in-law Menios Tsikouris ("Mr Tsikouris") and I went to the Property to inspect and started to remove most of the carpet and all the floors and remove the doors. 4. On 25 January 2014 Mr Tsikouris and I moved the carpet in the loungeroom, hallway, main bedroom and removed the vinyl floor in the kitchen. After Mr Tsikouris and I did the above, he left at around midday. At around that time, my father Georgios Alexandrou arrived to assist. I showed Mr Alexandrou around the house and as I was leaning on the window sill on [sic] the main bedroom with my left hand, it crumbled and termites started spewing out of the hole. This shocked both myself and Mr Alexandrou. I immediately telephoned Katina and advised her of the termite discovery. 5. Katina arrived at the property shortly thereafter and had the report of Pacific Pest Control ("the Pacific Pest Control report") dated 16 December 2013 with her and we compared the photos in the report with the house." (Note: Date within brackets inserted.) 1. What is apparent is that whilst spending some extended time working within the house, initially with his father-in-law and subsequently with his father, including showing them around the house; there was nothing seen by him, or them, until the collapse of the window sill, which caused him or them concern. The plaintiffs do not point to visual presentation during that inspection and those works on 24 and 25 January 2014 which alerted them to termites or termite damage until the window sill crumbled. In the context of the retained inspection being a visual inspection only, in my opinion, it is significant that even with the focused attention of Mr Alexandrou during display of the property to his father in law and father, approximately forty days after the inspection by Mr Francis, nothing of the nature of an abnormality or other feature indicating to them a concern for termites was noticed. On the common evidence, when they performed that inspection on 24 and 25 January 2014, the extensive termite damage about which the case is concerned, was within the house. In his evidence preceding that quoted above, Mr Alexandrou during cross examination, made the following concession (transcript page 130 lines 5 to 41): "Q. Well, before 25 January you've told his Honour you spent at most 15 minutes at the house? A. Yes. Q. In the presence of your wife and a real estate agent? A. Yes. Q. So it was only after 25 January that you first got a good look at the place? A. Yes. Q. You told his Honour earlier today, you gave evidence earlier today, that you were certain that the exterior of the bathroom window hadn't changed between when you inspected the property and when you came to take a photograph of that location after 25 January 2014? A. Yes. Q. Do you seriously tell his Honour that in your 10 to 15 minute inspection of the property, you observed the bathroom window closely so that you could give that evidence? A. I walked past it, yes. Q. Observed it closely? A. No. Q. You didn't, did you? A. No. Q. You know that in this case it's important for your position to be successful for you to say "Judge, those things just weren't there when I looked at the place"? A. No. Q. Or do you say they were always there? A. Yes. Q. Always there and always plainly obvious? A. No, no." 1. At hearing the plaintiffs did not obtain from Mr Francis any concession of things he missed during his visual inspection on 16 December 2013. 2. On 25 January 2014 Mr Alexandrou telephoned Mr Francis and reported the collapsed window sill and termites. Mr Francis responded that he was on holiday and that after the Australia Day long weekend he would attend the property on Tuesday 28 January 2014. He advised Mr Alexandrou not to disturb the termites found in the bedroom but to move to another room with his work. Mr Alexandrou then moved to the bathroom. 3. In the bathroom on 25 January 2014 Mr Alexandrou was using a screw driver to remove a door when his screw driver pushed into the architrave. He noticed a two centimetre gap in the bathroom wall lining. He was able to easily pull away the bathroom wall lining panels and when he did so it was apparent that the studs and noggins within were significantly termite damaged. He then accessed the roof void through the manhole in the bathroom ceiling where he saw what he described as "mud tracks and after further investigation I saw termites eating the wood in the roof". It is not clear whether Mr Alexandrou's further investigation involved invasive techniques but the evidence of pest inspector, Mr Roubin, in the plaintiffs' case, clarified that termites do not walk around in the open but are concealed within the timber and mud trails. 4. Mr Roubin attended the property on 6 February 2014, at the invitation of the plaintiffs, in order for him to advise in regard to termite treatment. At paragraphs 11 and 12 of his affidavit he gave the following evidence: "11. I performed a visual inspection of the cavity between the roof and the ceiling. I used a ladder to climb into the roof through the manhole. There was no sarking in the roof. In the roof, immediately above the manhole I observed termite workings. In the rafters (the timbers which support the battens under the roof tiles) I observed termite workings which were substantial and fresh. It was not necessary for me to remove any insulation, sarking or other covering in order to observe the termite workings. Termite workings are darker in colour when they are fresh and usually indicate active termites and lighter in colour when they are dry and perhaps do not have active termites. Using a screwdriver I opened the termite lead and a few termites crawled out. 12. I did not see active termites, which are termites walking around and apparent to the naked eye. To determine termite activity comes with experience in the field and can be determined through visual inspection. 13. I then crawled underneath the house then the open subfloor and observed termite activity which was present in the area underneath where the laundry is located. The joist had apparent termite damage and termite tunnelling was evident leading up from the ground to the joist … 14. … 15. I also observed termite workings in the north easterly corner of the dwelling inside the external cladding. These workings were visible from the outside of the house without the need to remove or disturb the cladding." 1. In oral evidence in chief Mr Roubin clarified that during the visual inspection one never finds termites walking in the open on the external surfaces. His evidence was (transcript page 192 lines 29 to 37): "Q. You say, "I did not see active termites, which are termites walking around. Termites do not walk around on the outside and only travel within the workings. To determine termite activity comes with experience in the field and can be determined through a visual inspection." A. Correct. So I didn't see any active termites walking on the outside of the timber but they were definitely inside the timber. So active termites means that they are inside the timber or in the tunnelling or in their mite trails or a mound of some sort. They will never be walking on the outside of the timber. It just won't happen." 1. Mr Alexandrou on 25 January 2014 examined the house exterior and found what he described as "a termite track running along the top of" a window frame and "termite damage" in the external kitchen, laundry, main bedroom and bathroom windows. Mr Alexandrou's attribution to termite activity of features of the house identified in his evidence, was admitted on the basis of what he understood but not as evidence of the fact that it was termite caused damage and termite mud trails. In this regard, the evidence of Mr Francis was that the window frames were rotten and the defendants' expert report recorded areas of rotten timber. 2. Mr Alexandrou's father, Georgios, on 27 January 2014 again visited the property and Mr Alexandrou showed him the damaged timbers within the bathroom, the panelling having been stripped away. Mr Georgios Alexandrou then climbed a step ladder to the roof void through the manhole in the bathroom and with the use of a torch saw what he described as timbers coated with what appeared to be brown mud or clay "looking like a small beehive" and he noticed that some timbers had more brown mud than others. 3. Exhibits K, G, J, A and H show the substantial deterioration of the structural timbers behind wall linings as they were subsequently exposed to a greater extent by the plaintiffs. In fact, there is no contest in the proceedings of the fact of the physical damage as portrayed in the plaintiff case; that damage being as discovered after settlement of the purchase of the property. 4. When Mr Francis attended the property on 28 January 2014, Mr Alexandrou showed him the termite damage which the plaintiffs had discovered in the main bedroom and in the bathroom. Mr Francis responded with words to the effect: "I can't look behind walls". Mr Francis then obtained access to the roof void by a ladder through the manhole in the bathroom. He performed a quick look, without the benefit of a torch and descended the ladder in order to obtain his camera. 5. At this point I interpose that Mr Francis' photographic recording of his inspection of the roof void performed on 16 December 2013, as appears in the photograph on page 30 of his report and in the collection of photographs Exhibit 7, to my observation, appears to show the use of a torch during that inspection. I raised this during oral submissions. Defendant counsel agreed but plaintiff counsel was unable to agree. It is not necessary for me to determine the extent to which roof void termite activity or damage was detectable on visual inspection with or without a torch, save to acknowledge that in the context of the dispute as to the conversation which followed Mr Francis descending the ladder on 28 January 2014, there is no evidence that he had looked within the roof void using a torch, as Mr Georgios Alexandrou had done the preceding day. Nor is there evidence that Mr Francis conducted a thorough inspection of the roof void on 28 January 2014.