Background to the Court's decision

• Paul Gomes, originally from Bangladesh, was a 60-year-old chef-by-trade who speaks English as his second language.
• In January 2015, Mr. Gomes was enticed by the prospect of owning and operating the Cohuna Hotel Motel. The Hotel Motel was presented by the vendor as being in excellent order with a turnover of $1.4 million. Despite a limited inspection of the premises, Mr. Gomes (through his company, S&P Gomes Pty Ltd) agreed to purchase the hotel for a non-negotiable price of $880,000.
• Post-settlement, Mr. Gomes discovered significant defects and pest issues. Mr Gomes also discovered that a 2012 fire safety notice, issued by the local council, was not complied with by the vendor. The state of the building continued to worsen following the purchase, which led to a series of inspections and emergency orders from the local council. The Hotel's operations were largely ceased, with only the adjoining bottle shop remaining operational.
• The first defendant, Mohan Sundar trading as Sun Legal, was engaged as his solicitor to act in the property transaction. Mr Sundar had previously acted for Mr Gomes in two or three conveyancing transactions involving residential property in Sydney.

The plaintiff's claim

Mr Gomes and his company (S&P Gomes Pty Ltd t/a Cohuna Hotel Motel) sought compensation for loss sustained following the purchase and issued proceedings against Mr Sundar and Gannawarra Shire Council. Mr Gomes did not pursue the vendor, as she died some years following the transaction.

The building condition reports identified significant problems with the property, including structural defects, water damage, termite infestation, and fire safety issues. The cost of repair was estimated to be around $1.7 million. Mr Gomes claimed the costs of demolition and rebuilding, estimated to be approximately $7 million, in addition to loss of profits and opportunity, estimated to be approximately $20 million.

Mr Gomes also claimed to have suffered psychological and physical injury as a result of the defendants' negligence.

Against the local council, Mr Gomes claimed that he was owed a duty of care to ensure that the Hotel Motel was compliant with various laws and regulations (including building, fire and health and safety). Specifically, it was alleged that between 2011 and 2012, the council issued notices to the vendor but did not take steps to ensure that the notices were complied with. As a result, Mr Gomes alleged that Council ought to have followed up on the notices, and that this failure led to the loss arising from the ongoing deterioration of the building.

Evidence at trial

Mr. Gomes gave evidence that he had discovered further issues with the property after settlement, including a pest infestation, a gas leak, and a leaky roof. He also raised issues about the missing stock with the vendor's solicitor. Despite his concerns, he proceeded with the settlement after being advised by Mr Sundar that he risked losing his deposit if he did not. He also denied that the first defendant provided the advice and was adamant that no such advice had been provided.

The witness' evidence concerning the local council revolved around the inspections conducted by the council officers and the emergency orders issued by the council in relation to the condition of the Hotel Motel. From 2017 to 2021, the council officers conducted several inspections of the property. In 2022, emergency orders were issued for repairs to the veranda and balcony. Despite some compliance with these orders, the Hotel Motel was in such a poor state that it could not be operated and used, limiting Mr Gomes to operating only the bottle shop. The council's CEO gave evidence that it had no knowledge of the building issues and pest infestation until much later and the only intervention prior to the purchase was in relation to fire safety notices.

Solicitor liable for failing to give advice

The Court found that S&P Gomes Pty Ltd was entitled to judgment against Mr Sundar, as a duty of care was owed, which Mr Sundar breached by not providing advice to Mr Gomes as to:

• building and pest reports;
• the terms of the contracts, specifically that the value of the stock was nil; and
• make his own enquiries of the Council.

While the Court accepted that Mr Gomes would not have entered into the property transaction but for Mr Sundar's breach, the Court did not accept the breach caused Mr Gomes' psychiatric injuries.

Council not liable: Authorised, but not compelled, to enforce

Cavanagh J found that Mr Gomes did not establish the existence of any duty of care owed by the Council.

The Court held that Mr Gomes had not identified any statutory obligation imposed on the Council to carry out regular inspections of the property. Specifically, his Honour noted that while councils have the ability to carry out inspections and make orders pursuant to the Building Act 1993 (Vic), it does not compel them to do so.

Cavanagh J held that Mr Gomes was a person who was able to and did take his own steps to seek advice as to what he should be doing to protect himself in respect of the purchase of the property. In respect of causation, his Honour held that even if Mr Gomes had established that the Council owed a duty of care to him to follow up on their own building orders, all that would have happened is that further fire safety measures would have been taken.

Assessment of loss

His Honour ordered that Mr Sundar pay the sum of $1,216,615.17, assessed as follows:

Local councils should take solace in the judgment, but they should be wary to ensure that enforcement notices and orders are followed through to avoid criticism and involvement in drawn out legal proceedings.