The Owners – Strata Plan No 14846 v Wesfarmers General Insurance Ltd T/AS Lumley General [2014] NSWCATCD 199

Civil and Administrative Tribunal New South Wales Medium Neutral Citation: The Owners – Strata Plan No 14846 v Wesfarmers General Insurance Ltd T/AS Lumley General [2014] NSWCATCD 199 Hearing dates: 23 July 2014 Date of orders: 13 October 2014 Decision date: 13 October 2014 Jurisdiction: Consumer and Commercial Division Before: S Thode, Senior Member Decision: 1. The application is dismissed Catchwords: Insurance Contract, appeal from decision of insurer. Legislation Cited: Home Building Act 1989, Home Building Regulation 2004 Cases Cited: Brown v Brown (1905) 5 SR (NSW); Alliance Bank v Broom (1864) 2 Dr &Sm 289; 62 ER 631; Grygiel v Baine [2005] NSWCA 218; Vero Insurance Ltd v Buckle[2008] NCWSC 73. Category: Principal judgment Parties: The Owners – Strata Plan No 14846 (applicant) Wesfarmers General Insurance Ltd T/AS Lumley General (respondent) Representation: Mr Neggo of counsel for the applicant Mr Dawson of counsel for the respondent File Number(s): HB 13/25336

REASONS FOR DECISION 1. By application filed on 3 May 2014 the Owners Corporation (the applicant) seeks to appeal the decision of the respondent (the insurer) to deny indemnity under a Home Owners Warranty Policy (HOW) pursuant to section 48A(2) of the Home Building Act 1989.

The applicant's case 1. The following facts are not controversial. The applicants are owners of a residential apartment complex at xx Pacific Highway, Lane Cove. The building was developed in or about 1970. The roof membrane installed was a "Scotch Clad Deck Coating System" with a life span of approximately 20 to 30 years. 2. The applicant noted roof leaks in or about 2004. The applicant resolved to retain a builder to rectify the roof leaks. The applicant retained Acevedo Building Services Pty Ltd trading as Acevedo Painters and Building Services ("Acevedo") to undertake roof rectification work in or about 2005. 3. In or around 2005 Acevedo carried out waterproofing work to the roof of the units, installing a membrane over a reinforced slab, and to the balcony of unit 13 (the 2005 works). 4. The scope of the works is not entirely clear but may have been set out in a quotation from Acevedo to Mr Greg Beard of Paint and Technical Services Pty Ltd. 5. The 2005 waterproofing work was defective. 6. After noting further and additional leaks in 2008 the applicant retained Mr Beard to inspect the works. On 19 February 2008 Mr Beard sent an email to the Owners Corporation noting that Acevedo had agreed "to rip it up and start again". "It" referred to the membrane applied to the roof slab in 2005. 7. The email referred to the applicants and Acevedo entering into a new contract; and referred to the need to obtain Home Owners Warranty Insurance for the rectification works. 8. It is not in dispute that the insurance policy, subject of these proceedings, was not taken out for the 2005 works. Indeed no insurance was obtained for the 2005 works. It is further not in dispute that no written contract, satisfying the provisions of the Home Building Act 1989, was entered into in 2005 or 2008. 9. In 2008 Acevedo applied to the Insurer for Home Owners Warranty Insurance. The policy application form describes the works as "roof waterproofing". 10. On 30 July 2008 the insurer issued a Certificate of Insurance covering "roof works to an existing dwelling consisting of waterproofing as application dated 28 July 2008". 11. Between July and August 2008 Acevedo carried out waterproofing work on the roof (the 2008 works). 12. The 2008 works contained a number of defects which arose from inadequate substrate penetration and also an inadequate application of the waterproof membrane. 13. Bellmont Façade Engineering Pty Ltd (Bellmont Façade), an independent builder, was retained by the applicant to supervise the 2008 works. It is contested when exactly the 2008 works commenced and when it finished. A report from Belmont Façade evaluating the roofing works dated 19 February 2008 was prepared and tendered by both parties in these proceedings. 14. Acevedo was deregistered in 2009. Mr Acevedo became the director of a new company, Stratabuild Pty Ltd. 15. On 19 October 2011 the applicant lodged a claim with the Insurer in relation to the defective 2008 works. 16. On about 12 December 2011 Igentia Pty Ltd, retained by the insurer, issued a Technical Inspection Report based on their investigation into the applicant's claimed items under the policy. The report recommends acceptance of waterproofing and rectification works and values the work at $121,000.00. In summary, the report states that the "builder has failed to waterproof the rooftop in accordance with manufacturer's recommendations in that the builder did not remove all of the existing failed bitumen membrane." Igentia recommended preparing the surface of the slab; installation of topping screed with falls to roof outlets; installation of suitable outlets and application of the waterproofing membrane as specified by the manufacturer. The Igentia report was prepared for the Insurer and tendered by the Insurer as attachment MD-08. Relevantly, the Igentia report refers to the builder as "Acevedo Building Services Pty Ltd". 17. On 3 January 2012 the Insurer wrote to the applicant's solicitors enclosing an "Amended Inspection Summary" which set out the insurer's assessment of the applicant's claim. The inspection summary included a scope of work to rectify the leaking roof that the Insurer accepted. The Insurer wrote: "Lumley Insurance now requires [the applicant's] written approval to the decision on their claim as per the attached Amended Inspection Summary. Upon receipt of their approval Lumley Insurance can then proceed to obtain quotations for the rectification of the accepted works". 18. On 17 February 2012 the applicant's solicitor wrote to the Insurer accepting the Insurers' decision of 3 January 2012. 19. On 24 April 2012 the applicant's solicitor wrote to the Insurer identifying additional defects in the common property not originally claimed in their claim form of 19 October 2011. 20. On 2 April 2013 the Insurer's solicitor wrote to the Owners solicitors issuing a complete declinature of the claim including those items which formed part of the earlier accepted Amended Inspection Summary. 21. On 3 May 2013 the applicant filed the current application pursuant to section 48(A)(2)(a) of the Act appealing the decision of the Insurer. At the hearing it was conceded the claim was brought within the requisite 45 days as required pursuant to section 65 of the Act.