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Broker axed after being found liable for $3.4 million building defects

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Authorised representative (AR) group UIG has terminated its relationship with a broker after a court found she engaged in “misleading and deceptive” conduct years before she started working with the network.

The Supreme Court of NSW ruled on Monday that home warranty insurance broker Irena Alexandrova was liable for building defects found in a Sydney strata dwelling of 11 townhouses that were built in 2011 and 2012, and ordered her to pay the Owners Corporation of the scheme $3.43 million plus costs.

Liability for the defects fell on her after the court dismissed the first proceedings filed against the residential development’s builder, who denied entering into a contract to build the houses.

The Owners Corporation had lodged a second proceeding against Ms Alexandrova in case its claim against the builder did not succeed.

In the case against Ms Alexandrova, the Owners Corporation said she was responsible for the defects as she submitted documents to obtain home warranty insurance when she was not authorised to do so. They said the documents submitted to QBE, which issued the cover, were not signed by the builder.

According to details provided in the ruling, signatures found in the insurance documents, and other supporting forms purportedly signed by the builder, were falsified.

Ms Alexandrova, who represented herself in the case, said it was not her duty to check the signatures. She said she could not have engaged in misleading and deceptive conduct because she believed she was authorised by the builder to apply for insurance in relation to the townhouses.

The documents she received were forwarded by William Zaatani, a nephew of the builder whom Ms Alexandrova liaised closely with when she made arrangements for the insurance. The builder had introduced his nephew to her, and in the second half of 2010 and early 2011, she dealt with him in matters related to the Marrickville townhouses, including insurance.

The court says it “is common ground that the nephew sent her the [building] contract, application for home warranty insurance naming [his uncle] as the builder and other related documents”.

Ms Alexandrova had a referral agreement with OAMPS Insurance Brokers at that time, earning commissions for introducing licensed builders to the broker.

Justice Trish Henry, who presided over the case, says in her ruling “there can be no doubt that… by sending the application and related documents to OAMPS, Ms Alexandrova intended to create the impression that she was authorised by [the builder] to do so and her purpose was to get OAMPS to arrange home warranty insurance for the Marrickville project in [his] name”.

“There is, thus, a fair inference of fact that OAMPS proceeded to apply to QBE for home warranty insurance because it was induced to believe that Ms Alexandrova was authorised by [the builder] to submit the application and related documents and that he had signed the related documents.

“It seems fanciful to think OAMPS would have applied for home warranty insurance from QBE if it knew otherwise.”

Justice Henry accepts Ms Alexandrova “was an honest witness attempting to state events as she recalled them” in her numerous exchanges with the builder and his nephew.

But she was “not satisfied, on the balance of probabilities, that [the broker] spoke to [the builder] about the Marrickville project, his ‘role’ as builder or [his nephew’s] authority in relation to documents naming [his uncle] as builder in the terms in which she deposes or more generally in relation to those matters prior to 12 October 2010”.

“Nor do I feel an actual persuasion that she had any conversation with [the builder] from which I can infer that he had placed [his nephew] in a position where he was authorised to deal with Ms Alexandrova as [his uncle’s] agent in relation to home warranty insurance in respect of a contract which named [the uncle] as the builder of the Marrickville project.”

The broker also raised, by way of defence, that others are responsible causing the Owners Corporation’s loss and should therefore be liable.

This was rejected by Justice Henry. She says “the conduct of others that is deliberate or wrongful and causes loss does not mean that Ms Alexandrova’s conduct was not causative of the Owners Corporation’s loss”.

“I acknowledge that Ms Alexandrova is self-represented,” Justice Henry said. “That does not, in my view, absolve her of the obligation to plead or at least notify in submissions the basis on which it is alleged that the third parties to whom she has referred are concurrent wrongdoers.

“This is particularly as Ms Alexandrova was actively encouraged prior to and during the hearing to obtain legal representation in this case.

“It follows that I am satisfied that the Owners Corporation has suffered loss or damage by or because of Ms Alexandrova’s misleading conduct for which she is liable.”

insuranceNEWS.com.au understands that Ms Alexandrova became a UIG AR in March 2017, having previously worked with Westcourt. UIG yesterday confirmed it had ended its relationship with Ms Alexandrova, and that it had been previously unaware of the proceedings.

Click here for the ruling.