Michael and Rosemary Foy v Calliden Insurance Limited

Case •

[2017] NSWDC 33

•

03 March 2017

No judgment structure available for this case.

District Court


New South Wales

Medium Neutral Citation: Michael & Rosemary Foy v Calliden Insurance Limited [2017] NSWDC 33
Hearing dates: 9 – 10 March 2016; 1 April 2016 (directions); 3 June 2016; 19 August 2016 (directions); and 4 November 2016
Date of orders: 03 March 2017
Decision date: 03 March 2017
Jurisdiction:Civil
Before: Hatzistergos DCJ
Decision:

1. Verdict for the Defendant; and
2. The Plaintiffs are to pay the Defendant’s costs.

Catchwords:

CONTRACT LAW – INSURANCE – home building insurance – last resort policy – whether insurer breached contract – whether notification of loss was adequate – whether grace period applied –– whether failure to advise as to change in legislation amounts to misleading or deceptive conduct – unconscionable conduct – estoppel – whether insurer failed to pay claim contrary to s 54 of the Insurance Contracts Act

CONSTITUTIONAL LAW – whether Home Building Act 1989 (NSW) s 103BB inconsistent with Insurance Contracts Act 1984 (Cth) s 54
Legislation Cited: Australian Securities and Investment Commission Act 2001 (Cth) ss 12BB, 12CB, 12CC and 12DA
Bell Group Companies (Finalisation of Matters and Distribution of Proceeds) Act 2015 (WA)
Commonwealth of Australia Constitution Act 1901 (Cth)
Home Building Act 1989 (NSW) ss 103B, 103BA, 103BB, sch 4 cl 86 and sch 4 cl 106
Home Building Amendment (Claims) Regulation 2008 (NSW) cl 63A
Home Building Amendment (Insurance) Act 2009 (NSW)
Home Building Amendment Act 2011 (NSW)
Home Building Regulation 2004 (NSW) r 53(2)
Insurance Contracts Act 1984 (Cth) ss 7 and 54
Interpretation Act 1987 (NSW) ss 30, 31 and 39
Judiciary Act 1903 (Cth) s 78B(2)
Trade Practices Act 1974 (Cth) ss 51AC and 52
Cases Cited: Australian Competition and Consumer Commission v Allphones Retail Pty Ltd (No 2) [2009] FCA 17
Australian Competition and Consumer Commission v Dukemaster Pty Ltd [2009] FCA 682
Bell Group NV (in liq) v The State of Western Australia (2016) 90 ALJR 655; [2016] HCA 21
Commonwealth v Verwayen (1990) 170 CLR 394; [1990] HCA 39
Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Limited (1986) 160 CLR 226; [1986] HCA 14
Edgar v Farrow Mortgage Services Pty Ltd (in liq) (1992) ASC 56-186
FAI General Insurance Company Ltd v Australian Hospital Care Pty Ltd (2001) 204 CLR 641; [2001] HCA 38
Gosford City Council v GIO General Limited (2003) 56 NSWLR 542; [2003] NSWCA 34
Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641
Johnson v Triple C Furniture & Electrical Pty Ltd (2010) 243 FLR 336; [2010] QCA 282
Kopriunjak v Vero Insurance Ltd (Home Building) [2008] NSWCTTT 1520
Maxwell v Highway Hauliers Pty Ltd (2014) 252 CLR 590; [2014] HCA 33
Michell & Thomas v Calliden Insurance Limited (Home Building) [2011] NSWCTTT 300
Morton v Hampson [1962] VR 364Ward v Walton (1989) 10 MVR 537
Nigel Watts Fashion Agencies Pty Ltd v GIO General Ltd [1994] NSWCA 365
Prepaid Services Pty Ltd & Ors v Atradius Credit Insurance NV [2013] NSWCA 252
Puckeridge v Calliden Insurance Limited (Home Building) [2013] NSWCTTT 450
Susiatin v Minister for Immigration and Multicultural Affairs (1998) 83 FCR 574
The Owners Strata Plan 57504 v Building Insurers’ Guarantee Corporation [2008] NSWSC 1022
Thompson v Palmer (1933) 49 CLR 507
Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (1992) 38 FCR 1
Walton Stores (Interstate) Ltd v Maher (1998) 164 CLR 387; [1988] HCA 7
Category:Principal judgment
Parties: Mr Michael Foy (First Plaintiff)
Ms Rosemary Foy (Second Plaintiff)
Calliden Insurance Limited (Defendant)
Representation:

Counsel:
Mr J Sleight (Plaintiff)
Mr P Bambagiotti (Defendant)

  Solicitors:
Knight Lawyers (Plaintiff)
Mills Oakley (Defendant)
File Number(s): 2014/365958

Judgment

  1. This matter came on for hearing before me on 9 March 2016 as a one day hearing. It came to consume three further hearing days and two directions days. At the outset, the Plaintiffs foreshadowed seeking leave to rely on an Amended Statement of Claim. Following argument, I granted the Plaintiffs leave to do so, subject to the Defendant being able to ventilate any issue as to its ability to meet the proposed amendments. [1]

    1. See Judgment, unreported, 9 March 2016

  2. On 10 March 2016, the Defendant indicated that the proposed paragraph [20](A) of the Amended Statement of Claim had raised issues which required the calling of further evidence on its part. Further argument then took place as to the state of the proposed Amended Statement of Claim which resulted in concern about the state of readiness, [2] and the capacity of the proposed Amended Statement of Claim to reflect the case which the Plaintiffs wished to pursue as set out in a document entitled “Outline of Argument” presented at the commencement of the hearing. The Plaintiffs then proposed to proceed by way of an Amended Reply. That course was opposed by the Defendant on the basis that the matter should have been pleaded in the Amended Statement of Claim. [3] Ultimately, leave was granted by consent for the Plaintiffs to rely on a Further Amended Statement of Claim incorporating an amendment in the form indicated in paragraph [1](a) of the proposed Amended Reply. [4]

    2. T 30.36 – 32.2

    3. T 37.6 – 39.16

    4. T 40.24 – .26 (which was Marked for Identification #1)

  3. During the course of the hearing, further amendments to the Further Amended Statement of Claim were sought by the Plaintiffs. [5] Leave was granted for the Plaintiffs to proceed on a Second Further Amended Statement of Claim filed 16 March 2016. For its part the Defendant relied on an Amended Defence filed on 22 March 2016 and an Amended Reply was filed by the Plaintiff dated 16 March 2016.

    5. T 60.30 – 61.29

  4. In light of the amendments, the Defendant sought to rely on further evidence which comprised an affidavit from Mr Matthew David Curry dated 18 March 2016.

  5. When the matter came on for submissions on 3 June 2016, it became apparent that the Plaintiffs, although intending to proceed with a constitutional issue raised in paragraph [9] of the Amended Reply, had not given notice as required under s 78B(2) of the Judiciary Act 1903 (Cth). In these circumstances, directions were given requiring the Plaintiffs to give the relevant notifications by 10 June 2016 and to require responses by 12 August 2016.

  6. On 19 August 2016, an affidavit from Mr Robert Peter Kalde, sworn 18 August 2016 was filed, indicating compliance with the orders and directions made on 3 June 2016; and further advising that no Attorney-General had elected to intervene. In the circumstances, the matter proceeded by the hearing of submissions (excluding the constitutional issue) pursuant to s 78B(2)(c) of the Judiciary Act 1903 (Cth), with the constitutional issue being subject to separate submissions on 4 November 2016.

  7. These matters and the availability of suitable dates to reschedule regrettably led to a lengthening of time taken for the resolution of the proceedings.

Evidence

  1. The Plaintiffs purchased the subject property located at Hurstville Grove, on or about 23 April 2008 and obtained a certificate of insurance issued by the Defendant when they settled. [6]

    6. Affidavit of Mr Michael Foy sworn 15 November 2013 at [2]

  2. The First Plaintiff, Mr Michael Foy gave evidence that the settlement took place on 4 July 2008. [7] On settlement, the Plaintiffs were also provided with a copy of the policy. [8]

    7. Affidavit of Mr Michael Foy sworn 15 November 2013 at [8]

    8. Affidavit of Mr Michael Foy sworn 15 November 2013 at [3]

  3. It is not in issue that the relevant policy was for home building works performed by the vendor on the said property as owner builder. Further it was not in issue that the beneficiary under the policy was “the purchaser.” [9] He stated that within the first six months of occupation, he became aware of various defects in the premises.

    9. Affidavit of Mr Michael Foy sworn 15 November 2013 at [6]

  4. Mr Foy gave evidence that in mid to late January 2009, he telephoned either the broker or the Defendant directly, as he considered them one in the same organisation, and wherever possible used a telephone landline rather than the 1300 number. [10] He stated that he believed he called the broker. [11] Mr Foy’s evidence was that between 9 December 2008 and 30 January 2009, his telephone records indicate that he made three local calls which were non-itemised on his telephone records. [12] He informed the Court that it was not possible to obtain an itemised list of calls made from his telephone during January 2009. [13] The text of the phone call he said that he made, was described as follows:-

    10. Affidavit of Mr Michael Foy sworn 15 November 2013 at [15]

    11. Affidavit of Mr Michael Foy sworn 15 November 2013 at [18]

    12. Affidavit of Mr Michael Foy sworn 15 November 2013 at Annexure G

    13. Affidavit of Mr Michael Foy sworn 15 November 2013 at [20]

“[21] When I made the Call, I spoke with a customer service/claims representative (the “Representative”). I recall that the person I spoke to was a male person, however I did not record the name of the person or the precise details of the conversation. However, I do recall that we had a conversation to the following effect:-

Me: I have an issue with a house at East Crescent Hurstville Grove that is covered under your policy. There are some defects which I have discovered, where do I go from here?

Representative: What is the policy number?

Me: The policy number is BBAU1325.

Representative: The policy does not operate unless the builder has died, disappeared or become insolvent. Are any of those circumstances the case?

Me: No, I believe he still exists, but beyond that I don’t know. Can you send me a claim form to fill out of something please?

Representative: No. It is too early and you can’t claim until the policy is activated in the circumstances I have told you. You should contact us again when one of those things occur.” [14]

14. Affidavit of Mr Michael Foy sworn 15 November 2013 at [21]

  1. Subsequent to receiving that information, Mr Foy and his wife (the Second Plaintiff) commenced the proceedings earlier referred to, against the vendor Mr Anthony Grubisic.

  2. Mr Foy stated that in advising the broker of the state of affairs relating to the defective building work by telephone and asking for a claim form, he believed he was complying with his obligations under the policy. [15] He stated that he was surprised by the advice that he received, however on the basis of that advice together with his wife, decided to commence proceedings against the vendor, Mr Grubisic. Those proceedings were brought in the then NSW Consumer and Tenancy Tribunal. [16] They were determined favourably to the Plaintiffs in the sum of $222,591 on 12 December 2011 [17] .

    15. Affidavit of Mr Michael Foy sworn 15 November 2013 at [22]

    16. Affidavit of Mr Michael Foy sworn 15 November 2013 at [9] – [10]

    17. Affidavit of Mr Michael Foy sworn 15 November 2013 at [11]

  3. Mr Foy stated that on 15 September 2010, he instructed his then solicitor, Ms Wang from “The Builders’ Lawyers” to contact the Defendant on his behalf. That letter is to be found in Exhibit A. [18] It refers to the earlier contact with the Defendant in February 2009.

    18. Affidavit of Mr Michael Foy sworn 15 November 2013 at Annexure H

  4. The letter of 15 September 2010 was responded to on 29 September 2010 by Claims Services Australia Pty Ltd who had been appointed as agents in administrating claims lodged in respect of insurance policies issued or underwritten by the Defendant. [19]

    19. Affidavit of Mr Michael Foy sworn 15 November 2013 at Annexure I

  5. As a consequence of Mr Grubisic not making payment, pursuant to the judgment, a sequestration order was obtained in the Federal Magistrates Court on 21 March 2013. [20] Mr Foy’s evidence was that he had not received a dividend from the bankrupt estate of the vendor. [21] Eventually the Plaintiffs assembled documentation and completed a claim form which was forwarded on 10 May 2013. [22] On 13 June 2013, the Plaintiffs were informed that the claim had been rejected. The letter stated:-

“We refer to your recent claim form received on 17 May 2013 in relation to the above property.

We advise that the policy of insurance provides cover for various breaches of statutory warranties by the builder for the duration of the period of cover, which is six years from completion of the work as referred to under clause (a) of “Period of Insurance” on page 6 of the policy (wording enclosed).

We confirm that the Period of Cover commenced on 14 May 2003, being completion of the property as detailed in the Inspection Request (attached) and expired six years later on 14 May 2009. We note that the initial correspondence to our office was received on 20 September 2010, more than six months after the Period of Cover expired. We also note that you advised us of the items of claim on 17 May 2013, more than three years from the Period of Cover expiring.

Accordingly, as we were not notified during the Period of Cover, which expired on 14 May 2009, indemnity is not available and your client’s claim is denied.”

20. Affidavit of Mr Michael Foy sworn 15 November 2013 at [13]

21. Affidavit of Mr Michael Foy sworn 15 November 2013 at [14]

22. Affidavit of Mr Michael Foy sworn 15 November 2013 at Annexure L

  1. In cross-examination, Mr Foy conceded that the conversation earlier recounted represented his recollection. [23] He conceded that from the time he made the telephone call in January 2009 until he spoke to his former lawyer, he did not make any note of the conversation. [24] He said that he rang about an enquiry about the defects of the house and he was put on the phone to an individual who he cannot remember, although he knows them to be a male. [25] Mr Foy stated that he gave the person he contacted his name and address, address of the house and the policy he had been given. [26] When it was drawn to his attention that paragraph [21] of his affidavit did not include a name or address, he responded by stating that he did provide this to the person. [27] Notwithstanding this, Mr Foy conceded that the conversation as recited above did not contain a reference to an email address, telephone number or address. He conceded that he did not in the conversation, detail the various defects. [28] He was then questioned about his solicitor’s letter referring to his conversation having occurred in February, rather in January 2009. Mr Foy stated that might have been their mistake. [29] He admitted that he did not write to them to correct it. [30] Later he stated that he: “… can’t say I did, I can’t say I didn’t” write a letter. [31] Mr Foy specifically denied that he re-constructed the version of the conversation to suit his case. [32] He conceded that there was no statement to him that the insurer would contact him or follow up, stating that he was to follow up when he either, the builder was bankrupt, deceased or had absconded. [33]

    23. T 49.33 – .45

    24. T 50.11 – .15; and T 50.30 – .42

    25. T 50.44 – 51.6

    26. T 51.13 – .14

    27. T 51.22 – .25

    28. T 53.1 – .16

    29. T 55.19 – .21

    30. T 55.23 – .24

    31. T 55.46 – .47

    32. T 56.6 – .9

    33. T 57.12 – .15

  2. In re-examination, Mr Foy stated that if the insurance company subsequently wanted him to tell him about the defects, he would have expected the insurance company to have given him the procedure to follow. [34]

    34. T 60.3 – .12

  3. The Defendant relied on an affidavit from Mr Martin White, sworn 7 February 2014. Mr White was a director of Don Hutton Insurance Brokers Pty Ltd being the broker for the Defendant. In his affidavit, Mr White states that he has checked the records of the company and was unable to find any record of a telephone call from Mr Foy from mid-late January 2009 as alleged in Mr Foy’s affidavit. Any records of telephone conversations in relation to the policy were recorded on the computer system, and annexed to Mr White’s affidavit at Annexure A. [35] None of the documented conversations appear to be relevant to the proceedings.

    35. Affidavit of Mr Martin Warren White sworn 7 February 2014, Annexure A

  4. The Defendant further relied on an affidavit from Mr Stephen Molcik sworn 11 August 2015. Mr Molcik was an officer in the employ of Innovation Group Pty Ltd, holding the position of technical manager warranty. Innovation Group Pty Ltd was previously known as Claims Services Australia Pty Ltd who handled claims management of home building warranty claims for the Defendant since before 2008. Mr Molcik stated that any enquiries regarding claims, or people seeking to make claims in early 2009 would, from his experience, would have been directed by the Defendant or the relevant broker to Innovation Group Pty Ltd. This was a matter of usual practice. [36] He stated that the recording of claims notifications by Innovation Group in relation to home warranty claims commenced in 2009 with the earliest being in February 2009. [37] Mr Molcik stated that prior to 2009, Innovation Group’s procedure in dealing with home warranty claims from 1 July 2002, was based on an understanding that a claim had to be made within the relevant period of insurance, meaning that the builder had to be dead, disappeared or insolvent before a claim could be lodged. The insurance claims were not administered on the basis that it was a claims made and notified policy. Accordingly Innovation Group’s records did not contain a record of a telephone conversation although Mr Molcik conceded that if was such a call was made it would not recorded by Innovation Group in light of its policy at the time. [38]

    36. Affidavit of Mr Stephen Molcik sworn 11 August 2015 at [4]

    37. Affidavit of Mr Stephen Molcik sworn 11 August 2015 at [5]

    38. Affidavit of Mr Stephen Molcik sworn 11 August 2015 at [6] – [7]

  5. Notwithstanding the fact that the Second Further Amended Statement of Claim was for an amount of $307,263.46, I was informed at the commencement of the hearing that damages were agreed save as to the issue of interest in a sum of $246,079.20.

  6. The proceedings against the Defendant were argued on five bases. Each is considered below in this judgment.

Contractual claim

  1. The Plaintiffs acknowledge that under the terms of the policy giving rise to the claim, a prescribed cause has to occur within the period of the insurance. “Prescribed clause” is defined in the policy as follows:-

“Prescribed cause: means a breach of any of the warranties implied by ss 18B, 18C and 18D of the Act, being that the owner builder warrants that:-

(a) the owner builder work has been performed in a proper and workman like manner;

(b) all materials supplied by the owner builder were good and suitable for the purpose for which they were used and that, unless otherwise stated in the contract of sale, all Report required by the insurer to be obtained before the insurance contract is entered into; and

(c) owner builder work was carried out with all the laws and legal requirements.” [39]

39. Exhibit A, Product Disclosure Statement for Owner Builder Warranty Insurance, produced by Calliden Insurance Limited, dated 1 October 2007, p 12

  1. It was not in issue between the parties that the relevant period of insurance commenced on 14 May 2003 [40] and expired six years thereafter. The Defendant acknowledged as much. [41] The defects discovered by the Plaintiffs were particularised in the NSW Consumer, Trader and Tenancy Tribunal [42] proceedings between the Plaintiffs and the previous owner-builder, Mr Anthony Grubisic. [43] The Defendant did not dispute the Plaintiffs discovery of defects in the property within six months of the insurance. [44] No issue was raised that these constituted a prescribed cause within the terms of the policy.

    40. Affidavit of Mr Michael Foy sworn 15 November 2013 at Annexure A

    41. T 115.17 – .47

    42. Hereinafter referred to as the “NSW CTTT”

    43. Exhibit A, Points of Claim dated 11 April 2014 filed in the NSW CTTT at [6]

    44. Amended Defence filed on 22 March 2016 at [6](a)

  1. The terms of the policy did not require notification of a prescribed cause, nor did the policy specifically provide a time limit for the making of a claim, a fact which was acknowledged by the Defendant in argument. [45] However, the policy did specify claims procedures as follows:-

    45. T 111.13 – .19

“General provisions

[2] Despite clause (1), the Insurer shall not reduce its liability under the policy or to reduce any amount otherwise payable in respect of a Claim made by reason only of any delay in a Claim being notified to the Insurer if the person making the Claim against the Insurer has notified the Insurer in writing, within 180 days after the date when the Insured first became aware, or ought reasonably to have been aware, of the death, Disappearance or Insolvency of the Owner Builder.

[3] Upon becoming aware of the death, Disappearance or Insolvency of the Owner Builder, the Insured shall:

(a) notify the Insurer in writing;

(b) not undertake or cause to be undertaken any rectification works without notifying the Insurer, unless such works are reasonably necessary to prevent or minimise any further loss or damage; and

(c) provide the Insurer or any person nominated by the Insurer with reasonable access to the building site for the purpose of inspection and/or rectification of the Owner Builder Work;

provided however, that the Insurer may only reduce its liability to the Insured by reason of a failure on the part of the Insured to comply with any requirement of this clause to the extent that the Insurer can prove that such failure increased the liability of the Insurer under the policy.” [46]

46. Exhibit A, Product Disclosure Statement for Owner Builder Warranty Insurance, produced by Calliden Insurance Limited, dated 1 October 2007, p 16

  1. In this instance there is no issue of the Plaintiffs making the claim on 10 May 2013 [47] which was within 180 days of the orders being made against Mr Grubisic in the Federal Magistrates’ Court on 21 March 2013. [48] By the nature of the claim, the Defendant had drawn to its attention the insolvency of Mr Grubusic within the terms of the claims procedure.

    47. Affidavit of Mr Michael Foy sworn 15 November 2013 at Annexure D

    48. Affidavit of Mr Michael Foy sworn 15 November 2013 at Annexure E

  2. Although the Defendant concedes that the insurance claim was lodged on 10 May 2013, it contends that it was necessary for the Plaintiff to comply with s 103BB of the Home Building Act 1989 (NSW). [49] The Plaintiffs for their part contended that the phone call by Mr Foy in January 2009, as it stood constituted valid notice in the context of the requirements of s 103BA of the 1989 Act in its 2009 amended form, although in written and oral submissions, it was conceded that by reason of the Home Building Amendment Act 2011 (NSW), [50] s 103BB of the 1989 Act also had to be complied with. In order to determine whether the Plaintiffs’ contractual claim can succeed it is therefore necessary to consider the relevant statutory intervention that occurred.

    49. Hereinafter referred to as the “1989 Act”; and also: Amended Defence filed 22 March 2016 at [10]

    50. Hereinafter referred to as the “2011 Act”

Home Building Amendment (Claims) Regulation 2008 (NSW)

  1. The policy in question effectively required that the prescribed cause occur during the period of insurance. The policy would then respond, in the event that compensation could not be recovered because of the death, disappearance or insolvency of the owner-builder. In this sense the policy can also be described as a “last resort” policy.

  2. This was in contrast to home warranty insurance policies between 1 May 1997 and 30 June 2002 which were described as a “first resort” policies.

  3. On 3 October 2008 the Supreme Court of NSW determined the case of The Owners Strata Plan 57504 v Building Insurers’ Guarantee Corporation. [51] The effect of that decision was to render void provisions in policies which required claims to be made within the period of insurance. It appears that concern arose from this decision that although s 103B of the 1989 Act specified a minimum period of insurance cover, there was no explicit statutory limit on when a claim could be made. [52]

    51. [2008] NSWSC 1022 (McDougall J)

    52. New South Wales, Parliamentary Debates, Legislative Assembly, 6 May 2009 (Virginia Judge)

  4. The initial response thereafter was to proclaim Clause 63A of the Home Building Amendment (Claims) Regulations 2008 (NSW). [53] This Regulation provided:-

    53. Home Building Amendment (Claims) Regulation 2008 (NSW) as made under the Home Building Act 1989 (NSW)

63A Period within which insurance claim must be made

(1) A claim under a contract of insurance must be made no later than 6 months after the beneficiary first becomes aware, or ought reasonably to have become aware, of the fact or circumstance under which the claim arises or no later than 6 months after the end of the period of cover, whichever is the earlier.

(2) Despite subclause (1), if the claim is a claim for loss arising from non-completion of work, the claim must be made:

(a) in the case of a claim arising from a failure to commence the work—no later than 12 months after the contract date or the date provided in the contract for commencement of work, whichever is the later, or

(b) in any other case—no later than 12 months after the date work ceased.

(3) A claim cannot be made later than as permitted by this clause.

(4) This clause applies only to a claim made after the commencement of this clause and extends to a claim made after that commencement in respect of a loss arising before that commencement.

(5) In this clause:

period of cover means the period for which the contract of insurance provides insurance cover as required by section 103B of the Act.

  1. The Plaintiffs contended that in respect of “last resort” policies such as that in the instant case, it was almost impossible to give the clause a meaningful interpretation, as it would require all claims to be made within 6 months from the end of the period of cover. It contended that if it applied to “last resort” policies, Clause 63 A would be draconian to the point of being nonsensical as the Plaintiffs could only make a claim when the builder disappeared, died or became insolvent within the prescribed 6 month period.

  2. Although a Minister’s subsequent Second Reading Speech, stated that “the interim amendment was limited in that it could not retroactively address existing insurance contracts, [54] the clause itself referred to loss arising before commencement of the clause. Such loss could only relate to insurance contracts for a period of cover prior to the commencement of the clause. s 39 of the Interpretation Act 1987 (NSW) does not provide for back-dating of regulations. There is nothing in the 1989 Act that provides for the making of regulations other than prospectively. However except as indicated, the validity and operative effect of Clause 63A was not challenged. It significance pertains to the subsequent legislative changes incorporated in the Home Building Amendment (Insurance) Act 2009 (NSW). [55]

    54. New South Wales, Parliamentary Debates, Legislative Assembly, 6 May 2009 (Virginia Judge)

    55. Hereinafter referred to the “2009 Act”

Home Building Amendment (Insurance) Act 2009 (NSW)

  1. Clause 63A was repealed on 19 May 2009, with the commencement of the 2009 Act. This inserted s 103BA into the 1989 Act. Pursuant to Clause 83 of Schedule 4 of the 1989 Act, s 103BA was deemed to extend to:-

  1. Contracts of insurance entered into before the commencement of that section (despite any provision of the contract); and

  2. A claim under any such contract of insurance; and

  3. Proceedings on such a claim (including proceedings commenced but not finally determined before commencement of that section).

  1. s 103BA as introduced by the 2009 Act read as follows:-

103BA Limitations on policy coverage—claims made and notified policy

(1) A contract of insurance provides insurance cover in respect of

loss only if:

(a) in the case of cover for loss arising from non-completion

of work—the loss becomes apparent and is notified to the

insurer within the period of insurance, or

(b) in any other case:

(i) the loss becomes apparent and is notified to the insurer within the period of insurance, or

(ii) the loss becomes apparent during the last 6 months of the period of insurance and is notified to the insurer within 6 months after the loss becomes apparent.

(2) A loss becomes apparent when a beneficiary under the contract first becomes aware (or ought reasonably have become aware) of the loss.

(3) In this section:

loss means loss indemnified by a contract of insurance.

period of insurance means the period for which a contract of insurance provides cover.

  1. s 103BA of the 2009 Act did not distinguish between pre-1 July 2002 and post, 30 June 2002 policies. It was intended to operate in respect of policies including those in the Plaintiffs’ case. The rationale for doing so was expressed as follows:-

“Home warranty insurance contracts entered into since 1 July 2002 differed from previous insurance contracts by providing what is known as last resort insurance. This style of insurance contract indemnifies beneficiaries for loss or damage arising from a breach of statutory warranty, being loss or damage in respect of which the beneficiary cannot recover compensation or have rectified because of the insolvency, death, or disappearance of the building contractor. These contracts also continue to provide insurance against loss or damage resulting from non-completion of the work because of the insolvency, death, or disappearance of the contractor. The retroactive application of proposed section 103BA to home warranty insurance contracts entered into since 1 July 2002 confirms that these contracts provide insurance cover only when a loss indemnified by a contract of insurance becomes apparent and is notified within the minimum periods specified by section 103B or any longer period that may be specified in the contract.” [56]

56. New South Wales, Parliamentary Debates, Legislative Assembly, 6 May 2009 (Virginia Judge)

  1. To understand the impact that this had on the Plaintiffs, requires a consideration of whether the “loss” requires the death, disappearance or insolvency of the builder to have occurred before the notification requirement is invoked.

  2. The Plaintiffs made reference to the decision in Coprivngak v Vero Insurance Ltd (Home Building) 2008 (NSW),[57] where Member Smith held that “loss” under a last resort policy meant loss arising from the builder’s breach of statutory warranty, rather than arising from the death, disappearance or insolvency of the builder. The Member’s conclusion however related to terms of the policy and not the statutory provision.

    57. Kopriunjak v Vero Insurance Ltd (Home Building) [2008] NSWCTTT 1520 (Member Smith)

  3. Indeed subsequently in Puckeridge v Calliden Insurance (Home Building) Limited, [58] Member Smith stated in reference to s 103BA and the policy there in question:-

“[17] … ‘loss’ as defined relates to the indemnified event which must mean:

(a) defective or incomplete work by the builder plus

(b) death, disappearance or insolvency of the builder

because this is the only set of circumstances to which the indemnity applies.”

58. Puckeridge v Calliden Insurance Limited (Home Building) [2013] NSWCTTT 450 at [17] (Member Smith)

  1. During submissions, Counsel for the Defendant initially contended that “loss” in terms of s 103BA as it stood in its initial 2009 form was loss occasioned by an inability to recover from the builder because of insolvency. [59] Following argument and further consideration, Counsel for the Defendant recanted from this position stating:-

“Before the break, we were exploring the version of s 103BA as enacted in the 2009 amendment and you asked me what was loss and I pointed out that loss under the last resort policies, were - and 103BA in 2009 applied to both first and last resort. Loss was a reference to an inability to recover compensation. But of course, your Honour, that doesn’t make a lot of sense or a lot of utility in the context of the way that 103BA is expressed. So given that 103BA is about notification and the critical feature your Honour, is in 103BA(1)(b)(i): "The loss becomes apparent and is notified". It says:

‘The curiosity of the phrase 'Loss becomes apparent and is notified' becomes apparent - has an explanation although not necessarily a definition and loss seems to be loss indemnified under the insurance.’

Your Honour, we would say that the proper construction of that clause is that providing the notification of the incidence or the trigger of the loss; that is, the deficiency in the building work is notified, then it doesn’t matter when - subject to two qualifications - the actual trigger arises.” [60]

59. T 102.31 – .33

60. T 104.2 – .19

  1. Bearing in mind the effect of the 2009 amendments was to repeal Clause 63A, transitional provisions were inserted which enabled a period of grace for notifying the loss. In this respect Clause 86 of Schedule 4 of the 1989 Act read as follows:-

86 Repeal of clause 63A of Regulation – period of grace for notifying loss

(1) If clause 63A of the Regulation prevented a claim for loss from being made during any part of the loss notification period for the loss, there is to be a period of grace for notifying the loss.

(2) The period of grace starts on the repeal of clause 63A of the Regulation and continues for a period that is equal in length to that part of the loss notification period for which clause 63A of the Regulation prevented the claim from being made.

(3) A loss notified to an insurer during the period of grace is deemed to have been notified during the loss notification period for the loss.

(4) If an insurer has refused a claim on the basis of clause 63A of the Regulation:

(a) the insurer must notify the claimant of any period of grace for notifying the loss to which the claim relates that results from the operation of this clause, and

(b) the period of grace for notifying the loss concerned starts (despite subclause (2)) when the claimant receives the insurer’s notification under paragraph (a) and continues for the period provided for by subclause (2).

(5) The refusal of a claim for loss on the basis of clause 63A of the Regulation (being a claim that would have been validly made had clause 63A of the Regulation not been made):

(a) does not prevent the claimant from resubmitting the claim or submitting the claim as a new claim (without the need to appeal against the decision to refuse the claim), and

(b) does not prevent the insurer from proceeding to accept and assess the refused claim as a claim now properly made.

(6) An insurer is not entitled to refuse or reduce liability on a claim for loss on the grounds of a failure to notify the loss during the loss notification period if the loss is notified during the period of grace.

(7) The period of grace provided by this clause does not apply in a case in which the loss notification period ended before the commencement of clause 63A of the Regulation.

(8) In this clause:

"loss notification period" for a loss means the period within which loss must be notified to the insurer under a contract of insurance in order for the loss to be covered by the contract of insurance (as provided by section 103BA).

Note: Section 103BA extends to existing contracts of insurance.

"the Regulation" means the Home Building Regulation 2004 .

  1. It is not in issue that the period of grace was not utilised. The Plaintiff contends that the phone call in January 2009 provided the relevant notification within the terms of s 103BA(1)(b)(i) as inserted in the 1989 Act, and further Clause 86 could not apply to provide a period of grace as Clause 63A as it stood, had not prevented the claim from being made during any part of the loss notification period.

  2. The Plaintiffs further contend that a claim could not be made under the policy until the owner builder was dead, disappeared or insolvent. They argued that if Clause 63A of the Home Building Amendment (Claims) Regulations 2008 (NSW) applied to the present policy, a claim could never had been made under the policy as the builder did not die, disappear or become insolvent until six months after 14 May 2009, being the expiration of the period of cover. [61] That concession appears to acknowledge that the effect of Clause 63A would have been to prevent a claim from being made. The Plaintiffs submitted however that the prevention of the making of a claim would not be during any part of the loss notification period as the Plaintiffs could never have made a claim under their “last resort” policy during the legislative life of Clause 63A, and therefore the clause could never have prevented a claim from being made on the policy. [62]

    61. Plaintiff’s Written Submissions in Reply filed 12 May 2016 at [3] – [4]

    62. Plaintiff’s Written Submissions in Reply filed 12 May 2016 at [8]

  3. The Defendant for its part contended, in its submissions, as follows:-

“[9](h) [O]n 19 May 2009, the HBA was amended with the introduction of the then sec 103BA (and cl 63A of the HBR was repealed). Sec 103BA was a claims made and notified provision turning on notification during the period of insurance. That provision was also subject to a ‘period of grace’ (see cl 86 of Schedule 4 of the HBA). The Plaintiffs failed to utilise that ‘period of grace’ which was available to them and was intended to deal with just such a situation, both to protect the rights of beneficiaries and also provide certainty to insurers to allow them to record notices that previously would not have been recorded as notice was irrelevant under the insurance scheme in place prior to 19 May 2009.” [63]

63. Defendant’s Written Submissions dated 26 April 2016 at [9](h)

  1. The Defendant further responded to the Plaintiff’s reference to Clause 63A of the Home Building Amendment (Claims) Regulation 2008 (NSW) being “draconian” [64] by referring to the fact that the clause was subsequently repealed with transitional provisions including a “period of grace” so that debate on this clause (other than as to the state of knowledge at the time of the January 2009 telephone call) was not relevant. [65]

    64. Plaintiff’s Outline of Argument dated 8 March 2016 at [26]

    65. Defendant’s Written Submissions dated 26 April 2016 at [31]

  2. I accept that s 103BA of the 2009 Act has retrospective effect in light of the provisions of Clause 83(1)(b) of Schedule 4 of the 1989 Act. [66]

    66. Defendant’s Written Submissions dated 26 April 2016 at [32]

  3. Notwithstanding the Defendant’s observations earlier referred to in relation the Plaintiff’s failure to utilise the period of grace provided in Clause 86 of Schedule 4, the Defendant orally submitted that Clause 86(1) could only provide a period of grace if Clause 63A had prevented the claim. [67] The Defendant submitted that the effect of Clause 86(7) and Clause 63A was not what prevented the claim and further the loss notification period had ended before the commence of Clause 63A. It argued that the relevant loss notification period ended on 14 May 2009 when the six year cover period expired pursuant to s 103BA. [68]

    67. T 106.10 – .18

    68. T 107.9 – .21

  4. The Defendant’s submission in this respect was put as follows:-

“BAMBAGIOTTI: They couldn’t take advantage of the period of grace because 63A hadn’t been the reason that they couldn’t make the claim in 2009. The reason they couldn’t make the claim in 2009 was because the DDI trigger event had not occurred and the transitional provision was provided only to people who'd been disadvantaged because of the harshness of 63A. Your Honour we then - I'm sorry - when your Honour's ready.

HIS HONOUR: So you say the loss notification period had ended before the commencement of cl 63A?

BAMBAGIOTTI: Well the loss notification period had ended - I haven't gotten the date of the proclamation of 63A. The answer need only be 86(1), and that is that 63A wasn't the reason for denial of the claim, and that's the only basis upon which you can claim a period of grace entitlement. None of these provisions were ever and you'll see when we get to it

HIS HONOUR: The first real operative provision is 103BA(1)(b)(1), that is that the loss was apparent and needs to be notified to the insurer within the period of insurance. So they would've had to have notified within the period of insurance, this being a claim that's not captured by sub para (2). So that means they should've notified then, but then 103BA

BAMBAGIOTTI: And we've given you that date at para 9(d). The plaintiff alleges the completion occurred on 14 May 2003 and so the six year insurance period

HIS HONOUR: Sorry, I've just got to find your submissions.

BAMBAGIOTTI: I'm sorry, 9(d) on p 2.

HIS HONOUR: I see that. 19 May 2009, cl 63A was repealed. 103BA comes into force. What do you mean by the plaintiff's failed to utilise the period of grace?

BAMBAGIOTTI: Well they didn't

HIS HONOUR: Was it available to them? You say it wasn't.

BAMBAGIOTTI: I've said which was available to them, but on reflection it wasn't because of 86(1). So I apologise, that part of my submission is in error. The period of grace was not available to them because of the specific terms by which the period of grace was provided under 86.” [69]

69. T 114.45 – 115.36

  1. The Defendant’s submissions if accepted, would mean that by the time of the repeal of Clause 63A on 19 May 2009, the Plaintiff no longer had an ability to make a notification as was required under s 103BA (assuming that the January 2009 notification was insufficient) as the period of the insurance provided by the policy, and the relevant notification period had expired on 14 May 2009.

  2. Whilst the submissions of both parties was that Clause 86 did not provide a period of grace to the Plaintiffs, the Defendant’s contention was that Parliament had given specific consideration to providing relief consequent to the repeal of Clause 63A, and in this instance, the relief granted did not extend to the circumstances of the Plaintiff.

  3. With great respect to the parties I am doubtful that Clause 86(1) of Schedule 4 of the 1989 Act is to be interpreted so that the preclusion brought about by Clause 63A only applied in circumstances which otherwise would have entitled the insured to bring a claim under the policy. Clause 63A (3) was specific in preventing a claim that was later than as permitted by the clause.

  4. Clause 63A operated from the 18 December 2008 to 18 May 2009, a period of five months. Any period of grace would have consequently have commenced on 19 May 2009 pursuant to Clause 86(2) of Schedule 4 of the 1989 Act.

  5. Notwithstanding the terms of the policy the effect of Clause 63A was also to prevent a claim for loss in this extended sense from being made during part of the loss notification period referred to in s 103BA of the 2009 Act. This would mean the period from 18 December 2008 to 14 May 2009 being when the cover expired. If this is correct it would have provided a period of grace under Clause 86 of Schedule 4 for an equivalent period, pursuant to Clause 86(2). This would have enabled a loss to be notified (as opposed to a claim being made) during a period of 21 weeks commencing on 19 May 2009. If that occurred then the Plaintiff would have met the requirements of s 103BA as it stood in the 2009 amendments.

  6. Accordingly for my own part, I would not be inclined to accept the contention that Clause 86(1) of Schedule 4 cannot apply to “last resort” policies that had no contractual notification period such as the present policy. [70]

    70. Plaintiff’s Written Submissions in Reply filed 12 May 2016 at [9]

  7. However, a concluded view is not necessary for the determination of this case, as it is not in issue that the period of grace was not utilised.

Home Building Amendment Act 2011 (NSW)

  1. What happened thereafter was that on 25 October 2011, a further set of amendments were passed by the Home Building Amendment Act 2011 (NSW). [71] The effect of the 2011 Act was to amend s 103BA of the 2009 Act so that it specifically applied to policies issued between 1 May 1997 and 30 June 2002. The Plaintiffs did not contend that by reason of their notification in January 2009 and the amendments to the s 103BA of the 2009 Act they accrued rights based on the previous provisions pursuant to s 30 of the Interpretation Act 1987 (NSW). Nor could they in light of the 2011 amendments.

    71. Hereinafter referred to as the “2011 Act”

  2. The effect of the new s 103BB was confined to policies issued from 1 July 2002, which included the policy in the Plaintiff’s case. The section provided:

103BB Time limits for policies issued from 1.7.2002

(1) A contract of insurance under the Home Building Compensation Fund entered into on or after 1 July 2002 provides insurance cover in respect of loss only if a claim in respect of the loss is made to the insurer during the period of insurance.

Note.

Subsection (1) is the general rule but there are exceptions to this general rule, as provided by this section.

(2) A loss that becomes apparent in the last 6 months of the period of insurance has an extended claim period, which permits a claim in respect of the loss to be made within 6 months after the loss becomes apparent. There is no extended claim period for a loss that arises from non-completion of work.

(3) When a loss becomes apparent during the period of insurance but a claim cannot be made during that period because an insured event has not occurred, a claim can be made after the period of insurance (as a delayed claim) but only if:

(a) the loss was properly notified to the insurer during the period of insurance (or within 6 months after the loss became apparent in the case of a loss that became apparent in the last 6 months of the period of insurance), and

(b) the beneficiary under the contract of insurance making the claim diligently pursued the enforcement of the statutory warranty concerned after the loss became apparent.

(4) A delayed claim can also be made when the insured event occurs in the last 6 months of the period of insurance (as if the insured event did not occur until after the period of insurance) subject to compliance with the other requirements of this section for a delayed claim.

(5) (Repealed)

(6) The regulations can make provision for or with respect to what constitutes or does not constitute diligent pursuit of the enforcement of a statutory warranty for the purposes of this section.

(7) A loss is properly notified to an insurer only if the insurer has been given notice in writing of the loss and the notice provides such information as may be reasonably necessary to put the insurer on notice as to the nature and circumstances of the loss. The regulations can make provision for or with respect to the form and content of such a notice.

  1. The Plaintiffs accept that these provisions have retrospective operation by reason of Clause 106 of Schedule 4 of the 1989 Act. They contend that the phone call of January 2009 amounted to oral notification which was perfected by the solicitor’s letter of 15 September 2010. As such, they argue that they are entitled to the period of grace provided for in Clause 115 of Schedule 4 of the 2011 Act. That clause reads as follows:-

115 Period of grace for proper notification of losses

(1) The requirement under section 103BB(3)(a) that a loss be properly notified to an insurer during the required notification period is satisfied in the case of a loss that was notified (but not properly notified only because it was not notified in writing) to the insurer during the required notification period and before the commencement of that section if the loss is properly notified to the insurer within 6 months after the commencement of that section.

(2) The required notification period is the period of insurance or the period of 6 months after the loss became apparent in the case of a loss that became apparent in the last 6 months of the period of insurance.

  1. In short, the Plaintiffs claim that their case falls within s 103BB(3) of the 1989 Act as a “delayed claim.” They contended that they suffered a loss but did not make a claim because of the lack of an insured event being the death, disappearance or insolvency of the builder. There was no issue raised that the Plaintiffs did not diligently pursue enforcement of the statutory warranty. Accordingly they contend that they complied with the statutory notice requirements by virtue of Mr Foy’s telephone call of January 2009, this being a notification that was not “proper” because it was not in writing within the period of insurance. The Plaintiff s contended that the letter was prior to the commencement of the 2011 Act and therefore fell within the requirements that it be within six months within the commencement of the section. It asserted that the section was retrospective in respect of a notification of a loss prior to the by reason of Clause 106 of Schedule 4. They argue that the written notification identified the property and the proceedings in the NSW CTTT as being the proceedings which the insurer had agreed to be bound by as per the terms of the policy. [72]

    72. Plaintiff’s Outline of Argument dated 8 March 2016 at [56]

  2. The Defendant argues that the Plaintiffs’ notification in January 2009 overlooks the fact that the telephone conversation referred to did not amount to a notification within the terms of the policy as it was not in writing.

  3. The policy itself did not require notification of loss ahead of making a claim. The provisions which required notification of the claim specifically are the statutory provisions I have referred to. Clause 115 specifically envisages a period of grace in circumstances where notification was given but not in writing for the purposes of s 103BB(3)(a) of the 1989 Act. No exception is made in circumstances where the contract of insurance provided for any notification to be in writing. In the circumstances, I do not accept the Defendant’s argument.

  4. Next the Defendant argues that the phone call of January 2009, needed to meet all the requirements of s 103B(7) of the 1989 Act in order for Clause 115 to potentially provide a period of grace. It contends that it is little more than the type of phone call which was rejected in Michell & Thomas v Calliden Insurance Ltd. [73] It contends that whatever else the call was, it could not have realistically have been a notice of the nature and circumstances of loss sufficient for the purposes of notifying the insurer.

    73. Michell & Thomas v Calliden Insurance Limited (Home Building) [2011] NSWCTTT 300 at [30] (Senior Member Buckley)

  5. As to the purpose of requiring a person who had otherwise given notice but not within six months to resubmit the Defendant contended:

“BAMBAGIOTTI: It would be required because that was the time at which, on one view of it, the legislation had introduced a paper driven scheme, whereas before if there was no requirement for notification, notifications in writing or otherwise received could've been cast at the four winds, it was not necessarily a signal to the insurer that the written documents had the effect that they have under s 103BB. That would be why you'd have to resubmit.” [74]

74. T 121.39 – .44

  1. The Plaintiff seeks to distinguish the decision in Michell & Thomas. It argues that Mr Foy outlined the cause of the claim being the existence of the defects, specified his intention to make a claim, but was told that he could not do so until the contingency eventuated. [75] In Michell & Thomas, the relevant conversation agreed to between the parties was comprised and agreed in the facts as follows:-

“The Applicants’ solicitor telephones the Respondent and requests a copy of the Certificate of Insurance and policy wording in respect of the Insurance and advised the insurer that the insured had a dispute with the owner/builder”. [76]

75. Plaintiff’s Outline of Argument dated 8 March 2016 at [47]

76. Michell & Thomas v Calliden Insurance Limited (Home Building) [2011] NSWCTTT 300 at [25] (Senior Member Buckley)

  1. The decision in that case centred on the words of s 103BA(1)(b)(i) of the 1989 Act, inserted by the 2009 Act, to specify:-

“The loss becomes apparent and is notified to the insurer within the period of insurance.”

  1. Member Buckley in rejecting the communication of 21 February 2008 as constituting a notification of loss, referred to the heading of s 103BA as it stood reading: “Limitations on policy coverage – claims made and notified policy” before concluding that the communication was nothing more than a communication which did not refer to loss, any claim, contingent or otherwise, nor any defect apparent or otherwise. [77]

    77. Michell & Thomas v Calliden Insurance Limited (Home Building) [2011] NSWCTTT 300 at [30] (Senior Member Buckley)

  2. The decision in Michell & Thomas is of little assistance in this case as s 103BB of the 1989 Act is a different section, and to the extent that it is relevant, has a new heading although not part of the section which reads “Time limits for policies issued from 1 July 2002.” Further, the requirement of proper notification is specified in s 103BB. The requirement that the loss be properly notified, requires notice to provide such information as may be reasonably necessary to put the insurer on notice as to the nature and circumstances of the loss. Even accepting that the call was made and met the purposes of the section, Clause 115(1) of Schedule 5 required proper notification to the insurer within six months of the commencement of s 103BB(3)(a). That section commenced on 25 October 2011. The six months expired on 25 April 2012. The meaning of the term “within” was considered by the Full Court of the Supreme Court of Victoria in Morton v Hampson [78] where the plurality stated:-

“The modern rule in relation a period of time fixed by statute ‘within’ which an act is to be done after a specified event is the day of the event is to be excluded; the next day is the first day of the stipulated period and the time expires on the last day of the period, counting from and of course including, the first day.”[79]

78. Morton v Hampson [1962] VR 364, 365 (Herring CJ, Sholl and Little JJ)

79. See also: Ward v Walton (1989) 10 MVR 537; and Susiatin v Minister for Immigration and Multicultural Affairs (1998) 83 FCR 574, 580 (Beaumont J)

  1. Whatever else can be said about the letter of 15 September 2010, it cannot be said that it constituted notification within six months of the commencement of s 103BB of the 1989 Act. That letter was an invitation to the insurer to join in the proceedings in the NSW CTTT. Nor does it appear that the Plaintiffs saw it as notification of a claim, since the letter from Claims Services Australia Pty Ltd dated 29 September 2010 enclosed a notification of loss form, [80] and there was no evidence that this was completed before the claim was ultimately submitted. I do not accept that the effect of Clause 106 of Schedule 4 was to make s 103BB retrospective in respect of a notification of a loss prior to the amendment. [81] The provisions of Clause 115 specifically applied where the requirements under s 103BB(3)(a) that the loss properly notified to the insurer during the required notification period is satisfied, but not in writing, and required the notification to the insurer be properly made within six months of the commencement of the section. In my view, Clause 106 does not have the effect for which the Plaintiff contends.

    80. Affidavit of Mr Michael Foy sworn 15 November 2013 at Annexure I

    81. Plaintiff’s Outline of Argument dated 8 March 2016 at [55] and T 94.32 – 95.3

  2. In the circumstances I accept the Defendant’s argument that the Plaintiffs failed to respond or take advantage of the specific statutory provisions that were available to them and the contractual claim must fail. [82]

    82. Defendant’s Written Submissions at dated 26 April 2016 at [42]

Misleading or deceptive conduct

s 52 of the Trade Practices Act 1974 (Cth) and s 12DA of the Australian Securities and Investment Commission Act 2001 (Cth)

  1. In its claim, the Plaintiff has also pleaded reliance on s 52 of the Trade Practices Act 1974 (Cth) [83] and to the extent that financial services were involved, the parallel provisions in, s 12DA of the Australian Securities and Investment Commission Act 2001 (Cth). [84] To understand the allegation made, the Plaintiffs rely on the phone discussion of January 2009, namely the response provided to the First Plaintiff’s question: “Where do I go from here?” being, “You should contact us again if one of those things occur.” It was argued that this was a reference to the events which activated the indemnity, the death, disappearance or insolvency of the owner builder. [85]

    83. Hereinafter referred to as the “1974 Act”

    84. Hereinafter referred to as the ”2001 Act”

    85. Exhibit A, Product Disclosure Statement for Owner Builder Warranty Insurance, produced by Calliden Insurance Limited, dated 1 October 2007, p 10

  2. The Plaintiffs pleaded that the Defendant’s responses amounted to a representation to the following effect:

“[9] In response to the matters raised by the First Plaintiff, the employee or agent of the Defendant made representations to the First Plaintiff to the following effect:

(a) That the Insurance Policy does not operate unless the Builder has died, disappeared or become insolvent;

(b) That a claim cannot be made under the Policy until it is activated in the circumstances outlined at (a) above;

(c) The First Plaintiff should contact the Insurer again when one of the events outlined in (a) occurs.” [86]

86. Second Further Amended Statement of Claim filed 16 March 2016 at [9](a) – (c)

  1. The Plaintiff pleaded that these representations were misleading and deceptive, for the reasons stated at [12] of the Second Amended Statement of Claim.

  2. Firstly, the Plaintiff pleaded that the Defendant’s agent was aware of or had constructive notice of the Defendant’s requirements as to the need for notice of defects to be put in writing within the period of cover, and to be provided with further or more specific details of the defects discovered in the property. No submission in this regard was ultimately pursued. The Defendant correctly argued that paragraph [12](a) of the Second Further Amended Statement of Claim refers to terms of the policy which were equally known to the Plaintiff. To the extent that notice was required, this was a factor which arose with the enactment of s 103BB of the 1989 Act in 2011.

  3. In relation to paragraph [12](b) of the Second Further Amended Statement of Claim it was contended that the employee or agent did not notify the Plaintiff at the time of the Defendant’s requirement for written notice or further details in response to the notification. This was also not pursued in argument by the Plaintiff. At the time of the phone call there was no notice requirement either in the Home Building Act or under the terms of the policy. This changed with the 2009 and 2011 amendments.

  4. In relation to paragraph [12](c) of the Second Further Amended Statement of Claim, the First Plaintiff contended that he was not advised in the phone call as to there being time limitations in relation to the making or notifying under the insurance policy. That of course, is correct. The conversation at the time did not purport to deal with time limitations. Furthermore, circumstances were not at that point such that a claim could be made, as the circumstances engaging indemnity had not been arrived at.

  5. In [12](d) of the Second Further Amended Statement of Claim the Plaintiffs contended that the First Plaintiff was misled or induced into a false belief that he should not contact the Defendant again unless and until the builder had died, disappeared or had become insolvent. In fact the First Plaintiff was not given negative advice as asserted to “not to make contact.” But in any event, the obligation to notify in respect of the policy arose when the 2009 amendments came into force. In January 2009 when the phone call is said to have been made, there could be no such “false belief”.

The conflict may also arise from the laws' legal operation or from their practical effect.

[52] [A]ny alteration or impairment of, or detraction from, a Commonwealth law must be significant and not trivial". The question of whether any alteration or impairment of, or detraction from, a Commonwealth law is significant is "always one of fact and degree". The starting point is an analysis of the laws in question and their true construction. The extent of the inconsistency "depends on the text and operation of the respective laws". As Dixon J explained in Wenn v Attorney-General (Vict):

‘[W]hile s 109 invalidates State legislation only so far as it is inconsistent, the question whether one provision of a State Act can have any operation apart from some other provision contained in the Act must depend upon the intention of the State legislation, ascertained by interpreting the statute. ... No doubt s 109 means a separation to be made of the inconsistent parts from the consistent parts of a State law. But it does not intend the separation to be made where division is only possible at the cost of producing provisions which the State Parliament never intended to enact.’”

  1. The basis on which the High Court held that the Bell Group Companies (Finalisation of Matters and Distribution of Proceeds) Act 2015 (WA) was invalid was described as follows:-

“[60] The Bell Act thus purports to create a scheme under which Commonwealth tax debts are stripped of the characteristics ascribed to them by the Tax Acts as to their existence, their quantification, their enforceability and their recovery. It purports to override the Commonwealth's accrued rights under a law of the Commonwealth as a creditor of each of the WA Bell Companies. With respect to the recovery of tax debts due to the Commonwealth, the Commonwealth (and the Commissioner) is reduced to the position of a mere supplicant for the exercise of a favourable discretion on the part of the Executive of the State of Western Australia. In particular, ss 9, 16, 22, 25, 35, 37, 38, 39, 42, 43, 44, 73 and 74 of the Bell Act have the effect of altering, impairing or detracting from s 177 of the 1936 Act (now Item 2 of the table in s 350-10(1) of Sched 1 to the TAA) and ss 208 and 209 of the 1936 Act (now s 255-5 of Sched 1 to the TAA).”

  1. The plurality of the High Court at [61] then went onto state that the Bell Act purported to alter, impair or detract from the operation of each of those rights which arose and had accrued to the Commonwealth or to the Commissioner under a law of the Commonwealth prior to the enactment of the Bell Act; and that that alteration or impairment of, or detraction from the Tax Acts was significant so as to engage s 109 of the Constitution.

  2. s 7 of the 1984 Act states as follows:-

7 Effect of Act on other laws

It is the intention of the Parliament that this Act is not, except in so far as this Act, either expressly or by necessary intendment, otherwise provides, to affect the operation of any other law of the Commonwealth, the operation of law of a State or Territory or the operation of any principle or rule of the common law (including the law merchant) or of equity.

  1. s 103BB of the 1989 Act relates to the terms of the offer of the indemnity, that is offered under the policy. The section does not attempt to restrict or impair s 54 of the 1984 Act.[124] s 54 operates “where the effect of the contract of insurance would, but for this section, be that the insurer may refuse to pay a claim.” The section does not define or regulate the effect of the contract of insurance. It follows that there is no inconsistency of the kind referred to in Bell Group NV. s 54 of the 1984 Act does not alter or impair, or detract, in a manner so as to engage s 109 of the Constitution. It follows that the Plaintiffs’ claim in this regard must also fail.

    124. See: Home Building Regulation 2004 (NSW) r 53(2) then in force; and Interpretation Act 1987 (NSW) s 31

CONCLUSION

  1. For these reasons, the Plaintiffs have failed to succeed on each of their arguments. Accordingly the formal orders are:

  1. Verdict for the Defendant; and

  2. The Plaintiffs are to pay the Defendant’s costs.

Endnotes

Decision last updated: 11 May 2018

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