Campbell v Stoneman - [2012] NZHC 392

IN THE HIGH COURT OF NEW ZEALAND WANGANUI REGISTRY

CIV-2010-483-149 [2012] NZHC 392

BETWEEN BRUCE CAMPBELL Plaintiff

ANDMARK DAVID STONEMAN First Defendant

ANDSTONEMAN FINANCIAL SERVICES LIMITED
Second Defendant

ANDKAREN BUKHOLT Third Defendant

ANDLUMLEY GENERAL INSURANCE (NZ) LIMITED
Third party

Hearing: 29 February 2012

Counsel: P Rzepecky for Third Party in Support
E J Unsworth for First and Second Defendants to Oppose

Judgment: 9 March 2012

I direct the Registrar to endorse this judgment with a delivery time of 4.15pm on the
9th day of March 2012.

RESERVED JUDGMENT OF MACKENZIE J

[1] This is an application by the third party (Lumley) to strike out the defendants’

third party notice against it.

[2] The essence of the plaintiff’s claim against the defendants is that the plaintiff engaged the first defendant, a financial and insurance adviser, in connection with the
plaintiff’s need to borrow $10,000. The plaintiff alleges that the first defendant

CAMPBELL V STONEMAN HC WANG CIV-2010-483-149 [9 March 2012]

advised him to invest in a Blue Chip scheme, by which an apartment in Auckland was to be purchased on the plaintiff’s behalf, financed by a mortgage over that apartment and over the plaintiff’s home in Wanganui. As part of this transaction, the plaintiff would acquire a $10,000 loan up front. The plaintiff entered into the scheme. Blue Chip failed and this plaintiff suffered a large financial loss. The plaintiff sues the first defendant, and the third defendant who the plaintiff alleges was responsible for arranging the mortgage structure and who filled out documentation, in negligence and negligent misstatement. The plaintiff also sues the second defendant, a company of which the first defendant is a director, for breach of contract. Against all three defendants the plaintiff pleads causes of action based on s 9 of the Fair Trading Act 1986 and for breach of the guarantee in s 28 of the Consumer Guarantees Act 1993.

[3] The defendants have a professional indemnity insurance policy with Lumley. It is not in dispute that all three defendants are insured under that policy. The defendants have joined Lumley as a third party. Lumley asserts that the claim is excluded from policy coverage, and that the defendants’ claim against it must necessarily fail because of the following exclusion clause:

Lumley shall not be liable to indemnify the Insured in respect of any liability arising out of any claim:

4.17 Investment Advice

alleging, arising out of, based upon or attributable to, or in any way involving, directly or indirectly:

(a) The sale and/or promotion of any investment otherwise than an investment offered pursuant to a prospectus compliant with all statutory requirements, or

…

[4] Mr Rzepecky accepts that Lumley must convince the Court that the defendants do not have a reasonable arguable cause of action and that the legal principles to be applied are those summarised by the Court of Appeal in A-G v
Prince and Gardner in these terms:[1]
[1] A-G v Prince and Gardner [1998] 1 NZLR 262 at 267.

A striking-out application proceeds…

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.

Continue reading Campbell v Stoneman

Details

AGLC: Campbell v Stoneman [2012] NZHC 392
Case: [2012] NZHC 392
Decision Date: 9 March 2012

CaseChat Overview and Summary

In the case of Campbell v Stoneman, the plaintiff, Bruce Campbell, brought a claim against Mark David Stoneman, Stoneman Financial Services Limited, and Karen Bukholt, alleging negligence and negligent misstatement in connection with a financial investment scheme that resulted in a significant financial loss for the plaintiff. Lumley General Insurance (NZ) Limited, the third party, applied to strike out the defendants' third party notice against it. The defendants had professional indemnity insurance with Lumley, but Lumley argued that the claim was excluded from policy coverage. The key legal issue was whether the claim against Lumley was so clearly untenable that it could not possibly succeed. The court held that a striking-out application proceeds on the assumption that the facts pleaded in the statement of claim are true, even if they are not admitted. However, the court must be cautious in applying this principle to a third party insurer, as the facts relevant to the insured's liability to the plaintiff may differ from those relevant to the insured's claim against the insurer. The court dismissed the application, holding that questions of policy coverage and the interpretation of exclusion clauses should not be determined on the hypothetical basis necessarily involved in a striking-out application. Instead, these questions require consideration in the light of all the evidence and should be addressed in the context of the relevant facts.

The court's reasoning was that it was inappropriate to determine the scope and effect of the exclusion clause in the absence of primary evidence, such as might have been given if the court had ordered formulation of a question or questions for trial, informed by evidence of a limited nature. The court relied on the principles established in Vero Liability Insurance Ltd v Symphony Group Ltd and Clasper v Duns, which held that the application of a liability policy, including the application of an exclusion clause in the policy, requires an assessment of the facts pursuant to which the claim under the policy arises. The court also noted that the application of a liability policy requires consideration of the facts, and should not be determined on the hypothetical basis necessarily involved in a striking-out application. The court's decision highlights the importance of considering the relevant facts when determining questions of policy coverage and the interpretation of exclusion clauses in professional indemnity insurance policies. The court's approach ensures that the insured's liability to the plaintiff, as ultimately found, is the basis of the insured's liability to the insurer, and that the insurer is not exposed to the risk of the plaintiff amending its statement of claim in a way that might have led to a different result on the striking-out application.

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