Colonial Range Pty Ltd v CES-Queen (Vic) Pty Ltd

IN THE SUPREME COURT OF VICTORIA AT MELBOURNE

Not Restricted

COMMERCIAL COURT
INSURANCE LIST

S CI 2016 2742

COLONIAL RANGE PTY LTD (ACN 070 855 220)	Plaintiff
v
CES-QUEEN (VIC) PTY LTD (ACN 153 232 663) and DELTA PTY LTD (ACN 007 069 794)	Defendants

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JUDGE:	DIGBY J
WHERE HELD:	Melbourne
DATE OF HEARING:	27 July 2016
DATE OF JUDGMENT:	5 August 2016
CASE MAY BE CITED AS:	Colonial Range Pty Ltd v CES-Queen (Vic) Pty Ltd & anor
MEDIUM NEUTRAL CITATION:	[2016] VSC 494

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PRACTICE AND PROCEDURE – Application for declaratory relief – Application for injunctive relief – Whether Contract of Insurance is a contract of insurance in accordance with s 93 of the Building Act 1993 (Vic) – Whether Contract of Insurance together with Contract Endorsement is a contract of insurance in accordance with s 93 of the Building Act 1993 (Vic) – You v Thomas [2014] VSC 255, considered.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J Pizer QC with Mr N Wood	Norton Gledhill
For the First Defendant	Mr M Roberts QC with Ms C Symons	Moray & Agnew
For the Second Defendant	Mr B Reid	Thomson Geer

HIS HONOUR:

This proceeding

By this proceeding the plaintiff seeks declarations that the defendants have failed to effect the insurances provided for by s 93 of the Building Act 1993 (Vic) (‘the Act’) which are required to be in place before an owner commences what are defined as protection works preparatory to the commencement of subsequent building works, in this instance to be undertaken in Melbourne’s central business district. The plaintiff also seeks to enjoin the owner from commencing such protection works if it is established that the required insurances are not in place.

Background

CES-Queen (Vic) Pty Ltd (‘CES-Queen’), the first defendant, is the registered proprietor of 150 Queen Street, Melbourne. The existing building on 150 Queen Street is an office building comprising 13 storeys with a basement car park. CES-Queen intends to demolish the existing building and in its place build a 71-storey residential tower to be known as ‘Tower Melbourne’. CES-Queen has retained Delta Pty Ltd (‘Delta’), the second defendant, to perform the demolition work.

Colonial Range Pty Ltd (‘Colonial’), the plaintiff, is the registered proprietor of two properties adjoining 150 Queen Street, being the properties at 140 Queen Street and 21-27 McKillop Street. These properties are, for the purposes of the Act and in particular, Part 7, understood to be ‘adjoining properties’ and Colonial, an ‘adjoining owner’.

Under the Act, CES-Queen is an ‘owner’ and has certain obligations, including under Part 7 of the Act, which prescribes a regime that is to apply in circumstances where ‘protection work’ is required to be carried out in respect of an ‘adjoining property’.

The Building Surveyor appointed under the Act in respect of the proposed building works to take place at 150 Queen Street, Mr Ari Akritidis, issued a Protection Works Determination, pursuant to s 87 of the Act, on 4 May 2015. On 28 April 2016, the Building Appeals Board determined Colonial’s appeal of the Building Surveyor’s Determination and affirmed the determination of Mr Ari Akritidis.

On 7 April 2016, CES-Queen provided Colonial with a certificate of currency and a copy of Delta insurance policy No. B0621CDELT000115.

On 12 April 2016, solicitors for Colonial wrote to the solicitors for CES-Queen, outlining a number of bases upon which Colonial contended that Delta policy No. B0621CDELT000115 was not a contract of insurance in force in accordance with s 93(1) of the Act. Those alleged bases were, inter alia:

(a) Colonial was not, as an adjoining owner, insured under the contract of insurance as s 93(1)(a) of the Act requires;

(b) if Colonial was to be a named insured under the contract of insurance, exclusion 4 would need to be amended, as it excluded liability to pay compensation for property damage where that property was owned by the insured;

(c) as CES-Queen was not a named insured in the contract of insurance, Colonial would need to review the demolition contract between CES-Queen and Delta to ensure that CES-Queen fell into one of the classes defined as being insured under the contract of insurance;

(d) cover provided by the contract of insurance did not extend to events which caused personal injury or property damage where that damage was expected or intended by the insured, as required by s 93 of the Act;

(e) cover provided by the contract of insurance did not extend to economic loss or consequential loss which may be caused to adjoining occupiers and members of the public; and

(f) cover provided by the contract of insurance extended to indemnity for the insured’s liability arising from the existence of or exposure to asbestos and/or any asbestos containing materials, but the asbestos cover contained a number of provisos.

On 2 July 2016, CES-Queen sent an email to Colonial stating that it intended to commence the protection work the subject of the Building Appeals Board determination of 28 April 2016 during the week starting 8 August 2016. The email from CES-Queen attached Delta Policy No. B0621CDELT00016 (‘the Contract of Insurance’) and Contract Endorsement 01 dated 21 June 2016 (‘Contract Endorsement’). The Contract Endorsement amended the Contract of Insurance and contained the following clauses:

1.CES-Queen is included as an Additional Insured for its rights and interests
2.any term of this Policy which is in conflict with Section 93 of the Building Act 1933 [sic] (Vic) (Act) is hereby amended to conform to such Section 93
3.Definition 3, “Property Damage” shall read:
(a)physical injury to or destruction of loss of tangible property which occurs during the Policy Period and any loss of use of that property resulting therefrom; or
(b)loss of use of tangible property which has not been physically injured or destroyed or lost which is caused by physical injury to or destruction or loss of other tangible property, trespass, nuisance or wrongful interference with the enjoyment of rights over tangible property which occurs during the Policy Period.

4.the attached Protection Works Endorsement shall apply in respect of the owners of property adjoining 150 Queen Street.

The ‘Protection Works Endorsement’, referred to in Clause 4 above, which formed part of the Contract of Insurance defined ‘Adjoining Owner’, ‘Adjoining Property’, ‘Owner’, ‘Protection Works’ and stated:

During the Policy Period and for a period of twelve months after the expiry of the Policy Period, this Policy indemnifies:
Damage to the Adjoining Property caused by the proposed Protection Works and any legal liabilities incurred to the Adjoining Property occupiers and members of the public, but only if the Owner has complied in every respect with the Protection Work requirements.

The ‘Protection Works Endorsement’ was subsequently amended on 21 July 2016, as explained in the Affidavit of Andrew John Montgomery Blunt, dated 21 July 2016. As a result of this amendment the above extracted section of the Protection Works Endorsement now reads:

During the Policy Period and for a period of twelve months after the expiry of the Policy Period, this Policy indemnifies:
Damage to the Adjoining Property caused by the proposed Protection Works and any legal liabilities incurred to the Adjoining Property occupiers and members of the public, ~~but only if the Owner has complied in every respect with the Protection Work requirements.~~

However, despite CES-Queen’s efforts to meet Colonial’s criticisms of the Contract of Insurance, on 13 July 2016 the solicitors for Colonial emailed the solicitors for CES-Queen informing them that they did not consider the Contract of Insurance, standing alone or in conjunction with the Contract Endorsement, to be a contract of insurance in accordance with s 93 of the Act and that Colonial would be issuing proceedings without further notice.

Relief sought by the plaintiff

By Originating Motion filed 13 July 2016, Colonial now seeks a declaration that the Contract of Insurance taken out by Delta is not a contract of insurance in accordance with s 93 of the Act.

Colonial also seeks a declaration that the Contract of Insurance, when read together with the Contract Endorsement, is not a contract of insurance in accordance with s 93 of the Act.

Further, Colonial seeks injunctive relief preventing CES-Queen from undertaking or commencing protection work on the adjoining properties at 140 Queen Street and 21-27 McKillop Street, Melbourne, until a contract of insurance is in force in accordance with s 93 of the Act.[1]
[1]CES-Queen earlier raised with Colonial’s lawyers the question of whether or not the Building Appeals Board may wish to be involved in the hearing of this matter (Affidavit of Andreanna Constantine Moschoyiannis, sworn 21 July 2016 Exhibit “ACM-21”). The solicitors for Colonial responded that in their view all relevant parties had been notified of the proceeding.

Colonial’s Amended Originating Motion filed 3 August 2016 is in the following terms:

1.A declaration that the contract of insurance with policy number B0621CDELT000116 procured by the Second Defendant (Delta) for the period 1 June 2016 to 1 June 2017 (Contract), is not a contract of insurance in accordance with section 93 of the Building Act 1993 (Vic) (Act) against damage by the protection work proposed by the First Defendant (CES-Queen) to the adjoining properties owned by the Plaintiff (Colonial) at 140 Queen Street, Melbourne (140 Queen Street) and 21-27 McKillop Street, Melbourne (21-27 McKillop Street) and against any liabilities likely to be incurred to adjoining occupiers and members of the public during the carrying out of the building work by CES-Queen.
2.A declaration that the Contract, when read together with the Contract Endorsement 01 dated 21 June 2016 (being exhibit “AB1” to the affidavit of Andrew John Montgomery Blunt affirmed 21 July 2016), is not a contract of insurance in accordance with section 93 of the Act against damage by the proposed protection work to 140 Queen Street and 21-27 McKillop Street and against any liabilities likely to be incurred to adjoining occupiers and members of the public during the carrying out of the building work by CES-Queen.
3.An injunction restraining CES-Queen from commencing or undertaking protection work in respect of 140 Queen Street and 21-27 McKillop Street unless and until CES-Queen:
(a)ensures that a contract of insurance is in force in accordance with section 93 of the Act against damage by the proposed protection work to 140 Queen Street and 21-27 McKillop Street and against any liabilities likely to be incurred to adjoining occupiers and members of the public during the carrying out of the building work by CES-Queen; and
(b)lodges a copy of that contract of insurance with Colonial.

4. Costs.
5. Such further or other orders as the Court thinks fit.

The determination of these issues is pressing because CES-Queen, the owner of 150 Queen Street Melbourne, is poised to demolish that building with those works scheduled to commence on 8 August 2016 and to be followed by the continuation of a substantial development said to be worth $750 million.

The trial and subsequent correspondence

The trial proceeded by way of affidavit evidence alone.[2] At the hearing of the trial on 27 July 2016, leave was granted to Colonial to amend the Originating Motion filed 13 July 2016 so that the declaration sought at paragraph 2 of the Originating Motion would refer and apply to the most recent contract endorsement[3] which CES-Queen seeks to rely upon in conjunction with the Contract of Insurance.
[2]Colonial relied upon the Affidavit of Andrew John Green, dated 13 July 2016 and the Affidavit of Miranda Ellen Bordignon, dated 19 July 2016. CES-Queen relied upon the Affidavit of Andreanna Constantine Moschoyiannis, dated 14 July 2016 and the Further Affidavit of Andreanna Constantine Moschoyiannis, dated 21 July 2016. Delta relied upon the Affidavit of Andrew John Montgomery Blunt, dated 21 July 2016.
[3]Affidavit of Andrew John Montgomery Blunt affirmed 21 July 2016, Exhibit “AB-1”.

The need to amend the Originating Motion arose as a result of the Contract Endorsement being revised so as to delete the words ‘… but only if the Owner has complied in every respect with the Protection Works requirements’.

An Amended Originating Motion was filed with the Court on 3 August 2016, which specifically identified the Contract Endorsement as exhibit “AB-1” to the affidavit of Andrew John Montgomery Blunt, affirmed 21 July 2016.

On 1 August 2016, the Court received correspondence from the solicitors for CES-Queen, which stated, inter alia, that:

CES-Queen does not consider it necessary for the Court to consider whether it should grant the injunction sought by the plaintiff, in circumstances where CES-Queen has not at any time indicated an intention to act otherwise than in accordance with law and that statement reflects both the statement of present fact as well as future intention.

This correspondence was provoked by discussion during the trial on 27 July 2016 as to whether CES-Queen would provide a communication in the nature of an assurance or an undertaking that if the Court decided that the subject Contract of Insurance was not compliant with s 93 of the Act, CES-Queen would not proceed with the protection works until a compliant contract of insurance was in place.

Relevant legislation

Section 3 of the Act includes the following definitions:

adjoining property means land (including any street, highway, lane, footway, square, alley and right of way) which is so situated in relation to the site on which building work is to be carried out as to be at risk of significant damage from the building work;
protection work means—
(a) permanent or temporary work of—
(i) underpinning, including the provision of vertical support, lateral support, protection against variation in earth pressures, provision of ground anchors and other support for adjoining property; or
(ii) shoring up of adjoining property; or
(iii) overhead protection for adjoining property; or
(iv) other work designed to maintain the stability of adjoining property or to protect adjoining property from damage from building work; or
(b) any work or use of equipment necessary for the provision, maintenance and removal of work referred to in paragraph (a)—

whether or not the work or equipment is carried out or used on, over, under or in the air space above the land on which the building work is or is to be carried out or the adjoining property.

Section 93 of the Act provides:

Owner to arrange insurance cover
(1) Before any protection work is commenced in respect of an adjoining property, an owner must ensure that a contract of insurance is in force, in accordance with this section, against—
(a) damage by the proposed protection work to the adjoining property; and
(b) any liabilities likely to be incurred to adjoining occupiers and members of the public during the carrying out of the building work and for a period of 12 months after that building work is completed.

Penalty: 500 penalty units, in the case of a natural person.
2500 penalty units, in the case of a body corporate.

(2) The contract of insurance must be entered into with an insurer and for an amount—
(a) agreed to by the owner and the adjoining owner; or
(b) in the event of a dispute, determined by the Building Appeals Board under Part 10.

(3) The owner must lodge a copy of the contract of insurance with the adjoining owner before the commencement of the protection work.

Penalty: 50 penalty units, in the case of a natural person.
120 penalty units, in the case of a body corporate.

(4) The owner must ensure that the contract of insurance is renewed or extended as often as may be necessary during the carrying out of the building work and for 12 months after that work is completed.

Penalty: 500 penalty units, in the case of a natural person.
2500 penalty units, in the case of a body corporate.

(5) The owner must lodge a copy of a document evidencing the renewal or extension of the contract of insurance with the adjoining owner as soon as it is practicable to do so after the renewal or extension.

Penalty: 50 penalty units, in the case of a natural person.
120 penalty units, in the case of a body corporate.

Section 98 of the Act provides:

An owner must compensate an adjoining owner or adjoining occupier for inconvenience, loss or damage suffered by the adjoining owner or adjoining occupier in connection with the carrying out of protection work under this Part.

Section 99 of the Act provides:

Nothing in this Part relieves an owner from any liability to which the owner would otherwise be subject for injury to the adjoining owner or adjoining occupier because of the protection work carried out by the owner under this Part.

Section 152 of the Act provides:

If an owner and an adjoining owner cannot agree about the nature of cover to be provided under a proposed contract of insurance under section 93 or about the amount to be insured under that contract, either of them may refer the matter to the Building Appeals Board.

Section 253 of the Act provides:

(1)The Authority or a municipal building surveyor or any other prescribed body or person may bring proceedings in any court of competent jurisdiction for an order under this section in the event of a breach, or threatened or apprehended breach, of this Act or the regulations or a notice, permit, order or determination issued or made under this Act (including a notice or order or determination of the Building Appeals Board).
(2)The court, if it is satisfied that a breach, or threatened or apprehended breach, has been or will be committed or is likely to be committed, may make any one or more of the following orders—
(a)an order to restrain the breach or other conduct by the person by whom the breach is committed or by whom the threatened or apprehended breach is likely to be committed;
(b)an order requiring building work or protection work to be carried out;
(c)an order requiring the payment of money into court in respect of any building work carried out by, or to be carried out by, the municipal building surveyor;

(d) any necessary ancillary orders.
(3)An application for an order under this section may be made during proceedings for an offence under this Act or the regulations and an order may be made instead of or in addition to any penalty imposed in those or any other proceedings.
(4)An application may not be made under this section as to a notice or order or other matter that is subject to a proceeding before the Building Appeals Board that has not been finally disposed of.

Colonial’s submissions
Summary

In summary, Colonial submits that CES-Queen has failed to procure a contract of insurance that is ‘in accordance with s 93’ of the Act and therefore cannot commence the proposed protection work, which is scheduled to begin on Monday 8 August 2016.

Colonial argues that the Contract of Insurance procured by Delta, whether read alone or together with the Contract Endorsement, does not comply with the requirements of s 93 of the Act. Colonial notes that the phrase ‘contract of insurance’ referred to in s 93(1) of the Act is not defined by the Act. Colonial submits that therefore that phrase must be construed in accordance with the general law. Colonial submits that at general law a contract of insurance must have three elements, namely it must provide that the insured will become entitled to something on the occurrence of some event; the event must be one which involves some element of uncertainty; and further that the assured must have an insurable interest in the subject matter of the contract.

Colonial contends that the indemnity required by s 93(1)(a) of the Act is first party liability insurance for the benefit of any person who might suffer loss if the adjoining property is damaged by the proposed protection work. Colonial submits that such persons include the adjoining owner and any other person, such as tenants of the adjoining owner, who have an insurable interest in the adjoining property.

Colonial then submits that the indemnity required by s 93(1)(b) of the Act, by contrast, is third party liability insurance for the benefit of the owner.

Colonial submits that the two distinct species of insurance required by s 93(1)(a) (first party liability insurance) and by s 93(1)(b) (third party liability insurance for the benefit of the owner) is supported by a decision of this Court in You v Thomas[4].
[4][2014] VSC 255, [31]

CES-Queen submits in relation to the injunctive relief sought by Colonial that ‘There may well continue to be an issue as to whether injunctive relief may be granted but as that does not seem to be pursued then CES-Queen does not further address the issue’.[5]
[5]Written Submissions of CES-Queen, 21 January 2016, [12].

Colonial’s submissions that the contract does not accord with s 93 of the Act

Colonial submits that for the following five reasons the Contract of Insurance (read alone without the Contract Endorsement) fails to meet the requirements of s 93 of the Act.

First, the Contract of Insurance does not state that the adjoining owner, Colonial, or any other person with an insurable interest in the adjoining properties, is insured under the contract and therefore it is not in compliance with s 93 of the Act for that reason. Further, neither Colonial, nor any other person with an insurable interest in the adjoining properties, are named insured or (if the following was sufficient to satisfy the requirements of s 93(1) of the Act) persons otherwise entitled to the benefit of the Contract of Insurance so as to engage s 20 and/or s 48(1) of the Insurance Contracts Act 1984 (Cth) (‘the IC Act’).

Second, the ‘owner’ must be an insured under the insurance contract for that contract to comply with the requirements of s 93(1)(b) of the Act. Colonial submits that in relation to the Contract of Insurance, read alone and apart from the Contract Endorsement, CES-Queen is not stated to be an insured under the Contract of Insurance. Put another way, CES-Queen is not a named insured or, if the following was sufficient to satisfy s 93(1), a person otherwise entitled to the benefit of the contract so as to engage s 20 and/or s 48(1) of the IC Act.

Third, because the definition of ‘Occurrence’ in the relevant policy is defined as ‘an event…which causes Personal Injury, Property Damage or Advertising Liability which is not expected or intended from the standpoint of the Insured’, the Contract of Insurance does not cover events that cause Personal Injury or Property Damage where that injury or damage is expected or intended by the insured. Colonial argue that these terms give rise to a qualification in respect of cover which is not permitted by s 93 of the Act.

Fourth, the Contract of Insurance does not provide indemnity for any liabilities for economic loss or consequential loss that may be caused to adjoining occupiers and members of the public, because such loss is not encompassed within the definitions of Personal Injury, Property Damage or Advertising Liability. Colonial argues that the Contract of Insurance thereby impermissibly excludes claims such as claims for nuisance or for consequential loss due to business disruption.

Finally, the provisions of proviso three to extension 12[6], limit the scope of the ‘asbestos removal extension’ in respect of liability arising from a requirement to clean up or remove asbestos, to circumstances where that liability arises solely in consequence of a ‘sudden specific and identifiable fire explosion impact or collapse’. Colonial argues that these terms give rise to a limitation of cover which results in the Contract of Insurance not providing the full indemnity required by s 93 of the Act.
[6]Contract of Insurance, p 12.

Colonial also argues that any contention of CES-Queen and Delta that the Contract of Insurance when read together with the Contract Endorsement meets the requirements of s 93 of the Act is flawed for the following reasons.

Colonial had argued that the indemnity Contract of Insurance read together with the Contract Endorsement is impermissibly qualified by the Protection Works Exclusion. Colonial identified ‘the Protection Works Exclusion’ as the following provisions in the second part of the Endorsement entitled ‘Protection Works Endorsement’, and in particular the following provisions of the Protection Works Endorsement:

The Indemnity
During the Policy Period and for a period of 12 months after the expiry of the Policy Period, this Policy indemnifies:
Damage to the Adjoining Property caused by the Proposed Protection Works and any legal liabilities incurred to the Adjoining Property occupiers and members of the public, but only if the Owner has complied in every respect with the Protection Works requirements. (emphasis added)

Colonial submitted that s 93(1)(a) requires insurance against ‘damage by the proposed protection work to the adjoining property’. Colonial contends that the cover required by both this section and s 93(1)(b) must meet the requirement to the section which is expressed in unqualified terms.

Colonial had contended that the Protection Works Exclusion qualifies the scope of cover by providing that the indemnity will be provided ‘but only if the Owner has complied in every respect with the Protection Works requirements’. Colonial had contended that these words introduced a significant qualification to the cover required by s 93(1). Colonial contended that if the Protection Works Exclusion applied, indemnity may be refused even in circumstances where there is damage to an adjoining property by protection works or liabilities are incurred to adjoining occupiers and members of the public.

However, as noted above, by the Contract Endorsement dated 21 July 2016[7] which Delta agreed with its underwriters, the ‘Protection Works Exclusion’ has been deleted rendering the above Colonial contentions in relation to the earlier ‘Protection Works Exclusion’ redundant.
[7]Exhibit “AB1” to the Andrew John Montgomery Blunt affidavit affirmed on 21 July 2016.

Contract Endorsement

Colonial also argue that the section of the Contract Endorsement which is entitled ‘Contract Changes’ gives rise to uncertainty of application and in turn provisions of the insurance policy. The section of the Contract Endorsement which is entitled ‘Contract Changes’ includes the following terms:

1. CES-Queen is included as an Additional Insured for its rights and interests.
2. any term of the Contract which is in conflict with Section 93 of the Building Act 1933 [sic] (Vic) (Act) is hereby amended to conform to such Section 93. [‘the Amendment Clause’]

3. Definition 3, “Property Damage” shall read:
(a) physical injury to or destruction or loss of tangible property which occurs during the Policy Period and any loss of use of that property resulting therefrom; or
(b)loss of use of tangible property which has not been physically injured or destroyed or lost which is caused by physical injury to or destruction or loss of other tangible property, trespass, nuisance or wrongful interference with the enjoyment of rights over tangible property which occurs during the Policy Period.

4. the attached Protection Works Endorsement shall apply in respect of the owners of property adjoining 150 Queen Street.

Colonial submits that it is unclear whether, and if so how, each of the potential inconsistencies in the body of the insurance contract can be ‘amended’ by operation of the Amendment Clause. Colonial contends that it is unclear whether the Amendment Clause which is intended to obviate any conflict with s 93 of the Act, is intended to work by authorising the severance of clauses in the Contract of Insurance which are in conflict with s 93 of the Act or whether, as Colonial describes the hypothetical exercise, ‘it is also intended to authorise clauses being rewritten’. Colonial submits that as a result of what it says is uncertainty of operation it is unclear whether the inconsistencies which it relies upon are ‘cured’ by the Amendment Clause.[8]
[8]Written Submissions of Colonial, 19 July 2016, [24.1]-[24.5].

Benefit of the indemnities

Colonial submits that the section of the Endorsement entitled ‘Contract Changes’ fails to state that that indemnities provided by the Protection Works Endorsement are for the benefit of CES-Queen, as Colonial submits is required by s 93(1)(b) of the Act. The Endorsement entitled ‘Contract Changes’ includes the following provision in subparagraph 4:

4. the attached Protection Works Endorsement shall apply in respect of the owners of property adjoining 150 Queen Street.”

Colonial notes that the Protection Works Endorsement indemnifies ‘damage to the Adjoining Property…’. Colonial submits that the section of the Endorsement entitled ‘Protection Works Endorsement’ does not identify who is entitled to the benefit of the indemnity. Colonial observes that the first part of the Endorsement states that the Protection Works Endorsement ‘shall apply in respect of the owners of property adjoining 150 Queen Street’, and asserts that the Endorsement should, but does not expressly state that it affords or provides indemnity for an ‘Adjoining Owner’ (such as Colonial) and for all other persons with an insurable interest in the adjoining property (such as Colonial’s tenants). Colonial notes that the phrase ‘Adjoining Owner’ is a defined term in Part 2 of the Endorsement to the Contract of Insurance, and concedes that that term would probably cover Colonial, but submits further that the term is not being used in respect of the indemnity.[9]

[9]Colonial written submission 19 July 2016, [28].

Colonial contends on these bases that the Contract of Insurance when read together with the Endorsement is not a contract of insurance ‘in accordance with s 93 of the Act.

CES-Queen’s submissions

CES-Queen argues that the indemnity required by s 93(1)(a) of the Act is not ‘first party liability insurance’ for the benefit of any person who might suffer loss if the adjoining property is damaged by proposed protection work, including an adjoining owner. Rather, what is required is third party liability insurance that can be called on by an owner in satisfaction of any claim made by an adjoining owner or adjoining occupier, including one made under s 98 of the Act. CES-Queen submits this reading is supported by the unambiguous language of s 93 of the Act and also by what is said to be the counterpart provision to s 93 of the Act, s 98 of the Act.

CES-Queen submits that the indemnities required by ss 93(1)(a) and 93(1)(b) are of the same character. It submits that s 93(1)(a) simply requires that an owner have in place a contract of insurance that indemnifies against a prescribed category of damage, and further submits that there is no indication from the language of s 93(1)(a) that the required contract of insurance must be in the name of, or otherwise operate to the benefit of an adjoining owner, such as Colonial or any other person with an insurable interest in the adjoining property.

CES-Queen argues that many things indicate a contrary construction to that contended for by Colonial, including that a failure to arrange required insurance exposes the ‘owner’ to substantial potential penalties under s 93(1). CES-Queen also submits that the owner should be in a position to protect against the risk to which s 93 is directed, without having recourse to third parties such as the adjoining owner. In support of that submission CES-Queen also submits that if an owner is required to ensure that a contract of insurance is in place to which an adjoining owner is a party (as a ‘named insured’ or ‘named beneficiary’), that would assume a level of co-operation, authority and control with and in respect of, an adjoining owner that is unrealistic and from an insurance perspective, CES-Queen asserts, impractical and unworkable. For example, CES-Queen points to what it argues would be clear problems regarding disclosure in relation to an unwilling adjoining owner who must be named as an insured.

Further, in support of its contention that the Act does not require an adjoining owner to be named as an insured under the contract of insurance required by s 93 of the Act, CES-Queen points out that the Act contemplates the involvement of the adjoining owner in respect of the amount of insurance which the owner procures, as expressly provided for in s 93(2)(a). No further contemplated involvement by the adjoining owner in relation to other issues in connection with the acquired Contract of Insurance appears to be contemplated by s 93 of the Act.

CES-Queen also submits that s 98 of the Act provides for an entitlement in an adjoining owner or adjoining occupier to compensation in respect of loss or damage suffered in connection with the carrying out of protection work. In that part of its submissions CES-Queen also contends that s 93(1) of the Act should be understood as the mechanism by which a claim made under s 98 can be satisfied.

CES-Queen explains the scheme of the Act as one where in the ordinary course, upon receipt of a claim for compensation under s 98 of the Act, the owner would look to the insurance contract enforced pursuant to s 93(1) to discharge any liability. CES-Queen cites CGU Insurance Ltd v Blakeley[10] as authority to establish that an adjoining owner is likely to be entitled to participate in any proceeding concerning a contract of insurance enforced under s 93(1), despite being a third party or ‘outsider’ to the relevant insurance contracts.
[10](2016) 327 ALR 564.

CES-Queen contends that the decision of this Court in You v Thomas does not support Colonial’s construction of s 93(1)(a) of the Act. CES-Queen refers to Justice McMillan’s statement in that case that ‘an insurance contract upon which the adjoining owner was unable to recover would necessarily fail to comply with s 93(1)(a), for it would not in effect indemnify the adjoining owner against loss’.[11] CES-Queen submits that her Honour’s statement is not irreconcilable with such a contract being a third party indemnity contract. CES-Queen submits that this is so given that her Honour’s decision, it submits, focuses on the practical position in connection with whether an adjoining owner will receive the benefit of a contract of insurance directed at protection works which have damaged its property, and her Honour’s conclusion at [36] in substance that a policy of insurance will not fail to comply with s 93 of the Act solely because the adjoining owner was not named in such a policy.[12]
[11][2014] VSC 255, [31].
[12]As an alternative to its construction submission, CES-Queen submits that the decision in You v Thomas should not be followed (Written Submissions of CES-Queen, 21 July 2016, [20]).

CES-Queen further contends that notwithstanding the construction which Colonial submits is supported by the decision in You v Thomas, CES-Queen contends that the only requirement it has to satisfy is to ‘ensure that a contract of insurance is in force’. CES-Queen’s submission is that any requirement arising under s 93(1)(a) of the Act to procure first party indemnity insurance in the name of Colonial, would in any event be met by an owner taking steps to satisfy itself that an adjoining owner or other party with an insurable interest, had itself procured its own first party indemnity insurance which provided cover, including, for ‘damage by the proposed protection work to the adjoining property’.

CES-Queen also emphasises that the relevant insurance contract includes a three page endorsement dated 21 June 2016. The three page additional endorsement by which CES-Queen sought to satisfy Colonial includes Clauses 1-4, set out above.

CES-Queen submits that the effect of the Amendment Clause is to make the Contract Endorsement a self-contained extension of cover provided by the underlying policy. Further, CES-Queen submits that the clear intention of the policy, and accordingly of the insurer, is that the policy as endorsed provides the cover required by the provisions of ss 93(1)(a) and 93(1)(b) of the Act. CES-Queen pointed out in submissions that the indemnity provision of the Contract Endorsement mirrors the words of s 93(1)(a), rendering it clear that the insurance provided by the Contract of Insurance is intended, and does cover, the insurance required under the Act.

Colonial’s submissions in response

By further written submissions dated 25 July 2016, Colonial submits that because the ‘adjoining property’ is the subject matter of the insurance required by s 93(1)(a), what must be insured is the adjoining property itself. By contrast, Colonial submits, the subject matter of the insurance required by s 93(1)(b) is ‘any liabilities likely to be incurred’ to certain third parties in certain circumstances. Accordingly, Colonial submits that what must be insured under s 93(1)(b) is the owner’s liability to third parties. In this way Colonial submits a clear distinction can be identified between the insurances required under s 93(1)(a) and (b).

Colonial further develops the above submission by contending that under s 93(1)(a) it is the asset itself, being the adjoining property which must be insured, and therefore it submits, persons with an insurable interest in that asset must be insured under the contract, by either being named insureds or in a manner which otherwise entitles those persons to the benefit of the insurance contract in a way which engages s 20 and/or s 48(1) of the IC Act.[13]
[13]Colonial asserts that this conclusion is supported by You v Thomas. Colonial adds to its submission that to depart from the decision of a Judge of the same rank, the subsequent Judge must consider the other Judge plainly wrong. Colonial refers to to Melbourne City Investments Pty Ltd v Leighton Holdings Limited [2015] VSCA 235, [39], noting that the test of whether a judgment is ‘plainly wrong’ is a ‘stringent one’.

As earlier mentioned, Colonial submits that insofar as the Amendment Clause seeks to resolve potential conflicts between the terms of the Contract of Insurance and s 93 of the Act, because, in its submissions, there will be different ways to make the policy conform to s 93 of the Act, the application of the Amendment Clause to the preceding terms of the Contract of Insurance renders that contract vague and unenforceable. Therefore, Colonial submits, in addition to its responses in argument to the defendants’ assertions, the Amendment Clause does not cure all the problems which Colonial has submitted result in the Contract of Insurance failing to provide cover in accordance with the Act.

Delta’s submissions

Delta expressly agrees with and adopts CES-Queen’s submissions in this matter.

Delta describes the subject Policy it has agreed with its underwriters as a broad form general third party liability policy of insurance which operates to indemnify Delta, its subsidiaries and related corporations and CES-Queen, against sums they become liable to pay as compensation in respect of third party Personal Injury, Property Damage or Advertising Liability, arising out of or in connection with their relevant activities.

Delta submits that the Contact of Insurance and its Endorsement extend to include any person not being an insured, including Colonial and any other third party who may suffer loss and damage.

Delta submits that the Endorsed Contract of Insurance, clarifies and contractually ensures that the terms of the Contract of Insurance meet the requirements of s 93 of the Act.

Delta argues that Colonial’s contention that it should be named as an insured is flawed because the subject policy operates so as to meet the requirements of the Act by establishing third party indemnity cover in respect of any relevant loss or damage suffered by Colonial, and all others the Act requires to be covered.

Delta argues that if Colonial was named as an insured, it would be disadvantaged because it could not sue a co-insured like Delta or CES-Queen.

Delta also argues that the decision in You v Thomas stands only for the proposition that an adjoining owner does not need to be named as an insured for s 93(1)(a) of the Act to be satisfied and does not decide that the type of insurance required by s 93(1)(a) is first party indemnity insurance.

The Contract of Insurance and Contract Endorsement

The Contract of Insurance and Contract Endorsement contain the following relevant clauses:

CORPORATE RISKS
UMR / POLICY NO. B0621CDELT000116
DELTA PTY LTD and Others as specified in the Schedule
(hereinafter referred to as the "Insured")
GENERAL THIRD PARTY LIABILITY
SCHEDULE
POLICY NUMBER: B0621CDELT000116
INSURED:Delta Group of Companies including subsidiary companies and/or related corporations and associated companies now existing or acquired or formed during the period of insurance; and financial institutions for their respective rights and interests and:
1. The Insured named in the Schedule and/or past, or present Subsidiary Companies (referred to as the Contractor); and/or
2. Joint Venture(s) (incorporated or not) in which the Contractor is a co-venturer and is responsible for arranging insurance therefor; and/or
3. Principals for whom they may be working and/or
4. Superintendents; and/or
5. Sub-Contractors or Contractors
All for their respective rights and interests and to the extent they are not more specifically insured

INTEREST:To indemnify the Insured in respect of their legal liability for third party personal injury and/or property damage claims arising out of or in connection with their activities
LIMITS OF LIABILITY: AUD 50,000,000 any one occurrence and in the aggregate separately during the Period of Insurance in respect of Products Liability and Pollution Liability

MILLER CONTRACTOR'S AUSTRALIAN BROADFORM WORDING 2016
The Insured named in the Schedule having made to the Insurers a written proposal which is deemed to be incorporated herein and having paid the premium stated in the Schedule then subject to the terms, conditions and exclusions contained in or endorsed on this Policy the Insurers will pay to or on behalf of the Insured all sums provided by the Policy which the Insured shall become legally liable to pay as compensation for:
1. Personal Injury or
2. Property Damage or
3. Advertising Liability
caused by an Occurrence within the Territorial Limits as stated herein in connection with the Insured's Business.
Limit of Liability
The limit of the Insurers' liability in respect of any one Occurrence shall not exceed the Limit of Liability stated in the Schedule for Public Liability or Products Liability or Advertising Liability or Pollution Liability. All Personal Injury and Property Damage arising out of continuous or repeated exposure to substantially the same general conditions will be construed as arising out of one Occurrence.
The total aggregate limit of the Insurers during any one Policy Period for all claims arising out of Products Liability including Advertising Liability and Pollution Liability shall not exceed the Limit of Liability stated in the Schedule.
Definitions
Where appearing in the Policy the following words shall mean:
1. "Insured"
Each of the following is insured under this Policy to the extent set forth below:
(b)      all subsidiary companies (now or hereafter constituted) of the Named Insured whose place of incorporation is within Australia and whose business falls within the definition of the Named Insured's Business
3. "Property Damage" means:
(a)       physical injury to or destruction or loss of tangible property which occurs during the Policy Period and any loss of use of that property resulting therefrom; or
(b)       loss of use of tangible property which has not been physically injured or destroyed or lost which is caused by physical injury to or destruction or loss of other tangible property which occurs during the Policy Period.
4. "Occurrence" means an event including continuous or repeated exposure to substantially the same general conditions, which causes Personal Injury, Property Damage or Advertising Liability which is not expected or intended from the standpoint of the Insured.
The Insurers shall not be liable to indemnify the Insured in respect of:
4. Property in Physical or Legal Control
liability to pay compensation for damage to property owned leased or hired or under hire purchase or on loan to the Insured or otherwise in the Insured’s care, custody or control other than:
(a) premises (or the contents thereof) temporarily occupied by the Insured for work therein (but no indemnity is granted for Damage to that part of the property on which the Insured is working and which arises out of such work)
(b) clothing and personal effects belonging to employees and visitors of the Insured
(c) premises tenanted by the Insured for the purpose of the Insured's business to the extent that the Insured would be held liable in the absence of any specific agreement
(d) any property in the physical or legal control of the Insured, not otherwise covered hereunder, up to the applicable sub-limit detailed in the Risk Details

14. Asbestos
liability arising out of or related in any way to asbestos or asbestos-containing materials other than liability not caused by or contributed to by or alleged to be caused by, in whole or in part, directly or indirectly, the known or suspected injurious or damaging effects of asbestos
Attaching to and forming part of Policy No. B0621CDELT000116
Notwithstanding anything contained to the contrary in Exclusion 14 it is noted and agreed that this Policy includes the Insured's liability arising from the existence of or exposure to asbestos and/or any asbestos containing materials occurring on or after the Retroactive Date but only in respect of claims first made against the Insured and notified to Insurers during the Policy Period
The Retroactive Date in respect of this Endorsement is 1 June 2014.
13. STATUTORY LIABILITY
Insurers agree to pay to and on behalf of the Insured any Loss arising from any claim first received by the Insured and notified to the Insurers during the Period of Insurance in respect of a Wrongful Breach that occurs after the Retroactive Date being 1 June 2015.
Exclusions
Uninsured Breaches
This Endorsement does not provide indemnity in respect of any Claim based upon, attributable to or in consequence of:
(a) any Wilful, intentional or deliberate Wrongful Breach;
(b) a Wilful, intentional or deliberate failure to comply with any lawful notice, direction, enforcement action or proceeding under any Act;

The Policy
The Delta Policy operates to provide cover for 1) Personal Injury, 2) Property Damage and 3) Advertising Liability, subject to policy terms and conditions.
Broadly speaking, the Policy will operate when an event has occurred which has caused a Third Party (which need not be a Delta client) injury, loss or damage. The date that the event has occurred generally indicates which policy period may respond.
CONTRACT ENDORSEMENT

Unique Market Reference:

B0621CDELT000116

Endorsement Reference:

01

Insured:

Delta Pty Ltd

Period:

1 June 2016 to 1 June 2017

CONTRACT CHANGES
Endorsement Effective Date: 1 June 2016
It is noted and agreed that this Policy is amended insofar as follows in respect of the 150 Queen Street demolition contract:
1CES-Oueen is included as an Additional Insured for its rights and interests
2 any term of this Policy which is in conflict with Section 93 of the Building Act 1933 (Vic) (Act) is hereby amended to conform to such Section 93

3 Definition 3, "Property Damage" shall read:
(a)physical injury to or destruction or loss of tangible property which occurs during the Policy Period and any loss of use of that property resulting therefrom; or
(b)loss of use of tangible property which has not been physically injured or destroyed or lost which is caused by physical injury to or destruction or loss of other tangible property, trespass, nuisance or wrongful interference with the enjoyment of rights over tangible property which occurs during the Policy Period.

4 the attached Protection Works Endorsement shall apply in respect of the owners of property adjoining 150 Queen Street.

All other terms and conditions remain unchanged
Protection Works Endorsement
Attaching to and forming part of Policy Number: B0621CDELT000116
Adjoining Owner means owner of an adjoining property
Adjoining Property means land (including any street, highway, lane, footway, square, alley and right of way) situated in relation to the Contract Site on which building work is to be carried out so as to be at the risk of significant damage from the building work
Owner means the owner of the land on which the Contract Works is situated.
Protection Works means:
(a) permanent or temporary work of
(i) underpinning, including the provision of vertical support, lateral support, protection against variation in earth pressures, provision of ground anchors and other support for adjoining property;
or
(ii) shoring up of adjoining property; or
(iii) overhead protection for adjoining property; or
(iv)other work designed to maintain the stability of adjoining property or to protect adjoining property from damage from building work; or

(b) any work or use of equipment necessary for the provision, maintenance and removal of work referred to in paragraph (a) whether or not the work or equipment is carried out or used on, over, under or in the air space above the land on which the building work is or is to be carried out or the adjoining property;

The Indemnity
During the Policy Period and for a period of twelve months after the expiry of the Policy Period, this Policy indemnifies:
Damage to the Adjoining Property caused by the proposed Protection Works and any legal liabilities incurred to the Adjoining Property occupiers and members of the public, ~~but only if the Owner has complied in every respect with the Protection Works requirements.~~
All other terms and conditions remain unchanged

Consideration

Colonial’s submission that the Contract of Insurance, including the Contract Endorsement, is not compliant with s 93 of the Act is primarily based upon its assertion that s 93 of the Act requires the owner to effectuate a first party indemnity insurance policy. The policy is a third party liability insurance policy. The defendants do not argue to the contrary.

However, in my view the policy satisfies the requirements of s 93(1)(a) and (b). Section 93 of the Act mandates the extent of cover required, namely insurance against damage by the proposed protection works to adjoining property and in respect of liabilities likely to be incurred to adjoining occupiers and members of the public during the course of the performance of the building work. Section 93 does not specify expressly, or in my view by implication, the type of insurance policy required to effectuate that cover. In particular, s 93 of the Act does not expressly or by implication require the owner to effect first party indemnity insurance in relation to potential damage by the proposed protection works to the adjoining property.

If the legislature had intended that the form of cover required to comply with s 93(1)(a) had to be first party indemnity cover, language conveying that intent would be included in that part of the Act. It is not.

I do not consider that the language of s 93 of the Act, and in particular the requirement that physical damage be insured against in s 93(1)(a) and the separate requirement in s 93(1)(b) that liabilities likely to be incurred to adjoining occupiers and members of the public be insured against, provides a basis for an inference that the Act in that regard intends that two different types of insurance be procured. Neither the express language of that section, or any other sections of the Act, nor in my view the context asserted by the plaintiff, nor any principle of interpretation supports such an implication.

Rather the language of s 93 appears to convey the intent of the legislature that effective insurance of whatever nature is required to be procured by the owner to insure against at least two types of harm that might be caused by protection works and building works, namely damage to the adjoining property and liability arising to adjoining occupiers and members of the public. Those envisaged forms of damage and liability have been conveniently separated by the draftsperson into s 93(1)(a) and s 93(1)(b). This approach by the legislature to defining the scope of the occurrences against which the owner is required to insure does not in my view identify or infer a requirement that different types of insurance are required to be put in place so as to satisfy s 93 of the Act.

Further, the Contract of Insurance, read together with the Endorsement to the policy as CES-Queen urges it should,[14] satisfies the requirements of s 93 of the Act.
[14]T63.21-31.

Although it is arguable that potential limitations on the scope of cover provided by the Contract of Insurance, including those referred to in clauses 4 and 14 of the policy may (if the Endorsement to the policy is not effective) limit cover in a way which renders the policy non-compliant with the requirements of s 93 of the Act, in my view the Contract of Insurance, as endorsed, is likely to respond to any claim of the type required to be insured by s 93 of the Act. In my view this position also pertains to Colonial’s suggested cover limitations said to arise from the definition of ‘Occurrence’, and Colonial’s contention that the Contract of Insurance does not provide the necessary cover for pure economic loss. Read as a whole, including the Contract Endorsement, it is, in my view, unlikely any such suggested limitations exist.

It is in this regard notable that the Contract Endorsement was procured by Delta and its underwriters after Colonial had raised arguments about the adequacy of the earlier policy of insurance, clearly in an endeavour (undertaken by Delta on more than one occasion) to meet the issues and concerns which had been raised by Colonial as to compliance with s 93 of the Act.

I consider that the Contract Endorsement to the Contract of Insurance clarifies and is likely to clarify and resolve in a way which obliges the insurer to meet any claims in respect of the damage or other liability required to be the subject of a contract of insurance in compliance with s 93(1)(a) and s 93(1)(b) of the Act. By the subject Contract of Insurance together with its latest Endorsement, that is clearly what the parties to that policy intended to achieve, and I consider agreed and effected.[15]
[15]Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640, 656-657 [35].

I consider that the third party liability Contract of Insurance procured in this case is likely to operate effectively and in compliance with s 93 of the Act to ‘indemnify the Insured in respect of their legal liability for third party personal injury and/or property damage claims arising out of or in connection with their activities’. The policy is likely to effectively, and in compliance with s 93 of the Act, indemnify ‘the Insured’ in respect of each named Insured’s liability to claims made against them by third parties. This is, for the reasons I have outlined above, sufficient to comply with s 93 of the Act, and, in my view, it is therefore not necessary that adjoining owners or occupiers be named as Insured or expressly nominated as a class of insured.

Here, however, it is to be noted that the Endorsement provides under ‘The Indemnity’ that the policy expressly indemnifies ‘Damage to the Adjoining Property’ caused by the proposed protection works and any legal liabilities incurred to the adjoining property occupiers and members of the public.

In my view, the Contract Endorsement amends the scope of coverage under the policy. The Endorsement also names CES-Queen and includes it as an Additional Insured for its rights and interests.[16] Accordingly, both CES-Queen and Delta’s liability, if any, in respect of claims made by third parties, including Colonial, are expressed to be covered by the Contract of Insurance.
[16]Affidavit of Andrew John Montgomery Blunt affirmed 21 July 2016, Exhibit “AB-1”, page 1 Item 1.

Furthermore, the Contract Endorsement amends the definition of Property Damage to include loss occasioned by ‘trespass, nuisance or wrongful interference with the enjoyment rights over tangible property‘. I consider that this amended definition is also likely to be effective to indemnify CES-Queen and Delta in respect of liability to an owner of an adjoining property, an occupant of such property, or a member of the public, resulting from the carrying out of the protection work.

In my view it is therefore likely that the Contract of Insurance, as endorsed, provides indemnity for any liability, including for economic loss, consequential loss and damages.

The Contract of Insurance, together with the Contract Endorsement, is also likely to be effective to remove the otherwise arguable potential inconsistencies, conflicts and ambiguities, and arguable limitations to cover and indemnity, which Colonial has contended exist. This is because the clear and express intent of the Contract Endorsement, including by the express words ‘any term of this Policy which is in conflict with section 93 of the Building Act 1993 (Vic) (Act) is hereby amended to conform to such section 93’. I consider that the Contract of Insurance, together with the Contract Endorsement, is, on the balance of probabilities, a contract of insurance against both damage by the proposed protection work to the adjoining property, and against any liabilities likely to be incurred to adjoining occupiers and members of the public during the carrying out of the building works, for the required period.[17]
[17]Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640, 656-657 [35].

Accordingly, the Contract of Insurance endorsed is, in my view, likely to achieve compliance with the requirements of s 93 of the Act by the express terms to which I have referred above, including by the operation of the terms in Item 2 on page 1 of the Endorsement, by which it is clear for the avoidance of doubt the parties to the insurance contract expressly evinced an intention to have that contract provide in all respects the nature and extent of cover required by s 93 of the Act. It would therefore appear likely that the underwriters would be obliged to provide all forms of insurance cover required by s 93(1)(a) and (b) of the Act.

In my view the intent and operation of the Contract Endorsement is likely to remove any possible conflict between arguable limitations arising from any of the policy wording by referring to the nature and extent of cover required by s 93(1) of the Act. I am unpersuaded in this regard that any of the suggested ‘uncertainties’ referred to by Colonial in relation to arguable limitations in the body of the policy would be likely to give rise to any relevant limitation of cover, given the clear intent of the Endorsement.[18]
[18]Colonial relies on statements in Davies v Davies (1887) 36 Ch D 359 at 392-393 to support its argument that the relationship between the Contract Endorsement and the balance of the Contract of Insurance gives rise to uncertainties and a lack of clarity in certain respects.

I reject Colonial’s contention that Colonial should be, and in fact is required to be, a named insured under the Contract of Insurance. I consider that s 93 requires that a contract of insurance is in force against damage by the proposed protection work to the adjoining property and any liabilities likely to be incurred by adjoining occupiers and members of the public. The endorsed Contract of Insurance provides insurance against such damage and any such liabilities by extending the indemnity to which I have earlier referred to the insured entities under that policy.

Section 93 of the Act does not expressly, or in my view by any form of implication, require the owner to effect first party liability insurance nor require that Colonial be a named Insured under the policy. Further, it is likely for the reasons that I have outlined above that the policy extends the required scope of cover to the adjoining owner and adjoining occupiers and members of the public.

Furthermore, for the reasons I have mentioned I am not persuaded, on the balance of probabilities, that the Contract of Insurance, as endorsed, does not insure against the matters and occurrences in relation to which s 93 of the Act requires the owner to ensure a contract of insurance is in force.

I am similarly unpersuaded that the absence of any express, or in my view implied requirement of s 93 of the Act to ensure that first party liability insurance is in place is materially affected by the provisions of s 98 and or s 99 of the Act, as was submitted by Colonial. Nor am I persuaded that s 98 is confined to claims for pure economic loss, such as business disruption, although I need not decide that point in this proceeding.

In my view s 93 of the Act is sufficiently clear in its terms and intent. Section 93 is directed to mandating that insurance cover of the extent referred to in s 93(1)(a) and (b) is procured by the owner, and that the extent of that cover is for all damage which may be caused by the proposed protection work to the adjoining property and any liability likely to be incurred to the adjoining occupiers and members of the public. It is for the owner to ensure via the type of insurance selected that these key requirements of the Act are satisfied. In my view the compensation provisions in s 98 and the common law preservation provisions in s 99 do not directly or indirectly alter the intent and operation of s 93.

I do not accept Delta’s submission that if Colonial was named as an insured under the Contract of Insurance, say together with Delta and CES-Queen, a prohibition would arise whereby one co-insured would be precluded from claiming against another co-insured, and Colonial would not be able to claim compensation under s 98, or otherwise, against Delta or CES-Queen.

Further, Delta by its supplementary written submissions dated 27 July 2016, conceded that there is also some debate concerning the extent to which co-insured may be constrained from suing other co-insured. Delta also submitted that, in any event, consideration of these principles in the context of this proceeding is a moot point and does not require determination, because by virtue of the words of the Policy, the insurers’ right of subrogation is relevantly waived in express terms insofar as it relates to any “principal” – CES-Queen – and Delta as the party who has procured the Contract of Insurance.

Whether or not a co-insured can claim against another co-insured will usually depend on the terms of the contract of insurance. In Tyco Fire & Integrated Solutions (UK) Ltd v Rolls Royce Motor Cars Ltd[19] it was argued that one joint-named insured cannot recover from another joint-named insured in respect of the same loss. The Court observed that there was no absolute proposition or principle that a co-insured could not sue a co-insured; the Court considered that the position would turn upon the wording of the particular contract of insurance.
[19][2008] EWCA Civ 286.

Furthermore, if Colonial’s above contention that it should be a named insured were correct, it would also probably be necessary to name all relevant ‘adjoining occupiers’, ‘members of the public’ and other difficult to ascertain persons in the relevant classes, including those with any insurable interest in the adjoining property, for example such as any mortgagee of such property, as insureds and co-insured parties.

You v Thomas

You v Thomas[20] concerned an application for judicial review of a decision of the Building Appeals Board. Similarly to the present proceeding, the question for the Building Appeals Board was whether an insurance policy taken out in respect of protection/building works complied with s 93 of the Act.
[20][2014] VSC 255.

The Building Appeals Board determined that the insurance policy did not comply with s 93 of the Act and, upon request, provided the following reasons for its determination:

1.The Class of Insurance is ‘Contract works, Plant & Equipment and legal liability’;
2.The insured is Raisin & Braden Pty Ltd, not the adjoining owner Wal Mykyktenko [sic];

3. The Period of Insurance is only from 23 April 2013 to 23 April 2014;
4.The Owner Details do not identify Mr & Mrs Mykyktenko [sic] as the adjoining owner;

5. The statement ‘In accordance … 3145’ is meaningless;
6.There is no reference under Legal Liability to liability for protection work;
7.In the Coverage Summary there is no defence [sic] to the adjoining property or the protection work;
8.In paragraph 1 in the Insuring Clause of Section 1 — Contract Works, the indemnity does not extend to the adjoining property;
9.The definitions of Property Insured and Property Damage in Definitions — Section 1 do not extend to damage to the adjoining property; and
10.There is no reference to the adjoining property in the Endorsements Section.

Mr You, the owner of the property upon which the building works were to take place, challenged the decision of the Building Appeals Board on four bases: failure to provide natural justice, failure to take into account relevant considerations, taking into account irrelevant considerations, and errors of law.

Prior to the hearing of the application for judicial review, the Building Appeals Board indicated to the Court that it consented to part of its determination being set aside. Specifically, the Building Appeals Board’s determination that required Mr You to provide to Mr Mykytenko, the adjoining owner, a contract of insurance complying with s 93 of the Act.

No representative of the Building Appeals Board appeared at the hearing before her Honour.

Justice McMillan decided that the decision of the Building Appeals Board should be quashed, and the appeal should be remitted to the Building Appeals Board, differently constituted, for hearing and determination in accordance with law. Her Honour’s conclusions included, in essence, that:

(a) the failure to hear Mr You on the period of insurance, which formed the basis of reason three for the Board’s decision that the insurance contract did not comply with s 93 of the Act, constituted a denial of procedural fairness;

(b) the fact that the insured identified under the policy is the builder, not the adjoining owner, is an irrelevant consideration;

(c) an insurance contract wherein the adjoining owner is not named as the insured will not, for that reason alone, fail to comply with s 93(1)(a);

(d) insofar as reason two rests on the supposition that, for the policy to comply with s 93, the adjoining owner must be named as the insured in the policy, the Board erred in law; and

(e) insofar as the Board considered that s 93 required the policy to cover the entire period of the building work, it erred in law.

The following paragraphs of McMillan J’s judgment have been highlighted by the parties to this dispute:

[28] The type of insurance contemplated by s 93(1)(b) of the Act is liability insurance, that is, insurance whereby the insurer undertakes to indemnify the insured for loss suffered as a result of liability to a third party; in this context, the adjoining owner and members of the public. It follows that the consideration that the adjoining owner is not the insured under the contract is an irrelevant consideration in the context of s 93(1)(b), since the adjoining owner is the person liability payable to whom is covered.
…
[31] I have come to the conclusion that an insurance contract wherein the adjoining owner is not named as the insured will not, for that reason alone, fail to comply with s 93(1)(a). That section requires there to be a contract of insurance indemnifying the insured against damage by the protection work to the adjoining property. Its purpose is the protection of the adjoining owner against loss. An insurance contract upon which the adjoining owner was unable to recover would necessarily fail to comply with s 93(1)(a), for it would not in effect indemnify the adjoining owner against loss. In my opinion, s 93(1)(a) requires that the adjoining owner be insured under the contract.
[32] But, as Ms Fitzgerald submitted, by operation of ss 20 and 48(1) of the Insurance Contract Act 1984, a person may be insured under a contract without being explicitly named as the insured. It follows that the fact that the adjoining owner was not named as the insured was not a relevant consideration.
[33] Insofar as reason (2) rests on the supposition that, for the policy to comply with s 93, the adjoining owner must be named as the insured in the policy, the Board erred in law. There is no such requirement under s 93.
…
[36] Leaving aside the question whether the certificate of currency forms part of the contract, Mr You must succeed on this point. The effect of s 20 of the Insurance Contracts Act 1984 is that Mr and Mrs Mykytenko need not be named in the insurance policy in order to be covered by it. It follows that a finding that they were not named in the policy cannot form the basis of a conclusion that the policy did not comply with s 93.

Her Honour was focusing on the question of whether the Board had taken into account an irrelevant consideration and erred in law when it decided that the policy was invalid under s 93 of the Act because the adjoining owner was not named as the insured. Her Honour came to the view that a person may be insured under a contract of insurance without being explicitly named as the insured because of the operation of ss 20 and 48(1) of the IC Act. Accordingly, her Honour held that the second reason given by the Building Appeals Board was not a relevant consideration and that the Board had erred in law by coming to that conclusion.

To the extent that in paragraph 31 her Honour made observations about the requirements of s 93(1)(a) of the Act, I do not consider such observations ultimately formed part of the foundation of reasoning for her decision that the failure to name the adjoining owner as an insured under the policy was not a relevant consideration and that the Building Appeals Board had erred in law. Paragraph 32 makes this clear by the reference to the operation of ss 20 and 48(1) of the IC Act.

In my view her Honour’s decision in You v Thomas was to the effect that it will not of itself render a contract of insurance non-complaint with s 93 of the Act that an adjoining owner is not named under that contract.[21] It was not part of her Honour’s reasoning in that regard that s 93 contemplated any peculiar species of insurance policy; her Honour’s statements at [27], [28] and [31] as to the types of insurance which s 93 contemplates were therefore in my view peripheral observations.
[21]Ibid [31]-[33].

At all events, in the observations made about the species of insurance contemplated by s 93(1)(a), her Honour at [31] observes that s 93(1)(a) requires a contract of insurance indemnifying the insured against damage by the protection work to the adjoining property so as to protect the adjoining owner against loss and her Honour says in substance that it is necessary that any policy taken out to satisfy that section indemnifies the adjoining owner against loss. Her Honour adds that s 93(1)(a) requires the adjoining owner be insured under the contract. Her Honour then emphasises her dispositive conclusion at [32] and [33], namely that s 93(1)(a) of the Act does not require that an adjoining owner be explicitly named as the insured in the required policy. In my view, therefore, her Honour did not conclude or find that s 93(1)(a) of the Act requires the owner to ensure that a first party liability insurance policy is in place under which the adjoining owner is the insured.

Jurisdiction to grant injunctive relief

I add in relation to the limited aspect of the relief sought by the plaintiff which CES-Queen argues may be beyond the Court’s jurisdiction, namely the power to grant injunctive relief to prevent the commencement of protection works were the Contract of Insurance proffered by CES-Queen to be non-compliant with the Act, that, for the reasons I have outlined above, I do not consider that Colonial’s applications for the declarations it seeks are made out. Accordingly, it follows that no issue arises as to whether an injunction should issue restraining CES-Queen from commencing or undertaking protection works in respect of 140 Queen Street and 21-27 McKillop Street and there is therefore also no present need to determine the extent of the Court’s jurisdiction in that respect. Nor is there any utility in addressing whether it is unauthorised, or undesirable, for an applicant such as Colonial to approach the Court in these circumstances, given the provisions of ss 152 and 253 of the Act.

Decision

For the reasons outlined above I have decided that:

1.The subject Contract of Insurance, as endorsed, complies with the requirements of s 93(1)(a) and (b) of the Act.

2. The plaintiff’s Amended Originating Motion shall be dismissed.

I shall hear the parties, when convenient, as to the final form of orders, including any orders as to costs.

Unique Market Reference:	B0621CDELT000116
Endorsement Reference:	01
Insured:	Delta Pty Ltd
Period:	1 June 2016 to 1 June 2017

[2016] VSC 494

5 August 2016