Aldridge v JHA 09 Pty Ltd [2012] QCAT 440

CITATION: Aldridge v JHA 09 Pty Ltd [2012] QCAT 440 PARTIES: Deborah Jean Aldridge v JHA 09 Pty Ltd (formerly Jeffrey Hills & Associates Pty Ltd) ACN 139 933 681 APPLICATION NUMBER: BDL325-10 MATTER TYPE: Building matters HEARING DATE: 30 April 2012 HEARD AT: Brisbane DECISION OF: Peta Stilgoe, Senior Member DELIVERED ON: 10 September 2012 DELIVERED AT: Brisbane ORDERS MADE: 1. JHA 09 Pty Ltd (formerly Jeffrey Hills & Associates Pty Ltd) ACN 139 933 681 pay Deborah Jean Aldridge $2,451.00 by 12 October 2012. CATCHWORDS: BUILDING INSPECTION REPORT – where homeowner thought she was requesting full pre-purchase building inspection report – where report was limited to structural and pest – where report showed problems with building – where contract gave right to terminate for pest and structural defects only – where homeowner incurred costs in rectification – whether entitled to claim rectification costs from author of report CORPORATION – where company sold – where change of name – where no ACN on report APPEARANCES and REPRESENTATION (if any): APPLICANT : Ms Aldridge in person RESPONDENT: No appearance -- 1 of 7 -- REASONS FOR DECISION [1] On 24 May 2010, Ms Aldridge signed a contract for the purchase of a property at Eagleby. The standard REIQ contract clause relating to a building and pest inspection had been deleted and replaced with a clause allowing her to terminate if, within 14 days, she received a report stating either that the property was not structurally sound or there was active termite activity within the property. [2] Ms Aldridge engaged Jeffrey Hills & Associates Pty Ltd to provide a report. She received a report from Hills by email on 2 June 2010 and through the post on 4 June 2010. On the basis of that report, Ms Aldridge completed the purchase of the property. [3] After Ms Aldridge took possession of the property, she found that there were a number of defects that were not referred to in the Hills’ report. Ms Aldridge says that, had she known about these defects, she would not have completed on the purchase. She is claiming the cost of rectifying these items from Hills. [4] The issues I have to decide are: a) What was the agreement between Ms Aldridge and Hills? b) Did Hills breach that agreement? c) Did Hills’ breach cause Ms Aldridge’s loss? d) What is the amount of Ms Aldridge’s loss? Miscellaneous matters [5] Although the company ABN appeared on its website, there is no reference to an ABN or ACN on the inspection report. Section 153 of the Corporations Act 2001 (Cth) states that a company’s ACN must appear on all of its public documents. That definition must include a report prepared on the company letterhead. The absence of the ABN on the report has led to confusion. [6] The company was sold in July 2011 on the condition that the purchaser could not use the name Jeffrey Hills & Associates. It was then that the name was changed to JHA 09 Pty Ltd. A new company by the name of Jeffrey Hills and Associates Pty Ltd has now been registered. Interestingly, it trades in the same business of providing inspection reports. [7] It is also of interest that the 2010 website showed Jeffrey Hills as the principal of the company, although he was not connected with the company at the time of its sale or liquidation. Mr Hills is the nominee of the new Jeffrey Hills & Associates. A search of the QBSA licence information shows that Mr Hills has been the nominee of other companies that are now in liquidation1. This matter merits investigation by the Authority. [8] If Mr Hills was the company nominee at the time the report was provided, or represented that he was actively involved in the company, and Ms 1 JHA Number 2 Pty Ltd , JHA 06 Pty Ltd, JHA No 11 Pty Ltd. -- 2 of 7 -- Aldridge can produce the necessary evidence of loss, then she may have other remedies in another jurisdiction. [9] On the morning of the hearing, the tribunal was advised that JHA 09 Pty Ltd had entered into a voluntary liquidation agreement. The only reason that this dispute has proceeded to a decision is that Ms Aldridge obtained the leave of the Supreme Court to continue proceedings against the company in liquidation. What was the agreement? [10] There is a difference between a structural inspection report and a building inspection report. The difference is set out in AS4349.1. A structural inspection should not contain any assessment or opinion regarding any non-structural element, any component that cannot be seen or requires testing, general maintenance or serviceability issues, or damp defects unless there is structural damage. A structural inspection report is, as Mr Howarth from the Queensland Building Services Authority observed, a very basic report. [11] Ms Aldridge states that she asked Hills for a building report. She says that she visited Hills’ website before deciding to engage the company. Ms Aldridge says that the website detailed what was involved in a “pre- purchase building and pest inspection” and that is what she wanted. [12] Ms Aldridge has provided a copy of the website as at 2009 and September 2010.2 The website records that, with pre-purchase building and pest inspection: We thoroughly inspect and provide a comprehensive report on such areas as:  Building exterior  Building interior  Cracks and defects  Roof  Roof space  Sub-floor space  Site drainage and stability  Pool  Electrical and plumbing services  Retaining walls and fencing  Pest inspection [13] Hills disputes that this is a true reflection of the web site at the time of Ms Aldridge’s visit. It says that the website details the scope of the report and includes a copy of the standard agreement. Hills did not provide evidence to support this assertion whereas Ms Aldridge went to the effort of engaging an expert to track iterations of Hills’ website. I accept Ms Aldridge’s evidence that there was no distinction between a structural report and a building report on the Hills’ website and that a copy of the standard agreement was not available on the website. [14] Neither party has produced a copy of a tax invoice or receipt. I would expect this document to outline clearly what service was provided. 2 Exhibit 8 to Ms Aldridge’s statement filed 3 October 2011. -- 3 of 7 -- Because neither party has produced a tax invoice, I cannot draw an inference either way except to note that it is a curious omission. [15] The evidence suggests that Ms Aldridge did not receive the standard agreement until she received the report, after she had paid for it. Because there is no evidence that Ms Aldridge received the standard agreement before engaging Hills, Hills cannot rely on it as forming part of the agreement between the parties. [16] Ms Aldridge submits that I should find that she engaged Hills to provide a full building inspection and report in accordance with Appendix C of AS4349.2. I am not prepared to make that finding. Ms Aldridge had no knowledge of the existence of the Australian Standards until she received the report from Mr Horwath. There was no reference to the Australian Standards on the Hills’ website. Although the Australian Standards set out the minimum requirements for a building report, I am unable to find that these standards were incorporated into the agreement between Ms Aldridge and Hills. [17] Because she was not aware that there were different standards of report, I accept that Ms Aldridge engaged Hills to conduct a pre-purchase building and pest inspection as outlined in paragraph [7]. Did Hills breach the agreement? [18] There is no dispute that the Hills’ report is not a comprehensive building report as contemplated by AS4349.1. It is not a structural report within the contemplation of the standards either. As Mr Howarth observed, the report lists some of the matters that are excluded from a structural inspection but which are standard in a building inspection. [19] Interestingly, the report does conform to the format promised in the website in that there is a comment on each of the matters dot pointed. However, even with the most generous interpretation, I could not describe the report as “comprehensive”. [20] The standard agreement terms were annexed to the report. Presumably, Hills included that document to make it clear to Ms Aldridge that it was a structural inspection report, with significant limitations. By purporting to limit the scope of the report to a structural inspection, I find that Hills did breach the agreement. Did Hills’ breach cause Ms Aldridge’s loss? [21] It is not really in dispute that there were a number of “problems” with the property. The overflow relief gulley was blocked. The stormwater pipes were not connected to any underground drainage and the original stormwater drain was blocked. The shower drainage was leaking. The bathroom plumbing was run in non-compliant 40mm PVC pipe. There were three cracks in the roof tiles and a crack in the pointing. The garage was constructed from second hand materials with insufficient tie downs, no stormwater management system and no termite management system. The electrical wiring from the house to the garage was unlawful. The clothes line was defective. The palings were covered by woodchip, affecting the integrity of the termite protection system. The eaves were rotten. -- 4 of 7 -- [22] Mr Horwath was of the view that only the problems with the garage would be the subject of a structural inspection. Mr Taber, an expert engaged by Hills, comes to the same conclusion3. Mr Horwath gave evidence that that all of these issues should have been identified by a building inspection. Mr Taber’ report does not address this second question and he did not give evidence at the hearing. I am satisfied that all of these issues would have been identified in a building inspection but only the garage issues would, and should, have been identified in a structural inspection. [23] Ms Aldridge submits that, if she had known about the defects in the property, she would have taken the opportunity to renegotiate the purchase price. Sensibly, Ms Aldridge does not rely on the special building and pest condition of the contract to support this claim. As I have already identified, that condition only allows termination for structural defects. [24] Instead, Ms Aldridge says that she had an opportunity to terminate the contract on 23 June 2010 when the seller asked for an extension of the settlement date for two days until 25 June 2010. Ms Aldridge submits that, if she had received a proper building report that identified all of the issues with the property she would have: a) Engaged a plumber, electrician and builder to explore the extent of the defects. b) Had a reasonable estimate of the cost to rectify the defects. c) Taken into consideration the time it would take to carry out the repairs and accounted for the loss of rent. d) Negotiated the purchase price on a “worst case scenario”. [25] Ms Aldridge told me that, before signing the contract, she inspected the property only once, late on a winter afternoon. She said that she did not take much notice of the outside, because she intended to revisit the site when Hills performed its inspection. [26] Ms Aldridge did not attend the property when Hills inspected it. The inspection was booked for 3.30 pm but Hills’ representative Mr Cotugno conducted the inspection at 10.30 am. Ms Aldridge was given no notice of the change in time. This fact is the source of considerable frustration to her. [27] Ms Aldridge spoke to Mr Cotugno the afternoon of the inspection. She says that he told her the property was in good condition. [28] Ms Aldridge received a copy of the report on 2 June 2010. While it was not the complete report, some aspects of it should have raised questions about the report. It states that the service provided was a structural inspection. Clause 5 of the standard terms states “If a more detailed inspection is required, please advise in writing as additional charges will apply.” The scope of the structural inspection is set out on page 3 as being a report on “any significant and obvious structural defects.” 3 Statement Paul Taber filed 5 August 2011 -- 5 of 7 -- [29] Mr Cotugno recorded that the garage was “All metal construction”. Even a cursory examination of the garage shows that it was constructed of multiple materials and is not “all metal”. Mr Cotugno also recommended additional investigations. He said there were a number of repair/maintenance items that required attention and recommended a protective termite treatment if there was no receipt for a current treatment system4. [30] Ms Aldridge received a complete copy of the report by mail on 4 June 2010. The date for termination the contract on the basis of an adverse report was 7 June 2010. Ms Aldridge took no action to clarify the terms of the report, ask Mr Cotugno for details of the additional investigations or the recommended maintenance, or revisit the property herself because she had not attended the Hill’s inspection. [31] It is significant that the standard REIQ condition relating to a building and pest inspection had been altered to a condition allowing termination only if the property was not structurally sound or there was active termite activity. The change was initiated by the seller’s agent. Ms Aldridge did not ask the agent why the change was required or obtain any advice about what that change meant. [32] It was a special condition of the contract that, once it was unconditional, prospective tenants could view the property at a time arranged between the seller and Ms Aldridge’s agent. [33] I do not accept that Ms Aldridge was entitled to rely on the Hills’ report as a substitute for her own inspection of the property and I do not accept that Ms Aldridge was entitled to assume the report was a comprehensive building inspection report without, in effect, reading the fine print. There were unusual features about the contract and the report that should have caused Ms Aldridge to make further inquiries. [34] It is apparent that the garage was not structurally sound even though Mr Cotugno recorded that the garage was in good condition. It was apparent that the garage was not “all metal construction” even though Mr Cotugno recorded that it was. Hills says that the ability to terminate the contract relates to structural defects in the dwelling, not the garage. Hills also says that Ms Aldridge cannot rely on the report to assert that she is entitled to an all metal garage. [35] As I have previously noted, even a cursory inspection in daylight should have revealed that the garage was not of all metal construction. I am satisfied that Ms Aldridge has suffered loss because of Hills’ inaccurate report. Her loss is caused by Hills’ failure to identify structural problems with the garage. The amount of that loss is a different, and difficult, question. What is the amount of Ms Aldridge’s loss? [36] Ms Aldridge’s submission that she would have renegotiated the contract if she had known the true extent of the problems has a number of “what ifs” 4 All on page 22 of Exhibit 3 to Ms Aldridge’s statement of 22 June 2011 -- 6 of 7 -- which make it unlikely that she would have been able to renegotiate the purchase price. [37] The first “what if” is whether the seller would have allowed access for the plumber, electrician and builder to investigate the problem and provide quotes to Ms Aldridge. Given the change to the building and pest inspection clause, I consider it likely that the seller knew the property would fail a building inspection. In those circumstances, I find it unlikely that the seller would have allowed access. [38] The second “what if” is that the extent of some of the problems was not evident without invasive testing or rectification. Again, I find it unlikely that the seller would have agreed to this level of testing. [39] The third “what if” is whether the seller would have entertained a renegotiation of the purchase price, particularly as it was only seeking an extension of two days for settlement. There is simply no evidence about the state of the market, whether this property was well-priced or how long it had been for sale. [40] I note that Ms Aldridge’s purchase was subject to finance. Presumably, the property came up to valuation, otherwise finance would have been declined. If the bank’s valuer inspected the property and it came up to valuation, then without further evidence, I find it unlikely that the seller would have renegotiated the purchase price. [41] Ms Aldridge’s loss is not the cost of repairs. [42] Her loss is the difference between the price she paid for the property and what it was worth, having regard to a proper building inspection. I have no evidence on this point. [43] Ms Aldridge is not entitled to the cost of reports identifying the real condition of the property. These reports were suggested by the Hills’ report. Ms Aldridge did not undertake them until after settlement of the purchase. [44] Because Hill’s report should have identified that the garage was defective, and it did not, I am prepared to allow Ms Aldridge to recover some damages. She is not entitled to the cost of a new garage in steel, for which she has quotes totalling $12,350. She is entitled to the cost of correcting the stormwater runoff from the garage and the cost of internal strapping and tie downs, a total of $1,806.00. Hills should also refund the cost of the report at $390 and pay Ms Aldridge’s filing fee of $255. -- 7 of 7 --