Their Honours in Grant , at 129-130, also referred to an equitable principle whereby:
"… a releasee must not use the general words of a release as a means of escaping the fulfilment of obligations falling outside the true purpose of the transaction as ascertained from the nature of the instrument and the surrounding circumstances including the state of knowledge of the respective parties concerning the existence, character and extent of the liability in question and the actual intention of the releasor."
37 I do not construe the release which arose from the payment as extending to the claim of Mr Williams to recover the amount CHU has expended.
38 Throughout the negotiations about replacement costs, both sides were aware that there was an insurer, and that the insurer would be attending to reinstatement of the kitchen. At the time of Mr Luong's handwritten letter of 22 August 2002, it had not occurred to either party that the insurer might seek to recover from either of them the amount it expended in fixing the kitchen. The negotiation of the amount which Ms Le was to pay in connection with the damage proceeded on the basis that the cost of repairing the kitchen was not being quantified. Mr Williams' description, in the heading of his Excel spreadsheet (which Mr Luong received in mid October 2003 - see para [21] above) of the amount he was quantifying as "Excess Costs as agreed …" confirms that only some of the total costs incurred were being quantified. When Ms Le and Mr Luong received the letter from the loss adjusters dated 8 October 2002, Mr Luong's telephone call to Mr Griffin, asking for an explanation, shows a realisation on his part that this demand was not consistent with the assumptions on which both parties had, up to that time, been working. Mr Griffin's response to Mr Luong's phone call, that he would sort it out, shows an understanding on both sides that it was a matter which required sorting out. When the loss adjusters wrote again on 1 November 2002 to Ms Le, this provided confirmation that this question had not been sorted out. Nor am I persuaded that the conversation between Mr Luong and Mr Griffin, after Ms Le received that letter, was one in which the problem was definitively sorted out.
39 By the letter of 13 November 2002, Mr Griffin was, it seems to me, dealing with payment of those expenses which had been paid by Mr Williams personally. The offer, contained in that letter, that "payment of the above balance due will release you from any further claim in this matter" needs to be understood by reference to what counted as "this matter". In circumstances where both parties were aware that the insurer was claiming the amount it had expended on repairs, and there had been no express discussion between Ms Le and Mr Luong on the one hand, and Mr Williams and Mr Griffin on the other, about how that claim should be dealt with between them, I do not regard it as being released by the payment.
40 In Morganite Ceramic Fibres Pty Ltd v Sola Basic Australia Ltd (1987) 11 NSWLR 189, Smart J reviewed legal authority relating to a contention that a release given to a tortfeasor or party in default under a contract will not bind a subrogated insurer if, at the time of the release, such tortfeasor or party was aware that payments had been made by the insurer to the insured and of the rights of the subrogated insurer. His Honour appears to have been of the view that there was such a legal principle. On appeal to the Court of Appeal (Sola Basic Australia Limited v Morganite Ceramic Fibres Pty Limited (NSWCA, 11 May 1989, unreported), Meagher JA held no such principle existed, but Priestley JA (with whom, it appears, Hope JA agreed) did not need to decide the question. In Baltic Shipping Co v Merchant "Mikhail Lermontov" (1994) 36 NSWLR 361 at 370, Handley JA (with whom Kirby P and Mahoney JA agreed) appears to have accepted the proposition. In circumstances where I have come to the view, as a matter of construction, that the release does not extend to the insurer's claim, it is not necessary for me to decide which of Smart J and Meagher JA I should follow, nor what is the precise import of the passage in Handley JA's judgment in Baltic Shipping Co v Merchant "Mikhail Lermontov" to which I have referred, nor whether that passage was part of the ratio of the case, and therefore binding upon me.
41 The release, on its proper construction, prevents Mr Williams from making any additional claim for loss of rent concerning the property. The question of what rent the tenant should pay, in the period following the fire, was part of the discussions which made up the "this matter" which was released. From soon after the date of the fire, Mr Luong was offering to continue to pay rent (para [4] above). Even after the lease was terminated, the tenant continued to pay rent, for two weeks. However that payment of rental was, by agreement, regarded as an overpayment, and deducted in calculating the amount which the tenant was required to pay - see paras [21], [22] and [26]. Thus, any claim for further rent falls within the ambit of "any further claim in this matter" which was released by payment of the agreed amount of $2,191.59.
Entitlement to Sue in Local Court Proceedings - No Subrogated Rights
42 A fallback argument of the plaintiff is that the Local Court proceedings are not validly instituted. It is common ground that the Local Court proceedings are being conducted, in the name of Mr Williams, by CHU Underwriting Agencies.
43 One basis on which the institution of the proceedings is challenged concerns the law of subrogation. The plaintiff points to the uncontroversial proposition that under the general law, unless and until an insurer makes good any loss, it is not entitled to be subrogated to the rights of the insured: AFG Insurances Ltd v Mayor, Councillors and Citizens of the City of Brighton (1972) 126 CLR 655 at 663. While sometimes an insurance policy might, as a matter of contract, give an insurer rights akin to subrogation at a time when the insurer has granted only a partial indemnity, the insurer has been unable to prove the terms of the policy. That means that the insurer cannot rely on any such right here. The plaintiff submits that CHU has not indemnified Mr Williams in full for his loss, and hence it cannot be subrogated to any rights of Mr Williams.
44 Business records have been produced by the insurers, consisting of tax invoices from Update Project Management Pty Ltd totalling $12,485, payment advice slips of the insurer relating to each of those tax invoices, and file copies of "advice to payee" documents relating to all except the first of those payments. I am satisfied that the insurers have paid the whole of the amount claimed by Update Project Management, and that Update Project Management did all the work on restoration of the kitchen which was not personally paid for by Mr Williams.
45 There is in evidence an invitation to insure, from CHU to "The Owners - S.P. 2772", which shows that insurance was offered, for risks including "Building", on a particular policy number, for the period which includes the date when the fire occurred. The payment advice slips which are part of CHU's business records are all annotated with a reference to the Strata Plan number, the policy number, and the address at which the fire occurred. I am satisfied that it is pursuant to an insurance policy with the owners' corporation of the building in which the unit was located, that CHU made the payments to Update Project Management.
46 It is true that the insurers did not reimburse Mr Williams for the whole of the loss he sustained in consequence of the fire - as well, there were the costs which he agreed to share with the plaintiff. Because the defendant was unable to prove what were the precise terms of the insurance policy, it was unable to demonstrate that the payment CHU actually made to Update Project Management, was the full extent of the liability which it had under the policy to indemnify. There is some argument about whether an insurer's rights of subrogation arise under the general law only if the insurer has indemnified the insurer against the totality of the loss the insured suffered, or whether it is enough that the insurer has provided indemnity to the full extent the policy requires it to do so: Sutton, Insurance Law in Australia, 3rd ed (LBC Information Services, 1999), p 1226. Even assuming, without deciding, that the latter is correct, if it were necessary for the defendant to demonstrate that circumstances had arisen where his insurer had an entitlement to be subrogated to any rights which the defendant had against the plaintiff, he would have failed to do so.
47 In my view, however, this does not matter. Whether or not the insurers have an enforceable legal right against the defendant, arising under the law of subrogation, to run the Local Court proceedings in his name, they have his consent to run those proceedings in his name.
48 It may be - I do not need to decide - that this point should properly have been taken in the Local Court, by way of a motion seeking to stay those proceedings on the ground that the solicitors acting there in Mr Williams' name were not really retained by him or otherwise entitled to sue in his name: Richmond v Branson & Son [1914] 1 Ch 968 at 974; Russian Commercial and Industrial Bank v Comptoir d'Escompte de Mulhouse and Others [1923] 2 KB 630 at 671 - 672 per Atkin LJ (dissenting, but whose view was upheld on appeal: Russian Commercial and Industrial Bank v Comptoir d'Escompte de Mulhouse and Others [1925] AC 112 at 130, 148); Australian Workers' Union and Others v Bowen (1946) 72 CLR 575 at 586, 589, 590, 592; Harry S Bagg's Liquidation Warehouse Pty Ltd and Others v Whittaker and Others (1982) 44 NSWLR 421; Knox Street Apartments v Roger Percival Flexman & Another [2002] NSWSC 102. When the matter has been argued before me, and the amount of money at stake is not large, I think it is preferable to deal with the substance of the point, and ignore the procedural niceties.
49 I note that this is not a case where it is submitted that the tenancy agreement contained terms allocating the obligation to insure to one of the parties, such that there is an implied term that the insurance taken out will be for the benefit of both parties and no rights of subrogation will be claimed: cf Mark Rowlands Ltd v Berni Inns Ltd and Others [1986] 1 QB 211.
No Loss Suffered by Mr Williams
50 Another argument the plaintiff puts is that the Local Court proceedings must fail because Mr Williams has not suffered the loss for which he sues in the Local Court, because the strata plan's insurer has already made good the loss caused by the fire in the kitchen. Consideration of that argument requires review of some of the legislation governing strata schemes.
51 The Strata Schemes (Freehold Development) Act 1973 draws a fundamental distinction between the lots in a strata plan, and the common property. Section 5(1) of that Act defines "parcel" as meaning:
"(a) except as provided in paragraph (b), the land from time to time comprising the lots and common property the subject of a strata scheme, and
(b) in relation to a plan lodged for registration as a strata plan, the land comprised in that plan."