Ew Zealand Fire Service Commission v Insurance Brokers Association of New Zealand Incorporated

• Jurisdiction: New Zealand
• Judge: Wild J
• Judgment Date: 13 May 2014
• Neutral Citation: [2014] NZCA 179
• Docket Number: CA56/2013
• Court: Court of Appeal
• Date: 13 May 2014

BETWEEN

New Zealand Fire Service Commission

Appellant

and

Insurance Brokers Association of New Zealand Incorporated

First Respondent

And

Vero Insurance Limited

Second Respondent

[2014] NZCA 179

Court:

Ellen France, Wild and White JJ

CA56/2013

IN THE COURT OF APPEAL OF NEW ZEALAND

Appeal against a High Court judgment which gave declarations as to the correct method of computing levies under s 48 Fire Service Act 1975 (“FSA”) (levy) in relation to split tier insurance policies and multi-insured composite policies — the appellant was funded largely by the levies computed and payable under s48 FSA — sample policies rather than completed policies were submitted for Court's consideration — composite policy covered eight port companies — whether declaratory relief was inappropriate as the Court was being asked to look at sample policies — whether the exclusion in s48(7) (exemption from calculation — contract limited to cover over the indemnity value of the property) was wide enough to encompass any type of insurance cover for damage by fire that was in excess of the stated “indemnity value” — whether the existence of joint obligations meant that the composite policy constituted a single policy, or whether it was eight separate policies.

Counsel:

A R Galbraith QC and C M Stevens for Appellant

R G Simpson and S P Elliott for Respondents

• A The appeal is dismissed.

• B The declarations made by the High Court, as set out in [45], [49] and [76] of this judgment, are affirmed.

JUDGMENT OF THE COURT

REASONS OF THE COURT

(Given by ( Wild J)

Contents

	Para No
Introduction	[1]
A legislative solution is needed	[7]
Appropriateness of declarations about the split tier policies	[11]
Split tier policies	[16]
ndemnity policy	[17]
Excess of indemnity policy	[18]
The New Zealand Ports Collective policy	[19]
Placing slip	[20]
Policy document	[21]
Invoices for the premiums	[22]
Section 48 of the Act	[23]
Application of s 48 to the split tier policies	[26]
Analysis of the New Zealand Ports Collective policy	[46]
Costs	[78]
Result	[82]

Introduction

1 In issue on this appeal is the correct method of computing levies under s 48 of the Fire Service Act 1975 (the Act). As most of the funding for New Zealand's Fire Service comes from levies struck under s 48, the issue is important.

2 The appeal is by the New Zealand Fire Service Commission against a judgment given by Heath J in the High Court at Auckland on 17 December 2012. In that judgment, upon the application of the Insurance Brokers Association of New Zealand Inc and Vero Insurance New Zealand Ltd, the Judge made declarations as to the correct method of computing levies under s 48. 1 We will refer to the parties,

respectively, as the Commission, IBANZ and Vero.

3 As we mentioned, the Commission and, through it, the New Zealand Fire Service, is funded largely by the levies computed and payable under s 48. 2 Under s 48(2) the Executive prescribes the rate of the levies which are payable to the

Commission by insurance companies on each contract of fire insurance made in New Zealand. 3

4 The proceeding brought by IBANZ and Vero, and this appeal by the Commission, turn on the correct interpretation of the computation provisions in s 48, and their application to the two types of fire insurance policy which Heath J was asked to rule on. These are split tier insurance policies and multi-insured composite policies.

5 IBANZ and Vero indicated in a notice on 8 February 2013 that they would be seeking to support Heath J's judgment on an additional ground. Their concern was that the meaning of “indemnity value” was implicit rather than explicit in Heath J's judgment. The notice asserted:

The term “indemnity value” means the depreciated replacement cost of insured property, or its current market value, depending on the nature of the property and the purpose for which it is held by the insured.

We understood Mr Galbraith QC for the Commission to accept this meaning, though stressing the s 48(6)(c)(i) requirement for objectivity — a fair and reasonable indemnity value in relation to the replacement value of the property”. We also agree with the meaning set out in the notice.

6 As the rate of the levy is fixed by the Executive the Court inquired, before the hearing, whether the Crown ought not to have been a party to the proceeding. Mr Galbraith advised us that the Department of Internal Affairs had been notified of the proceeding and had elected not to join. This is an appropriate point to record concern expressed by Mr Simpson about the impact of the levy penalty provisions, should the appeal be allowed and the declarations set aside. 4 In response, Mr Galbraith informed the Court that the Commission would apply any different method of computing levies prescribed by this Court only to future fire insurance contracts.

A legislative solution is needed

7 Early in the argument before us it became apparent that s 48 was drafted before the two types of policy in question became common, and perhaps before the advent of at least the multi-insured composite policy. Counsel differed over the extent to which this is true. But, undoubtedly, s 48 has not kept pace with developments in New Zealand in the structuring of fire insurance policies covering commercial properties. Notwithstanding its apparent purpose, it is fair to say that s 48 is now at breaking point.

8 We make that comment notwithstanding s 6 of the Interpretation Act 1999 and the “ambulatory” or “dynamic” approach to interpretation s 6 supports. The section provides:

6 Enactments apply to circumstances as they arise

An enactment applies to circumstances as they arise.

The ambulatory interpretative approach aims to apply the purpose of a statutory provision(s) to the changing circumstances of today. The nature and scope of that approach are well described in Burrows and Carter's Statute Law in New Zealand. 5 That approach does not assist here, because the structure of the two types of policies in issue differs fundamentally from earlier “conventional” policies.

9 The solution is legislative not judicial. A comprehensive look at how levies to fund the Commission are most effectively and fairly fixed is needed. It has, in fact, taken place. On 5 September 2013 the Minister of Internal Affairs announced reforms to the Act, including to s 48. That announcement followed the publication in December 2012 of a comprehensive report by the Fire Review Panel. 6

10 In the meantime, this Court must consider whether it was appropriate for the High Court to make the declarations it did under the Declaratory Judgments Act 1908.

Appropriateness of declarations about the split tier policies

11 The declarations under appeal in respect of the split tier policies were based on sample (or template) forms of those policies, and not on actual policies. Heath J put to one side the Commission's submission that this was not an appropriate case for a declaratory judgment. He regarded that as a “narrow view” of the circumstances in which declaratory relief may be appropriate, one which was rejected by the Supreme Court in Mandic v The Cornwall Park Trust Board (Inc). 7 Heath J's view was that the questions of statutory interpretation arising here are suitable for declaratory relief. That accords with the view this Court took in Electoral Commission v Tate. 8

12 We describe in [33]–[36] below what occurred on this appeal in respect of the split tier policies. Essentially, although this appeal was argued on two sample split tier policies, the Court post-hearing was asked to look at different sample policies. These events underline the soundness of the principle that a court should not make a declaration if the underlying facts are in dispute, including where the question is one of mixed (but disputed) facts and law. The authorities establishing that principle were collected by White J in Taylor v The District Court at North Shore. 9

13 In her judgment in Mandic, the Chief Justice observed:

[9] The jurisdiction under the Declaratory Judgments Act enables anyone whose conduct or rights depend on the effect or meaning of an instrument, including an agreement, to obtain an authoritative ruling. …

Implicit in that observation is that there be no doubt as to which instrument or agreement the court is being asked to rule on. Especially bearing in mind the binding precedential effect of a judgment of this Court under the Declaratory Judgments Act, 10 it is not satisfactory to be asked to rule on sample policies — policies that have not actually been issued, and are not complete as to their relevant

contents. Having heard argument based on two such policies, it is even less satisfactory now to be invited to consider other policies. This judgment is accordingly based on the two sample split tier policies that were before us when we heard this appeal on 7 November last

14 Had we been sitting as a court of first instance, we would probably have declined to make declarations, at least in relation to the split tier policies. That is simply because there was no actual policy or policies to rule on.

15 For the Commission, Mr Galbraith reiterated the Commission's reservations about the appropriateness of declarations. As the appeal was fully argued on the two sample split tier policies we give judgment, though reiterating our concerns about the appropriateness of doing so.

Split tier policies

16 We detail the two sample policies in turn.

Indemnity policy

17 This policy is headed “Fire (Indemnity) Insurance Policy”. Its important features are:

• (a) Indemnity cover: It provides cover up to a fixed cap which is lower than the indemnity value of the property. Take, as an example, a portfolio of 10 commercial buildings, geographically dispersed through...