Max Build Pty Ltd v The Owners – Strata Plan No 54026 (No 2)

Decision date: 27 June 2025

Jurisdiction: Equity - Technology and Construction List

Before: Rees J

Decision: Further rulings made under s 192A, Evidence Act 1995 (NSW)

Catchwords: PROCEDURE — advance ruling under s 192A Evidence Act — whether defect reports prepared by quantity surveyor are business records — whether prepared for purpose of proceedings — s 69(3)(a), Evidence Act 1995 (NSW) — whether opinions expressed in business record admissible — limitation made under s 136 Evidence Act (NSW).

Legislation Cited: Evidence Act 1995 (NSW), ss 69(3)(a), 76-79, 136, 192A

Cases Cited: Bale v Kimberley Developments Pty Ltd [2022] NSWSC 820
Keane v Caravan City Cowra Pty Ltd [2006] NSWSC 942
Lithgow City Council v Jackson (2011) 244 CLR 352; [2011] HCA 36
Max Build Pty Ltd v The Owners – Strata Plan No 54026 [2025] NSWSC 533
Nikolaidis v Legal Services Commissioner [2007] NSWCA 130
Rosenbaum v Vaidarman (No 2) [2021] NSWSC 574
Vitali v Stachnik [2001] NSWSC 303

Texts Cited: Practice Note SC Eq 3

Category: Procedural rulings

Parties: Max Build Pty Ltd (Plaintiff)
The Owners – Strata Plan No. 54026 (Defendant)
TOP Consulting Group (NSW) Pty Ltd (Second Cross-Defendant)

Representation: Counsel:
M Sheldon (Plaintiff)
F Ashworth (Defendant)
Solicitors:
Construction Legal (Plaintiff)
Sparke Helmore Lawyers (Defendant)

File Number(s): 2023/290009

JUDGMENT

1. HER HONOUR: On 23 May 2025, I heard an application by the plaintiff builder for advance evidentiary rulings under s 192A of the Evidence Act 1995 (NSW): Max Build Pty Ltd v The Owners – Strata Plan No 54026 [2025] NSWSC 533. I made rulings in respect of various expert reports.

2. Two reports prepared by quantity surveyor, Robert Madden, remained for consideration. While each report was entitled “Defect Inspection Report”, there was no evidence that Mr Madden had expertise in identifying building defects. The defendant owner made plain that they relied on Mr Madden as a witness of fact only. I posited whether the reports would be admissible as business records under s 69 of the Evidence Act 1995 (NSW), but there was insufficient evidence before the Court to take that possibility any further. At the conclusion of the hearing, I made directions for the parties to file affidavits and submissions on this issue, and the costs of the plaintiff’s motion, with both matters to be determined on the papers. This judgment concerns those remaining matters.

3. The owner read the affidavits of Mr Madden dated 28 October 2024, 9 April 2025 and 6 June 2025 and tendered the exhibits to the first and last of these affidavits (which are marked Exhibit RM-1 and Exhibit RM-2 respectively). The owner also provided submissions and “supplementary” submissions.

4. The builder provided proposed redactions for the Defect Inspection Reports, highlighting text said to record opinions or ‘second-hand’ hearsay evidence. The builder also provided written submissions.

Facts

5. The builder suspended work on 6 July 2022. The owner’s architect engaged Mr Madden to conduct a peer review of the administration of the building contract by the superintendent and to review the builder’s progress claim to ensure that the builder was not overpaid, including having regard to any defects or incomplete works. At the time, the architect was trying to mediate the issues which had arisen between the builder and the owner so that building works could resume.

6. On 29 August 2022, Mr Madden inspected the building site “to identify any items of visibly defective, incomplete or non-compliant work”. He did a walkthrough of the building and took photographs. Mr Madden then reviewed the builder’s progress claim No 20 and a claim for delay costs. In that context, Mr Madden asked the architect whether the owner “can provide evidence of loss in regard to the wrongful suspension of the works [as the] client [is] entitled to damages due to breach of contract”. It does not appear that any evidence of loss was provided.

7. On 5 September 2022, Mr Madden issued his first report and attached photographic report. The builder has proposed that certain portions of the report, together with text accompanying the photographs, be redacted as stating Mr Madden’s opinions. Other portions appear to contain hearsay from tenants of the apartments inspected by Mr Madden. Having reviewed the redactions, I agree that the highlighted text records either an opinion or ‘second-hand’ hearsay, save for the following text in the photographic report:

(a) On page 1, “Protective plastic not fixed”; (b) On page 2, “Protective sheeting loose”, twice appearing, for apartments 1055 and 1065.

I consider this text records Mr Madden’s visual observations and does not include expressions of opinion.

8. Separately, the architect asked Mr Madden to roughly estimate the cost to complete the works, as the owner was deciding whether to get the builder to finish the works or “terminate the contract. And go to arbitration”. Further instructions were provided by the owner’s solicitor, who asked Mr Madden, “Also could you provide an estimate of the damages to the Owners caused by the delay and any other damages caused by Max Build …”.

9. On 14 September 2022, Mr Madden inspected the building again.

10. On 21 September 2022, Mr Madden sent through his estimate of the costs to complete the works which, as mentioned, appears to have been done as a separate exercise for the owner’s architect and solicitor.

11. On 27 September 2022, Mr Madden issued his second report. The builder has proposed redactions to this report in respect of opinions and hearsay. The highlighted text is generally appropriate save for in the attached photographic report:

(a) Pages 10, 11 and 12 “currently loose on site”, appearing four times; and (b) Page 45 “no ceiling, extensive mould”.

I consider this text records Mr Madden’s visual observations and does not include expressions of opinion.

12. On 4 October 2022, the owner purported to terminate the building contract. In September 2023, the builder commenced these proceedings, seeking lost profits and unpaid amounts. In December 2023, the owner filed a cross-claim seeking damages for defective building works.

Business records

13. Whether the two Defect Inspection Reports were admissible as business records turned on whether the reports were prepared or obtained for the purpose of conducting, or in contemplation of, legal proceedings: s 69(3)(a), Evidence Act 1995 (NSW).

14. The mischief to which s 69(3) of the Evidence Act 1995 (NSW) is directed is to prevent the admission of hearsay material via this exception, where the material was “prepared in an atmosphere or context which may cause it to be self-serving in the sense of possibly being prepared to assist the proof of something known or at least apprehended to be relevant to the outcome of identifiable legal proceedings”: Vitali v Stachnik [2001] NSWSC 303 at [12] (Barrett J). The issues is whether there is a real risk of this mischief arising: Keane v Caravan City Cowra Pty Ltd [2006] NSWSC 942 at [15] (Rothman J). This generally requires that legal proceedings must be likely or reasonably probable rather than simply possible: Nikolaidis v Legal Services Commissioner [2007] NSWCA 130 at [61] (Beazley JA).

15. Mr Madden’s reports were commissioned by the owner, through its architect, for the purpose of having a ‘fresh pair of eyes’ to review the builder’s progress claim, having regard to the state of the works. This was so that the owner could respond to the progress claim and, more generally, to decide the way forward given the builder’s suspension of the works and the fact that the owner was concerned that progress claims were not being thoroughly scrutinised.

16. The only suggestion of potential legal proceedings is in the emails from the architect and the owner’s solicitor referred to at [8]. As I read it, these instructions went to the preparation of a cost estimate rather than the task which is documented in Mr Madden’s Defect Inspection Reports. Any cost estimate prepared by Mr Madden in response to these instructions may well fall within the exception in s 69(3)(a) of the Evidence Act 1995 (NSW), but I do not think those instructions necessarily taint the Defect Inspection Reports. The reports are admissible as business records.

Other objections

17. The builder submitted that, even if the reports were admissible as business records, the highlighted portions of the reports should be excluded as opinions or hearsay. The owner did not address these submissions in its supplementary submissions.

18. In Lithgow City Council v Jackson (2011) 244 CLR 352; [2011] HCA 36, French CJ, Heydon and Bell JJ observed that a business record may be admissible as an exception to the hearsay rule if no other exclusionary rule applies: at [19]. Another exclusionary rule which continues to apply is the opinion rule in ss 76–79. One way of addressing this problem is to restrict the use to which such evidence may be put, under s 136 of the Evidence Act 1995 (NSW), as was done in Bale v Kimberley Developments Pty Ltd [2022] NSWSC 820 at [234]-[235] (Ward P) and Rosenbaum v Vaidarman (No 2) [2021] NSWSC 574 at [29] (Williams J).

19. Save for the portions earlier identified in this judgment, I agree that the highlighted portions of the Defect Inspection Reports are either opinion evidence or ‘second-hand’ hearsay. Rather than redact those highlighted portions, I consider that a ruling should be made under s 136 of the Evidence Act 1995 (NSW) to limit the use which can be made of those portions.

Costs

20. The owner’s solicitor initially accepted that the builder should have its costs of the motion, having succeeded, but submitted that the costs should not be payable until the conclusion of the proceedings. The builder submitted that the costs should be assessable forthwith, in the usual way: para 57, Practice Note SC Eq 3. Further, the Court was asked to make clear that the costs of the motion should extend to costs thrown away by reason of the service of the inadmissible evidence in the first place. The owner’s counsel then served supplementary submissions, withdrawing the submissions on costs earlier made by the owner’s solicitor. The owner’s counsel submitted that the costs of the motion should be costs in the cause given that it related solely to rulings on evidence.

21. I am not sure why the fact that the motion relates to rulings on evidence has the consequence that the costs should be costs in the cause. It is the case that the builder pointed out the perceived problems with the owner’s expert reports in lengthy correspondence and sought to engage on that issue. Having failed to achieve any resolution of the issue by dialogue, the builder filed its motion and enjoyed substantial success. The builder should have its costs of the motion, being in the usual form of order.

22. For these reasons I make the following orders:

23. Pursuant to section 192A of the Evidence Act 1995 (NSW), rule that the Defect Inspection Reports prepared by Madden & Associates Pty Ltd dated 5 September 2022 and 27 September 2022 (the reports) are admissible as business records under s 69 of that Act.

24. Subject to paragraphs [7] and [11] of the judgment of Rees J handed down today, pursuant to section 136 of the Evidence Act 1995 (NSW), admit the highlighted portions of the reports, as circulated by the plaintiff’s solicitor on 16 June 2025, only for the fact that such statements were made, not as to the truth of the conclusions there stated.

25. Order the defendant to pay the plaintiff’s costs of the notice of motion filed on 13 March 2025.

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