BFSL 2007 LIMITED & ORS (IN LIQUIDATION) First Appellants
BRIDGECORP LIMITED & BRIDGECORP MANAGEMENT SERVICES LTD (BOTH IN RECEIVERSHIP AND LIQUIDATION) Second Appellants
AND
PETER DAVID STEIGRAD Respondent
SC 21/2013
BETWEEN
ERIC MESERVE HOUGHTON Appellant
AND
AIG INSURANCE NEW ZEALAND LIMITED (FORMERLY CHARTIS INSURANCE NEW ZEALAND LIMITED) First Respondent
T E C SAUNDERS, S J MAGILL, J M FEENEY, P THOMAS, C E HORROCKS & P D HUNTER Second Respondents
Hearing:
17 October 2013
Court:
Elias CJ, McGrath, Glazebrook, Gault and Anderson JJ
Counsel:
M J Tingey and D J Friar for First and Second Appellants in SC 19/2013 B P Keene QC and J F Anderson for the Respondent in SC 19/2013 A J Forbes QC and P A B Mills for Appellant in SC 21/2013 M G Ring QC and B J Burt for First Respondent in SC 21/2013 A R Galbraith QC and A E Ferguson for Second Respondents in SC 21/2013 C T Patterson for Intervener G K Urwin in SC 19/2013
Judgment:
23 December 2013
JUDGMENT OF THE COURT
AThe appeals are allowed. The Court of Appeal’s declaration in SC 21/2013 is set aside.
BThe respondent is to pay costs of $25,000 to the appellants in SC 19/2013 plus usual disbursements (to be set by the Registrar, if necessary). We certify for two counsel.
CThe respondents are to pay, jointly and severally, costs of $25,000 to the appellants in SC 21/2013 (to be set by the Registrar, if necessary). We certify for two counsel.
Section 9(4) – direct right of action for third parties
[55]
Section 9(6) – payments made under the contract of insurance
[62]
Nature of the statutory charge
[70]
Prior caselaw
[78]
Legislative history
[86]
The predecessor provisions
[86]
The Law Reform Act
[95]
Discussion
[99]
General policy arguments
[105]
Conclusion
[115]
Result and costs
[119]
Background
Section 9(1) of the Law Reform Act 1936 imposes a statutory charge on insurance money payable to an insured to indemnify the insured for damages or compensation payable to third party claimants. The issue in these appeals is the nature and effect of such a charge and in particular:
(a)whether the charge secures whatever is eventually held to be the full amount of the insured’s liability to the third party claimant (subject to any insurance policy limit), with no payments under the policy able to be made that would deplete the insurance money available to meet the third party claim if it is established; or
(b) whether the charge secures the insurance money that remains at the time of…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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Details
AGLC
BFSL and Bridgecorp v Steigrad, Houghton v AIG [2013] NZSC 156
Case
[2013] NZSC 156
Decision Date
CaseChat Overview and Summary
In the case of BFSL 2007 Ltd v Steigrad, the Supreme Court of New Zealand was asked to determine the nature and effect of a statutory charge imposed on insurance money payable to an insured to indemnify the insured for damages or compensation payable to third party claimants. The issue was whether the charge secures whatever is eventually held to be the full amount of the insured’s liability to the third party claimant, or whether it secures the insurance money that remains at the time of judgment or settlement of the third party claim against the insured, allowing in the meantime the payment of other sums that fall due for payment under the policy. The Court held that the statutory charge attaches at the time of the occurrence of the event giving rise to the claim for compensation or damages in respect of the liability to third parties which is covered by the policy. Reimbursement to the directors of their defence costs is not within the statutory charge. It is immaterial under the statute that the contractual obligation to pay the directors’ defence costs arises when the costs are incurred and that liability on the claim for damages is not yet determined or payable. The effect of the charge is that payments on the contractual obligation to meet the directors’ defence costs can be met only at the peril of the insurer when there is insufficient insurance cover under the limit of the policy to meet both insurance obligations.