Nicola Jayne Marchand, Jacques Renard Marchand and Patrick Gregory Costello v John F Jackson Hc Chch

JurisdictionNew Zealand
CourtHigh Court
JudgeMatthews,Associate Judge
Judgment Date02 May 2012
Neutral Citation[2012] NZHC 944
Docket NumberCIV-2011-409-000810

[2012] NZHC 944

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

Associate Judge Matthews

CIV-2011-409-000810

Between
Nicola Jayne Marchand, Jacques Renard Marchand and Patrick Gregory Costello
First Plaintiffs

and

Nicola Jayne Marchand and Jacques Renard Marchand
Second Plaintiffs
and
John F Jackson
Defendant
Iag New Zealand Limited
Third Party
Appearances:

G A Hair for Plaintiffs

B R D Burke and K Hill-Dunne for Defendant

G S A Macdonald for Third Party

Application by third party for summary judgment on defendant's indemnity claim against it — plaintiffs' home was substantially damaged in Christchurch earthquakes — plaintiffs had engaged defendant to arrange insurance cover for their home, contents, motor vehicles and assets in their medical practice — defendant assured them this had been arranged but actually was not — plaintiffs discovered the true situation after the September 2010 earthquake — third party was defendant's professional liability indemnifier — defendant had indicated on indemnifier's policy renewal that he did not know of circumstances which might give rise to a claim against him — whether defendant's actions in assuring plaintiffs of cover and paying for a claim himself amounted to dishonesty — whether defendant's failure to notify third party of plaintiffs' claim disentitled him to cover under policy.

The issues were: whether J's actions in assuring the plaintiffs of cover and paying for the glasses claim amounted to dishonesty; and whether J's failure to notify IAG of the plaintiffs' claim disentitled him to cover under the policy.

Held: Exclusion E had to be considered in two parts:

  • (1) whether J's conduct was dishonest; and

  • (2) if so, whether J's potential civil liability to the plaintiffs was “in connection with” that dishonesty.

J's conduct was deliberate in that he repeated advice to the plaintiffs that insurance cover was in place, paid out personally an insurance claim by the plaintiffs in the knowledge that cover was not in place as a result of his own negligent conduct and had emailed an NZI claim form to the plaintiffs to complete in relation to another claim with the same knowledge.

J's conduct on the face of it had the appearance of being dishonest in the sense of not being straightforward and of being underhand (McMillan v Joseph). However, grossly negligent conduct did not equate to dishonest conduct. The Court was required to take into account the surrounding circumstances ( McMillan, Starglade Properties Ltd v Roland Nash, Campbell v Stoneman). J filed an affidavit from a consultant psychiatrist which set out J's medical difficulties since 2007. There was sufficient in that report to provide doubt that J was dishonest in his dealings with the plaintiffs and there was real doubt that a finding of dishonesty was appropriate. There was no need therefore to consider whether there was a causal relationship.

J had stated that his failure to follow up on the issue of cover for the plaintiffs was due to inadvertence. This inaction was not the same as failing to tell IAG of circumstances which might give rise to a claim. But when J initially completed the renewal form, he had ticked “yes” in response to the question about potential claims. He then subsequently deliberately ticked no, showing he had specifically turned his mind to the issue and certified that there were not. That was a deliberate act. However, J claimed that he had forgotten the plaintiffs' claim. In the light of the circumstances affecting his acumen and ability to function properly and consistent with the previous finding as to dishonesty, it had not been established to the degree necessary on an application for summary judgment that J deliberately failed to inform IAG of the circumstances of the plaintiffs' affairs when he completed his application for personal indemnity cover.

It was arguable that J's actions were not deliberate given the explanations of forgetfulness and inattention and the likelihood that physical and mental ill health problems contributed to a deterioration in J's work performance. It was appropriate for the extent to which these factors contributed to be assessed at trial.

Application for summary judgment declined.

JUDGMENT OF ASSOCIATE JUDGE Matthews

1

In September 2010 and February 2011 the plaintiffs' home, and a substantial part of its contents, along with the land on which the home stands and other improvements, were substantially damaged in two earthquakes.

2

In May 2009 they had engaged the defendant to arrange insurance cover for them on their home and contents, their motor vehicles and the assets in the first-named plaintiffs' medical practice. Although the defendant assured the plaintiffs that cover had been arranged with New Zealand Insurance (NZI), that was not the case. This came to light after the earthquake in September 2010. The plaintiffs brought this proceeding alleging breach of contract, breach of a duty of care owed in tort and breach of certain provisions of the Fair Trading Act.

3

At material times the third party was the indemnifier of the defendant for professional liability. The defendant alleges that the third party should indemnify him for any loss on the part of the plaintiffs for which he might be found liable. The third party denies liability. It has brought an application for summary judgment in its favour on the defendant's third party claim, relying on one or other of two exclusion provisions in the policy. The issue on this application is whether either of these exclusions applies.

Principles of summary judgment
4

Rules 4.7( 2) and 12.2 of the High Court Rules provide that the Court may give judgment against a defendant if a third party satisfies the Court that none of the causes of action in the defendant's claim can succeed. The onus is on the third party to establish this position to the satisfaction of the Court: see, for example, Garnett v Tower Insurance Ltd.1

5

In this case, as will be seen, it is necessary to have regard to two principles in relation to the evidence before the Court, first that the Court need not accept uncritically evidence which is inherently lacking in credibility (for example where it is inconsistent with undisputed contemporary documents or is inherently improbable): Eng Mee Yong v Letchumanan, 2 and secondly, that evidence must be considered in a robust and realistic manner: Bilbie Dymock Corporation v Patel. 3

6

As will also emerge, it is alleged by the third party that in certain respects the actions of the defendant which are relevant to this case were dishonest. Bearing in mind that an application for summary judgment is determined on evidence by way of affidavit, without witnesses appearing in person and thus being able to respond orally to such allegations and to be assessed for credibility, it is necessary to proceed with circumspection. The onus of proving dishonesty remains the civil standard of

the balance of probabilities, but it is established that the more serious the allegation of dishonesty, the stronger the evidence in support of it should be: Re H (Minors). 4
Facts
7

On engagement by the plaintiffs to arrange insurance cover for their assets the defendant contacted a number of insurers, and on receipt of their responses recommended to the plaintiffs that the best prospect for appropriate cover lay with NZI. At the defendant's request the plaintiffs completed a High Value Homes questionnaire for NZI which the defendant emailed to the company together with photographs of the property, and a request to quote terms and a premium for cover on the house, contents and vehicles. NZI emailed a quote and an offer of cover, on 1 July 2009. The defendant did not refer this to the plaintiffs.

8

Late in July or early in August 2009 Mrs Marchand telephoned the defendant to check that they had insurance cover for their house, contents and vehicles. The defendant informed her that they did have cover, but this was not true.

9

Early in 2010 Mrs Marchand once more inquired with the defendant about cover on their assets and was once more informed that the property was insured.

10

Although the defendant received the NZI quote at the beginning of July 2009, he did not take any further steps to implement the cover until after September 2010. On 4 September the plaintiffs' house and contents, and other improvements on their property, sustained serious damage in a major earthquake. Endeavours by the defendant to arrange cover with NZI after that were unsuccessful. As a consequence the plaintiffs were uninsured, with a further consequence that they were without access to compensation from the Earthquake Commission.

11

The plaintiffs' property suffered further damage in another major earthquake on 22 February 2011. On 21 April 2011 their solicitors advised the defendant they would claim against him.

12

Early in August 2009 the defendant learnt that Dr Jacques Marchand had earlier been convicted of making false medical claims to the Accident Compensation Corporation. The consequence of this had been the cancellation of the plaintiffs' existing insurance cover by their former insurer, Medical Assurance Society. He was not aware of this at the time he had approached NZI to arrange insurance on their behalf, in June that year.

13

In May 2010 Mrs Marchand contacted the defendant to advise that she wished to claim on their insurance policy for a pair of spectacles. A claim was completed by the defendant but not forwarded to NZI. Instead the defendant paid the amount claimed to Mrs Marchand himself.

14

From 12 May 2009 to 12 May 2010 the defendant was insured against certain professional risks under a policy with the third party. In February 2010 he completed a proposal for a renewal of this insurance for a 12 month period from 12 May 2010 to 12 May 2011. The document required him to advise whether he had received any claims,...

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