The Owners Units Plan No. 3115 v The Trustees of the Master Builders Fidelity Fund Scheme

The Owners - Units Plan No. 3115, an owners corporation, brought proceedings against The Trustees of the Master Builders Fidelity Fund Scheme, seeking to enforce claims made under fidelity certificates issued by the Fidelity Fund. The dispute centres on the validity of claims made by the owners corporation under the fidelity certificates, which were issued in connection with the construction of residential and commercial units. The owners corporation argued that the trustees of the Fidelity Fund were required to honour claims made under the fidelity certificates, despite the period of cover having expired and the builder becoming insolvent. The Trustees of the Fidelity Fund rejected the claims, contending that they were not obliged to honour claims made outside the period of cover.

The primary legal issues in the case were whether the trustees of the Fidelity Fund were entitled to reject the claims brought by the owners corporation and whether the fidelity certificates issued under the Building Act 2004 (ACT) constituted contracts of insurance for the purposes of the Insurance Contracts Act 1984 (Cth). The owners corporation contended that the fidelity certificates were independent and standalone sources of legal rights and obligations, while the trustees argued that the relevant rights and obligations were to be found in the Building Act 2004 (ACT) and related instruments.

The court held that the fidelity certificates were not an independent or standalone source of legal rights and obligations. Instead, the relevant rights and obligations were to be found in the Building Act 2004 (ACT) and related instruments, including the Deed governing the Fidelity Fund. The court found that the trustees of the Fidelity Fund were entitled to reject the claims brought by the owners corporation as the claims were made outside the period of cover provided for under the trust deed and the legislation governing the fund. The court also held that the fidelity certificates did not constitute contracts of insurance for the purposes of the Insurance Contracts Act 1984 (Cth).

The amended originating application was dismissed, with the owners corporation ordered to pay the trustees' costs. The court held that the fidelity certificates were an important practical document within the framework of the Fidelity Fund Scheme, but they were not an independent or isolated source of enforceable legal rights and obligations. Instead, the relevant rights and obligations were to be found in the Building Act 2004 (ACT) and related instruments. The trustees of the Fidelity Fund were entitled to reject the claims brought by the owners corporation, as the claims were made outside the period of cover provided for under the trust deed and the legislation governing the fund.