Kotku Bread Pty Ltd v Vero Insurance Ltd - [2012] QSC 109

SUPREME COURT OF QUEENSLAND

CITATION:

Kotku Bread Pty Ltd v Vero Insurance Ltd & Anor [2012] QSC 109

PARTIES:

KOTKU BREAD PTY LTD (ACN 089 980 772)
(plaintiff)
v
VERO INSURANCE LIMITED (ACN 005 297 807)
(first defendant)
and
786 INTERNATIONAL (AUST) PTY LTD
(ACN 010 805 222)
(second defendant)

FILE NO:

BS 2284 of 2011

DIVISION:

Trial Division

PROCEEDING:

Claim

ORIGINATING COURT:

Supreme Court of Queensland

DELIVERED ON:

26 April 2012

DELIVERED AT:

Brisbane

HEARING DATE:

13-17, 20, 23 and 24 February 2012 and 21 March 2012

JUDGE:

Applegarth J

ORDERS:

1. The plaintiff’s claim against the first defendant is dismissed.

2. Judgment be entered for the plaintiff against the second defendant for damages in the amount of $2,706,300 together with interest to be assessed.

CATCHWORDS:

INSURANCE – GENERAL – MISREPRESENTATION AND NON-DISCLOSURE – Statutory remedies – where contents of building destroyed by fire – where plaintiff’s fixtures, fittings, equipment and stock insured by first defendant – where the internal construction of the building comprised a high proportion of highly flammable Expanded Polystyrene (“EPS”) – whether in response to a question about EPS in an online insurance proposal form the plaintiff, through its broker, the second defendant, had not disclosed or misrepresented the amount of EPS in the building’s internal construction – whether the first defendant, by means other than the answer, knew that the internal walls had a substantial amount of EPS – whether the plaintiff made a misrepresentation or breached its duty of disclosure – whether the first defendant is entitled to reduce its liability to nil pursuant to s 28(3) Insurance Contracts Act 1984 (Cth)

INSURANCE – INSURANCE AGENTS AND BROKERS – GENERAL DUTY OF CARE – where the plaintiff engaged the second defendant as its insurance broker over several years – where an employee of the second defendant completed an online proposal for insurance with the first defendant – where in response to a question about EPS in the online proposal the second defendant gave an incorrect answer – where, had the correct answer been given, the proposal would have been declined by the first defendant – whether the second defendant failed to warn the plaintiff of the significance of EPS and failed to make proper inquiries as to its presence – whether the second defendant breached its duty of care to the plaintiff and contractual retainer

Insurance Contracts Act 1984 (Cth), ss 21, 28

Esanda Finance Corporation Ltd v Colonial Mutual General Insurance Co Ltd (1993) 217 ALR 180, cited
Evans v Sirius Insurance Co Ltd (1986) 4 ANZ Ins Cas 60-755, cited
Gaiform v Suncorp (1992) 7 ANZ Ins Cas 61-143, cited
Geoffrey W Hill & Associates (Insurance Brokers) Pty Ltd v Squash Centre (Allawah North) Pty Ltd (1996) ANZ Ins Cas 61-012, cited
HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640, cited
Jones v Dunkel (1959) 101 CLR 298, cited
Macfie v State Government Insurance Office (Qld) (1985) 3 ANZ Ins Cas 60-606,…

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: [2012] QSC 109
Decision Date: 26 April 2012

CaseChat Overview and Summary

The case of Kotku Bread Pty Ltd v Vero Insurance Ltd involved the plaintiff, Kotku Bread Pty Ltd, seeking damages for the destruction of their building and contents by fire. The building, which was insured by Vero Insurance Ltd, contained a substantial amount of Expanded Polystyrene (EPS), which is highly flammable. The plaintiff’s claim against Vero Insurance Ltd hinged on whether the plaintiff had misrepresented or failed to disclose the amount of EPS in the building during the insurance application process, and whether Vero Insurance Ltd was entitled to reduce its liability under section 28(3) of the Insurance Contracts Act 1984 (Cth). Additionally, the plaintiff claimed against its insurance broker, the second defendant, for failing to properly advise on the significance of EPS and for breaching its duty of care and contractual retainer.

The court was required to determine whether the plaintiff’s failure to disclose the amount of EPS in its insurance proposal constituted a misrepresentation or a breach of its duty of disclosure, and whether this warranted Vero Insurance Ltd reducing its liability under the policy. Additionally, the court had to assess whether the insurance broker breached its duty of care and contractual obligations by providing incorrect information about the EPS in the proposal, which, had it been correct, would have led to the proposal being declined.

The court found that the plaintiff had indeed misrepresented the amount of EPS in the building, as it failed to disclose the full extent of the EPS present, which was significant enough to affect the risk assessment. However, the court held that this misrepresentation was not material enough to warrant Vero Insurance Ltd reducing its liability to nil. The court also found that the insurance broker breached its duty of care and contractual retainer by providing incorrect information regarding the EPS, which had a direct impact on the assessment of the risk and the decision to insure the property. The broker’s failure to properly advise the plaintiff on the significance of the EPS, coupled with the incorrect information provided, resulted in a liability for damages in favour of the plaintiff against the broker.

The court ordered that the claim against Vero Insurance Ltd be dismissed, and that judgment be entered for the plaintiff against the insurance broker for damages in the amount of $2,706,300, together with interest to be assessed.

Orders

Orders of the court

1. The plaintiff’s claim against the first defendant is dismissed.

2. Judgment be entered for the plaintiff against the second defendant for damages in the amount of $2,706,300 together with interest to be assessed.

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.

CITATION:	Kotku Bread Pty Ltd v Vero Insurance Ltd & Anor [2012] QSC 109
PARTIES:	KOTKU BREAD PTY LTD (ACN 089 980 772) (plaintiff) v VERO INSURANCE LIMITED (ACN 005 297 807) (first defendant) and 786 INTERNATIONAL (AUST) PTY LTD (ACN 010 805 222) (second defendant)
FILE NO:	BS 2284 of 2011
DIVISION:	Trial Division
PROCEEDING:	Claim
ORIGINATING COURT:	Supreme Court of Queensland
DELIVERED ON:	26 April 2012
DELIVERED AT:	Brisbane
HEARING DATE:	13-17, 20, 23 and 24 February 2012 and 21 March 2012
JUDGE:	Applegarth J
ORDERS:	1. The plaintiff’s claim against the first defendant is dismissed. 2. Judgment be entered for the plaintiff against the second defendant for damages in the amount of $2,706,300 together with interest to be assessed.
CATCHWORDS:	INSURANCE – GENERAL – MISREPRESENTATION AND NON-DISCLOSURE – Statutory remedies – where contents of building destroyed by fire – where plaintiff’s fixtures, fittings, equipment and stock insured by first defendant – where the internal construction of the building comprised a high proportion of highly flammable Expanded Polystyrene (“EPS”) – whether in response to a question about EPS in an online insurance proposal form the plaintiff, through its broker, the second defendant, had not disclosed or misrepresented the amount of EPS in the building’s internal construction – whether the first defendant, by means other than the answer, knew that the internal walls had a substantial amount of EPS – whether the plaintiff made a misrepresentation or breached its duty of disclosure – whether the first defendant is entitled to reduce its liability to nil pursuant to s 28(3) Insurance Contracts Act 1984 (Cth) INSURANCE – INSURANCE AGENTS AND BROKERS – GENERAL DUTY OF CARE – where the plaintiff engaged the second defendant as its insurance broker over several years – where an employee of the second defendant completed an online proposal for insurance with the first defendant – where in response to a question about EPS in the online proposal the second defendant gave an incorrect answer – where, had the correct answer been given, the proposal would have been declined by the first defendant – whether the second defendant failed to warn the plaintiff of the significance of EPS and failed to make proper inquiries as to its presence – whether the second defendant breached its duty of care to the plaintiff and contractual retainer Insurance Contracts Act 1984 (Cth), ss 21, 28 Esanda Finance Corporation Ltd v Colonial Mutual General Insurance Co Ltd (1993) 217 ALR 180, cited Evans v Sirius Insurance Co Ltd (1986) 4 ANZ Ins Cas 60-755, cited Gaiform v Suncorp (1992) 7 ANZ Ins Cas 61-143, cited Geoffrey W Hill & Associates (Insurance Brokers) Pty Ltd v Squash Centre (Allawah North) Pty Ltd (1996) ANZ Ins Cas 61-012, cited HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640, cited Jones v Dunkel (1959) 101 CLR 298, cited Macfie v State Government Insurance Office (Qld) (1985) 3 ANZ Ins Cas 60-606,…