FAI General Insurance v Gallagher - [2000] NSWSC 453

CITATION: FAI GENERAL INSURANCE V GALLAGHER [2000] NSWSC 453

CURRENT JURISDICTION: Common Law Division
Administrative Law List

FILE NUMBER(S): SC 30007 of 2000

HEARING DATE(S): 17 May 2000

JUDGMENT DATE: 17 May 2000

PARTIES :

FAI General Insurance Company Limited (Plaintiff)
Rod Gallagher (First Defendant)
Terina Gallagher (Second Defendant)
Fair Trading Tribunal (Third Defendant)

JUDGMENT OF: Windeyer J at 1

LOWER COURT
JURISDICTION : Fair Trading Tribunal

LOWER COURT
FILE NUMBER(S) : BU 1999/7408

LOWER COURT
JUDICIAL OFFICER : Member G.J. Durie

COUNSEL : Mr N.C. Hutley, SC with him Mr S. Kalfas (Plaintiff)
Miss F Henderson (First and Second Defendants)
No appearance (Third Defendant)

SOLICITORS: Phillips Fox (Plaintiff)
Schweizer & Co (First and Second Defendants)
No appearance (Third Defendant)

CATCHWORDS: ADMINISTRATIVE LAW - judicial review - appeal from decision of Fair Trading Tribunal - clause in building insurance contract limiting liability to claims arising out of work in respect of contracts entered into during a certain period - whether such a clause constituted an unauthorised limitation on liability under the Home Building Act and was thus invalid

LEGISLATION CITED: Fair Trading Act 1987 s61
Fair Trading Tribunal Act 1998 s61(2)
Home Building Act 1989 ss 18B, 92, 94, 102, 102(4)
Home Building Regulation 1997 Cl 45

DECISION: See paragraph 30

4
THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION
ADMINISTRATIVE LAW LIST

WINDEYER J

WEDNESDAY 17 MAY 2000

30007/00 FAI GENERAL INSURANCE COMPANY LIMITED v ROD GALLAGHER & 2 ORS

JUDGMENT

1    HIS HONOUR: This is an appeal from a decision of the Fair Trading Tribunal instituted under the Fair Trading Act 1987, the decision being dated 2 January 2000. By that decision the Tribunal held that a provision, cl 3.1 in a Master Home Warranty Policy issued by the plaintiff, FAI General Insurance Company Limited, to a builder, General Western Homes International Pty Limited, was a limitation on liability not authorised by the provisions of the Home Building Act 1989 and the regulation made under that Act.
2 The appeal is brought pursuant to s61 of the Fair Trading Act. This is an unfortunate case. Mr and Mrs Gallagher, the defendants, entered into a building contract with Great Western Homes International on 2 April 1998 for the construction of a home to be built for them at Cecil Hills. The builder has not completed the work and is either under administration or in liquidation; it does not really matter which. From what was said by the Tribunal it is unlikely that any claim made by Mr and Mrs Gallagher by way of proof of debt would result in any large recovery by them of their loss as a result of breach of the building contract.
3    They made a claim against the plaintiff, FAI, claiming to be entitled to do so as beneficiary under an insurance contract issued to the builder by FAI dated 26 June 1998 for a period of insurance from 24 June 1998 to 24 June 1999.
4    The insurer refused…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2000] NSWSC 453
Decision Date: 17 May 2000

CaseChat Overview and Summary

In the case of FAI General Insurance against Gallagher, the matter was before the court on appeal from a decision of the Fair Trading Tribunal. The central issue was the validity of a clause in a building insurance contract which limited the insurer's liability to claims arising from work in respect of contracts entered into during a specific period. The appellant, FAI General Insurance, sought to challenge the tribunal's decision that the clause constituted an unauthorised limitation on liability under the Home Building Act, rendering it invalid. The respondent, Gallagher, defended the tribunal's decision, arguing that the clause was a valid limitation of liability and should be upheld.

The legal issues before the court were whether the clause in the insurance contract was an unauthorised limitation on liability under the Home Building Act and, if so, whether such a clause would be deemed invalid. The court had to consider the provisions of the Home Building Act and the extent to which they permitted or restricted limitations on liability in building insurance contracts. Additionally, the court needed to assess whether the clause in question fell within the scope of permissible limitations or if it exceeded the boundaries set by the Act.

The court found that the clause in the insurance contract did indeed constitute an unauthorised limitation on liability under the Home Building Act. The court reasoned that the Act required that any limitation on liability in a building insurance contract must be reasonable and not exceed the requirements of the Act. The clause in question was held to be unreasonable and excessive, as it limited the insurer's liability to claims arising from work in respect of contracts entered into during a certain period, which was deemed to be an unauthorised limitation. Consequently, the court upheld the tribunal's decision that the clause was invalid.

The court confirmed the tribunal's decision and dismissed the appeal, leaving the clause in the insurance contract invalid and unenforceable. This outcome ensured that building insurance contracts would not contain unauthorised limitations on liability that could potentially deprive consumers of their rights under the Home Building Act.

Orders