Heale v IAG New Zealand Ltd

• Jurisdiction: New Zealand
• Judge: Paulsen
• Judgment Date: 01 November 2019
• Neutral Citation: [2019] NZHC 2829
• Court: High Court
• Docket Number: CIV-2018-409-000166
• Date: 01 November 2019

Between

Thomas Edward Fairfax Heale and Anthea Clare Heale

Plaintiffs

and

IAG New Zealand Limited

Defendant

and

QBE Insurance (Australia) Limited

Proposed First Third Party

and

Buildtech Restorations Limited

Proposed Second Third Party

and

Engineering Design Consultants Limited

Proposed Third Third Party

[2019] NZHC 2829

JUDGE Paulsen

CIV-2018-409-000166

IN THE HIGH COURT OF NEW ZEALAND

CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA

ŌTAUTAHI ROHE

Civil Procedure, Insurance — joinder — charge on the insurance monies — Law Reform Act 1936

Appearances:

A N Riches for Plaintiffs

N S Gedye QC and B R Cuff for Defendant

D McLellan QC for Proposed First Third Party

P A Cowey and D Bell for Proposed Second Third Party

J M Morrison for Proposed Third Third Party

JUDGMENT OF ASSOCIATE JUDGE Paulsen

This judgment was delivered by me on 1 November 2019 at 4.00 pm

pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date:

Introduction

1 This judgment concerns three applications as follows:

• (a) an application by IAG New Zealand Ltd (IAG) for leave under s 9(4) of the Law Reform Act 1936 to join QBE Insurance (Australia) Ltd (QBE) as the first third party;

• (b) related to (a) above, an application by QBE objecting to the admissibility of the affidavits of Craig Harvett; and

• (c) an application by IAG for leave to join Buildtech Restorations Ltd (Buildtech) and Engineering Design Consultants Ltd (EDC) as the second third party and third third party respectively.

Background and the third party claims

2 The plaintiffs' (the Heales) home at 9 Snowdon Road, Christchurch was damaged in the September 2010 and February 2011 earthquakes. They were insured under a policy of insurance underwritten by IAG (the policy), providing that IAG would pay the cost of repairing or rebuilding their home. The Heales made a claim under the policy and elected to repair their home. IAG accepted the claim.

3 IAG entered into a Rebuild Solution Master Agreement (RSMA) dated 13 August 2012 (as amended on 17 November 2014) with Hawkins Management Ltd and Hawkins Group Ltd (Hawkins) for Hawkins to manage the reinstatement of earthquake damage on behalf of IAG's clients. This was known as the Canterbury Home Repair Scheme.

4 At all material times, Hawkins held professional indemnity and general liability policies of insurance underwritten by QBE. 1 Hawkins is now in liquidation.

5 The Heales took part in the Canterbury Home Repair Scheme. They entered into a building contract with Buildtech, dated 4 December 2013, to repair their home

(the building contract). IAG was not a party to the building contract, but it paid for the repairs as they were completed

6 EDC was engaged by Buildtech to provide it with engineering advice in relation to a geotechnical assessment of the Heales' property, the foundations and repairs to be carried out to the foundations and other structural elements.

7 The repairs were completed by Buildtech in around March 2015.

The Heales' claim against IAG

8 In March 2018, the Heales commenced this action against IAG. They plead four causes of action, alleging breach of the policy, breach of the Fair Trading Act 1986, negligence and loss of a chance. 2

9 There is much factual overlap between the causes of action. In this context, it is more useful to focus on the Heales' complaints. These can be summarised as:

• (a) they were not advised (or were negligently advised) of the appropriate options available to them under the policy;

• (b) IAG recommended Buildtech to do the repairs, but Buildtech was not competent or properly resourced to do so;

• (c) the repair process was not managed properly;

• (d) there were serious delays in completing the repairs which were expected to be completed in 20 weeks, but took over a year;

• (e) the scope of works was deficient, and the Heales were misled by it;

• (f) the defective scope of works meant that the Heales had to pay large costs for works outside the insurance budget;

• (g) because of the delays, the policy entitlements for alternative accommodation and landscaping were inadequate; and

• (h) the financial pressure consequent upon the delays, and from being forced to incur costs that should have been covered under the policy, meant the Heales had no option but to sell their home at an under-value without testing the market.

10 In respect of all causes of action, the Heales seek damages in a sum to be quantified at trial, but plead that they have suffered losses of:

• (a) accommodation costs of $16,042;

• (b) building costs paid above their insurance budget of $116,929; and

• (c) loss on the sale of their home of $500,000.

IAG's claims against the proposed third parties

11 IAG's application to join third parties is founded on an assertion that the Heales' complaints all involve acts or omissions of Hawkins, Buildtech and EDC, who had the direct physical responsibility for, and involvement in, the repair of the Heales' home. This is because:

• (a) Hawkins's project management role was acknowledged in the building contract and comprehensively set out in the terms of the RSMA. It had responsibility in relation to the Heales' allegations concerning builder recommendation, the scope of works, ensuring the implementation and completion of the repairs and certifying payments.

• (b) Buildtech contracted directly with the Heales to do the repairs and was primarily responsible for any delays and was, allegedly, generally incompetent.

• (c) EDC undertook a geotechnical assessment of the property and a technical assessment of the extent of the structural damage and reviewed the remediation works proposed by Buildtech, including to the foundations. The Heales allege deficiencies in the foundation requirements. Buildtech identifies a need to vary the foundation repair as one of two causes of delays in the completion of the repairs.

12 In its draft statement of claim against the proposed third parties, IAG makes claims directly against each of them and, by means of causes of action seeking declarations, it is also concerned with the liability of the proposed third parties to the Heales. Mr Gedye submitted that by determining the “nature and extent and causal potency” of liabilities of Hawkins, Buildtech and EDC to the Heales, the Court may make an appropriate apportionment of liability between them and IAG. In addition, and assuming IAG is found liable to the Heales under the policy, the declarations would allow IAG to enforce its rights of subrogation, without further determinations of the Court.

13 As noted earlier, Hawkins in is liquidation. The first three of IAG's causes of action against QBE seek to enforce a charge over all insurance moneys that are or may become payable in respect of Hawkins's liability to IAG under s 9 of the Law Reform Act 1936. The first two of these causes of action rely on the terms of the RSMA, which, it is alleged, create indemnity obligations on behalf of Hawkins in respect of any liability that IAG may be found to have to the Heales. The third cause of action claims contribution for any sums IAG is found to owe the Heales as a co-tortfeasor under s 17(1)(c) of the Law Reform Act 1936 or as equitable contribution, in reliance upon the principles in Hotchin v New Zealand Guardian Trust Company Ltd. 3 IAG's fourth and fifth causes of action against QBE seek declarations that, should the Heales prove their claims against IAG, Hawkins will similarly be liable to them for breaches of a duty of care or the Consumer Guarantees Act 1993, and that QBE must indemnify them for such loss as they have suffered.

14 Against Buildtech and EDC, IAG pleads the same two contribution pathways. IAG also seeks declarations against Buildtech that it is directly liable to the Heales in contract, in negligence and under the Consumer Guarantees Act 1993. Against EDC,

IAG seeks declarations that it is liable to the Heales in negligence and under the Consumer Guarantees Act 1993

Legal principles

15 Rule 4.4 of the High Court Rules 2016 provides:

4.4 Third parties

(1) A defendant may issue a third party notice if the defendant claims any or all of the following:

• (a) that the defendant is entitled to a contribution or an indemnity from a person who is not a party to the proceeding (a third party):

• (b) that the defendant is entitled to relief or a remedy relating to, or connected with, the subject matter of the proceeding from a third party and the relief or remedy is substantially the same as that claimed by the plaintiff against the defendant:

• (c) that a question or issue in the proceeding ought to be determined not only between the plaintiff and the defendant but also between–

  • (i) the plaintiff, the defendant, and the third party; or

  • (ii) the defendant and the third party; or

  • (iii) the plaintiff and the third party:

• (d) that there is a question or an issue between the defendant and the third party relating to, or connected with, the subject matter of the proceeding that is substantially the same as a question or an issue arising between the plaintiff and the defendant.

(2) A third party notice must be issued within–

• (a) 10 working days after the expiry of the time for filing the defendant's statement of defence; or

• (b) a longer time given by leave of the court.

(3) A third party notice may be issued only with the leave of the court if an application for judgment is pending under rule 12. 2 or 12.3.

16 Rule 4.8 provides:

4.8 Court's power and discretion

• (1) On an application seeking leave to issue a third, fourth, or subsequent party notice, the court must have regard to all relevant circumstances, including delay to the plaintiff.

• (2) On the making of an application of that kind, the court may grant or refuse leave or grant leave on just terms.

17 Mr Gedye submitted that underlying applications to join third parties is the important...