2. Bearing the above in mind, the background to this dispute is as follows. The applicant, Elias Moutidis, is a builder. Pursuant to a building contract dated 23 September 1998, the applicant built a home for the second respondents. A dispute has arisen concerning some aspects of the construction of the home.

3. Following a Ministerial Order which came into effect on 1 December 1998, owners were required to be the insured party under domestic warranty insurance with subrogation operating, and the builder was obliged to obtain run-off cover in relation to the insurance previously held. In 1999 when his domestic warranty insurance fell due for renewal, the applicant completed an application form provided to him by the Master Builders' Association of Victoria ("MBAV"), and returned it to the MBAV. As I understand it, the MBAV effectively acted as agent for the insurer, and indeed the application form has on it the logo of FAI Insurance and has stated on it that "This Insurance is underwritten by a panel of insurers led by FAI General Insurance Company Limited". In May 1999, the MBAV forwarded to the applicant a document headed "QUOTATION. Residential Builders Warranty Insurance". On page 1 of that quotation there is a series of columns under the heading "Amount of each claim to be borne by the Insured under a separate Deed of Indemnity". The three columns are headed "5,000", "10,000" and "25,000". There are further figures under those, these figures having dollar signs in front of them, and being in respect of renewal, run-off cover and total premium. It seems quite clear that the figures at the head of each column represent the excess to be borne by the applicant builder, and, as one would expect, the total premium decreases as the excess increases. The fact that the figures are meant to represent the excess is confirmed on page 2 of the quotation. An excess of $10,000 has been circled and there is reference to the fact that a run-off premium of $572 is included in the total premium to be paid. Whilst not going into findings of fact I accept, and it was not challenged for the purposes of this argument, that the applicant had a discussion with a Mr Pantalone from the insurance section of the MBAV. For the purposes of these rulings I treat Mr Pantalone as an agent of the insurer. It was again confirmed that the figure at the head of each column was in fact excess and the applicant was told by Mr Pantalone that, if there was a claim, he would have to pay the amount of the excess. In any event, the applicant chose the $10,000 excess, with the help of Mr Pantalone executed a Deed of Indemnity (dated 25 May 1999) and paid the appropriate premium referable to a $10,000 excess. The Deed of Indemnity contains a clause as follows:-

"The indemnifiers will indemnify and keep indemnified FAI for all loss, damage, costs and expenses incurred as a result of any claim arising under the Insurance, and all amounts which FAI must pay under the Insurance (whether or not FAI pays any amount) in all cases whether or not the claim arises or is made before or after the date of this deed, provided that the amount of such indemnity shall be no greater than $10,000 (Indemnified Amount) per claim."

"Any right of FAI to recover from the Contractor monies paid or payable by FAI under the insurance is limited to the amount, including interest, recoverable by FAI pursuant to the provisions of this deed."

The contractor is the builder for the purposes of this argument.

5. Approximately one week later a policy from FAI General Insurance Company Limited and bearing the description "Builders `Annual Blanket EXTRA' Policy (Victoria)" and dated 31 May 1999 was received by the applicant. He contends that he placed the policy away without reading it in detail and that it was not brought to his attention that there may be any variation or distinction between what was set out in the quotation and the Deed of Indemnity, and what was contained in the policy. Again, I make no absolute finding of fact in relation to the applicant's scrutiny or lack thereof of the policy, but again, for the purposes of this argument, there was no challenge from the first respondent to the applicant's contention. I do repeat that this was apparently a different type of insurance and policy from that previously used. The applicant had not used it before.

6. Whilst the policy was issued by FAI, both the policy and the covering letter enclosing the policy and addressed to Mr Pantalone at the MBAV bear the logo of HIH Insurance. I accept that FAI was part of the HIH Insurance Group.

7. The policy makes no reference to the relevant provisions or clauses of the quotation and the Deed of Indemnity. Under the heading "Limit of Indemnity applicable to this policy", it is stated that:-

"(a) The aggregate liability of the Insurer pursuant to this Policy shall, notwithstanding any other provision to the contrary, not exceed One Hundred Thousand Dollars ($100,000.00) per home plus reasonable legal costs and expenses incurred by the Insured associated with the successful enforcement of a claim against the Insurer."

Thus the limit of liability of the insurer is established at $100,000. The amount allegedly involved in the present case exceeds that limit.

8. However, the policy also contains a somewhat complicated exclusion clause. In order to grasp its impact, it is necessary to track through a number of provisions in the policy. Firstly, the Schedule at the commencement of the policy, whilst again recounting the premium paid, also refers to a "Reimbursement Amount applicable to Section 3: $10,000". In Section 3, it is stated that the insurer is subrogated to any right of the insured (the owners) against the builder. Section 3B provides that, in essence, subject to the builder paying the reimbursement amount (ie $10,000) and subject to the conditions in the policy applicable to the builder, the insurer will not enforce its right of subrogation to recover from the builder any sum for which the insurer accepts liability or any costs and expenses incurred by the insurer in relation to such claim.

9. In other words, and pausing at this stage, if the builder pays the reimbursement amount of $10,000, the insurer will not enforce its right of subrogation. Of course, by this means the builder is effectively paying the first $10,000 by way of excess.

10. However, this arrangement is subject to the conditions contained in the policy. On page 5 of the policy, there is to be found, "Special Conditions applicable to Section 3 of this policy". Special Condition (5) reads:-

"The Builder's rights under Section 3 of this policy shall be deemed cancelled immediately upon the occurrence of any event referred to in Item 2(b) to (g) of the definition of Prescribed Cause."

11. One must then go to the definition of "Prescribed Cause" contained in the policy. In that definition, Item (2)(b) to (g) refers to such matters as the disappearance of the builder, the builder becoming insolvent, and the like. Importantly, (g) reads:-

"Early termination of the Major Domestic Building Contract by the Building Owner as a result of the Builder's wrongful failure or refusal to complete the building work."

12. The very allegation made by the insured (the owners) in this case is that there was early termination of the contract as a result of the builder's wrongful failure or refusal to complete the building work. Whilst that is vigorously denied, I am asked to assume that it has occurred for the purposes of this argument.

13. Accordingly, if one follows the steps through to their conclusion, a quite rigorous exclusion clause is found to exist. If the owners establish that the circumstances described in Item (2)(g) of the definition of Prescribed Cause exist, the applicant builder's rights under Section 3 of the policy are cancelled immediately. He cannot avoid the enforcement of the subrogation by paying the Reimbursement Amount of $10,000. As shall be discussed, the liability limit of $100,000 becomes payable.

14. For the purposes of this argument, I accept that not only did the applicant place the policy to one side without reading it fully, and not only was it a new type of policy with which the applicant was unfamiliar, but that there was no attempt on the part of the insurer to draw to his attention the existence of the exclusion clause or of any relevant difference between what was contained in the quotation and the Deed of Indemnity or what had been told to him by Mr Pantalone, and what was contained in the policy.

15. The House Contracts Guarantee Act 1987 has been amended by the House Contracts Guarantee (HIH) Act 2001. Various provisions of that Act are relevant to the present dispute.

16. For the purposes of the first question of law to be determined, ss.35, 37, 40 and 44 of the House Contracts Guarantee Act 1987, as amended, require consideration. Pursuant to s.37, the State must indemnify any person entitled to an indemnity under an HIH Policy to the extent of the indemnity under that policy. Section 40 establishes that a person who has incurred a loss pursuant to s.37 may make a claim against the Domestic Building (HIH) Indemnity Fund ("the Indemnity Fund") in respect of that loss. If, pursuant to s.40, a claim is made for loss arising from incomplete or defective building work, s.44 enables HGFL to give reasonable directions to the builder in respect of payment by the builder to the Indemnity Fund of any amount in respect to the completion of the building work or the rectification of the defective work. Section 44(3) restricts the direction which HGFL may give to the extent that HIH would be able to require that work or require a payment to HIH by the builder under the relevant HIH policy.

17. In other words, and putting it at its simplest, the amount which the builder can be directed to pay is that which the builder would have been obliged to pay under the policy. It should be added that, pursuant to s.35 of the Act, "HIH policy" means:-

(a) which was underwritten by HIH ... before the relevant date ..."

18. This provision received considerable emphasis from Mr Carr in his submissions on behalf of the applicant.

19. The first question to be answered is, on its face, comparatively simple. In basic terms, it could be expressed as "Is the builder liable to pay to the Indemnity Fund $10,000 being the excess, or $100,000 being the limit of liability?" Whilst the question posed in that form may set out, somewhat starkly, the practical consequences for the applicant, the question of law agreed upon and drafted by counsel is in more elegant terms. It is as follows:-

Is the amount recoverable, if any, by HGFL from the Applicant under s.44 of the House Contracts Guarantee Act 1987 limited by the Deed of Indemnity executed by the Applicant on 25 May 1999 to $10,000?

20. Both Mr Carr on behalf of the applicant and Mr Powell on behalf of the first respondent spoke to extremely well prepared written submissions. These came complete with copy documents and authorities. The submissions of both counsel were particularly helpful in what is a somewhat difficult and complex case, and I am grateful for their assistance. Whilst probably not doing justice to them, I shall attempt to summarise their respective arguments.

21. Mr Carr's submissions could be summarised as follows. The meaning of "HIH Policy" is as defined in the Act and means a contract of insurance. The contract was made on 25 May 1999 when the builder accepted the quotation, signed the deed of indemnity, and paid the premium. The policy issued did not reflect the final intention of the parties which is capable of proof in clear and precise terms. The builder had a right to expect that the policy embodied substantially the terms of the proposal, and it was the duty of the insurer to make that policy accord with, and not depart from, the terms of the proposal. Where the documents under consideration are not merely a proposal, but a quotation and a Deed, that proposition has even greater strength. If there is an inconsistency between the proposal (or a quotation and a Deed) and the policy, the two are to be read together and a court must attempt to reconcile any apparent inconsistency if this can be done, or otherwise construe the contract against the insurer. Further, when the insurer issues the policy, there is an implied term that, in such vital areas as the extent of cover and the total amount of indemnity, the terms are consistent with those contained in the proposal which has been accepted, and that nothing has been done to alter them. In addition, pursuant to the Insurance Contracts Act 1984, there is a duty of utmost good faith.

22. In the present case there is a marked and important inconsistency or difference between the terms contained in the quotation and Deed and those in the policy. There has been no reasonable notice given by the insurer in relation to such variation, and there was no knowledge on the part of the applicant in relation to it. The contract of insurance consists of the quotation, its acceptance, the execution of the Deed of indemnity, and the payment of the premium. For all of these reasons, including the principles of uberrimae fidei and contra proferentem, the exclusion clause contained in the policy has no operation, and the builder's liability is to pay the agreed excess of $10,000.

23. In a complex case, the submissions of Mr Powell on behalf of the first respondent are relatively straightforward. They are as follows.

24. Pursuant to s.44 of the House Contracts Guarantee Act, a builder can be directed to pay money to the Indemnity Fund only to the extend that HIH would have been able to acquire that payment under the relevant HIH policy. The limitation, or excess, clause in the Deed of Indemnity can only limit the ability of HGFL to direct payment under a policy if that limitation clause is, by implication, incorporated into the policy or is found to be a collateral contract to the policy. The policy contains no reference to the Deed of Indemnity. The policy is a "stand alone" document, and the limitation clause does not affect the terms and conditions of the policy, which contains all relevant terms. The policy does not require the inclusion of terms set out in the Deed of Indemnity in order to make it work. There is no necessity to employ those terms in order to avoid an unworkable situation. The conditions for a term to be implied, as established by law, have not been satisfied. As established by the authorities and texts, the correct legal proposition is that, unless the circumstances are such as to rebut the presumption that the policy is the exclusive evidence of the terms of the agreement between the parties, the policy is the paramount document setting out the terms upon which the parties have entered into the contract. The contract of insurance is contained in the policy alone and does not consist of the policy plus the proposal and attached documents (in this instance, the quotation and the Deed of Indemnity). Nor do those documents constitute a collateral agreement. Neither the Deed nor the quotation can be incorporated into the policy of insurance unless there is specific reference to those documents in the wording of the policy itself. If the Deed and the quotation represent any contract, it is a totally separate contract.

25. In other words, the submission of the first respondent is centred upon the proposition that there is no legal reason or necessity to look beyond the terms and conditions set out in the policy. If the allegations of the owners are accepted, the builder is in breach of the special condition and accordingly cannot avail himself of the option of paying the reimbursement amount in accordance with Section 3 of the policy. Therefore the insurer may recover from the builder the amount for which it accepts liability up to the limit of that liability, namely $100,000.

26. Before giving such ruling, I should point out that, in the summaries of submissions set out above, I have omitted references to authorities or extracts from texts. Each side referred to various cases, and to extracts from the text "Insurance Law in Australia", Third Edition, by Dr Kenneth Sutton. In particular, Mr Powell relied upon the decision of the High Court of Australia in Australian Provincial Assurance Association Limited v Producers and Citizens Cooperative Assurance Company of Australia Limited (1932) CLR 341. The above failure to refer to case law or to text is solely in the interests of presenting a concise summary of the principal arguments. Certainly it should not be inferred that each step in the submissions advanced was not supported by reference to authorities.

27. Turning to my ruling in relation to this argument, I am of the view that the submissions advanced on behalf of the applicant should prevail. The applicant, as builder, applied for insurance cover by completing a form provided by the insurer. He received a quotation form setting out both the underwriting requirements and the excess. He selected, and paid for, an excess of $10,000. As is required by the terms of the quotation, the applicant also executed the Deed of Indemnity, pursuant to which the right of recovery of the insurer is again limited to $10,000. There is no suggestion that the applicant completed any of these documents in a manner which was misleading or incomplete. There is no suggestion that the manner in which these documents were completed breached or failed to satisfy a condition precedent in relation to the granting of insurance cover.

28. Bearing this in mind, I find in favour of the applicant for the following reasons. They are not listed in order of importance, but rather reflect the approximate sequence in which arguments were advanced.

29. Firstly, I accept that the contract of insurance commenced its existence at the time of completion of the quotation, the acceptance of same, the payment of the premium, the acceptance of same, and the execution of the Deed of Indemnity. In this regard, I refer to the decision of the Supreme Court of Victoria in Shepherd v National Mutual Life Association of Australasia Ltd and Bob Broadley and Associates Pty Ltd (1995) 8 ANZ Insurance Cases [61-233]. In that case there was argument concerning when the period of cover commenced and concerning the duty of disclosure. Evidence was called in relation to conversations between the agent of the insurer and the insured and as to representations that may have been made. As in the present case, there was no doubt but that the terms of the of the policy produced an unfavourable result for the insured As was said by Hedigan J at p 75, 610:-

"There can be no dispute, and there is none, that the written terms of the policy disentitled the plaintiff from recovery..."

30. Hedigan J at p75, 615 goes on to refer to various passages from "MacGillivray & Parkington on Insurance Law" at paragraphs 220 and 237. One of the quotations relied upon by His Honour reads as follows:-

"It will readily be assumed that, when an applicant seeks insurance cover from particular insurers, he impliedly offers to take an insurance on the insurers' usual, or standard, terms of cover, just as the insurers' interim cover note will be issued impliedly subject to the usual conditions contained in their policies. When, therefore, the insurers come to issue their policy, their only obligation is to issue it with the terms and conditions usually attached to their policies, in so far as these are not inconsistent with the express term of the parties' preliminary contract."

31. His Honour deliberately emphasised the concluding words of that quotation, commencing with the words "in so far". Further, there is reference to the old case of Collett v Morrison [1851] EngR 439; (1851) 9 Hare 162 as follows:-

"...if there be an agreement for a policy in a particular form, and the policy be drawn up by the office in a different form, varying the right of the party assured, a Court of equity will interfere and deal with the case upon the footing of the agreement and not of the policy."

32. In Shepherd, His Honour's conclusions on this question are found at p.75, 616. They are as follows:-

"...I have reached the conclusion that the statements made by Broadley (the agent) were promissory and not representational. I have concluded that the contract of insurance made between the plaintiff and the first defendant was partly oral and partly in writing, comprised of the relevant parts of the conversations on 7 April between Broadley and Shepherd and the policy document. In my view, since it had already been agreed between the plaintiff and the first defendant that he would be covered upon acceptance of the risk, that was a term of the contract and to the extent that the 90-day qualification period was purported to be included it was an alteration to which the plaintiff did not agree. The first defendant is therefore bound by the contractual term agreed to by its agent Broadley, and I hold that the plaintiff was covered for the risk from the date of acceptance ..."

33. In relation to this issue, Mr Carr relied upon the decision of the Supreme Court of Queensland in West's Plumbing Services Pty Ltd v Trade Indemnity Australia Limited (1994) 8ANZ Insurance Cases [61-214]. In that case, it was decided that the contract of insurance included a further oral term which provided additional cover. The policy ultimately issued did not contain such cover. The Court ruled that the policy did not embody the final intention of the parties and that the omitted ingredient was capable of proof in clear and precise terms, having regard to the antecedent dealings of the parties.

34. In summary, in the present case I am satisfied that the contract was constituted by the various discussions and documents, including the policy, to which I have referred. On the basis of the unchallenged assertion and affidavit material, I accept that the applicant accepted and paid for insurance cover based upon a $10,000 excess. I accept that he was advised by the agent of the insurer that, in the event of a claim under the policy, he would only have to pay the amount of the excess. I accept that he executed the Deed of Indemnity which is based upon that $10,000 excess. The policy which issued varied "the right of the party assured" to a significant degree. For all of these reasons, and again adopting the wording used in Collett v Morrison as quoted by Hedigan J in Shepherd, it seems to me that the Court should "deal with the case upon the footing of the agreement and not of the policy".

35. I might add that the wording in the quote from MacGillivray & Parkington which was emphasised by Hedigan J reinforces this view. The condition attached to the policy is inconsistent with the express terms of the "preliminary contract". Further, the uncontested factual basis upon which I am determining these questions establishes that the particular condition could not even be described as one usually attached to such policies. This was a new form of insurance for builders, and the structure and content of the policy are different from that previously in use.

36. Next, I am also persuaded by the submissions advanced on behalf of the applicant insofar as they are based upon the decision of the Supreme Court of New Zealand in the case of Braund v Mutual Life & Citizens Assurance Co Ltd [1926] NZGazLawRp 96; [1926] NZLR 529. Again, that was a case where the policy ultimately issued by the insurer differed materially from the proposal in that liability in respect of various types of accident was excluded. That case also possesses some similarities to the present case. Again, it was the distinction between a proposal form (rather than a quotation and Deed of Indemnity), and policy, that was at the centre of dispute. Interestingly, the decision in Collett v Morrison, referred to above, was applied. At page 533, Stringer J states as follows:

"The question is whether, when the policy was sent by the company to the plaintiff, there was not an obligation on the part of the company to call the plaintiff's attention specifically to the conditions in the policy which introduced a variety of exemptions not contemplated by the proposal, in order that he might consider whether or not he would accept a policy which so widely departed from the terms of his original proposal."

"In the present case I hold that the plaintiff, when he received the policy without any notification of its departure from the terms of his proposal, assumed, and had a right to assume, that it embodied substantially the terms of his proposal, and therefore that he had no reasonable notice of the introduction of the exemptions in question."

38. It is also of interest that Stringer J referred to the reasonably well known decision of In re Bradley, Essex Suffolk and Accident Insurance Society [1912] 1 KB 415, and in particular to a passage from the judgement of Farwell L.J. which reads as follows:

"..... it is, in my opinion, scarcely honest to induce a man to propose on certain terms, and then to accept that proposal and send a policy as in accordance with it when such policy contains numerous provisions not mentioned in the proposal, which operate to defeat any claim under the policy, and all the more so when such provisions are couched in obscure terms."

39. Farwell L.J. also states that the proposal form should contain the acts which, by the policy, the assured is to covenant to perform, and that it should be made clear in the policy the conditions, non-performance of which will entail the loss of all benefits of the insurance.

40. I appreciate that the decision in Bradley was not followed by the Supreme Court of Victoria in Davis and Young Pty Ltd (in liquidation) v Assurance Compagniet Baltica Skandinavia Aktieshelskab [1986] VicRp 24; 1986 VR 203, but it was not followed in relation to the issue of whether or not a condition precedent existed. However, the passages referred to above, whilst they may well be considered obiter dicta, are not criticised in Davis and Young. Indeed, Dr Sutton refers to the decision in Bradley in support of the proposition that an assured is entitled to assume that the policy accords with the provisions of the proposal, and is not called upon to undertake a detailed examination of all its terms.

41. Further, I agree with the proposition advanced by Mr Carr, and in support of which he relied upon extracts from Dr Sutton's text, that there is an implied representation by the insurer that the terms of the policy in vital areas are consistent with those contained in the proposal - in this case, the quotation and Deed of Indemnity - and that the terms have not been altered or varied to the disadvantage of the insured.

42. Mr Carr also referred to Sections 13 and 14 of the Insurance Contracts Act 1984 and in particular to the duty of utmost good faith. As stated, there is no suggestion that the applicant failed to reach that standard in the manner in which he completed the quotation form or the Deed of Indemnity. However, it seems to me that, given the discrepancy between the quotation, the Deed, the verbal assurances given to the applicant, and the policy, an argument that the insurer has not acted with the utmost good faith can be maintained. This is no criticism of HGFL. However, as discussed, by virtue of the legislation it effectively stands in the shoes of the insurer.

43. The arguments advanced on behalf of the first respondent rely basically upon the "stand alone" premise and the decision in Australian Provincial Insurance Associated Limited, including the proposition that any contract based upon the quotation and the Deed is a separate contract.

44. Dealing firstly with this latter proposition, it does not seem to me that the quotation and the Deed can be divorced in this way from the policy. The quotation, for example, refers to a policy period of 12 months. It refers to the limit of indemnity as being $100,000 per claim. It sets out the basis of cover. It is clearly related to the policy. One of its "Outstanding Underwriting Requirements" is the signature on the Deed of Indemnity for selected excess. The excess was selected and the Deed signed. The Deed in turn states that any right of the insurer to recover from the contractor (clearly identified as the applicant) is limited to the amount recoverable by the insurer pursuant to the provisions of the Deed. The three documents are related. I do not accept that there are two completely separate contracts. The oral representations of Mr Pantalone only reinforce this view.

45. In addition, it seems to me that the provision in the Deed referred to in paragraph 4 of this ruling can be interpreted as limiting the amount payable under the insurance in the sense of limiting the amount payable under the subrogation.

46. Furthermore, it is to be remembered that Australian Provincial Insurance Associated Limited is essentially related to alleged untruths and omissions in the proposal and accompanying declaration, and is distinguishable. In addition, the decision is referred to by Dr Sutton, and adopted in the present case by the first respondent, as standing for the proposition that:

"Unless the circumstances are such as to rebut the presumption that the policy is the exclusive evidence of the terms of the agreement between the parties, the policy is the paramount document setting out the terms on which the parties have entered into the contract."

47. It seems to me that the circumstances in the present case are such as to rebut the presumption that the policy is the exclusive evidence of the terms of the agreement between the parties. In my opinion, the terms of agreement between the parties clearly included a provision that the maximum amount which the insurer could recover from the applicant was limited to the amount of $10,000. The policy issued has not accurately reflected one of the vital terms of the agreement, namely that the extent of the applicant's liability is $10,000.

48. In summary, in relation to the first question of law, I am persuaded by the arguments advanced on behalf of the applicant and find in his favour.

49. The second question is one based upon interpretation of the Act. It was phrased by the parties as follows:-

"Even if the fund is limited to $10,000 in the amount it can recover from the builder pursuant to s.44, can it nevertheless proceed under s.43 to recover all amounts it paid out under the claim?"

50. Another way of framing this question would be to ask whether, even if HGFL fails to make out a case pursuant to Section 44, or there is a limit upon the direction which it can make pursuant to that section, it has an entirely different right, not so limited, to recover pursuant to Section 43.

51. In relying upon this argument, the first respondent also points to Section 46 of the Act, and in particular to Section 46(2)(c). That section effectively provides that there must be paid into the Indemnity Fund money recovered by the State from any person under a right assigned under Section 43. Section 46(2)(d) contains a separate reference to money paid or recovered under Section 44. Therefore, it is argued, there is clearly a separate and distinct right of recovery existing pursuant to Section 43, and which is contingent upon the assignment to the State of a person's right to recover from HIH, the builder, or if required by HGFL, any other person. The argument, as I understand it, is that, in the present case, the owners may assign to the State their right to recover from the builder (the applicant) and the State, through HGFL, can then so recover.

52. Whilst I am told that, in fact, no such assignment has taken place in the present case, I am asked to assume that it may or will take place, and to rule accordingly. Whilst the making of these rulings divorced from the actual facts of the case may seem undesirable, I am asked to make them, and accordingly am so doing in the interests of the efficient conduct of the case.

53. I am against the argument advanced on behalf of HGFL. It seems to me that Section 43 sets out conditions precedent to be satisfied prior to the payment of any amount pursuant to Section 42. Section 42 refers to HGFL accepting a claim in respect of a loss covered by an indemnity pursuant to Section 37, and the payment out of the Indemnity Fund of the amount assessed by HGFL as payable under the indemnity. Whilst I agree that the drafting of these various sections appears to be confusing, I do not accept that there has been created a new or additional liability in a builder insured with HIH. This seems to me to go against the general scheme of operation of the Act. One of the main purposes of the amending Act is to establish an indemnity scheme in respect of losses arising in respect of certain classes of domestic building work affected by the collapse of the HIH insurance group. An Indemnity Fund is established for the purposes of that scheme. It does not seem to me to have been intended that a builder should be required to contribute to that Indemnity Fund to an extent greater than that which could have been recovered by HIH. Section 44(3) sets this out. Logically, HGFL stands in the shoes of the defunct insurer. If, pursuant to Section 43, HGFL can also stand in the shoes of the owners for the purposes of recovering from the builder "any amount in respect of the loss", the restrictions contained in Section 44 are pointless. Viewed one way, such an interpretation would result in builders being treated as remaining without any effective insurance, indemnity, or support. They would simply be called upon to pay the amount of any loss to the Indemnity Fund rather than to the owners. This interpretation of the provisions is not one which I accept, and I prefer the argument that the provisions of Section 43(1) contain conditions precedent for payment pursuant to Section 42, and do not impose some alternate and potentially far greater liability upon the builder.

54. In summary, I do not accept the argument, however ingenious, advanced on behalf of HGFL, and I prefer the submissions advanced on behalf of the applicant.

55. I am of the opinion, that, as a matter of law, the liability of the applicant is limited to the figure of $10,000. Given that I am making this ruling on a question of law in advance of the substantial hearing, and given that the ruling is made on a number of bases, I shall hear from the parties as to the precise nature of any order that is required.