Barfly’s Nominees Pty Ltd v Insurance Australia [2012] VCC (6 June 2012)

Limitation of actions in an insurance claim.

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE CIVIL DIVISION

Revised (Not) Restricted

(Not) Suitable for Publication

Case No.

BARFLY'S NOMINEES PTY LTD Plaintiff

v

INSURANCE AUSTRALIA LIMITED Defendant

JUDGE: WHERE HELD:

DATE OF HEARING: DATE OF JUDGMENT: CASE MAY BE CITED AS:

HIS HONOUR JUDGE COISH

Melbourne

6 June 2012

MEDIUM NEUTRAL CITATION: [2012] VCC

REASONS FOR JUDGMENT

Catchwords:

APPEARANCES:

Counsel

Solicitors

For the Plaintiff

Mr J.D. Catlin

For the Defendant

Mr J.F. Richardson

VICTORIAN GOVERNMENT REPORTING SERVICE

565 Lonsdale Street, Melbourne - Telephone: 9603 2403

HIS HONOUR:

1 I have been asked to determine the following preliminary questions:

1. When did the plaintiffs alleged cause of action (being a claim for indemnity under an insurance policy) accrue?

and (b) based upon the answer to (a) above, does s.5 of the Limitation of Actions Act 1958 operate to bar the plaintiff's cause of action?

2 In order to determine these preliminary questions the parties have reached agreement on the following relevant documents and facts:

"Agreed facts and documents. (2) For the purposes of the trial of the preliminary questions only, the following documents and facts have been agreed by the parties.

Documents. (a) The insurance policy which comprised of (i) the Host Pack Policy Wording Material Damage and (ii) a document issued by Aon Risk Services Australia Limited titled 'Coverage summary'. (Collectively the insurance policy).

1. A letter dated 30 March 2005 from Angus Stewart of Loss Management International Pty Ltd (LMI) (on behalf of the plaintiff) to Crawford and Company (Australia) Pty Ltd (on behalf of the defendant) (the plaintiff's letter).

2. A letter dated 22 December 2005 from Norris Coates (solicitors for the defendant) to Allan Manning of LMI (on behalf of the plaintiff) (the defendant's letter).

Facts. (a) The insurance policy was effective from 28 August 2002 until 15 September 2003.

1. The latest date for an incident occurring to which the policy would respond was therefore 15 September 2003.

2. Save by effluxion of time the insurance policy was not terminated by either party.

3. The plaintiff's first written application to the defendant for indemnity under the insurance policy was contained in the plaintiff's letter.

4. The plaintiff relies on the defendant's letter as (i) a denial of indemnity under the insurance policy, (ii) thereby a breach of the insurance policy, and (iii) the event and date from which the plaintiff asserts its cause of action accrued.

5. Proceedings were issued on 2 June 2011."

3 Section 5 of the Limitation of Actions Act 1958, insofar as relevant, provides:

"(5) (1) The following actions shall not be brought after the expiration of six years from the date on which the cause of action accrued-

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JUDGMENT

Barfly's Nomines P/Lv Insurance Australia Ltd

2.1. In the event of any building or any other property or any part thereof insured under Section 1 (Material damage), Section 3 (Burglary/theft), Section 4 (Money) or Section 5 (Glass) used by you at the premises for the purpose of the business being physically lost, destroyed or damaged (hereinafter referred to as "damaged" with "damage" having a corresponding meaning) by any cause or event not excluded under those sections, and the business carried on by you being in consequence thereof interrupted or interfered with, provided the interruption or interference is caused by damage occurring during the period of insurance, the company will, subject to the provisions of this Section 2 (Business interruption) and Section 7 (Common policy section), pay to you the amount of loss resulting from such interruption or interference in accordance with the applicable basis of settlement..."

1. The policy therefore provides that on the happening of a certain event the insurer will "indemnify" (Clause 1.1) the insured or "pay to you the amount of loss resulting from..." (Clause 2.1).

2. In Cigna Insurance the Full Court of the Supreme Court of Western Australia considered the date the cause of action accrued in a proceeding in which the respondent (plaintiff) claimed damages for breach of contract from the appellant (defendant) for failing to pay a sum of money pursuant to a policy of personal accident insurance. The District Court Commissioner at first instance followed Giles J's judgment in Penrith City Council and held the cause of action did not accrue until the rejection by the appellant of the respondent's claim (see Paragraph 74). Accordingly the proceeding was not statute barred. This decision was overturned by the Full Court. It held that the cause of action under the personal accident insurance policy accrued at the time of the happening of the relevant event. This meant the proceeding was issued out of time. The Full Court of the Supreme Court held that liability was not dependent upon the respondent (plaintiff) making a claim. Rather, it was the happening of the relevant event which was the only fact to be proved.

11 In the course of Pidgeon J's judgment in Cigna Insurance he considered Giles J's decision of Penrith City Council and stated, at paragraph 84:

"I have mentioned that what was said in Council of the City of Penrith in the passages to which I have referred would result in its being necessary to lodge a claim in order to ascertain whether or not the defendant intended to perform its promise. I consider that this, in so far as it is applicable to personal accident policies, is contrary to what was said in Tillotson and contrary to the other authorities I have set out. For these reasons I consider this aspect of Council of the City of Penrith should not be followed. There is no requirement to prove

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4 JUDGMENT

Barfly's Nomines P/Lv Insurance Australia Ltd

that the defendant was not going to carry out its promise. There is therefore no requirement for this purpose to submit a claim on this account and, as I mentioned, the reasoning in Tillotson would show that there is no implied term requiring a claim to be submitted."

12 Malcolm CJ stated, at paragraph 32:

"In the present case it was necessary for the respondent to commence his action within six years from the date on which the cause of action accrued. The substantive issue in the appeal, therefore, is the identification of the date on which the cause of action accrued. In the particular context of the trial of the preliminary issue, the question was whether the cause of action had accrued on 20 March 1987. The policy in this case was a policy to pay a fixed amount of compensation upon the happening of one or other of the defined events. I agree with Pidgeon J for the reasons he has stated that liability was not dependent on the respondent making a claim. In the present case, the relevant defined event was bodily injury which resulted in permanent total disablement..."

13 In my opinion the decision of the Full Court of the Supreme Court of Western Australia in Cigna Insurance is directly relevant to this matter. It is submitted on behalf of the plaintiff that this decision forges a new direction in the law and follows Western Australian precedent. I do not agree with the submission. The decision is based in part on an earlier Western Australian case of Tillotson v. ANZ Life Assurance Company Limited (1997) 9 ANZ Insurance Cases 61, in which the court refused to imply a term into a policy that a claim must be first be made, however it is largely based on authorities concerning the time at which a cause of action accrues, and in particular when a cause of action accrues under a contract of insurance.

14 It is further submitted on behalf of the plaintiff that the Penrith City Council case has been applied in a number of subsequent cases, and it remains the law of other states, in particular Victoria. The Penrith City Council decision has been referred to in other cases, however these are not cases concerning the issue in dispute in this proceeding and they do not specifically address the authority of Cigna Insurance. Limit (No 3) Limited v. ACE Insurance Limited (2009) NSWSC 514 considered whether an insurer had incurred a "legal liability" within the meaning of the insuring clause. CGU Insurance Limited v. Watson (as trustee of the deed of arrangement in respect of Greaves) (2007) NSWCA 301 concerned the nature of a claim. Kone Elevators Pty Ltd v. Popa

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5 JUDGMENT

Barfly's Nomines P/lv Insurance Australia Ltd

(2006) VSCA 26 dealt with an argument that a limitation period for an indemnity claim did not commence to run until the amount of damages payable by Kone to the plaintiff was ascertained. British American Tobacco Australia ltd v. Eagle Star Reinsurance Company ltd (2006) NSWCA 156 concerned the appropriate framing of a claim, whether it be a claim to specific performance or claim for unliquidated damages for breach of contract.

1. In my opinion the decision of the Full Court of the Supreme Court of Western Australia in Cigna Insurance is directly relevant to this proceeding and ought be followed. It is a decision of an intermediate appellate court which I ought not depart from (see Farah Constructions Pty ltd v. Say-Dee Pty ltd (2007) 230 CLR 89, paragraph 135).

2. I do not accept the submissions on behalf of the plaintiff that the defendant is in effect submitting that this is not a contract dispute or that there is an implied term that the insured is entitled to indemnity before a claim has been made. The defendant is relying on the general principle that, "In a simple contract of insurance the assured becomes entitled to payment upon the occurrence of the event insured against." (Chitty On Contracts, 30th edition, p.1315)

3. I accept the submissions made on behalf of the defendant that this proceeding is statute barred. It therefore follows that the answers to the preliminary questions are:

   1. on or before 15 September 2003;

   2. yes.

I shall hear the parties on the appropriate formal orders.

Subject to sub-ss.(1AA) and (1A), actions founded on simple contract (including contract implied in law) or actions founded on tort including actions for damages for breach of a statutory duty ..."

1. The plaintiff claims damages for breach of contract, the contract being the insurance policy. The plaintiff alleges that as a result of rain events from August to October 2003 its bar and restaurant business suffered an interruption to business and there was damage to property and stock. The plaintiff alleges that the defendant denied its claim for indemnity under the insurance policy and that denial of indemnity amounted to a breach of that contract.

2. It is therefore submitted on behalf of the plaintiff that its cause of action accrued on 22 December 2005 and accordingly it is not statute barred. It is submitted on behalf of the plaintiff that this is a proceeding for breach of contract and the plaintiff relies on the general principle that in contract the cause of action accrues on breach of contract. The plaintiff relies particularly on a decision of Giles J in Penrith City Council v. GIO (1991) 24 N.S.W.L.R. 564.

3. The defendant alleges the proceeding is statute barred. Paragraph 21 of the amended defence provides:

   "(21) Further the plaintiff's claim is a claim to indemnity pursuant to contract and arose more than six years prior to commencing this proceeding and is barred by operation of s.5 of the Limitation of Actions Act 1958."

   The defendant relies on the general principle that a cause of action accrues when all the facts have occurred which the plaintiff must prove in order to succeed. It is submitted on behalf of the defendant that there is no condition precedent to accrual in the insurance policy. It is submitted that the liability of the insurer is not dependent upon the insured making a claim, not is it dependent upon refusal of that claim, not is it dependent upon the claim being quantified or quantifiable at the date of accrual.

4. It is submitted on behalf of the defendant that having regard to the terms of

   the insurance policy the contractual indemnity and therefore accrual in respect of material damage arises upon physical loss, destruction or damage to property occurring during the period of insurance. Similarly, contractual indemnity and therefore accrual in respect of business interruption arises upon physical loss, destruction or damage to property occurring during the period of insurance and the insured's business being interrupted or interfered with during the period of insurance. Thus all elements necessary for the plaintiff to prove its claim had occurred by no later than 15 September 2003. This was therefore the latest date upon which the plaintiff's cause of action accrued. As the proceeding was not issued until June 2011 it is submitted on behalf of the defendant that the proceeding is statute barred. In support of its submission the defendant relies upon Cigna Insurance Asia Pacific Ltd v. Packer (2000) WASCA 415, a decision of the Full Court of the Supreme Court of Western Australia.

5. The insurance policy contains the following relevant provisions:

"Claims. If an event occurs which you believe may result in a claim under this policy, please advise the company immediately..."

There is no term of the insurance policy that the making of a claim or rejection of a claim is a condition precedent for liability. Whilst it is submitted on behalf of the plaintiff that common sense dictates a claim will be made by an insured, it is not submitted that the making of a claim and/or rejection of that claim is a condition precedent to liability under the policy:

"Section 1 (Material damage). The indemnity.

1.1. In the event of any physical loss, destruction or damage (hereinafter referred to as "damage" with "damaged" having a corresponding meaning) not otherwise excluded happening to the property insured at the premises, the company will subject to the provisions of this Section 1 (Material damage) and Section 7 (Common policy section) indemnify you in accordance with the applicable basis of settlement."

"Section 2 (Business interruption). The indemnity.