Victorian Construction Professionals Under Scrutiny: A New Wave of Claims on the Horizon


Victorian Construction Professionals Under Scrutiny: A New Wave of Claims on the Horizon

A recent surge in un-litigated complaints from homeowners in Melbourne’s outer suburbs coupled with a largely unheralded decision in the Domestic Building List of the Victorian Civil & Administrative Tribunal (VCAT), has the potential to lead to a rise in domestic building litigation involving construction professionals.

Shifting focus

In excess of 4,000 homes in Melbourne’s west and northern suburbs are suffering from slab heave caused by volatile soil movements leading to significant damage to property. Slab heave is caused by soil movement under the foundations of poorly built houses and can result in significant structural damage. Although builders are invariably seen as the primary wrongdoers, the spotlight is likely to extend to the role played by other construction professionals, in particular, slab designers and soil testers.

In the context of slab designers, the use of ‘waffle slab’ foundations has come under scrutiny, including calls that the Victorian Building Authority, the statutory agency is responsible for domestic building consumer protection and regulating the associated industries, set up a ”waffle slab taskforce” to determine compensation for homeowners affected by shoddy building practices. According to some observers, waffle slabs, which comprise pods that float on top of the compacted ground, may be unsuitable for areas with low soil stability given that they are heavily dependent on effective drainage systems which can be notoriously difficult to design and construct.

In the context of soil testers, the likely area of concern is the classification of the soil given that it impacts on the type of slab foundation recommended and designed by the slab designer. In this regard, where a waffle slab is contemplated, soil testers may be exposed if they fail to provide sufficient details of the drainage requirements.

Recent VCAT decision

The recent VCAT decision of Hooper v Metricon Homes Pty Ltd [2014] VCAT 277 is likely to be relied on by owners in their pursuit of claims against construction professionals, such as slab designers and soil testers, particularly in circumstances where it becomes apparent that the quantum of their claims cannot be met by the relevant builder or exceeds the limit of indemnity provided by the home warranty insurer.

The case at hand concerned a claim made by a house owner for compensation against a builder and structural engineer in respect of a poorly built slab and foundation which exhibited significant movement. In short, the owner claimed that in breach of its duty of care the engineer prepared an inadequate slab design. As against the builder, the owner claimed that in breach of the implied warranties in the Domestic Building Contracts Act 1995 (Vic) (DBCA) it failed to build the slab in accordance with the design or proper workmanship.

Although ultimately finding that the engineer’s design was adequate, VCAT held that a duty of care existed in circumstances where the owner was vulnerable to the engineer. In coming to its decision, VCAT rejected the engineer’s primary defence that it did not owe a duty of care to the owner because the owner was not vulnerable to it by reason of the protections of the implied warranties in the DBCA.  Put another way, the owner was considered vulnerable despite the protections afforded under the DBCA.

Cautionary approach

Although the above complaints are currently limited to Victoria, waffle slabs are commonly used throughout Australia and accordingly an increase in claims of this kind is likely to extend across all States and Territories. Should this occur, it is highly probable that construction professionals, such as slab designers and soil testers, will become embroiled in litigation given their perceived roles in the design and construction process and the ‘open and arguable’ cause of action against them.

Given the potential liability exposure and the likely significant costs involved in funding a defence, PI insurers may wish to adopt a cautionary approach by increasing their underwriting criteria when writing construction PI-focused business.