[1995] HCA 17
CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384
[1997] HCA 2
Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389
[1996] HCA 36
Henville v Walker (2001) 206 CLR 459
[2001] HCA 52
Hunt & Hunt v Mitchell Morgan Nominees Pty Ltd (2013) 247 CLR 613
Source
Original judgment source is linked above.
Catchwords
[1995] HCA 17
CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384[1997] HCA 2
Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389[1996] HCA 36
Henville v Walker (2001) 206 CLR 459[2001] HCA 52
Hunt & Hunt v Mitchell Morgan Nominees Pty Ltd (2013) 247 CLR 613[2013] HCA 10
I&L Securities Pty Limited v HTW Valuers (Brisbane) Pty Limited (2002) 210 CLR 109[2002] HCA 41
Independent Commission Against Corruption v Cunneen (2015) 256 CLR 1[2012] HCA 26
Saaed v Minister for Immigration and Citizenship (2010) 241 CLR 252[2010] HCA 23
State Government Insurance Commission v Stevens Brothers Pty Ltd (1984) 154 CLR 552
Tabet v Gett (2010) 240 CLR 537
Judgment (15 paragraphs)
[1]
Background
In 2002, a company known as Great Wall Constructions Pty Ltd (the builder) undertook to construct a residential strata title development at Lilyfield. The builder could not lawfully do that work unless there were in force, in relation to it, a policy of insurance that complied with the Home Building Act 1989 (NSW) (the HB Act) [1] . The respondent (Allianz) was prepared to provide such a policy, but only on condition that the appellants (the indemnifiers), who were directors and shareholders of the builder or their associates, agreed to provide indemnities. This they did.
Allianz issued the policy on 2 December 2002. The builder thereafter carried out the work. The work was completed in late 2003, and a final occupation certificate was issued on 18 December 2003.
The strata plan was registered on 23 January 2004. Thereupon, the Owners Corporation for the strata scheme came into existence, and the common property of that scheme became vested in the Owners Corporation.
In July 2009, the Owners Corporation made a claim against Allianz for indemnity under the policy in respect of loss or damage (defects in the common property) said to have been caused in breach of the statutory warranties implied by s 18B of the HB Act. Great Wall was deregistered, and thereupon ceased to exist, in November 2010. Allianz accepted liability under the policy in August 2011. Remedial work was carried out. On 14 February 2013, Allianz settled with the Owners Corporation, on the terms set out in a written agreement styled "Terms of Settlement".
Allianz made demand upon the indemnifiers pursuant to the deeds of indemnity that they had provided. The indemnifiers refused to indemnify Allianz. Allianz commenced proceedings in the District Court.
By the time proceedings came on for trial below, the amount of the indemnity (if entitlement were proved) was agreed at $185,000. Further, Allianz and the indemnifiers agreed that the only issue between them was whether Allianz's claim was barred by operation of s 109ZK(1) of the EPA Act. The primary judge held that s 109ZK(1) did not bar Allianz's claim. Accordingly, his Honour gave judgment for Allianz in the agreed sum.
The indemnifiers appeal to this court from the whole of the decision of the primary judge. In essence, the grounds of appeal argue that the primary judge erred in his construction of the definition of "building action" in s 109ZI of the EPA Act. (The limitation set out in s 109ZK(1) prohibits "a building action" from being brought more than 10 years after the date of issue of the final occupation certificate). The grounds of appeal in effect particularise that contention in various ways, but it is unnecessary to state their detail.
[2]
The HB Act
Section 18B of the HB Act implies various statutory warranties into every contract to do residential building work. Since there is no doubt that the warranties applied to the work done by the builder and were breached, it is not necessary to set out their detail. By s 18C of the HB Act, the benefit of the statutory warranties extends to "[a] person who is the immediate successor in title to… a developer who has done residential building work on land". It is common ground that the Owners Corporation, as the immediate successor in title to the developer with whom the builder contracted to do the residential building work in question, had the benefit of the statutory warranties.
As I have noted, s 92 requires residential building work to be insured. I set out s 92(1):
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 prescribed by the regulations, has been provided to the other party (or one of the other parties) to the contract.
Sections 103BB and 103BC of the HB Act (which were enacted after the events in question took place, but which have retrospective effect) provide time limits for claims under policies of insurance required by s 92 for residential building work. Those sections read as follows:
103BB Time limits for policies issued from 1.7.2002
(1) A contract of insurance under the Home Building Compensation Fund entered into on or after 1 July 2002 provides insurance cover in respect of loss only if a claim in respect of the loss is made to the insurer during the period of insurance.
Note: Subsection (1) is the general rule but there are exceptions to this general rule, as provided by this section.
(2) A loss that becomes apparent in the last 6 months of the period of insurance has an "extended claim period" , which permits a claim in respect of the loss to be made within 6 months after the loss becomes apparent. There is no extended claim period for a loss that arises from non-completion of work.
(3) When a loss becomes apparent during the period of insurance but a claim cannot be made during that period because an insured event has not occurred, a claim can be made after the period of insurance (as a "delayed claim") but only if:
(a) the loss was properly notified to the insurer during the period of insurance (or within 6 months after the loss became apparent in the case of a loss that became apparent in the last 6 months of the period of insurance), and
(b) the beneficiary under the contract of insurance making the claim diligently pursued the enforcement of the statutory warranty concerned after the loss became apparent.
(4) A delayed claim can also be made when the insured event occurs in the last 6 months of the period of insurance (as if the insured event did not occur until after the period of insurance) subject to compliance with the other requirements of this section for a delayed claim.
(5) (Repealed)
(6) The regulations can make provision for or with respect to what constitutes or does not constitute diligent pursuit of the enforcement of a statutory warranty for the purposes of this section.
(7) A loss is "properly notified" to an insurer only if the insurer has been given notice in writing of the loss and the notice provides such information as may be reasonably necessary to put the insurer on notice as to the nature and circumstances of the loss. The regulations can make provision for or with respect to the form and content of such a notice.
103BC 10-year "long stop" limit on claims under existing policies
(1) Despite any other provision of this Act, a contract of insurance under the Home Building Compensation Fund entered into before 1 July 2010 does not in any circumstances provide insurance cover in respect of loss unless a claim in respect of the loss is made to the insurer within 10 years after the work insured was completed.
Note: Section 3B provides for the date of completion of residential building work.
(2) This section does not operate to extend any period of insurance.
The expression "insurance under the Home Building Compensation Fund" is defined in Schedule 1 to the HB Act to mean "a contract of insurance required to be entered into by or under Part 6". Part 6 includes ss 92, 103BB and 103BC.
[3]
The EPA Act
When Part 4C was first introduced into the EPA Act, with effect from 1 July 1998, it provided as follows, in ss 109ZI, 109ZJ, 109ZK and 109ZL:
Division 1 Preliminary
109ZI Definitions
In this Part:
building action means an action (including a counter-claim) for loss or damage arising out of or concerning defective building work.
building work includes the design, inspection and issuing of a Part 4A certificate or complying development certificate in respect of building work.
subdivision action means an action (including a counter-claim) for loss or damage arising out of or concerning defective subdivision work.
subdivision work includes the design, inspection and issuing of a Part 4A certificate or complying development certificate in respect of subdivision work.
Division 2 Liability
109ZJ Apportionment of liability
(1) After determining an award of damages in a building action or subdivision action, a court must give judgment against each contributing party for such proportion of the total amount of damages as the court considers to be just and equitable, having regard to the extent of that party's responsibility for the loss or damage in respect of which the award is made.
(2) Despite any Act or law to the contrary, the liability for damages of a contributing party is limited to the amount for which judgment is given against that party by the court.
(3) A contributing party cannot be required:
(a) to contribute to the damages apportioned to any other person in the same building action or subdivision action, or
(b) to indemnify any such other person in respect of those damages.
(4) In this section contributing party, in relation to a building action or subdivision action, means a defendant to the action found by the court to be jointly or severally liable for the damages awarded, or to be awarded, in the action.
109ZK Limitation on time when building action or subdivision action may be brought
(1) Despite any Act or law to the contrary:
(a) a building action may not be brought in relation to any building work more than 10 years after the date on which the relevant final occupation certificate is issued, and
(b) a subdivision action may not be brought in relation to any subdivision work more than 10 years after:
(i) in the case of work completed before the relevant subdivision certificate is issued, the date on which the relevant subdivision certificate is issued, or
(ii) in the case of work completed after the relevant subdivision certificate is issued, the date on which the compliance certificate that certifies that the work has been completed is issued.
(2) This section does not operate to extend any period of limitation under the Limitation Act 1969.
109ZL Division not to affect rights to recover damages for death or personal injury
Nothing in this Division applies to or affects any right to recover damages for death or personal injury arising out of or concerning defective building work or subdivision work.
Section 109ZJ was repealed with effect from 1 December 2004, contemporaneously with the commencement of Part 4 of the Civil Liability Act 2002 (NSW). It may be noted that s 34(3A) of the Civil Liability Act, which was inserted with effect from 25 October 2011, provides that Part 4 "does not apply to a claim in an action for damages arising from a breach of statutory warranty under Part 2C of the Home Building Act 1989 and brought by a person having the benefit of the statutory warranty". In other words, since the commencement of subs (3A), no proportionate liability regime applies to claims for breaches of statutory warranty.
At the same time as s 109ZJ was repealed, s 109ZK(1) was slightly amended. It now reads as follows:
109ZK Limitation on time when building action or subdivision action may be brought
(1) Despite any Act or law to the contrary, a building action may not be brought in relation to any building work:
(a) more than 10 years after the date on which the relevant final occupation certificate is issued, or
(b) in a case where no final occupation certificate is issued, more than 10 years after:
(i) the last date on which the building work was inspected by a certifying authority, or
(ii) if no such inspection has been conducted, the date on which that part of the building in relation to which the building work was carried out is first occupied or used.
Sections 109ZI and 109ZL were not amended when s 109ZJ was repealed.
[4]
Relevant provisions of the policy, the indemnities and the Terms of Settlement
Clause 1 of the policy provided indemnity to "the Building Owner". I set it out, so far as it is relevant:
1. The Insurer will indemnify the Building Owner for loss or damage in respect of residential building work:
1.1 which results from non-completion of the work because of the insolvency, death or disappearance of the Contractor;
1.2 arising from breach of a statutory warranty and which either the Contractor is unable to rectify, or the Building Owner is unable to recover compensation from the Contractor, because of the insolvency death or disappearance of, the Contractor.
Clause 6 of the policy provided for limits on liability. Nothing of present moment turns on those limits.
Clause 2 of the deeds (there were several, in identical terms) provided as follows:
2. The indemnifier unconditionally and absolutely agrees to Indemnify and keep indemnified the Insurer for all loss, damage, costs, charges, or other liabilities incurred or paid as a result of any claim arising under the Policy and all amounts which the insurer must pay and is liable to or may become liable to pay under the said policy (whether or not the Insurer has paid any amount) in all cases whether or not the claim arises or is made before or after the date of this deed PROVIDED ALWAYS that the amount of such indemnity shall be no greater than $200,000 per claim.
Clause 3(c) provided:
3(c) On receiving a demand from Dexta or the Insurer, the indemnifier will pay to Dexta all of the monies so demanded forthwith, together with interest at the rate of Ten per cent (10%) per annum from the date of such demand, all losses, damages, costs, charges, fees expenses or other liabilities borne by the Insurer, whatsoever incurred by the insurer, which shall become due and payable on receipt of such demand:
Clause 4(a) provided:
4(a) The Indemnifier unconditionally, irrevocably and without any reservation, requests, authorises and consents to Dexta settling or compromising any claim, suit or judgment under or relating to the Policy without any notice, consent or any communication with the Indemnifier or the obtaining any further consent, and the Indemnifier shall not compete with Dexta for any claim whatsoever and howsoever obtained against the Contractor:
"Dexta" is Dexta Corporation Limited, which acted as agent for Allianz in connection with the insurance. The "Insurer" was defined to mean Allianz.
The Terms of Settlement, which took effect as an agreement between Allianz and the Owners Corporation, commenced by reciting various matters of background. Those matters included the alleged defects and the claim under the policy, and that the Owners Corporation intended to enter into a "New Building Contract" to carry out "Works" in order to rectify the "Defects".
Allianz agreed to make payments direct to the "New Builder" in accordance with the contract between that builder and the Owners Corporation, up to the limit of the "Settlement Sum" ($153,639, together with the cost of approved variations). The Owners Corporation agreed to ensure that the settlement sum was applied to payment of amounts owing to the New Builder for rectification works. There were provisions for Allianz to be released on complying with its obligations under the Terms of Settlement, and for assignment to Allianz of the Owners Corporation's rights in respect of the defective building work.
[5]
The reasons of the primary judge
The primary judge articulated the nature of the dispute. He set out the (agreed) facts and the terms of the relevant legislation. After directing himself as to the principles applicable to the construction of statutes, the primary judge turned to the resolution of the dispute.
First, his Honour considered a number of "contextual and historical matters". They indicated to him that the definition of "building action" in s 109ZI "was not aimed at proceedings of the type in the present proceedings" [2] .
His Honour noted [3] that it was common ground "that some limitation must be read into the natural and ordinary meaning of 'building action' [because, if it were not] it would cover, because of the general words used, a number of causes of action which could not have been objectively intended to be prevented". It was not suggested in this appeal that his Honour had erred in stating that this was common ground between the parties. Nor was it suggested that his Honour had erred in accepting it as correct.
The primary judge said [4] that the proper limitation upon those general words should be ascertained by reading the definition in the context of the statute as a whole, and taking into account its purpose or object and the mischief sought to be overcome. Again, no one submitted that his Honour erred, in principle, in approaching the matter in that way.
The primary judge identified the relevant "mischief" [5] as follows:
58 It is clear, and is accepted by the parties, that the mischief which Part 4C was intended to remedy was the decision of the High Court in Bryan v Maloney (1995) 182 CLR 609. That case raised the spectre of a potential "indeterminate time liability" for builders and building professionals to successors in title. That was the mischief which Section 109ZK sought to overcome. The case was important not just to bare liability but also to the potential need for building professionals to have insurance cover for lengthy periods including lengthy run off insurance cover.
Again, neither party submitted that his Honour had erred in stating that this was the common position of the parties at trial. The indemnifiers' complaint was, rather, that the primary judge had erred by (so it was said) confining the meaning of "building action" to "addressing claims for compensation arising from latent defects identified in Bryan v Maloney …" [6] . It is convenient to say at this point that I do not think that the primary judge said anything of the sort.
The primary judge considered that it was necessary to characterise the cause of action advanced by Allianz: was it in substance one for loss or damage arising out of or concerning defective building work, or was it in substance one for damages for failure to meet a contractual obligation "which is only indirectly connected to defective building work?" [7] . His Honour considered that the present case was of the latter variety. He explained why [8] . Nothing turns on this [9] .
The primary judge added [10] that his preferred interpretation was confirmed by the explanatory note to the Environmental Planning and Assessment Amendment Bill 1997, by which (more accurately, by the enactment of which) Part 4C was introduced into the EPA Act.
[6]
The parties' submissions on appeal
Mr Bambagiotti of Counsel, who appeared for the indemnifiers, submitted that the primary judge had erred in giving the definition of "building action" a narrower construction then the meaning that, he said, was apparent from its plain words. He submitted that the primary judge fell into error in this way, because he had sought impermissibly to constrain the proper construction of the definition by reference to his Honour's erroneous perception of the mischief that Part 4C of the EPA Act was intended to combat. He referred in particular to the reasons of the primary judge at [66] where his Honour stated:
The above interpretation is, in my view, confirmed by the Explanatory note to the Environmental Planning and Assessment Amendment Bill 1997 which gave rise to the 1997 Amendment Act. That makes clear that the imposition of a limitation period of 10 years under the proposed Section 109ZK in the amendment Act was designed to address the law concerning latent defects in Bryan v Maloney in which the then current approach was that the "limitation period begins to run only when the defect becomes apparent". It was apparently from the note not intended to cover causes of action of the type in the current proceedings.
Mr Bambagiotti noted, correctly, that what was in issue was the proper construction of a statutory definition, rather than the construction of a not substantive provision (in this case, s 109ZK(1)). He submitted that statutory definitions should not be limited or qualified unless the language used or its context dictated that this should be done.
Mr Bambagiotti submitted that the evident purpose of Part 4C was to alleviate the problems, for those involved in performing building work (as defined) and their insurers, perceived to have arisen from the decision of the High Court in Bryan v Maloney [11] . That problem, Mr Bambagiotti submitted, was the spectre of indeterminate liability for building work: liability that was unlimited as to time, as to amount and as to those to whom it might be owed. Mr Bambagiotti submitted that the only proper way to give effect to this, as he called it, beneficial legislation was to construe it broadly, so as to ensure that the statutory purpose was achieved.
Mr Bambagiotti noted, correctly, that the language of connection or causation linking "action" to "defective building work" was of the widest possible kind. When read into s 109ZK(1), he submitted that the effect was to introduce a time bar for any action connected with the defective building work, regardless of the nature of the cause of action.
Mr Bambagiotti noted that the insurance was required before the builder could undertake the building work in question. In turn, he noted, the deeds of indemnity were required before Allianz would issue the insurance policy. The loss that was the subject of the indemnity was one that arose from the defective performance of the insured building work. In those circumstances, Mr Bambagiotti submitted, there was a sufficient connection between the action brought against the indemnifiers and the defective building work in question, so that the provisions of s 109ZK should apply.
Mr Bambagiotti referred to the introductory words of s 109ZK(1): "Despite any Act or law to the contrary…". He submitted that these words reinforced what he said was the proper and wide construction of the definition of "building action", and its application to the facts of the present case. The suggested failure of the primary judge to deal with the indemnifiers' submissions on the effect of those words was the subject of a separate ground of appeal.
Mr Lynch of Senior Counsel, who appeared with Ms Saunders of Counsel for Allianz, submitted, correctly, that the words of connection in the definition of "building action", linking the concept of "action" to "defective building work", were capable of a very wide application, which was incapable of precise general definition. He submitted that in those circumstances there was no relevant "plain meaning", and that their application in the present case required attention to text and context, including (as the primary judge had said) reference to the existing state of the law, the mischief intended to be addressed and the explanatory memorandum and other materials relevant to the Bill for the Act.
Mr Lynch stressed the fact that when originally enacted, Part 4C included s 109ZJ which, like s 109ZK, was predicated upon the existence of a building action (subdivision actions can be put to one side for present purposes). By reference to the text of s 109ZJ(1), Mr Lynch submitted that the evident purpose of Part 4C was to remedy perceived injustices in the way that damages could be recovered by successful plaintiffs: both as to the persons against whom they might be recovered (hitherto, in some cases at least, those with the deepest pockets) and when they could be recovered (hitherto, in some cases at least, without any clear or precise time limitation).
Mr Lynch submitted that the primary judge had not, impermissibly or otherwise, confined the operation of s 109ZK(1) in the manner suggested by Mr Bambagiotti. Mr Lynch submitted, further, that the primary judge had dealt with the introductory words to s 109ZK(1), and in any event that they added nothing to the indemnifiers' case.
Both Mr Bambagiotti and Mr Lynch referred to numerous authorities, particularly in their written submissions. With great respect both to Counsel and to the judges who decided those authorities, many of them appear to have very little to do with the issue in this case; and many others state propositions that are neither contestable nor contested. I shall refer only to those few authorities that do seem to me in some way to bear upon the resolution of this appeal.
[7]
The approach to statutory construction
Counsel's submissions placed some emphasis on ss 33 and 34 of the Interpretation Act 1987 (NSW). There is no need to set out those sections.
One of the peculiarities of Part 4C is that it is, in effect, a self-contained code of limited application, appearing in a statute to which, otherwise, it bears little relationship. Accordingly, the familiar task of construing statutory provisions in the context of the statute as a whole means, in this case, that the contested provisions of Part 4C should be considered by reference to that Part as a whole, rather than to the EPA Act as a whole.
It is clear that the provisions of a statute must be interpreted in context, and that "context" includes such things as the existing state of the law and the mischief that the statute was intended to cure [12] .
Although extrinsic materials may assist in identifying the mischief that a statute was intended to overcome or the objects that it was intended to achieve, it remains always the position that the court's task is to construe the language of the statute, not the language used in the second reading speech or in some explanatory memorandum. So much appears from Saaed v Minister for Immigration and Citizenship [13] . The court there observed that the process of construction of a statute requires it to discern the intention manifested by the legislature, and that statements of legislative intention in extrinsic materials "cannot overcome the need to carefully consider the words of the statute to ascertain its meaning" [14] .
The plurality reasons in CIC Insurance referred [15] with approval to an observation of McHugh JA in Isherwood v Butler Pollnow Pty Ltd [16] . McHugh JA, with whom Glass JA agreed, said [17] that if one reads the apparently plain words of a statute in the light of the mischief that it was designed to overcome and the objects that it sought to achieve, those plain words may wear a very different appearance.
I do not think it is necessary, for the resolution of this appeal, to say anything more about the principles guiding the approach to statutory construction.
[8]
"Action"
It is obvious that the operation of s 109ZK(1) should not be constrained by reference to the pleading or elements of the cause of action that is advanced. As Mr Bambagiotti submitted, it is capable of covering causes of action founded on contract and on tort, and causes of action litigated (for want of a better word) in forums other than courts: for example, in this State, the New South Wales Civil and Administrative Tribunal; its equivalents in other states; and in arbitrations. That is however not to the point. To say that the concept of a "building action" should not be confined to particular causes of actions pleaded in particular ways says nothing about the proper construction of the statutory definition of that expression.
An "action" (whether an action at law or otherwise) may be said to arise from, and to concern, so many things or states of affairs as are necessary to exist for the action to exist. Applied to a legal proceeding (one of the kinds of "action" of the kind clearly intended to be caught by the definition of "building action" in s 109ZI of the EPA Act), it may be said that the action will arise from everything that must exist before there can be any complete and maintainable cause of action.
The action brought by Allianz against the indemnifiers was based on the indemnifiers' failure to pay on demand the amount that Allianz had expended pursuant to the policy. I am prepared to assume that, as Meagher JA explains at [16], that action may be characterised as an action for damages for breach of the promise to indemnify.
The liability that Allianz sought to have made good by the indemnifiers was one arising out of, and conditioned by, the relevant provisions of the policy. First of all, the claimant (the Owners Corporation) must have suffered loss or damage in respect of residential building work undertaken by the builder. Next, that loss or damage must have arisen from breach of a statutory warranty. Next, and leaving aside the first alternative (non-rectification), the Owners Corporation must have been unable to recover compensation from the builder because of its insolvency, death or disappearance. Each of those conditions had to be satisfied before Allianz became liable to pay any amount to or on behalf of the Owners Corporation; and each of them was.
Neither Allianz nor the indemnifiers were parties to the building contract. I accept that at least some of the indemnifiers were directors of or shareholders in the builder. I accept, further, that there was a clear factual connection between the relevant contracts: the building contract, the insurance policy and the deeds of indemnity.
In those circumstances, as Mr Bambagiotti submitted, the existence in fact of defective building work was a necessary condition of:
1. Allianz's liability to pay money to or for the benefit of the Owners Corporation; and
2. the indemnifiers' obligation to indemnify Allianz in respect of such payments.
It was not however a sufficient condition to trigger either of those obligations. Demand was essential to trigger the indemnifiers'' liability to pay; and both demand and failure to pay were essential elements of Allianz's causes of action against the indemnifiers.
[9]
"Building action"
The context within which the definition of "building action" should be construed is Part 4C of the EPA Act as it was introduced in 1 July 1998. That context included s 109ZJ. I do not think that the subsequent repeal of that section has any impact on the construction of the definition of "building action". It cannot be supposed that the legislature, simply by repealing s 109ZJ, intended to affect, in some undisclosed way, the construction or legal effect of those sections of Part 4C that continued in force.
Looking at the language of Part 4C when it was introduced, its evident purpose was to combat the mischiefs perceived to arise from the then state of the law, including specifically:
1. that a plaintiff in a "building action" could select a defendant or defendants with the deepest pockets, and seek to recover the whole of its damages from them, notwithstanding that their responsibility for those defects might have been very limited; and
2. the problems identified that were perceived to have arisen from the decision in Bryan [18] .
The legal effect of the words in question - the linking words "arising out of or concerning" - cannot be stated with precision or in any general way. They are, to borrow the language of the majority in Independent Commission Against Corruption v Cunneen [19] , words "of indefinite connotation"; they "are especially susceptible to context"; and thus they "frequently do mean one thing in one legislative context and something quite different in another".
It may be accepted that the linking words form part of a statutory definition. It may also be accepted that, as a general approach to construction, the words of a statutory definition should be given their natural and ordinary meaning, and then read into the substantive provisions of the statute so that those substantive provisions may be construed. This general statement of principle necessarily assumes that the words have a clear, natural and ordinary meaning. But in this case the linking words do not have a fixed and precise meaning, capable of universal application regardless of context.
Section 109ZJ is concerned with apportionment of liability for "damages in a building action or subdivision action". I leave aside, in what follows, further references to "subdivision action". Where damages in a building action are assessed, the court is required to determine and give judgment against each "contributing party" for what the court thinks to be its proportionate responsibility for the total amount of damages. A contributing party has no further liability, nor can it be required to contribute to another contributing party's damages or to indemnify any other contributing party.
In short, the focus of s 109ZJ is on allocation of proportionate responsibility for damages in a building action among those who contributed to their being suffered, once those damages have been assessed.
It follows that, at least for the purposes of s 109ZJ:
1. the subject-matter of a "building action" is an action for damages (in the legal sense) arising out of or concerning defective building work; and
2. the persons who are entitled to the protection of the section are those who have some legal responsibility to compensate the plaintiff for those damages.
Thus, the obvious beneficiaries of the scheme of proportionate liability established by s 109ZJ are those engaged in some way in, so as to have legal liability for defects in, "building work" (and, of course, their insurers).
Section 109ZK gives another protection to those engaged in building work. That protection is the absolute time bar provided in s109ZK(1)(a): the prohibition on bringing after the specified time "a building action in relation to any building work" performed by that person.
Section 109ZL provides an exception, in respect of claims for damages for death or personal injury, to the protections afforded by ss 109ZJ and 109ZK.
Sections 109ZM and following require accredited certifiers and building practitioners to hold insurance, and make provision for the regulations to extend that requirement to "such other persons as are prescribed". Again, although ss 109ZM to 109ZP have been repealed, it cannot be supposed that the legislature intended, by that repeal, to alter the construction or legal effect of the sections that remain in force.
When one considers Part 4C as it was introduced into the EPA Act, the obvious intention of ss 109ZJ and 109ZK was to protect, through the mechanisms of proportionate liability and ultimate time bar, those who were engaged, one way or another, in the performance of building work. In each case, the protection related to liability in damages for the defective performance of such work. The achievement of that statutory purpose does not necessarily require the protection of people who were doing neither, at the suit of someone else who was doing neither, in an action for damages.
Further, as the existing state of the law made clear, someone could suffer loss by (to use of the moment another word of imprecise connotation) defective building work in at least three situations:
1. the defective performance of building work pursuant to a contract to which that person was a party;
2. the Bryan v Maloney situation: the person is a purchaser of property that has latent defects that were the result of defective building work performed for a previous proprietor; and
3. where the defective performance of building work caused physical injury to the person or the person's property.
The recurrent theme in Part 4C is that it is concerned with participants in the building industry. Sections 109ZJ and 109ZK make it clear that those intended to be protected by their provisions are participants in the building industry. The definition of "building action" must be construed to extend to claims against such persons of that nature. The process of construction must seek to give the linking words "arising out of or concerning" sufficient legal effect to ensure that the purposes of, in this case, s 109ZK are met. At the same time, those words should not be given a meaning so wide that the operation of the section goes beyond that which, objectively, the legislature intended it to have.
The function of the linking words is to indicate the source, or origin, or nature, of the "action"; and thus to differentiate a "building action", to which Part 4C will apply, from any other "action", which will be outside Part 4C. The inquiry required by those words is analogous to an inquiry as to causation; something familiar in the law of wrongs.
It has been said, more than once and in various ways, that the answer to a question of causation will depend, in part at least, on the purpose for which the question is asked [20] . That proposition is applicable, by analogy, to consideration of the effect of the linking words "arising out of or concerning".
Applied to the facts of the present case, the question must be answered for the purpose of deciding whether an action for damages involving parties, none of whom contracted to perform, or had contractual or statutory liability for the performance of, residential building work, should be characterised as a "building action" for the purposes of Part 4C of the EPA Act.
I accept that the words "arising out of or concerning", considered at a level of generality, indicate only the existence of some real and discernible connection between the two subjects that they link. It is the very width or imprecision of that concept of connection that requires its precise legal effect, for the purposes of the definition of "building action", to be identified by reference to context: specifically, the pre-existing state of the law, the perceived mischief, and the legislative object insofar as it appears from the words of the statute.
Approaching the words in that way, it seems to me that it cannot be correct to give them the width of operation that they must have if the indemnifiers' appeal is to succeed. The effect of that would be, as I have indicated, to extend the protections of Part 4C to people who did not perform building work or subdivision work and who, as between them and the ultimate beneficiary of that work, have no contractual, statutory or other legal responsibility for it or for its sufficiency. That effect cannot be said to be a necessary, and thus unavoidable, consequence of giving the words the width of application that is required to achieve the statutory purpose.
I have referred earlier to:
1. the common ground noted by the primary judge that there must be some limitation on the natural and ordinary meaning of "building action" [21] ; and
2. Mr Bambagiotti's submission that the primary judge had gone too far in limiting, or narrowing, the nature and ordinary meaning of those words [22] .
There is some inconsistency between Mr Bambagiotti's submissions in this court and the position, apparently accepted by his clients below, as recorded by the primary judge [23] . In reality, Mr Bambagiotti's argument in this court was that the words "arising out of or concerning" should be read at the level of generality to which I referred earlier [24] : indicating only the existence of some real and discernible connection between the "action" and the "defective building work". Presumably, Mr Bambagiotti did not intend to adopt a position that was different to that taken at trial. However, at no point in his submissions did he indicate what was the limitation that should be read in. Nor was Mr Bambagiotti able to formulate a construction that meant that the present action by Allianz did fall within the definition, whereas (for example) a claim by Allianz against a reinsurer would not.
Whilst I do not suggest that those considerations are decisive, they do to my mind indicate the problematic consequences of the approach to construction for which the indemnifiers contend.
I add that I do not intend to state in some definitive or exhaustive way the full extent and effect of the definition of "building action". That task is one that is impossible of fulfilment. It is enough to say that the operation or reach of the definition must be considered with reference to the facts of each case, and taking into account the considerations that I have set out.
[10]
Other issues
As the primary judge pointed out [25] , the Explanatory Note for the Environmental Planning and Assessment Amendment Bill 1997 confirms that the objects sought to be addressed included those that I have identified. I do not think that his Honour erred at all, let alone erred in any relevant way, by having regard to the provisions of that Explanatory Note.
Nor do I think, in any event, that the primary judge constrained his construction of the definition of "building action" in the way that Mr Bambagiotti submitted his Honour had done. When one reads the relevant paragraph of his Honour's reasons [26] , it is quite clear that his Honour relied upon the Explanatory Note for the purpose of identifying the mischief that Part 4C was intended to address. That was permissible. His Honour said no more than that the explanation there given confirmed that s 109ZK(1) was "not intended to cover causes of action of the type in the current proceedings". That was a conclusion that his Honour had reached in any event [27] ; and his Honour regarded the Explanatory Note as confirmatory of that conclusion.
It is correct to note that the primary judge stated at [64], [65]:
There is nothing in the text of the relevant statutory provisions or the context of the Act which would suggest the limitation of the current cause of action propounded by the defendants.
It is submitted by Counsel for the Defendants that such a construction would leave a person in the position of the defendants with a liability where they were unable to seek contribution from the party causing the defective building work. This may be correct but the mischief the legislation was aimed to meet was the indeterminate liability of building professionals and related designers and certifiers.
His Honour at [65] was dealing with a submission that the legislation, on his preferred construction, left the indemnifiers in the position that he identified. This, his Honour said, was consistent with the purpose of Part 4C. If his Honour were correct in identifying the purpose of Part 4C, and construing the words "arising out of or concerning defective building work" accordingly, there was no error in this paragraph.
In the course of submissions, Counsel referred to the decision of Bongiorno J in Australian Rail Track Corporation Ltd v Leighton Contractors Pty Ltd [28] . The short facts of that case were as follows. Leighton was constructing an overpass across the Geelong-Melbourne Railway. A beam collapsed and blocked the tracks. The plaintiffs, all users of the tracks, made claims against Leighton for the recovery of damages that they said that they had suffered by the interruption to their businesses.
Leighton contended that the claim against it was a "building action" for the purposes of the Building Act 1993 (Vic). By s 131 of that Act a "building action" was defined to mean "an action (including a counter-claim) for damages for loss or damage arising out of or concerning defective building work". It will be seen that both the defined term and its definition are the same as those set out in s 109ZI of the EPA Act. The definition of "building work" in the Building Act, although not identical to the definition of the equivalent expression in the EPA Act, was to similar effect.
Section 131 of the Building Act set out a proportionate liability regime that was similar to the regime formerly contained in s 109ZJ of the EPA Act. Jumping ahead for a moment, s 134 of the Building Act was a limitation provision substantially resembling s 109ZK of the EPA Act.
Bongiorno J concluded [29] that the overpass was not a "building". On that basis, there could be no "building action". However, his Honour considered, in the alternative, what would be the case if the overpass were a "building". Even on that assumption, his Honour said, s 131 would have no application. That followed, his Honour [30] said, because the regime did not apply "where the victim of a building practitioner's negligence, nuisance, trespass or other tort is an outside party whose loss and damage is caused by defective building work in only an accidental, incidental or indirect sense".
Bongiorno J said [31] that the apparent width of expressions such as "arising out of" had to be considered by reference to "the purpose of the statute". In this case, that purpose "was not to change the general law of tortious liability" but "to regulate liability, inter se, of building owners and building practitioners [32] ".
In my view, the approach taken by Bongiorno J represents the correct approach to construction that should be taken in this case. The connecting factor must be construed so as to give effect to the evident purpose of the legislation. Relevantly, that purpose is to impose an absolute time bar for the protection of those who otherwise would have some legal liability in damages for defective building work.
[11]
Conclusion on the principal ground
Where an action is brought against someone who did not perform defective building work by a plaintiff who does not claim damages for defective building work, s 109ZK has no application.
In my view, the primary judge did not err in concluding that, properly construed, the legislation does not apply to the action brought by Allianz against the indemnifiers.
[12]
"Despite anything to the contrary…"
Finally, I turn to Mr Bambagiotti's reliance on the introductory words to s 109ZK(1), and the suggested failure of the primary judge to pay sufficient attention to those words. I think it is fair to say that in the course of his oral submissions, Mr Bambagiotti accepted that if the question of construction were resolved against them, the indemnifiers, they could not succeed on this ground alone.
In my view, those words do nothing more than make it clear that the provisions of s 109ZK are, as it were, pre-eminent or paramount. The Court of Appeal of Victoria reached a similar conclusion, in respect of a similar legislative scheme, in Brirek Industries Pty Ltd v McKenzie Group Consulting (Vic) Pty Ltd [33] . The provision that their Honours considered was s 134 of the Building Act. That section read:
Limitation on time when building action may be brought
Despite anything to the contrary in the Limitation of Actions Act 1958 or in any other Act or law, a building action cannot be brought more than 10 years after the date of issue of the occupancy permit in respect of the building work (whether or not the occupancy permit is subsequently cancelled or varied) or, if an occupancy permit is not issued, the date of issue under Part 4 of the certificate of final inspection of the building work.
The Court of Appeal said [34] that the introductory words mean that s 134 operates despite the various different periods of limitation arising either under the Limitation of Actions Act 1958 (Vic) or under any other statute. In my respectful view, the same approach should be taken to the introductory words to s 109ZK(1) of the EPA Act.
[13]
Conclusion and proposed orders
For those reasons, and in addition for the reasons given by Meagher JA (with which, in substance, I agree), I propose that the appeal be dismissed with costs.
[14]
Endnotes
See s 92 of the HB Act.
At [53].
At [54].
At [55].
At [58].
Ground 2.
At [61].
At [62] to [65].
At [70] (below).
At [66].
(1995) 182 CLR 609.
See, by way of example only, CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408 (Brennan CJ, Dawson, Toohey and Gummow JJ).
(2010) 241 CLR 252.
At [31].
At 408.
(1986) 6 NSWLR 363.
At 388.
See at [48] above.
(2015) 256 CLR 1 at [59] (French CJ, Hayne, Kiefel and Nettle JJ).
See, for example, Tabet v Gett (2010) 240 CLR 537 at [112] (Kiefel J); I&L Securities Pty Limited v HTW Valuers (Brisbane) Pty Limited (2002) 210 CLR 109 at [56] (Gaudron, Gummow and Hayne JJ); Henville v Walker (2001) 206 CLR 459 at [99] (McHugh J); see also, in a similar statutory context, Brirek Industries Pty Ltd v McKenzie Group Consulting (Vic) Pty Ltd [2014] VSCA 165 at [108] (Redlich, Whelan and Santamaria JJA).
See at [46] above.
At [52].
At [54] of his Honour's reasons.
At [92].
At [33], [34].
At [66].
At [64].
[2003] VSC 189.
At [15].
At [21].
At [22].
Ibid.
[2014] VSCA 165.
At [115].
[15]
Amendments
24 October 2017 - Coverpage: paragraph references inserted
[9] "which" inserted in "the mischief to which s 109ZK"
[10] duplicate "does not" deleted
[68] "Appeals" deleted from "New South Wales Civil and Administrative Appeals Tribunal"
[76] "or" inserted in "arising out of or concerning"
27 October 2017 - Coverpage: barrister name corrected
06 August 2018 - 6 August 2018
[50] final sentence changed to "Nothing turns on this"
[75] "25 October 2011" changed to "1 July 1998"
[95] cross-reference corrected in footnote 24
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: 06 August 2018
Parties
Applicant/Plaintiff:
Dino Dinov
Respondent/Defendant:
Allianz Australia Insurance Limited
Legislation Cited (8)
Environmental Planning and Assessment Amendment Act 1997(NSW)
Solicitors:
Stanton Legal (Appellants)
Mills Oakley Lawyers (Respondent)
File Number(s): 2016/388878
Decision under appeal Court or tribunal: District Court of New South Wales
Jurisdiction: Civil
Citation: [2016] NSWDC 342
Date of Decision: 05 December 2016
Before: Dicker SC DCJ
File Number(s): 2015/251386
Judgment
BEAZLEY P: I agree with the reasons and orders proposed by McDougall J and the additional observations of Meagher JA.
MEAGHER JA: I agree with the reasons given by McDougall J for dismissing this appeal with costs. I add the following further observations, adopting the abbreviations used by his Honour and assuming a familiarity with the underlying facts as explained by his Honour.
The respondent insurer, Allianz, issued a contract of insurance to the builder, Great Wall, which complied with the HB Act, s 99. That policy insured the person on whose behalf building work was being done by Great Wall, and that person's successors-in-title (together referred to in the policy as the Building Owner), against the risk of being unable, because of insolvency, death or disappearance, to have Great Wall rectify any defective building work or pay compensation for it. In consideration for the issue of that policy, the appellants severally indemnified Allianz against "all amounts which [it] must pay and is liable to or may become liable to pay under the said policy" up to an amount of $200,000. In the proceedings at first instance, Allianz claimed $185,000 from each of the appellants by way of indemnity in relation to moneys it had paid under the home warranty policy.
The question in the appeal is whether the action by Allianz to enforce that indemnity against each appellant is a "building action" brought in relation to "building work" within EPA Act, s 109ZK(1). Taking account of the definitions of "building action" and "building work" in s 109ZI, that question becomes whether the liability of each appellant which Allianz seeks to enforce is properly characterised for the purpose of these provisions as being "for loss or damage arising out of or concerning defective building work".
The answer to this question depends on the construction of the defined term "building action", which as defined is a composite expression. For that reason, as McHugh J observed in Applicant A v Minister for Immigration and Ethnic Affairs (1997) 190 CLR 225 at 256, it would be a "mistake":
to isolate the elements of the definition, interpret them, and then ask whether the facts of the instant case are covered by the sum of those individual interpretations. Indeed, to ignore the totality of the words [within the definition] would be an error of law by virtue of a failure to construe the definition as a whole.
That is because the meaning of words and phrases is influenced by the immediate context in which they are used, with the result that the meaning of the whole may be different to the sum of the meaning of the parts: see Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389; [1996] HCA 36 at 396-397 (Brennan CJ, Dawson, Toohey, Gaudron and McHugh JJ) citing Lord Hoffmann in R v Brown [1996] 1 AC 543 at 561.
The definition includes the connecting words "arising out of or concerning". In R v Khazaal (2012) 246 CLR 601; [2012] HCA 26 at [31], French CJ observed of such terms:
… They may refer to a relationship between two subjects which may be the same or different and may encompass activities, events, persons or things. They may denote relationships which are causal or temporal or relationships of similarity or difference. The task of construing such terms does not involve the resolution of ambiguity. They are ambulatory words and may be designed to cover a variety of subjects and a variety of relationships between those subjects. The nature and breadth of the relationships they cover will depend upon their statutory context and purpose. Generally speaking it is not desirable, in construing relational terms, to go further than is necessary to determine their application in a particular case or class of cases. A more comprehensive approach may be confounded by subsequent cases. (Footnotes omitted)
The modern approach to statutory interpretation uses "context" in its widest sense "to include such things as the existing state of the law and the mischief which, by legitimate means … one may discern the statute was intended to remedy": CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384; [1997] HCA 2 at 408 (per Brennan CJ, Dawson, Toohey and Gummow JJ). Those "legitimate means" include any explanatory note or memorandum in relation to the Act in question: Interpretation Act 1987 (NSW), s 34(2)(e).
Parts 4-4C were first included in the EPA Act by Environmental Planning and Assessment Amendment Act 1997 (NSW), s 3, Sch 1, [32]. As the primary judge observed, the mischief to which s 109ZK in Pt 4C was directed was the open ended outcome arising from the application of existing limitation periods with respect to claims for latent defects, which only give rise to actionable damage upon first becoming manifest: Bryan v Maloney (1995) 182 CLR 609; [1995] HCA 17 at 617 (Mason CJ, Deane and Gaudron JJ).
The Explanatory note to the Bill for that Act describes s 109ZK as imposing "a limitation period of 10 years for any person's liability for damage arising as a result of defective building work" so as to avoid the operation of the law covering latent defects "in which the current limitation period begins to run only when the defect becomes apparent" (p 11). That limitation period does not apply to rights to recover damages for death or personal injury arising out of or concerning such defective work (s 109ZL), nor does it "extend any period of limitation under the Limitation Act 1979 (s 109ZK(2)).
Thus, s 109ZK imposes a maximum limitation period of 10 years for actions brought to enforce a liability for property or economic loss or damage arising out of or concerning defective building work, irrespective of when the existence of defects first become manifest.
The reference to loss or damage is to harm or injury, as distinct from damages which are compensation claimed for harm or injury: see the discussion in Hunt & Hunt v Mitchell Morgan Nominees Pty Ltd (2013) 247 CLR 613; [2013] HCA 10 at [24] (French CJ, Hayne and Kiefel JJ). An action will be "for" harm or injury if it claims a remedy, usually compensation, in relation to or because of it. Harm or injury may be compensable when it is sustained to some interest of the claimant. In relation to defective building work those interests might include personal or property interests as owner, developer or subsequent owner. The expression "defective building work" is not defined. It describes building work that is defective, and accordingly likely to require rectification. The existence of defects may also require that other work be undertaken. In each case, the undertaking of the rectification or other work may cause or result in other harm or damage, including by reason of delay or loss of income or diminution in value.
The expression "arising out of" generally requires an element of cause or consequence, but not the direct or proximate relationship that might be required by the words "caused by": State Government Insurance Commission v Stevens Brothers Pty Ltd (1984) 154 CLR 552 at 555, 559; Walton v National Employers Insurance Association [1973] 2 NSWLR 73 at 83-84 (Bowen JA). And the ordinary meaning of "concerning" as "regarding, touching, in reference or relation to [or] about" requires a relationship between the harm or injury and defective building work which need not be causal: see Minister for Immigration and Ethnic Affairs v Teoh (1995) 183 CLR 273 at 289, 302 (Mason CJ and Deane J). It follows that the relationships which answer these descriptions may overlap. As would be the case in relation to a claim by a building owner against the builder for the cost of rectifying defective work, which would both arise out of that work and be regarding or in relation to it.
The indemnities were given between August and November 2002 for the issue of the policy on 2 December 2002. The defective building work was undertaken by Great Wall before 18 December 2003, when the final occupation certificate was issued. By July 2009 the owners' corporation had made a claim against Great Wall in respect of the defective work. Great Wall was deregistered in November 2010. A claim was made under the policy. In February 2013 Allianz settled that claim, having first made demands under the indemnities in late 2012.
The limitation period for bringing actions under the indemnities, which were given by deed, was 12 years from the date on which the cause of action first accrued: Limitation Act 1969 (NSW), s 16. That period would expire in late 2024. The proceedings were commenced on 27 August 2015. The appellants' case was that, because the action on the indemnities was a "building action", each claim became statute barred on 18 December 2013. It is noteworthy that, if the existence of the underlying claim against the builder had first become known closer to the end of the relevant 10 year period and the claim under the indemnity was considered a "building action", it would be possible for the period under s 109ZK to expire before the six-year period under Limitation Act, s 14 for bringing that claim had even commenced to run.
Allianz' action, whether for a liquidated or unliquidated sum, is to enforce an indemnity. Although this is to be distinguished from a claim for damages for repudiation of the obligation to indemnify, the conventional view is that the indemnified party recovers for its actual loss by way of damages for breach of the indemnity. The loss suffered by the indemnified party is the failure to receive the sum that ought to have been paid: see Wayne Courtney, Contractual Indemnities, (1st ed 2014, Hart Publishing) at [1-19] (esp cases cited at fn 47, including Giles J's decision in Penrith City Council v Government Insurance Office of New South Wales (1991) 24 NSWLR 564 at 568) and [5-41].
The appellants indemnified Allianz against any amount it was liable to pay under the home warranty insurance. Two conditions had to be satisfied before Allianz was so liable: they were that the owners' corporation had suffered loss or damage in respect of defective building work arising from breach of a statutory warranty; and that it was unable to recover compensation in respect of that loss or damage because of Great Wall's insolvency or disappearance.
To the extent that Allianz' claim is for loss or damage, it is for the damage it would otherwise suffer if the indemnity were not performed. The capacity in which it suffers that damage is as insurer under the home warranty policy. Its liability under that policy is engaged by the fact of Great Wall's inability, because of insolvency or disappearance, to pay compensation for or rectify the defective building work.
The claim by Allianz is not for any harm or injury sustained as a direct or indirect consequence of the happening of the defective building work. Neither the fact of that work nor its consequences meant that Allianz sustained the "loss" which was the subject of the claim under the indemnity. As such, Allianz' action is not correctly characterised as one to enforce a liability for loss or damage arising out of or concerning defective building work. Nor is it necessary to construe that expression as describing such an action in order to address the mischief to which s 109ZK is directed.
McDOUGALL J: The issue for decision on this appeal is whether an insurer's claim to be indemnified, pursuant to deeds of indemnity, for payments that it made to rectify defective residential building work were time-barred by operation of s 109ZK(1) of the Environmental Planning and Assessment Act 1979 (NSW) (the EPA Act). That issue arises in the following way.