Insurance Australia Limited v Hortomaris
[2021] VCC 954
•16 July 2021
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-20-01941
| Insurance Australia Limited (ACN 000 016 722) | Plaintiff |
| v | |
| Bill Hortomaris & Ors | Defendants |
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JUDGE: | Judge Burchell | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 14 July 2021 | |
DATE OF JUDGMENT: | 16 July 2021 | |
CASE MAY BE CITED AS: | Insurance Australia Limited v Hortomaris | |
MEDIUM NEUTRAL CITATION: | [2021] VCC 954 | |
REASONS FOR JUDGMENT
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Subject:LIMITATIONS – CONTRACTS – CONTRACTUAL INDEMNITY – DOMESTIC BUILDING INSURANCE
Catchwords: contractual indemnity – insurance – limitations – domestic building insurance – parol evidence – upon demand – reimbursement clause – nonsensical, capricious, unreasonable, inconvenient and unjust – implied terms – promise to indemnify – condition precedent – contra proferentem – whether ambiguity – surrounding circumstances – extrinsic material
Legislation Cited: Limitations of Actions Act 1958 (Vic) s5(1)(a)
Cases Cited: Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 - Western Export Services Inc & Ors v Jireh International Pty Ltd (2011) 282 ALR 604 - Reading Properties Pty Ltd v Mackie Group Pty Ltd [2012] VSCA 90 - Bytan Pty Ltd v BB Australia Pty Ltd [2012] VSCA 233 - Retirement Services Australia (RSA) Pty Ltd v 3143 Victoria St Doncaster Pty Ltd [2012] VSCA 134 - and Pepe v Platypus Asset Management Pty Ltd [2013] VSCA 38 - Electricity Generation Corporation v Woodside Energy Ltd; Woodside Energy Ltd v Electricity Generation Corporation (2014) 251 CLR 640 - Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 - Gleeson v Gleeson [2002] NSWSC 418 - Netglory Pty Ltd v Caratti [2013] WASC 364 - J Brown’s Estate; Brown v Brown [1893] 2 Ch 300 - Bradford Old Bank Ltd v Sutcliffe [1918] 2 KB 833 - Romain v Scuba TV Ltd [1997] QB 887 - BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1994) 180 CLR 266 - Grocon Constructors (Victoria) Pty Ltd v APN DF2 Project 2 Pty Ltd [2015] VSCA 190 - Globe Church Incorporated v Allianz Australia Insurance Ltd [2019] NSWCA 27 - Optus Vision Pty Ltd v Australian Rugby Football League Ltd [2004] NSWCA 61 - Siemens Gamesa Renewable Energy Pty Ltd v Bulgana Wind Farm Pty Ltd [2020] VSC 126 - Andar Transport Pty Ltd v Brambles Ltd (2004) 217 CLR 424
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APPEARANCES: | Counsel | Solicitors |
| For the plaintiff | Mr S Ryan | William Roberts Lawyers |
| For the defendants | Mr F Brimfield | Johnston Construction Lawyers |
HER HONOUR:
1 By agreement, this proceeding turns on whether the plaintiff’s claim is precluded by operation of s 5(1)(a) of the Limitation of Actions Act 1958 (Vic), because the cause of action accrued more than 6 years prior to the institution of these proceedings.
2 The plaintiff submits that its cause of action only crystallised once a demand for payment was made upon the defendants. If this is made out then these proceedings were instituted within 6 years after the date of the first demand being made and accordingly the plaintiff’s claim must succeed.
3 The defendants contend that the plaintiff’s cause of action arose either upon the date when the Owner made her claim upon the insurance policy or the date when the claim was accepted. If either of these views are accepted, then the plaintiff’s cause of action arose more than 6 years prior to the institution of the proceedings and is statute barred.
4 If the plaintiff succeeds, then it is entitled to an order on the claim in the sum of $136,913.18.
5 I am satisfied the cause of action only crystallised once a demand for payment was made upon the defendants.
6 Therefore, I will order that there be judgment for the plaintiff against the defendants in the sum of $136,913.18 plus interest at 10% per annum from the date of the demand and that the defendants pay the plaintiff’s costs of and incidental to the proceeding on the standard basis, in default of agreement, unless either party can show a basis for seeking a different order to costs. I invite the parties to prepare draft orders to give effect to these reasons, and any further issue as to costs will be determined on the papers.
The factual background
7 There have been written submissions filed on behalf of both parties.
8 The background facts are common ground between the parties. The plaintiff’s submissions helpfully set out the facts, relevantly, as follows (omitting footnotes).
9 The defendants were each directors of Living Home Builders Pty Ltd ACN 121 644 308 (‘the Company’). The Company was principally involved in the business of construction and/or renovation of domestic homes. Pursuant to the provisions of the Building Act 1993 (Vic) and Domestic Building Contracts Act 1995 (Vic), the Company was required to take out a policy of Builder’s Warranty Insurance in favour of an owner of premises for which the Company performed major domestic building works. Builder’s Warranty Insurance provides indemnity to homeowners for, inter alia, defective or non-complete building works performed by a builder and where the builder subsequently dies, disappears or becomes insolvent during the period of insurance.
10 The plaintiff and its predecessors, Australian International Insurance Limited (‘AIIL’) and WFI Insurance Ltd trading as Lumley Insurance (‘Lumley’) carried on business as Home Warranty Insurers pursuant to the provisions of the Building Act 1993 (Vic) and Domestic Building Contracts Act 1995 (Vic). There is no issue in this proceeding that the plaintiff was transferred the relevant rights to the Eligibility Application and Home Warranty Insurance referred to below, and has standing to bring its claim.
11 On 11 November 2006, the Company completed an eligibility application with AIIL (‘the Eligibility Application’). The Eligibility Application, if accepted, enabled the Company to make an application for Builder’s Warranty Insurance with AIIL for the benefit of homeowners for which the Company performed domestic building works.
12 On 1 December 2006, AIIL accepted the Company’s Eligibility Application. Relevantly, the Eligibility Application required each of the defendants, as directors of the Company, to sign an undertaking to reimburse AIIL for amounts which AIIL was required to pay in respect of a claim (‘the reimbursement clause’).
13 The reimbursement clause was on page 4 of the Eligibility Application under the heading of ‘Undertaking, Indemnity and Declaration’ and was in the following terms (omitting irrelevant parts and with underlining added):
…. (e) if the insurer grants the Builder/Contractor eligibility for insurance and a claim is made by a homeowner under any policy of insurance which the insurer has previously issued or may in the future issue in respect of any work, whenever performed, which the Builder/Contractor has done or has failed to do, then I/we, on behalf of the Builder/Contractor and in my/our personal capacity, jointly and severally assume liability for and undertake to:
(iii) reimburse the insurer, immediately upon demand, and without set-off or counterclaim, any and all amounts which the insurer has paid, agrees to pay or is required to pay in respect of a claim, howsoever arising, including all costs and expenses incurred in dealing with the claim and any costs, expenses or liabilities associated with any claim, together with interest thereof at the rate of 10% per annum from the date of demand until payment. [Emphasis added]
23 The document was signed by each of the defendants.
24 In accordance with the Eligibility Application, the Company was required to submit an insurance proposal form with respect to each job for which Builder’s Warranty Insurance was sought. On 21 May 2007, the second defendant on behalf of the Company, submitted an application for Builder’s Warranty Insurance for a proposed extension and renovation at 352 Neerim Road, Carnegie (‘the Property’) owned by Mrs F. Diamantis (‘the Owner’).
25 AIIL accepted the Company’s application for Builder’s Warranty Insurance for the works to be completed at the Property and issued a policy of insurance in favour of the Owner on 24 May 2007 (‘policy of insurance’). The building works were completed on or about 12 February 2009 when an occupancy certificate was issued for the Property.
26 The Company became de-registered on 1 February 2010. The de-registration is an act of insolvency for the purposes of the Builder’s Warranty Insurance.
27 On 2 August 2011, the Owner made a claim upon the insurance policy seeking indemnification for defective building works performed by the Company. Following an assessment of the claim, on or about 22 November 2011, Lumley (who had at that stage assumed the rights of AIIL) admitted part of the claim and indemnified the Owner in accordance with the insurance policy. Lumley arranged for rectification works to be completed and paid for between 2012 and February 2014.
28 On 23 June 2014, Lumley sent letters of demand to each of the defendants seeking recovery of the amount owing by them to Lumley pursuant to the reimbursement clause (demands for payment). Subsequent letters of demand were sent on 25 July 2014, 11 August 2014 and 3 September 2014.
29 On 1 August 2017, the assets and liabilities of Lumley, which included its rights against the defendants pursuant to the reimbursement clause of the Eligibility Application were transferred to the plaintiff.
30 The plaintiff instituted this proceeding on 4 May 2020.
Analysis
Parol Evidence
31 The defendants resist the application primarily on the basis that the reimbursement clause is ambiguous and is capable of having more than one meaning. If accepted, this opens the door to a reference to extrinsic material and the surrounding circumstances.
32 The plaintiff submits that the starting point must always be the terms of the contract in question. That is, construed objectively, what would a reasonable person or reasonable businessperson have understood the terms of the agreement to mean.
33 Secondly, the plaintiff contends that where the contract provides for a payment upon demand, the cause of action accrues upon the making of that demand, and that principle applies to all agreements, other than a simple loan agreement which provides in its terms a certain date for payment. In that instance, liability would accrue when the loan was due to be paid by that date, and a demand is not necessary, but in all other instances, if a contract includes an upon demand clause, then a demand is required.
34 Thirdly, the plaintiff says the term “immediately upon demand”, are not words that have any relevant ambiguity. In its view, the words mean what they say, that is, a demand is required prior to the defendants being liable to pay the plaintiff. Accordingly, there is no need to, nor is it permitted to refer to surrounding circumstances in order to determine a meaning.
35 Both parties relied on the ‘true rule’ in relation to parol evidence as espoused by Mason J in Codelfa Construction Pty Ltd v State Rail Authority (NSW)[1] (“Codelfa”). The High Court stated as follows:
[1](1982) 149 CLR 337, 352 at [22]-[23].
The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although… if the facts are notorious knowledge of them will be presumed.
It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself.
36 In Western Export Services Inc & Ors v Jireh International Pty Ltd[2], (“Jireh”) Gummow, Heydon and Bell JJ rejected a submission that it was not essential to identify ambiguity in the language of the contract before the court may have regard to the surrounding circumstances and object of the transaction and said that such an approach would require reconsideration of Codelfa.
[2](2011) 282 ALR 604.
37 The Jireh case has been cited in the Court of Appeal decisions of Reading Properties Pty Ltd v Mackie Group Pty Ltd[3]; Bytan Pty Ltd v BB Australia Pty Ltd[4] (“Bytan”); Retirement Services Australia (RSA) Pty Ltd v 3143 Victoria St Doncaster Pty Ltd[5] (“Retirement Services”); and Pepe v Platypus Asset Management Pty Ltd[6].
[3][2012] VSCA 90.
[4][2012] VSCA 233.
[5][2012] VSCA 134 at [50].
[6][2013] VSCA 38 at [25].
38 However, in Electricity Generation Corporation v Woodside Energy Ltd; Woodside Energy Ltd v Electricity Generation Corporation[7] (“Woodside”), the High Court did not refer to Jireh or any necessity to expressly find ambiguity before admitting parol evidence. After briefly reviewing the approach to interpreting contracts, French CJ and Hayne, Crennan and Kieffel JJ observed (at [35]):
[The parties] recognised that this Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding 'of the genesis of the transaction, the background, the context [and] the market in which the parties are operating'. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption "that the parties ... intended to produce a commercial result". A commercial contract is to be construed so as to avoid it "making commercial nonsense or working commercial inconvenience".
[7](2014) 251 CLR 640.
39 Further, in the recent High Court decision of Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd[8], Kiefel and Keane JJ (with whom French CJ, Nettle and Gordon JJ agreed on this point) observed that in Jireh at [111]-[112]:
Reference was made to a requirement that it is essential to identify ambiguity in the language of the contract before the court may have regard to the surrounding circumstances and the object of the transaction. There may be differences of views about whether this requirement arises from what was said in Codelfa. This is not the occasion to resolve that question.
It should, however, be observed that statements made in the course of reasons for refusing an application for special leave create no precedent and are binding on no one.
[8](2015) 256 CLR 104.
40 The defendants contend that the “condition precedent” to liability was the Insurer paying, agreeing to pay, or being required to pay the insured in respect of a claim, and that the insurer’s cause of action against the defendants for indemnification accrued on the happening of any one of those events; each of which happened 6 years before these proceedings were commenced.
41 The defendants raise four main arguments in support of their preferred interpretation of the reimbursement clause:
a) Firstly, the Insurer’s construction would lead to a result that was nonsensical, capricious, unreasonable, inconvenient and unjust;
b) Secondly, the reimbursement clause is a promise to indemnify, and the cause of action to sue upon an indemnity arises when indemnification becomes due;
c) Thirdly, the words “immediately upon demand” are not a condition precedent to a claim being made; and
d) Fourthly, the reimbursement clause must be construed contra proferentem in the defendants’ favour.
42 In my view, there is no ambiguity in the reimbursement clause. It is clear in its terms and is only open to one construction for the reasons set out below.
43 The plaintiff’s submissions identified a number of “upon demand cases”, where clauses were required to be construed that included the words, “upon demand prior to a payment obligation arising”. The plaintiff contended that there was settled judicial determination with respect to those words and the cases establish the clear principles which are applicable to the construction of the contract the subject of the present proceeding and to the reimbursement clause.
44 The plaintiff relies on Bryson J’s decision in Gleeson v Gleeson (“Gleeson”).[9] After considering the English authorities, Bryson J in Gleeson ultimately concluded (at [49]):
In my view it is only in very simple cases where reference to a demand can be taken to be nominal that a reference to a demand as part of the mechanism to precipitate payability should be understood to have any less than its literal meaning….In my opinion literal weight must be given to the reference to the demand.
[9][2002] NSWSC 418 at [4].
45 I accept the plaintiff’s submissions that Bryson J in Gleeson was being asked to determine when the cause of action arose for the purposes of a limitation defence, similar to the present case. The defendant in Gleeson similarly argued that the words, “the principal sum shall immediately become due”, meant that the cause of action arose immediately upon default. As such, his Honour concluded that the cause of action did not accrue until such time as a demand had been made.
46 Further, in Netglory Pty Ltd v Caratti (“Netglory”)[10] there were analogous “on demand” terms. This case involved both a loan agreement and a guarantee, and Eldelman J was asked to consider when or if a cause of action had arisen pursuant to the guarantee, which included a requirement that a demand be made. In addition, there was an assertion in Netglory that the words “advanced” and “loan” had some ambiguity when those words were taken in the context of surrounding circumstances, including other related documents. Hocking Land Company submitted that the words “advanced” and “loan” had an ordinary meaning. Netglory accepted that the words of the loan agreement were not ambiguous until reference was made to surrounding circumstances. Applying the true rule and the principles in Codelfa, Eldelman J found that there was no ambiguity with respect to those words and so it was not permissible to admit evidence of surrounding circumstances.[11]
[10][2013] WASC 364.
[11]ibid at [232]-[233].
47 In Netglory, his Honour was further asked to consider the expression “upon demand” with reference to the guarantee. Eldelman J determined that because the guarantee was expressed to be conditional upon a demand being made, then there was no liability that accrued until such time as a demand had been made.[12] See also J Brown’s Estate; Brown v Brown[13]; Bradford Old Bank Limited v Sutcliffe[14] and Romain v Scuba TV Limited[15].
[12]ibid at [305]-[306].
[13][1893] 2 Ch 300.
[14](1918) 2 KB 833.
[15][1997] QB 887.
48 Given my finding that the words “immediately upon demand” are in no way ambiguous, it is not open to the defendants to rely on extrinsic material or context for the purposes of the construction of the contract.
49 I agree with the plaintiff that there are no discernible differences in the words of the reimbursement clause in the present case and the words of the numerous “on demand clauses” referred to in the authorities set out above. Indeed, there is a clearer application of the “on demand” cases in the instant proceeding as the words “immediately upon demand” used in the reimbursement clause precede the obligation to pay. In cases such as Gleeson, there is an immediate obligation to pay, and the last words are "on demand". The present clause is not only analogous but if anything, it makes the obligation to pay clearer because the words precede the obligation to pay.
50 Even if I am wrong in relation to my primary finding that the words contained in the reimbursement clause are plain and ordinary, I would reject the four grounds relied on by the defendants in this proceeding for the following reasons.
Ground One
51 Firstly, the defendants contend that the Insurer’s construction would lead to a result that was nonsensical, capricious, unreasonable, inconvenient and unjust. The basis for this ground is that an insurer could, “hypothetically delay making a demand upon the defendants until some 20, 30 or 50+ years.”
52 The plaintiff responds that:
a) This is not such a case, as the first demand was made approximately 4 months after the plaintiff finished rectification works at the Property.
b) If the contention was accepted this would mean that the numerous authorities as set out above which establish otherwise were wrongly decided.
c) Any prospective defendant is still protected by the Court’s inherent power to permanently stay a proceeding as an abuse of process, which would include an excessive delay in bringing proceedings.[16]
d) It is open for the court to imply a term into the agreement that a demand needs to be made within “a reasonable time”. If a demand is made an unreasonable time after, in this instance, the plaintiff incurred the liability to the insured, then it would be in breach of that implied term.
[16]Batistatos v Roads and Traffic Authority of New South Wales [2006] 226 CLR 256.
53 Both parties agreed that the conditions for implying a term into a contract are set out in BP Refinery (Westernport) Pty Ltd v Shire of Hastings[17] and interpreted by Mason J in Codelfa at [9] as follows:
[17][1977] UKPC 13.
a) the term must be reasonable and equitable;
b) the term must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;
c) the term must be so obvious that ‘it goes without saying’;
d) the term must be capable of clear expression; and
e) the term must not contradict any express term of the contract.
See also Grocon Constructions (Victoria) Pty Ltd v APN DF2 Project 2 Pty Ltd[18].
[18][2015] VSCA 190 at [141]-[142].
54 In my view, the hypothetical does not arise in the present case. The demand was made 4 months after the completion of the rectification works. Further, I follow the Supreme Court decisions of Gleeson and Netglory. As those authorities identify, the fact that a cause of action does not accrue until a demand is made where the contract provides for the making of a demand, is a well-established principle. The authorities recognise that this may delay the cause of action accruing for some time but this does not make the clause nonsensical, capricious, unreasonable, inconvenient and unjust.
55 Finally, I note that any application for abuse of process or implied terms may be open to a plaintiff, however, I make no concluded findings on these claims in the present case given my findings above.
56 Ground one is not made out.
Ground Two
57 Secondly, the defendants submit the reimbursement clause is a promise to indemnify, and the cause of action to sue upon an indemnity arises when indemnification becomes due.
58 The defendants contend that the reimbursement clause is an agreement to indemnify, which is an agreement to hold harmless the indemnified. They claim that the nature of the indemnity is that all of the costs of that indemnification might be unliquidated or undetermined at the time the obligation to hold harmless arises, is not ascertainable or perhaps, remains ongoing. But all of the facts necessary to prove a case for a breach of an indemnity agreement will arise at the point that the indemnifier has to hold harmless the indemnified. The defendants rely on Globe Church Incorporated v Allianz Australia Insurance Ltd (“Globe Church”)[19].
[19][2019] NSWCA 27.
59 The plaintiff seeks to distinguish Globe Church on the basis that it is a case that involves a direct policy where an insurer has a direct liability to the insured. Further, Globe Church establishes that the primary task is the wording of the individual contract. Globe Church identifies that the wording of that particular policy provided that the insurer became liable upon property damage and the court notes that the decision would have been different if the policy wording was different. It cites Globe Church (at [210]), which states:
Thus, unless the making of a demand is a condition precedent to liability, all the essential facts required to be established by the insured to enforce the indemnity will by then have occurred and accordingly the cause of action for unliquidated damages will be complete. It follows that the cause of action accrues on the happening of the property damage (the insured event).
60 The plaintiff says that the present case falls within the carve out identified in Globe Church of “unless the making of a demand is a condition precedent to liability”. The plaintiff also notes at ([54]) of Globe Church that the defendants in that case accepted that if there were contrary terms in the insurance policy that required a demand or the making of payment, then the decision would have been different.
61 I accept the plaintiff’s submission that primacy must be given to the words of the contract and the present case involves a condition precedent of the making of a demand for the cause of action to accrue.
62 Ground 2 therefore fails.
Ground Three
63 Thirdly, the defendants contend the words “immediately upon demand” are not a condition precedent to a claim being made.
64 The defendants sought to rely on clause 4 of the warranty insurance as a basis for the contention that there is no mention of a requirement of a demand. Clause 4 provides:
The builder, and if a company, also each of the directors, or if a partnership, also each of the partners, will reimburse the insurer any and all moneys paid by the insurer howsoever arising, including all assessment, legal and handling costs in relation to each and every claim made under the Policy.
65 The defendants submit that the absence of a reference to a demand being made, in clause 4, suggests that the parties did not intend for the making of the demand to be a condition precedent, and the reimbursement clause was to operate like any other indemnity clause which creates a complete cause of action once the indemnifier is required to hold harmless the indemnified party.
66 The defendants say that the words, “immediately upon demand” in the reimbursement clause still had work to do in circumstances where the insurer had commenced a claim for recovery against the defendants. Had they done so within six years of the insurer having paid, or agreeing to pay, the building owner; then the defendants might have a good argument as to why they should not pay the insurer’s costs of these proceedings.
67 The plaintiff did not accept that the warranty insurance application is a related contract for the purposes of the present matter. It cited Optus Vision Pty Ltd v Australian Rugby Football League Ltd[20], in which Einstein J considered at ([24]-[25]) the question of whether the terms of the interrelated contracts, the subject of the proceeding, could be used in assisting in the construction of certain terms of the sponsorship deed :
But resort to extrinsic evidence, here documentary, must not detract from the axiomatic proposition that the starting point when considering a point of interpretation must be the text itself.
….Thus far no Australian authority has gone so far as to allow unambiguous language to be contradicted by context.
[20][2004] NSWCA 61.
68 The plaintiff says that the defendants refer to the application for warranty insurance in an attempt to establish ambiguity in the reading of the reimbursement clause set out in the Eligibility Contract. As Riordon J identified in Siemens Gamesa Renewable Energy Pty Limited v Bulgana Wind Farm Pty Ltd[21] it is not appropriate to refer to extrinsic materials to create an ambiguity, the ambiguity must be apparent from terms of the contract itself.
[21][2020] VSC 126 at [48].
69 I accept the plaintiff’s contention that, even if the application for warranty insurance was a document to be considered when construing the Eligibility Contract, the clause referred to simply confirms the requirement for reimbursement to the plaintiff, with the reimbursement clause then identifying when the liability for reimbursement was due, being “immediately upon demand.”
70 Ground three is rejected.
Ground Four
71 Fourthly, the defendants claim the reimbursement clause must be construed contra proferentem in the defendants’ favour.
72 The defendants rely on the High Court decision in Andar Transport v Brambles[22] (at [26]) (“Andar”) which stands for the proposition that if a clause is designed to satisfy a liability owed by someone other than the guarantor or indemnifier to a third person, then, one must construe that clause against the party who the clause favours. The defendants contend that the reimbursement clause in this case fits squarely within that definition.
[22](2004) 217 CLR 424.
73 The plaintiff contends that the Eligibility Application creates a binding contract and cause of action in and of itself. If the terms of the reimbursement clause identify a cause of action and when that cause of action accrues from a natural ordinary reading of its terms, it is not appropriate to refer to matters outside the four corners of the contract. Where there is no ambiguity, contra proferentem has no application.
74 The plaintiff submits that the language of the reimbursement clause is plain and clear. The defendants are required to reimburse the plaintiff ‘immediately upon demand”. The clause in Andar bears no resemblance to the reimbursement clause in this matter. The defendants’ submissions attempt to create an ambiguity which is not apparent from the clear wording of the reimbursement clause. Given the clear wording, it is not open to refer to external circumstances or documents or to construe the reimbursement clause contra proferentem.
75 I accept the plaintiff’s position that there is nothing ambiguous about the language of the clause that would require recourse to surrounding circumstances or for the expression to be construed contra proferentem.
76 Ground four is rejected.
Conclusion
77 Accordingly, for the foregoing reasons, I am satisfied that that words “immediately upon demand” have a plain and ordinary meaning and are not in any way ambiguous. Therefore, the cause of action arises on the date that the first demands were made upon the defendants and the plaintiff’s claim is not statute‑barred.
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Certificate
I certify that these 15 pages are a true copy of the judgment of Judge Burchell delivered on 15 July 2021
Dated: 15 July 2021
Simon Bobko Associate to
Judge Burchell
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