This article highlights the importance of construction professionals ensuring they have appropriate Professional Indemnity Insurance in place and is a reminder to check your Risk Management policies relevant to advice procedures and contracts with other construction professionals.
Victorian Construction Professionals under scrutiny – new claims on the horizon
A recent surge in un-litigated complaints from home owners 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.
A recent media report indicates that 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 geotechnical engineers.
The use of ‘waffle slab’ foundations has come under scrutiny, including calls that the Victorian Building Authority, the statutory agency responsible for domestic building consumer protection and regulating the associated industries, set up a ”waffle slab taskforce” to determine compensation for home owners affected by shoddy building practices. According to some observers, waffle slabs, which comprise pods that float on top of 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 geotechnical engineers, 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, geotechnical engineers 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 is likely to be relied on by owners in their pursuit of claims against construction professionals, such as geotechnical engineers, particularly in circumstances where it becomes apparent that the quantum of their claim cannot be met by the relevant builder or exceeds the limit of indemnity provided by the home warranty insurer.
In this case, a home owner commenced civil proceedings against the 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.
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 geotechnical engineers, 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 cost involved in funding a defence, it is imperative that construction professionals have appropriate professional insurance, both in terms of scope of cover and limit of indemnity, to ensure that they are fully protected.”
This article was written by Hubert Wajszel, Special Counsel, Hunt & Hunt Lawyers and is reproduced here with their kind permission.
For an obligation free quotation please phone Professionals Australia Insurance Services on 1800 245 123 or follow the following link – http://www.professionalsaustralia.org.au/workplace/professional-indemnity-insurance/.
This advice and comments are provided in the capacity as your insurance broker and should not be construed as legal advice. Separate legal advice relating to the interpretation and implication of this article for your individual circumstances should be obtained.
 The Sunday Age, Sinkhole suburbs: thousands face ruin, 8 June 2014
 The Age, Slater & Gordon calls for taskforce to act on faulty house slabs, 4 April 2014
  VCAT 277