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Costs associated with the rectification of these defects formed the subject of the claim.
The claimant contended that costs for rectification of all accepted defects were in the vicinity of $8 million and submitted a claim at $10 million. Insurers considered the claim exceeded likely reinstatement costs. As both parties could not reach a settlement agreement, the matter proceeded to The Supreme Court.
Through their preferred Lawyer, Insurers engaged Sergon Building Consultants, instructing our Quantity Surveying department to act as their Expert Witness with regard identification of reasonable rectification costs. The challenge was to accurately determine a realistic reinstatement estimate based on a scope of works for reinstatement of accepted defects, provided by others, in order to negotiate settlement of a claim to the satisfaction of all parties.
Sergon Quantity Surveyors attended the site on a number of occasions. Not content with acceptance of measurements supplied by others, the Quantity Surveyors lifted quantities from supplied original plans and tested measurements physically while on site. While time consuming the exercise yielded immediate results.
Sergon Quantity Surveyors determined numerous measurement and quantity inaccuracies that had inflated the Claimants view on reinstatement cost estimates.
This demonstrates the value of accurately measured scopes of work. Sergon Quantity Surveyors then set about preparing independent reinstatement cost estimates based on a provided scope of reinstatement requirements, but utilising the accurate measurements substituted back into the scope.
Utilising first principle estimating technique, initial estimates calculated that probable reinstatement costs totalled around $3.5 million, an amount used by Insurers as a base on which the established claim reserves.
Sergon Building Consultants initial estimates were presented to The Supreme Court. The Supreme Court recognised the significant disparity between claimed costs at $10 million and Sergon Reinstatement Estimates now to hand at $3.5 million.
With the gap between the Parties now clearly identified, the Supreme Court ordered an independent Quantity Surveyor complete a further review of reinstatement cost estimates. The Independent Quantity Surveyor supported the estimates prepared by Sergon Building Consultants, confirming their accuracy.
Negotiations commenced with Insurers offering to settle the claim for reinstatement costs calculated at $3.5 million as estimated by Sergon Quantity Surveyors. The matter was eventually settled at $3.5 million plus legal and expert costs, a saving on claimed costs at around $6 million.
Once the matter was concluded, the Lawyer engaged by the Insurers to represent their interests wrote:
“… the Owners Corp alleged the defects would cost over $8m and wanted $10m to settle the Supreme Court case. I asked (Sergon Quantity Surveyors) to meet… and to estimate the rectification costs of the extensive defects allowing for complexity, potential variations, alternate accommodation etc. Sergon Quantity Surveyors arrived at a figure of about mid $3m and this assisted me to provide a reserve assessment to the Insurers. Sergon Quantity Surveyors were spot on, as the Supreme Court ordered an independent QS to cost the defects who recently arrived at a similar figure and we submitted an offer of $3.5m plus legal / expert costs. I commend (Sergon Quantity Surveyors) work and confirm they added real value and savings.”