Body Corporate 83501 (Bealey) and Others v Christchurch City Council and Others

• Jurisdiction: New Zealand
• Judgment Date: 20 September 2013
• Neutral Citation: [2013] NZHC 2472
• Date: 20 September 2013
• Court: High Court

Between

Body Corporate 83501

Plaintiff

and

William Malcolm Murphy & Others

Second Plaintiffs

and

Christchurch City Council

First Defendant

Timothy Harvey Field

Second Defendant

Gordon Kenneth Stamper

Tird Defendant

Anton Summerfield

Fourth Defendant

Lsc Consulting Limited

Fifth Defendant

The Earthquake Commission

Sixth Defendant

Iag New Zealand Limited

Seventh Defendant

[2013] NZHC 2472

In The High Court Of New Zealand Christchurch Registry

Application by third defendant for leave to bring a third party claim and/or joinder claim against the seventh defendant — substantive proceeding concerned a leaky building — third defendant was a co-developer and/or project manager in relation to the construction of the building complex — plaintiff claimed the third defendant had been negligent in the construction of the complex — third defendant had an insurance policy with the seventh defendant which provided a general indemnity, but “insured products” were excluded — claimed that the subject matter of the claim, a defective construction, was a product and the exemption applied — whether the leaky building complex was an “insured product”.

Appearances:

N R Campbell QC and J Moss for Applicant (Third Defendant) M G Ring QC and G J Turner for Respondent (Seventh Defendant)

RESERVED JUDGMENT OF FOGARTY J

Introduction

1 The applicant applies for an order granting leave to bring a third party claim against the respondent. These proceedings were commenced in 2010. They are complex. The subject matter is an apartment complex. The original litigation was a leaky home claim. That has been complicated by earthquake damage.

2 The case is now set down for hearing in mid-October for eight weeks. The parties are in the final stages of preparation for trial. There are also going to be attempts to settle the case, beginning sometime next week.

3 In July of this year, Mr Stamper the third defendant sought leave to join IAG as a third party. IAG is already a third party. I treat Mr Stamper's application for leave to plead a claim against IAG, at this late stage, as an application to cross-claim.

4 The application by Mr Stamper for leave to bring third party and/or joinder claim against IAG pleads:

The Broadform Policy provides a general indemnity for the Applicant for all amounts up to $1 million which the Applicant shall become legally liable to pay arising from property damage happening within the geographical limits during the period of insurance and caused by an occurrence in connection with the business.

5 This “Broadform” insurance policy was taken out by Mr Stamper's company, Ice Properties Limited, in the late 1990s and early 2000s. For some time IAG has been declining cover. It is only in the last couple of months that a measure of acceptance was reached as to existence of a policy, in favour of Ice Properties Limited, between 1996 and 2005. IAG has reserved its position on indemnity in all respects, but for contending that the claims in these proceedings against Mr Stamper, if upheld, would not qualify for indemnity under this policy. This was because the subject matter of the claim, a defective construction, was a “product” of Ice Properties Limited, and as such excluded from the indemnity otherwise provided by the contract of insurance, should that contract apply. This is because any liability will be a “Product Liability”. “Product Liability” is excluded, in this context, by the policy.

6 It is accepted that Mr Stamper personally is one of the insured persons with cover under the public liability policy. Mr Stamper naturally describes Ice Properties Limited as his company. It is now in liquidation. He was a director and shareholder. He is a named person in the policy.

7 Mr Stamper's counsel argue that it is not possible before the trial verdict to exclude cover by reason of the “Product Liability” exceptions. Therefore leave should be granted now to plead indemnity against IAG.

The nature of the claims against Mr Stamper

8 The multi-unit complex consists of 42 self-contained residential apartments together with a basement car parking facility, indoor swimming pool, gym complex and outdoor leisure area.

9 The plaintiffs' claim pleads, either as particulars of the non-delegable duty of care, or (arguably) as separate duties: 1

It goes on to plead:

the Units affected by moisture ingress and the need for such extensive repairs.

• 52. Mr Stamper was a co-developer and/or project manager in relation to the construction of the Complex.

• 53. Consequently, Mr Stamper owed the Plaintiffs as owners and/or future purchasers of the Units a non-delegable duty of care to ensure that:

• 53.1 The building work was carried out in a good and workmanlike manner;

• 53.2 The Complex complied with the provisions of the Building Act, the Building Code, and other relevant standards;

• 53.3 The building work was conducted in accordance with the Building Consents; and

• 53.4 That the contractors and consultants who were engaged on the building work had the necessary experience and level of expertise to ensure that the work was carried out in a good and workmanlike manner and that it complied with the Building Act 1991, the Building Code, the relevant technical literature and other relevant standards.

• 54. In so far as any aspect of the building works or their supervision were carried out by Bealey Avenue or Ice Properties, Mr Stamper assumed personal responsibility for that work and had control over it.

• 55. Mr Stamper breached his duty of care and caused or materially contributed to the Plaintiffs' loss.

• 56. Mr Stamper was negligent in that he:

• 56.1 conducted, carried out, or permitted the building work on the Units to be completed with the Defects set out above and so created a foreseeable risk of leaks and moisture ingress in contravention of the Building Code, in particular clauses B2, E2 and E3;

• 56.2 carried out or caused the building work to be conducted in such a way that it did not correspond with the Building Consents;

• 56.3 failed to supervise the subcontractors on site adequately or at all or ensure appropriate sequencing of work and to ensure that all work was conducted in a good and workmanlike manner and in compliance with the Building Code and the Building Consents;

• 56.4 failed to ensure that adequate plans, specifications, and the relevant technical literature were made available to the subcontractors and tradesmen on site and were followed and adhered to; and

• 56.5 failed to detect and/or take any reasonable steps to have the Defects in the Complex rectified during the course of the building works.

• 57. As a consequence of Mr Stamper's negligence the Plaintiffs have suffered loss as follows:

• 57.1 As a result of the negligence and defects set out in paragraph 56 above the Complex was damaged and required repair or demolition and reconstruction to ensure that the Complex is watertight, structurally sound and compliant with all relevant standards and ordinances under the Building Act 2004 and the Building Code and the Plaintiffs have suffered economic loss as a result in an amount to be particularised before trial; and/or

• 57.2 As a result of that negligence and those defects, the Complex was made more susceptible to sustaining damage as a result of the Earthquakes and Aftershocks and did sustain that damage and the Plaintiffs have suffered economic loss as a result in an amount to be particularised before trial; and

• 57.3 The Second Plaintiffs have suffered considerable stress, anxiety and inconvenience arising from their ownership of

The Broadform liability policy

10 The relevant insuring clauses are attached as Appendix 1. Appendix 2 is the same page, but with the key passages underlined. The appendices form part of this judgment. I have found it helpful to refer to both insuring clauses 1 and 2, as a whole, while also focusing on individual sub-clauses. “Insured's Products” is defined as:

“Insured's Products” means –

(a) anything (including labels, instructions and any container or package other than a vehicle), after it has ceased to be in the possession or under the control of the Insured, which has been manufactured, constructed, grown, extracted, produced, processed, assembled, erected, installed, sold, handled, supplied or distributed in or from New Zealand by the Insured;

…

11 Mr Stamper's entitlement to indemnity is to the same extent as Ice Properties Limited. Condition 6(a) provides:

Claims made between or against any corporation or person indemnified under this Policy will be treated as though each had been issued with a separate policy in the name of that corporation or person. Each corporation or person will be separately subject to the terms, definitions, insuring clauses, exclusions, conditions and limits of this Policy insofar as they can apply.

12 Mr Stamper does not contend for “Product Liability” cover. Mr Stamper relies upon clause 1, “General Indemnity”. The question becomes whether any finding of liability can only fall within “Product Liability”.

13 Mr Ring QC for IAG argues that the whole complex is the “Insured's Product”. The gist of the claim seeks damages against Mr Stamper for the cost of repair of the Insured's Product, by reason of defects caused by the negligence of Mr Stamper.

14 Mr Ring QC argues that clauses 1 and 2, read as a whole, exclude from indemnity any liability of Mr Stamper in tort, as pleaded in the current statement of claim.

15 There is common ground between the parties as to the relationship between the first two insuring clauses. The first clause provides for a general indemnity to the insured arising from property damage, provided it happens within the geographical limits, during the period of insurance, and caused by an occurrence in connection with the business of the insured, except product liability. Clause 2 provides for an indemnity to the insured for liabilities of the...