Ali v Insurance Australia Limited

or tribunal: District Court of New South Wales Jurisdiction: Civil Citation: [2021] NSWDC 369 Date of Decision: 06 August 2021 Before: J Smith SC DCJ File Number(s): 2019/323518

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

HEADNOTE [This headnote is not to be read as part of the judgment] In June 2013, the appellant, Mukhtar Ali, took out a home and contents insurance policy with the respondent, Insurance Australia Ltd. On 10 October 2013, following a break-in at his Bonnyrigg Heights home on the previous day, Mr Ali made a claim under the policy, which the respondent denied on 20 May 2014. On 16 October 2019, Mr Ali commenced proceedings against the respondent in the District Court, seeking damages for failure to comply with the policy. The respondent, relying on s 14 of the Limitation Act 1969 (NSW), argued that Mr Ali's action was brought outside of the relevant six-year limitation period, and was therefore statute-barred. In so arguing, the respondent claimed that its liability under the policy arose on the occurrence of the claimed break-in (9 October 2013), and not the later date on which it denied cover (20 May 2014). The application of s 14 of the Limitation Act was heard as a separate question. On the primary judge's construction of the policy, the respondent's liability under the policy arose on the occurrence of the claimed break-in. It followed that Mr Ali's claim had been brought out of time, and the proceedings were dismissed. The primary issue on appeal was whether the primary judge erred in concluding that, on the proper construction of the policy, Mr Ali's cause of action accrued on the occurrence of the alleged break-in. Mr Ali also sought to challenge the primary judge's reliance on and application of the decision of this Court in Globe Church Incorporated v Allianz Australia Insurance Limited (2019) 99 NSWLR 470; [2019] NSWCA 27 ("Globe Church"). The Court (Mitchelmore JA, Ward P and Leeming JA agreeing), granting leave to appeal the decision of the primary judge but refusing leave to reconsider the correctness of the decision in Globe Church, held: As to the correctness of Globe Church: 1. Mr Ali's policy of insurance was drafted in distinctly different terms from the policy considered in Globe Church, such that the decision in Globe Church is not determinative of the construction of the present policy. There being no reason to reconsider that decision, leave to do so is refused: at [1], [2], [9]. Globe Church Incorporated v Allianz Australia Insurance Limited (2019) 99 NSWLR 470; [2019] NSWCA 27 distinguished. As to the construction of the policy: 1. Mr Ali's policy did not contain a clear contractual promise to the effect that the respondent was liable under the policy to indemnify an insured upon the occurrence of a listed event: at [1], [2], [51]-[52], [61]. The primary judge erred in finding that, where used in the policy, "cover" was interchangeable with "indemnity". A reasonable non-expert in insurance law would not have construed the policy in that manner: at [1], [2], [62], [77]. HDI Global Specialty SE v Wonkana No 3 Pty Ltd (2020) 104 NSWLR 634; [2020] NSWCA 296 applied. 1. The respondent's promise under the policy was to compensate a claimant for their loss following the process described in the Product Disclosure Statement ("PDS"). That obligation only arose upon the respondent's decision to accept or decline a claim: at [1], [2], [74]. In circumstances where the respondent had a choice as to the wording of the PDS, it could not rely on the plain English drafting as supporting the construction for which it contended: at [1], [2], [78].

Judgment

1. WARD P: I agree with Mitchelmore JA.
2. LEEMING JA: I agree with Mitchelmore JA.
3. MITCHELMORE JA: This application for leave to appeal concerns the proper construction of a policy of home and contents insurance that the applicant, Mr Mukhtar Ali, took out with the respondent, Insurance Australia Limited, in June 2013.
4. On 10 October 2013, the applicant made a claim under the policy, after an unknown person forced entry into his home at Bonnyrigg Heights on 9 October 2013, stole goods, and caused damage. On 20 May 2014, the respondent denied the claim.
5. On 16 October 2019, the applicant commenced proceedings against the respondent in the District Court, seeking damages for failure to comply with the policy. By way of defence, the respondent relied on s 14 of the Limitation Act 1969 (NSW), which relevantly provides: "(1) An action on any of the following causes of action is not maintainable if brought after the expiration of a limitation period of six years running from the date on which the cause of action first accrues to the plaintiff or to a person through whom the plaintiff claims - (a) a cause of action founded on contract (including quasi contract) not being a cause of action founded on a deed …"
6. The primary judge heard a separate question in relation to the application of s 14 of the Limitation Act. Resolution of the question turned upon "whether the defendant was liable under the policy on the occurrence of the claimed break in (9 October 2013) or only when it denied cover (20 May 2014)": at [5]. On the construction of the policy that his Honour adopted, the defendant (now respondent) was liable on the occurrence of the claimed break-in: at [27]. It followed that the applicant's cause of action was not maintainable due to the limitation period and the primary judge dismissed the proceedings on that basis.
7. The draft Notice of Appeal contains two grounds of challenge to the primary judge's decision. First, the applicant alleged that the primary judge's conclusion that the cause of action arose upon the happening of the break-in rested on a misconstruction of the policy. Second, and in the alternative, the applicant alleged that the primary judge erred in following and applying the decision of this Court in Globe Church Incorporated v Allianz Australia Insurance Limited (2019) 99 NSWLR 470; [2019] NSWCA 27 ("Globe Church"). As part of that ground, the applicant sought leave to argue that Globe Church was wrongly decided.

The policy of insurance: legislative framework

1. The policy in the present case comprised the following three documents: 1. the "2013-2014 Certificate of Insurance, Home Buildings and Contents Renewal" ("Certificate of Insurance"); 2. the "Home Insurance Buildings & Contents Product Disclosure Statement and Policy Booklet" ("the PDS"); and 3. the "Home Insurance Building & Contents Supplementary Product Disclosure Statement" ("Supplementary PDS").
2. Both the Certificate of Insurance and the PDS confirmed that upon the applicant's payment of the premium (or the first instalment thereof), those three documents constituted the contract between the applicant and the respondent.
3. It was common ground between the parties that the PDS contained the terms of the policy. There is a legislative background against which that document is to be understood. The relevant provisions are contained in Chapter 7 of the Corporations Act 2001 (Cth). Section 760A provides that the main object of Chapter 7 is to promote, inter alia, "confident and informed decision making by consumers of financial products and services while facilitating efficiency, flexibility and innovation in the provision of those products and services": s 760A(a). The financial products regulated in the Chapter include a "general insurance product", which is defined in s 764A(1)(d) to mean "a contract of insurance" (with a number of exceptions that are not presently relevant).
4. Section 1012B(3) of the Corporations Act requires a "regulated person" (defined in s 1011B to include, relevantly, the issuer of a financial product) to give a person a Product Disclosure Statement for a financial product if, inter alia, the regulated person offers to issue the financial product to the person and the financial product is, or is to be, issued to the person as a retail client. Section 1013C makes provision for the content of a Product Disclosure Statement. Relevantly for present purposes, s 1013C(1)(a)(i) stipulates that a Product Disclosure Statement must include the statements and information required by s 1013D, while s 1013C(3) stipulates that the information included in the Product Disclosure Statement "must be worded and presented in a clear, concise and effective manner".
5. Section 1013D(1) of the Corporations Act provides that a Product Disclosure Statement must include the statements for which the subsection makes provision, together with such of the information for which the subsection makes provision "as a person would reasonably require for the purposes of making a decision, as a retail client, whether to acquire the financial product". The information described in s 1013D(1) includes, in paragraphs (b) and (f): "(b) information about any significant benefits to which a holder of the product will or may become entitled, the circumstances in which and times at which those benefits will or may be provided, and the way in which those benefits will or may be provided; and … (f) information about any other significant characteristics or features of the product or of the rights, terms, conditions and obligations attaching to the product; …"

The decision of the primary judge

1. On 26 March 2021, the Judicial Registrar of the District Court ordered, by consent, that the following be determined as a separate question: "Whether the plaintiff's claim in these proceedings is barred by s 14 of the Limitation Act 1969 (NSW) as raised in Prayer 4 of the Further Amended Statement of Claim and paragraph 28 of the Defence to the Amended Statement of Claim, or any further or amended pleadings in relation to this question."
2. The primary judge noted that the PDS was "written in plain English and prepared for retail, rather than commercial purposes", and that there was a combination of high level and more specific statements in the document which needed to be read together: at [9]. At [10]-[16], his Honour identified a number of features of the PDS which he considered were relevant to the applicant's argument. I will come to the terms of the PDS in more detail, but for present purposes it is sufficient to note that the passages that were of significance to his Honour included the following: 1. the following explanation of the "Insurance Cover": "Your policy is made up of cover for your home and cover for your contents. The insurance cover we provide under your policy depends on: … the listed events you're covered for and any other cover that applies…"; 1. the following statement under the heading "Listed events", with the words in bold emphasised by his Honour: "We cover your home or contents when certain things happen - for example, fire, theft, storm and earthquake. … You can make a claim if a listed event you are covered for takes place and causes loss or damage to your home or contents during the policy period. …" 1. the statement, under the heading "Paying your premium", that "In return for paying your premium, we provide the cover you have chosen"; 2. what his Honour described as "the critical paragraph", in Section 3 of the document, which relevantly provided: "We cover your home or contents when certain things happen. These are known as 'listed events'. You can make a claim if a listed event takes place and causes loss or damage to your home or contents during the policy period. In this section, we tell you what events you're covered for and any specific exclusions and conditions that apply to the event. General exclusions may also apply - see Section 5. Also, if you don't meet your responsibilities when you make a claim you may put your claim or cover at risk - see page 55. How we settle a claim is set out in Section 6." 1. Section 6, which dealt with claims, explaining "what happens when you make a claim" and including, under the heading "What we pay for - Contents Insurance", the following statement: "If we agree to cover your claim under Contents Insurance, then we will: - pay the cost to repair or replace your contents (whichever is lower) - pay for any extra costs we cover under 'other cover' - see below."

General principles of construction

1. The applicable principles were not in dispute and were summarised in HDI Global Specialty SE v Wonkana No 3 Pty Ltd (2020) 104 NSWLR 634; [2020] NSWCA 296 ("Wonkana"), which concerned policies of insurance for business interruption. Meagher JA and Ball J addressed the principles at [18]-[31], as did Hammerschlag J at [114]-[118]. As with any written contract, the task for the Court is to determine the intention of the parties as expressed in the words in which they have recorded their agreement: Wonkana at [18]. That task is to be approached objectively, ascertaining the meaning of words "by reference to what a reasonable person would have understood the language of the contract to convey": at [19], citing Toll (FCGT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52 at [40]; Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35].
2. It is necessary to construe the language of a contract according to its natural and ordinary meaning, having regard to "the circumstances which the document addresses, and the objects which it is intended to secure": Wonkana at [22]-[23]. Specifically in relation to policies of insurance, Meagher JA and Ball J stated that "[w]here the written contract evidences the terms on which a financial product or service is offered for acquisition, the meaning of its language is to be construed from the perspective of a reasonable person in the position of the offeree, in this case the prospective insured": at [21]. Their Honours referred in this context to the judgment of the plurality in Australian Casualty Co Ltd v Federico (1986) 160 CLR 513; [1986] HCA 32, which concerned a sickness and accident policy. Noting that the policy in that case was "a standard document used by Australian Casualty in the course of its insurance business", which was offered "to ordinary working people … who are unlikely to have the advantage of the advice of a commercial lawyer when they purchase [it]", the plurality identified the starting point as being (at 525): "… what the words of the policy convey, as a matter of contemporary language read in the context of the whole policy, to a reasonable non-expert in this country."
3. The insurance policy at issue in Globe Church was an Industrial Special Risks Insurance Policy: at [2]. In circumstances where the insurer pleaded the Limitation Act in defence of Globe Church's cause of action for breach of the policy, the issue was whether the policy contained a promise to indemnify, and, if so, whether the principal loss against which the insured was to be held harmless arose "on the occurrence of the property damage in question": at [9]-[10], [122]. The clauses of the policy in issue included cl 2, which relevantly read: "Provided the Insured has paid or agreed to pay the premium, the Insurer will indemnify the Insured against Damage occurring to Property Insured during the Period of Insurance and shall provide the additional cover referred to in Clause 3 up to the value of the Limit(s) and Sub-Limit(s) of Liability referred to in the Schedule, but subject to: … 2.2 the Limit(s) and Sub-Limit(s) referred to in the Schedule; 2.3 the amount of the indemnity being calculated in accordance with the Basis of Settlement Clause 4; … 2.6 the application of any Deductible referred to in the Policy Wording and the Schedule; and 2.7 the Conditions set out in Clauses 7 and 14." [Emphasis added.]

Construction of the PDS

1. The first two pages of the PDS, before the Table of Contents, contained a diagram titled "Home Insurance at a glance - a quick summary", which identified a number of features of the policy developed in the PDS:

2. It is apparent from the content of the diagram that the word "cover" was deployed in various senses. That said, the word was used consistently to explain the scope and content of the insurance with which the PDS was concerned. So much is confirmed by a review of the Table of Contents, the headings in which include "Your insurance cover", "Buildings and contents we insure", "What you're covered for", and "Optional cover you can add to your policy".
3. Section 1, titled "Key details about your policy", provided more detail around the framework in the diagram. The first subsection addressed "Who's covered by the policy" (emphasis added), stating that the policy "covers" the insured and the family who normally lives with the insured at the insured's home. In this context, and as the applicant submitted, "cover" is used descriptively, to convey who falls within the scope of the policy. In the following segment of text, under the heading "Your insurance cover", the word "cover" is used interchangeably with (and, in the heading, in combination with), "insurance". Thus, the PDS stated: "Your policy is made up of cover for your home and cover for your contents. The insurance cover we provide under your policy depends on: the type of insurance you choose the level of cover you choose the amount of insurance you choose the listed events you're covered for and any other cover that applies, and any optional cover you add to your policy." [Emphasis added.]
4. It is pertinent here to observe, as did Senior Counsel for the applicant, that the meanings of "cover" in the Macquarie Dictionary include "to insure against risk: covered by a comprehensive policy" and "insurance - coverage". The word "coverage" is defined separately to mean, inter alia, "the total extent of risk, or the total number of risks, as fire, accident etc covered in a policy of insurance".
5. The primary judge referred expressly to the passage from the PDS that I extracted above, but appears to have focused on the use of language and not considered the passage as a whole. Specifically, the passage highlighted that the nature and extent of insurance under the policy was subject to the choices that an insured made. Consistently with the legislative requirements, the PDS needed to address each of those choices notwithstanding that they would not all be applicable to an individual insured. Thus, for example: 1. Under the heading "Type of insurance", the PDS identified what each of Building and Contents Insurance, Buildings Insurance and Contents Insurance "covers". 2. Similarly, under "Level of cover", the PDS stated that it provided "two levels of cover for your home" and referred the policyholder to the Certificate of Insurance for "the level of cover you have chosen". The "Home" level was described as providing "our standard level of cover", while "Home Plus" provided "a higher level of cover - so you get our standard cover plus more". The accompanying Table 1.1 set out in more detail the differences between the Home and Home Plus levels, by reference to "Cover we give you". That table listed the provisioning made for various events and/or things under the two available levels of cover (Home or Home Plus). In relation to "spoiled food and prescription medicine", for example, up to $500 was available under the Home level of cover, while up to $2,000 was available under the Home Plus level. 3. Under the heading "Sum insured", the PDS referred to the Certificate of Insurance as showing "the amount of insurance you have under your policy", by reference to the "Buildings sum insured" and the "Contents sum insured". These sums were explained, in turn, as "the amount of insurance you choose to cover" the home and/or its contents (emphasis added).

Conclusion

1. As a result of the primary judge's answer to the separate question, the proceedings were dismissed. Given the different view to which I have come, the dismissal should be reversed.
2. I would propose the following orders: 1. Grant leave to appeal. 2. Order that the applicant file a notice of appeal in accordance with the draft Notice of Appeal within 7 days. 3. Appeal allowed. 4. Answer the separate question, ordered by consent in the District Court on 25 March 2021: "The plaintiff's claim in these proceedings is not barred by s 14 of the Limitation Act 1969 (NSW) as raised in Prayer 4 of the Further Amended Statement of Claim and paragraph 28 of the Defence to the Amended Statement of Claim, or any further or amended pleadings in relation to this question." 5. Set aside the order of the District Court dated 22 September 2021, dismissing the applicant's claim and awarding costs to the respondent and in lieu thereof order that paragraph 29 of the Defence to the Further Amended Statement of Claim be struck out under rule 14.28 of the Uniform Civil Procedure Rules 2005 (NSW). 6. Remit the proceedings to the District Court for determination. 7. The respondent pay the appellant's costs of the appeal and the costs below of the determination of the separate question.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 08 September 2022