The Owners - Strata Plan 64415 v Vero Insurance Ltd; The Owners - Strata Plan 64415 v Vero Insurance Ltd - [2014] NSWSC 1500 - NSWSC 2014 case summary

Supreme Court of NSW|2014-10-16|Before: Stevenson J

Solicitors: Serman & Associates (Plaintiff) Vardanega Roberts (Defendant) File Number(s): SC 2010/330571; SC 2013/249384

Introduction 1On 3 February 2014 the Court ordered, pursuant to Uniform Civil Procedure Rules 2005 r 20.14, that the whole of these two proceedings be referred to the Honourable R H Macready ("the Referee") for inquiry and report. 2The Referee heard the proceedings at a reference hearing which spanned 12 days: 4, 7, 8, 9, and 10 April, 5, 6, 27 and 30 May and 2, 3 and 11 June 2014. 3The Referee delivered a report to the Court on 26 June 2014 ("the Report"). 4In the Report the Referee determined that both proceedings should be dismissed and that the plaintiff should pay the defendant's costs. 5I have before me competing applications concerning the Report. The defendant seeks to have the Report adopted in whole (subject to the question of costs; the defendant seeks a special order as to costs). The plaintiff, in effect, resists adoption of the Report.

Principles to be applied concerning the adoption of the Referee's Report 14The principles to be applied are those summarised by McDougall J in Chocolate Factory Apartments Pty Ltd v Westpoint Finance [2005] NSWSC 784 at [7] (recently acknowledged as being "highly influential": Mainteck Services Pty Ltd v Stein Heurty SA [2014] NSWCA 184 per Leeming JA, with whom Ward and Emmett JJA agreed, at [24]) as follows: "(1) An application under Pt 72 r 13 is not an appeal either by way of hearing de novo or by way of rehearing. (2) The discretion to adopt, vary or reject the report is to be exercised in a manner consistent with both the object and purpose of the rules and the wider setting in which they take their place. Subject to this, and to what is said in the next two sub paragraphs, it is undesirable to attempt closely to confine the manner in which the discretion is to be exercised. (3) The purpose of Pt 72 is to provide, where the interests of justice so require, a form of partial resolution of disputes alternative to orthodox litigation, that purpose would be frustrated if the reference were to be treated as some kind of warm up for the real contest. (4) In so far as the subject matter of dissatisfaction with a report is a question of law, or the application of legal standards to established facts, a proper exercise of discretion requires the judge to consider and determine that matter afresh. (5) Where a report shows a thorough, analytical and scientific approach to the assessment of the subject matter of the reference, the Court would have a disposition towards acceptance of the report, for to do otherwise would be to negate both the purpose and the facility of referring complex technical issues to independent experts for enquiry and report. (6) If the referee's report reveals some error of principle, absence or excessive jurisdiction, patent misapprehension of the evidence or perversity or manifest unreasonableness in fact finding, that would ordinarily be a reason for rejection. In this context, patent misapprehension of the evidence refers to a lack of understanding of the evidence as distinct from the according to particular aspects of it different weight; and perversity or manifest unreasonableness mean a conclusion that no reasonable tribunal of fact could have reached. The test denoted by these phrases is more stringent than "unsafe and unsatisfactory". (7) Generally, the referee's findings of fact should not be re-agitated in the Court. The Court will not reconsider disputed questions of fact where there is factual material sufficient to entitle the referee to reach the conclusions he or she did, particularly where the disputed questions are in a technical area in which the referee enjoys an appropriate expertise. Thus, the Court will not ordinarily interfere with findings of fact by a referee where the referee has based his or her findings upon a choice between conflicting evidence. (8) The purpose of Pt 72 would be frustrated if the Court were required to reconsider disputed questions of fact in circumstances where it is conceded that there was material on which the conclusions could be based. (9) The Court is entitled to consider the futility and cost of re-litigating an issue determined by the referee where the parties have had ample opportunity to place before the referee such evidence and submissions as they desire. (10) Even if it were shown that the Court might have reached a different conclusion in some respect from that of the referee, it would not be (in the absence of any of the matters referred to in sub para (6) above) a proper exercise of the discretion conferred by Pt 72 r 13 to allow matters agitated before the referee to be re-explored so as to lead to qualification or rejection of the report. (11) Referees should give reasons for their opinion so as to enable the parties, the Court and the disinterested observer to know that the conclusion is not arbitrary, or influenced by improper considerations; but that it is the result of a process of logic and the application of a considered mind to the factual circumstances proved. The reasoning process must be sufficiently disclosed so that the Court can be satisfied that the conclusions are based upon such an intellectual exercise. (12) The right to be heard does not involve the right to be heard twice. (13) A question as to whether there was evidence on which the referee, without manifest unreasonableness, could have come to the decision to which he or she did come is not raised "by a mere suggestion of factual error such that, if it were made by a trial judge, an appeal judge would correct it". The real question is far more limited: "to the situation where it is seriously and reasonably contended that the referee has reached a decision which no reasonable tribunal of fact could have reached; that is, a decision that any reasonable referee would have known was against the evidence and weight of evidence". (14) Where, although the referee's reasons on their face appear adequate, the party challenging the report contends that they are not adequate because there was very significant evidence against the referee's findings with which the referee did not at all deal, examination of the evidence may be undertaken to show that the reasons were in fact inadequate because they omitted any reference to significant evidence. (15) Where the court decides that the reasons are flawed, either on their face or because they have been shown not to deal with important matters, the court has a choice. It may decline to adopt the report. Or it may itself look at the detail of the evidence to decide whether or not the expense of further proceedings before the referee (which would be the consequence of non adoption) is justified."

Issues decided in favour of the Owners Corporation by the Referee 15Although the Referee found that both the Breach of Contract and the Insurance Appeal Proceedings should be dismissed, he did find some issues favourably to the Owners Corporation. 16Vero did not seek to challenge those findings and, as I have said, submitted that the Referee's Report should be adopted in whole (subject to the matter of costs).

The limitation issue 17Before the Referee, Vero contended that the Breach of Contract Proceedings were not maintainable by reason of s 14 of the Limitation Act which, relevantly, is in the following terms: "(1) An action on any of the following causes of action is not maintainable if brought after the expiration of a limitation period of six years running from the date on which the cause of action first accrues to the plaintiff or to a person through whom the plaintiff claims: (a) a cause of action founded on contract...". 18Section 7 of the Limitation Act provides, relevantly, that: "Nothing in this Act: (a) applies to an action...for which a limitation period is fixed by or under an enactment other than this Act...". 19The Owners Corporation contended before the Referee that s 18E of the Home Building Act 1989 ("the Act") was a provision of the kind referred to in s 7 of the Limitation Act. 20At the relevant time, s 18E of the Act provided that: "(1) Proceedings for a breach of a statutory warranty must be commenced within 7 years after: (a) the completion of the work to which it relates...". 21If the relevant limitation period is that in s 14 of the Limitation Act, the Breach of Contract Proceedings have been brought out of time and are not maintainable. 22The Owners Corporation's cause of action in the Breach of Contract Proceedings arose on breach of the contract of insurance comprised by the Policy (for example, N Seddon, R Bigwood and M Ellinghaus, Cheshire & Fifoot Law of Contract, (10th Aust ed, 2012, Lexis Nexus Butterworths) at [25.2]). 23In this case, if Vero was in breach, that breach occurred on 21 January 2004, when it denied liability to indemnify the Owners Corporation. 24On the same date Vero rejected claims from the owners of Units 2, 4, 6 and 11 but accepted (in part) the claim made by the owner of Unit 12, Mr Con Kormas. The damage said to have been sustained in Unit 12 formed part of the Owners Corporation's claim of 11 September 2003. However, Vero denied any liability to indemnify the Owners Corporation and made clear, in its letter of 21 January 2004, that it regarded the Owners Corporation's claim (as opposed to Mr Kormas's claim) as not including the damage claimed to have been suffered in Mr Kormas's unit. If Vero was wrong to reject the Owners Corporation's claim on that basis, and thus in breach of its obligations under the Policy, the time during which the Owners Corporation could maintain an action against Vero commenced on 21 January 2004. 25The same conclusion follows, in my opinion, even if, as Mr Jacobs QC, who appeared for the Owners Corporation before the Referee and before me, submitted the correct conclusion is that Vero did not reject all of the Owners Corporation's claims on 21 January 2004. It rejected (at least) some of them. If it was not entitled to do that, it was in breach of its obligations under the Policy. Indeed, that is precisely the claim made by the Owners Corporation in the Breach of Contract Proceedings (see [40] below). For that reason, time started to run on 21 January 2004. 26The Breach of Contract Proceedings were commenced on 5 October 2010; more than six years after that date. Section 14 of the Limitation Act bars the remedy, not the right and "[a]bsent an appropriate plea, the matter of the statutory bar does not arise for the consideration of the court" (per Gleeson and Kirby JJ in The Commonwealth v Mewett [1997] HCA 29; 191 CLR 471 at 534). However, Vero pleaded that the Owners Corporations cause of action was statute barred. Further, although the Owners Corporation initially alleged that Vero had waived its right to plead a limitation defence, this was abandoned before the Referee (see [161] of the Report). There was a suggestion in Mr Jacobs's written submissions delivered after the hearing before me that he was seeking to revive the question of waiver. If he was, I reject the submission as, the matter having been abandoned before the Referee, it can play no role in my consideration of whether to adopt the Referee's Report. 27The Referee found that the Breach of Contract Proceedings were not "proceedings for a breach of a statutory warranty" and that, accordingly, s 18E of the Act had no application; and that it followed that the relevant limitation period was in s 14 of the Limitation Act and that the proceedings were brought out of time (at [159] to [161]). 28In my opinion, the Referee was correct in coming to this conclusion. 29The claim made by the Owners Corporation in the Breach of Contract Proceedings is a claim for breach of the Policy; it is not a claim for breach of the statutory warranties implied by the Act into the Builder's contract to carry out the relevant "residential building work". 30Section 18E (in its then form) was introduced into the Act (then known as the Building Services Corporation Act 1989) by the Building Services Corporation Legislation Amendment Act 1996 ("the 1996 Amendment Act"), which took effect on 1 May 1997. 31The 1996 Amendment Act introduced a new "Part 2C" which was headed "Statutory warranties" and included s 18B (which implies the relevant warranties into "every contract to do residential building work") as well as s 18E. 32The 1996 Amendment Act also introduced a new "Part 6" into the Act (headed "Insurance") which provided, in s 92, that: "A person must not contract to do any residential building work unless a contract of insurance which complies with this Act is in force in relation to the proposed work". 33The 1996 Amendment Act also introduced, as part of the new "Part 6", s 99 which provided, relevantly: "A contract of insurance in relation to residential building work required by section 92 must insure: ... (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." (emphasis added) 34Thus the statutory requirement was that there be insurance to protect from "loss arising from" a breach of statutory warranty. 35The Policy does just that and provides, under the heading "Your Insurance Cover": "If (only if) you, the Insured have complied strictly with all your obligations in this policy then, subject to the terms of this policy, we will at our option make good or pay you your loss or damage resulting from - ... (2) a breach by your builder of a statutory warranty." 36The claim against Vero for failing to comply with that promise is not itself (or at all) a claim for a "breach of a statutory warranty". It is a claim for a breach by the insurer of its promise to indemnify the insured (the Owners Corporation) for damage it has suffered as a result of the breach (by the Builder) of the relevant statutory warranty. 37Examination of the Owners Corporation's List Statement confirms that this is precisely the nature of the claim made by the Owners Corporation in the Breach of Contract Proceedings. 38The List Statement lists, as amongst the issues likely to arise: "1. Whether the Builder has breached one or more of the s 18B implied warranties. 2. Whether or not [Vero] is obliged to indemnify [the Owners Corporation] in respect of breaches by the Builder...of the Builder's s 18B implied Statutory Warranties." 39This makes clear the distinction between a claim made by the Owners Corporation that the Builder has breached the statutory warranties implied in the building contract by s18B of the Act on the one hand, and the claim by the Owners Corporation that Vero, as the statutorily required insurer, had breached its obligations under the Policy to indemnify the Owners Corporation for the loss it has suffered as a result of the Builder's breaches of the statutory warranties, on the other. 40The List Statement alleges that on 27 March 2002 the Owners Corporation "made a claim on insurance, thereby requiring [Vero] to provide indemnity thereunder" (par 18.1.1), that Vero responded by its letter of 21 January 2004 (par 18.4.1) and that: "In rejecting the claim...[Vero] breached the aforesaid clauses of the insurance contract, and by reason of such breach, [the Owners Corporation] stands to suffer loss and damage as set out therein." (par 19.1) 41The claim actually made in the List Statement by the Owners Corporation is thus not a claim for a breach of a statutory warranty. It is a claim for indemnity under the Policy; that is a claim for breach of the contract of insurance. 42No doubt, as Mr Jacobs QC submitted, an integral part of the Owners Corporation's claim is that there was, in fact, a breach by the Builder of the relevant statutory warranties. It is also no doubt true, as Mr Jacobs submitted, that unless the Owners Corporation could establish that there had been a breach by the Builder of a statutory warranty, its claim against Vero would fail. 43But it does not follow that the proceedings that the Owners Corporation has brought against Vero are themselves "proceedings for a breach of a statutory warranty". 44In my opinion they are not, and the Referee was correct in coming to that conclusion. 45In his written and oral submissions, Mr Jacobs referred to, and placed emphasis on the observations of McDougall J in The Owners Strata Plan 57504 v Building Insurers' Guarantee Corporation [2008] NSWSC 1022 at [67] to [70]. In that case, his Honour was concerned with the question of whether the owners corporation had made a claim under the relevant policy within the time limit specified in that policy. His Honour did not need to consider the Limitation Act. I see nothing in his Honour's remarks that touches on the issue before me.

"Completion of the work" 46A considerable portion of Mr Jacobs's written and oral submissions were directed to the question of whether or not the Referee had erred in relation to his conclusion as to when the contract between the Builder and Developer was completed. The Referee's conclusion (at [200]) was that completion took place by 20 September 2000. 47Mr Jacobs's submissions appear to have proceeded upon the basis that the Referee was dealing with the question of "completion of the work" for the purposes of consideration of s 18E of the Act. 48In my opinion, this is a misunderstanding of the Referee's Report. 49As I read the Referee's Report, he dealt with the limitation question from [147] to [162] and concluded (at [160] and [162]) that the relevant limitation was to be found in s 14 of the Limitation Act and that the proceedings were thereby statute barred. 50From [168] of the Report, the Referee dealt with defences raised by Vero under the terms of the Policy itself. It appears that the words at [168] ("Defences under the terms of the policy") were intended by the Referee to be a sub-heading rather than a separate paragraph. 51From that point in the Report to [205] the Referee dealt with the question of whether or not the Owners Corporation had made a claim under the Policy within the time specified in the Policy (seven years from completion). 52The Referee held (at [200]) that the Owners Corporation had made its claim under the Policy within the time limited by the Policy and thus resolved this question in the Owners Corporation's favour. 53The Referee was not, in this part of the Report, dealing with when "completion of the work" had taken place for the purpose of s 18E of the Act. That is made clear by the Referee's observation at [179]: "However given my finding that the relevant limitation is that contained in the Limitation Act I do not have to consider the meaning of completion for the purposes of s 18E." 54Thus, the Referee, having decided (correctly in my opinion) that the limitation question was governed by s 14 of the Limitation Act, and that the Breach of Contract Proceedings were statute barred, did not need to, and did not in fact, consider whether, assuming s 18E to be the relevant provision, the Breach of Contract Proceedings were brought within a time calculated by reference to the words of that section. 55Mr Jacobs's submissions concerning the "completion" issue were thus misdirected and proceed upon a misapprehension as to what the Referee did.

Insurance Appeal Proceedings 56In the Insurance Appeal Proceedings, the Owners Corporation sought the orders I have set out at [11] above. The Owners Corporation sought orders to similar effect in the Breach of Contract Proceedings (see [10(2)] above). 57Sections 48K and 48M of the Act are, relevantly, in the following terms: "48K Jurisdiction of Tribunal in relation to building claims (1) The Tribunal has jurisdiction to hear and determine any building claim brought before it in accordance with this Part in which the amount claimed does not exceed $500,000 (or any other higher or lower figure prescribed by the regulations) ... (6) The Tribunal does not have jurisdiction in respect of a building claim arising out of a contract of insurance required to be entered into under this Act if the date on which the claim was lodged is more than 10 years after the date on which the residential building work the subject of the claim was completed. (7) The Tribunal does not have jurisdiction in respect of a building claim arising from a breach of a statutory warranty implied under Part 2C if the date on which the claim is lodged is after the end of the period within which proceedings for a breach of the statutory warranty must be commenced (as provided by section 18E) ... 48M Jurisdiction in relation to actions against refusal of insurance claims Despite section 48K, a building claim that relates to the refusal of an insurance claim that exceeds $500,000 (or any other higher or lower figure prescribed by the regulations) is to be heard by a court of competent jurisdiction." 58A "building claim" is defined, for the purposes of Pt 3A, as including a "claim for...the payment of a specified sum of money" (s 48A(1)(a)) and both "an appeal against a decision of an insurer under a contract of insurance required to be entered into under this Act" (s 48A(2)(a)) and "a claim for compensation for loss arising from a breach of statutory warranty implied by Part 2C" (s 48(a)(2)(b)). 59Section 48A(2)(a) has been in its current form since 1 July 2002. Section 48A (2)(a) was originally inserted by the Home Building Legislation Amendment Act 2001 which commenced on 1 January 2002. Between 1 January 2002 and 1 July 2002, the subsection referred to an "action for reversal of" the "decision of an insurer" rather than an "appeal against" a "decision of an insurer". The change to the current form of s 48A(2)(a) was effected by the Home Building Amendment (Insurance) Act 2002. 60At all relevant times, cl 65 of the Regulation was in the following form: "(1) An appeal against a decision of an insurer that is a building claim made under Part 3A of the Act or a consumer claim under the Consumer Claims Act 1998 must be made not later than 45 days after written notice of the decision is given to the beneficiary. (2) Nothing in subclause (1) limits the time within which an appeal may be made if a claim is taken to have been refused because of the operation of clause 64 and written notice of a decision has not been given to the beneficiary. (3) However, an appeal may, with the leave of the Tribunal or court, be lodged with the registrar of the Tribunal or court after the end of the period referred to in subclause (1), if: (a) an application is made to the Tribunal or court for leave to lodge the appeal out of time, and (b) in the opinion of the Tribunal or court, there are special circumstances to grant leave, and (c) the Tribunal or court grants leave. (4) Without limiting the type of circumstances that may be considered special circumstances, the time taken for a decision to be reviewed by the insurer is a factor in determining special circumstances." 61The "appeal" referred to in cl 65 of the Regulation is that referred to in s 48A(2)(a) of the Act as part of the extended definition of "building claim". 62There are some conceptual difficulties involved in the notion of proceedings before the Tribunal (then the Civil and Administrative Tribunal and now the New South Wales Civil and Administrative Tribunal) or a court of the kind contemplated by these sections being characterised as an "appeal". As Hidden J has observed in Defence Housing Authority v Building Insurers' Guarantee Corporation [2005] NSWSC 206; 189 FLR 197 "in claims of that kind the Tribunal exercises original, not appellate jurisdiction" (at [9]). 63The conferral by ss 48K and 48M of the Act of jurisdiction on the tribunal and court to hear a "building claim" constituted by an "appeal against a decision of an insurer under a contract of insurance required by this Act" does not, in my opinion, itself create a cause of action over and above such cause of action as an insured might otherwise have against an insurer under the relevant policy. It does no more than provide a remedy for the insured (the "appeal") not otherwise available by application of normal contractual principles. So much seems to be recognised by the Owners Corporation in the orders sought by it in the Breach of Contract Proceedings (see [10(2)] above). 64In my opinion, the Act assumes the existence of, and does not create, a substantive right or legal entitlement the denial of which could give rise to an entitlement to appeal. 65Hidden J came to the same conclusion in Defence Housing Authority at [14] where his Honour said that a plaintiff is, consistently with s 48M of the Act "entitled to pursue such general law remedies as are available to it in this Court". The Referee, when an Associate Judge of the Court also came to the same conclusion in The Owners Strata Plan 58068 v Fair Trading Administration Corporation [2007] NSWSC 1235 at [38] where his Honour (as he then was) held that s 48A "does not give rise to a statutory cause of action but assumes that a cause of action exists". His Honour (as the Referee then was) went on to find that a different statutory cause of action arose from the statutory "scheme" but, as he observed in the Report (at [240]), this was by reason of "other sections of the Act". 66The Referee came to the same conclusion in the Report (at [239] and [240]) and in my opinion was correct in doing so. 67Contrary to Mr Jacob's submissions, the Referee did not find "the Appeal remedy constituted a self-standing remedy". At [240] the Referee accepted Vero's submission that "the present scheme does not create a freestanding cause of action" (see [239]). 68The Referee also observed at [238]: "A very important matter is that I have earlier in this determination held that the underlying cause of action is time barred. To grant an appeal now would side step that decision". 69If, as the Owners Corporation's submissions appear to assume, ss 48K and 48M of the Act create a cause of action, and the tribunal or court has a discretion under cl 65 to extend the time to bring an appeal beyond the 45 day period specified in cl 65, the result would be the conferral on the Tribunal or court a power to extend indefinitely the time during which a "building claim" could be brought (against a builder or an insurer). 70I would not attribute to the Parliament an intention to achieve such an extraordinary result in the absence of the clearest possible language. I see no such language in either ss 48K or 48M or in cl 65. To the contrary, s 48K(7) of the Act suggests that Parliament did not intend this result. Section 48K(7) provides that the Tribunal has no jurisdiction to hear a "building claim" arising from a breach of statutory warranty outside the time limited by s 18E of the Act. 71Further, the change made on 1 July 2002 to the form of s 48A(2)(a) referred to at [59] above (from an "action for reversal of" an insurer's decision to an "appeal against" same) suggests that Parliament wished to make clear that the extended definition of "building claim" was not intended to create a new cause of action. 72 At [240] the Referee said: "I am thus left with the situation that although the underlying cause of action for breach of the insurance policy is barred by the statute of Limitations, this leave to appeal is not" (emphasis added). 73Thus, despite coming to the conclusion I have set out at [66], the Referee apparently took the view that it was still open to the Owners Corporation to seek "leave to appeal" under cl 65. 74It appears that it was for that reason that the Referee went on to consider whether or not the Owners Corporation had made out "special circumstances" such as would justify an exercise of discretion under cl 65(3). The Referee concluded that the Owners Corporation had not established "special circumstances" on the number of bases, including that the underlying cause was commenced beyond the six year period referred to in s 14 of the Limitation Act (at [243]), and also because the Owners Corporation had not given "a proper explanation of the delay" (at [234]). 75In my opinion, the correct analysis is that as the Owners Corporation's cause of action in contract against Vero was no longer maintainable, it was no longer able to maintain an appeal of the kind referred to in s 48A(2)(a) of the Act against Vero's decision to decline indemnity. As the "appeal" was not maintainable, no cause arose to consider whether "special circumstances" existed such as might warrant an extension of the time within which to appeal. 76That would have been the preferable way to deal with the matter. However, the Referee reached the correct result, which is that proceedings should be dismissed.

A denial of procedural fairness? 77Mr Jacobs submitted that the Referee had wrongly refused Mr Jacobs's "application to cross-examine" (evidently under s 167 of the Evidence Act 1995) an employee of the Woollahra Municipal Council, Mr Norman Wong. 78Mr Wong was the author of diary notes upon which the Referee relied to form a conclusion as to when a "final inspection" of the property took place for the purpose of considering, and rejecting, Vero's case that the Owners Corporation had not made its claim under the Policy within the time limit set out in the Policy (seven years from completion: see [46] to [55] above). As the Referee resolved that issue favourably to the Owners Corporation, it is not relevant to the bases available to the Owners Corporation to resist adoption of the Report. 79However, as a denial of procedural fairness is, as a general matter, capable of relevance to the discretion to adopt a referee's report (for example, see Xuereb v Viola (1989) 18 NSWLR 453 per Cole J at 468) and because, in any event, it is a serious matter to allege that a Referee has denied a party procedural fairness, I will consider that matter. 80Through the affidavits of Mr St Leon and Mr Kormas (both unit owners in the Birriga Road building) the Owners Corporation placed into evidence a letter written by Mr Craig Jenner from Woollahra Council to Mr St Leon on 9 September 2009 stating that: "Council records show a Final inspection was performed on 16 August 2000 however a number of matters were outstanding." 81The Owners Corporation had a copy of part of the Council's records concerning the Birriga Road building. On the first day of the reference Mr Dawson, who appeared before the Referee and before me for Vero, called for the Council records. They were not produced. On the second day of the reference Mr Dawson again called for the Council records. Mr Jacobs then said that the records were not produced as the Council records in the possession of the Owners Corporation were incomplete and partly illegible. 82On the sixth day of the reference the question arose as to the status of the Council's letter to Mr St Leon of 9 September 2009. Mr Jacobs said that the Owners Corporation was not "tendering it as a business record". The Referee pointed out that the document was in evidence and was "in for all purposes". 83On the tenth day of the reference, Mr Jenner (the author of the Council's letter of 9 September 2009) gave evidence, evidently in response to a request made by Mr Jacobs pursuant to s 167 of the Evidence Act. Mr Jacobs's cross-examination revealed that Mr Jenner had no personal knowledge of when the final inspection took place. Accordingly, the Referee made what was in effect a ruling under s 136 of the Evidence Act that Mr Jenner's letter not be admitted as proof of the facts asserted in it. 84In the meantime Vero had issued a subpoena to the Council for production of its records. By notice of motion filed on 29 April 2014 the Owners Corporation sought to set aside that subpoena. On 9 May 2014 McDougall J dismissed that application. 85In an affidavit sworn on 29 April 2014 in support of the Owners Corporation's application to set aside the subpoena, the Owners Corporation's solicitor, Mr Graham Liebenberg gave evidence that, five months earlier, in November 2013, he had been informed by Council officers that Mr Wong no longer worked at that Council. Mr Liebenberg stated that had he made enquiries and that: "I was unable to locate a Mr Norman Wong in Sydney but found a person by that name on the internet, who was employed at the Brisbane Council, and left a message for him to phone me, but he never returned my call." 86Thereafter, on the ninth day of the reference (2 June 2014) Mr Dawson tendered the Council files, including a number of handwritten notes made by Mr Wong in August and September 2000. 87It was in those circumstances that Mr Jacobs sought what was in effect an order under s 167 of the Evidence Act requiring that Vero produce Mr Wong for cross-examination (notwithstanding Mr Liebenberg's evidence that he could not be located). 88In that context the Referee refused Mr Jacobs's application and gave the following reasons: "I note your application but I refuse the application. This document...just indicates results of a joint inspection. It's fairly readable. I propose to admit. I note that Mr Jacobs has asked that the author be produced for cross-examination. I have given my ruling but I don't propose to allow that. I have already allowed cross-examination of Mr Jenner in respect of one document [that is Mr Jenner's letter of 9 September 2009] which was a particularly important one and there were proper reasons for doing so, and I will come to deal with that document when we get to it in due course. But given the stage of the trial, the availability of council records, and the apparent regularity of what we're dealing with, I don't think that I should extend the trial by allowing further cross-examination of everyone who has written a letter of done a report on the council's files." 89Accepting that Mr Jacobs was not seeking to cross-examine "everyone" (only Mr Wong), but in the circumstances I have described (especially Mr Wong's evident unavailability), and the further circumstance that Mr Wong's diary notes were clearly receivable as business records, I cannot see how the Referee denied procedural fairness to the Owners Corporation by taking the course he did. I reject Mr Jacobs's submissions to the contrary.

Quantum of damages 90Mr Jacobs submitted that the Referee had erred in not giving reasons for not allowing the Owners Corporation's claim for damages in respect of the cost of effecting certain structural roof repairs. 91In my opinion, this submission arises from a misreading of the Referee's Report and from a failure to distinguish between the Owners Corporation's rights against the Builder pursuant to the statutory warranties implied in the building contract by s 18E of the Act on the one hand, and the Owners Corporation's rights against Vero as issuer under the Policy on the other. 92The Referee dealt with the question of damages from [14] to [39] of the Report and concluded, at [35], that the total rectification cost (that is, the amount recoverable from the Builder for breach of the statutory warranties) was $1,236,358. 93From [36] of the Report, the Referee dealt with the question of how much of that amount was recoverable by the Owners Corporation against Vero under the Policy. 94The Referee determined that the amount recoverable under the Policy was the amount the subject of the claim made by the Owners Corporation on 11 September 2003, together with the matters raised on behalf of the Owners Corporation in a report prepared by an architect, Mr Gray, which the Owners Corporation had earlier sent Vero. 95As the Referee explained at [38], the items allowed at [39ff] were such of those defects identified in a report prepared by the experts in conclave as were identified in the Owners Corporation's original claim and Mr Gray's report. 96Thus, contrary to Mr Jacobs's submissions, the Referee did give reasons for allowing (and only allowing) the items listed at [39].

Conclusion 97For those reasons I propose to make orders to the following effect: (1)Pursuant to UCPR r. 20.24, adopt the report of the Honourable R H Macready of 26 June 2014; (2)Dismiss each of proceedings 2010/330571 and 2013/249384 with costs. 98I will now hear submissions from the parties as to the precise orders I should make and as to any special costs order.

Amendments 13 February 2015 - Par 64: typographical error, inserted the word "not" in the first line. 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. Decision last updated: 13 February 2015

The Owners - Strata Plan 64415 v Vero Insurance Ltd; The Owners - Strata Plan 64415 v Vero Insurance Ltd

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Judgment (12 paragraphs)

Legislation Cited (1)

Cases Cited (8)

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