Rassale v Resilium & Ors [2026] VCC 88

Fitzgerald & Anor v CBL Insurance Ltd (No.2) [2015] VSC 176;

Rassale v Resilium & Ors [2026] VCC 88 | Case summary | Zoe

[30]

By its statement of claim dated 9 March 2021, the plaintiff alleges the defendants breached the policy by failing to offer a sum equal to the amount it would cost the defendants to repair the dwelling new for old.
The plaintiff makes a claim for the amount it would cost to repair the damage, by way of indemnification, as well as some specific costs incurred (temporary fencing, costs associated with disconnecting and reconnecting electricity, damage to specific items and removal of rubbish and debris). The plaintiff also claims loss of rent during the time the dwelling was uninhabitable, or $4,000 under the terms of the policy.
As an alternative cause of action, the plaintiff claims the amounts payable under the policy as damages for breach of the insurance contract. This included damages associated with the loss of use of the dwelling and land for the entirety of the period it could not be repaired and put out to rent.
The relief sought included the indemnity sum due under the policy as a debt, alternatively, as damages. Interest was claimed under s57 of the Insurance Contracts Act 1984 (Cth).
The defendants filed their defence on 14 May 2024. In paragraph 11, they set out various factual matters relied upon. They plead that they engaged a building consultant to prepare a scope of works and cost estimate in respect of the fire damage (there is no dispute that the consultant retained was MCS). The assessor recommended a cash settlement due to the poor condition of the building and non-claim related maintenance repairs which needed to take place before reinstatement works could commence. Based on the assessor's assessment and the scope of works and costs estimate provided by the building consultant, the defendants made a cash settlement payment to the plaintiff in the sum of $101,225.70. The defendants allege that the two quotations obtained by the plaintiff, which the defendants reviewed, contained a number of items that were unrelated to the claim or were significantly more than required to repair the damage. The defendants then obtained quotations from a further two builders who estimated lower repair costs than the initial building reinstatement figure. The defendants honoured the original settlement amount paid to the plaintiff of $101,225.70.
The defendants deny the plaintiff's claim for general damages. They claim the plaintiff has failed to mitigate its loss in relation to the fire damage by not, inter alia, using the settlement funds to secure/maintain/repair the premises.
The plaintiff relied upon amended particulars of loss dated 6 August 2025, produced on the first day of trial. By closing, the plaintiff's claim for consequential loss was confined to a claim for loss of rent. The claim for maintenance and other like costs was not pursued.

[31]

Mr Vartuli gave evidence on behalf of the plaintiff. The plaintiff also called expert evidence from Mr Talevski, a structural and civil engineer. His report is dated 21 March 2025.[26]
The defendants called Mr Irwin, a consulting structural engineer as an expert witness. He prepared an expert report dated 17 June 2025.[27] He was provided with copies of Mr Talevski's expert report dated 21 March 2025 and a report from Mr Pitney, a quantity surveyor, dated 27 March 2025. Mr Irwin was asked about the damage to the roof. He was of the view that there was no structural damage to the roof. Mr Irwin noted there was a problem with the west gable and that both sarking and charred timber needed to be replaced. Mr Irwin observed the house was in an advanced state of dereliction and that demolition was necessary and inevitable.
No other witnesses were called on behalf of the defendants.
Mr Talevski and Mr Irwin produced a joint report dated 25 July 2025[28] and a supplementary joint report dated 8 August 2025, following their joint inspection of the property on 7 August 2025 (the 2nd day of trial).[29] They assessed the damage together and identified specific timbers and members in the roof that needed replacing. Both expert witnesses changed some of their opinions from those contained in their initial reports. Mr Talevski had originally expressed the view that the entire roof needed to be replaced. After conferring with Mr Irwin, he revised his opinion to say that repairs could be done on a more limited basis. For his part, Mr Irwin increased the scope of repair works needed to be done on the roof from the scope set out in his original report. The two engineers ended up agreeing that repairs to the roof were required.
The final witness called was Mr Pitney, a quantity surveyor and a registered builder. He gave evidence on behalf of the plaintiff about the costs to be incurred in undertaking the scope of works for the repairs. His first expert report is dated 8 May 2025.[30] Mr Pitney inspected the property on 24 February 2023. He estimated the costs to rectify in three parts, namely:

[37]

The plaintiff's claim is that the adjusted figure as assessed by Mr Pitney should be allowed for the costs of the scope of works identified by MCS. It was said that his evidence should be accepted as an expert witness, whose evidence was not controverted after cross-examination.
It was a somewhat unusual feature of this case that Mr Goodbrand of MCS, who prepared the scope of works and related costings upon which the insurer relied, was not called to give evidence. Nor were any of the building companies who provided alternative quotations on the works to be performed. Their quotations were received into evidence without objection. The defendants objected to the receipt of the MCS reports into evidence. For reasons set out in a ruling dated 7 August 2025, I determined these reports were admissible.
The defendants' case is that the MCS costings should be accepted as they represent what it would have cost the insurer to undertake the repairs. There is no contest that the insurer could select this method of settlement under the policy.
It is not suggested nor pleaded that the defendants failed to exercise their duty of good faith by offering an inadequate sum. The key issue is whether the indemnity sum was sufficient to cover the cost of the repairs. The plaintiff says this in turn raises a question of construction of policy with the obligation to pay for repairs new for old, being a reference to the market cost of repair.
The defendants argue, as a matter of construction, there is no obligation upon them to offer a sum which is fair and reasonable, being the basis assessed by Mr Pitney. The test is simply what it would have cost them to do the repair work.
In response, the plaintiff submitted it would lead to an uncommercial outcome if an insurer could choose to pay a settlement sum below the market price it would cost an insured to undertake the repairs itself. The obligation upon the insurer is to pay the fair and reasonable market rate that would be incurred to have the work done. No evidence was led that the insurer was entitled to pay less than market rates. Although, in any event, the purported distinction raised by the insurer went nowhere because both MCS and Mr Pitney applied the prevailing market rates as at the date of the fire in 2016 in assessing their costings.
It cannot be a definitive answer for the insurer to say, in effect, that because it received a quotation for the cost it would incur for the repairs, this sum cannot now be challenged. There is also the question of whether there are additional items which should form part of the indemnity and for which MCS made no allowance. I accept the plaintiff's submission that new for old should be assessed by reference to the prevailing market rates. In my view, if it can be shown that the amounts offered are inadequate and/or incomplete, then the insurer has not met its obligation to fully indemnify the insured. Although the onus is on the plaintiff to prove that the amount offered was inadequate, the insurer did not call any evidence from MCS to rebut the evidence from Mr Pitney that the sum offered was insufficient - instead, it sought to challenge the latter's findings in cross-examination. Nor did the insurer put on any expert evidence to support the costings of MCS.
Mr Pitney set out a comparison table of the assessments obtained by the parties in his report dated 8 May 2023, including that of MCS.[36] The other quotations put into evidence have limited weight when none of the authors were called to give evidence. At trial, the plaintiff did not rely upon the higher quotations it obtained and instead relied upon Mr Pitney's costings and opinions. The defendant sought to rely upon the lower quotations they had obtained from BBS and JLG to argue that the costs of MCS were reasonable by way of comparison. The instructions given by the defendants to the two builders who provided lower quotes than MCS after the dispute arose were not in evidence. There was a passing reference to these builders' quotes in a letter to Mr Vartuli from Resilium dated 26 June 2017, to the effect that they gave quotes based on the MCS scope of works. However, it is not known precisely what they were asked to do, with the result being that any useful comparison with the figures of MCS is problematic. For example, the BBS quotation notes "scope is for cash settlement purposes only". That suggests a different method of assessment might be made if the insurer were to reimburse the insured if the latter undertook the repairs. In the absence of those builders being called, their evidence could not be tested. Mr Pitney was of the view that both these quotations were insufficient for the reasons he expressed on page 15 of his quantum report. In the end, the court must do the best it can with the evidence led at trial.
The items claimed under the MCS scope of works, which rely upon Mr Pitney's figures, are set out in the plaintiff's amended particulars dated 25 August 2025 as follows.

[40]

According to Mr Pitney, his estimate is based on the documents provided, observations made during his site inspection and his professional skills and experience. His costs estimate was done on a new for old basis. Mr Pitney lists the criteria that inform his cost rates, including that they are based on construction costs around the date of the fire event in August 2016, and that he has referred to estimates and projects that he was involved with at the time of the event.[37] The labour rates, for example, are based on an estimate Mr Pitney undertook for a house fire in the Yarra Valley, where Mr Pitney says the labour rates are the same as in Melbourne.[38]
Mr Pitney considers many of the costs included in the costings of MCS are reasonable but that the allowances for cleaning, remediation, supervision and preliminary costs are insufficient.
In cross-examination, Mr Pitney agreed that the scope of works of MCS is relatively simple, and that the allowance of MCS of 20 per cent for preliminary costs is relatively generous. MCS allowed a figure of $10,835. Mr Pitney agreed that his allowance of $19,270 for preliminary costs is the equivalent of 28.8 per cent, which is relatively high.[39]
Mr Pitney also notes that the allowances of MCS of 20 per cent for builders' margin and contingency, while reasonable, have not been compounded and are therefore arithmetically incorrect.[40]
Mr Pitney assessed the base costs of the MCS scope of works at $66,839, whereas MCS assessed these costs at $52,782.
Given there is in effect no contradictor to the expert evidence of Mr Pitney, who is both a builder and quantity surveyor with considerable experience, I have no evidentiary basis for rejecting or disallowing his figures which disputed the MCS costings. Nor was I persuaded that any of the matters explored with him in cross-examination should cause me to reject or discount any of the evidence he gave. The result then is I accept his evidence that the cost to perform the MCS scope of works should be assessed in the sum of $125,030.

[46]

The plaintiff claims the sum of $11,500 plus GST for the cost of a project manager/owner's representative to oversee the repairs. Mr Pitney's evidence was that an owner would typically retain a project manager and would pay. This is a cost that needed to be incurred to ensure the work was properly performed and the insurer would have incurred it in carrying out the repairs had it performed them. No allowance was made by the defendants for this cost and the plaintiff claims it as a proper part of the indemnity. Mr Pitney's allowance for this supervision is $11,500. The plaintiff says his evidence on this topic was not challenged. Further, no one was called on behalf of the defendants to say that this is a cost they would not incur in undertaking the repairs.
The defendants' position was that this cost was irrelevant to the insurer's contractual obligation. The obligation did not extend to indemnifying an owner to engage a professional person to act on its behalf because this is not a cost the insurer would bear to carry out the work. There was no evidence as to what it would have cost the loss adjuster to supervise the work or even that an insurer would have incurred such cost. Such a cost would not be a cost of rectification but would be, at most, a business expense of the insurer.
I regard the defendants' position as being correct. There is no obligation under the policy for the insurer to engage an owner's representative to supervise the works - the obligation is to pay for fire damage. I am not persuaded that it was proved this expense fell within the scope of the indemnity under the fire policy. Nor is there any evidence in this case to suggest that the insurer would have engaged a supervisor to undertake this work had the insurer conducted the works itself. Whilst the engagement of an owner's manager may well be desirable, it is by no means mandatory. As Mr Pitney noted in his report dated 8 May 2023, there may be a requirement for an owner for the service of a building consultant to supervise the works. The evidence fell short, in my view, of proving that an owner (or an insurer) was required to engage a project manager as a matter of course, and that this cost was one which the insurer was required to meet under the terms of the policy. I therefore reject this item of the plaintiff's claim.

[50]

There was some divergence in the evidence about the scope of works needed to rectify the roof. The parties' position in respect to the necessary repairs altered during trial. MCS had allowed for repair to the gable wall and a few roof timbers which were specified as two roof timbers. In line with the opinion of Mr Talevski, the scope of works originally costed by Mr Pitney was for the removal of the entire roof system and its replacement.
The defendants arranged for Mr Irwin to inspect the property in June 2025. When he first inspected the property, Mr Irwin did not observe the extent or structural nature of the damaged timbers.
The plaintiff noted that very late in the piece, the engineers both changed their minds. Mr Talevski no longer contends the entire roof needs to be replaced. Mr Irwin accepts there is damage to the roof timber and there are structural and confinement issues which would make removal and replacement of the gable a sensible method of rectification. The experts differed as to the degree of propping that was required whilst the repairs are being undertaken.
The experts accepted the top plate had been burnt where two other members are seated on it. They accept those timbers need to be replaced. The supports are structural, either primary or secondary. They agree that the vertical strut and diagonal prop supported by the top plate each has a structural role to play in the roof. The engineers disagreed about whether the vertical timber that has been damaged is a strut carrying out the gable lining or an under purlin carrying some of the weight of the roof. They accept it would be necessary to remove at least part of the top plate and to prop or find some way to support the façade whilst replacing the top plate.
There was a discussion about what should be done given the presence of asbestos. The engineers agreed that replacing the timbers would be very difficult to do without getting involved with the asbestos. They agreed that, for practical reasons, they would replace all of the asbestos. Doing so would significantly simplify the cost of replacing the timber. They agreed that, to allow that work to take place, one would erect a scaffold and the space allows for that.
The plaintiff submits the key matter now agreed is that the work involved to rectify the burnt roof is greater than the replacement of the two pieces of timber allowed for in the MCS report. It requires cutting and replacing sections of the top plate, detaching the façade frame while that takes place, most likely from working outside and replacing the asbestos of the façade to allow safe access to the area to be worked upon. None of this was provided for in the MCS scope of works nor costed in the amount proffered by the defendants in settlement of the claim.
Mr Pitney, the quantity surveyor, endeavoured to provide a costing of the additional work contemplated by the two engineers that he had not previously allowed for in his earlier costs of the MCS scope. The number of props are given an individual rate, so can be adjusted. As the evidence shows, the greater scope of work remains appropriate. The best evidence before the court is the costing of Mr Pitney, which puts the cost additional to the MCS scope of works in relation to the roof at $23,953.90, together with the additional carpentry costs of the gable of $1,150, being a total additional amount of $25,103.90 (including GST).
By contrast, the defendants say the entire roof claim falls away on the basis that the timbers in the gable frame are not structurally damaged, relying upon the evidence of Mr Irwin.[42] "Damage" in the relevant sense must be damage which means the item in question no longer performs its relevant function. Consequently, although the timbers were charred, this did not affect their structural function. To the extent that repair was needed, Mr Goodbrand had included replacement of those timbers in his scope and the cost of those repairs in his costs estimate.
The defendants relied upon the evidence from Mr Pitney when he said he regarded the new scope of repairs, which he estimated at $25,000, as being very excessive.
Mr Irwin regarded it as being a simple exercise once the asbestos was removed. The damage to the asbestos was pre-existing and was not caused by damage from the fire, therefore this cost was at the owner's expense. This removes a lot from the quote, which was already included in Mr Goodbrand's scope, according to the defendants.
In reply, the plaintiff says the contention about "damage" is ill founded, both contractually and factually. The obligation upon the insurer is to restore the property to the condition it was in prior to the fire. There is no question the timbers under consideration were damaged in the fire. Mr Irwin accepted that the three damaged timbers had to be replaced to get them back to their original condition.[43] None of the witnesses had suggested leaving the timbers there as a sensible alternative. The experts in their joint report had also identified further works to the roof that required repair, being the base plate, the props and at least one of the vertical timbers. Those extra works should form part of the indemnity and those works have now been costed by Mr Pitney.

[51]

As a result of the experts changing their minds after their joint inspection and producing a joint expert report, the evidence about the scope of roof repairs needed altered significantly during trial.
The end result was that the experts were agreed that the three charred timbers needed to be replaced and other works needed to be done, including removing and replacing the gable. The defendants accepted there was little divergence in the experts' evidence about the need to replace three charred pieces of timber and the gable frame. There was some dispute between the expert engineers as to whether this was best done from the outside or whether it could be done internally. If the former, then the costs of propping might be avoided. On that front, Mr Pitney has costed the hire of 16 props in the princely sum of $246.40.
I do not accept the submissions put by the defendants that the claim for the roof repair costs falls away because the three roof timbers were not structurally damaged. The obligation upon the insurer is to pay for damage caused by the fire. It is not restricted to only damage which is said to be structural in nature. The engineers were in agreement that these timbers had to be replaced.
Mr Pitney did not duplicate the figures already allowed for in the original MCS scope for replacing timber. He gave evidence that he did not overlap between his scope and the scope of MCS. These are items [11] and [14] in his costing report dated 12 August 2025.[44]
Mr Pitney was asked to estimate costs on the instructions given to him by the plaintiff's solicitors on 7 August 2025 and following. To that extent, it assumes that these are works needed to be done. Whether they are required or not is outside the purvey of Mr Pitney's expertise - his task was to estimate costings based on a proposed scope of work for the roof repairs. The key issue is whether there is a basis for the revised scope and, if so, what would it cost.
If it is accepted that these further roof repairs needed to be done, which I do given the engineers' revised evidence, then it follows that Mr Pitney's costing of these revised scope of works should be allowed, subject to any obvious errors. I was not persuaded by the defendants' submissions that any of the amount he listed were unreasonable or should not be allowed. That being so, I find that the plaintiff is entitled to the additional sum claimed of $25,103.90 for the roof repairs.

[56]

The property has been untenanted since the fire. Mr Vartuli said that he spent several years trying to induce the defendants to increase the amount of indemnity without success. Accordingly, the plaintiff seeks damages for lost rent for at least the first two years after January 2017.[45] The plaintiff contends the contract of insurance assumes the property is income producing and was most likely rented. It must have been within the contemplation of the parties that if the insurer did not carry out the repairs or paid to the insured an insufficient part of the indemnity, the insured would not be able to repair the property and it would remain untenanted. The loss of rent claim is said to fall within the second limb of Hadley v Baxendale.[46]
The plaintiff referred to what it described as a current legal controversy about the nature of an insurer's obligation under an insurance policy.[47] In Australia, until recently, the insurer's promise was generally understood to be a promise to make good loss or damage suffered by an insured in accordance with the terms of the insurance contract. An action under the policy was to enforce the insurer's promise to either carry out works or make payment after the insured event had occurred.[48] In contrast, the position taken in England was that the promise made by an insurer was that the insured event would not occur. This promise is breached when the insured event occurs and payment made is by way of unliquidated damages for breach of contract. The commentary in Sutton on Insurance Law observes that English courts have applied this approach consistently and Australian courts inconsistently. The learned authors describe the characterisation adopted in Australia as being opaque and inconsistent.[49]
The plaintiff referred to the majority judgment in Globe Church Inc v Allianz Australia Insurance Ltd ("Globe Church")[50] and Worth v HDI Global Speciality SE ("Worth"),[51] in which the New South Wales Court of Appeal adopted the English approach that payment made by an insurer is by way of damages. Despite this difference in approach, the plaintiff notes an insurer's obligations are governed by the terms of the policy, such that this distinction should not occasion radically different outcomes. Although the distinction does become relevant where a claim for consequential loss or damage is made.
Worth held that consequential damages are not recoverable for breach of an insurance contract. The defendants rely upon this decision as barring the plaintiff from claiming potential rent as consequential loss. In response, the plaintiff argues Worth represents a departure from frequent intermediate appellate decisions to the contrary. In support of its submission, the plaintiff identified various cases where damages were awarded for consequential loss.[52]

[64]

The Court of Appeal in Worth followed Globe Church in determining that an insurance policy is to be interpreted consistently with the position in England at common law. This position being that an insurer's promise to indemnify is a promise "to hold harmless against loss", rather than as a promise on the happening of the insured event to make a payment reflecting the damage suffered as a result of that event, in accordance with the policy and within a reasonable time. An insured's claim is accordingly a claim to unliquidated damages which arises when the insured event occurs.[56]
Meagher JA (with Macfarlan and McCallum JJA agreeing) held that damages for consequential loss are not recoverable, since the common law does not recognise claims to "damages for late payment damages". His Honour noted that the Australian authorities which have allowed damages for consequential loss are not uniform and none address the English authorities or adopt what is, on the approach of the majority in Globe Church, the proper characterisation of the obligation of an insurer.[57] His Honour acknowledged, however, that "[t]he English authorities recognise that the limitation may be circumvented if the loss can be characterised as consequential on 'some other and separate breach of contract'."[58]
A subsequent NSW Court of Appeal case, Admiral International Pty Ltd v Insurance Australia Pty Ltd ("Admiral")[59] applied the reasoning from Globe and Worth in determining that damages for consequential loss said to arise from the insurer's breach of contract in failing to indemnify the insured are not available. The reason being that it would otherwise offend against the principle that an award of damages for non-payment of damages is precluded.
The appellant in Admiral submitted that Worth, to the extent that the court applied the majority's judgment in Globe Church, was wrongly decided. The Court of Appeal rejected that submission because the appellant did not advance submissions formally and directly addressing the factors governing whether an appellate authority is "plainly wrong" or "clearly wrong".[60]
Bell CJ stated: "[o]n the authority of Globe Church and Worth, damages for consequential loss were not 'legally available'."[61] His Honour acknowledged the observation in Worth that damages for consequential loss may be available if the loss could be characterised as consequential on "some other and separate breach of contract". An argument put by the insured that a breach of the duty of good faith under s13 of the Insurance Contracts Act by the insurer was a distinct and separate claim which overcame the effect of Globe and Worth was rejected. Bell CJ observed that a breach of an insurer's duty of good faith required rather more than a simple failure to grant indemnity. Nothing advanced by the appellant sustained an argument that the insurer breached its implied duty of good faith so as to permit the recovery of damages for consequential loss. [62]
The plaintiff submits the reasoning in Worth should not be followed because it represents a departure from frequent intermediate appellate decisions to the contrary. In support of its argument, the plaintiff relied upon the following decisions in which damages for consequential loss were awarded, several of which were in fact decisions of single judges in other jurisdictions.
The first case relied upon is a decision of the High Court in CIC Insurance Ltd v Bankstown Football Club Ltd.[63] The Club made a claim under an indemnity policy for property damage where there had been three successive fires at its premises. The insurer had denied liability on the grounds of fraud. Under the terms of the policy, the insured could claim consequential loss for interruption or interference with its business capped at $520,000. An allowance for consequential loss under the policy was made by the trial judge. The issues before the High Court related to the construction of other terms of the policy and the application of s58 of the Insurance Contracts Act. The High Court held that the indemnity should be valued at the time of the first fire. I do not consider this decision operates as a barrier to the submission put that Worth applies to the facts in this case - the matters under consideration by the High Court were quite different.
In Settlement Wine Co Pty Ltd v National & General Insurance Co Ltd,[64] a single judge in South Australia awarded damages due to the loss of use of the insurance proceeds, which had caused the insured's indebtedness to increase.
Maxwell v Highway Hauliers Pty Ltd [65] is a decision of the Western Australian Court of Appeal. It concerned a claim made for indemnity for the cost of repairs to damaged commercial vehicles. The insured also made a claim for consequential loss, for loss of profits due to the inability to hire out the vehicles whilst damaged. This claim was accepted by the trial judge as not being too remote - a finding with which the Court of Appeal concurred.
Tropicus Orchids v Territory Insurance Office is a decision of a single judge in the Northern Territory.[66] The trial judge awarded damages in favour of the insured for loss of the use of money as "damages for late payment of insurance moneys", on the basis that an insurer has an obligation to perform its obligations within a reasonable time. Such an award being made in accordance with the principles in Hungerfords v Walker. This decision was upheld on appeal.
Naomi Marble & Granite Pty Ltd v FAI General Insurance Co Ltd [67] is a decision of a single judge in Queensland. The trial judge found that the insurer was entitled to deny the claim due to fraud. This decision does not appear to be relevant to the matters under consideration in this case.
Fogarty v CGU Insurance Ltd,[68] is a decision of the Full Court in the ACT. The appellant lost on the issue of liability, with the result that the court did not need to address grounds of appeal relating to the assessment of damage.
In accordance with the principle from Farah Constructions Pty Ltd v Say-Dee Pty Ltd,[69] confirmed in Hill v Zuda, this court must decide whether the decision of Worth (and followed in Admiral), so far as it relates to the recoverability of damages for consequential loss, is plainly wrong, or there is a compelling reason not to follow the decision.
I consider the circumstances of this case are analogous to the claim made for consequential losses in Worth. The insured in that case was seeking business interruption losses caused by fire damage beyond the 12-month indemnity period specified under the policy. The claim made for consequential loss was not covered under the policy. The claim was rejected because it was regarded as being a claim for damages for late payment of damages, which is not recognised in law. The plaintiff here seeks loss of potential rent beyond the period specified under the policy when the property is being repaired, which is capped at 52 weeks. It is therefore a claim for consequential loss which is outside the scope of the indemnity under the policy and, similarly to Worth, is not recoverable.
In my view, the plaintiff's claim for consequential loss of potential rent is a claim for damages upon damages which both Worth and, subsequently, Admiral have held is not recognisable at law. These are both recent decisions of the New South Wales Court of Appeal and, in the latter case, the principles are set out definitively by the Chief Justice of that court.[70] To the extent that the decisions of other intermediate courts of appeal might differ (and which predate these cases), I consider myself bound by the recent and compelling statements of the New South Wales Court of Appeal to the effect that consequential losses for a failure to indemnify under a policy of insurance are not generally available. The various decisions referred to by the plaintiff of other courts did not give rise to any compelling reason to disregard the New South Wales cases, which are squarely on point.
I am not persuaded the decisions in Worth or Admiral are plainly wrong or there is some compelling reason not to follow them. Nor do I consider I should decline to follow them because of the jurisdictional inconsistency identified by the plaintiff and, in Sutton, about the characterisation of an insurer's obligation to make payment under a policy of insurance.
No other separate breach of contract claim was pleaded in this case, such as a breach of good faith. The only breach relied upon was the failure to indemnify, which falls within the principles set out in Worth and Admiral. That being so, I find the plaintiff is not entitled to the loss of hypothetical rent claimed as consequential damages as a matter of law.
If I am wrong about this legal issue, the plaintiff still faced some factual hurdles in proving the loss of rent claim. The claim for rent is premised on the proposition that, because of the inadequate indemnity payment, the plaintiff was unable to carry out the works necessary to bring the property into lettable condition.
The claim is made under the second limb of Hadley v Baxendale. Whilst it is debatable, I am prepared to assume it would have been within the contemplation of the parties that if the indemnity sum offered was insufficient, the plaintiff would be unable to relet the investment property because it could not undertake the necessary repairs.
According to the defendants, the height of the plaintiff's policy claim was $61,004, being $29,014 in respect of Mr Goodbrand's scope of works, $11,500 for an owner's representative and $20,490 for additional items. There was no evidence led that the plaintiff could not afford the sum of $61,004. Nor was there any evidence led that the plaintiff would have conducted the other repairs needed to fix pre-existing damage, which was not covered by the policy. Mr Vartuli gave evidence that, apart from some cleaning up and some temporary work, he had not attempted to refurbish the interior of the property. The reason being that the roof had to be fixed first because it was too dangerous.[71] It is now nearly 10 years since the fire and yet the property remains in a state of dereliction.
Mr Irwin opined that the property was in such an advanced state of dereliction to be beyond economic or practical repair or renovation. He regarded demolition as necessary and inevitable.[72] Mr Talevski agreed with Mr Irwin that the state of dereliction makes the house economically irretrievable.[73] Mr Pitney, the surveyor, took a different view and said the property was habitable.[74] Mr Vartuli disagreed with the view expressed by Mr Talevski that the property was economically irretrievable. He gave evidence that he had not decided whether he would repair the property or knock it down.[75]
In my view, the expert evidence of the two engineers that the property is economically irretrievable carries more weight, given their building expertise, and should be accepted. Overall, I am not persuaded, on the state of the evidence led, that the property could have been restored to a habitable condition capable of being relet. The proper counterfactual is that the property was economically irretrievable. In addition, there was a paucity of evidence led to show that because of the partial indemnity sum offered, the plaintiff was unable to conduct the repairs itself.
As a result of all these matters, the consequential damages claim for loss of hypothetical rent was not proved and therefore is dismissed.

[68]

The plaintiff claims it is entitled to interest from the date upon which it was unreasonable for the defendants to have withheld payment and ending on the date the payment was made.
The plaintiff notes "unreasonable" used in s57(2) is not defined under the Act. A summary of the authority on the question of when it becomes unreasonable for an insurer to withhold payment was set out by Garde J in UDP Holdings Pty Ltd v Ironshore Corporate Capital Limited (No 2).__[76] What is reasonable is determined objectively and is a question of fact that will depend upon the circumstances of the case.[77]
As noted by Sloss J in Fitzgerald & Anor v CBL Insurance Ltd (No.2),[78] the discretion to award interest under s57 falls to be exercised by reference to the particular circumstances of the case and, in particular, having regard to what the court finds is a reasonable time for completion of the insurer's investigation of the claim. The question of unreasonableness is determined by the true position as found by the court. Once the court has rejected the insurer's defence, what the insurer did internally by way of investigating the claim, and what views it held bona fide or otherwise as to the merit of the claim, are not relevant to the court's enquiry under s57.[79] A reasonable period is to be given to an insurer to investigate and determine its position. However, if it does adopt an incorrect position, this does not mean that simply because that incorrect position is adopted on a bona fide basis, it becomes reasonable for the insurer to decline to pay the sums otherwise due.[80]
For reasons identified in paragraph 61 of the plaintiff's closing submissions, the appropriate date is either 11 January 2017 or, on a more generous view, from 26 June 2017, when the defendants wrote to Mr Vartuli to advise of their final decision on the plaintiff's claim. In terms of the amounts, the plaintiff said at trial that interest should be assessed on the difference between the cash settlement offered in respect of building repair works, namely $96,015.70, and the true sum representing the building repair works as calculated by Mr Pitney, together with the out of pocket expenses in the sum of $186,246. The difference between the two figures is $90,230.[81] These figures are no longer applicable as a result of these reasons.
The plaintiff notes the award of interest under s57 is not discretionary, unlike orders for interest under the Supreme Court Act 1986. It appears to be accepted in Victoria that it constitutes a code for the payment of interest and so displaces the provisions of s60 of the Supreme Court Act.[82]
During closing address, counsel for the defendants conceded that the principles put forward by the plaintiff in its written closing submissions relating to interest were correct.[83] If the court were to find there was some liability, then the correct date is June 2017, being the date of the resolution of the contest. If, however, the court were to find that an expense, the subject of the indemnity was not incurred until much later, then the proper date for that discrete expense would run from when that was incurred.
In the end, the dispute lies as to the correct date for the assessment of interest - whether it is 11 January 2017 or 26 June 2017.
I accept the plaintiff's submission that a reasonable period for the defendants to have conducted the investigation had elapsed by 11 January 2017, when the plaintiff was notified of the insurer's decision. This is nearly five months after the fire occurred. In my view, this constituted a reasonable period for the insurer to investigate and determine its position. The defendants by then had obtained the MCS reports, considered the further quotations provided by the plaintiff, reviewed the claim and calculated the figures to offer the plaintiff by way of indemnity under the policy. I therefore determine that interest is payable under s57 on and from 11 January 2017.
I will give the parties an opportunity to be heard upon the precise calculations of interest consequent upon these reasons, in the absence of agreement.

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Decision date

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Judgment (100 paragraphs)

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Cases Cited (15)