Strategic Property Holdings No. 3 Pty Ltd v Austbrokers RWA Pty Ltd

Judgment 1This is a professional negligence action against an insurance broker. 2On 14 December 2012 I delivered a judgment: Strategic Property Holdings No. 3 Pty Ltd v Austbrokers RWA Pty Ltd [2012] NSWSC 1570. 3In this judgment, I shall use the same abbreviations as I used in my earlier judgment. 4In my earlier judgment, I held that the Broker, by not advising Strategic of the nature and effect of the Sub-Limit under the Policy, acted in breach of its retainer and duty. I held that that breach had caused Strategic loss and that Strategic was entitled to damages. 5For the reasons set forth at [141] - [145] of my earlier judgment, I was not then able to reach any conclusion as to the quantum of damage to which Strategic is entitled. 6Since the date of my earlier judgment the parties have provided written submissions on the question of damages, and have invited me to decide the issue on the papers. 7It is common ground that Strategic is entitled to damages to put it in the position it would have been had the Broker not breached its retainer and duty. On the findings that I made in my earlier judgment, the damages to which Strategic is entitled are those which would put it in the position it would have been had the Policy had a sub-limit of $2 million, rather than $200,000. 8As a result of the roof collapse at the Geddes building on 13 January 2006, Strategic incurred total rectification costs of $3,100,176.75. 9Strategic made a claim on Suncorp under the Policy in respect of those costs. Suncorp paid Strategic $1,256,968.15. The amount paid by Suncorp was referable to damage specifically insured under the Policy (for example removal of debris, temporary protection and loss of rent). This left an amount of $1,843,208.60 of rectification costs which were not covered ("the Insurance Gap"). 10In the Amended Commercial List Statement filed in Court on 26 November 2012, Strategic claimed as damages: - (a)the Insurance Gap of $1,843,208.60; (b)finance costs associated with rectification of the roof of $750,794.42; and (c)legal costs of the ACT Proceedings: $101,228.45. 11There is no dispute as to the latter sum. There is a dispute as to the first two sums.

The Insurance Gap claim 12The matter for consideration is how much more would Suncorp have paid on Strategic's claim, had the Policy had a sub-limit of $2 million. 13In order to answer that question, it is necessary to take into account the hypothetically increased sub-limit, the Faulty Design Exclusion and the Proviso. 14The parties agree that the best guide (and indeed it is the only guide) as to what Suncorp would have paid out is its solicitor's letter of 31 March 2006. 15 That letter was in the following terms: - "As you are aware Lewis & Associates, Engineers, have investigated the cause of the roof collapse of the Geddes Building. They have concluded that the roof trusses were installed incorrectly and are in failure mode with several trusses having completely failed. Considering the above, it has been determined that your policy coverage does not extend to cover the cost of replacement of the roof trusses and adjoining supports. The resultant damage to the roof is covered under section 1 of the Policy as it comes within the proviso to section 4(c) and 4(e) of the Perils Exclusions. As you are aware, the Schedule to the Policy contains Sub Limit(s) of liability...Accidental damage is limited to $200,000.00. Our client considers that the roof's collapse comes within the definition of accidental loss, destruction or damage provided in the Policy." 16The dispute between the parties concerning the Insurance Gap principally revolved around their competing contentions as to the proper construction of that letter. 17The Broker submitted that the amount Strategic would have recovered from Suncorp, had the Sub-Limit been $2 million, would have been its uninsured rectification costs other than "the costs of replacement of the roof trusses". Accordingly, the Broker submitted, Strategic can only recover from the Broker those uninsured rectification costs that it can prove were not "the cost of replacement of the roof trusses". 18Further, the Broker submitted that the "cost" of replacing the roof trusses extended, or may extend beyond the "price" (my word) of purchasing those items. 19For example, the Broker submitted that the "cost" of replacing the roof trusses could extend to overhead expenses such as "crane hire", "scaffolding", "site management" and "labour" and might, for example, extend to part of the costs of replacing the roof tiles on the building. 20The Broker conducted a detailed analysis of the invoices relied upon by Strategic to support its claim. It submitted that, to a very considerable extent, it was not possible to discern, from that material, what items were not part of the "cost" of replacing the roof trusses. 21However, this analysis ignores, in my opinion, an important aspect of Suncorp's letter (not referred to in the Broker's submissions), namely Suncorp's statement that the "roof's collapse" (see [15] above) fell within the Sub-Limit. 22Of course, the point that Suncorp was making was that, in its view, its liability to indemnify Strategic in relation to the "roof's collapse" was limited to $200,000. But it was also making clear, in my opinion, that subject to the Sub-Limit, it did consider itself liable to indemnify Strategic in relation to the "roof's collapse". 23That suggests to me that the earlier statement in Suncorp's letter, that it was not liable for the "cost" of replacing the roof trusses, was not intended by it to suggest that, otherwise, it was not liable to indemnify Strategic (albeit subject to the Sub-Limit) for its loss referrable to the "roof's collapse". 24In those circumstances, I read Suncorp's reference to the "cost" of replacing roof trusses as being a reference to the direct cost of "replacing" the roof trusses, as distinguished from costs associated more generally with the "roof's collapse". 25For those reasons, I accept Strategic's submission that Suncorp's letter should be read in a "common sense manner, as legal causation must be" as if it read: - "We will not pay to replace the roof trusses and supports as they are excluded because they were incorrectly installed. The result of that incorrect installation was the collapse of the roof. As this was the result of the excluded peril, the replacement of the roof is covered, albeit subject to the Accidental Damage Sub-Limit." 26Strategic accepts that it follows from this that the following items must be deducted from the amount of the Insurance Gap: - (a)invoice issued by Canberra Roof Trusses on or about 9 May 2006 for $37,879 (exclusive of GST); (b)invoice issued by Canberra Roof Trusses on or about 25 July 2006 for $80,577 (exclusive of GST); (c)invoice issued by Canberra Roof Trusses on or about 8 August 2006 for $605 (exclusive of GST); (d)invoice issued by Lewis and Associates dated 21 November 2006 for $209,719.54 (exclusive of GST); and (e)invoice issued by Lewis and Associates dated 27 August 2007 for $38,425.01 (exclusive of GST). 27In my opinion, the following further matters must be deducted, as they also relate to the direct cost of replacing the roof trusses: - (a)invoice issued by Rumbles Cranes on 9 May 2006 for $2,508 for "crane with dogman" to "lift trusses"; (b)invoice issued by Rumbles Cranes on 10 May 2006 for $2,508 for "crane with dogman" to "lift trusses"; (c)invoice issued by H&D Developments Pty Ltd on 22 May 2006 for $18,128 for "installation of new trusses" and other matters (it is not possible to apportion what part of the invoice related to those other matters so the total should be deducted); (d)invoice issued on or about 13 June 2006 by H&D Developments Pty Ltd for $21,058.12 for "installation of roof trusses" (and one other matter; again it is not possible apportion the cost); (e)invoice issued by H&D Developments Pty Ltd on 31 July 2006 for $29,640 for "installation of roof trusses"; (f)invoice issued by Builders Trading Co-Op Ltd on 17 July 2006 $2,365.60 for "radiata frame"; (g)invoice issued by Builders Trading Co-Op Ltd on 26 July 2006 for $1,732.72 for "radiata frame"; (h)invoice issued by Rumbles Cranes on 2 August 2006 for $60,788.75 primarily for crane hire in relation to "trusses"; (i)invoice issued by PRT Fabrication & Consulting Pty Ltd on 23 August 2006 for $10,192.60 for "supervision as quoted for placement of roof trusses"; (j)invoice by H&D Developments Pty Ltd on 27 August 2006 for $23,606 for "installation of new roof trusses"; (k)invoice issued on 31 August 2006 by Builders Trading Co-Op Ltd for $7,110.44 for "radiata frame"; (l)invoice issued on 2 September 2006 by Rumbles Cranes for $80,841.76 primarily for crane hire in relation to "trusses"; (m)invoice issued by H&D Developments Pty Ltd on 13 September 2006 for $20,284 for "installation of new roof trusses"; (n)invoice issued by H&D Developments Pty Ltd on 28 September 2006 in the sum of $25,366 for "installation of new roof trusses"; (o)invoice issued by H&D Developments Pty Ltd on 11 October 2006 for $5,973 for "installation of new roof trusses".

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