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Supreme Court of Victoria |
Last Updated: 30 October 2023
AT MELBOURNE
COMMERCIAL COURT
INSURANCE LIST
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TV MEWS PTY LIMITED (ACN 007 026 100)
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Second Plaintiff
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and
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JUDGE:
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WHERE HELD:
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DATE OF HEARING:
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CASE MAY BE CITED AS:
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MEDIUM NEUTRAL CITATION:
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CONTRACT – POLICY OF INSURANCE – Whether accord and satisfaction
or accord executory – Whether binding contract
or whether settlement arose
in course of insurer’s business – Consideration moving from promisee
– Unilateral contract.
CONTRACT – ELECTION – Whether
rights inconsistent – Sargent v ASL Developments Ltd [1974] HCA 40; (1974) 131 CLR
634 – DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423.
POLICY OF INSURANCE – Claims preparation costs – Claims
advocacy costs.
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APPEARANCES:
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Counsel
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Solicitors
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For the Plaintiffs
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Walpole Menzies
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For the Defendant
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Hall & Wilcox
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Introduction
1 The second plaintiff (‘TV
Mews’) owns and operates the retirement village known as ‘Tudor
Village Lilydale’
at 520 Maroondah Highway, Lilydale (‘Tudor
Village’). TV Mews is a wholly owned subsidiary of the first plaintiff,
Pinnacle
Living Pty Ltd (‘Pinnacle’). Geoffrey Reeve is the sole
director of both companies.
2 In early 2013, TV Mews
decided to carry out improvements to the community centre forming part of Tudor
Village (‘the community
centre’). It contracted with a builder,
Method Construction Pty Ltd (‘Method’), who started work on 4
February
2013.
3 On 6 May 2013, the community
centre, including the building works commenced but not completed by Method, was
destroyed by fire.
The fire resulted in the destruction of the community centre
and the works carried out by Method to that
date.
4 In 2012, Pinnacle and TV Mews had entered
into an insurance contract with the defendant (‘QBE’) in the terms
set out
in the document entitled ‘JLT VillageWISE Industrial Special Risks
Mark IV Insurance Schedule and Policy Wording’ (‘the
QBE
policy’).
5 By the terms of the QBE policy, QBE
agreed to indemnify Pinnacle and TV Mews against physical loss and destruction
or damage not
otherwise excluded to property in accordance with the applicable
Basis of Settlement. The relevant Basis of Settlement under the
QBE policy was
the cost of reinstatement. The QBE policy excluded liability for loss or damage
to contract works when the value
of such works exceeded 10% of the limit of
liability or $500,000, whichever was the lesser. It is not in issue that the
exclusion
was engaged.
6 Separately, the terms of
the construction contract between TV Mews and Method required Method to take out
an insurance policy covering
its works ‘against loss or damage resulting
from any cause whatsoever until [Method] ceases to be responsible for their
care’
in the joint names of TV Mews and
Method.
7 Pursuant to that obligation, Method entered
into an insurance contract with Ace Insurance (‘the Ace policy’)
naming
both Method and TV Mews as the ‘insured’. The Ace Policy
provided, inter alia, that Ace was liable to indemnify TV Mews
in respect of
damage to the ‘contract works’ as defined by the policy terms.
8 Accordingly, damage to contract works was excluded
from cover under the QBE policy but was subject to an entitlement to indemnity
under the Ace Policy. Damage to the community centre not forming part of the
contract works fell within the scope of the QBE
policy.
9 The 2013 fire resulted in the commencement
of two proceedings in this Court. In the first proceeding (‘the recovery
action’)
commenced in September
2021,[1] TV Mews commenced action
against Method seeking damages of an amount representing, among other things,
the cost of reinstatement
of the community centre to its pre-incident condition.
Method defended the claim alleging, inter alia, that the fire was caused by
the
acts or omissions of a welder who Method had subcontracted to do works. Method
joined the welder as a third party as well as
a second insurer who had agreed to
indemnify Method on the terms of a legal liability policy. As a consequence of
Method’s
joinder of the welder as a third party, TV Mews also brought a
direct claim against the welder.
10 The liability
insurer defended Method’s third party claim on the ground that, inter
alia, the liability policy contained
an exclusion in relation to welding works
which in turn resulted in the commencement of separate third party proceedings
by Method
against its insurance broker, in broad terms alleging that if the
liability insurer was correct, the broker had breached a duty of
care owed to
Method in failing to take out adequate insurance.
11 Separately, Pinnacle and TV
Mews[2] commenced this proceeding
against QBE in 2018 (‘the indemnity proceeding’). In the indemnity
proceeding, the plaintiffs
sought indemnity under the QBE policy, alternatively
they advanced a claim for debt and/or damages alleged to be owing by QBE to
them
pursuant to separate agreements allegedly entered into between the plaintiffs
and QBE in April and August 2014. The separate
agreements are defined in the
pleadings filed by the plaintiffs as ‘the First Release’ and the
‘the Second Release’
respectively. By defining the agreements in
that way, the plaintiffs characterised their legal effect in a way which proved
contested.
The use of defined terms in pleadings is useful and common place.
However, where the choice of a particular defined term characterises
a
contestable event in a manner favourable to one party, it is less helpful.
Nevertheless, QBE adopted the definitions in its pleadings
whilst at the same
time pleading that the First Release did not create binding rights or
obligations. For convenience in these reasons
the same terms are used to
describe the two alleged agreements.
12 Interlocutory steps in the recovery proceeding
and the indemnity proceeding occurred largely in tandem over the ensuing years.
Orders were made on 3 September 2021 fixing both proceedings for hearing on 6
June 2022 with an estimated duration of six weeks.
By orders made 5 November
2021 in both proceedings, the Court settled a list of questions to be considered
in an expert conclave
of quantity surveyors which was to take place prior to,
but as an adjunct to mediation between all parties in both proceedings.
13 At the conclave, the relevant quantity surveyor
participants reached agreement on certain questions including relevantly the
cost
of rebuilding the community centre as at the date of the fire and the
re-useability of a concrete slab that formed part of the community
centre.
14 Subsequently, the parties to the recovery
proceeding resolved their disputes and on 30 May 2022, orders were made
dismissing the
claims with no order as to costs.
15 The indemnity proceeding did not resolve.
Instead, the plaintiffs amended their claims in the indemnity proceeding so as
to claim,
firstly, an amount alleged to be outstanding pursuant to the First
Release allegedly entered into by them with QBE in 2014 along
with a separate
claim for claims preparation costs allegedly payable by QBE pursuant to the QBE
policy. Although at various times
the plaintiffs claimed higher amounts, at
trial, the plaintiffs claimed $420,386.18 as the amount unpaid under the First
Release
(which the parties accepted was $2,650,000) and $72,816.18 in respect of
the claims preparation costs.
16 QBE has also
counterclaimed for $15,376.15 in respect to moneys expended on TV Mews’
behalf relating to the removal of debris.
The plaintiffs accept that they are
liable for the $15,376.15.
17 The issues for
determination are relatively confined and can be summarised as follows:
(a) Did the plaintiffs enter into a legally enforceable agreement with QBE in 2014 in the form of the First Release which obliged QBE to pay $2.65 million,[3] in respect of which QBE had only paid $2,229,613.19?
(b) Alternatively, is QBE estopped from denying that it is liable to pay $2.65 million to the plaintiffs?
(c) Have the plaintiffs waived, alternatively elected, alternatively abandoned, any claim to enforce the 2014 agreement?
(d) Are Pinnacle and TV Mews entitled to recover claims preparation costs under the QBE policy in the amount of $72,816.18?
18 Before determining the issues in dispute, it is necessary to set out some of the relevant factual background in more detail.
Factual background
19 Much if not all of the critical facts
are not in dispute. The terms of both the QBE policy and the Ace policy are not
in dispute.
Both TV Mews and Pinnacle are named as the Insured in the QBE
policy. Nor is it in dispute that TV Mews was entitled to indemnity
under both
the QBE policy and the Ace policy and that it received $420,386.81 from Ace and
$2,229,613.19 from QBE.
20 On 15 May 2013, nine
days after the fire, Mr Reeve completed a claim form and provided same to
QBE’s agent claiming ‘replacement
costs etc., to be
established’ as a result of the fire at the community centre which
destroyed the building. The claim form
was signed by Mr Reeve with the name of
the claimant recorded as ‘TV Mews P/L (Pinnacle Living Pty Ltd)’.
21 In or around May 2013 QBE accepted that it was
liable to indemnify under the QBE policy pursuant to its terms, and appointed
Cunningham
Lindsey Australia Pty Ltd (‘Cunningham Lindsey’), loss
adjusters, as its agent in dealings with the insured.
22 By email dated 21 March 2014, Mr Reeve emailed
Cunningham Lindsey seeking confirmation of its position with respect to building
replacement costs of the community centre so that Mr Reeve could decide on a
building contract and commence the works.
23 In
his email, Mr Reeve expressed his understanding:
I understand QBE are prepared to settle with us the direct construction costs to the total amount of $2,600,000 (exclusive of GST) unconditionally. This amount will be increased by $100,000 (ex. GST) pending the outcome of observations to be made of the slab during the reconstruction of the building. This $100,000 contingent amount has arisen because it is not known categorically if the concrete slab of the former building is suitable to retain or otherwise.
Mr Reeve thereafter set out differing views on the reusability of the slab that had been expressed by various engineers, which included an option proposed by Forensic Engineering Solutions Pty Ltd (‘FE Solutions’) who apparently were of the belief that the slab could be rendered suitable for reuse.
24 The next business day, Cunningham
Lindsey emailed a representative of FE Solutions summarising Mr Reeve’s
position with respect
to the proposed methodology in ascertaining whether the
slab had to be replaced and requesting that Mr Reeve’s summary be reviewed
and if necessary amended by FE Solutions.
25 On
the same day, 24 March 2014, Cunningham Lindsey emailed Mr Reeve relevantly in
the following terms:
We confirm the agreement to settle the building reinstatement claim (excluding consultants fees) for an agreed amount of $2,600,000 (excluding GST) to be increased by $100,000 (excluding GST) if it is confirmed that the concrete slab could not have been used in the reinstatement.
The methodology of determining whether the slab could have been used has been produced to Richard Kingston for comment/verification/amendment. We will advise as soon as he responds.
To follow is a copy of the response we have received from Rob Robertson acting on behalf of Ace Insurer (Insurer of contract works of Method Constructions).
From our review of the email and schedule of claims the:
- agreed value of works undertaken to 20 April 2014 of $457,159.56 as a GST exclusive (not inclusive) value
– contract works Insurer have accepted that additional works have been undertaken until the fire on the 6th of May to a value of $106,725.01 (excluding GST)
- total contract undertaken of $563,904.57 (excluding GST).
This contribution of $563,904.57 (excluding GST) by the contract works Insurer to the building reinstatement cost is prior to a consultancy fee component. For the agreed value of $2,600,000 (excluding GST) the contributions are:
$2,036,095.43 – QBE Insurance
$563,904.57 – Ace Insurance
26 Also in March 2014, Cunningham Lindsey
was corresponding with another firm of loss adjusters, Crawford & Co.
Crawford &
Co were adjusting the claim made by TV Mews under the Ace policy
on behalf of Ace. On 24 March 2014, Crawford & Co emailed Cunningham
Lindsey agreeing to make a 30% contribution towards the removal of debris, which
amounted to $15,375.90, and confirmed that Ace acknowledged
acceptance of
liability under the terms of the Ace policy noting that works completed at the
time of the fire amounted to $574,576.56
comprising the works to 20 April 2013
at $457,179.56 inclusive of GST plus works completed between 21 April and 6
May 2013 at $117,397
inclusive of GST.
27 The
email from Crawford & Co continued as follows:
The advice from Ace insurers is not correct and does not align with the contract between Method and ourselves.
The value of work complete to 30 April 2013 is $457,179.56 (certificate 3) and to 6 May is $455,020.86 excluding GST, before retentions are applied. I have attached the certificates which is the authoritative document of the value of works completed. Certificate 4 was sent to Method on 1 July 2013 by email which is attached.
I am concerned that when you reconcile the source of moneys to total $2,600,000 or $2,700,000 as the case may be, that you include reference to Ace and to what they have already supposedly paid the building Contractor. We were not involved with any payment by Ace, and have not received any of this money, and we don’t expect there to be any deduction for it. We expect the $2,600,000 or $2,700,000 amount to be paid in full and without any deduction.
30 On 27 March 2014, Cunningham Lindsey wrote to Pinnacle in the following terms:
We confirm previous advice that the value of $2,600,000 (excluding GST) is accepted by QBE Insurance for the building reinstatement costs (net of consultant fees).
The additional value of $100,000 (excluding GST) will be paid if it is determined during the construction project that the concrete slab could not have been utilised in a reinstatement project.
A form is being prepared to confirm details of the agreement which will be signed off by QBE Insurance.
The letter was addressed to Mr Reeve and included reference to the relevant claim number, the date of loss and the address of the property where the fire had occurred.
31 On 4 April 2014, Cunningham Lindsey wrote to Pinnacle enclosing a ‘Claim Form’. The accompanying letter read:
Contained herein, we enclose a Claim Form confirming the agreement of the building reinstatement limit of liability (excluding professional and consultant fees) at $2,600,000 (excluding GST) with the potential of an additional allowance of $100,000 (excluding GST) if it is deemed that the contract slab required replacement to undertake the reinstatement works.
We propose to have Forensic Engineering Solutions on site for a 2 day period when the slab is demolished and removed to coordinate the testing by materials and geotechnical engineers to establish whether the slab could have been used. The engineers will be engaged directly by our office on behalf of QBE Insurance.
QBE Insurance have confirmed instructions that they do not need to be included in the process involving resolution of the building contract with Method Constructions, but stress that any deed of settlement should not involve terms that would prevent further action by TV Mews/Pinnacle Living Pty Ltd and/or your Insurers from recovery of insured and uninsured losses. Once an agreement is prepared, QBE Insurance has requested a draft copy for consideration by their appointed lawyers.
The accompanying Claim Form included a subheading ‘(Building Reinstatement Costs excluding professional and consultant fees)’ and provided:
We, Pinnacle Living Pty Ltd (owner) of 520 Maroondah Highway, Lilydale VIC 3140, confirm acceptance of $2,600,000 (excluding GST) against our claim on Policy No MK1RVA154875ISR for loss arising from fire damage to the community centre building on or about 06 May 2013.
This acceptance represents the cost of reinstatement of the building excluding professional and consultant fees.
We also agree that a review of the concrete slab will be managed by Forensic Engineering Services during the reinstatement works utilising a materials and geotechnical engineer to establish whether the pre-existing concrete slab could have been used in the reinstatement project. If we agree that this was the case per the engineering findings the building reinstatement claim will be limited to $2,600,000 (excluding GST). If it is proven that the concrete slab could not have been used in the reinstatement project we agree to accept $2,700,000 (excluding GST) as the building reinstatement cost (excluding professional and consultant fees).
The form provided a space for the signing and witnessing of the form.
32 The Claim Form was duly signed by Mr
Reeve on 10 April 2014 and returned to Cunningham Lindsey under cover of an
email in which
Mr Reeve requested confirmation as to how Cunningham Lindsey
‘would like to handle the drawing down of payments against this
claim’. The Claim Form is that defined in the statement of claim later
issued as ‘the First Release’. It is also
common ground that
Pinnacle and TV Mews executed a document entitled ‘Partial Form of Release
– Concrete Slab’
on or about 29 August 2014 which provided that TV
Mews and Pinnacle would accept $50,000 for the replacement of the community
centre’s
concrete slab. This second document is that defined in the
statement of claim later issued as ‘the Second
Release’.
33 QBE indemnified TV Mews under the
QBE policy in the sum of $2,229,613.19 for the cost of reinstatement of the
community centre
and on or around 17 June 2015 Ace paid TV Mews $420,386.81
pursuant to the Ace Policy.
34 Thus, it is common
ground that TV Mews received $2,650,000 in total; $420,386.81 from Ace and
$2,229,613.19 from QBE. The plaintiffs,
however, contend that QBE agreed to pay
$2,650,000 itself, pursuant to the First Release as later modified by the Second
Release
and has only paid $2,229,613.19 and thus owes the plaintiffs
$420,386.81.
35 Foundational to the
plaintiffs’ claim is that the execution (and return) by Pinnacle of the
Claim Form referred to above
gave rise to a binding agreement to the effect that
QBE would pay the plaintiffs either $2.6 million or $2.7 million (viz,
the First Release) which the parties now agree was later modified so as to
require payment of $2,650,000.[4]
36 The first issue that arises therefore is whether
the First Release constitutes a binding agreement between the plaintiffs and
QBE.
Did the First Release give rise to a legally enforceable agreement?
37 QBE denies that it entered into any
binding agreement with Pinnacle and TV Mews in 2014. QBE submits that the only
promise having
contractual force was QBE’s promise to indemnify contained
in the QBE policy which was later confirmed by its acceptance of
indemnity under
the policy in or around May 2013. In support of that submission, QBE emphasises
that it is not a party to the Claim
Form which was signed by Pinnacle alone;
that the document does not contain a promise by QBE to do anything, but rather
records an
‘acceptance’ by Pinnacle of the sum of $2.6 million
against a claim under the QBE policy and that even if the document
is construed
as communicating a promise by QBE to pay the stated sum, such promise is not
supported by any consideration moving from
Pinnacle (or TV Mews). Otherwise, it
submits that even if the document is construed as containing a release from
Pinnacle, TV Mews
was not party to it and is not affected by it.
38 In Foskett’s The Law and Practice of
Compromise,[5] the author
observes:
“settlements” of claims made under insurance policies should be seen as forming a category of their own, some of which will have all the characteristics of the compromise of a dispute either as to liability or as to quantum or both, and some of which simply reflect the performance by the insurer of the obligations under the insurance contract.
39 Relatedly, in The Law of Insurance
Contracts,[6] the authors note the
distinction between the settlement of a claim and the settlement of a dispute,
observing that in most cases
the settlement of a claim is no more than the
customary language where an insurer considers a claim presented in light of
evidence
and of the terms of the policy concerned before completing the
indemnity obligation by payment.
40 In Prudential
Insurance Company of America v
Harris,[7] the United States
District Court for the Middle District of Louisiana rejected an argument that
payment of £250,000 under a
life insurance contract occurring after a
person had apparently drowned after being swept overboard from a ferry off the
coast of
New Zealand was payment by way of a settlement agreement as there was
no underlying dispute.
41 Thus, QBE emphasises
that there has to be a dispute before the relevant agreement can give rise to a
contract of compromise or
settlement.
42 Care must
be taken to note the proper context of the reasoning in such cases. There is no
bright line between a settlement of
a claim in the ordinary course of the
conduct of an insurer’s business and a contract of compromise. The cases
provide guidance
but turn on their own facts.
43 In
Magee v Pennine Insurance Co
Ltd,[8] the insured submitted a
claim in circumstances where the insured was not the driver of a car involved in
the accident and in fact
did not even have a driver’s licence. The
accident occurred whilst the car was being driven by his son, who in every
practical
sense was the owner of the car. In the claim form lodged by the
insured, the claimant said the car had a value of £600 which
was overstated
because the car had been acquired at new for only £547 the year before.
The insurers undertook an inspection
via an engineer engaged by the insurer, and
subsequently the insurer’s agent wrote to the insured advising that the
engineer
had assessed that the vehicle had been damaged beyond repair but that
its pre-accident market value was only £410. As a result,
the insurer
offered this amount (less the £25 accidental damage excess) ‘in
settlement of your claim’ and requested
confirmation that such a course
was acceptable. The insurer’s offer was accepted. The insurer
subsequently became aware of
the fact that the insured did not drive the vehicle
at all and never even had a driver’s licence. Once it discovered those
facts, the insurer said it was not liable on the policy at all. At first
instance, the judge found there was a concluded agreement
to settle the claim
and as such the plaintiff succeeded.
44 Whilst the
Court of Appeal allowed the insurer’s appeal by a majority, all three
judges comprising the Court of Appeal considered
that the relevant circumstances
gave rise to a compromise agreement. Two of the members of the Court of Appeal
set aside the agreement
on the basis of mutual mistake. Their Lordships
considered that the wording ‘in settlement of your claim’ imported
that
the claim was to be settled without further controversy and that the
relevant consideration was the ascertainment of a sum which
was previously
unascertained.[9]
45 To similar effect, in Prattley Enterprises
Ltd v Vero Insurance New Zealand
Ltd,[10] Dunningham J sitting in
the High Court of New Zealand accepted that a binding agreement arose in
circumstances where the insured
had an entitlement under the policy for an
unliquidated sum in circumstances where there was room for legitimate doubt
about the
quantification of that amount, holding that the insured obtained the
benefit of a promise to pay a specified sum without the need
to engage in
dispute resolution procedures or litigation involving attendant cost and delay.
Her Honour held that by accepting the
certain sum, the insured gave up the right
to forego any other arguments which would increase its entitlement under the
policy and
this constituted valuable
consideration.
46 This line of reasoning has force
here. The First Release provided for the payment of $2.6 million. The insured
gave up the right
to pursue any larger claim and both parties obtained certainty
resulting from the conversion of an unascertained claim for the ‘cost
of
reinstatement’ into the ascertained amount of $2.6
million.
47 There is another answer to QBE’s
argument. On QBE’s case, no legal consequence attached to anything after
QBE’s
acceptance of the claim in May 2013. But if that is so, then the
insured had no obligation to execute the Claim Form and return
it to QBE. By
the signing and return of the Claim Form, Pinnacle confirmed acceptance of $2.6
million against its claim under the
QBE policy. This execution and return of
the Claim Form on 4 April 2014, nearly a year after QBE had accepted the claim,
constitutes
sufficient consideration on its own by reason of Pinnacle’s
undertaking of the act requested by
QBE.[11] The language of the
document executed and returned at QBE’s request, supports the conclusion
that its acceptance and return
gave rise to a binding agreement. Firstly, and in
addition to the undertaking of the act requested by QBE, viz, the signing
and return of the form, the language of the document so executed and in
particular the various references to confirming
acceptance of $2,600,000 as the
cost of reinstatement of the building, construed objectively and as a reasonable
business person
would have understood
it,[12] gives rise to an implied
release on the part of the insured of any claim for a further amount in respect
of the cost of reinstatement
aside from the possibility of the additional
$100,000 in the event that the slab could be not reused. Moreover, the latter
parts
of the Claim Form which refer to the agreed arrangement variously for the
review of the concrete slab to be managed by QBE’s
engineers, FE
Solutions, and the associated agreement between the claimant and QBE to the
effect that the reinstatement cost would
be agreed at $2.7 million if the slab
could not be reused, constitutes an additional promise on the part of the
insured sufficient
to give rise to an enforceable agreement.
48 The next point is whether the fact that the
language of the Claim Form references Pinnacle alone as the party whose
acceptance
of $2.6 million as the cost of reinstatement of the building means
that the only party that has given consideration is Pinnacle and
not TV Mews
necessarily means that the only party who has entered into a binding agreement
is Pinnacle and not TV Mews. QBE submits
that this points to the document not
having legal effect, as it does not bind TV Mews which is one of the named
insured.
49 There are a number of answers to this
aspect of QBE’s case. First, even if the agreement only binds Pinnacle
and not TV
Mews, this would not be an answer to any claim by Pinnacle for breach
of the agreement, particularly in circumstances where the relevant
document was
drawn up by QBE and references that $2.6 million is the amount that the insurer
is to pay with respect to ‘our
claim’. Secondly, the Claim Form
itself lodged on 15 May 2013, in substance, identifies TV Mews as well as
Pinnacle as the
claimant and both are the insured under the QBE policy.
Thirdly, Mr Reeve was the sole director of both TV Mews and Pinnacle. He
was
clearly being asked to execute the relevant document required of him by QBE
qua the claimant or the insured. Having regard to the circumstances of
its execution, and the evident purpose of doing so, it cannot
be reasonably
doubted that Mr Reeve was purporting to sign it on behalf of the insured under
the QBE policy, Pinnacle and TV Mews,
and that this was the very purpose of
QBE’s agent requiring its signature and
return.
50 Finally, QBE argues that it makes no
sense to construe the First Release as amounting to a promise by QBE to pay $2.6
million itself
given that it is clear that QBE had, via its loss adjuster,
assessed the value of the building reinstatement claim including the
value to be
attributed to the contract works which were excluded from the ambit of the QBE
policy, in total at $2.6 million. The
reference to ‘agreed value’
appears in the email from Cunningham Lindsey to Mr Reeve dated 24 March
2014.[13] This email contemplates
that the $2.6 million would be paid as to $2,036,095.43 by QBE with the balance
by Ace. In answer, the
plaintiffs point to the subsequent email from Mr Reeve
dated 25 March 2014,[14] which
critiques the accuracy of the calculations provided by Ace, emphasising the last
sentence where Mr Reeve concludes ‘[w]e
expect the $2,600,000 or
$2,700,000 amount to be paid in full without any
deduction’.
51 In my view, the email from Mr
Reeve harms not helps the plaintiffs. Whilst not clear, on one reading it is
consistent with him
requiring $2.6 million or $2.7 million in total from Ace and
QBE, not that sum from QBE alone and an additional amount from Ace.
Mr
Reeve’s expressed concern may have more related to the fact that part of
the insurance moneys to be paid by Ace for the
damage to the contract works were
going to be paid by Ace to Method on account of amounts allegedly owing to
Method by TV Mews.
However, the earlier correspondence and what it reveals of
the alleged subjective understanding of the parties is irrelevant. Whilst
there
is good reason, given Cunningham Lindsay’s earlier communications to
consider that the Claim Form (the First Release)
may have been poorly drafted
and intended by Cunningham Lindsey to amount to a release by the insured,
provided the insured received
a total of $2.6 million (or $2.7 million), this
matters not if the words of the First Release are clearly to the contrary, save
for
any rectification claim. The Claim Form (the First Release) unambiguously
records acceptance of $2.6 million against the claim under
the QBE Policy. The
claim under the QBE policy must necessarily refer to a claim for the amounts due
under that policy which expressly
exclude the contract works. The agreement is
to be construed objectively; so construed QBE was to pay $2.6 million against
the claim
made under its policy.
52 Accordingly, I
reject the first argument advanced by QBE; in 2014 the plaintiffs and QBE
entered into a binding agreement in the
form of that which was later referred to
as the First Release, the effect of which was to require QBE to pay the
plaintiffs in the
events which later ensued, the sum of $2,650,000.
Is QBE estopped from denying that it is liable to pay $2.6 million to Pinnacle and TV Mews?
53 Given my conclusion that the First
Release gave rise to a binding agreement, it is not necessary for me to
determine the plaintiffs’
alternative claim in which they allege that QBE
is estopped from denying that it is so
liable.
54 However, given that the estoppel claim
was both pleaded and addressed (albeit comparatively briefly in the
parties’ submissions)
I shall deal with the claim briefly. The plaintiffs
allege that QBE, through its agent Cunningham Lindsey, induced an assumption
by
the plaintiffs that it was liable to pay the plaintiffs the sum of $2,600,000
and that the plaintiffs as a consequence relied
upon this assumption to their
detriment by entering into a building contract with a builder, 2Construct Pty
Ltd, to construct the
community centre building for $2,874,000 and a contract
with Bespoke Pools to construct a swimming pool for $136,122.60.
55 Notwithstanding the estoppel plea, no party
called oral evidence. Rather, the trial proceeded by way of the agreed tender
of a
comparatively small number of documents and was otherwise determined on the
basis of agreed facts which arose from admissions contained
in the pleadings and
general inferences drawn from the uncontested facts and the pleadings.
56 At trial, QBE was prepared to proceed on the
basis that the plaintiffs assumed that QBE would pay the plaintiffs the sum of
$2.6
million, however, argued that it did not know or intend that Pinnacle and
TV Mews would act or abstain from acting in reliance on
the assumption or
expectation, and accordingly its departure from any such assumption was not
unconscionable in the circumstances.
57 On 28 March
2014, ILP Consulting, who were apparently advisors to Pinnacle and TV Mews, sent
an email to Mr Reeve attaching a proposed
construction contract which Mr Nelson
intended to send out to the builder 2Construct. The contract price specified in
the contract
was $2,874,000 as well as an additional amount for a Bespoke pool
in the amount of $143,000.
58 On 17 April 2014,
after Pinnacle had executed the Claim Form, TV Mews entered into a construction
contract with 2Construct for
the contract sum of $2,874,000 (excluding GST). On
the same day, Cunningham Lindsey emailed Mr Reeve asking for a copy of the
invoice
for the swimming pool, which was forwarded by Mr Reeve on the same day
and was in the sum of $7,486.75 (including GST) which apparently
represented a
5% deposit for the construction of the pool. Also on the same day, Mr Reeve
provided Cunningham Lindsey with a copy
of the construction contract with
2Construct.
59 Whilst I accept that the proper
construction of the letter from Cunningham Lindsey to Mr Reeve of 4 April 2014
and the accompanying
Claim Form executed by Mr Reeve on Pinnacle’s behalf
objectively conveys a promise by QBE to pay $2.6 million to the plaintiffs,
and
hence that the plaintiffs have established that they entered into a contract
with QBE to that effect, such a conclusion follows
from orthodox principles of
objective contractual interpretation.
60 In
contrast, the estoppel claim is an equitable estoppel by which equity intervenes
to prevent the departure by one party from
an assumption induced by that
party’s conduct in circumstances where the departure from the assumption
will occasion detriment.
In the case of an equitable estoppel, in contrast to
the objective theory which underlies determination of rights and obligations
in
contract, it is necessary for Pinnacle and TV Mews to establish that QBE knew
that Pinnacle and TV Mews anticipated receiving
$2.6 million from QBE alone and
that as a consequence of that belief, they entered into the contract with
2Construct and the separate
contract with Bespoke Pools.
61 The documents tendered on the hearing of this
proceeding establish only that, objectively, that promise is contained in the
Claim
Form. That understanding is consistent with Mr Reeves’ email to
Cunningham Lindsey of 21 March 2014 but is inconsistent with
the latter part of
Cunningham Lindsey’s email to Mr Reeve of 24 March 2014 which
suggests that the $2.6 million would be paid
as to $2,036,095.43 by QBE and
$563,904.57 by Ace. It is also inconsistent with QBE’s subsequent loan of
$420,386.81 made
to TV Mews on or around 30 March 2015 by which QBE effectively
loaned Ace the amount that TV Mews was likely to receive from Ace
pursuant to
the Ace policy and arguably with the repayment of that loan by TV Mews on or
around 19 June 2015.
62 Whilst it is clear that
QBE’s agent Cunningham Lindsey was informed of the fact of TV Mews’
entry into the construction
contract and the pool contract contemporaneously
with the execution of the Claim Form as requested by QBE, this does not permit
the
inference based on the documents alone that QBE apprehended that either, TV
Mews would not have entered into the construction contract,
or would have
otherwise acted in some different way but for TV Mews’ subjective
understanding that it was to receive $2.6 million
from QBE as well as an
additional circa $400,000-$500,000 from Ace.
63 Given the reasonably sparse evidence, I do not
consider that the estoppel claim is made out.
Waiver election and abandonment
64 Although QBE relied on each of waiver,
estoppel, election and abandonment in its defence and the written submissions
filed in advance
of the hearing, QBE confined its oral submissions to election
and abandonment and did not press the waiver analysis. Accordingly,
I propose
to only deal with election and abandonment.
65 QBE
submits that throughout the course of the indemnity proceeding the plaintiffs
pressed a claim that QBE was liable to indemnify
Pinnacle and TV Mews pursuant
to the QBE policy, rather than a claim for moneys not paid pursuant to the First
Release. According
to QBE, it was only when the expert conclave of quantity
surveyors held between 11 November and 17 November 2021 agreed that the
cost of
reinstatement at the time of the fire excluding the contract works was
$1,846,315 (excluding GST), which was less than the
sum paid by QBE of
$2,229,613.19, that the plaintiffs recast their case so as to allege that the
First Release obliged QBE to pay
them $2,650,000 and that they only received
$2,229,613.19.
66 It is critical to an evaluation
of both QBE’s submissions and the plaintiffs’ response, to examine
the history of the
indemnity proceeding from its commencement until the filing
of the second further amended statement of claim (‘the second
FASOC’)
dated 4 March 2022. Such scrutiny is required in order to
evaluate the assertion that the plaintiffs elected to pursue inconsistent
rights
and/or abandoned the First Release.
67 In the
versions of the pleadings set out below, reference is first made to the
allegation in the statement of claim with the responsive
allegation in the
defence appearing immediately below the relevant paragraph in the statement of
claim.
Statement of claim dated 10 May 2018 (‘SOC’) and defence (‘the defence’) and counterclaim dated 6 July 2018
B. TV MEW’S CONTRACT OF INSURANCE WITH QBE
- By contract of insurance with policy number MK1RVA154875ISR between:
(a) QBE as the insurer;
(b) Pinnacle and TV Mews as the insured;
QBE insured the plaintiffs for all real and personal property of every kind and description belonging to them or for which they were responsible or had assumed responsibility to insure, including all such property in which they may acquire an insurable interest, for the period 1 July 2012 to 30 June 2013, such policy containing terms as set out in “JLT VillageWISE Industrial Special Risks Mark IV Insurance Policy Wording” (QBE policy).
Defence
- It admits the allegations in paragraph 4 and says further that the QBE policy contained the terms, conditions and exclusions set out in the JLT VillageWise JDT Excess of Loss Insurance Policy Schedule dated 3 October 2012; and JLT VillageWise JDT Excess of Loss Insurance Policy Wording (the Policy Wording).
SOC
5 Under section 1 of the QBE policy:(a) in the event of any physical loss, destruction or damage happening to the insured property, QBE is to indemnify the plaintiffs in accordance with the applicable “Basis of Settlement” (page 2);(b) the “Basis of Settlement” in paragraph 5(a) above provides that, on buildings, machinery, plant and all other property and contents, QBE is to indemnify the plaintiffs for the costs of reinstatement, replacement or repair in accordance with the provisions of:
(i) the “Reinstatement and Replacement Memorandum”;(ii) the “Extra Cost of Reinstatement Memorandum” (page 3);(c) the “Reinstatement and Replacement Memorandum” in paragraph 5(b)(i) above provides that, on buildings, machinery, plant and all other property and contents, QBE is to indemnify the plaintiff for the cost of reinstatement of the damaged property at the time of its reinstatement, where “reinstatement” means:
(i) in the case of a building, the rebuilding thereof;(ii) in the case of a property other than a building, the replacement thereof by similar property;
in a condition equal to, but not better or more extensive than, its condition when new (page 5, definition (a) of reinstatement);(d) the “Extra Cost of Reinstatement Memorandum” in paragraph 5(b)(ii) above provides that, on buildings, machinery, plant and all other property and contents, QBE is to indemnify the plaintiffs for the extra cost of reinstatement (including demolition or dismantling) of damaged property necessarily incurred to comply with the requirements of any Act of Parliament or authority (page 6).
Defence
- Subject to the Policy Wording and reference to its full terms and effects it admits the allegations in paragraph 5.
...
SOC
F ACKNOWLEDGEMENT OF INDEMNITY
20 In or around May 2013, QBE:(a) accepted that it was liable, pursuant to the QBE Policy, for a claim by TV Mews with respect to the destruction of the Community Centre in paragraph 19(a) above; and(b) appointed Cunningham & Lindsey Australia Pty Ltd (Cunningham & Lindsey) as its agents in its dealings with TV Mews.
Defence
- Save for stating that its obligation to indemnify under the QBE Policy was subject to the Policy Wording it admits the allegations in paragraph 20.
...
SOC
G RELEASES
- On 10 April 2014, QBE caused Pinnacle to execute a document entitled “CLAIM FORM – Building Reinstatement Cost excluding professional and consultant fees,” providing that:
(a) the plaintiffs accept $2,600,000 pursuant to the QBE Policy for the replacement of the Community Centre; and(b) further, should a geotechnical engineer retained by Cunningham & Lindsey’s own contractor, Forensic Engineering Services, find:
(i) the concrete slab can be used in the replacement of the Community Centre, then QBE’s liability for the replacement of the Community Centre is to remain as in paragraph 22(a) above; or(ii) the concrete slab could not be used in the replacement of the Community Centre, then alternatively to paragraph 22(a) above, QBE’s liability for the replacement of the Community Centre is to be $2,700,000 (the First Release).
Defence
- Save for admitting that the First Release was executed by Pinnacle on or about 10 April 2014 it denies the allegations in paragraph 22.
SOC
- On 29 August 2014, QBE caused the plaintiffs to execute a document entitled “PARTIAL FORM OF RELEASE – Concrete Slab”, providing that, in compromise of the parties’ obligations in paragraph 22(b) above, the plaintiffs accept $50,000 for the replacement of the Community Centre’s concrete slab (the Second Release).
Defence
- Save for denying that QBE caused the execution of the Second Release it admits the allegations in paragraph 23.
SOC
- QBE has asserted that the First Release and the Second Release are legally binding on TV Mews.
Defence
- Save for admitting that the Second Release binds TV Mews it does not admit the allegations in paragraph 24.
...
SOC
- QBE has paid the plaintiffs $2,229,613.19 for the replacement of the Community Centre, being:
(a) $2,650,000 being QBE’s assessment as to the cost of the replacement of the Community Centre on the terms of its obligation in paragraph 5 above;
less
(b) $420,386.81, paid to the plaintiffs pursuant to the Ace Release;
and has refused to pay any further sum for the replacement of the Community Centre.
Defence
30 Save for admitting:(a) it has indemnified TV Mews under the QBE policy in the sum of $2,229,613.19 for the cost of reinstating the Community Centre; and
(b) that represents a complete indemnity;
it otherwise denies the allegations in paragraph 30.
SOC
I FIRST RELEASE AND SECOND RELEASE
- By reason of paragraphs 20 and 21 above, in causing the plaintiffs to execute the First Release and the Second Release, QBE breached the duty in paragraph 6 above.
Defence
- It denies the allegations in paragraph 31.
SOC
(a) Releases Set Aside
32 By reason of paragraph 31 above:(a) the First Release and the Second Release are voidable by the plaintiffs which the plaintiffs hereby so avoid; or(b) alternatively, QBE is otherwise prevented from asserting the validity of or relying on the First Release and the Second Release.
Defence
32 It denies the allegations in paragraph 32.
SOC
33 By reason of paragraphs 31 and 32 above:(a) QBE remains liable to indemnify the plaintiffs pursuant to its obligations in paragraph 5 above for the replacement of the Community Centre; and
(b) the plaintiffs are entitled to a declaration to this effect.
Defence
33 It denies the allegations in paragraph 33.
SOC
(b) Damages
- Alternatively to paragraphs 32 and 33 above, in breaching its duty as pleaded in paragraph 31 above, QBE has caused the plaintiffs $520,650.25 in loss and damage.
Particulars
|
Subject Matter
|
Paragraph Above
|
Amount Owing
|
How Calculated
|
|
Concrete slab
|
[21(c)(i)]; [22]; [23]
|
$364,952.75
|
$364,952.75 of $414,952.75 not provided for in First and Second
Release
|
|
Disability access requirement
|
[21(c)(ii)]
|
$155,697.50
|
No provision made in First or Second Release
|
Defence
34 It denies the allegations in paragraph 34.
SOC
K ACE PAYMENT
(a) Liability pursuant to QBE Policy
- Further and alternatively, by reason of paragraphs 25 to 30 above, QBE has withheld $420,386.81 of its liability to the plaintiffs pursuant to its obligations in paragraph 5 above for the replacement of the Community Centre.
Defence
35 It denies the allegations in paragraph 35.
SOC
(b) Liability pursuant to First Release and the Second Release
- Alternatively to paragraph 35 above, by reason of paragraphs 22 to 24 above, QBE owed the plaintiffs $2,650,000 under the First Release and the Second Release for the replacement of the Community Centre.
Defence
36 It denies the allegations in paragraph 36.
SOC
- By reason of paragraphs 30 and 36 above, QBE is indebted to TV Mews in the sum of $420,386.81 under the First Release and the Second Release for the replacement of the Community Centre.
Defence
- It denies the allegations in paragraph 37.
SOC
AND THE PLAINTIFFS CLAIM:
- A declaration that the defendant remains liable to indemnify the plaintiffs pursuant to section 1 of contract of insurance with policy number MK1RVA154875ISR with respect to the replacement of the community centre located at “Tudor Village Lilydale”, 520 Maroondah Highway, Lilydale, destroyed by fire on or around 6 May 2013.
B. $520,650.25.
C. $420,386.81 debt.
D. Interest.
E. Costs.
68 Putting to one side some infelicities in the drafting, when considered as a whole the plaintiffs were advancing a claim to the effect that QBE was required to indemnify the plaintiffs under the QBE policy by paying it the amount of $520,650.25, alternatively QBE was liable in damages for that amount by reason of its breach of duty of utmost good faith contained in s 13 of the Insurance Contracts Act 1984 (Cth) (the ‘Insurance Contracts Act’) and that such claims were not barred by the First Release and the Second Release (as so defined) which were voidable by the plaintiffs and avoided by them on the filing of the SOC. In the alternative, the plaintiffs advanced a claim in debt (more precisely, liquidated damages) in the amount of $420,386.81 being the amount unpaid under the First Release and the Second Release.
Amended statement of claim dated 14 March 2019 (‘ASOC’); the amended defence to the ASOC dated 22 March 2019[15] and the further amended defence to the ASOC dated 4 June 2019
69 In the ASOC, the plaintiffs added a
new claim in respect of the claims preparation costs and pleaded the relevant
entitlement under
the QBE policy. That claim has been maintained in the present
proceeding and the form of the amended pleading in that respect is
not material.
70 In addition, the plaintiffs added new paragraphs
40 and 41 which alleged an entitlement to interest under s 57 of the Insurance
Contracts Act on the basis that it was unreasonable for QBE to withhold the
amount of $420,386.81 and accordingly it was liable to the plaintiffs
in respect
of the interest provided for under the Insurance Contracts Act. Paragraphs 40
and 41 read:
QBE also denied the allegation that it had unreasonably withheld the money and accordingly denied that the plaintiffs were entitled to interest under s 57 of the Insurance Contracts Act.
72 Whilst the plaintiffs’ case did
not change materially by reason of the filing of the ASOC, upon the filing of
its amended
defence to the ASOC, QBE’s case did change. QBE made it clear
that it was not advancing any case that QBE or TV Mews were
parties to the First
Release. By reason of the plea that QBE was not a party to the First Release,
QBE’s plea could only be
taken to mean that it was not advancing a case
that the First Release bound the parties. Accordingly, it remained open to the
plaintiffs
to press any claim for indemnity under the QBE policy irrespective of
the alleged breach of the Insurance Contracts Act by QBE (which QBE denied).
QBE also pleaded an alternative case; if QBE was bound by the First Release,
then it should be rectified,
or, an implied term arose to the effect that the
amount payable by QBE under the First Release should be reduced by the amount
paid
out by Ace under the Ace policy for contract works indemnity (for
convenience, collectively the rectification
argument).
73 QBE further clarified its position by
its filing of a further amended defence dated 4 June
2019,[16] which included a new
paragraph 22 in response to the plaintiffs unchanged paragraph 22. QBE’s
amended paragraph 22 read:[17]
(a) TV Mews was not a party to the First Release; and(b) QBE does not contend in this proceeding that TV Mews is bound by the terms of the First Release.
Further amended statement of claim dated 22 August 2019 (‘FASOC’) and the defence to the FASOC
74 In the FASOC, the plaintiffs made a
number of amendments which are important in the resolution of the extant
dispute. The previous
plea in paragraph 24 of the SOC and the ASOC was expanded
effectively by further particulars, and new paragraphs 24A, 32A and a revised
paragraph 35 were added along with an amended prayer for
relief.
75 Paragraphs 24 and 24A
read[18] (omitting particulars in
the case of paragraph 24):
...
24A By its Further Amended Defence and Counterclaimed filed on 4 June 2019, QBE denies:
(a) that either it or TV Mews is a party to the First Release; or
(b) that QBE is bound by the First Release’s terms.
Paragraph 32A read:
32A By reason of paragraph 24A above, the First Release is not binding on the plaintiffs.
76 The amended paragraph 35 read as follows:
J. ACE PAYMENT
(a) Liability pursuant to QBE Policy
35 Further and alternatively, QBE has withheld:
(a) $420,386.81, being an amount:(i) constituting part of QBE’s assessment in paragraph 30(a) above provided for in the First Release and Second Release;(ii) not paid in the circumstances in paragraphs 25 to 30 above; and
(iii) owing to the plaintiffs pursuant to QBE’s obligations in paragraph 5 above for the replacement of the Community Centre;
(b) $364,952.75, being an amount:(i) not provided for in the First and Second Release with respect to the concrete slab referred to in paragraph 21(c)(i) above;(ii) not paid in the circumstances in paragraphs 21 to 23 above;
(iii) owing to the plaintiffs pursuant to QBE’s obligations in paragraph 5 above for the replacement of the Community Centre;
(c) $155,697.50, being an amount:(i) not provided for in the First and Second Release with respect to disability access requirements referred to in paragraph 21(c)(ii) above;(ii) not paid in the circumstances in paragraphs 21 to 23 above;
(iii) owing to the plaintiffs pursuant to QBE’s obligations in paragraph 5 above for the replacement of the Community Centre.
The amended prayer for relief read as follows:
AND THE PLAINTIFFS CLAIM:
- A declaration that the defendant remains liable to indemnify the plaintiffs pursuant to section 1 of contract of insurance with policy number MK1RVA154875ISR with respect to the replacement of the community centre located at “Tudor Village Lilydale”, 520 Maroondah Highway, Lilydale, destroyed by fire on or about 6 May 2013.
- $941,037.06
$520,650.25 damages.
- $
420,386.81 debt.
- Interest pursuant to s 57 of the Insurance Contracts Act 1984 (Cth).
- Costs pursuant to the QBE Policy.
77 On the basis of the above amendments,
it is clear enough that the plaintiffs were only pursuing a claim for indemnity
under the
policy which sounded in a claimed entitlement to $941,037.06, being
the total of the sums set out in the various sub-paragraphs comprising
paragraph
35. Paragraph C of the prayer for relief which sought $420,386.81 which
represented the amount unpaid under the First
Release, was
deleted.
78 However, notwithstanding the above,
paragraphs 36 and 37 remained unamended and still
read:[19]
(b) Liability pursuant to First Release and the Second Release
- Alternatively to paragraph 35 above, by reason of paragraphs 22 to 24 above, QBE owed the plaintiffs $2,650,000 under the First Release and the Second Release for the replacement of the Community Centre.
- By reason of paragraphs 30 and 36 above, QBE is indebted to TV Mews in the sum of $420,386.81 under the First Release and the Second Release for the replacement of the Community Centre.
79 The claim for interest under the
Insurance Contracts Act made in paragraphs 40 and 41 and which cross referenced
paragraphs 22 and 24, also remained unchanged, despite the new paragraph
24A
which was foundational to the plea in paragraph
32A.
80 In QBE’s defence to the FASOC, it
abandoned the rectification argument relating to the First Release. The reason
for its
abandonment of those pleas is made clear by its expanded denial of
paragraph 37, such that by paragraph 37 of the defence to the
FASOC QBE now
pleaded as follows:[20]
37 As to paragraph 37, it says as follows:
(a) It denies the allegations in paragraph 37.(b) It says further that the allegation in paragraph 37, namely that QBE remains indebted to TV Mews under the terms of the First and Second Releases, is inconsistent with the allegation in paragraph 32, namely that TV Mews has avoided the First and Second Releases, and should be struck out for offending the principle that a party is not permitted to approbate and reprobate.(c) Further, and in any event, in circumstances whether neither TV Mews nor QBE contend that the First Release is binding upon them, the allegations in paragraph 37, insofar as they relate to the First Release should be struck out.
81 That was where matters were left for
the next 2½ years which relevantly included the expert conclave of quantity
surveyors
in November 2021. Shortly prior to the indemnity proceeding returning
to Court for directions, the plaintiffs sought, and on 4 March
2022 obtained,
leave to file the second further amended statement of claim, which they did on 4
March 2022 (the ‘second FASOC’).
82 In
the second FASOC, the plaintiffs advanced a new estoppel
claim[21] and also added a number of
new paragraphs including a paragraph 50 which alleged that the concrete slab
could not be used in the
reinstatement such that the amount payable under the
First Release was $2.7 million and a new paragraph 51 which alleged that
‘QBE
has failed to fully indemnify the plaintiffs in that it has failed to
pay $2.7M as required by the First Release, together with other
monies payable
under the consultant’s indemnity’. The particulars referenced that
$2,229,613.19 had been paid such that
$470,386.81 was payable as well as legal
costs totalling $104,674.62. The new prayer for relief
read:[22]
AND THE PLAINTIFFS CLAIM:
- A declaration that the defendant remains liable to indemnify the plaintiffs pursuant to section 1 of contract of insurance with policy number MK1RVA154875ISR with respect to the replacement of the community centre located at ‘Tudor Village Lilydale,” 520 Maroondah Highway, Lilydale, destroyed by fire on or about 6 May 2013.
- A declaration that the defendant is bound to pay the plaintiff the balance payable under the First Release without deduction (namely, $2.7M less amounts paid for the cost of reinstatement).
B. $575,061.43
C. Interest pursuant to s 57 of the Insurance Contracts Act 1984 (Cth).
D. Costs pursuant to the QBE Policy.
83 $575,061.43 is the sum of the amounts
alleged to be unpaid under the First Release and the legal costs particularised
in paragraph
51 of the Second
FASOC[23].
84 When seeking the amendment, the plaintiffs were
unabashed as to the change of course, conceding that there had been a change of
position brought about as a result of the quantity surveyor conclave with it now
being accepted that the slab could not be reused,
such that there was an
obligation on QBE’s part to pay $2.7 million under the First Release. The
plaintiffs argued that any
preclusionary circumstances which barred them from
now advancing such a claim were matters for QBE’s defence.
Underlying principles
85 The concurrent existence of
inconsistent rights underpins the doctrine of election. If the rights are in
truth inconsistent then
neither right can be enjoyed without the extinction of
the other. Thus, election confers upon the party electing the benefit of
enjoying the other right which benefit is denied so long as both remain in
existence.[24]
86 The
concurrent existence of inconsistent rights must be distinguished from various
other circumstances which are relevant to the
issues which arise in this case.
87 Inconsistent rights must be distinguished from
alternative and inconsistent remedies. Generally, a promisee may pursue
alternative
and inconsistent remedies without being held to have elected in
favour of either. In the case of alternate remedies, no question
of election
arises until one or other claim has been brought to
judgment.[25]
88 No question of election arises until the
promisee is faced with the need to make a choice between the inconsistent
rights.
89 Rules of pleading permit a party to
make allegations of fact which are inconsistent provided the pleading makes it
clear that the
allegations are made in the alternative, although one party will
not be permitted to set up two inconsistent sets of facts where
one set or the
other must be known by the party pleading to be
false.[26]
90 For the doctrine of election to apply, the
promisee must have sufficient knowledge. In Coastal Estates Ltd v Melevende
(‘Melevende’),[27]
a case where a purchase had been induced by fraudulent misrepresentations to
purchase land from the appellant by a terms contract
of sale, the purchaser has
a choice between terminating or proceeding with the contract of sale. The Full
Court held that the elector
must have full knowledge of both the circumstances
which gave rise to a right to terminate the contract and of the legal right
itself.
91 This latter element of the knowledge
requirement is controversial. In JW Carter’s Contract Law in
Australia,[28] the authors note
that in Sargent the High Court did not decide whether the distinction
drawn in Melevende between knowledge of the circumstances giving rise to
a right to termination and knowledge of the right itself was correct, and
observe
that the balance of authority favours knowledge of the circumstances as
sufficient even in relation to a common law termination
right.[29]
92 Whether
a promisee’s words or conduct amount to an election to continue
performance is a question of fact. What is said
or done must be unequivocal and
inconsistent with the alternate right. Thus, an election to continue
performance is a permanent
restriction on the right to terminate (save with
respect to a subsequent breach).
93 Whether the
election is one to terminate the contract or to continue performance is
generally a final election against the inconsistent
right.[30]
94 What may appear to be an application of the
doctrine is in fact the consequence of that party’s conduct. Thus, in the
case
of termination of a contract for breach, it is not the doctrine of election
that prevents the avoiding party subsequently from enforcing
the contract but
rather the fact that the contract has, by the act of termination ceased to
exist.[31]
95 A party may also cease to be entitled to enforce
a contract where the circumstances are such that it is possible to infer from
the conduct of both parties to the contract that they can be seen to have
abandoned the rights and obligations created by the terms
of the contract
between them. In such circumstances, the contract will be treated as
discharged.[32] In certain
circumstances the parties by their statements and actions may make it clear that
each of them regards the contract as
at an end, not because they are in
agreement to that effect, but because they have each taken up rival positions as
to why the contract
is no longer operative. Even if they are both held to be
wrong, the contract may be treated as having been abandoned by
both.[33]
96 In DTR Nominees Pty Ltd v Mona Homes Pty
Ltd,[34] the purchaser under a
contract purported to rescind. The vendor asserted that the purported
rescission was a repudiation and purported
to accept that repudiation and
thereby terminate the contract. Both were found to be wrong in their respective
contentions. In
the joint judgment, Stephen, Mason and Jacobs JJ said that both
the purported recission by the purchaser and the vendor’s purported
acceptance of the recission as an act of repudiation were ineffective such that
neither party had effectively brought the contract
to an end. However their
Honours considered that it could be inferred that no party intended that the
contract should be further
performed and that, in those circumstances, the
parties must be regarded as having so conducted themselves as to abandon or
abrogate
the contract.[35]
A brief summary of the parties’ positions
97 QBE submits that the plaintiffs’
conduct of the proceeding evinced an unequivocal choice to eschew reliance on
such rights
as arose under the First Release. QBE argues that instead of the
pursuit of such rights, the plaintiffs pressed a claim for indemnity
under the
QBE policy and that choice has the effect that it is now not open to the
plaintiffs to press any claim under the First
Release.
98 The plaintiffs’ argument in
response is threefold; first, they argue that the time for election had not
arisen as the plaintiffs
were entitled to pursue inconsistent claims in the
alternative until judgment; secondly, they argue that the alternative claim for
moneys owing pursuant to the First Release has remained at all times; thirdly,
they argue that the correct analysis is to characterise
their avoidance of the
First Release as a purported repudiation, the validity of which had not been
determined by the Court and,
in any event, was not accepted by QBE of having had
a legal consequence. In respect of the latter proposition, the plaintiffs rely
on the oft-cited observation of Asquith LJ in Howard v Pickford Tool Co
Ltd[36] that ‘a[n]
unaccepted repudiation is a thing writ in water and of no value to anybody: it
confers no legal rights of any sort
or
kind’.[37]
Analysis
99 Whilst the parties’ submissions
conveniently drew attention to the relevant concepts of election and
abandonment, the application
of those doctrines calls for precise analysis of
the plaintiffs’ conduct in the
proceeding.
100 First, in the SOC, the plaintiffs
specifically pleaded avoidance of the First Release. Considered alone, such a
plea gives rise
to a manifest and communicated intention to neither be bound by
the obligations imposed by the First Release or to take advantage
of such rights
as were conferred under it. As such, and as the plaintiffs’ argument
recognises, depending on QBE’s response,
that conduct may be ripe for
assessment through the prism of the discharge or termination of the First
Release arising because of
an acceptance by QBE of such repudiation. Similarly,
if the plaintiffs conduct is repudiatory, if QBE otherwise shows that it too
is
not relying on the First Release it may be possible to infer an abandonment,
such as occurred in DTR, regardless of any question of acceptance by QBE
of any repudiation by the plaintiffs.
101 However,
the plea of avoidance of the First Release in the SOC cannot be considered in
isolation. Whilst the drafting of the
SOC could certainly have been clearer,
when read as a whole, a fair reading of it discloses that the primary claim is
for indemnity
under the QBE policy but the gateway to that claim is acceptance
of the contention that QBE has breached the good faith obligations
imposed on it
under the Insurance Contracts Act, and as a result, the plaintiffs are entitled
to avoid the First Release. QBE of course consistently denied any breach of the
good
faith obligations.
102 The claim for
the amount allegedly unpaid under the First Release, on a sensible reading,
proceeds on the premise of failure of
the avoidance claim based on the asserted
good faith breach. It is a true alternative claim calling for consideration in
the event
that the avoidance claim is rejected leaving open the claim for moneys
unpaid under the First Release.
103 The claim is
not so much one for alternate remedies but rather alternate rights which
necessarily lead to different remedies.
The requirement to elect, as noted
above, arises in circumstances where the rights are inconsistent with one right
not being able
to be enjoyed without the extinction of the inconsistent right.
For example, re-entry of premises by a landlord bringing about the
termination
of a lease has the effect of extinguishing the landlord’s right to rent
following the termination of the lease.
In the present case, in the event that
the plaintiffs’ contested avoidance of the First Release was accepted by
the Court,
its effect would have been that there was no binding First Release.
Its success on the primary claim would have destroyed the alternate
claim.
Conversely, its failure would have left the claim open. In neither case, did
the doctrine of election have any role to play
because there was no
inconsistency in the prevailing rights.
104 There is
another reason why I do not accept that there is any inconsistency in the rights
then pursued by the plaintiffs in the
SOC. QBE of course submitted that the
First Release had no binding effect, but in the event that it did, its
submission appeared
to proceed on the premise that the First Release barred the
claim for indemnity under the QBE policy. This premise assumes that
by entering
into the First Release, the plaintiffs forewent the right to indemnity under the
QBE policy in exchange for benefits
provided by the First Release. The
plaintiffs’ submissions (and case as pleaded) proceeded on the same
assumption, namely
that the First Release constituted an accord and
satisfaction. If the proper construction of the First Release is, however, one
in which the plaintiffs forewent any entitlement to indemnity under the QBE
policy only upon payment of the sum referred to in the
First Release, then they
remained at liberty to pursue their claim under the QBE policy until such time
as the $2.6 million was paid
by QBE. Given that it is common ground that this
amount was not paid by QBE, if the First Release is properly characterised as an
accord executory, then there is no inconsistency in the plaintiffs pursuing
their rights under the QBE policy at all unless and until
QBE had made payment
of the $2.6 million.
105 Whether it is the promise
or performance of the promise which extinguishes the original obligation depends
on the proper interpretation
of the language constituting the agreement (or
accord). As such, previous cases provide little assistance as they depend on
their
own facts.[38] Here, the
commercial purpose of the First Release was to extinguish the claim for the
undetermined cost of reinstatement in exchange
for the certainty arising from
the cost being fixed. It is not easy to see why an insured in the position of
the plaintiffs would
have given up the right under the policy only on the
promise to pay as opposed to receipt of the sum promised. The language is also
more consistent with such characterisation. The form prepared by Cunningham
Lindsey on QBE’s behalf for signing and return
by the insured referred to
acceptance of $2,600,000 (excluding GST), not acceptance of the promise to pay
that sum as acceptance
of the claim for indemnity under the policy. Further, in
Contract: General Principles - The Laws of
Australia,[39] the author
observes that there is growing support for the view that actual performance is
required in cases where there is uncertainty
as to the
intention.
106 In Fraser v Elgen Tavern Pty
Ltd,[40] Murphy J, after
concluding that a compromise agreement negotiated between counsel required
actual performance of the promise in accord
to constitute satisfaction
stated:
...if parties to a settlement intend the result which I have found has occurred here, it would be wiser perhaps in the future to use definitive words such as “upon payment by the defendants to the plaintiff”, before stipulating the consequences which are to flow in the action itself. If they intend to achieve the consequences for which [counsel for the defendant] has contended, they should include the words “The defendants promise to pay and the plaintiffs accept the defendants’ said promise” before stipulating the intended consequences in the action itself.
The dichotomy between on the one hand acceptance of the promise in satisfaction and on the other hand acceptance of its performance by payment in satisfaction should be made clear in settlements...
In contrast, where the new promise is complex and requires a series of detailed steps to be taken, this may suggest that the promise of performance is the satisfaction.[41]
107 In my view, and noting that the claim
form was prepared on QBE’s behalf, and should therefore be construed
contra proferentem, there was no satisfaction of the plaintiffs’
claim for indemnity under the policy until such time as payment in full was made
of the $2.6 million. As this never occurred, the plaintiffs’ pursuit of
their claims for indemnity under the QBE policy did
not give rise to a relevant
inconsistency such as to give rise to any requirement to elect. It necessarily
follows that if the First
Release did not preclude the claim for indemnity under
the QBE policy until the $2.6 million was paid, the plaintiffs’ avoidance
claim was superfluous.
108 Nothing relevantly
changed with the filing by the plaintiffs of the ASOC filed 14 March 2019.
Nor does anything of consequence
arise from QBE’s service of its amended
defence to the ASOC, although this impacts on the analysis which follows. In its
amended
defence to the ASOC, QBE made clear that contrary to the
plaintiffs’ apprehension, QBE did not allege that the First Release
was
binding. The perceived impediment to the claim for indemnity under the QBE
policy was not present.
109 However, QBE, whilst
maintaining its denial of the binding nature of the First Release, in the
alternative relied on the rectification
argument. The premise of this plea can
only be the recognition that the plaintiffs’ claim in the ASOC included a
plea for moneys
owing under the First Release. One thing, however, is clear;
QBE itself did not contend that the First Release created binding rights
and
obligations and did not intend to rely upon the First Release in the proceeding.
The fate of the plaintiffs’ alternate
claim for relief under the First
Release remained one where it was dependent on the failure of the
plaintiffs’ primary claim
that QBE had breached the Insurance Contracts
Act and the plaintiffs’ avoidance claim failed. In that event though, it
remained the burden of the plaintiffs’ to establish
that the First Release
was binding and QBE was in breach of it.
110 The
FASOC later filed by the plaintiffs on 22 August 2019 however is significant.
In the FASOC, the plaintiffs now specifically
plead that the First Release was
not binding,[42] not only because of
their avoidance of that First Release which remained alleged (and contested),
but because the counterparty, QBE,
was not asserting that the First Release gave
rise to any binding rights and obligations. Paragraphs 24A to paragraph 32A of
the
FASOC in particular make it clear that the position advanced by both the
plaintiffs and QBE was that the First Release was not binding.
Whilst QBE
maintained its denial of the breach of the obligation of good faith and hence
its denial of the validity of the plaintiffs’
avoidance of the First
Release on that ground, QBE contended for other reasons that the First Release
was not binding. Whatever
their reasoning, neither the plaintiffs and QBE were
alleging that the First Release gave rise to binding rights and obligations.
The
good faith breach issue became largely
irrelevant.
111 If the plaintiffs’ plea in
paragraph 32A was not clear enough, the plaintiffs also amended the prayer for
relief by deleting
the claim for the amount owing under the First Release of
$420,386.81 and now claimed that the amount that was owed was $941,037.06.
This
amount is referable to the sum of the amounts set out in the amended paragraph
35 said to be owing pursuant to QBE’s
obligation to indemnify under the
QBE policy.
112 The only complication that arises
is due to the fact that paragraphs 36 and 37 remained in the FASOC. These
paragraphs are inconsistent
with the plea in paragraph 32A and untethered to and
inconsistent with the prayer for relief. The implicit plea of an enforceable
agreement contained in paragraphs 36 and 37 cannot co-exist with the plea in
paragraph 32A.
113 This inconsistency in the FASOC
was squarely raised by QBE in its defence to the FASOC. QBE’s plea in
paragraph 37 of its
defence was clear and correct. Further, QBE reiterated its
position that the First Release was not binding by dropping its rectification
argument. QBE’s pleaded defence proceeded on the understandable basis
that the rectification argument was unnecessary because
the plaintiffs were not
pressing any claim that the First Release was enforceable. In fact paragraph 32A
and the abandonment of paragraph
C of the prayer for relief were to the opposite
effect.
114 Although QBE did not issue any strike
out application, when confronted with QBE’s explicable defence, the
plaintiffs took
no steps to seek to amend the FASOC by reinstating the claim for
moneys owing under the First Release by amending the prayer for
relief and
deleting paragraph 32A or otherwise explain or deal with the inconsistency in
the FASOC by explaining in some way how
they could pursue a case to the effect
that the First Release was binding given the plea in paragraph 32A that
‘by reason of
paragraph 24A [in which QBE had asserted in its defence that
the First Release was not binding] the First Release is not binding
on the
plaintiffs’. That they did not do so is explicable; the plaintiffs were
pressing a claim for amounts substantially
in excess of the amount unpaid under
the First Release.[43] The
additional sums sought included an additional amount of $364,952.75 relating to
the concrete slab, and an additional $155,697.50
relating to the disability
access requirements. These amounts were expressed to be owing pursuant to the
extant obligation falling
on QBE pursuant to the indemnity clause contained in
the QBE policy.
115 It was not until over two years
later, after the expert conclave came to an end, that the plaintiffs once again
sought to amend
the statement of claim so as to return to a claimed entitlement
for the amount unpaid under the First
Release.[44]
116 Given my conclusion that the First Release,
whilst legally binding, did not extinguish the plaintiffs’ claim for
indemnity
under the QBE policy until such time as the amount due thereunder was
paid to the plaintiffs, which never occurred, the plaintiffs
remained entitled
to pursue the claim for indemnity under the QBE policy until such time as the
amount owing under the First Release
was paid in full. The point never arose
where the plaintiffs had to choose between inconsistent rights such that the
doctrine of
election came into play.
117 The
critical question is whether the plaintiffs’ conduct in the period as and
from its filing of the FASOC on 22 August
2019 and thereafter until 4 March
2022, manifests an intention on the plaintiffs’ behalf that the
obligations imposed on the
parties under the First Release need not be
performed. It is clear that QBE maintained that position as and from 22 August
2029,
if not earlier. QBE was not asserting that the plaintiffs were bound and
QBE was denying that it was bound. Although I have found
that the First Release
was binding, contrary to QBE’s submission, it is clear regardless that
QBE’s conduct was such
that it did not intend to be bound by or rely on
the First Release. It is also clear that QBE apprehended that the
plaintiffs’
likewise were not seeking to enforce the First Release; hence
QBE dropping the rectification argument.
118 The
critical question is whether it can be inferred that as and from the filing of
the FASOC on 22 August 2019, the conduct of
the plaintiffs (as opposed to
QBE’s belief as to the plaintiffs’ conduct) can be viewed as
conveying that it was walking
away from any rights and obligations arising under
the First Release.
119 In my view, such intention
can be inferred on the part of the plaintiffs. It is obviously so but for the
retention of paragraphs
36 and 37 in the FASOC. Having regard to the below
matters, the retention of those paragraphs should be seen as an unintended carry
over of a previous and then abandoned
claim.
120 First, it was always the
plaintiffs’ primary case that neither party was bound by the First
Release; this was the premise
of its claim that the plaintiffs had avoided the
First Release by reason of QBE’s breach of the Insurance Contracts Act.
It only needed the claim under the First Release in the dual contingency that
QBE sought to rely on the First Release and the plaintiffs’
avoidance
claim failed. Once QBE made it clear that it was not seeking to rely on the
First Release, as it did in its defence to
the ASOC and more clearly in its
defence to the FASOC, the contingency was entirely illusory.
121 Secondly, the FASOC reinforced the abandonment
of any rights under the First Release by reason of the plea in paragraph 32A and
the amendment to the prayer for relief deleting any claim for moneys owing under
the First Release.
122 Thirdly, the
plaintiffs’ silence in the face of QBE’s defence to the FASOC, in
which it pleaded that neither party
contended that the First Release was binding
and the associated failure until 2½ years later to reinstate a component of
the
prayer for relief seeking the lesser sum due and unpaid under the First
Release, is further evidence of the plaintiffs’ abandonment
of any claim
under the First Release. Given that QBE was not contending that the plaintiffs
were bound by the First Release, the
plaintiffs wanted to pursue the claim for a
full indemnity under the QBE policy, by pressing the claim for the additional
moneys
totalling $520,650.25 pleaded in sub-paragraphs 35(b) and (c) and
reflected in the claim for $941,037.06 contained in paragraph B
of the prayer
for relief.
123 Fourthly, the plaintiffs’
belated filing of the second FASOC on 4 March 2022, recognises that there was a
need to add that
which was not contained in the FASOC, namely a claim for moneys
unpaid under the First Release; hence the addition of the new paragraph
AA in
the prayer for relief and the revised sum sought in paragraph B. More stark is
the deletion of paragraph 32A from the FASOC
which removed the allegation that
the First Release was not binding. This was necessary because the plaintiffs
were now asserting
that it was binding.
124 In
fact, the plaintiffs had no need to press a claim under the First Release as
long as the replacement cost for the community
centre exceeded $2,650,000; it
was only in November 2021 that the prospect of it being less appeared to
materialise after the expert
conclave. Then, and only then, did the plaintiffs
seek to return to the First Release, after eschewing its benefits and burdens
arguably from as far back as the commencement of this action in 2018 but more
clearly from the filing of the FASOC in August
2019.
125 Neither the plaintiffs nor QBE were
relying on the First Release as and from 22 August 2019 such that they abandoned
any rights
and obligations arising thereunder. Accordingly, the
plaintiffs’ claim for the balance of moneys owing under the First Release
is rejected.
Claims preparation costs
126 It remains necessary to consider the
plaintiffs’ claim for $72,816.18 in claims preparation costs. Neither
party contended
that the effect of the First Release was such as to preclude any
claim by the plaintiffs for indemnity for such costs or that either
the First
Release operated in a way which would preclude any claim by the plaintiffs for
reasonable professional fees payable by
the insured and such other reasonable
expenses as may be necessarily incurred by the insured for preparation of claims
under the
policy. To put it another way, it was common ground that the only
operative effect of the First Release was to preclude the claim
under the
insuring clause for building reinstatement costs, not
otherwise.
127 The insuring clause in the QBE policy
applicable to claims preparation costs is in the following terms:
The insurance under this item is to cover such reasonable professional fees as may be payable by the insured, and such other reasonable expenses necessarily incurred by the insured and not otherwise recoverable, for preparation of claims under the Insured’s Material Damage and Consequential Loss insurance policies and the Insurer’s shall indemnify the Insured for such reasonable fees and expenses.
128 The plaintiffs confined the claim for
claims preparation costs to $72,816.18 and relied upon an expert statement from
Naomi Murray,
cost consultant, to the effect that the professional fees were
reasonable in respect of their quantum for the work carried out.
Ms Murray was
not cross-examined and QBE accepted that the fees were reasonable in that
limited sense.
129 The plaintiffs otherwise relied
upon invoices from the plaintiffs’ solicitors, the first of which is dated
31 March 2017
and the last of which is dated 8 May 2018. Whilst it is not
necessary to recite all of the narrations setting out the work done
referred to
in the invoices, it is notable that the first entry in the invoice dated 31
March 2017 is 4 January 2017 and the entries
in the last of the invoices include
attendances on 11 and 12 April 2018 with the relevant narration in the latter
being ‘considering
and drafting the statement of claim.’
130 It will be recalled that the plaintiffs lodged
the claim on 15 May 2013[45] and
that the plaintiffs pleaded, and QBE relevantly admitted, that QBE accepted that
it was bound to indemnify the plaintiff, subject
to the terms of the QBE policy,
in or around May 2013. It will also be recalled that the First Release was
signed on 10 April 2014.
131 The time period in
which the professional fees were incurred was well after the time the plaintiffs
(as the insured) had lodged
their claim for indemnity on QBE, after the
obligation to indemnify had been recognised and accepted and well after the
First and
Second Releases had been signed.
132 The
plaintiffs submit that a perusal of the narrations in the invoices, along with
letters passing between the plaintiffs’
solicitors and the solicitors for
QBE, show that the expenses incurred by the plaintiffs were responsive to
enquiries made by QBE
and necessary in order to prepare and substantiate the
claims made by the plaintiffs on the QBE policy. I do not agree.
133 In fact, the letters and related narrations in
the accounts are in the nature of demands made by the solicitors for the insured
for amounts alleged to be due under its obligation to indemnify for matters such
as the costs associated with the concrete slab,
the disability access
requirements and loss of revenue and the like, being claims which were rejected
and which are no longer pressed.
134 Thus, the
plaintiffs assert an entitlement to recover under the relevant insuring clause
professional costs incurred in connection
with claims which were not accepted
and where the rejection has not been challenged, where the claim for indemnity
in general had
been accepted as far back as May 2013 and where the case now
sought to be made by the plaintiffs is that the parties’ rights
and
obligations were compromised by the First Release entered into on 10 April 2014.
135 The plaintiffs are seeking to recover advocacy
costs in respect of claims rejected and not challenged. The only sensible
construction
of the insuring clause is one which is to the effect that it
relates to professional expenses reasonably incurred by the insured
for the
preparation of claims which are accepted and as such fall within the scope of
the material damage and consequential loss
insurance policy.
136 Where an insured seeks to recover claims
advocacy costs in connection with claims that are accepted, the leading texts
and the
comparatively few cases which determine the scope of such clauses draw a
distinction between claims preparation costs on the one
hand and claims advocacy
costs on the other. In Riley on Business Interruption Insurance, the
author states:
It should be noted that cover only extends to the provision of information ‘as required by the insurers’. Thus it does not cover time spent by the accountant:
• in formulating or negotiating settlement of their client’s claims ...[46]
Similarly, in Principles and Practice of Interruption Insurance, the learned author states (referring to auditors’ fees):
It should be emphasised that it is not the intention of insurers to indemnify the assured in respect of any fees paid to professional claim makers who may be engaged by the assured to conduct on his behalf loss settlement negotiations either direct with the insurers or with the insurers’ official adjuster. Invariably the cover is restricted to the reasonable cost of producing particulars and information etc required by the insurers.[47]
137 In Australian Pipe & Tube Pty
Ltd v QBE Insurance (Australia) Ltd (No
2),[48] Beach J considered that
a ‘broad-brush’ approach was not warranted on the facts of the case
and confined recoverable
claims preparation fees only to ‘those costs
noted to be “claims preparation costs” in the individual invoices
[post] presentation of the claim’.
138 The
professional fees and expenses sought to be recovered here, well after indemnity
had been accepted and after, on the case
now advanced by the plaintiffs, that
QBE had agreed to pay $2.6 million to the plaintiffs in settlement of their
claim for building
reinstatement costs, do not amount to costs ‘for claims
under the insured’s material damage and consequential loss insurance
policies’.
139 Rather, the costs and
expenses relate to claims made by a solicitor on behalf of the insured for
amounts not due under the insured’s
material damage and consequential loss
insurance policies, alternatively, claims by the solicitor on behalf of the
insured for moneys
due under an agreement between the plaintiffs and QBE. They
do not amount to costs incurred for preparation of claims under the
relevant
policy. That claim was made and accepted some years earlier. Accordingly, the
plaintiffs’ claim for claims preparation
costs is rejected.
Disposition
140 In the result, the plaintiffs’ claim will be dismissed. There will be judgment on the counterclaim against TV Mews in the sum of $15,376.15. I will hear from the parties as to costs and interest.
[1] Although the action was commenced in TV Mews name, in substance QBE was behind the action exercising its rights of subrogation.
[2] Where necessary and convenient, Pinnacle and TV Mews are referred to collectively as ‘the plaintiffs’.
[3] As will be apparent, the First Release provided for payment of $2.6 million or $2.7 million depending on whether the concrete slab could be re-used. It is not in dispute that a compromise of $50,000 was later agreed such that all parties accept that if there is an enforceable agreement the relevant amount payable is $2.65 million.
[4] For convenience and ease of reading, in these reasons, the alleged obligation arising under the First Release is described as an obligation to pay $2,600,000 ($2.6 million).
[5] David Foskett, The Law and Practice of Compromise (Thomson Reuters London,7th ed, 2010) 22-18.
[6] Malcom A Clarke and Julian M Burling and Robert L Purves, The Law of Insurance Contracts (LLP, 4th ed, 2002) [30-6].
[7] 748 F Supp 445 (MD La, 1990).
[8] [1969] 2 QB 507, 513.
[9] Ibid 514 ( Lord Denning MR).
[10] [2015] NZHC 1444 [220] – [226].
[11] See JLR Davis, Contract: General Laws of Australia (Thomson Reuters, 2nd ed, 2012) [7.1.1210] where such a contract is described as a unilateral contract.
[12] Mount Bruce Mining v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104, 116 [47].
[13] See above [25].
[14] See above [29].
[15] Confusingly the document is headed ‘Further Amended Defence and Counterclaim’ and purports to be in response to the SOC not the ASOC. Its content suggests that it is in fact responsive to the ASOC.
[16] The same erroneous reference to the SOC remains.
[17] The changes are underlined.
[18] The underlining replicates that it is the amended pleading as filed.
[19] See above [67].
[20] Defence to the FASOC (emphasis added).
[21] This is the estoppel claim considered and rejected above at [53]–[63].
[22] Underlined as in the amended pleading.
[23] As later reduced; see [15] above.
[24] Sargent v ASL Developments Ltd [1974] HCA 40; (1974) 131 CLR 634 (‘Sargent’).
[25] United Australia Ltd v Barclays Bank Ltd [1941] AC 1, 30; Ciavarella v Balmer [1983] HCA 26; (1983) 153 CLR 438, 449.
[26] Supreme Court (General Civil Procedure) Rules 2015 (Vic) r 13.09; Neil J Williams, LexisNexis Butterworths, Civil Procedure: Victoria, vol 1 (at Service 332) [13.02.35].
[27] [1965] VicRp 60; [1965] VR 433.
[28] J W Carter, Contract Law In Australia (J W Carter Publishing, 8th ed, 2023) [31-05].
[29] See for example Australian Horizons (Vic) Pty Ltd v Ryan Land Co Pty Ltd [1994] VicRp 70; [1994] 2 VR 463, 494.
[30] Sargent (n 24) 655-6.
[31] Ibid 642.
[32] DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423 (‘DTR’); Fitzgerald v Masters [1956] HCA 53; (1956) 95 CLR 420; Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 (‘Air Great Lakes’).
[33] Air Great Lakes (n 32).
[34] DTR (n 32).
[35] Ibid 434.
[37] Ibid 421.
[38] See for example: Howes v Miller [1970] VicRp 68; [1970] VR 522; Fraser v Elgen Tavern Pty Ltd [1982] VicRp 38; [1982] VR 398; Scott v English [1947] VicLawRp 22; [1947] VLR 445; McDermott v Black [1940] HCA 4; (1940) 63 CLR 161; Tallerman & Co Pty Ltd v Nathan’s Merchandise (Vic) Pty Ltd [1957] HCA 10; (1957) 98 CLR 93.
[39] JLR Davis, Contract: General Principles Laws of Australia (Thomson Reuters, 2nd ed, 2012) [7.8.230].
[40] [1982] VicRp 38; [1982] VR 398, 404.
[41] Auckland Bus Company Limited v New Lynn Borough [1965] NZLR 542, 556.
[42] See above [75].
[43] Further and notwithstanding paragraphs [104]–[107] above, the plaintiffs’ appeared to proceed on the basis that the First Release constituted an accord and satisfaction not an accord executory.
[44] For reasons that do not matter, that claimed amount due under the First Release assumed that the amount required to be paid was $2,700,000; the plaintiffs later changed their position and all parties accept that the effect of the Second Release was to make the sum payable under the First Release (if binding $2,650,000; see above [16].
[45] See above [20].
[46] Harry Roberts, Riley on Business Interruption Insurance (Sweet and Maxwell, 10th ed, 2016) 187.
[47] WB Honour and GJR Hickmott, Principles and Practice of Business Interruption Insurance (Butterworths, 4th ed, 1970)252.
[48] [2018] FCA 1450, [286].
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