Housing Guarantee Fund Ltd v Dore [2003] VSCA 126

5. The reasons behind para.(b) of the "Limit of Indemnity applicable to the Policy" are by no means clear. One can see, nevertheless, that under the Act and the scheme represented by the Ministerial Order it was thought desirable that some cap should be placed on the amount of extra work for which the insurer would ordinarily be liable for non-completion. Limit (a) in the policy provided a general limitation of $100,000 for any claim, whether or not it arose from non-completion. There must have been some purpose in imposing a further limit in relation to non-completion and doubtless that purpose ought to have been reflected in the prescribed policy terms which should ultimately have formed part of any relevant policy issued pursuant to the statutory requirements. It is much harder to see from the language adopted what was that purpose. One reasonable possibility was that the Minister and the insurer were each afraid that the cost of finishing the works

might blow out without there necessarily being any active dishonesty or deliberate attempt to inflate those costs. The inconvenience to a building owner caused by non-completion is obvious, leading as it almost invariably does to the need to bring new equipment and new workers onto the site and to let a contract appropriate for the completion of works which may well be left in a disorganised state. There would be a temptation, not so much for the building owner perhaps, but more likely for the new builder to add a few "bells and whistles" to the cost of the finishing works, in order to make it a worthwhile contract. Perhaps the Minister saw para.(b) as a means of keeping builders' quotations under some restraint.

9. In the end I am by no means satisfied that the contentions put forward by either appellant or respondent correctly reflected the language of limit (b) or the intention of those responsible for putting it forward, but some resolution must be reached. I am therefore, with considerable hesitation and reluctance, prepared to accept the conclusion which is set out in the judgment of Phillips, J.A. and in his reasoning. That solution has the advantage of comparing like with like, albeit that it does not give full cover to the building owner except in a small number of cases.[1] That, nevertheless, is only to be expected since the object was to provide a limit. I do not find it necessary in resolving this legal issue to decide whether the relevant contract price has been accurately stated, although neither party suggested it was not. That is one of the questions of fact left for the Tribunal to resolve. I therefore agree in the order proposed by Phillips, J.A.

14. On 28 May 2002 the present respondent applied to the Victorian Civil and Administrative Tribunal for the review of a decision made by the present appellant under Part 6 of the House Contracts Guarantee Act 1987, as amended by the House Contracts Guarantee (HIH) Act 2001. By Part 6, the State of Victoria was obliged to indemnify any person entitled to an indemnity under a policy of insurance issued by

HIH Casualty and General Insurance Limited ("HIH") in respect of domestic building work, to the extent of the indemnity provided by that policy. The scheme is administered by the appellant.

18. At a directions hearing conducted on 23 July 2002, the application was referred for hearing "on an preliminary issue as to the interpretation of the insurance policy", namely the proper interpretation of the limit imposed upon the extent of indemnity available under the policy which existed in this case. The preliminary issue was heard on 5 December 2002. The Tribunal held that the insurer's liability under the policy was limited to 20% of the total contract price specified in the building contract (which, before us, was accepted as 20% of $140,742, or $28,148.40).

21. The respondent then applied to the Trial Division for leave to appeal and for any necessary extension of time. The application was heard on 7 March and 11 March 2003, and by agreement the appeal too. At the conclusion of the hearing, leave to appeal was granted and the appeal allowed, the learned judge holding that on the proper interpretation of the policy the indemnity was limited only in the event that the cost of finishing that portion of the work left unfinished by the original builder, exceeded the contract price for the whole of the work by more than 20%. As that was not so in the case under appeal, the respondent was entitled to be indemnified to the full extent of her loss, which was $79,912.30.

24. Leave to appeal from that decision was granted by this Court on 11 April 2003 and it is that appeal which is now before us.

29. The respondent entered into a domestic building work contract on 16 October 2000 with a builder which is now in liquidation. Construction of the respondent's house, in Echuca, was commenced but it was not completed because of the builder's insolvency. The builder had, however, arranged insurance protection for the respondent under s.135 of the Building Act 1993 with HIH Casualty and General Insurance Limited, also now in liquidation. In argument there emerged some doubt about whether a policy actually issued to the respondent or whether she was merely one of several who had the benefit of a more general policy issued to the builder (as indicated by a certificate produced in the course of argument by Dr. Griffith[2]). However that may be, it was common ground (here and below, as I apprehend it) that in one way or the other the respondent had the benefit of a policy by which she was provided with an indemnity against loss or damage occurring through the failure of the builder to perform the contract work due, inter alia, to insolvency.

32. Again it was common ground that the insurance cover so provided was subject to a number of express limitations. According to a document promulgated by the insurer (and headed "Home warranty policy clauses relevant to building owner"), it is the first two limitations that are presently relevant. The first, found in paragraph (a), subjected the "aggregate liability of the insurer pursuant to the policy" to an overall maximum of $100,000 for claims "in respect of any one home". The second, in paragraph (b), read as follows (in which HIH is called "the insurer", the respondent "the insured", and the building contract is referred to as "the Major[3] Domestic Building Contract"):

"(b) The insurer shall bear no liability for claims arising from non-completion of domestic building work for any reason listed in Item(2) of the definition of Prescribed Cause to the extent that the cost of completing the domestic building work (excluding the cost of rectifying any defective building work) exceeds the contract price specified in the Schedule for the Major Domestic Building Contract by more than 20%."

The issue determined by the Tribunal, and subsequently in the Trial Division, was the meaning and effect of this limitation. The reasons "listed in Item (2) of the definition of Prescribed Cause" included the death, the disappearance and the insolvency of the builder, the third being the relevant one in this instance.

37. The express limitations contained within the policy were not, however, the invention of the insurer. Section 135 of the Building Act 1993 empowers the Minister, by order published in the Government Gazette, to specify the type and amount of insurance the builder is required to hold and such a Ministerial Order was published on 30 October 1998. Clause 5.1.3 required that the insurance purchased in a case like the present contain terms and conditions indemnifying the building owner in respect of loss or damage resulting from non-completion of the domestic building work due, inter alia, to the death of the builder, the disappearance of the builder or the builder's becoming insolvent. Clause 5.5 then spelled out a number of "permissible policy limitations" and one of them, as set out in clause 5.5.6, permitted a provision excluding or limiting claims under the policy -

"made under the indemnity for non-completion of domestic building work required by clause 5.1.3 to the extent that the cost of completing the domestic building work (excluding the cost of rectifying any defective building work) exceeds the contract price under the relevant major domestic building contract by more than 20%."

Subject (inter alia) to clause 5.5, the policy was not otherwise to "contain any exclusion or other provision which excludes limits avoids or modifies the requirements of" clause 5 (see clause 5.6) and this was reinforced by clause 8.1 which read:

"The policy is issued in compliance with this Order and if any term of the policy conflicts or is inconsistent with this Order then the policy shall be read and be enforceable as if it complies with this Order."

43. Now, the limitation provision identified above as paragraph (b) in the policy is obviously a reflex of clause 5.5.6 of the Ministerial Order, but there is, unfortunately, a difference. In the policy wording, the concluding words refer to "the contract price specified in the Schedule for the Major Domestic Building Contract", whereas the corresponding expression in clause 5.5.6 is more simply "the contract price under the relevant major domestic building contract". In the course of argument before us, there was some discussion over which was the relevant "schedule" mentioned in the policy wording, and it was at that point that Dr. Griffith produced the schedule already mentioned which, on examination, was a form taken from Schedule 2 of the Ministerial Order made under the Building Act: it was not a schedule to the building contract. To my mind, the policy wording should be taken to refer to the schedule (Schedule 1 as it happens) which formed part of the relevant building contract in this instance and on the first page of which is specified, in both words and figures and against the description "contract price", the sum of $140,742. According to clause 12 of the building contract, "the Owner must pay the Builder the Contract Price set out in Item 2 of Schedule 1" and although clause 12 obliges the owner to pay the builder as well "other amounts to be paid by the Owner under this Contract in accordance with Clause 30 or as otherwise stated in this Contract", it seems sufficiently clear to me that $140,742 is "the contract price specified in the Schedule" as mentioned in the policy wording (in paragraph (b) above).

46. In the end, of course it does not matter; for if there is any departure in the wording of the policy from the requirements of the Ministerial Order, it is the latter which prevails inasmuch as the policy is to "be read and be enforceable as if it complies with" the Ministerial Order; and the wording of the Ministerial Order refers, much more simply, to "the contract price under the relevant major domestic building contract". It was, moreover, common ground on this appeal that that contract price was indeed $140,742, and beyond that it seems unnecessary to go. In what follows when I refer to "the limitation provision" I am referring to the wording of both paragraph (b) and clause 5.5.6, unless otherwise stated, for the difference rarely matters.

49. It should be added that the parties themselves were agreed that the question of construction was the same whether one considered the wording of the policy or the wording of the Ministerial Order. As for the principles to be applied, again it was common ground (at least when argument commenced) that those principles were the same, whichever was considered. Although at times during argument counsel tended to suggest that there might be some difference in approach according to whether the point was one of statutory construction or construction of a private contract, I am satisfied that in the end there is no difference in result.

53. The difference between the construction of the limitation provision adopted by the Tribunal and that adopted in the Trial Division is clearer when one has regard to the figures in more detail. The total contract price was the sum of $140,742 and the estimated cost of finishing the respondent's house, left uncompleted by the insolvent builder, was $128,172. The latter is less than the former and so, claims the respondent, she is entitled to be fully indemnified against the cost of completion. Having already paid the original builder the sum of $92,482.30 leaving a balance unpaid of $48,259.70, the respondent calculates her loss by deducting from the estimated cost of finishing the house (that is $128,172) the sum not paid to the original builder and so "saved" (that is $48,259.70). The resultant loss is $79,912.30. Because the policy insures against loss, the respondent claims to be entitled to $79,912.30, being the loss suffered. The policy limitation does not operate (it is claimed) simply because $128,172 is less than the contract price of $140,742 (or, more strictly speaking, the contract price plus 20%). And that was the construction of the limitation provision adopted by the judge.

56. In contrast, the appellant submits that the "the cost of completing the domestic building work" within the meaning of the policy is the total cost of the building work as a whole, being the amount already paid to the original builder plus the amount required to finish the work which it left undone. So, in this case, the cost of completing the work is $220,654.30 being the amount paid to the original builder ($92,482.30) plus the estimated cost of finishing the house (which is $128,172). The sum of $220,654.30 exceeds the original contract price ($140,742) by more than 20% (which is $28,148.20), with the result that the limitation applies to restrict the respondent's claim (so the argument runs) to $28,148.40. That was the construction adopted by the Tribunal. Of her loss of $79,912.30, the respondent is therefore left more than $51,000 out of pocket.

59. The difference between these two constructions lies principally in the meaning attributed to the words "the cost of completing the domestic building work". Following an earlier decision of the Tribunal in Bulboa v. Royal and Sun Alliance Insurance Australia Limited [2002] VCAT 316, the Tribunal considered that "the cost of completing the domestic building work" meant the cost of completing the work as whole, and not just the unfinished portion. The trial judge rejected this interpretation as inconsistent with "the ordinary and natural meaning of the words". His Honour considered that "the cost of completing the domestic building work" meant the cost of finishing the uncompleted portion only, and not the total cost of the building work as whole (including the amount paid to the original builder). In his Honour's view, there was no ambiguity and no room for any difference of opinion.

62. Although not raised below, a third possibility occurred to me, which I put to counsel during argument. Let it be assumed that the words "the cost of completing the domestic building work" do mean the cost of bringing to completion that part of the work which was left unfinished by the insolvent builder (the meaning preferred by the judge). According to the limitation provision, that cost is to be compared to "the contract price" to determine whether the former exceeds the latter by more than 20%. Might the expression "the contract price" refer, not to the total contract price for the whole of the work, but to such part only as was referable to the unfinished portion of the building work? If so, like would be compared with like and there would be no cause for reading "the cost of completing the ... work" as going beyond the cost of remedying the builder's default.

66. On reflection, I think that the third possibility should be rejected. The words of the limitation provision appear to me too clear to admit of their being qualified in the way I have suggested; indeed neither party found the possibility attractive. At first I thought it might provide a half-way house between the position taken by the appellant and that adopted by the respondent, but upon analysis I am satisfied that it would limit the indemnity provided to a building owner to 20% of the cost under the contract of completing the building work left unfinished - or in other words 20% of what had not yet been paid to the original builder. In this case that would be , 20% of $48,259.70 (the amount "saved") or $9,651.94. Even the appellant did not seek to limit the owner's claim to that extent and I agree that therefore the reference in the limitation provision to "the contract price under the ... building contract" should be taken to be a reference to $140,742 - unless of course context compels otherwise. And, as will be seen, I think that it does not. (I simply note in passing that the conclusion would be simply the stronger if one were to have regard to paragraph (b) of the policy wording rather than the wording employed by clause 5.5.6 of the Ministerial Order.)

69. On that basis the resolution of this appeal turns upon the proper interpretation of "the cost of completing the domestic building work". As his Honour pointed out in the course of his reasons for judgment, that expression would seem, according to the natural and ordinary meaning of the words, to refer to the cost of completing something as yet left unfinished. After all, the limitation provision commences by referring to the liability of the insurer "for claims arising from non-completion of domestic building work for any reason listed in item (2) of the definition of Prescribed Cause". The reference to "non-completion of domestic building work" leads naturally towards the reference to "the cost of completing the domestic building work", the one referring to what has not been done and the other to the cost of doing it. That led his Honour to reject the construction adopted by the Tribunal, instead confining "the cost of completing the ... work" exclusively to that portion of the work which was left unfinished.

72. If that is correct, on the common assumption made below that "the contract price" as mentioned in the limitation provision was the price for the whole of the work, the limitation provision is not comparing like with like - a difficulty frankly acknowledged by his Honour. And greater difficulties follow. The construction adopted by the judge meant (as his Honour said) that what was intended to limit the liability of the insurer "would do so only in a few extreme cases". Obviously, if "the cost of completing the ... work" (in the sense of finishing what was left uncompleted) is to be compared with the contract price of the whole project, the former will only rarely exceed the latter, and even more rarely exceed it "by more than 20%" (as witness the present case where the cost of finishing the work is more than 2.5 times the original price). It is this last consideration which impels me to the conclusion, with respect, that the construction adopted by the Judge is not the correct one unless it be inescapable; for, if it were the correct one, I cannot discern a reason for the limitation provision referring not just to "the contract price" but to the cost of completion exceeding the contract price "by more than 20%".

75. Of course one may accept readily enough the argument for the appellant that, on any view, the limitation on liability is arbitrary; in one sense the limitation by reference to the contract price plus 20% is just as arbitrary as the limitation of $100,000.00. But that means only that the selection of these touchstones is arbitrary. What is more troubling is that the operation of the limit according to contract price will be arbitrary - in the sense of without rhyme or reason. There will be no logic to it; it can even be called haphazard and why it should be so counsel was unable to suggest. And granted that comparing the contract price for the whole with the cost of finishing part only will yield an adventitious result, the problem is compounded by adding the extension of 20%. To my mind, the lack of a sound reason for comparing the cost of completing a part with the contract price for the whole, and especially the contract price plus a further 20%, provides a compelling reason for rejecting the construction which would permit, and indeed require, this comparison otherwise than of like with like.

78. Given the foregoing, I see nothing against, and everything in favour, of the construction adopted by the Tribunal. According to the Tribunal, "the cost of completing the ... work" meant the cost of the whole, not merely the cost of finishing the uncompleted portion of the work. Of this, the judge opined that according to their plain meaning the words referred to the cost of finishing what was left uncompleted, and that that plain meaning was too clear to admit of any other reading. With respect, I cannot agree that there is no ambiguity in the expression used. If asked how much it cost to complete the house, for instance, the proud new owner might well refer to the cost of the whole. It is the earlier reference in the limitation provision to "non-completion" that gives force to his Honour's view, but that is neither more nor less than an appeal to context: and, when all is said and done, it is the context that must provide the solution. The intention must be gathered from the context.

81. One of the principal criticisms levelled by the judge at the construction adopted by the Tribunal was this: that if the limitation provision meant only that claims for loss or damage (when work was left unfinished) were to be limited in all cases to 20% of the contract price as set forth in the schedule to the building contract (which would be so as a matter of arithmetic), why did the draftsman not say so more directly? Why use the verbiage of comparison when it was not needed? And, I would add, why impose such a limit, of an apparently fixed amount, altogether irrespective of the extent to which the building work was left unfinished?

84. To my mind answers can be found to these questions. As to the verbiage, if one accepts that the intention was to fix a maximum on any claim at 20% of the contract price for the work as a whole, the draftsman could have attached that maximum to the amount of the claim (with consequent uncertainty as to the subject matter of the claim) or to the extra cost of seeing the unfinished contract work through to its agreed conclusion. But either way there could have been difficulty in expression, if uncertainty was to be avoided. If tied to the claim, what was to be the subject matter of a relevant claim? If tied to the extra cost to be incurred for completion, how was the extra cost to be identified if not by comparing the actual cost of completing with the contract price for that unfinished portion? The simplest solution to both problems was by comparing the total contract price of bringing the project to completion with the actual cost to the insured, again, of completing the project as a whole (and not just in part) - which is how the limitation provision is drafted. With respect, I think that the criticism of the verbiage is of little weight. And to select the one fixed amount (20% of the total contract price) as a maximum irrespective of how much work was left unfinished, while it may be an arbitrary limit, is none the less explicable as fixing that highest amount by which default on the part of the original builder is to be remedied by the insurer. If there is little of the work left unfinished when the builder (as here) becomes insolvent, the limit may not be called into play. If there is a great portion left unfinished, the limit will surely bite, but so be it; it provides the maximum measure of the insurance and a measure which is very fairly made referable to the total contract price in the first place. In all cases the insured is entitled to no more than the additional 20% over and above the contract price.

87. Reference to the context seems to me, then, to provide the solution to the problem raised by this appeal. The expression "the cost of completing the domestic building work" may mean either the cost of completing the whole of the work for which the contract was entered into or it may mean the cost of completing only that which was left unfinished. If the latter, the limitation provision requires a comparison which, to my mind, cannot be justified, one for which no reason can be offered. If the former, the comparison becomes one of like with like and the logic apparent, though the limit provided on claims by the building owner is still an arbitrary one. This is the construction, then, to be placed upon the limitation provision, given that, in my opinion, the meaning is not clear and a choice is truly open.

90. It is not altogether apparent that this case requires reference to authority, because it does not seem to me that we are doing any more than construing in context the words actually used. We are not for instance importing by implication some qualification on the wording of the limitation provision; rather we are interpreting the very words used. But the parties took us to authority and, if such is needed, I am content to refer to Darlington Futures Limited v. Delco Australia Pty. Ltd. [1986] HCA 82; (1986) 161 C.L.R. 500 at 510 (which concerns the construction of an exception clause) and Cooper Brookes (Woolongong) Pty. Ltd. v. Federal Commissioner of Taxation [1981] HCA 26; (1981) 147 C.L.R. 297, Kingston v. Keprose Pty. Ltd. (1987) 11 N.S.W.L.R. 404 at 421 and Murphy v. Obst [1996] VICSC 11; (1996) 2 V.R. 613 at 625 (concerning the construction of legislation). In Darlington, 161 C.L.R. at 510 the court approved the following passage form the

judgment of Walsh, J. in H. & E. Van Der Sterren v. Cibernetics (Holdings) Pty. Ltd. (1970) 44 A.L.J.R. 157 at 158:

"The terms of exception clauses must sometimes be read down if they cannot be applied literally without creating an absurdity or defeating the main object of the contract ... . But such a modification by implication of the language which the parties have used in an exception clause is not to be made unless it is necessary to give effect to what the parties must be understood to have intended."

It matters not whether the reference to the intention of "the parties" be understood as referring in the instant case to the intention of the parties to the insurance contract or to the intention the Minister when making his Ministerial Order: either way, I am quite satisfied that the intention may fairly be culled from the context and that it favours the construction placed upon the limitation provision by the Tribunal.

97. For these reasons I would allow the appeal, set aside the order made below, and in lieu dismiss the appeal to the Trial Division from the Tribunal.

103. The circumstances of the matter are set out in the judgment of Phillips JA. The indemnity limitation clause in what was assumed to be a policy of indemnity insurance operating between the insurer[4] and the first respondent (conveniently, "the respondent") had no less than nine sub-clauses. By sub-clause (a) the aggregate liability of the insurer pursuant to the policy was limited, in most cases, to an amount of $100,000 plus the reasonable legal costs and expenses of enforcing the claim against the insurer. By sub-cl. (b), the subject of present dispute (conveniently, "sub-cl. (b)"), the insurer was to bear no liability for claims arising from non-completion of building work for any one of a number of specified reasons to the extent that:

"the cost of completing the domestic building work[5]" (`the first factor')

"the contract price specified in the Schedule for the Major Domestic Building Contract by more than 20%" (`the second factor').

109. Two different questions would arise in this case on the claim by the appellant against the respondent.[6] First, what was the owner's loss that could be the subject of a claim? Second, what impact, if any, did sub-cl. (b) have upon that claim - that is, to limit the available indemnity? The same questions would arise in every claim upon a policy so worded.

112. In the present case there was no debate but that the respondent's actual loss was in the order of $80,000. The mathematics were simple. The contract price was agreed to be $140,742. When the builder became insolvent and work ceased the respondent had paid the builder $92,482.30. The cost of finishing the job was estimated to be $128,172. The owner having "saved" moneys under the initial contract amounting to $48,259.70 - that is, the difference between contract price and the amounts paid by the respondent - the loss was $79,912.30.

116. Concerning the impact of sub-cl. (b), the parties focussed solely upon the first factor pertinent to its operation. That was the situation before the tribunal, before the learned judge at first instance, and on the hearing of this appeal. Counsel evidently considered that the meaning of the second factor was too clear for argument. It meant the contract price specified in the schedule to the pertinent building contract. In the present case, schedule so understood had a plain meaning. The building contract operating between the respondent and the now insolvent builder provided by cl. 12.0 that

"The Owner must pay the Builder the Contract Price set out in Item 2 of Schedule 1."

120. Item 2 of Schedule 1 was headed "Contract Price". By Section A of the contract the headings formed part of the contract. Only one contract price was specified in Item 2 of Schedule 1 - the price for the job. True it was that such price might be varied. But that did not mean that any other price was specified.

123. If Schedule 1 to the contract was the schedule to which sub-cl. (b) referred, then in my opinion the parties were correct in adopting the position that it set out the specified contract price. In my opinion, however, Schedule 1 to the contract was not the schedule to which sub-cl. (b) referred.

126. I should note, before going further, that it is quite unclear whether a policy actually issued to the respondent; or whether she rather had the benefit of a blanket policy provided to the particular builder for a 12 month period. Moreover, it seems clear that the entirety of whatever policy applied was not placed before either the Tribunal or the Court. The document in the Appeal Book describes itself as "... an extract from Builder's Annual Blanket policy document".

129. The circumstances to which I have just referred cloud, to an extent, consideration of the meaning of the second factor. That said, the excerpt from the pertinent policy which was before the court[7] defines "Schedule" to mean "the schedule of the policy". So far as I can see the word "schedule" is used four times in the policy: First, in the definition of "builder"; second, in sub-cl. (b); third, in General Provisions ("GP") cl (10); and fourth in GP cl (8). The last-mentioned, specifically, gives a different meaning to "schedule" than that which is defined. Thus:

"The Insurer shall provide a Certificate of Insurance in the form or to the effect of the form contained in Schedule 2 of the Current Order... evidencing a policy issued in compliance with the Current Order in respect of the policy: (a) to the insured immediately upon issue of the policy;"

133. In my opinion the contrast between the language of GP cl. (8) and the other references to "schedule" in the policy is telling. "Builder" is defined to mean "the builder specified in the Schedule". In the Housing Industry Association Limited copyright contract entered into between the builder and the owner in this case the "builder" is not specified in a schedule, let alone "the schedule" (for there are five schedules in the contract). In GP (10) reference is made to "the contract price specified in the Schedule". That reference is naturally consistent with the defined meaning of the word "Schedule". It is inconsistent with reference to one of a number of schedules to a building contract. Later reference in GP (10) to "such contract price" does not tell to the contrary. Then, as to sub-cl. (b), several considerations tell in favour of Schedule being given its defined meaning: use of the definite article, inapposite in the case of a contract with multiple schedules; and the use of "for" rather than "of"[8] or "to".

136. In the event, I consider that neither before the Tribunal, nor before the Court at first instance or on appeal was there any material bearing upon the second factor. Regardless what meaning the first factor bore, it could not be said, if no additional material was placed before the Tribunal on the substantive hearing, that the amount determined in accordance with such meaning exceeded the contract price specified in the Schedule by more than 20%.

139. In the course of argument in the present appeal Dr Griffith QC, who appeared with Mr Caleo for the appellant, produced a document headed "Schedule 2, Building Act 1993... Certificate in Respect of Insurance". He submitted, as I understood it, that this was a copy of the schedule referred to in sub-cl. (b). In my opinion that is clearly not the case. That document was rather a copy of the document which GP cl (8)[9] required must be provided to the owner. I should add, with respect to GP cl (8), that "Current Order" was defined by the policy to mean the Ministerial Order made 20 October 1998 and amendments thereto made 9 November 1998. Schedule 2 of that Order set out a form of certificate[10]. That form contained no reference to contract price. So far as the copy document produced by Dr Griffith did so, it was of no present significance. I note, in any event, that the reference to contract price was outside the body of the certificate which he produced.

142. This litigation has been undertaken throughout on the footing that within the contract itself was to be found the "contract price specified in the Schedule", and thus the key ingredient of the second factor. For reasons indicated that, in my opinion, was an incorrect approach. But that is not necessarily the end of the matter. The policy was obligated by the Ministerial Orders to which I have earlier referred, those orders being made under the authority of s. 135 of the Building Act 1993. Sub-clause (b) addresses the subject-matter of cl. 5.5.6 of those Orders. By that sub-clause a policy may limit claims

"to the extent that the costs of completing the domestic building work... exceeds the contract price under the relevant major domestic building contract by more than 20%."

"Subject to clauses 5.5 and 7, the policy shall not otherwise contain any exclusion which excludes, limits, avoids or modifies the requirements of this clause 5."

148. I should refer also to cl. 8.1 of the Orders. It provides that a policy must contain a provision to the effect that

"The policy is issued in compliance with this Order and if any term of the policy conflicts or is inconsistent with this Order then the policy shall be read and be enforceable as if it complies with this Order."

There was a provision to that general effect in the policy: GP (3.).

153. I cannot accept that by operation either of cl. 5.6 of the Orders or GP (3) the reference in sub-cl. (b) to "the contract price specified in the Schedule for the Major Domestic Building Contract" should be read as if it said "the contract price under the relevant major domestic building contract". There is no reason why a policy might not provide that "the contract price under the relevant major domestic building contract" be ascertained by reference to a schedule to the policy. So to provide, in my view, would not infringe either cl. 5.6 of the Orders or GP (3). The question whether there was in fact any schedule to the policy is quite distinct. So is the question whether, if there was, the contract price ascertained by reference to such Schedule infringed cl. 5.6 or GP (3). At present, as matters stand, there is in my view simply no evidence of the existence of a Schedule to the policy; and if there was no schedule, then rescuing a limitation clause by re-writing its terms would seem to me to offend principle. On the footing, however, that such opinion does not prevail, and because it might turn out that there was a relevant schedule in other cases if not in this case, I should address the meaning of what I have called the first factor.

157. The question, then, is what is the meaning of "the cost of completing the domestic building work". The two alternatives offered were on the one hand, the total amount paid (or payable) by the owner from job start to job end; and, on the other hand, the amount payable to finish the job from the incomplete state in which it was left when the builder defaulted. The former was proposed by the appellant, the latter by the respondent.

160. The learned judge from whose decision this appeal is brought considered that the ordinary and natural meaning of the critical words was "the cost of finishing the work and not the total cost of the works including the amount paid to the original builder". He also concluded that such meaning was not gainsaid because some other comparison may arguably have been more rational; or because, thus construed, there would be a limitation on indemnity in few cases.

163. In my respectful opinion the meaning which his Honour gave the critical words was correct. He considered that such was their ordinary and natural meaning, a meaning admitting of no ambiguity. I agree. From my perspective, and with respect to those who think otherwise, to depart from that meaning would involve, in truth, recourse to and application of policy considerations which are properly the province of the legislature.

166. In agreeing that the ordinary and natural meaning of the words was as his Honour concluded, it may be observed that sub-cl. (b) applies to claims arising from non-completion of the domestic building work - that is, claims arising from the builder's failure to finish the job. Such claims, ordinarily, take as their starting point the cost of finishing the job viewed prospectively from the time of the original builder's default. See, for example, The Corporation of the City of Adelaide v Jenmings Industries Ltd[11]. The "cost of completing the domestic building work" has a natural meaning in that context.

169. Quite apart from the ordinary and natural meaning of the critical words, there are indications in the policy which in my opinion support the conclusion that "the cost of completing the ... work" means the cost of finishing the work prospective from the time of the builder's default. I think that the definition of "Prescribed Cause", insofar as the same refers to "non-completion of the domestic building work", the terms of GP cl. (9), and the language of cl. 2(b) and (d) of the Claims Procedures section of the policy all tend in that direction.

172. Counsel for the appellant submitted, however, that the construction of sub-cl. (b) which he advanced was consistent with the phrase "completion date" as defined in the Ministerial Order and in s. 137B of the Building Act 1993; completion being treated as the physical completion of a building. Counsel argued that it would be inconsistent to treat "completing... the work" in sub-cl. (b) as meaning completion of part of the overall work.

175. I do not accept that submission. "Completion date" is defined in the policy so as to confine the indemnity temporally, and to provide a temporal context for excess provisions: see Indemnity Section A(1) and Excess Provisions A(1) - (5). That says nothing, I consider, upon the question whether the cost of completing the work for the purpose of sub-cl. (b) refers to the cost to the owner from the date of the builder's default onwards; or rather to the overall cost of the work.

178. Counsel for the appellant further submitted that to give sub-cl. (b) the meaning contended for by the respondent would have the result that rarely would the insurer's liability be thereby confined. That is evidently so, as the learned trial judge acknowledged. But in my opinion that is not a reason for giving the words of the sub-clause a meaning which they do not naturally bear. It might as well be said, as would seem to be the case, that most often, if the appellant's construction was adopted, the owner would be very substantially out of pocket. Appellant's counsel provided some examples of the consequences of the competing constructions. In six of the seven examples, upon the respondent's construction, the owner would have recovered all his or her actual loss. In every one of the seven examples the owner would have recovered less than the actual loss, and most often very much less, upon the appellant's construction. Confronted by the natural meaning of the words of the pertinent sub-clause, I see no contextual reason to impose a construction that would limit indemnity more often and more greatly than a construction which would not have that effect. The consequences of the meaning which appeared inescapable to the learned trial judge, and which appear inescapable to me, cannot be said to yield an absurd or manifestly unjust result.[12] It may be said that the sub-clause was intended to limit the insurer's liability. Beyond that, with respect, it is not possible to go. Whether the sub-clause failed to achieve what was subjectively intended by the Minister or the insurer is both irrelevant and no more than speculation. The purposive approach to (statutory) construction contended for by the appellant relying upon Cooper Brookes (Wollongong) Pty Ltd v The Commissioner of Taxation[13], Kingston v Keprose Ltd[14], Murphy v Obst[15], Project Blue Sky Inc and ors v Australian Broadcasting Authority[16] and Eastman v Director of Public Prosecutions[17] does not yield, in the particular circumstances, an answer favourable to the appellant. The same may be said of s. 35(a) of the Interpretation of Legislation Act 1984, which in any event refers only to Acts and subordinate instruments.

181. Counsel for the appellant submitted, further again, that the construction which he advanced was "consistent with the method of identifying [the respondent's] total loss or damage - that is, by requiring a comparison between the ultimate cost of the work and the original contract price. In that way, the... clause imposes a limitation directly upon the loss or damage for which [the respondent] claims indemnity". I do not accept that submission, which, I should add, did not involve the argument of comparing like with like which has commended itself to Phillips JA. I think it is not accurate to say that an owner's actual loss would necessarily be identified by comparing the whole cost of the work with the original contract price. Unless, in calculating the "whole cost," cost was limited to moneys actually paid or payable, such a comparison would overstate the loss by failing to make allowance for money not paid under the original contract. Further, the contract between the owner and builder was not a fixed price contract. It provided for variations and for additional costs in a number of circumstances. See cll. 12, 16, 17, 18, 21-22 and 23-24. The original contract price, if not in the respondent's case then certainly in other cases involving this form of contract, would not be the price taken into account in calculating loss and damage. What would be pertinent would be the contract price as varied and the amount paid thereunder. It would be those figures that would yield the "saving" under the contract - that is, of moneys not paid.

184. Counsel for the appellant also submitted that sub-cl. (b) should not be read contra proferentem. For the purpose of that submission, he accepted that the meaning of the first factor was ambiguous. His main argument, as I understood it, was that the Court was concerned with a legislative instrument - that is, the Ministerial Orders of October and November 1998. But if that was incorrect, he relied upon the approach to construction of limitation clauses described in Darlington Futures Ltd v Delco Australia Pty Ltd[18].

187. As matters now stand, the learned trial judge and I are of one opinion concerning the meaning of the first factor, and the two other members of this Court are of the obverse opinion. It does not necessarily follow that the meaning of the first factor is ambiguous. But let it be supposed that there was in truth ambiguity, all legitimate means of construction having been exhausted. What would then be further considered is the language of an insurance policy. The fact that it reflected a statutory requirement would not be in point. Then, as to counsel's second point, in my opinion the passage in Darlington Futures to which he referred would not assist his client. If there was ambiguity, then according to Darlington Futures the sub-clause should be construed contra proferentem; see also Johnson.[19] In that event the respondent's construction should prevail.[20]

190. I understood counsel for the appellant to rely upon a connection between contract price and the amount of premium in arguing also that sub-cl. (b) should be construed as he contended for. There is such a connection: see GP cl. (10). But the conclusion which counsel sought to draw far from follows. It is trite that in many classes of insurance there is an absence of relationship between the criterion by which premium is fixed and the circumstances and quantum of a claim upon the policy written.

193. I should finally mention another consideration which, in my view, tends against the construction advanced for the appellant. According to counsel's submission the effect of sub-cl. (b) was to limit an owner's claim for non-completion to an amount not exceeding 20% of the specified contract price. Had that been the intent of sub-cl. (b), then in my opinion, and with respect to those who think otherwise, it could readily have been said. There was no need for two factors, both of which must be ascertained before the 20% limitation would (according to the appellant's contention) almost always apply. Yet those two factors were specified.[21]

197. The learned judge at first instance ordered that the decision of the Tribunal be set aside to the extent that it was inconsistent with his Reasons, and remitted the matter to the Tribunal for further hearing and disposition consistent with those Reasons and according to law. I have said that in my respectful opinion his Honour correctly construed the first factor set up by sub-cl. (b). That was the reason for the substantive order which his Honour pronounced. His Honour was not asked to consider the meaning of the words constituting the second factor. Whilst I have addressed that matter, and whilst my conclusion (depending upon what material is adduced on the substantive hearing) might provide another reason why the respondent's claim should in practical terms be unconfined by sub-cl. (b), I consider that the appeal should simply be dismissed.

[1] The relevant Order has now been amended.

[2] The certificate, headed Schedule 2, reflected Schedule 2 to the Ministerial Order which is mentioned below.

[3] It is called "major" because the value of the work to be done exceeded $50,000.

[5] Excluding the cost of rectification work.

[6] I say "would arise" because so far the litigation has proceeded upon the construction issue alone.

[7] I shall, for sake of convenience, describe it as "the policy".

[8] As to which see the definition of "schedule" in the policy.

[9] And clause 8.9.1 of the Ministerial Order.

[11] [1985] HCA 7; (1985) 156 CLR 274 at 294 per Brennan J

[12] See Johnson v American Home Assurance Company (1998) 182 CLR 266 at 274 per Kirby J, who dissented in the result.

[13] [1981] HCA 26; (1981) 147 CLR 297.

[14] (1987) 11 NSWLR 404 at 421-424, per McHugh JA, dissenting in the result.

[15] [1996] VICSC 11; [1996] 2 VR 613 at 625, per Phillips JA.

[16] [1998] HCA 28; (1998) 194 CLR 355 at 384 per McHugh, Gummow, Kirby and Hayne JJ.

[17] (2003) 198 ALR 1 at footnote 94 per Heydon J.

[18] [1986] HCA 82; (1986) 161 CLR 500 at 510.

[20] The purpose of the relevant provisions of the Building Act 1993, bearing in turn on the Ministerial Orders and the policy, was described by Eames JA, in whose Reasons Callaway and Vincent JJA agreed, in HIA Insurance Services Ltd v Davy [2003] VSCA at [36]-[38].

[21] I say "were specified" because the 1998 Orders were revoked and a new Order was gazetted on 20 May 2002. By cl. 17 of the new Order a policy may limit claims for non-completion "to an amount that is not more than 20% of the contract price under the insurable domestic building contract". That clause, expressed in simple language, may have the effect which the appellant attributed to sub-cl. (b). Even if that be so, it does not give an answer to the meaning of sub-cl. (b).