Insurance Australia Ltd v Milonas - [2021] VSC 602

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

JUDICIAL REVIEW AND APPEALS LIST

S ECI 2020 00541

INSURANCE AUSTRALIA LTD (ACN 000 016 722)	Applicant
v
PANAGIOTA ULA MILONAS	Respondent

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JUDGE:	McDonald J
WHERE HELD:	Melbourne
DATE OF HEARING:	28 and 31 May 2021
DATE OF JUDGMENT:	22 September 2021
CASE MAY BE CITED AS:	Insurance Australia Ltd v Milonas
MEDIUM NEUTRAL CITATION:	[2021] VSC 602

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APPEAL — Application for leave to appeal from orders of Victorian Civil and Administrative Tribunal — Swimming pool constructed with incorrect dimensions — Pool had to be demolished and rebuilt — Whether applicant liable to indemnify respondent for cost of demolition and rebuilding pool — Whether incorrect dimensions of pool constituted a latent defect — Whether respondent’s loss occurred when she had actual knowledge of incorrect dimensions — Incorrect dimensions discoverable by exercise of reasonable diligence — Loss occurred when respondent took possession of pool with incorrect dimensions — Applicant liable to indemnify respondent for loss — Grounds of appeal relating to construction of insurance policy having no real prospect of success — Leave to appeal refused — Victorian Civil and Administrative Tribunal Act 1999 ss 148(1), (2A) (‘VCAT Act’).

INTEREST — Applicant ordered to pay interest on $200,000 from the date the respondent filed amended particulars of loss and damage — No finding that it was unreasonable for applicant to have withheld payment of $200,000 from date of filing of amended particulars of loss and damage — Not unreasonable for applicant to have withheld payment — Order for payment of interest set aside — Question of applicant’s liability to pay interest remitted to Tribunal — Insurance Contracts Act 1984 (Cth) s 57.

COSTS — Applicant ordered to pay respondent’s costs of proceeding in Tribunal on solicitor-client basis — Senior Member had regard to applicant’s failure to comply with VCAT Act — No basis for finding applicant failed to comply with VCAT Act — Costs order set aside — Question of cost remitted to Tribunal for further hearing — VCAT Act s 109.

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APPEARANCES:	Counsel	Solicitors
For the Applicant	Mr S Stuckey QC	Moray & Agnew Lawyers
For the Respondent	Mr P Marzella	Ferraro & Co Pty Ltd

HIS HONOUR:

Introduction

Insurance Australia Ltd (‘IAL’) and Dr Panagiota Milonas (‘Dr Milonas’) each had the serious misfortune of having dealings with the inaptly named ‘Paradise Pools’. In 2006 Dr Milonas undertook significant building works at a property she owned in Elwood. Her builder engaged Paradise Pools to construct a steel reinforced concrete swim spa. The result was nothing short of a disaster. The pool as constructed had numerous defects. Foremost amongst these was the length and width of the pool being shorter and narrower than specified in the approved building plans. As a consequence, the pool could not be used as a swim spa. It had to be demolished, removed and rebuilt. For its part, IAL has the misfortune of standing in the shoes of…

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] VSC 602
Decision Date: 22 September 2021

CaseChat Overview and Summary

The case of Insurance Australia Ltd v Milonas involved an appeal against orders made by the Victorian Civil and Administrative Tribunal (VCAT). The dispute centred on the construction of a swimming pool that had been built with incorrect dimensions, necessitating its demolition and rebuilding. The central issue was whether the applicant, Insurance Australia Ltd, was liable to indemnify the respondent, Milonas, for the costs associated with the demolition and rebuilding of the pool. Additionally, the court had to determine whether the incorrect dimensions constituted a latent defect and whether the respondent’s loss occurred when she had actual knowledge of the incorrect dimensions.

The legal issues before the court included whether the incorrect dimensions of the pool constituted a latent defect, and if so, whether the loss occurred when the respondent took possession of the pool with the incorrect dimensions. The court found that the incorrect dimensions were discoverable by the exercise of reasonable diligence and thus did not constitute a latent defect. The court further determined that the respondent's loss occurred when she took possession of the pool with incorrect dimensions, making the applicant liable to indemnify the respondent for the loss. The court also considered the grounds of appeal relating to the construction of the insurance policy, concluding that they had no real prospect of success.

The court refused leave to appeal, finding that the grounds concerning the insurance policy had no real prospect of success. Regarding the interest on the $200,000, the court set aside the order for payment of interest and remitted the question to the Tribunal. The court also set aside the order for the applicant to pay the respondent’s costs of the proceeding and remitted the question of costs to the Tribunal for further hearing. This decision underscores the importance of the timing of loss and the discoverability of defects in insurance claims.

Orders