New South Wales Supreme Court CITATION : Council of the City of Wollongong v Vero [2009] NSWSC 771 HEARING DATE(S) : 27 July 2009 JURISDICTION : Equity Division Technology and Construction List JUDGMENT OF : McDougall J at 1 EX TEMPORE JUDGMENT DATE : 27 July 2009 DECISION : See paragraph [21] of the judgment. CATCHWORDS : PRACTICE - separate determination of questions - whether to order hearing of an additional question after judgment delivered on questions earlier stated by consent - inconsistency with list statement and submissions - question hypothetical. LEGISLATION CITED : Uniform Civil Procedure Rules CATEGORY : Procedural and other rulings PARTIES : Council of the City of Wollongong (Plaintiff) Vero Insurance Limited (Defendant) FILE NUMBER(S) : SC 55095/07 COUNSEL : N A Cotman SC / R I Goodridge (Plaintiff) S R Donaldson SC / G A Donnellan (Defendant) SOLICITORS : Fisher Cartwright Berriman Pty Limited Lawyers (Plaintiff) Wotton & Kearney (Defendant) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION TECHNOLOGY & CONSTRUCTION LIST McDOUGALL J 27 July 2009 (ex tempore – revised 28 July 2009) 55095/07 COUNCIL OF THE CITY OF WOLLONGONG v VERO INSURANCE LIMITED JUDGMENT 1 HIS HONOUR: On 11 and 12 May 2009 I heard a number of separate questions relating to a dispute between the plaintiff and the defendant arising from a policy of insurance. For convenience, I incorporate (to explain what follows) [1] of my reasons given on 12 May 2009: On 20 August 2006, a building known as the "NES Hall", which was owned by the plaintiff (the council), was destroyed by fire. The council had the benefit of an industrial special risks policy of insurance (the policy) issued by the defendant (Vero). Vero accepts that it is liable to indemnify the council for the loss of the NES Hall, according to the terms of the policy. The council and Vero are in dispute as to the basis on which the council should be indemnified. 2 The separate questions that I heard, and the answers that I gave, are as follows: 1. Was the recording of the sum of $322,000 in relation to the NES Hall an entry into the accounting or other records of the council as being the value of the property insured for the purposes of insurance within the meaning of the endorsements to the policy section 1? Yes. 2. Was $322,000 in relation to the NES Hall an incorrect declaration of value within the meaning of the extended condition 1 of the policy? No. Or 3. If "yes" to 1, was the entry into the accounting or other records of the council of the said sum of $322,000 as the insured value of the NES Hall an unintended and/or inadvertent error, or misdescription within the meaning of the extended condition 1 of the policy? No. 4. If 2 or 3 is answered "yes", is the council prejudiced by the entry of the said value in the accounting or other records of the council within the meaning of the extended condition 1 of the policy in the events that have happened? Does not arise. 5. If 2 or 3 is answered "yes", did the council inform the insurer as soon as practicable? Does not arise. 6. If 2 or 3 and 4 and 5 are answered "yes", is the council only entitled to $302,000 ($322,000-$20,000) under the Policy? Does not arise. If 6 is answered "no": … 14. Is the council entitled to indemnity for the following additional claims: 14.1 $37,568 for removal of debris including decontamination; Yes. 14.2 $1,176 for temporary protection and safety costs; Yes. 14.3 $2,990 for quantity surveyors expenses; No and; 14.4 $2,888 for consulting engineers expenses? No. 3 The consequence of those answers was, as I said at [57], "that the council is entitled to succeed in the sum of $6,844..., presumably with some interest". The orders that I made included one directing the parties to bring in short minutes of order to give effect to my reasons. 4 The council has filed a notice of motion seeking to pose a further question for separate determination under UCPR r 28.2. That question is: "On its proper construction does [sic] the Endorsements to the Policy appearing at pages 46, 47, and 48 of the Consolidated Court Book ("CCB") in the case of total loss displace the proviso to (a) of the Basis of Settlement appearing at page 28 of the CCB?" 5 To avoid cross-referencing between these reasons and my earlier reasons, I insert para (a) of the basis of the settlement from CCB 28, the introductory words to the endorsements commencing at CCB 46 and the first three endorsements, relating to the basis of settlement, at CCB 47. BASIS OF SETTLEMENT (a) On buildings, machinery, plant and all other property and contents (other than those specified below); the cost of reinstatement, replacement or repair in accordance with the provisions of the Reinstatement and Replacement and Extra Cost of Reinstatement Memoranda as set out herein. Provided that if the Insured elects to claim the indemnity value of any damaged property, the Insurer(s) will pay to the Insured the value of such property at the time of the happening of the damage or at its/their option reinstate, replace or repair such property or any part thereof. In any event the Insurer(s) will pay costs incurred by the Insured in accordance with the provisions of the Extra Cost of Reinstatement Memorandum. ENDORSEMENTS ATTACHING TO AND FORMING PART OF INDUSTRIAL SPECIAL RISK INSURANCE POLCY No ISA010236185 Notwithstanding anything contained herein to the contrary it is hereby declared and agreed that the following Endorsements are made to the Policy. BASIS OF SETTLEMENT Landscaping The Property Insured and Basis of Settlement (a) of Section 1 are extended to include landscaping, which term includes trees, shrubs, plants and lawns. Property Exclusions 7 and 8 shall not apply to the cover granted by this endorsement. It is agreed that the liability of the Insurer(s) shall not exceed the amount of the sub-limit stated in the schedule of the policy against "Landscaping" for any one loss or series of losses arising out of any one event or occurrence. Partial Loss – Total Loss In the case of damage to Property Insured which is covered under Section 1, the Basis of Settlement shall in respect of all Property Insured, be determined in accordance with the definitions of Reinstatement and Extra Costs of Reinstatement contained in the Memorandum to this Section 1, except that in respect of: (a) any Property, Insured where values have been assigned thereto in the Insured's accounting or other records as being the value of that Property Insured for the purpose of insurance, then (i) in the case of partial loss due to damage which can be repaired, the Basis of Settlement shall be the cost of repairs necessary to restore the relevant Property Insured, as far as practicable, to the condition in which it existed immediately before the occurrence of the damage or (ii) in the case of total loss of the relevant Property Insured the Basis of Settlement shall be the value so stated in the books of account or other records of the Insured. Designation The following sentence is added to the first paragraph of Basis of Settlement (a): For the purpose of ascertaining the classification under which any property is insured, the Insurer(s) agree to accept the designation applied to such property by the Insured. 6 In my view there are three reasons why the additional question should not be posed and answered. 7 The first reason is that the question now sought to be argued is inconsistent with the "pleadings" and the way that the case was run. 8 The council's Technology and Construction List statement included, in the statement of contentions, an allegation that as a result of the fire in question the NES hall was a total loss (para 3) and then the following allegation of the relevant basis of settlement (para 7): 7. By reason of the loss and by reason of the operation of the "Misdescription, Non-Disclosure and Alteration" clause in the Contract, the Plaintiff claims it is entitled to $758,365.00 from the Defendant being the valuation in the QS Report for the NES Hall plus reinstatement costs. 9 The claims for relief that were articulated at paragraph 14 included the following: 14. The Plaintiff claims the Defendant is liable under the Contract to the Plaintiff as follows: (a) the reinstatement valued [sic] in the amount of $594,990.00; (b) the extra cost of reinstatement valued in the amount $163,375.00. 10 Thus, relating the matter back to the policy, the case that the council alleged in its List Statement was that the relevant basis of settlement was the Partial Loss - Total Loss clause appearing at CCB 47. Further, and consistent with that, the amount that the Council claimed was the reinstatement value. There was no allegation that there was, either additionally or in the alternative, an entitlement to indemnity value in accordance with the proviso to para (a) of the Basis of Settlement at CCB 28. 11 That this is the way the Council intended its case to be understood is confirmed by some matters that passed in the course of submissions on 11 May 2009. At T20, I sought to elucidate the consequences of a negative answer to the Council's proposition that the assigned value in its records ($322,000) was a misdescription of a kind to which the misdescription, non-disclosure and alteration clause at CCB 59 applied. The response was, in effect, that in those circumstances nothing was payable other than the basis at settlement in accordance with the Partial Loss - Total Loss clause at CCB 47 (T20.24-30): "HIS HONOUR: Can I just ask this: If the extension to condition 1 of the policy set out on page 59 does not apply to a mistake of the kind alleged, is anything payable other than the basis of settlement in accordance with the partial loss/total loss clause on page 47." "COTMAN: That is the parties' present understanding of the policy. There is nothing additional payable. The $17,000 has been paid in relation to contents. So, that has been disposed of. The only matter left is the building issue, which is $322,000." 12 This was confirmed, from both sides of the bar table, a little later (T21.1-16): HIS HONOUR: 2 raises the question of construction of the policy and such evidentiary material as may be gleaned from the Court book. DONALDSON: Yes. HIS HONOUR: If that is answered "No", then that is as far as we need to go, is it? DONALDSON: Correct. HIS HONOUR: Because the partial loss/total loss clause then operates according to its terms. COTMAN: Right. That is what I say. The page 59 clause, and the scope of its operation, is the issue. That issue, in turn, resolves itself into a very narrow issue, as I read my friend's submission. 13 Thus, the question was whether the council was entitled to be relieved from the consequences of what it said was an unintended or inadvertent error or misdescription in the value of the property insured in what was agreed to be one of its "accounting or other records" for the purposes of the Partial Loss - Total Loss clause. It was never suggested that, if that question were answered adversely to the council, it had available to it a fall-back position, namely, indemnity value. 14 In those circumstances, it seems to me, the case having been "pleaded" and fought on a particular basis, to a result that disposes of the issues between the parties as they were articulated, the council should not be permitted now to seek to argue the case on a different basis. 15 The second reason why the question should not now be raised is that it is hypothetical. If the proviso to para (a) of the Basis of Settlement clause at CCB 28 is available, its invocation depends on the making of an election. This is plain from the introductory words "provided that if the insured elects to claim the indemnity of any damaged property". 16 In this case, there is no evidence of any election. Thus, the question now sought to be argued is hypothetical. I do not see why, there having been argument on real questions and a determination of the issues arising from those real questions, the council should now be given the opportunity to have the benefit of the Court's views on an alternative and hypothetical question. 17 The third reason is that not only is there no evidence of election, there is I think evidence that (entirely consistently with the way the matter was put in the List Statement) the council has elected to claim not the indemnity value of the NES hall but, rather, the cost of reinstatement. 18 As I have said, that appears to be the way that the relevant paragraphs of the List Statement should be read. It is confirmed in para 5.18 of the Council's outline of submissions dated 7 May 2009. The introductory sentence of that paragraph reads: "The plaintiff elected to reinstate the NES hall." 19 In submissions today Mr Cotman SC, who appeared with Mr Goodridge of counsel for the council, submitted that the word "elected" in that sentence was not intended to have its technical meaning. In the context of a dispute about a basis of settlement clause that includes the concept of election, I find it very difficult to understand what other meaning should be attributed to the word. 20 I should note that Mr Donaldson SC (who appeared with Mr Donnellan of counsel for Vero) submitted, as a fourth reason why the motion should be dismissed, that it would be futile to grant leave to argue the question because it would have to be resolved adversely to the council in any event. Because I have concluded for other reasons that the additional question should not be posed and argued, I will not express a view on that proposition. 21 In the result, I order that the plaintiff's notice of motion filed on 20 May 2009 be dismissed with costs. ********** 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.