NSW Supreme Court confirms need for properly prepared Building Experts Reports – Substantial claim lost due to unacceptable Expert Evidence


A recent decision of the NSW Supreme Court has confirmed it is vital that parties claiming for building defects obtain properly prepared Building Reports from appropriate and acceptable Experts to give evidence on your behalf in order to recover your losses.

At Watson & Watson we believe that because someone says he or she is an Expert does not necessarily mean that he or she is the appropriate Expert for your important case.

As in the case of AAI v Kalnin, Justice Stephenson in the Supreme Court of New South Wales decided that a Building Report relied upon by a party to claim losses or damages for defects could not be admitted into evidence.  Accordingly, the party claiming for losses due to the defects should lose its claim.

The facts of that case, decided on 5 May 2017 were that Kalnin was the Developer of a proposed building in Redfern, Sydney.  It entered into a Building Contract with a Builder called Definite Dimensions.  The Builder then erected an apartment building which was completed in 2004.  A Strata Plan was registered on 13 January 2005.

The Owners Corporation of the new building then in 2008 alleged that the Builder had carried out defective work.

The Builder was at that time insolvent which was such that it triggered the Home Owners’ Warranty Insurance provided by AAI/Vero Insurance.  Accordingly the Owners’ Corporation made a claim on Vero under the Home Owners Warranty Insurance.

Following consideration of the claim by Vero Insurance, the insurer agreed to pay and paid $4,200,000 to the Owners Corporation for the remedial works for the building.

As is common, AAI (Vero Insurance) as a condition of obtaining the Home Owners’ Warranty Insurance, entered into an agreement with the Developer whereby the Developer indemnified Vero Insurance for losses that may occur as a result of a beneficiary under the Home Owners’ Warranty Insurance being required to pay out on the insurance.

As AAI (Vero Insurance) had paid out $4,200,000 under the Home Owners’ Warranty Insurance, AAI claimed reimbursement from the Developer pursuant to the “indemnity”.

In order to support its claim AAI had prepared some Building Defect Reports to show that the work carried out by the Builder was defective work.

During the preparation of the case the reports which AAI submitted set out an opinion as to whether the defects which the Owners Corporation had complained of were structural defects.  However AAI had made a mistake in that the report it had obtained:

(a)       Did not state that the defects were the product of an act or omission of the Builder;

(b)       Furthermore there was no evidence of what work had been done to repair the defects or what the work had cost.  This evidence was critical for Vero Insurance to recover in its favour against the Developer.

In the result, the learned Judge of the Supreme Court of New South Wales stated that there was insufficient evidence that the Builder caused the defects.

Accordingly, the Supreme Court decided that AAI, the Insurance Company could not succeed to recover its loss in excess if $4,200,000 from the Developer Kalnin.  This was because Vero Insurance did not prove that the Builder, under the terms of the Indemnity Contract had caused the defects.

The preparation of Expert Reports to support claims for losses following building defects is a complicated task requiring consideration of the law about expert evidence and proper selection and briefing of appropriate experts to give the required independent evidence.

Watson & Watson Solicitors specialise in Building and Construction work and can assist owners of properties and Builders to prepare their claims.  It is essential that proper reports be obtained in any claims for defects to insurance companies or in Court or Tribunal proceedings.  Watson & Watson Solicitors can assist you in this task.  Please feel free to contact Richard Watson or his assistant Shereen Da Gloria if you have any concerns or queries regarding your claim.

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