Dieter v NSW Self Insurance Corporation

Background

1. The factual background to the Tribunal proceedings and the appeal is not in dispute.
2. The appellant owns a parcel of land in East Gosford, New South Wales (the Property). In June 2019 the appellant signed a contract with a builder, Centra Projects Pty Ltd (Centra), for redevelopment of the Property. The redevelopment involved the existing commercial premises on the ground floor of the Property and the construction of four residential apartments on the first floor.
3. The builder was required to provide an HBCI policy because the development involved "residential building work" under the HB Act. In late 2019 Centra applied to the respondent for an HBCI policy. The application was made through an insurance broker. The respondent is the sole provider of HBCI cover in New South Wales.
4. In December 2019 the broker was directed to submit an application for a "Multiple Dwellings Project". This was done and on 16 January 2020 the respondent issued four certificates of insurance comprising one policy, with each certificate bearing policy number HBCF20001737 (the Policy). The appellant was named as the homeowner on each of the certificates. The cost of the Policy was $18,359.71. At the time, the appellant objected to the cost, saying in an email to the broker that he felt "well and truly ripped off" and was "totally disgusted".
5. Sometime in July 2020 Centra abandoned the project. The appellant subsequently lodged an application against Centra in the Tribunal. On 20 January 2021 the Tribunal made an order that Centra pay the appellant the sum of $344,517.05. Centra did not comply with the Tribunal's order and ultimately became insolvent. These events were considered "trigger events" under the Policy, potentially enlivening entitlement to cover under the Policy.
6. The appellant made a claim for indemnity under clause 1.1(a)(i) of the Policy for "loss or damage resulting from non-completion of the work because of the insolvency, death or disappearance of the builder". Clause 1.1 relevantly provides: (a) Subject to the terms of the policy and in accordance with the Act and the Regulation, the policy will cover you if you suffer the following losses or damage in respect of the work covered by this policy: (i) loss or damage resulting from non-completion of the work because of the insolvency, death or disappearance of the builder".
7. The failure of Centra to comply with the earlier orders of the Tribunal and the deemed insolvency of Centra were sufficient to engage cl 1.1(a)(i) of the Policy. However, the respondent declined the claim on 28 May 2021 on the basis that the appellant is a "developer" for the purposes of the Policy and was thus excluded by operation of cl 3.4(a) of the Policy. This clause states: 3.4 The policy does not cover a claim by any person who is, in relation to the work: (a) A developer; …
8. "Developer" is defined in cl 7 of the Policy as having "the same meaning as it does under the Act", being the HB Act.
9. "Developer" is defined in the HB Act as follows: 3A Application of provisions to developers (1) For the purposes of this Act, an individual, a partnership or a corporation on whose behalf residential building work is done in the circumstances set out in subsection (2) is a developer in relation to that residential building work. (1A) Residential building work done on land in the circumstances set out in subsection (2) is, for the purpose of determining who is a developer in relation to the work, deemed to have been done on behalf of the owner of the land (in addition to any person on whose behalf the work was actually done). Note - This makes the owner of the land a developer even if the work is actually done on behalf of another person (for example, on behalf of a party to a joint venture agreement with the owner for the development of the land). The other person on whose behalf the work is actually done is also a developer in relation to the work. (2) The circumstances are - (a) the residential building work is done in connection with an existing or proposed dwelling in a building or residential development where 4 or more of the existing or proposed dwellings are or will be owned by the individual, partnership or corporation, or (b) the residential building work is done in connection with an existing or proposed retirement village or accommodation specially designed for the disabled where all of the residential units are or will be owned by the individual, partnership or corporation. (3) A company that owns a building under a company title scheme is not a developer for the purposes of this Act.

Tribunal proceedings and decision

1. The application to the Tribunal was lodged on 26 July 2021 and was listed for final hearing on 19 October 2021. The Tribunal's reasons for decision were published on the day of the hearing.
2. The Tribunal accepted that the application was a building claim within the meaning of s 48A(2) of the HB Act. It rejected the appellant's argument that he was not a developer and that the building did not consist of four residential units. The Tribunal also rejected the argument that the respondent did not act in good faith.
3. The appellant appealed the Tribunal's decision.

Scope and nature of internal appeals

1. Internal appeals may be made as of right on a question of law, and otherwise with leave of the Appeal Panel: s 80(2) NCAT Act.
2. In Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 the Appeal Panel set out at [13] a non-exclusive list of questions of law: 1. Whether there has been a failure to provide proper reasons; 2. Whether the Tribunal identified the wrong issue or asked the wrong question; 3. Whether a wrong principle of law had been applied; 4. Whether there was a failure to afford procedural fairness; 5. Whether the Tribunal failed to take into account relevant (i.e., mandatory) considerations; 6. Whether the Tribunal took into account an irrelevant consideration; 7. Whether there was no evidence to support a finding of fact; and 8. Whether the decision is so unreasonable that no reasonable decision-maker would make it.
3. The circumstances in which the Appeal Panel may grant leave to appeal from decisions made in the Consumer and Commercial Division are limited to those set out in cl 12(1) of Schedule 4 of the NCAT Act. In such cases, the Appeal Panel must be satisfied that the appellant may have suffered a substantial miscarriage of justice on the basis that: 1. the decision of the Tribunal under appeal was not fair and equitable; or 2. the decision of the Tribunal under appeal was against the weight of evidence; or 3. significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with).
4. In Collins v Urban [2014] NSWCATAP 17 (Collins v Urban), the Appeal Panel stated at [76] that a substantial miscarriage of justice for the purposes of cl 12(1) of Schedule 4 may have been suffered where: … there was a "significant possibility" or a "chance which was fairly open" that a different and more favourable result would have been achieved for the appellant had the relevant circumstance in para (a) or (b) not occurred or if the fresh evidence under para (c) had been before the Tribunal at first instance.
5. Even if an appellant from a decision of the Consumer and Commercial Division has satisfied the requirements of cl 12(1) of Schedule 4, the Appeal Panel must still consider whether it should exercise its discretion to grant leave to appeal under s 80(2)(b).
6. In Collins v Urban, the Appeal Panel stated at [84] that ordinarily it is appropriate to grant leave to appeal only in matters that involve: (a) issues of principle; (b) questions of public importance or matters of administration or policy which might have general application; or (c) an injustice which is reasonably clear, in the sense of going beyond merely what is arguable, or an error that is plain and readily apparent which is central to the Tribunal's decision and not merely peripheral, so that it would be unjust to allow the finding to stand; (d) a factual error that was unreasonably arrived at and clearly mistaken; or (e) the Tribunal having gone about the fact finding process in such an unorthodox manner or in such a way that it was likely to produce an unfair result so that it would be in the interests of justice for it to be reviewed.
7. In Cominos v Di Rico [2016] NSWCATAP 5, the Appeal Panel stated at [13]: 13. It may be difficult for self-represented appellants to clearly express their grounds of appeal. In such circumstances and having regard to the guiding principle, it is appropriate for the Appeal Panel to review an appellant's stated grounds of appeal, the material provided, and the decision of the Tribunal at first instance to examine whether it is possible to discern grounds that may either raise a question of law or a basis for leave to appeal. The Appeal Panel has taken such an approach in a number of cases, for instance, Khan v Kang [2014] NSWCATAP 48 and Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69. However, this must be balanced against the obligation to act fairly and impartially (Bauskis v Liew [2013] NSWCA 297 at [68] citing Hamod v State of New South Wales [2011] NSWCA 367 at [309]-[316]). Relevantly, s 38(2) provides that that Tribunal "may inquire into and inform itself on any matter in such manner as it thinks fit, subject to the rules of natural justice.

Submissions and evidence

1. In deciding the appeal, we have had regard to the following:

• The Notice of Appeal lodged on 28 October 2021;
• The Reply to Appeal lodged on 18 November 2021;
• The appellant's bundle and written submissions lodged on 17 December 2021;
• The respondent's bundle and written submissions lodged on 18 January 2022;
• The appellant's submissions in reply lodged on 28 January 2022;
• The procedural directions made at call over;
• The Tribunal's Notice of Order and reasons for decision dated 18 October 2021;
• The application to the Tribunal dated 26 July 2021; and
• The oral submissions made by the parties during the hearing.

Notice of Appeal

1. The Notice of Appeal was lodged on 28 October 2021, which is within the 28 day time period specified in cl 25(4) of the Civil and Administrative Tribunal Rules 2014 (the Rules). The appeal has therefore been lodged within time.

Grounds of Appeal

1. The grounds of appeal set out in the Notice of Appeal are somewhat discursive and do not clearly identify the precise grounds of appeal or clear bases for leave to appeal. Consistent with the principle enunciated in Cominos v Di Rico, we considered the material as a whole with a view to identifying the grounds of appeal. At the beginning of the appeal hearing, the appellant confirmed that his grounds of appeal are: 1. The Tribunal misinterpreted or misapplied the definition of "developer" in the Act. 2. The Tribunal erred in not finding that the respondent had not complied with its obligation to act with utmost good faith.
2. In oral submissions during the appeal hearing, the appellant referred to "estoppel", arguing that the respondent couldn't "go against a previously assumed position" and that the respondent had to know that the appellant would never be covered for completion costs. When asked whether he raised this "estoppel" issue at the Tribunal hearing, the appellant stated that he had not called it estoppel. Rather, he had referred to bad faith. We have accordingly considered this not as a separate ground of appeal, but as part of the "utmost good faith" ground.
3. While the issue of leave for legal representation being granted by the Tribunal in the proceedings below was raised in the Notice of Appeal, the appellant did not press this as a ground of appeal.
4. The appellant also sought leave to appeal on the basis that the decision is not fair and equitable and is against the weight of evidence.

Ground 1: The Tribunal misinterpreted or misapplied the definition of "developer" in the HB Act.

1. It is not in dispute that cl 3.4 of the Policy states that the Policy does not cover a claim by a developer. It is also not in dispute that for the purposes of the policy, "developer" has the same meaning as it does under the HB Act.
2. The definition of a developer in the HB Act is also not in dispute; that is, for the purposes of the HB Act, a person is a developer if residential building work is done "in connection with an existing or proposed dwelling in a building or residential development where 4 or more of the existing or proposed dwellings are or will be owned by the individual, partnership or corporation".
3. In the Tribunal proceedings the appellant argued that the building work did not consist of four or more dwellings. The Tribunal's rejection of the appellant's argument in this regard was not challenged in the appellant's submissions at the appeal hearing. In any event, the material provided to the Tribunal and on the appeal clearly indicates that the building work included the construction of four residential units on the first floor of the Property, comprising three two bedroom dwellings and one one-bedroom dwelling: see, for example, Central Coast Council Development Application Assessment Report at page 10 of the respondent's appeal bundle.
4. In his written submissions on the appeal, the appellant expressed the view that the legislature did not have in mind his situation when formulating the definition of "developer" in the HB Act. He submitted at [11] of his appeal submissions in reply: As the law had to be circumspect but also specific, I suggest that the sections of the act defining "developer" meant to say, "for example, owning four units or more" rather than making the only defining aspect.
5. The appellant submitted that we should construe the definition of "developer" in the HB Act in such a way as to benefit him, specifically by adding words to the definition. While the contemporary approach to statutory construction requires both the text and the context and purpose of the relevant statutory provision to be considered (see SZTAL v Minister for Immigration and Border Protection [2017] HCA 34; (2017) 347 ALR 405 at [14]), there is no principle of statutory construction that allows the definition of a particular word in a statute to be changed by the addition of one or more words to that definition. This is, in effect, what the appellant invites us to do.
6. In our view, the definition of developer in s 3A of the HB Act is clear. The appellant is a developer for the purposes of the HB Act because he owns the four proposed dwellings which are the subject of the residential building work. The Tribunal did not misinterpret or misapply s 3A.
7. This ground of appeal fails.

Ground 2 - The Tribunal erred in not finding that the respondent had not complied with its obligation to act with utmost good faith.

1. The appellant argued that the respondent had not acted in good faith in issuing the Policy and then relying on the "developer" exclusion to refuse his claim. In his written submissions in the Tribunal proceedings, the appellant claimed that the respondent's actions in this regard constituted "extremely bad faith": Appellant's bundle page 7.
2. In his written submissions, the appellant refers to the "utmost good faith" principle referred to in s 13 of the Insurance Contracts Act 1984 (Cth) (the IC Act). However, the IC Act does not directly apply in the present case. This is because it does not bind the Crown in right of a State (s 3(1)) and it does not apply to State insurance contracts (s 9(2)).
3. However, there is no dispute that the principle of utmost good faith applies to the conduct of both parties to an insurance contract. As Leeming JA stated in TAL v Shuetrim (2016) 91 NSWLR 439; [2016] NSWCA 68 at [49]: 49 The obligation to act in utmost good faith, of course, predates statute. As Emmett J said in AMP Financial Planning Pty Ltd v CGU Insurance Ltd [2005] FCAFC 185; 146 FCR 447 at [88]-[89], the concept of utmost good faith or uberrima fides has always been present in the law of insurance, and encompasses notions of fairness, reasonableness and community standards of decency and fair dealing, and may be breached by capricious or unreasonable conduct which falls short of dishonesty. That part of his Honour's reasons was agreed with by Moore J and, on appeal, by Gleeson CJ and Kirby and Crennan JJ: CGU Insurance Ltd v AMP Financial Planning Pty Ltd [2007] HCA 36; 235 CLR 1 at [15] and [128].
4. The appellant's appeal submission in respect of the good faith issue is in essence that the respondent breached its obligation to act in utmost good faith by directing the broker to apply for a multi-dwelling policy and then issuing the Policy without disclosing that as a developer he was not covered by the Policy.
5. The Tribunal rejected the appellant's argument, stating: I am not persuaded that there is any substance in the Applicant's allegations of bad faith on the part of the Respondent. The Policy was taken out in the usual way, and, like any written contract, contains various clauses including here clause 3 which is clearly titled "Loss and damage for which the policy provides no cover". Clause 3 includes cl 3.4(a), which is discussed above, provides that "[t]he policy does not cover a claim by any person who is, in relation to the work: (a) a developer". "Developer" is then clearly defined in cl 7 ("Terms with special meanings") as having the same meaning as it does under the HB Act (also set out above). I see no reason not to give effect to the ordinary meaning of cl 3.4(a). I reject the Applicant's various submissions (variously expressed) that the Respondent's "bad faith" disentitles it from being permitted to rely on the exception contained in cl 3.4(a) of the Policy.
6. In written submissions in the appeal proceedings, the appellant argued that the principle of utmost good faith required the respondent, having issued the Policy, to inform him about the limitation of the Policy. He submitted that he had an expectation that he would be covered by the Policy. The appellant also submitted that the respondent "violated the principle of consumer protection laws" by hiding information "behind this 'maze' of important regulations / information" and by relying on the exclusion to avoid liability when a trigger event occurred.
7. We do not accept that the respondent failed to comply with its obligation in respect of the utmost good faith principle.
8. First, Centra was obliged to obtain an HBCI policy in accordance with s 92(1) of the HB Act, which provides: 92 Contract work must be insured (1) A person must not do residential building work under a contract unless - (a) a contract of insurance that complies with this Act is in force in relation to that work in the name under which the person contracted to do the work, and (b) a certificate of insurance evidencing the contract of insurance, in a form approved by the Authority, has been provided to the other party (or one of the other parties) to the contract.
9. Second, the material before the Tribunal indicates that Centra's broker applied for the Policy in the usual way, albeit apparently some months after Centra entered into the contract with the appellant. The appellant says that the broker initially suggested and applied for a "single dwelling policy" and that the respondent "deemed this policy inappropriate and suggested the current policy, without pointing to the differences in cover". However, the materials before us do not contain evidence that a single dwelling policy was at any stage suggested or applied for by the broker. In any event, given that the residential building work involved the construction of four dwellings, an application for a multi-dwelling policy was clearly appropriate. There is nothing in the material before us to suggest that, once the correct application had been submitted and the premium paid, there was any reason for the respondent not to issue the Policy.
10. Third, there is nothing in the material before us to suggest that the Policy does not comply with the terms of the HB Act. The existence of the developer exclusion is consistent with and permitted by the terms of the HB Act and the Home Building Regulation 2014 (the Regulation), in that it is the intention of the HB Act that parties other than builders and developers are the beneficiaries of HBCI insurance. In relation to this, s 99(2) of the HB Act and cl 37(2) of the Regulation make it clear that developers do not have to be covered by an HBCI insurance policy.
11. Fourth, it is clear from the material provided that there was no direct contact between the appellant and the respondent in the process of applying for the Policy. As noted above, the builder was obliged to obtain the policy, Centra's broker applied for the policy and any communications about the Policy prior to it being issued were between the respondent and the broker. There is nothing to suggest that in its dealings concerning the issuing of the policy the respondent behaved in any way that was unfair, unreasonable or otherwise in breach of community standards of decency and fair dealing.
12. Fifth, there was no obligation on the respondent to specifically disclose to the appellant that the Policy contained a developer exclusion. The builder had to obtain the Policy (paid for by the appellant) and the respondent had to issue it. As noted above, the respondent communicated with Centra's broker, which is the usual process.
13. Sixth, there is nothing in the material before us to suggest that the existence of the developer exclusion in the Policy was unknown to Centra and/or to Centra's broker. The appellant queried both the premium and what was covered by the Policy. This was done in an email exchange with Centra's broker: see pages 27-30 of the appellant's bundle. Apparently in response to the appellant's email, Centra's broker advised that the cost of the Policy was set by the State government and provided some general information about HBCI insurance cover. To the extent that Centra's broker did not give the appellant adequate details of the Policy when the appellant asked what he was covered for, or advised him that that the Policy contained a developer exclusion that applied to him, this is not the fault of the respondent and does not constitute a breach of the respondent's utmost good faith obligation.
14. Seventh, in relation to the appellant's "estoppel" argument, the respondent did not depart from any "assumed position". We accept that the appellant assumed that he was covered by the Policy, but the respondent was not responsible for that assumption. The Policy always contained the developer exclusion and the respondent did not represent otherwise to the appellant.
15. Overall, we are not satisfied that the Tribunal erred in rejecting the appellant's submissions in respect of the "utmost good faith" principle. This ground of appeal fails.

Leave to appeal

1. The appellant seeks leave to appeal on the basis that the decision is not fair and equitable and against the weight of evidence.
2. We accept that the appellant considers that the situation he is in is "unfair". However, this is not of itself a basis for leave to appeal. The "not fair and equitable" ground for leave to appeal essentially concerns process rather than outcome. There is nothing in the material provided to suggest that there was anything unfair in the conduct of the Tribunal proceedings. The appellant was clearly given an opportunity to present his case and the Tribunal's decision demonstrates that the appellant's evidence and submissions were taken into account.
3. There is also nothing in the material before us to suggest that the decision was against the weight of evidence. As noted above, the facts of this case are not in dispute. The dispute between the parties is not about the evidence. It concerns the interpretation of the definition of "developer" in the HB Act, the applicability of the developer exclusion in the Policy and whether the respondent breached its utmost good faith obligation.
4. We are not satisfied that the appellant has established a basis for leave to appeal.

Conclusion

1. While we accept that the appellant genuinely feels aggrieved by the rejection of his insurance claim, the appellant has not established that the Tribunal made an error of law or that there is a basis for leave to appeal.

Costs

1. The respondent sought an order for costs in the event that the appeal is dismissed. The parties made oral submissions on this issue at the end of the appeal hearing.
2. The general rule in relation to costs in the Tribunal is that unless special circumstances are established, the parties pay their own costs: s 60(1) and s 60(2) of the NCAT Act.
3. Section 60(3) of the NCAT Act sets out factors to which regard may be had in deciding whether there are special circumstances. These factors are: 1. whether a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to the proceedings; 2. whether a party has been responsible for prolonging unreasonably the time taken to complete the proceedings; 3. the relative strengths of the claims made by each of the parties, including whether a party has made a claim that has no tenable basis in fact or law; 4. the nature and complexity of the proceedings; 5. whether the proceedings were frivolous or vexatious or otherwise misconceived or lacking in substance; 6. whether a party has refused or failed to comply with the duty imposed by section 36(3); 7. any other matter that the Tribunal considers relevant.
4. The special circumstances relied on by the respondent are the weakness of the appeal, that the appeal was lacking in substance and that the appeal had no tenable basis in fact or law. The appellant objects to the costs application. He submitted that he raised some legal points and that he should not be "punished" with a costs order.
5. The term "special circumstances" is not defined in the NCAT Act. It has been interpreted to mean circumstances that are out of the ordinary but not necessarily extraordinary or exceptional. The discretion to award costs must be exercised judicially having regard to the underlying principle that parties to proceedings in the Tribunal are ordinarily to bear their own costs: Megerditchian v Kurmond Homes Pty Ltd [2014] NSWCATAP 120 at [11].
6. In Alexander James Pty Ltd v Pozetu Pty Ltd (No. 2) [2016] NSWCATAP 75 at [14] the Appeal Panel stated: An assessment whether circumstances are "special" involves the exercise of a value judgement carried out by way of comparison between what is not "special", and what is special. There are no scientific means by which the former can be ascertained. The evaluative process is necessarily one of impression informed by the particular provisions of section 60, which by sec 60(3)(f) incorporates also a consideration of section 36(3) of the Act.
7. In our view, the appellant's appeal was extremely weak. He raised legal issues (that is, the interpretation of the definition of a developer and whether the respondent had breached its utmost good faith obligations), but his grounds of appeal realistically had no prospects of success, particularly given the undisputed facts of the case. Nor was there any realistic chance that the appellant would be granted leave to appeal. While we do not characterise the case as having "no tenable basis in fact or law", we nevertheless conclude that the extreme weakness of the appellant's case constitutes special circumstances warranting an order for costs. Contrary to the appellant's submission, an order for costs is not "punishment". Rather, it is an acknowledgment that the respondent has been put to unnecessary costs in defending an appeal that could not succeed.

Orders 1. Leave to appeal is refused. 2. The appeal is dismissed. 3. The appellant is to pay the respondent's costs of the appeal on the ordinary basis, as agreed or assessed.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar 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: 24 February 2022