Guttenbeil v Tower Insurance Ltd Hc Ak

• Jurisdiction: New Zealand
• Judge: R M BELL
• Judgment Date: 13 August 2012
• Neutral Citation: [2012] NZHC 2106
• Court: High Court
• Date: 13 August 2012

BETWEEN

Herman Robert Guttenbeil and Yvonne Gay Guttenbeil

First Plaintiffs

and

Sarah Guttenbeil and Brent Guttenbeil

Second Plaintiffs

and

XS Performance Limited

Third Plaintiff

and

Tower Insurance Limited

First Defendant

and

Iag New Zealand Limited

Second Defendant

[2012] NZHC 2106

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

Application for orders relating to discovery — plaintiffs& family home extensively damaged in fire caused by arson — defendants insured plaintiffs& house and contents — insurance claim declined as defendants believed plaintiffs were parties to the arson — whether defendants had properly listed documents in their control — whether litigation privilege had been appropriately claimed for a number of documents.

Appearances:

E Telle with L T Meys for Plaintiffs

R Hern with G Wishart for First Defendant

R Armstrong for Second Defendant

JUDGMENT OF ASSOCIATE JUDGE R M BELL

[judgment re-called and re-issued]

1 There are cross-applications for discovery. The defendants' joint application against the plaintiffs is largely resolved. The plaintiffs' application against the defendants is contested. It raises these questions:

• [a] Have the defendants properly listed documents in their control?

• [b] Are internal documents of the defendants' consultants and investigators in the defendants' control?

• [c] From when can the defendants claim litigation privilege?

• [d] Can the defendants claim litigation privilege for witness statements?

• [e] Does an insurer's duty of utmost good faith require the defendants to disclose documents subject to litigation privilege?

• [f] Have the defendants waived privilege under section 65(2) of the Evidence Act 2006? and

• [g] Have the defendants put documents in issue under section 65(3)(a) of the Evidence Act 2006?

What the case is about

2 The plaintiffs sue Tower and IAG for claims under insurance policies.

3 The first plaintiffs are the parents of the second plaintiffs. The first plaintiffs and their daughter, Sarah, lived at 77 Tautari Street, Orakei, Auckland. The family have a company, XS Performance Ltd, that carried on business supplying performance car parts and accessories. The plaintiffs are the only shareholders of XS Performance Ltd. Yvonne Guttenbeil is the sole director. XS Performance Ltd operated from leased premises at 431 Church Street East, Penrose, Auckland.

4 Tower Insurance Ltd, the first defendant, is the insurer of the Guttenbeils' family home at 77 Tautari Street. IAG, the second defendant, insured the household contents, Mrs Guttenbeil's Chrysler car, and the business and premises of XS Performance Ltd.

5 On 14 June 2009 the house at 77 Tautari Street was extensively damaged in a fire. The plaintiffs claimed under the insurance policies. Both defendants declined the claims. It is common ground that the cause of the fire was arson. The defendants say that the first and second plaintiffs were parties to the arson. They say that the Guttenbeils were in dire financial circumstances before the fire. Both their business and personal finances were at crisis point. The house at 77 Tautari Street is said to have suffered leaky building defects, affected by water ingress and widespread timber decay. It was said to be unsaleable and could not be economically repaired. The value of the property at 77 Tautari Street was considerably less than the mortgage debt secured over it. The Guttenbeils were out of time under s 393 of the Building Act 2004 for suing anyone for the building defects.

6 The defendants also say that entry to the house to light the fire was not forced, the fire was set in such a way as to make it appear that its cause was accidental, the accelerant used was kerosene — a kerosene container was found in the basement garage after the fire. The Guttenbeils are alleged to have given false information as to the reported theft of a Mazda ute before the fire. Although they were out of town, the Guttenbeils are said not to have any good reason to be absent from Auckland on the day of the fire and were absent only on a pretext to create an alibi. The Chrysler car at the premises suffered smoke and soot damage but expensive components from the car had been removed and replaced by standard components. There were very few items of personal significance found in the family home after the fire.

7 The Guttenbeils sue Tower and IAG under the insurance policies. Their claims are more extensive than I have outlined above, but for this decision it is not necessary to set out more details. Similarly, it is not necessary to summarise the array of defences being run by the defendants.

Defendants' discovery application

8 By the hearing the focus of the defendants' application was discovery of financial records of XS Performance Ltd and documents relating to TEA Custodians Ltd's mortgage, including communications with the lawyers for TEA Custodians, Gibson Sheat. The defendants' initial discovery application sought extensive non- party discovery and sought extensive discovery of documents of the plaintiff. However, by the hearing, the defendants' request for non-party discovery had been largely resolved and no orders for non-party discovery were sought. The plaintiffs had made extensive informal disclosure of documents. They did so, while maintaining that the disclosure was not necessary because the documents could not be relevant. They also reserved the claim for privilege in respect of one class of documents (documentation with Simpson Western).

9 At the hearing, the defendants simply sought an affidavit to be sworn by the plaintiffs confirming the adequacy of the informal disclosure that they had made. That is, they wanted an order for one of the plaintiffs to swear an affidavit as to the disclosure of the documents relating to the financial records of XS Performance Ltd. The affidavit would be in the form required by the rules, but the descriptions of documents used in correspondence between the parties would be adequate. The affidavit would also confirm that there are no other documents in the possession of the plaintiffs. The plaintiffs did not oppose an order for a supplementary affidavit of documents in those terms.

10 There was also the question of documents relating to TEA Custodians Ltd. In the end, Mr Armstrong did not press for an order in respect of those documents, accepting the statements by the plaintiffs that they do not hold any further documentation beyond what they have already disclosed.

11 There remains the question of costs. The plaintiffs are legally aided. The defendants sought an order under s 45(5) of the Legal Services Act 2011, declaring what costs would be payable if an order for costs were made. Mr Armstrong limited his claim for costs to the filing of the application. Mr Telle opposed saying that the application was totally unnecessary.

12 I find that the application was necessary, because the documents were relevant. They were relevant because the financial position of XS Performance Ltd was in issue. XS Performance Ltd is one of the plaintiffs. It is suing for losses said to arise from IAG's cancellation of its insurance cover. Its financial records are relevant to its own claim. Further, they are relevant to the Guttenbeils' personal financial position, which bears on the question of motive for the alleged insurance arson.

Plaintiffs' discovery application

Have the defendants properly listed documents in their control?

13 The first part of the plaintiffs' application seeks orders for the defendants to properly and individually identify and describe each discoverable document. The real nub of their complaint came down to these matters:

• [a] The defendants had not separately identified and described attachments to other documents and emails;

• [b] The defendants had listed documents in groups, rather than individually; and

• [c] The defendants had not discovered documents held by inquiry agents and other consultants they had instructed.

14 The grounds for their complaint are that they were unable to ascertain whether claims to privilege were valid, that documents that ought to have been disclosed had not been and that they were unable to ascertain the identity of witnesses interviewed by the defendants' consultants.

15 In Vanda Investments Ltd v Logan, 1 Associate Judge Osborne summarised the purpose of the discovery rules:

• (a) To ensure (to the reasonable satisfaction of the Court and other parties) that all disclosure has been given.

• (b) In relation to open documents:

  • i. To enable the opposite party to identify the documents; and

  • ii. To enable the opposite party to request particular documents for inspection or copying; and

  • iii. To enable the Court to order production and to ensure that such and order is enforced.

• (c) In relation to privileged documents –

  • i To enable the opposite party to become aware of the documents claimed to be privileged.

  • ii To enable that party to meaningfully consider a challenge to the claim of privilege.

• (d) In relation to documents no longer in the possession of the discovering party, to enable the opposite party to decide whether to seek discovery against a third party or to issue a subpoena to that person

• (e) To enable the opposite parties and the Court to meaningfully apply the provisions of r 8.37 as to the effect of failure to include a document in an affidavit of documents.

• (f) To enable the Court to enforce the provisions of r 8.38 as to the admissions as to documents being originals or true copies.

16 That decision was given before the new discovery rules came into force on 1 February 2012. 2 However, with one minor exception, 3 the new Rules are also directed at the same purpose. The plaintiffs'...