The plaintiff, Votraint No. 1019 Pty Ltd, was the owner of land in Bowral. I will refer to the plaintiff as "the Owner".
By contract made on or about 26 September 2017, the Owner engaged the defendant, Zauner Construction Pty Ltd, to design and construct four houses on the Bowral land. I will refer to the defendant as "the Builder".
Shortly after completion of the construction, and approximately three years before these proceedings were commenced, the Owner engaged a building surveyor, Mr Richard Jones, to inspect the completed houses and prepare a detailed defects report.
Mr Jones produced a report on 30 October 2019 ("the Report").
The Owner's then solicitors served the Report on the Builder on 14 November 2019.
The Owner commenced these proceedings, more than three years later, on 14 December 2022, alleging that the Builder breached the warranties in Pt 2C of the Home Building Act 1989 (NSW).
The Builder denies that the works were defective.
Most, or all, of the defects were rectified otherwise than by the Builder some time in 2020.
Earlier this year, Mr Jones told the Owner's solicitors that he is no longer in a physical or mental state to give evidence in relation to his report. It is now common ground that he is no longer available to be cross-examined on his report.
Pursuant to r 31.29(1) of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"), if an expert's report is served in accordance with r 31.28 or in accordance with an order of the Court, the report is admissible as evidence of the expert's opinion. If the expert's direct oral evidence of a fact on which the opinion was based would be admissible, the report is also admissible as evidence of that fact, without further evidence, oral or otherwise.
Rule 31.29(2) of the UCPR then provides that unless the Court otherwise orders, a party may require the attendance for cross-examination of the expert by whom the report was prepared by notice served on the party by whom the report was served. The time for giving such a notice as set out in r 31.29(3) has not yet arrived. It is expected that such notice will be given by the Builder, and argument before me proceeded on the basis that this was so.
Rule 31.29(5) of the UCPR provides that if an expert's attendance for cross-examination is required under r 31.29(2), the report may not be tendered under ss 63, 64 or 69 of the Evidence Act 1995 (NSW) or otherwise used unless the expert attends or is dead, or the Court grants leave to use it.
The Owner proposes to tender the report under s 64 of the Evidence Act and, as a result, makes this application under r 31.29(5) of the UCPR for leave to use it without Mr Jones being available for cross-examination.
In those circumstances, the Owner seeks an advance ruling under s 192A of the Evidence Act as to the admissibility of the Report in circumstances where the Owner cannot call Mr Jones as a witness.
As the Builder submitted:
"An early ruling under s 192A of the Evidence Act would assist the parties, and should be made, as the matters that the Expert Report deals with are of central importance to the [Owner's] case, and if the Expert Report is ultimately inadmissible, then the [Owner] will have to find another way to prosecute its claim, and the progress of the trial will be significantly different. For those reasons it is better that a ruling be made now rather than during the final hearing."
It is thus common ground that this is an appropriate case for an advance ruling.
[3]
Should leave be granted under r 31.29 of the UCPR?
For the reasons that follow, the Owner should be granted the leave it seeks.
There is limited guidance in the authorities as to the application of UCPR r 31.29(5) and, in any event, each case is likely to turn very much on its particular facts. The Court has a discretion to grant leave, and must give effect to the overriding purpose in s 56(2) of the Civil Procedure Act 2005 (NSW) and have regard to the objects of case management and the dictates of justice. [1]
Although a number of other matters were agitated in the Builder's written submissions, the matter ultimately pressed on behalf of the Builder was that it would be unfairly prejudiced were the Owner permitted to rely on the Report without the Builder having the opportunity to cross-examine its author.
Were the Owner to be given leave, some prejudice would thereby be occasioned to the Builder. If leave is refused, significant prejudice is likely to be occasioned to the Owner. The Owner's position is that, in circumstances where most, or possibly all, of the alleged defects have now been rectified, it is unlikely that the Owner will be able to replicate the evidence said to exist in the Report from another witness, and that if the Owner is not permitted to rely on the Report, it will be required to make a decision about whether the proceedings can otherwise be maintained.
The debate before me was primarily focused on what transpired between the parties after service of the Report on the Builder on 14 November 2019 and the rectification by the Owner of the allegedly defective building work sometime between December 2019 and the commencement of these proceedings in December 2022; probably in 2020.
There is no direct evidence of when the Owner carried out the rectification works. Those works must have been carried out prior to the issue by the relevant Council of an occupation certificate in March 2021. In an email sent to the Owner's solicitor on 18 March 2023, Mr Jones referred to the work as having been effected "some three years ago". In the absence of evidence from the Owner, which must know the true position, I infer from this evidence that the work was done in the first half of 2020.
The debate concerning what occurred between service of the Report and the rectification of the allegedly defective building work was in substance concerned with the question of whether the Builder forewent an opportunity then available to it to arrange for its own expert to inspect the works and prepare a report responsive to the Report, and has, to that extent, brought upon itself such prejudice as will now arise if the Report is admitted to evidence notwithstanding the fact that its author is not available to be cross-examined.
As I have said, the building contract between the Owner and the Builder was made on 26 September 2017. There is no dispute that the contract was wholly in writing. Thus, any debate about the scope of works will depend upon that writing.
A certificate of practical completion was issued on 29 April 2019. There is a dispute between the parties as to whether practical completion was in fact achieved on that date. The Owner's position is that it was not. Nevertheless, handover took place in April 2019.
Mr Jones was retained to produce the Report in an email of 6 October 2019 from Mr Darrin Edwards, a solicitors' managing clerk employed by the Owner's then solicitors, Australian Property Lawyers.
The Report was served on the Builder under cover of a letter from Australian Property Lawyers dated 14 November 2019. The letter asserted that there had been a "fundamental breach" of s 18B of the Home Building Act, and continued:
"In those circumstances, our client is entitled to claim damages, both liquidated and otherwise under the Contract together with damages for breach of contract.
In our view, because practical completion could not have been achieved, liquidated damages continue to run and, coupled with the estimated cost of the rectification works, our client's damages are estimated to be $2,321,610.24 as at today's date, such damages being calculated in accordance with the Schedule attached hereto.
Given the expanse of the defects and the severity of the same (13 major defects), our client [has] indicated that they have lost faith in your abilities to manage, supervise, and/or carry out the works.
However, notwithstanding our client's view, our client has also instructed us that they [are] committed to meeting with you as arranged and invites you to consider the report and advise of any proposal that you may wish to put forward in an attempt to mitigate any loss that might be suffered by either party.
Regrettably, in the absence of the meeting proceeding and/or in the absence of any satisfactory proposal being put forward, our client will consider [its] rights and take such steps as [it] might be advised [about] this without any further warning or reference to you." (Emphasis in original.)
Thereafter, on 22 November 2019, a meeting took place between Mr Edwards, Mrs Gretel Ainsworth (the director of the Owner) and Mr Garry Zauner and his daughter, Ms Ella Zauner, from the Builder. A few days later, on 26 November 2019, Mr Edwards had a telephone conversation with Ms Zauner.
There is some dispute as to what was said at that meeting and in that conversation about whether or not the Builder should arrange to have its own expert to attend the site and inspect the alleged defects and as to whether Mrs Ainsworth or Mr Edwards said, as was implicitly threatened in the 14 November 2019 letter, that the Owner intended to arrange for someone other than the Builder to rectify the alleged defects.
Mr Edwards deposed that in his 26 November 2019 telephone conversation with Ms Zauner, he said:
"If you want to obtain an expert report in response to our expert report, you will need to send your expert to [the] site sooner rather than later, otherwise there will be no access without Mrs Ainsworth present."
and
"Due to the expanse of the defects, Mrs Ainsworth has lost faith in your ability to do the rectification work in a proper and workmanlike manner."
Mr Edwards made a contemporaneous file note of a conversation which confirms these details.
In his affidavit evidence, Mr Edwards deposed that he also told Ms Zauner that "Mrs Ainsworth wishes to proceed with the rectification works" and "does not want you to return to the site to do that work". In cross-examination, Mr Edwards retreated somewhat from that position. I do not find it necessary to make any finding as to what, if anything, Mr Edwards said about this because, as I set out below, at least from early 2020, it must have been obvious to the Builder that the Owner proposed to have the alleged defects rectified by a third party.
Ms Zauner agreed in cross-examination, in answer to questions from me, that she had discussed with her father whether the Builder should engage its own expert. Ms Zauner said that she and her father had decided not to do so as discussions were ongoing as to how the alleged defects should be remedied and as it was not then clear to the Builder what was likely to be the final scope of the allegedly defective works.
On 29 November 2019, Ms Zauner sent Mr Edwards a "Draft Proposal" in the form of a schedule setting out a "Defects List", together with photographs, and a detailed narration in relation to each defect under the heading "Zauner Comment/Proposed Action". In that narration setting the Builder set out what it understood was required in relation to the defects and stated what the Builder proposed to do "once access is approved by Mrs Ainsworth".
On 4, 6 and 16 December 2019, Ms Zauner sent emails to Mr Edwards seeking access to the site to install "window stoppers" which were evidently required by the local Council before it would issue an occupation certificate. Mr Edwards made no substantial response to those enquiries and communications. Nor did the Owner respond to the Builder's 29 November 2019 "Draft Proposal".
There the matter rested.
There were no further communications between the parties after 16 December 2019 until these proceedings were commenced. As Ms Zauner deposed:
"The next I heard about this matter was on or about 19 January 2023, when the [Owner] served its List Statement in the proceedings … "
In the meantime, as I have said, the Owner arranged for the allegedly defective works to be rectified without further notice to the Builder, and thus without the Builder having any further opportunity to consider whether it would arrange for its own expert to inspect the works and create a report in reply to the Report.
My attention was not drawn to any evidence explaining why the parties were content to allow this hiatus in communication to endure for so long. The Builder could not reasonably have concluded, given the terms of the Owner's solicitor's letter of 14 November 2019 and the contents of the Report, that the Owner had decided not to rectify the alleged defects nor pursue the Builder for the cost of the rectification. The Builder obviously knew that it had not been asked or permitted to carry out the works. It appears that the Builder concluded that it should keep quiet and hope for the best.
However that may be, the position that the Builder now finds itself in is that it is being sued by the Owner in relation to the alleged defects, it has not engaged an expert to respond to the Report and now, assuming the Owner obtains leave to rely on the Report, it cannot cross-examine its maker.
The Builder is obviously disadvantaged by this turn of events.
However, this should be seen in the following context.
First, Mr Jones' unavailability is not the result of any want of diligence on behalf of the Owner. The Owner's legal representatives contacted Mr Jones shortly after these proceedings were commenced and it immediately became apparent from the terms of Mr Jones' email communications that, to put the matter neutrally, he is no longer available to give evidence in relation to his Report, or at all.
Second, the Report is the only independent expert report from either party prepared with the benefit of an inspection of the actual alleged defects. Thus, even if Mr Jones were available to be cross-examined on his Report, there would not be available to the Builder an expert, who examined the alleged defects, who could give expert evidence contesting or contradicting what Mr Jones has said in the Report.
Third, leaving aside the question of whether the Report as a whole should be allowed into evidence, the Builder has made extensive objections as to the admissibility of a large number of passages in the Report. The Builder's schedule of objections was 40 pages in length. The parties agree that I should make rulings on those objections. I have, to a large extent, upheld the Builder's objections. The Owner accepts that, if it is able to deploy the Report at hearing, the Report will be received subject to those rulings. In closing submissions, Mr Campbell, who appeared for the Builder, accepted that my rulings had brought about a significant "emasculation" of the Report. Further, because of Mr Jones unavailability, the Owner is not now able to call Mr Jones to give evidence to cure any lacunae in the Report arising from those rulings.
Fourth, as Mr Campbell accepted, even if the Owner was denied leave to rely on the Report, the Owner (or indeed the Builder) could tender the numerous photographs taken by Mr Jones that are included in the Report as evidence of the state of the building work in or around October 2019; being when Mr Jones took those photographs.
Fifth, because of the terms of UCPR r 31.29(5), had Mr Jones died, the Owner could have tendered the Report without leave. I find it hard to see why the position should be different here where, although Mr Jones has not died, he is just as effectively unavailable due to incapacity. [2]
Sixth, assuming that such part of the Report as has survived objection was admitted into evidence at trial, the Builder could challenge any conclusions or opinions contained in it, including by engaging its own expert to express opinions on the basis of a review of the photographs taken by Mr Jones and by leading evidence from those who carried out the work on its behalf; there being no suggestion that such witnesses are not unavailable.
Ultimately, the Builder's position is that it would be unfairly prejudicial to it to allow the Owner to deploy the Report now that the allegedly defective building works have been rectified. But that cuts both ways, because, as I have said, if the Owner is unable to rely on the report, it is hard to see how it will be able to make out its contentions concerning the allegedly defective building works.
Obviously, the fact that Mr Jones is not available to be tested in relation to his Report is a matter that the judge conducting the final hearing of these proceedings will take into account when assessing the weight to be given to such conclusions in the Report as have survived objection.
Taking into account all of the factors that I have discussed, my conclusion is that the interests of justice require that the Owner be granted the leave it seeks under r 31.29(5) of the UCPR.
The parties should bring in short minutes to give effect to these reasons and to make provision for the directions needed to progress the matter.
As to costs, my preliminary view is that the costs of the Owners' Notice of Motion seeking leave should be the Owners' cost in the cause. If the parties wish to contend for a different costs order, they should confer and agree on a timetable for written submissions. I will deal with that issue on the papers.
[4]
Endnotes
Sections 57 and 58.
Evidence Act 1995 (NSW) s 13.
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Decision last updated: 01 September 2023