Colonial Range v CES-Queen [2016] VSCA 328

STATUTORY INTERPRETATION - Section 93(1)(a) of the Building Act 1993 - Meaning of 'insurance ... against damage by the proposed protection work to the adjoining property' - Whether insurance on which adjoining owners can themselves claim is required.

INSURANCE - Insurance contracts - Construction - Whether contract of insurance with endorsement satisfied Building Act 1993 s 93(1).

INSURANCE - General indemnity insurance - Distinction between property damage insurance and liability insurance.

PRACTICE AND PROCEDURE - Arguments raised for first time on appeal - Whether party should be permitted to rely on argument.

1 The applicant, Colonial Range Pty Ltd ('Colonial'), applies for leave to appeal against a decision of the trial judge that the plaintiff's Amended Originating Motion be dismissed.

2 The relevant background facts can be stated as follows:

(a) The first respondent, CES-Queen (Vic) Pty Ltd ('CES-Queen'), is the registered proprietor of 150 Queen Street, Melbourne. It proposes to demolish the existing 13 storey building on the site and replace it with a 71 storey residential tower to be known as 'Tower Melbourne'.

(b) The second respondent, Delta Pty Ltd ('Delta'), has been retained by CES-Queen to perform the demolition work.

(c) Colonial is the registered proprietor of two properties adjoining 150 Queen Street, being the properties at 140 Queen Street and 21-27 McKillop Street. It is common ground that these properties are 'adjoining properties' to 150 Queen Street within the meaning of the Building Act 1993 ('the Act').[1]

(d) CES-Queen is required by Part 6 of the Building Regulations 2006 to carry out protection work in respect of Colonial's properties, as adjoining properties, before commencing demolition of the existing building at 150 Queen Street.

(e) Part 7 of the Act provides for an owner to serve a notice of proposed protection works on an adjoining owner; and for the resolution of disagreements about proposed protection works. After Colonial gave a notice under s 85(1)(b) of the Act disagreeing with CES-Queen's proposed protection work, on 4 May 2015 the relevant building surveyor, Mr Ari Akritidis, issued a Protection Works Determination pursuant to s 87 of the Act.

(f) Pursuant to s 141 of the Act, Colonial appealed to the Building Appeals Board against the determination of the building surveyor. On 28 April 2016, the Building Appeals Board affirmed the determination of the building surveyor.

3 Pursuant to s 93 of the Act (which is set out below), before any protection work can be commenced, CES-Queen must ensure there is a contract of insurance in force against:

(a) damage by the proposed protection work to the adjoining property; and

(b) any liabilities likely to be incurred to adjoining occupiers and members of the public during the carrying out of the building work and for a period of 12 months after that building work is completed;

and must lodge a copy of that contract of insurance with Colonial.

4 On 7 April 2016, CES-Queen provided Colonial with a certificate of currency and a copy of General Third Party Liability Insurance Policy No B0621CDELT000115 ('the Contract of Insurance'). The named insured was CES-Queen's demolition contractor, Delta. The schedule contained an expanded definition of the 'insured'.

5 By letter dated 12 April 2016 to the solicitors for CES-Queen, the solicitors for Colonial asserted that the Contract of Insurance was not in accordance with s 93(1) of the Act and set out the grounds for that assertion.

6 By email dated 2 July 2016 to Colonial, CES-Queen attached what it described as 'documentation ... being the Contract of Insurance lodged in respect of Section 93 of the Act'. That documentation was a copy of the Contract of Insurance and a copy of a document entitled 'Contract Endorsement 01' dated 21 June 2016 ('the Contract Endorsement'). The email stated that CES-Queen proposed to commence the protection work during the week starting 8 August 2016 and invited Colonial to advise it of any dispute so that the matter could then be referred to the Building Appeals Board.

It is noted and agreed that this Policy is amended insofar as follows in respect of the 150 Queen Street demolition contract:

1. CES-Queen is included as an Additional Insured for its rights and interests
2. any term of this Policy which is in conflict with Section 93 of the Building Act 1933 [sic] (Vic) (Act) is hereby amended to conform to such Section 93

3 Definition 3, 'Property Damage' shall read:

(a) physical injury to or destruction or loss of tangible property which occurs during the Policy Period and any loss of use of that property resulting therefrom; or

(b) loss of use of tangible property which has not been physically injured or destroyed or lost which is caused by physical injury to or destruction or loss of other tangible property, trespass, nuisance or wrongful interference with the enjoyment of rights over tangible property which occurs during the Policy Period.

1. the attached Protection Works Endorsement shall apply in respect of the owners of property adjoining 150 Queen Street.

All other terms and conditions remain unchanged.

8 The Protection Works Endorsement, which is referred to in cl 4 of the Contract Endorsement, defines 'Adjoining Owner', 'Adjoining Property', 'Owner' and 'Protection Works' substantially in accordance with the definitions under the Act and provides as follows:

Protection Works Endorsement

Attaching to and forming part of Policy Number: B0621CDELT000116

... [Definitions]

The Indemnity

During the Policy Period and for a period of twelve months after the expiry of the Policy Period, this Policy indemnifies:

Damage to the Adjoining Property caused by the proposed Protection Works and any legal liabilities incurred to the Adjoining Property occupiers and members of the public, but only if the Owner has complied in every respect with the Protection Works requirements.

All other terms and conditions remain unchanged.

9 By letter dated 13 July 2016 to CES-Queen's solicitors, the solicitors for Colonial identified alleged shortcomings in the Contract of Insurance and endorsements; and stated it was Colonial's intention to file proceedings to 'determine the issues in question'.

10 On 13 July 2016, Colonial commenced this proceeding by filing an Originating Motion seeking a declaration that the Contract of Insurance and endorsements was not a contract of insurance as required by s 93 of the Act, and seeking injunctive relief preventing CES-Queen from commencing the protection work on Colonial's properties until an appropriate contract of insurance was in force in accordance with s 93 of the Act.

11 On 21 July 2016, the Protection Works Endorsement was amended by the deletion of the proviso (being the words deleted below), so that the endorsement now reads:

The Indemnity

During the Policy Period and for a period of twelve months after the expiry of the Policy Period, this Policy indemnifies:

Damage to the Adjoining Property caused by the proposed Protection Works and any legal liabilities incurred to the Adjoining Property occupiers and members of the public [, but only if the Owner has complied in every respect with the Protection Works requirements].

All other terms and conditions remain unchanged.

12 We will refer to the Contract of Insurance as endorsed by the Contract Endorsement and the Protection Works Endorsement (as amended) as the 'Contract of Insurance as endorsed'.

13 On 27 July 2016, leave was granted to Colonial to amend the Originating Motion filed 13 July 2016 so that the relief sought related to the Contract of Insurance as endorsed.

14 Section 3 of the Act includes the following definitions:

adjoining property means land (including any street, highway, lane, footway, square, alley and right of way) which is so situated in relation to the site on which building work is to be carried out as to be at risk of significant damage from the building work;

protection work means -

(a) permanent or temporary work of -

(i) underpinning, including the provision of vertical support, lateral support, protection against variation in earth pressures, provision of ground anchors and other support for adjoining property; or

(ii) shoring up of adjoining property; or

(iii) overhead protection for adjoining property; or

(iv) other work designed to maintain the stability of adjoining property or to protect adjoining property from damage from building work; or

(b) any work or use of equipment necessary for the provision, maintenance and removal of work referred to in paragraph (a) -

whether or not the work or equipment is carried out or used on, over, under or in the air space above the land on which the building work is or is to be carried out or the adjoining property.

Owner to arrange insurance cover

(1) Before any protection work is commenced in respect of an adjoining property, an owner must ensure that a contract of insurance is in force, in accordance with this section, against -

(a) damage by the proposed protection work to the adjoining property; and

(b) any liabilities likely to be incurred to adjoining occupiers and members of the public during the carrying out of the building work and for a period of 12 months after that building work is completed.

(2) The contract of insurance must be entered into with an insurer and for an amount -

(a) agreed to by the owner and the adjoining owner; or

(b) in the event of a dispute, determined by the Building Appeals Board under Part 10.

(3) The owner must lodge a copy of the contract of insurance with the adjoining owner before the commencement of the protection work.

(4) The owner must ensure that the contract of insurance is renewed or extended as often as may be necessary during the carrying out of the building work and for 12 months after that work is completed.

(5) The owner must lodge a copy of a document evidencing the renewal or extension of the contract of insurance with the adjoining owner as soon as it is practicable to do so after the renewal or extension.[2]

An owner must compensate an adjoining owner or adjoining occupier for inconvenience, loss or damage suffered by the adjoining owner or adjoining occupier in connection with the carrying out of protection work under this Part.

Nothing in this Part relieves an owner from any liability to which the owner would otherwise be subject for injury to the adjoining owner or adjoining occupier because of the protection work carried out by the owner under this Part.

If an owner and an adjoining owner cannot agree about the nature of cover to be provided under a proposed contract of insurance under section 93 or about the amount to be insured under that contract, either of them may refer the matter to the Building Appeals Board.

The Building Appeals Board must consider and determine a matter referred or application made to it under this Act or any other Act and may make any order that it considers appropriate in the circumstances.

20 Certain provisions of the Insurance Contracts Act 1984 (Cth) are also relevant. Section 48 of that Act provides:

Contracts of general insurance - entitlements of third party beneficiaries

(1) A third party beneficiary under a contract of general insurance has a right to recover from the insurer, in accordance with the contract, the amount of any loss suffered by the third party beneficiary even though the third party beneficiary is not a party to the contract.

(2) Subject to the contract, the third party beneficiary:

(a) has, in relation to the third party beneficiary's claim, the same obligations to the insurer as the third party beneficiary would have if the third party beneficiary were the insured; and

(b) may discharge the insured's obligations in relation to the loss.

(3) The insurer has the same defences to an action under this section as the insurer would have in an action by the insured, including, but not limited to, defences relating to the conduct of the insured (whether the conduct occurred before or after the contract was entered into).

21 A third party beneficiary is defined in s 11 of the Insurance Contracts Act as follows:

"third party beneficiary", under a contract of insurance, means a person who is not a party to the contract but is specified or referred to in the contract, whether by name or otherwise, as a person to whom the benefit of the insurance cover provided by the contract extends.

22 Section 20 of the Insurance Contracts Act provides that an insurer is not relieved of liability by reason only that the names of persons who may benefit under the contract are not specified in the policy document.

23 The legislative history of s 93 of the Act may be summarised as follows:

(a) Its current form is the result of an amendment in 2001,[3] prior to which it provided:

Before commencing any protection work in respect of an adjoining property, an owner must enter into a contract of insurance, in accordance with this section, against damage by the proposed protection work to the adjoining property and against any liabilities likely to be incurred to adjoining occupiers and members of the public during the carrying out of the building work and for a period of 12 months after that building work is completed.

(b) The changes as a result of the 2001 amendment were as follows:

(i) Under the former section, the owner had been required to 'enter into a contract of insurance'; under the amended section, it was required to 'ensure that a contract of insurance is in force'.

(ii) The two requirements for insurance were put into separate sub-paragraphs.

(c) Prior to the enactment of the Act in 1993, building construction in Victoria was primarily regulated by the Building Control Act 1981; and s 154 of that Act imposed an obligation on an owner with respect to insurance prior to the commencement of protection works that was substantially identical to s 93 of the Act prior to its amendment in 2001.

(d) Prior to the enactment of the Building Control Act 1981; s 948 of the Local Government Act 1958[4] imposed a substantially identical obligation on an owner with respect to insurance prior to the commencement of (what was then described as) underpinning.[5]

24 The second reading speeches,[6] and the explanatory memorandum,[7] in relation to the 2001 amending Bill do not refer to the changes made to s 93. In the course of debate the Opposition spokesman on the Bill[8] explained the changes made to s 93 by cl 7 of the amending legislation, which the Opposition supported, in the following terms:[9]

The current Act provides that an owner must take out a contract of insurance in regard to protection works - in other words, the owner has had the obligation to take out an insurance contract. That has created some problems in that an owner is then legally obliged to take out a contract of insurance. Even though an insurance contract may have been put in place by the owner's builder, there is an obligation under the law to do something slightly different. In reality and in practice what happens is that the builder takes out a contract of insurance and that stands for the owner.

Clause 7 basically picks up that anomaly and amends the provision to reflect current practice. It does so by deleting the words 'take out' and replacing them with the words 'must ensure that'. That is a reasonable adjustment, and the Opposition does not have any problem with it. I am sure the insurance industry would not either, and nor would the building industry.

25 In the hearing before us, CES-Queen asserted that this was the explanation for the changes made to s 93 in 2001. Colonial accepted that explanation but submitted that the separation of the two insurance requirements into separate paragraphs was also significant as it indicated that what was being dealt with was two distinct classes of insurance.

26 On 5 August 2016, the trial judge held that the Contract of Insurance as endorsed complied with the requirements of s 93(1)(a) and (b) of the Act; and dismissed the plaintiff's Amended Originating Motion.

27 Relevantly, for the purposes of this appeal, the trial judge's reasons were as follows:

(a) Section 93 of the Act required that the owner procure insurance to cover physical damage to the adjoining building and liabilities likely to be incurred to adjoining occupiers and members of the public. His Honour found no basis for an inference that the legislature intended that these would be two different types of insurances. He stated:[10]

Neither the express language of that section, or any other sections of the Act, nor in my view the context asserted by the plaintiff, nor any principle of interpretation supports such an implication.

(b) His Honour found that s 93 of the Act did not expressly or implicitly require the owner to effect what the judge called 'first party liability insurance'.[11] The expression 'first party liability insurance' was one which had been used by Colonial's solicitors in correspondence and was one used in Colonial's submissions. The expression was inapt given that, as will be seen, Colonial, in effect, bases its case on a distinction to be drawn between liability insurance on the one hand and property insurance on the other. What was meant by the expression 'first party liability insurance' in the context in which it was used by Colonial, and adopted by the trial judge, was insurance under which the adjoining owner was itself able to claim on the insurer either as a named insured or on some other basis.

(c) The Contract of Insurance as endorsed effected 'what the parties to that policy intended to achieve',[12] being 'the Insured' was indemnified 'in respect of their legal liability for third party injury and/or property damage claims arising out of or in connection with their activities'.[13] As a result, the Contract of Insurance as endorsed satisfied the requirements of s 93 of the Act.[14]

(d) His Honour considered that cl 2 of the Contract Endorsement was 'likely to remove any possible conflict between arguable limitations arising from any of the policy wording by referring to the nature and extent of cover required by s 93(1) of the Act'.[15]

(e) His Honour rejected the contention that the compensation provision in s 98 and the provision preserving the common law in s 99 altered the intent or operation of s 93.[16]

28 His Honour considered another decision of the trial division of this Court addressing s 93, being You v Thomas.[17] In that case, McMillan J had said that s 93(1)(a) required that the adjoining owner be itself insured, although it was not necessary for the adjoining owner to be a named insured. McMillan J said it was sufficient if the adjoining owner could itself claim under the policy as a third party beneficiary, that is a person specified or referred to in the insurance contract as a person to whom cover extended, as provided for by s 48 of the Insurance Contracts Act.

29 The trial judge did not adopt McMillan J's approach. He observed that McMillan J had determined that the Building Appeals Board in that case had erred in law on a number of different bases;[18] that McMillan J had focused upon the Board's erroneous reliance upon the fact that the adjoining owner there had not been named as an insured; and that the relevant statements McMillan J had made in her judgment as to the type of insurance contemplated under s 93 were 'peripheral observations'.[19]

30 By Application for Leave to Appeal dated 2 September 2016, Colonial seeks leave to appeal against the decision of the trial judge and proposes the following grounds of appeal:

6.1 The trial judge at paragraph [75] erred in finding that the contract of insurance (policy No. B0621CDELTOOO115) read together with the Endorsement to the policy (the Contract of Insurance) satisfies the requirements of section 93(1) of the Building Act 1993 (Vic) but ought to have found that the Contract of Insurance did not comply with section 93(1).

6.2 The trial judge at paragraph [71] erred in finding that section 93 does not specify the type of insurance policy required to effectuate cover under section 93(1) of the Act.

6.3 The trial judge at paragraph [74] erred in finding that the language of section 93 of the Act appears to convey the intent of the legislature that effective insurance of whatever nature is required to be procured by the owner in respect of the types of damage specified in sub-sections 93(1)(a) and 93(1)(b).

6.4 The trial judge at paragraph [76] erred in finding that the Contract of Insurance is likely to respond to any claim of the type required to be insured by section 93 of the Act.

6.5 The trial judge at paragraphs [84] and [85] erred in finding that clause 2 of the Endorsement to the policy operates to remove arguable limitations to cover and liability contained in the Contract of Insurance and therefore the Contract of Insurance is likely to achieve compliance with section 93 of the Act.

6.6 The trial judge erred in finding that the owner had complied with section 93(1) by providing a contract of insurance that is likely to insure against any claim of the type required to be insured by section 93 of the Act (see paragraphs 77, 79, 84, 85 and 86) in circumstances where section 93(1) of the Act stipulates that a contract of insurance be in force in accordance with that section. The likelihood that the contract of insurance is in accordance with section 93(1) of the Act is insufficient.

31 By a Notice of Contention dated 29 September 2016, CES-Queen contends that the trial judge's decision should be affirmed on the following ground:

The judge incorrectly held that the compensation provisions in s 98 of the Building Act 1993 (Vic) (the Act) do not directly or indirectly alter the intent and operation of s 93 of the Act: [2016] VSC 494 at [91].

The judge ought to have held that s 98 of the Act is a counterpart provision to s 93 of the Act and in particular, that s 93(1) of the Act is the mechanism by which a claim for compensation made under s 98 of the Act can be satisfied.

32 By a Notice of Contention of the same date, Delta contends that the trial judge's decision should be affirmed on the following ground:

The Contract of Insurance, together with the Endorsement ... was a 'contract of insurance' that satisfied the requirements of s 93(1) of the Building Act 1993 (Vic) because:

(a) By reason of clause 4 of the Endorsement, the Applicant (as an 'owner of property adjoining 150 Queen Street') was a person to whom the benefit of the insurance cover provided by the Contract of Insurance extended for the purposes of ss 20 and 48 of the Insurance Contracts Act 1984 (Cth);

(b) By reason of the words appearing under the heading 'The Indemnity' in the Protection Works Endorsement forming part of the Endorsement, the Contract of Insurance provided indemnity against the risks required by s 93(1).

33 Colonial contends that s 93(1) requires that the owner must ensure that the adjoining property is covered by a policy in respect of which Colonial is entitled to directly claim under the policy as a named insured or as a third party beneficiary under s 48 of the Insurance Contracts Act. This is what it called a 'first party liability policy'. It would be more aptly called a 'first party indemnity policy'. We will henceforth use the latter expression.

(a) The subject matter of the first limb of the insurance requirement in s 93 is to cover adjoining properties in clear distinction to the second limb which requires cover against liabilities.

(b) Prior to the amendment of the Act in 2001, s 93 required the owner to enter into a contract of insurance but it now requires the owner to 'ensure that a contract of insurance is in force'. This manifests a legislative intention that it is not just the owner but other persons who are to be insured. Reliance was also placed upon the fact that s 93(1) of the Act, as amended, placed the two categories of insurance in separate paragraphs.

(c) Part 7 of the Act is intended to provide protection to adjoining owners; and a first party indemnity policy would give better protection against the risk of significant damage to the adjoining building.

(d) The interpretation contended for by Colonial is supported by the decision of McMillan J in You v Thomas.[20]

(e) The argument that indemnity property insurance would require numerous unknown persons with an interest in the adjoining property to be insured should be rejected because such persons could be identified by class.

(f) The trial judge correctly concluded that s 98 (and the common law preservation provisions in s 99) did not affect the interpretation of s 93.

35 Colonial contends that the trial judge had erred in finding that the Contract of Insurance as endorsed complied with s 93(1) of the Act because that contract is a 'third party liability policy', with CES-Queen and Delta as the named insureds. The endorsements were said not to remedy the position because:

(a) Clause 2 of the Contract Endorsement, which provides that 'any term of this Policy which is in conflict with Section 93 of the Building Act 1933 [sic] is hereby amended to conform to such Section 93', is meaningless and unenforceable as, on recognition of a conflict, there is no explanation as to how the conflicting term is to be amended.[21]

(b) By applying a 'balance of probabilities' test to determine whether the Contract of Insurance as endorsed was compliant with s 93(1) of the Act, the trial judge misconstrued s 93(1). The owner must ensure the requisite cover is in place, not that it is 'likely' to be in place.

36 CES-Queen submitted that the trial judge was correct in holding that s 93(1)(a) of the Act does not require the owner to ensure a first party indemnity policy is in force for the following reasons.

(a) There was no indication in s 93(1)(a) that the property damage cover must be in the name of, or otherwise insure directly, the adjoining owner.

(b) The legislative purpose for the amendment was only to avoid an owner having to enter into a contract of insurance where the builder had already arranged insurance cover.

(c) If the owner was required to ensure there was cover directly on the adjoining property, the adjoining owner would become a party to the contract of insurance (either as a named insured or a named beneficiary) which would require an unworkable level of co-operation, authority and control.

(d) The trial judge correctly accepted that, on Colonial's construction:

It would also probably be necessary to name all relevant 'adjoining occupiers', 'members of the public' and other difficult to ascertain persons in the relevant classes, including those with any insurable interest in the adjoining property, for example such as any mortgagee of such property, as insured and co-insured parties.[22]

(e) The Act contains no mechanism to resolve the myriad of disputes that may arise if s 93(1)(a) requires a first party indemnity policy in the name of the adjoining owner.

(f) The decision in You v Thomas[23] was in respect of the ability of an adjoining owner, as a matter of practicality rather than legal entitlement, to receive the benefit of the contract of insurance directed at damage caused to its property by protection works.

(g) Section 93(1) should be understood as providing for the means by which a claim made by an adjoining owner under s 98 would be satisfied.

37 CES-Queen contended that the Contract of Insurance as endorsed complied with s 93(1)(a) for the following reasons:

(a) The indemnity included in the Protection Works Endorsement adopted the language of the section itself and provides for cover against 'damage to the Adjoining Property caused by the proposed Protection Works'.

(b) Clause 2 of the Contract Endorsement is not uncertain. It provides that, if there is a provision of the insurance contract that conflicts with the extent of cover required by s 93(1) of the Act, then the cover provided under the Act will take precedence.

38 In oral submissions, counsel for CES-Queen told the Court that, if, contrary to its primary contention, s 93(1)(a) required a first party indemnity policy, CES-Queen adopted Delta's submissions in support of its Notice of Contention that the Contract of Insurance as endorsed included such a first party indemnity policy.

39 CES-Queen submitted that the trial judge did not misconstrue s 93(1) and the phraseology employed in the Trial Reasons that the contract of insurance as endorsed was 'likely' to achieve compliance with s 93(1) appropriately reflected the proper standard of proof because his Honour was being asked to consider a number of theoretical fact scenarios.

40 Delta accepts Colonial's contention that s 93(1)(a) requires the owner to ensure that the adjoining property is covered by a first party indemnity policy. Counsel for Delta contended that the trial judge did not decide to the contrary. In any event, Delta submits that the judgment should be affirmed on the basis that the Contract of Insurance as endorsed satisfies the requirements of s 93(1) for the following reasons:

(a) The Protection Works Endorsement expressly indemnifies 'Damage to the Adjoining Property' and the fact that Colonial is itself entitled to the benefit of that indemnity is clear from cl 4 of the Contract Endorsement which states that it 'shall apply in respect of the owners of property adjoining 150 Queen Street'. Accordingly, Colonial is a 'third party beneficiary' under the Insurance Contracts Act and is entitled, under s 48 of that Act, to claim on the insurer.

(b) The trial judge did not misconstrue s 93(1) and, even if the term 'likely' was inapt at times, in expressing his critical conclusions the trial judge approached the application of the legislative provision correctly.

41 CES-Queen contends that the trial judge should have held that s 98 of the Act is a counterpart provision of s 93; and, in particular, that s 93(1) is the mechanism by which a claim for compensation made under s 98 of the Act can be satisfied.

42 CES-Queen submits that, in the ordinary course, upon a claim being made under s 98 of the Act, an owner would look to the contract of insurance taken out pursuant to s 93(1). Accordingly, the relationship entitles the Court to infer that the cover under s 93(1)(a) will correspond with the liability under s 98. Liability under s 98 does not contemplate an adjoining owner having a right to directly benefit under the insurance cover.

43 Colonial submits that the trial judge correctly concluded that the compensation provision in s 98 of the Act did not alter the intent or the operation of s 93 of the Act.

44 Delta contends that the trial judge's decision should be affirmed on the basis that under the Protection Works Endorsement the precise cover required by s 93(1)(a) was provided; and, under cl 4 of the Contract Endorsement, the Protection Works Endorsement applies 'in respect of the owners of property adjoining 150 Queen Street'. Thus, the owner has ensured a first party indemnity policy is in place.

(a) The contention that an adjoining owner was a person to whom the benefit of the Contract of Insurance as endorsed extended for the purposes of ss 20 and 48 of the Insurance Contracts Act was not put at trial; and Delta should not be permitted to rely upon it on this appeal.

(b) In any event, Colonial submits that, even if accepted, the Protection Works Endorsement did not extend the benefit of the cover to other persons with insurable interests in adjoining properties such as the tenants of 140 Queen Street.

(c) The contention ignores the fact that the Protection Works Endorsement states in terms that it attaches to, and forms part of, the Contract of Insurance; and that 'all other terms and conditions remain unchanged'. Accordingly, the indemnity provision under the Protection Works Endorsement has to be considered in conjunction with the other terms and conditions of the Contract of Insurance.

(d) The Protection Works Endorsement does not insure CES-Queen or Delta. Clause 4 of the Contract Endorsement states that it applies in respect of adjoining owners; it does not purport to confer the benefit of the separate indemnity on CES-Queen or Delta.

46 The principal questions to be determined on this appeal are as follows:

(a) What is the correct construction of s 93(1)(a)? Does it require first party indemnity insurance?

(b) If so, does the Contract of Insurance as endorsed provide first party indemnity insurance?

(c) Should Delta be permitted to rely on its Notice of Contention?

47 The primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute.[24]

48 To enable the relevant provision to be properly construed, it is therefore necessary to identify the legislative purpose of the Act as a whole and whether the relevant provision can be interpreted in a manner harmoniously with that purpose. This process requires consideration of:

(a) the text of the relevant provision itself;[25] and

(b) the whole of the instrument,[26] and the provisions with which the relevant provision interacts.[27] The context extends to the existing state of the law, the history of the legislative scheme and the mischief which the statute sought to remedy,[28] and 'imports all legitimate means by which the legislative intent may be ascertained'.[29]

49 When identifying the legislative purpose of the Act consideration may be given to extrinsic material,[30] but such extrinsic material should be looked at after 'exhausting the application of the ordinary rules of statutory construction'[31] and it 'cannot be relied on to displace the clear meaning of the text'.[32]

50 Where the ordinary meaning of the text is consistent with the legislative purpose, the court will apply that as the legal meaning.

51 If the text permits more than one possible construction, s 35(a) of the Interpretation of Legislation Act 1984 requires that a construction which would promote the purpose or object of an Act be preferred to one that would not.

52 A tension arises when the court considers that the the ordinary meaning of the text is inconsistent with the legislative purpose. As the plurality in Project Blue Sky Inc v Australian Broadcasting Authority explained:

the duty of a court is to give the words of a statutory provision the meaning that the legislature is taken to have intended them to have. Ordinarily, that meaning (the legal meaning) will correspond with the grammatical meaning of the provision. But not always. The context of the words, the consequences of a literal or grammatical construction, the purpose of the statute or the canons of construction may require the words of a legislative provision to be read in a way that does not correspond with the literal or grammatical meaning.[33]

53 The circumstances which may justify a court departing from the ordinary meaning of a relevant provision include where:

(a) the literal meaning would conflict with other provisions of the statute;[34]

(b) the literal meaning is inconsistent with the purposes of the statute;[35]

(c) the literal meaning is incapable of practical application;[36] or

(d) adoption of the literal meaning would lead to a result which is absurd, unreasonable or anomalous.[37]

54 Recent statements of the High Court have emphasised the primacy of the text in the resolution of any perceived tension between the text and the legislative purpose of the Act.[38] Such statements include the following:

(a) 'The words of the statute, not non-statutory words seeking to explain them, have paramount significance'.[39]

(b) 'This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the [statutory] text itself ... The language which has actually been employed in the text of legislation is the surest guide to legislative intention'.[40]

(c) 'A second and not unrelated danger that must be avoided in identifying a statute's purpose is the making of some a priori assumption about its purpose. The purpose of legislation must be derived from what the legislation says, and not from any assumption about the desired or desirable reach or operation of the relevant provisions'.[41]

55 In the High Court decision in Taylor v Owners - Strata Plan No 11564[42] the majority stated that, in considering whether a provision could be interpreted as if it contained additional words, 'the task remains the construction of the words the legislature has enacted. ... any modified meaning must be consistent with the language in fact used by the legislature'.[43] The majority said that whether such a construction is justified involves a judgment of matters of degree and explained:[44]

That judgment is readily answered in favour of addition or omission in the case of simple, grammatical, drafting errors which if uncorrected would defeat the object of the provision. It is answered against a construction that fills 'gaps disclosed in legislation' or makes an insertion which is 'too big, or too much at variance with the language in fact used by the legislature'.

56 Property insurance and liability insurance are both forms of general indemnity insurance. Although they are sometimes covered within the one policy,[45] property insurance and liability insurance are recognised as being conceptually different. [46]

57 The Encyclopaedic Australian Legal Dictionary defines these insurances as follows:[47]

A form of indemnity insurance protecting the insured against loss of or damage to property. Damage to property means disturbance of the physical integrity of the subject property... "Property" has been held to include money: ... It is presumed that an insured, under a contract of property insurance, intends to protect only his or her own interest. The presumption may be rebutted if the insured is under a duty to insure on behalf of others, or if it is shown that the insured's intention was to insure on behalf of others: ... [48]

A form of general insurance providing cover in respect of the insured's liability for loss or damage to another person: ... Under a contract of liability insurance, the insurer has no obligation to indemnify the insured until he or she becomes subject to a liability covered by the policy: ... The liability must be enforceable by law: ....[49]

58 Section 93(1)(a), in terms, requires insurance 'against damage to ... the adjoining property'. The text is most consistent with a requirement to ensure that there is property damage insurance. That would ordinarily mean insurance upon which the owner of the damaged property can itself claim.

59 By contrast, s 93(1)(b) clearly requires liability insurance. The specific obligation in s 93(1)(b) of the Act is for there to be insurance against 'any liabilities'. The party suffering loss cannot claim under this policy (unless specific legislative provisions operating on death or deregistration of the insured apply[50]), but the owner who has incurred the liability to the damaged party can claim on the policy and thereby have funds to meet the claim.

60 Discussion on the appeal centred around the question whether s 93(1)(a) ought be interpreted as if it contained the words 'any liability for' before the words 'damage ... to the adjoining property'. To adopt this approach would involve a departure from the text.

61 Part 7 of the Act is headed 'Protection of Adjoining Property'. The relevant legislative purpose is clear. It is to protect those who might suffer loss as a result of damage to adjoining properties.

62 Insurance against the liability of an owner for damage caused to adjoining property by protection works would provide a measure of protection to the owner of an adjoining property, but first party indemnity insurance over the adjoining property for the benefit of the adjoining owner would be likely to provide greater protection. As a general proposition, it certainly would not provide less.

63 In identifying and clarifying the legislative purpose, the observations made in the course of debate on the 2001 amending bill do not relevantly assist.

64 We have concluded earlier that the ordinary meaning of s 93(1)(a) is that what is required is insurance upon which the owner of the damaged property can itself claim: what we have termed first party indemnity insurance. This interpretation is consistent with the legislative purpose. The legislative purpose provides no warrant, in this case, for a departure from the ordinary meaning.

Is the interpretation of s 93(1) informed by s 98 of the Act?

65 Liability under s 98 does not correlate with the insurance cover required by s 93(1).

66 Section 98 requires the owner to compensate the adjoining owner for inconvenience, loss or damage. The insurance required by s 93(1)(a), on any interpretation, is limited to damage to the adjoining property, which is not necessarily the same.

67 Section 98 is limited to losses suffered 'in connection with the carrying out of protection work'. The insurance required by s 93(1)(b) extends to 'liabilities likely to be incurred ... during the carrying out of the building work'.

68 The liability under s 98 is unlimited in time. The insurance required by s 93(1)(b) is limited temporally to liabilities likely to be incurred 'for a period of 12 months after that building work is completed'.

69 Given the lack of correspondence between the liabilities imposed by s 98 and the cover required by s 93(1), the proper construction of s 93(1)(a) is not informed by the liability imposed under s 98 of the Act. The trial judge was correct to reject that contention.

70 The other provisions of the Act, and s 98 in particular, do not suggest any basis upon which a departure from the ordinary meaning of the text would be warranted.

Is the ordinary meaning incapable of practical application?

71 CES-Queen submitted that a construction of s 93(1)(a) which requires first party indemnity insurance was unworkable. It was submitted that the class of insureds would be uncertain, and that such a requirement would impose unworkable burdens and a need for impractical levels of cooperation in relation to the terms of the insurance and obligations of disclosure and the like.

72 We reject this contention. The obligation provided for under s 93(1)(a) is met if the relevant claimant falls under the provisions of s 20 and s 48 of the Insurance Contracts Act. Our conclusion in that respect reflects the observations of McMillan J, admittedly made obiter, in You v Thomas.[51] The potential difficulties arising as a result of the operation of s 20 and s 48 of the Insurance Contracts Act in this case are no greater than might potentially exist in any other case in which those provisions apply. As Colonial submitted, the obligation can be met by the use of class descriptions in the definition of the 'insured'.

73 The ordinary meaning of the text of s 93(1)(a), in our view, is that it requires insurance upon which the owner of the damaged property can itself claim; that is, what we have called first party indemnity insurance. This ordinary meaning is consistent with the relevant legislative purpose. It is not inconsistent with other provisions of the Act. It is not incapable of practical operation. There is no warrant for the addition of words rendering the insurance provided for by s 93(1)(a) to be a form of liability insurance, being the type of insurance which is expressly provided for in s 93(1)(b).

Does the Contract of Insurance as endorsed provide first party indemnity insurance against damage by the proposed protection work to adjoining properties?

74 The Protection Works Endorsement specifically provides for an indemnity with respect to 'Damage to the Adjoining Property caused by the proposed Protection Works ...'. This language closely reflects that of s 93(1)(a).

75 The definitions in the Protection Works Endorsement of 'Adjoining Owner', 'Adjoining Property', 'Owner' and 'Protection Works' substantially follow the definitions under the Act.

76 Clause 2 of the Contract Endorsement is clearly intended to ensure that the Contract of Insurance as endorsed conforms with the requirements of s 93 of the Act.

77 The Contract of Insurance as endorsed does not name the owners of adjoining properties as insureds but the owners of property adjoining 150 Queen Street are specifically referred to in cl 4 of the Contract Endorsement which states that 'the attached Property Works Endorsement shall apply in respect of the owners of property adjoining 150 Queen Street'.

78 Although the words used are not as clear as they might be, cl 4 of the Contract Endorsement does specify that the 'owners of property adjoining' are persons to whom the benefit of the insurance cover provided by the Contract of Insurance as endorsed extends. There is no apparent purpose for cl 4 of the Contract Endorsement other than to extend the property insurance cover to the adjoining owners. In our view, it does so with sufficient clarity.

79 Once it is accepted that Colonial is within a class of persons specified or referred to in the Contract of Insurance as endorsed to whom the benefit of the insurance cover extends, s 20 and s 48 of the Insurance Contracts Act mean that first party indemnity insurance cover is provided. Again, our conclusion in this respect reflects that of McMillan J in You v Thomas.[52]

80 The Contract of Insurance as endorsed satisfies the requirement for insurance imposed on CES-Queen by s 93(1)(a) of the Act.

Does the policy adequately cover the class required to be covered by s 93(1)(a)?

81 It was submitted on behalf of Colonial that a first party indemnity policy would not satisfy the requirements of s 93(1)(a) of the Act unless it extended the indemnity to occupiers, mortgagees and others who might have an interest in the adjoining property. We reject this contention.

82 If the adjoining owner does not agree to the nominated insurer, the amount of insurance or the 'nature of cover' provided under s 93, the dispute may be referred to the Building Appeals Board.[53] The Building Appeals Board is given a broad discretion to determine the dispute and 'may make any order that it considers appropriate in the circumstances'.[54] The issue of the breadth of the class of insureds, which does not in fact arise here, would, if it did arise, be capable of determination in that way. Section 152 of the Act is a clear indication that the parties whose interests must be addressed are the owner (as defined) and any adjoining owner (as defined).

83 We also reject Colonial's contention that the Contract of Insurance as endorsed is uncertain and unenforceable.

84 We accept the submission made on behalf of CES-Queen and Delta that the Contract of Insurance as endorsed is to be interpreted as providing that where any conflict exists between the cover required by s 93 and that provided by the insurance contract, the terms of the insurance contract are amended so as to conform to the cover which s 93 requires. In our view, that is what cl 2 of the Contract Endorsement expressly provides.

Should Delta be permitted to rely on the new point on appeal?

85 Colonial contended that Delta should not be permitted to raise the argument that the Contract of Insurance as endorsed did in fact provide first party indemnity insurance covering the adjoining properties as required by s 93(1)(a) ('the new point') because it had not so contended at trial.

86 A party on appeal cannot raise an argument that was not run at trial except in exceptional circumstances.[55] The reasons for this general position were stated by the High Court in Whisprun Pty Ltd v Dixon as follows:

It would be inimical to the due administration of justice if, on appeal, a party could raise a point that was not taken at the trial unless it could not possibly have been met by further evidence at the trial. Nothing is more likely to give rise to a sense of injustice in a litigant than to have a verdict taken away on a point that was not taken at the trial and could or might possibly have been met by rebutting evidence or cross-examination. Even when no question of further evidence is admissible, it may not be in the interests of justice to allow a new point to be raised on appeal, particularly if it will require a further trial of the action. Not only is the successful party put to expense that may not be recoverable on a party and party taxation but a new trial inevitably inflicts on the parties worry, inconvenience and an interference with their personal and business affairs.[56]

87 As is clear in the passage quoted, the fact that a new point could not possibly be met by further evidence is itself a relevant consideration, but it might still not be in the interests of justice to allow a new point to be raised on appeal even when there is no question of further evidence.

88 A court is more likely to entertain a new point on appeal where the point is one of construction or law.[57]

89 The relevant circumstances in this case are as follows:

(a) As a result of CES-Queen stating that it proposed to start the protection work during the week commencing 8 August 2016, Colonial commenced this proceeding on 13 July 2016. The proceeding was brought on for an urgent hearing on 27 July 2016 and the trial judge delivered judgment on 5 August 2016.

(b) There were no pleadings and the matter proceeded on the basis of:

(i) Colonial's outline of submissions dated 19 July 2016.

(ii) CES-Queen's outline of submissions dated 21 July 2016.

(iii) Delta's outline of submissions dated 21 July 2016.

(iv) Colonial's outline of submissions in reply dated 25 July 2016.

(v) Delta's supplementary outline of submissions dated 27 July 2016.

(c) Colonial's outline of submissions of 19 July 2016 included a detailed analysis of the Contract Endorsement and the Protection Works Endorsement. Amongst other submissions, it was submitted that cl 4 of the Contract Endorsement did not 'expressly state that it provides an Indemnity for an Adjoining Owner'.[58]

(d) By its notice of contention dated 29 September 2016, Delta gave notice that it would argue the new point on the hearing of the appeal.

(e) By its written case in response to Delta's notice of contention dated 10 October 2016, Colonial contested Delta's entitlement to rely on the new point but also dealt with the substance of Delta's submissions on the new point.

90 Colonial did not contend that the new point raised any issue of fact that required additional evidence or that it raised any issue other than the construction of a written contract. It did contend that it would suffer prejudice by the raising of the new point on appeal because, it said, if the point had been raised before the trial, it would have had the opportunity of joining the insurer so that the insurer would be bound by the decision of the Court.

91 Delta should be permitted to rely upon the new point for these reasons:

(a) Colonial's submissions filed 8 days before the trial indicate that it was aware that the new point could be argued by CES-Queen or Delta at the trial. It took no step to join the insurer.

(b) After service of the notice of contention, Colonial did not seek to join the insurer on the appeal.

(c) Colonial has filed no evidence as to whether it would have joined the insurer had the new point been taken at or prior to trial; nor any evidence as to why it did not seek to join the insurer on this appeal after service of Delta's notice of contention.

(d) The new point requires no additional evidence. It is confined to the construction of a written contract.

(e) Colonial has dealt with the new point on the appeal. It has not suggested it had insufficient opportunity to do so.

92 There was no suggestion that Delta had made a forensic decision at some stage not to advance the new point.[59]

93 When cases are brought on as a matter of urgency, it is more understandable that a new point may not be raised until a relatively advanced stage of the proceeding. In this case the decision to raise the new point seems related to Delta's concession that s 93(1)(a) of the Act does require first party indemnity insurance, a concession which we have concluded was properly made.

94 Once it is accepted that s 93(1)(a) requires first party indemnity property insurance, there is an air of unreality in this Court refusing to consider whether such a policy had been provided when full argument on that issue has been heard and when all the relevant material is before the Court.

95 Leave to appeal should be granted but the appeal should be dismissed.

[1] Section 3 of that Act defines adjoining property to mean 'land (including any street, highway, lane, footway, square, alley and right of way) which is so situated in relation to the site on which building work is to be carried out as to be at risk of significant damage from the building work'.

[2] The penalties have been excised from the above extract.

[3] Building (Amendment) Act 2001 s 7.

[4] Section 948 was inserted by s 58 of the Local Government (Amendment) Act 1975.

[5] Section 942 of the Local Government Act 1958 defined 'underpin' to mean to provide permanent support (including vertical support, lateral support, and protection against variation in earth pressures) for adjoining property and 'underpinning' had a corresponding interpretation.

[6] Victoria, Parliamentary Debates, Legislative Assembly, 27 September 2001, 763-4 (John Thwaites, Minister for Planning) and Victoria, Parliamentary Debates, Legislative Council, 18 October 2001, 926-7 (Justin Madden, Minister Assisting the Minister for Planning).

[7] Explanatory Memorandum, Building (Amendment) Bill 2001.

[8] Mr Ted Baillieu, then Shadow Minister for Planning.

[9] Victoria, Parliamentary Debates, Legislative Assembly, 17 October 2001, 1180 (Ted Baillieu, Shadow Minister for Planning).

[10] Colonial Range Pty Ltd v CES-Queen (Vic) Pty Ltd [2016] VSC 494 [73] ('Trial Reasons').

[17] [2014] VSC 255.

[20] [2014] VSC 255.

[21] Colonial relied upon Davies v Davies (1887) 36 Ch D 359, 392-393 and Run Corp Ltd v McGrath Ltd [2007] FCA 1669 [27].

[23] [2014] VSC 255.

[24] Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355, 381 [69] (McHugh, Gummow, Kirby and Hayne JJ).

[25] Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27, 46-7 [47] (Hayne, Heydon, Crennan and Kiefel JJ); Northern Territory v Collins [2008] HCA 49; (2008) 235 CLR 619, 642 [99] (Crennan J).

[26] Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation [1981] HCA 26; (1981) 147 CLR 297, 320 (Mason and Wilson JJ).

[27] Saeed v Minister for Immigration & Citizenship [2010] HCA 23; (2010) 241 CLR 252, 265 [34] (French CJ, Gummow, Hayne, Crennan and Keifel JJ).

[28] CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384, 408 (Brennan CJ, Dawson, Toohey and Gummow JJ).

[29] DPP v Leys [2012] VSCA 304; (2012) 44 VR 1, 32 [94] (Redlich and Tate JJA and T Forrest AJA).

[30] Interpretation of Legislation Act 1984 s 35(b).

[31] Saeed v Minister for Immigration & Citizenship [2010] HCA 23; (2010) 241 CLR 252, 265 [33] (French CJ, Gummow, Hayne, Crennan and Keifel JJ); quoted in Di Paolo v Salta Constructions Pty Ltd [2015] VSCA 230 [36] (Osborn and Kyrou JJA).

[32] Northern Territory v Collins [2008] HCA 49; (2008) 235 CLR 619, 642 [99] (Crennan J); see also Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27, 47 [47] (Hayne, Heydon, Crennan and Kiefel JJ); Nominal Defendant v GLG Australia Pty Ltd [2006] HCA 11; (2006) 228 CLR 529, 538 [22] (Gleeson CJ, Gummow, Hayne and Heydon JJ).

[33] (1998) 194 CLR 355, 384 [78] (McHugh, Gummow, Kirby and Hayne JJ).

[34] Ibid 382 [70] (McHugh, Gummow, Kirby and Hayne JJ).

[35] See for example DPP v Leys [2012] VSCA 304; (2012) 44 VR 1.

[36] See for example DPP v Walters [2015] VSCA 303.

[37] See for example Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation [1981] HCA 26; (1981) 147 CLR 297.

[38] See examples cited in Commissioner of State Revenue v EHL Burgess Properties Pty Ltd [2015] VSCA 269 [56]-[62] and the discussion in Di Paolo v Salta Constructions Pty Ltd [2015] VSCA 230 [32]-[48] (Osborn and Kyrou JJA) and Lowe v R [2015] VSCA 327 [12]-[18] (Warren CJ).

[39] Nominal Defendant v GLG Australia Pty Ltd [2006] HCA 11; (2006) 228 CLR 529, 538 [22] (Gleeson CJ, Gummow, Hayne and Heydon JJ).

[40] Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27, 46-7 [47] (Hayne, Heydon, Crennan and Kiefel JJ).

[41] Certain Lloyd's Underwriters v Cross ([2012] HCA 56; 2012) 248 CLR 378, 390 [26] (French CJ and Hayne J).

[42] [2014] HCA 9; (2014) 253 CLR 531.

[43] Ibid 549 [39] (French CJ, Crennan and Bell JJ).

[44] Ibid 548 [38] (French CJ, Crennan and Bell JJ) (citations omitted).

[45] A comprehensive motor vehicle insurance policy will usually indemnify the owner with respect to loss or damage to his or her motor vehicle and also indemnify the owner with respect to liability for damage caused to third parties' motor vehicles or other property. Similarly, home and contents policies will frequently provide indemnity for some liabilities incurred to third parties together with indemnity to the owner for loss or damage caused to the property by fire etc.

[46] The differences between property insurance and liability insurance can be significant. See for example Commercial Union Assurance Co Ltd v Hayden [1977] 1 QB 804, 811G, 812B and G, 814F-G, 815D (Cairns LJ).

[47] LexisNexis Butterworths, Encyclopaedic Australian Legal Dictionary.

[50] Insurance Contracts Act 1984 s 51; Corporations Act s 601AG.

[51] [2014] VSC 255.

[55] Metwally v University of Wollongong [1985] HCA 28; (1985) 60 ALR 68, 71 (Gibbs CJ, Mason, Wilson, Brennan, Deane and Dawson JJ); Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1, 7 (Gibbs CJ, Wilson, Brennan and Dawson JJ); Setka v Abbott [2013] VSCA 345.

[56] [2003] HCA 48; (2003) 200 ALR 447, 461 [51] (Gleeson CJ, McHugh and Gummow JJ) (citations omitted). With respect to the effect of the Civil Procedure Act 2010 on the raising of a new argument on an appeal, see Setka v Abbott [2013] VSCA 345 [31] (Warren CJ, Ashley and Whelan JJA).

[57] Water Board v Moustakas (1988) 180 CLR 491, 497 (Mason CJ, Wilson, Brennan and Dawson JJ).

[59] Trans Petroleum (Australia) Pty Ltd v White Gum Petroleum Pty Ltd [2012] WASCA 165; (2012) 268 FLR 433, 453 [101] (Buss JA, with whom Pullin and Murphy JJA agreed); Wallis Nominees (Computing) Pty Ltd v Pickett [2013] VSCA 24; (2013) 45 VR 657, 674 [84] (Warren CJ and Davies AJA, with whom Redlich JA relevantly agreed).