Kavanagh v New South Wales Self Insurance Corporation

[2024] NSWCATCD 14

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

Kavanagh -v- New South Wales Self Insurance Corporation [2024] NSWCATCD 14

Hearing dates:

1 November 2023

Date of orders:

12 January 2024

Decision date:

12 January 2024

Jurisdiction:

Consumer and Commercial Division

Before:

P Moran, Senior Member

Decision:

1. Appeal against the decision of the respondent made 24 February 2023 allowed.

2. The decision of the respondent made 24 February 2023 be set aside.

3. The claim by the applicant upon the respondent made 2 August 2022 be reconsidered by the respondent pursuant to law.

Catchwords:

HOME BUILDING APPLICATION – building claim – appeal against decision of insurer under building cover contract – whether policy provision excludes cover – successor in title – whether successor in title has an interest in the work – non completion of work by builder

Legislation Cited:

Home Building Act 1989 (NSW)

Cases Cited:

Alliance Australia Insurance Limited -v- Rawson Homes Pty Limited [2021] NSWCA 224

Texts Cited:

Nil

Category:

Principal judgment

Parties:

Applicant: Alana Kavanagh
Respondent: New South Wales Self Insurance Corporation

Representation:

Applicant: M Draybi, Centurion Lawyers Pty Limited
Counsel: T Smartt

Respondent: D Newey, Gillis Delaney Lawyers
Counsel: S Ahmed

File Number(s):

2023/00402222 (Previously HB 23/16467)

Publication restriction:

Nil

REASONS FOR DECISION

Background/Application

1. The applicant is the owner of premises in Cocoparra Circuit, North Kellyville (Property); settlement of her purchase of the property from CN1 Pty Limited (CN1) occurring on 29 December 2021 following the entering into of a Contract for Sale of Land on 30 April 2021.

2. Prior to the applicant’s purchase of the property from CN1 the vendor had entered into a NSW Residential Building Contract for New Dwellings with Willoughby Homes Pty Limited (Builder) on 17 February 2021 for the construction by the builder of a two storey residential dwelling on the property (Building Contract).

3. Some two weeks prior to the builder and CN1 entering into the building contract the respondent had, on 4 February 2021, had issued to CN1 a Policy of Insurance under Part 6 of the Home Building Act 1989(NSW) (Policy).

4. Both the building contract and the policy are discussed in greater detail later in these Reasons. Two certificates were issued in respect of two lots comprising the North Kellyville property.

5. In late July 2022 the builder, having commenced the building work for CN1 pursuant to the building contract prior to the applicant becoming the registered proprietor, became insolvent and did not thereafter attend the property or complete the works.

6. On 2 August 2022 the applicant made a claim under the policy against the respondent in respect of incomplete building work, defective building work, defective design and legal (and other) costs.

7. The respondent, having received the claim, accepted liability for defective work on 31 October 2022 but denied liability in respect of the claim for incomplete building work, relying upon clause 3.2 of the policy. The claim on the policy, and the respondents response to the claim, are discussed in more detail below.

8. In response to a request by the applicant the respondent reviewed its decision in respect of the incomplete building work component of the claim. It informed the applicant on 24 February 2023 that it was maintaining its declinature of liability.

9. Following notification of the review decision the applicant on 6 April 2023 lodged the current Application. She seeks an order to allow an appeal against the indemnity decision of the respondent. She contends the respondent’s rejection of the claim in respect of incomplete works by relying upon clause 3.2 of the policy was erroneous because

1. it misconstrued the clause, and

2. it erred in concluding that the clause had application to the claim for incomplete work.

Issues for Determination

10. The issues for determination are, firstly, whether the respondent’s rejection of the claim insofar as it related to incomplete work, by reason of its reliance on policy exclusion 3.2, was erroneous; secondly, if so, what is the appropriate order that the Tribunal ought make.

Jurisdiction

11. Both parties submit that the Tribunal has jurisdiction to hear and determine the Application.

12. The applicant refers to ss48K and 48A of the Home Building Act, 1989 (NSW) (HB Act); s48K conferring jurisdiction on the Tribunal to hear building claims and s48A(2) defining a building claim as including “an appeal against the decision of an insurer under a Building Cover/Contract required to be entered into under this Act.”

13. The applicant contends that the appeal sought in the Application ought properly be characterised as an appeal in the strict sense where the only questions are whether the decision maker erred and, if so, what it should have done. It submits that the Tribunal’s task on the present Application is to review the respondent’s decision by reference to the materials and law that were before the respondent and that, if the applicant is successful, the appropriate order is that her claim upon the respondent be redetermined in accordance with law.

14. The respondent, equally, points to s48A and s48K. It concedes that the Application seeking to appeal is made within time and that the amount claimed does not exceed the Tribunal’s jurisdiction.

15. The respondent submits that the appeal the subject of the Application ought be conducted as a rehearing of the applicant’s claim for indemnity to the respondent in respect of incomplete works; that there is no issue of fresh evidence, and that if the applicant succeeds the appropriate Tribunal order is for the respondent to indemnify the applicant under the terms of the policy in respect of incomplete works.

16. I agree with the submissions of the parties on the issue of jurisdiction. I find that, pursuant to s48K(1) of the HB Act, the Tribunal has jurisdiction to hear and determine the application being – I find – a building claim – brought before it in accordance with Part 3A.

17. The respondent's 24 February 2023 decision was, I find, a decision of an insurer under a building contract required to be entered into under the HB Act: the Application is an appeal against that decision and hence S48A(2) gives the Tribunal jurisdiction to hear and determine it.

Decision the Subject of Appeal

18. Section 4B of the 6 April 2023 Application asserts that on or around 2 August 2022 the applicant made a claim against the Home Building Compensation Fund, claim number HBCF-CL-006771 (Claim); that Claim was rejected by the respondent, and that that rejection was erroneous.

19. The applicant contends that the relevant decision was made on 24 February 2023 – being set out in a letter of Gillis Delaney Lawyers of that date and annexed to the Application - and is, for the purpose of s48A(2)(a) of the HB Act, the decision of the insurer the subject of the appeal.

20. The respondent in its written submissions agrees that it is the 24 February 2023 decision that is the subject of the present Application.

21. Relevantly, the respondent’s reasons for its decision are set out in paragraphs 1.11 to 1.22 of the 24 February letter. The respondent asserted:

1. The applicant’s claim in respect of incomplete works concerned works that were not undertaken by the builder.

2. The applicant purchased the property from CN1.

3. At the time she purchased the property,

1. The builder was carrying out residential building works at the property pursuant to a building contract between it and CN1 and,

2. The residential building works were not completed.

4. The applicant had not submitted any evidence that established that she procured an interest in the building contract.

5. When the applicant purchased the property she did so with the knowledge that the works of the builder had not been completed.

6. By virtue of the Contract for Sale of the property between herself and CN1 the property was conveyed in the state it was in at the time of completion of the sale contract.

7. There were no provisions in the sale contract that assigned or novated rights of CN1 under the Building Contract to the applicant.

8. The applicant has no interest in the Building Contract.

9. Clause 3.2 of the policy provided:

“3.2 The policy does not cover an interest in the work that is not your interest and we are not liable under the policy to any person other than you.”

10. Clause 3.2 of the policy applies to the claim in respect of incomplete works.

11. The applicant has an interest in the works completed by the builder up to the date of the completion of the sale contract.

12. The applicant has no claim available to her under the policy in respect of incomplete works.

Evidence

22. The evidence before the Tribunal comprised an affidavit of Maroun Antoine Draybi sworn on 29 May 2023 as well as an exhibit to that affidavit, and an affidavit of Darren William King affirmed 13 June, 2023 as well as an exhibit to that affidavit.

23. The applicant’s affidavit deposes to a Building Contract being entered into between Willoughby Homes Pty Limited as builder and CN1 on 17 February 2021 for the construction by the builder of a two storey residential dual occupancy at the North Kellyville property. The Building Contract commences at page 28 of the affidavit. It is a contract between CN1 as “owner” and the builder. The contract price is stated to be $465,002.25. Clause 6 provided that the building works were to reach the stage of practical completion no more than 42 weeks after the building period commenced. Clause 14 named David Kavanagh – who the evidence discloses is the applicant’s father – as guarantor. A schedule of progress payments appears at page 31, and the contract was executed by Mr Kavanagh on behalf of CN1 and a Simone Walker on behalf of the builder; those signatures appearing at page 37.

24. The applicant’s affidavit deposes to the applicant’s father, David Kavanagh (Mr Kavanagh), sending an email to the respondent’s claims manager, Gallagher Bassett, on 2 August 2022 attaching:

1. a completed claim form.

2. details of payments made to the builder under the Building Contract.

3. a copy of the Home Warranty Certificate issued by the respondent.

4. the executed Building Contract, and

5. the construction certificate approved plans.

That email, and the attachments referred to, are at pages 7 to 156 of the affidavit. A copy of what the applicant contends is the relevant policy of insurance issued by the respondent appears at pages 1 to 6.

25. Page 8 of the affidavit is an email of Gallagher Bassett to Mr Kavanagh of 30 June 2022 attaching a copy of what is described as a Loss Notification Form. The email sought submission of the form completed, a copy of the Certificate of Insurance and proof of ownership of the property. At page 7 of the affidavit is an email of Mr Kavanagh to Gallagher Bassett of 29 July 2023 attaching a Loss Notification Form and enquiring as to whether a claim could be made under “HOW Insurance” as the builder could not complete the house as the license had been cancelled.

26. The response of Gallagher Bassett appears on the same page of the exhibit to the affidavit. It records the loss notification having been registered and advises that a claim consultant would review the form. It attached a claim form for completion. That claim form was returned and marked as completed by Mr Kavanagh in a further email to Gallagher Bassett of 2 August 2022. That email purported to enclose payment details, “HOW Certificate, signed contact and CC approved plans”. The email asks for confirmation of receipt.

27. The claim form commences at page 9 of the exhibit to the affidavit. It names the home owner as the applicant, gives the property as the address of the building work the subject of the claim, provides a Certificate of Insurance number, names the builder and answers “yes” to the question - “Is the builder or owner/builder insolvent (bankrupt, in liquidation or under external administration)?”. The form says that the applicant became aware of the insolvency in late July 2022 and outlines the nature of her claim to be “defective building work”, “non completion of building work”, “defective design” and “legal or other reasonable costs in seeking to recover compensation from the builder/owner builder”.

28. In answer to question 12 the applicant says the builder last attended the site on 28 July 2022 and that the then current stage of the works was “brick work stage”.

29. There are two relevant insurance certificates in respect of the property reproduced at pages 22 and 23 of the affidavit. They are identical in terms. They relate to two separate lots comprising the property. They each record the “home owner” as CN1, and both are issued on 4 February 2021, that is some two months prior to the applicant’s purchase of the property. They both refer to works carried out by the builder. Both certificates state:

“Subject to the Act the Home Building Regulation 2014 and the conditions of the Insurance Contract, cover will be provided to a beneficiary described in the Contract and successors in title to the beneficiary. This Certificate is to be read in conjunction with the policy wording current as at the policy date available at the Icare website. . . . .”

30. The wording of each certificate, after referring to a policy number and a policy date, provides:

“A contract of insurance complying with sections 92 and 96 of the Home Building Act 1989 (the Act) has been issued by Insurance and Care NSW (Icare) for the insurer, the New South Wales Self Insurance Corporation (Home Building Compensation Fund).”

31. The policy of insurance that the applicant deposes was the relevant issued policy in respect of which the claim is made is at pages 1 to 6 of the affidavit exhibit.

32. The affidavit of Darren William King (respondent’s affidavit) refers in paragraph 7 to the applicant’s affidavit and the inclusions in that affidavit including the policy wording at pages 1 to 6 of the exhibit to the applicant’s affidavit. The respondent, for the purpose of the Application, also relies on those documents.

33. The parties, then, agree that the policy wording appearing at pages 1 to 6 of the exhibit to the applicant’s affidavit is the relevant policy wording.

34. Relevantly for the purposes of the present Application subclauses (a) and (b) of clause 1.1 of the policy provide:

“1.    Cover

1.1   Residential Building Work

(a)   Subject to the terms of the policy and in accordance with Act and the Regulations, the policy will cover you if you suffer the following losses or damage in respect of the work covered by this policy.

1. Loss or damage resulting from non completion of the work because of insolvency, death or disappearance of the builder; and

2. Loss or damage arising from a breach of a statutory warranty by the builder being loss or damage in respect of which you cannot recover compensation from the builder or have the builder rectify because of the insolvency, death or disappearance of the builder.

1. Subject to the terms of the policy in accordance with the Act and the Regulations and without limiting (a) the policy will cover you for the following loss or damage, being loss or damage in respect of which you cannot recover compensation from the builder or have the builder rectify because of the insolvency, death or disappearance of the builder:

1. . . . . .

2. Loss or damage resulting from non completion of the work because of early termination of the contract because of the builder’s wrongful failure or refusal to complete the work.

3. . . . . .

4. . . . . .

5. . . . . . ”

35. Clause 3.2 of the policy provides:

“3.2   The policy does not cover an interest in the work that is not your interest and we are not liable under the policy to any person other than you.”

36. Clause 7 is headed “Terms With Special Meanings”. Immediately under that heading the policy says,

“In the policy the words in bold have meaning indicated below”.

37. Relevantly for the purposes of the present Application within Clause 7 is provided:

“Contract means a contract between you and the builder pursuant to which the work is done or is to be done”

“Work means the residential building work which is done or is to be done by the builder to the dwelling under the contract”

“You or your means the person on whose behalf work is done or is to be done including any owner of the land at the time the contract is entered into, on which the residential building work is done, and any successor in title to that person”

38. Commencing at page 173 of the exhibit to the applicant’s affidavit is a letter of who the affidavit describes as the respondent’s claims manager and dated 16 August 2022. It is addressed to the applicant, refers to receipt of her claim, confirms that the builder is considered insolvent at the time and that that was an insurable event under the policy. It indicates that additional information is required. It purports to attach the policy wording, specifically refers to clause 3.2 as well as s99 of the HB Act, then says:

“This may mean that we are unable to accept your claim for loss resulting from non completion of the work as you may not be a person on whose behalf the work is being done.”

The letter then says that a decision had not been made and that the question of whether the abovementioned provisions applied was still being considered.

39. On page 217 is a further email of who the applicant describes as the respondent’s claims manager. It is again addressed to the applicant and is dated 31 October 2022. By its terms the respondent accepts the applicant’s defective work claim but in relation to the “non completion claim” again refers to clause 3.2 of the policy and s99(1)(a) of the Act. The letter then says,

“ this means that we are unable to accept your claim for loss resulting from non completion of the work, as you are not a person on whose behalf the work is being done.”

40. Mr Kavanah challenged the declinature of the claim in respect of non completion works by an email to the claims manager of 1 November 2022, specifically referring to the reference in s99(1)(b) of the HB Act as including successors in title to persons on whose behalf work is being done. Further challenge was made to the determination in a letter of the applicant’s solicitors to Gallagher Bassett of 29 November 2022 commencing at page 223 of the applicant’s exhibit. A review of the decision was requested. The letter referred to definitions of “work” and “you” in clause 7 of the policy and asserted the applicant had an interest in` the work (as defined) by reason of the statutory warranties specified in s18B of the Act which were extended to the applicant under s18D. The letter concluded with an invitation that the claim for incomplete works be reassessed.

41. Gallagher Bassett advised the applicant’s solicitors by letter of 22 December 2022 that what is described as its Internal Disputes Resolution Service had completed its review of the matter, then said:

“(a) The applicant was not a party to the Building Contract.

(b) There was no binding obligation on the builder to deliver a complete dwelling to the applicant.

(c) The applicant purchased the property with the dwelling in its then current stage, in full knowledge that the work was incomplete.

(d) The applicant did not suffer a loss resulting from non completion of the work because of the insolvency of the builder.

(e) As a result of the above the “IDR Committee” maintained the claims decision issued 31 October 2022.”

42. The applicant’s solicitors requested that the matter be referred to the Icare HBCF Claims Committee for review. That request was made by email of 16 January 2023 appearing at page 230 of the exhibit attachments. That resulted in the issuing on 24 February 2023 of the Gillis Delaney letter; this being the relevant decision for the purpose of the current Application. The relevant provisions of the letter have been set out earlier in these Reasons.

43. The respondent’s affidavit, in paragraph 7, sets out the documents attached to the applicant’s affidavit on which the respondent also relies. In addition, paragraph 9 sets out further documents on which it relies being:

1. Development Application and Statement of Environmental Effects dated 24 November 2014.

2. Notice of Determination of a Development Application dated 15 May 2015.

3. Deposited Plan Administration Sheet registered 4 January 20156.

4. Section 88B Plan of Subdivision Instrument dated 4 January 2016.

5. Notice to Applicant of Determination of a Development Application dated 25 February 2020, and

6. Title searches.

Applicant’s Submissions

44. The applicant relies on two grounds of appeal. Firstly, that the respondent misconstrued clause 3.2 of the policy; secondly, it erred in concluding that that clause had application to the claim for incomplete work. She says that the policy is to be construed in accordance with principles approved by the Court of Appeal in Alliance Australia Insurance Limited -v- Rawson Homes Pty Limited [2021] NSWCA 224 including

1. The meaning of words used in an insurance policy are to be construed in favour of an insured as far as the ordinary and natural meaning of the words used by the insurer allows and,

2. If an insurer proffers a document which is ambiguous, it and not the insured should bear the consequences of the ambiguity because the insurer is usually in the superior position to add a word or clause clarifying the promise of insurance which it is offering.

45. The applicant points to the respondent’s focus in its declinature decision on what it refers to as the applicant’s “interest in the building contract”. The applicant submits that clause 3.2 does not refer to an interest in the building contract but, rather, an interest in the work. The applicant submits that the policy has a separately defined term for the building contract – clause 7. She says that, accordingly, if the drafter of the policy meant to refer in clause 3.2 to an interest in the building contract it would have been easy to use the defined term in clause 7.

46. Secondly, the applicant points out that the respondent’s reference in its declinature decision to “interest in the building contract” renders nearly all of the policy definition of “you” and “your” otiose. Those words are defined in the policy as the person on whose behalf the work is done or is to be done, including any owner of the land at the time the contract is entered into (on which the residential building work is done) and any successor in title to that person. The applicant submits that if the effect of exclusion 3.2 was that it was only a person who was a party to the building contract who could make a claim what would be the point of the policy specifically extending coverage to “you” in policy clause 1.1(a). By that clause the policy covers “you” if “you” suffer loss or damage resulting from non completion of the work because of the insolvency, death, or disappearance of the builder.

47. The respondent’s construction, the applicant submits, would mean that successors in title would be unable to claim.

48. The applicant further submits that the respondent’s construction of the policy is inconsistent with its purpose. She says that it is plain from the title page of the policy that it is designed to be a policy that complies with Part 6 of the HB Act.

49. The applicant submits that the respondent erred in construing clause 3.2 of the policy and in concluding that the clause had application to the claim. It should, the applicant submits, have accepted that she had an interest in the work for the purpose of clause 3.2 as successor in title to the contracting party. She says that not only is that a commonsense reading of clause 3.2 but that, in addition, her construction of the policy achieves the purpose of creating a contract compliant with the HB Act.

50. The applicant submits that she does have an interest in the work and that the respondent, in wrongfully – she says – applying the clause 3.2 exclusion, referred to the applicant having no interest in the building contract. She specifically points to the definition of “you” and “your” appearing at clause 7 of the policy to include “. . . . . any successor in title” of the person on whose behalf the work is done or to be done, including any owner of the land at the time the contract is entered into. She says the exclusion in clause 3.2 does not apply as that exclusion only operates to exclude cover to persons that do not have an interest in the work. She has that interest, she says, because “work” is defined in the policy to mean residential building work which is done (or is to be done) by a builder to the dwelling under the contract, and “contract” is defined in the same clause to mean a “contract between you and the builder pursuant to which the work is done or to be done”.

51. The applicant further submits that, when construing the policy, the wording of s99 of the HB Act is important in its reference to insuring of successors in title.

Respondent’s Submissions

52. The respondent refers to the applicant entering into the contract for the purchase of the property on 30 April 2021, settlement occurring in respect of that purchase on 29 December that year and that, at the time of settlement, the works under the building contract were not completed and the applicant was aware of that fact. It says that the purchase contract did not contain any terms which either assigned or novated the vendors interest under the building contract to the applicant. Further, it says that the applicant has adduced no evidence to establish that she entered into a separate Home Building Contract with the builder requiring the builder to complete the works.

53. The respondent says that the applicant was not a party to the building contract and that contract was not assigned or novated to her by the vendor. It says that the applicant’s interest in the works under the building contract can only be with respect to those works that were completed as at the time of settlement of her purchase, namely as at 29 December 2021. It says that the builder was under no binding obligation to the applicant to complete the construction of the properties and that the applicant has no interest in the works after 29 December 2021.

54. It maintains its decision to deny the applicant’s claim for incomplete work relying upon clause 3.2 of the policy. It points to the policy definition of work meaning the residential building work done (or to be done) by the builder to the dwelling under the contract; further, that the contract means the contract between CN1 and the builder. It submits that “work” is tied to the relevant contract, being the building contract, and pertains only to the parties to that contract.

55. In reference to the policy definition of “you” the respondent submits that that merely means that the benefit of the policy – in accordance with its terms – extends to successors in title such as the applicant. The respondent says that that is not an all encompassing transfer of rights from an original owner to any successor in title.

56. The respondent submits that the position of the applicant as successor in title is not the same as that of CN1. She is not, it says, a party to the building contract and does not have, or could ever have, contractual rights against the builder. It says that her rights against the builder arise from the HB Act, namely the extension of statutory warranties by operation of s18D of that Act.

57. The respondent points to s99 of the HB Act which deals with requirements for insurance for residential building work done under contract. It says that subsection (1)(a) refers to a contract of insurance insuring against the risk of loss resulting from non completion of the work for “a person on whose behalf the work is being done” and, in subsection (1)(b), a contract of insurance being required to insure a “person on whose behalf the work is being done and the person’s successors in title” against the risk of being unable to have the contractor rectify a breach of a statutory warranty in respect of the work. It points to the fact that the insurance obligation under s99(1)(a) only applies to a person on whose behalf the work is being done. It does not – the respondent says – require insurance for non completion to successors in title. This - it says - is in contrast to s99(1)(b) where in relation to breaches of statutory warranty the section is directed to both the person on whose behalf the work is being done and to successors in title. It says that subsections (1)(a) and 1(b) were drafted such that a contract for insurance for non completion is only for the benefit of the person on whose behalf the work is done and not to successors in title. The respondent says that clause 3.2 of the policy especially makes clear what 99(1) of the HB Act requires.

58. The respondent further submits that, as a successor in title, the applicant will enjoy the benefits of the policy in so far as the builder has performed effective work that it has performed under the contract. It says that the benefits of the policy do not extend to incomplete work that the builder has not yet performed under the contract. This because the applicant, as a successor in title, could not compel the builder to perform any work under the contract as she is not a party to it. It says any incomplete work would not be work done under the contract.

59. The respondent points to the words “interest in the work” appearing in clause 3.2. It says that such an interest must mean either a legal interest, an equitable interest, or an interest arising under statute. It submits that no interest arises under the HB Act. It submits that the applicant does not have a legal interest under the contract as she is not a contracting party. It also submits that the applicant does not have an equitable interest in the work.

Consideration and Findings

60. Insuring clause 1.1(a) provides cover to the applicant because she is, I find, a successor in title to the entity to whom the respondent issued the certificates of insurance in respect of the property in February 2021, namely CN1 Pty Limited. There is no dispute that the applicant is a successor in title to CN1; she having purchased the property by contract entered into on 30 April, 2021 which completed on 29 December 2021. CN1 Pty Limited had entered into the policy with the respondent prior to it entering into its 30 April 2021 contract to sell the property to the applicant.

61. The opening words of clause 7 of the policy say that words in the policy in bold have the meaning indicated by the clause. As previously stated in these Reasons, the words in bold in the policy “you” and “your” are defined to mean the person on whose behalf the work is done or is to be done including any owner of the land at the time the contract is entered into on which residential building work is done, and any successor to that person.

62. “Work” is defined in the same clause to mean residential building work which is done, or is to be done by the builder to the dwelling under the contract, and “contract” is defined to mean “. . . . . a contract between you and the builder pursuant to which the work is done or is to be done”.

63. Applying the definition of “you” to include a successor in title, the definition of “contract” – as expanded – in the policy means a contract between a successor in title to a person on whose behalf the work is done (or is to be done) - including a successor in title to the owner of the land at the time the contract is entered into - and the builder.

64. Applying this expanded definition, ensuring clause 1.1(a) the respondent’s policy covers successors in title to persons on whose behalf work is done (including any owner of the land at the time the contract is entered into) if such successor in title suffers loss or damage resulting from non completion of the work because of the insolvency, death or disappearance of the builder.

65. I accept the applicant’s submissions as to the respondent erring in concluding that exclusion 3.2 of the policy had application to the applicant’s claim for incomplete work.

66. The drafter of the policy included the word “your” in clause 3.2 in bold. Whilst s99 of the HB Act only includes the words “and the person’s successors in title” in subsection 1(b) and not subsection 1(a), the applicant’s claim on the respondent was a claim under the policy of insurance as drafted and issued by the respondent. It is the wording of the policy that is applicable. If the policy wording in any respect is ambiguous the authorities cited by the applicant apply and it is the insurer, and not the insured, who should bear the consequences of the ambiguity.

67. The applicant, does, I find, have an interest in the work when one interprets the policy in the way that its draftsperson specifically provided in the opening words of clause 7 by specifically linking the definition of “work” to that which is done “under the contract” and defining “contract” to mean one between the builder and “you”. The draftsperson is intending that a successor in title – by reason of the expressed definition of “you” or “your” – to have “an interest in the work”. The respondent could have drafted clause 3.2 in such a way that the words in bold “work” and “your” were to be construed or interpreted in a way other than the way in which those words are specifically policy defined by clause 7. It didn’t do so.

68. Additionally, the respondent’s decision referred to the applicant’s “interest in the building contract”. Policy exclusion 3.2 does not refer to “an interest in the building contract” but, rather, an interest in the “work”. I agree with the applicant’s submission that the policy has a separately defined term for “the building contract” set out in clause 7 namely, “the contract between you and the builder pursuant to which the work is done or is to be done”. That is policy defined as “the contract”. If the draftsperson meant to refer to “interest in the building contract” in clause 3.2 it would have been easy for the defined term “the building contract” to be used.

69. The respondent, I find, erred in construing clause 3.2 of the policy and erred in concluding that the clause had application to the applicant’s claim. It should, I find, have accepted that the applicant had “an interest in the work” for the purposes of clause 3.2 as successor in title to the contracting party.

70. The applicant submits, and I agree, that if her application is successful the appropriate order is that her claim on the respondent under the policy be redetermined in accordance with law. The respondent submits that if the Tribunal finds that the respondent’s decision was not correct it has the power to order it to indemnify the applicant under the policy for the incomplete works with the amount of such indemnity,

1. to be agreed by the parties, or

2. if not agreed, to be determined by the Tribunal pursuant to a fresh Home Building Application.

71. I agree with the applicant’s submission as to the appropriate order to be made. The issue for the Tribunal’s determination is in respect of the decision of the respondent insurer.

72. Paragraphs 1.23 to 1.25 of the respondent’s 24 February 2023 decision (page 235 of the applicant’s affidavit) refer to the insurer being prepared to reconsider its decision in the event of additional information being supplied by the applicant and required by the insurer. In those circumstances the appropriate order is not that the respondent indemnify the applicant under the policy with the amount of such indemnity to be agreed between the parties or determined by a fresh Tribunal application but, rather, to order that the applicant’s claim under the policy be redetermined by the respondent in accordance with law.

73. The respondent also produced evidence - and made submissions in respect of - the applicant’s father, his company being the contracting party with the builder and the vendor to the applicant. I do not consider that those factors are relevant to the issue that the Tribunal is required to determine. Nor do I consider it relevant as to what the applicant may or may not have known as to completion of the building works at the time when she settled on her purchase of the property.

ORDER

1. Appeal against the decision of the respondent made 24 February 2023 allowed.

2. The decision of the respondent made 24 February 2023 be set aside.

3. The claim by the applicant upon the respondent made 2 August 2022 be reconsidered by the respondent pursuant to law.

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I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.

Registrar

Decision last updated: 13 August 2024