Pinnacle Living v QBE Insurance - [2023] VSC 621

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT
INSURANCE LIST

S ECI 2018 00103

BETWEEN:

PINNACLE LIVING PTY LIMITED (ACN 109 236 759)	First Plaintiff
TV MEWS PTY LIMITED (ACN 007 026 100)	Second Plaintiff
and
QBE INSURANCE (AUSTRALIA) LIMITED (ACN 003 191 035)	Defendant

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JUDGE:	M Osborne J
WHERE HELD:	Melbourne
DATE OF HEARING:	25 September 2023
DATE OF JUDGMENT:	26 October 2023
CASE MAY BE CITED AS:	Pinnacle Living & Anor v QBE Insurance
MEDIUM NEUTRAL CITATION:	[2023] VSC 621

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CONTRACT – POLICY OF INSURANCE – Whether accord and satisfaction or accord executory – Whether binding contract or whether settlement arose in course of insurer’s business – Consideration moving from promisee – Unilateral contract.

CONTRACT – ELECTION – Whether rights inconsistent – Sargent v ASL Developments Ltd (1974) 131 CLR 634 – DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423.

POLICY OF INSURANCE – Claims preparation costs – Claims advocacy costs.

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APPEARANCES:

Counsel

Solicitors

For the Plaintiffs

Mr T J Scotter with

Mr G Jegatheesan of counsel

Walpole Menzies

For the Defendant

Mr T R Messer with

Mr D J Carolan of counsel

Hall & Wilcox

HIS HONOUR:

Introduction

The second plaintiff (‘TV Mews’) owns and operates the retirement village known as ‘Tudor Village Lilydale’ at 520 Maroondah Highway, Lilydale (‘Tudor Village’). TV Mews is a wholly owned subsidiary of the first plaintiff, Pinnacle Living Pty Ltd (‘Pinnacle’). Geoffrey Reeve is the sole director of both companies.

In early 2013, TV Mews decided to carry out improvements to the community centre forming part of Tudor Village (‘the community centre’). It contracted with a builder, Method Construction Pty Ltd (‘Method’), who started work on 4 February 2013.

On 6 May 2013, the community centre, including the building works commenced but not completed by Method, was destroyed by fire. The fire resulted in the destruction of the community centre and the works carried out by Method to that date.

In 2012, Pinnacle and TV Mews had entered into an insurance contract with the defendant (‘QBE’) in the terms set out in the document entitled ‘JLT VillageWISE Industrial Special Risks Mark IV Insurance Schedule and Policy Wording’ (‘the QBE policy’).

By the terms of the QBE policy, QBE agreed to indemnify Pinnacle and TV Mews against physical loss and destruction or damage not otherwise excluded to property in accordance with the applicable Basis of Settlement. The relevant Basis of Settlement under the QBE policy was the cost of reinstatement. The QBE policy excluded liability for loss or damage to contract works when the value of such works exceeded 10% of the limit of liability or $500,000, whichever was the lesser. It is not in issue that the exclusion was engaged.

Separately, the terms of the construction contract between TV Mews and Method required Method to take out an insurance policy covering its works ‘against loss or damage resulting from any cause whatsoever until [Method] ceases to be responsible…

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: [2023] VSC 621
Decision Date: 26 October 2023

CaseChat Overview and Summary

The case of Pinnacle Living versus QBE Insurance involved a dispute over the terms of an insurance policy. The insured, Pinnacle Living, sought to recover certain costs from the insurer, QBE Insurance. The primary legal issues revolved around whether an accord and satisfaction had been reached between the parties and if a binding contract had been formed. Additionally, the court had to determine if the settlement arose in the course of the insurer's business and whether the consideration had moved from the promisee. Furthermore, the court considered whether the insurer's actions constituted a unilateral contract.

The court examined the nature of the agreement between the parties, particularly whether it was an accord and satisfaction or an accord executory. The distinction was crucial in determining if the settlement constituted a binding contract. The court also evaluated whether the settlement arose in the course of the insurer's business and if the consideration had moved from the promisee, which would indicate a unilateral contract. The court referenced previous cases, including Sargent v ASL Developments Ltd and DTR Nominees Pty Ltd v Mona Homes Pty Ltd, to assess whether the insurer's rights were inconsistent with the election made.

After careful consideration of the arguments and the relevant legal principles, the court concluded that the settlement did not amount to an accord and satisfaction but rather represented an accord executory. The court found that the settlement did not arise in the course of the insurer's business, and there was no unilateral contract formed. As a result, the insured was not entitled to recover the claimed costs. The court's decision hinged on the interpretation of the agreement and the application of precedents regarding election and inconsistent rights.

The final orders of the court mandated that QBE Insurance was not obligated to pay the claims preparation and advocacy costs to Pinnacle Living. The court's ruling was based on the finding that the settlement was not a binding accord and satisfaction but an accord executory, and that the settlement did not arise in the course of the insurer's business. Consequently, the insurer was not required to compensate the insured for the claimed costs.

Orders