Fibretech Holdings Limited v Vero Insurance New Zealand Limited
[2021] NZHC 3104
•18 November 2021
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2021-409-000136
[2021] NZHC 3104
BETWEEN FIBRETECH HOLDINGS LIMITED
Appellant
AND
VERO INSURANCE NEW ZEALAND LIMITED
Respondent
Hearing: 27 October 2021 Appearances:
J E Bayley and F H Scrase for the Appellant
P J L Hunt and L O Fernandez for the Respondent C M Keall, in-house counsel for the Respondent
Judgment:
18 November 2021
JUDGMENT OF NATION J
[1] The appellant (FibreTech) owned an industrial building in Christchurch which was damaged in the 2010/2011 Canterbury earthquake sequence (2010/2011 earthquakes). It was insured with the respondent (Vero).
[2] FibreTech made a claim under the policy after the 4 September 2010 earthquake.
[3] FibreTech and Vero entered into a settlement on 11 May 2018 for an amount which included recognition of FibreTech’s building having been damaged to the extent of it being a total loss through the damage suffered in the 2010/2011 earthquakes.
FIBRETECH HOLDINGS LTD v VERO INSURANCE NEW ZEALAND LTD [2021] NZHC 3104 [18
November 2021]
[4]The settlement agreement recorded a clause:
The Settlement Sum is paid by Vero and accepted by the Insured in full and final settlement and discharge of the Claim and any claims, rights, demands and set-offs against Vero arising directly or indirectly out of, or in connection with the Earthquake Activity and/or the Earthquake Losses and/or the Material Damage Cover and/or the Policy whether such claims arise under statute, common law, or equity; …
[5] FibreTech issued proceedings in the District Court claiming $93,856.93 for the premiums paid under its insurance policy for the years 2013 to 2017 on the basis FibreTech received no benefit from its policy over those years.
[6] In a judgment of 18 March 2020, Judge Kellar in the District Court refused to strike out FibreTech’s claim but issued summary judgment for Vero on the basis the settlement agreement provided a complete legal defence to the claim.1
[7] FibreTech appeals the summary judgment in favour of Vero. Vero cross- appeals the decision refusing the strike out.
Principles on Appeal
[8] The appropriate appeal route in this matter is the general right of appeal conferred by s 124 District Court Act 2016.2 FibreTech is therefore entitled to judgment in accordance with the opinion of this Court by way of re-hearing.3
[9] The principles of summary judgment were discussed in the District Court judgment, and are set out in r 12.2 of the District Court Rules 2014, as shown below:4
12.2 Judgment when there is no defence or when no cause of action can succeed
(1)The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.
(2)The court may give judgment against a plaintiff if the defendant satisfies the court that none of the causes of action in the plaintiff’s statement of claim can succeed.
1 Fibretech Holdings Ltd v Vero Insurance New Zealand Ltd [2021] NZDC 4829.
2 Auckland Council v Hill [2018] NZHC 3315.
3 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [16].
4 See High Court Rules 2016, r 12.2.
[10] Vero filed its cross-appeal under r 15.1 of the District Court Rules 2014. The relevant principles pertaining to strike out are set out at [60] below.
The District Court decision
[11] The Judge referred to various judicial statements as to the approach to be taken to the interpretation of contracts, and particularly release clauses, recording a settlement between the parties.5
[12] The Judge noted that the settlement here was primarily targeted towards settling FibreTech’s claims in respect of earthquake damage under the policy. The claim for refund of premiums related to a different dispute. In contrast to the situations dealt with by the Court of Appeal in Prattley6 and Yarrow,7 he held it was “not equally clear that the claim relates to the subject matter of the settlement agreement”.8 On that basis, he found FibreTech’s claim was reasonably arguable so declined to strike out the claim.
[13] The District Court Judge accepted that, at the time of settlement, FibreTech was unaware of a claim it could make as to recovery of the premiums paid but held that they could have been aware of such a claim. He held the settlement agreement was primarily directed towards earthquake damage but was also equally directed towards achieving finality in relation to potential claims in connection with the policy. He held the claim in respect of the premiums was clearly connected to the insurance policy. He found the background supported the notion that the parties wished to achieve finality in respect of the policy and claims that might arise in connection with it. Overall, he considered that Vero had a complete legal answer to FibreTech’s claim in the form of the release clause, the language of the clause and the background in which the bargain was struck. He was satisfied that none of the causes of action in
5 Firm PI 1 Ltd v Zurich Australian Insurance Ltd [2014] NZSC 147, [2015] 1 NZLR 432; Tag Pacific Ltd v The Habitat Group Ltd (1999) 19 NZTC 15,069 (CA); Bank of Credit and Commerce International SA (in liq) v Ali [2001] UKHL 8, [2002] 1 AC 251 [Ali]; Prattley Enterprises Ltd v Vero Insurance New Zealand Ltd [2016] NZCA 67, [2016] 2 NZLR 750; Yarrow v Yarrow HC New Plymouth CIV-2008-443-72, 14 August 2009; Finnigan v Auckland Council [2014] NZHC 1390.
6 Prattley Enterprises Ltd, above n 5.
7 Yarrow v Yarrow, above n 5.
8 Fibretech Holdings Ltd, above n 1.
FibreTech’s statement of claim could succeed. On that basis, he entered summary judgment in favour of Vero.
Submissions for FibreTech
[14] FibreTech contended that the settlement agreement released Vero from claims only in respect of the earthquake damage which was the subject of the claim relating to damages from the 2010/2011 earthquakes and any other claim under the policy. FibreTech argued that its claim in the District Court was for monies received for premiums paid under the separate contracts of insurance entered into after 2011, which were void due to Vero’s failure to provide any consideration or benefit in return for the premiums. They submitted this was because the building was a total loss as a result of the damages caused by the 2010/2011 earthquakes. FibreTech could not make successive claims in respect of that loss so there was no value to them in the insurance policy for which they had paid the premiums they were seeking to recover. FibreTech submitted the claim for return of premiums was thus outside the scope of the release clause in the settlement agreement.
Submissions for Vero
[15] Vero submitted that the terms of the settlement agreement were drafted in terms that released Vero from any liability arising out of the damage from the 2010/2011 earthquakes to FibreTech’s building. Vero also submitted that, until the settlement agreement was entered into, there was potential for FibreTech to be entitled to indemnity or a further payment from Vero for damage to its building that might have been suffered in the years for which they were insured so that they did obtain a benefit in return for the premiums they paid.
[16] Vero argued the claim FibreTech was making was connected to the earthquake damage which had been the subject of the original claim because it was only as a result of the loss suffered through that damage that FibreTech claimed they received no benefit from the policy for which they had paid premiums over subsequent years. They said, in any event, FibreTech had agreed with the settlement not to make any claim arising directly or indirectly out of, or in connection with, the policy. Vero contended that, with the terms of settlement, Vero had an unarguable legal defence to
the claim so there was no error in the Judge entering summary judgment for them. They also submitted that, for that reason and because the bringing of a claim in breach of a settlement is an abuse of the court process, the claim could and should have been struck out.
Analysis
[17] The Judge in the District Court noted that, if premiums had not been paid, it would have jeopardised coverage under the policy.9
[18] The sum insured under the policy in 2011 was $2,715,000 plus GST. The policy stipulated an estimated reinstatement or replacement cost of $2,565,000 plus an allowance for demolition of $150,000 and an indemnity value of $2,140,000.
[19] As FibreTech acknowledged, an insurer could be liable, depending on the policy, for successive losses during the period of cover even though the aggregate amounts of a loss exceeded the ceiling on the actual loss recoverable.10 They submitted the amount of insurance reduced by a claim under the policy was automatically reinstated.11 It was an event-based policy depending on whether the building was destroyed. If one event caused damage that was repairable, then the measure was restoration of the damaged portion to a “condition substantially the same as, but not better than, its condition when new”. If the building was then destroyed in a subsequent event, the measure was replaced with an equivalent building.
[20] The Judge noted that Vero obtained multiple reports estimating the cost of repairs/reinstatement:12
(a) Cunningham Lindsey repair estimate dated 23 May 2011 - $263,062.54;
(b) Mainzeal Property and Construction Ltd estimate dated 27 February 2012
- $554,011;
9 Fibretech Holdings Ltd, above n 1, at [56].
10 Malcolm A Clarke, Julian M Burling and Robert L Purves, The Law of Insurance Contracts (6th ed, Informa UK Ltd, London 2009) at 28.1A.
11 Citing QBE Insurance (International) Ltd v Wild South Holdings Ltd [2014] NZCA 447, [2015] 2 NZLR 24 at [83].
12 Fibretech Holdings Ltd, above n 1, at [4].
(c) Mainzeal Property and Construction Ltd estimate dated 27 March 2012 -
$473,653;
(d) Whyte Construction Ltd estimate dated 29 July 2015 - $1,805,400; and
(e) PHC Quantity Surveyors estimate dated 6 July 2017 - $3,550,000.
[21]The Judge also recorded that:
[5] The parties settled the claim on a replacement cost basis pursuant to a written Vero Commercial Settlement Agreement (“the settlement agreement”) on 10 May 2018. The settlement agreement recorded that on 8 January 2018 the defendant paid the sum of $4,060,256 to the plaintiff, which was calculated as follows:
Depreciated replacement cost $3,115,000.00
GST $ 467,250.00
Less excess at 2.5 per cent -$ 89,556.25
3.25 years interest at 5 per cent $ 567,562.74
Total $4,060,256.50
[22] In written submissions, counsel for FibreTech said the Judge had erred in referring to the $4,060,256.50 as being “intended to cover the replacement cost”.13 Counsel submitted there was nothing in the agreement to indicate this was the agreed replacement cost or that replacement was the ceiling. I do not consider there was any material error in the way the Judge referred to this. It was an amount that was paid on account of the replacement cost paid and which FibreTech accepted as being on account of the replacement cost.
[23] It was only with the settlement agreement that Vero treated the 2010/2011 earthquakes as having caused a total loss, requiring replacement of the building. Until then, Vero had provided coverage under the policy in respect of damage that might result from subsequent insured events. With the information they had as to the estimated cost of repairs/reinstatement, Vero potentially would have had a liability under the policy for damage caused by subsequent events that was additional to that suffered in the 2010/2011 earthquakes. In renewing the insurance over the intervening
13 Fibretech Holdings Ltd, above n 1.
years, FibreTech obviously considered there would be a benefit to them in having continued coverage under the policy, the benefit FibreTech obtained through paying the premiums over that period.
[24] Both FibreTech and Vero considered that FibreTech had material damage cover under the policy for the period through to settlement. Clause 6 of the settlement agreement recorded “the insured agrees that the material damage cover will terminate with immediate effect from the date of the agreement”.
[25] Counsel for FibreTech did not cite any authority for the proposition that, where there is a failure of consideration, the contract or agreement to which it relates is void.
[26]They referred instead to the relevant passage from the Laws of New Zealand
which states:14
Money paid pursuant to a transaction which is, or later becomes, ineffective may be recovered if the thing the claimant expected in return did not materialise. The action is for money had and received on the grounds of a “total failure of consideration”. Retention of the payment would be unjust because the transfer was conditional and the condition has not been met.
The traditional rule has been that a restitutionary remedy will not be available if the claimant received any part of the expected benefit.
[27] FibreTech’s argument is that, with the settlement, it turned out FibreTech’s building was damaged to the extent of being a total loss in the 2010/2011 earthquakes. There was thus no value in the coverage provided by the insurance contracts in the subsequent years.
[28] In Goss v Chilcott, the Privy Council endorsed an earlier statement made by the House of Lords that:15
[w]hen one is considering the law of failure of consideration and of the quasi- contractual right to recover money on that ground, it is, generally speaking, not the promise which is referred to as the consideration, but the performance of the promise.
14 Mark O’Regan (ed) The Laws of New Zealand: The doctrine of total failure of consideration, (Online ed, LexisNexis).
15 Goss v Chilcott [1996] 3 NZLR 385 (PC), citing Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32 (HL).
[29] Here, Vero provided the insurance cover which FibreTech had contracted for each year with the renewed policy. Vero had thus performed the promise which had been contracted for.
[30] I thus reject the submission for FibreTech that the policy was void as from the time its building was damaged in the 2010/2011 earthquakes.
[31] The District Court Judge did not make that determination and was not required to in reaching his decisions. The determination I have just made is also not essential to the decision I have reached as to whether there was any error in the ultimate decisions the Judge made as to both strike out and summary judgment in the District Court.
[32]The Vero Commercial Settlement Agreement included the following:
PARTIES
Fibretech Holdings Limited a duly incorporated company having its registered office at 22 Kennaway Road, Woolston, Christchurch, New Zealand and any other party entitled to insurance cover under policy number HO BSP 3855005 (the Insured); and
…
Vero Insurance New Zealand Limited a duly incorporated company having its registered office at 48 Shortland Street, Auckland, carrying on business as an insurer (Vero).
BACKGROUND
…
E. The Insured has a BrokerWeb Material Damage Insurance policy which is underwritten by Vero, Policy Number HO BSP 3855005, (the Policy). Material Damage cover is provided under the Policy to the structures and various other items situated at the Property, as specified in the Policy (the Insured Property), up to a sum insured of $2,715,000 (the Material Damage Cover).
F. On or about 4 September 2010 there was an earthquake in the Canterbury region and a number of subsequent earthquakes and/or aftershocks followed including various major earthquakes and/or aftershocks. The 4 September 2010 earthquake and all subsequent earthquakes and/or aftershocks up to the date that Vero signs this agreement (the Date of the Agreement) are referred to as the Earthquake Activity. The Earthquake Activity resulted in substantial damage to the Insured Property (the
Insured Property Damage). The Insured Property Damage shall be referred to as the Earthquake Losses.
G. The Insured has made a claim under the Policy for its Earthquake Losses (the Claim).
H. On 8 January 2018 Vero paid the insured the indemnity value of the property plus interest less excess calculated as:
Estimated depreciated replacement cost $3,115,000.00 Plus GST $467,250.00 $3,582,250.00 Less excess @ 2.5% of the loss $89,556.25 Total $3,492,693.80 Plus interest – 3.25 years1 @ 5% $567,562.74 Total payment $4,060,256.50
I. The parties have agreed that Vero will make a cash payment to the Insured in full and final settlement of the Claim on the terms set out below.
Terms of the Settlement Agreement
…
2 The Insured and the owners of the underlying land and buildings will indemnify and hold harmless Vero against all claims (including all defence costs) that may be made against Vero by any person or entity (including without limitation the parties to this agreement), alleging that they have an interest in the Insured Property and/or the Earthquake Losses and/or any right to any benefit under the Policy in relation to the Claim.
3 The Insured has offered to accept the sum of $1,000,000 dollars plus GST, which Vero has agreed to pay (the Settlement Sum).
4 Release
a)The Settlement Sum is paid by Vero and accepted by the Insured in full and final settlement and discharge of the Claim and any claims, rights, demands and set-offs against Vero arising directly or indirectly out of, or in connection with the Earthquake Activity and/or the Earthquake Losses and/or the Material Damage Cover and/or the Policy whether such claims arise under statute, common law, or equity; are in existence now or may arise sometime in the future; are known or unknown; in the contemplation of the parties or otherwise. For the avoidance of doubt, this clause applies to any such claim in circumstances where the Insured and/or Vero were mistaken about the existence and/or validity of such a claim. The discharge provided for in this clause also applies to any further claim under the Material Damage Cover for damage, loss or other entitlement under the Material Damage Cover occurring subsequent to the date the Insured Property Damage occurred, whether or not that further claim has been notified to Vero.
b)The Insured agrees, on behalf of itself and on behalf of the Insured’s assigns, transferees, representatives, principals, agents, officers or trustees not to sue, commence, voluntarily aid in any way, prosecute or cause to be commenced or prosecuted against Vero or its advisers, reinsurers, agents or representatives any action, suit or other proceeding concerning or relating to the Claim, in this jurisdiction or any other.
5 The Insured, Susan Jane Sheldon, Peter Jarvis Sheldon and Maurice John Walker are responsible for any costs, expenses or liability related to the Insured Property including but not limited to the demolition of the Insured Property and the removal of debris.
6 The Insured agrees that the Material Damage Cover will terminate with immediate effect from the Date of the Agreement.
…
12 The parties agree that all discussions and communications between the parties and/or their respective representatives, agents or advisers, arising in any way howsoever from the Earthquake Activity, and the terms of both the settlement and this agreement (but not the fact that settlement has been reached nor the fact of this agreement being entered into) are confidential to the parties and their agents and advisers, except
(a)to the extent that any of the parties are required to disclose them by law;
(b)to the extent that Vero is required to disclose them in connection with reinsurance arrangements or to earthquake authorities, including but not limited to the Earthquake Commission and/or the Canterbury Earthquake Recovery Authority;
(c)for the purposes of raising the settlement as a defence to any subsequent proceedings;
(d)for the purpose of enforcing the agreement;
(e)to the extent that the parties agree otherwise in writing.
[33] The Judge’s review of judicial statements as to how contracts, and in particular release clauses in settlement agreements, are interpreted by courts was careful and comprehensive. FibreTech does not suggest the Judge made any error in referring to the approach to be taken. It argued the Judge erred in applying those principles to the facts of this case and, in particular, the settlement agreement and release clause he considered.
[34] In written submissions, counsel for FibreTech suggested the Judge had erred in referring to the payment of $1 million as a payment to “induce entry into the release clause”. Counsel submitted there was no evidence as to what the basis for the payment of $1 million had been and thus no basis for the Judge to find that $1 million had been paid as an inducement.
[35] I do not accept there was any material error in the way the Judge referred to this payment.
[36] Clause 3 referred to FibreTech offering to accept $1 million plus GST and Vero agreeing to pay that amount (the settlement sum). The very next clause, 4a, was the release clause recording that this sum was accepted by FibreTech “in full and final settlement and discharge of the [c]laim and any claims, rights, demands and set-offs against Vero”. The payment of $1 million was clearly in consideration of the release given to Vero by FibreTech.
[37]As the District Court Judge noted:16
[19] The leading case on contract interpretation in New Zealand is Firm PI Ltd v Zurich Australian Insurance Ltd. The approach to interpretation is an objective one, the aim being to ascertain:
… the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
[20] If the text, construed in the context of the contract as a whole, has an ordinary and natural meaning, that will be a powerful, albeit not conclusive, indicator of what the parties meant. The wider context may point to some interpretation other than the most obvious one, although a purposive or contextual interpretation is not dependent on there being an ambiguity in the contractual language.
[38] Under the general rule of construction, courts will be slow to infer a release clause as relinquishing a claim that a party is unaware of.17
16 Footnotes omitted.
17 Tag Pacific Ltd v The Habitat Group Ltd, above n 5; and Ali, above n 5, per Lord Bingham at [9] and [10]; per Lord Nichols at [27] and [28].
[39] As the Judge noted, the Court of Appeal has held the ultimate focus is on the words used by the parties. An intention to relinquish a claim that a party was unaware of at the time will be found if it is clearly demonstrated by the words used.18
[40] In BCCI v Ali, in the House of Lords, it was noted that parties in a compromise agreement, supported by valuable consideration, can agree to release claims or rights of which a party is unaware of, even in circumstances when they could not have been aware of such claims or rights.19
[41] In Prattley Enterprises Ltd v Vero Insurance Ltd, our Court of Appeal found there is no policy reason to resist an agreement that exchanges money for a full and final settlement of any possible claim.20 The Court acknowledged that parties can enter such agreements to achieve finality and, from the releasee’s perspective, to guard against the risk of further claims emerging that are not known at the time.21
[42] I agree with the District Court Judge that the settlement was primarily about settlement of the claim relating to the damage to FibreTech’s building caused by the 2010/2011 earthquakes.
[43] Consistent with that, in the recitals to the settlement agreement, the parties referred to the earthquake on 4 September 2010 and all subsequent earthquakes and/or aftershocks up to the date of the settlement agreement. All that activity was referred to in the settlement agreement as the earthquake activity. The parties acknowledged the earthquake activity resulted in substantial damage to the insured property (the insured property damage). The insured property damage was referred to in the agreement as the earthquake losses.
[44] A number of clauses in the settlement agreement, such as cls 1 and 2, referred expressly to the settlement being in respect of claims for earthquake losses.
18 Fibretech Holdings Ltd, above n 1, at [21], citing Tag Pacific Ltd v The Habitat Group Ltd, above n 5.
19 Ali, above n 5, per Lord Bingham at [9] and [10]; Lord Nicholls at [27] and [28].
20 Prattley Enterprises Ltd v Vero Insurance Ltd, above n 5, at [64].
21 At [63]-[64].
[45] The release clause however expressly went further than this and dealt with more than just the claims that had been made in respect of earthquake damage. FibreTech accepted the settlement sum of $1 million in full and final settlement and discharge of the claim (the claim it had made under the policy for its earthquake losses) but also of:
… any claims, rights, demands and set-offs against Vero arising directly or indirectly out of, or in connection with, the Earthquake Activity … and/or the Policy, whether such claims arise under statute, common law, or equity; are in existence now or may arise sometime in the future; are known or unknown; in the contemplation of the parties or otherwise.
[46] The policy referred to in that clause was policy HO BSP 3855005. FibreTech’s claim was for recovery of the premiums paid in respect of that policy. That was clearly a claim arising directly or indirectly out of, or in connection with, the policy.
[47]In the District Court, the Judge said:
[58] It would strain the language into the realm of nonsensicality to adopt the view that the premiums were not connected to the policy. The background does not require such a departure, in fact, it supports the notion that the parties wishes [sic] to achieve finality in respect of the policy and claims that may arise in connection with it. Unlike the decision in Finnigan, there is clearly a common thread between the subject matter of the disputes: the policy.
[48]I agree with that analysis.
[49] In Prattley Enterprises, the Court of Appeal recognised that general release clauses can be worded to achieved finality so that the risk that further claims might later emerge, is a risk that the person giving the release took upon themselves.22
[50]The Court of Appeal said that:
[64] Where such is the parties’ objectively ascertained intention, courts readily give effect to it, recognising that finality facilitates settlements. There is no policy reason to resist an agreement that exchanges money for a full and final settlement of any possible claim.
22 Prattley Enterprises Ltd v Vero Insurance New Zealand Ltd, above n 5, at [64] with reference to Lord Nichols in Ali, above n 5.
[51] I consider that, interpreted objectively, this is what the release clause was intended to achieve for these parties. Consistent with that, Vero no longer had any obligations to FibreTech in connection with the policy. The material damage cover under the policy terminated from the date of the agreement. The release clause was intended to end the relationship between FibreTech and Vero.
[52] Through written submissions, FibreTech contended the Judge had inferred that FibreTech had agreed to relinquish future claims in consideration of the payment it was receiving. It was submitted that an inference is a matter of an interpretation. An intention to release an unknown claim would not lightly be inferred and should not be inferred without some express provision to that. It was argued that, if there had been an intention to exclude a claim for premiums paid under the policy, there would have been express reference to that in the settlement agreement.
[53] I do not accept that submission. Given the apparent all-embracing nature of the release clause, it could have been expected that, if FibreTech wished to retain the right to bring a claim in respect of premiums paid, it would have required reference to this in the agreement. There was no challenge to the Judge’s observation that, although FibreTech had not known of this potential claim at the time of settlement, it could have done so. Proof of that was a document in the common bundle which showed that, as at 16 September 2014, FibreTech had obtained an estimate for the cost of repairs and reinstatement of $3,990,531.07 exclusive of GST. This would have been consistent with the building being a total loss under the policy and Vero being required to pay the full insurance amount for replacement.
[54] The wording of the release clause expressly discharged Vero from any liability for both existing and future claims, known or unknown, or in the contemplation of the parties or otherwise. The settlement agreement thus did expressly provide for the Judge to draw the inference that FibreTech had intended to relinquish all claims.
[55] In written submissions, FibreTech also contended that the reference to the policy in clause 4a was arguably a catch-all aimed at “any other claim under the policy”,23 for example a claim for which there might arguably have been cover under the policy, and not a claim that premiums had been paid in respect of the policy. FibreTech suggested this was the more natural meaning of clause 4a.
[56] I do not accept that an objective interpretation of the release clause is consistent with that submission. The express wording of the release clause was much wider than that. I accept that the release clause and its reference to claims directly or indirectly out of, or in connection with, the policy was part of a catch-all clause to ensure the relationship between Vero and FibreTech was brought to an end and Vero would face no future claim arising out of that relationship, that relationship having been determined by the insurance policy which FibreTech had contracted for with Vero over the relevant years. The release clause expressly released Vero from any potential claims relating to the policy which was significantly wider than claims “under” the policy.
[57] There was thus no error in the District Court Judge deciding that the release clause provided a complete answer to FibreTech’s claim and none of the causes of action in FibreTech’s claim could succeed so that Vero was entitled to summary judgment.
[58] That determination is sufficient to dispose of the appeal but, for completeness, I also consider Vero’s argument that, with the release clause, FibreTech had discharged Vero from any claim in respect of the premiums paid through agreeing they would not make any claim against Vero arising directly or indirectly out of, or in connection with, the earthquake losses and/or the material damage cover.
[59] FibreTech’s argument was that, with the settlement, FibreTech had suffered a total loss of the building requiring full reinstatement to the ceiling insured value so that it obtained no benefit from the continuation of the policy after the earthquake damage had been suffered. The claim to recover subsequent premiums was thus a claim arising directly or indirectly and in connection with the earthquake losses and/or
23 Emphasis added.
the material damage cover. But for that damage and the cover which FibreTech had in respect of it, FibreTech could not have argued there was no consideration in return for the contracts of insurance and the payment of premiums in the years 2011 to 2017. Had it been necessary, I would also have found that, on this ground, by reason of those words in the release clause, Vero also had a complete answer to FibreTech’s claim.
The cross-appeal/strike out
[60] As was submitted for Vero, the general principles for striking out a statement of claim are well settled:24
(a) for the purposes of the strike out application, it is assumed that the facts pleaded in the statement of claim are true;
(b) before this Court may strike out the proceedings, the causes of action must be so clearly untenable that they cannot possibly succeed;
(c) jurisdiction is exercised sparingly and only in a clear case where the Court is satisfied it has the requisite material; and
(d) the fact that an application raises difficult questions of law and requires extensive argument does not exclude jurisdiction.
[61] The District Court Judge refused to strike out the statement of claim on the basis it was arguable the release clause related only to a discharge of FibreTech’s claims or rights with regard to earthquake property damage. In his consideration as to summary judgment, the Judge however went on to find that the release clause discharged Vero from any claim arising directly or indirectly out of, or in connection with, the policy. With that determination, over which there was no error, the Judge found that the release clause did discharge Vero from any liability for the claim FibreTech had made.
[62] FibreTech acknowledged that the Judge’s conclusion in this regard was inconsistent with the Judge holding that the same clause provided a complete answer to the claim.
24 Attorney-General v Prince and Gardner [1998] 1 NZLR 262 (CA), at 267.
[63] For the reasons just discussed, the Judge could also have found that Vero was discharged from any such claim because it arose directly or indirectly out of or in connection with the earthquake losses and the material damage cover.
[64] I thus consider that, on the Judge’s own analysis, he was in error in saying it was not clear that FibreTech’s claim related to the subject matter of the settlement agreement. The settlement agreement did relate primarily to the claim for earthquake damage but it also related to the claim for premiums paid under the policy. Accordingly, the Judge could and should have found that FibreTech’s cause of action was so clearly untenable that it could not possibly succeed, and consequently struck out the proceeding.
[65] I accept that, where parties have entered into a settlement, as here, with the benefit of independent legal advice, the courts should be amenable to striking out a claim or proceedings which is clearly in breach of that settlement agreement.
[66] In Nandro Homes Ltd v Datt, Asher J held that the respondents’ claim was in breach of a settlement of earlier proceedings as recorded in a settlement agreement.25 Asher J said:
[69] It is an abuse of process to bring proceedings which will destroy a settlement reached in earlier proceedings. To use Lord Millett’s phrase, the Court will protect the integrity of the settlement. I conclude that the second proceedings damage the integrity of the settlement agreement, and are an abuse of process.
[67] Asher J’s reference to Lord Millett’s statement was as to his statement in the House of Lords in Johnson v Gorewood & Co,26 where Lord Millett was discussing abuse of process, and stated:
In one respect, however, the principle goes further than the strict doctrine of res judicata or the formulation adopted by Sir James Wigram V C, for I agree that it is capable of applying even where the first action concluded in a settlement. Here it is necessary to protect the integrity of the settlement and to prevent the defendant from being misled into believing that he was achieving a complete settlement of the matter in dispute when an unsuspected part remained outstanding.
25 Nandro Homes Ltd v Datt HC Auckland, CIV-2008-404-6676, 16 March 2009.
26 Johnson v Gorewood & Co [2001] 1 All ER 481 (emphasis added).
[68] Consistent with that, in Prattley, the Court of Appeal said, where the parties objectively ascertained intention is to achieve finality through releasing a party from any future claim, “courts readily give effect to it, recognising that finality facilitates settlements”.
[69] In this case, the way in which Vero had a complete answer to FibreTech’s claim was apparent from the terms of the settlement agreement itself without the Court having to rely on contentious evidence.
[70]In these circumstances, strike out would have been appropriate.
[71]In that sense, Vero has been successful on its cross-appeal.
[72] It is not however necessary for me to formally allow the cross-appeal and order that the proceedings in the District Court be struck out. Vero obtained similar relief in the District Court through obtaining summary judgment in that Court. Consistent with the approach taken by Asher J in Nandro Homes, it is sufficient that Vero obtained summary judgment in the proceedings.27 There is thus no need for me to allow the cross-appeal and order that the proceedings be struck out.
Result
[73]Accordingly, FibreTech’s appeal is dismissed.
[74] Vero is entitled to costs on a 2B basis. If there is no agreement over the quantum of costs, Vero is to file a memorandum as to the costs it seeks by 26 November 2021. FibreTech is to file a memorandum in reply by 10 December 2021. Vero can file a memorandum in reply by 17 December 2021. I will determine any issue as to costs on the papers.
Solicitors:
Rhodes & Co., Christchurch McElroys, Auckland.
27 Nandro Homes Ltd v Datt, above n 25, at [72]-[75].
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