Notification of Circumstances Under s40(3) ICA. MS Amlin Corporate Member Limited v LU Simons Builders Pty Ltd

DATE PUBLISHED: July 25, 2023

key takeaways

General circumstances can satisfy s40(3) notification without identifying individual possible matters, situations or claimants.
The court decided that a reasoned opinion from an expert can be considered a "fact" under S.40(3) Insurance Contracts Act 1984 (Cth), diverging from previous rulings.

Facts

A 36-storey building in Melbourne (Atlantis Towers) was built with ACP (Aluminium Composite Panels) cladding.
Building was built by LU Simons.
ACP cladding was considered to be combustible and not fire-resistant – highlighting its unsuitability for external walls of a building.
Two notifications allegedly given.

Issue

Whether LU Simons gave sufficient notification of the facts to engage 40(3) of the Insurance Contracts Act 1984 (Cth)

Law

S.40(3) Insurance Contracts Act 1984 (Cth)
P&S Kauter Investments Pty Ltd v Arch Underwiting at Lloyd’s Ltd
Uniting Church in Australia Property Trust (NSW) v Allianz Australia Insurance Ltd
No overseas authorities were considered.

The Two Notifications Given by Broker to insurers

First notification

The first notification dated 5th May 2015 (within the policy period) stated the following:

“Attached is a notification of circumstances that may result in a claim under LU Simons Policy. We have prepared this statement on facts known to date on the Insured’s behalf.

Really most of the noise is around the press really.

We bring this to your attention in terms of policy. No formal claim has been made against LUS at this point in time.”

-Two attached documents

A) Attached was a Newspaper Article – noting the investigation into LU Simons (builders of the Lacrosse Building) using external cladding which contributed to the spreading of the fire.

Insurers argued that the article was focused only on the Lacrosse Building and the particular brand of ACP used on that building.

The article referred to “an investigation into building practices” – conveying a winder investigation not only confined to one building.
The comment by Managing Director of LU Simon stated that ACPs was used widely – referring not to only one brand but the general application of ACPs.

B) Attached was a MFB Opinion (may be an article, not specified)

Insurers argued that the document was confined to the ACP used for Lacrosse.

The article referred to a wider problem by stating “no like product has passed the test for combustibility” – therefore confirming that it related to ACPs in general.

second notification

The second notification dated 14 May 2015 stated:

“Attached please find a copy of the design and construct contract which is an Australian standard (AS3400) which was the basis of Lacosse and sets out our insured’s obligations.

Also attached for your interest is a copy of the MFB report which may also be of interest for insurers. Page 24 is of particular interest and generally the report is critical of many contributing factors in regards to this incident”

“The last paragraph of those conclusions expresses a strongly held opinion by the MFB that ACPs without appropriate accreditation and certification represent an unacceptable fire safety risk for residential high-rise buildings, or indeed any occupiable buildings, and there was a need to prevent similar incidents not only in new developments, but also in existing developments” – [28] (therefore referring to ACP’s in general)

Insured argued that a hyperlink within the attached MFB report was in itself part of disclosure – rejected by judge on the basis that clicking a link is not more demanding then turning a physical page.

Principles for s.40(3) to be Engaged (per P&S Kauter Investments Pty Ltd v Arch Underwriting at Lloyd’s Ltd [2021] NSWCA 136)

1
There must be a sufficient correspondence between the facts notified as facts “that might give rise to a claim” and a claim subsequently made for the latter to be identified as “the” or a claim arising or resulting from those facts;
2
It is not necessary that the notified facts identify the likely claimant or claimants;
3
The notification may be of a problem which of itself may give rise to a claim or claims by persons or entities having particular characteristics, although the quantum of such claims and the identity of the claimants may not be known at the date of notification;
4
The requirement that the notification be of “facts” indicates that s 40(3) is concerned with the notification of objective matters that bear on the possibility of a claim being made, rather than matters of belief or opinion as to that possibility;
5
A fact will be one which “might give rise to a claim” if, alone or taken with other notified facts, it is reasonably to be regarded as having that character; and
6
The reference to the possibility of a “claim”, rather than of a liability, encompasses claims which may not have significant prospects of success, and thus the notified facts could include an event which, in common experience, is followed by the making of claims notwithstanding that those claims may have modest or limited prospects of success.

All except principle 4 was accepted.

This was rejected by Court in the current matter as being to the effect that a reasoned opinion given by an expert within his or her field of expertise is not capable of constituting a “fact”.
His Honour was concerned to emphasise that the “facts” are the objective matters that bear on the possibility of a claim being made, and it is not sufficient to point to a mere belief or opinion that a claim might be made.
In circumstances where that opinion is given by a person in a position of public authority, such as the MFB or the MBS, the publication of that opinion may well be a most important fact that might itself give rise to a claim. (this overturned the principle set out in Uniting Churt in Australia Property Trust (NSW) v Allianz Australia Insurance Ltd, in which Lee J held opinion of a PI is not capable of constituting a “fact” within s.40(3))

conclusion

This case provides critical insights into the interpretation and application of S.40(3) of the Insurance Contracts Act 1984 (Cth), particularly regarding the sufficiency of notifications and the scope of "facts" that might lead to a claim. Importantly, the court validated that the opinions of experts or those in positions of public authority could be regarded as "facts," altering the previously held view. These findings may have significant implications for future insurance cases, especially those involving potential claims and the sufficient disclosure of facts.

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