Victorian Managed Insurance Authority v Roe & Ors
[2007] VSC 56
•13 March 2007
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
No. 5086 of 2006
| VICTORIAN MANAGED INSURANCE AUTHORITY | Plaintiff |
| and | |
| THOMAS R W ROE and SARAH M ROE | First and Second Defendants |
| and | |
| BURRANBOK PTY LTD t/as PETER J RUSSELL MASTER BUILDER | Third Defendant |
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JUDGE: | SMITH J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 26 February 2007 | |
DATE OF JUDGMENT: | 13 March 2007 | |
CASE MAY BE CITED AS: | VMIA v Roe and Anor | |
MEDIUM NEUTRAL CITATION: | [2007] VSC 56 | |
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Building - Domestic Building Indemnity Scheme – obligations of VMIA – whether and to what extent VMIA stands in the shoes of HIH – deemed acceptance of claim 90 days after lodgement – construction of s.37 House Contracts Guarantee Act 1987.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P Murdoch, QC and Mr S Stuckey | Sparkie Helmore Lawyers |
| For the First and Second Defendants | Mr P Duggan | Noble Lawyers |
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HIS HONOUR:
Background to appeal
On 25 January 2003, the first and second defendants, Mr and Mrs Roe, purchased a property situated at 42 Thomson Drive, Barwon Heads from the original owner's estate. It had been built by the third defendant in late 1999 and early 2000. The third defendant had taken out a policy of insurance, principally with HIH Casualty and General Insurance Ltd (HIH)[1], under the obligations imposed upon builders of domestic homes by a Ministerial Order made 30 October 1998 pursuant to s.135 Building Act 1993.
[1]10% of the cover was provided by CGU Insurance Ltd but it was common ground that that fact did not affect the determination of this matter.
In 2001, a statutory indemnity scheme was set up after a provisional liquidator was appointed to HIH. Legislation was enacted to add a new Part, “Part 6 – Domestic Building (HIH) Indemnity Scheme” to the House Contract Guarantee Act 1987 (the Act). Until 1 February 2006, House Guarantee Fund Limited (HGFL) was the responsible entity for the legislative scheme.
Mr and Mrs Roe became concerned about cracking on the facade of their new home and on 6 December 2004, lodged a claim under the statutory scheme with HGFL. They identified the following matters in their claim.
NO. DATE
(MONTH/YEAR)DESCRIPTION 1. June ‘03 Noticed general widespread cracking of external rendered house and garage facades 2
Nov ‘03
Observed cracking getting more severe and widespread
3
LATE ’03 or EARLY ‘04
Noticed a section of the external rendered well delaminated from the rear sub-structure
On 21 April 2005, HGFL wrote to Mr and Mrs Roe informing them that it rejected the claim. It identified the following grounds:
“We are writing to advise that your claim has been rejected on the following grounds:
1)The Building Commission’s guide to Standards and Tolerances state in section 3.6 that cracking of 1mm or less is not considered a defect in rendered surfaces.
2)Evidence provided by the original owner’s architect indicates that the previous owner was aware of cracking to the render at the time of settlement.
3)Correspondence between the builder and the owner’s architect confirms that the final contractual sum incorporated a deduction in costs in consideration of the cracking in the render.”
On 13 May 2005, Mr and Mrs Roe commenced proceedings at VCAT, pursuant to ss.60 and 61 of the Domestic Building Contracts Act 1994, to review the rejection of their claim by HGFL. Such a review is a merits review and VCAT is empowered to make such decisions it thinks fit.
From 1 February 2006, the plaintiff, Victorian Managed Insurance Authority (VMIA) took over the management[2] of the statutory indemnity scheme. By s.59 of the Act it was substituted for HGF in the proceedings.
[2]The company originally responsible for administering the scheme was the Housing Guarantee Fund Ltd (HGFL) as agent for the State.
On the first day of the hearing before VCAT, 2 February 2006, counsel for Mr and Mrs Roe argued, as a preliminary issue, that because HGFL, at the relevant time the agent of the State, did not reject their claim within 90 days of it being made, it should be deemed to have accepted the claim with the result that the review must be determined in favour of them. The 90 day requirement was contained in the insurance policy issue by HIH. This argument was accepted by the Tribunal.
On 3 February 2006, a Senior Member of VCAT ordered that:
“The ‘90 day’ deeming provisions in the relevant policy and Ministerial Orders are applicable to this proceeding.”
On 7 February 2006, the senior member made the following further orders:
“1.Decision of 1st respondent is set aside.
2.The 1st respondent is deemed to have accepted liability of the applicant’s claim made to the 1st respondent on 6 December 2004.
3.Matter remitted to 1st respondent to consider questions of damage and/or repairs.
4.Respondents pay applicants’ costs of the application from 7 November 2005 to this day inclusive, such costs to be taxed in default of agreement on County Court Scale ‘C’ …”
The appeal
VMIA appeals from this decision pursuant to s. 148 Victorian Civil and Administrative Tribunal Act 1998. VMIA obtained leave to appeal on 6 April 2006. In its notice of appeal it identified the following grounds of appeal and questions of law:
“Grounds of Appeal against Order 2 of the decision made on 3 February 2006
In respect of Order 2 of the decision dated 3 February 2006 the grounds of appeal are that;
1.The Senior Member erred in law and/or was wrong in determining that the ’90 day’ deeming provisions in the relevant policy and Ministerial Orders were applicable to the proceedings in the Victorian Civil and Administrative Tribunal; and
2.The Senior Member erred in law and/or was wrong in determining that the ’90 day’ deeming provisions in the relevant policy and Ministerial Orders were applicable to the VMIA in the course of its administration of the HIH Indemnity Scheme pursuant to Part 6 of the House Contracts Guarantee Act 1987.
Grounds of Appeal against the whole of the decision made on 7 February 2006
In respect of the whole of the decision dated 7 February 2006 the grounds of appeal are that;
1.The Senior Member erred in law and/or was wrong in determining to set aside the decision of the VMIA.
2.The Senior Member erred in law and/or was wrong in determining that the VMIA was deemed to have accepted liability of the defendants’ claim made to the VMIA on 6 December 2004.
3.The Senior Member erred in law and/or was wrong in remitting the matter to VMIA to consider questions of damage and/or repairs.
4.In the event that the Senior Member’s determination that the VMIA was deemed to have accepted liability of the defendants’ claim made to the VMIA on 6 December 2004 was correct, the Senior Member erred in law and/or was wrong in failing and refusing to determine the extent of the liability of the VMIA in accordance with the policy.
5.In the event that the Senior Member’s determination that the VMIA was deemed to have accepted liability of the defendants’ claim made to the VMIA ON 6 December 2004 was correct, the Senior Member erred in law and/or was wrong in remitting the matter to the VMIA to consider questions of damage and/or repairs but not the extent of liability under the policy.
Questions of law in respect of Order 2 of the decision dated 3 February 2006
In respect of Order 2 of the decision dated 3 February 2006 the questions of law upon which the appeal is brought are as follows;
1.Did the Tribunal err in law in determining that the deeming provision in the relevant policy and the relevant Ministerial Order applied to the VCAT proceedings?
2.Did the Tribunal err in law in determining that the deeming provision in the relevant policy and the relevant Ministerial Order applied to the VMIA in the course of its administration of the HIH Indemnity Scheme pursuant to Part 6 of the House Contracts Guarantee Act 1987?
3.Did the Tribunal err in law in determining that the words of s37(1) of the Act were sufficiently clear on their face to show all substantive liability of HIH in relation to Home Warranty Insurance in Victoria was bestowed upon VMIA without regarding the provisions of Part 6 of the Act?
4.Did the Tribunal err in law in failing to give sufficient consideration to the statutory framework of Part 6 of the House Contracts Guarantee Act 1987 (including s40) and the State’s obligation to provide an indemnity pursuant to s37 of the Act, in contrast to HIH’s obligation to provide an indemnity under the relevant policy of insurance?
5.Did the Tribunal err in law in finding that the VMIA was standing in the shoes of HIH save and except for procedural requirements and the matters referred to in ss38(3) and (4) of the Act?
Questions of law in respect of the whole of the decision dated 7 February 2006
In respect of the whole of the decision dated 7 February 2006 the questions of law upon which the appeal is brought are as follows;
1.Did the Tribunal err in law in determining to set aside the decision of the VMIA?
2.Did the Tribunal err in law in finding that the VMIA was deemed to have accepted liability of the applicant’s claim made to it on 6 December 2004?
3.Did the Tribunal err in law in determining to set aside the decision of the VMIA in the circumstances to consider questions of damage and/or repairs?
4.In the event that the Tribunal determined correctly that there had been deemed acceptance of liability under the policy of VMIA, was the Tribunal obliged at law to determine the extent of the VMIA’s liability under relevant policy?
5.In the event that the Tribunal determined correctly that there had been deemed acceptance of liability under the policy by VMIA, did the Tribunal fail and refuse to determine the extent of the VMIA’s liability under the policy?
6.In the event that the Tribunal determined correctly that there had been deemed acceptance of liability under the policy by VMIA, and in the event that it failed and refused to determine the extent of the VMIA’s liability under the policy, should the Tribunal have included in the orders that it made remitting the matter to the VMIA to consider questions of damage and/or repairs that the VMIA was to consider the extent of liability under the policy?”
The challenge to the decision is best encapsulated in the second ground relied upon to challenge each of the two decisions. Counsel for VMIA indicated that it no longer sought to challenge the decision made on 7 February 2006 to remit the preceding to VMIA; if VMIA’S challenge to the primary orders made on 3 and 7 February 2006 failed, it accepted that the proper course would be for the matter to be remitted to VMIA.
The statutory provisions
The statutory indemnity is conferred in Part 6 of the House Contract Guarantee Act 1987 by s.37(1). It provides:
"37. Indemnity
(1)Subject to this Part, the State must indemnify any person who is entitled to the indemnity under a HIH policy to the extent of the indemnity under that policy.
(2)Despite any provision of a HIH policy which limits the liability of HIH if it ceases to trade, a person is deemed for the purposes of this section to be entitled to an indemnity under a HIH policy if that person would have been entitled to that indemnity if HIH had not ceased to trade.”
An exception to this general provision is contained in section 38 (3) of that Act and is in the following terms:
"38(3) Section 37 does not apply to indemnify a loss if the indemnity for that loss under the HIH policy arises solely because --
(a)a claim for the loss has been made on the HIH policy on or after 16 December 2000; and
(b)a claim is deemed to have been accepted under the HIH policy because it was not dealt with by HIH within the period specified by the policy.”
That provision in turn is qualified by the following subsection:
"38(4)Nothing in subsection (3) prevents section 37 from applying to indemnify a loss to the extent that the loss is indemnified under the HIH policy otherwise than in the circumstances set out in subsection (3)."
The policy provision
The critical 90 day term in the policy between HIH and the original builder was as follows:
“6.7 … Unless otherwise agreed any claim submitted by the Building owner which has not been accepted by the Insurer giving the Building Owner written notice within 90 days of the receipt by the Insurer of a written Claim notification is deemed to be accepted.”
This clause was included to comply with the Ministerial Order published under ss.135 and 136 of the Building Act. Clause 8.5 of the Ministerial Order states:
“Where a written claim is not determined as to liability by the insurer within ninety (90 days of receipt then, unless the insurer obtains an extension of time from the insured or the Tribunal, the insurer shall be deemed to have accepted liability for the claim.”
I note that clause 8.1 states:
“Where a policy is issued in compliance with this Order and if any term of the policy conflicts or is inconsistent with this Order then the policy shall be read and be enforceable as if it complies with this Order.”
The Tribunal’s reasons
The Tribunal, after referring to the history behind the statutory scheme, referred to the policy of insurance and the critical clause. It also referred to clauses 8.1 and 8.5 of the relevant Ministerial Order. The Tribunal then formulated the question for determination:
“… whether the failure by the 1st respondent[3] to determine the claim within 90 days amounts to a deemed acceptance of the claim.”
[3]VMIA.
The Tribunal first referred to a decision by Dr Cremean, Deputy President, in Kleeven v Housing Guarantee Fund Ltd[4] which was adverse to the argument of Mr and Mrs Roe on the interpretation of s.37. The Tribunal commented that at the time of that decision, s.38 had not come into existence and, therefore, is not mentioned in the Deputy President’s reasons. The Tribunal referred to and rejected the argument advanced for VMIA that the 90 day provision in both the Ministerial Order and in the policy itself is no more than a procedure. It stated:
[4][2002] VCAT 380 (4 June 2002).
“13… For the reasons stated by the Deputy President, in my view, it is a substantive provision and is as much a part of the indemnity as the monetary liability.”
The Tribunal then stated:
“14.Section 37(1) of the Act states that the person is entitled to be indemnified to the extent of the indemnity under the policy. In my view, not only is the money sum part of the extent of the indemnity under the policy but also an advantage which an insured may have. That is, being able to make a claim and have it promptly dealt under s.37 of the Act. If s.37 of the Act was to be read in any other way, in my view, the claimants would have a lesser right than what they would have had under the policy. The deeming provision as a result of the time limit is part of the substantive right given by the policy.”
The Tribunal argued that the passing of the provisions of s.38 of the Act supported this view:
“[They] relate specifically to the provisions for where a claim had been made directly to HIH but the liquidator of HIH had not had time to process the claim before the 90 day period had expired. It was under these circumstances that s.38 of the Act came into being. The Minister, Ms Kosky, in her speech to Parliament in introducing this amendment on 1 November 2001, stated as follows:
Understandably such claims do not rank high on the liquidator’s current priorities as he will most probably not be making any payments to creditors for at least two years. It is quite likely therefore that the claim made direct to HIH will not be determined within 90 days of its receipt. Should the home owner subsequently lodge a claim with the HGFL the Act requires the State to provide the same indemnity that HIH does under the policy. However, if 90 days have elapsed since the claim was received by HIH, HIH may have been deemed to have accepted the claim and therefore to have provided an indemnity to the home owner. Consequently the State may also have automatically provided an indemnity before the merits of the claim have been established and in all likelihood before HGFL has even received the claim. To avoid any unnecessary cost to the taxpayer and a risk of litigation on purely technical points, the Bill provides that an indemnity from the State is not created solely through 90 days having elapsed since the claim was received by HIH.
15.If the Minister had intended the 90 day provision in the Ministerial Order and in the policy to which I have referred not to apply to the State through the auspices of HGFL, in my view, it is probable and quite likely that s.38 of the Act would have been worded in different terms and, indeed, her speech would have been worded in different terms. It was not. In my view, it is clear to me liability of HGFL, as its agent for the State Government, is incurred in relation to both indemnity and the 90 day deeming provision by the combined effect of the policy and/or Ministerial Orders and s.37 of the Act.”
The Tribunal then referred to and rejected the submission for VMIA that the State had not entered into any agreement and no cause of action arose against the State, save for those causes of action that arise under Part 6 of the Act.
“15.… In my view, Part 6 of the Act does in fact create this potential liability. Mr Forrest suggested that HGFL were not standing in the shoes of HIH. I do not agree with that submission. It stands in the shoes of HIH save and except for procedural requirements and save and except to that referred to in s.38(3) and (4) of the Act. I do not accept Mr Forrest’s submission that because there is no express provision in the Act that requires HGFL to determine the claim within 90 days that the deemed provision cannot apply. The words of s.37(1) of the Act, in my view, are sufficiently clear on their face to show all substantive liability of HIH in relation to Home Warrant Insurance in Victoria, is bestowed upon HGFL.”
The Tribunal then turned to an argument advanced for VMIA, based on what the Deputy President said in Kleeven’s case, that the 90 day provision did not apply in the circumstances of this case. The Tribunal referred to the Deputy President’s reasons in Kleeven where he set out his interpretation of s.37.
“16.It seems to me though that this right – described by Counsel as a right ‘sui generis’ – is one which is created solely by s.37. It does not derive its force out of anything done or not done by the Respondent. When the benefit of the rule can be claimed, that benefit occurs because HIH has failed to determine a claim within 90 days and has not sought or been granted an extension of that time. It is not a benefit that occurs because the Respondent itself has failed to determine a claim within 90 days. The 90 day rule arises out of what was the contract of insurance between HIH and the insured party. In this particular case, the Applicant and the Respondent clearly have not been in contractual relations. No bargaining process has ever taken place between them. Had one taken place, possibly a clause like that in clause 3.5.2 would have been included in their arrangements or possibly not.”
The Tribunal disagreed with this analysis. It argued that:
“17.… The various policies over the years that have been issued in relation to home warranty insurance have been issued not as a result of bargains which have been made or a bargaining process which has taken place between the building owner who gets the benefit of the policy and the insurer. Such policies come about by means of government action requiring the builder to take out such policy and not only does the government’s action require the builder to take out such policy, but the policy must, as a minimum, be in the terms of the Ministerial Order (see paragraph 9 hereof). As such, in my view, the Deputy President is mistaken when he refers to a bargaining position in the case which was before him. In my view, there was no bargaining position in the case which was before the Deputy President and there has been no bargaining position in this case. It is this policy that is largely created by legislation and by a Ministerial Order. Therefore, with respect, I will deviate from the view expressed by the learned Deputy President in that case.”
The Tribunal then reiterated its view:
“18.… s.37(1) of the Act does create an indemnity and as the section states a person ‘who is entitled to an indemnity under a HIH policy to the extent of the indemnity under that policy’, I disagree with Mr Forrest that the words ‘to the extent of the indemnity under that policy’ mean in fact that indemnity pursuant to the policy is limited to only the monetary sum. It extends to all substantive benefits which accrue under that policy and one of those benefits is prompt action which is something that the 90 day period is designed to give.”
Submissions of Mr and Mrs Roe
Before turning to the arguments advanced for VMIA, it is convenient to summarise and comment on arguments advanced on behalf of Mr and Mrs Roe.
Their counsel in substance adopted the analysis of the Tribunal. In particular, he pressed the submission that VMIA was standing in the shoes of the insurer, HIH. Counsel put that people in the position of Mr and Mrs Roe could only claim against HGFL and not against HIH. It was also put that the 90 day time limit was imposed by the Ministerial Order upon the insurers and that the construction of the clause in the policy was controlled by that Order. Whilst not expressly stated, I assume that it was sought by reference to the Ministerial Order to give the 90 day requirement some sort of general binding legal status. However, as pointed out by counsel for VMIA, the Ministerial Order was directed to requiring builders to purchase required “insurance of the kind and amount specified in the Order”.
In further support of the Tribunal’s reasons, counsel submitted that s.37(2) left open the possibility that the 90 day period could apply. That is so, but the issue remains – does the 90 day clause operate only where a claim was made on HIH and HIH failed to deal with it within 90 days or does it operate in a case like the present?
Counsel also referred to the Procedures that had been laid down for handling claims on the indemnity fund which referred to the 90 day period and argued that it lent support to the construction adopted by the Tribunal to the Act. It is true that the Procedures document refers to HGFL needing to process claims within 90 days but it states that the period “commences on the day a written claim is received by the insurer” and refers to the problem of “delay in HGFL becoming aware of the claim following the lodging of a written claim with the insurer”. Thus it addresses the problem of claims lodged with HIH under the policy and not claims lodged with HGFL under the Act.
Counsel also argued that the amendments that were made by s.38(3) and (4) and the statements in Hansard relating to them were all consistent with the 90 day rule applying to HGFL and consistent with the conclusion of VCAT. As to the s.38 amendments, they address the specific problem of a claim lodged with HIH and not processed by it within the 90 days in the six month period prior to liquidation. The passage from Hansard relied on by the Tribunal addresses the same issue. Neither sheds direct light on the operation of s.37 in the present circumstances.
It should be borne in mind that the reason for inclusion of s.38(3) and (4) was that it remained open under the legislation[5] to people such as Mr and Mrs Roe to lodge a claim with HIH while seeking an indemnity from HGFL and later VMIA. This was discussed by the Minister in the second reading speech, part of which is quoted above in the reasons of the Tribunal. That passage should be read with other passages in Hansard.[6] The Minister listed the problems addressed by the Bill. One problem identified was:
[5]Section 40 (3) of the Act.
[6]Hansard, Legislative Assembly 1 November 2001 1513, 1514.
“Precluding HGFL from being obliged to accept claims because they were lodged with HIH more than 90 days previously;”
A more detailed explanation followed:
“The ministerial orders provide that if a claim is received by the insurer and that claim has not been determined within 90 days of its receipt, the claim is deemed to be accepted. Generally this is an admirable provision that is designed to prevent insurance companies from delaying their handling of claims. However, this provision creates particular problems for the statutory indemnity scheme that is intended to provide social relief in aberrant circumstances.
As the scheme is voluntary, it remains possible for homeowners to lodge builders’ warranty claims directly with HIH …”
The Minister then continued in the terms quoted above in the reasons of the Tribunal.
As to the decision in Kleeven, counsel submitted that it was wrongly decided, as the Tribunal held.
Analysis
The idea that HGFL and subsequently VMIA should stand in the shoes of HIH is an attractive one and an initial reading of s.37(1) encourages the impression that that was the intent of that section. On the face of it there appears to be an intended symmetry between the State’s obligation through HGFL and VMIA to indemnify anyone entitled to indemnity under the insurance policy to “the extent of the indemnity under that policy”. I can understand the impression being formed that there was an intention to replicate the situation that existed prior to the collapse of HIH. The difficulty facing Mr and Mrs Roe, however, is that, in establishing Parliament’s intention, it is critical to consider the wording of the provision and construe it. In my view, the provision, properly construed, raises insurmountable problems for them. I refer, in particular, to the following points, points that were raised by counsel on behalf of VMIA.
1.The statute, in creating a right of indemnity against VMIA, did so by reference to the provisions of the policy and it was those provisions which determined whether Mr and Mrs Roe were entitled to an indemnity. The statute did not make VMIA an insurer - but merely obliged it to indemnify Mr and Mrs Roe in the circumstances defined by the provisions referred to above.
2.What s.37 required was that the person demonstrate that it was entitled to an indemnity under the policy before that person could establish a right to indemnity from the State through VMIA. The section did not purport to affect the circumstances in which an entitlement to indemnity under the policy itself arose. Unless there was such entitlement, however, the indemnity could not arise. Under the terms of the policy there were two ways in which an owner might become entitled to an indemnity. One was that the facts of the case entitled that person under the terms of the policy to be indemnified by it. The other way was where a claim had been made and HIH failed to determine it within 90 days. If that period was not extended, the policy deemed the claim on the policy to be accepted regardless of whether the owner would, otherwise, on the facts, be entitled to indemnity under the policy. This second way required a claim to be lodged with HIH and that HIH fail to deal with the claim within the 90 days spelt out in the policy. Here the claim was lodged with HGFL and it was HGFL, not HIH, who rejected the claim after the expiration of 90 days from the date when it was received.
3.Parliament could have drafted the provisions in such a way as to place VMIA as a substitute to the insurer under the policy. Instead, what it did was equate the indemnity under the Act to the extent of the indemnity given under the policy.
4.There was nothing in the legislation which substituted HGFL (or VMIA) for HIH in determining whether a person was entitled to an indemnity under a HIH policy. In fact there were contrary legislative indications:
·The statutory procedures laid down for dealing with claims for indemnity are dealt with in s.41. Such claims are there described as claims "under this Part", not under the policy.
·VMIA was not otherwise given rights under the policy by the Act. Specific provision was made in s.44 to empower VMIA to direct a builder to complete or rectify building works or require payments from a builder “to the extent that HIH would be able to do so”.[7]
·In the related legislation, Domestic Building Contracts Act 1995, amendments were made to permit appeals from decisions by VMIA to the Tribunal by defining the expression "insurer" to include VMIA.[8]
[7]Section 44(2), (3) and (4).
[8]Section 3, definition of insurer.
Thus, a literal construction of the provisions does not have the effect of incorporating the 90 day rule into the statutory indemnity procedure. Further, the history of the legislation and its amendment, and Hansard relating to it, also support the conclusion that Parliament amended the legislation on the basis of the interpretation that was proffered by Dr Cremean, an interpretation which in my view is correct and which is contrary to the interpretation adopted by the Tribunal in this case.
Counsel for Mr and Mrs Roe also submitted that there were policy concerns which supported the construction relied upon by them. Counsel submitted that a liberal construction was warranted in legislation of this kind. He also argued that it would be hypocritical to have a different regime applying in respect of claims for indemnity against HGFL or VMIA as opposed to those under the statutory insurance scheme. Counsel submitted that the provision of insurance was closely controlled and left little room for contractual negotiation. Counsel also submitted that there was as much need for ensuring expeditious handling of claims by HGFL and VMIA as there was for the handling of claims by insurance companies.
It seems to me that there are stronger policy reasons why the 90 day rule should not be applied to claims lodged under the statutory indemnity scheme with HGFL or VMIA. The scheme was designed to clean up the mess left by HIH and was using taxpayers’ money to protect those who had had insurance with HIH under a statutory scheme to protect homeowners. It made sense to have a 90 day rule apply where the relationship was a contractual one - it was a way of applying pressure upon the insurers to deal promptly with the claims. Further, in a contractual situation, insurers can factor in such requirements in determining what premiums to charge. Under the statutory scheme, however, the indemnifier is not in that position. In addition, where a claim for indemnity is to be made under legislation and to be funded by taxpayers, one would expect the emphasis to be placed on paying a fair and reasonable indemnity but only when a case was made out. In addition HGFL (and VMIA) would need time to examine and process the claims and would have to do so with little or no assistance from HIH and could easily fail to process claims within 90 days through no fault of their own. While obviously prompt handling of the claims is highly desirable, one can well understand those responsible for setting up the statutory indemnity scheme, and the Parliament, itself to be concerned that matters be determined on their merits and that there would be no artificiality or technicality in determining whether a claim should be met or not.
For the foregoing reasons, I have come to the conclusion that the Tribunal erred in holding that the 90 day provision applied in this case. The appeal should be allowed. I will invite submissions on appropriate orders.
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