Best Food Fresh Tofu Limited v China Taiping Insurance (NZ) Co Limited

[2014] NZHC 350

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-3094 [2014] NZHC 350

BETWEEN  BEST FOOD FRESH TOFU LIMITED Plaintiff

ANDCHINA TAIPING INSURANCE (NZ) CO LIMITED

Defendant

Hearing:                   28 February 2014

Appearances:           J Skinner for Plaintiff

C Langstone for Defendant

Judgment:                28 February 2014

ORAL JUDGMENT OF ASSOCIATE JUDGE BELL

Solicitors:

Andrew Hooker, Albany, for Plaintiff

Jones Fee, Auckland, for Defendant

BEST FOOD FRESH TOFU LIMITED v CHINA TAIPING INSURANCE (NZ) CO LIMITED [2014] NZHC

350 [28 February 2014]

[1]      The defendant applies for particulars and asks for an extension of time to join and serve third parties.  The application for particulars is contested.  The application to extend time to join third parties is not.

[2]      The plaintiff is suing the defendant as insurer under two policies – a material damage policy and a business interruption policy.  The plaintiff has factory premises at 22 Elliott Street, Papakura, which were damaged by fire on 12 May 2011.

[3]      The plaintiff made claims under the policies.   It pleads that the defendant elected to arrange and pay for the repairs, and instructed an assessor to manage the claim – paragraph 1.5 of the statement of claim.  It alleges that the repair work was carried out defectively, and that there was delay in completing the repairs.

[4]      For its  first  cause of action  for defective repairs,  the plaintiff has  given particulars of work alleged to have been carried out defectively and has provided, in broad-brush terms, the costs of the work to remedy the defects.  While it has given round-figure costs for individual defects, it pleads that the total costs of remedial works would be $309,000 plus GST.   For its claim for delay in carrying out the reinstatement work, it has claimed for loss of earnings.   These are: for the year ending 31 March 2012, $127,994, for the year ending 31 March 2013, $457,000. The amount claimed for the current financial year has yet to be quantified.

[5]      Before I address the particulars sought by the defendant, it is helpful if I

articulate certain matters.

[6]      As the plaintiff has presented its case, the insurer instructed an assessor, and the assessor managed the reinstatement and repair work in the way typically undertaken  by  insurance  assessors  –  that  is,  by  appointing  contractors  and supervising and overseeing their work.  Although this has not been stated expressly, I take it  that  in  the plaintiff’s  case the insurer  met  the costs  of the contractors engaged by the assessor.  On that theory of the case, it seems to me that there is a contractual chain in the sense that the plaintiff can look to the defendant under the

policy. As insurer the defendant has the option of simply meeting any repair costs incurred, but in this case the defendant went further and appointed an assessor and arranged for repairs to be carried out.  There will be a chain of contracts: the plaintiff and the defendant under the policy, the defendant and the assessor, and either the assessor and the contractors or the defendant and the contractors.  The contractual chain can be seen in the defendant, as insurer, paying the contractors for their work. I say that to address some of the matters raised by the defendant.

Application for particulars

Paragraph 2.1

[7]      Paragraph 2.1 of the statement of claim says:

It was an implied term of the material damage policy that the defendant would carry out repairs and reinstatement to a reasonable and workmanlike standard.

[8]      In its application the defendant seeks the following particulars:

(a)       What are the precise facts and circumstances which the plaintiff says give rise to the alleged implied term that the defendant would carry out all repairs and reinstatement?

(b)       What are the precise facts and circumstances which the plaintiff says give rise to the alleged implied term that the defendant would carry out all repairs and reinstatement in a reasonable time?

(c)       What are the precise facts and circumstances which the plaintiff says give rise to the alleged implied term that the defendant would carry out all repairs and reinstatement in accordance with all applicable building and health standards?

[9]      For  the  defendant  Mr  Langstone  pressed  the  argument  that  the  policy relevantly provided that the insurer was required only to pay for the costs of repairs. There was a separate provision in the policy which provides that certain items of insured property (identified in the schedule to the policy) would be subject to reinstatement.   I understand Mr Langstone’s argument to be that that part of the policy did not apply and that here the obligations of the insurer amounted only to payment for repairs.   The challenge from the insurer was that as it had only an obligation to pay for repairs then it could not be under an obligation to see that work

was carried out to a reasonable and workmanlike standard.  The particulars sought are directed at ensuring that a proper basis is given for implying the terms pleaded by the plaintiff in paragraph 2.1.

[10]     Mr Langstone referred to a Scottish decision, Davidson v Guardian Royal Exchange Assurance,1  where it was held that a delay of 32 weeks in repairing a motor vehicle led to a liability on the part of the insurer in arranging for the repairs. Mr Langstone queried whether that would be good authority in New Zealand.

[11]     I do not order the particulars sought by the defendant.   The plaintiff has adequately pleaded the basis for its case even though the pleading is somewhat bald. That is, the plaintiff has pleaded in paragraph 1.5 that the defendant did elect to arrange and pay for the repairs and did instruct an assessor to manage the claim.  On that basis it is arguable for the plaintiff that if the insurer did undertake to manage the repairs through the appointment of an assessor and by engaging contractors, there can be contractual liability on the part of the insurer if the repair work has not been carried out to a reasonable workmanlike standard.  I see the question of implying a term to that effect as being little different from implying such a term in a building contract.

[12]     In support, Mr Skinner for the plaintiffs referred to an old decision, Robson v New Zealand Insurance Co Ltd.2   In that case, an insurance company was held liable when it arranged for the repairs of a motor vehicle which had been damaged, and those repairs were carried out defectively.   The insured in that case was able to recover the costs of remedial work.

Paragraph 2.2

[13]     Paragraph 2.2 of the statement of claim says:

In  breach  of  the  implied  terms  the  defendant  carry  out  all  repairs  and reinstatement to a reasonable and workmanlike standard.

1      Davidson v Guardian Royal Exchange Assurance [1979] 1 Lloyd’s Rep 406 (Scot IH (2 Div)).

2      Robson v New Zealand Insurance Co Ltd [1931] NZLR 35 (SC).

[14]     For  the  plaintiff  Mr  Skinner  accepted  that  that  was  ungrammatical  and inelegant, and offered to re-plead. The amended wording will be:

In breach of the implied term the defendant did not carry out all repairs and reinstatement to a reasonable and workmanlike standard.

[15]     The particulars the defendant seeks are:

(a)       Please  provide  all  repairs  and  reinstatement  carried  out  by  the

defendant at the plaintiff’s premises.

(b)       In  respect  of  all  repairs  and  reinstatement  work  (collectively, “work”) carried out by the defendant in breach of the alleged implied term, please provide precise details of:

(i)        Whether it is alleged that each such item of work fails to accord with all applicable building and health standards and if so, specify the particular standard that is alleged to have been breached.

(ii)      Whether it is alleged that each such item of work has not been carried out to a “reasonable standard” and if so, what is the reasonable standard referred that the plaintiff says should have been reached.

(iii)      The  date  each  item  of  allegedly  defective  work  was discovered.

(iv)      Any steps taken  by the  plaintiff to remedy the  allegedly defective work.

(v)       The  steps  required  to  remedy  each  item  of  allegedly defective work and the likely cost to remedy each such item.

[16]     It is not necessary in a claim for defects in building work or reinstatement work carried out on behalf of an insurer for a plaintiff to list all works carried out. It is only necessary to identify the works that have been carried out defectively.  The pleading does list the particular items which are in issue.  There is no complaint as to the particularity of those individual items.  I dismiss the application for particulars in respect of paragraph 2.2.

Paragraph 2.3

[17]     Paragraph 2.3 of the second amended statement of claim provides broad- brush costings for the remedial work.  While the defendant does not press for further particulars to be given in its application today, I signal to the plaintiff that such

broad-brush round figures will not be adequate for trial purposes.  Before this case can be given a close of pleadings date, I expect the plaintiff to provide proper costings for the remedial work.

Paragraph 3.1

[18]     Paragraph 3.1 of the second cause of action pleads:

It was an implied term of the material damage contract and/or a duty at common law that the defendant would settle the claim and complete reinstatement within a reasonable time.

[19]     The particulars sought by the defendant in respect of paragraph 3.1 are:

What are the precise facts and circumstances which the plaintiff says give rise to the alleged implied term that the defendant would carry out all repairs and reinstatement in a reasonable time?

[20]     The argument in respect of paragraph 3.1 is similar to the argument as to the implied term under paragraph 2.1, and for similar reasons I reject it.

[21]     Mr Langstone also took other points.   He noted that there was a claim for breach of contract and also a claim for breach of duty at common law.  He noted that concurrent causes of action need to be pleaded distinctly, and it was inappropriate to run a claim for breach of contract and a claim for breach of duty at common law, presumably tortuous, as one and the same cause of action.

[22]     The point is sound.  I do not rule upon the merits of a claim in tort of the sort pleaded here.  I simply comment that there may be advantages for the plaintiff if it were to confine its cause of action in this matter to a single appropriate cause of action without cluttering the matter up with alternative and more theoretical causes of action.

[23]     Mr Langstone took the point that the words “settle the claims” and “complete reinstatement” referred to two matters.  That is pedantic.  The point being made by Mr Langstone is that if an insurer did meet all costs incurred in carrying out the repair work, from its point of view it has settled the claim.  The point will remain alive, however, for the plaintiff because its case is based on losses it alleges it has

suffered  as  a  result  of  the  reinstatement  work  not  being  carried  out  within  a reasonable time.  Under the plaintiff’s case it will not be an answer for the defendant to say that it has paid the contractors, if the reinstatement work took too long.

[24]     For paragraph 3.1, I leave the plaintiff to reconsider how it is pleaded but do not direct any further particulars.

Paragraph 3.2

[25]     In paragraph 3.2 the defendant asks for particulars as to why the proposed period for completion, 12 months, is an appropriate period for reinstatement.  The question how much time is required to complete reinstatement works is a question of fact.  It will be the subject of evidence at trial.  It is not something that needs further particulars at the pleading stage.  I do not order any further particulars for paragraph

3.2.

Paragraph 3.3

[26]     The defendant’s application sought particulars of paragraphs 3.3 and 3.4. Mr Langstone’s oral submissions for this hearing did not deal with those paragraphs but in my view further particulars are required.  Paragraph 3.3 says:

In breach of the terms/duty the defendant failed to settle the claims and complete reinstatement within a reasonable time.

[27]     The particulars the defendant seeks are:

Please provide full details of each claim and each item of reinstatement that the defendant is alleged to have failed to settle or complete within a reasonable time.

[28]     The plaintiff’s pleading is inadequate to inform the defendant as to what work had not been completed within the proposed reasonable period of 12 months from the date of the fire.   The defendant needs to know what work was not completed within that time so that the defendant can deal with causation issues.  The extent to which reinstatement work was not completed is relevant to the plaintiff’s ability to resume its business activities on the premises at Elliott Street.

[29]     I  require  the  plaintiff  to  give  further  particulars  in  paragraph  3.3.    The plaintiff is required:

(a)       to specify what work remained uncompleted after the 12 months; (b) to state when that outstanding work was completed; and

(c)      to  state  how  that  work  which  was  uncompleted  after  12  months prevented the plaintiff from resuming its business activities on the premises in Elliott Street.

Paragraph 3.4

[30]     Paragraph 3.4 simply pleads the amounts claimed for loss of earnings without any further particularisation.  A claim for loss of earnings said to flow from the non- completion  of  building  works  and  reinstatement  works  is  inevitably  a  complex matter.   Simply pleading final figures, the result of extensive calculations, is not adequate.  I require the plaintiff to provide a schedule for paragraph 3.4 setting out its calculations to show how these figures are derived.

Joinder of third parties

[31]     At the hearing the plaintiff adopted a rather generous view on the joinder of third  parties.    In  two  previous  minutes  of  case  management  conferences  I had extended the time for the joinder of third parties.   In the first case management conference minute I extended the time to 19 November 2013.   In my minute of

5 December 2013 I extended the time to 31 January 2014.  Both parties attended to discovery and inspection of documents in early November 2013.   I would have expected that the defendant had had enough time in which to decide whether to join third parties.  The plaintiff did not want to take such a hard line as I would have, and is prepared to allow further time for joinder of third parties.

[32]     Following discussion I give these directions:

(a)       The plaintiff is to file and serve a new statement of claim by 14

March  2014.   That  new statement  of claim  is  to  incorporate the particulars that  I have required  for paragraphs  3.3 and 3.4  of the second amended statement of claim.

(b)      Any statement of defence by the defendant is to be filed and served by

4 April 2014.

(c)      The defendant will also have until 4 April 2014 in which to file any third party notices and statements of claim against third parties.

(d)I  direct  a  case  management  conference  for  no  earlier  than  the beginning of June 2014.  I direct the conference at that time to allow the defendant to serve third parties.  At the conference the joinder of third parties will be up for review.  Specifically if the defendant has issued third party notices and has not been able to serve the third parties, I reserve the right to direct that proceedings against those third parties no longer be allowed, given the potential for this proceeding to drag because of elusive third parties.

(e)      Other directions will turn very much on whether third parties are participants in the proceeding or not, and how far they have advanced matters by filing statements of defence.  If no third parties are joined, I trust that directions may be able to be given to have the matter set down for hearing.  I expect that the plaintiff will have firmed-up on quantum for its first and second causes of action.

(f)      I reserve leave to the parties to apply for further directions at a further telephone conference if required, but trust that will not be necessary.

Costs

[33]     On costs, I declare that the result of this hearing is a draw.  The plaintiff has been partly successful and the defendant has been partly successful.   There is no clear winner.  I make no order as to costs.

…………………………..

Associate Judge R M Bell