HIH v Jones [2000] NSWSC 359

New South Wales Supreme Court

CITATION : HIH v Jones [2000] NSWSC 359 FILE NUMBER(S) : SC 10055/00 HEARING DATE(S) : 14/04/00 JUDGMENT DATE : 10 May 2000

PARTIES : HIH Casualty and General Insurance Ltd v Jones & Ors JUDGMENT OF : James J

COUNSEL : C Gee QC/J Gooley - Plaintiff B Ralston - 1st and 2nd Defendants SOLICITORS : HIH Legal Services Pty Limited - Plaintiff Luchettie & Company - 1st and 2nd Defendants CATCHWORDS : Home Building Act ss3A, 92, 96, 99, 101, 103C, 103D DECISION : Appeal dismissed

THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

JAMES J

10 May 2000

10055/2000 - HIH Casualty and General Insurance Ltd v Jones & Anor

JUDGMENT 1 HIS HONOUR: This is an appeal by HIH Casualty and General Insurance Limited ("HIH") from a decision of the Fair Trading Tribunal given on 6 December 1999 in favour of Stephen Jones and Roslyn Jones ("the Joneses"). The appeal raises questions of the proper interpretation of certain provisions of the Home Building Act 1989 No. 147 and the Home Building Regulation 1997. 2 There was no dispute, either before the Tribunal or on this appeal, about the background facts, which can be briefly summarised as follows. 3 At all material times the Joneses were the owners of, or at least had some interest in, land at Alexandria. On 17 June 1997 they entered into a contract with Acosta Constructions Pty Limited ("Acosta") for the construction by Acosta of a block of home units on the land ("the works"). Acosta issued a "Certificate of Insurance to do residential building work", pursuant to an authority from HIH as insurer. It will be necessary to refer to the Certificate of Insurance and to the terms, conditions and exclusions of the Contract of Insurance in more detail later in this judgment. 4 Acosta commenced to carry out the works. However, disputes arose between the Joneses and Acosta and the Joneses terminated the building contract. Acosta was wound up, without the works having been completed. 5 The Joneses made a claim on the Contract of Insurance with HIH. This claim was rejected by HIH, on the grounds that the Joneses were the "developer" within an exclusion clause in the Contract of Insurance (cl 5.8). 6 The Joneses brought proceedings in the Fair Trading Tribunal, challenging HIH's rejection of their claim. On 6 December 1999 the Tribunal gave a reserved decision in favour of the Joneses, holding that cl 5.8 of the Contract of Insurance was rendered void by certain provisions of the Home Building Act and that, consequently, HIH was not entitled to exclude the Joneses from the benefit of the Contract of Insurance. 7 HIH then brought this appeal to this Court. It was accepted by the Joneses that the appeal was competent. 8 It is convenient at this stage to trace some of the legislative history of the Home Building Act ("the Act") and to examine some of the provisions of the Act. 9 The Act was enacted in 1989 as the Building Services Corporation Act. The name of the Act was changed to the Home Building Act by the Building Services Corporation Legislation Amendment Act 1996 No. 122 (s 3; Sch 5 (2)). 10 Although the provisions of the Act relating to insurance were substantially changed by the 1996 Amendment Act, it is necessary to refer to the original provisions about insurance in the Act and in the Building Services Corporation Regulation made under the Act, as they were made the basis of a submission by counsel for the appellants. 11 Part 6 of the Act as enacted in 1989 was headed "BSC Insurance". Section 91 in Pt 6 provided that the regulations could prescribe two insurance schemes, to be known as "the BSC Comprehensive Insurance Scheme (which contains the conditions on which BSC comprehensive protection is to be provided)" and "the BSC Special Insurance Scheme (which contains the terms and conditions on which BSC special protection is to be provided)". The two schemes prescribed for the purposes of Pt 6 of the Act were referred to in Pt 6 of the Act as "BSC Insurance". Section 91 (3) of the Act provided:- "The conditions of BSC Insurance must, in the case of each scheme, identify those having the benefit of the scheme but may also impose limits on, and exceptions from, the making or payment of claims". 12 Section 91 (4) of the Act provided:- "The Corporation (that is, the Building Services Corporation constituted by the Act) is to be the insurer under both schemes". 13 In this judgment it is necessary to have regard only to the BSC Comprehensive Insurance Scheme. 14 Part 6 of the Building Services Corporation Regulation dealt with BSC Insurance. Clause 31 in Pt 6 included a definition of "developer". Clause 33 in Pt 6 provided in part that for the purposes of Pt 6 of the Act the BSC Comprehensive Insurance Scheme was prescribed in form 4. Form 4 to the Regulation was not really a form but rather a set of provisions. Clause 4 in form 4 was in the following terms:- " 4. (1) Subject to subclause (2), beneficiaries are: (a) the owner of the land on which the residential building work was done or was contracted to be done, except where the work was authorised to be done under an owner-builder permit; and (b) the person, other than the owner, who contracted to have the residential building work done; and (c) the successor in title to the owner of the land on which the residential building work was done. (2) The following persons are not beneficiaries: (a) developers, as defined in clause 31 of the Building Services Corporation Regulation 1990; (b) the holder of a licence who or which carried out the residential building work under a contract or otherwise; (c) companies which are related, within the meaning of the Companies (New South Wales) Code, to any corporate person referred to in paragraph (a) or (b)".