Mehran Pty Ltd as Trustee for the Djamshidi Unit Trust v Queensland Building Services Authority
[2011] QCAT 420
•5 September 2011
| CITATION: | Mehran Pty Ltd as Trustee for the Djamshidi Unit Trust v Queensland Building Services Authority [2011] QCAT 420 |
| PARTIES: | Mehran Pty Ltd as Trustee for the Djamshidi Unit Trust |
| v | |
| Queensland Building Services Authority |
| APPLICATION NUMBER: | GAR334-10 |
| MATTER TYPE: | Building matters |
| HEARING DATE: | On the papers |
| HEARD AT: | Brisbane |
| DECISION OF: | Richard Oliver, Senior Member Elizabeth Benson-Stott, Member |
| DELIVERED ON: | 5 September 2011 |
| DELIVERED AT: | Brisbane |
ORDERS MADE: | [1] The decision of the Respondent dated 10 September 2010 is set aside. [2] The Respondent pay to the Applicant the sum of $400,000.00 from the Statutory Insurance Scheme in respect of the defective and incomplete building work on Lots 29 and 31, Macquarie St, St Lucia. |
| CATCHWORDS: | Administrative Review – Queensland Building Services Authority Statutory Insurance Scheme – where single building contract to construct two houses on adjoining lots – where insurance certificates issued in respect of two houses on the adjoining lots – whether clause 4.2(c) of the Insurance Policy Conditions 6th ed are applicable – whether cover is limited to maximum payout of $200,000 for both claims Queensland Civil and Administrative Tribunal Act 2009, s 22 Acts Interpretation Act 1954, s 14A Statutory Instruments Act 1992, ss 7, 14 Lloyds TSB General Insurance Holdings Ltd and Others v Lloyds Bank Group Insurance Co Ltd [2003] 4 All ER 43 |
APPEARANCES and REPRESENTATION (if any):
This matter was heard and determined on the papers pursuant to section 32 of Queensland Civil and Administrative Tribunal Act2009 (QCAT Act).
REASONS FOR DECISION
INTRODUCTION
Mehran Pty Ltd is the owner of adjoining residential Lots at 29 and 31 Macquarie Street, St Lucia, Brisbane (“the Lots”).
In or about September 2006, Mehran entered into a single written building contract with Spectrum House and Land Pty Ltd for it to construct a detached house on each of the lots respectively. The construction work commenced in June 2006.
The Queensland Building Services Authority issued initial Certificates of Insurance for each house on each lot on or around 13 June 2006. The Authority subsequently issued further Certificates of Insurance, which were separate certificates for each of the Lots, which increased the Notified Contact Value and changed the name of the Contractor to ‘Spectrum House & Land Pty Ltd’.
The Spectrum carried out part of the Residential Construction Work on each of the Lots.
On 10 August 2007, Mehran lawfully terminated the contract with the Spectrum by written notice sent on 14 August 2007 because of defective and incomplete work. That Authority has accepted Mehran’s lawful termination of the contract.
Mehran filed a complaint form with the Authority on 25 July 2007 that the building work undertaken by Spectrum was defective and incomplete and making a claim on the statutory insurance scheme.
On 30 January 2008 the Authority accepted the claim and initially decided Mehran’s maximum entitlement was $400,000 ($200,000 per lot). However this was corrected in a letter to Mehran on 10 September 2009 stating that the maximum amount payable under the policy was $200,000 in the aggregate.
Mehran now seeks a review of the Authority’s decision of 10 September 2010 to allow Mehran’s claim pursuant to the Statutory Insurance Scheme in the amount of $200,000 in total.
The issue in dispute and for determination is whether, on its proper interpretation, clause 4.2 of the Policy is applicable and whether it means that the Authority should pay out the maximum amount of $200,000.00 or is it to be aggregated for both lots.
Clause 4.1 Limits of Liability:
In no case will BSA be liable to an Insured for an amount in excess of the maximum amount of payment for loss calculated in accordance with this policy.
(a)“Subject to the terms of this policy, the maximum amount of payment for which BSA is liable is:
(i)for each single detached dwelling, residential unit or related roofed building – an amount calculated by BSA as the replacement value of the residential construction work or $200,000 (whichever is the lesser), INCLUDING (where applicable) a sum to the maximum of $5,000 for alternative accommodation, removal and storage costs”.
(c)the maximum amount of payment for which BSA is liable to an Insured for a contractor failing to complete the contract or contracts with the Insured is $200,000 in the aggregate, notwithstanding the Insured may be covered under this policy and another policy or policies”.
The function of the Tribunal is to come to the correct and preferable decision by way of a fresh hearing on the merits.[1]
[1] QCAT Act, s 22.
The Authority accepts that a Certificate of Insurance was issued for each dwelling. The Authority further stated that it is standard Authority’s practice to insure both dwellings and issue separate Insurance Polices for each. Therefore apart from clause 4.2(c) each house is covered by a certificate of insurance.
Mehran’s submission
Mehran contends that subject to the statutory insurance policy conditions, the Authority is required to indemnify a claimant against loss for non-completion; loss as the result of defective construction; and loss caused by subsidence or settlement. In accordance with the general scheme of the policy of insurance, each of these categories of loss are to be treated as separate matters for which the Authority is obligated to indemnify an insured. This is because each of these types of losses is dealt with by separate parts under the policy conditions, being Parts 1, 2 and 3. Interestingly the Authority accepted that Mehran had a claim for both non-completion[2] and defective construction.[3]
[2] Part 1.
[3] Part 2.
Overall limits on the liability of the Authority are then dealt with in Part 4 of the policy conditions. Mehran contends that the maximum amount of payment for which the Authority is liable for each single detached dwelling, (and no matter the category of loss for which the claim is made) is a matter expressed in clause 4.2(a)(i) in Part 4 of the policy conditions to be $200,000.00.[4]
[4] Applicant’s submissions dated 1 February 2011, paragraph 22.
Mehran then contends that clause 4.2(c) must be understood as an aggregation clause, that serves to limit liability on the part of the Authority to an insured to the sum of $200,000 only in the specific case of a contractor failing to complete the contract or contracts with the insured, or what is otherwise a liability on the part of the Authority to indemnify an insured under Part 1 of the standard contract of insurance.[5]
[5] Applicant’s submissions paragraphs 25-27.
Because clause 4.2(c) is an aggregation clause, Mehran submits that the correct approach to its interpretation should be that as identified by the House of Lords in Lloyds TSB General Insurance Holdings Ltd and Others v Lloyds Bank Group Insurance Co Ltd,[6] where Lord Hoffman observed that the purpose of an aggregation clause was to enable categories of loss covered by a policy to be treated as a single loss for deductible or other purposes (such as, for example limiting liability), when they are linked by a “unifying factor” of some kind. In relation to this notion of a unifying factor, Lord Hoffman observed:
“…much will turn upon the precise nature of the act or event which, for the purposes of aggregation, the clause treats as a unifying factor. The more general the description of that act or event, the wider the scope of the clause”.
[6] [2003] 4 All ER 43.
Here Mehran contends that the unifying factor in clause 4.2(c) for the purposes of aggregating (and limiting) the extent of the Authority’s obligation to indemnify has been expressed narrowly, and extends to only one of the categories of loss for which indemnity under the policy of insurance is otherwise available, being that of a builder failing to complete the contract (or contracts), with the insured. Mehran expressed the argument in these terms:
“As a limitation clause, aggregation clauses need to be clearly stated and words should not be stretched or inferred or implied when they could easily have been written by the parties. It would have been very easy for the drafter of the provision to have added reference to the distinct losses found in parts 2 and 3 and, in particular, for defective construction, to [be included as part of] the aggregation clause. The drafter could have spelt out that failure to complete subsumed any concurrent defective work. Or, even more simply, the drafter could have referred to any liability under the policy as being subject to aggregation.”[7]
[7] Applicant’s submissions dated 1 February 2011, at paragraph 28.
Thus, Mehran contends that the Authority should be regarded as obligated to indemnify Mehran as if 4.2(c) were of no application, such that Mehran should be entitled to a maximum of $200,000 pursuant to clause 4.2(a)(i) “for each single detached dwelling”, making for a total indemnity of $400,000.00.
The Authority’s submission
We accept the Authority’s contention that the proper approach to interpretation of the statutory policy of insurance requires the wording of the policy to be construed in its ordinary sense that will best achieve the purposes of the policy[8], because this insurance policy is a statutory instrument.[9] That purpose is consumer protection.[10]
[8] Acts Interpretation Act 1954, s 14A.
[9] Statutory Instruments Act 1992, ss 7 and 14.
[10]Lange v QBSA [2011] 58 at [30] and Queensland Building Services Authority Act1991, Part 5.
Next, the Authority submits that clause 4.1 of the policy is clear and unambiguous in providing that in “no case” will the Authority be liable for an amount in excess of the maximum payment for loss, even where there are two separate houses to be constructed but included in a single contract. As regards that maximum, the respondent submits that clause 4.2(c) must be seen to ‘trump’ clause 4.2(a)(i), because of the use of the commencing words “subject to the terms of this policy” in clause 4.2(a). We do not accept that submission as it is inconsistent with a purposive construction of the clause 4.2(c).
We accept Mehran’s contention that clause 4.2(c) is an aggregation clause. We also accept that the “unifying factor” in clause 4.2(c) as the failure by the builder to complete. Consistent with the consumer protection purpose of the statutory policy of insurance set up under Part 5, an interpretation must be given to the clause that serves to maximise consumer protection.[11] Consistent with that aim the limit on liability that potentially results from clause 4.2(c) must be construed narrowly.
[11] Lange v QBSA, supra.
In our view, clause 4.2(c) should only be seen to apply in those circumstances in which claims for indemnity have been brought to the Authority by a singular reason of a failure by the builder to complete a contract, or contracts. In the present case the respondent has recognised that Mehran has parallel entitlements to be indemnified for both the failure to complete and defective works by the defaulting builder.
If there was an intention by the legislature to limit the entitlement to both defective work and failure to complete, this could easily have been included in the drafting of clause 4.2(c).
Does clause 4.2(c) apply?
We therefore accept Mehran’s submission that clause 4.2(c) does not apply to the factual circumstances arising in this case. Nor do we feel that it should apply, merely because one of the two grounds that entitles Mehran to an indemnity from the Authority has been nominated in clause 4.2(c). To find to the contrary would, as we have said diminish the consumer protection focus of the provision, and would be inconsistent with the identified purpose of Part 5 of the QBSA Act.
Clause 4.2(a)(i) provides that the maximum amount for which the Authority is liable is “subject to the terms of this policy” $200,000 for each single detached dwelling, of which here there are two. Because clause 4.2(c) has been found by us not to apply, clause 4.2(a)(i) is not then subject to it as a term of the policy. In the circumstance of this case clause 4.2(c) is of no application, such that clause 4.2(a)(i) need not be read subject to it.
Conclusion
Mehran is entitled to be indemnified by the respondent pursuant to the statutory policy of insurance on the basis of $200,000 in respect of each of the detached dwellings at lot 29 and lot 31 Macquarie Street, St Lucia. Mehran should be paid a total sum of $400,000 in respect of their claim against the Statutory Insurance Scheme.
Therefore the decision of the Tribunal will be that:
[1]The decision of the Authority dated 10 September 2010 is set aside;
[2]The applicant be paid $400,000 from the Statutory Insurance Scheme in respect of the defective and incomplete building work on Lots 29 and 31, Macquarie St, St Lucia.
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