Delor Vue Apartments CTS 39788 v Allianz Australia Insurance Ltd

ALLSOP CJ: 1 The applicant is the body corporate of apartments in Cannonvale in Queensland. On 28 March 2017, the apartments were damaged as a result of Tropical Cyclone 'Debbie'. Significant damage occurred. It is not necessary for present purposes to discuss the nature of the damage. 2 The respondent, through its underwriting agent, Strata Community Insurance Agencies Pty Ltd (SCI) had, only a few days before the cyclone, issued a Residential Strata Insurance Policy to the applicant which had 11 available sections of cover. One section dealt with property damage. 3 During the adjustment of the claim it became apparent that there may have been defects in the premises to the eaves and soffits and to the trusses and tie downs. The question of the non-disclosure of these defects was apparently broached by the respondent insurer. 4 On 9 May 2017 the respondent sent an email to the applicant through its broker about the claim. The full text of that email is attached. The applicant focuses upon what is written below the headings "Indemnity to the Body Corporate" and "Relevant Policy Exclusions". It says that these are clear statements of the insurer that it will not rely upon any rights it may have arising from any non-disclosure and that it will adjust the claim by reference to the exclusion clauses in a particular way. 5 For the following year, until May 2018, the claim was adjusted. By letter dated 28 May 2018, the respondent in effect said that it would rely upon its rights under s 28 of the Insurance Contracts Act 1984 (Cth) to reduce any liability to nil, based on non-disclosure and misrepresentation, unless the applicant accepted a certain offer. 6 The applicant asserts in the proceeding that by reason of the letter of 9 May 2017 and the conduct during the following year, up to the letter of 28 May 2018, the respondent cannot (whether by waiver or affirmation or estoppel or its obligations of good faith) rely on any rights of non-disclosure or misrepresentation or apply the exclusion clauses in a way other than as it stated it would in the letter of 9 May 2017. 7 The parties are now at the "litigation-daggers-drawn stage" of their insurance relationship. The applicant has brought the matter to the Insurance List of the Court seeking to have certain preliminary issues determined. The respondent resists this course and says that the whole case should be heard, including the claim by it to reduce its liability to nil, the proper construction of the policy and the application of the policy to the facts. 8 The applicant says that its preliminary issues will take up to two days' hearing. The respondent says that all the issues are intertwined and the case will take at least two weeks. 9 I heard argument last week about the proper course to take. 10 One of the purposes of this list was to provide a facility for insureds and insurers to have resolved short issues, short of a full trial, to facilitate the resolution of a wider dispute. I fully recognise that long experience tells one that the shortest way home in litigation is sometimes just to hear the case in full. But experience also tells one, and the experience of this List is clear, that with willing parties demonstrating a commitment to the overriding purpose in Pt VB of the Federal Court of Australia Act 1976 (Cth) and to solving a mutual commercial problem in good faith, shorter, cheaper and targeted techniques can be used to resolve the heart of a problem, allowing the parties to exercise common sense in the resolution of the balance of the matter. 11 I am of the view that there are a number of matters that can be conveniently dealt with before a full hearing as to the whole of the claim. 12 First, the insurer says that it is entitled to relief under s 28 by reason of non-disclosure and misrepresentation. That involves what the body corporate and its agents knew, whether they should have disclosed it, and what the underwriter would have done had he or she been given the relevant information. 13 Secondly, by reason of the letter of 9 May 2017 and the conduct of the insurer for the next year, assuming that the first question would be answered favourably to the respondent insurer, is it now or was it at some point by some legally operative rule as principle (waiver, affirmation, election, duties of good faith) prevented from relying upon s 28? 14 Thirdly, by reason of the same things is the insurer disentitled from approaching the resolution of the claim on some basis different from that which was stated in May 2017? 15 Fourthly, if the applicant is not prevented from recovering in accordance with the policy being operative and binding what in all the circumstances is the proper claim of the applicant by reference to the proper construction of the policy or the letter of 9 May 2017 (if different)? 16 I am unpersuaded that the first and second issues are not usefully dealt with first. If the respondent is correct, it will, after the resolution of those issues, be entitled to have the proceedings dismissed. If the applicant is correct, it will, after the resolution of those issues, be entitled to have the balance of the proceedings heard. 17 I should add that if the first two issues are resolved in the applicant's favour, then subject to any discrete question of the construction of the policy, I would be minded to refer the balance of the dispute (dominated as it would be by the minutiae of the facts concerning the damage to the apartments and how such fits into the coverage and exclusion clauses of the policy) to a referee for a report to the Court. That task may involve some interstitial questions of construction. 18 Thus, subject, to such variation of terms as in due course seem appropriate, I would make the following orders:

1. The matter be set down on a date to be fixed for the first stage of a hearing.
2. The first stage of the hearing is to deal with: (a) the rights, if any, of the respondent to reduce its liability to nil under s 28 of the Insurance Contracts Act 1984 (Cth); and (b) whether by some operative rule or principle the respondent is now unable to rely upon s 28.
3. On or before 17 May 2019, the parties submit to the chambers of the Chief Justice orders providing for any further steps in preparation for the hearing referred to in Orders 1 and 2 above. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Chief Justice Allsop.