1. The first respondents must pay the second respondent the sum of $1200 being costs thrown away by reason of the adjournment on 1 August 2001 - stayed for seven days.

2. The second respondents must pay the applicants the sum of $200 being costs thrown away in preparation for today's hearing which order and the costs order in favour of the applicants made 1 August 2001 are stayed for seven days.

3. The second respondent pay the applicants in the sum of $100,000.00.

4. The second respondent pay the applicant's interest, pursuant to the Insurance Contracts Act 1984, in the sum of $1632.00.

5. The second respondent pay all of the applicants' legal costs and expenses related to the enforcement of the insurance claim against the second respondent, except in so far as they are of an unreasonable amount or unreasonably incurred and so that, subject to the above exceptions, the applicants will be completely indemnified by the second respondent for their costs.

6. The question of the costs ordered in Paragraph 5 above be referred to the Principal Registrar for assessment in default of agreement by the parties

7. The proceeding as against the first respondent be set down for hearing on 15 October 2001, with an estimate of 8 days.

8. No later than 1 October 2001 each party must file and serve:

(a) statements of the evidence of each witness that party will call; and

(b) copies of each document that party will place in evidence.

9. Any material in reply must be filed on or before 8 October 2001.

10. Without leave of the Tribunal no party may adduce further evidence in chief beyond that contained in the material filed and served in accordance with Orders 8 and 9.

11. The assessment of the costs ordered by Senior Member Walker 4 December 2000 be referred to the Principal Registrar for assessment in default of agreement between the parties.

For the First Respondents: Mr G. Hellyer of Counsel

For the Second Respondents: Mr E. Riegler of Counsel

1. This proceeding was before me last Wednesday, the 1st of August. At that time I heard lengthy submissions made by Mr Hellyer on behalf of the second respondents, the Tasevskis who are the builders, in connection with the present domestic building dispute. In the course of those reasons I explained the background to the present dispute at some length. Those reasons have been transcribed and in the circumstances I incorporate by reference my description of the background in the nature of the dispute as given on the 1st of August. Events have moved on to some degree since the 1st of August and the matter has come on for hearing again today, the 6th of August.

2. The dispute which confronts me today is one in which neither the builder nor the second respondent, the insurer, seeks to controvert the evidence brought forward by the applicants as to the quantum of their loss. The insurance policy issued by Reward Insurance Pty Ltd with respect to the construction of a dwelling house by the Tasevskis had an upper limit of $100,000. The affidavit material filed on behalf of the Trajkovskis shows, if accepted, that the cost to rectify or complete is at least in that amount. Accordingly in the absence of any challenge to that material, the Trajkovskis are entitled to recover the full limit of liability under the insurance policy, namely $100,000. In addition, through their Counsel Mr Aghion, they seek both interest and costs and it as to these matters that I have heard lengthy submissions today.

3. The first issue, namely interest, is, it was conceded by the parties, dealt with by the Insurance Contracts Act 1984. Further, it is agreed that this statute applies, on the subject of interest, to the exclusion of State legislation such as the empowerment to order damages by way of interest to be found in the Domestic Building Contracts Act 1995 and the Fair Trading Act and also the stipulation of rates for such interest to be found in the Victorian Penalty Interest Act.

4. Again, it is not disputed that Section 57 of the Insurance Contracts Act 1984 of the Commonwealth has as its relevant rate of interest, the rate of 8.75 percentum per annum. What is disputed is the date as from which one would consider calculating such interest. The submission made by Mr Aghion is that the interest should be payable from May of 2000.

5. To understand the force of that submission it is necessary to say something as to the text of Section 57 of the Insurance Contracts Act. Sub-section (1) states:

"Where an insurer is liable to pay to a person an amount under a contract of insurance or under this Act in relation to a contract of insurance, the insurer is also liable to pay interest on the amount to that person in accordance with this section."

"The period in respect of which interest is payable is the period commencing on the day as from which it was unreasonable to the insurer to have withheld payment of the amount and the ending on whichever is the earlier of the following days:

(b) the day on which payment is sent by post to the person to whom it is payable."

7. It will be recalled that Deputy President Associate Professor Cremean's determination made on the 2nd of May this year that the insurer was deemed to have accepted the Trajkovskis' claim was based upon Clause 4.5.2 of the relevant policy which states:

"If we do not determine liability for a claim within 90 days of receipt he will be deemed to have accepted liability for the claim unless he has obtained an extension of time from the insured or the Domestic Building Tribunal."

8. Professor Cremean found that no extension of time has been given by the insured and dismissed the costs application by the insurer for an extension of time. He held that as from May 2000, that is the expiry of the 90 day period, the insurer was deemed to have accepted liability. In those circumstances Mr Aghion says that it is from that date that the interest under Section 57 should be calculated because as from that date it became unreasonable for the insurer not to have paid. He calculated interest from that date until today in the sum of $10,931.54.

9. Mr Riegler who appears for the insurer gave as his primary submission that no interest at all should be payable because it is only as from today that the final determination has been made with respect to these matters and accordingly it was reasonable for his client to wait until this day to make payment.

10. His second or fallback position was that no interest should be payable except from the 30th of May this year. This latter date represents the date which is 14 days after the 16th of May being the day upon which the applicants' evidence as to the quantum which has ultimately gone unchallenged before me was furnished to the insurer.

11. Mr Riegler submits that Clause 4.5.2 of the gravamen of Professor Cremean's determination deals with the issues of liability only. It is traditional in the law, he says, to distinguish between matters of liability and matters of quantum. It is common for Courts to direct separate trials of the two. Accordingly, based on the submission that his client was deemed as from May 2000 to have accepted liability, he contends that that fact in itself imposes no obligation upon his client to have reached a determination as to quantum. Since no payment can realistically be made (except in special circumstances where there might be a question of interim payment), until quantum has been determined, Mr Riegler submits that his client was really only put in a position where it could make that determination on and from the 16th of May when it received the applicant's material as to quantum.

12. Mr Riegler does not deny that his client could have made enquiries itself but he submitted that the issues of quantum were peculiarly within the knowledge of the applicant and that it was reasonable for his client to call upon the applicant to provide quantum material. Accordingly in Mr Riegler's submission it could not be said that there was any unreasonable default in the insurer's failing to make any payment, at least until the 30th of May this year. Accordingly as his second submission, if any interest was to be allowable, it should be allowable only from that date.

13. In reply Mr Aghion submitted that to interpret Clause 4.5.2 in the manner contended for by Mr Riegler would have the effect of emasculating the policy evident in that provision. We must bear in mind that it is not a provision introduced solely as a result of standard forms dictated by the insurer or as a form negotiated either between the insurer and the builder or between the insurer and the insured owner. Rather it is a provision imposed by an Order in Council of the Governor of Victoria. The policy he says is to encourage the early disposition of claims. Having achieved a degree of compulsion for early consideration and disposition as to liability, the clause as construed Mr Riegler contended ultimately failed to achieve its object of an early disposition of the matter in its entirety if there were no matter compelling the insurer to give early attention to the issue of quantum as distinct from the issue of liability in the narrow sense.

14. Mr Aghion's submission therefore is that liability in this case should be regarded as bearing a wider than its usual denotation and comprehending not only liability in the narrow sense but also quantum. He said in any event 90 days was ample time for the insurer to make its enquiries. If the insurer was having difficulty it was open to it to take the measure provided for in the insurance contract, namely seek an extension of time from the Tribunal. The insurer neither made an early decision nor sought any extension in the Tribunal, at least until after directions summons was issued by Mr Aghion's clients seeking a deemed determination in their favour. Accordingly in Mr Aghion's submission the simple lapses of time independent of any deemed operation of Clause 4.5.2 would have the insurer found to be unreasonable in failing to have made payment within 90 days.

15. Mr Riegler submitted that the true construction of the policy is that the insurer is obliged to take no action with regard either to liability or quantum until the lapse of 90 days and the 90 day period obliges the insurer to act only with regard to liability. Thereafter there is a further unspecified reasonable period of time for the insurer to consider the issue of quantum.

16. In my view neither of the submissions made at least as primary submissions by the parties can be quite correct. First, the mere fact that the policy of insurance deems the insurer to have accepted liability absent a denial of liability within 90 days or the extension of time by the insured or the Tribunal does not to my mind indicate that the insurer is at liberty as it were to sit on its hands for 90 days. In my view the more likely interpretation of the policy is that the insurer is regarded as obliged to do all that is reasonably appropriate in considering a claim and if a claim could reasonably be dealt with in seven days then the insurer should deal with it in seven days both as to quantum and liability.

17. On the other hand if the claim were one of such complexity or difficulty that it required six months, the insurer would be expected perhaps to protect its position by denying liability with an indication that it might reconsider or else by seeking and obtaining an extension of time either from the Tribunal or from the insured.

18. On the other hand I cannot accept Mr Aghion's submission that merely because the policy provides a stick to beat the insurer with where it is tardy is determining liability, that for that reason alone the stick must also be big enough to beat the insurer for tardiness with respect to quantum merely because it would be reasonable for the stick to be as large as that. The stick can be used to beat the insurer if the words render it apt so to do. In my view there is no reason to give the word liability in the clause any different denotation from the one which it ordinarily bears and that is a concept which stands in contradistinction to issues of quantum.

19. No party seems to have adverted to the issue of the time limit at all until November 2000 when the applicants filed a summons for directions. It is perhaps difficult then to see that the insurer has acted unreasonably in not considering a time limit which the applicant themselves have failed to press for quite a few months. Moreover, as the insurer's affidavit sworn by one of its officers, Mr Corey Nugent explained, the issue of quantum of liability would be affected, all other things being equal, by the determination that might or might not ultimately be given upon a counter claim filed by the builder in which the builder's contention was that far from the situation being the one described by the applicant in which the applicant lawfully had dismissed the builders from the site, in truth, according to the builders, the notices were not authorised by his contract and operated as a repudiation so far as the builder is concerned. That is, a repudiation by the owners. In those circumstances, the insurer is I think, in a difficult position and I am not persuaded that in that difficult position it has acted unreasonably. Moreover, whilst it did not distinctly call for the provision of material as to the quantum of its claim, at least until Deputy President Associate Professor Cremean determined that there had in the circumstances been a deemed acceptance and that no extension of time ought be given to stave off that consequence, it was not in my view unreasonable for the insurer not to call for evidence as to quantum. In the circumstances therefore I think that the insurer has not acted unreasonably. It should not reasonably meet the claim until it received evidence of quantum. That it did not do until the 16th of May this year.

20. Further, I accept the submission made by Mr Riegler that the insurer should be regarded as entitled to 14 days to peruse the material as to quantum to consider its position. That being the case no interest under Section 57 should commence to run until the 30th of May this year.

21. I now turn to the issue of costs. Again, this is a matter which turns upon the provisions of the policy of insurance. Against the heading "Sum insured" in the schedule we find the following:

"$100,000 in the aggregate during period of insurance plus reasonable legal costs and expenses associated with the enforcement of a claim against the company."

22. In the matter of Reid v FAI General Insurance Limited [1999] VCAT DB1 Deputy President Associate Professor Cremean determined that the legal costs which may be recovered under that provision are not limited to those incurred in purely litigious circumstances either in Court or in the Tribunal but extend to costs occurred before litigation or indeed without their being any litigation at all. In Reid's case the proceeding on the Tribunal was commenced solely for the purpose of recovering the legal costs and there was no proceeding with respect to principal matters relative to liability or quantum under the policy at all.

23. The parties are agreed that the legal costs recoverable should be fixed upon what is described in summary form as a full indemnity basis. What divides them is the question as to the date from which these costs may be measured.

24. Mr Aghion's submission is that every step which the applicant's legal advisers took towards recovering money for their clients under the policy started presumably from the initial conference in taking of instructions should be the subject of the costs order.

25. Mr Riegler submits that there should be no recovery of costs until a point of resistance has been reached, a point where the insurer indicated expressly that the claim was not going to be met. At any rate Mr Riegler submitted that there should be no costs recoverable with respect to the initial 90 day period within which the insurer was entitled to deliberate on the issue of liability without obtaining any extensions of time and without being deemed as to have committed itself in any way.

26. What I have said already as to what the insurer was or was not obliged to do in the initial 90 day period constitutes to my mind something of an embarrassment to the acceptance of the submission made by Mr Riegler on this point; but he did go further and take me to material from a number of dictionaries, notably, initially the Concise Oxford Dictionary the 9th Edition 1995 which defines "enforce" in the following way:

"1. compel observance of (a law etc). 2. impose (an action, conduct, or one's will). 3. persist in (a demand or argument)."

27. He then took me to Butterworths Australian Legal Dictionary, edited by the Honourable Dr Peter Nygh and Peter Butt 1997 and the definition of "enforcement notice" and "enforcement of judgment". "Enforcement notice" without going to the detail of the definition was a notice served in some States by a local authority to enforce compliance with its by-laws or other rules which it is responsible for enforcing. "Enforcement of judgment" entails taking steps to compel a party to observe the terms of a judgment.

28. There is nothing of that sort, Mr Riegler submits where all that is being done is lodging a claim with an insurer who at this stage has indicated no resistance to the meeting of the claim but rather merely seeks information and particulars as to the claim. Further, Mr Riegler took me to an unreported decision of the Court of Appeal of New South Wales in the matter of Cherryop Pty Ltd v Commonwealth Bank of Australia (14 June 1996). The Court consisting of Priestley, Clarke and Cole JJA had to consider whether in the circumstances the service upon a corporate debtor of a wind-up notice under the terms of the Corporations Act amounted to "enforcement action" as defined in the Farm Debt Mediation Act 1994 (NSW)

29. In referring me to this authority Mr Riegler conceded that it was necessarily somewhat remote from the present context; he submitted nevertheless that it did give the flavour of what was necessary for there to be what one might describe as enforcement. Priestley JA at page 3 of the print of the unreported judgment as provided by Mr Riegler said:

"As I see it, the principal argument concerning question (ii), because the nature and effect of a statutory demand (see ss 459E to 459T of the Corporations Law) make its service impossible, in my opinion, to be called enforcement action of any kind, let alone of a mortgage so that on any view the answer to question(i) must be no."

30. He also referred me to a judgment of the Full High Court of Australia in the matter of Mayfair Trading Company Pty Ltd v Dreyer which was referred to by their Honours in the Cherryop case.

31. Section 9 of the Money Lenders Amendment Act 1937 of the State of Western Australia limited the taking of enforcement action. The question was what action constituted the taking of enforcement action for these purposes. The decision is reported at [1958] HCA 55; (1958) 101 CLR 428. At page 448-9 Sir Owen Dixon CJ said:

"The words `enforce', `enforceable' and `enforcement' when used in relation to security may be properly applied to the exercise of any of the remedies which the security may give. When a mortgagee resorts to his power of sale he may be said without any incorrectness to enforce his security. A landlord, whee distress for rent obtains `enforces' payment of rent when he distrains. There seems to be no reason for limiting the expression `enforceable' in s.9 to judicial or curial remedies."

32. What then are we to make of enforcement in the present context? It is necessary I believe first to consider what that context is. It is a policy of insurance, the terms of which are imposed by delegated legislation, namely the relevant Order of Council. Insurance which is introduced for the express purpose of providing consumer protection. The authorities to which I have been referred by Mr Riegler are in a very different context indeed as he himself conceded. They seem to be limiting enforcement action for the very purpose of providing consumer protection. Certainly that is the purport of the Farm Debt Mediation Act and also of the money lenders legislation considered by the High Court in the Mayfair Trading case. Consumer protection legislation must balance the interests of consumers against a creditor's right of enforcement. Certainly consumers have to be protected but there is another element in the consumer protection measure whereby the rights of creditors must also be respected. In the context of the insurance policy however, the insurer's rights must be respected; but giving a wider rather than a narrower meaning to "enforcement" in the context of the policy would not prevent the insurer from exercising any of its rights; nor would it prejudice the rights of the insured.

33. In any event I am not persuaded that the sort of meaning which Mr Aghion contends for is inconsistent with the meaning given to "enforce" in the Shorter Oxford Dictionary. The primary meaning there it will be observed is "compel observance of the law etc". The holder of an insurance policy under this scheme has no out of court rights such as landlords in states other than Victoria or landlords in Victoria before 1948 had to distrain for rent. They have no rights to appoint receivers as mortgagees do and/or to enter into possession of rents and profits. The sole remedy that such a person has is either to make a claim and/or bring proceedings in this Tribunal.

34. Deputy President Associate Professor Cremean in Reid's case found that the concept of enforcement was not limited to the litigious context. I see no reason therefore why it is not implicit in his conclusion that the very process of making and prosecuting a claim under such a policy is "enforcement" in the present context. Indeed if one does not give such a wide meaning to enforcement it is difficult to see at what point one should draw the line where costs are recoverable and when they are not recoverable.

35. I have rejected Mr Riegler's submission to the effect that the insurer is entitled as it were, to sit back for 90 days. Accordingly, in my view the costs which the owners are entitled to recover are costs which have been incurred in any way in the enforcement of the policy and that includes the making of the claim and indeed any preliminary conference in taking instructions which solicitors involved required to enable the claim to be made and framed.

36. A final question is as to how these costs should be fixed. These costs for which recovery is being sought are not costs to be ordered, as it were, as appurtenant relief under Section 109 of the Victorian Civil and Administrative Tribunal Act 1998. Rather they are part of the principal relief sought and they are sought under the insurance policy. Section 111 of the Victorian Civil and Administrative Tribunal Act 1998 authorises the Tribunal to direct a taxation of costs by the Principal Registrar. Sub-section (1) provides:

"If the Tribunal makes an order for costs the Tribunal may fix the amount of costs itself or order that the costs be assessed or settled by the Principal Registrar."

37. The words "if the Tribunal makes an order for costs" are in my view wide enough to contemplate this situation as well as situations where an order is made under Section 109 of the Act and so accordingly I will order that the costs in question be taxed by the Principal Registrar if not agreed by the parties.