Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Wesfarmers General Insurance Pty Ltd t/as Lumley Insurance v James Arthur Fordham [2015] NSWCATAP 103 Hearing dates: 13 March 2015 Date of orders: 03 June 2015 Decision date: 03 June 2015 Jurisdiction: Appeal Panel Before: D Patten, Principal Member S Thode, Senior Member Decision: 1. Appeal allowed. 2. Orders made below quashed. 3. In lieu order (a)That the appellant pay the respondent $58,000.00 forthwith. (b)That the appellant pay the respondent's costs of the proceedings below on a party and party basis as agreed or assessed. (c) That there be no order as to the costs of the appeal. Catchwords: Home Owners Warranty Insurance - Construction of time limits in policy Legislation Cited: Home Building Act 1989 Cases Cited: Blair v Curran (1939)62CLR 464 Ramsay v Pigram(1999)118CLR271 VACC Insurance v BP Australia (1999)47NSWLR716 Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2005]NSWCA248 Category: Principal judgment Parties: James Arthur Fordham (Respondent) Representation: Counsel: M J Dawson (Appellant) J Young (Respondent) File Number(s): AP 14/56173 Publication restriction: Unrestricted Decision under appeal Court or tribunal: Civil and Administrative Tribunal Jurisdiction: Consumer and Commercial Date of Decision: 24 October 2014 Before: M J Cohen, Senior Member File Number(s): HB 14/28211 REASONS FOR DECISIOn 1. This is an appeal from orders made by the Tribunal (Senior Member M J Cohen) on 24 October 2014: 1. The Respondent is to pay the Applicant the sum of $210,510.25 immediately. 2. The Respondent is to pay the Applicant's costs of the proceedings on the indemnity basis. 1. The underlying facts leading up to that decision are complicated and occurred over the space of more than 10 years. In outline what we regard as the relevant facts are set out below. For the most part they are uncontroversial but we will need to return to some of them later in these reasons: * On 25 June 2002 Mr James Fordham (the respondent) entered into a contract with Dewsash Pty Ltd trading as SP & W Hobson (the builder) for the builder to erect a dwelling on a site owned by the respondent known as Lot 4 Fisher Lane Bendick Murrell NSW (the building site) for the price of $187,986.75 inclusive of GST (the building contract). * On 13 November 2002 the appellant issued an insurance certificate No 039524 in respect of the building work with the description "Home Warranty – Job Specific Policy (NSW)" (the policy). * The policy named the respondent as beneficiary. * The builder entered upon the site and commenced work under the building contract on 13 November 2002. * On 27 April 2003 the builder presented the respondent with a number of documents including Progress Claim Part A No 1 for $29,000.00 and Progress Claim Part B No 1 for $7,000.00. * On 28 April 2003 the respondent paid to the builder $29,314.60 being Progress Claim Part A No 1 $29,000.00 plus $314.60 Variation Order No 3. * On 13 May 2003 the builder poured concrete for the main house slab. * On 14 May 2003 the builder removed the formwork surrounding the slab. * On 27 May 2003 the respondent noticed "bubbling rust beginning to form on the tie down rods where they entered the concrete slab." * Between May 2003 and January 2007 no further work was carried out by the builder on the building site but during that period there was correspondence between the respondent and the builder and experts were consulted by the respondent as to the soundness of the slab. * On 15 January 2007 the respondent made a formal complaint about the building work to the Department of Fair Trading. * Between April 2007 and May 2008 further discussions took place between the respondent, the builder, experts retained by each of them, and representatives of the Department of Fair Trading. * By letter of 4 August 2008 the respondents' solicitor Mr John Carpenter gave notice to the builder of termination of the building contract. * In May 2009 the respondent commenced proceedings against the builder HB 09/25483 in the Consumer Trader and Tenancy Tribunal (CTTT). * The builder brought separate proceedings by way of cross claim against the respondent in the CTTT and they were numbered HB 10/21874. * Proceedings in the CTTT HB 09/25483 and HB 10/21874 were heard together by the Tribunal (Senior Member Smith) from 28 to 30 April 2010 at Bathurst. * In his decision published on 17 March 2011 Senior Member Smith found that the slab was deficient and assessed damages at $8,000.00 which he ordered the builder to pay to the respondent. He also ordered the respondent to pay $7,000.00 to the builder. * There was an appeal by the respondent to the District Court against Senior Member Smith's decision and on 27 July 2012 Judge P Taylor SC upheld the appeal set aside the orders made by the Tribunal below and remitted the matter to the Tribunal for rehearing. * The rehearing occurred before Senior Member Rosser in October 2013 and her decision was published on 20 November of that year. She found that the contract between the respondent and the builder had been validly terminated by the respondent on 4 August 2008 and she assessed consequential damages for breach of contract at $82,010.05 which included $8,000.00 damages for breach of the Statutory Warranty in respect of the slab. * On 9 January 2014 Senior Member Rosser ordered the builder to pay the respondents costs of the proceedings before her, of the District Court Appeal, and of the proceedings before Senior Member Smith on a party and party basis. * Pursuant to Senior Member Rosser's orders on 15 January 2014 the respondents solicitors sent to the builder's solicitors an assessment of their costs and disbursements totalling $104,259.50. * On 24 February 2014 the builder went into liquidation and Messrs T Gumbleton and A Bowcher were appointed liquidators. * On 1 November 2013 at a time when Senior Member Rosser's decision was reserved the respondent through its solicitors gave formal notice of a claim under the policy to the appellant. * The claim was denied in a lengthy letter from the appellant to the respondent dated 5 May 2014. As the issues raised in the letter were also issues raised in the proceedings below and (with one significant exception, namely the identity of the builder as the entity entitled to benefit under the policy which was resolved in favour of the respondent and is not subject to appeal) are issues in the appeal we need make no further reference to the letter of denial. * On 29 May 2014 proceedings were commenced by the respondent against the appellant in this Tribunal leading to the decision by Senior Cohen subject to appeal. 1. The facts outlined above occurred within the matrix of the Home Building Act 1989 (the Act). Those provisions of the Act which we see as relevant to this case are: 3B Date of completion of residential building work (1A) This section does not apply to residential building work to which section 3C applies. Note. Section 3C provides for the date of completion of new buildings in strata schemes. (1) The completion of residential building work occurs on the date that the work is complete within the meaning of the contract under which the work was done. (2) If the contract does not provide for when work is complete (or there is no contract), the completion of residential building work occurs on practical completion of the work, which is when the work is completed except for any omissions or defects that do not prevent the work from being reasonably capable of being used for its intended purpose. (3) It is to be presumed (unless an earlier date for practical completion can be established) that practical completion of residential building work occurred on the earliest of whichever of the following dates can be established for the work: (a) the date on which the contractor handed over possession of the work to the owner, (b) the date on which the contractor last attended the site to carry out work (other than work to remedy any defect that does not affect practical completion), (c) the date of issue of an occupation certificate under the Environmental Planning and Assessment Act 1979 that authorises commencement of the use or occupation of the work, (d) (in the case of owner-builder work) the date that is 18 months after the issue of the owner-builder permit for the work. (4) If residential building work comprises the construction of 2 or more buildings each of which is reasonably capable of being used and occupied separately, practical completion of the individual buildings can occur at different times (so that practical completion of any one building does not require practical completion of all the buildings). (5) This section applies for the purposes of determining when completion of residential building work occurs for the purposes of any provision of this Act, the regulations or a contract of insurance under the Home Building Compensation Fund. 18B Warranties as to residential building work (1) The following warranties by the holder of a contractor licence, or a person required to hold a contractor licence before entering into a contract, are implied in every contract to do residential building work: (a) a warranty that the work will be done with due care and skill and in accordance with the plans and specifications set out in the contract, (b) a warranty that all materials supplied by the holder or person will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract, those materials will be new, (c) a warranty that the work will be done in accordance with, and will comply with, this or any other law, (d) a warranty that the work will be done with due diligence and within the time stipulated in the contract, or if no time is stipulated, within a reasonable time, (e) a warranty that, if the work consists of the construction of a dwelling, the making of alterations or additions to a dwelling or the repairing, renovation, decoration or protective treatment of a dwelling, the work will result, to the extent of the work conducted, in a dwelling that is reasonably fit for occupation as a dwelling, (f) a warranty that the work and any materials used in doing the work will be reasonably fit for the specified purpose or result, if the person for whom the work is done expressly makes known to the holder of the contractor licence or person required to hold a contractor licence, or another person with express or apparent authority to enter into or vary contractual arrangements on behalf of the holder or person, the particular purpose for which the work is required or the result that the owner desires the work to achieve, so as to show that the owner relies on the holder's or person's skill and judgment. (2) The statutory warranties implied by this section are not limited to a contract to do residential building work for an owner of land and are also implied in a contract under which a person (the principal contractor) who has contracted to do residential building work contracts with another person (a subcontractor to the principal contractor) for the subcontractor to do the work (or any part of the work) for the principal contractor. 18E Proceedings for breach of warranties (1) Proceedings for a breach of a statutory warranty must be commenced in accordance with the following provisions: (a) proceedings must be commenced before the end of the warranty period for the breach, (b) the warranty period is 6 years for a breach that results in a major defect in residential building work or 2 years in any other case, (c) the warranty period starts on completion of the work to which it relates (but this does not prevent proceedings from being commenced before completion of the work), (d) if the work is not completed, the warranty period starts on: (i) the date the contract is terminated, or (ii) if the contract is not terminated—the date on which work under the contract ceased, or (iii) if the contract is not terminated and work under the contract was not commenced—the date of the contract, (e) if the breach of warranty becomes apparent within the last 6 months of the warranty period, proceedings may be commenced within a further 6 months after the end of the warranty period, (f) a breach of warranty becomes apparent when any person entitled to the benefit of the warranty first becomes aware (or ought reasonably to have become aware) of the breach. (2) The fact that a person entitled to the benefit of a statutory warranty specified in paragraph (a), (b), (c), (e) or (f) of section 18B has enforced the warranty in relation to a particular deficiency in the work does not prevent the person from enforcing the same warranty for a deficiency of a different kind in the work (the other deficiency) if: (a) the other deficiency was in existence when the work to which the warranty relates was completed, and (b) the person did not know, and could not reasonably be expected to have known, of the existence of the other deficiency when the warranty was previously enforced, and (c) the proceedings to enforce the warranty in relation to the other deficiency are brought within the period referred to in subsection (1). (3) The regulations may prescribe defects in a building that are not (despite any other provision of this section) a major defect. (4) In this section: major defect means: (a) a defect in a major element of a building that is attributable to defective design, defective or faulty workmanship, defective materials, or a failure to comply with the structural performance requirements of the National Construction Code (or any combination of these), and that causes, or is likely to cause: (i) the inability to inhabit or use the building (or part of the building) for its intended purpose, or (ii) the destruction of the building or any part of the building, or (iii) a threat of collapse of the building or any part of the building, or (b) a defect of a kind that is prescribed by the regulations as a major defect. Note. The definition of major defect also applies for the purposes of section 103B (Period of cover). major element of a building means: (a) an internal or external load-bearing component of a building that is essential to the stability of the building, or any part of it (including but not limited to foundations and footings, floors, walls, roofs, columns and beams), or (b) a fire safety system, or (c) waterproofing, or (d) any other element that is prescribed by the regulations as a major element of a building. 92 Contract work must be insured (1) A person must not do residential building work under a contract unless: (a) a contract of insurance that complies with this Act is in force in relation to that work in the name under which the person contracted to do the work, and (b) a certificate of insurance evidencing the contract of insurance, in a form prescribed by the regulations, has been provided to the other party (or one of the other parties) to the contract. 99 Requirements for insurance for residential building work done under contract (1) A contract of insurance in relation to residential building work required by section 92 must insure: (a) a person on whose behalf the work is being done against the risk of loss resulting from non-completion of the work because of the insolvency, death or disappearance of the contractor, and (b) a person on whose behalf the work is being done and the person's successors in title against the risk of being unable, because of the insolvency, death or disappearance of the contractor: (i) to have the contractor rectify a breach of a statutory warranty in respect of the work, or (ii) to recover compensation from the contractor for any such breach. 103B Period of cover (1) A contract of insurance must provide insurance cover for loss arising from non-completion of the work for a period of not less than 12 months after the failure to commence, or cessation of, the work the subject of the cover. (2) A contract of insurance must provide insurance cover for other loss insured in accordance with this Act for a period of not less than: (a) in the case of loss arising from a major defect in residential building work (within the meaning of section 18E)—6 years after completion of the work, or (b) in the case of any other loss—2 years after completion of the work. 103BB Time limits for policies issued from 1.7.2002 (1) A contract of insurance under the Home Building Compensation Fund entered into on or after 1 July 2002 provides insurance cover in respect of loss only if a claim in respect of the loss is made to the insurer during the period of insurance. 103BC 10-year "long stop" limit on claims under existing policies (1) Despite any other provision of this Act, a contract of insurance under the Home Building Compensation Fund entered into before 1 July 2010 does not in any circumstances provide insurance cover in respect of loss unless a claim in respect of the loss is made to the insurer within 10 years after the work insured was completed. Note. Section 3B provides for the date of completion of residential building work. (2) This section does not operate to extend any period of insurance. 1. Also relevant to the case are the provisions of the building contract and the policy between the appellant and the respondent. 2. The building contract was in a standard form endorsed by the Housing Industry Association. It included these provisions: Clause 2. Builder's Obligations 2.1 The builder must: (a) complete the building works in accordance with this contract; and (b) comply with all laws and requirements of any statutory or other authority with respect to the carrying out of the building works. Clause 8. Commencing the Building Works 8.1 The builder is to commence the building works within ( ) working days after the date that a) the builder receives all necessary permits and planning approvals for the building works to commence; or (b) the owner satisfies all of the requirements of Clause 4. whichever is later. Clause 11. Site Possession and Access 11.1 The owner gives the builder exclusive possession of the site to carry out the building works. 11.3 The owner, the owner's agents and officers of the lending body: (a) must not hinder: (i) the builder's access or possession of the site; and (ii) the progress of the building works; (b) must not: (i) make inquiry of; (ii) issue directions to; or (iii) give instructions to, the builder's workers or subcontractors. Communication must only be with the builder's nominated person; and (c) may only have access to the building works at reasonable times and after giving reasonable prior notice for the purposes of inspecting the progress of the building works. 11.4 The builder's unused materials on the site are the property of the builder. Clause 33. Ending the Contract – Breach 33.1 If a party is in substantial breach of this contract the other party may give the party in breach a written notice stating: (a) details of the breach; and (b) that, if the breach is not remedied within 10 working days, that party is entitled to end this contract. 1. The policy after naming the respondent as "beneficiary", the builder, and identifying the building site contained this limitation: MAXMIMUM AMOUNT OF COVER AND CLAIMS The limit of liability is $200,000 in relation to each dwelling, or such amount as is determined by Regulations pursuant to the Home Building Act. The period in respect of which claims may be made commences on the date of the relevant Residential Building Work Contract or date of issue of the building permit for the relevant work (whichever is the earlier); and expires on the date being seven (7) years after the date of completion of the Residential Building Work, provided that the Insured shall have 90 days from the expiry of the period of Insurance in which to notify the Insurer of any matter of which the Insured became aware during the period of Insurance as existence of grounds for a claim. 1. Other relevant provisions of the policy include SECTION 2 INDEMNITY FOR INSURED EVENTS 2.1 Subject to Section 1.1 the Insured shall be indemnified for Insured Loss which arises from: (a) non-completion of Residential Building Work under the relevant Contract; (b) a breach of a Statutory Warranty, being loss or damage in respect of which the Insured cannot recover compensation from the Contractor or have the Contractor rectify because of the Insolvency, death or Disappearance of the Contractor; (c) faulty design, where the design was provided by the Contractor; (d) the non-completion of the Work because of early termination of the Contract for the Work because of the Contractor's wrongful failure or refusal to complete the Work; ………………… 2.3 During the Period of Insurance and upon the occurrence of an Insured Event, the Insured is indemnified subject to the Policy Limitations, for any Reasonable Costs incurred by the Insured in seeking to recover compensation from the Contractor for the loss or damage or in taking action to rectify the loss of damage. ………………… 2.6. The date of early termination of the relevant Contract for the purpose of Section 2.1(d) shall be taken to be the date on which the Insured purported to bring the Contract to an end whether pursuant to the terms of the Contract or pursuant to general principle of law. SECTION 3 EXCLUSIONS AND LIMITATIONS 3.1 The indemnities referred to and contained in Section 2.1 shall only apply if the Insured suffers loss or damage because of the Insolvency, death or Disappearance of the Contractor. ………………… 3.4 (i) a Claim for compensation made under the indemnity for non-completion of the Residential Building Work under Section 2.1(a), (b) and (d) to the extent that the cost of completion (excluding the cost of rectifying any Defective Work) exceeds an amount equal to 20% of the Contract Price (including any agreed variation to the Contract Price) under the relevant Contract for the Work. ………………… SECTION 4 PERIOD OF INSURANCE 4.1 This Policy only provides the indemnities referred to in Section 2 for the following period: (a) in respect of loss or damage arising from non-completion of the Work, the period of 12 months commencing upon the date of the failure of the Contractor to commence the Work or the date of the cessation of the Work; or (b) in respect of loss arising from a Structural Defect for the period of 6 years after the date of Completion of the Work or the date of the end of the Contract relating to the Work, whichever is the later; or (c) in respect of loss arising otherwise than from any such Structural Defect 2 years after that date of the Completion of the Work or the date of the end of the Contract relating to the Work, whichever is the later. …………………. SECTION 7 NOTIFICATION OF DEFECTS AND LEGAL PROCEEDINGS 7.1 The Insured is required to give the Insurer or the Insurer's agent immediate notice in writing of: (a) any Defect upon any Defect becoming evident or reasonably evident to the Insured subsequent to the Completion of the Residential Building Work; and (b) any circumstances which may give rise to a claim, upon the Insured becoming aware of that circumstance. SECTION 8 NOTIFICATION OF A CLAIM AND CLAIMS PROCEDURE 8.1 The Insured is required to give the Insurer or the Insurer's agent immediate notice on the Insurer's Claim form of any Insured Event occurring due to the Insolvency, death or Disappearance of the Contractor. 8.7 The period for making claims under the Policy ceases immediately the Period of Insurance expires. …………………. SECTION 12 MISCELLANEOUS 12.1 This Policy is issued in compliance with the requirements of the Act and if any term of this Policy conflicts or is inconsistent with the Act or the Regulations then the Policy must be read and be enforceable as if it complies with the Act. 'Completion' of the Work means: (a) the date on which the Work is completed within the meaning of the relevant Contract; or (b) if the relevant Contract does not provide for when the Work is completed or there is no contract, on the date of the final inspection of the Work by the applicable council; or (c) in any other case, on the latest date that the Contractor attends the Site to complete the Work or hand over possession to the Owner, or if the Contractor does not do so, on the latest date the Contractor attended the Site to carry out the Work. 'Reasonable Costs' means: (a) Reasonable Legal Costs; and (b) reasonable costs and expenses, actually incurred by the Insured in the proper and reasonable attempt to seek to recover compensation from the Contractor or in taking action to rectify any loss or damage. 'Reasonable Legal Costs' means costs calculated on a party/party basis in accordance with the appropriate scale having regard to the quantum of the Insured's loss or damage covered by the Policy. 'Statutory Warranty' means each of the warranties given by the Contractor to the Owner as implied under Section 18B of the Act being: (a) a warranty that the Work will be performed in a proper and workmanlike manner and in accordance with the plans and specifications set out in the Contract; (b) a warranty that all materials supplied by the Contractor will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the Contract, those materials will be new; (c) a warranty that the Work will be done in accordance with, and will comply with the Act or any other law; (d) a warranty that the Work will be done with due diligence and within the time stipulated in the Contract, or if no time is stipulated, within a reasonable time; (e) a warranty that, if the Work consists of the construction of a Dwelling, the making of alterations or additions to a Dwelling or the repairing, renovation, decoration or protective treatment of a Dwelling, the Work will result, to the extent of the Work conducted, in a Dwelling that is reasonably fit for occupation as a Dwelling; (f) a warranty that the Work and any materials used in doing the Work will be reasonably fit for the specified purpose or result, if the Person for whom the Work is done expressly makes known to the Contractor or another person with express or apparent authority to enter into or vary contractual arrangements on behalf of the Contractor, the particular purpose for which the Work is required or the result that the Owner desires the Work to achieve, so as to show that the Owner relies on the Contractor's skill and judgement. 'Work' means the Residential Building Work to be carried out by the Contractor for the Owner as described in the Contract, or where there is no contract entered into between the Contractor and the Owner in respect of the Work in circumstances where under the Act as a contract in writing for that Work is not required, the actual Work performed by the Contractor for the Owner on the Site. 1. From the above summary it would appear that the respondent was entitled to claim damages against the builder in respect of the defective slab and in respect of its breach of contract leading to termination by the respondent. Proceedings in respect of the defective slab could not be maintained while the contract remained on foot (Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2005] NSW CA 248) 2. On the face of it potentially the policy responded to claims in respect of the slab and the breach of Contract and also to costs incurred in pursuing such claims against the builder (2.1(a), 2.1(b), 2.1(d) and 2.3). The policy does not in terms respond to an inability to recover the amount ordered to be paid by a Court or Tribunal and the learned Member below may have erred in law when suggesting that proceedings before the Tribunal between the respondent and the builder could have given rise to an issue estoppel. As Dixon J makes clear in the passage quoted from Blair v Curran (1939) 62 CLR 464 the estoppel applies only to the parties to proceedings and their privies. The present appellant is, we think, a privy neither of the respondent nor of the builder. See for instance the discussion as to the meaning of "privies" in Ramsay v Pigram (1967) 118 CLR 271 and by Brownie A-JA in VACC Insurance v BP Australia (1999) 47 NSWLR 716 although as the majority in VACC pointed out wider principles of estoppel may apply. 3. The first ground of appeal asserted that contrary to the express terms of the policy the Tribunal below ordered a payment in excess of $200,000. The respondent argues that this was not a point argued below. However, the policy and all its terms were in issue in the proceedings below and although the member makes no express mention of the point, we see no reason why the respondent should not be held to the plain terms of the policy. Accordingly this ground of appeal is upheld. 4. In her decision Senior Member Rosser quantified the cost of rectifying the slab at $8,000.00 and assessed damages for breach of contract by the builder leading to termination of the building contract at $74,010.05 a total of $82,010.05. In these proceedings by virtue of cl 3.4(i) of the policy damages for non completion are limited to 20% of the contract price. As the contract price was $187,986.75 damages for non completion were limited to $37,597.35. The Tribunal below erred in law in not giving effect to this limitation and the third and fifth grounds of appeal should be upheld. Subject to other questions dealt with below it would seem to follow (as the amounts are not disputed by the appellant) that the policy responds to claims for $8,000.00, $37,597.35 and costs pursuant to cl 2.3. 5. The main issues in the appeal concern the temporal limitations in the policy. For the purposes of the claim for damages for breach of contract the most significant limitation seems to be that contained in cl 4.1 (a) of the policy. The limitation plainly relates back to cl 2.1 (a) and cl 2.1 (d). Although counsel for the respondent submitted that damages for non completion of the work would also fall within cl 2.1(b) we think that as a matter of construction the express terms particularly of 2.1 (d) exclude reliance upon the more general terms of cl 2.1 (b). In concluding otherwise in our opinion the Tribunal below erred. 6. The evidence seems to establish without contention that the builder did no work on the site beyond about May 2003. In context the meaning of cl 4.1 (a) is not entirely clear although it largely follows the terms of 103B of the Act. Counsel for the appellant submitted that the paragraph requires a claim to be made and quantified within 12 months from cessation of the work. Presumably this would necessitate the builder becoming insolvent dying or disappearing within that period. Although this interpretation may be unduly restrictive we think that at least it requires notification to the insurer of a potential claim within 12 months after cessation of work see cl 8.7. 7. The expression "cessation of work" is not defined and "work" in effect means work performed under the contract. There is no reason to give "cessation of work" other than its natural meaning namely the date upon which the builder actually ceased to work on the site. This according to the evidence was about May 2003. It was not until November 2013 or later that the appellant was notified of the claim, many years beyond the period fixed by cl 4.1(a). In our opinion the respondent was not then entitled to claim damages under the policy suffered as a result of the termination of the building contract and this part of his claim must fail. The seventh ground of appeal should be upheld. 8. As to the claim in respect of the defective slab the relevant period stipulated by cl 4.1 (b) and cl 4.1 (c) is related to the date of completion of the work or the date of the end of the contract relating to the work whichever is the later. "Completion of the Work" is defined in the policy not inconsistently, we think, with s 3B of the Act. Paras (a) and (b) of the definition clearly do not apply. Arguably para (c) is applicable on the basis that the contract was terminated on 4 August 2008 and at that time the builder's shed and materials remained on the property to the effect that the builder was still in possession. In any event in our opinion the contract did not "end" earlier than the date it was terminated by written notice given by the respondent and we see no reason to disturb the finding below which was also the finding of Senior Member Rosser that the contract terminated on 4 August 2008. 9. Nor is there any reason to disturb the finding below that the defect in the slab was a structural defect within cl 4.1 (b). That being so as the Period of Insurance did not expire until 4 August 2014 these proceedings were brought within the six year period permissible under the Policy. Therefore the eighth ground of appeal fails. 10. There remains the question of the operation of the statutory bar in S 103 BC. It was contended by the respondent in argument before us that S 103 BC which commenced on 25 October 2011, does not apply to this case. It is unnecessary, however, for us to decide that question in light of our earlier finding that the contract remained on foot until 2008. The bar operates 10 years after the date the work insured was completed. The section draws attention to section 3B which curiously provides for the ascertainment of a rather different expression namely "completion of residential building work." However given the reference to S 3B in S 103 BC we conclude that the legislative intent was to equate "the date the work insured was completed" with the expression "completion of the residential building work." 11. On behalf of the appellant it was submitted that the completion of the building works ascertained in accordance with S 3B occurred in May 2003 as provided by S 3B (3) (b). The respondent submitted that to the contrary S 3B (1) applies and that as the work was never completed within the meaning of the contract the date of determination of the contract is to be taken as the date on which the work was completed. 12. Principles which we regard as relevant were discussed in Beckhaus: 68 While, on this assumption (the Contract still being on foot), the Council may have been entitled to claim damages for delay arising out of Beckhaus' failure to achieve practical completion by the date for practical completion, it could not sue Beckhaus for defective or incomplete work. As long as the Council maintained that the Contract was alive and had not been terminated, and held Beckhaus to its obligation to complete the work in accordance with the specification, on its contention the work remained lawfully in Beckhaus' possession. In other words, it was an inevitable incident of the Council's argument that the work had not been delivered to and accepted by the Council (Beckhaus –on the Council's argument – being in possession of and obliged to complete the work). While the work was in Beckhaus' possession, the Council suffered no loss by reason of defective or incomplete work; the work, not being in the Council's possession, did not at that stage form part of its patrimony. 69 This situation would have changed when the Council was terminated. When that occurred, the work (in its defective and incomplete state) was handed over to the Council. At that stage, the Council suffered loss by being in possession of defective and incomplete work. 1. In our opinion the interpretation of S 3B as it applies to this case contended for by the respondent is to be preferred. It is consistent with the passages quoted from Beckhaus. Moreover S 3B 3(b) assumes that there has been practical completion of the work. It would we think do much violence to the subsection if it were to be applied to an entirely notional situation. 2. In the circumstances we see no reason to reject the respondent's proposition that the contract was on foot until it was formally terminated by him on 4 August 2008 as found by the Tribunal below. It is clear that although no work was actually performed by the builder beyond May 2003 the parties were for some years thereafter engaged in discussions and negotiations which assumed the continued existence of a contract. For these reasons in our opinion grounds of appeal 9,10,11,12 and 13 should be rejected. 3. There is also in our view no reason to disturb the finding of the Tribunal below that damages for breach of warranty in respect of the slab should be assessed at $8,000.00. 4. There remains the claim for costs under cl 2.3. The Tribunal below dealt with that matter in par 139 of its reasons: 139 There is a proper basis for the Applicant to have the whole of the costs awarded in proceedings HB 12/43117 & HB 12/42122, being $128,500.00. While that sum is the product of calculation by the Applicant's solicitor, not by way of assessment by a costs assessor, and it would seem has been grossed up by the costs incurred since the day of publication of the decision of Senior Member Rosser on 20 November 2013, the calculations from which it emanates – see Ex. 1, p. 299 – are compelling, and apt not to be disturbed by a costs assessor. The Tribunal will so order. 1. Clause 2.3 of the policy unsurprisingly has limitations. They include that there must exist an "Insured Event" and that a claim must be made within the "Period of Insurance". In this case the Insured Events are those specified in cl 2.1, 2.1 (a) and 2.1 (d). 2. As we have found earlier the Period of Insurance in respect of claims under cl 2.1 (a) and 2.1 (d) expired long before the respondent commenced any proceedings and the policy did not respond to them. In our opinion as a matter of construction the parties did not intend cl 2.3 to extend to legal proceedings other than those based upon claims to which the policy potentially responded. Otherwise the phrase "during the period of insurance" would have no work to perform. As a consequence we do not consider that in these proceedings the respondent should be entitled to the whole of the costs ordered by Senior Member Rosser. The total was assessed in the Tribunal below at $128,500.00 and there is no reason not to accept that figure. It is not unreasonable for the Appeal Panel to infer that the cost attributable to litigation in respect of the slab amounts to less than half of the total amount of costs claimed bearing in mind that those proceedings involved a hearing before Senior Member Smith, an appeal to Judge Taylor and a further hearing before Senior Member Rosser. Doing the best we can we would quantify the respondent's entitlement under cl 2.3 of the policy to a proportion of those costs and we assess the sum of $50,000.00. 3. In the result in lieu of the amount awarded below we would substitute an order that the appellant pay the respondent $58,000.00. Costs of the proceedings below 1. As to the costs of the proceedings the Tribunal below ordered costs on an indemnity basis. There was we think in the circumstances no basis for such an order or for the findings, in effect, of misconduct which the Tribunal advanced to support it. In any event the respondent did not wish to be heard on the subject. We would substitute an order that the appellant pay the respondent's costs on a party and party basis as agreed or assessed. Costs of the Appeal 1. As to the costs of the appeal although the appellant has had a considerable measure of success we think the appropriate order is that there be no order as to costs. No special circumstances have been established for the purposes of section s 62 of the Civil and Administrative Tribunal Act 2013. 2. We make these orders 1. Appeal allowed. 2. Orders made below quashed. 3. In lieu order 1. That the appellant pay the respondent $58,000.00 forthwith. 2. That the appellant pay the respondent's costs of the proceedings below on a party and party basis as agreed or assessed. 3. That there be no order as to the costs of the appeal. I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. 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. Decision last updated: 03 June 2015