April 14, 2023

In Allianz Australia Insurance Limited v Delor Vue Apartments CTS [2022] HCA 38, the High Court held that there are limited circumstances in which a waiver of contractual rights will be found to be irrevocable.

In this matter, Delor Vue Apartments (the Body Corporate) did not disclose non-structural defects in its apartment building to Allianz (the Insurer) when obtaining an insurance policy. Following a cyclone, the Body Corporate made a claim under the policy in respect of building damage. Damage from the cyclone exposed the existence of pre-existing defects in the buildings, some of which needed to be rectified at the same time as the cyclone damage. Following the Body Corporate’s insurance claim, the Insurer represented that it would grant indemnity notwithstanding that the Body Corporate had failed to disclose the pre-existing defects (the Waiver).

Subsequently, a dispute arose as to the sequence of repair works and the rectification costs covered under the Policy. The Insurer proposed to settle the claim stating that if its offer was not accepted, it would rely on its right not to pay the claim under the policy due to the Body Corporate’s non-disclosure. The Body Corporate did not accept the offer and the Insurer’s denied indemnity.

At trial, the Body Corporate successfully argued the Insurer:

  • irrevocably elected not to exercise its power and also waived its right to rely on any defence arising from the non-disclosure;
  • was prevented from resiling from its representation that it would grant indemnity; and
  • had failed to act with the utmost good faith.

The matter was appealed to the High Court and the decision was overturned on the basis that (among other reasons) the Body Corporate did not establish it suffered any detriment in reliance upon the Insurer’s representation. In reaching this conclusion, the High Court considered whether the Insurer could revoke the offer to waive its right to rely on the non-disclosure to deny indemnity.

The High Court emphasised that there are only ‘limited circumstances in which [such a] waiver becomes irrevocable’ and these situations are ‘exceptional’. Such circumstances include entry into a deed, a fresh agreement for consideration, or expiry of a limitation period. The High Court held that other than in those circumstances, in respect of a promise not to enforce a legal right without any consideration, the legal right may continue to be enforced until it is fully satisfied. The High Court concluded the representation/waiver could be revoked as the Body Corporate had not established it suffered any detriment by relying on it and this could not be said to be an ‘exceptional situation’.

The full decision is available here.

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