Fair Trading Tribunal New South Wales CITATION: The Owners - Strata Plan 57072 v HIH Casualty & General Insurance Limited [2000] NSWFTT 7 DIVISION: Home Building Division PARTIES: APPLICANT: The Owners - Strata Plan 57072 RESPONDENT: HIH Casualty & General Insurance Limited FILE NUMBER: BU 1999/3814 HEARING DATES: 11/11/1999 SUBMISSIONS CLOSED: DATE OF DECISION: 24/02/2000 BEFORE: Mr J Gallagher Senior Member Fair Trading Tribunal Act 1998 - ss21 & 77 LEGISLATION CITED : Fair Trading Tribunal Regulations 1999 - cl27 Home Building Act 1989 - ss84 & 86 CASES CITED: In re Vandervells Trusts (1971) AC 912 Tania Phan v Fair Trading Administration Corporation CT No 1170 of 1998 CATCHWORDS: Notice of motion to join parties - some of the parties joined are in liquidation - be joined as respondents or as cross-respondents to a cross-application - matter concerns denial of liability under an insurance policy - definition of dispute - costs MATTER FOR DECISION: Appeal under s86 of Home Building Act 1989 REPRESENTATION: APPLICANT: Mr F Corsaro RESPONDENT: Mr J Whittle SC with Mr J Gooley ORDERS: Notice of motion is refused Reasons for Decision: Additional Appearances For Graham Jahn Architects Pty Ltd - Ms J Oakley, Barrister For Witsands Pty Ltd - Mr R O'Hagan of Haralambis, Solicitors For Ocean View Apartments Pty Ltd - Mr A Perkins of Colin Biggers & Paisley, Solicitors Reasons 1 On 11 August 1999 an application was lodged by The Owners – Strata Plan No. 57072 naming HIH Casualty and General Insurance Ltd as the Respondent. The application set out the following details of claim: "The applicant is an owners corporation constituted pursuant to the provisions of the Strata Schemes Management Act 1996 (NSW). The strata plan was registered on 28 April 1998 and comprises 56 residential lots and 1 commercial lot. It is located at ... , Bronte, NSW. The respondent is a company and the home warranty insurer of Australian Construction Enterprises Pty Limited (ACE). ACE was a builder who carried out residential building works at the applicant's property while the building located at the applicant's property was being reconstructed (the works). The work carried out by ACE was not carried out in a good and workmanlike manner and was defective. On 21 December 1998 the applicant lodged a claim with the respondent under the policy of home warranty insurance which ACE had taken out in respect of the works (the claim). Along with the claim, the applicant has provided the respondent with full particulars of the defects as set our in the reports of Paul Rappoport Architect Pty Limited and in particular the report of Paul Rappoport Architect Pty Limited dated October 1998. On 2 June 1999 the applicant provided to the respondent all necessary information (including further experts reports and quotations from licensed contractors) to allow the respondent to assess and determine the applicants claim in so far as it relates to defects which pose a threat to the health and safety of occupiers and passers-by (the health and safety defects). The respondent has failed to determine the applicant's claim, either in relation to the health and safety defects only and/or in relation the applicant's overall claim." The application sought orders that "the respondent indemnify the applicant for the defective building work in the applicant's property under the home warranty insurance", for payment to the Applicant of the sum of $4,288,106.00 and for the Respondent to pay the Applicant's costs. 2 On 3 February 2000, the Respondent filed a notice of motion seeking an order that Bradnam's Windows and Doors Pty Ltd, Goltep Constructions (NSW) Pty Ltd (in liquidation), Graham Jahn Architects Pty Ltd, Ocean View Apartments Pty Ltd, Roof & Building Waterproofing Services Pty Ltd (in liquidation), Thomson Kane Hydraulic Engineers Pty Ltd and Witsands Pty Ltd be joined as respondents to the proceedings or in the alternative as cross-respondents to a cross-application brought by the Respondent. 3 The application was supported by an affidavit of Mr Golledge sworn 27 January 2000 and an affidavit of Mr Minahan sworn 1 February 2000. These affidavits were accepted into evidence and marked A2 and A3 respectively. Facts 4 Mr Whittle filed written submissions on behalf of the Respondent. The following facts outlined in his submissions do not appear to be in dispute: a) On 30 September 1996, Ocean View Apartments Pty Ltd (" Ocean View ") contracted with Goltep Constructions Pty Ltd (" Goltep ") to convert the ... , located at ... , Bronte, into 55 separate apartments (the " property "). b) Between October 1996 and July 1997 Goltep and or Ocean View engaged certain contractors to work on the property. These contractors included Bradnam's Windows and Doors Pty Ltd (" Bradnam "), Roof & Building Waterproofing Services Pty Ltd (" Roof & Building "), Thomson Kane Hydraulic Engineers Pty Ltd (" Thomson ") and Witsands Pty Ltd (" Witsands "). Graham Jahn Architects Pty Ltd (" Jahn ") was the firm of architects engaged for the project. c) On 1 September 1997, Goltep was placed under the control of a liquidator. d) On or about 1 August 1997, Australian Construction Enterprises Pty Ltd (" ACE ") was appointed construction manager in relation to the property. ACE took out a Home Warranty Insurance policy, certificate number 01984 (the " policy ") with the Respondent naming Ocean View and its successors in title as beneficiaries. e) The Applicant is the successor in title of that part of the property that is constituted by the common property. Preliminary matters 5 Two of the parties mentioned in the joinder application, namely Goltep and Roof & Building, are in liquidation. Mr. Whittle submitted, correctly in the Tribunal's view, that no decision could be made in respect of the application to join those parties until the Supreme Court had given its consent to the application to proceed. Pending the outcome of the appropriate application to the Supreme Court, he submitted that this application in respect of those two companies should be stood over with liberty to restore on 7 days notice. A formal order to that effect was made ex-tempore by the Tribunal. 6 Evidence was given by Mr Tomkin, a solicitor in the employ of the Respondent's solicitors. He gave evidence of service by way of mail of the Notice of Motion on the two parties who made no appearance, namely Bradnam and Thomson. Copies of the relevant correspondence were accepted into evidence and marked A1. The Tribunal is satisfied that the Notice of Motion was duly served on Bradnam and Thomson. The relevant law 7 Section 21 of the Fair Trading Tribunal Act 1998 is a general statement of the jurisdiction of the Tribunal. It provides as follows: 21 (1) The Tribunal has such jurisdiction to decide matters, and such powers to make orders and otherwise exercise any function in connection with any such decisions, as is conferred on it by any Act or law. (2) Except as provided by any Act, the Tribunal has jurisdiction in respect of a matter arising whether before or after the commencement of any provision of this Act. One of the Acts conferring jurisdiction on the Tribunal is the Home Building Act 1989. Section 89A of that Act provides as follows: Any person may apply to the Tribunal, in accordance with the regulations, for determination of a building claim. The definition of "building claim" is contained in section 84. Paragraph 84(2)(a), in particular, provides as follows: Without limiting the definition of building claim, a building claim includes the following: (a) An appeal against a decision of an insurer under a contract of insurance required to be entered into under this Act. 8 The power to make regulations is set out in section 77 of the Fair Trading Tribunal Act 1998 which is as follows: 1. The Governor may make regulations, not inconsistent with this Act, for or with respect to any matter that by this Act is required or permitted to be prescribed or that is necessary or convenient to be prescribed for carrying out or giving effect to this Act. 2. Without limiting the generality of subsection (1), the regulations may provide for the following: *** (c) the joinder, by the Tribunal or by a party to proceedings, of other parties. *** The regulation governing joinder of parties is contained in section 27 of the Fair Trading Tribunal Regulation 1999 which provides as follows: 27. Joinder of parties 1. If the Tribunal is of the opinion that a person has a sufficient interest in resolving the dispute to which an application to the Tribunal relates but the person has not been served with notice of the application, the Tribunal may make an order directing that the person be joined either as an applicant or as a respondent, as appears to the Tribunal to be appropriate, and notice of the proceedings is to be served accordingly. 2. The powers of the Tribunal under this clause may, in accordance with any relevant directions of the Chairperson, be exercised by the Registrar. Submissions 9 Mr Whittle filed written submissions on behalf of the Respondent. He expanded on these submissions during the hearing of the application. The essence of those submissions relevant to the Tribunal's decision can be summarised as follows: a) Clause 27 of the Fair Trading Regulation 1999 confers the widest possible discretion upon the Tribunal to determine when a person should be joined to proceedings. The wording used is wider than the well established wording used in the Supreme Court rules and District Court rules in relation to joinder and the Tribunal should give full effect to the discretion conferred on it and not import restrictions that do not appear in the clause itself. He referred to a number of authorities in support of this submission. b) The persons who are sought to be joined by the Respondent undertook building work at the property or were otherwise clearly involved in the building project. They have a sufficient interest in resolving the dispute because the claim made by the Applicant relates to building work carried on at the property and the Respondent contends that ACE did not undertake all the building work carried out on the property. c) The dispute in question will therefore be more in the nature of "a full-blown building case" where the nature of any defective work will have to be addressed, findings as to who was responsible for that work will have to be made and decisions will have to be reached on who is liable including the ultimate liability of the Respondent as an insurer for indemnity or damages. d) A failure to join the relevant persons would defeat the underlying purpose and philosophy of clause 27 of the Fair Trading Regulation 1999 and of the Tribunal's statutory charter in that separate proceedings will be commenced either in the Tribunal or elsewhere leading to the possibility of different and inconsistent decisions being made by different courts or Tribunals. 10 Various other submissions were made by Mr Whittle going to the question of whether it is necessary for relief to be claimed against persons sought to be joined. In light of the decision reached by the Tribunal, these submissions do not need to be addressed. Applicant's submissions 11 Mr. Corsaro opposed the joinder application and made oral submissions to the Tribunal. As the Tribunal understood him, the main thrust of those submissions was as follows: a) This matter relates to a denial of liability under an insurance policy and the Applicant's task is to demonstrate that its claim comes within the terms of that policy. It is not its task to demonstrate who else might be responsible for various aspects of the building work. b) Because it has denied liability, the Respondent has no rights of subrogation under the insurance policy and it therefore has no rights to seek indemnity or contribution from another person in respect of the Applicant's claim. c) The joinder sought would only give forensic advantage to the Respondent and would prejudice the Applicant in its case. It is up to the Applicant to decide for itself whether it should pursue anyone else in any other Tribunal. The insurer has the power in this application to subpoena and obtain witness statements. Other submissions 12 Ms. Oakley and Mr. O'Hagan generally adopted the submissions made by Mr. Corsaro. Ms. Oakley also made submissions going to her client's "supervision only" of the building work and whether this came within the definition of residential building work under the Home Building Act 1989. Mr. O'Hagan made submissions going to the lack of evidentiary material in relation to the work done by his client and also referred to the question of the effect of separate District Court proceedings mentioned by Mr. Whittle. In view of the decision reached by the Tribunal, it is not necessary to address these submissions. 13 Mr. Perkins had no instructions and therefore made no submissions except to raise the question of costs. Findings 14 In discussion with the Tribunal, Mr. Whittle stated that perhaps the first question to ask was what was "the dispute". He suggested an immediate answer could be given that "it's a dispute between an insurer and the insured and a claim for indemnity or damages, which ever way you want to characterise it under the contract of insurance". Mr Whittle went on to argue, however, that the dispute involved more than just that and that to prove its claim the Applicant would have to go into considerable detail identifying particular items of defective work, identifying who performed that work and ascertaining the respective liabilities involved. In other words, it would not be a "standard insurance claim" and would involve a "sizeable investigation" similar to a normal building case in order to work out the liability of the Respondent as insurer. 15 The phrase "the dispute" is not defined in the Fair Trading Tribunal Act. In the Tribunal's opinion, however, its use in clause 27 of the Fair Trading Regulation 1999 must be looked at in the context of the application in question. The Tribunal is of the view that the correct interpretation of the phrase in this case is the first proposition advanced by Mr. Whittle (and as submitted by Mr. Corsaro ). The Applicant has claimed indemnity under the insurance policy. The dispute is whether the Respondent is liable under that policy for the claim as particularised by the Applicant. In the Tribunal's opinion, Mr. Whittle's second proposal confuses the factual investigation with the question of what is "the dispute". In the Tribunal's view, the persons sought to be joined have no interest in resolving "the dispute" which is solely about the insurer's liability under the insurance policy. While their evidence may be of assistance in the factual investigation, that is another matter that can be addressed in the normal way. 16 The Tribunal found little assistance from the authorities referred to by Mr. Whittle. Most of them involved different legislative provisions, usually Rules of Court. As noted by Mr. Whittle, the wording of clause 27 of the Fair Trading Tribunal Regulation 1999 is somewhat different. In this regard, the Tribunal agrees with Mr. Whittle's submission (when referring to the comments of Viscount Dilhorne in the case of In re Vandervells Trusts" (1971) AC912 ) that the Tribunal's primary obligation "is to construe the actual words used and to apply them". On the Tribunal's reading of clause 27, the phrase "the dispute to which an application to the Tribunal relates" can only mean in this matter whether the Respondent is liable to the Applicant, as the successor in title to the beneficiary Ocean View under the insurance policy, for the work done by ACE. 17 It is probably appropriate that the Tribunal refer to one authority quoted by Mr. Whittle. This was a decision of the Fair Trading Tribunal in the matter of Tania Phan –v- Fair Trading Administration Corporation (No 1170 of 1998) handed down by the Tribunal on 24 September 1999. That case involved the question of joinder and was an appeal in relation to an insurance claim. The Tribunal made an order that the builder be joined as a respondent in the proceedings. However, while this decision was a decision of the Fair Trading Tribunal, the relevant legislation was the former Commercial Tribunal Act 1984 and the joinder provision in that Act was somewhat different from clause 27 of the Fair Trading Tribunal Regulation 1999. Subsection 21(4) of the Commercial Tribunal Act 1984 provided as follows: "Where, before the holding of proceedings before the Tribunal, or at any stage during the holding of any such proceedings, the presiding Chairman or Deputy Chairman is of the opinion that a person ought to be joined as a party to the proceedings, the Chairman or Deputy Chairman may, by notice in writing given to the person or by oral direction given during the holding of the proceedings, join the person as a party to the proceedings." It can be readily seen that the discretion given to the Tribunal under this section is far wider than the provision contained in clause 27 of the Fair Trading Tribunal Regulation 1999. If the Tribunal was "of the opinion" that a person "ought to be joined" then the Tribunal could do so. No other guidance was given as to the exercise of that discretion apart perhaps from the provisions of subsection 19(10) of the Commercial Tribunal Act whereby the presiding Chairman or Deputy Chairman: "(a) may give directions relating to procedure that, in the opinion of the Chairman or the Deputy Chairman, will enable costs to be reduced and will help to achieve a prompt hearing of the matters in issue between the parties to the proceedings…". In the circumstances of the present application, the Tribunal is of the view that Phan's case can be distinguished because of the different statutory provisions. 18 The Notice of Motion sought in the alternative to have the persons referred to in the application joined as "Cross-respondents to a cross application brought by the Respondent". Mr. Whittle conceded that this course of action presented "conceptual difficulties". He explained these difficulties in the following terms: "We are an insurer. We issued a policy of insurance. That is a contract. We are now sued for failing to honour our obligations under the contract, that is, failing to pay out on a claim it is said was rightly made under the contract. That is a matter of contract on one level – and I will come to other levels of the discussion in a moment – that is between us and the insured or a person who has the benefit of the contract of insurance. … As an insurer we see some real difficulties in us bringing a cross-claim against various entities who might have done subcontracting work or other work on the premise, because we had no contractual relationship with them and it would be hard for us to say that they owed us any tortious duty which we could use to found a cross-claim". Leaving aside Mr. Whittle's submissions addressing the question of the right of a party under the Fair Trading Tribunal Act 1998 to make a cross-claim, the Tribunal agrees with.his comments about the difficulties associated with the Respondent as insurer bringing cross-claims against persons with whom it had no contractual or other relationship. Indeed, the Tribunal regards these comments as giving further weight to its conclusion about the characterisation of "the dispute" in its consideration of the joinder as co-respondents argument. The Respondent has not in fact filed any cross-claim or cross application. In view of the nature of the issues raised concerning the proposed cross respondents, however, the Tribunal is of the opinion that a cross claim or application would not be a proper vehicle for the Respondent's purposes. Decision 19 The Tribunal refuses the application by the Respondent. 20 No submissions were made on the question of costs apart from a simple reference to costs by Mr. Perkins. In the light of the decision to dismiss the application, however, the Tribunal orders that the Respondent pay the costs of the Applicant in respect of the Notice of Motion and of the other parties who appeared to the Notice of Motion. John Gallagher Senior Member I HEREBY CERTIFY THAT THIS IS A TRUE AND ACCURATE RECORD OF THE REASONS FOR DECISION OF THE FAIR TRADING TRIBUNAL. 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.