Absolute Tiling Solutions Pty Ltd v Certain Underwriters at Lloyds - [2024] NSWSC 364

Supreme Court

New South Wales

Medium Neutral Citation: Absolute Tiling Solutions Pty Ltd v Certain Underwriters at Lloyds [2024] NSWSC 364
Hearing dates: 12-15 February 2024, 19 February 2024, 13 March 2024
Date of orders: 10 April 2024
Decision date: 10 April 2024
Jurisdiction: Equity - Commercial List
Before: Nixon J
Decision:
See [472]

Catchwords:
INSURANCE – professional indemnity insurance – plaintiff was design and construct contractor – claim made relating to external sandstone tiling designed and installed by plaintiff – insured activities included design but not installation – whether the liability resulted from the design or installation of the tiling system
INSURANCE – professional indemnity policy underwritten by first defendant for three consecutive years – exclusion clause in respect of prior known circumstances – whether failure to disclose prior known circumstances – consequences of failure to disclose prior known circumstances after entry into the first of the three consecutive policies – application of continuous cover provision – application of ss 21 and 28 of the Insurance Contracts Act 1984 (Cth)
INSURANCE – whether plaintiff failed to comply with s 21 of the Insurance Contracts Act 1984 by failure to disclose that plaintiff performed external tiling or cladding works – whether the first defendant would have entered into policy if relevant failure had not occurred
INSURANCE – construction of contract of insurance – exclusion clauses
INSURANCE – brokers – claims for negligence and misleading or deceptive conduct – premises for claims not established
BUILDING AND CONSTRUCTION – scope of rectification works – cost of rectification works

Legislation Cited:
Civil Liability Act 2002 (NSW), s 5D
Home Building Act 1989 (NSW), ss 18B, 18G
Insurance Contracts Act 1984 (Cth), ss 21, 28, 40

Cases Cited:
AFC Holdings Pty Ltd v Shiprock Holdings Pty Ltd [2010] NSWSC 985
Astley v Austrust Limited (1999) 197 CLR 1; [1999] HCA 6
Beaufort Developments (NI) Ltd v Gilbert-Ash NI Ltd [1999] 1 AC 266
Bellgrove v Eldridge (1954) 90 CLR 613 at 617; [1954] HCA 36
Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (2008) 166 FCR 494; [2008] FCAFC 38
Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2006] NSWCA 361
CGU Insurance Limited v Porthouse (2008) 235 CLR 103; [2008] HCA 30
CIMIC Group Limited v AIG Group Limited [2022] NSWSC 999
Classics for a Cause Pty Ltd v Grays Ecommerce Group Ltd [2023] NSWSC 967
DIF III – Global Co Investment Fund LP v DIF Capital Partners Ltd [2020] NSWCA 124
Electricity Generation Corp v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7
FAI General Insurance Co Ltd v McSweeney (1999) 10 ANZ Insurance Cases ¶61-443
Fishwives Pty Ltd v FAI General Insurance Co Ltd [2001] NSWCA 193
Hakea Holdings Pty Ltd v Neon Underwriting Ltd [2023] FCAFC 34
HDI Global Speciality SE v Wonkana No 3 Pty Ltd [2020] NSWCA 296
Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd (2013) 247 CLR 613; [2013] HCA 10
Karenlee Nominees Pty Ltd v CAN 004 312 234 Ltd (1995) 8 ANZ Ins Cas 61–236
Kiriacoulis Lines SA v Cie d’Assurances Maritime Aeriennes et Terrestres [2002] 1 Lloyds’s Rep IR 795
Lake v Simmons [1927] AC 487
Lasermax Engineering Pty Ltd v QBE Insurance (Aust) Ltd [2005] NSWCA 66
Legal & General Insurance Australia Limited v Eather (1986) 6 NSWLR 390
Liberty Mutual Insurance Company Australian Branch t/as Liberty Specialty Markets v Icon Co (NSW) Pty Ltd (2021) 396 ALR 193; [2021] FCAFC 126
Malamit Pty Ltd v WFI Insurance Ltd [2017] NSWCA 162
McCarthy v St Paul International Insurance Co Ltd (2007) 157 FCR 402; [2007] FCAFC 28
New Cap Reinsurance Corporation Limited (in liq) v Daya [2010] NSWSC 1226
Permanent Trustee Australia Ltd v FAI General Insurance Co Ltd (In Liq) (2003) 214 CLR 514; [2003] HCA 25
Prepaid Services Pty Ltd v Atradius Credit Insurance [2013] NSWCA 252
RAA-GIO Insurance Ltd v O’Halloran (2007) 98
Roberts v Goodwin Street Developments Pty Ltd [2023] NSWCA 5 SASR 123; [2007] SASC 245
Samways v Workcover Queensland [2010] QSC 128
Sheehan v Lloyds Names Munich Re Syndicate Ltd [2017] FCA 1340
Star Entertainment Group Ltd v Chubb Insurance Australia Ltd (2022) 400 ALR 25; [2022] FCAFC 16
State of New South Wales v Tempo Services Ltd [2004] NSWCA 4
Stealth Enterprises Pty Ltd t/as The Gentlemen’s Club v Calliden Insurance Limited [2017] NSWCA 71
Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272; [2009] HCA 8
AMRO Bank NV v Bathurst Regional Council [2014] FCAFC 65; (2014) 224 FCR 1
Todd v Alterra at Lloyd’s Limited (2016) 239 FCR 12; [2016] FCAFC 15
Wayne Tank & Pump Co Ltd v Employers Liability Assurance Corp Ltd [1974] QB 57
Weir Services Australia Pty Ltd v AXA Corporate Solutions Assurance (2018) 359 ALR 314; [2018] NSWCA 100
XL Insurance Co SE v BNY Trust Company of Australia Ltd [2019] NSWCA 215
Zurich Australian Insurance Ltd v Regal Pearl Pty Ltd [2006] NSWCA 328

Texts Cited:
DK Derrington KC and RS Ashton, The Law of Liability Insurance (3rd ed, 2013, LexisNexis Butterworths)

Category: Principal judgment
Parties: Absolute Tiling Solutions Pty Ltd (Plaintiff)
Certain Underwriters at Lloyd’s subscribing to a policy of insurance (First Defendant)
Coverforce Insurance Broking Pty Ltd (Second Defendant)
Action Insurance Brokers Pty Ltd (Third Defendant)
Sang Jo Moon aka Charles Moon (Fourth Defendant)
Representation:
Counsel:
F C Corsaro SC with B Le Plastrier (Plaintiffs)
C J Peadon with H Cooper (First Defendant)
S R Donaldson SC with D Wong (Second Defendant)
M S White SC with N Riordan (Third and Fourth Defendant)
Solicitors:
Pinsent Masons (Plaintiff)
Colin Biggers & Paisley (First Defendant)
Meridian Lawyers (Second Defendant)
DLA Piper Australia (Third and Fourth Defendant)

File Number(s): 2021/00257066
Publication restriction: Nil

JUDGMENT

Introduction

These proceedings concern a claim by the Plaintiff, Absolute Tiling Pty Ltd (Absolute Tiling), on a professional indemnity policy underwritten by the First Defendant (the Underwriters) in respect of the period from 31 January 2020 to 4 May 2021 (the 2020/21 Policy).
The 2020/21 Policy was in substantially similar terms to two earlier professional indemnity policies held by Absolute Tiling and underwritten by the Underwriters, in respect of:

the period from 31 January 2018 to 31 January 2019 (the 2018/19 Policy); and

the period from 31 January 2019 to 31 January 2020 (the 2019/20 Policy).

The Second Defendant, Coverforce Insurance Broking Pty Ltd (Coverforce), was Absolute Tiling’s broker and placed the 2020/21 Policy.
The Third Defendant, Action Insurance Brokers Pty Ltd (AIB), had acted as Absolute Tiling’s broker prior to being replaced by Coverforce. AIB placed the 2018/19 Policy and the 2019/20 Policy. The Fourth Defendant, Mr Moon, was the authorised representative of AIB.
The dispute in these proceedings concerns whether Absolute Tiling is entitled to indemnity under the 2020/21 Policy in respect of a claim made by Toga Constructions NSW Pty Limited (Toga). That claim arose from a contract pursuant to which, relevantly, Absolute Tiling undertook to design and install sandstone cladding at a mixed-use development constructed by Toga. Following completion of the cladding works, the sandstone tiles began to detach and, despite rectification works, continued to detach. Toga subsequently made a series of demands for Absolute Tiling to rectify the works. Absolute Tiling first notified these matters to the Underwriters on 4 August 2020.
The Underwriters have denied indemnity. Although the denial of indemnity was put on various bases, the Underwriters relied in closing submissions principally on Absolute Tiling’s failure to comply with its disclosure obligations and on certain exclusions in the 2020/21 Policy.
Absolute Tiling contends that the Underwriters wrongfully denied indemnity and therefore breached their obligations under the 2020/21 Policy.
In the event that it is found that the Underwriters were justified in denying indemnity on certain of those bases, Absolute Tiling makes claims for negligence, breach of contract and misleading conduct against Coverforce, AIB and Mr Moon (collectively, the Brokers).
After briefly outlining the factual background to the dispute in Section A below, I deal with the following issues:

the application of the insuring clause and, in particular, whether the detachment of the tiles was due to a deficiency in the design of the tiling system or a deficiency in its installation (Section B);

whether Absolute Tiling failed to disclose prior known circumstances and the consequences of any such non-disclosure (Section C);

whether Absolute Tiling failed to make adequate disclosure regarding the nature of its business, and the consequences of any such non-disclosure (Section D);

whether any exclusion clause or endorsement operates to exclude cover in respect of Toga’s claim (Section E);

whether, in the event that cover is excluded, the Brokers were negligent or engaged in misleading conduct (Section F); and

the scope and cost of the rectification works (Section G).

A. FACTUAL BACKGROUND

Subcontract between Absolute Tiling and Toga

“Harbourfront Balmain” is a mixed residential and commercial development on the waterfront at 100-102 Elliott Street, Balmain, New South Wales (Harbourfront Balmain). It was built by Toga for another entity in the same corporate group, Toga Development Pty Limited.
On 18 June 2016, Absolute Tiling entered into a subcontract with Toga for the design and construction of floor and wall tiling systems and associated works at Harbourfront Balmain (the Subcontract).
Absolute Tiling is a member of a group of companies known as the Versatile Group.
Clause 8.14 of the Subcontract set out Absolute’s design obligations. It provided, relevantly, as follows:

“As part of the Subcontractor’s Design Obligations, the Subcontractor shall:
(a) ensure that the Design Documents (including any Design Documents which were not produced by the Subcontractor) satisfy the Main Contractor’s Project Requirements;
(b) ensure that the Design Documents contain sufficient detail to construct the Subcontract Works so that the Subcontract Works, when completed; satisfy the warranties in clause 2.3 and clause 2.7;
(c) ensure that the details contained in any Design Documents are coordinated with the details contained in all other design documents prepared by Other Subcontractors;
…
(g) conduct sufficient investigations to ascertain the existence and extent of any Site conditions which may have an effect on the Subcontract Works;
(h) design the Subcontract Works so that the Subcontract Works, when constructed, shall be structurally and aesthetically sound despite any Site conditions;
…”

Clause 9.12(c) of the Subcontract required Absolute Tiling to deliver a Deed of Subcontractor Warranty. Absolute Tiling complied with this requirement. Pursuant to this Deed, Absolute Tiling warranted that it would complete the works free from defects, and was obliged to make good any defects, at no cost to Toga, within the warranty period.

Sandstone Tiling Specification

The Subcontract included, as part of Schedule 2, “Oculus Technical Specification Landscape Works (LA.30.0001) Draft 50% Tender Issue, dated 27 February 2015” (Oculus Technical Specification).
The intent of the original design for the works at Harbourside Balmain, as shown in the Oculus Technical Specification, was for sandstone tiles to be mechanically fixed. Section 3.3 of the Oculus Technical Specification provided that the construction of the sandstone walls was to be as shown on the “Drawings”. The relevant drawings include “Oculus Landscaping Drawings / Date: 19.07.16 Issue for Tender / Dwg No LA. 18.300 Rev 3 Detail 3”. This drawing relates to the installation of sandstone cladding on planter walls at Harbourside Balmain. It includes the following note:

“20mm THICK SANDSTONE CLADDING TO BLOCKWORK
…
WALLS 0-1500mm ABOVE FFL [Finished Floor Level] TO BE MORTAR FIXED.
WALLS 1500mm + ABOVE FFL TO BE PIN FIXED”

Following entry into the Subcontract, Toga suggested to Absolute Tiling that glue fixing rather than pin fixing be used for all tiles, as this would significantly reduce the cost of the cladding works. On 21 October 2016, Absolute Tiling and Toga agreed on a “Scope of Subcontract Works – Hard Landscaping: Cladding” (Cladding Scope of Works). Paragraph 5 of the Cladding Scope of Works provided that the Subcontractor shall complete the “supply and installation of sand stone cladding, capping etc. to planter walls, free standing walls, building façade, lookout etc”. Paragraph 9 provided that the works in the Cladding Scope of Works comprised, but were not limited to, “the Design and Construct of the hard Landscaping works, including provision of … design, supply, installation … as indicated on the drawings”. Paragraph 9 also provided that:

“The subcontractor is not liable for any design associated with structure or works associated with other trades. However, they are obligated to provide a sound, fit for purpose execution and provide advice if the current design is not suitable for its intended purpose”.

Paragraph 10 of the Cladding Scope of Works was set out in a marked-up form. The mark-up indicated the amendments which had been made as the result of moving from a system of mechanically fixing the sandstone to one relying on adhesive. Paragraph 10 relevantly stated as follows:

“The Subcontractor shall complete all works listed but not limited to the following:
a. Supply and installation of sandstone cladding to building façade, free standing walls, planter walls, lookouts etc.
b. Walls exceeding ~~1,500~~ 2,700 mm in height ~~must have cladding mechanically~~ will be adhesive with supporting angles every 2^nd course fixed, walls not exceeding ~~1,500~~ 2700mm in height to have cladding glue fixed or similar. No allowance for mechanical (pin) fixing has been made.
…”

In accordance with the Cladding Scope of Works, Absolute Tiling designed the cladding system on the basis that the tiles would be glue fixed. For this purpose, Absolute Tiling selected an adhesive product which was manufactured by Sika Australia Pty Ltd (Sika) and was named A-50. This adhesive was to be applied directly to the “Crystoflex” waterproof membrane laid onto concrete blockwork. The Crystoflex product was manufactured by Duram Industries Pty Ltd, and the membrane had been installed by a third party contractor, Tight Seal. The sandstone tiles that were to be applied to the wall were 20 millimetres thick, and 400 millimetres x 200 millimetres in size. On 15 March 2017, Absolute Tiling wrote to Sika, providing the data sheet on the Crystoflex membrane and asking whether the A-50 Sika glue could be used to fix tiles of this size to the membrane. On the following day, a Sika representative replied that “A50 would be ideal for this application”.
Absolute Tiling proceeded to fix the sandstone tiles by this method. During installation, Absolute Tiling used plastic T-shaped spacers to ensure that the tiles did not touch and that the space between the tiles was even. These plastic spacers were left in place after the tiles had been installed.

Detachment of Tiles

Towards the end of 2017, tiles began detaching at Harbourside Balmain. This problem continued during 2018 and 2019. I deal below, when addressing the issue of non-disclosure, with the communications between Toga and Absolute Tiling regarding this issue, and Absolute Tiling’s knowledge regarding the nature and extent of the problem at various points during this period. In around October 2019, Toga engaged an independent expert, Mr Ross Taylor, in order to identify the cause of the problem.
On 27 July 2020, Mr Taylor issued a report, in which he expressed the following opinion:

“It is our view that Duram Crystoflex waterproofing membrane on concrete block wall is not a suitable substrate for direct fix adhering sandstone tiles in an external environment. Alternative methodologies such as mechanical fastening etc would provide a more appropriate and reliable design.
The fundamental unsuitability of a membrane a substrate is exacerbated by several non compliances in the method of adhering the tiles. This has heightened the risk of differential movement combined with the heavy weight of the tile units leading to extensive detachment of tiles throughout the podium areas.”

Claim by Toga – Coverage Declined

On 4 August 2020, shortly after receiving Mr Taylor’s report, Toga sent Absolute Tiling an email with the subject line “Formal notice of intention to claim”. This email included the following statements:

“As you know, the ongoing delamination of the sandstone cladding at Harbourside Balmain has been of concern since the project was completed in December 2017.
Despite repeated attendance and reinstallation of the system put forward by Absolute Tiling under clause 8 (Subcontractor Design Obligations) … the tiles continue to delaminate and we are now of the view that the designed system is inadequate, and that:
• all sandstone needs to be removed,
• an alternate fixing system needs to be presented by Absolute for Toga sign off,
• all walls need to be re clad with the intended finish (sandstone tiles).

This position has been validated by the recent completion of Absolute Tiling’s ‘lap test’ which has resulted in circa 70% of the remaining sandstone tiles presenting as ‘drummy’.
Can you please advise next steps from Absolute Tiling to address this matter asap …”

On the same day, Absolute Tiling forwarded Toga’s email to a Coverforce representative, Mr John Angelis, who in turn forwarded it to the email address [email protected]. Mr Angelis added the following message:

“Dear Claims,
Please find below precautionary notification of a potential PI claim against our Insured, Versatile Group.
As you will see, this is in respect of works which were carried out back in 2017.
As mentioned, the Insured wishes to lodge this on a precautionary basis at this time and will continue to discuss with the third party, TOGA.
Please note our claim reference above and advise us of any comments or queries you may have when you have an opportunity.”

On 5 August 2020, Colin Biggers & Paisley wrote to Coverforce, stating that they had been appointed to deal with the claim. They advised that, based on their review of the notification, they had formed the view that the claim would be excluded by virtue of certain exclusions and endorsements in the 2020/21 Policy.
On 9 November 2020, Toga sent a letter of demand to Absolute Tiling, which commenced as follows:

“Toga … wish to formally advise Absolute Tiling … that you are in breach of Subcontract Clause 8: Subcontractor’s Design Obligations for the Harbourfront Balmain Project … with regards to the ongoing defectiveness of the Sandstone wall cladding throughout the landscaped areas of the development.”

This letter attached a further report of Mr Taylor dated 31 October 2020. In this report, Mr Taylor expressed the following views:

“While a waterproofing membrane such as the [Duram] Crystoflex is suitable for waterproofing block walls such as these it is not appropriate to direct fix adhere heavy sandstone tiles to the membrane in such an exposed external environment. Mechanically fixed stone systems are a minimum appropriate design. Duram Crystoflex waterproofing membrane on concrete block wall is not a suitable substrate for direct fix adhering sandstone tiles in an external environment.
The combination of a heavy tile unit, dimensionally uneven substrate (block wall), the presence of a waterproofing membrane in most situations and large walls sizes mean that the design limitations of the adhesive is frequently exceeded. Adhesive fixed sandstone is an inappropriate cladding system design for walls such as the landscape areas at Harbourfront Balmain. The combination of substrate variability, the need for a waterproofing membrane coating to the walls and overall wall scale / height means that the walls require a cladding design based on mechanical fixing and not adhesive fixing.”

Mr Taylor’s report concluded with his recommendation that “all existing sandstone cladding is removed from the landscaped areas of the complex” and that a “new cladding system should be selected which provides an equivalent organic finish but with a purpose made mechanically fastened support system”.
On 10 November 2020, this material was forwarded by Coverforce to Colin Biggers & Paisley. Coverforce stated that this additional information indicated that the claim arose from a design issue and asked for confirmation that it could be accepted under the 2020/21 Policy. Correspondence followed in November 2020, in which Colin Biggers & Paisley confirmed that the claim was declined. They stated that the Policy excluded “any claim arising out of the installation of products such as the tiles/cladding in question”.
On 19 March 2021, Toga sent a further letter of demand, referring to the letter of 9 November 2020 “regarding Sub-Contract non conformance against Subcontract Clause 8: Subcontractor’s Design Obligations” (emphasis in original). The letter continued:

“The failure to commence rectification works on site is now, without limitation:
1. Increasing safety risk to residents as sandstone pavers fall from height in common areas,
2. Affecting use of the development as some walkways and access points are restricted in response to 1,
3. Adversely affecting Toga’s reputation with the Owners Corporation.
Absolute Tiling Solutions Pty Ltd (ABN: 29 134 925 214) are in breach of Subcontract Appendix 1: Deed of Subcontractor Warranty.”

A further letter of demand followed on 26 April 2021.
On 8 December 2023, Toga wrote to Absolute Tiling, referring to this earlier correspondence and stating as follows:

“As set out in Toga’s letters and the Ross Taylor Associates rectification methodology, the widespread delamination of the external sandstone tiles that were affixed by adhesive in accordance with the defective design prepared by Absolute requires rectification. This includes the removal of all external sandstone tiles, grinding of adhesive and waterproofing, substrate preparation, re-waterproofing, and the mechanical fixing of all tiles.
If this issue cannot be resolved to Toga’s commercial satisfaction within the next few months, Toga intends to enforce its rights under the subcontract deed dated 18 June 2016 to recover damages from Absolute for losses, costs and expenses it has suffered or incurred or may suffer or incur arising from or relating to Absolute’s defective design and installation of the sandstone tiling works.”

Absolute Tiling has not commenced any rectification works. The Chairman of Absolute Tiling, Mr Fahd, has informed Toga that “Absolute Tiling can’t afford to mechanically fix the sandstone tiles until the insurer pays the claim”.

B. APPLICATION OF INSURING CLAUSE

Issues for determination

The parties prepared a Joint List of Issues. The first item in that list is as follows:

“Whether any ‘Claim’ for civil liability for compensation resulted from the conduct of ‘Insured Activities’?”

Clause 1.1 of the 2020/21 Policy, which is headed “Insuring Clause”, provides as follows:

“We will pay up to the Limit of Liability on behalf of the Insured any civil liability for compensation (which includes the claimant’s legal costs and expenses) arising from any Claim first made against the Insured during the Period of Insurance resulting from the conduct of the Insured Activities.”

An “Insured” is defined as including a “Named Insured”, being any person named as an the “Insured” in the Schedule to the Policy (cll 7.10.1, 7.13). Absolute Tiling is a “Named Insured”.
A “Claim” is relevantly defined as including:

“7.2.2 the positive assertion in writing or verbally of a legal entitlement to damages or other compensatory relief in connection with an alleged civil liability on the part of the Insured, in terms evincing an intention to pursue such legal entitlement.”

In opening submissions, the Underwriters accepted that a “Claim” had been made by Toga against Absolute Tiling “during the Period of Insurance” under the 2020/21 Policy, but disputed that the Claim was one “resulting from the conduct of the Insured Activities”. However, following the completion of the expert evidence, the Underwriters indicated in closing submissions that they did not press this contention.
Nonetheless, it is important to spend some time addressing the definition of “Insured Activities” and the reasons why the expert evidence established that the Claim was one resulting from the Insured Activities, as these are matters which are relevant to the determination of the remaining issues concerning the interpretation and application of the 2020/21 Policy.

Definition of “Insured Activities”

The term “Insured Activities” is defined in clause 7.11 of the 2020/21 Policy as follows:

“7.11 Insured Activities
Means one or more of the following services:
a) design, including advice in relation to design, in accordance with all relevant laws, regulations and industry codes of practice;
b) drafting;
c) technical calculation;
d) technical specification;
e) technical advice;
f) project management;
g) construction management;
h) feasibility studies;
i) programming and time flow management;
j) quantity surveying;
k) surveying;
l) inspection; and
m) training in respect of a) to l) above,

provided always that it is performed only by, or under the direct supervision of, a properly registered architect, engineer, surveyor, a quantity surveyor who is a member of the Australian Institute of Quality Surveyors or any other person providing a professional service of a skilful character according to an established discipline appropriate to the Insured Activities being performed or supervised.
Insured Activities does not include:
i. performance or supervision (where such supervision would normally be undertaken by a building contractor) of construction, manufacture, assembly, installation, erection, maintenance or physical alteration of buildings, goods, products or property; or
ii. environmental protection, workplace health and safety or industrial relations matters which would normally by overseen by a building contractor.”

The Insuring Clause applies in respect of a Claim “resulting from the conduct of the Insured Activities”. In the law of insurance, it early became and has remained the rule to look to the proximate and not the remote cause of loss or damage in order to determine the liability of underwriters: Lasermax Engineering Pty Ltd v QBE Insurance (Aust) Ltd [2005] NSWCA 66 at [39] per McColl JA (with whom Ipp and Tobias JJA agreed). In this context, the phrases “proximate cause” and “direct cause” have come to be used interchangeably: ibid at [41]. “Proximate” in this context means proximate in efficiency rather than in time: ibid at [44]. The proximate cause rule “was not divorced in the cases from the terms of the particular policy under consideration”, but was based on the inferred intention of the parties; it “would not apply if it would defeat the manifest intention of the parties”: ibid at [45].
In Sheehan v Lloyds Names Munich Re Syndicate Ltd [2017] FCA 1340, Allsop CJ said (at [77], citations omitted):

“The causal inquiry in insurance law is directed to the proximate cause of the relevant loss or damage. This means proximate in efficiency, not the last in time … A proximate cause is determined based upon a judgment as to the ‘real’, ‘effective’, ‘dominant’ or ‘most efficient’ cause... What is the proximate cause is to be decided as a matter of judgment reached by applying the commonsense knowledge of a business person or seafarer ... There does not need to be a single dominant, proximate or effective cause of loss or damage …”

Absolute Tiling contended that the Claim was one “resulting from” its “design” of the tiling system, or its “technical specification” for, or “technical advice” relating to, that system (and therefore resulting from matters within paragraphs (a), (d) or (e) of the definition of Insured Activities). In this regard, Absolute Tiling relied on the expert evidence of Mr Taylor. As noted above, Mr Taylor had previously been engaged by Toga to investigate the cause of the detachment of the tiles and had conducted inspections of the site from around October 2019 onwards.
The Underwriters did not raise any issue regarding the proviso to paragraphs (a) to (m) of clause 7.11. However, the Underwriters did, in opening, rely on the carve-out at the foot of clause 7.11 and submitted that deficiencies in the “performance … of… installation” of the tiles had caused the detachment of the tiles. In this regard, the Underwriters relied on the report of Mr Drakakis.
Before considering the expert evidence on this issue, a point about terminology should be noted. There were numerous references in the contemporaneous documents and in the evidence given in this proceeding to the “delamination” of the tiles. Mr Taylor explained in his expert report that this term did not accurately describe what occurred. In particular, a reference to “delamination” might suggest that the mode of failure of the cladding system is the detachment of a layer of stone from the stone cladding units themselves. Mr Taylor noted that he had observed this sort of “delamination” to have occurred at Harbourfront Balmain on only one isolated occasion. Accordingly, Mr Taylor preferred to refer to the mode of failure as “detachment” of the stone tile or cladding “as this simply and accurately describes the condition at hand”. I similarly have referred to detachment, rather than delamination of the tiles, and have regarded references in the evidence to “delamination” as references to “detachment”, since the experts agreed that “delamination” in the manner described above was not the mode of failure at Harbourfront Balmain.

Expert evidence regarding cause of detachment

Mr Taylor and Mr Drakakis met in conclave and prepared a joint report. This joint report indicated a significant extent of agreement between them regarding the cause of the detachment of the tiles.
First, the experts agreed that “a majority of the stone cladding tiles have detached from the walls due to the adhesion / cohesion failure of the waterproofing”. “Adhesion” refers to the bonding of the waterproofing to the walls, while “cohesion” refers to the bonding of the waterproofing to itself. Absolute Tiling was not responsible for the waterproofing of the walls.
Secondly, Mr Drakakis identified that there were some deficiencies in the application of the tile adhesive to the tiles. In particular, he identified instances where the surface area of the tiles was insufficiently covered by tile adhesive and where the depth (in mm) of the adhesive was excessive. That is consistent with the view Mr Taylor reached in July 2020 (see paragraph 22 above) that there had been “several non compliances in the method of adhering the tiles”. However, the experts agreed that there are “very few cases of adhesion failure of tile adhesive to the underlying waterproofing membrane substrate or to the stone cladding tile”. Accordingly, any such deficiencies in the method of adhering the tiles appear to have made minimal contribution to the detachment of the tiles. In this regard, Mr Taylor noted (and Mr Drakakis did not dispute) that a number of the photographed examples of tiles with deficiencies in adhesive coverage, to which Mr Drakakis referred in his report, were tiles which had been removed by force. That is, these tiles had been removed by jackhammer or chisel, either for the purpose of “make good” works, or for the purpose of Mr Drakakis’ investigations, rather than having detached without human intervention. Mr Drakakis gave evidence that he was “unable to identify the extent to which adhesion failure of the tile adhesive has occurred”.
Thirdly, the experts agreed that the mechanical fixing of the stone tiles to the walls would have eliminated the risk of the tiles detaching due to the cohesive failure of either the waterproofing membrane or the tile adhesive.
Mr Taylor expressed the opinion that the tile adhesive system was not suited to the walls at Harbourfront due to deviations in the substrate. Mr Drakakis did not disagree with that view, adding that if this was correct, then a reasonably competent tiling contractor should have raised the issue so that it could be addressed by way of variation.
Mr Taylor, who has over 45 years’ experience in the design of tiling systems, including the design of external stone cladding, considered that, having regard to the matters outlined above, the use of a tile adhesive system rather than a mechanical fixing system was a design flaw. Mr Drakakis did not express a contrary view. The experts agreed that after the walls were re-waterproofed (which each considered should occur), a “new mechanically fixed stone cladding system” should be installed.
Having regard to those matters, I find that the Claim made by Toga results from the design of the sandstone tiling system and, in particular, results from the failure to adopt a system of mechanically fixing the sandstone tiles to the substrate, which would have eliminated the risk of tiles detaching due to any adhesion/cohesion failure of the waterproofing (this being the agreed cause of the detachment of the vast majority of the tiles).
Toga’s claim is not one “resulting from” the “performance … of… installation” of the tiling system. Although there is evidence of some deficiencies in the application of the tile adhesive, the evidence does not establish that such deficiencies have contributed to the detachment of the tiles to any material extent.
Accordingly, the Claim comes within the Insuring Clause.

C. NON-DISCLOSURE – PRIOR KNOWN CIRCUMSTANCES?

Issues for determination

Items 2 to 5(a) in the Joint List of Issues are as follows:

“2.    Whether the Plaintiff was aware of circumstances which might give rise to a claim of the type of the Toga Claim (as defined in the Second Further Amended Commercial List Statement) prior to entry into the 2020/2021 Policy.
3.    If so, when did the Plaintiff first became aware of circumstances which might give rise to a claim of the type of the Toga Claim (as defined in the Second Further Amended Commercial List Statement)?
4.    In the event that the Plaintiff was aware of circumstances which might give rise to a claim prior to entry into the 2020/2021 Policy:
a.    whether the Toga Claim is not covered by reason of the Plaintiff’s prior knowledge of such circumstances; or
b.    whether Extension 2.15 Continuous Cover (Continuous Cover Extension) operates so that the Toga Claim is not excluded by reason only of the Plaintiff’s prior knowledge of such circumstances.

5. Whether the Plaintiff breached its duty of disclosure under section 21 of the Insurance Contracts Act 1984 (Cth) by failing to disclose that:
a. given its knowledge of the circumstances of the delamination of the sandstone cladding it was aware of a real risk that a claim may be brought against it by Toga; …
and as a result the First Defendant’s liability is reduced to nil under section 28 of the Insurance Contracts Act 1984 (Cth)?”

In order to resolve these issues, I address below:

the submissions made by the Underwriters concerning the evidence of Absolute Tiling’s principal witness, Mr Marco Fahd;

the evidence regarding matters known to Absolute Tiling at various points in time from the entry into the Subcontract through to early August 2020, when it gave notification of Toga’s Claim to Coverforce;

whether, by reason of the matters known to Absolute Tiling prior to entry into the 2018/19 Policy, clause 6.1.2 of the 2020/21 Policy operates to exclude liability for Toga’s Claim;

whether, by reason of matters known to Absolute Tiling prior to entry into the 2020/21 Policy, ss 21 and 28 of the Insurance Contracts Act 1984 (Cth) operate to exclude or reduce any liability for Toga’s Claim;

the significance of matters known to Absolute Tiling prior to entry into the 2020/21 Policy for the claims against Coverforce, AIB and Mr Moon.

Underwriters’ submissions regarding evidence called by Absolute Tiling

In relation to the issue of knowledge, Absolute Tiling relied primarily upon an affidavit of Mr Marco Fahd, who was its Managing Director throughout the period from 2016 to 2019, and then its Chairman.
The Underwriters pointed out that Absolute Tiling did not call Mr Gotti, for whom an affidavit was served, and who was nominated as “Subcontractor’s Representative” by Absolute Tiling in the June 2016 Subcontract Deed. Nor did it call Mr Leerberg, who was Project Manager for Absolute Tiling at Harbourfront Balmain and who was party to the majority of communications from 2016 onwards regarding the design and installation of the tiling system and the subsequent detachment of tiles. Nor did it call Mr Saleh, who was Mr Fahd’s business partner and who, according to Mr Fahd, handled onsite delivery and oversaw all of the site managers that worked for Absolute Tiling.
Nonetheless, Mr Fahd’s evidence was that he was “very hands-on in many regards with particular clients, Toga being one of them”, and that the detachment of the tiles was directly raised with him by Toga’s construction manager soon after it arose. From that point in time, he was personally involved in discussions with Toga about the issue.
In any case, the Underwriters did not advance a submission that I should draw any adverse inference from the failure to call Mr Gotti, Mr Leerberg or Mr Saleh, but rather that I should more confidently draw inferences from the contemporaneous records about the state of Absolute Tiling’s knowledge at various points in time. As I have explained below, I have approached the issue of knowledge primarily by reference to the contemporaneous documentary evidence.
The Underwriters submitted that Mr Fahd was an unsatisfactory and unreliable witness whose evidence was “coloured by strategic calculations designed to advance Absolute’s case”, and who “did not exhibit the hallmarks of a credible and reliable witness, such as making reasonable concessions, and attending directly to the questions asked”.
I do not accept this submission. My impression was that Mr Fahd had firm views about the causes of the detachment and that he was keen to ensure that those views were made clear to the Court, and that this led him to repeat a series of similar points in response to questions asked in cross-examination, whether or not those points were responsive to the particular question being asked. However, such behaviour is not unusual for a lay witness whose knowledge and conduct are under scrutiny, and I did not form any impression that Mr Fahd was doing anything other than stating honestly his recollection of the course of events and what he perceived to be his state of mind at the relevant time.
At the same time, I accept there is a significant risk that such evidence may be affected by hindsight bias. It is difficult for any witness, when dealing with a sequence of events commencing more than six years ago (in late 2017) and extending for several years thereafter, to recall precisely what understanding he or she had about a particular issue at any specific point in time in that period. Those difficulties are compounded where a witness has been engaged in litigation for a number of years and has firm views about their position in that litigation. Where it is known that a critical issue in the proceedings concerns whether such a witness was aware of certain matters by a particular date, there is a risk that this will influence the witness’s perception of the point in time when certain matters came to his or her attention or when their significance was understood.
In this regard, Mr Fahd frequently referred, when asked about his understanding of the detachment issue at specific points in time, to matters of which he only became aware, and could only have become aware, at later points in time. For example, the following exchange occurred when Mr Fahd was asked about an email exchange of 12 January 2018, which is addressed in more detail below:

“Q: And then if you read the first paragraph to yourself, does that assist you to recall that the delamination started; you were aware of it in December 2017?
A: It was ongoing, correct, as per that email.
Q: And you understood at that time that the common pattern was that they were detaching with the membrane?
A: Well it’s not only that I understood it, TOGA accepted it, and they accepted that via myself engaging also a third party independent consultant, which verified at the time that it’s the membrane detaching off the wall, installed by others, therefore the fact that the membrane that is coming off the wall, with my adhesive, that was not installed by Versatile or Absolute, was an issue of the membrane. And then that was validated by us being paid by TOGA a variation to rectify those areas, whereby the membraner, the water proofer was not paid to do the rectification works. And in fact it was even compounded with the fact that we, through this whole process, were paid our retention moneys, which warranted and validated that there were no major defects left on the project. So via a deed of release signed by TOGA and Absolute Tiling, I think it’s sometime in 2018 I believe, we were paid out our contract sum, our retention, which in the industry practice is that there are no remaining major defects left on the project. So it was always accepted by TOGA that it was a membrane, hence the reason why, I suppose, we were paid. Because we accepted that position, we were paid to re put those stones back on the wall.”

As the above exchange shows, Mr Fahd, when answering a question that was specifically addressed to his understanding as at around January 2018, referred to the engagement of a third party consultant, Mr Cass (which only occurred in March 2018); the report delivered by Mr Cass which “verified” certain matters (in May 2018); Toga’s signing a deed of release and paying out retention moneys (“sometime in 2018”); and Toga’s paying Absolute Tiling for rectification works (in mid-2019).
Having regard to those matters, I have sought to determine the issue of Absolute Tiling’s knowledge at particular points in time by reference primarily to the contemporaneous documentary evidence. That is not to say that I have disregarded Mr Fahd’s evidence, particularly where it provides context for the documentary material. However, it is the documents which provide the most reliable record of when particular pieces of information came to the attention of Absolute Tiling, and whether or not those matters were perceived as cause for concern at the time.

Matters known to Absolute Tiling

The starting point is the Subcontract and the Cladding Scope of Works. Absolute Tiling must have been aware of the terms of those documents. These include, relevantly, that Absolute Tiling had an obligation under clause 8.14 of the Subcontract to:

“(g) conduct sufficient investigations to ascertain the existence and extent of any Site conditions which may have an effect on the Subcontract Works;
(h) design the Subcontract Works so that the Subcontract Works, when constructed, shall be structurally and aesthetically sound despite any Site conditions;”

Further, the Cladding Scope of Works provided that Absolute Tiling was “obligated to provide a sound, fit for purpose execution and [to] provide advice if the current design is not suitable for its intended purpose”.
Mr Fahd agreed that it is fundamental to any tiling job to understand the substrate to which tiles will be applied. He understood that it was Absolute Tiling’s responsibility “to ensure that what we see is acceptable for us to adhere to, and prior to us making that adherence we ensure that our materials [are] compatible with the material”. In that regard, Absolute Tiling was aware that the substrate to which the sandstone tiles were to be affixed by adhesive consisted of blockwork with a “Crystoflex” membrane that had been installed by a third party contractor. As noted above, Absolute Tiling had in 2017 specifically sought advice from Sika on the suitability of the A-50 adhesive for fixing sandstone tiles of specified dimensions to this membrane.
The detachment of tiles first appears to have come to the attention of Absolute Tiling towards the end of 2017.
The earliest document of Absolute Tiling which refers to the issue is an internal email chain dated 12 January 2018. The first email in this chain was sent at 11.34am by Mr Leerberg to Mr Saleh and Mr Gotti, and copied to Mr Fahd. Its subject line is “Balmain – sandstone dislodging”. The email assumes existing familiarity with the fact that such detachment has occurred, as it commences by proposing a “solution” for those individual tiles which have detached:

“The solution that comes to mind is only for pieces that are loose or have already fallen and that would involve mechanically fixing wire-mesh cut into 195x395mm pieces (or larger depending on the number of adjacent pieces that have fallen off) and then glue the tiles to the wire-mesh.”

Mr Leerberg estimated a “price per piece” of $125.00 plus GST, which will be charged to Toga for this rectification work. Mr Leerberg also raised the prospect of a solution that involved mechanically fixing the detached tiles:

“A topical solution might be to mechanically [fix] a support to the face of the sandstone, whether it be something like a stainless steel stud indicator through the centre of each tile or a flat bar across a length of tiles (very ugly).”

Mr Leerberg sought feedback on the matters in his email, noting that a meeting had been arranged with Toga on the following Tuesday afternoon.
Only a matter of minutes after receiving this email, Mr Fahd responded at 11.41am as follows:

“This is larger than just a repair, we must have toga acknowlede it is a membrane issue, once acknowledged ask them how they wish to proceed? Via a temporary solution or permamnet fix ? I assume permanent fix which would mean a greater scope to the fix, and this scope should be implemented through a consultant that toga find? We can assist them through this process.”

This email featured prominently in the Underwriters’ submissions. That was because, as explained further below, it was an email sent prior to the entry by Absolute Tiling into the 2018/19 Policy. The Underwriters relied on this email to contend that Absolute Tiling had knowledge of circumstances that might give rise to a claim prior to the inception of that Policy, and therefore cover was excluded under any of the Policies underwritten by them. I deal with the significance of this email below, when addressing the Underwriters’ submissions regarding Absolute Tiling’s failure to disclose circumstances known prior to 31 January 2018.
On 18 January 2018, Mr Tim Parsons of Sika conducted a site visit at Harbourside Balmain. Mr Parsons referred to this site visit in a letter of 13 February 2018 that was addressed to Mr Leerberg. Mr Parsons reported as follows on his observations:

“The A50 tile adhesive was well bonded to the back of the Sandstone Tile and to the waterproof membrane applied to the substrate.
It was observed that the bond failure has occurred at the interface of the waterproofing membrane and the substrate.
Please note however, that the site visit in no way represents supervision or approval of the work and the responsibility of correct application of the Products rests with the applicator. Please refer to our Terms and Conditions of Sale for further information.”

The Underwriters submitted that it should be inferred that “Absolute was sufficiently concerned about the delamination issue that it engaged its adhesive supplier to perform an in-person inspection of the site” and that “this is signally inconsistent with Absolute’s supposed belief that the only possible explanation for the issue was Tightseal’s fault”. However, it is not clear that the site visit was arranged by Absolute Tiling. On Friday 12 January 2018, Mr Leerberg had referred to a meeting with Toga planned for the next Tuesday (16 January), and this visit of 18 January may have been arranged at the request of Toga following that meeting. The fact that Mr Parsons sent a letter to Mr Leerberg about this site visit in mid-February 2018 is not indicative of a concern on Absolute Tiling’s part that it may have been at fault. The observations reported by Mr Parsons in his letter may well be ones which he reported to Toga representatives at the time, and which he was confirming to Absolute Tiling at a later point in time. If Absolute Tiling had been anxious about its exposure, it would be expected that it would have been keen to ensure that it received Mr Parsons’ report much closer to the date of his visit.
Further, the matters observed by Mr Parsons were consistent with the understanding that Mr Fahd held at this time, namely, that the problem was not with the tile bonding to the membrane, but with the membrane bonding to the substrate.
On 20 February 2018, Mr Hutchinson of Toga sent an email to Mr Fahd with the Subject “Sandstone Cladding Falling Off – Balmain”. The email set out a memorandum addressed to Mr Fahd and Mr Leerberg and to Mr Gorkis of Tight Seal. The memorandum stated as follows:

“Following our site inspection with TCN, Tightseal and Absolute Tiling to investigate the cause of Sandstone cladding falling off at Balmain the following observations and notes were made:
• There was two main areas where sandstone cladding was falling off at the time of inspection - A2 Entrance to unit 07 and above basement door located towards North east corner of Building C3.
• Absolute and Tightseal agreed (supported by product reps) that the glue and membrane products are compatible products.
• Several pieces of fallen stone had membrane remanence on back of glue.
• The area out the front of A2 appeared to be spot fixed.
• Tightseal advised that [Crystoflex] had been used on block walls with no primer.
• Tightseal rep. advised that primer was not necessary for Crystoflex despite the product data sheet reference for primer
• There was evidence of membrane peeling off block walls with evidence of dust/friable material behind membrane
• It was noted that upon more stone pieces falling off, an inspection is to be undertake[n] to determine if suspected membrane or glue/spot fixing failure.
• Tightseal and Absolute agreed to repair the affected areas.

It is Toga’s opinion that the membrane falling off is attributed to inadequate adherence of membrane to block walls due to inadequate preparation and compounded by spot fixing technique used for cladding.
Please be advised Toga have recently noticed more individual pieces of stone falling off. Can you please continue to liaise with our Foreman on-site and repair as necessary ASAP. We are beginning to get several complaints from residents regarding this matter and it is clearly not a good look.
If this issue does become a systemic issue then Toga may need to engage an independent expert to determine final cause in all instances if disputed. If you disagree with any of the above please advise.”

As stated in the opening words of the memorandum, the observations and notes which are set out in the bullet points were made in the course of a site inspection involving Toga, Absolute Tiling and Tight Seal. Mr Fahd indicated that he was unlikely to have been involved in the inspection. The conclusion in the second bullet point – namely, that the glue and membrane products are compatible – is consistent with the view expressed in the letter from Mr Parsons of Sika. The memorandum identifies two potential causes for the detachment of tiles. The first potential cause is “membrane failure”. In this regard, reference was made to various matters, including that: “several pieces of fallen stone” had membrane attached to them; Tight Seal acknowledged that it had not used primer, despite this being required by the product data sheet for the Crystoflex product (although Tight Seal advised that primer was not necessary); and there was evidence of “membrane peeling off block walls”. The second potential cause is that, in one of the two areas where tiles had detached, the tiles “appeared to be spot fixed” by Absolute Tiling.
Toga appears to have reached the preliminary view that there was “inadequate adherence of membrane to block walls due to inadequate preparation” and that this problem was “compounded by spot fixing technique used for cladding”. That this is a preliminary view is indicated by the fact that “upon more stone pieces falling off, an inspection is to be undertake[n] to determine if suspected membrane or glue/spot fixing failure”. Toga also added that if the issue went beyond the “two main areas” which were affected at the time, and became “a systemic issue”, then Toga “may need to engage an independent expert to determine final cause in all instances if disputed”.
The memorandum also noted that “Tightseal and Absolute agreed to repair the affected areas”. It was this statement which caused Mr Fahd concern, as he explained in an email sent to Mr Leerberg and Mr Saleh shortly afterwards: “I am concerned about the last point only where it says [Absolute Tiling] and Tightseal will repair [a]ffected areas”. Mr Fahd’s concern appears to have been directed at the suggestion that Absolute Tiling would share, with Tight Seal, responsibility for rectifying the problem.
This concern likely explains why, in March 2018, Absolute Tiling engaged Mr Colin Cass, an expert tiling consultant, to prepare a report on the cause of the detachment. That is, Absolute Tiling was seeking independent support for its position that the problem was with the membrane, rather than with Absolute Tiling’s spot fixing technique, so as to ensure that Absolute Tiling was paid for any rectification work.
On 4 April 2018, Mr Cass sent an email to Mr Fahd and to Mr Troy Hogan of Sika (the adhesive manufacturer), which stated:

“Following our discussion yesterday, and viewing the photos you sent, the main mode of failure is in adhesion of the waterproofing membrane to the substrate. I cannot see any bubbling of the membrane so contrary to my concern that the membrane can’t withstand negative hydrostatic pressure, it appears to be another issue with the waterproofing membrane…
It will require a site inspection and possibly some product testing to get to the bottom of it.”

It is apparent from the opening words of the quotation above, and the concluding sentence, that the view expressed by Mr Cass at this stage was based on what he had been told and some photographs which had been shown to him, rather than based on any site visit.
By around this time, Absolute Tiling was aware that some large sandstone tiles were detaching without any membrane attached. On 6 April 2018, Mr Leerberg sent a message to Mr Hogan, copied to Mr Fahd, Mr Saleh and Mr Parsons, stating as follows:

“The attached photos show sandstone falling off walls with no membrane, the stone here is 400x200x40mm.
Please respond as to why this may have happened, too heavy? dot fixed?”

The tiles referred to in this email were 40mm thick, and were therefore double the weight of the 20mm tiles that were specified in the Cladding Scope of Works. Mr Fahd gave unchallenged evidence that these 40mm tiles were used only at the end of the project, when Absolute Tiling ran out of the 20mm tiles. He explained that the thicker tiles were used “for the last .02% of the project”, and covered an area that constituted “[m]aybe five square metres”.
Mr Parsons of Sika, replied to Mr Leerberg’s email, stating that:

“1. Adhesive coverage on an exterior application such as this should be 95%
2. Weight – anything over 32kg m2 should be mechanically fixed. This stone is 48Kg m2.”

The reference to “this stone” is to the thicker, 40mm tiles. The tiles used on the vast majority of the project, being half this weight, were approximately 24kg per sqm. As such, they were below the weight at which Sika recommended that tiles “be mechanically fixed”.
When asked about this email in cross-examination, Mr Fahd said that “spot-fixing could achieve, and does achieve, 95% [adhesive coverage].” Consistently with that evidence, Mr Taylor noted in the expert’s joint report that numerous of the photographs exhibited to Mr Drakakis’ report show adhesive coverage of over 90% being achieved.
On 10 April 2018, there was a series of emails between Sika, Toga, Absolute Tiling and Tight Seal regarding the proposed repair works at Harbourside Balmain. Mr Fahd noted that Absolute Tiling had engaged a third party consultant (that is, Mr Cass) and that his report would “be circulated to all”. Mr Fahd stated that comments were required from both Tight Seal and Sika on the repair works, which would need to be provided to Toga. He added that: “The issue is the longevity of the entire system to ensure what is laid is the correct product and in fact has been laid correctly, this is from a membrane point of view and a tile application point of view”.
On the same day, Mr Hutchinson of Toga authorised the repair works and gave the following direction to Absolute Tiling:

“Versatile – Please note Sika reps comments below regarding >95% coverage in order for glue to bond effectively. Please ensure correct method of installation (i.e. no spot fixing), notch trowel walls, butter entire back of stone in particular the corners. If further sandstone needs to be removed in order to achieve this then we should explore this.”

It is apparent that Mr Hutchinson had a concern with the spot fixing technique and wanted to ensure that the repair works not adopt that technique, but instead adopt the “correct method of installation”.
Five minutes after this email, Mr Fahd replied to Mr Hutchinson as follows:

“Colin [Cass] will be providing comments on the coverage, he has confirmed no issue with this, Sika has also checked on site and confirm what is existing is fine, THIS IS NOT THE ISSUE. Again you can not simply trowel this to a wall like a ceramic tile, otherwise toga would have to render all walls to suit, this I understand toga did not want to spend the money in this instance to do this. Stone at all times is primarily spot fixed, never just back buttered or trow[el]ed.
Please await the independent advi[c]e.”

Mr Hutchinson responded with a request that the consultant engaged by Absolute Tiling “comment on the appropriate method of installing the glue / stone and coverage etc”, and made clear that this was an issue on which Sika would also need to comment and provide advice.
On 8 May 2018, Mr Cass delivered a report entitled ‘Sandstone Cladding Delamination at 100 Elliot St Balmain’. In this report, Mr Cass noted that, when he inspected the sites of delamination, the Crystoflex membrane was very thin and that the tile adhesive had “ripped the membrane cleanly from the wall”. He did observe that there were some issues with the adhesive coverage, stating as follows:

“Some of the adhesive coverage was less than acceptable for consideration as good workmanship. (see photo No. 2.) However, spot fixing of stone is an accepted industry practice. This is because unlike ceramic tiles, stone varies in thickness and the back has to be packed out to make the face flush.”

Mr Cass concluded as follows (emphasis added):

“26. There is a serious problem of stone tile delamination to external sandstone cladding to this apartment complex. The problem is random and unpredictable, and likely to continue, meaning the cladding will not perform its intended function.
…
28. The mode of failure is at the tile adhesive to Crystoflex membrane interface, with the stone regularly tearing the membrane from the wall.
29. This is typical when the membrane is too thinly applied, and this problem is made worse by some poor surface preparation and the membrane appearing to not be applied according to the manufacturer’s instructions, which requires a primer. .…
30. The tile adhesive CTA A-50 used is suitable for use in this situation. Mr. Leerberg advised me that CTA [Sika] had confirmed that their A-50 is suitable for use over the Crystoflex membrane. The spot fixing used by the tile installers at some locations is an allowable practice in the industry with stone tiles, and while the spots are smaller than recommended in some locations, this [is] not the cause of the delamination. This is clearly shown by there still being delaminations when there is close to 100% contact coverage of adhesive to the membrane.”

Toga does not appear to have raised any issue about the spot fixing of tiles after this report was provided.
On 13 March 2019, Colin Cass provided a supplementary report to Absolute Tiling. He stated that he had conducted a further site inspection “with the parties” on 3 March 2019, and reported as follows:

“At the above inspection I found no new evidence that would change my findings of my earlier report. They were that the key mode of failure is a cohesive breakdown in the [Duram] Crystoflex waterproofing membrane because [it] was not applied according to the manufacturer’s instructions.”

On 23 March 2019, Mr Gotti of Absolute Tiling sent an email to Mr Spry, who was Defects Manager at Toga, attaching the supplementary report of Mr Cass and a proposal for “Sandstone Wall Remedial Works”. The works fell into three categories. First, there were some “Variation works”, such as the application of penetrating sealer to all capping stone pieces. Secondly, there were some “Absolute Tiling Solutions (ATS) defective works – FREE OF CHARGE”. These were limited in scope. In two specific locations (in a staircase and above a fire door), Absolute Tiling was to remove stone, install an angle support, and then reinstall the stone cladding. In addition, Absolute Tiling was to clean glue residue on the top of the stone by “buffing of sandstone surface”. Thirdly, there were more substantial works relating to detachment of the sandstone tiles, described as “Toga (or waterproofing) defective works”. The work to be done included the following:

“1. General stone falling off the wall, rectification as follow:
a. Toga to provide a new waterproofed substrate
i. Ensure membrane has the correct thickness and ensure full adhesion to substrate (concrete / black wall)
ii. Optional we take care or cleaning substrate and re-waterproof all these section[s]
b. Stone cladding re-install using glue-fixing method (or angle fix depending on wall height).”

The proposal was for the last category of works to be performed at the rate of $650 per day for a tiler. Mr Fahd gave evidence that this work was performed and paid for. Invoices dated May and June 2019 showed some $13,650 being charged for “Daily Works – Tilers @ $650/day”. This equates to 21 days’ labour. Mr Fahd explained that at around this time, “maybe 100 pieces, 150 pieces in total over the project” had detached, out of a total of some 20,000 tiles. As noted above, Toga had, under the Deed of Subcontractor Warranty, the right to require Absolute Tiling to make good any defects in its work at no cost to Toga. The fact that Toga paid for these repair works is consistent with an understanding on its part, at this time, that the detachment of the tiles was not due to any defect in the works performed by Absolute Tiling.
Following these repair works, sandstone tiles continued to detach, and Toga retained Mr Taylor to investigate the cause of the problem.
On 19 November 2019, Mr Moore of Toga requested that Absolute Tiling meet at Harbourfront Balmain to discuss the sandstone tiling, stating that:

“As we delve further into this issue with our consultant and seek to better understand root cause, it is becoming apparent that there are a number of contributing factors.
The delamination is also accelerating.”

Mr Fahd responded that: “It is important we are having a consultant determine the root cause here and advise”.
An onsite inspection appears to have occurred on 5 December 2019. On the following day, Mr Taylor sent an email to Mr Fahd, copied to Mr Moore. This email included the following comments:

“2. All our observations to date including yesterday’s inspection seem to support the hypothesis that the detachment of sandstone is primarily due to unaccomodated / differential thermal movement. We believe the differential between sandstone and the concrete structure behind to be much greater than the figures quoted by Colin. The concrete structure is much less responsive to thermal change than the thin layer of sandstone tile. The linear temperature expansion coefficient for a concrete structure is 9.8 compared to 11.6 for sandstone. This differential is a major contributor to the build up of stresses. In addition there is the effect of the post tensioned structure contracting particularly over the first 3 to 4 years of the building life.
3. With regard to Colin’s comment on the plastic spacers removal we suggest the spacers are providing continuity / accumulation of the sandstone expansion both in the horizontal and vertical plane. Everywhere that we have checked the spacer condition we found that they jammed in tight. The plane of sandstone tile is as tight as a drum. Even yesterday morning after a cool night the spacers were jammed. We believe this accumulated load from thermal gain in the vertical plane also needs to be released by removal of the horizontal section of the spacers. Downward creep load will then be limited to just the weight of one individual sandstone tile on the underlying membrane substrate. Perhaps some specialist engineer analysis would be worthwhile to check the calcs on this one for reassurance.
Marco, in terms of a way forward I think there may be a way to minimise the pain. My sense is that it will be important to remove the spacers from all areas. However as we found yesterday they are pretty tight and hard to remove. Another approach would be to immediately remove a row of the spacers at regular intervals , say 3 Im, from all walls now to relieve current load build up. We could then look at waiting until winter say August for the walls to contract and theoretically allow the remaining spacers to be removed much more easily.”

Mr Taylor gave evidence that at this time, in his expert opinion, the only explanation which was consistent with the limited evidence of tile detachment on site was an installation issue, namely, that the plastic spacers had not been removed following the installation of the sandstone tiles. He formed the view that the presence of these spacers allowed the transmission and accumulation of thermal movement of the tiles along the full wall length of the stone installation, resulting in the localised detachment of tiles from the underlying substrate, which was itself variable, in certain locations where the accumulated forces came into contact with hard surfaces. Mr Taylor explained that the issue which he was identifying at this time was “not related to the design of the system”. That is because the plastic spacers are not part of the design of the tiling system, but are instead part of the methodology of installation.
Mr Taylor confirmed that he did not consider that there was any problem with the design of the tiling system and did not report any such problem to Toga until the winter months of 2020 (that is, around July 2020). By this time, the plastic spacers had been removed, and the weather was cooler than in the previous December, but the detachment of the tiles was continuing and in fact increasing. This caused Mr Taylor to doubt his previously held view that the differential thermal movement between the sandstone and the concrete substrate was being exacerbated by the presence of the spacers between the tiles, which were causing accumulation of the thermal expansion of the sandstone in both the horizontal and vertical plane, leading to detachment of tiles.
The views Mr Taylor formed at this time regarding the flaws in the design of the tiling system were set out in his report to Toga dated 27 July 2020, which led to the letter sent by Toga to Absolute Tiling on 4 August 2020 and notification to Coverforce on the same day (see paragraphs 21-24 above).

Clauses 6.1.2 and 2.15 – Matters known prior to 31 January 2018

Clause 6.1.2 of the 2020/21 Policy provides as follows:

“Exclusions
We shall not be liable to cover or pay on behalf of the Insured in respect of any liability, Claim, Fine or Penalty, or Privacy Breach directly or indirectly arising out of, related to, or in connection with:
6.1 Previously Known Claim or Circumstance
any:
…
6.1.2 fact, matter or circumstance known to the Insured, at any time prior to the inception of this policy, and which the Insured knew or a reasonable person in the Insured’s profession could, in the circumstances, be expected to know or have known might give rise to a Claim against the Insured…”

Clause 6.1.2 has no application where the terms of clause 2.15 are satisfied. Clause 2.15 provides as follows (emphasis added):

“2.15 Continuous Coverage
We will cover the Insured pursuant to Insuring Clause 1.1 for any Claim arising from any fact, matter or circumstance known to the Insured, prior to the Period of Insurance, and which the Insured knew, or a reasonable person in the Insured’s profession could, in the circumstances, be expected to know, might give rise to a Claim against the Insured, provided always that:
2.15.1 We were the professional liability insurer of the Insured when the Insured first became aware of such fact, matter or circumstance;
2.15.2 We continued without interruption to be the professional liability insurer of the Insured from the time mentioned in paragraph 2.15.1 above up until the time the Insured lodges a claim under this policy;
2.15.3 had We been notified by the Insured of such fact, matter or circumstance when the Insured first became aware of it, the Insured would have been covered under the policy in force at that time but is not now entitled to be covered by that policy solely because the Insured did not notify the fact, matter or circumstance;
2.15.4 there is an absence of fraudulent noncompliance with the Insured’s duty of disclosure and an absence of fraudulent misrepresentation by the Insured in respect of such fact, matter or circumstance;
2.15.5 We may reduce Our liability to the extent of any prejudice We may suffer in connection with the Insured’s failure to notify the fact, matter or circumstance;
2.15.6 the Limit of Liability provided for any Claim covered by this Additional Cover is the lesser available under the terms of the policy in force at the earlier time referred to in paragraph 2.15.3 above, or under this policy. The terms of this policy otherwise apply.
The cover provided by this Additional Cover is not subject to Exclusion 6.1.2.”

As noted above, the Underwriters provided coverage to Absolute Tiling under three consecutive Design and Construct Contractors Professional Liability policies, from 31 January 2018 onwards, which were in substantially similar terms: namely, the 2018/19, 2019/20 and 2020/21 Policies. The Underwriters accepted that the effect of cl 2.15 was that the exclusion in clause 6.1.2 would have no application unless the Underwriters could establish that Absolute Tiling had knowledge, prior to the inception of the first of these Policies, of a fact, matter or circumstance which it knew, or a reasonable person in its profession could be expected to know or have known, might give rise to a Claim against it.
The reference to a “fact, matter or circumstance” is a reference to an objective matter, rather than a state of mind or belief: CGU Insurance Ltd v Porthouse (2008) 235 CLR 103; [2008] HCA 30 at [63]. Similarly, the phrase “known to the Insured” is not satisfied by matters of belief or suspicion. In Permanent Trustee Australia Ltd v FAI General Insurance Co Ltd (In Liq) (2003) 214 CLR 514; [2003] HCA 25 at [30], McHugh, Kirby and Callinan JJ observed, albeit in the context of s 21 of the Insurance Contracts Act, that “the word ‘knows’ is a strong word. It means considerably more than ‘believes’ or ‘suspects’ or even ‘strongly suspects’”. As such, nothing less than actual knowledge must be established before the first limb of the exclusion will be satisfied: see also Prepaid Services Pty Ltd v Atradius Credit Insurance [2013] NSWCA 252 at [98] per Meagher JA.
Clause 6.1.2 operates to exclude coverage only in respect of those prior known circumstances “which the Insured knew or a reasonable person in the Insured’s profession could, in the circumstances, be expected to know or have known might give rise to a Claim against the Insured”.
The reference in clause 6.1.2 to matters that “might give rise to a Claim” reflects the terms of subsection 40(3) of the Insurance Contracts Act. That phrase was described by Meagher JA in DIF III – Global Co Investment Fund LP v DIF Capital Partners Ltd [2020] NSWCA 124 at [171] (with whom Bathurst CJ agreed) as creating a “deliberately undemanding test”. His Honour continued:

“a notification need not be limited to particular events and may be to a ’problem’ described in general terms if that problem of itself may give rise to a claim, and notwithstanding that the quantum and character of such claims, or the identity of claimants, may not be known at the date of notification; and … whilst the insured necessarily has to be aware of circumstances which might reasonably be expected to produce a claim …, that does not ’predicate that the insured needs to know or appreciate the cause, or all the causes, of the problems which have arisen, or the consequences, or the details of the consequences, which may flow from them’.”

In FAI General Insurance Co Ltd v McSweeney (1999) 10 ANZ Insurance Cases ¶61-443 at 75,033-4, Lindgren J said, in relation to a clause that was in similar terms to cl 6.1.2 of the 2018/19 Policy, that:

“In my opinion, it is not desirable to attempt to define precisely the shade of meaning signified by the expression ‘may give rise to a claim’. The appropriate connection between the known circumstances and the claim referred to in [the question in the proposal] is, perhaps, best described by saying that circumstances ‘may give rise to a claim’ if they would, as at the time of the proposing of the insurance, immediately suggest to a reasonable person in the proponent insured’s position who reflected upon those known circumstances, that the bringing of a claim against the insured in respect of them was a ‘definite risk’ or a ‘real possibility’ or ‘on the cards’. Perhaps the notion of the ‘springing to mind’ of the making of a claim also appropriately expresses the shade or meaning intended.
The expression is concerned with the making of a claim as distinct from the mere existence of legal liability. Ordinarily it can be expected that what will be known will include the fact that the circumstances have actually led a person at least to contemplate the making of a claim. However, I do not exclude the case where the underlying circumstances establishing liability themselves, of their nature, would prompt a reasonable person immediately to foresee the making of a claim as a real possibility. In such a case, the length of time that has passed without any suggestion of a claim and the degree of obviousness of liability may assume importance….”

Mason P (with whom Meagher and Handley JJA agreed) quoted those observations in Fishwives Pty Ltd v FAI General Insurance Co Ltd [2001] NSWCA 193 at [37], describing them as a “helpful summary”, while finding it “unnecessary to express a concluded view” on them.
The Underwriters submitted that Absolute Tiling was aware, prior to 31 January 2018, that the detachment of the tiles “might give rise to a Claim”, relying in particular on Mr Fahd’s statements in his email of 12 January 2018 that:

“This is larger than just a repair, we must have toga acknowlede it is a membrane issue, once acknowledged ask them how they wish to proceed? Via a temporary solution or permamnet fix? I assume permanent fix which would mean a greater scope to the fix, and this scope should be implemented through a consultant that toga find? We can assist them through this process.”

The Underwriters focused upon Mr Fahd’s statement in the email that “we must have toga acknowledge” that the membrane was the issue. It was said that this reflected a recognition on Mr Fahd’s part that Toga had not reached a view on the cause of the problem and that there was a realistic possibility that it could blame Absolute Tiling, in part if not in whole.
Mr Fahd’s email must be read in the context of Mr Leerberg’s email which immediately preceded it. Mr Leerberg had proposed that, where individual tiles had detached, wire mesh be mechanically fixed to the substrate in dimensions (195 x 395mm) slightly smaller than those of the tiles (200 x 400mm), and that the tiles then be glued to the mechanically fixed mesh. He also proposed a cost per tile for such works (see paragraphs 71-73 above).
Mr Fahd explained that he considered it necessary to have Toga “acknowledge” that this was a membrane issue because he was keen to ensure that there was no dispute about Absolute Tiling’s ability to charge for the repairs referred to in Mr Leerberg’s email. He described the direction to his team as follows: “these costs, make sure we’re getting them approved in writing and they’re not verbal so that we don’t go and do the works and then the person that we’re dealing with at TOGA leaves and then we’re left holding the – carrying the burden”.
I accept this evidence, which is consistent with the context in which Mr Fahd’s email was sent (in particular, responding to Mr Leerberg’s email proposing a price for the repair works), and which also makes commercial sense. The fact that Mr Fahd was keen as a matter of commercial precaution to ensure, prior to performing repair work, that Toga had expressly agreed that Absolute Tiling would get paid for the repair work, which Mr Fahd understood to be required because of the membrane issue, does not mean that Mr Fahd had any appreciation at this time that Toga might make a claim against Absolute Tiling.
The essence of Mr Fahd’s evidence, which I accept, was that he did not see the detachment of tiles as potentially giving rise to a claim against Absolute Tiling because its task had been to ensure that the adhesive used was compatible with the membrane and that the tiles adhered to the membrane, and he was informed that the tiles were detaching with the membrane still attached. He explained as follows: “the fact that the membrane … is coming off the wall, with my adhesive, that was not installed by Versatile or Absolute, was an issue of the membrane”.
In circumstances where he had that understanding and wanted to ensure that Absolute Tiling was paid for any rectification work, Mr Fahd was concerned to ensure that Toga understood that the detachment of tiles was due to the membrane (installed by a third party), and that there may be a need to consider an appropriate “fix” for the membrane. The fact that Mr Fahd’s subsequent comments are framed in terms of questions indicate that Absolute Tiling is unclear about what the scope of the “fix” to the membrane might be, and that this might require a consultant to be involved. Mr Fahd accepted in cross-examination that he expected that this “wasn’t just a matter of replacing a few tiles” and that dealing with the issue “was going to be very expensive for TOGA and the contractor” (namely, the contractor who had installed the membrane, Tight Seal).
The Underwriters, in submissions, placed particular emphasis on an answer given by Mr Fahd in cross-examination that he was aware, in January 2018, that the detachment of tiles was “accelerating”. However, that answer needs to be put in context. The particular response on which the Underwriters rely (which is identified by the use of italics below) was given following a series of questions on the same topic:

“Q. The subcontract was entered into in around 2016, and the works were done through 2016/2017; yes?
A. Yes.
Q. And the tiles started delaminating in December 2017?
A. Not sure of the date, but we’ve got here, well January 2018 is an internal email, so I’d say you’re quite correct there, yes
…
Q. And you knew, as at December 2017, that this was a serious issue so far as TOGA was concerned?
A. Well they weren’t detaching everywhere at that time, they were in isolation, and in small areas, but as far as, yeah, I believed, I believed that there’s a potential issue for TOGA here, and it’s going to accelerate.

On 9 November 2020, Toga wrote to “formally advise” Absolute Tiling that it was in breach of its design obligations under the Subcontract, referring to an attached report of Mr Taylor and asking for a programme for rectification works. The report of Mr Taylor dated 31 October 2020 recommended that “all existing sandstone cladding is removed from the landscaped areas of the complex”.

On 19 March 2021, Toga demanded that Absolute Tiling comply with its obligations under the Deed of Subcontractor Warranty to perform rectification works. Toga attached an expert report on the required rectifications works. I infer that this was the report of Mr Taylor dated 6 March 2021 which included the following step: “Remove all existing sandstone from all landscaped walls and dispose offsite”. That plainly required the removal, and disposal, of the coping stones.

Mr Taylor stated in his report in these proceedings that he is of the view that the rectification methodology which he set out in March 2021 remains appropriate. That is, the proposed rectification methodology in these proceedings is in substance the same as the methodology which Toga itself proposed in March 2021, when it sent its letter of demand to Absolute Tiling.

On 8 December 2023, Toga wrote to Absolute Tiling, referring again to “the Ross Taylor Associates Rectification Methodology” and stating that this methodology requires “the removal of all sandstone tiles”.

In addition, Mr Moore, who previously held the position of Executive General Manager – Supply Chain and Business Operations at Toga, and who, in that role, was responsible for dealing with the tiling issues at Harbourside Balmain, gave unchallenged evidence that Toga “wanted a permanent solution which was consistent with the originally agreed scope of works involving the replacement of the original adhesively fixed sandstone tiles with properly secured sandstone tiles of the same type and quality”. He explained that “the sandstone was a design feature on the original development approval”, and that he understood this meant that Toga “should restore what was originally delivered”, which would involve the “final rectification solution” being “consistent with what was initially specified and constructed when [Toga] took possession of the Development”.
The Underwriters submitted that the cost of removing and replacing the coping stones was “out of proportion to the (debatable) aesthetic benefit said to derive” from doing so. Whether the cost of rectification works is “disproportionate” is usually assessed by reference to the diminution in value of the premises: Roberts v Goodwin Street Developments Pty Ltd [2023] NSWCA 5 at [110], [115] per Kirk JA and Griffiths AJA. It is “not generally necessary for the claimant to put on evidence that the cost of rectification is not disproportionate to any diminution in value, in the absence of the issue having been raised with evidentiary support by the defendant”: ibid at [119]. The Underwriters did not plead that the cost of the proposed rectification works (or any part of them) was disproportionate to the diminution in value of the premises and did not lead any evidence on the extent of such diminution in value.
The Underwriters’ submission instead appeared to be that the cost of the works was out of proportion to the benefit to be obtained: see the principle expressed in Brewarrina Shire Council v Beckhaus Civil Pty Ltd & Anor [2006] NSWCA 361 at [89] per Tobias JA (Giles and McColl JJA agreeing). In this regard, the Underwriters simply referred to the amount estimated by Mr Whyte for the removal and replacement of the coping stones ($473,058.94) and asserted that this was disproportionate to the “(debatable) aesthetic benefit”. The cost of replacing the coping stones represents around 12.5% of Mr Whyte’s estimate of the total cost for the works, being $3.808m (before various uplifts are added, as discussed below). It is not apparent why, in circumstances where the remaining 87.5% of the work is to be performed, the further step of replacing the coping stones, which is to be undertaken in order to ensure a uniform appearance to the coping and cladding stones (which was the intent of the Cladding Scope of Works and which would otherwise, as Mr Drakakis recognised, not be able to be achieved) represents a step that is disproportionate.
Further, an assessment of what is reasonable in a particular case is not to be measured in purely economic terms, and personal preferences of a subjective nature are not irrelevant when choosing the appropriate measure of damage: Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (2008) 166 FCR 494; [2008] FCAFC 38 at [29] per Finkelstein and Gordon JJ, referred to with approval in Roberts v Goodwin Street Developments at [99]-[103] and [111]. I consider that the preferences set out in the correspondence from Toga and the evidence of Mr Moore which I have summarised above are significant matters. Mr Drakakis himself recognised that the owners of the building would need to be consulted about this issue (see paragraph 406 above). He also said that: “I think if the owners had paid for sandstone, they should get sandstone.” In the present case, Toga had not only paid for sandstone, but had required that the sandstone tiles be of a uniform type and come from a single source. It is not to the point that, as Mr Drakakis suggested, the use of sandstone for the cladding that is different in colour and appearance from the coping tiles might be regarded by some as an architectural feature: that is not a feature that Toga sought or bargained for.
This is not a situation where Toga is “merely using a technical breach to secure an uncovenanted profit”: Tabcorp v Bowen Investments at [17]. Nor could Toga’s desire to achieve (in Mr Moore’s words) a “permanent solution which was consistent with the originally agreed scope of works … with properly secured sandstone tiles of the same type and quality” be described as unreasonable in any broader sense.
Having regard to those matters, the scope of the rectification works should extend to the removal of all existing tiles, including the coping stones.

Removal of row of pavers

Mr Taylor identified that the need to remove a row of pavers in order to allow the mechanical fixing of tiles at the bottom of a wall arises in two distinct situations.
The first situation is where the cladding is to be replaced on walls at an internal boundary to residents’ balconies. Mr Taylor explained that these balconies usually have pavers on support pads as the floor finish; that the wall cladding runs below the level of pavers; and that it was therefore necessary to remove the floor paving tile during the recladding works in order to allow the bottom wall tiles to be removed and replaced. Mr Drakakis agreed that, in this situation, “the pavers directly adjacent to the stone cladding on the walls would need to be temporarily removed (by hand) and reinstated after the new stone cladding is installed”.
The second situation is where the tiles “are to be replaced adjacent to paths with pavers on sand cement mortar bed”. Mr Taylor was of the view that in this situation it was necessary for the row of pavers adjacent to the wall to be removed. He explained that this was because the StoneClip system which is to be used for the mechanical fixing of the cladding “relies on a 2 screw fixed bottom support bracket”, and therefore it is necessary for the paver to be removed “to enable a percussion drill preparation for mechanical fastenings”.
Mr Drakakis did not disagree with Mr Taylor’s evidence that it would be necessary to remove the adjacent row of pavers if a two-screw fixed bottom support bracket were to be installed for the lowest row of wall tiles. However, he proposed a workaround which would avoid the need to do so. This involved the bottom edge of the lowest stone tile on the wall being secured by an “L” bracket, which is mechanically fixed to the substrate. He explained that the configuration of the L bracket readily enables this fixing to be installed into the substrate without the need to remove adjacent pavers.
Mr Taylor did not dispute that it would be possible to fix an L bracket to the substrate without removing any adjacent pavers. His objection to the proposed workaround was that “an L bracket support to the lower tile as suggested by [Mr Drakakis] is not compliant to the stone clip system adopted” for the rectification works.
Mr Taylor was not challenged on his evidence that the L bracket was not compliant with the StoneClip proprietary system. Mr Drakakis confirmed that he had not made any enquiries in relation to this issue:

“CORSARO: You’d agree with me, wouldn’t you, that the L‑angle is not part of the proprietary system which is being posited for rectification works here. Correct?
WITNESS DRAKAKIS: I’m not sure if it is or not. I will say this, I would be very surprised if they do not have an L‑angle system to accommodate that type of configuration.
CORSARO: But you don’t know?
WITNESS DRAKAKIS: No, I don’t.
CORSARO: And you haven’t bothered to find out?
WITNESS DRAKAKIS: I’ve looked on their website, and that’s the only information I have regarding that particular proprietary system.”

Having regard to the evidence set out above, I am not satisfied that the proposed “L” angle solution is an available workaround, which would be compliant with the StoneClip system that has been selected for the mechanical fixing of the tiles. Accordingly, the scope of the rectification works should extend to the removal of the row of pavers adjacent to the walls in each of the two situations identified by Mr Taylor.

Limits on hours of rectification work

Mr Taylor made an assumption that rectification works would only be able to be performed during the hours of 9am to 1pm from Mondays to Fridays. Mr Whyte has adopted this assumption in his report on the quantification of the rectification works. Mr Whyte expresses the view that this will result in “disruption and lost productivity”. He has added an amount of some $588,246.84 to the cost of the rectification works, which he estimates as being the costs of this lost productivity. The basic premise is that even though the workers will only do 4-hour days, the contractor performing the works should be paid on the basis of 8-hour days in recognition of the fact that they cannot, on the days when they perform work on the Harbourside Balmain site, perform work elsewhere. Mr Whyte put the position as follows in his expert report: “From the Total estimate of the billable hour cost, I added the Extra cost of non-productive costs as the crews would still be paid a full day’s wages and likely unable to relocate to another worksite for the remaining hours per day”.
Mr Whyte accepted in the course of his examination that this added a “very significant sum to the cost” of the works and that the proposed restriction on hours was a “very unusual” restriction.
In his report, Mr Drakakis expressed the following views regarding the working hours restriction that was assumed by Mr Taylor:

“Work Time Restrictions
18.4.   In my experience, work time restrictions for remedial building work is regulated by Local Council. To be more specific, when I prepare contracts and tenders for remedial building work, I routinely obtain information from Local Councils which set out the time restrictions on the use of ‘power tools’, ‘equipment’ and ‘machinery’. By reference to information derived from the Inner West Council website, ‘power tools and equipment’ are not permitted to be used before 8am and after 8pm on Sundays and public holidays and before 7am and after 8pm on any other day.
18.5.    In light of the above, I am of the opinion that the work hour restrictions in the Taylor Report (which is limited to between 9am and 1pm – Monday to Friday) is unjustified and unreasonable.
18.6.   In my opinion, having regard to the time restrictions derived from Inner West Council, I am of the opinion that the relevant rectification work may be undertaken within the usual working hours that are typically used for this type of remedial work, namely, between 7am and 4pm (Monday to Saturday).”

The basis for the assumption regarding working hours is evidence given by Mr Moore in his affidavit of 2 May 2022. At the time he swore this affidavit, Mr Moore was still working for Toga. He deposed that “approximately 12 months” earlier (that is, around the beginning of May 2021), he had attended a meeting at Harbourside Balmain with Ric Clark, who was the Chairman of the Owners’ Corporation, and Troy Turner, who was the Chairman of the Building Management Committee. Given the significance of this conversation, I have set out Mr Moore’s evidence in full below:

“While I cannot recall the specific words that were spoken at the meeting, the effect of those words were as follows:
Troy: The retail and commercial occupants are particularly concerned about noise, vibration and access during the rectification works and the impact that is likely to have on their businesses. Noise, vibration and access are primary concerns. They require that any work be undertaken on weekends to minimise disruption.
Ric: The residents are mostly home on the weekends and won’t agree to work on weekends. Some residents are also working from home so any work during the week will cause them disruption as well.
Troy: Given all those competing concerns, the BMC is prepared to agree to site access during the week between 9am to 1pm, with majority of cutting to either be done off site or in the basement.

Based on those discussions, whoever carries out the rectification work will be under a requirement to only carry out rectification works during the hours of 9am to 1pm as these are the only times access to the site will be allowed.”

The reported conversation does not, on its terms, indicate any agreement about working hours. Instead, it reveals that the Building Management Committee proposed that work be done only on weekends; the Owners’ Corporation opposed any work on weekends, and noted that some residents were working from home during the week; and, in response, the Building Management Committee indicated that it was “prepared to agree” to work during the week, if the hours were limited to 9am to 1pm. The evidence does not include any response by either the Owners’ Corporation or Toga to this proposal.
One of the reasons for the proposal appears to have been that in May 2021, which was in the middle of the COVID-19 pandemic, a number of residents were working from home. There is no evidence regarding the extent to which that is still the case some three years later.
Mr Moore left Toga in March 2023. He has had very little contact with Toga since that time. He agreed in cross-examination that he is unable to speak to Toga’s present intention regarding the remediation works and that he did not know one way or the other whether the position had changed since he left.
Further, there is evidence that when remedial works were performed in the past, there was no restriction on working hours. Those works were performed at a time when Harbourside Balmain was occupied by residents and commercial tenants. A letter from Absolute Tiling to Toga dated 20 March 2019 sets out the remedial works to be undertaken on the cladding at that time, and states that the works are to be done “during normal working hours”. Further, Mr Moore referred in his affidavit to temporary works which were undertaken from around 2022 involving the installation of porcelain tiles in place of detached sandstone tiles (discussed further below). Mr Taylor confirmed that these new tiles have been mechanically fixed, as opposed to being adhesively fixed. I was not referred to any evidence to show that there were any restrictions on the working hours for the performance of these works.
Having regard to those matters, I am not satisfied that there is a sufficient basis to conclude that works will only be able to be performed between the hours of 9am and 1pm.

Cost of Rectification Works

Absolute Tiling and the Underwriters were both of the view that, given the matters which needed to be resolved before a figure for the quantum of the indemnity could be determined, the Court should determine those issues of principle and then give the parties an opportunity to confer, with the assistance of their respective experts (Mr Whyte and Mr Zakos), to see whether a figure for quantum can be agreed without the need for further argument. I agree that this is the appropriate course.
One issue of principle that separates the experts on quantum is whether there should be any allowance for lost productivity by reason of restricted working hours. For reasons given above, I do not consider that any such allowance should be made.
Otherwise, as set out above, I consider that the cost of the rectification works should be determined on the basis of Mr Taylor’s proposed scope of works, including the need for coping stones to be removed and replaced, and the need to remove the row of pavers adjacent to walls in the two situations identified by Mr Taylor.
In addition, there are a number of matters which Mr Zakos has excluded from the costs of the rectification works on the basis of certain conclusions that he drew when he made site visits to Harbourfront Balmain on 15 December 2022 and 16 March 2023. In particular, Mr Zakos concluded that:

as at the date of his visits, works which were described as “make safe” works had commenced, and had progressed to approximately 30-40% completion;

the works being undertaken were not actually “make safe” works, but were instead the “recladding works”, that is, the rectification works; and

the recladding works were not being performed in accordance with the scope of works proposed by Mr Taylor, with Mr Zakos identifying in his report around a dozen elements of Mr Taylor’s scope of works which were not in fact implemented as part of the recladding works.

As a result, Mr Zakos excluded from his calculations all those items within Mr Taylor’s scope of work which Mr Zakos identified as not in fact being performed.

However, this reasoning proceeded on a mistaken assumption. The works which Mr Zakos witnessed were not the rectification works, which have not yet commenced, but were instead temporary works which are described in Mr Moore’s affidavit, which have been undertaken in order to improve the aesthetics of the development and to make it safe pending the commencement of the planned rectification works. Accordingly, each of the elements within Mr Taylor’s scope of work which was excluded by Mr Zakos on the basis of this mistaken assumption should be included when determining the cost of the rectification works.
The remaining issues of principle which have been raised by closing submissions all relate to various uplift percentages which have been applied by Mr Zakos and Mr Whyte to the cost of the rectification works. The amount of those percentages is agreed, but the need for their application is disputed.

GST

Each of Mr Whyte and Mr Zakos has included 10% GST in his calculations. Mr Zakos noted that “this percentage may not be applicable if the appropriate parties are registered for GST”. Mr Whyte did not, in his report in reply, dispute this proposition.
Clause 5.6 of the 2020/21 Policy provides that where the Underwriters “are required to cover or pay on behalf of [Absolute Tiling] and the [Absolute Tiling] is entitled to claim an input tax credit in relation to GST the amount of such input tax credit will be deducted from any amount payable by [the Underwriters]”.
Absolute Tiling is registered for GST. Appendix 8 to the Subcontract is a “Form of Recipient Created Tax Invoice Agreement”. In paragraph 4 of this document, Absolute Tiling “acknowledges that it is registered for GST at the date of this agreement and that it will notify [Toga] if it ceases to be registered”. Further, by clause 42.5 of the Subcontract, Absolute Tiling gave a warranty that it is, and will continue to be, registered for GST. There is no evidence that this position has changed.

Having regard to those matters, no allowance should be made for GST in the calculation of the amount payable by way of indemnity under the 2020/21 Policy.

Builder’s Overhead and Profit

Each of Mr Whyte and Mr Zakos has applied a 10% uplift for “Builders Overhead and Profit”. Mr Whyte explained that this uplift was based on his “own experience in preparing tenders and estimates over the years” and that, having regard to this experience, “10% is a fair and reasonable percentage for Overhead and Profit on this type of work, where there is little risk to the builder”. Mr Zakos did “not cavil” with Mr Whyte’s assessment in this regard and also adopted the 10% uplift.
In his report, Mr Whyte indicated that the Overhead element of this uplift related to “offsite Overheads”. In cross-examination, he described this element as relating to “the running of the office” and indicated that, of the 10% figure, an uplift of 2.5% was allowed for those costs and an uplift of 7.5% was allowed for the “profit element that you’d hope to get out of every job”.
While the experts agreed that the inclusion of a 10% uplift for profit and overheads is appropriate when preparing a tender or estimate for work of this type, their agreement on this matter is not determinative of whether such an uplift should be included in the calculation of the quantum of indemnity payable under the 2020/21 Policy.
The Underwriters’ obligation under the 2020/21 Policy is to indemnify Absolute Tiling for loss suffered by a Claim. The Insuring Clause (cl 1.1) refers to “civil liability for compensation (which includes the claimant’s legal costs and expenses) arising from any Claim”. Absolute Tiling is obliged to perform the rectification works at no cost to Toga. Mr Fahd has indicated to Toga that Absolute Tiling will commence this rectification work when its entitlement to indemnity under the 2020/21 Policy is resolved. If an amount is included in the indemnity for Overhead and Profit, Absolute Tiling will receive a windfall amount from the Underwriters, namely, a profit and a contribution to its overheads (amounting, on Mr Whyte’s calculations, to some $0.58m), which does not represent either any amount that Absolute Tiling is liable to pay Toga or any cost that Absolute Tiling will incur as a result of Toga’s claim.
Absolute Tiling did not advance any submissions as to why it should be entitled to such an uplift. It did not point to anything in the 2020/21 Policy to support the contention that the Underwriters are obliged to pay an amount representing a profit margin and a contribution to overheads in respect of rectification work performed by Absolute Tiling.
In light of those matters, no uplift for profit or overheads should be included in the calculation of the amount of the indemnity under the 2020/21 Policy.

Rise & Fall

Each of Mr Whyte and Mr Zakos included amounts for “Rise and Fall”: that is, for increases over time in the price of the components of their estimates. Mr Whyte’s initial report was prepared in June 2022 and estimated the cost of works as at that date. Mr Whyte added a 5.8% uplift for cost escalation for 2022 and 2023, and a further 4% uplift for cost escalation up to 31 December 2024. Mr Zakos agreed that these percentage uplifts were appropriate when determining the cost of performing the rectification works in 2024.
The Underwriters advanced several arguments against any such uplift.
First, the Underwriters noted that Absolute Tiling was obliged to rectify the cladding works “promptly” and that, despite Toga demanding in early 2021 that this rectification work be undertaken, Mr Fahd told Toga that Absolute Tiling would not do so “until the insurer pays the claim”. The Underwriters argued that the inclusion of an allowance for price increases from 2022 onwards would, in effect, indemnify Absolute Tiling “for its own failure to perform its contractual obligations”.
This submission ignores that, prior to these demands being made in early 2021, the Underwriters had rejected Absolute Tiling’s claim for indemnity in late 2020. I have found that this was in breach of their obligations under the 2020/21 Policy. If the Underwriters had not breached their obligations, Absolute Tiling would likely have promptly performed the rectification work in early 2021. In those circumstances, any increase in the costs of the rectification works which has resulted from the time taken to establish Absolute Tiling’s right to indemnity under the 2020/21 Policy represents a cost that will have been incurred as a result of the Underwriters’ breach of the terms of the 2020/21 Policy and should be borne by the Underwriters.
Secondly, the Underwriters referred to the terms of Schedule 3A to the Subcontract, headed “General Preliminaries Specification”. Paragraph 8.1 of that Schedule provided as follows (emphasis in original): “The Subcontract Amount shall not be subject to adjustment for rise and fall. All prices are fixed for the duration of the project (i.e. until the last stage of the Works under the Head Contract)”. The Underwriters submitted that, in light of that provision, “it would be a strange result if Absolute [Tiling] were nonetheless able to claim an amount for rise and fall from its insurer for performing rectification works under the Subcontract”.
I do not consider that there is any inconsistency between this contractual term and the claim for Rise & Fall. The contractual term related to the price of the works under the Subcontract. The question now under consideration is unrelated to the price of those works, which were performed some seven years ago, and instead concerns the quantification of the cost of performing rectification works in 2024. The Rise & Fall percentages have been agreed between the experts as appropriate for quantifying this cost.
Thirdly, the Underwriters pointed out that the Rise & Fall percentages have been applied on a blanket basis to all materials, despite there being evidence that the price of the sandstone tiles (being the largest contributor to the cost of materials) has been fixed for the past two years. When Mr Whyte sought a quote for the cost of sandstone tiles from Gosford Quarries in April 2022, he specifically asked whether Gosford Quarries was “able to predict an estimate of rise and fall relating to these quoted materials … for the next 2 years”. Gosford Quarries replied with a price and stated that it was “confident that there will be no rise and fall in price and the above price will hold for the next 2 years”. Gosford Quarries issued a revised quote, dated 12 April 2022, which stated that it “can hold the above rate for a period of 2 years – subject to availability” (that is, until 12 April 2024). Despite this, a rise & fall uplift has been applied to the price of the sandstone tiles for 2022, 2023 and 2024.
Having regard to those matters, I accept the Underwriters’ submission that the Rise & Fall uplifts should not be applied to the cost of the sandstone tiles. However, for the reasons given above, the agreed percentages should be applied to other elements of the costing of the rectification works.

Contingency

Each of Mr Whyte and Mr Zakos has applied a 2.5% uplift as a “Contingency”. Neither of the experts addressed this element of the costing in their reports.
In the course of their examination, Mr Whyte and Mr Zakos explained the basis of this uplift. Mr Whyte gave evidence that “Contingency is always applied … in pricing work, because there are always some unknowns, and builders like to have a little bit of leeway I suppose you’d call it, when you price a job”. He noted that if this was an “open site”, the contingency factor might drop to zero, but “where there are walls hidden behind facings, as they are at the moment, you don’t know really what confronts you once you start to open it up”. He agreed that the Contingency was, in effect, an amount intended to compensate the tenderer for assuming the risk of those unforeseen matters.
Similarly, Mr Zakos explained that any contractor quoting for this work would add an element for contingency, explaining that: “the sort of contingency we’re talking about is like if you’re doing these sort of walls, block walls, you may have a part where you’re trying to nail a stone slip on and you puncture the wall; you’ve got to go back and patch that or if you’re grinding the wall too hard, you break a bit of the block work”. Mr Zakos agreed with Mr Whyte that this uplift should be included for the purpose of determining the reasonable cost of the rectification works.
The Underwriters argued that such an allowance was “evidently a convention of risk allocation in commercial tender agreements”, but that it was not appropriate to include any such allowance when determining the quantum of the indemnity under the 2020/21 Policy. I do not accept this submission. The experts have agreed that there is, in the rectification work under consideration, a real risk of there being a need for additional work as a result of unforeseen events, and have agreed on the appropriate uplift to allow for such additional work in respect of this particular project. Having regard to their evidence, it is necessary to include an allowance for contingency in making a determination of the cost of rectification works and in order to ensure that the contractor is compensated for the cost of those works.
For those reasons, the quantification of the costs of the rectification works should include the agreed Contingency allowance.

Remaining Issues

There were a number of other issues separating Mr Whyte and Mr Zakos, about which the parties did not make any submissions in closing addresses.
For example, there was a dispute about whether the stone clips would cost around $6 each or around $8 each, and whether the time to install each clip would be around 3 minutes or 5 minutes.
I will give the parties an opportunity to confer, in the light of these reasons, to see whether the outstanding issues in relation to quantum can be agreed. If not, it will be necessary to give consideration to the steps required to resolve any outstanding dispute. Depending on the nature and scope of such dispute, it may be appropriate to make orders for a reference of the outstanding matters to a referee appointed by the Court for inquiry and report.

orders

None of the parties made any submissions about costs. Unless any different or other order is sought, it would be appropriate in respect of each claim for costs to follow the event. I will give the parties an opportunity to be heard on whether any other form of order should be made.
For the reasons given above, I make the following orders. The Court:

Directs the parties to bring in short minutes of order, by 5pm on 8 May 2024, to give effect to these reasons for judgment, including orders that deal with quantum and costs, insofar as those matters can be agreed.

Directs that insofar as orders to give effect to these reasons for judgment, including orders dealing with quantum and costs, cannot be agreed:

the parties exchange, by 5pm on 8 May 2024, and provide to my Associate, the orders which each party proposes for the resolution of any outstanding issues; and

the matter be stood over for directions at 9.30am on 13 May 2024, or on such other date as may be arranged with my Associate.

**********

Decision last updated: 10 April 2024

Medium Neutral Citation:	Absolute Tiling Solutions Pty Ltd v Certain Underwriters at Lloyds [2024] NSWSC 364
Hearing dates:	12-15 February 2024, 19 February 2024, 13 March 2024
Date of orders:	10 April 2024
Decision date:	10 April 2024
Jurisdiction:	Equity - Commercial List
Before:	Nixon J
Decision:	See [472]
Catchwords:	INSURANCE – professional indemnity insurance – plaintiff was design and construct contractor – claim made relating to external sandstone tiling designed and installed by plaintiff – insured activities included design but not installation – whether the liability resulted from the design or installation of the tiling system INSURANCE – professional indemnity policy underwritten by first defendant for three consecutive years – exclusion clause in respect of prior known circumstances – whether failure to disclose prior known circumstances – consequences of failure to disclose prior known circumstances after entry into the first of the three consecutive policies – application of continuous cover provision – application of ss 21 and 28 of the Insurance Contracts Act 1984 (Cth) INSURANCE – whether plaintiff failed to comply with s 21 of the Insurance Contracts Act 1984 by failure to disclose that plaintiff performed external tiling or cladding works – whether the first defendant would have entered into policy if relevant failure had not occurred INSURANCE – construction of contract of insurance – exclusion clauses INSURANCE – brokers – claims for negligence and misleading or deceptive conduct – premises for claims not established BUILDING AND CONSTRUCTION – scope of rectification works – cost of rectification works
Legislation Cited:	Civil Liability Act 2002 (NSW), s 5D Home Building Act 1989 (NSW), ss 18B, 18G Insurance Contracts Act 1984 (Cth), ss 21, 28, 40
Cases Cited:	AFC Holdings Pty Ltd v Shiprock Holdings Pty Ltd [2010] NSWSC 985 Astley v Austrust Limited (1999) 197 CLR 1; [1999] HCA 6 Beaufort Developments (NI) Ltd v Gilbert-Ash NI Ltd [1999] 1 AC 266 Bellgrove v Eldridge (1954) 90 CLR 613 at 617; [1954] HCA 36 Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (2008) 166 FCR 494; [2008] FCAFC 38 Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2006] NSWCA 361 CGU Insurance Limited v Porthouse (2008) 235 CLR 103; [2008] HCA 30 CIMIC Group Limited v AIG Group Limited [2022] NSWSC 999 Classics for a Cause Pty Ltd v Grays Ecommerce Group Ltd [2023] NSWSC 967 DIF III – Global Co Investment Fund LP v DIF Capital Partners Ltd [2020] NSWCA 124 Electricity Generation Corp v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 FAI General Insurance Co Ltd v McSweeney (1999) 10 ANZ Insurance Cases ¶61-443 Fishwives Pty Ltd v FAI General Insurance Co Ltd [2001] NSWCA 193 Hakea Holdings Pty Ltd v Neon Underwriting Ltd [2023] FCAFC 34 HDI Global Speciality SE v Wonkana No 3 Pty Ltd [2020] NSWCA 296 Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd (2013) 247 CLR 613; [2013] HCA 10 Karenlee Nominees Pty Ltd v CAN 004 312 234 Ltd (1995) 8 ANZ Ins Cas 61–236 Kiriacoulis Lines SA v Cie d’Assurances Maritime Aeriennes et Terrestres [2002] 1 Lloyds’s Rep IR 795 Lake v Simmons [1927] AC 487 Lasermax Engineering Pty Ltd v QBE Insurance (Aust) Ltd [2005] NSWCA 66 Legal & General Insurance Australia Limited v Eather (1986) 6 NSWLR 390 Liberty Mutual Insurance Company Australian Branch t/as Liberty Specialty Markets v Icon Co (NSW) Pty Ltd (2021) 396 ALR 193; [2021] FCAFC 126 Malamit Pty Ltd v WFI Insurance Ltd [2017] NSWCA 162 McCarthy v St Paul International Insurance Co Ltd (2007) 157 FCR 402; [2007] FCAFC 28 New Cap Reinsurance Corporation Limited (in liq) v Daya [2010] NSWSC 1226 Permanent Trustee Australia Ltd v FAI General Insurance Co Ltd (In Liq) (2003) 214 CLR 514; [2003] HCA 25 Prepaid Services Pty Ltd v Atradius Credit Insurance [2013] NSWCA 252 RAA-GIO Insurance Ltd v O’Halloran (2007) 98 Roberts v Goodwin Street Developments Pty Ltd [2023] NSWCA 5 SASR 123; [2007] SASC 245 Samways v Workcover Queensland [2010] QSC 128 Sheehan v Lloyds Names Munich Re Syndicate Ltd [2017] FCA 1340 Star Entertainment Group Ltd v Chubb Insurance Australia Ltd (2022) 400 ALR 25; [2022] FCAFC 16 State of New South Wales v Tempo Services Ltd [2004] NSWCA 4 Stealth Enterprises Pty Ltd t/as The Gentlemen’s Club v Calliden Insurance Limited [2017] NSWCA 71 Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272; [2009] HCA 8 AMRO Bank NV v Bathurst Regional Council [2014] FCAFC 65; (2014) 224 FCR 1 Todd v Alterra at Lloyd’s Limited (2016) 239 FCR 12; [2016] FCAFC 15 Wayne Tank & Pump Co Ltd v Employers Liability Assurance Corp Ltd [1974] QB 57 Weir Services Australia Pty Ltd v AXA Corporate Solutions Assurance (2018) 359 ALR 314; [2018] NSWCA 100 XL Insurance Co SE v BNY Trust Company of Australia Ltd [2019] NSWCA 215 Zurich Australian Insurance Ltd v Regal Pearl Pty Ltd [2006] NSWCA 328
Texts Cited:	DK Derrington KC and RS Ashton, The Law of Liability Insurance (3rd ed, 2013, LexisNexis Butterworths)
Category:	Principal judgment
Parties:	Absolute Tiling Solutions Pty Ltd (Plaintiff) Certain Underwriters at Lloyd’s subscribing to a policy of insurance (First Defendant) Coverforce Insurance Broking Pty Ltd (Second Defendant) Action Insurance Brokers Pty Ltd (Third Defendant) Sang Jo Moon aka Charles Moon (Fourth Defendant)
Representation:	Counsel: F C Corsaro SC with B Le Plastrier (Plaintiffs) C J Peadon with H Cooper (First Defendant) S R Donaldson SC with D Wong (Second Defendant) M S White SC with N Riordan (Third and Fourth Defendant) Solicitors: Pinsent Masons (Plaintiff) Colin Biggers & Paisley (First Defendant) Meridian Lawyers (Second Defendant) DLA Piper Australia (Third and Fourth Defendant)
File Number(s):	2021/00257066
Publication restriction:	Nil