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Insurance update October 2014

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Welcome to Hunt & Hunt’s Insurance Market Update, a quarterly publication featuring hot issues and legal developments relevant to insurance professionals who have an interest in the Australian insurance market.



Misleading advertising cost vendors over $1m in damages

By Hunt & Hunt

Under the Australian Consumer Law, a person must not, in trade or commerce, engage in conduct that is misleading or likely to mislead or deceive. The vendors in this case contended that sale of a family home is not in trade or commerce. The Court, however, found that the house had been renovated as an investment property to resell with financial gain which therefore amounted to trade or commerce.

Any loss or damaged occasioned as a result of the misleading or deceptive conduct may be recovered in court. The damage will be assessed as the cost of reasonable and necessary work to bring the construction in line with the representations, which in this case amounted to $1,171,124.00 including GST.


Georgia Dandris and her husband, Patrick Williams, purchased a house in Dover Heights, NSW in December 2003 with an alleged intention "to live in the house as their family home". Dandris obtained an Owner-Builder Permit from the Department of Fair Trading. The house was extensively renovated into a double-storey five-bedroom house with a tiled rooftop terrace with views of Sydney Harbour.

Dandris employed an architect to prepare development application documents for the Council, including the necessary plans. As owner-builder, she arranged for all works to be carried out and she contracted with all tradespersons. Ultimately, however, the building work was executed without detailed architectural plans or architectural supervision.

Dandris retained a real estate agent who advertised the property on After accessing the web advertisement, Bruno and Sia Pisano inspected the house with a representative from the estate agent. Both the web advertisement and the inspection brochure contained the following words:

Offering every conceivable luxury for your absolute comfort and security, this stunning suburban oasis showcases state of the art technologies with fixtures and finishes of the highest standard. Offering 400sqm of seamlessly integrated indoor/outdoor living, no detail has been spared with this meticulously designed and built home.

Written in small print on the reverse of the brochure and on the web advertisement was the following disclaimer clause:

The information contained in this brochure has been furnished to us by the vendors…we have not verified whether or not that information is accurate… We do not accept any responsibility to any person for its accuracy and do no more than pass it on. All interested parties should make and rely on their own enquiries.

The estate agent informed the Pisanos that the house was built above and beyond the standard home, that the builder was a real professional and was very meticulous, and that the house had been master-built for the builder to live in with the builder's family.
The Pisanos made an offer on the house which, after some negotiations, was accepted. The contract contained a special condition whereby:

The purchaser acknowledges that he/she is buying the property relying on his/her own inspections, knowledge and enquiries and not relying on any representation, warranty, statement or promise other than as set out in writing in this contract.

Attached to the contract was a Certificate of Home Warranty Insurance which referred to a defects inspection report, which stated:

The purpose of this inspection is to identify any areas where poor workmanship, incomplete works or rectification woks are required and have been identified within this report. A further and concise report should be requested to investigate in greater detail prior to purchase…it is strongly recommended that a more comprehensive service be sought on areas/queries in this report.

The report also contained the following disclaimer:

No liability shall be accepted on account of failure of the Report to notify any problems in area(s)…of the property physically inaccessible for inspection…This report is NOT an all-encompassing report…It is a reasonable attempt to identify any obvious or significant defects…This report is not a Certificate of Compliance with the requirements of any Act, Regulation, Ordinance or By-Law…should you require any advice of a structural nature you should contact a structural engineer.

Only one item was identified in the report as requiring attention:  the ground floor dining room door track, which was found to have water ponding. All other aspects of the house were "found to be completed in a good workmanship like manner and finished in good order."

Shortly after sale was completed and the Pisanos moved into the house, problems emerged. 


The proceedings had three distinct but overlapping components. First, the Pisanos claimed damages from Dandris for breach of statutory warranties. Second, they claimed from both Dandris and Williams damages suffered by conduct engaged in trade and commerce which was misleading and deceptive or likely to mislead or deceive. Third, they sued Williams in negligence.

The Misleading or Deceptive Conduct Claim

Section 18 of the Australia Consumer Law, a schedule of the Competition and Consumer Act 2010 (Cth),provides that a person must not, in trade or commerce, engage in conduct that is misleading or likely to mislead or deceive. A person may recover by action, under section 236, an amount of loss or damage suffered because of that conduct.

The Pisanos contended that the web advertisement, the brochure and by oral statements made by the agent, amounted to representations in trade and commerce that was misleading or deceptive or likely to mislead or deceive because they were false.

They alleged that as a result of relying on the misrepresentations, they suffered loss and damage in deciding to buy the house.
Although the real estate agent was also sued, the claim was ultimately abandoned in circumstances where the agent was insolvent and without insurance. Moreover, albeit not discussed in the judgment, it appears that the agent may have been able to avoid a liability finding as on one view it merely passed on information supplied to it by the Dandris and Williams which it duly noted in the disclaimer clause.

First, Dandris and Williams submitted that section 18 did not apply because the "sale of a family home is not in trade or commerce". Second, they submitted that the conduct complained of was not misleading or deceptive or likely to mislead or deceive because:

  1. they made disclaimers on the web advertisement and brochure;
  2. the Pisanos acknowledged on the special condition of the contract that they were relying on their own inspections, knowledge and enquiries;
  3. attached to the contract was the defects inspection report which advised that a further and concise report should be requested to investigate in greater detail prior to purchase and strongly recommended that a more comprehensive service be sought on identified areas;
  4. they afforded the Pisanos the opportunity to inspect the house before purchase, which was taken up;
  5. the Pisanos elected not to have their own professional pre-purchase inspection; and
  6. the Pisanos were represented by an experienced solicitor on the purchase.

Third, they submitted that the Pisanos had not proved that they suffered any loss because of the conduct complained of, but rather they caused their own loss because they had a "cavalier approach to their own rights."

In considering the claim, His Honour noted that the true issue was whether the misrepresentations which played a part in inducing the sale, thereby causing the Pisanos' loss, were in trade or commerce.

A transaction involving the sale of a domestic residence will be in trade or commerce if, in all of the circumstances in which it occurs, It discloses a commercial or business character. This is a question of fact in each case.

Despite Dandris' and Williams' allegations, His Honour was satisfied that the house was renovated with the intention of improving the house for resale for financial gain. The sale, including its advertising, was the carrying into effect of their investment strategy and was considered conduct in trade or commerce.

The falsity of the representations was clearly established and it was found that the misrepresentations of Dandris and Williams played a significant part in inducing the Pisanos to purchase the house. The misstatements in the advertising material were undoubtedly intended positively to influence the reader to purchase the house.  There was reliance on the misrepresentations and consequently a causal link was established between the misrepresentations and the loss or damage flowing from entering into the contract.

Other claims

His Honour also found that the defects, which were the consequence of work not being performed in a proper workmanlike manner and materials supplied not being good and suitable for the purpose for which they were used, had been established. By reason of the defects which caused significant water ingress, the house was deemed not reasonably fit for occupation as a dwelling.

However, in relation to the negligence claim, His Honour concluded that, in these particular circumstances, Williams did not owe such duty to the Pisanos bearing in mind the salient features underpinning a duty of care to avoid economic loss.


Representations made when selling property must be made with caution. What may be conceived as an innocent advertising technique could amount to misleading or deceptive conduct under Australian Consumer Law and thus entitle the purchaser who relied on those representations to recover from the vendor potentially huge amounts in court.


Assessing the period of construction related risk

By Steven Smith

Anticipating unknown defects poses challenges when assessing risk. In Australia, this risk is compounded by the lack of national standard set of limitations periods.


Some jurisdictions have, in addition to imposing standard time limits following the accrual of an action, further limited claimant's rights to commence actions. These parameters significantly affect the potential exposure of insurers. Below is a situational overview of each Australian state and territory.

Time limits for building actions are governed by 3 factors:

  1. State based Limitation Acts
  2. Date of accrual of action
  3. State specific limitations on building actions

Limitations Acts.  Each jurisdiction provides specific limitation periods.  For the Northern Territory (NT) it is 3 years from accrual of actions in tort or contract, and 6 years elsewhere in Australia.

Date of accrual of action.  The basic common law position is that the right to take action accrues when either the defect in the building is actually discovered or if it is a latent defect, which is not apparent, when the defect becomes manifest (in the sense of becoming discoverable by reasonable diligence – Pullen and Anor v Gutteridge[1] ).

Where there are no statutory limits on by which construction proceedings have to be commenced by, or any deeming of when accrual of the right to take action arises, claims could be bought effectively at any time following discovery of a latent defect, as long as the action commences within the general limitation act limits for each jurisdiction. If 15 years post construction a latent defect is discovered, action in regard to such can be commenced within 6 years (3 in NT) of that discovery.

Tasmania and the NT have provisions that deem when the right to take action accrues.  Each is different; however, effectively they relate to either date of issue of occupancy permit, certificate of final inspection or building work completion. Neither jurisdiction has the deeming of the accrual of rights been judicially considered.  The Victorian position has now been considered, and we expect that decision will be followed in these jurisdictions.

In Brirek Industries v McKenzie Group Consulting[2], the Victorian court of Appeal determined that section 134 effectively put a 10 year limit from the issue of an occupancy permit on a party’s right to commence a building action. This  is not limited by their Limitation Act

Section 134 says: "Despite anything to the contrary in the Limitation of Actions Act 1958 or in any other Act or law, a building action cannot be brought more than 10 years after the date of issue of the occupancy permit in respect of the building work (whether or not the occupancy permit is subsequently cancelled or varied) or, if an occupancy permit is not issued, the date of issue under Part 4 of the certificate of final inspection of the building work.

This decision also impacts upon the position in Tasmania, the NT and the Australia's Capital Territory (ACT). Tasmania and the NT have similar 10 year limits.  As a result in our view the effective time in which to take action is 10 years, in these Jurisdictions. Essentially the effective time limit for building actions is 10 years in Tasmania, Australia Capital Territory (ACT) and unlimited/6 years from common law accrual elsewhere.


Limitation Act

Date of accrual

Building Act



6 years

Deemed at issuing of occupancy permit/completion of works

10 years post issuing of occupancy permit or first occupation or 2 years post building permit or date work completed if occupied without permit.



6 years

Common law

10 years post issuing of occupancy permit, or certificate of final inspection

Does the 10 years limit apply if no occupancy permit or certificate of final inspection has been issued.  It is not clear if this leaves open the right to accrue later.


6 Years

Common Law

No specific limitations



6 Years

Common Law

No specific limitations


Western Australia

6 Years

Common Law

No specific limitations



3 Years

Accrual deemed at issuing or occupation permit or first occupation

10 years



6 years

Common Law

10 years post Completion certificate; last inspection; or first occupancy

Section 42 Building Act 2004, makes it clear that if limitation act limits to less than 10 years lower limit applies.


6 Years

Common Law

No specific limitations


 In considering rates for cover, the jurisdiction in which the insured operates can have a significant impact on your exposure profile.


[1] Pullen and Anor v Gutteridge Haskins and Davey Pty Ltd [1993] VicRp 4; [1993] 1 VR 27 (19 June 1992)

[2] Brirek Industries Pty Ltd v McKenzie Group Consulting (Vic) Pty Ltd [2014] VSCA 165


State not liable for criminal acts committed by teacher 

by Tara Maschotta

The recent decision of case JK V STATE OF NSW [2014] NSWSC 1084 considers the vexed question as to whether an institutional body may be vicariously liable for criminal conduct of its employees, a question which had been left unresolved in the High Court decision of State of NSW v Lepore.

Whilst the Court held the State was not vicariously liable there were a number of factors which indicated that there may be some scope (albeit limited) that an institutional body may be vicariously liable for criminal conduct. 


JK was a student at a school in NSW who made a claim for damages for psychiatric injury suffered as a result of sexual assaults by a teacher, QR.

JK initially issued proceedings against the State of NSW, the Principal of the School, the Deputy Principal and QR. The State of NSW cross claimed against the offending teacher, QR. 

The offending occurred between 2002 - 2006 and occurred mainly outside of the school grounds.  Actual offending occurred on school grounds on one occasion only. The school was unaware of the offending but had been informed that JK had a crush on QR and QR was informed not to have contact with JK. QR was instructed to swap classes, which occurred, but in the following year he was teaching a class in which JK was a student.

In 2007, QR was found guilty of the sexual assaults and served a custodial sentence. He was released in 2013.
In October 2012, JK settled with defendants 1-3. However a Notice of Discontinuance could not be signed as proceedings were still on foot against QR.

There were 3 main issues to be determined in the current proceedings:

  1. Whether the settlement was reasonable;
  2. Whether QR should indemnify the State of NSW;
  3. Whether there should be contribution by QR to the State of NSW, and, if so, what percentage amount.


Consent judgment was for the sum of $525,000.00 and, of that, $208,630.00 was for solicitor client costs. Two psychiatric reports were relied upon. The Court considered that the settlement was a reasonable one, taking into account the medical evidence, injuries and the plaintiff's age. 


When damage is suffered by any person as a result of a tort, the Court has power to direct that the contribution to be recovered from any person shall amount to a complete indemnity. The Court also has the power to exempt any person from liability to make contribution.

The State of NSW accepted that generally schools have a non-delegable duty to its students. However, they argued that the school authority's non-delegable duty of care did not extend to cover criminal actions. The issue the Court was faced with was whether the school authority was vicariously liable for this type of behaviour by a teacher. The State argued that vicarious liability would be imposed if the conduct was carried out with an intention to "further the interests of" or "perform the duty for" the employer.

The State of NSW argued that its obligation did not extend beyond exercising reasonable care. They further argued that it would be difficult to protect students against every risk of injury possible. 

Further, the State argued that QR's conduct did not occur in the course of and did not arise out of his employment with the State.
The Court considered it was unlikely that it would have been satisfied that there was a sufficient connection between QR's employment and his wrongful acts. The Court accepted that it was more likely that it would have found that the school authority was not aware that QR was involved in sexual assaults committed upon JK which took place off school premises and outside school hours and was not vicariously liable for QR's behaviour.

In the circumstances, the Court ordered that QR indemnify the State of NSW.


The State submitted that based on QR's conduct, no culpability could be attributed to the State and that but for the resolution of the claim, any finding of negligence should have been attributed 100% against QR.

QR submitted that the there were some bullying issues apparent at the time of his conduct that contributed to his offending together with the schools knowledge that JK had a crush on him. 

After taking all of these matters into account, the Court was of the view that nearly all of the fault could be attributed to the actions of QR. The Court ordered that it was just and equitable that QR pay 90% of the judgment sum.

The Court ordered that QR pay the State of NSW the sum of $472,500.00 by way of indemnity and contribution. The Court declined to order that QR pay the costs incurred by all defendants, but did order that he pay interest from the date of the judgment.


Although the Court held that QR was responsible for the injuries suffered by JK, they were not willing to attribute the full 100% of the damages paid to JK by the State. 

The school was unaware of the assaults as the assaults occurred outside of the school grounds and outside of school hours on all but one occasion. However, the Court ordered only 90% be paid by QR to the State.

The fact that the wrongdoing occurred away from the workplace was not determinative of liability and it was necessary to determine whether the conduct could be held to be in the course of employment.

Whilst a party may not owe a plaintiff a non-delegable duty to protect against a criminal act of a teacher, the position of whether a school could be held vicariously liable for the criminal act is not so clear. It should be noted that QR was self represented and therefore further legal arguments could have been put forward such that the school may have borne some responsibility. His limited financial means may have also influenced the judgment to some extent.

Parties should consider the ramifications of entering into settlements where cross claims are on foot as there are a number of issues that can be taken into account when seeking indemnity and contribution. 



Trucks and Tribulations: Maxwell v Highway Hauliers Pty Ltd [2014] HCA 33

by Hunt & Hunt

Section 54

Prior to the ICA, contracts of insurance were governed by a mixture of federal and state statutes, imperial statutes and common law principles. Following referral to the ALRC 1 in 1976 for a review of the adequacy and appropriateness of the governance of insurance contracts the ICA was born eight years later.

The ICA is described in its long title as an Act to reform and modernise the law relating to certain contracts of insurance so that a fair balance is struck between the interests of insurers, insureds, and other members of the public and so that the provisions included in such contracts, and the practices of insurers in relation to such contracts, operate fairly.

The relevant provisions of the ICA to consider in relation to this decision are as follows:

Section 54(1):
"(1) Subject to this section, where the effect of a contract of insurance would, but for this section, be that the insurer may refuse to pay a claim, either in whole or in part, by reason of some act2 of the insured or of some other person, being an act that occurred after the contract was entered into but not being an act in respect of which subsection (2) applies, the insurer may not refuse to pay the claim by reason only of that act but the insurer's liability in respect of the claim is reduced by the amount that fairly represents the extent to which the insurer's interests were prejudiced as a result of that act. "

Section 54(2):
"(2) Subject to the succeeding provisions of this section, where the act could reasonably be regarded as being capable of causing or contributing to a loss in respect of which insurance cover is provided by the contract, the insurer may refuse to pay the claim."


The respondent, Highway Hauliers Pty Ltd (HH) was an interstate freight business which owned a fleet of vehicles. HH hauled cargo between Western Australia and Eastern states. In 2004, HH entered into a contract of insurance (the policy) with various Lloyd's Underwriters (insurers). The policy period ran from 29 April 2004 to 30 April 2005 and provided cover for specified loss, damage or liability occurring to or in respect of HH vehicles, subject to the terms and conditions of the policy.

An endorsement formed part of the policy. This endorsement stated that no indemnity would be provided unless, amongst other things the driver of the vehicle had a PAQS profile score of at least 36 (or an approved equivalent). PAQS testing was defined as psychological/safety testing conducted by People and Quality Solutions Pty Ltd.

Two of HH's vehicles were damaged in separate incidents occurring within the period of insurance. At the time of the incidents the vehicles were being driven by HH drivers who had not undertaken the PAQS testing required by the endorsement (untested drivers).

HH claimed under the policy for the damage to the vehicles, third party liability and legal costs (claims).  Insurers refused to pay the claims because the drivers were untested drivers.

HH commenced proceedings in the Supreme Court of Western Australia against insurers seeking indemnity under the policy for the damage to the vehicles, third party liability and damages for consequential loss3 .

First instance, Supreme Court of Western Australia4

It was established at first instance that HH during the period of insurance had omitted to ensure its drivers had undertaken PAQS testing. However, even though each vehicle was being operated by an untested driver it was established pursuant to section 54(2) of the ICA that this could not have been reasonably regarded as being capable of causing each loss.
Justice Corboy held:

    1. insurers were therefore obliged to indemnify Highway Hauliers for the claims by reason of section 54(1) of the ICA; and
    2. by refusing to pay the claims, insurers had breached the terms of the policy and were also liable for HH's consequential loss.

Court of Appeal5

Insurers appealed the decision. The decision of Justice Corboy was upheld by McLure P, Murphy and Pullin JJA.

High Court decision

By special leave, insurers appealed to the High Court. 

The High Court affirmed the decision of the Court of Appeal and held that HH had made claims in relation to incidents which had occurred within the period of insurance. It was therefore sufficient to engage section 54(1) to the effect that insurers could only refuse to pay claims by reason only of acts which occurred after an insurance contract was entered into.

Impact on insurers

Insurers should be aware that:

    1. section 54(1) of the ICA will only apply to acts or omissions that occur after the policy is entered into;
    2. section 54(1) of the ICA will not apply to conduct which took place before inception of a policy;
    3. section 54(1) of the ICA allows an insurer to reduce its liability for the loss to the extent that its interests were prejudiced; and
    4. section 54(2) of the ICA allows an insurer to refuse to pay the claim only if the act or omission could be reasonably regarded as being capable of causing or contributing to the loss.

If the untested drivers in this case had caused the losses then section 54 would have applied.

1 Australian Law Reform Commission

2 An act also includes an omission; see section 54(6) of the ICA.

3 Loss of profits.

4 Highway Hauliers Pty Ltd v Maxwell (2012) 17 ANZ Insurance Cases 61-925.

5 Maxwell v Highway Hauliers Pty Ltd [2013]  WASCA 115


Shona Wilde, Sydney
Graeme Armstead, Melbourne
Peter Jones, Adelaide
Darren Miller, Perth
Peter Forbes-Smith, Tasmania
Chris Osborne, Darwin

Disclaimer: The information contained in this e-alert/update is not advice and should not be relied upon as legal advice. Hunt & Hunt recommends that if you have a matter that is legal, or has legal implications, you consult with your legal adviser.

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