By: Stuart Moore, Nicholas Graham and Taylor Mullins
O’Connell v Lentelle Pty Ltd (in liq) [2026] VSCA 76
The recent Victorian Court of Appeal’s decision in O’Connell v Lentelle Pty Ltd (in liq) [2026] VSCA 76 provides much needed clarity on the oft-misunderstood Licensed Plumbers General Insurance Order 2002 (Vic) (Ministerial Order) – a Victorian regulatory instrument that prescribes the mandatory insurance requirements that must be satisfied for a plumber to hold a licence in Victoria.
The Court of Appeal’s judgment confirms and amplifies the County Court’s decision in O’Connell v Lentelle Pty Ltd (in liq) [2025] VCC 109 on the nature of the cover required for Victorian licensed plumbers and third-party claimants’ rights to ‘enforce’ the policy – and goes further, clarifying the specific point at which a claimant’s right of ‘enforcement’ can arise and what constitutes a ‘refusal’ by an insured plumber to claim on the policy.
Significantly, the Court of Appeal has confirmed that the Ministerial Order requires ‘third party liability cover’ and that a third party’s rights to ‘enforce’ the policy follow the plumber’s liability first being established by judgment (or agreement).
This decision will assist insurers of Victorian licensed plumbers facing increasing numbers of claims brought directly against them by claimants and proceedings naming them as defendants in their own right.
The County Court Decision
The Plaintiff issued proceedings against her builder, alleging various defects in building and plumbing works. After the builder went into liquidation, the proceedings (including third-party proceedings against the plumbers) were stayed. The Plaintiff then proceeded directly against the plumbers and also sought to join their respective insurers to the proceedings, purportedly pursuant to the ‘enforcement’ provisions (Clause 9 of Schedule 2 of the Ministerial Order).
The County Court refused the Plaintiff’s applications to join the insurers and, in doing so, clarified the operation of the Ministerial Order and the cover required by it. The Court reasoned that, as the cover required by the Ministerial Order is in the nature of a third-party liability policy, a claimant’s right to ‘enforce’ the policy arises only in defined, limited circumstances.
The County Court decision makes clear that:
- The cover required by the Ministerial Order is in the nature of a ‘third-party liability policy’.
- Clause 9 of Schedule 2 provides certain rights to claimants in limited circumstances where the plumber satisfies one of the following conditions, specifically:
- is dead or lacking legal capacity;
- has disappeared;
- is an insolvent under administration;
- has refused to make a claim on the insurer; or
- there is an irretrievable breakdown between the plumber and the insurer.
However, such rights do not change the nature of the policy from being a third-party liability policy. The policy remains a contract between the insurer and the licensed plumber; a third party obtains only a limited right, in defined circumstances, to enforce the policy – not a freestanding right to claim against the insurer as though they were themselves an insured.
The insured under the policy is the licensed plumber – homeowners and third-party claimants are not insureds and are not permitted to claim on the policy ‘directly’ (ie. as a ‘policy of first resort’), as is the case with domestic building insurance (under which a homeowner may claim directly on the policy without first establishing the builder’s liability for the defective work).
The Plaintiff sought leave to appeal the County Court decision.
The Court of Appeal Decision
The Court of Appeal refused leave to appeal on all grounds, with specific attention to the point at which a claimant’s rights to ‘enforce’ the policy may arise (under Clause 9 of Schedule 2).
The Court of Appeal endorsed the County Court reasons and conclusions as to the interaction between the Ministerial Order and insurance policies offered to licensed plumbers.
The Court of Appeal’s judgment makes clear that:
- Firstly, the insured plumber must be liable to the claimant – such liability must be established by way of judgment (or agreement).
- Secondly, the liability must be of a kind covered by the policy.
- Thirdly, the insurer must be liable to indemnify the plumber.
- If the plumber is then unable or unwilling to satisfy that obligation and refuses to claim on the policy required by the Ministerial Order (or one of the other triggers in Clause 9 of Schedule 2 applies), the claimant may enforce the policy directly.
Whilst the Plaintiff had argued that there had been a refusal by a plumber to claim on the policy, the Court of Appeal’s judgment clarified that there can be no refusal until such time as the plumber’s liability has been established. That is, there is no basis to conclude that an insured plumber has ‘refused’ to make a claim simply because they do not do so immediately in response to a demand by a third party. In practical terms, this confirms that a demand letter from a claimant or their solicitors does not, of itself, trigger any immediate obligation on the part of the insurer to accept or respond to a direct claim.
Whilst a purpose of the Ministerial Order is no doubt to afford some protection to persons who have suffered loss and damage as a result of defective work, it operates within established legal parameters for the establishment of civil liability and does not remove the need for a claimant to prove that they have suffered such loss and damage. Importantly, the Court of Appeal’s confirmation of this point makes clear that the Ministerial Order does not create a no-fault compensation mechanism – a point of significant practical importance for insurers resisting premature direct claims.
The Court of Appeal also clarified that the Ministerial Order requires a minimum indemnity level of $50,000 for liabilities of the kind specified in clauses 10(a) (ie. ‘defects liability’), 10(b) (ie. trade ‘practices liability’) and 11 (ie. ‘non-completion liability’) and that policies providing this level of cover would comply with the Ministerial Order (so long as cover was also provided for a claimant’s reasonable legal costs and expenses associated with the successful enforcement of a claim against the plumber or the insurer).
‘Direct Enforcement’: Narrow and Contingent
The Court of Appeal has confirmed that the Ministerial Order sets out insurance requirements for a plumber to be licensed in Victoria. It does not establish a compensation scheme for homeowners and third parties.
No doubt Victorian plumbers’ insurers will continue to manage claims proactively and defend their insureds in accordance with the common practice of responsible liability insurers. The Court of Appeal’s decision will assist them and their practitioners, with a strong and principled basis to resist misconceived and premature ‘direct claims’.
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