Garnett v Tower Insurance Ltd - [2011] NZCA 576

IN THE COURT OF APPEAL OF NEW ZEALAND

CA4/2011
[2011] NZCA 576

BETWEEN STEPHEN WILLIAM GARNETT
Appellant

AND TOWER INSURANCE LIMITED
First Respondent

AND THREE TUIS LIMITED
Second Respondent

AND NELSON FOREST LIMITED
Third Respondent

AND NEW ZEALAND FIRE SERVICE COMMISSION
Fourth Respondent

Hearing: 26 October 2011

Court: O'Regan P, Randerson and Harrison JJ

Counsel: S J Zindel for Appellant
R B J Hern for First Respondent

Judgment: 15 November 2011 at 11.15 am

JUDGMENT OF THE COURT

AThe appellant’s application for leave to adduce further evidence is dismissed.
BThe appeal is allowed.
CThe order for summary judgment in favour of the first respondent is set aside.
D The order for costs made in the High Court is quashed. Costs are to be fixed in that Court.
EThe first respondent must pay the appellant costs equal to 50 per cent for a standard appeal on a band A basis and all usual disbursements.

REASONS OF THE COURT

(Given by Harrison J)

Introduction

At issue on this appeal is the construction of three discrete provisions of an insurance policy designed to indemnify farm owners against third party liability.
Three Tuis Ltd (TTL) owns a lifestyle farming property at Glenhope southwest of Nelson. It is a 21.6 hectare block with a 170 square metre house and some farm related improvements. Stephen Garnett, the appellant, and his partner, Tracey Lynch, own TTL. The company bought the Glenhope property in December 2002.
In early 2005 TTL constructed two tourist cabins on the Glenhope property. The income was used to meet the company’s mortgage commitments. Mr Garnett worked full time maintaining the cabins, some livestock and other property in general. Ms Lynch worked separately as a travel agent in Richmond.
Two tourists, Paul and Donna Maddock, occupied one cabin on 24 and 25 November 2009. They lit a fire and used the fireplace. Mr Garnett cleared the fire grate of debris in the morning on 26 November. Afterwards he disposed of the debris at the edge of a grassed paddock near the cabin. Later on 26 November two forestry workers observed smoke rising from that vicinity and alerted Mr Garnett. The three of them discovered that a small woodshed in the scrub was alight. The fire quickly developed and spread, causing damage to neighbouring forests owned by Nelson Forest Ltd (NFL).
NFL has issued a proceeding in the High Court at Nelson claiming judgment against TTL and Mr Garnett for $484,853 for loss caused by the fire. The New Zealand Fire Service Commission (the Commission) and the Waimea Rural Fire Committee have issued a separate proceeding claiming judgment against Mr Garnett and TTL for $602,861 for the cost of extinguishing the fire.
The two proceedings have since been consolidated. Both claims are based upon liability arising under s 43 of the Forest and Rural Fires Act 1977. Mr Garnett and TTL deny liability for each. NFL alleges additionally that TTL or Mr Garnett caused the fire by negligently depositing ash and embers on TTL’s property…

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

Case: [2011] NZCA 576
Decision Date: 15 November 2011

CaseChat Overview and Summary

The appeal in Garnett v Tower Insurance Ltd concerned the interpretation of various provisions within an insurance policy designed to protect farm owners from third-party liability. The appellant, Stephen Garnett, sought indemnity from Tower Insurance Ltd for damages incurred due to a fire on his property, which he managed as a lifestyle farming operation. The High Court had granted summary judgment in favour of Tower, but Garnett appealed this decision. The legal issues centred on the interpretation of the policy's liability protection, the statutory liability extension under the Forest and Rural Fires Act 1977, and the personal liability extension. The Court of Appeal found that the liability protection extension did not cover the fire as it was related to a tourist accommodation business, not the lifestyle farming operation. Regarding the statutory liability extension, the Court held that it provided indemnity up to $200,000 for liability under the Forest and Rural Fires Act, irrespective of the business activity. The personal liability extension was deemed inapplicable because the fire was directly related to a business activity.

The Court of Appeal allowed the appeal, set aside the summary judgment in favour of Tower, and quashed the costs order from the High Court. Tower was ordered to pay Garnett 50% of the costs for the appeal on a band A basis and all usual disbursements. The case highlights the importance of accurately defining insured activities within an insurance policy and the consequences of failing to do so.

Orders