Summer Breeze Pty Ltd v Victorian Managed Insurance Authority

[2021] VCC 734

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL DIVISION

Revised
Not Restricted
Suitable for Publication

BUILDING CASES LIST

Case No. CI-20-04555

SUMMER BREEZE PTY LTD (ACN 165 267 541)	Plaintiff
v
VICTORIAN MANAGED INSURANCE AUTHORITY	Defendant

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JUDGE:	HIS HONOUR JUDGE WOODWARD
WHERE HELD:	Melbourne
DATE OF HEARING:	On the papers; final submissions dated 2 April 2021
DATE OF JUDGMENT:	8 June 2021
CASE MAY BE CITED AS:	Summer Breeze Pty Ltd v Victorian Managed Insurance Authority
MEDIUM NEUTRAL CITATION:	[2021] VCC 734

REASONS FOR RULING
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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	M Wolff	Noble Lawyers
For the Defendant	S Stuckey QC	Moray & Agnew Lawyers

HIS HONOUR:

1The plaintiff (“Summer Breeze”) applies for summary judgment against the defendant (“VMIA”) for part of its claim in this proceeding, pursuant to order 22 of the County Court Civil Procedure Rules 2018 (Vic) and s61 of the Civil Procedure Act 2010 (Vic) (“CPA”). Relevantly for the purposes of this application:

(a)   on about 21 July 2016, Summer Breeze entered into a major domestic building contract as owner with Buildark Constructions Pty Ltd for the construction of 20 residential apartments, eight retail lots and associated common property (“project”);

(b)   VMIA provided the domestic building insurance for the project, and the terms of the policy of insurance were, in effect, that VMIA must indemnify the owner in respect of loss or damage resulting from (among other things) defective work;

(c)   VMIA’s liability under the policy of insurance is limited to not less than $300,000 for all claims in respect of any one home, including reasonable legal costs and expenses;

(d)   the building work on each of the (ultimately) 18 residential apartments was defective and the builder became insolvent;

(e)   Summer Breeze made claims under the relevant insurance certificates and VMIA accepted liability for these claims, but has so far refused to make payment;

(f)    Summer Breeze claims a total of $1,669,262 plus interest and costs and asserts in this application that $1,083,869.46 of this sum is not in dispute, and it should therefore have judgement for that sum.

2Summer Breeze relies on two affidavits of Justin Wilson affirmed 9 December 2020 and 15 January 2021. VMIA relies on the affidavit of Jacinta Baird affirmed 29 January 2021. The parties filed written submissions and were content for the application to be determined on the papers. Summer Breeze’s initial submissions are dated 19 February 2021, VMIA’s submissions in response are dated 12 March 2021, and Summer Breeze’s reply submissions are dated 2 April 2021.

3The principles to be applied on an application for summary judgment are well settled,[1] and are not relevantly in dispute. It is unnecessary to restate them.

[1]Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (2013) 42 VR 27 (“Lysaght”).

4In its initial submissions, Summer Breeze submits that the determination of this application comes down to an assessment of a letter from VMIA to Summer Breeze dated 11 January 2019. The letter relevantly states:

“We are writing to advise you of the VMIA’s decision to accept your claims under the domestic building insurance policies issued on 29 July 2019. The claims under the policies are accepted due to the Insolvency of your builder.”

5Summer Breeze submits that there is no language in the letter to the effect that the acceptance of liability might be dependent on another event or was otherwise conditional, except for outlining an “administrative process” for reimbursement. Summer Breeze further submits that any argument that the letter effectively reserved VMIA’s position on quantum would be difficult to sustain in light of paragraph 79 of the affidavit of Jacinta Baird, which outlines how on “3 July 2020, VMIA’s lawyers issued a decision in respect of the plaintiff’s claims which set out VMIA’s position on quantum as follows,” before stating the total amount is $1,083,869.46. Summer Breeze then goes on to refer to a number of other paragraphs of Ms Baird’s affidavit, before asserting that: “All in all, her evidence is that the defendant accepted liability for the sum of $1,083,869.46”.

6VMIA submits that Summer Breeze applies for summary judgment for the amount that VMIA has assessed on Summer Breeze’s insurance claims, but also seeks to contest the correct amount due to Summer Breeze under the insurance policies. It argues (and I agree) that these two claims necessarily and inevitably overlap, and cannot be the subject of separate orders. VMIA accepts that it has assessed Summer Breeze’s claims as a global figure (albeit one that Summer Breeze disputes), but asserts that the simplicity of that single figure is misleading: “It does not seek to take account of the fact that the global figure does not arise from a single obligation, but arises under some 50 claims under 20 distinct policies of insurance in respect of 18 apartments and common property”.

7More particularly, VMIA argues that Summer Breeze seeks by its prayer for relief both the sum of $1,083,869.46 assessed by VMIA and “indemnity pursuant to the terms of the policy of insurance”. The difficulty with this, according to VMIA, is that the latter claim for relief encompasses the former claim, but a judgment for the former claim would not resolve any part of the broader indemnity claim This is essentially because the sum is not attributable to a particular cause of action or an identifiable part of the broader claim. Thus: “the entry of any judgment will not put an end to the matter of controversy”. VMIA continues:

“Although judgment can be given on part of a claim, it must be both an identifiable part of the claim and something that is a severable aspect susceptible to a single judgment. The Court cannot be asked to give judgment twice in respect of a single claim, once for the Defendant’s estimate of the value and later for the Plaintiff’s. The summary judgment process is not a means for plaintiffs to receive the defendant’s alleged quantum early to fund the fight for the plaintiff’s preferred amount.”

8VMIA next explains why a judgment that allocates the judgment amount to particular elements of Summer Breeze’s claims is essential to the ultimate resolution of the proceeding. It points to matters such as:

(a)   the fact that Summer Breeze’s claim arises under 20 separate policies of insurance and relates to both private lots and common property, with the latter being shared between the 18 private lots and also commercial lots representing 21.5% of the liabilities in the common property;

(b)   the relevant policies of insurance do not merely benefit Summer Breeze as developer, but also subsequent owners of the properties;

(c)   the policies of insurance are each subject to a maximum total cover of $300,000, which applies collectively to all persons insured under that policy (that is, all consecutive owners share the one pool of $300,000);

(d)   Summer Breeze has disposed of its interests in all of the apartments and in the common property, with the result that new owners now have rights under the policies, which rights will be affected by how Summer Breeze’s claim is allocated;

(e)   Summer Breeze purports to claim under 20 certificates of insurance notwithstanding that the project was later varied with the result that only 18 apartments were constructed - this complicates the allocation of any sum recovered; and

(f)    Summer Breeze’s claims and VMIA’s assessment do not match and it is not possible on the evidence available for VMIA to identify by what amount to reduce the $300,000 cap on recovery under each insurance policy.

9Finally, in relation to Summer Breeze’s primary claim, VMIA submits that, even if the court were satisfied that its assessment of Summer Breeze’s claim rendered VMIA liable to pay that sum to Summer Breeze, there is a substantial reason for the court to determine that the matter should proceed to trial pursuant to CPA s64. Namely, that the interests of 18 new owners of the apartments and the owners corporation will be affected by the entry of judgment in the proceeding and at least some of the people affected should be given the opportunity of being heard, lest their interests be prejudiced.

10VMIA concludes its written submissions by arguing that Summer Breeze’s claim for summary judgment of the amount of its legal costs is “particularly adventurous”. However, in its submissions in reply, Summer Breeze has disavowed any claim for summary judgment on the component of the insurance claims that provide for indemnity for legal costs and expenses associated with a successful claim under the insurance policies.

11In its submissions in reply on the substantive issues, Summer Breeze criticises VMIA for opposing summary judgment on the basis that the $1,083,869.46 global figure cannot be broken down when the knowledge to do so is solely the preserve of the VMIA. It continues:

“The Defendant’s argument that the Plaintiff must somehow go behind the assessed amount of $1,083,869.46 and break it down by reference to the claim and apartment number is not to the point. This argument, such as it is, does not suddenly give to the Defendant’s defence to the part of the claim the reasonable prospects of success that it simply does not have.”

12However, Summer Breeze submits that, in any event, the evidence discloses that at least a significant part of the $1,083,869.46 can indeed be traced back to specific apartments and specific claims. Summer Breeze’s submissions next detail the evidence on behalf of Summer Breeze and relevant admissions in the pleadings and affidavits on behalf of VMIA that, it submits, establishes the amount VMIA has assessed for each claim and apartment. This, it argues, provides the breakdown by claim and by apartment (and relevant common property) that VMIA says is missing, and thus precludes a judgment for the global figure. The table prepared by Summer Breeze showing this breakdown also confirms that Summer Breeze (at least on this application) is not seeking double insurance because of the amalgamation of apartments 1 and 12 and apartments 2 and 3.

13Summer Breeze’s submissions on this issue conclude as follows:

“Accordingly, even if the Defendant’s “severable claim” argument had any merit, which the Plaintiff submits it does not, the Plaintiff must be entitled to summary judgment in the sum of at least $698,698.01 together with interest from at least the date of filing of the writ, namely 12 October 2020.”

14On the issue of the potential effect of any judgment on subsequent owners, Summer Breeze argues that the policy of insurance can only be sensibly and commercially construed in a way that allows claims made by the original owner to be determined first. Once the original owner’s claims are determined, subsequent owner’s claims are then determined by reference to the residual cover remaining on the policy. In relation to the particular example of apartment 6, Summer Breeze notes that it does not seek summary judgment on the full amount of its claim for this apartment, but rather only the sum assessed by VMIA in the 3 July 2020 letter from its solicitors.

15Finally, Summer Breeze responds to VMIA’s argument that it is an issue whether Summer Breeze has any standing to enforce the terms of the policies, given that it did not contract for the issue of the policies and did not pay the premiums. In my view, this argument is a distraction, essentially for the reasons submitted by Summer Breeze. Further, it is no answer to Summer Breeze’s primary submission that VMIA has admitted at least substantial part of Summer Breeze’s claims.

Analysis

16At first blush, it does seem incongruous that VMIA can accept liability under the policies of insurance for a very precise sum ($1,083,869.46), and yet successfully resist an order for summary judgment in that same sum. However, I agree with VMIA that, where (as here) judgment is sought on part of a claim, it must be both an identifiable part of the claim and something that is susceptible to a discrete judgment.

17In this case, it is not in dispute that Summer Breeze claims the $1,083,869.46, but also claims indemnity under the policies for a significantly higher sum (approximately $1.6 million) which, Summer Breeze asserts, is its proper entitlement under the policies. Thus, I agree with VMIA that giving judgment in favour of Summer Breeze for the global figure accepted by VMIA will not put an end to the primary controversy between the parties in the proceeding.

18In particular, it will still be necessary for the court to identify and attribute a discrete and precise value to each claim under each policy, essentially because subsequent owners of the apartments now have rights under the policies, and those rights will be directly affected by the value attributed to Summer Breeze’s claims under those same policies. Most notably, it is not in dispute that the fixed policy limit under each of the policies (being $300,000 for each apartment policy) available to subsequent owners will be diminished by the amount ultimately paid out on each of Summer Breeze’s claims.

19In my view, this is a sufficient basis to find that VMIA’s defence has real prospects of success under the test in Lysaght, at least insofar as the court must determine Summer Breeze’s claim for indemnity under each of the policies which may or may not equate to the sums assessed to date by VMIA. Further, to the extent that it is not possible on the evidence adduced to date to attribute precise sums to each claim, I agree with VMIA that there is substantial reason for the court to determine that the matter proceed to trial pursuant to s64 of the CPA.

20On the other hand, I am satisfied that the same difficulties do not arise if Summer Breeze can attribute an amount in respect of each claim that represents a “not less than” sum that will be paid by VMIA under each policy. This is for two reasons, First, CPA s61 clearly contemplates (and it is not in dispute) that summary judgment can be entered where a court is satisfied that part of a defendant’s defence has no real prospects of defence. Second, if Summer Breeze can show that VMIA has accepted liability for a discrete sum under each insurance policy:

(a)   I am satisfied that VMIA has no real prospects of defence for a claim under each such policy up to that sum; and

(b) the concern about the interests of subsequent owners under the policies is met by the attribution of a discrete sum to each policy, and thus the considerations underpinning CPA s64 are not engaged to that extent.

21Further, the analysis of the evidence by Summer Breeze and the table and summary of the discrete amounts attributable to each claim at paragraphs 9 to 13 of its submissions in reply, in my view, do constitute a sufficient basis for attributing an amount in respect of each claim that represents a “not less than” sum that will be paid by VMIA under each policy. Subject to the fact that I have not personally checked the arithmetic supporting this figure, I am satisfied that Summer Breeze should therefore have judgment in the sum of $698,698.01 claimed in paragraph 13 of its submissions, plus interest from 12 October 2020.

22I reject VMIA’s argument that the proceeding should go to trial in any event, to allow subsequent owners to be heard on any dispute about whether any of the claims made by Summer Breeze are arguably claimable by the subsequent owners. I agree with Summer Breeze that the policies of insurance can only be sensibly and commercially construed in a way that allows claims made by the original owner to be determined first. It is a matter for VMIA to assess each of those claims on their merits, regardless of the potential for any claims by subsequent owners.

23On the question of costs, unless either party can rely on any offer made or other matter supporting a different order for costs, it seems to me that the measure of success Summer Breeze has achieved on its application is such that I should order that VMIA pay Summer Breeze’s costs of and incidental to the application, to be taxed on the standard basis in default of agreement.

24I invite the parties to submit orders giving effect to these reasons for my consideration. Such orders will, I assume, include (perhaps as an annexure) something akin to the table at paragraph 11 of Summer Breeze’s reply submissions, modified to account for what is set out in paragraph 12 of those submissions. Any dispute on the question of costs will be determined on the papers.

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Certificate

I certify that these 9 pages are a true copy of the judgment of His Honour Judge Woodward delivered on 8 June 2021.

Dated: 8 June 2021

Claire Findlay
Associate to His Honour Judge Woodward