Jones & Anor v Builders' Insurers Guarantee Corporation

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

3067/03 STEVEN JONES & ANOR v BUILDING INSURERS' GUARANTEE CORPORATION JUDGMENT 1 On an agreed statement of facts, the plaintiffs sought a declaration that they were entitled to be indemnified by the State of New South Wales under a policy of insurance with HIH Casualty and General Insurance Ltd. The defendant was the body to which a claim for such an indemnity was to be made under the Home Building Act 1989, s 103K(1). 2 The plaintiffs were the registered proprietors of land in New South Wales. On 17 June 1997, they entered into a contract with Acosta Constructions Pty Ltd for it to build a block of 15 home units on the land. Acosta obtained from HIH certificates of insurance to do residential work. The certificates were signed by the plaintiffs as the "beneficiary". On 28 April 1998, the plaintiffs gave Acosta notice of termination of the contract and thereafter claimed against HIH for incomplete and defective work. 3 The claim was rejected by HIH and the plaintiffs lodged an application with the Fair Trading Tribunal which overturned the refusal. HIH appealed to the court which dismissed the appeal (HIH v Jones [2000] NSWSC 359). 4 The Home Building Act 1989, s 96(1) provided that a developer who did residential building work could not do the work unless a contract of insurance in compliance with the Act was in force in relation to that work. Section 101 provided that the contract had to insure a purchaser and the purchaser's successors in title against the risk of loss arising from a breach of a statutory warranty with respect of the work. The Home Building Regulation 1997, cl 42(2)(a) provided that a developer who did residential building work was not required to be a beneficiary under the contract. 5 The certificates of insurance issued to the plaintiffs contained an exclusion in cl 5.8 that the insurance would not pay claims if the beneficiary was also the developer. Clause 2.11 defined "developer" as having the same meaning as the Home Building Act 1989, s 3A. It provided that if residential building work was done in connection with an existing or proposed dwelling in a building or residential development where four or more of the existing or proposed dwellings were to be owned by an individual, partnership or corporation, that individual, partnership or corporation on whose behalf residential building work was done, was a developer who did the work. 6 In Jones, HIH argued that the Home Building Act 1989, s 96 and s 101 applied to the exclusion of other provisions with the result that the exclusion of the developer in the certificates was effective. 7 The Home Building Act 1989, s 92(1) provided that a person could not do residential building work under a contract unless a contract of insurance in compliance with the Act was in force in relation to that work in the name of the person who contracted to do the work and a certificate of insurance evidencing the contract in prescribed form had been provided to the other party. Section 99(1)(b) provided that the contract of insurance had to insure a person on whose behalf the work was being done and the person's successors in title against the risk of being unable, because of the insolvency, death or disappearance of the contractor, to recover compensation from the contractor for a breach of a statutory warranty in respect of the work or to have the contractor rectify any such breach. 8 The plaintiffs argued, successfully, in Jones that they were entitled to indemnity under the certificates of insurance because the builder was obliged by the Home Building Act 1989, s 92 to take out a contract of insurance that, in terms of s 99, had to insure them as the persons on whose behalf the work was being done. 9 The Home Building Act 1989, s 103D provided that a provision of a contract or other agreement that purported to restrict or remove the rights of a person under Pt 6 was void. In Jones at par 56, James J concluded that cl 5.8 of the certificates of insurance was void pursuant to that provision because it purported to exclude the plaintiffs from benefit under Pt 6. At par 58 his Honour concluded that the Home Building Regulation 1997, cl 42(2)(a) did not apply to a developer on whose behalf residential building work was to be done by a contractor. 10 The decision in Jones was reversed by the introduction on 5 July 2000 by the Home Building Amendment Act 2000 of the Home Building Act 1989, s 99(2)(a). It provided that a developer on whose behalf residential building work was being done was not required to be insured. The Home Building Act 1989, s 103(2) specified matters with respect to which regulations could be made. The Home Building Amendment Act 2000 inserted s 103C(2)(b) which provided that regulations could be made in relation to beneficiaries who had to be insured, or persons who were not required to be insured under a contract of insurance. Section 103C(3) was also inserted. It provided that a provision of a regulation with respect to s 103C(2)(b) applied despite any other provision of Pt 6. 11 The Home Building Amendment Act 2000 also inserted a Pt 7 to Sch 4 to the Home Building Act 1989. Clause 52(1) provided that any provision of a contract of insurance that purported to exclude a developer from making claims under a contract of insurance that would have been valid had s 99(2) been in force at the time, was taken to have been a valid provision of the contract at all relevant times. Clause 52(3), however, provided that cl 52(1) did not affect the judgment of the court in Jones or any other proceedings that had been determined by a court or tribunal before the commencement of the clause, as between the parties to those proceedings. 12 The Home Building Act 1989, Sch 4, Pt 7, cl 53 was to like effect with respect to the Home Building Regulation 1997, cl 42. It provided that a provision of that clause that would have been valid had the Home Building Act 1989, s 103C(2)(b) and s 103C(3) been in force at the time the provision commenced, was taken to have been a valid provision of the regulation at all relevant times. Again, however, that provision did not affect the judgment of the court in Jones or any other proceedings that had been determined by a court or tribunal before the commencement of the clause, as between the parties to those proceedings, pursuant to Sch 4, Pt 7, cl 53(4). 13 Clearly enough, the amending legislation preserved from the effect of the amendments to the Home Building Act 1989, Pt 6 the decision of this court in Jones. 14 Part 6A was introduced to the Home Building Act 1989 with effect from 30 June 2001 by the Insurance (Policyholders Protection) Legislation Amendment Act 2001. On 15 March 2001, HIH went into provisional liquidation and was declared to be an "insolvent insurer" for the purposes of those provisions. 15 The new s 103I(1) of the Home Building Act 1989 provided that the State of New South Wales had to indemnify any person who was entitled to recover an amount under a contract of insurance entered into under Pt 6 and who was covered by an insolvent insurer's policy to the extent of the amount that the person was entitled to recover under the policy. 16 The plaintiffs clearly fell within that provision. However, the Home Building Act 1989, s 103I(2)(b) was in the following terms: "The following provisions apply to that indemnity: … (b) a developer to which the policy relates, or a company related, within the meaning of the Corporations Law , to a developer, is not entitled to the indemnity." 17 The plaintiffs submitted that they were not developers to which the policy related. They applied for the State indemnity and, upon refusal by the defendant, they appealed to the Consumer Trader and Tenancy Tribunal under the Home Building Act 1989, s 103ZA(1) which provided that the tribunal had the same jurisdiction in relation to claims for indemnity as it had in relation to claims under contracts of insurance under Pt 6. 18 The Home Building Act 1989, s 48I provided that any person might apply to the Consumer Trader and Tenancy Tribunal for the determination of a "building claim". That term was defined in s 48A(2)(a) to include an appeal against a decision of an insurer under a contract of insurance required to be entered into under the Act. The tribunal thus had jurisdiction to hear the plaintiffs' appeal. However, the plaintiffs discontinued their appeal to the tribunal and commenced the proceedings in this court. 19 It was submitted on behalf of the plaintiffs that while they fell within the definition of the term "developer" in the Home Building Act 1989, s 3A they were not developers to which the policy related for the purpose of s 103I(2)(b) because James J held in Jones that the exclusion in cl 5.8 of the certificates of insurance was void with the consequence that they were entitled to recover under the certificates of insurance not as developers, but as beneficiaries. It was submitted that the plaintiffs' case was peculiar to them alone as a result of the preservation of the decision of the court in Jones. Their case said nothing of who might be a developer to which a policy related with respect to any other parties. 20 The defendant argued that the case had nothing to do with the preservation of the decision in Jones which was for the purposes of the Home Building Act 1989, Pt 6. Part 6A, it was submitted, introduced a new statutory entitlement and the question was whether the exclusion in s 103I(2)(b) applied. 21 The defendant pointed out that the exclusion in the Home Building Act 1989, s 103I(2)(b) presupposed that a developer was otherwise entitled to recover under a contract of insurance in terms of s 103I(1). It was submitted that Jones did not decide that the plaintiffs were beneficiaries and not developers: nor was it decided that their claim as beneficiaries who were developers was not excluded by cl 5.8 of the certificates of insurance. 22 Clause 2.11 of the certificates of insurance defined the term "developer". The decision in Jones did not affect that definition. The plaintiffs were within it. The defendant submitted that, as the only beneficiaries under the certificates of insurance, the plaintiffs were persons to which the policies related and developers to which the policies related for the purposes of the Home Building Act 1989, s 103I(2)(b). 23 The plaintiffs' argument that they were not developers to which the policies related because they were developers not excluded from benefit under the policies, creates the odd result that while they were the only persons to benefit under the policies, and they were developers for that purpose, the policies nevertheless did not relate to them as developers. 24 That argument also has the effect that if, like them, a person as a developer was entitled to recover under a policy because there was no exclusion, there was no work to be done by the Home Building Act 1989, s 103I(2)(b) because, on the plaintiffs' argument, the policy would not relate to the developer. 25 In my view, the legislation should not be construed to render the Home Building Act 1989, s 103I(2)(b) otiose or to produce the odd result that a policy does not relate to the only person to benefit under it. 26 It was submitted on behalf of the plaintiffs that this result thwarts the statutory intention of preserving this court's decision in Jones evident in the Home Building Act 1989, Sch 4, Pt 7, cl 52(3) and cl 53(4). That may be so. However, if the legislature intended to make the new statutory entitlement available to the plaintiffs, one would have expected a similar provision preserving the decision to have been included in Pt 6A. 27 Unfortunate though it may be for the plaintiffs who succeeded in Jones, they do, in my view, fall within the exclusion in the Home Building Act 1989, s 103I(2)(b). They were beneficiaries and developers under the policies constituted by the certificates of insurance. But for the operation of the exclusion, they were entitled to recover amounts under the policies. The policies thereby related to them. They were developers to which the policies related. 28 The defendant submitted that the Consumer Trader and Tenancy Tribunal was the primary forum for determination of entitlements under the Home Building Act 1989, Pt 6A and since the plaintiffs exercised the right to apply to that tribunal but voluntarily abandoned the opportunity, the court should, in its discretion, refuse the relief sought in the summons. 29 In view of my construction of the relevant provisions of the Home Building Act 1989, I am of the view that the plaintiffs have failed. The appropriate order is to dismiss the summons as that construction is against the terms of the declaration sought. The question is whether I should dismiss the summons on the discretionary ground without expressing my views of the proper construction of the legislation. 30 It was not suggested that the court lacked jurisdiction to construe the legislation. The proper construction to be afforded to it was argued by both parties. In my view it is appropriate that I determine that issue. I reject the submission that I dismiss the summons without expressing my reasons for determining the construction question. 31 I dismiss the summons. I order the plaintiffs to pay the defendant's costs.

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