The application of section 54 of the Insurance Contracts Act to the insurance required (in its various iterations) by the Home Building Act has been debated for years. The most recent decision on this topic concerns the pre 1 July 2010 scheme (pre HBCF).
In Drummond v Gordian Runoff Ltd [2023] NSWSC 607, the Supreme Court considered the application of section 103BB of the Home Building Act 1989 (NSW) (HBA) in light of section 54 of the Insurance Contracts Act 1984 (Cth) (ICA).
This debate concerned whether the relevant HBA section, which provided that an insurance claim may only be made during the period of insurance, was contrary to the relevant ICA section, which prevents the decline of a claim but allows for a reduction for prejudice "where the effect of a contract of insurance would, but for this section, be that the insurer may refuse to pay a claim" in relation to an "act of the insured or of some other person".
Section 103BB was introduced following decisions that interpreted the HBA as allowing for claims to be made under home warranty insurance at any time, including outside of the insurance period of cover.
Facts
The owners did not notify the insurer of their claim within the period of insurance, as required under section 103BB. Rather, they successfully pursued a claim against the builder for rectification work in the NSW Civil and Administrative Tribunal. Prior to completing the rectification work, the builder entered into external administration. The owners made a claim with the insurer three years after the expiry of the period of insurance, which was rejected.
The owners argued that:
- section 54 prevented the insurer from rejecting a claim on the basis that the claim does not comply with section 103BB; or in the alternative
- section 103BB was inconsistent with section 54. Accordingly, section 109 of the Commonwealth Constitution applied to render section 103BB invalid, to the extent of inconsistency.
How do section 54 and section 103BB work together?
In considering the owners' first argument that section 54 prevented the insurer from rejecting the claim under section 103BB, the Court began by considering whether section 103BB operates to imply terms within the policy or operates outside the insurance contract and directly alters the rights and obligations of the parties. This question was pertinent because section 54 only applies "where the effect of a contract of insurance would, but for this section, be that the insurer may refuse to pay a claim". The explicit reference to a "contract of insurance" meant that the source of refusal must lie within the contract and not a statute. Accordingly, the owners argued that section 103BB was implied into the contract of insurance and thus the insurer had rejected their claim on the basis of the contract of insurance, enlivening section 54.
The Court found against the owners' argument, holding that section 103BB did not imply terms within the contract of insurance but directly altered the rights of the owners. In contrast to section 18 of the HBA (statutory warranties implied into building contracts) and section 13 of the ICA (relating to a duty of utmost good faith implied into insurance contracts), section 103BB contained no explicit language that would evince a statutory intention to insert terms into a contract.
Rather, section 103BB changed the circumstances in which the policy was to operate, but did not change the policy itself. Even if a contract of insurance is presupposed, the insurer's entitlement to refuse to pay a claim was found to be sourced in the statute rather than in contract.
Accordingly, section 54 does not apply to soften the effect of section 103BB of the HBA. Since the insurer is prohibited from paying the owners' claim by statute, not by the contract of insurance, the circumstances contemplated in section 54 were not engaged.
Are section 54 and section 103BB inconsistent?
In the alternative to the first argument, the owners argued that 103BB was inconsistent with section 54, such that section 109 of the Commonwealth Constitution was enlivened to hold section 103BB invalid, to the extent of its inconsistency.
The Court found that there is no indirect inconsistency because the ICA was not intended to be a complete statement of the law regarding insurance. To illustrate, section 7 of the ICA confirms that the ICA is not intended to exhaustively create a code for insurance contracts but rather merely deal with certain aspects of them.
The Court also found that there was no direct inconsistency. Section 103BB is concerned with circumstances outside of the contract of insurance, whereas section 54 is primarily concerned with the contract of insurance. When section 103BB applies to the rights or obligations directly, it does not impair the functioning of section 54. Accordingly, there was no inconsistency and section 109 was not enlivened.
In the media
No penalties for areas that resist high-density
housing
Inner-city councils will not be penalised into meeting
housing targets, despite high taxpayer burden of mass building on
outer-suburban fringes. The NSW government wants to shift more
residential development to suburbs close to the Sydney centre,
where infrastructure-related costs are lower because essential
services are already in place (28 August 2023). Read more
here.
Local councils divided after government report
identifies cost-effective suburbs for new infrastructure
The report from the NSW Productivity Commission published
a report on 28 August 2023 that found the costs of infrastructure
to support new homes are lowest in the CBD, parts of the Lower
North Shore, Eastern Suburbs and Inner West (28 August 2023). Read
more
here.
NSW coastal communities join forces to fight against
rise of development approvals
Community groups along the NSW coastline are calling for
planning reforms to stop the revival of 'zombie development
applications'. The Coastal Residents United group is calling
for planning-law reform to stop projects approved decades before,
before many of today's environmental, cultural or other impact
assessments were required (24 August 2023). Read more
here.
Calls to ban gas in new buildings in NSW and what it
will mean for households
Debate has emerged after the City of Sydney council voted
to begin the process of making all new homes and businesses gas
free. Similar measures are in place in Waverley and Parramatta
councils, as well as Victoria and the ACT (23 August 2023). Read
more
here.
Waterloo Estate redevelopment to add 1500 social,
affordable homes, but current residents say they don't want the
building demolished
The NSW government announced the renewal of the Waterloo
Estate which will convert the current 749 public housing
developments to at least 1500 public and social housing, among the
privately-owned apartments. Current residents will be located in
nearby social housing homes around mid-2024. Read more
here.
Master Builders Australia supports the government's
move to boost housing supply
The Master Builders Australia (MBA) has
issued statements approving the federal government's efforts to
tackle the supply-side issues plaguing Australia's housing
market. The National Cabinet announced that the states and
territories will be entitled to a "new home bonus" of
around $3 billion to help the nation reach the new target of 1.2
million additional homes built in the next five years (18 August
2023). Read more
here.
South West Rocks residential complex gets nod after
resurrection of 30-year-old 'zombie DA'
A controversial residential development in South West
Rocks, NSW, is set to become a reality. The project will include 18
two-storey townhouses and 12 resort-style townhouses on a
five-hectare strip close to the Trial Bay Front Beach. The Kempsey
Shire Council has voted to approve the project, with 72 development
conditions (16 August 2023). Read more
here.
In Practice
AAT Bulletin Issue No. 17/2023
(28 August 2023). Read more
here.
Decisions reserved as at 18 August 2023
The Court of Appeal maintains a list of matters before the
Court for which judgement is reserved (18 August 2023). Read more
here.
Reissued Practice Note SC WQ 12 – Real Property
List
The Chief Justice reissued this Practice Note on 17 August
2023, commencing on 18 August 2023. The revised Practice Note
updates requirements for submitting consent orders, provides
procedure for remote appearances and updates the procedures for
interlocutory applications (17 August 2023). Read more
here.
Published
NSW Productivity Commission's latest report confirms
density close to CBD lowers infrastructure costs
The NSW Government welcomed the release of the latest
housing study: "Building more homes where infrastructure costs
less – comparing the marginal costs of servicing growth in
different areas of Sydney". The NSW Productivity
Commission's conclusion that building closer to Sydney's
CBD can save up to $75,000 in infrastructure costs per new home
reinforces the NSW Government's commitment to rebalance housing
targets around transport links (28 August 2023). Read the media
release
here. Read the housing study
here.
Statutory Reviews into native vegetation management and
biodiversity laws tabled
Two statutory reviews into native vegetation management
and biodiversity conservation laws were tabled in the NSW
Parliament on 24 August 2023. The independent review of the
Biodiversity Conservation Act concluded it was not meeting its
primary purpose of maintaining a healthy, productive and resilient
environment. It makes 58 recommendations, including changes to the
Biodiversity Offset Scheme (24 August 2023). Read more
here.
Collaboration to deliver for community at Rozelle
Parklands
The Minns Labor Government will work with the Inner West
Council and Transport for NSW to undertake a new masterplan for
Rozelle Parklands to salvage the project that was not going to
provide the sporting facilities, accessibility and car parking that
the community was promised (22 August 2023). Read more
here.
New home sales foreshadow a weak 2024 for home
building
The Housing Industry Australia's Home Sales report
revealed a decline in sales in the three months to July 2023, down
by 33.4% nationally compared to 2022 (22 August 2023). Read more
here.
Australian Institute of Architects signs landmark
Commonwealth pact to counter climate impact as urban populations
set to double
The Australian Institute of Architects has signed an
agreement, which has been signed by over 15 members of the
Commonwealth Association of Architects, to enable vital knowledge
and expertise to be shared between Commonwealth countries to
address global challenges of rapid urbanisation and environmental
degradation. The agreement consists of a Memorandum of
Understanding (21 August 2023). Read more
here.
Cases
Amirbeaggi v NSW
Self Insurance Corporation [2023] NSWCATAP 230
APPEALS – stay – procedural directions made in face of
assertion Tribunal lacked jurisdiction – jurisdiction of
Appeal Panel if assertion correct – application for stay
ill-conceived.
Civil and Administrative
Tribunal Act 2013 (NSW); Home Building Act 1989
(NSW); Uniform Civil
Procedure Rules 2005 (NSW).
Feng v
Haghparast [2023] NSWDC 310
APPEALS – appeal from decision of an Assessor in the Small
Claims Division of the Local Court – grounds of appeal
limited by statute – application of s 39(2) of the
Local Court Act 2007 (NSW) –
appealed decision was not within the jurisdictional remit of the
Small Claims Division – denial of procedural fairness not
established – summons and appeal dismissed.
Home Building Act 1989, (NSW) s 7B; s 18B; Local Court Act 2007
(NSW), s 39(2); Health and Safety Regulation 2017 (NSW), cl
308.
Nu-Stone Building
Pty Ltd v McInerney [2023] NSWSC 940
APPEALS – leave to appeal from decisions of NSW Civil and
Administrative Tribunal ("NCAT") Appeal Panel to Supreme
Court – whether Appeal Panel gave adequate reasons –
statutory obligation on Appeal Panel to provide the reasoning
process that led it to the conclusions in made in its written
reasons – review of written reasons as a whole – leave
to appeal granted – appeal allowed.
Civil and Administrative Tribunal Act 2013 (NSW), ss 27(1),
34(1)(c), 62, 78, 80, 81, 83; Home Building Act 1989 (NSW), ss 42A,
48K, 48L; Administrative Decisions Review Act 1997 (NSW), s 63;
Residential Tenancies Act 2010 (NSW).
Read v Gitman
[2023] NSWDC 330
TORT – defamation – Plaintiff is the chair, secretary
and treasurer of the owners committee of a small apartment block
– three publications by the strata manager to owners, a
tenant and unit managers concerning her conduct of strata matters
– qualified privilege at common law – malice –
defence of justification to one imputation – damages.
Defamation Act 2005 (NSW), ss 10A, 34, 35, 38, 39; Home Building
Act 1989 (NSW), ss 3, 4, 10, 92(1)(a); Property and Stock Agents
Act 2002 (NSW), ss 3B(1), 8(1), 32(1), 86(1), 103(3), 104(1)(a);
Property Stock and Business Agents Regulation 2014 (NSW); Strata
Schemes Management Act 2015 (NSW), ss 30(4), 33(2), 178(1)(c),
Schedule 1, ss 11, 21; Uniform Civil Procedure Rules 2005 (NSW), rr
17.6, 31.10.
Rauf v Vartanian; Vartanian v Rauf [2023] NSWCATAP
238
APPEALS – BUILDING AND CONSTRUCTION – contract not in
writing – need to prove loss or damage arises – new
decision substituted.
Civil and Administrative Tribunal Act 2013 (NSW); sections 36 (1),
(2),(4), 38 (2), (5), 80, Schedule 4 clause 12 (1),
H & M Constructions (NSW) Pty Ltd v Golden Rain Development
Pty Ltd (No 4) NSWSC 925
BUILDING AND CONSTRUCTION – design and construct contract
– practical completion – superintendent to issue
certificate of practical completion or give reasons for not doing
so – superintendent issued "conditional"
certificate of practical completion – purported retrospective
date of practical completion on satisfaction by builder of
specified conditions – contractual status of conditional
certificate – whether Court can in any event determine when
practical completion took place.
CONTRACTS – "prevention principle" – whether
developer took over builder's obligations and prevented builder
from performing those obligations.
ESTOPPEL – whether developer induced builder to understand
that effect of conditional certificate was to fix time for
determination of liquidated damages and delay costs.
UNCONSCIONABLE CONDUCT – whether developer engaged in
unconscionable conduct.
Australian Securities and Investments Commission Act 2001 (Cth);
Competition and Consumer Act 2010 (Cth), Sch 2 – Australian
Consumer Law; Environmental Planning and Assessment Act 1979
(NSW).
Singh v
Commissioner for Fair Trading [2023] NSW CATOD 123
ADMINISTRATIVE LAW – Home building – application for
individual contractor licence – application of Instrument
– experience requirements – 'wide range of building
construction work'.
Administrative Decisions Review Act 1997; Home Building Act 1989;
Licensing and Registration (Uniform Procedures) Act 2002.
Heather v Taylor
Industries Pty Ltd [2023] NSWSC 96C
BUILDING AND CONSTRUCTION – Grosvenor or Brodyn stay –
couple enter into contract for home renovation – payment
claim for variations – adjudication determination and
judgment in favour of builder – principles at [45]
–[46] – cashflow problems natural consequence of
principal withholding payment – not satisfied of
"certainty" that judgment sum not recoverable if
plaintiffs succeed in substantive proceedings.
Building and Construction Industry Security of Payments Act 1999
(NSW), s 20(2B); Home Building Act 1989 (NSW), s 42A.
Legislation
NSW Regulations and other miscellaneous
instruments
Water
Management (Murray River Traffic) Regulation 2023 (NSW) (No
479) – published LW 25 August 2023
Natural Resources Access Regulator Regulation 2023 (NSW) (No
473) – published LW 25 August 2023
Community
Housing Providers (adoption of National Law) Regulation 2023 (NSW)
(No 465) – published LW 25 August 2023
Environmental Planning Instruments
State
Environmental Planning Policy Amendment (Agritourism) 2023
(2023-458) – published LW 18 August 2023
This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.