Allianz Australia Insurance Ltd v Douralis
[2008] VSCA 72
•8 May 2008
SUPREME COURT OF VICTORIA
COURT OF APPEAL
No 3700 of 2007
| ALLIANZ AUSTRALIA INSURANCE LTD (ACN 000 122 850) | |
| Appellant | |
| v | |
| GEORGE DOURALIS and HAROLD JOHN SIMPSON | Respondents |
| No 3705 of 2007 | |
| GEORGE DOURALIS and JENNIFER DOURALIS | Appellants |
| v | |
| ALLIANZ AUSTRALIA INSURANCE LTD (ACN 000 122 850) | First Respondent |
| and | |
| NINETY SECOND SONMAR PTY LTD (ACN 007 230 420) | Second Respondent |
| and | |
| HAROLD JOHN SIMPSON | Third Respondent |
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JUDGES: | NETTLE, DODDS-STREETON JJA and COGHLAN AJA | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 25 February 2008 | |
DATE OF JUDGMENT: | 8 May 2008 | |
MEDIUM NEUTRAL CITATION: | [2008] VSCA 72 | |
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INSURANCE – Building Act 1993 (Vic) ss 135, 137 – Whether domestic building insurance policy nominating company as builder indemnified building owners party to major building contract with company’s controller – Controller within definition of insured builder in certificate of currency – Building contract referred to in insurance contract certificate – Company and controller interchangeable – Effect of s 135(6) and (7) and s 137A of Building Act 1993 (Vic).
INSURANCE – Insurance Contracts Act 1984 (Cth) s 56 – Whether s 56 of Insurance Contracts Act 1984 (Cth) applied to false evidence given in proceeding to enforce building owners’ claim – Whether false evidence related to minimal or insignificant part of the claim.
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| APPEARANCES: | Counsel | Solicitors |
| For Allianz Australia Insurance Limited | Mr P B Murdoch QC with | Moray & Agnew |
| For Mr G and Mrs J Douralis | Mr P W Lithgow | Valos Black & Associates |
There were no appearances for Mr H Simpson or Ninety Second Sonmar Pty Ltd.
NETTLE JA:
I have had the advantage of reading in draft the reasons for judgment of Dodds-Streeton JA.
I agree with her Honour that, because Mr Simpson was expressly included in the description of ‘The Insured Builder’ in the Certificate of Currency, it is to be inferred that the appellant (‘Allianz’) agreed to indemnify Building Owners in respect of breach of the warranties implied by s 8 of the Domestic Building Contracts Act1995 under major building contracts entered into by Mr Simpson as builder during the period 4 July 2001 to 4 July 2002.
I also agree with her Honour that, although the Builders ‘Annual’ Home Warranty Insurance Policy (Victoria) issued to the first and second respondents (‘Mr and Mrs Douralis’) stated that the certificate was ‘ONLY VALID for a contract entered into by Ninety Second Sonmar Pty Ltd’, it is to be construed as covering liability arising out of the major domestic building contract into which Mr Simpson entered as builder with Mr and Mrs Douralis on 30 January 2002.
In my view, it was either a case of falsa demonstratio non nocet cum de corpore constat or, alternatively, one in which, because the ‘insured builder’ was defined in the policy as ‘Ninety Second Sonmar Pty Ltd…including all principals…who are registered domestic building practitioners’, it was to be taken as going without saying that the reference to Ninety Second Sonmar Pty Ltd in the Builders ‘Annual’ Home Warranty Insurance Policy (Victoria) included a reference to Mr Simpson.
As to the question of fraudulent misrepresentation, I respectfully take leave to doubt that s 56 of the Insurance Contracts Act 1984 (Cth) has anything to do with representations made in evidence in the course of proceedings following the rejection of a claim. Notwithstanding what was said in To v Australian Associated Motor Insurers Limited,[1] I see no reason in principle why a plaintiff’s claim against an
insurer should any more be denied on the basis that the plaintiff has given deliberately false evidence than a plaintiff’s case against any other sort of defendant is denied on the basis that the plaintiff has given deliberately false evidence.
[1](2001) 3 VR 279, 284.
By the time a plaintiff gets to evidence in the course of a proceeding to enforce an insurance policy, the circumstances are really no different to those which obtain when a plaintiff gets to evidence in the course of a proceeding to enforce any other form of contract.[2] Logic implies, therefore, that the results of telling lies in each proceeding should be more or less the same. Regrettably, witnesses can and sometimes do tell lies in evidence, and it is to be discouraged. Hence, they are liable to be punished for perjury. But they are not usually punished by being deprived of the fruits of their claim when and if they manage to prove it regardless of the identity of the defendant.
[2]Cf Manifest Shipping Co v Uni-Polaris Insurance Co Ltd [2003] 1 AC 469, 496 [57]-[58] (Lord Hobhouse of Woodborough).
If, however, this is a case to which s 56 applies, I consider that, for the reasons essayed by Dodds-Streeton JA, only a ‘minimal or insignificant part’ of Mr and Mrs Douralis’ claim was fraudulent and that non-payment would be ‘harsh and unfair’. In those circumstances, in my view, the just and equitable amount for the appellant to be ordered pay pursuant to s 56(2) of the Act is the amount which would otherwise have been payable.
DODDS-STREETON JA:
Introduction
In this matter, two related appeals were heard together. The principal issue in the first appeal is whether property owners who are party to a major domestic building contract with a builder are indemnified under a contract of insurance to which the builder’s company, rather than the builder personally, was a party. The issue in the second appeal is whether (if the property owners are indemnified under
the contract of insurance), the insurer may nevertheless refuse payment because the property owners relied on a false affidavit in a proceeding in which, inter alia, they sought indemnity under the policy.
In appeal 3700/07 (‘the first appeal’), the appellant, Allianz Australia Limited (‘Allianz’), an insurance company, appeals against the primary judge’s determination of a preliminary point in County Court proceeding C1-05-02713, in a judgment given on 6 December 2006, that Allianz was liable to indemnify the first respondents, Jennifer and George Douralis, pursuant to a contract of insurance number BAV 997-DA000702-01 between Allianz and Ninety Second Sonmar Pty Ltd (‘Sonmar’) dated 17 December 2001 (‘the policy’).
In appeal 3705/07 (‘the second appeal’), Mr and Mrs Douralis appeal against the primary judge’s judgment given on 6 February 2006, in which he concluded that under s 56(1) of the Insurance Contracts Act 1984 (Cth), Allianz could refuse payment of their claim for indemnity under the policy, because the affidavit of Mr Douralis (filed in support of the Douralis’ summary judgment application in the County Court proceeding for, inter alia, indemnity under the policy) contained untrue statements intended to mislead the court into concluding that Allianz had no defence.
Facts and evidence
Each appeal arises from the same factual background, which is undisputed. Under the current legislative scheme governing insurance for domestic building projects, typically the builder enters the contract of insurance which extends indemnity to the building owners who contract with the builder.
Mr and Mrs Douralis, the owners of a weatherboard dwelling situated at Daly Street, West Brunswick, entered into a major domestic building contract dated 30 January 2002 with Harold Simpson for alterations and additions involving the construction of new areas on the ground and first floor levels of their property, for a contract price of $216, 200 (‘the building contract’).
Mr Simpson was, in both 2001 and 2002, the controller of Sonmar.[3] He was also a registered builder. Sonmar and Mr Simpson are the second and third respondents in both appeals.
[3]Following a trial on preliminary questions, the trial judge found that ‘Mr Simpson was associated with Sonmar at all material times.’ Although the evidence did not allow him to find with certainty that Mr Simpson was ‘a director or officer of, or a shareholder in, Sonmar’, he inferred from the evidence that the association was formal in nature. See George and Jennifer Douralis v Allianz Australia Insurance Limited, Ninety Second Sonmar Pty Ltd and Harold John Simpson (Unreported, County Court, Holt J, 6 December 2006) , 4.
On 17 December 2001, Sonmar (by Mr Simpson) and Allianz, by its agent Dexta Corporation Limited (‘Dexta’) executed the policy entitled Builders ‘Annual’ Home Warranty Insurance Policy (Victoria), which provided insurance cover for domestic building work, as required by s 135(1) of the Building Act 1993 (‘the Act’).
The introductory paragraph of the policy stated that the insurer provides ‘insurance cover’ as specified by the Builder who requests it to be issued ‘to comply with the relevant Ministerial Order issued pursuant to Section 135 of the Building Act 1993’.
The policy provided that Allianz, as insurer, would:
indemnify the Building Owner in respect of loss or damage, which results from Domestic Building Work which is defective …
The Building Owner was defined as
the person for whom domestic building work is being or is about to be carried out under a Major Domestic Building Contract as defined in this policy, and includes:
(a)any person who is the owner for the time being of the land or building in respect of which domestic building work was carried out under the Major Domestic Building Contract;
(b)where such land or building is subject to the Subdivision Act 1988, the body corporate for that land or building; and/or
(c)any other person who is or becomes entitled to the benefit of the warranties contained in section 8 of the DBC Act;
but excludes:
(d)the Builder;
(e)an Owner Builder; and/or
(f)a building owner that is a related body corporate of the Builder within section 50 of the Corporations Law, or where neither party is a public company but have a common director or a common shareholder.
Major Domestic Building Contract was defined as -
a domestic building contract entered into by the Builder with the Builder Owner during the Policy Period for the carrying out of major domestic building work.
Builder was defined as ‘the builder specified in the Schedule‘.
The Schedule stated the Builder to be ‘Ninety Second Sonmar Pty Ltd, ACN 007 220 420.’
The Schedule stated the ‘Registered Practitioner(s)’ as ‘Harold Simpson’.
The Schedule stated the Policy Period to be ‘commencing from 4 July 2001 to 4 July 2002 at 4.00 pm’.
By Part A 5, the policy stated ‘The risks for which the Building Owner is indemnified include the acts and omissions of all persons contracted by the Builder to persons in the domestic building work under the Relevant Domestic Building Contract resulting in loss or damage of the kind referred to under sub-clauses (1) to (5) of Part A.’[4]
[4]The types of loss and damage referred to in subclauses (1)-(5) included those arising from breaches of warranties implied by the Domestic Building Contracts Act 1995. The Act implies in Div 1 (s 8) warranties relating to the execution of the works in a proper manner and according to the plans and specifications; the suitability of materials used in the works; compliance with the Building Act 1993; the care and skill of the builder; timely completion of the works; the suitability of the final product built for occupation once work was completed; fitness for purpose of the final work; and failure to maintain the specified standard or quality of the building work.
By General Condition 1, the policy stated:
The indemnity provided to the Building Owner complies with the Ministerial Order and if any term of this policy conflicts or is inconsistent with the Ministerial Order then this policy shall be read and be enforceable as if it complies with the Ministerial Order.
Shortly after the execution of the policy, Dexta, as Allianz’s agent, delivered insurance certificates to Sonmar. According to usual practice, an insurance company provides the builder with a book of blank certificates for a range of amounts. The builder subsequently selects a certificate corresponding to the contract price of each job it undertakes and fills out the details of the owner, property, nature of the works, price and date. Such certificates constitute evidence of the existence of an insurance policy, which the builder provides to the property owner prior to the commencement of the works.
On 30 January 2002 the building contract was executed by Mr and Mrs Douralis and Mr Simpson. Under the building contract, Mr Simpson, as builder, agreed to complete the works, defined as alterations and additions to Daly Street, West Brunswick, for a contract price of $216,200. The date for practical completion was 9 August 2002 and the date for completion was 8 November 2002.
Section 8 of the building contract was entitled ‘Indemnities and Insurance – First Alternative – Builder to Insure’. Clause 8.1 provided that the Builder ‘shall be liable for and shall indemnify the Proprietor against any liability … in respect of … any loss or damage [that] arises out of or in the course of or by reason of the execution of the Works …. due to the negligence, omission or default of the Builder, the Builder’s servants or agents or of any sub-contractor, the sub-contractor’s servants or agents ….’.
The Appendix to the building contract stated the Builder to be ‘Harold Simpson’, whose Builder Registration Number was DBU 4125. The space for ‘Registration Nos. of Directors where Builder is incorporated’ was left blank.
The Appendix stated the Builder’s Domestic Building Insurance Policy Number to be ‘BAV 997 DA 000 302 01/1/6’ issued by ‘Dexta’.
Thus, in the building contract, Mr Simpson was identified as the Builder, but the Builder’s insurance policy was identified as the policy to which his company Sonmar, rather than Mr Simpson, was a party.
The disparity between the builder named in the policy and the builder named in the building contract, which has given rise to this litigation, was not conclusively explained, although the following cross-examination of Mr Simpson indicates a mistake on his part.
Mr Lithgow: So they have never enquired of you whether you issued insurance ?
Mr Simpson: No.
Mr Lithgow: But you have no doubt that you issued insurance?
Mr Simpson: I thought I had, apart from what appears to (indistinct) I’ve worded it or worded it wrongly, which was not my intention.
Mr Lithgow: But it was your mistake?
Mr Simpson: My mistake, I must admit…
Mr Lithgow: At least on one view?
Mr Simpson: The architect filled out the contract with my particulars on it and which – which I signed.
Mr Lithgow: But you filled out the bit about…?
Mr Simpson: But I filled out the bit, the insurance…
Mr Lithgow: About registration and insurance?
Mr Simpson: Insurance. I filled out that certificate….
Mr Simpson commenced the works under the building contract in about late February or early March 2002.
According to Mr Simpson’s uncontested evidence, he reassured Mr and Mrs Douralis that he had arranged insurance for their work ‘right from the beginning’. He told Mr and Mrs Douralis ‘at all times’ that they had insurance. Although Mr Simpson on or about 7 February 2002 filled out a certificate for the Douralis’ building contract, his van, which contained the book of certificates, was stolen. He was therefore unable to provide them with a certificate at the commencement of the works.
In March 2002, an application was made to the relevant building surveyor for a building permit for the works. Unless Mr Simpson could produce the certificate that evidenced the insurance required under s 135 of the Act, the building surveyor could not issue a building permit. Mr and Mrs Douralis, at Mr Simpson’s suggestion, therefore nominated themselves as owner builders in the building permit, in order to overcome the problem that the work had begun, but could not continue, without evidence of insurance. During April 2002, Mr Douralis and his architect, David Luck, on several occasions requested a certificate of insurance from Mr Simpson. Mr Simpson testified that he ‘had to go back to the insurance company after a heap of paperwork to prove I needed another certificate.’ After he had established that the original certificate had not been given to another person, Mr Simpson was provided with a replacement certificate. He handed the completed certificate to Mr Douralis on 2 May 2002, during a site meeting at the premises, also attended by Mr Luck.
The certificate, which was dated 7 February 2002, was numbered BAV997-DA-000302 01/1/6, which corresponded with the policy. It stated, inter alia, that:
This certificate is issued to comply with the relevant law and MUST be signed by the builder and the insurer (or its agent). This ORIGINAL CERTIFCATE must be retained as evidence of the insurance which is provided under an annual policy to the builder. The terms, conditions and exclusions of the insurance relevant to the Building Owner are set out in the attached policy wording.
This Certificate is ONLY VALID for a contract entered into by Ninety Second Sonmar Pty Ltd (ACN 007 220 420) dated between 4 July 2001 and 4 July 2002 and where the contract value is less than $250,000.
This Certificate applies to one dwelling ONLY and relates to a Major Domestic Building Contract dated 30.01.02. The contract price was $216,200…. The estimated construction period from 25 February 2002 to 9 August 2002.”
The certificate stated that a contract of insurance ‘complying with the Ministerial Order for Domestic Building Insurance issued under Section 135 of Building Act 1993’ had been issued in the name of the Building Owner as the Insured by Allianz in respect of ‘addition and renovation of existing residence at …Daly Street West Brunswick carried out by Ninety Second Sonmar Pty Ltd for Mr and Mrs Douralis’.
It was signed by Randolf de Silva on behalf of Dexta and signed and dated 7 February 2002 by Mr Simpson as the ‘Builder’.
As the primary judge observed, by the time the certificate was delivered, Mr and Mrs Douralis had moved out of the premises, the works were underway, demolition of the rear of the existing house had occurred, the first progress payment had been made and Mr and Mrs Douralis were, on the evidence of Mr Douralis, ‘stuck’.
Under Mr Luck’s supervision, the works proceeded to purported completion. Matters of dispute arose between Mr and Mrs Douralis and Mr Simpson about the works.
Mr Douralis, by a letter to Allianz dated 27 February 2004 (received on or about 22 March 2004) advised, inter alia, of problems with the builder over outstanding matters, including the rectification of ‘bad quality workmanship’. On or about 10 June 2005, Mr and Mrs Douralis’ solicitors lodged a completed claim form with Allianz. On or about 20 June 2005, Allianz rejected the Douralis’ claim to indemnity on the basis that the policy did not respond when there was a contractual dispute on foot between the builder and the building owner.
On or about 23 June 2005, the Douralis’ solicitors wrote to Allianz disputing its denial of indemnity. They pointed out that the builder named in the certificate of insurance was ‘Ninety Second Sonmar Pty Ltd’, while the builder named in the building contract was ‘Harold Simpson’. The solicitors requested Allianz to confirm that the policy covered the Douralis’ building contract.
On or about 28 June 2005, Allianz confirmed its decision to deny the Douralis’ claim, both on the original ground of the contractual dispute and on the additional ground that ‘as the registered identity on the insurance certificate differs to the builders name on the contract’, there was no insurance in place for the works.
Due to Allianz’s rejection of their claim, Mr and Mrs Douralis issued the County Court proceeding. In the course of that proceeding, they made an application for summary judgment. It was dismissed on 21 April 2006. The application was supported by the affidavit of George Douralis sworn 5 April 2006.
Mr Douralis’ affidavit, sworn on behalf of himself and Mrs Douralis, included the following statements (which the primary judge found, on the balance of probabilities, to be untrue and known to be so by Mr Douralis when he swore the affidavit).
(1)On or about 7 February 2002 the Builder as the Defendant’s agent provided my wife and me with one of the Defendant’s certificates of insurance …;
(2)On receipt of the certificate of insurance my wife and I looked at the document and saw that our names and address were included in the certificate , and that it said that insurance had been provided;
(3)My wife and I were aware of the need for insurance, and we would not have let the Builder start works without this insurance;
(4)I also note that no building permit can be issued without insurance, and
(5)I can say that if we had not been provided with the insurance, then we would not have let the Builder start would and we would not have paid any progress payments under the contract.
Contrary to the account in his affidavit, at the trial of the County Court proceeding, Mr Douralis confirmed that he received the certificate only on about 2 May 2002 at the site meeting with Mr Simpson and the supervising architect, Mr Luck. It was not disputed that Mr Douralis and the architect were well aware that no evidence of insurance had been received when the first progress payment was made on 29 April 2002, by which date the building work was well advanced.
The legislation
The following provisions of the Building Act 1993 (‘the Act’) are relevant.
Section 3 of the Act states:
‘domestic builder’ means ‘a builder within the meaning of the Domestic Building Contracts Act 1995’
‘major domestic building contract’ has ‘the same meaning as it has in the Domestic Building Contracts Act 1995’
‘registered building practitioner’ means ‘a building practitioner registered under Part 11’
Under s 4 of the Domestic Building Contracts Act 1995 (‘the DBC Act’)
‘builder’ means ‘a person who, or a partnership which —
(a) carries out domestic building work; or
(b) manages or arranges the carrying out of domestic building work; or
(c) intends to carry out, or to manage or arrange the carrying out of, domestic building work’
‘major domestic building contract’ means ‘a domestic building contract in which the contract price for the carrying out of domestic building work is more than $5000 (or any higher amount fixed by the regulations)’
Section 4 of the Building Act 1993 states:
(1) The objectives of this Act are—
(a)to protect the safety and health of people who use buildings and places of public entertainment;
(b) to enhance the amenity of buildings;
(c)to promote plumbing practices which protect the safety and health of people and the integrity of water supply and waste water systems;
(d)to facilitate the adoption and efficient application of—
(i) national building standards; and
(ii) national plumbing standards;
(e)to facilitate the cost effective construction and maintenance of buildings and plumbing systems;
(f)to facilitate the construction of environmentally and energy efficient buildings;
(g)to aid the achievement of an efficient and competitive building and plumbing industry.
(2)It is the intention of Parliament that in the administration of this Act regard should be had to the objectives set out in subsection (1).
Section 135 of the Act states:
(1)The Minister may, by order published in the Government Gazette—
(a)require building practitioners in specified categories or classes of building practitioners or any part of a class or category of building practitioners to be covered by insurance; and
(b)require specified classes of persons to whom section 137B or 137D applies to be covered by insurance for the purposes of that section; and
(c)specify the kinds and amount of insurance by which building practitioners and persons in each specified category or class or part of a category or class are required to be covered.
…
(6)For the purposes of this Act, a person is covered by the required insurance if—
(a)the person holds the required insurance; or
(b)the building work carried out by or on behalf of the person is covered by the required insurance; or
(c)in the case of a person who manages or arranges the carrying out of domestic building work, the work carried out by the person and the building work which the person manages or arranges is covered by the required insurance; or
(d)the person is not a party to the required insurance but is specified or referred to in the insurance, whether by name or otherwise, as a person to whom the insurance cover extends.
(7)In this section insurance includes—
(a)professional indemnity insurance;
(b)a performance bond;
(c)a guarantee;
(d)an indemnity;
(e)public liability insurance;
(f)insurance relating to a particular building work project;
(g)insurance taken out by any body or person which relates to the work of a building practitioner;
(h)any agreement or instrument in the nature of an item set out in paragraphs (a) to (g).
Section 136 of the Act states:
(1)A building practitioner (other than a builder carrying out or managing or arranging the carrying out of domestic building work) must not carry out work as a building practitioner unless the building practitioner is covered by the required insurance.
(2)A builder must not carry out or manage or arrange the carrying out of domestic building work under a major domestic building contract unless the builder is covered by the required insurance.
Section 137 of the Act states:
A building practitioner who is not covered by the required insurance, must not hold himself or herself out as being covered by that insurance.
Section 137A states:
(1)Without limiting section 135, if an order under that section requires a builder to be covered by insurance relating to the carrying out of domestic building work or managing or arranging the carrying out of domestic building work, the insurance required by the order may, subject to any exemptions or exclusions set out in the order, relate to losses resulting from—
(a)breaches of warranties implied into the major domestic building contract for that work under the Domestic Building Contracts Act 1995;
(b)domestic building work which is defective within the meaning of that Act;
(c)non-completion of the domestic building work;
(d)conduct by the builder in connection with the major domestic building contract for that work which contravenes section 52, 53, 55A or 74 of the Trade Practices Act 1974 of the Commonwealth or section 9, 11 or 12 of the Fair Trading Act 1999.
(2)An order under section 135 may require insurance cover of a kind referred to in—
(a)subsection (1)(a) to extend to each person who is or may become entitled to the benefit of any of those warranties; or
(b)subsection (1)(b) to extend to any person on whose behalf the domestic building work is being carried out and to the owner for the time being of the building or land in respect of which the building work was being carried out.
…
Section 176 states:
(1)A person who is not registered in the appropriate category or class under this Part must not—
(a)take or use any of the following titles—
(i)building practitioner or registered building practitioner; or
(ii)building surveyor; or
(iii)building inspector; or
(iv)engineer, if the use of the title relates to the building industry; or
(v)draftsperson, if the use of the title relates to the building industry; or
(vi)quantity surveyor; or
(vii)a prescribed title; or
(b)practise as a building inspector; or
(c)hold himself or herself out as being registered under this Part or in a particular category or class of registration; or
(d)hold himself or herself out as being qualified to practise as a building practitioner either generally or in a particular category or class of work.
(2)A person who is not registered under this Part as a building surveyor must not practise as a building surveyor.
(2A)A builder must not carry out domestic building work under a major domestic building contract unless the builder is registered under this Part in the appropriate class of domestic builder.
(3)Subsections (1), (2) and (2A) do not apply to the use by a partnership of a title that can only be used by a person registered under this Part or the carrying out by a partnership of work that can only be carried out by a person registered under this Part, if at least one of the partners is registered in the appropriate category or class under this Part.
(4)Subsections (1), (2) and (2A) do not apply to the use by a corporation of a title that can only be used by a person registered under this Part or the carrying out by a corporation of work that can only be carried out by a person so registered if at least one of the directors of the corporation is registered in the appropriate category or class under this Part.
…
First appeal – the judgment below
In his judgment delivered on 6 December 2006, the learned judge concluded that Mr and Mrs Douralis were ‘owners within [the Builders Home Warranty Insurance Contract and the BOHWI Certificate] contemplation and entitled to indemnity from Allianz in relation to any relevant act or omission by Mr Simpson in the performance of the Daly Street Building Contract’.
Although Mr Simpson was not the builder nominated in the policy or the certificate), his Honour held that s 135(6)(b) and 135(7)(g) of the Act applied to amend both the policy and the certificate to include Mr Simpson, who was the company’s controller and the ‘registered practitioner.’ He contemplated that s 135(6)(d) also applied to Mr Simpson.
His Honour noted that under sections 169-176 of the Act, although only a natural person could apply for, and obtain, registration as a building practitioner (defined to include a builder and a domestic builder), a corporation could perform ‘regulated’ building work and call itself a registered building practitioner if at least one of its directors were a registered building practitioner.
Similarly, his Honour relied on s 31(1)(f)(i) of the DBC Act, by which a corporation could enter a major domestic building contract if one of its directors were registered as a builder under the Act. He observed that s 31(1) of the DBC Act was ‘obviously intended to operate in tandem with cognate provisions of the Building Act’. He concluded that Allianz and its agent, Dexta, knew or should have known that Sonmar could not have been a ‘registered building practitioner’ who was required to have the insurance under the statutory scheme.
He considered that, on a proper construction, Mr Simpson was covered by the required insurance pursuant to both s 135(6)(b) of the Act (because the building work carried out by or on behalf of Mr Simpson was covered by the required insurance) and s 135(6)(d) of the Act (because Mr Simpson was not a party to the required insurance, but was specified or referred to in the insurance, whether by name or otherwise, as a person to whom the insurance cover extended). He considered that that construction upheld the statutory objective and accorded with other relevant provisions of the Act and the DBC Act.
The primary judge thus found that s 135(6) operates to expand the categories of persons whose activities give rise to the risk of loss and damage under required insurance. On that view, the subsection does not directly expand the category of persons indemnified, but achieves it indirectly, because parties acquire insured or indemnified status by reason of their contractual relationship with the person whose activities give rise to the risk.
His Honour’s conclusion was fortified by the fact that Mr Simpson appeared to be covered by both s 135(6)(b) and (d). He noted that Mr Simpson was referred to in the Schedule to the policy, which appeared inexplicable had there been no intention to cover him.
The primary judge also relied on s 135(7)(g) of the Act, which extended the meaning of ‘insurance’ to ‘insurance taken out by any body or person (Sonmar) which relates to the work of a building practitioner (Mr Simpson)’. He considered that it applied in the present case, because Sonmar had taken out insurance which related to the work of Mr Simpson, a building practitioner.
Grounds of appeal
Effect of section 135(6)–(7) of the Act
On appeal, Allianz argued that his Honour fundamentally misconstrued the effect of s 135(6)(b) and (d) and s 135(7)(g) of the Act. It contended that s 135(6) did not expand the persons indemnified under a required contract of insurance by deeming categories of persons to be the nominated builder in such a contract, to which they were not party.
Rather, Allianz submitted that s 135(6) merely ensured that a natural person would not be guilty of an offence under s 136(2) (which makes it an offence to carry out, manage or arrange domestic building work without being covered by required insurance), provided that another person had insured the relevant works. That situation would most commonly arise, counsel submitted, when works were insured by a corporation which had entered into a contract to perform them.
Similarly, s 135(7) of the Act, in defining ‘insurance’ expansively, merely protected a natural person performing work under a contract entered into by a corporation, by ensuring that he or she was not guilty of an offence which would otherwise be committed.
In summary, Allianz submitted that neither ss 135(6) nor 135(7) did more than preclude the commission of an offence which would otherwise be committed by a building practitioner who performed works without being covered by insurance.
Counsel for Allianz emphasised that s 135(6)(a)-(d) and 135(7)(a)-(h) were to be read subject to s 135(1), which, in his submission, made clear that a contract between an insurer and a nominated builder delimited their operation. The relevant paragraphs could not extend the class of persons indemnified under a contract of insurance to persons who did not have their building contract with the nominated builder. Thus, they could not overcome the fundamental problem in the present case that the builder privy to the contract of insurance and the builder privy to the building contract are different persons, because under the policy, coverage (whether in the character of an owner or a builder) depends on a building contract between an owner and the builder nominated in the policy. Counsel contended that s 135(6)(a) - (d) assume, but cannot create, such antecedent coverage.
Counsel for Mr and Mrs Douralis contended that, on the contrary, a broad construction of sub-ss (6) and (7) of s 135 was required in order to uphold the objectives of the Act reflected in the Ministerial Order made pursuant to s 135. In his submission, the clear aim was adequately to protect, through insurance, home owners and their successors in title for whom domestic building work was undertaken. Therefore, the person ‘covered by insurance’ in s 135(6) should be read as including both the builder and the indemnified building owner.
I am not persuaded that s 135(6) is aimed solely at excluding the commission of an offence which would otherwise be committed.
Section 135(6)(a) would not appear referable to the limited purpose of precluding an offence which would otherwise arise under s 136, as it refers to a person who holds the required insurance. Further, given that a corporation is an artificial legal personality which acts only through human agents, it is not apparent that a natural person carrying out building works on behalf of an insured corporation would constitute the party ‘carrying out’ the works so as to attract the penal provisions.
The terminology of s 135(6) is wide and imprecise. It does not clearly express whether the ‘person covered’ in s 135(6) refers to categories of builders or related practitioners whose activities are the potential cause of the loss, to building owners to be indemnified by the required insurance or to both those categories. In the current Ministerial Order made on 30 October 1998 pursuant to s 135(1), the concept of a person covered by insurance is used in at least two senses. First, to refer to both the builder and other persons required to take out insurance in relation to their building activities, and secondly to refer to the building owner who is indemnified under the insurance. Section 135(1)(a)-(c), in providing that the Ministerial Order may require certain categories of building practitioners and persons to be covered by insurance, suggests, however, that building practitioners and owner builders are the subjects of s 135(6)(a) – (d), rather than building owners generally.
Some categories of s 135(6) appear essentially declaratory or included for avoidance of doubt. Paragraph 135(6)(a) refers to a person who holds the required insurance. Such a person is likely to be covered independently of statutory prescription. Paragraph 135(6)(d), similarly, in providing that a person named or referred to in the insurance as ‘a person to whom the insurance cover extends’ may merely declare or clarify the effects of applicable general law principles.
It is a precondition of paragraphs 135(6)(b) and (c) that there be ‘work’ covered by the required insurance. The concept of work which is covered by the required insurance is not elucidated. It suggests a building project to which insurance applies independently of paragraphs 135(6)(b) or (c), so that their operation depends on an antecedent contract of insurance. In my opinion, although not merely declaratory, the paragraphs do not purport to construct a contract of insurance where none exists or to alter or add to the parties to an existing contract of insurance. Rather , they appear directed at expanding the category of parties whose activities in relation to an insured project are insured. Where indemnity under a policy depends on the identical legal person’s privity to both the contract of insurance and the building contract, their impact is necessarily limited.
Sub‑section 135(7) defines ‘insurance’ for the purposes of section 135, but does not dispense with the criteria for formation of a valid contract of insurance.
His Honour considered that s 135(6)(b) and 135(7) operated to amend the policy between Allianz and Sonmar by extending coverage to Mr Simpson as the builder for the purposes of the policy, thereby securing indemnity for Mr and Mrs Douralis.
The trial judge assumed, correctly in my view, that ‘the person covered’ in s 135(6) of the Act refers to the building practitioner rather than the building owner. He also considered that at least two paragraphs of s 135(6) applied to Mr Simpson.
The application of s 135(6)(b) would depend on a finding that the Douralis’ building work was covered by the insurance. The paragraph cannot itself operate to satisfy a precondition of its application.
Mr Simpson is, however, in my opinion, comprehended by s 135(6)(d) because, although he was not expressly identified as a party to the policy (‘the required insurance’), he was implicitly referred to in the policy as a person to whom the insurance cover extended, by virtue of being named in the policy as the building practitioner. Section 135(6)(d) recognises that the reference to the person to whom cover extends may be implicit.
Further, s 135(7)(h) provides that insurance is any agreement or instrument in the nature of an item in paragraphs 135(7)(a)-(g). In my opinion, both the certificate and the certificate of currency constitute instruments in the nature ‘of insurance relating to a particular building work project’, in which Mr Simpson was specified or referred to by name as a person to whom the insurance cover extends.
Given the conclusion on the effect of the certificate of currency, set out below, it is unnecessary to determine the effect of s 135(6)(a)-(d). In my opinion, however, the trial judge correctly considered that s 135(6)(d) applied to Mr Simpson, but its effect was merely declaratory of the fact that, by reason of other circumstances discussed below, he was a person covered by insurance under the policy. His coverage did not depend on the operation of s 135(6)(d), although he answered its description.
Section 137A of Act and the Ministerial Order
The impact of section 137A of the Act was also discussed before us. Section 137A(1) contemplates that a Ministerial Order may be made under s 135, requiring a builder to be covered by insurance relating to breaches of warranties implied into a domestic building contract by the DBC Act and losses resulting from defective building work.
Section 137A(2) provides, inter alia, that a Ministerial Order under s 135 may require first, insurance for breach of the warranties to extend to each person who is or may become entitled to the benefit of the warranties; and secondly, insurance relating to domestic building work to extend to any person on whose behalf the domestic building work is being carried out and to the owner for the time being of the building or land in respect of which the building work was being carried out.
The current Ministerial Order dated 30 October 1998 with effect from 1 December 1998 revoked the previous Ministerial Order made on 1 October 1996 with effect from 1 November 1996.
The Ministerial Order adopts the definition of ‘builder’ in the DBC Act,[5] which includes a person carrying out domestic building work as defined in s 4 of the DBC Act.
[5]Clause 1.1 of the Ministerial Order.
The Ministerial Order defines the ‘insured’ to mean any person insured under a policy including
(a)…policies issued pursuant to clause 4.1, the building owner under a major domestic building contract and any person who is the owner for the time being of the land or building in respect of which the domestic building work was carried out under the contract and any other person who becomes entitled to the benefit of the warranties contained in section 8 of the DBC Act…
As contemplated by s 135(1) of the Act, clause 4.1 of the Ministerial Order provides that a builder shall ensure that a policy is issued which complies with all the requirements of the Order.
Clause 5 of the Ministerial Order provides that a policy issued pursuant to clause 4.1 of the Order shall contain terms and conditions, which have the following effect
5.1The policy shall indemnify the building owner (“insured”) in respect of loss or damage, which results from:
5.1.1Domestic building work which is defective….
Clause 4.10 of the Ministerial Order is headed ‘Persons to whom insurance cover shall extend’. It provides
4.10 In accordance with section 135(1)(c) of the Building Act 1993 the insurance cover required in a policy shall be extended:
4.10.1 to each person who is or becomes entitled to the benefit of any warranties referred to in clause 5.1.1 or clause 6.1, as the case may be;
4.10.2 in the case of clause 5:
a) to any person on whose behalf the domestic building work is or was being carried out; and
b) to the owner for the time being of the building or land in respect of which the domestic building work was being carried out;
4.10.3 in the case of clause 6, to any person who is the successor in title to the purchaser.
The words of clause 4.10.2 of the Ministerial Order, read literally, require the insurance cover in a policy (for, inter alia, breach of the relevant warranties in a domestic building contract and loss for defective work), to extend to the owner for the time being of the building or land in respect of which the domestic building work was being carried out.
The requirements of the Ministerial Order in relation to the scope of the indemnity are incorporated into the policy by General Condition 1, which provides that the indemnity provided to the Building Owner under the policy complies with the Ministerial Order or if any term of the policy is inconsistent with it, then the policy shall be read and be enforceable as if it complies with the Ministerial Order.
Counsel for Allianz contended that the relevant provisions of the Ministerial Order were directed only at coverage of a successor in title to the Building Owner and did not obviate the requirement for a contract of insurance between the insurer and the builder. In contrast to clause 4.10.3 of the Ministerial Order, clause 4.10.2 does not expressly refer to a successor in title. While it is not clear that the effect of clause 4.10.2 is limited to requiring coverage for successors in title to the building owner, it would not, in my opinion, eliminate the requirement for an insurance contract to which the insurer and the builder (however expansively defined) are party.
The extension of the indemnity specified in the Ministerial Order cannot be in vacuuo, but necessarily assumes a contract of insurance. The language of s 137A(1) of the Act also indicates that it is predicated on a contract of insurance between an insurer and a builder.
The certificate of currency
Counsel for Mr and Mrs Douralis relied on the Builder’s certificate of currency to establish that Mr Simpson was included in the definition of ‘Builder’ insured under the policy. The certificate of currency was executed at about the same time and on the same date as the policy of insurance, by Dexta, as agent for Allianz.
The certificate of currency stated the following.
DEXTA
Acting as agent for: ALLIANZ AUSTRALIA Insurance Limited A.C.N. 000 122 850
Builder’s Certificate of Currency (for registration of builder ONLY)
Important Notice
This certificate is NOT to be given to the homeowner and NOT TO BE USED for building permit purposes.
…
Part A
Indemnifies the building owners under a Major Domestic Building Contract as defined in the Domestic Building Contracts Act 1995 for loss or damage in accordance with clause 5 of the Ministerial Order.
Cover applies for 6½ years from completion of the work (or 7 years from the date of the building contract) as required by clause 5.4 of the Ministerial Order.
A certificate complying with Schedule 2 will be issued in respect of each Major Domestic Building Contract entered into during the policy period.
Part B
Provides ‘run-off’ cover required by clause 4.9 of the Ministerial Order, subject to the retroactive date stated below.
Retroactive Date: 4 July 2001
Limit of Indemnity
$100,000 in the aggregate for all claims per home, plus reasonable legal expenses of the building owner.
Building Owner Excess
As provided in the Ministerial Orders.
Builders Obligation Amount
$50,000 each and every claim per home.
Insurer
ALLIANZ AUSTRALIA Insurance Limited
A.C.N. 000 122 850 – 100%Policy No
BAV997-DA000302-01
Policy Period
Insures all major domestic building work for which a contract is entered into or a building permit obtained during the period; 4pm 4 July 2001 until 4pm 4 July 2002.
17 December, 2001 09:25 _______________________________________
Date signed DEXTA Corporation Ltd (ACN 084 487 712)
as agent for and on behalf of the insurers listed
above, for the percentage set against its name.
The certificate of currency further stated:
The Insured Builder Ninety Second Sonmar Pty Ltd ACN (if applicable)
007 220 420
including all principals, partners, directors and employees who are registered domestic building practitioners
Nominated Practitioners
Harold Simpson
Type
Domestic Builders Annual Warranty Insurance in compliance with the Ministerial Orders issued pursuant to section 135 of the Building Act 1993.
Allianz contended that the inclusive definition of the Insured Builder was not effective for the purposes of the policy. Counsel for Allianz submitted that the certificate of currency was executed for the sole purpose of ensuring that the specified category of persons included in the definition would, if liable, be covered by the policy in respect of building contracts entered by Sonmar. It was thus directed, he said, at the superseded scheme applicable prior to 1 November 1996, under which liable builders were indemnified, rather than, as now, the building owner. The ‘Important Notice’ stated that the Builder’s certificate of currency was for the ‘registration of builder only’ and ‘not to be given to the homeowner’. Counsel submitted that the certificate of currency was intended to be forwarded to the body charged with the registration of building practitioners.
Those contentions were, in my view, unpersuasive. The certificate of currency was executed on 17 December 2001, by which date the current Ministerial Order was in force and the present statutory regime well established.
As counsel for Allianz acknowledged, the present scheme is not based on the indemnification of builders against their liability, but rather, on the indemnification of building owners pursuant to their building contracts with insured builders. The expanded definition of ‘Insured Builder’ in the certificate of currency is thus not explicable as an extension of indemnity to principals, partners, directors and employees of an insured builder for their liability, as under the old scheme.
The policy of a corporate insured builder, would in any event, cover the activities of persons such as directors and employees, who would be comprehended by the legal personality of the company in performing the relevant works.
Further, as the expanded class of persons constituting ‘the builder’ is restricted to registered domestic building practitioners, the insurer’s liability would be confined to contracts entered into by qualified persons closely associated with, or controlled by, the insured party. As such, the extension of risk does not impose an unreasonable burden on the insurer.
As Nettle JA observed in the course of the hearing, the fact that the expansive language of the certificate of currency is otherwise otiose and irrelevant compels the conclusion that it was intended to expand the definition of the nominated builder for the purposes of the policy.
While counsel for Allianz objected that the certificate of currency was not the subject of a notice of contention, he did not dispute that the issue was argued before, and dealt with by, the primary judge.
Further, as Coghlan AJA pointed out, the reference to Mr Simpson in the schedule to the policy as ‘building practitioner’ appeared implicitly to define the risk. The substitution of a different building practitioner may have founded a denial of liability.
Allianz complained that if Mr Simpson were included within the definition of the builder under the policy, it could potentially lose some of its subrogated rights because, as he was not the builder, it could not require him to rectify defects. That contention is, in my view, unpersuasive. It is unrealistic, in the particular circumstances of this case, to suppose that Mr Simpson would not continue to equate his legal personality and interests with those of Sonmar. I am satisfied that, as a matter of substance, Mr Simpson and the company were, throughout, treated by all relevant parties as essentially interchangeable. In any event, the inclusion of Mr Simpson in the definition of builder would attract the attendant obligations as a precondition of the coverage.
Given the expanded definition of Insured Builder in the certificate of currency, which was executed contemporaneously with the policy, the express references to Mr Simpson as the nominated practitioner in the certificate of currency and as the registered practitioner in the policy, I conclude that Allianz on 17 December 2001 agreed with Sonmar that Mr Simpson was comprehended in the definition of the Builder in the policy, so that a building owner contracting with Mr Simpson would secure an indemnity under the policy.
The insurance contract certificate
The insurance contract certificate BAV997-DA000 302 01/1/6 post-dated entry into the policy. It was the replacement certificate obtained by Mr Simpson, after the theft of the original, which he delivered to Mr and Mrs Douralis only on 2 May 2002, by which time the building works were well advanced.
Allianz contended that the insurance contract certificate was not a contractual document. Rather, its sole purpose was to evidence the existence of the policy and that it described and could not alter the policy. The policy itself, however, refers to the issue of the certificate by the builder as the agent of the insurer. The relevance of the agency is unclear if the certificate is wholly devoid of contractual significance. Further, the certificate itself states:
Subject to the Act, the Ministerial order and the conditions of the insurance contract, cover will be provided to the building owner named in the major building contract and to the successors in title to such building owner.
The certificate stated that it was only valid for a contract entered into by Ninety Second Sonmar Pty Ltd (ACN 007 220 420) dated between 4 July 2001 and 4 July 2002. It also stated that it applied to one dwelling only and related to a Major Domestic Building Contract dated 30 January 2002. It stated that insurance had been issued by Allianz in respect of the addition and renovation of the existing residence at Daly Street, West Brunswick for Mr and Mrs Douralis. Unless Sonmar were identified with Mr Simpson for the purposes of the building contract, the statements contained in the certificate were mutually contradictory.
General Condition 2 of the policy provides that ‘the builder will issue a certificate of insurance as agent of the insurer’ to the building owner. General Condition 3 provides that, if required by the insurer, the builder will supply copies of all certificates of insurance issued.
Allianz contended that Mr Simpson was not its agent for the purpose of issuing the certificate, because he was not the builder. Mr Simpson’s uncontested evidence was, however, that he obtained the replacement certificate from the company or its agent after explaining that he had not issued the original. No contrary evidence was called on behalf of Allianz.
The certificate was signed by Mr Simpson and by Dexta, as agent for Allianz. Mr Simpson delivered the certificate to Mr and Mrs Douralis with Allianz’s knowledge and consent. Those circumstances establish at least that all relevant parties perceived no material difference between, on the one hand, a contract between Sonmar and Mr and Mrs Douralis and, on the other hand, a contract between Mr Simpson and Mr and Mrs Douralis. The certificate treated such contracts as indistinguishable. The parties viewed Sonmar and Mr Simpson as interchangeable for purposes of the building contract and the policy, and were not alive to the refinements of separate artificial corporate personality and its ramifications for the Douralis’ indemnity.
That circumstance fortifies, but is unnecessary to, the conclusion that Allianz agreed to extend cover to a building contract entered by Mr Simpson as principal.
Conclusion on first appeal
In my opinion, by the combined effect of the policy and the certificate of currency, Allianz, on 17 December 2001 agreed to extend cover to a building contract entered by Mr Simpson as a principal, which agreement Allianz confirmed by its subsequent provision of the replacement certificate in the terms it stated. Mr and Mrs Douralis, as Building Owners party to the building contract with Mr Simpson, are entitled to indemnity under the policy. The first appeal should be dismissed.
The second appeal
The learned judge, having held that Mr and Mrs Douralis were indemnified under the policy, concluded that Allianz could refuse payment of their claim, pursuant to s 56(1) of the Insurance Contracts Act 1984 (Cth), due to the false statements made by Mr Douralis in his affidavit. The statements were intended to deceive the court into concluding that Allianz had no valid defence to the Douralis’ claim in the context of the summary judgment application which, if successful, would have entitled them to the relief sought.
The Insurance Contracts Act1984 (Cth) s 56 states:
(56) Fraudulent claims
(1)Where a claim under a contract of insurance, or a claim made under this Act against an insurer by a person who is not the insured under a contract of insurance, is made fraudulently, the insurer may not avoid the contract but may refuse payment of the claim.
(2)In any proceedings in relation to such a claim, the court may, if only a minimal or insignificant part of the claim is made fraudulently and non payment of the remainder of the claim would be harsh and unfair, order the insurer to pay, in relation to the claim, such amount (if any) as is just and equitable in the circumstances.
(3)In exercising the power conferred by subsection (2), the court shall have regard to the need to deter fraudulent conduct in relation to insurance but may also have regard to any other relevant matter.
His Honour concluded, and it was accepted on appeal, that the untrue statements were fraudulent in the relevant sense. In reliance on To v Australian Associated Motor Insurers Ltd (‘To’),[6] he denied Mr and Mrs Douralis relief under s 56(2), because he considered that ‘the untrue statements affect the whole of the [‘Douralis’] claim not some discrete portion of it.’ Further, he rejected the contention that after the lodging of a claim and the institution of legal proceeding governed by the rules of court, s 56 ceased to apply. He concluded that, consistently with To, ‘the obligation of an insured to observe the common law requirement to behave towards an insurer in the utmost good faith endures until a claim is brought to an end by acceptance or court order. It would make a nonsense of the policy standing behind the common law obligation, it seems to me, if it were otherwise’.
[6](2001) 3 VR 279.
In To, the appellant had an insurance policy in respect of her motor vehicle, which was damaged while being driven by her adolescent son without her consent. Wrongly apprehending that the policy would not cover such damage, she made a claim falsely stating that the vehicle had been stolen and damaged.
Buchanan JA rejected an argument based on GRE Insurance Ltd v Ormsby (‘Ormsby’)[7] that a fraudulent claim could not be made by an insured who was, in fact, entitled to an indemnity. In Ormsby, the insured, who knew that they were entitled to an indemnity for loss of stock under a policy of insurance, tried to bolster their claim by deliberately causing further damage to the premises from which the stock was stolen.
[7](1982) 29 SASR 498.
Buchanan JA stated that whether or not the insured knew that she was entitled to indemnity .[8]
the existence of an underlying valid claim does not render fraud irrelevant; the dishonest intention required for fraud is at least one to induce a false belief in the insurer for the purpose of obtaining payment or some other benefit under the policy, with or without belief or knowledge of a lack of entitlement…
[8]To, [23].
Charles and Callaway JJA agreed with Buchanan JA on that issue. While, in contrast to Ormsby, his Honour did not consider that a valid underlying claim excludes the application of s 56(1), his observations assume, consistently with the language of s 56(1), that the fraud must be directed to obtaining payment or some other benefit ‘under the policy’ (emphasis added).
In the present case, the false statements made by Mr Douralis in his affidavit sworn in the County Court proceeding to support the application for summary judgment were directed at an alternative claim pursuant to the Trade Practices Act 1974 (Cth). Further, Mr and Mrs Douralis sought general unliquidated, special or consequential damages for the stress, inconvenience and anxiety allegedly occasioned by Allianz’s misleading and deceptive representations through its agent, which led them to believe that the works were covered by the policy, and on which they relied in proceeding with the works. The false statements also supported their claim that Allianz’s alleged unconscionable conduct estopped it from denying them cover under the policy.
Those claims, to which the false statements in the affidavit were directed, were not, in my view, claims made under the policy in terms of s 56(1). Rather, they were made to support claims which assumed that the policy did not cover Mr and Mrs Douralis who were not, in consequence, entitled to claim under it.
As such, I do not consider that the fraudulent claims were made under the contract of insurance. Rather, they were made as an alternative to the claim under the contract of insurance. They had no substantive operation if Allianz’s denial of the Douralis’ coverage under the policy were upheld. While the claims made fraudulently included a claim that Allianz was estopped from denying the policy, there is, in this context, a fine but clear distinction between the estoppel claim and a claim made under the policy.
As I consider that Mr and Mrs Douralis were persons insured under the policy, the ‘second limb’ of s 56(1) also has no application.
If those conclusions be incorrect, I consider that s 56(2) of the Insurance Contracts Act 1984 (Cth) would afford relief to Mr and Mrs Douralis. False statements were, it is true, the foundation of the estoppel claim, which sought to secure the equivalent of the benefit of indemnity under the policy, but the estoppel claim would have been otiose if the Douralis’ claim were in fact made under the policy. The other false assertions in relation to damages for stress and anxiety relate to a minimal and insignificant part of any claim which was indeed made under the policy.
It is unnecessary to determine whether, on the basis of the principle recognised in Manifest Shipping Co Ltd v Uni-Polaris Shipping Co Ltd (‘Manifest’),[9] the application of s 56 of the Insurance Contracts Act ceases upon the making of a claim. In Manifest, it was held that an unqualified obligation of good faith and disclosure did not continue once hostile litigation had commenced, as the parties’ relationship then shifted from a purely contractual one to a relationship governed by the rules of court. The terms of s 17 of the Marine Insurance Act 1906 (the provision at issue in Manifest) differ markedly from those of s 56 of the Insurance Contracts Act.
Conclusion on second appeal
[9][2001] 1 All ER 743.
It follows that, in my opinion, the second appeal should be allowed.
Remitter
The trial involved lengthy evidence concerning the alleged defects in the works carried out under the building contract. His Honour made no findings in relation to them, apparently because a VCAT proceeding between Mr and Mrs Douralis and Mr Simpson in relation to such matters was in progress. In the circumstances, it may be necessary to order that the matter be remitted to the learned trial judge.
COGHLAN AJA:
I have had the advantage of reading in draft the reasons for judgment of Nettle and Dodds-Streeton JJA.
I agree with the reasons of Dodds-Streeton JA for dismissing the first appeal and I agree with the conclusion of Nettle JA that s 56 of the Insurance Contracts Act 1984 (Cth) does not have any application to representations made in evidence.
If I am wrong as to the application of s 56, I agree with the reasons of Dodds-Streeton JA for granting the second appeal.
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