Insurance Australia Ltd v Holden - [2021] NSWDC 142

District Court

New South Wales

Medium Neutral Citation: Insurance Australia Ltd v Holden & Ors [2021] NSWDC 142
Hearing dates: 16, 17, 18, 19 March 2021
Date of orders: 30 April 2021
Decision date: 30 April 2021
Jurisdiction: Civil
Before: Russell SC DCJ
Decision:
(1) Judgment for the plaintiff against the first defendant for $529,148.05.
(2) Order the first defendant to pay the plaintiff’s costs.
(3) Judgment for the plaintiff against the second, third and fourth defendants for $529,148.05.
(4) Order the second, third and fourth defendants to pay the plaintiff’s costs.
(5) Grant leave to approach my Associate by email, within 7 days, if any different costs orders are sought.

Catchwords:
CONSTRUCTION OF INSURANCE POLICY – Home Owners Warranty insurance policies issued by insurer to a building company on basis that deeds of guarantee and indemnity would be executed – whether the first defendant entered into a valid deed of guarantee and indemnity
CONSTRUCTION OF A GUARANTEE – Whether the first defendant is bound by first and/or second deeds of guarantee and indemnity – whether deeds of guarantee and indemnity are enforceable
CONSTRUCTION OF DEED OF RELEASE – whether bringing of proceedings by the plaintiff against the first defendant was a breach of a covenant not to sue in release deed signed by the parties
UNJUST CONTRACTS – whether guarantee is an unjust contract pursuant to s 7 of the Contracts Review Act 1980 (NSW)
UNCONSCIONABILITY – whether an independent and adequate explanation of the legal effect of executing a guarantee was provided – whether the first defendant acted in reliance upon statements from her husband, family members and/or insurer
UNCONSCIONABLE CONDUCT – equitable doctrine of unconscionable dealing – meaning and scope of unconscionability under s 21 of the Australian Consumer Law – whether the s 22 factors that assist in determining if a person has engaged in unconscionable conduct are relevant to the relationship between an insurer and a guarantor – whether the s 22 factors are restricted to the relationship between the insurer as the “supplier” and the insured business as a “customer”
EVIDENCE – absence of handwriting expert evidence – no evidence presented that first defendant did not understand the purport and effect of the transaction

Legislation Cited:
Australian Consumer Law (Cth), ss 21, 22
Australian Securities and Investments Commission Act 2011 (Cth)
Civil Procedure Act 2005 (NSW), s 100
Contracts Review Act 1980 (NSW), ss 7, 9
District Court Act 1973 (NSW), ss 4(1), 134(1)
Home Building Act 1989 (NSW), ss 18B, 102BB, 103BB
Insurance Act 1973 (Cth), Pt III Div 3A, ss 17E, 17F, 17G
Penalties Interest Rates Act 1983 (Vic), s 2

Cases Cited:
Australian Competition and Consumer Commission v Quantum Housing Group Pty Limited [2021] FCAFC 40
Commercial Bank of Australia v Amadio (1983) 151 CLR 447
Commonwealth Bank of Australia v Hadfield [2001] NSWCA 440; (2001) 53 NSWLR 614
Garcia v National Australia Bank Ltd [1998] HCA 48; (1998) 194 CLR 395
Good Living Company Pty Limited v…

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: [2021] NSWDC 142
Decision Date: 30 April 2021

CaseChat Overview and Summary

The case of Insurance Australia Ltd v Holden involved a dispute between the insurer and a building company, along with other defendants. The insurer claimed that the building company had breached its obligations under a home owners warranty insurance policy. The primary issue was whether the building company had entered into a valid deed of guarantee and indemnity, and if the building company was bound by the first and/or second deeds of guarantee and indemnity. Additionally, the court needed to determine if the proceedings were a breach of a covenant not to sue in the release deed, if the guarantee was unjust under the Contracts Review Act 1980 (NSW), and if the building company had received an adequate explanation of the legal effect of the guarantee. The court also needed to consider whether there was unconscionable conduct by the insurer, and whether the factors outlined in section 22 of the Australian Consumer Law were relevant to the relationship between the insurer and the guarantor.

The court examined the nature of the guarantee and the enforceability of the deeds of guarantee and indemnity. The court found that the building company had indeed entered into a valid deed of guarantee and indemnity. It was held that the deeds were enforceable against the building company. The court also concluded that the insurer's proceedings against the building company did not breach the covenant not to sue in the release deed. The guarantee was not found to be unjust under the Contracts Review Act 1980 (NSW), and the court found that an independent and adequate explanation of the legal effect of executing the guarantee was provided. Furthermore, the court determined that there was no unconscionable conduct by the insurer, as the factors in section 22 of the Australian Consumer Law were not restricted to the relationship between the insurer and the insured business. The court held that the absence of handwriting expert evidence and the lack of evidence that the building company did not understand the purport and effect of the transaction were significant factors in their decision.

The court made several orders, including judgment for the plaintiff against the first defendant for the amount of $529,148.05, and an order for the first defendant to pay the plaintiff's costs. The court also made similar orders against the second, third and fourth defendants. The court granted leave to approach its Associate by email within 7 days if any different costs orders were sought. These orders reflect the court's findings in relation to the validity of the deeds of guarantee and indemnity, the enforceability of the guarantee, and the absence of any breach of covenant not to sue or unconscionable conduct by the insurer.

Orders

Orders of the court

(1) Judgment for the plaintiff against the first defendant for $529,148.05.

(2) Order the first defendant to pay the plaintiff’s costs.

(3) Judgment for the plaintiff against the second, third and fourth defendants for $529,148.05.

(4) Order the second, third and fourth defendants to pay the plaintiff’s costs.

(5) Grant leave to approach my Associate by email, within 7 days, if any different costs orders are sought.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.

Medium Neutral Citation:	Insurance Australia Ltd v Holden & Ors [2021] NSWDC 142
Hearing dates:	16, 17, 18, 19 March 2021
Date of orders:	30 April 2021
Decision date:	30 April 2021
Jurisdiction:	Civil
Before:	Russell SC DCJ
Decision:	(1) Judgment for the plaintiff against the first defendant for $529,148.05. (2) Order the first defendant to pay the plaintiff’s costs. (3) Judgment for the plaintiff against the second, third and fourth defendants for $529,148.05. (4) Order the second, third and fourth defendants to pay the plaintiff’s costs. (5) Grant leave to approach my Associate by email, within 7 days, if any different costs orders are sought.
Catchwords:	CONSTRUCTION OF INSURANCE POLICY – Home Owners Warranty insurance policies issued by insurer to a building company on basis that deeds of guarantee and indemnity would be executed – whether the first defendant entered into a valid deed of guarantee and indemnity CONSTRUCTION OF A GUARANTEE – Whether the first defendant is bound by first and/or second deeds of guarantee and indemnity – whether deeds of guarantee and indemnity are enforceable CONSTRUCTION OF DEED OF RELEASE – whether bringing of proceedings by the plaintiff against the first defendant was a breach of a covenant not to sue in release deed signed by the parties UNJUST CONTRACTS – whether guarantee is an unjust contract pursuant to s 7 of the Contracts Review Act 1980 (NSW) UNCONSCIONABILITY – whether an independent and adequate explanation of the legal effect of executing a guarantee was provided – whether the first defendant acted in reliance upon statements from her husband, family members and/or insurer UNCONSCIONABLE CONDUCT – equitable doctrine of unconscionable dealing – meaning and scope of unconscionability under s 21 of the Australian Consumer Law – whether the s 22 factors that assist in determining if a person has engaged in unconscionable conduct are relevant to the relationship between an insurer and a guarantor – whether the s 22 factors are restricted to the relationship between the insurer as the “supplier” and the insured business as a “customer” EVIDENCE – absence of handwriting expert evidence – no evidence presented that first defendant did not understand the purport and effect of the transaction
Legislation Cited:	Australian Consumer Law (Cth), ss 21, 22 Australian Securities and Investments Commission Act 2011 (Cth) Civil Procedure Act 2005 (NSW), s 100 Contracts Review Act 1980 (NSW), ss 7, 9 District Court Act 1973 (NSW), ss 4(1), 134(1) Home Building Act 1989 (NSW), ss 18B, 102BB, 103BB Insurance Act 1973 (Cth), Pt III Div 3A, ss 17E, 17F, 17G Penalties Interest Rates Act 1983 (Vic), s 2
Cases Cited:	Australian Competition and Consumer Commission v Quantum Housing Group Pty Limited [2021] FCAFC 40 Commercial Bank of Australia v Amadio (1983) 151 CLR 447 Commonwealth Bank of Australia v Hadfield [2001] NSWCA 440; (2001) 53 NSWLR 614 Garcia v National Australia Bank Ltd [1998] HCA 48; (1998) 194 CLR 395 Good Living Company Pty Limited v…