Earlier this year in mid-July, a construction project went horribly wrong as the walls of the 15m pit collapsed during excavation causing damage at the site and to neighbouring property, displacing local residents and creating weeks of traffic chaos in the surrounding area. It is now a site of public interest. Fortunately, no one was hurt and so we may discuss the events without the involvement of a coroner. A number of investigations are in place so hard detail is scarce. But some things are obvious.

What should have happened and what transpired:

A building development needs to go through the following list throughout its lifetime:

• Engage an architect/draftsman (who carries Professional Indemnity insurance) to design the building to the Building Code of Australia (BCA).
• Engage engineers (who also carry Professional Indemnity insurance) to conduct soil testing, structural design / computations and safe building methods to conduct construction. It appears the ground was weathered silt / mudstone. Technically this is rock, but shows close properties to clay. The dry weather over the previous few weeks masked any problems as the excavation was taking place. After sustained rainfall, it gave way.
• Apply for planning approval from local council who ensures the development meets local planning laws, streetscape, including the ability of the proposal to protect adjacent properties. In this case, the ex-petrol-station site was initially granted development approval in October 2013 by the local council for basement parking, doctors’ surgery, childcare centre and 9 apartments. In 2014, it approved an amendment to increase the size of the development adding an extra level of basement, increase number of doctors’ rooms and increased childcare places. The overall development was estimated to cost approximately $5.5M.
• Apply for a building permit from a building surveyor (also carries Professional Indemnity Insurance) who is responsible for site safety and that the project is built according to the building regulations and to the conditions and specifications of the planning and building permits. He will demand appropriate construction methods and carry out appropriate inspections through the building phase. This particular building permit was issued by a private building surveyor and not the Monash Council. A local council can also issue asset protection notices for adjacent properties and underground utilities. Council will monitor these assets protection notices through the construction process. There are a range of ways to protect the caving in of a pit with secant piles and concreted rock anchors. It is well known in construction that what gets dug up must be replaced with stronger material for construction.
• In accordance with S.93 of the Building Act, the developer ought to issue a Protection Works Notice. It is unknown as to whether or not this was supplied. It appears little or no effort was made to underpin or shore up the adjoining properties.
• Registered Builder and trade practitioners also have duty to ensure the Building Code is met along with the ability to understand the project its engineering, and plans. In this case it would include the site workers who all must have white cards which certify they have an understanding of OH&S in construction work, including excavation of any hole over 1.5 meters that must have protection from collapse. All must work is under WorkSafe safe work practices.

What will probably happen now:

• Due to the work site being on a busy corner and excavation taking over 3 months, all entities including the Civil and/or Structural Engineer, Architect, Builder, excavator driver, Monash Council planning department, Building Surveyor will have questions to answer.
• The most likely remedy is for the site to be made safe by filling the whole site in to within 1m of street level and starting again. There are no safe work methods that will allow anyone to work close enough to unstable walls. It is estimated that nearly 2,000 truckloads have already filled the site with some 20,000 cubic metres of earth. As the area around the intersection has been filled in, the intersection at Highbury and Huntingdale Roads has been re-opened.
• Depending on the quality and level of liability insurance, this event may send the builder into liquidation. Already there are rumblings that the insurer has refused to meet the costs of the backfill.
• Should the builder be placed in liquidation, the VMIA may need to step in and indemnify the apartment purchasers. However, due to this being a mixed development, it would be a grey area as to how this is made (if at all, when considering sunset clauses and the like).
• There is no Structural Defects Insurance application as the project was damaged during the construction process.
• The professional trades would be closely examining their disclaimers in order to reduce their exposure. The developer and excavation contractor should be covered by the builder’s liability policy. The buck may well stop with the builder.
• The property owner of those cantilevering townhomes would be asking for compensation, not only for repairs and loss of rent, but for the loss of intrinsic value of the property, ie. if they were worth (say) $1M each before the event, what could they sell for after the event, considering the stigma and notoriety of the event. We understand building surveyors have entered the premises and are to make a recommendation as to their inhabitability. The original tenants have settled elsewhere.
• It is unknown as to what Advanced Consequential Loss Insurance was purchased (or offered) to the developer. It is likely that the doctors’ surgery and childcare centre would have budgeted for a start date. Leases would have been signed with an expectation of income upon the project handover, which will now not happen.
• Given a main sewerage line and road way are under threat, Government will more than likely take control due to the health and safety risk to the community. It may then seek compensation through the courts.
• The project may now become financially unviable It may remain a vacant site for some time. The owner or the funder may well step in and sell it or make a business decision and complete it themselves. Either way, it will cost somebody a lot of money.

Surely, the lawyers would be loving this.

At McKenzie Ross we have the solutions to these issues through the use of industry-leading policy wordings and many years of experience. We are aware that the bad taste of a claim not paid lasts far longer than the initial sweetness of a premium saving. Call us today and see how we can help.

Content privided by Don Todorovski