New South Wales Supreme Court CITATION : Tilley & 4 Ors v Allianz Australia Insurance [2007] NSWSC 359 HEARING DATE(S) : 17/04/2007 JUDGMENT DATE : 20 April 2007 JUDGMENT OF : Associate Justice Malpass DECISION : The decisions of the Tribunal are set aside. The proceedings are remitted back to the Tribunal for determination according to law. The defendant is to pay the costs of the proceedings before this Court. CATCHWORDS : Home warranty insurance - period of insurance and making of building contract - building owners Consumer Claims Act 1998 (NSW) LEGISLATION CITED : Home Building Act 1989 (NSW) Legal Profession Act 1987 (NSW) CASES CITED : Taylor v Dexta Corporation Ltd & Ors [2005] NSWSC 974 Taylor v Dexta Corporation Ltd and Others [2006] NSWCA 310 Adam Tilley Sally Tilley PARTIES : David Lloyd Kay Lloyd Owners Corporation Strata Plan 69826 Allianz Australia Insurance Ltd FILE NUMBER(S) : SC 30140/06 COUNSEL : Mr T. Lynch (Pl) Mr D. K. Jordan (Def) SOLICITORS : Swaab Attorneys Ebswoth & Ebsworth Lawyers (Def) LOWER COURT JURISDICTION : Consumer Trader and Tenancy Tribunal of NSW LOWER COURT FILE NUMBER(S) : HB 03/41683 LOWER COURT JUDICIAL OFFICER : Member D A Turley LOWER COURT DATE OF DECISION : 25/05/2006 LOWER COURT MEDIUM NEUTRAL CITATION : Adam and Sally Tilley v Allianz Australia Insurance Limited - 3 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ASSOCIATE JUSTICE MALPASS 20 APRIL 2007 30140/06 Adam Tilley & 4 Ors v Allianz Australia Insurance Ltd JUDGMENT 1 HIS HONOUR: Mr and Mrs Tilley (the Tilleys) purchased a property at 20 Sutherland Crescent, Darling Point. Subsequently, the Tilleys entered into a contract (the building contract) with a builder (the builder) to demolish the existing building and to erect two townhouses (Lots 1 and 2 and the common property in Strata Plan 69826). 2 Lot 2 was purchased by Mr and Mrs Lloyd (the Lloyds). The Lloyds have since sold Lot 2. 3 The Tilleys are still the Registered Proprietors of Lot 1. However, there is a caveat on the title. 4 The builder took out a Building Owners Home Warranty Insurance Policy with the defendant (the policy) under the now repealed scheme. The policy requires the defendant to indemnify the building owner for loss or damage in respect of residential building work. The policy contains a definition of "period of insurance". The Schedule to the policy identifies the policy period as commencing 3 April 2001 to 3 April 2002 at 4.00pm. For present purposes, the policy defines "building owner" as meaning the person for whom residential building work is being or is about to be carried out under a contract and any person who is a successor in title for the time being of the land or building in respect of which the work was carried out under the contract. The policy was evidenced by two certificates of insurance (which were expressed to apply to one dwelling only and to a building contract dated May 2001). 5 The Tilleys brought proceedings in the Consumer, Trader and Tenancy Tribunal (the Tribunal) in its Home Building Division to propound a claim made pursuant to the policy. Subsequently, the Lloyds and the Owner's Corporation of Strata Plan 69826 also brought applications. 6 The applications came to a hearing. They were heard by Member Turley. The Member dismissed all applications. Written Reasons for Decision (the reasons) were given. 7 The applicants in the proceedings before the Tribunal (who are collectively referred to as the plaintiffs) presented a variety of submissions to it. Despite this, the Member disposed of all applications upon one issue (the issue). In so doing, he failed to address alternative submissions. 8 The issue was not raised until August 2005 in further amended responses. It litigated the question as to whether or not the policy had responded to the claims (by reason of the building contract not having been entered into during the period of insurance). 9 The reasons, which are dated 25 May 2006, contain, inter alia, the following:- "After my consideration of all the above factors I am satisfied that not only was the building contract entered into well before the insurance policies were issued but also that building contract was entered into well before the policy period that was specified in those policies. Further, it is my opinion that the building contract was entered into by the parties in or about mid January 2001. Counsel for both parties referred me to a number of authorities but Mr Burge for the respondent took me in particular to the decision in the case of Susan Elizabeth Taylor v Dextra (sic) Corporation Ltd & Ors [2005] NSWSC 974 . This judgment was only recently handed down on 29 September 2005 and the subject matter of that decision and the matters before me are markedly similar. In both the matter before the Supreme Court and in the matters before me the retroactive date is the same as the date of commencement of the policy period. The relevant date in the matters before me was 3 April 2001. At paragraph 37 Page 15 of that decision it was found that: "As the contract in this case was entered into not only prior to the commencement of the policy but also prior to the retroactive date it is not a contract within the meaning of the first paragraph and hence the obligation to indemnify does not arise. It follows in my opinion, that Allianz was entitled to deny the plaintiff's claim". For the same reasons it is my opinion that the subject policies do not respond given my conclusion as recorded above as to when the construction policy was entered into by the parties. Accordingly, I find for the respondent and the claims are dismissed. I also order the applicants to pay the respondent's costs either as agreed or as are assessed under the Legal Profession Act 1987. There is one final issue which I should briefly record. Mr Lynch for the applicants put a submission to me that the combination of Sections 9 to 13 of the Consumer Claims Act 1998 and Section 48 (O) of the Home Building Act 1989 prevent me from dismissing these claims as I must make fair and equitable orders and dismissal of these claims would not be fair and equitable in all the circumstances. I entirely reject any suggestion that these Tribunals must only make fair and equitable orders and a number of cases determined in the Supreme Court have previously held these or similar Tribunals to be judicial or quasi-judicial bodies that must make judicial decisions." 10 The decision of Nicholas J in Taylor went on appeal. The Court of Appeal delivered judgment on 10 November 2006 (Taylor v Dexta Corporation Ltd and Others [2006] NSWCA 310). The appeal was allowed. 11 Whilst there were differences in approach taken by the Judges, in substance the Court of Appeal found that there was an internal conflict in the policy which enabled it to look at the real intention of the parties as gathered from the instrument as a whole. Further, it found that the real intention was that the policy would cover a building contract that came into existence prior to its "period of insurance" provisions. 12 On 23 June 2006, the plaintiffs filed a Summons in this Court. The Summons purports to bring an appeal from what was done by the Tribunal. An appeal is restricted to a question with respect to a matter of law. There has to be error that is material to the decisions and so justifies the disturbing of them. 13 The appeal was heard on 17 April 2007. There was no dispute that there was jurisdiction to entertain the questions argued on behalf of the plaintiffs. 14 Broadly speaking, the plaintiff's case had two components. One relied on the decision of the Court of Appeal in Taylor. The other concerned questions which were not dealt with by the Member (including questions of mutual intent, unconscionable action, rectification and misleading and deceptive conduct). 15 Clearly, the following of the decision of Nicholas J led the Member into error. There was also error in respect of reasoning process. However, apart from formally submitting that the decision was erroneous, the defendant has argued that the decision of the Court of Appeal can be distinguished from the circumstances of this case. 16 In my view, the questions thrown up by Taylor require findings of fact to be made by the Tribunal. It will be necessary for the Tribunal to consider, inter alia, whether or not there is an internal conflict in the policy and, if so, what was the real intention of the parties. 17 If the plaintiffs be unsuccessful on those questions, other alternative arguments will still have to be considered by the Tribunal. There seems to be no dispute that, because the Member erred in not dealing with the alternative arguments, (the Member erroneously took the view that they had "become irrelevant"), these matters necessarily have to be remitted back to the Tribunal for their determination according to law. This determination will also involve the making of findings of fact. 18 During this appeal, the defendant also sought to agitate other questions relating to status of certain of the plaintiffs. If these are to be pressed, findings of fact and determinations will also have to be made in respect of them (these will concern the application of the definition of "building owner"). 19 The decisions of the Tribunal are set aside. The proceedings are remitted back to the Tribunal for determination according to law. The defendant is to pay the costs of the proceedings before this Court. Exhibits may be returned. ********** 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.