Wesfarmers General Insurance Ltd v Jameson

Tribunal Decision

1. On 22 January 2016 the Tribunal, upon application by the respondent, rejected the appellant's interpretation of cll 71(1)(b) and (c) of the Regulations. The Tribunal Member observed that the sewer pipes under the respondent's house were laid to a non-compliant gradient and were undersized resulting in the backflow of effluent and spill onto the floor of the residence. The Tribunal member noted the applicant's claim that the kitchen sink was not clearing and backflowed. The Tribunal Member found: "I am satisfied that this back flowing sewer in the applicant's house falls within the definition of a structural defect in clause 71(1)(b) and (c) of the Regulation. That is, the over flawing [sic] sewer is likely to prevent a part of the dwelling such as toilet/bathroom and the kitchen from continual practical use. The over flowing sewer is likely to result in physical damage to the floors cabinets and walls. The definition of a structural element in the Regulation is not exhaustive. It includes things such as foundations, floors, walls, roofs, columns and beams. My view is that the sewer which over flows is not dissimilar, by analogy, to a structural element comprised in a leaking or defective roof."
2. On 24 February 2016, another Tribunal Member made a work order requiring the appellant to carry out the defective workmanship, and treated the decision referred to above as an interlocutory decision confined to the question of whether the defect was a structural defect.
3. It is against both decisions set out above that the appellant now appeals.

The Appeal

1. The appeal essentially raises two issues. The first issue alleges that the respondent's application was out of time. It is alleged that the appeal against a decision of an insurer being a building claim made under Part 3A of the Home Building Act 1989 or a consumer claim under the Consumer Claims Act 1998 is required to be made no later than 45 days after written notice of the decision is given to the beneficiary, as provided by reg 65 of the Regulations.
2. The appellant acknowledges that reg 65(3) of the Regulations provides that such time may be extended where an application is made to the Tribunal or Court for leave to lodge an appeal out of time and in the opinion of the Court or Tribunal, there are special circumstances to grant leave and the Tribunal or Court grants such leave.
3. In view of the fact that the decision was made under the policy to reject the claim of the respondents at an early stage, and because the respondents lodged their application to the Tribunal four to five months outside the permissible timeframe to appeal, the appellant submits that there was no jurisdiction in the respondent's application and the Tribunal had no jurisdiction to proceed with the hearing on 22 January 2016 before Member Vrabac nor the further proceedings before Member Cohen on 24 February 2016 when the orders were made. Accordingly, it is submitted that the Tribunal's decisions were made without jurisdiction.

Consideration

1. No issue was taken by the appellant at either the first or the second Tribunal hearing to the effect that the Tribunal could not exercise jurisdiction. In Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418, the High Court of Australia said at [9]: "Where a point is not taken in the court below and evidence could have been given there which by any possibility could have prevented the point from succeeding it cannot be taken afterwards".
2. The above observation however did not relate to the question whether such a principle would apply to a situation where the issue of jurisdiction is raised for the first time. Such a question is a far more fundamental issue. Another consideration arises, namely whether s 41 of the Civil and Administrative Tribunal Act 2013 (NCAT Act) operates to enable the Tribunal to consider both the original application and this appeal. Section 41 provides: "(1) The Tribunal may of its own motion or on application by any person, extend the period of time for the doing of anything under any legislation in respect of which the Tribunal has jurisdiction despite anything to the contrary under that legislation. (2) Such an application may be made even though the relevant period of time has expired".
3. The Appeal Panel finds it unnecessary, at this stage, to consider the operation of either the principle in Suttor (supra) or the operation of s 41 in view of the facts, which clearly demonstrate that the application was brought to the Tribunal within 45 days after written notice of the final decision of the appellant was given to the respondent.
4. By letter dated 13 November 2014, the appellant disputed liability but advised the respondent as follows: "If you are not happy with this decision you can make a complaint and ask for our decision to be reviewed".
5. The letter contained details of how such complaint and dispute procedure was to be dealt with by the appellant.
6. The procedure was invoked and on 12 December 2014, the appellant stated that its final Internal Dispute Resolution decision was to maintain the decision that, in summary, the claim was rejected. The letter continued: "You should be aware that this is WFI Insurance Limited's final IDR decision. If you wish to pursue this complaint further by taking it to the Financial Ombudsman Service Ltd (FOS) you will need to do so within two years of the date of this letter"
7. The respondents did not accept the appellant's internal decision. The respondents made further submissions to the appellant. However, by email dated 7 August 2015 the appellant again reiterated that, having considered the material raised by the respondents, it remained the appellant's final "IDR position" that the claims were not structural in nature and that therefore the respondent was not liable to provide indemnity.
8. The respondents again disputed such contention. By email dated 25 November 2014 the respondents requested a hearing to explain their position. Significantly, on Wednesday 3 December 2014 the National Builders Warranty Manager of the appellant, Ms Lisa Fotakis, responded: "I can confirm receipt of your email and also confirm this has been passed to John Hawkins in the Technical Team for consideration when he is reviewing your claim".
9. The respondents sent several emails thereafter to the appellant enquiring as to the progress of their claim. However there was no communication from the appellant until 5 August 2015 when Mr Hawkins, Senior Technical Specialist of the respondent responded saying: "I apologise that your earlier emails were not successfully received. Lisa Fotakis is no longer employed by Lumley and since the purchase of Lumley by Insurance Australia Group, my old email address @ wesfarmersinsurance.com.au is no longer functioning. Please note my new telephone number and email contact details below in my email address signature for any future contact on this matter. Please accept this email as confirmation of the receipt of your intent to lodge an appeal against Lumley's final internal Dispute Resolution (IDR) decision with the NSW Civil and Administrative Tribunal (NCAT). In this regard Lumley now awaits correspondence from NCAT. Although the substance of your email correspondence below does not alter Lumley's final IDR position, I would take this opportunity to once again clarify Lumley's position on this matter."
10. The application made by the respondent to the Tribunal was filed on 28 August 2015.
11. The fact that the correspondence demonstrates that up to 5 August 2015 the appellant was prepared to accede to further submissions being received, and that the appellant's Builders' Warranty Manager was prepared to accept the submissions of the respondents and to refer the submissions made by the respondents for consideration, has resulted in the respondents withholding their application to the Tribunal pending a final determination by the appellant.
12. In the circumstances, the Tribunal readily infers that, but for the continued correspondence being received from the appellant, the respondents would have filed their application to the Tribunal at an earlier point of time. Only when all avenues with the appellant were exhausted did the respondents file their application. Further, the first email from the appellant clearly states that it would "await correspondence from NCAT". The appellant has clearly indicated that, irrespective of its decision, it did not regard any time bar as having application, and it remained of that position until this appeal.
13. In these circumstances, the Appeal Panel finds that the appellant has so conducted itself to give rise to a reasonable understanding on the part of the respondents that there was no need for the Tribunal application to have been filed at an earlier point of time and that, by convention, the appellant is estopped from denying that it was continuing to accept and respond to correspondence from the respondents and to consider the respondents' submissions as if no final decision of the appellant had been made. The estoppel prevents the appellant from acting contrary to the stated facts which the respondents were induced to believe: see Amalgamated Investment and Property Co Ltd v Texas Commerce International Bank Ltd (in liq) [1982] 1 QB 84 per Brandon LJ at 590-591. At 591 Lord Justice Brandon said that such estoppel is not the normal kind of estoppel which arises by representation but upon an agreed statement of facts, the truth of which has been assumed. Quoting from Spencer Bower and Turner on Estoppel by Representation (3rd Ed 1977 at pp157-160), his Lordship referred to the sentence which concludes: "When the parties have acted in their transaction upon the agreed assumption that a given state of facts is to be accepted between them as true, then as regards that transaction each will be estopped as against the other from questioning the truth of the statement of facts so assumed".
14. Quite apart from the above conclusion, the Appeal Panel would also, in the circumstances, of its own motion apply s 41 of the NCAT Act to extend the time limit prescribed by Reg 65 of the Regulations so that the application made by the respondents to the Tribunal is deemed to have been made within 45 days.
15. The Tribunal has such power pursuant to s 41(1) and may do so even though the time has already expired: see s 41(2). Such provision is invoked where it would be clearly unconscionable for the appellant to rely upon the decision of 13 November 2014, but then invited the respondents to invoke its internal dispute resolution procedure. On the evidence, this process continued to 5 August 2015.
16. Accordingly, the Appeal Panel rejects the first ground of appeal.

Interpretation of policy

1. The second issue raised on appeal concerns the definition of "structural defect" contained in the policy relied upon by the appellant, which is set out below. Significantly, the definition contains words in bold precisely as set out in the definition: "'Structural Defect' in relation to a building means any Defect in a Structural Element of the building that is attributable to defective design, Defective or faulty workmanship or Defective materials (or any combination of these) and that: results in, or is likely to result in, the building or any part of the building being required by or under any law to be closed or prohibited from being used; or prevents, or is likely to prevent, the continued practical use of the building or any part of the building; or results in, or is likely to result in: the destruction of the building or any part of the building; or physical damage to the building or any part of the building; or (d) results in, or is likely to result in, a threat of imminent collapse that may reasonably be considered to cause destruction of the building or physical damage to the building or any part of the building"
2. The appellant maintains that because the drainage pipes do not constitute a "Structural Element", there is no structural defect. The term "structural element" is defined in the definitions as follows: "'Structural Element' in relation to a building means: (a) any internal or external load-bearing component of the building that is essential to the stability of the building or any part of it, including things such as foundations, floors, walls, roofs, columns and beams; and (b) any component (including weatherproofing) that forms part of the external walls or roof of the building".

Consideration

1. The definition in the policy makes it plain that there are three separate and distinct elements to the definition of "Structural Defects". Firstly, there can be a defect in a structural element of the building that is attributable to defective design.
2. However, there are two other types of defect which are within the definition of "Structural Defect" in the policy, namely. "Defective or faulty workmanship or Defective materials (or any combination of these and that. …"
3. Accordingly it must follow as a matter of construction, that there are three kinds of defects which are within the purview of the definition of "structural defect". Provided any one of them, or "any combination of these" have the consequence referred to in (a)-(d) inclusive, then the requirement of the definition is satisfied.
4. Whilst the appellant submitted that in fact the defect had to be comprised in a "structural element", such an interpretation does not accord with the clear manner in which the definition appears in the policy. Nor would such an interpretation give any scope for the operation of the words "or any combination of these".
5. The unchallenged evidence before the Tribunal showed that the raw sewerage was backflowing into the residence causing the floors to flood with effluent. Further, there is evidence of a foul odour pervading the residence.
6. The Appeal Panel concludes that on such evidence, as was found by the Tribunal, there was likely to be physical damage to the building or a part of it (see definition (c)(ii)). Further, the Appeal Panel draws the inference that the "continued practical use of the building or any part of the building" could be prevented or was likely to be prevented: see definition (b). The Appeal Panel sees no error in the conclusion of the Tribunal that the loss or damage, namely the need to rectify the drainage and sewerage system, comprises a "structural defect", as defined in the policy.

Adequacy of reasons

1. The appellant argued that the reasons of the Tribunal Member were inadequate. The Appeal Panel notes that neither the Notice of Appeal, nor the detailed Points of Appeal which supplemented the Notice of Appeal, suggest that inadequate reasons were provided by the Tribunal. Nevertheless, as such a contention was raised in the course of the hearing, we set out our findings hereunder.
2. Section 62 of the NCAT Act requires that a written statement of reasons for any decision dealing with the findings on material questions of fact and referring to the evidence or other material on which those findings were based, are to be provided. In Collins v Urban [2014] NSWCATAP 17 at [43]-[64] the Appeal Panel confirmed the need for reasons to be provided comprising the findings of fact and legal reasoning of the decision maker at first instance.
3. The content and detail of the reasons for decisions will vary according to the nature of the jurisdiction which the body in question is exercising, as well as the consideration of the particular matter the subject of the decision. In respect of a Tribunal's decision, the "guiding principle" for the NCAT Act is contained in s 36(1) thereof, namely that the Tribunal is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. The Tribunal is not bound by the rules of evidence. However, it is a requirement that the reasons explain how the decision maker arrived at his conclusion. This involves reference to the relevant evidence; the relevant facts being set out and the reasons for making the relevant findings of fact: see Beale v GIO of NSW (1997) 48 NSWLR 430 at 443.
4. As the Appeal Panel recently stated in O'Brien v Twyman [2016] NSWCATAP 125 at [51]: . . . as noted by the Appeal Panel in Commissioner of Police, NSW Police Force v Barrett [2015] NSWCATAP 68, at [97], it is well accepted that reasons for decision need not be highly detailed and they should not be examined with an overly critical eye. The Appeal Panel went on to cite the following remarks of Gleeson JA in Keith v Gal [2013] NSWCA 339, at [117]: 117 Thus, it is essential to expose the reasoning on a point critical to the contest between the parties. This proposition reflects one of the three fundamental elements to a statement of reasons identified by Meagher JA in Beale v GIO [Beale v Government Insurance Office of NSW (1997) 48 NSWLR 430] at 443-444: "Thirdly, a judge should provide reasons for making the relevant findings of fact (and conclusions) and reasons in applying the law to the facts found. Those reasons or the process of reasoning should be understandable and preferably logical as well.'"
5. In reviewing the reasons of the first Tribunal determination, the Appeal Panel must consider whether the reasons are such as to constitute a denial of procedural fairness. Upon perusal of the reasons, it is apparent the Tribunal Member has set out the submissions of both parties. The Tribunal Member did so before reaching his decision, the relevant extract of which is set out above.
6. The reasons are brief. The Tribunal Member came to the conclusion that the defect in the sewerage lines constituted a structural defect without explaining how he made such determination. While such reasoning must be inferred from the Tribunal's stated analogy, it would have been preferable had the member's reasoning been explained. Nevertheless, the Appeal Panel considers that there is sufficient reasoning to conclude that the Tribunal member has given reasons for his decision in accordance the guiding principle, referred to in [39] above.
7. As to the second Tribunal orders, those orders relate to the findings made by the first Tribunal at its interlocutory stage. There is nothing deficient in those reasons.

Procedural claim

1. The respondent has submitted that the notice of appeal was filed more than 28 days from the date of the Tribunal's decision. Such contention could only relate to the first Tribunal decision as the notice of appeal was filed within 28 days of the second Tribunal decision. Since the first decision was interlocutory, we find that there is no merit in such submission and, in view of the fact that the appeal be dismissed, it is of no consequence.
2. The Appeal Panel notes that a submission was received from the appellant, with the leave of the Appeal Panel, on 3 June 2016 drawing our attention to two authorities, namely Gray v QBE Insurance (Australia) Ltd [2015] NSWCATCD 124 and Lin v McIntosh [2016] NSWCATCD 6. Such decisions address the issue of a "major defect" which is now substituted in the Home Building Act in lieu of "structural defect". The amendment took effect from 15 January 2015. However, for the purposes of this appeal, the Appeal Panel considers that the relevant policy governs the relationship between the parties and that the definition of "structural defect" as appears in the policy is the definition to be construed.
3. We note that, following the appellant's submission, we received a short note from the respondent commenting on those authorities to which it referred. Given our reasons above, there is no need to consider the respondent's observations.

Orders

1. The Appeal Panel, for the reasons referred to above, orders that the appeal be dismissed.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar 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: 23 June 2016