Appeal against $1.8 million judgment in favour of domestic building insurer fails as appeal point not raised below

Vitale v Allianz Australia Insurance Ltd  [2014] NSWCA 358

The New South Wales Court of Appeal has refused leave to add a ground of appeal against a judgment that the director of a building company and his wife indemnify an insurer for over $1 million paid out to home owners, as the appeal point on which the appellants now sought to rely was not raised before the primary judge.

The facts

The appellants executed a deed of indemnity pursuant to which they indemnified an insurer of domestic building works against any liability incurred by it under home building warranty insurance policies issued to a building company of which one of the appellants was a director and the other appellant was his wife. Under the deed of indemnity the amount of the indemnity was limited to $200,000.00 “per claim”.

The individual owners of a 7-unit development and the relevant owners corporation made claims under the policies. The insurer disputed some of the claims and proceedings were commenced by the individual lot proprietors and the owners corporation in the relevant tribunal. The insurer subsequently settled the claims in terms of settlement by which the insurer agreed to pay the “owners” in excess of $1 million. The “owners” were defined as the owners corporation and the proprietors of the seven lots.

The insurer then sued the appellants to recover the amounts paid out to the owners, together with legal costs incurred by the insurer in defending the legal proceedings instituted by the owners.

The primary decision

The principal ground relied upon by the appellants to defend the insurer’s claim was that the insurer had engaged in unconscionable conduct within the meaning of s. 51AA of the Trade Practices Act 1974. The primary judge rejected the defence and entered judgment for the insurer for $1,870,036.85.

The appeal

The appellants relied on 5 grounds of appeal. The first three grounds challenged the primary judge’s finding that the insurer had not engaged in unconscionable conduct. The remaining 2 grounds were, in substance :

(a) that the insurer did not discharge the onus of proving the quantum of each claim indemnified under the deeds of indemnity, so that it failed to prove its entitlement to an indemnity or an indemnity greater than $200,000.00 [Ground 3]; and

(b) if there were claims by an individual owner and the owners corporation for the same damage (ie to the common property), there is only one claim and therefore the indemnity is limited to $200,000.00 in respect of that damage [Ground 4].

The appellants abandoned the grounds of appeal concerning the finding about unconscionable conduct and did not press Ground 4 in oral argument. That left them with Ground 3, which had not been put in argument before the primary judge.

The Court of Appeal refused the appellants leave to rely on Ground 3 as the point was not raised before the trial judge. The Court accepted the submissions of the insurer that if the appellants had raised the point at trial, the insurer may have been able to adduce evidence showing that the amount paid in respect of any one claim did not exceed $200,000.00.

Discussion

Vitale is another in a line of cases applying the well established principle that an appellant is not entitled to advance a fresh argument on appeal if that argument could possibly have been met by calling evidence below – Water Board v Moustakas [1988] HCA 12; 180 CLR 491 at 497 (Mason CJ, Wilson, Brennan and Dawson JJ); Sutton v Gundowda Pty Ltd [1950] HCA 35; 81 CLR 418 at 438 (Latham CJ, Williams and Fullagaar JJ). The principle was also applied by the Victorian Court of Appeal in Devon v Capital Finance Australia Ltd [2014] VSCA 73 at [75] – [84], in which the Court of Appeal held that a party is only entitled to depart from the case advanced at trial in “exceptional circumstances”.

The rationale for the principle was neatly expressed in Coulton v Horcombe (1986) 162 CLR 1, 8 where the majority of the High Court said that it was “fundamental to the due administration of justice” that substantial issues between the parties are ordinarily settled at the trial. If it were not so, said the majority, the proceedings in the court of first instance would be reduced to “little more than a preliminary skirmish”.

In Geelong Building Society v Encel [1996] 1 VR 594, 608 Tadgell J. said that, “It is inimical to the interests of justice that a plaintiff’s case, left half-made in the commercial list, should be completed on appeal”.

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