Australia: The calculation of a sum insured expressed to be net of GST: Mattress Innovations Pty Ltd v Suncorp Metway Insurance Limited [2013] QCA 377


Mattress Innovations Pty Ltd (Mattress Innovations) was the owner of commercial premises insured by Suncorp Metway Insurance Limited (Suncorp). The insured property was leased by Mattress Innovations to a third party, which used the insured premises as a mattress and furniture warehouse.

The policy issued by Suncorp to Mattress Innovations covered total loss of the premises, contents, debris removal as well as business interruption losses. There was cover up to a total of $2.1m.

A General Condition of the policy, clause 16, related to payments of claims. Clause 16 provided that Suncorp would calculate claims inclusive of Goods and Services Tax (GST) and would deduct any entitlement of Mattress Innovations to input tax credits (ITC).

The Claim

On 25 April 2007 the insured premises were totally destroyed by fire, and the total amount of Mattress Innovations loss was greater than the total of the sums insured. Suncorp agreed to indemnify Mattress Innovations for the loss, electing under the policy to pay the claim over reinstatement.

In applying clause 16 of the policy, Suncorp reduced payment of the full policy limit of $2.1m by 1/11th on account of an ITC Mattress Innovations could, or would be, entitled to claim.

The Proceedings

Mattress Innovations challenged Suncorp's construction of clause 16, arguing that any 1/11th deduction for ITC should have been applied first when assessing the value of the claim, and if the claim's calculated value (being the remaining 10/11ths) was above the total of the sums insured then Mattress Innovations was entitled to the total of the sum insured.

Suncorp denied that it had miscalculated the ITC deduction, submitting that in claims where the insured's loss exceeded the sums insured, the first step would be to reduce the claim value to the insured's maximum liability (the total sums insured) and then apply the 1/11th ITC deduction.

In the decision at first instance, Justice Dalton described clause 16 as "...infelicitously drafted. It is marked by incorrect use of legal terms ...poor word choice, and a lack of conceptual clarity as a matter of ordinary English."

Nevertheless, Justice Dalton agreed with Suncorp that if the calculation method offered by Mattress Innovations were applied, it was possible that an underinsured party could be "in a better financial position, relatively speaking, than an insured whose claim fell within policy limits."

Mattress Innovations appealed this decision.

The Appeal Judgment

The Court of Appeal set aside the judgment of Justice Dalton and found that Mattress Innovations' construction of clause 16 and how it should be applied was correct.

Justice Fraser, with whom Justices Holmes and North agreed, found that Suncorp's ITC deduction from its maximum liability to Mattress Innovations could only ever result in Mattress Innovations receiving less than the $2.1m it contracted to be the total sums insured:

"Even on the insurer's construction, there may be one situation in which it will be obliged to pay the whole of the Sum Insured without the benefit of any input tax credit namely, in the case of an insured which is not entitled to claim any input tax credits."

"On the other hand, the construction adopted by the trial judge produces the result that the limit of the insurer's liability to satisfy its obligations under the policy by payment to the insured is not the Sum Insured stated in the certificate of insurance in simple and unqualified terms, but is instead 10/11ths of that amount. That is such a surprising result as to suggest that the construction which produces it could not reflect the intention of reasonable contracting parties."


In this instance both the Supreme Court and the Court of Appeal considered the public policy impact of potentially rewarding underinsured parties, against the commercial bargain entered into by the insured and the insurer.

Although these considerations took place in the context of taxation benefits, the contractual interpretation process undertaken by the Court demonstrates that great care needs to be taken when drafting policies; if the wording is unclear and lacks certainty, it will be of little assistance to either party despite the monetary repercussions that may flow.


1Andrews v Australian and New Zealand Banking Group Limited [2012] HCA 30

2Australian Government Productivity Commission Issues Paper "Access to Justice Arrangements" September 2013

3Merritt, C "Regulation is on the Cards" The Australian, 8 November 2013 September 2013

4Corporations Amendment Regulation 2012 (No. 6)

5Elliot, R "Australian Institute of Company Directors submission: Access to Justice – Litigation Funding & Class Actions" 4 November 2013

6IMF (Australia) Ltd, "Submission to the Productivity Commission: Access to Justice Arrangements" 18 November 2013

7Maurice Blackburn Lawyers, "Response to the Access to Justice Arrangements Issues Paper" November 2013

8Clasul Pty Ltd & Ors v Commonwealth of Australia (NSD 368/2013)

9The Damages Based Agreements Regulations 2013 were introduced with effect on 1 April 2013 permitting lawyers to bring litigation and arbitration on a contingency fee arrangement taking up to 50% of general damages or a 25% share in personal injury and medical negligence claims (including VAT).

10Matthews v SPI Electricity Pty Ltd & Ors

11Matthews v SPI Electricity Pty Ltd & Ors (No 9) [2013] VSC 671

12BFSL 2007 Limited & Ors (In Liquidation) v Steigrad [2013] NZSC 156

13[2013] NSWCA 212

14Natural Disaster Insurance Review: Inquiry into flood insurance and related matters, September 2011, pg. 25

15Natural Disaster Insurance Review: Inquiry into flood insurance and related matters, September 2011, pg. 1

16Natural Disaster Insurance Review: Inquiry into flood insurance and related matters, September 2011, pg. 6

17Natural Disaster Insurance Review: Inquiry into flood insurance and related matters, September 2011, pg. 1

18Justine Bell 'Flood insurance, denials of claim and the role of the Financial Ombudsman Service' (2011) 22 Insurance Law Journal pg. 40

19Richard Batten and Martin Wright 'Under the spotlight: recent regulatory developments in the insurance industry', Australian Insurance Law Bulletin, May 2012, pg. 70

20Richard Batten, Pam Madafiglio and Marin Wright 'Update: Mandatory flood cover and the Wayne Tank principle', Australian Insurance Law Bulletin, May 2012, pg. 78


22The definitions may vary from jurisdiction to jurisdiction, however the foundations remain the same.

23Reinhold v New South Wales Lotteries Corporation (2008) 82 NSWLR 762

24Hunt & Hunt Lawyers v Mitchell Morgan Nominees (2013) 247 CLR 613

25Although it was by a slim majority of 3:2

26See for example State Government Insurance Office (Qld) v Brisbane Stevedoring Pty Ltd (1969) 123 CLR 228; Insurance Commission of Western Australia v Kightly (2005) 30 WAR 380.

27[1896] AC 250. See also Wellington Insurance Co Ltd v Armac Diving Services Ltd (1987) 38 DLR (4th) 462.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.