Mandatory domestic building insurance, successors in title, and the temporal limits of cover: Victorian Building Authority v Fall-Armytage [2026] VSCA 32 (special leave application pending)
 
In summary, the Court of Appeal (Niall CJ, McLeish and Whelan JJA) has construed the domestic building insurance (DBI) policy required by the Domestic Building Insurance Ministerial Order (2003) (MO) made under s 135 of the Building Act 1993 (Vic). It held that the phrase ‘occurring during the period’ in cll 34 and 35 qualifies the loss or damage sustained by the insured, not the defect (or other cause) said to give rise to it. The Court further held that s 9 of the Domestic Building Contracts Act 1995 (Vic) (DBCA) enables a successor in title to sue for breach of the s 8 warranties, but ss 8 and 9 ‘say nothing at all about remedies for breach’ (at [74]); remedies are left to the general law and a successor must prove its own loss and damage. An application for special leave to appeal is presently before the High Court (M27/2026); the matter therefore remains live.

In more detail, the respondent (FA) became the registered proprietor in May 2018 of a Caulfield South home completed in November 2014. A DBI policy had been issued on behalf of the designated insurer (now VBA) under the MO. Defects manifested within months. After the builder entered voluntary administration, FA claimed under the policy. The insurer refused indemnity. In Fall-Armytage v VMIA [2025] VCC 709, Judge Macnamara gave judgment for FA construing cl 34 such that ‘occurring during the period’ qualified the defect, not the loss. On that construction, the policy responded because the defects occurred during construction.

On the construction question, the Court of Appeal granted leave to appeal and allowed the appeal. The Court reasoned that, although cl 34 was ambiguous, cl 35 unambiguously connected ‘occurring during the period’ to ‘loss, damage or expense’, the commas separating ‘from a cause other than a non-structural defect’ from ‘occurring’ being ‘an important aid to clarity’ (at [57]). The need for a ‘congruent operation’ of cll 34 and 35 made the meaning of cl 35 ‘a highly significant consideration’ in construing cl 34 (at [58]). The primary indemnity in cl 32 turned on the insured having ‘sustained … loss or damage’; that supported a reading of cll 34 and 35 by reference to when loss is sustained (at [59]). The commercial purposes advanced by each side were ‘expressed at too high a level of generality to be useful’ (at [53]). For similar reasons the MO itself was ‘not a useful aid to construction’: although cl 12 of the MO unambiguously connected the limitation periods to the occurrence of loss and damage, it delineated only a minimum level of cover and the discrepancy between cl 12 of the MO and cl 34 of the policy could be explained either way (at [54]).

On the s 9 question, the Court rejected FA’s notice of contention. It held that, while s 9 enables a successor in title to sue for breach of the s 8 statutory warranties, ss 8 and 9 say nothing about remedies for breach; that being a matter for the general law, a successor must prove its own loss and damage (at [74]–[77]). The Court drew support from the analysis of the analogous s 18D of the Home Building Act 1989 (NSW) in Allianz Australia Insurance Ltd v Waterbrook at Yowie Bay Pty Ltd (2009) 15 ANZ Ins Cas ¶61-827, and from the application of similar reasoning to s 9 in Mirvac Victoria Pty Ltd v Liszka (2019) 61 VR 527 (at [80]–[83]). The Court of Appeal set aside the trial judgment and consequential costs orders and substituted orders dismissing FA’s claim, save in relation to the 11th defect, which was remitted to the County Court for classification as structural or non-structural (at [85]).

Special leave sought: the policy is the form of DBI required by the MO for residential building contracts above the prescribed threshold in Victoria, and analogous statutory warranty and DBI schemes operate in other jurisdictions. The questions on which special leave is sought are, in summary: (Q1) whether, in construing cll 34 and 35, the phrase ‘occurring during the period’ qualifies the loss or damage sustained by the insured, or the defect (or cause of loss); and consequently whether subsequent purchasers acquiring a home more than two years after completion have cover for non-structural defects under the MO, and more than six years after completion for other causes; and (Q2) whether s 9 of the DBCA enables a successor in title to take proceedings for breaches of the s 8 warranties in respect of loss occurring within the coverage period, or is confined to a right to sue limited to proof of the successor’s own loss. Practitioners advising insurers, builders or purchasers should keep both the cll 34/35 timing point and the s 9 question in view. The High Court’s disposition of the special leave application is awaited.

Disclosure: The authors appeared as senior and junior counsel respectively for the respondent (FA) in the Court of Appeal. The second-named author is  counsel for the applicant in the High Court special leave application.

Authors: Hugh Foxcroft KC and Nicholas Andreou

Liability limited by a scheme approved under professional standards legislation