The Owners - Strata Plan 89005 v Stromer (No 2)

[2022] NSWSC 955

Supreme Court

New South Wales

Medium Neutral Citation:

The Owners – Strata Plan 89005 v Stromer (No 2) [2022] NSWSC 955

Hearing dates:

15 July 2022

Decision date:

15 July 2022

Jurisdiction:

Equity - Technology and Construction List

Before:

Stevenson J

Decision:

Leave to proceed under Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) refused; leave to proceed against company in liquidation to be granted

Catchwords:

INSURANCE – procedure – civil – whether leave should be granted to proceed against the insurer pursuant to s 5 of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) – whether arguable case that the relevant policy would respond to a claim made against it by the certifier

CORPORATIONS – procedure – civil – whether leave should be granted to proceed against the certifier in liquidation pursuant to s 471B of the Corporations Act 2001 (Cth) – where liquidator neither consents to nor opposes leave being granted

Legislation Cited:

Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW)

Corporations Act 2001 (Cth)

Trade Practices Act 1974 (Cth)

Category:

Procedural rulings

Parties:

The Owners – Strata Plan No 89005 (Plaintiff)
Thomas Stromer (First Defendant/Cross-Claimant/Applicant)
Simone Stromer (Second Defendant/Cross-Claimant/Applicant)
Nathan Stromer (Third Defendant/Cross-Claimant/Applicant)
Farad Electrical Co Pty Ltd (Fourth Defendant/Cross-Claimant/Applicant)
Lloyd’s of London Syndicate 1200 (First Respondent)
Lloyd’s of London Syndicate 2987 (Second Respondent)
Mondan Management Pty Ltd (in liq) t/as Vic Lilli & Partners (First Cross-Defendant/Third Respondent)
Peter Smith Constructions Pty Limited (Second Cross-Defendant)

Representation:

Counsel:
J O’Sullivan (First to Fourth Defendants/Cross-Claimants/Applicants)
M F Newton (First and Second Respondents)

Solicitors:
& Legal (First to Fourth Defendants/Cross-Claimants/Applicants)
Barry. Nilsson. Lawyers (First and Second Respondents)

File Number(s):

2019/294941

EX TEMPORE Judgment (REVISED)

1. In these proceedings the Owners Corporation seeks damages and other relief against the defendant builders (the “Stromer parties”).

2. By a Cross-Claim filed on 23 December 2021 the Stromer parties seek relief against Mondan Management Pty Ltd trading as Vic Lilli & Partners, the certifier of the relevant project and the entity that certified an occupation certificate issued in relation to the project on or about 16 November 2013.

3. The certifier is now in liquidation.

4. The certifier is named as insured under a policy issued by Lloyd’s syndicates.

5. By Notice of Motion filed on 6 June 2022 the Stromer parties seek leave under s 5 of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) to continue their proceedings against the Lloyd’s syndicates.

6. In order to obtain such leave, the Stromer parties must show, among other things, that there is an arguable case that the relevant policy would respond to a claim made against it by the certifier.

7. In my opinion there is no such arguable claim.

8. The policy is a “claims made” policy.

9. Section 1 cl 1 reads, taking into account the amendments made by the Addenda at cll 2-3:

“The Insurer will indemnify the Insured in respect of:

1. Legal Liability

claims made against the Insured and notified to the Insurer during the Policy Period incurred in the conduct of the Insured’s Professional Business which give rise to a legal liability as a result of breach of professional duty on the part of:

(i) the Insured …”. (Emphasis in original.)

10. The policy period was 30 September 2013 to 30 September 2014. The claim made on the insured was done so by the Cross-Claim of 23 December 2021.

11. Mr O'Sullivan, who appeared for the Stromer parties, contends that the policy responds by reason of provisions in what he described as a "carve out", being an “Australian Conditions Endorsement”.

12. That endorsement provides that where, as is the case here, the policy “includes the jurisdiction of Australia”, the conditions set out therein are added to the policy and override any existing terms or conditions.

13. The first of those conditions is as follows:

“1. Trade Practices and related Legislation

This Policy is extended to Indemnify the Insured in respect of any claim made upon the Insured for financial loss caused directly by conduct on the part of the Insured which is misleading or deceptive, or likely to mislead or deceive, or misrepresentations by the Insured (not being deliberate or fraudulent conduct) contrary to section 52 or section 53 of the Trade Practices Act 1974 (Commonwealth) respectively, or the equivalent sections of the Fair Trading Act 1999 (Victoria) or similar legislation enacted in the States and Territories of Australia.” (Emphasis in original.)

14. Mr O'Sullivan also relies upon cl 4 in the endorsement, which is in the following terms:

“Any term of the Policy which confers a right or imposes an obligation upon the Insured to notify the Insurer of circumstances which may give rise to a claim is deleted.” (Emphasis in original.)

15. It appears to me that the only effect of cl 1 in the endorsement is to extend the subject matter of claims that may be made under the policy to those therein described, namely claims for misleading or deceptive conduct under s 52 of the Trade Practices Act 1974 (Cth) and its analogues. I cannot see how the wording of that endorsement in any way affects the “claims made” nature of the policy as set out in cl 1.

16. As to cl 4 in the endorsement, its effect, it seems to me, is to do no more than remove from the ambit of the policy wording which, but for the condition, would provide the insured with an ability to notify the insurer of circumstances which may give rise to a claim and to thereafter contend that any claim thereafter made would fall within the ambit of the policy.

17. I do not see that cl 4 in the endorsement, even arguably, can somehow affect the nature of the policy as being a “claims made” policy.

18. For that reason alone, the application for leave under the Civil Liability (Third Party Claims Against Insurers) Act must be refused.

19. Alternatively, the Stromer parties seek leave to proceed against the certifier in liquidation.

20. Mr O'Sullivan informs me that the liquidator is aware that that application might be made and neither opposes nor consents to it. I invite Mr O'Sullivan to provide my Associate with a Short Minute of the orders which he seeks under section 471B of the Corporations Act 2001 (Cth). That Short Minute of Order should include a provision that leave is granted subject to the condition that any judgment obtained against the company in liquidation may be enforced only by way of lodgement on that proof of debt in the winding up.

21. The Notice of Motion is otherwise dismissed with costs.

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Decision last updated: 18 July 2022