Judgment date: 18 May 2011
Vero Insurance Limited v Owners of Strata Plan No 69352 & Ors  NSWCA 138 New South Wales Court of Appeal1
The NSW Court of Appeal has held that an insurance claim made by an Owners Corporation within the meaning of the Strata Schemes Management Act 1996 (NSW), in respect of property that the respondent Owners Corporation legally owns, is a single insurance claim.
On 27 July 2006 the Owners Corporation of Strata Plan 69352 notified Vero Insurance Limited (Vero) of a claim under a policy of Home Warranty Insurance issued to the builder and developer Meriton Apartments in 2001 by Vero in respect of a residential apartment complex built on land at Chatswood in New South Wales. The claim was in the amount of $85,137.50 for repair and rectification of defective common property.
The insurer Vero rejected the claim based upon the proposition that a claim made by an owners corporation is not a single insurance claim but instead a series of multiple claims made on behalf of all of the owners of the lots. As the subject strata scheme had 201 lots, the insurer Vero contended that a claim by an owners corporation was not a single claim but in fact 201 claims made on behalf of all lot owners. As there was a $500 excess payable in respect of each claim, Vero rejected the claim based upon a calculation that the excess payable ($500 x 201 lots = $100,500 total excess payable) exceeded the value of the claim.
The NSW CTTT
It was therefore no surprise that the Owners Corporation appealed to the NSW Consumer Trader and Tenancy Tribunal pursuant to the statutory appeal mechanism provided by the NSW Home Building Act (HB Act). The Tribunal then promptly decided that the excess payable was $500 in respect of a claim of $85,137.50.
"....the Owners Corporation, as the successor in title to the developer in relation to the common property, was entitled to make a claim under the Policy. It was entitled to do so notwithstanding that it had never received a certificate from the Insurer in respect of the common property. Since the Owners Corporation had made only a single claim for indemnity, the only excess payable was $500. The excess provided for in the Standard Terms was not to be understood by reference to the interest of each lot proprietor in the common property"
This appears at the outset to have been a simple and not unexpected tribunal decision.
Notwithstanding the logic and efficiency of the decision of the CTTT, the insurer, Vero, proceeded with an appeal to the District Court of New South Wales based upon exercise of a statutory right of appeal from the CTTT and running in essence the same submissions put before the Tribunal to the concluded effect that:
"..... a claim for indemnity in respect of loss or damage to the common property can only be a claim by the several lot proprietors in the strata scheme or their separate policies and there cannot be a claim by an owners corporation for its own benefit. In other words, Part 6 of the HB Act precludes a single claim for indemnity in respect of common property, where the strata scheme comprises multiple residential lots. The excess applicable to the claim made by the Owners Corporation is therefore $100,500".
The District Court Judge (Levy DCJ) then promptly dismissed the appeal on the ground that the Tribunal's decision was rested exclusively upon a finding of fact - thus no question of law arises in relation to the appeal - thus the insurers appeal could not succeed for reason that the statutory right of appeal to the District Court only exists in relation to matters of law.
NSW Court of Appeal
The insurer then appealed to the NSW Court of Appeal, initially under a statutory right of appeal pursuant to section 127 of the District Court Act but then amended to an appeal under section 69 of the Supreme Court Act, seeking to set aside the decision of the District Court of NSW based upon a judicial error having been made by that court.
The insurer also sought to hold section 65 of the CTTT Act constitutionally invalid, served the required notices of a constitutional matter as required by section 78B of the Judiciary Act 1903 (Cth) and the Attorney General of New South Wales as a result was required to intervene in the proceedings.
The insurer abandoned its constitutional case at the hearing - thus leaving the remaining issue to be resolved - whether the claim by the Owners Corporation was to be treated as one single claim or 201 separate claims.
The NSW Court of Appeal, after detailed consideration of the various oral and written submissions of the parties, decided via 81 paragraphs of deducted legal reasoning that "The answer given by the Tribunal to the preliminary question [i.e. one claim or 201 claims] was correct as a matter of law" and ordered that "The Insurer's Summons should be dismissed and the Insurer should pay the Owners Corporation's costs".
The Court agreed that the statutory scheme clearly contemplated that an owners corporation was entitled, in its own right, to make a claim on the statutory home insurance policy. In particular, the scheme contemplated that an owners corporation would be entitled to make a claim in respect of loss arising from the breach of a statutory warranty in respect of defective work on the common property. The owners corporation's entitlement flowed both from s 227(2) of the Strata Schemes Management Act and, more simply, from its status as the registered proprietor of the common property and as the successor in title to the person on whose behalf the residential building work was carried out.
The effect of s 99(1)(b) of the HB Act was that the Insurer had to insure the Owners Corporation, as Meriton's successor in title to the common property, against the specified risks. The statutory requirement was not conditional upon the Insurer issuing a certificate of insurance to the Owners Corporation. Nor was it in any way dependent on the terms of any certificate issued by the Insurer in respect of lots in the strata scheme.
It did not matter that the Owners Corporation held the common property as agent for the lot proprietors as tenants in common in the sense described by Spigelman CJ in SP No 43551 v Walter Construction. The Court did not need to decide whether an individual lot proprietor could make a claim under the Policy in respect of the common property.
The minimum liability of an insurer under the home warranty policy is $200,000 in relation to each "dwelling". The potential liability of the Insurer under the Policy in this case was a total of $40,200,000 (calculated as the minimum cover of $200,000 per residential unit in the strata scheme). However, the legislation implicitly permits an insurer to limit coverage under the home warranty policy to $200,000 in relation to each dwelling.
The legislative scheme contemplated that any amount paid by the Insurer to the Owners Corporation would reduce pro rata the coverage available to each lot proprietor.
In the present case, the claim by the Owners Corporation under the Policy was for an amount less than $200,000 and thus the Court did not consider whether the limit imposed by cl 1 of the Standard Terms of $200,000 "for the aggregate amount of all claims under this policy" applied to a claim by the Owners Corporation in respect of the common property.
The Court has made it plain that an Owners Corporation can make a claim under a Home Warranty Insurance policy although not named as an insured.
A claim by an Owners Corporation was not many claims made on behalf of all lot owners but a single claim which attracted one excess only. The question of whether the $200,000 policy limit per dwelling applied to the claim by the Owners Corporation did not need to be decided although reading between the lines suggests it will not be.
1 Judge(s) Allsop P, Basten JA and Sackville AJA
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