1. In Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd, French CJ, Nettle and Gordon JJ stated:

The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.[18]

1. In Electricity Generation Corporation v Woodside Energy Ltd four members of the High Court said as to the material bearing on construction of a commercial contract:

The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract.[19]

1. Specifically as to the role of commercial purpose in construction, they continued:

Appreciation of the commercial purpose or objects is facilitated by an understanding of the genesis of the transaction, the background, the context and the market in which the parties are operating. ... [U]nless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption that the parties intended to produce a commercial result. A commercial contract is to be construed so as to avoid it making a commercial nonsense or working commercial inconvenience.[20]

1. The parties in the present case identified different commercial purposes as guides to construction of the policy. The applicant described the commercial purpose of the contract as being 'to provide the insurance required' by the order. The respondent relied on the purpose of consumer protection, specifically the extension of insurance cover to successors in title.
2. It is clear from the above extracts that the commercial purpose of a contract (or a contractual provision) is to be identified by reference to permissible materials, and that once so identified, that purpose may inform the question of construction. A commercial purpose is not identified by positing a particular construction and attaching the label of purpose to the perceived commercial effect of that construction. The construction of the contract is informed by its purpose, and a posited construction cannot be the basis for inferring the purpose of the contract without rendering the analysis circular.
3. Even if there is material available of the kind which the above extracts describe, from which to derive a commercial purpose, that purpose must have sufficient specificity to assist in choosing between competing constructions of the relevant provision. As Gleeson CJ said in Carr v Western Australia in the context of statutory construction, where the problem is one of doubt about the extent to which legislation pursues a purpose, stating the purpose is unlikely to solve the problem.[21] The same is true of purposes pursued by contracts.
4. The commercial purposes urged by the parties in this case suffered from this problem. The purposes identified were expressed at too high a level of generality to be useful. To point to the consumer protection purpose underlying the order does not help to identify how far the policy goes in pursuit of that purpose, including how far it extends cover to successors in title. Similarly, while in a broad sense the purpose of the policy is to comply with the order, there is no basis for concluding that that purpose was confined to effecting the minimum insurance required by the order. As we have seen, the order contemplates that the policy may provide greater cover than the order specifies. In short, both constructions of the policy give effect to each of the identified purposes, but that does not identify the extent to which the policy pursues those purposes. Reliance on either of the purposes advanced by the policy is not the key to unlocking the question of construction. Ultimately the purposes relied on by the parties are just characterisations of the effect of their favoured constructions.
5. For similar reasons, the order is not a useful aid to construction, albeit that it forms an important part of the context in which the policy was adopted. Clause 12 of the order is expressed in terms that unambiguously connect the limitation periods to the occurrence of loss and damage. On one view, urged by the applicant, this tells against the judge's construction. But it can equally be said that, by using language different from that in cl 12, the drafter of the policy must have intended to depart from the order, with the effect of affording more generous cover. Since the order delineates only a minimum level of cover, it is not possible to draw any conclusion from the discrepancy between cl 12 of the order and cl 34 of the policy.
6. In our opinion, the meaning of cl 34 emerges clearly from its text and its context within the policy itself. First, cl 34 sits with cl 35 under the heading 'How long are you covered for?', and a construction should be preferred that supplies 'a congruent operation to the various components of the whole' instrument and these two clauses in particular.[22] That is confirmed by the structure of cls 34 and 35, which answers the question posed by the heading by first dividing the kinds of case where there is insurance cover into two kinds.
7. The judge appears to have recognised this when he created his amalgamated wording. But in the process, he effaced an important indicator of the meaning of cl 34.
8. Secondly, accepting that there is ambiguity in cl 34, the same cannot be said of cl 35. In cl 35, the words 'occurring during the period' refer to 'loss, damage or expense', and not 'a cause other than a non-structural defect'. So much is apparent from the grammatical structure of cl 35 and in particular the commas separating the phrase 'from a cause other than a non-structural defect' from the word 'occurring'. The commas do not have reduced significance because of their status as punctuation. They are an important aid to clarity, which was lost in the judge's amalgamated wording.
9. The need to provide for a congruent operation of cls 34 and 35 makes the meaning of cl 35 a highly significant consideration in construing cl 34.
10. Thirdly, it is significant that the primary indemnity to which cls 34 and 35 relate, contained in cl 32, turns on the insured having 'sustained ... loss or damage'. A congruent reading of the policy would mean that, when the policy specifies the duration of the indemnity provided, it does so by reference to the time when the event giving rise to the indemnity occurred. Reading the provisions together, that event is the sustaining of loss or damage, which is when loss and damage 'occurs' within the meaning of cls 34 and 35.
11. In our view, these considerations point decisively to the construction advanced by the applicant.
12. We have left out of account the applicant's submission that the judge's construction gives cls 34 and 35 no work to do, on the basis that every defect in building work 'occurs' during the nominated limitation periods, specifically before the completion of the work or the termination of the contract, such that no claims would be excluded by the clauses. Although this would be true of most defects on the judge's construction, it is conceivable that a defect could occur in the performance of building work after the completion date (and maybe 2 years after) - for example, in the course of work intended to remedy defects in work performed prior to completion. That is one example of a defect for which the policy may deny cover on the judge's construction. As to latent defects, to which the respondent also pointed, it is only on the applicant's construction that they occur when the work is done, rather than when damage materialises at some later time. On the judge's construction, cls 34 and 35 may have work to do in respect of such defects. In that respect, the applicant's submission that the provisions have no work to do therefore depends in part on first adopting the applicant's construction.
13. It is true that the judge's construction gives cl 34, in particular, very little work to do. But without more, it is difficult to characterise his construction as 'making a commercial nonsense or working commercial inconvenience' on that account.
14. Further, the cover extends to loss or damage resulting from non-completion of the work or other causes which are not defects. Clause 35 is addressed to 'other causes', not 'structural defects'. Even if the premise of this part of the applicant's argument is accepted, therefore, and all defects 'occur' before completion of the work, that does not cover all cases, and it does not necessarily follow that cls 34 and 35 have no work to do on the judge's construction.
15. These arguments are not critical to the applicant's case. The proposed ground of appeal is made good on the basis of the textual indications to which we have referred. It becomes necessary to address the respondent's notice of contention.

If the Court of Appeal finds that the learned trial judge erred in his construction of clauses 34 and 35 of the [policy], and that the phrase 'occurring during the period' in the policy pertains to the occurrence of the loss or damage, not the occurrence of the defect, the relevant loss or damage occurred within the relevant coverage period.

1. Under the heading 'Particulars', the notice states:

a. Loss or damage from a non-latent defect is sustained when it is inflicted or first suffered, ie on construction.

b. The initial owner and party to the domestic building contract therefore sustained loss or damage in 2014 in respect of all non-latent defects.

c. All defects claimed against the VMIA were found by the learned trial judge to be non-latent defects (in that they were discoverable by reasonable diligence). The loss and damage therefore occurred at the time construction was completed.

d. The effect of section 9 of the Domestic Building Contracts Act 1995 is that the Respondent, as the successor in title, has standing to pursue breaches of the statutory warranties under s 8 of the ... Act as if he were party to the domestic building contract.

e. The Respondent is therefore entitled to the benefit of the warranties for the loss and damage which occurred prior to him taking possession of the building and within the relevant period covered by the Policy.

1. Section 8 of the Domestic Building Contracts Act relevantly provided for the following warranties:

Implied warranties concerning all domestic building work

The following warranties about the work to be carried out under a domestic building contract are part of every domestic building contract -

(a) the builder warrants that the work will be carried out in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract;

(b) the builder warrants that all materials to be supplied by the builder for use in the work will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract, those materials will be new;

(c) the builder warrants that the work will be carried out in accordance with, and will comply with, all laws and legal requirements including, without limiting the generality of this warranty, the Building Act 1993 and the regulations made under that Act;[23]

(d) the builder warrants that the work will be carried out with reasonable care and skill and will be completed by the date (or within the period) specified by the contract;

(e) the builder warrants that if the work consists of the erection or construction of a home, or is work intended to renovate, alter, extend, improve or repair a home to a stage suitable for occupation, the home will be suitable for occupation at the time the work is completed;

...

1. Section 9 provided as follows:

Warranties to run with the building

In addition to the building owner who was a party to a domestic building contract, any person who is the owner for the time being of the building or land in respect of which the domestic building work was carried out under the contract may take proceedings for a breach of any of the warranties listed in section 8 as if that person was a party to the contract.[24]

1. The essence of the respondent's argument was that s 9 had the effect that a successor in title could assert the contractual rights implied by s 8 of the Domestic Building Contracts Act as if they were a party to the original contract. It was said to follow that any loss or damage sustained by a prior owner could be recovered by a successor in title pursuant to cls 34 and 35 of the policy.
2. The respondent submitted that the determination of when loss and damage occurred should be governed by Insurance Australia Ltd v Milonas ('Milonas').[25] In that case, McDonald J held that loss and damage from a non-latent defect is sustained when it is first inflicted or suffered[26] or, in the case of a latent defect, when the defect is discoverable by the exercise of reasonable diligence.[27] The respondent submitted that Milonas supplies the timing rule for loss, and that s 9 of the Domestic Building Contracts Act 'supplies the transmission of that right'. In oral submissions, senior counsel noted that Milonas was also a case in which the insured was a successor in title, but did not go as far as submitting that the case was authority for the point now sought to be drawn from s 9.[28]
3. The respondent submitted that loss was occasioned in respect of the defective works by the time the building work was complete and the property was handed over to the original owner. While that located the occurrence of loss at a time before a successor took ownership of the property, s 9 gave the successor the same rights as the original owner in respect of the loss. This argument was said to be bolstered by cl 11 of the order, which required that the policy extend to 'the owner for the time being'.
4. In response, the applicant argued (among other things) that s 9 was concerned with privity. It enabled a successor in title to sue for a breach of warranty implied by s 8 as if a party to the original agreement. The applicant submitted that s 9 said nothing as to how loss was to be calculated, allocated or inherited. Moreover, the respondent's argument erroneously blurred the distinction between the right to bring proceedings, facilitated by s 9, and the indemnity provided by the policy in accordance with the order and scheme under the Building Act.
5. The applicant submitted that loss and damage is personal to the relevant owner. While s 9 enabled a successor in title to sue for breach of the warranties implied by s 8, the successor must still prove their own loss. It was submitted that the assessment of loss and damage is a question of fact and a subsequent purchaser's loss will not necessarily be the same as that of the original contracting owner.[29] A purchaser's loss may depend on whether defects were taken into account in agreeing the purchase price, and to what extent.[30]
6. The short answer to the notice of contention is that, while s 8 creates statutory warranties given by builders performing work under a domestic building contract, and s 9 both confirms that the other party to the contract has the right to sue the builder for breach of those warranties and extends that right to subsequent owners for the time being, the provisions say nothing at all about remedies for breach of the statutory warranties, leaving that matter for the general law. That is so in the case of the original owner, and all the more so when it comes to a subsequent owner. In that scenario, there is no foundation for the specific contention that s 9 entitles a subsequent owner to recover for loss and damage suffered by a previous owner.
7. It would be perverse if it were otherwise. A subsequent owner may not suffer any loss or damage as a result of a breach of warranty occurring before that owner acquired the property. An obvious example is where the breach was known to the parties and accepted by the purchaser, whether or not that was reflected in a reduced purchase price.[31] If the argument in the notice of contention were correct, such a subsequent owner could recover for the breach of warranty despite the original owner having borne its financial impact or the subsequent owner having knowingly acquired the property in its defective state.
8. The respondent accepted that if a subsequent owner knowingly acquired the property in a defective state, this would break the chain of causation, but submitted that this did not deny his argument that s 9 otherwise entitles a subsequent owner to recover for loss and damage suffered by a previous owner. It seems to us, however, that acceptance of the need to establish such a 'chain of causation' is antithetical to the construction of s 9 which the respondent advances under his notice of contention, by which the subsequent owner succeeds to the right to recover for loss and damage sustained by the previous owner without needing to prove their own loss and damage.
9. Conversely, a subsequent owner who suffers loss and damage by acquiring a property at full price without knowledge of defective work has the benefit of the statutory warranties, and may recover damages for the cost of remediation works. Again, that remedy flows from the general law and does not depend on anything in s 9.
10. The principal authorities to which the Court was taken do not directly address the issue, but they are consistent with the above conclusion.
11. In Milonas, a swimming pool was constructed in the wrong dimensions and the question was whether the owner who claimed for the resulting damage did so within a limitation period for which the contract of insurance provided. It was held that loss and damage was suffered when the owner took possession of the pool, the measure of her loss being the cost of rectification works.[32] This was so, irrespective of whether the incorrect size of the pool was regarded as a latent or non-latent defect. The case involved no subsequent owner and says nothing about s 9 of the Act.
12. The decision of the New South Wales Court of Appeal in Allianz, concerning a statutory provision similar to s 9 but in different terms, supports our conclusion. Section 18D of the Home Building Act 1989 (NSW) provided, in respect of statutory warranties in that legislation corresponding to those in s 8:

Extension of statutory warranty

A person who is a successor in title to a person entitled to the benefit of a statutory warranty under this Act is entitled to the same rights as the person's predecessor in title in respect of the statutory warranty, except for work and materials in respect of which the person's predecessor has enforced the warranty.[33]

1. Ipp JA (with whom Hodgson JA agreed) said of this provision that it

enabled the successor in title to claim whatever remedies might be available to it based on a breach of the statutory warranties by the builder. Those remedies included recovery of any loss incurred by the successor arising from the breach of the statutory warranties (and, arguably, the right to enforce the statutory warranties). It is not suggested that s 18D conferred the right on a successor to claim the losses its predecessor incurred arising out of a breach of the statutory warranties. That does not appear to be the intent of the legislation.[34]

1. The result was that the successor in title had to prove its own loss and establish an appropriate causal connection between that loss and the breaches of statutory warranty.[35]
2. Our conclusion, in relation to the similar Victorian provision, is the same. We note that this approach to the New South Wales provision was also taken, in the context of s 9 of the Act, in Mirvac.[36] Forbes J said, of s 9:

[A] subsequent owner is entitled to damages if a breach of a warranty is established ...

That is not to say that a subsequent owner's loss and damage for breach of warranty will necessarily be identical to that of the contracting owner, even if assessed on the same principles. Assessment of loss and damage of each owner is a question of fact ...[37]

1. We agree. We reject the respondent's notice of contention.

1. We will grant leave to appeal and allow the appeal. The orders of the trial judge giving judgment for the plaintiff, and consequential orders including as to costs, should be set aside and in their place there should be orders dismissing the plaintiff's claim, except in relation to the 11th defect, which it remains necessary to classify as structural or non-structural. The latter question was the subject of competing expert evidence at trial, and we are not in a position to decide it. That matter should be remitted to the County Court for further hearing and determination in accordance with these reasons. Given the small amount involved, it is to be hoped that this issue can be resolved by agreement.
2. We shall hear the parties as to whether there is any reason why the costs of the appeal, and of the trial, should not follow the event.

[1] As described below, the policy was originally issued on behalf of the Victorian Managed Insurance Authority, for which the applicant was later substituted. It is convenient to refer to the insurer generally as 'the applicant'.

[2] Clause 24 (definition of 'you/your').

[4] The 'commencement date' was either 30 October 2013 or the date of issue of a building permit, presumably around that time.

[5] In respect of the 11th defect, the judge found that it was covered because it occurred either during the period of cover specified in cl 34 (if it was a non-structural defect) or the longer period of 6 years in cl 35 (loss or damage from other causes).

[6] Victoria, Domestic Building Insurance Ministerial Order, No S 98, 23 May 2003.

[7] The order was revoked by cl 4 of an order also called the Domestic Building Insurance Ministerial Order: Victoria, Domestic Building Insurance Ministerial Order, No S 98, 23 May 2003.

[12] Fall-Armytage v Victorian Managed Insurance Authority [2025] VCC 709 [115] (Judge Macnamara) ('Reasons').

[18] (2015) 256 CLR 104, 116 [46] (citations omitted).

[19] [2014] HCA 7; (2014) 251 CLR 640, 656-7 [35] (French CJ, Hayne, Crennan and Kiefel JJ) (citations omitted).

[20] Ibid 657 [35] (French CJ, Hayne, Crennan and Kiefel JJ) (citations omitted).

[21] [2007] HCA 47; (2007) 232 CLR 138, 142-3 [5]-[6].

[22] Wilkie v Gordian Runoff Ltd [2005] HCA 17; (2005) 221 CLR 522, 529 [16] (Gleeson CJ, McHugh, Gummow and Kirby JJ, Callinan J agreeing at 538 [53]).

[25] [2021] VSC 602.

[28] The respondent submitted that the 'successor-in-title logic' drawn from s 9 was also observable in Building Insurers' Guarantee Corporation v The Owners - Strata Plan No 57504 [2010] NSWCA 23; (2010) 16 ANZ Ins Cas 61-838, 78,018 [34]-[35], 78,019 [46] (Handley AJA, Tobias JA agreeing at [1], Campbell JA agreeing at [2]); [2010] NSWCA 23. The applicant argued that this decision was not concerned with the time when loss was incurred by a subsequent purchaser, but with the accrual of contractual causes of action under limitation provisions. The case has indirect relevance to the present issue, at best.

[29] Mirvac Victoria Pty Ltd v Liszka (2019) 61 VR 527, 535-6 [60]-[61] (Forbes J) ('Mirvac').

[30] Allianz Australia Insurance Ltd v Waterbrook at Yowie Bay Pty Ltd (2009) 15 ANZ Ins Cas 61-827, 77,887-8 [110]-[116] (Ipp JA, Hodgson JA agreeing at 77,875 [30]); [2009] NSWCA 224 ('Allianz').

[31] Ibid 77,880 [69], 77,885 [100], 77,887 [110]; Mirvac (2019) 61 VR 527, 537 [67]-[69] (Forbes J).

[32] [2021] VSC 602 [64]-[67] (Forbes J).

[33] The provision has since been amended twice, see Home Building Amendment (Statutory Warranties) Act 2006 (NSW), sch 1 items 1-2; Home Building Amendment (Warranties and Insurance) Act 2010 (NSW), sch 1 items 2-3.

[34] Allianz (2009) 15 ANZ Ins Cas 61-827, 77,880 [65] (Hodgson JA agreeing at 77,875 [30]); see also Giles JA at 77,874 [19] (emphasis added).

[36] (2019) 61 VR 527, 537 [67].