2. I order the First Respondent to pay the Applicants the sum of $90,417.00.

3. I reserve liberty to the Applicants to apply for costs.

1. In this matter I have already ordered that the Second Respondent pay the Applicants the sum of $90,417.00. Despite demand, as I understand it, the Second Respondent has failed to pay any part of this sum. None of this, however, has any bearing on my decision in the case so far as it concerns the Insurer.

2. The Applicants also wish to proceed against the First Respondent. The name of the First Respondent is now Vero Insurance Limited (Vero). I amend the title of the proceeding accordingly.

3. A peculiarity about the proceeding is that at the hearing (which occupied 5 days) the Second Respondent did not contest the proceedings but the director of that party (Mr. Gridley) gave sworn evidence on behalf of Vero. As the Second Respondent was evidently still in business, and that may still be the case, I was left to wonder why this should be so. I am still puzzled by it. But I draw no adverse inferences from it.

4. The case is disclosed essentially in the pleadings. The case against Vero is that Vero is in breach of the policy in having failed to pay out the Applicants' claim. Vero makes relevant denials.

5. It is not in dispute that the Applicants' premises at 72 Boundary Road, Gruyere, Victoria, suffer severe cracking and other internal distress due to foundation movement. A figure of $90,417.00, based on the report of Mr Lorich, is put on this loss. The Applicants seek this amount. The question is whether Vero is liable to indemnify the Applicants in this or in any other sum. This is the question I must decide. I must decide this question according to the civil standard of proof - the balance of probabilities.

6. At the hearing, sworn evidence was given by Mr Gower (the First Applicant) and, as I have noted, by Mr Gridley. Also giving evidence on behalf of the Applicants were Mr Neil (engineer) and Mr Lorich (building consultant). Giving evidence on behalf of Vero were also Mr Prime (labourer), Mr Lees (building consultant) and Mr Kroenert (engineer). All those who gave evidence were cross-examined in detail and I was in a good position to view and assess the demeanour of each in the witness box. Although their reports were referred to in final submissions by Vero, Mr Coulthard did not give evidence nor did A.S. James.

7. The question which I have to decide, whether Vero is liable or not, in turn, in my view, requires me to decide a further question - did the Second Respondent install an AG cut-off drain on the Applicants' property? I am satisfied this had been recommended in the soil report and was specified in the contract drawings. Or, if the drain was put in, was it rendered ineffective by the work done by or on behalf of the Applicants soon or shortly afterwards?

8. Vero's case is that the drain was put in when the house was being constructed in about 1998. This was Mr Gridley's evidence and he repeated this point on more than one occasion. He wanted to make sure, I think, that the point did not escape my attention. He was supported by the evidence of Mr Prime, his labourer, who, it turned out, was also related to him.

9. On the other hand, the Applicants' case is that the drain was never put in. The Applicants contend I should reject the builder's evidence. Their case is that they have suffered their losses out of the fact that the builder failed to put the drain in.

10. No drain of the kind in question was subsequently or has since been located onsite. This is despite directions given by Mr Gridley, on site, on where to find it. Yet, as he emphasized to me, he was certain that one was put in. Surely, though, if it had been put in, I might ask, he would have known where to locate it and would have, in fact, located it?

11. I am not satisfied on the evidence, and on the balance of probabilities, that any drain of the kind in issue was ever put in. No drain, as I say, has ever been located subsequently, despite Mr Gridley's directions. And, apart from his evidence, and that of Mr Prime, there is nothing else in the evidence which would show the drain was ever put in. The video did not assist me very much. Mr Gridley swore that the drain was 67m long. Yet there is not a single invoice for the purchase of piping of that length or more. The only invoices Mr Gridley could produce total significantly less than 67m - on one analysis only 49m.

12. Mr Gridley also swore that the pit for the drain was dug by his subcontractor. He was unable, however, to remember the name of that subcontractor. I was surprised at this because his evidence on so many other matters was so detailed. I was surprised to hear him say in evidence that he could not read very well. It seemed to me that his reading skills were more than adequate when he was asked to read a letter out loud. But, based on correspondence which had passed between the parties between 1999 and 2001, I was not surprised when it was put to him that it was a recent invention, as it were, that he was alleging he had installed the drain but that it was disturbed by the owner's driveway. For, it seemed to me that really it was only something which had been raised in more recent times and not earlier.

13. In the end I consider I am justified in rejecting Mr Gridley's evidence on this crucial point of whether the drain was put in or not. I do not consider he was giving truthful evidence on the point. It is correct to note that he started swearing when called upon to produce some documents he had brought to the hearing, and that he described the proceedings, at one point, as a "joke." I consider his bearing and his demeanour were, at times, quite hostile. He was not an impressive witness.

14. Nor do I consider I can place any reliance on the evidence of Mr Prime in this regard. I do not consider he was giving truthful evidence either. Confronted by having to give sworn evidence in the witness box, he had to be excused to get fresh air. Then, having regained his composure, he expected me to believe that he had volunteered a statement in support of Mr Gridley without being asked by any one to do so and despite the passage of years. He went further, and then expected me to believe that he had visited the Applicant's address (which is not easy to access) simply out of curiosity and for no other reason. These implausbilities affected the credibility of the whole of his evidence in my view.

15. Mr Gower, in his sworn evidence, verified the contents of his witness statement. Cross examination did not undermine his evidence in any material way, in my view. He impressed me as a witness of truth - one who was very careful to make sure he answered questions correctly. I have no hesitation at all in accepting his evidence in its entirety.

16. Nor did cross-examination, in my view, undermine in any material way the expert evidence given by Mr Neil and Mr Lorich. At one point, I note that Vero's Counsel accused the latter of being "partisan", which I thought was a baseless and unfair accusation to make. I can only express my amazement at this accusation. This is another matter that I am puzzled about, considering Vero's Counsel had earlier acknowledged Mr Lorich's expertise, as I recall.

17. Mr Neil, an engineer, noted in his evidence that an excavation on site on 19 August 2002 in the builder's presence did not reveal any cut-off drain outlets at either the north or south ends of the house as described by Mr Gridley. In his report dated 26 September 2003 Mr Neil gave as his Summary: "Cracking to plaster, tiles and brickwork, and frame distortion have resulted from severe footing movement." He said: "Footing and drainage during construction and after completion, as constructed by the builder are considered to be the cause." He also said: "Level measurements, and moisture content measurements by others indicate that seepage following construction of a retaining wall by the owner is not the cause of the damage." Finally Mr Neil noted, as I have said, that: "Excavations on site did not indicate the presence of adequate cut-off drainage constructed by the builder." In his opinion: "Some underpinning, re-levelling, construction on a root barrier, and repairs are required."

18. In an earlier report (of 18 June 2003) Mr Neil expressed a number of views including this: "I agree that building movement has caused the damage. The owner reported that building damage and movement was evident at the time of occupation which was prior to construction of the crib retaining wall and driveway. This indicates that the drainage installed by the builder was not adequate." He said: "Inadequate footing construction by the builder is also considered to have contributed to the building damage." He also said: "I consider that the owner's drainage is adequate."

19. In yet another report (of 22 May 2003) Mr Neil said that: "The level differences measured and the lack of damage in the north-west corner indicate significant footing movement prior to completion..." In his view: "Saturation of foundations by poor drainage during construction as indicated by the unpainted column is consistent with this movement."

20. In his report of 30 September 2003 Mr Lorich made the general observation of the Applicants' premises that: "There appears to be severe stump movement at the dwelling which has resulted in a 'dishing' affect to the centre of the dwelling causing major plaster cracking and much distortion along with cracking of slate floor tiles through the living area." His general observation continued that: "There appears to be some minor heaving of external footings due to drainage problems, however, this is not readily apparent when inspecting the building and only becomes obvious when levels are taken. The dwelling now appears to be generally stable with the heave having occurred mostly during construction or shortly after completion." Further, he said: "The footing depth appears to be inadequate to both the north and south ends of the east wall as it is founded in sand only, not clay and cracking is evident to external brickwork. There are also some trees in close proximity to the dwelling." He said that inspection "of the sub-flor area revealed many loose stumps with gaps under bearers being evident and the soil being extremely dry and powdery." To rectify and make good the dwelling to an acceptable standard ("which is what should have been provided") it was Mr Lorich's evidence that an amount of $90,417.00 would be needed. This was after taking into account an "overpaid contract amount of $10,907.00."

21. I have already expressed my view that cross-examination did not materially undermine any of the evidence of Mr Neil or Mr Lorich. The evidence which they gave seemed highly probable and correct and no answer they gave to any of the questions put to them made me think that I should not accept the evidence given by each in its entirety.

22. It is true that Mr Lorich was questioned about differences in costings in several areas existing between himself and Mr Lees. He was also questioned about overpayments under the contract. However, the questions as regards the former did not, in my view, invalidate Mr Lorich's costing in the relevant areas. And, as I have yet to mention, I am unable to gain any assistance from the costings of Mr Lees prepared on 23 and 26 October 2003. Those costings, which were excluded from evidence, may or may not have had an affect on Mr Lorich's costings in the case. Otherwise, though, any dispute with Mr Lorich on his evidence as regards a number of items seemed to come down ultimately to differences of opinion only, such as with reference to the tanks, with Vero's Counsel putting one view to Mr Lorich on instructions and Mr Lorich responding. But I was at no point satisfied that I should not accept Mr Lorich's opinion in preference. As regards the issue of over payments I heard and saw Mr Gridley trying to explain the matter and I was not satisfied I could place any reliance on anything he said in that regard. His explanation, such as it was on this point, was confusing and unclear. I found it difficult even to follow the line of argument of Vero's Counsel in his questioning. I am satisfied that I can place reliance on the figures provided by Mr Lorich as conveyed to him also by the Applicants. The probabilities, in my view, lie in that direction and not away from it.

23. Expert evidence given on behalf on Vero included that given by Mr Lees. He referred to this report dated 7 May 2003 and I have noted his evidence in that regard. It was his view that: "The building has suffered severe cracking due to footing movement." It was his view that such footing movement was "caused by variations in the moisture content of the foundation soils that have swollen and shrunk due to changes in the moisture content." He said: "The house has been constructed in the lower quarter of a relatively steep hill. The western wall of the house has cause (sic) a damming affect to the water flowing down the hill and hence the soils in this location of (sic) swollen." He also expressed this view: "The builder has installed a drainage system to prevent this water reaching the house, however this system was interrupted by the construction of the driveway and retaining wall structure, work that was carried out by the Owner's contractors."

24. It was apparent to me that, on this last point and on some others, Mr Lees was expressing an opinion based on what he was told. It was apparent that, partially, he was relating his instructions and then expressing a view based on what was related to him. For the reasons I have given, however, I reject the Builder's evidence in this regard. To that extent, I am unable, in consequence, to accept the opinions of Mr Lees, in any event.

25. There is this further aspect too. It was hoped to elicit from Mr Lees more evidence than he gave, so to speak. But he was only ever able to give me evidence of an incomplete nature. Cost estimates (with accompanying comments) dated 23 and 26 October 2003 were not admitted by me into evidence. Following objection, I ruled against their admissibility on the ground, for reasons given at the time, that they had arrived too late, as I recall.

26. There was also expert evidence given by Mr Kroenert, engineer. He confirmed his reports dated 16 March 2000 and 29 April 2003. It was apparent to me though, upon cross-examination, that Mr Kroenert's evidence was of a most unsatisfactory kind. Indeed, as I recall, he admitted he had never given expert evidence before. He could not recall the duties of an expert witness under the Practice Note. He was uncertain even who his client was. At one stage, despite proper questioning by Counsel, he claimed he felt he was being harassed. To my mind, Mr. Kroenert was quite ill equipped to be expressing expert evidence in the case. Upon the basis of my own observations of him, he had a marked reluctance to be impartial. In the end, in all the circumstances, I considered I was entitled to give his evidence such little weight as it deserved. And in my view, where it was in conflict with the evidence of Mr Neil or Mr Lorich I consider I was entitled to give it no weight at all. In any event, it was apparent to me that much of Mr Koenert's evidence proceeded upon the basis of what Mr Gridley had told him.

27. In the end, it is for the Applicants to prove their case on the balance of probabilities. Considering all the evidence, and having seen and heard the various witnesses, I am satisfied that they have done this. I accept their evidence, and that of their experts. I am satisfied, on the balance of probabilities, that their house is damaged in the way alleged and that it is the Builder, and no one else, which is responsible for that damage. I reject the Builder's version of event on material facts. I am satisfied also, again on the balance of probabilities, that I should accept the evidence that, with allowances, the proper figure for the loss and damage suffered by the Applicants is, in fact, the figure given in evidence by Mr Lorich - namely, $90,417.00.

29. Lastly, I noted that certain insurance agreements were addressed to me in final submissions though, as I recall, they had not been pressed earlier very much. Reference was made to the excess under the policy and to Clauses 10, 15 and 20. I agree that an excess may well be deductible but I am unable to be satisfied, at present, on what the amount(s) of the same should be. This is an issue for the Insurer to prove and I am not satisfied on the evidence as to the actual amount(s) involved. The parties should be able to deal with this themselves. As to the other arguments, they did not seem to me to be urged with utmost vigour. I am satisfied, in any event, that Vero is liable under the policy to the Applicants and that no exception, properly and reasonably construed, or fairly construed, enables it to avoid its responsibilities in this regard.

30. I reserve liberty to the Applicants to apply for costs.