Briese v Allianz Australia Insurance Pty Ltd
[2019] VCC 2170
•20 December 2019
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-18-02092
| BEVERLEY BRIESE | Plaintiff |
| v | |
| ALLIANZ AUSTRALIA INSURANCE PTY LTD | Defendant |
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JUDGE: | HIS HONOUR JUDGE MURPHY | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 21- 25 October 2019, 28 October – 1 November 2019, 4 November 2019 | |
DATE OF JUDGMENT: | 20 December 2019 | |
CASE MAY BE CITED AS: | Briese v Allianz Australia Insurance Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2019] VCC 2170 | |
REASONS FOR JUDGMENT
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Subject: INSURANCE – BREACH OF CONTRACT
Catchwords: contract for flood loss – no dispute as to the flood – event covered by the policy - dispute as to the scope of the damage caused by the flooding – expert evidence – joint conclave – contractual duty to repair - Competing accounts of the scope of the repair obligation
Legislation Cited: Insurance Contracts Act 1984, s54(2)
Cases Cited: Wayne Tank and Pump Co v Employers Liability Assurance Corporation Ltd [1974] QB 57 - Fogarty v CGU Insurance Ltd [2016] ACTCA 62 – Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603 - Burns v MAN Automotive (Aust) Pty Ltd (1986) 161 CLR 653 at 673 - NRMA Limited v Morgan [1999] NSWSC 407 - Turnbull (Peter) & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (1954) 90 CLR 235 - Mahoney v Lindsay (1980) 33 ALR 601 - Hotham v East India Co (1787) 1 TR 638 - Taylor v GIO General Pty Ltd [2018] VCC 1301, distinguished
Judgment: For the Defendant [188]
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J. Ribbands & Mr A. Campbell. | T. F. Grundy Solicitors |
| For the Defendant | Mr J Twigg QC & Mr S. Briggs | McCabe & Curwood |
HIS HONOUR:
Introduction and overview
1 The plaintiff, a suburban home owner, claims substantial damages against the defendant insurer alleging that it breached a policy of insurance against accidental loss and damage in that it had failed to properly effect repairs to the property following the discovery of a burst subfloor hot water pipe on 27 May 2014. As a result of the burst pipe there was a substantial water discharge leading to lifting of parquetry and the development of mould. The insurer accepted liability to repair the property, effected immediate remediation to ensure it was habitable, retained a building contractor, and after some delay the works commenced. Just before the parquetry floor was about to be re-laid works ceased at the instigation of the plaintiff. Thereafter there was a significant period where the parties disputed as to what was an appropriate scope of works referable to the insured event. During this period the property was unoccupied and additional mould developed. Subsequently the plaintiff retained her own builder to reinstate the property. She seeks an award of damages based on the amounts she paid to her builder as she sought to mitigate the losses said to be caused by the breach by the defendant.
2 The defendant admits the insured event, it also admits that it elected to effect repairs to the property. It asserts however that the actions of the plaintiff contributed to the extent of the damage sustained to the property, and in addition prevented it discharging its obligations under the contract. The defendant therefore denies that it breached the contract of insurance and on the contrary asserts that it was the plaintiff who breached her obligations under the contract.
3 For the reasons set out hereunder I find for the defendant. It was the plaintiff who breached the insurance contract.
Overview of pleadings and the field of battle
4 As opened and in accordance with her amended statement of claim, the plaintiff’s case was relatively straightforward. The plaintiff was entitled to cover under the defendant’s policy of insurance. An event within the policy occurred, namely a burst pipe causing discharge of water. Damage was caused to the plaintiff’s house. That damage included structural damage and the development of subfloor mould. The defendant incurred a repair obligation. It commenced the repairs but failed to complete them. That constituted a breach of contract. Further loss and damage occurred to the wallpaper finishes following cessation of the work as a result of the development of mould. The plaintiff then took reasonable action to mitigate her damages by ultimately retaining a building contractor, Longbow. The measure of her damages is the amount that she ultimately had to pay Longbow to reinstate her property.
5 The defendant in its defence admitted that an insured event had occurred and that it was required to indemnify the plaintiff for losses that occurred as a result of the insured event. It elected to repair the property. It maintained however that the plaintiff had failed in her duty to cooperate with it in effecting those repairs that flowed directly from the insured event. As a result the losses which the plaintiff had sustained were her responsibility and did not constitute losses arising as a result of a breach of contract by the defendant.
6 The defendant relied on various provisions of the contract in support of its position that the plaintiff has failed in her duties under the contract to properly maintain her own property and to cooperate with it in effecting the repairs that flowed from the insured event, and some of the damage was covered by exclusions.
C. ISSUES FOR DETERMINATION
7 In final addresses the issues for determination were refined as follows:
Question 1: What was the insurable damage that was directly caused by the leak event?[1]
Question 2: What scope of works was necessary to rectify the damage caused by the leak?
Question 3: Did the defendant fail or refuse to conduct the scope of works necessary to rectify the damage cause by the leak and thereby breach the contract of insurance?
Question 4: If yes to 3, what loss arose by reason of the defendant’s breach of contract?[2]
[1] {Plaintiff would have “directly” deleted}
[2] [Defendant says this does not arise if it succeeds on Q 3]
Relevant terms of the policy
8 The relevant policy was for home and contents and covered loss and damage for a number of specified events including:
“(p) water and/or other liquids and/or substances discharged and/or overflowing and/or leaking from any apparatus and/or appliance and/or pipes.”
The policy provided the options on the insurer following a claim.
“How we will pay
Home
(a) At our option we:
·repair the home;
·replace the home to a condition substantially the same as, but not better than when new;
· pay the reasonable cost of its repair or replacement to a condition substantially the same as when new; or
…
(d) If part of your home is damaged and we agree to pay your claim, we pay only for the part of parts of the home that actually sustained damage. We do not pay or replace any undamaged materials.”
9 The defendant pleaded terms of the policy placing duties on an insured as follows:
(vii) a clause entitled “Care and Maintenance”, set out on page 67 of the PDS, which provided:
If you do not take reasonable care to:
·protect and maintain the property insured;
·prevent damage or injury to others or their property;
·minimise the cost of any claim under this Policy; or
·comply with all statutory obligations and by-laws or regulations relating to the safety of person or property we, will not pay for loss, damage, liability or injury to which this failure to take reasonable care contributes.”
10 It also relied on exemptions:
“General exclusions applying to Parts A and B this Policy
2. This Policy does not cover:
(b)loss or damage resulting from or caused by: …
• water seeping through a wall or floor, other than escaping from a gutter, drain, tank, pipe, water-bed or other apparatus designed to store or carry any liquid located on or outside the home site;
• water entering the home through an opening made for the purpose of alterations, additions, renovations or repair;
• inherent defects, structural defects, faulty workmanship or faulty design;
• wear, tear, rust, corrosion, depreciation or gradual deterioration;
• mildew, mould, algae, atmospheric or climatic conditions (other than storm);”
Relevant pleadings as amended
11 In her amended statement of claim, the plaintiff alleged damage as a result of an insured event being “hot water discharged and/or overflowed and/or leaked under the floor of the property and the discharged water caused loss or damage within the meaning of the contract of insurance.” The damage was particularised as “a hot water pipe developed a leak which lead (sic) to the pooling of a substantial volume of water over a period of time beneath the house.”
12 The plaintiff alleged a breach of the repair obligation as follows:
“6 As a consequence of the discharged water, the property and contents were damaged.
PARTICULARS
Floors and walls warped and buckled. Mould caused extensive damage to joinery and wallpaper finishes together with soft furnishings, curtains, carpets and the like. Full particulars of the damage to the property have been provided to Alllianz and Allianz has arranged for its own inspections and assessments.”
She alleged a breach of the repair obligation as follows:
“8C Wrongfully and in breach of the contract of insurance Allianz failed and/or refused to fulfil the repair obligation.
PARTICULARS
a. failed to level the floor in the family room kitchen area
b. failed to repair movement in stumps in the subfloor
c. failed to install new parquetry floor in the family room kitchen area
d. failed to remediate the presence of mould in and under the house
e. failed to obtain clearance certificates regarding mould removal for all areas of the house
f. exposed the interior of house to the subfloor area by cutting access holes in the lounge and dining rooms in August 2014 and removing floor sections in the kitchen and family room in March 2015 and then leaving those exposed areas open for the indeterminate period of time.”
13 She alleged damage as follows:
“12. By reason of the foregoing the Plaintiff has sustained loss and damage.
PARTICULARS
Access holes were cut into the floor and the dining room and lounge room area which exposed the interior of the property to the underground subfloor section. In addition, having removed the parquetry floor from the kitchen and likewise exposing that area to the underground subfloor section, the interior of the house remained unprotected so that the existence of any mould spores that were below the floor area were exposed to the interior of the house. Any mould spores within the house were then able to be circulated within the house by reason of the operation of the ducted heating system. Walls, carpets and curtains were damaged by mould.
The estimated cost of repairs exceeds $1 million.”
The defence
14 The substantive defence of the defendant is set out in paragraph 8C of the pleading as follows:
“8C. It denies the allegations in paragraph 8C, and says further that:
(a) in compliance with and in fulfilment of its obligations under the Policy, the Defendant sought to indemnify the Plaintiff in respect of the Insured Damage;
PARTICULARS
The Defendant, its agents and representatives, engaged contractors to remediate and repair the Insured Damage in accordance with the terms and conditions of the Policy.
(b) to the extent that the Insured Damage was not rectified, that is so solely because of the Plaintiff’s acts or omissions preventing the performance by the Defendant of its obligations under the Policy;
PARTICULARS
(A) On 23 October 2014, at the request of the Plaintiff, works were delayed until 2 February 2015.
(B) On or about 11 December 2014, the Defendant engaged Pattersons Insurer build in accordance with the terms and conditions of the Policy to repair the Insured Damage.
(C) On or about 2 February 2015, Pattersons Insurerbuild commenced repair works on the Plaintiff’s property.
(D) On or about 17 June 2015, the Plaintiff refused Pattersons Insurerbuild contractors ongoing access to her property and requested that Patterson Insurerbuild vacate her property, such that the repair works being carried out at the property ceased.
(E) In around June 2015, the Plaintiff changed the locks on the external doors to the property.
(F) Since 17 June 2015, the Plaintiff neither requested nor permitted the Defendant or its contractors to recommence works.”
15 The defence went on to plead that the plaintiff was responsible for her own loss as follows:
“(b) To the extent that the Plaintiff has suffered loss and damage, that loss and damage was caused by:
(i)the Plaintiff’s failure to take reasonable care to:
(A)protect and maintain the property insured;
(B)minimise the cost of any claim under this Policy; and/or
(C)take all reasonable precautions to prevent further loss, damage or liability
PARTICULARS
The Defendant refers to and repeats the matters in paragraph 8C and the particulars thereto.
After refusing the Defendant’s contractors access to her property, the Plaintiff:
(A)failed to take appropriate steps to prevent the growth and/or spread of mould;
(B)left the property unoccupied and locked up for an extended period of time;
(C)failed to remedy or repair the Uninsured Defects and Design Faults within a reasonable time; and
(D)failed to remedy or repair the Insured Damage within a reasonable time.
(c) Further or alternatively, the Plaintiff has failed to mitigate her loss and damage properly or at all.
PARTICULARS
The Plaintiff failed to mitigate her loss and damage by:
(A)refusing to allow the Defendant’s contractors, including Pattersons Insurerbuild contractors ongoing access to her property to complete their repair works of the Insured Damage, and requesting that Patterson Insurerbuild vacate her property;”
(B)failing to remedy or repair the uninsured defects and design faults.”
16 Pausing there, the defence by the insurer was comprehensive and confronted the plaintiff with what it asserted were the consequences of her actions as the defendant sought to exercise the right that it had under the policy to repair the damage. As matters unfolded within the trial and in the focus of the final address by the plaintiff, the defendant did not focus solely on challenging the plaintiff’s actions as being unreasonable. Rather effectively the defendant alleged that the plaintiff was the contract breaker by preventing its performance of its duties under the contract. This was consistent with the defendant’s position in final address that where an insurer elects to reinstate, the insurance policy becomes a repair contract and is enforceable as such: “in other words, where a contract provides for an election, the party making the election is in the same position as if he had originally contracted to do the act which he has elected to do.[3]”
[3]DFS [51]
The evidence overview
17 There was a substantial amount of evidence, both lay and expert, in the trial. The evidence ranged from the plaintiff and her son-in-law who provided first-hand observations as to the state of the property both before and after the event. In addition the plaintiff’s tradesmen, a plumber and a builder, who effected immediate repairs, were called. Thereafter the insurers contractors who commenced remediation work on the property to maintain its liveable status were also called. The insurer got to the point where it’s contractor (Pattersons) commenced reinstatement. This contractor was not called. After the work stopped, various experts were retained by both the plaintiff and the defendant as the parties sought to identify an agreed scope of works. Those experts provided reports and were called. Evidence was led from Longbow, the contractor who finally reinstated the premises. At the trial there were also experts retained by both sides to opine as to the extent of the damage caused and the costs of reinstatement. Prior to the trial the parties had been directed to engage in a conclave to seek to narrow disputed expert evidence. After the pre-trial conclave a schedule setting out the responses all the experts to various questions was prepared,[4] and during the trial there were three sessions of concurrent evidence involving structural engineers, mould remediation experts, and quantity surveyors.
[4]Exhibit 6
The actors and the immediate aftermath of the insured event
18 The plaintiff is a widowed middle-aged businesswoman heavily involved in charitable activities living in a substantial single story brick veneer house in a desirable area of East Ivanhoe. The house was built in 1980 and it is common ground that it was well maintained and the furnishings and fittings were of the highest order. In addition to that the house contained a significant collection of art and antiques. At the time of the insured event the plaintiff’s husband who had suffered a stroke was alive and he sadly passed away in July 2016.
19 The house was located on the lower side of the road on a sloping block and underneath were three garages where her husband kept his vintage car collection. The plaintiff’s son-in-law lived in a nearby suburb and was a regular visitor. The plaintiff also had tradespeople who she regularly retained for maintenance such as Mr Lloyd, a plumber, and Mr Foxwell, a builder. Both were called after the event and effected immediate repairs.[5]
[5]Evidence of Mrs Briese
20 The property had an extensive parquetry floor in the living dining area and the plaintiff gave evidence that one day in May 2014 she noted lifting of the parquetry. Her housekeeper stated that she could hear water, and so she contacted her plumber, Mr Lloyd. He sent one of his assistants to the property and the assistant then went to the subfloor area. He returned and said that he had stopped the water but he has to get his boss back with oxy-acetylene.
21 The next day, Mr Lloyd arrived and he and his employees went underneath the house. They came back and told her that it was a disaster down there because, “There’s water everywhere.” She was instructed to get her builder, Mr Foxwell, to get a pump. She also rang her insurance brokers. When she herself went to the subfloor area, she noted all “twinkly things underneath the house.” They were on “all the beams and on the floor.” Further it was all wet and a large air conditioning duct lying on the subfloor ground was in what she said about eight inches of water.
22 The property was insured for a substantial sum and the plaintiff had retained the defendant as her insurer for many years. As events unfolded, she dealt with the defendant through Wilkinson Insurance Brokers Pty Ltd (Wilkinson) and a claim form was lodged on 28 May 2014.
23 The insurer retained an insurance adjuster, Cunningham Lindsey (Cunningham), and a site inspection was undertaken immediately after the event. The adjuster retained Assurance Assessing Pty Ltd (AA’s) to provide advice as to the extent of the damage. The adjuster retained an organisation Oriel Property Services to arrange immediate loss mitigation. They engaged another company Prensa, a hygienist, to assess mould and bacteria. A further organisation Restorx was retained to undertake mould remediation and the drying of the subfloor, which was undertaken by Mike Boyle. A specialist environmental assessor, Dr Black of Biotopia, was also retained to assess the property and provide clearance certificates.
24 The broker sent an employee, Ms Fruin, out. Ms Briese said that this employee was completely out of her depth. On the following Monday, Mr Thomson from Wilkinson arrived. Also another person, Ms Duong, from Prensa arrived. Mr Foxwell came about midday on Friday and put a pump underneath the house which she said ran until Sunday night. She said that no one attended to check the pump over that period. Mr Foxwell subsequently gave evidence that in fact he had returned to the pump to clean it on a couple of occasions, so on the evidence it did not run continuously.
25 Another organisation, Steamy’s, attended the property but was not retained. Subsequently Mr Mike Boyle attended the property. He told her that under no circumstances was she to go anywhere near under the house, as it was an absolute danger. He indicated that he would convey that to Mr Thomson of Wilkinson. She was concerned because her husband was an asthmatic as well having had a stroke.
26 An assessor, Mr Cameron Wright from AA, also arrived. She stated that he was, “the rudest man I have met.” She said she pointed out cracks in the roof, and at the door into the passageway. She also told him that her gardener had to shave the side door. She said to him that there were cracks in the ceiling in the passageway and on the wall in the third bedroom. She maintained that he did not take any notice of anything that she said. He denied this.
27 Later, Mr Boyle arrived with equipment to address the issue of mould. He placed machines in the subfloor that were sucking water out and she even checked the flow rate of those machines.
28 Mr Wright came back for a second inspection and the plaintiff and her husband went for a holiday from early July until 30 August 2014 in Queensland. When she returned she was advised by Mr Thomson of Cunningham that they would like to commence the works on 1 October. On 11 December 2014 Cunningham, after having obtained a couple of quotes for the scope of works retained Pattersons Insurerbuild to effect the repairs in the scope of works prepared by AA. She indicated that she would need alternative accommodation specifically for her husband. She then arranged to evict the tenants from another property that she owned and for it to be modified and then advised Mr Thomson that she would be in a position to vacate the property on 30 January 2015.
29 Over the period until September Restorx and Prensa were involved in remediation, inspection, monitoring and reporting to the insurer as to their efforts to remediate the immediate impact of the burst water pipe, and to ensure that the property remained habitable.
30 Meanwhile over the same period the adjuster through its assessor Mr Wright was assessing the scope of works required to repair the structural damage to the property consequent upon the burst pipe. He finally reported on 10 September 2014.
31 Works commenced on 2 February 2015 and were scheduled to conclude in July 2015. In February the plaintiff expressed concern with the condition of the timber floor in the formal dining room. The defendant disputed that this related to the insured event. Subsequently representatives of the assessor and the builder and the plaintiff undertook a site inspection. The assessor, Mr Thomas from AA, subsequently reported to the insurer and this was provided to the plaintiff. In that report he concluded that there was evidence of water ingress from the windows causing minor staining to the plywood floor in the dining room. He was of the view that the burst water pipe was not involved. He was also of the view that joists in the dining room had been installed contrary to appropriate recommendations. He concluded that this had caused a minor deflection that Mrs Briese had complained of. Upon his inspection of the underfloor area he noted that there appears to have been water pooling along the northern side of the lounge room and saturation to the subfloor soils and that this had contributed to elevated subfloor humidity and moisture content to the subfloor framing members. He also found inadequate subfloor ventilation. He recommended that this be upgraded before the current repair job. He also recommended that action be taken to address the waterproofing issues.
32 Meanwhile Mr Boyle re-attended to inspect mould growth after the subfloor was removed. By April household contents from the affected rooms had been packed up and Pattersons had removed the damaged parquetry floor and subfloor as well the kitchen prior to the reinstallation of a subfloor and parquetry. Dr Black provided a further clearance certificate as to the mould assessment. On 28th May the flooring was about to be reinstalled. On 17th June the plaintiff directed the builder to cease work as she had been advised by a sander preparing the subfloor that the floor was not level. AA attended to report on the complaint.
Events after Pattersons’ cessation of work
33 As the plaintiff’s claim under her amended statement of claim is that the defendant failed and/or refused to fulfil its repair obligation, it is important to look closely at events both before and after June 2015. As I have indicated, the rebuild undertaken by Pattersons did not commence until early February.
34 The correspondence between the defendant and its contractors including Restorx and Pattersons, indicate that in the period until mid-June there was extensive action to effect remediation and repairs.
35 On 13 April, Mr Boyle advised Mr Thomson that decontamination works had been completed including an inspection by a biologist.[6] The plaintiff was advised on 25 May by Mr Shortis of Pattersons that the flooring was about to be delivered so it can begin acclimatising.[7] On 4 June the insurer was advised by Mr Thomson that the plaintiff had called and advised that she was concerned with excessive moisture and she had spoken to Pattersons and they confirmed that they were to complete the floor over that weekend. On 14 June, Mr Thomson records a call from Pattersons that the plaintiff had complained regarding rubbish in the car port which turned out to be some sheets of ply left for collection. The plaintiff had also complained regarding unevenness in the floor near the bar, which she was advised that Pattersons would rectify. Also, the plaintiff had complained regarding the time for acclimatising of the parquetry floor and Mr Treble of Pattersons had contacted Greensborough Floors and deferred the installation for a week. Mr Thomson records a call to Ms De Iulio of Wilkinson:
“Rang Sophia, confirmed above, she advised she had a call from Bev, advising builder was walking off the job, assured her this was not the case, Bev advised Sophia, that the builder broke a door lock, we will f/up with builder.
Rang Geoff and Pattersons, requested he investigate broken lock in door ASAP.”[8]
[6] Court Book (‘CB’) 371
[7] CB 372
[8] CB 375
36 Mr Thomson recorded a call the plaintiff who had spoken to Mr Treble and they would be on site on 17 June. On 18 June Mr Thomson records a call with Mr Treble again who has met the plaintiff:
“Bev is concerned with floor level, agreed we will arrange re-inspection by Cameron Wright ASAP.”[9]
[9] CB 377
37 Ms De Iulio then on 18 June emails the plaintiff confirming a discussion regarding base flooring issues:
“I immediately contacted the assessor, Andrew Thomson, who is currently attending to this matter and will provide me with an update and recommendations within the next 24 hours. I will advise you of the outcome once notified.”
38 At 4.31pm, he further emailed the plaintiff as follows:
“Sorry I missed your call this morning.
I spoke with Geoff at Pattersons after your meeting yesterday and have requested inspection by the building consultant, Cameron Wright, as a priority, to assess floor levels and any other outstanding areas of concern.
We have stressed the urgency of this inspection to the building consultant, to ensure repairs can progress, as soon as possible.”[10]
[10] CB 379
39 On 24 June Mr Thomson emailed the plaintiff as follows:
“Hi Bev, please find attached further report by building consultant, Cameron Wright, of Assurance Assessing, for your attention.
The building consultant undertook further assessment of the floor, noting your concerns with the floor levels, following installation of new plywood flooring by Pattersons.
The building consultant has highlighted:-
3.1All evidence sighted and obtained showed undulating floor levels throughout lounge room and kitchen/meals had been a pre-existing condition prior to and not attributable to burst pipe event.
3.1.1All evidence sighted and obtained showed nil/negligible movement/settlement had occurred throughout inspected areas since burst pipe event had occurred.
We have taken the liberty of forwarding copy of the building consultant’s report to Pattersons, who may be able to assist you with the recommendations, noting however that such work does not fall within the scope of the current claim.”
[He concluded by saying that he was leaving the firm and had passed the matter to Mr Gunawardena.]
40 On 24 June, Mr Wright wrote to Mr Thomson attaching the report, confirming its contents and stating:
“I agree with insured’s builder that it would have been prudent to address the raised sections prior to installing replacement plywood flooring however this is not as simple as it sounds. My main concern is that ‘once the builders touch it, they own it’ so this could have opened a Pandora’s Box.”
41 On 26 June 2015, the plaintiff arranged for the locks on the house to be changed. In evidence she said she did not want any “Tom, Dick or Harry” attending the property.
42 On 29 June, Restorx attached a microbiologist’s clearance certificate.[11]
[11] CB 382
Competing reports received
43 After work stopped on replacing the floor, Mr Wright, on behalf of AA, by 24 June had undertaken a further assessment wherein he assessed that the undulations in the floor levels were a pre‑existing condition and:
“raised levels identified by the insured’s builders was attributable to subsidence of surrounding areas rather than heave of raised areas.”
44 Thereafter Mr Gunawardena, on behalf of Cunningham, sought further consultation with the plaintiff by email dated 14 July 2015.[12] A file note dated 17 July records a conversation between the plaintiff and Mr Gunawardena where in the plaintiff queried whether Mr Wright had in fact inspected the subfloor to prepare his report. She indicated at that point that she had arranged her own engineer and a soil test. Further, “the plaintiff had agreed to another inspection with Cameron Wright so subfloor access could be arranged.”
[12] CB 384
45 On 21 July, Pattersons recorded that they were attempting to contact the plaintiff to organise recommencement of works but this could not occur until the independent report was received.[13] The plaintiff had commissioned Mr Carlos Balmaceda, a consulting engineer of CCB, to consider the damage.
[13] CB 387
46 There was a site meeting on 30 July scheduled between the plaintiff and the engineering consultant. On 10 August the plaintiff advised Mr Gunawardena that the report would be available this week. On 3 September Mr Gunawardena forwarded an email to the plaintiff indicating he had left a message for her and then went on:
“We acknowledge receipt of your report from your structural engineer (CCB Consulting Engineers). We have reviewed the document and believe the engineer disagrees with the report submitted by Assurance Assessing. Your engineer believes the undulation in the flooring is a result of water ingress to the stump areas. Furthermore the engineer is of the opinion the work should not have commenced until sufficient time is allowed for drying out (minimum of 2 years). Accordingly the engineer recommends installation of a new floor system that does not rely on founding to the existing clay but down to rock or bedrock as found in the soil report. This will allow repair works to continue immediately.
There is a disparity between the report from CCB Consulting Engineers and Assurance Assessing.
In light of the above circumstances the insurer has requested that we engage own structural engineer to confirm the circumstances and provide a response in relation to the report from CCB Consulting.
Please note that we have sent a request to Assurance Assessing to appoint a structural engineer immediately. The engineer will contact you direct to arrange access to the property.”[14] (original emphasis)
[14] CB 395
47 The plaintiff was provided with a copy of the report by email dated 13 September 2015 stating:
“The structural improvements recommended by your engineer will be considered as an upgrade. Therefore the policy will not cover the additional cost.
Please discuss the details of the attached report with your engineer and advise how you would like to proceed.
If you wish to proceed with repairs based on your engineer’s scope of works we request that you submit a detailed quotation in order to complete the repairs for our consideration.
Please do not hesitate to contact me if you wish to discuss this matter further.”[15]
[15] CB 427
48 On 25 September, Ms De Iulio advised the defendant that the engineer was on site and wanted to pull up the flooring to properly inspect the damage. Later that day, Ms De Iulio advised Mr Gunawardena that the message was incorrect and that the engineer, Mr Predebon stated that he could still proceed without pulling up the floor. On 1 October, Mr Gunawardena stated that he had spoken to the plaintiff and it was the plaintiff who had suggested pulling the floor up.[16] Ms De Iulio sent a further email on 1 October saying:
“I spoke with Beverley this morning and she has stressed that she wants the flooring pulled up and wants marine ply laid as her husband had bad asthma and can only have this flooring. She has requested a cash settlement and is happy to source her own Contractor to lay the new flooring.
HELP!!!”
[16] CB 411
49 In evidence the plaintiff either denied or could not recall that she made this request. While Ms De Iulio was not called, the email is a very probative document reflecting the plaintiff’s state of mind at the time, and is confirmatory of her overall conduct of taking a hands-on attitude to the endeavours by the defendant to discharge its repair obligation.
50 The report from Force Management (Anthony Predebon) was received by defendant in October 2015. He had inspected the site on 30 September and 16 October. This report confirmed the opinion of Mr Wright that floor level variations were likely due to varying founding stratum of the stump footings. The report agreed with his view regarding cornice issues in the hallway. Subfloor framing was also noted to be of a mediocre standard. Moisture was noted in the wall area next to the pool.
51 On 12 November, a claims consultant from the defendant directed that Mr Gunawardena contact the plaintiff:
“To explain the findings of our engineer’s report and explain why we cannot pay the additional costs advised by their engineer. We are happy for you to try to negotiate a cash settlement offer with the insured and grant you some leeway with this to finalise the matter.”
52 Ms Nutbeam, claims officer of Wilkinson, forwarded an email to the plaintiff on 18 November 2015 as follows:
“Just confirming our discussion Friday.
1. Can you please get a quote for the repairs to the stumps and flooring as per your engineer’s recommendations.
2. Can you ask your engineer to comment on the report from Anthony Predebon.
We are when (sic) you receive the quotation (sic) going to come out and assist in putting the claim together.”
53 On 30 November, the plaintiff contacted the insurer seeking advice:
“She has been out of her house for the past 9 months and does not appreciate the delays. She wanted to know if Anthony Predebon’s report was received, which I confirmed “yes”. She requested for Nish [Gunawadena] to call her today with an update.”[17]
[17] CB 425
54 On 3 December 2015 a file note of the insurer reads:
“Called insured contact Sophie at Wilkinson Insurance Brokers. Sophia advised the insured has refused to do any organising to obtain a quote for the floor rectification works required.
Sophie has contacted the insured’s engineer, CCB Consulting Engineers, and requested they coordinate a quote for the work according to their findings.
Sophie advised she will follow this up with them again today.”
55 Ms Nutbeam of Wilkinson by email dated 8 December 2015 advised the plaintiff:
“Just confirming our discussions we are awaiting the quotes and comments from Carlos, we did follow him up Friday and he was going to send them that day – to date we do not have them.”[18]
[18] CB 430
56 On 11 December 2015, Ms De Iulio emailed CCB confirming that she attempted to follow him up requesting his comments:
“On the report from Anthony Predebon and also a builder’s quote for the repair to the stumps and footings as per your recommendations.
Please treat this matter as extremely urgent and I await your prompt reply.”
57 The plaintiff was copied with this email.
58 On 12 February 2016, Ms De Iulio contacted the plaintiff stating:
“I would like to inform you that I have tried calling Carlos your engineer several times over the past two days to obtain an update on his progress with the building quote and his written comments to the independent engineer’s report, but his phone has rang out each time. If you manage to be in contact with him could you please tell him to contact me as soon as possible so we can progress further with this claim.”[19]
[19] CB 435
59 On 17 February 2016, the plaintiff emailed the report from CCB Consulting Engineers. This was forwarded to Mr Predebon.
60 At 4.02pm on 4 March, Ms De Iulio emailed the plaintiff as follows:
“Just a quick update on the status of your claim.
We are still awaiting the quote for works to your dwelling from builder Joe Foxwell in order for your insurers to progress towards finalisation of the claim. I was advised by Joe Foxwell that the quote would be emailed to me by Monday, 22 February which I still do not have to date.
I have tried calling Joe today chasing the quote and have been unsuccessful in reaching him and have left another message chasing the quote.
I will keep you informed of any further progress.”
61 On 4 March, the plaintiff emailed Ms De Iulio in the following terms:
“Claim update.
Hi Sophia,
This whole problem would not have been delayed as long as it has if Allianz had appointed a representative who had listened to me from day one.
As far as I am concerned, ‘Time was always important’ as Peter’s health was of utmost importance to me and his family.
Unfortunately Allianz through their representatives were not interested in restoring our house to the quality that was needed to fix the problem, they were only interested in doing a cosmetic repair.
As their people have failed on all points it has been necessary for me to get personally involved. We are extremely disappointed that it was necessary as we believed (wrongly we now find out) that as we had INSURANCE we would be looked after …
The Builder will be working through me and until I am satisfied that everything has been covered by him and the Engineer, you will only then get the details.
I do not think you realise the damage that has been done to my home as no one from your organisation has ever bothered to visit even to see the original problem or what was done by your people, it is a wreck. The repairs to underneath the house are minor to what has to be done to restore the home.”
62 By email dated 10 March 2016, Mr Gunawardena of Cunningham again requested a quotation for completing the building repair works.
63 On 11 March 2016, Ms De Iulio emailed the plaintiff confirming a telephone discussion that day and continuing:
“As per our telephone discussions today regarding receiving a quote for scope of works to your property, it is understood that at this stage your builder, Joe Foxwell, has only provided an estimate to fix and level the floor and fix the stumps under the house and will not provide a final figure at this stage as he is unaware of any further works that may need to be addressed once repairs commence. You have also stated that you will you not present a final figure until you are satisfied that all works that need to be carried out are included in the quote such as replacement of the kitchen and parquetry, cracks in the hallway and third bedroom.
I am currently in the process of arranging a meeting at your premises with the two engineers, assessor Nish and myself along with Libby Nutbeam and Michael Wilkinson from our office to discuss the claim and progress it towards settlement.
I will be in touch within the next 7 days to discuss a convenient date and time.”[20]
[20] CB 459
64 It is common ground that around this time Mr Briese’s condition deteriorated and he subsequently passed away in July 2016.
65 On 14 April 2016, a site inspection was held. On 18 May, Mr Gunawardena later sent the plaintiff an email stating:
“As discussed we await the following documents so that we can reach an amicable solution in relation to the outstanding building reinstatement works.
A detailed scope of works prepared by your structural engineer.
An itemised quotation based on the above scope of works from a registered builder.
We would appreciate it if you can confirm the current status so that we can advise your insurer accordingly.”
66 On 7 June, Ms Nutbeam confirmed with Mr Gunawardena that she had had a meeting with the plaintiff two weeks previously and the engineer “is preparing a report.” On 27 July, Ms Nutbeam was still awaiting that report.
67 On 30 August 2016, CCB advised the plaintiff that it had formulated two plans of attack and forwarded the scope of works. They were received by Cunningham on 2 September.
The plaintiff moves to retain her own manager/builder
68 A turning point in relation to the plaintiff’s claim occurred in late September 2016 when the plaintiff retained Marius Schreuders of Longbow as her project manager. In her evidence she stated that at that point she was “at the end of her tether.” The home was becoming increasingly derelict. After he became involved, the plaintiff indicated that she had forwarded the following emails at his suggestion.
69 The first email on 28 September 2016 was to Pattersons as follows:
“When major faults were brought to your attention in June 2015 I have to this date never received any phone calls or help at any stage since or cooperation to help me or my husband in rectifying the problem caused by the hot water fault found back in May 2014.
Therefore I am discontinuing your services immediately.”
70 On any view this email was disingenuous. The plaintiff at all times had retained Wilkinson as her insurance broker. Wilkinson was the in constant liaison with Cunningham in relation to the administration of the claim. When the issue of the quality of works being undertaken by Pattersons was raised action was taken by the insurer to address the issue. The contractual relationship was between the insurer/adjuster and Pattersons and not between Pattersons and the plaintiff. The plaintiff does not recognise this in the thrust of that email.
71 A later email was sent on the same day, headed “To Whom It May Concern”:
“As of this day, 28th September [2016] you are formally advised that the contract between property 37 Maltravers Road, Ivanhoe and Patterson has been formally rescinded. (Copy attached)
As you know, Patterson were formally sacked from the site mid-June 2015.
Would you please provide me with a copy of the original contract entered into, also with the building surveyor notice of appointment within 7 days.
The negotiations are to be with the insurer and my appointed Project Manager being Marius Schreuders …”
72 The first of these emails was sent by the plaintiff. The second was sent from her accountant’s office at the instigation of Mr Schreuders.
73 On 29 September she sent a further email to Cunningham where she requested the dilapidation report. She concluded:
“I request that Patterson provide me with their dilapidated report in order that I and the insurer are able to assess the further damage caused to my property since the start of work to my property.
I have appointed Marius Schreuders of Longbow Group as project manager from this day forward in order that my property is returned to the standard it was prior to the insurer’s preferred repairer entering my property.”
74 On 15 November, Ms Nutbeam forwarded to Cunningham the three quotations that she had received from Longbow.
75 On 2 December, Mr Gunawardena forwarded the following email to Ms Nutbeam at Wilkinson:
“We refer to the above claim and confirm receipt of quotations from the insured for the amount of $1,329,134.40 inclusive of GST. In order to proceed further with this claim, we propose the following actions.
Request our engineer and the building consultant both attend site and prepare a detailed scope of works relating to the resultant damages caused by the event.
A dispute has arisen since the insured is claiming for structural upgrades, which in the opinion of our engineer is not considered as part of the resultant damage(s). We will request our engineer further comment in relation to the quotation submitted by the insured.”
76 Around this time Mr Ian Fleming of MCS Group was retained and inspected the property. He produced a comprehensive report as to his opinion as to the loss sustained as a result of the burst water pipe event. He confirmed the original AA scope of works to address the damage. However he opined that further works were due to the event including a need to re-level the floor, repair distorted door frames in the vicinity of the leak event and repair plasterboard wall and ceiling linings in the vicinity. He disputed the quotations received from Longbow as containing items unrelated to the event and including repairs for mould damage which he attributed to mould that had developed as a result of moisture ingress to the subfloor due to problems with leaking downpipes and ingress through penetrations to the brickwork, as well as lack of proper subfloor ventilation.
77 He then produced a scope of works to reinstate the resultant damage caused by the leak, as well as a second scope of works that were required to be undertaken by the insured to address issues that were non-event related.
78 On 22 February 2017 there was an on-site meeting including Mr Fleming and Mr Schreuders. After that meeting Mr Pahl of Cunningham provided Mr Fleming’s report as well as the revised scope of works to him under cover of an email which read:
“Many thanks for your time on site yesterday, I am sure you will agree that the meeting was beneficial.
I would also like to thank you for explaining why our contractors and mould specialists were denied access to certain rooms in the home – as discussed we regard the restriction as very concerning but do respect the insured’s reasoning.
Please find attached a copy of the engineers report referred to on site, as well as the assurance assessing scope of works referred to. Kindly regard these documents as being for informative purposes only at this stage, as a revised scope of works is now to be provided to yourself by Ian Fleming (via this office). I am hopeful that there is an understanding that this scope will cover all resultant damage from the burst pipe under the home and exclude damage all works required from other water/moisture ingress issues.”
79 Mr Schreuders replied by email dated 20th March as follows:
“I have carefully gone over all the reports provided to me and would ask you to discuss with the insurer what the possibility is for the insurer to make an offer to settle this matter so that my client can get organised to have her home repaired and move back in. The insured’s agent can supply a second claim as per the discussion held on site recently, however in my opinion this is only going to delay the matter further and whilst I understand the paper trail needs to be correct from an insurer’s books there are also times where a decision to settle the matter would be in all parties involved best interest.
I believe that Ian Fleming from MCS has carried out a genuine thorough report on the cause or causes of water damage to the property there are areas where he finds it difficult to substantiate some of the findings reported on over the last few years, but without making some sacrifices from all sides this will only lead to further delays in a settlement, and further potential damage to the property by not having it habituated.
From what you have inspected I think you could agree that to bring the house back to the standard Mrs Briese is expecting will far exceed any realistic offer the insurer would come up with. Considering that the property has withstood any water damage for the last 30 years, and possibly now without changing weather patterns I will raise with Mrs Briese the potential to carry out some modifications to the home to ensure that it will comply as close as practical to current building regulation.
My client has left me totally in charge of this matter and I would hope that with some cooperation we can resolve it very quickly from here, I look forward to hearing from you shortly.”
80 On 21st March Ms Nutbeam queried with Mr Pahl that Mr Schreuders had advised at the recent meeting that he had been instructed to commence repairs “you did seem okay with this – is that correct??”
81 He replied:
“You are correct. The house belongs to the insured, and if she wants to proceed with repairs we would have no right to object to that – particularly with a large portion of the works being “uninsured damage”. I got the impression to that Marius had instructions to commence works and while that was happening we would hopefully work out a cash settlement acceptable to the insured and Allianz for damage which relates to the broken pipe only.”
82 Around this time the plaintiff, after forwarding an 11 page letter to Mr Schreuders on 18th February, and a further memorandum on 22nd February detailing expenses that she had incurred on the property since the event, was compiling material to be provided to Ms Nutbeam of Wilkinson to be provided to the insurer, presumably for the purpose of negotiation. This included a quotation for storage of the house contents obtained by the plaintiff from Sievwright dated 7 April.
83 On 4 April the plaintiff sent a facsimile to Mr Schreuders advising him that she had sent a report dated 5 June 2014 from Mr Boyle. She went on:
“I sent Libby [Nutbeam] a copy of 5/6/14 report at 3.55 PM and told her everything from now on is based on that report from Mike Boyle. We are not negotiating her way it is our way, or no way.[21]”
[21] (original emphasis)
84 On 16 April Mr Schreuders provided to the plaintiff a quotation for repairs to the property for a total sum of $1,574,634.60. That quotation was supplied by Ms Nutbeam to Mr Pahl and he replied:
“Thank you for the quotation from Marius.
I must say though that I was surprised to see that the quote is not in accordance with the engineers determination of what damage is attributable to the insured event back in May 2014, as discussed on site and in various subsequent emails and conversations. It seems the quote is more for a full refurbishment for all works required, including damage from water/moisture ingress attributable to building defects, and mould that has more recently developed in areas previously certified as “clear” and in rooms that contractors acting on the insurer’s instructions were prohibited from entering – and this extended to post mould remediation testing.
My feeling is that all we can do is meet with Allianz and see what portion of the quotation they would be prepared to accept and make a cash offer on that basis.”
85 Subsequently the insurer retained a quantity surveyor Mr Pitney to provide a quotation for the repairs that the insurer asserted were as a result of the event. He estimated an amount of $128,083 was required to rectify the damage. The insurer also obtained a quote for $97,163.55 from a separate company on the same scope of works.
86 Subsequently the plaintiff lodged a dispute with the financial ombudsman service and on 17 August 2017 executed a lump sum building contract with Longbow group. After rejecting a cheque for $97,163.55 offered by the defendant on 17 August 2017, the plaintiff issued these proceedings on 23 November 2017.
Assessment
87 The above chronology is essentially common ground that provides an important basis to consider the issues that emerged in the trial. The defendant’s case is that it was seeking to repair the damage to the house as a result of the leaked pipe event but it’s endeavours to do so were frustrated by the conduct of the plaintiff. While essentially it did not dispute that the original performance of the work by Pattersons which led to the cessation of that work in June 2015 was less than satisfactory at that point, thereafter its efforts to recommence the works after obtaining expert advice were frustrated. In particular after Mr Fleming became involved to provide a revised scope of works, the plaintiff’s conduct frustrated further action. Further, after the plaintiff retained the services of Longbow, the plaintiff did not cooperate in providing a quotation for what the defendant asserted was the correct scope of works arising from the insured event. Rather it was faced with a grossly excessive quotation from Longbow compared with its own assessment that the damage could be repaired for around $130,000.
88 It was the defendant’s case in closing address that the plaintiff had just not proved a case of damages, which was what the defendant was obliged to repair. In the defendant’s submission the plaintiff had to identify the damage caused by the event and then prove that the defendant had failed to remedy that damage.
89 From the point of view of the plaintiff, she was justified in stopping the substandard works being undertaken by Pattersons, and thereafter as the engineers sought to resolve the issue of the damage attributable to the event, the condition of the house deteriorated, including as a result of the development of mould, she was unable to resume occupation, and was ultimately justified in retaining the services of Mr Schreuders to reinstate the house to its proper condition on a new for old basis, as she was entitled to under the policy.
What was the extent of the damage for the insured event?
90 A central element in the trial is the need to identify the extent of the damage as a result of the burst pipe. In this respect, both the plaintiff and the defendant were operating under imperfect information because no one knew exactly how much water had been discharged, and over what period? Nor, as identified by witness, Ms Khani, were there any proper pre-event and post-event levels of the floor and stumps. What the defendant was then forced to rely on was a statement by the plaintiff and inquiries from its investigators, including Mr Wright.
91 The next area of uncertainty is the pre-event condition of the house. In this regard it was the plaintiff’s evidence that she kept a house in perfect condition and there were no pre-existing problems in relation to cracks prior to the event. Her evidence was that she had had to have her gardener adjust one of the doors that was sticking and that cracks in the cornices and in the bathroom appeared after the event.
92 In her statement of claim the plaintiff particularised the damage as: “floors and walls warped and buckled.” She went on to allege mould had caused further damage. As noted above, she also claimed that the defendant had failed and/ or refused to level the floor, repair movement in the stumps in the subfloor, and install new parquetry floor.
93 The defendant by its defence admitted that the insured damage as follows:
“A. The timber floor frame and the ply timber floor lining were damaged, with excessive moisture and mould evident to the timber framing and underside of the ply lining;
B. The custom-made 120m2 parquetry floor throughout the open plan kitchen, dining and family rooms was damaged.”
94 The defendant admitted that it was required to repair the insured damage and as the plaintiff framed her case, denied that it had failed or refused to do so.
Competing accounts of the scope of the repair obligation
95 It is now appropriate to consider the competing expert evidence that emerged in the course of the trial. I have indicated above that as events unfolded the parties were operating in a state of some uncertainty as the defendant sought to respond to the insured event in circumstances where, in order to prosecute its decision to exercise its option to repair the premises, it required the cooperation of the plaintiff. This was not a simple case where a home had been partially destroyed by fire, the occupants had vacated, and the insurer sought to repair the home to its previous state. Rather this was a case where very early in the piece issues arose as to whether other events may have contributed to the observed damage, namely structural defects, pre-existing damage, or other water ingress. Further, issues arose once the work ceased in June 2015, and then there emerged differences between the parties as to how to proceed. Added to this from 26 June the plaintiff changed the locks on the then unoccupied property which on the evidence led to the development of further damage as a result of mould developing in the property.
96 All these matters arose in circumstances where the defendant, while accepting an obligation to discharge its repair obligation, had also pleaded a duty of cooperation owed by the plaintiff to it under that contract, and also the plaintiff’s obligations under the policy to keep her property in good repair, and it was relying on an exclusions in relation to damage caused by lack of maintenance, structural defects, and mould.
97 With these competing parameters in mind it is now appropriate to consider the expert evidence in the trial.
The conclave evidence: structural damage
98 There was a court ordered conclave between expert witnesses that were to be called by the parties. Arising out of the conclave a joint report coordinated by Mr Beck was produced[22], subsequently the witnesses Mr Wright, Mr Predebon, Mr Fleming, Ms Khani, and Mr Beck gave evidence in a joint session.
[22] Exhibit 6
Expertise of witnesses
99 There was some variation in the expertise and experience of the witnesses who contributed to the conclave. Messrs Wright and Beck were both experienced builders and assessors of damage to buildings. Messrs Predebon, Fleming and Ms Khani had qualifications in civil engineering and building assessment. Both Mr Predebon and Mr Fleming have extensive experience (30 and 46 years respectively) in that area and have been in the much field longer than Ms Khani.
Conclave reservations
100 In responding to questions directed to structural issues the participants were asked to ignore the issue of mould. In the joint report of the conclave there were two significant reservations placed by the participants. The first was that the parties could not differentiate “between moisture from pipe [leak] and moisture from other sources – this will have a direct impact on scope of works.”
101 The second was that “parties cannot determine the extent of moisture (volume) that was discharged under the building from the leaking hot water pipe.”
102 Both of these qualifications emerged as significant considerations in the cross examination of the participants in the conclave.
Conclave joint report
103 In the conclave, the witnesses were asked to respond to a series of questions designed to explore the extent to which there was common ground as to issues. In relation to structural damage. The questions were directed to attempting to ascertain the extent to which there was agreement first as to the extent of damage caused by the leaking pipe, then the issue of the extent to which it caused undulation in the floor level, and then to opine on the extent to which other causes may have caused damage to the premises.
104 The first question was: what damage, not including mould, was caused to the premises by the leaking pipe?
105 In response to this question witnesses Predebon and Fleming agreed with the original scope of works prepared by Wright. Mr Fleming went further and said that the damage also would include rectifying distortion of the subfloor in the vicinity and packing of stumps but no replacement of footings. In his evidence he noted that the floor had only lifted in one area and thus any stump caused damage was limited.
106 The second question these witnesses were asked to respond to was: did the leaked pipe cause undulation to the floor levels? If, so, please state to what extent.
107 Each of the witnesses effectively agreed that minor movement in the vicinity of the leak was possible. Ms Khani was of the view that as the amount of the leak was unknown the extent of the footing movement in the vicinity of the leak event is undetermined. Mr Beck also noted that in his experience volumetric changes in moisture conditions around footings can cause movement in the building. He refers to the report of Mr Lawrence to the same effect.
108 The final question asked participants to comment on damage from causes other than that of the leaked pipe. In response Mr Fleming referred to cracking of the plasterboard ceiling, of the cornice and distortion of door frames. He also referred to an issue of entry to the pedestrian door and cracked tiles in the bathroom. Mr Wright referred to undulations that have been referred to in other reports.
The joint evidence: structural issues
109 As would be expected in the joint evidence session counsel sought to extract from the witnesses evidence that supported the contents of the reports provided. There was considerable consensus among the witnesses as to the possible extent of damage as a result of the leaked pipe event. This however was subject to the uncertainty that none of the witnesses was aware of the extent of the duration and volume of the leaked pipe event.
110 A key issue was whether there was pre-existing damage to the house including variations in the floor levels and cracks. This had been the conclusion of Mr Wright in his June 2015 (and Mr Thomas in his earlier March report) report which was the basis of the plaintiff seeking her own independent advice and the subsequent involvement of Mr Predebon and Mr Fleming. Under considerable cross examination both engineers maintained their view that there was pre-existing unevenness in the floor of the property, and that the scope of works identified by Mr Wright, with the additional items conceded by Mr Fleming, was the extent of damage caused by the leak event. Ms Khani and Mr Beck did not contradict that opinion. Importantly Mr Fleming, who came onto the scene later opined that the actual quantum of the pipe leak was at the time of his assessment largely irrelevant as he was addressing the state of the building as it was. This is important as a central thrust of the plaintiff’s position was that as late as February 2016 moisture was still weeping out of the batter, and thus implicitly the pipe leak event was continuing. Mr Fleming did not accept this, nor did Mr Predebon who was of the view that when he inspected the property there would be no further leaking from the original event.
111 The second issue explored in the joint session was the extent of pre-existing undulating floor levels. This required an assessment of the extent to which other events, including other moisture ingress, may have affected the underlying subfloor prior to this event. Also relevant was that the floor may not have been originally laid completely level as a certain tolerance is allowed, and thus the true pre-event state of the floor was ultimately a matter of speculation, notwithstanding the lay opinion of the plaintiff that it was in perfect condition. Ms Khani noted that the house is “old”.
112 The evidence of Mr Fleming based on his investigation was that there was other moisture ingress to the subfloor area as a result of leaking downpipes and gaps around the penetrations into the subfloor. He maintained that position in the face of the evidence that there was continual leakage through the batten as observed by Mr Lloyd leading to the installation of a further pit in early 2016. He maintained that leaked pipe event would at that point no longer be relevant. I indicate below that I do not accept that any weeping from the batter observed by Mr Lloyd in early 2016 was related to the leaked pipe event. It is significant that prior to the time Mr Lloyd made that comment the property had been examined by Mr Prederbon, Mr Balmaceda, Statewide Geotechnical engineers[23], and Mr Lawrence.
[23] CB 1075
113 Each of the defendants’ witnesses were strongly cross-examined on the basis that they had not undertaken further investigations and were ignoring the observations by Mrs Briese as to the pre-existing good performance of the property. It was put to Mr Wright that he was effectively partisan. In particular Mr Wright had indicated that he had complied with his order 44 obligations yet he was unaware of the details of those obligations. On the basis of evidence that had been given by Mrs Briese it was put to him that he had ignored comments made to him by her and failed to fully investigate before reaching his conclusions. He refuted the puttage.
Overall assessment of experts
114 First, I do not accept the plaintiff’s criticisms in closing address of Mr Wright. While I accept that he was unaware of his obligations under the rules as an expert witness, this only goes to the weight of his evidence. Having had a chance to observe his demeanour under cross-examination and factor in the fact that his conclusion as to pre-existing structural issues was ultimately supported by Mr Predebon and Mr Fleming I accept his opinions. Similarly I accept the two opinions of the civil engineers and in particular those of Mr Fleming. He was very experienced and I reject suggestions that he was partisan. The same applies to the opinion of Mr Predebon. Both were impressive witnesses.
115 In final submissions the plaintiff criticised the defendant for failing to call Mr Thomas of AA who had reported in March 2015 on the undulations. His report is in evidence as a business record and his oral evidence is unlikely to have added to the defendant’s case. His conclusion that the subfloor was inadequate was consistent with the views of Mr Predebon.
116 In closing submissions counsel for the plaintiff was critical of the failure of AA and Messrs Predebon and Fleming to undertake more investigations into the state of the property including the level of moisture in the subfloor, whether there were other sources of moisture ingress into the subfloor and causing staining on the plywood, whether in fact the windows were leaking and more rigorous investigations to support the conclusions reached.
117 I’m unable to accept these submissions. As I’ve indicated the two engineers were highly qualified and had long experience. Similarly Mr Wright had 26 years’ experience as a builder and assessor. They are entitled to draw on that experience in expressing conclusions, and I reject the suggestions made of a need for greater investigations that are said to provide evidence of a lack of partiality in the witnesses. The various reports prepared at the time for Cunningham by the assessors from AA and later by Mr Predebon and Mr Fleming are comprehensive and don’t have the appearance on their face of seeking to systematically narrow the potential liability of the defendant.
118 One area where there is conflict is that of the opinion of Mr Lawrence as against that of Mr Fleming, and to an extent Ms Khani, as to whether the earth below the subfloor was dry enough to proceed with the rebuilding. The evidence of Mr Boyle when he returned in March 2015 was that the soil was very dry. Mr Fleming was of the view that it was dry enough to proceed. In so far as there is a conflict with Mr Lawrence I prefer the opinion of Mr Fleming.
Assessment on structural joint evidence and conclave
119 The evidence from the structural experts in the form of the original reports and the joint report as well is their oral evidence has to be considered in the light of all the other evidence including that of the plaintiff, her son-in-law Mr Murray, Mr Lawrence and, in relation to observations as to other potential sources of moisture in the subfloor, Mr Lloyd. A critical issue upon which there was general consensus is that given the subsoil conditions upon which the house was built then, in event that there was a major ingress of water as a result of the leaked pipe event, it was certainly possible that one or more of the stumps in the immediate vicinity would have hogged. The consensus as to the extent of such an event was that it would be minor, at most about 12 mm. This then could have given rise to the damage first identified in the AA report first prepared by Mr Wright in June 2015. The wider issue was whether the event gave rise to other structural damage attributed to the event by Ms Briese such as cracks in the cornice, misalignment of doors and a crack in the bathroom tiles, should in fact be attributed to the leaked pipe event.
120 The competing positions of the plaintiff and the defendant with their evidentiary basis are fully set out in the respective closing submissions[24], which I’ve considered and weighed. Both of the cases are essentially circumstantial, with the plaintiff’s case also including the direct observations of the plaintiff and Mr Murray as to cracks and malfunctioning doors that appeared after the event.
[24] DFS 149-176, PFS 122-135
121 In final submissions the plaintiff asked the Court to prefer the observations of Mrs Briese and her son-in-law as to the property after the immediate event following the leaked pipe and from that to conclude that the defendant has failed in its repair obligation. Having considered the matter I prefer the defendant’s analysis to that of the plaintiff. While this involves discounting the plaintiff’s direct evidence as to her observations and accepting over that evidence the expert analysis of the engineers, and building consultants, I am comfortably satisfied to do so. Mr Predebon in his evidence noted that in his experience, it frequently happens that after a particular event household occupants attribute a number of other matters to that event. I am of the view that that is what has happened here.
122 I therefore accept the defendant’s submission that “the unavoidable conclusion is that there must have been pre-existing unevenness.” [25] As the defendant submitted in its final submission, this requires the other matters relied on by the plaintiff, namely a crack in the hallway, a crack in the bathroom and cornice detachment, that she attributed to the leaked pipe event, to be attributed to other causes including structural issues. The arguments and evidence in favour of that conclusion are fully canvassed in the defendant’s final submission[26] and I accept the conclusions urged by the defendant.
[25] DFS 161 and the transcript references at 154 – 160
[26] DFS 165 – 176
123 As I have indicated the plaintiff is relying on a circumstantial case that damage other than the lifting of the parquetry is to be attributed to the leaked pipe event. The weight of the expert evidence, as canvassed by the defendant, is to the contrary. While the plaintiff may firmly believe that the variations in the floor level, and cracks that she observed are attributable to the leak event, her lay opinion has got to be weighed against the considered opinions of experts whose evidence I found convincing.
Mr Lloyd’s evidence as to observing seepage from the batters in early 2016
124 A significant element of the chain of causation of the plaintiff in relation to the development of mould and the extent of the original water leak is evidence from Mr Lloyd that he observed seeping from the batters in February 2016 and was asked by Mrs Briese to install a further sump pit. The inference is that at that point that seepage emanated from the original burst pipe. I find on the basis of the evidence that it is much more likely that any moisture emanating from the batter in February 2016 in fact came from water ingress from other sources such as groundwater following a rain event, or broken storm water pipes, or penetration into the subfloor area through the penetrations identified by Mr Fleming for the downpipes. There is considerable evidence that there was other water ingress into the subfloor. Thus Mr Fleming found dampness on the northern wall. He produced a plan showing the extent of the dampness. Mr Thomas who attended the property in March 2015 observed a pool of water near one of the downpipe penetrations. Mr Boyle who commenced the remediation said that he found the subfloor dry and dusty after he had done his original remediation in June 2014. When he returned in March 2015 when the parquetry had been lifted he said the soil was very dry. Mr Lawrence, who based his report in part on instructions from the plaintiff that it took three days to pump the water from the subfloor[27] and who appears not to have been provided with the report of Mr Thomas of March 2015 opined that it was highly unlikely that the excess water in the subfloor was as a result of water entering from outside. This weakens his opinion.
[27] DCB 1008
125 In the report from Statewide Geotechnical[28], the fill material at the time of their inspection on 26 October 2015 was described as dry but the silty clay was described as “slightly moist. During wet months or following significant rainfall events, development of “perched” groundwater may occur, resulting in localised wetting or saturation of fill materials which overlie the clay interface.” The report noted several large drying/shrinkage cracks were observed in the silky clay exposed in the excavated face. This report also referred to dampness near the pit adjacent to the pool.
[28] CB 1075
126 All the above matters are consistent with the conclusion that any moisture emanating from the original burst pipe event had concluded before the observation of Mr Lloyd in February 2016. This conclusion is relevant to the point made by the plaintiff in closing address that continuing moisture as a consequence of the burst pipe event gave rise to the conditions that would generate mould and therefore gave rise to what was implied as a continuing obligation to remediate the mould in the property after June 2015. For the reasons that I have sought to explain I do not accept that position and am satisfied that any moisture that was a consequence of the burst pipe event was effectively dissipated as a source of structural damage by June 2015, and that any moisture in the subfloor area thereafter is as a result of unaddressed sources of moisture into the subfloor including penetrations surrounding the downpipes. These matters are the responsibility of the plaintiff as the property owner. Contrary to the submission of the plaintiff any such subsequent water ingress cannot be seen as an insured event, as the case was fought on the basis of the May 2014 insured event.[29]
PFS 126 (g)
Evidence of Mr Michael Boyle and Mould Conclave
127 It was common ground in the trial that when the burst pipe event was first discovered there was extensive mould observed in the subfloor and on the various surfaces therein. Before the mould conclave, the defendant led evidence from Mr Boyle who has extensive qualifications and experience in water damage and mould remediation. He prepared a quote on behalf of Restorx that was submitted to Oriel for the remediation of the premises. He then was involved in undertaking the remediation, that led ultimately to the issuing of a clearance certificate that allowed Mr and Mrs Briese to continue living in the property.
128 He gave evidence as to his attendance at the property and placement of various instruments designed to remediate the mould that was located in the subfloor. After the 14 days the subfloor surface was dry and dusty.
129 He was also concerned that there may have been migration of mould into the house itself and he sought to address that by placing various instruments in the house in order to address it. He was very concerned as to the condition of, or risk to Mr Briese. He said that overall he attended the property 20 odd times, and a one occasion in September 2014 discussed condensation.
130 He returned to the property when Pattersons were lifting the parquetry floor in March 2015 and found the soil very dry and there was little mould on the bearers and joists. He engaged in further remediation after the damaged flooring had been pulled up and the new flooring was about to be installed in order to ensure that there were no further problem. He provided a further report for some further works on 10 March 2015. The proposal was accepted and the works were undertaken which included sealing off the balance of the house while the work was done.
131 Dr Black provided a clearance certificate on 12th May where he found that the house did not pass the relevant standards. In the report he notes that it is not clear if mould found throughout the house had been cleaned and/or remediated off contents. He indicated that he was concerned that other rooms of the house including the front bedroom and the “Marilyn room” have not been remediated and are likely to yet be mould contaminated. Subsequently on 28th May Dr Black further inspected and issued a clearance certificate in relation to the contained area, but noticing slightly damp flooring in the dining area.[30]
[30] CB 988
Mould Conclave evidence
132 The mould conclave joint report asked for responses as to what steps were required to rectify mould damage, and whether the steps taken were adequate to rectify the mould damage. The defendant’s expert Mr Murphy opined that the relevant steps had been taken. Mr Murphy had engaged in effectively a desktop analysis as he had not attended the property. Dr Black had attended the property and provided clearance certificates, and noted that the work took longer than expected and that household goods locked in closed rooms would have exacerbated the mould.
133 Mr Murphy noted that it was possible depending on the condition of the subfloor at the time that the subfloor was opened up, that some airborne spores could possibly have transferred throughout the building but would only present an issue if environmental conditions within the property were conducive to mould growth.
134 The mould conclave sought to address issues following the development of mould, whether it had been successfully remediated, and whether the later development of mould was as a result of the leaking pipe. There was evidence as noted above that the defendant had through its adjuster Cunningham arranged for remediation of the property and an assessment to confirm that it was fit for human habitation. The work was conducted by Mr Mike Boyle.
135 In his evidence in the conclave Dr Black was pressed by Mr Twigg as to the extent of mould he found in the property. He confirmed that from his observation there was extensive visible mould in the subfloor on many of the timber items and there was excessive humidity and materials moisture. The timbers were wet enough to support the growth of mould. In relation to the rest of the house he collected various samples and found very large amounts of airborne mould. It was the same type of mould found in the subfloor. He conceded that the particular type of mould, penicillium, was very common and the spores are ever present. Mr Murphy agreed.
136 Dr Black would not concede that the mere common presence was insufficient to support an inference of causation between the two locations. Mr Murphy noted that it is not completely airtight between the subfloor and the rest of the property and you will get a mixing between them. He said it was very difficult to rule it out. Dr Black referred to an inevitable mixing. You could never rule it out entirely. This was agreed with by Mr Murphy. Both witnesses agreed that the amount of water discharged and the conditions in the subfloor are relevant to the potential extent and spread of steam and vapour and ultimately where mould would grow.
137 In the joint evidence Dr Black was strongly pressed on his expert report delivered in December 2017 for the plaintiff’s solicitors. In it he opined that as at the 2015 report successful remediation had not been demonstrated via a post-remediation verification due to tested parts of the structure being found damp and then likely to grow mould and also content items were not available for testing. When he returned in 2017 there was a significant degree of mould contaminated dust over a wide area. Building works were being conducted without containment or complete remediation.
138 In the conclave both witnesses agreed that the presence of other moisture ingress in the subfloor, the absence of adequate ventilation in the subfloor, and within the house itself, would all have contributed to the growth of mould on the property. Dr Black gave further evidence that he observed a breach in the ducted heating which would cause the ducted heating to take any spores from beneath the house in the subfloor into other rooms in the property.
139 Both witnesses confirmed that better ventilation will reduce conditions for mould growth within the property.
140 The plaintiff’s case on mould damage was that the remediation process undertaken by Mr Boyle was confined to a predetermined area. The insurable event was limited to the presence of mould in the subfloor and how mould got anywhere else within the house was unknown. Proper inquiries and testing was not done to resolve the issue as to whether there had been proper remediation of mould throughout the balance of the property. Later there was a development of mould in rooms other those being rectified and damage occurred to the wallpaper. The plaintiff would attribute that to the burst pipe event.
141 Further the plaintiff relies upon the Wayne Tank[31] analogy to support an argument that mould within the property, including any damage to the wallpaper, is attributable to the burst pipe event. This is on the basis of a continuing causal connection as a result of continuing moisture giving rise to an atmosphere that generated the conditions for mould for which the plaintiff would hold the defendant responsible.
[31]Wayne Tank and Pump Co v Employers Liability Assurance Corporation Ltd [1974] QB 57
142 The flaw in this reasoning is twofold. First as I’ve indicated the plaintiff has a continuing duty to look after her own property. She was in occupation of the property and when the decision was taken to commence repairs she was content to have some of the chattels included in some locked up rooms. On any view locking up rooms gives rise to a risk of the development of mould. That is a matter of common sense. When mould was brought to the attention of Mr Boyle in 2016 he had remediated. That does not relieve the plaintiff of her own obligations.
143 A further matter undermining the plaintiff’s position in relation to mould is the argument that there was a continuing source of moisture in the subfloor as a result of the burst pipe event. For the reasons discussed below where I am unable to use accept the evidence of Mr Lloyd as to continuing seeping from the batter as a result of the event, this undermines that part of the argument. Further the evidence of Mr Fleming, Mr Predebon[32] and the report of Mr Thomas, make it clear that there were other sources of moisture in the subfloor, leaving aside issues of a lack of proper ventilation identified by Mr Fleming. Those matters further undermine the argument of the plaintiff that the defendant was failing in its repair obligation in respect of mould that emerged after the initial event.
[32] At CB 1074 Mr Prederbon refers to seepage groundwater and the dilapidated spoon drain
144 The defendant in its final submissions took two other crucial points. First it submitted that any mould that was a consequence of the insured event had been fully remediated by the time the plaintiff changed the locks on the property in June 2015.
145 Second, it submitted in any event mould was specifically excluded under the policy, and could not constitute physical damage in any case.[33]
[33] DFS 285 – 292
Defendants final submissions on mould accepted
146 On all those matters I accept the submissions of the defendant. As I’ve indicated above is difficult to fault the conduct of the insurer in relation to remediating the mould condition that arose immediately after the leak event.[34] The premises were made habitable and remained occupied until late January 2015. Thereafter any development of mould can be attributed to the lack of ventilation in the property as a whole after the plaintiff chose to change the locks and not allow the defendant to proceed with its repair election. As emerged from evidence, and as a matter of common experience, mould is ubiquitous and all property owners have a present continuous duty to take precautions to avoid its development. Those obligations remained on the plaintiff at all times and explain why mould was an excluded condition under the policy. While there may be an argument that mould itself was not “physical” damage, it is unnecessary to ultimately determine that as a legal issue as the defendant accepted, and I’m satisfied discharged, its obligation in relation to mould as part of its election to repair the physical damage to the property after the leak event. The clearance certificate issued by Dr Black is of itself, in my view, evidence that the defendant has discharged this part of its repair obligation following the leak event.
[34] DFS 221
147 When the events after June 2015 are considered, the plaintiff by her own conduct was evidencing an intention to maintain full control of her property and in so far as there may have been any mould spores remaining within the closed up rooms at that time then if they subsequently led to any damage that is a matter that I am satisfied the defendant cannot be held responsible, and I accept the submissions on that point.[35]
[35] DFS 223 – 240
148 The defendant has a further defence to the plaintiff’s claim of damage in relation to mould. It further submits that the plaintiff has not proved that she has suffered any damage as a result of mould. This is on the basis that the remediation undertaken successfully eliminated the mould in the period up to 2015. I’ve accepted that aspect of the defendants submission. The second basis for resisting the plaintiff’s claim is that in so far as there was any mould damage contributed to by the leak, “it was the locking up of the house and the failure to address issues of ventilation and ongoing moisture which contributed to or caused the damage.”[36] I accept the defendants submission that it is also entitled to resist that aspect of the plaintiff’s claim on the basis of section 54 (2) of the Insurance Contracts Act 1984.
[36] DFS 242
The scope of works and the quantum conclave
149 In closing addresses little was made of the competing issues of the quantum to reinstate the plaintiff’s property as a consequence of the burst pipe event. The essence of the plaintiff’s argument was that she had acted reasonably in retaining Longbow to reinstate her property in the face of the defendant’s actions. The measure of damages is the amount that she had paid Longbow namely $1,574,634.60. That is the quantum of her loss as a result of the defendant’s breach of contract.
150 The competing claims were the assessment by Mr Pitney, a quantity surveyor, that the scope of works identified by Mr Fleming as constituting his assessment of the damage caused by the leaked pipe event was $128,038, and the defendant submitted that this ought be accepted as objectively the amount required to repair the damage as a result of the leaked pipe event. The plaintiff did not seek to cross-examine him on that assessment. The approach was criticised in that his method could never be a substitute for a proper quantification on the basis of the work that was in fact done. That is how Mr Beck undertook his task and assessed the amount paid by the plaintiff to Longbow as fair. Her engagement of Longbow was a proper application of an obligation to mitigate her loss.
Did the defendant breach its repair obligation in June 2015?
151 Central to the plaintiff’s case is that she was entitled to have her property reinstated to the condition it was in before the burst pipe event. That condition included having level floors and no cracks in the walls. When it appeared that Pattersons were intending to re-lay parquetry without ensuring the floors were level, she was entitled to require that they cease work. It was reasonable action by her. Thereafter she changed the locks on the property. She did not want random individuals in her property. The building work ceased. The plaintiff retained Mr Foxwell to check the levels and the ascertained that it was not level. Thereafter the insurer sought further advice.
152 Pausing there, it is difficult to see how it could be asserted that the defendant at that point was manifesting an intention to no longer be bound by its repair obligation term. Granted, Pattersons were engaged in an arguably unsatisfactory attempt to effect repairs, they had however not completed the job and were about to have the matter addressed at the direction of Cunningham, who they were engaged by. When the issue of the uneven floor level was raised by the plaintiff, the defendant sought further advice. Pattersons was in a contractual relationship with the defendant, not with the plaintiff. That contract had not been completed.
153 As a matter of contract, even accepting, which I don’t, that the defendant was manifesting an intention to no longer be bound by the repair contract, or proposing an alternative method of implementing the contract, the conduct of the plaintiff in retaining her own expert engineer CBE, and geotechnical engineer Mr Lawrence, can only be seen as an affirmation of the contract at that point.
154 A further matter to note is that the plaintiff argued that after the work stopped no one sought to restart the work or ask for access to the property. There is an element of sophistry about that submission given the attitude that the plaintiff evidenced as the defendant attempted to address the complaint raised by the plaintiff. There was considerable delay as the plaintiff sought first a report from Mr Balmaceda, and then another period when the adjuster sought a proposed scope of works from him for it to consider. Once Mr Schreuders became involved again there was delay as Cunningham sought a quote from him on the scope of works prepared by Mr Fleming. That never emerged until much later. Until the issue of a price for the scope of works was identified then there was little opportunity for the defendant to seek to restart the works.
Breach of contract:which party bears the onus?
155 An important issue arises on the pleadings and emerged from closing addresses. The plaintiff’s case was that the defendant had breached its obligations under the insurance policy by its failure and/or refusal to fulfil its repair obligation and in particular to level the floor, repair the stumps, install new parquetry and remediate the presence of mould. The plaintiff’s claimed loss arose out of her reasonable actions taken in response to the defendant’s failure/refusal. Further, the defendant carried the onus of establishing a failure to mitigate. The extent of the obligation to mitigate is limited as the plaintiff as the wronged party is only required to take reasonable measures to prevent or diminish the loss.
“51. It is trite to say that damages cannot be recovered for any aspect for a loss that could have been prevented by reasonable mitigating action on the part of the injured party. On a proper analysis, the loss in such a scenario is not caused by the breach, but by the failure to mitigate. Allianz bears the onus of establishing the failure to mitigate. [37]
52. The extent of the obligation to mitigate however is limited. It requires the injured party to take reasonable measures that will prevent or diminish the loss. There is no need for the injured party to resort to measures that are costly, complex or extravagant. [Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603 at 607 per Brennan CJ and 654 per Hayne J] It has been said that;
‘A Plaintiff is not obliged to act otherwise than in the ordinary course of business, and the standard is not a high one because the Defendant is a wrongdoer’[38]
If in the course of a reasonable attempt on the part of the Plaintiff to mitigate loss, the total loss or damage is in fact increased, the Plaintiff still remains entitled to damages, including the increased amount. [Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603 at 654 per Hayne J][39]
[37]Burns v MAN Automotive (Aust) Pty Ltd (1986) 161 CLR 653 at 673
[38]NRMA Limited v Morgan [1999] NSWSC 407 at [1289] per Jiles J
[39] PFS [51-52]
156 The defendant by its amended defence asserted that it was the plaintiff who had prevented it fulfilling its accepted repair obligation. It was the plaintiff who carried the onus to prove that the defendant had breached the contract, and she had failed to discharge that onus. The defendant’s final submission set out the legal underpinning for its position:
71. In Mahoney v Lindsay (1980) 33 ALR 601 at 603, the Gibbs J (Stephen, Murphy, Aicken and Wilson JJ agreeing), held that:
‘[…] if one party to a contract prevents the other from fulfilling a condition of the contract, that is equivalent to performance by the latter. The law is stated by Dixon CJ in Turnbull (Peter) & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (1954) 90 CLR 235 at 246–7, in the following words:
“Now long before the doctrine of anticipatory breach of contract was developed it was always the law that, if a contracting party prevented the fulfilment by the opposite party to the contract of a condition precedent therein expressed or implied, it was equal to performance thereof: Hotham v East India Co (1787) 1 TR 638; [99 ER-1295]. But a plaintiff may be dispersed from performing a condition by the defendant expressly or impliedly intimating that it is useless for him to perform it and requesting him not to do so. If the plaintiff acts upon the intimation it is just as effectual as actual prevention.”[40]
[40] DFS [71] for an application of the principle the defendant also relied on Fogarty v CGU Insurance [2016] ACTCA 62 at [29]-[30] (emphasis added)
157 The plaintiff went on to argue that alleging that she has failed to mitigate her loss by refusing access wasn’t a correct application of principle.[41] “Properly understood, the Plaintiff would be required in such circumstances to take positive steps so as to present prevent a loss that could otherwise be reasonably avoided. The answer to a consideration of these questions is when the plaintiff’s conduct was reasonable.” She goes on to argue that where the witnesses agree that the workmanship was substandard then the request to stop the contract until the issues were resolved cannot be said to be unreasonable. Similarly it is asserted that the failure to remedy uninsured defects and design faults could not succeed because it requires the plaintiff to unreasonably not to have repaired matters which by their nature she was unaware of in circumstances where the work stopped and the parties were seeking further opinions. It was argued that the cessation of work was “arguably appropriate”. The submission on this aspect concluded:
“57. Even if it were accepted that the Plaintiff did refuse ongoing access to the Defendant’s contractors, and that the refusal of access caused further loss and damage, that further loss is nonetheless compensable if the conduct complained of was reasonably undertaken. In that regard, we say;
a.Firstly, there was no such refusal of access as has been contended by the Defendant. To the contrary, the cessation of works was accepted by both parties so as to afford an opportunity to resolve questions as to the extent of the scope of works;
b.Secondly, even if those contractors were refused ongoing access, it was a decision reasonably undertaken by the Plaintiff at the time in circumstances where the quality of the work which was being carried out by those contractors was substandard. “[42]
[41] PFS [54 – 55]
[42] PFS [57]
Analysis : plaintiff fails to grapple with her duty under the repair contract
158 For the reasons set out below I am satisfied that in circumstances where the defendant had elected under the policy to effect repairs to the property following the insured event, and where the plaintiff had at no stage prior to her commencing the works contract with Longbow elected to accept any asserted breach of contractual obligations by the defendant, then it was the plaintiff who carried the onus to satisfy the Court that the defendant had breached the contract. It was only in the event that the defendant has breached the contract that the plaintiff is entitled to damages. Further, as the defendant emphasised in closing address, on the plaintiff’s pleadings which alleged a failure or refusal to fulfil the repair obligation, the plaintiff must be alleging that damage occurred as at 17 June 2015 when the plaintiff ordered Pattersons to cease work and subsequently change the locks. In the defendants submission the plaintiff had not proved any damages arising out of any conduct by the defendant at that point.
159 It is no light matter to find that a party has breached a contract. It is not sufficient for counsel for the plaintiff to merely assert that his client has acted reasonably or not unreasonably. The issue must be considered within the contractual framework. As noted above this includes the duties of the defendant to effect the repair after it had made that election, the duty of the plaintiff is a matter of contract to cooperate with the defendant, and as an aspect of her duty of good faith under the contract of insurance, and the duty of the plaintiff under the policy to maintain her property, including where the property is not occupied while the repair works are being undertaken. The defendant squarely raised the issue that the plaintiff’s conduct had prevented it undertaking its repair obligation and on the authorities relied upon by the defendant, discharged it from any further obligation.
160 I find that in circumstances where both parties had not elected to terminate the contract, it was the plaintiff who had by her conduct evidenced a refusal to permit the defendant to discharge its contractual performance, namely repair the damage, and therefore it was the plaintiff who breached the contract. The defendant’s submissions are upheld.
Assessment of respective actions before involvement of Mr Schreuder
161 In reaching this conclusion and considering the actions of the respective parties over the period from June 2014 until July 2016, I find that the actions of the insurer cannot be faulted. The issue of the mould arising out of the original event had been addressed in the immediate period after the pipe burst, and a clearance certificate was issued in June 2015. I refer to my conclusions above and accept the defendants submission on the issue of mould and its remediation.[43] I found the evidence of Mr Murphy cogent. He had the relevant expertise and did not appear partisan. Indeed there was much common ground between his evidence and that of Dr Black.
[43] DFS [177 – 242]
162 In considering the argument that the defendant ought be responsible for development of mould after the plaintiff vacated the property, it is significant that even while Pattersons were undertaking the repairs, the plaintiff was still occupying her house as she had stored a number of valuable items within locked rooms, and was regularly visiting the property to collect her mail.
163 While Pattersons were undertaking work the plaintiff arranged for the subfloor ducting to be replaced. Over the period she also had Mr Lloyd undertake plumbing repairs. Thus the plaintiff was in a position to and did exercise full control over her property as she was obliged to do under the terms of the policy.
164 In relation to the uneven floor levels, immediately after the issue was first raised, through its adjuster Cunningham, the defendant was seeking to address the original complaint made by the plaintiff as to the level of the floor just before Pattersons were to undertake reinstatement of the parquetry. The plaintiff’s agents, Wilkinson had been actively involved in liaising with her and with Cunningham and with the plaintiff’s engineer CBE over the period once the floor level issue was raised. There were multiple meetings and numerous contacts between the relevant parties. It can hardly be said that the defendant was not seeking to move forward with repairing the property. The defendant had the opinions of Messrs Wright, Predebon and ultimately Fleming in support of its proposed scope of works.
165 The actions that the insurer had been taking up to the period of mid-2016 are relevant when characterising the subsequent conduct of the plaintiff.
Did the defendant breach its obligation to repair the damage caused by the insured event?
166 Central to the plaintiff’s case is that the defendant breached its duty to effect repairs that were caused by the burst pipe. This was evidenced by the faulty work commenced by Pattersons, leading the plaintiff to order Pattersons to cease work in June 2015. Thereafter there was never any offer by Pattersons or any other body on behalf of the defendant to complete the repair job. The plaintiff’s case was that she acted reasonably in ordering Pattersons to cease work, and to ultimately retain Longbow to complete the work.
167 In assessing the plaintiff’s conduct, as the wronged party, her submission was she was acting reasonably to mitigate her damage and the bar of reasonableness is not high.
Consideration
168 The policy of insurance, like any contract, requires cooperation between the parties. That it has concurrent obligations can be seen by its terms, such as excluding structural faults. It is implicit in a policy that requires one party to repair damage to another party’s property, that the other party will need to cooperate with the repairer to effect those repairs. Similarly, as the insured’s property is in the hands of the insured, this carries with it, logically, an obligation on the insured to look after her own interests and preserve her own property notwithstanding the repairs that are being effected by the insurer.
169 The plaintiff carries the onus of proof that the defendant breached its obligations under the policy. Considering the position as at June 2015, the Court could not be satisfied that the defendant has breached its obligation to repair the damage. Granted that Pattersons commenced the works, the works had not been concluded and were stopped by the plaintiff. If, which I do not accept, the works undertaken by Pattersons at that stage showed that the defendant was manifesting an intention to break the contract, the plaintiff did not accept that breach. Rather, the contract remained on foot as the parties addressed the significant issues as to how to replace the parquetry floor without doing further damage to the property.
Circumstantial facts that the plaintiff prevented the defendant from fulfilling its part of the contract
170 On the evidence I’m satisfied that the plaintiff has prevented the defendant from discharging its obligations to repair the property. This is a serious finding but is I’m satisfied justified by the evidence. The plaintiff’s attitude in dealing with events after the burst pipe failed to recognise her duty to cooperate with the defendant in order to allow the defendant to effect the repairs. Effectively from the beginning she did not accept the implications of its election to repair the property. It is clear from her demeanour under cross-examination that the plaintiff was used to getting her own way. She was a successful businesswoman. Thus in that capacity she was capable of and did reach conclusions about people and the quality of work quickly. Thus she formed a conclusion about Mr Wright from her first interaction with him. On the evidence she also formed the conclusion that Ms Fruin and who attended the property on behalf of Wilkinson was out of her depth. She formed the view that the standard of workmanship by Pattersons was inadequate. She formed the view that they had abandoned the job because one of the workers had failed to turn off a power tool. She complained about rubbish left in the garage when that consisted of some sheets of ply that were to be collected. Later she is recorded as indicating that Mr Predebon had sought to have the ply lifted so that he could complete his assessment. The true position was that he had not asked for that to occur. As the plaintiff sought to effectively negotiate with the insurer she sought to control the information provided. Thus she is recorded as advising her agent the broker on 4 March 2016 “the builder will be working through me”. [44] She is recorded as telling Mr Foxwell that he was to get the builders off the site “if the work wasn’t that good.” That is consistent with her statement that she had sacked Pattersons in June 2015.
[44] CB 451
171 Her builder Mr Foxwell is recorded in a facsimile in mid-2015 that “my client at this stage has suspended all works on site to have this matter resolved.”[45] In her letter to Mr Schreuders she makes a number of criticisms of both Wilkinson, her broker, and Cunningham in their efforts to address the matters she had been raising. In a second letter she told Mr Schreuders that Mr Foxwell was under “strict instructions he worked for me and no details of any money was to be discussed” [46]After Pattersons were either “sacked” by the plaintiff or to use a more neutral term, the work ceased, the plaintiff proceeded to change the locks on the property.
[45] CB 1020A
[46] CB 562
172 It was the plaintiff’s case in final address that the defendant had failed and/or refused to undertake the appropriate remedial works. The above matters indicate the attitude of the plaintiff after the works ceased.[47] Essentially after the work ceased and there was disagreement between the parties as to the extent of the works required and whether there was unevenness in the floor, the plaintiff adopted an inflexible attitude as to what was to occur.
[47] see also the matters raised in [106 – 112] of DFS
Failure to call witnesses as to repair work
173 In closing submissions the plaintiff criticised the defendant for failing to call a number of the staff of Pattersons to defend the conduct of the repair job before it was stopped by the plaintiff. I am not prepared to draw any inference against the defendant on this point. It was common ground from witnesses such as Mr Wright and Beck that at the point when the job stopped, the builder could be criticised for failing to seek to properly level the floor before applying the subfloor. Judged by the conduct of the defendant after the work stopped, in circumstances where the job had not been completed before it stopped, it is difficult to see that the conduct of the defendant at that point could be characterised as manifesting an intention not to comply with its contractual obligations. Thus calling witnesses from Pattersons would not advance the matter.
Should the defendant have sought to resume the works?
174 Implicit in the criticism of the defendant in the plaintiff’s final address and in the evidence of Mrs Briese is that after the work stopped no one sought to contact her and re-enter the property to recommence the works. On that basis she was entitled to retain Longbow and was acting reasonably to mitigate her loss in circumstances where the defendant was not discharging its duty to repair. Further the plaintiff was in a position where she was vulnerable due to the condition, then ultimate passing, of her husband. She had been out of her property for a considerable period and on her account action was not being taken. She expected high standards from tradesmen employed by her and was plainly frustrated at the failure of the defendant to respond in a “gold star” way. Counsel submitted that the plaintiff’s concerns were not being listened to all were being simply ignored. He particularly mentioned Mr Wright. Her concerns as to the quality of the work were justified and she was entitled to expect and as new standard in the work.
175 Overall, given the past events and her personal position, when she retained Longbow she was acting reasonably.
Assessment
176 There are a number of difficulties with these propositions and I accept the submission of the defendant that focusing on the position of the plaintiff, effectively reverses the onus of proof.
177 Looked at in terms of their overall conduct from the time of the pipe burst, all the actions by the defendant through its conduct including its conduct with the plaintiff’s agent Wilkinson, showed it was taking extensive action to discharge its duty to the plaintiff.
178 In closing address counsel for the plaintiff repeatedly emphasised the proposition that the plaintiff had acted reasonably following the discovery of the uneven floor in June 2015. Coupled with this submission is the submission that after the plaintiff changed the locks, at no time had there been any request on behalf of the defendant to re-enter the property and complete the job. As I have endeavoured to show this inverts the respective duties on the parties. I accept the defendant’s submission is on the point.
179 After the cessation of work which the plaintiff in final address did not dispute was reasonable, all the evidence suggests that it was the defendant that was seeking to have works restarted. It was submitted that there is nothing that the plaintiff did that was unreasonable. It was submitted that the Pattersons scope of works was not going to fulfil the obligations of the defendant under its contract. Thus when the plaintiff told them to stop in effect “what that means is that we have called a stop to the ongoing breach of the defendant’s work”.
180 In response to a question from the Court as to whether the plaintiff should have allowed the defendant to proceed with the MCS quote prepared by Mr Fleming it was submitted that there was no evidence that that had been suggested to the plaintiff. Counsel again in response to a further question as to offering to do the MCS quote said “Well it’s not about so much about repudiation as opposed to breach, but also the other issue is that the insurer is never said “we are now ready, willing and able to perform the works in accordance with the MCS quote.” “There were divergent opinions as to whether the scope of works and it was never resolved.” The matter was thus different from Taylor v GIO General Pty Ltd [2018] VCC 1301 where the insured had refused access.
181 The plaintiff disputed that tendering an amount of money that represented someone else’s quote was not fulfilling the obligations under the contract but rather seeking to settle the dispute. It has to be by agreement. There was a negotiation process.” That’s where those two pulverised opinions were with the defendant at one side of the spectrum and the plaintiff completely at the other. It doesn’t change anything at all. It was an endeavour to resolve the a dispute, but it failed.” He submitted that the defendant breached its contractual obligation when it tried to do the Pattersons scope of work.
182 Thus it was submitted that there was a breach and there was a process of negotiations and endeavours and Mr Schreuders became involved as an advocate for the plaintiff. It is put that everything that she did was on independent advice and had been done reasonably. Even if the Longbow bill was excessive that went back to the issue of mitigation of loss. The property was uninhabitable and remained so. Mould was a problem and as to the causation basis it emanated from the original event. The potential loss being occasion to the plaintiff was continuing to grow. The plaintiff acted reasonably to get a builder into fix the matter. A quote was obtained and it was concluded at $1.574 million.
183 On that basis the actual quantum of the amount spent to pay Longbow was not relevant. The opinion of Mr Pitney was not of assistance as he was not addressing the question needed.
184 In the circumstances the plaintiff was acting reasonably in entering a fixed price contract with Longbow. Her conduct was reasonably undertaken and the fact that she may have exacerbated her damage does not matter. She wasn’t being an intransigent plaintiff. She had another quote from Mr Foxwell similar to that of Longbow.
Consideration – the defendant discharged from performance
185 I refer to my consideration above as to the events after the work by Pattersons ceased in June 2015. A consideration of the conduct of the defendant after that time in the face of the actions by the plaintiff indicates, in accordance with the defendant’s submission submissions[48], which I accept, that the plaintiff has prevented the defendant discharging its election to repair the property. This follows from my acceptance that the original scope of works identified by AA and extended by the scope of works prepared by Mr Fleming, was the insurable damage caused by the leaked pipe event. I have found that in fact the defendant had remediated the mould consequences of that event by June 2015. The scope of works to repair the balance remained incomplete after Pattersons were sent of the site by the plaintiff. Thereafter the plaintiff never gave the defendant the opportunity to resume the work. The delay was attributable to her own actions and indeed Mr Schreuders did not until very late in the piece prepare a quote responsive to the scope of works prepared by Mr Fleming. Thereafter at the direction of the plaintiff he undertook works at the property. The defendant offered an amount to the plaintiff which was the amount that another builder had estimated to do the works following the Pitney scope of works. The plaintiff refused that offer. She cannot now look to the defendant.
[48] DFS 64 – 72
186 The defendant cited the case of Fogarty v CGU Insurance Limited. In that case which dealt with a fire claim where the insurer decided to reinstate but the insured refused to allow the insurer to proceed. The court noted the following:
‘The proceedings before the Magistrate, and before the primary judge, were conducted on the basis that the respondent had elected to repair the damage but this election had been frustrated by the appellant’s refusal to accept the proposed method of repair. The evidence very clearly supports the finding that the appellant was not willing to allow the respondent to undertake the repairs in the manner proposed by the respondent.
It was accepted by the appellant that she had an obligation to exercise her best endeavours to permit the respondent to discharge its obligations under the insurance contract. The respondent has been precluded from discharging its obligations because of the refusal of the appellant to allow it to undertake the proposed repairs. To put it simply, the respondent stands willing to discharge its obligations if it is permitted to do so by the appellant. No occasion for breach of the insurance contract by the respondent has yet arisen.[49]’
[49] [2016] ACTCA 62 at [29] , [ 31]
187 I am of the view that similar sentiments apply in this case.
188 For all the above reasons I dismiss the case.
189 I will hear the parties on the appropriate orders.
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