Owners Corporation Strata Plan 64487 v Suncorp Metway Insurance Limited

CATCHWORDS : [HOME BUILDING ACT] - Whether definition of "residential building work" in Home Building Act 1989 applicable to Insurance Policy provided by defendant under that Act - [SEPARATE QUESTIONS] - As to identity of person who did "residential building work" and gave warranties under the Act - As to whether the Policy responds to plaintiffs' claims.

Home Building Act 1989 LEGISLATION CITED : Home Building Amendment Act 2000 Home Building Regulation 1997

Clutterbuck v Curry (1885) 11 VLR 810 CASES CITED : Dillon v Gange (1941) 64 CLR 253 HIH Casualty and General Insurance Limited v Jones [2000] NSWSC 359 McLean Bros and Rigg Limited v Grice (1906) 4 CLR 835

Owners Corporation Strata Plan 64487 - first plaintiff Wai Yee Lee & Peter Tsz Pinn Li - second plaintiffs Paula Mary McCann - third plaintiff Chien-Yang Tai, Mei-Tso Tai Lai & Jung-Hui Tai - fourth plaintiffs JB Steedman & DM Steedman - fifth plaintiffs A Simms & K Simms - sixth plaintiffs NW Goodall & LJ Goodall - seventh plaintiffs N Mortimer & M Mortimer - eighth plaintiffs PARTIES : EJ Walter - ninth plaintiff BJ Nichols - tenth plaintiff D Wybrow & LE Wearne - eleventh plaintiffs WH Barber - twelfth plaintiff M Thompson - thirteenth plaintiff TA Clarke & KM Clarke - fourteenth plaintiffs Yun-Fu Tsui & Nan-Ping Hsu - fifteenth plaintiffs B Norton - sixteenth plaintiff Terence Peter Compton - seventeenth plaintiff Suncorp Metway Insurance Limited - defendant

COUNSEL : E Olsson SC/M Walsh - plaintiffs AS Martin SC/TW Marskell - defendant

SOLICITORS : Snelgroves - plaintiffs Moray & Agnew - defendant

• 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION TECHNOLOGY & CONSTRUCTION LIST

55066/2004 OWNERS CORPORATION STRATA PLAN 64487 & ORS V SUNCORP METWAY INSURANCE LIMITED JUDGMENT 1 The plaintiffs, Owners Corporation Strata Plan 64487 and sixteen others, are the owners of the common property and townhouse units 1 to 16 (the units) at 28-34 Kent St, Epping, New South Wales (the Property). The units were constructed between August 1999 and November 2000 and were sold during 2000 and 2001. The plaintiffs subsequently observed defects in the units including cracking of walls, water penetration with consequential dampness and problems in the roof. In April 2004 the plaintiffs made a claim on the defendant, Suncorp Metway Insurance Limited, for indemnity for the rectification of the alleged defects pursuant to a "Contractor's 'Annual' Home Warranty Insurance Policy" (the Policy) issued in compliance with the Home Building Act 1989 (the Act). 2 During the relevant period the defendant was represented by an agent Dexta Corporation Limited, however for ease of reference I will only refer to the defendant. On 4 August 2004 the defendant advised the plaintiffs that it had undertaken an inspection in relation to the claims and that it had recommended certain items for acceptance but had denied other claims. That notification advised the plaintiffs that the "original builders", identified in the defendant's letter as Clive Head and Andrew Head, no longer held building licences and accordingly requested the plaintiffs to provide two detailed written quotations for the performance of the building work set out in the enclosed Schedule of Works. The defendant subsequently denied the whole of the plaintiffs' claims and although there is no evidence of the communication of that denial, other than in the pleadings, the defendant denied liability on the basis that the "Insured" under the Policy did not carry out the "work", being the "residential building work", and accordingly the Policy did not respond to the plaintiffs' claims. The defendant claims that the work was carried out by the corporate entity, Head & Sons Constructions Pty Ltd (the Company) that was not Insured under the Policy.

The pleadings 3 In the Amended Statement of Claim filed in Court on 27 January 2005 the plaintiffs claim, inter alia: 3. Head & Sons Constructions Pty Limited, Licensed Builders and Clive Head and Andrew Head ("the Builders") constructed the property which comprises the common property and sixteen (16) townhouse developments ("the development") and the Owners Corporation came into existence upon registration of the Strata Plan on 29th of November 2000. … 7. The Defendant was the home warranty insurer for the builder and developer who did the works as defined under the Home Building Act 1989 (NSW) as amended and by virtue of the facts pleaded in paragraph 3 of the Statement of Claim, provided to the Plaintiffs as beneficiary, insurance cover for any defective work carried out by the builder. 8. The Builder breached the statutory warranties by 8.1 Failing to perform the works in a proper and workmanlike manner and in accordance with the plans and specifications approved by the Statutory Authority; 8.2 Failing to ensure that all materials supplied will be good and suitable for the purpose for which they were used and as otherwise stated in the plans and specifications approved [by] the Statutory Authority; 8.3 Failing to ensure the works were done in accordance with, and would comply with, the Home Building Act 1989 (NSW) as amended or any other law; 8.4 Failing to ensure that the works would result to the extent of the works conducted in a dwelling that was reasonably fit for occupation as a dwelling. 4 The particulars of the alleged breaches of statutory warranties identify three reports from: SBIC Advisory Services Pty Ltd dated 23 March 2002; Alden Associates Consulting Engineers Pty Ltd dated January 2004; and WJ Holley Constructions Pty Ltd dated 28 April 2003. The plaintiffs claim damages as a result of the Builder's breaches of statutory warranties (par 9) and that the defendant has wrongfully and in breach of the Policy denied their claims (par 15). 5 In its Further Amended Defence, the defendant claims that the Company was retained by Kent Street Investment Pty Limited (Kent Street), the then proprietor of the Property, to construct the development and denies that Clive Head and Andrew Head were the builders (par 3). It admits that it entered into the Policy with Clive and Andrew Head and claims that the Policy responded to residential building work to be carried out by Clive and Andrew Head for the Building Owner (par 6). It claims that the Company breached the statutory warranties as identified in the experts reports and that many of the defects were due to a faulty design or designs provided to the Company by Kent Street (pars 7.1-7.2). It denies that Clive and Andrew Head breached any statutory warranties (par 7.3). The defendant also relied on the terms of the Policy allowing it to deny that part of the claim that had been partially admitted by reason of further information and documents that came into its possession subsequent to that decision (par 13).

6 In their Reply to the Further Amended Defence the plaintiffs made the following claims: 1. By its conduct in issuing certificates of home warranty insurance, the defendant is estopped from denying that Clive and Andrew Head carried out the building works. 2. A subsidiary of the defendant was the financier and mortgagee of the subject development and in those circumstances is estopped from denying that Clive and Andrew Head were the builders of the building works and is estopped from denying that Clive and Andrew Head breached any statutory warranties. 3. In the premises the defendant is estopped from denying the claim made by form dated 4 April 2004. Separate Questions 7 The proceedings were heard on 2 and 3 October 2007 when Ms E Olsson SC and Mr M Walsh appeared for the plaintiffs and Mr AS Martin SC and Mr TW Marskell appeared for the defendant. On the first day of the trial an order was made under Rule 28.2 of the Uniform Civil Procedure Rules 2005 for the determination of the following separate questions: (1) Was the residential building work at the Property carried out by Clive and Andrew Head or was it carried out by the Company? (2) Were the warranties referred to in clause 2 (i), (ii), (iii), and (vi) under Part A of the Policy provided by Clive and Andrew Head or were they provided by the Company? (3) In light of the answers to Questions 1 and 2, does the Policy respond to the Plaintiffs' claim dated 4 April 2004? (4) If the answer to Question 3 is "No", is the Defendant estopped from denying indemnity under the Policy by reason of: (a) it issuing certificates of home warranty insurance? or (b) Regulation 49 of the Home Building Regulation 1997 (NSW)? or (c) its conduct following the attempted renewal of the Policy in 2000? FACTS 8 Kent Street was registered on 15 September 1981. Its directors included Andrew Head and Clive Head during the period the Property was developed. Kent Street was the registered proprietor of the Property and on 23 April 1999 it submitted a comprehensive report to the relevant Council seeking approval for the development. That report identified Kent Street as the developer and the Company as the builder. Development Approval 9 Development Approval for the Property was granted to Kent Street on 16 June 1999. The Application for the Construction Certificate dated 5 July 1999, but signed on 19 August 1999, identified the Company as the applicant. It also identified the Company under the heading "Builder's Details (Applicable to residential work)". Finance 10 On 23 July 1999 Kent Street submitted a Credit Approval Request to Suncorp Metway Limited (the Lender). That Request identified the "Group Name" as "Head", the Borrower as Kent Street as trustee for Clive Head Family Trust with the occupation of "Builders/Developer". The request was for approval of an increase of $4.08 million in Kent Street's facilities with the Lender. The Request included the following: Clive Head has been a builder and developer in Australia for over thirty years. He has built projects ranging from individual homes, (including a 700 square metre mansion in Kenthurst), through to 130 plus units in Parramatta. Head has been a client of the writer since 1988 Head is ably supported by his twenty six year old son, Andrew. Andrew is a licensed builder and has been involved in Head's developments since he was a teenager. Head's older son, Greg, forty-seven, is a Wellington NZ based real estate agent and developer. Greg is a frequent visitor to Sydney and provides technical support to both Clive and Andrew. … Clive Head has operated in partnership (via Malina Holdings Pty Ltd atf The Headcom Unit Trust) with Terry Compton of Raelon Pty Ltd from 1991 up until 1997. The partnership has now been dissolved with Malina Holdings and its trust in suspension. The builder for the partnership was Head & Sons Constructions Pty Ltd. This vehicle will continue as the Head Family construction company. ... The principal worth of the group lies ultimately with Clive Head. Head and Sons Constructions Pty Ltd is an operational vehicle which has assets comprising two units at 192 Longueville Rd Lane Cove. Its other major assets are limited to shareholders and intercompany loans which are largely offset by loans from shareholders and intercompany. … Clive Head is a sprightly septuagenarian. Succession arrangements are in place with Greg and Andrew with the actual building being undertaken by Andrew under Clive's supervision. 11 On 30 July 1999 the Lender offered a facility of $4.88 million for the development of the Property to Kent Street as the borrower with guarantees from Clive Head, the Company, Kent Street in its own capacity and as trustee for the Clive Head Family Trust. That offer was accepted and the agreement was signed by Kent Street, the Company and Clive Head. Clause 2 of the agreement referred to certain conditions precedent for the continuation of the facility. One condition was that the Lender was to be satisfied as to the "form and substance of the proposed building contract" before it was signed, which it required to be for a fixed price and "with a licensed builder (Head & Sons Constructions Pty Ltd)". Another condition was that the Lender had to be satisfied as to the form and substance of progress claims which were required to be in writing and authorised by the Lender to pay the amount of the claim "to the builder".

Correspondence and other communications 12 It is necessary to refer in some detail to correspondence and other documents in relation to the development because both the plaintiffs and the defendant have relied upon this material in making their respective claims about the identity of "the builder". 13 On 13 August 1999 the Lender received a "General Projects Report" from a quantity surveyor, Washington Brown Associates Pty Ltd, in which the following appeared: We understand your client is a builder/developer, and therefore no building contract is required. We have checked with the Department of Fair Trading on builder's licence no 30028C and advise that this licence is current, has had 1 insurance claim, has 4 outstanding complaints, however there have been no fines or cautions issued. 14 The quantity surveyor's recommendations identified the Company as the builder. 15 On 26 August 1999 the Company, on letterhead that included the Company's name together with the words "Builders Licence 30028C" (that was Clive Head's Licence Number) forwarded to the relevant Council a Notice of Commencement of Building Works at the Property. That Notice identified the Principal Certifying Authority as Trevor R Howse & Associates (TR Howse) and 23 August 1999 as the date the work was to commence. 16 On 3 September 1999 the Company wrote to the quantity surveyor enclosing the Construction Certificate, the Development Approval, hydraulic drawings, structural drawings, a full set of stamped plans, a specification, a schedule of finishes, insurance certificates for public liability, contract works and workers compensation and receipts from the Council. That letter was signed by Greg Head, under which appeared the words "Greg Head, Head & Sons Constructions Pty Ltd". The last paragraph of the letter was as follows: I trust the above completes your records and facilitates our future progress claims. Please advise if there are any outstanding matters to be completed before we make progress claims.

17 On 9 September 1999 the Company wrote again to the Council. This time the letterhead was different. It included the name of the Company with the word "Developers" typed under the Company's name, with a sketch of a residence in the middle of the letterhead and the words "Builder's Licence No: 30028C, Home Units and Townhouses Specialist" on the right-hand side of the letterhead. This letter referred to a site discussion on 8 September 1999 and enclosed plans for the proposed improvement to the streetscape. That letter was simply signed "Clive Head". In another letter dated 14 October 1999 using the same letterhead the Company advised the Council about the security of the site. This letter was signed "GA Head" above the typed name of the Company. 18 On 21 October 1999 a Council officer wrote to the Company referring to discussions between the Council's representative and Clive Head in relation to allegations of working out of hours on the site. On 1 December 1999 GA Head on behalf of the Company and on the same letterhead wrote to the Council observing that the Council had discussed the matter of work times with Andrew Head. That letter advised the Council that "we are aware of our responsibility as to work times and endeavour to ensure" they are not breached or that local residents are not unduly inconvenienced. 19 On 17 May 2000 the Company wrote to the Council on the same letterhead referring to a meeting with Andrew Head "confirming stormwater" at the subject development and advising that an application for approval had been forwarded to TR Howse. 20 On 22 June 2000 Kent Street sought modification of the Development Consent in which it identified the Company as the builder. On 4 October 2000 the Company certified and confirmed to the Council that landscaping at the development site had been completed pursuant to the consent and approval. The applicant for the occupation certificate was the Company. A file note of the Council noted that Mr Head "(foreman)" had been asked to spread mulch over the ground around the trees on the site. That note also recorded that the Council officer had instructed "Mr Head" to immediately move the mulch away from the street footpath and remove the discarded cement waste and clean up the base of the trees. 21 On 18 October 2000 the Company submitted for approval the original and ten copies of the Strata Plan for the Property and a copy of the final survey report. On 20 October 2000 the Company submitted to the Council for approval and signature the Plan of consolidation and an 88B Instrument. 22 The consulting engineers, Dincel & Associates also communicated with the Company in respect of the provision of its services for the development. 23 One document relied upon by the plaintiffs is a "Testimony" dated 7 June 2001 signed by Alan Hamilton of Dincel & Associates. That was in the following terms: As Mr Andrew Head's Consulting Structural and Civil Engineer, I have known Andrew for approximately 3 years in relation to the residential development at 28-34 Kent Road, Epping. Andrew was the Project Manager/Construction Manager for prime contractors and developers Head & Sons Pty Ltd. In the role of Project Manager Andrew has fully coordinated the design process including Structural, Civil, Hydraulic and Electrical Services and has always displayed a pro-active and constructive involvement in all aspects of project management. As Project Manager Andrew has also prepared a detailed construction program and construction budget before the commencement of work on site. During construction, Andrew has acted in the role of Construction Manager, coordinating sub-contractors including major bulk earthworks and excavation, concretors, steel fixers, formworkers, plumbers, electricians, bricklayers and carpenters. I have also had the opportunity to observe Andrew's completion of the works with finishing trades such as renderers, plasterers, painters and cabinet makers to achieve an excellent and well organised standard of finish for the project. Most importantly, Andrew has utilised his management skills to complete the project within a very tight program. As Structural and Civil Engineer for the above project I have always found Andrew to be extremely dedicated and conscientious in achieving a result above and beyond the clients' expectations. Andrew takes a pro-active involvement in all issues of construction work and has always acted in the clients best interest. 24 All progress claims for the construction of the development were approved by the Lender and paid to "Head & Sons Constructions". Insurance - 1999 25 On 24 August 1999 the defendant wrote to Wilburtins (the Broker) referring to the Builders Warranty application submitted by it on behalf of the Company and requested a profit and loss statement and balance sheet relating to the Company. On 27 August 1999 the Broker provided the Company's completed proposal form and associated documentation to the defendant. In the covering letter the Broker referred to the "history" of claims against the Company in respect of rectification work that it had to carry out. 26 The form enclosed with that letter identified the Company as the "Contractor" and under the heading "Construction Information" listed Clive and Andrew Head as the "Construction Manager(s)" with their licence numbers. In the "Builders History" section of the application an affirmative answer was given to the question, whether the "Applicant, any related company, any director, proprietor or person in charge of construction" had been refused a builder's licence or had a licence suspended or cancelled by a regulatory authority. There was also an affirmative answer to the question as to whether those persons had been subject to disciplinary procedures or reference to a tribunal in respect of building work in the last five years. The application form was signed by Greg Head as a director of the Company. An assets and liabilities statement of Clive Head as at 27 August, 1999 listed the Property as part of his assets. 27 On 30 August 1999 the Broker sent to the defendant' the "most recent profit and loss accounts and financials" of the Company. Those documents related only to the year ended 30 June 1998. On 31 August 1999 the defendant requested further information from the Broker in respect of a number of matters including details of the Builder's Licence Number for the Company. The Broker responded by letter the same day advising that the Company did not carry a builder's licence; that the directors of the Company were Clive and Andrew Head; and that if "this is a concern" the defendant should issue the cover under both their names. 28 On 1 September 1999 the defendant wrote to the Broker advising that there was concern with the details surrounding the previous claims history of the Company. That letter included the following: With respect to Head & Sons Constructions Pty Ltd not having a builders licence number, if the company is entering into building contracts it is in breach of the legislation. If we decide to accept this risk, our policy will cover Clive & Andrew Head only and any contracts the company may enter into will not be covered by the policy. 29 On 1 September 1999 the Broker responded in terms that included the following: The contract entered into at this stage is not a legal contract. In saying this the owners of the land are Kent Street Investments which is a company owned by Clive Head and Clive and Andrew Head are the Directors. The documents between the landowner and developers will be issued in Kent Street Investments and Clive Head. 30 On 1 September 1999 the defendant advised the Broker that the defendant was willing to accept the risk subject to the following relevant condition: Cover will be provided for Clive & Andrew Head and not Head & Sons Constructions Pty Ltd. As the company does not hold a builder's licence, any contracts entered into by the company will not be covered by the policy. 31 On the same date the defendant issued a Domestic Builders Quotation (NSW) subject to the underwriting requirements that were attached to it. The "Insured" was identified as "Clive & Andrew Head including all principals, directors and employees". The "attached" underwriting requirements stated that, "we are unable to bind cover until we receive and approve the following: Bank guarantee in favour of [the defendant] to the amount of $50,000; Insurance cover will not apply to Head & Sons Constructions Pty Ltd". 32 On 2 September 1999 the Lender wrote to the Broker advising that Greg Head had asked it to contact the Broker regarding the provision of Home Owners Warranty Insurance for Clive and Andrew Head "as builders of a 16 townhouse project at 28-34 Kent Street, Epping". The Lender advised that it would only provide the $50,000 guarantee in the name of the borrower, Kent Street Investments Pty Ltd. 33 On 3 September 1999 the Broker requested the defendant to confirm that cover would be bound with effect from 3 September 1999. That letter included the following: We would also like to confirm that the client has been made well aware that no cover applies if any contract is entered into in any other name than Clive and Andrew Head. … The particular contract at current is located at Epping where Kent Street Investments Pty Ltd owns the land. The directors of which are Clive and Andrew Head. As the owners of the land they will be the owners of the completed premises before being sold off and then becoming a Body Corporate. The developers/builders are Clive and Andrew Head. Therefore the contract for the construction is in the names of Kent Street Investments as owners and Clive and Andrew Head as developers. 34 On 6 September 1999 the Broker advised Clive and Andrew Head that the Builders Warranty Insurance had been effected and that a major exclusion was that: "Insurance cover will not apply to any contracts entered into by Head & Sons Constructions Pty Ltd. All contracts must be entered into in the names of Clive & Andrew Head as Developers/Builders". Insurance - 2000 35 On 13 July 2000 the defendant notified the Broker that the Policy for Clive & Andrew Head would expire on 3 September 2000 and that the application form provided with the letter needed to be returned at least two weeks prior to the expiry date in order to renew the Policy. On 9 September 2000 the Broker enclosed "partial completion" of the renewal proposal form, confirmed that renewal was obviously required and was waiting for the financial statements. The form was completed in the name Head & Sons Constructions Pty Ltd and was signed by GA Head as a director. On 12 September 2000 the Broker forwarded the financial statements of the Company to the defendant. On the same day the Broker wrote to the defendant confirming that the Insured, this time identified as Clive and Andrew Head, were not intending to start any new contracts in the near future and that the request for renewal was only to continue with cover until "the one off contract was completed" and asked whether renewal was required "if the original one-off contract Insured was to extend over the annual due date". On 27 September 2000 the Broker wrote to the defendant confirming that the initial Policy issued "will cover the existing contract at Epping until completion".

36 After some correspondence in which both the Broker and the defendant confused the identity of the Insured, the defendant wrote to the Broker on 23 October 2000 confirming that the expired policy was in the name of Clive & Andrew Head and that renewal could only proceed on the following basis:

· If the ongoing policy on a minimum premium basis is to continue, then the policy can only be in the name of Clive & Andrew Head. · If the applicant is seeking for the policy to be in the name of Head & Sons Constructions Pty Ltd, then this will be treated as a new policy and not as a renewal. If this is the case, we shall require the license number for Head & Sons Constructions Pty Ltd as held with the DFT. 37 On 24 October 2000 the Broker advised the defendant that the policy was to be renewed only in the names of Clive and Andrew Head. The Policy 38 The Policy provided relevantly as follows: In consideration of: (1) the Contractor requesting the Insurer to issue insurance to comply with the Act, and (2) the payment by the Contractor of the premium (and other charges) specified in the Schedule,

the Insurer will, subject to the terms, conditions, limitations and exclusions of this policy (which are conditions precedent to the right of the building owner to recover hereunder), provide insurance cover as specified in PART A or PART B of this policy. 39 Part A of the Policy was the Building Owner's Indemnity and provided as follows: The Insurer will indemnify the Building Owner for loss or damage in respect of residential building work:

(2) arising from breach of a statutory warranty under Part 2C section 18B of the Act, namely, the Contractor warrants that: (i) the work will be carried out in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract; (ii) all materials to be supplied by the Contractor will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract, those materials will be new; (iii) the work will be carried out in accordance with, and will comply with the Act or any other law; … (vi) the work and any materials used in doing the work will be reasonably fit for the specified purpose or result, if the Building Owner expressly makes known to the Contractor, or another person with express or apparent authority to enter into or vary contractual arrangements on behalf of the Contractor, the particular purpose for which the work is required or the result that the Building Owner desires the work to achieve, so as to show that, that person relies on the Contractor's skill and judgement.

Without limiting the Building Owners Indemnity subclause (1) or (2), the Insurer will also indemnify the Building Owner for:

(3) loss or damage resulting from faulty design, where the design was supplied by the Contractor; 40 The General Conditions included the following: (1) The indemnity provided to the Building Owner complies with the Act and if any term of this policy conflicts or is inconsistent with the Act then this policy shall be read and be enforceable as if it complies with the Act. If any term of this policy is held to be invalid, illegal or unenforceable for any reason, that term will be deemed to be deleted and this policy shall otherwise remain in full force and effect. 41 The Definitions section of the Policy provided relevantly as follows: " Act " means the Home Building Act 1989 (NSW) and any amendments thereto; " Building Owner " means the person for whom residential building work is being or is about to be carried out under a contract as defined in this policy, and any person who is a successor in title for the time being of the land or building in respect of which the work was carried out under the contract, but excludes:

(a) a developer who does residential building work; (b) a person who does residential building work other than under a contract; (c) the holder of a license who or which carried out residential building work; (d) persons or companies related, within the meaning of the Corporations Law, to any corporate person referred to in subclauses (a), (b) or (c) of this definition " contract " means the contract or contracts entered into between the Contractor and the Building Owner for the carrying out of the work. " contract price ", " Contractor ", " dwelling ", " license ", " owner-builder work ", " permit ", " residential building work " and " statutory warranty " shall, where the context permits, have the same meaning as those terms are defined in the Act. " Contractor " means the person named in the Schedule who enters into a contract with the Building Owner to do the work. " Contractor " and " common property " shall, where the context permits, have the same meaning as those terms are defined in the Regulation. " developer " means any Building Owner or other person for whom residential building work is done in connection with an existing or proposed: (a) dwelling in a building or residential development where 4 or more of the existing or proposed dwellings; or (b) retirement village or accommodation specially designed for the disabled where all of the residential units are or will be owned by the individual, partnership or corporation " Regulation " means the Home Building Regulation 1997 " residential building work " includes the installation of fixtures and apparatus which are specified in Part 2 clause 7 of the Regulation and excludes work which is specified in Part 2 Clause 8 of the Regulation " Schedule " means the schedule of this policy. " work " means residential building work to be carried out by the Contractor for the Building Owner as described in the contract, (including where the parties enter into more than one contract to carry out the work in stages) and the contract price (or sum of the contract prices where applicable) exceeds five thousand dollars ($5,000.00) or (if the contract price is not know ( sic )), the reasonable market cost of the labour and materials involved exceeds $5,000; or any higher amount as may be prescribed by the Regulation. Where there is no contract entered into between the Contractor and the Building Owner in respect of the work in circumstances where under the Act a contract in writing for that work is not required, "work" means the actual work performed by the Contractor for the Building Owner on the site. 42 The Contractor was identified in the Schedule as "Clive Head & Andrew Head". Contracts for the sale of land 43 There are three contracts for the sale of the units in evidence. The first in time is the contract dated 20 October 1999 for the sale of unit 5 to the sixth plaintiffs, A Simms and K Simms. The contract included the following clause: 25 Certificate of Insurance

25.1 The purchaser acknowledges that, for the purposes of this contract annexed and marked "C" is a copy of a certificate of insurance evidencing a contract of insurance in accordance with section 96 of the Home Building Act 1996 and is in the form prescribed by the Home Building Regulation 1997.

25.2 The purchaser shall not:- (a) make any objection, requisition or claim for compensation in respect of; or (b) rescind, terminate or delay completion of this contract because of any of the matters contained in, or relating to, the certificate of insurance 44 The Certificate of Insurance, annexure "C" to the contract, was in the following terms:

Building Owner's Home Warranty Insurance Certificate No. BAN999-DA000100-99/1/5 Important Notice This Certificate is issued to comply with the relevant law and MUST be signed by the contractor and the Insurer (or its agent). This ORIGINAL CERTIFICATE must be retained as evidence of the insurance, which is provided under an annual policy issued to the contractor. The terms, conditions and exclusions of the insurance relevant to the Building Owner are set out in the attached policy wording. This Certificate is ONLY VALID for a contract dated between 3 September 1999 and 3 September 2000 and a contract value less than $200,000. This Certificate applies to one dwelling ONLY and relates to a Residential Building Contract dated …………………………………. The contract price for the work is $………………………….. Variations of up to 10% of the contract price are automatically included. The estimated construction period is from …..…………….. to ……………. HOME BUILDING ACT 1989

Section 92 (2) CONTRACT WORK Section 96 (2) WORK BY DEVELOPERS & OTHERS

A contract of insurance complying with Section 92 or Section 96 of the Home Building Act 1989:

has been issued by: Suncorp Metway Insurance Limited (ACN 075 695 966) - 100%

in respect of: "Alexander on the Park" ……………………………………………… …………………………………………………………………………………………… ………………………………………………………………(description of the work)

at: 5/28-34 Kent Street, Epping.. …………………………(site address)

Subject to the Act and the Home Building Regulation 1997 and the conditions of the insurance contract, cover will be provided to the Building Owner described in the insurance contract and successors in title to the Building Owner. In respect to work by Developers & Others, cover will be provided to the immediate successor in title to the Contractor or Developer who did the work and subsequent successors in title. Instructions to the Contractor · For contract values over $200,000, contact your Insurance broker. · Each certificate is individually numbered. DO NOT dispose of spoiled certificates as all certificates MUST be accounted for at policy expiry date. · This ORIGINAL Certificate MUST BY LAW be attached to the building contract. Use a copy for the building permit purposes and for your records. 45 Mr Simms wrote to the vendor's, Kent Street's, solicitors Harris & Company on 4 December 2000. In that letter Mr Simms advised the solicitors that he had met with "the builder Clive Head and his Forman" on 2 December 2000 to solve issues that he had raised in a letter of 28 November 2000. Mr Simms then set out the alleged defects in a table and the position that "Clive Head [Builder]" took in relation to these issues. 46 Mr Simms was represented by Rickwood's Conveyancing Services who wrote to Harris & Company on 5 December 2000 advising that Mr Simms had met with the "Builder, Mr Clive Head and the Head Foreman" on site on 2 December 2000 and requested Harris & Company to speak with their client and confirm the resolution of the matters referred to in Mr Simms' letter. By 8 December 2000 Harris & Company responded to Rickwood's request. That letter advised that the solicitors were instructed as follows: · the contract makes no provision for the "builder to write up a corporate body rule" (sic) in relation to the use of a tap, the property of the owners' corporation, by the occupants of the property; · the builder has no power to contract on behalf of our client to "provide an additional wardrobe"; · the alleged seepage of water into common property is a matter for the owners' corporation; and · our client relies upon the provisions of special condition 19 of the contract in relation to any alleged defects or faults.

47 Although Harris & Company referred to the "builder" without correcting Rickwood's reference to "Builder, Mr Clive Head". However, the letter concluded with reference to the payments on settlement being to the Lender, Harris & Company and "Head & Sons Constructions Pty Ltd". 48 On 21 March 2001 Mr Simms, as "Executive Member of Corporate Body SP 64487", wrote to TR Howse requesting a copy of the "Home Warranty Insurance Company & policy number exclusively raised or existing to cover" the Property. That letter included the following: The reason for this record is for a likely claim related to defects associated with the workmanship & finish of some of the Units. A number of owners with differing contracts of sale [some with defects clauses and some with only the option of home warranty] are not likely to achieve their desired outcomes regarding repairs with the builder from current responses they have received. Owners of units here do not have this information. This information has not been forth coming from the builder Head & Sons Constructions P/L or from Kent Street Investments P/L. It is important also for all of the owners to have the Home Warrant Insurance record on file should the occasion arise & for future resale contracts.

49 The second contract that is in evidence is dated 26 May 2000 for the purchase of unit 8. It included the same clause 25 and an identical certificate of insurance except that it referred to unit 8 instead of unit 5. Unit 8 was purchased by Elizabeth Jeannette Walter, the ninth plaintiff, who was represented by AWM Dickinson and Son, who served requisitions on title on Harris & Company on 30 May 2000, the solicitors for Kent Street. Those requisitions included the following: 18C (a) Has any residential building work been done on the parcel under a contract entered into or commenced after 1 May 1997? (b) If so, please furnish details of insurance in respect of that work in accordance with S.92 of the Home Building Act 1989. 50 Harris & Company responded to that requisition on 1 December 2000 by answering "yes" to question 18C(a) and by answering "The vendor relies on the contract" to question 18C(b). 51 The third contract in evidence is dated 22 January 2001 for the sale of unit 4. That unit was purchased by John Brien Steedman and Doreen May Steedman, the fifth plaintiffs. That contract included clauses 45.1 and 45.2 in terms not relevantly different to clause 25 in the other contracts. The Certificate of Insurance was referred to as annexure "B" to the contract but was not included in the contract that is in evidence. However, the Steedmans were represented by RA Davies, solicitor, who made requisitions on title on 23 January 2001 including the following: 14. (d) In respect of any residential building work carried out in the last 7 years: (i) please identify the building work carried out; (ii) when was the building work completed? (iii) please state the builder's name and license number; (iv) please provide details of insurance under the Home Building Act 1989 52 Harris & Company responded to Mr Davies' requisitions on 24 January 2001 relevantly in the following terms: 14. (d) (i) The erection of 16 units and ancillary structures (ii) 2000. (iii) Clive Head and Andrew Head (iv) The vendor relies on the contract 53 On 29 January 2001 RA Davies wrote to Harris & Company requesting them to provide the Builder's License number of Clive Head and Andrew Head. On 1 February 2001 Harris & Co responded to that letter advising that the "contractor's license number for Clive Head is 30028C" and "the contractor's license number for Andrew Head is 76943C". The Act 54 The relevant provisions of the Act at the time of these events prohibited an individual doing any "residential building work" without a license or permit to do such work: s 12. The relevant provisions of s 92 of the Act provided as follows: 92 Contract work must be insured (1) a person must not do residential building work under a contract unless:

(a) a contract of insurance that complies with this Act is in force in relation to that work; and (b) a certificate of insurance evidencing the contract of insurance in a form prescribed by the regulations, has been provided to the other party (or one of the other parties) to the contract.

(2) a person must not demand or receive a payment under a contract for residential building work (whether as a deposit or other payment and whether or not work under the contract has commenced) from any other person to the contract unless: (a) a contract of insurance that complies with this Act is in force in relation to that work, and (b) a certificate of insurance evidencing the contract of insurance, in a form prescribed by the regulations, has been provided to the other party (or one of the other parties) to the contract.

55 Section 99 provided: 99 Requirements for insurance for residential building work

A contract of insurance in relation to residential building work required by section 92 must insure:

(a) a person on whose behalf the work is being done against the risk of loss resulting from non-completion of the work because of the insolvency or death of the contractor or because of the fact that, after due search and inquiry, the contractor cannot be found, and

(b) a person on whose behalf the work is being done and the person's successors in title against the risk of loss arising from a breach of a statutory warranty in respect of the work. 56 Between 30 July 1999 and 30 November 2001 s 96 provided as follows: 96 Insurance in relation to residential building work not carried out under contract (1) A person must not do residential building work otherwise than under a contract unless a contract of insurance that complies with this Act is in force in relation to that work.

(2) A person who does residential building work otherwise than under a contract must not enter into a contract for the sale of land on which the residential building work has been done, or is to be done, unless a certificate of insurance evidencing the contract of insurance required under this Part for that work, in a form prescribed by the regulations, is attached to the contract for sale.

2(A) A developer who does residential building work must not enter into a contract for the sale of land on which the residential building work has been done, or is to be done, unless a certificate of insurance evidencing the contract of insurance required under this Part for that work, in a form prescribed by the regulations, is attached to the contract for sale.

Maximum penalty: 100 penalty units 57 Section 101 provided: 101 Requirements for insurance by owner-builders and others A contract of insurance in relation to owner-builder work or residential building work required by section 95 or 96 must insure a purchaser of the land on which the work is done and the purchaser's successors in title against the risk of loss arising from a breach of a statutory warranty in respect of the work. 58 On 30 November 2001 s 96(2A) was repealed by the Home Building Amendment Act 2000 and s 96A was introduced in the following terms: 96A Obligations of developers in relation to insurance

(1) A developer must not enter into a contract for the sale of land on which residential building work has been done, or is to be done, on the developer's behalf unless a certificate of insurance evidencing the contract of insurance required under section 92 by the person who did or does the work for the developer in a form prescribed by the regulations, is attached to the contract for sale.

(2) Despite anything to the contrary in section 3A, a reference to this Part to a person who does residential building work:

(a) does not include a reference to a developer, and (b) includes a reference to a person who does the work on behalf of a developer. 59 The definition of residential building work in s 3 of the Act was as follows: residential building work means any work involved in, or involved in co-ordinating or supervising any work involved in:

(a) the construction of the dwelling, or (b) the making of alterations or additions to a dwelling, (c) the repairing, renovation, decoration or protective treatment of a dwelling. · It includes specialist work done in connection with a dwelling and work concerned in installing a prescribed fixture or apparatus in a dwelling (or in adding to, altering or repairing any such installation). · It does not include work that is declared by the regulations to be excluded from this definition. 60 Specialist work was defined in the Act as follows: specialist work means:

(a) plumbing work, or (b) gasfitting work, or (c) electrical work, or (d) any work declared by the regulations to be refrigeration work or air-conditioning work. 61 The Home Building Regulation 1997 applicable during the relevant period provided for the wording of the Certificates (Reg 56; Forms 1-4). The relevant forms were Form 1 and Form 4. The Certificates issued in this case referred to both s 92(2) and s 96(2).

62 In HIH Casualty and General Insurance Limited v Jones [2000] NSWSC 359 James J said: 53 I do not consider that a builder who proposes to do residential building work under a contract for a client is relieved of his obligation to comply with s92 of the Act, because the person for whom he will be doing the building work is, by virtue of s3A, "a developer who does the work" and is accordingly required himself by s96 of the Act to take out a contract of insurance of a different kind. 54 In most cases where s92 of the Act applies, s96 will not apply. However if a case falls within both s92 and s96, then the builder is required by s92 not to enter into a contract to do the proposed residential building work unless a contract of insurance complying with the Act, including s99, is in force and the person to whom s96 applies is obliged by s96 not to do the residential building work, unless a contract of insurance complying with the Act, including s101, is in force. Question 1 63 Was the residential building work at the Property carried out by Clive and Andrew Head or was it carried out by the Company? The answer to this question depends in part on the definition of "residential building work". Mr Martin submitted that because the Policy defined the term "residential building work", the definition in the Act did not apply. I disagree with that submission. The Policy provides that "'residential building work' shall, where the context permits, have the same meaning" as defined in the Act. The definition in the Act does no violence to and is not in conflict with the separate definition in the Policy. Indeed the separate definition of "residential building work" in the Policy is simply extending the meaning of "residential building work" in the Act so that it includes the installation of fixtures and excludes certain work referred to in the Regulation. Having regard to this context I am satisfied that the definition of "residential building work" in the Act applies to that term in the Policy. 64 The Certificate of Insurance referred to both s 92(2) and s 96(2) being respectively: the requirement that the Certificate be provided to the other party to the contract for residential building work before any payment for the work is demanded or received (s 92(2)); and the requirement that a person who does residential building work otherwise than under a building contract to attach a Certificate to the contract for the sale of land on which the residential building work was done (s 96(2)). 65 The defendant submitted that the Company was the entity that carried out the residential building work. In support of this submission it relied upon the fact that the Lender made the progress payments to the entity "Head & Sons Constructions" in conjunction with the term of the Development Finance Facility agreement provided that the Lender was to authorize payment "to the builder". The defendant's records evidencing the progress payments referred to "Head & Sons Constructions" rather than the Company. However the defendant's point is that the progress payments were not made to Clive Head and/or Andrew Head and that if Clive Head and/or Andrew Head were the "builders", the progress payments would have been made to them. 66 The borrower under the Development Finance Facility (the Facility Agreement) was Kent Street, with guarantees from Clive Head, the Company and Kent Street in its own capacity and in its capacity as trustee for the Clive Head Family Trust. It is clear from the Facility Agreement that the Lender was under the impression that the Company was a "licensed builder" which of course was not the case. The Facility Agreement was executed on 4 August 1999 before the correspondence and communications between the Broker and the defendant in relation to the Home Warranty Insurance in which it was made clear that the contractors were Clive Head and Andrew Head. The fact that the progress payments were made to "Head & Sons Constructions" needs to be weighed with all the other factors and circumstances of the case in deciding who did the residential building work.

67 There is a fax dated 13 September 1999 from "Clive Head" to the Lender on the Company's letterhead in which a request was made to the Lender to deposit $113,000 ($50,000 Council contributions and $63,000 for professional fees) "on behalf of Kent Street Investments P/L into Head & Sons Constructions bank account". The letterhead also included the Company's ACN and the words "Builders Licence 30028C". The defendant claimed that much of the correspondence in relation to the development is written by the Company and that this supports its submission that it was the Company that did the residential building work rather than Clive Head or Andrew Head. There is quite a large volume of material in evidence and it is necessary to go into further detail of that evidence in relation to the defendant's submission in this regard. 68 The Project Status Sheet of 30 September 1999 leaves the space for identification of "Builder/Developer" blank. The statutory declaration of 30 September 1999, referred to in other documents as "the Builder's Statutory Declaration", was signed by G. A. Head, as secretary of the Company. There is a letter on the Company's letterhead to the Lender dated 14 October 1999 enclosing engineers' certificates, signed by G. A. Head for the Company. The quantity surveyor produced a report to the Lender on a monthly basis advising that it had visited the project and reported to it prior to payments being authorised. In November 1999 and in later months, the quantity surveyor advised the Lender that it had sighted the Home Builders Insurance and that it was "OK". On 30 November 1999 Greg Head wrote to the Lender as a director of Kent Street on the Company's fax header that did not include reference to the Builders Licence Number. That fax sought the third draw from the Lender and it was signed by Greg Head as a director of Kent Street. On 16 December 1999 Greg Head wrote a similar fax to the Lender in relation to the fourth draw as a director of Kent Street. 69 The Builder's Statutory Declaration dated 16 December 1999 was made by Greg Head as director/secretary of the Company. The space for the identification of the Builders/Developer in the Project Status Sheet was once again left blank. On 22 December 1999 Greg Head in the Company's name wrote to the quantity surveyors on the Company letterhead, this time including reference to the Builder's Licence Number, confirming a request for an inspection for progress payment on the development. The Statutory Declaration dated 14 January 2000 was signed by G. Head but the body of the statutory declaration was not completed. The Project Status Sheet identified the "Builder/Developer" as "Kent Street Investments". On 19 January 2000 Greg Head as a director of Kent Street wrote to the Lender on the fax header of the Company seeking the sixth draw on the loan. Although the authorities signed by G. Head as a director of Kent Street Investments authorised payment of the progress payment into the account styled "Kent Street Investments Pty Ltd" it appears that the claims were made payable to "Head & Sons Constructions". 70 The Builder's Statutory Declaration of 3 February 2000 was signed by Greg Head as director/secretary of the Company. On this occasion the Project Status Sheet identified "Head & Sons Constructions Pty Ltd" as the "Builder/Developer". On 10 February 2000 Greg Head as a director of Kent Street wrote to the Lender on the fax header of the Company seeking the seventh draw on the loan and authorising its payment into Kent Street's account. Once again, notwithstanding this authority, the Lender apparently made the payment to "Head & Sons Constructions". The same occurred in respect of all other requests for "draws" until the end of the development. 71 The Project Status Sheets varied from month to month in respect of the identification of the "Builder/Developer". For instance, the "Builder/Developer" was identified as "Kent Street Investments" on 2 March 2000, 16 March 2000, and 17 April 2000. The "Builder/Developer" was identified as "Head & Sons Constructions" on 29 March 2000, 3 May 2000 and 17 May 2000. The space for identification of the "Builder/Developer" was left blank on 31 May 2000 and 10 October 2000. Greg Head completed all the Statutory Declarations but it is clear that they were completed with varying degrees of care. He failed on a number of occasions to delete alternatives and to complete the details in the declaration.

72 The defendant also relied upon Mr Simms' letter extracted earlier in which he referred to the builder as "Head & Sons Constructions P/L". That reference is not of much assistance particularly when Mr Simms' letter of 4 December 2000 referred to "the builder Clive Head and his Forman".

73 The plaintiffs relied upon the reference to a meeting with Andrew Head in the Company's letter of 17 May 2000 to submit that Andrew Head was involved in the decision-making in respect of the construction of the units and the development of the Property. Similar reliance was placed on the Council's file note in October 2000 referring to Mr Head as the "foreman". The plaintiffs also relied on the "Testimony" document of 7 June 2001 to submit that Andrew Head was doing "residential building work" of co-ordinating and supervising the work involved in the construction of the units. The Testimony document states that Andrew Head was the Construction Manager "coordinating sub-contractors" during the construction and that he co-ordinated the sub-contractors who carried out the earthworks and excavation, and that he also co-ordinated the concreters; the steel fixers; the form-workers; the plumbers; the electricians; the bricklayers and the carpenters. It also states that he completed the works with finishing trades including renderers, plasterers, painters and cabinet makers. The defendant pointed out that the beginning of the document stated that "Andrew was the Project Manager/Construction Manager for prime contractors and developers Head & Sons Pty Ltd". 74 It is a very unsatisfactory position for both parties to have to rely upon letters, letterheads, statements by third parties and ambiguous references to the identification of "Builders/Developers" without more, to prove who was the person or entity that did the residential building work. However the correspondence between the Broker and the defendant is of some significance. In particular the Broker's letter of 3 September 1999 stated that the "developers/builders" were "Clive and Andrew Head" and that "therefore the contract for the construction is in the name of Kent St Investments as owners and Clive and Andrew Head as developers". The Broker also advised the defendant that the "client" had been made well aware that no cover applied to any contract entered into in any other name than Clive and Andrew Head. It does not matter that the "client" may have been Head & Sons Constructions Pty Ltd because Clive and Andrew Head were directors of that entity and it is presumed that they gave instructions to the Broker to inform the defendant of the matters referred to above. 75 There is no building contract in evidence, however in the quantity surveyor's General Projects Report to the Lender the following appeared: 6. BUILDING CONTRACT/BUILDERS LICENCE We understand your client is a builder/developer, and therefore no building contract is required. We have checked with the Department of Fair Trading on builder's licence no. 30028C and advise that this licence is current, has had 1 insurance claim, has 4 outstanding complaints, however there have been no fines or cautions issued. 76 The issue of whether there was a building contract in place is uncertain having regard to the conflicting positions expressed in the Broker's correspondence and the quantity surveyor's General Projects Report. However the Broker's correspondence should be preferred as it was written later than the quantity surveyor's General Projects Report and it is presumed that it was written on instructions. Having regard to that correspondence there was a contract between Kent Street as owner and Clive and Andrew Head as developers/builders for the residential building work. However, there is what I regard as far more powerful evidence available to the plaintiff in respect of the identity of the person(s) who completed the residential building work. That evidence is found in the exchange of correspondence between the solicitors for Kent Street, Harris & Company, and the solicitor RA Davies, for one of the purchasers, the Steedmans. The defendant has not suggested that the requisitions sought by RA Davies were not proper requisitions. Those requisitions, with the answers thereto, are set out earlier but for ease of reference they are extracted again. RA Davies requisitions were as follows: 14. (d) In respect of any residential building work carried out in the last 7 years: (i) please identify the building work carried out; (ii) when was the building work completed? (iii) please state the builder's name and license number; (iv) please provide details of insurance under the Home Building Act 1989 77 Harris & Company responded to RA Davies' requisitions on 24 January 2001 relevantly in the following terms: 14. (d) (i) The erection of 16 units and ancillary structures (ii) 2000. (iii) Clive Head and Andrew Head (iv) The vendor relies on the contract 78 As has been said earlier, Harris & Company subsequently advised that the "contractor's license number for Clive Head is 30028C" and "the contractor's license number for Andrew Head is 76943C". 79 The vendor did not object to answering these requisitions and, as I have said, the defendant did not submit that the requisition was not a proper requisition. The solicitors for the vendor, Kent Street, must be taken to have acted on instructions. These were communications between two firms of solicitors on matters of significance to their clients. In those circumstances their statements should be given significant weight. The statement that Clive Head and Andrew Head were the builders of the 16 units and ancillary structures is the only unequivocal statement in relation to the identity of the builders who did the residential building work at the Property. The fact that the Company, of which the builders were directors, may have been utilised as a "vehicle", as it was referred to in the Request for Credit Approval with the Lender, to receive the progress payments and/or assist with administrative matters pertaining to such payments, does not detract from this very powerful evidence as to the true identity of the builders. 80 The plaintiff also relied upon the presumption of regularity and also submitted that it should be presumed that in the ordinary course of business the Company, which was not insured, would not have carried out the residential building work in contravention of the Act: McLean Bros and Rigg Limited v Grice (1906) 4 CLR 835 per Griffiths CJ at 848-850; Clutterbuck v Curry (1885) 11 VLR 810 per Higinbotham J at 815 and Holroyd J at 817; Dillon v Gange (1941) 64 CLR 253 per Starke J at 260. I am of the view that it is unnecessary to determine this matter in the light of the powerful and unequivocal answer to the requisition. 81 I am satisfied that the builders who carried out the residential building work were Clive Head and Andrew Head. Question 2 82 Were the warranties referred to in clause 2 (i), (ii), (iii), and (vi) under Part A of the Policy provided by Clive and Andrew Head or were they provided by the Company? The Policy provided that the Contractor gave the warranties. The warranties that were given were those in s 18B of the Act. The plaintiffs were indemnified for loss or damage arising from a breach of those warranties by the "Contractor". The Policy identified the Contractor as Clive Head and Andrew Head. The definition of Contractor was the person named in the Schedule "who enters into a contract with the Building Owner to do the work". The inference from the Broker's correspondence is that the person named in the Schedule, Clive Head and Andrew Head, entered into a contract with the Building Owner, Kent Street, to do the work.

83 The warranties were provided by Clive Head and Andrew Head. Question 3 84 In light of the answers to Questions 1 and 2, does the Policy respond to the Plaintiffs' claim dated 4 April 2004? The answer to this question does not call for an analysis of the detail of the alleged defects outlined in the plaintiffs' claim. That is for a later time, if necessary. Rather it is an answer based upon the answers to Questions 1 and 2. Having regard to the answers to Question 1 and Question 2 the answer to this question is "yes". Question 4 85 If the answer to Question 3 is "No", is the Defendant estopped from denying indemnity under the Policy by reason of: (a) it issuing certificates of home warranty insurance? or (b) Regulation 49 of the Home Building Regulation 1997 (NSW)? or (c) its conduct following the attempted renewal of the Policy in 2000? It is not necessary to answer this question, however to assist the parties on the basis that the answers to questions 1 to 3 do not prevail, I will deal with this question on the basis that Clive and Andrew Head did not complete the residential building work. Certificates of Insurance 86 As I have said earlier there are only three Contracts for the sale of the units in evidence, one of which does not contain a copy of the Certificate of Insurance. The terms of the Certificate in the other two contracts are set out earlier in this judgment. The plaintiffs claim that the defendant represented in the Certificate of Insurance that Clive Head and Andrew Head were the builders of the units. It was also submitted that the defendant would have known at the time the Certificates were issued that purchasers would rely upon the Certificate of Insurance in making their decision to purchase their units. It was further submitted that the plaintiffs relied upon such Certificates of Insurance to their detriment and that in the circumstances the defendant is estopped from denying indemnity under the Policy. 87 The defendant did not represent expressly that Clive Head and Andrew Head were the builders of the units. The only description of the work in the Certificate was "Alexander on the Park". The express representation contained in the certificate was that the defendant had issued a contract of insurance complying with the Act, in respect of the work described (Alexander on the Park) carried out by Clive Head and Andrew Head. It does not state that Clive Head and Andrew Head carried out the work, but rather that they were insured for any work that they did carry out. It may be that there is an inference available in all the circumstances that the Certificate represented that Clive and Andrew Head were the builders of the development. However, the plaintiffs did not call any evidence that they relied upon the Certificates of Insurance in making a decision to purchase their units. The only evidence in relation to the identity of the builder and the details of the Licence Number of the builder was in the requisitions issued by RA Davies. The solicitors for Kent Street, the vendor, represented to at least the Steedmans that Clive Head and Andrew Head were the builders. This representation combined with the Certificate may have given these purchasers some comfort. However there is no evidence from these plaintiffs that they relied on the Certificate in entering into the contract for the purchase of the unit. Indeed Mr Martin submitted that clause 45.2 of the Steedmans' contract and clause 25.2 of the Simms' and Walters' contracts evidence a lack of reliance on the Certificates of Insurance in that each of the purchasers agreed that: (a) they would not make any objection, requisition or claim for compensation in respect of them; and (b) rescind, terminate or delay completion of the contracts because of any matters contained in, or relating to the Certificates. 88 If it were necessary to decide this question I would have agreed with the defendant's submission that the plaintiffs have failed to prove reliance upon the Certificates. The plaintiffs' claims in estoppel in respect of the Certificates of Insurance would have failed. Regulation 49 89 Regulation 49 of the Home Building Regulation 1997 provided: 49 Misrepresentation or non-disclosure An insurance contract must contain a provision to the effect that the insurer is not entitled either to refuse to pay a claim under the contract or to cancel the contract on the ground that the contract was obtained by misrepresentation or non-disclosure by the contractor or supplier or that the policy premium was not paid providing, in the latter case, that a certificate evidencing insurance has been given or the insurer has otherwise accepted cover. 90 The Policy complied with this Regulation by the inclusion of the following provision in the General Conditions section: (6) The Insurer is not entitled either to refuse to pay a claim under this policy or to cancel this policy on the ground that (a) the insurance was obtained by misrepresentation or non-disclosure by the Contractor; or (b) the premium was not paid, providing that a certificate evidencing insurance has been given or the Insurer has otherwise accepted cover; PROVIDED HOWEVER that where the Insurer makes a payment under this policy in circumstances to which this General Condition (6) applies, there shall be deemed to be a right vested in the Insurer to recover from the Contractor any amount so paid. 91 The plaintiffs claimed that the Policy was obtained by a misrepresentation or a non-disclosure by the "Contractor", Clive Head and Andrew Head. Ms Olsson submitted that the correspondence between the Broker and the defendant demonstrates beyond any doubt that if the defendant had known that the Company was to do the "work" it would not have issued the Policy. It was submitted that but for the representation made by the Broker that Clive Head and Andrew Head were to be the builders, the Policy would not have issued and the "work" would not have been insured. 92 The defendant submitted that the plaintiffs' claim in this regard is misconceived. The defendant has not refused to pay the claim on the ground that the Policy was obtained by a misrepresentation or a non-disclosure. The insurer declined liability on the basis that the work that was done was not done by the insured. The defendant complied with Regulation 49 and included an appropriate clause in the Policy. Clause 6 of the Policy is not applicable to the circumstances of this case. There was no reliance upon any misrepresentation or non-disclosure to refuse to pay the plaintiffs' claim under the Policy. The plaintiffs' estoppel claims in reliance upon this aspect of the defendant's conduct would have failed. Renewal of Insurance - 2000 93 The correspondence in relation to the renewal of the Policy is set out earlier in this judgment. That correspondence was between the Broker and the defendant and there is nothing in the evidence to suggest that any of the plaintiffs were aware of the contents of these communications, let alone placed any reliance upon what occurred in this process such that an estoppel could arise against the defendant in respect of its refusal to indemnify. If it had been necessary to decide the plaintiffs' estoppel claim in reliance on this conduct it would have failed. Answers to Separate Questions Question 1: (1) Was the residential building work at the Property carried out by Clive and Andrew Head or was it carried out by the Company? Answer: Clive Head and Andrew Head. Question 2: Were the warranties referred to in clause 2 (i), (ii), (iii), and (vi) under Part A of the Policy provided by Clive and Andrew Head or were they provided by the Company? Answer: Clive Head and Andrew Head. Question 3: In light of the answers to Questions 1 and 2, does the Policy respond to the Plaintiffs' claim dated 4 April 2004?

Answer: Yes. Question 4: If the answer to Question 3 is "No", is the Defendant estopped from denying indemnity under the Policy by reason of: (a)it issuing certificates of home warranty insurance? or (b) Regulation 49 of the Home Building Regulation 1997? or (c) its conduct following the attempted renewal of the Policy in 2000? Answer: Not necessary to answer. However if necessary the answer would be "No". 94 The defendant accepted that an affirmative answer to Question 3 would mean that the proceedings would be concluded in the plaintiffs' favour. The parties are to bring in Short Minutes of Order reflecting that outcome together with an agreed order as to costs. If the parties are unable to agree on a costs order I will hear argument when the matter is listed for the filing of Short Minutes on 9 November 2007 at 9.15am.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.