The engineer appears to be either inexperienced or incompetent, and is expressing random unsubstantiated statements as fact and conclusion.
I can't see a way out of this for you. The buyer has instructed a bad engineer and there is no way out of this situation for you unless the buyer chooses to ignore their engineers advice.
Bit harsh. There has clearly been movement. Reading the extracts from the report it would seem it is a sloping site with a deep drain run running along the rear of the extension. The engineer has also identified dubious drainage work potentially causing localised saturation of the ground.
No professional is going to give this a clean bill of health without further investigation. Not everyone has Woody's x-ray vision and blind faith that all movement is caused by "shrinkage".
It rather begs the question why did the OP not deal with the visible cracking before he put the property on the market?