Body Corporate 78462 v IAG New Zealand
[2016] NZHC 320
•1 March 2016
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2014-409-000124 [2016] NZHC 320
BETWEEN BODY CORPORATE 78462
Plaintiff
AND
IAG NEW ZEALAND First Defendant
AND
EARTHQUAKE COMMISSION Second Defendant
Hearing: 24 February 2016 Appearances:
K J Crossland and J S Langston for VXJ Holdings Ltd
(Applicant for joinder)H C Matthews for Plaintiff (Respondent on joinder application) A R Armstrong for First Defendant (abiding the Court’s decision)
N S Wood for EQC (abiding the Courts’ decision) (attendance excused)
Judgment:
1 March 2016
JUDGMENT OF ASSOCIATE JUDGE OSBORNE
Introduction
[1] VXJ Holdings Limited (VXJ) asks the Court to join it as a defendant in a proceeding brought by the Body Corporate 78462 (the Body Corporate) in respect of a multi-unit complex (the complex) at Sumner. The complex suffered extensive damage in the Christchurch earthquake sequence. The first defendant, IAG, was the insurer of the complex. The second defendant, EQC, has its liability under the Earthquake Commission Act 1993. The Body Corporate sues for an order requiring IAG to reinstate the complex or to pay a sum equivalent to the reinstatement cost. The Body Corporate also sues EQC in relation to its liability arising from the
requirement to allocate payments between damage-causing earthquakes.
BODY CORPORATE 78462 v IAG NEW ZEALAND [2016] NZHC 320 [1 March 2016]
Facts
An insured complex
[2] The complex of which the plaintiff is the body corporate involves four separate buildings comprising 49 residential apartments and a commercial building which operates as a tavern. It is the latter building of which by VXJ is the unit holder.
The different positions of the parties
[3] Before turning to the pleadings, it is possible to state generally the different positions of the parties.
[4] The Body Corporate asserts that it suffered insured damage to the complex through more than one earthquake, that there is cover under the first policy for the year ending 5 June 2011, and further cover under the second policy for the year commencing 5 June 2011. The Body Corporate asserts that the damage needs to be allocated between the two years.
[5] For the purposes of the present application, there is no material difference between the parties as to the terms of the insurance policies. The total sum insured under each policy taken out by the Body Corporate was $15,938,000. The total sum insured under each policy was split between VXJ’s tavern ($771,000) and the apartments ($15,169,000).
[6] The Body Corporate asserts that the complex requires demolition and reconstruction. IAG puts in issue the extent of demolition and reconstruction required, the periods in which relevant damage was sustained, and quantum generally. IAG has paid to the Body Corporate what IAG calculates to be the entitlement. IAG also says affirmatively that the complex had weather tightness defects which were excluded by the policy.
[7] EQC puts in issue the correct allocation of damage as between parts of the complex and as between the two years.
Pleadings
[8] The pleadings reflect in more detail the parties’ different positions as I have
summarised them.
[9] In paragraph [23] of the Body Corporate’s first amended statement of claim, it pleads damage to the complex which occurred as a direct result of the earthquake of 22 February 2011 (that is to say, in the first year).
[10] Paragraphs [25] and [26] of the amended statement of claim plead the consequences of the 13 June 2011 earthquake (that is to say, in the second year):
25.As a direct result of the Earthquake on 13 June 2011 (Earthquake 2), the Complex has suffered damage during the period of Policy 2, including:
25.1Widespread new damage to the basement car park. The repair completed on the sumps post-February was undone causing further flooding. The earlier repair methodology was overtaken by the exacerbation of the February damage and was no longer appropriate.
25.2The differential settlement to Block 3 meant the concrete slab did not meet tolerance guidelines set out by the Ministry of Business, Innovation and Employment. It would prove more cost effective to demolish and rebuild the entire block.
25.3There are no cost effective repairs or long-term solutions that would enable the basement to be returned to its pre 13
June 2011 condition. All evidence supports a re-build
requiring reinstatement of the buildings that sit atop the basement, namely the Tavern, Block 2 and Block 3.
26.Except for Block 4, there is no economically feasible or practically possible re-levelling solution to restore the Complex to either the condition it was in prior to the June 13 earthquake and/or a condition substantially the same as when new. Accordingly the Complex requires demolition and reconstruction with appropriate foundations to meet the New Zealand Building Code.
[11] By its pleading, IAG has denied all the Body Corporate’s pleadings at paragraphs [25] and [26].
What VXJ would assert
A need for demolition of the basement?
[12] Within the Body Corporate’s pleading as to the requirement to rebuild the complex is an allegation that the basement must be rebuilt. VXJ’s tavern is constructed over the basement. VXJ would assert that the basement does not have to be rebuilt.
[13] The position of VXJ in relation to this application was supported by an affidavit of its sole director and joint shareholder, Peter Foster. Mr Foster deposes that, in addition to his involvement on behalf of VXJ as a unit owner in the complex (and his wife’s ownership of a unit), he has wide experience in property-related matters, including as a real estate sales person. He managed private property and land development companies and has been involved in the construction of “several hundred homes” in Christchurch from 1969 to 1998. He says that his final development project was of the very Sumner complex which is the subject of the insurance claim. Mr Foster refers in detail to expert reports which have been obtained by various parties in relation to the complex and exercises he has carried out in relation to scoping works.
[14] Mr Crossland, in his submissions, succinctly summarised Mr Foster’s concerns which relate to what Mr Foster views as two particular errors in the two reports relied upon by the Body Corporate. These are the Structura and Powell reports. First, Mr Foster views the two reports as containing or perpetuating false assumptions that seawater (“brackish water with high salt content”) is entering the basement. Secondly, Mr Foster identifies as false another assumption that there is a tanking membrane at basement level which cannot be reinstated. Mr Foster refers to other material, including his own reports, which identify what he says is the correct position. His concern is that the assumptions he has identified have led the Body Corporate to base its insurance claims on a need to reinstate the complex as opposed to undertaking repairs only.
[15] The concern of Mr Foster, as VXJ’s director and part-shareholder, is to avoid an outcome where the Body Corporate proceeds on the basis that what is factually
required is a demolition and reinstatement of the complex. The figures he gives in his evidence suggest that if the basement below the tavern is repairable, the tavern does not need to be demolished. On the other hand, if the basement is not repairable (the position taken by the Body Corporate in this proceeding) the amount available will be insufficient to effect demolition and rebuilding (taking into account the policy limit or cover on the tavern).
[16] Mr Foster’s concerns are not newly raised in the context of the present application. He has been involved in detailed exchanges of his information with both the Body Corporate and the insurers. The reports he has obtained from his own experts have been provided to all parties in this litigation. In mid-2014, Mr Foster went so far as to prepare the scope of works I have referred to, together with an indicative cost of repairing the basement. He provided those to all the parties.
VXJ’s other concerns as to the litigation
[17] Mr Foster deals with some matters beyond the state of the complex and its repair needs. He makes comment as to the conduct of the Body Corporate’s committee: He deposes that in 2014:
… my relationship with Mr White, the Body Corporate Committee and some of the Body Corporate members was not good. I had voiced by concerns about how the Body Corporate was being run. Some members of the Body Corporate also blamed me for the water-tightness issues affecting the complex. Some Body Corporate members felt that my action, in informing the Earthquake Commission that the basement could be repaired, jeopardised discussions with IAG. That was not my intention.
And later in his affidavit, Mr Foster concludes:
As referred to earlier, I have a number of concerns regarding the operation of the Body Corporate. I do not seek to address those concerns in this proceeding.
[18] For completeness, I also record that Mr Crossland spoke in his submissions of a further tension between Mr Foster and the Body Corporate committee, which does not appear to be a subject of the evidence filed. It is this. Mr Crossland notes that by reason of the extent of damage to the Complex, there is a live issue as to under-insurance. Mr Foster apparently holds the Body Corporate committee
responsible for any such under-insurance and has told the committee as much. In the event of a challenge of the decision-making of the Body Corporate committee, Mr Foster considers that one or more members of the committee may be conflicted by reason of his or her prior involvement and should not have been, or continue to be, involved in decision-making affecting other unit holders.
Joinder of a defendant – the jurisdiction and principles
The rule
[19] Rule 4.56 High Court Rules provides, as relevant to this application:
4.56 Striking out and adding parties
(1) A Judge may, at any stage of a proceeding, order that—
(a) the name of a party be struck out as a plaintiff or defendant because the party was improperly or mistakenly joined; or
(b) the name of a person be added as a plaintiff or defendant because—
(i) the person ought to have been joined; or
(ii) the person’s presence before the court may be necessary to adjudicate on and settle all questions involved in the proceeding.
(2) An order does not require an application and may be made on terms the court considers just.
The role of the two limbs of the joinder rule
[20] The Court of Appeal in Newhaven Waldorf Management Limited v Allen observed that the first limb under r 4.56(1)(b) addresses persons whose presence is necessary for the Court to adjudicate the exact issues arising on the pleadings.1 (As in Newhaven, this limb is inapplicable in this case.)
[21] In delivering the judgment of the Court in Newhaven, Kós J observed that the second limb of r 4.56(1)(b), “has other and more extensive work to do”.2 The Court
of Appeal identified the correct approach to the second limb by reference to the Privy
1 Newhaven Waldorf Management Limited v Allen [2015] NZCA 204, [2015] NZAR 1173 at [42].
2 At [42].
Council (on appeal from Malaysia) authority.3 The relevant English rule was materially the same as r 4.56(1)(b)(ii).
[22] In Newhaven, the Court of Appeal held:
[43] It is correct that in Pegang Mining Co Ltd v Choong Sam the Privy
Council suggested that an appropriate test was to ask:4
Will [the intended party]’s rights against or liabilities to any party to the action in respect of the subject matter of the action be directly affected by any order which may be made in the action?”
But the approach in Pegang is subject to two important qualifications. The first is that in adopting it the Privy Council expressly endorsed the decision of the Court of Appeal in Gurtner v Circuit.5 That was a running down case where the defendant had emigrated and could no longer be found. The police attending the accident had noted that he was insured, but had not recorded by whom. The Motor Insurers’ Bureau applied to be joined so they could contest the action. They had no legal obligation to the plaintiff, but they had agreed with the government to meet any judgments against insured motorists not paid by the insurers within seven days. The obligation to the plaintiff was described by counsel for the Bureau as moral rather than legal. The Court of Appeal directed it be joined. Lord Denning MR observed:6
It seems to me that when two parties are in dispute in an action at law, and the determination of that dispute will directly affect a third person in his legal rights or in his pocket, in that he will be bound to foot the bill, then the court in its discretion may allow him to be added as a party on such terms as it thinks fit.
[44] The second, more important qualification is that the Privy Council was at pains to avoid adopting any fixed, general rule in relation to joinder, recognising the wide variation in circumstances attending any particular case. A distinction between “legal interests” and “commercial interests” was expressly rejected as unhelpful. Rather, the Privy Council observed:7
In their Lordships’ view one of the principal objects of the rule is to enable the court to prevent injustice being done to a person whose rights will be affected by its judgment by proceeding to adjudicate upon
3 Pegang Mining Co Ltd v Choong Sam [1969] 2 MLJ 52 (JCPC) at 56.
4 Pegang Mining Co Ltd v Choong Sam, above n 3, at 56.
5 At 55; Gurtner v Circuit [1968] 2 QB 587 (CA).
6 At 595, in reliance on the judgment of Lord Esher MR in Byrne v Brown (1889) 22 QBD 657 (CA) at 666—667.
7 At 55.
the matter in dispute in the action without his being given an opportunity of being heard. To achieve this object calls for a flexibility of approach which makes it undesirable in the present case, in which the facts are unique, to attempt to lay down any general proposition which could be applicable to all cases.
Partly in consequence of that, partly reflecting Equity’s more expansive attitude to participation,8 and perhaps partly a reflection of the inherent jurisdiction to also permit intervention, the approach taken in New Zealand to joinder has long been regarded as liberal.9
[23] Kós J then completed the analysis of the correct approach by turning to New
Zealand authority:
[45] In McKendrick Glass Manufacturing Company Ltd v Wilkinson
Richmond J referred to Equity practice, citing Mitford:10
It is the constant aim of a Court of equity to do complete justice by deciding upon and settling the rights of all persons interested in the subject of the suit, to make the performance of the order of the Court perfectly safe to those who are compelled to obey it, and to prevent future litigation. For this purpose all persons materially interested in the subject ought generally to be parties to the suit, plaintiffs or defendants, however numerous they may be, so that the Court may be enabled to do complete justice by deciding upon and settling the rights of all persons interested, and that the orders of the Court may be safely executed by those who are compelled to obey them, and future litigations may be prevented.
That practice was found to have made its way into the rules, governing actions of all kinds, and to underlie what is now the second limb of r 4.56(1)(b).11
[46] This Court has previously noted that r 4.56 imposes “a fairly low threshold”.12 A cause of action need not necessarily be advanced (or lie) against a defendant to be added.13 Indeed, where the plaintiff
8 McKendrick Glass Manufacturing Company Ltd v Wilkinson [1965] NZLR 717 (SC) at 723—
725.
9 See for example McKendrick Glass Manufacturing Company Ltd v Wilkinson, above n 8; Westfield Freezing Co Ltd v Sayer & Co (New Zealand) Ltd [1972] NZLR 137 (CA); Arklow Investments Ltd v Ngai Terangi Iwi Inc CA 42/94, 1 June 1994.
10 McKendrick Glass Manufacturing Company Ltd v Wilkinson, above n 8, at 723; John Mitford A
Treatise on the Pleadings in Suits in the Court of Chancery (5th ed, V&R Stevens and G S Norton, London, 1847) at 190.
11 At 724—725.
12 Beattie v Premier Events Group Ltd [2012] NZCA 257 at [24].
13 See the authorities collected in A C Beck and others, McGechan on Procedure (online looseleaf
opposes joinder, a cause of action against the additional defendant may not be apparent unless the Court orders re-pleading by the plaintiff. It is the nature of the impact of the proceeding on the additional defendant's rights that is important. As Pegang and Gurtner make clear, these are not necessarily confined to legal rights, although the case for joinder may be stronger in such a case.14
Joinder for the defendant is not without risk, of course. It will be bound directly by an adverse outcome, and exposed to costs.
The Court’s discretion on joinder
[24] In Newhaven, the Court of Appeal left open a question as to whether the approaches identified in the cited authorities are jurisdictional in nature or involve the exercise of a discretion.15 Kós J, having referred to a previous decision in which
a joinder order was regarded as an exercise of a discretion,16 continued:
[53] ... It is clear that r 4.56(1)(b)(ii) imposes no bright line jurisdictional threshold. Rather, as we have explained, it imposes a flexible standard. The application of that standard will depend on contextual analysis. As the authors of McGechan on Procedure observe, “the jurisdictional question has tended to become intertwined with the discretionary question [whether joinder should be ordered], particularly the different approaches as to exercise of discretion depending upon whether application is made by plaintiff, defendant, or otherwise”.17
[25] The authors of Sim’s Court Practice succinctly and accurately record this in relation to the discretion:18
The court retains a discretion as to whether or not to strike out or add parties under the rule. Where jurisdiction exists under the rule the court will favour joinder. Issues of delay and prejudice to other parties may be relevant to the exercise of the discretion, but do not fundamentally alter the principles to be applied: Electrical Control Systems Ltd v Gregor Electrical Ltd (High Court, Christchurch CP 217/98, 11 August 2000, Chisholm J).
[26] The exercise of the discretion varies according to whether an application is made by the plaintiff, defendant, or a non-party or outsider (an “intervener”).19 The
recent judgment of Thomas J in Capital & Merchant Finance Ltd (in rec and in liq) v
ed, Thomson Reuters) at [HR4.56.09].
14 Pegang Mining Co Ltd v Choong Sam, above n 3; Gurtner v Circuit, above n 5.
15 At [53] to [54].
16 Puredepth Ltd v NCP Trading Limited [2010] NZCA 392 at [16],
17 Puredepth Ltd v NCP Trading Ltd, see Beck & Ors, above n 16, at [HR 4.56.08].
18 Sophie Young (ed) Sim’s Court Practice (online looseleaf ed, LexisNexis) at [HCR4.56.7].
19 See Beck & Ors, above n 13, at [HR4.56.10].
Perpetual Trust Ltd involved an application to be joined only as an interested party.20
Her Honour observed of the intervention principles:21
[8] It is important at the outset to note that Mr Stewart does not seek to be added as a plaintiff or a defendant, but as an interested party. The difference is significant.
[9] It appears, however, that the Court may be influenced by broader considerations than on applications for joinder of plaintiffs or defendants. This corresponds to the more limited rights acquired by interested parties/interveners.
Discussion
Jurisdiction and discretion
[27] The authorities establish that the Court, in considering an application for joinder of a party, is engaged on both a jurisdictional enquiry and in the exercise of a discretion (although the considerations may somewhat merge).
[28] As I have come to the view that the application must be dismissed (if for no other reason) as a matter of the Court’s discretion, I will only touch on some matters which engaged a significant portion of counsel’s submissions. They relate primarily to the jurisdictional threshold. For the purposes of the discussion which follows as to the discretion, I will assume (without deciding) that VXJ may be able to satisfy the jurisdictional threshold.
Jurisdictional considerations
[29] Upon the basis of the authorities recognised by the Court of Appeal in Newhaven, a significant jurisdictional requirement confronting VXJ is the requirement that the proceeding will directly affect either its legal or commercial interests (or both).
[30] Upon the pleadings a judgment in this proceeding may determine two issues:
20 Capital & Merchant Finance Ltd (in rec and in liq) v Perpetual Trust Ltd [2014] NZHC 3205, [2015] NZAR 228.
21 At [8] – [9].
(a) Is the damage sustained by the complex to be allocated to one or more earthquake events?
(b)What is the extent of IAG’s obligation (either reinstatement or repair) (the alternative remedies sought being orders to reinstate or to pay a sum equivalent to the cost of reinstatement).
Mr Crossland identified two respects in which VXJ will be affected.
[31] First, Mr Crossland submitted that the litigation will impact on VXJ’s legal rights because any orders made against IAG upon the basis of reinstatement may result in the VXJ’s unit (including the title to it) no longer being available to VXJ. If the amount to be received on account of reinstatement is inadequate to enable the Body Corporate to effect a reinstatement, the provisions of the Unit Titles Act 201022 relating to cancellation of the unit plan may be implemented. I doubt that the occurrence of such consequences means that the determination of this litigation directly affects the legal rights of VXJ.
[32] The second effect identified by Mr Crossland is the effect on VXJ’s commercial interests. In the judgment of Lord Denning MR in Gurtner v Circuit the relevant requirement was expressed as being that the “dispute will directly affect a third person… in his pocket, in that he will be bound to foot the bill”.23
[33] The Court in Gurtner found that test satisfied because the Motor Insurers Bureau, which applied to be added as a defendant, could be compelled (if judgment was given for the injured plaintiff) to satisfy the judgment.
[34] The financial impact of the determination of this litigation cannot readily be equated to that in Gurtner. There is an impact but one which is less direct. The direct impacts on VXJ will come from the decisions which the Committee of the Body Corporate makes in relation to the future of the complex once the outcome of
the litigation is known. Even if the Court in this proceeding orders IAG to reinstate
22 Unit Titles Act 2010, Pt 4.
23 Gurtner v Circuit, above n 5, at 595.
the complex, there will be decisions ahead for the Body Corporate before the litigation outcome has a direct impact on unit owners.
[35] It may be that on a somewhat generous approach to the concept of “directly effected” the Court might conclude that the jurisdictional threshold has been established. For my part, I am not inclined to that view but refrain from determining the application upon that basis, having regard to the decision I now come to upon the basis of the discretion.
Considerations informing the discretion
The Body Corporate’s pursuit of this claim
[36] Pursuant to s 135(1) Unit Titles Act, the Body Corporate created on the deposit of the Unit Plan (as in the case of the plaintiff) must insure and keep insured the improvements on the base land.24 The scheme of the Act is that a body corporate will effect insurance and pursue insurance entitlements for the development as a whole. For instance, in the event of the dissolution of a body corporate when a unit plan is cancelled, one of the assets to be distributed is money, which is expressly stated to include “insurance money received by the body corporate”.25
[37] The Act contains detailed provisions26 for the meetings and voting which a body corporate might require. For a special resolution to pass, a majority of 75 per cent of the eligible voters who vote on the resolution is required.27 Thus it is the scheme of the Act that the view of a 75 per cent majority of eligible voters voting as to what each views as the preferred approach or outcome prevails.
[38] A body corporate may delegate most of its duties or powers to the body corporate committee.28 Exempted from the subject matter of delegation are
decisions relating to the application of insurance monies in or towards reinstatement
24 The right of any particular unit owner to take out its own insurance policy against destruction of
or damage to the unit owner’s unit is expressly preserved. Unit Tiles Act 2010, s 137(1)(a).
25 Unit Titles Act 2010, s 185(2)(b).
26 Unit Titles Act 2010, ss 88 to 104.
27 Unit Titles Act 2010, s 98.
28 Unit Titles Act 2010, s 108(1).
of the development,29 but other matters relating to insurance, such as litigation in relation to a claim are not exempt. The body corporate committee decides matters by a simple majority of votes.30
[39] As identified in the express purposes of the Act, under s 3, the legal framework for the ownership and management of land and associated buildings and facilities is to be “on a socially and economically sustainable basis by communities of individual owners” with bodies corporate created to operate and manage the development.31
[40] If voting in relation to a body corporate’s insurance interests has taken place irregularly, there are legal avenues open to a unit owner (such as through judicial review) to address decisions or actions taken unlawfully. Otherwise, it follows from the scheme of the Act that the interests of the body corporate and the unit owners in relation to insurance effected by the body corporate will be pursued in accordance with decisions regularly made by the prescribed majorities.
[41] The scheme of the Act implicitly recognises that in decision-making on significant issues the preferences or arguments of individual unit owners may have to defer to the majority decision.
[42] Nothing in the evidence filed points to a failure by the plaintiff to pursue its insurance entitlements in accordance with the regime of the Unit Titles Act. Claims were properly notified to the insurers. A period of expert analysis was embarked upon both by the insurers and by the Body Corporate. The bundle of documents for this hearing included over 150 pages of reports and correspondence from and between experts dating from 2013. The Body Corporate commenced this proceeding on 6 March 2014. The Earthquake Commission was added as a defendant on 19
February 2015. The Court made directions by consent as to expert reporting. In July
2015, the experts retained by the three existing parties provided their draft report to the Court as to the outcome of their conference and as to areas of agreement and
29 Unit Titles Act 2010, s 108(2)(d).
30 Unit Titles Act 2010, s 113.
31 Unit Titles Act 2010, s 3(b).
disagreement. The proceeding has yet to be allocated a trial date but the Court expects to be at that point shortly.
The pursuit of VXY’s arguments
[43] I have referred at [15] to Mr Foster’s concern should the basement below
VXY’s tavern be demolished.
[44] In his submissions, Mr Crossland developed the consequential difficulties which would then confront VXJ (and the Body Corporate). Given an inability on the part of the Body Corporate to reinstate the complex according to the unit plan, cancellation of the unit plan may follow,32 with the extinguishment of every registered interest.33
[45] The difficulty for VXJ, in seeing its arguments pursued, is that the Body Corporate (by its constitutional decision-making process) and in accordance with the expert evidence it has obtained, is pursuing orders against IAG which would calculate costs upon the basis of demolition and reinstatement.
[46] On the other hand, the Body Corporate’s position is not accepted by IAG as defendant. For different reasons to those of Mr Foster, IAG has an interest in ensuring that the ultimate determination of the nature of damage and what is required by way of repair is at the lowest point appropriate in fact and law. To that extent, the VXJ factual arguments may be said to be already represented in this proceeding.
[47] In the course of his oral submissions, Mr Crossland identified the concern which Mr Foster has with the conduct of this litigation as being that “VXJ is stuck with the [Body Corporate committee] running it”. It is undoubtedly against that background that Mr Foster considered it appropriate to take his information and costings to the defendants as well as providing it to the Body Corporate. It appears from the evidence adduced that Mr Foster has exercised the freedom to seek to
persuade the defendants and/or their experts as to his view of the factual position.
32 Unit Titles Act 2010, Pt 4.
33 Unit Titles Act 2010, s 183.
[48] The experts retained by the parties in this litigation have their obligations of independence and impartiality under the High Court Rules.34 It is improbable that material of relevance provided to any of the experts will not be taken into account in their future reports and conferences.
Prejudice
[49] An important consideration in the exercise of the discretion is any prejudice which joinder may cause to the conduct of the litigation or to the existing parties. It is unnecessary to define the types of prejudice which may arise. An example lies in situations where joinder would delay a trial (particularly of long-standing litigation). It is appropriate to ask the question, where is the harm?35 The creation of little or no harm by joinder does not of itself satisfy the jurisdictional threshold but may be taken into account in the exercise of a discretion.
[50] The harm to a plaintiff of having another party joined who advocates for relief at a lower level than the plaintiff pursues is self-evident. There is a potential for the undermining of the existing plaintiff ’s claim, both as it is presented in the course of negotiations and (if the case does not settle) at trial. VXJ’s application is for an order that it be joined as a defendant. The reality is that its role would be more akin to that of a plaintiff pursuing a different outcome. In terms of rights under the insurance policy, it could not do that in a separate proceeding because it is not a party to the contracts of insurance. Accordingly, there is not the capacity for a separate proceeding to be issued by VXJ followed by a consolidation of the two proceedings.
[51] I am not satisfied on the evidence provided by Mr Foster that the Court’s refusal to join him as a defendant will substantially affect the defendants’ advancement of such reliable evidence as Mr Foster is able to produce. He has shown a willingness to provide such information and to enter into discussions with the defendants already, apparently to the chagrin of the Body Corporate. There is no
suggestion that he will cease to take that avenue if the present application is
34 High Court Rules, pt 9, sub-pt 5. Particularly r 9.43 and the Code of Conduct under sch 4.
35 As adopted by Thomas J in Capital & Merchant Finance Ltd (in rec and in liq) v Perpetual Trust
Ltd, above n 20, at [63].
declined. Accordingly, I do not recognise a significant harm accruing to VXJ through non-joinder in relation to the substance and quality of defendants’ arguments at trial.
[52] Mr Crossland developed a further submission as to the prejudice VXJ would suffer if not joined in the current proceeding. He submitted that VXJ “may be later prevented in any future s 74 Scheme application from arguing that the basement should be repaired [as against demolished and reinstated]”.
[53] Mr Crossland submitted that VXJ will be regarded as a privy of the Body Corporate and thereby estopped in any subsequent litigation from disputing or questioning the judgment in this proceeding.
[54] The scheme, in relation to which Mr Crossland submits an estoppel would arise, is the scheme which a body corporate, a unit owner or other identified persons may ask the High Court to settle under s 74 of the Unit Titles Act when a building has been damaged or destroyed but the unit title not cancelled.
[55] VXJ will not be issue estopped in the circumstances suggested by Mr
Crossland.
[56] The probability is that in any event, as identified by Mr Matthews, matters will in fact be settled without trial as between the Body Corporate and the insurers, with no final judicial decision pronounced.
[57] More directly on the estoppel point, Mr Matthews (on behalf of the Body Corporate) has in his submissions expressly disavowed the possibility that VXJ would not be permitted to argue for a different repair or reinstatement methodology in the context of a s 74 scheme. The Court will not impose an estoppel where a party involved in litigation has expressly disavowed future reliance on an estoppel applying in a particular (later) context.
[58] Secondly, the submission for VXJ involves a blurring of the separate functions of this litigation and an application for a s 74 scheme. The function of the
first is to produce a judgment as to the liability of the insurers to the Body Corporate as the insured. The second, separate function is that of the Body Corporate (either itself or through High Court order) in arriving at a decision as to how to deal with the fruits of the judgment against the insurers. Unit owners voting on the decision as to how to proceed in relation to the complex will not be bound by findings which lead the Court to make its order as to the insurers’ liability.
Outcome
[59] On an assumption that the applicant is able to satisfy the jurisdictional threshold for joinder (which is not determined in this proceeding), I am satisfied that it is neither just nor appropriate to join VXJ as a defendant in this proceeding.
[60] I have considered a fall-back position advanced by Mr Crossland in the course of oral submissions. He suggested that with the more restricted role which the Court may allow an intervening party in a proceeding, pursuant to the inherent jurisdiction, the Court might constitute VXJ an “Interested Party” for the purposes of the proceeding.
[61] In my judgment, considerations stand in the way of the joinder of VXJ as an interested party which are very similar to those which weigh against the application as framed. I therefore refrain from granting leave to VXJ to informally amend its application. Such application, if made, would have been refused for identical reasons.
Costs
[62] Counsel agreed that costs would follow the event and that an award on a 2B
basis would be appropriate.
Orders
[63] I order:
(a) The application of VXJ Holdings Ltd dated 2 November 2015 is dismissed;
(b)VXJ Holdings Ltd is to pay to the plaintiff the costs of the application on a 2B basis together with disbursements to be fixed by the Registrar.
Associate Judge Osborne
Solicitors:
Shieff Angland, Auckland
White Fox & Jones, Christchurch Young Hunter, Christchurch Chapman Tripp, Christchurch
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