Heale v IAG New Zealand Ltd
[2019] NZHC 2829
•1 November 2019
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2018-409-000166
[2019] NZHC 2829
BETWEEN THOMAS EDWARD FAIRFAX HEALE and ANTHEA CLARE HEALE
Plaintiffs
AND
IAG NEW ZEALAND LIMITED
Defendant
AND
QBE INSURANCE (AUSTRALIA) LIMITED
Proposed First Third Party
AND
BUILDTECH RESTORATIONS LIMITED
Proposed Second Third Party
AND
ENGINEERING DESIGN CONSULTANTS LIMITED
Proposed Third Third Party
Hearing: 24 September 2019 Appearances:
A N Riches for Plaintiffs
N S Gedye QC and B R Cuff for Defendant
D McLellan QC for Proposed First Third PartyP A Cowey and D Bell for Proposed Second Third Party J M Morrison for Proposed Third Third Party
Judgment:
1 November 2019
JUDGMENT OF ASSOCIATE JUDGE PAULSEN
This judgment was delivered by me on 1 November 2019 at 4.00 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
HEALE v IAG NEW ZEALAND LTD [2019] NZHC 2829 [1 November 2019]
Introduction
[1]This judgment concerns three applications as follows:
(a)an application by IAG New Zealand Ltd (IAG) for leave under s 9(4) of the Law Reform Act 1936 to join QBE Insurance (Australia) Ltd (QBE) as the first third party;
(b)related to (a) above, an application by QBE objecting to the admissibility of the affidavits of Craig Harvett; and
(c)an application by IAG for leave to join Buildtech Restorations Ltd (Buildtech) and Engineering Design Consultants Ltd (EDC) as the second third party and third third party respectively.
Background and the third party claims
[2] The plaintiffs’ (the Heales) home at 9 Snowdon Road, Christchurch was damaged in the September 2010 and February 2011 earthquakes. They were insured under a policy of insurance underwritten by IAG (the policy), providing that IAG would pay the cost of repairing or rebuilding their home. The Heales made a claim under the policy and elected to repair their home. IAG accepted the claim.
[3] IAG entered into a Rebuild Solution Master Agreement (RSMA) dated 13 August 2012 (as amended on 17 November 2014) with Hawkins Management Ltd and Hawkins Group Ltd (Hawkins) for Hawkins to manage the reinstatement of earthquake damage on behalf of IAG’s clients. This was known as the Canterbury Home Repair Scheme.
[4] At all material times, Hawkins held professional indemnity and general liability policies of insurance underwritten by QBE.1 Hawkins is now in liquidation.
[5] The Heales took part in the Canterbury Home Repair Scheme. They entered into a building contract with Buildtech, dated 4 December 2013, to repair their home
1 The policies were in fact issued by QBE Insurance (International) Limited, but QBE has assumed all outstanding obligations under the policies.
(the building contract). IAG was not a party to the building contract, but it paid for the repairs as they were completed.
[6] EDC was engaged by Buildtech to provide it with engineering advice in relation to a geotechnical assessment of the Heales’ property, the foundations and repairs to be carried out to the foundations and other structural elements.
[7]The repairs were completed by Buildtech in around March 2015.
The Heales’ claim against IAG
[8] In March 2018, the Heales commenced this action against IAG. They plead four causes of action, alleging breach of the policy, breach of the Fair Trading Act 1986, negligence and loss of a chance.2
[9] There is much factual overlap between the causes of action. In this context, it is more useful to focus on the Heales’ complaints. These can be summarised as:
(a)they were not advised (or were negligently advised) of the appropriate options available to them under the policy;
(b)IAG recommended Buildtech to do the repairs, but Buildtech was not competent or properly resourced to do so;
(c)the repair process was not managed properly;
(d)there were serious delays in completing the repairs which were expected to be completed in 20 weeks, but took over a year;
(e)the scope of works was deficient, and the Heales were misled by it;
(f)the defective scope of works meant that the Heales had to pay large costs for works outside the insurance budget;
2 The loss of a chance claim is pleaded as a cause of action but is in reality a separately pleaded head of damage.
(g)because of the delays, the policy entitlements for alternative accommodation and landscaping were inadequate; and
(h)the financial pressure consequent upon the delays, and from being forced to incur costs that should have been covered under the policy, meant the Heales had no option but to sell their home at an under-value without testing the market.
[10] In respect of all causes of action, the Heales seek damages in a sum to be quantified at trial, but plead that they have suffered losses of:
(a)accommodation costs of $16,042;
(b)building costs paid above their insurance budget of $116,929; and
(c)loss on the sale of their home of $500,000.
IAG’s claims against the proposed third parties
[11] IAG’s application to join third parties is founded on an assertion that the Heales’ complaints all involve acts or omissions of Hawkins, Buildtech and EDC, who had the direct physical responsibility for, and involvement in, the repair of the Heales’ home. This is because:
(a)Hawkins’s project management role was acknowledged in the building contract and comprehensively set out in the terms of the RSMA. It had responsibility in relation to the Heales’ allegations concerning builder recommendation, the scope of works, ensuring the implementation and completion of the repairs and certifying payments.
(b)Buildtech contracted directly with the Heales to do the repairs and was primarily responsible for any delays and was, allegedly, generally incompetent.
(c)EDC undertook a geotechnical assessment of the property and a technical assessment of the extent of the structural damage and reviewed the remediation works proposed by Buildtech, including to the foundations.
The Heales allege deficiencies in the foundation requirements. Buildtech identifies a need to vary the foundation repair as one of two causes of delays in the completion of the repairs.
[12] In its draft statement of claim against the proposed third parties, IAG makes claims directly against each of them and, by means of causes of action seeking declarations, it is also concerned with the liability of the proposed third parties to the Heales. Mr Gedye submitted that by determining the “nature and extent and causal potency” of liabilities of Hawkins, Buildtech and EDC to the Heales, the Court may make an appropriate apportionment of liability between them and IAG. In addition, and assuming IAG is found liable to the Heales under the policy, the declarations would allow IAG to enforce its rights of subrogation, without further determinations of the Court.
[13] As noted earlier, Hawkins in is liquidation. The first three of IAG’s causes of action against QBE seek to enforce a charge over all insurance moneys that are or may become payable in respect of Hawkins’s liability to IAG under s 9 of the Law Reform Act 1936. The first two of these causes of action rely on the terms of the RSMA, which, it is alleged, create indemnity obligations on behalf of Hawkins in respect of any liability that IAG may be found to have to the Heales. The third cause of action claims contribution for any sums IAG is found to owe the Heales as a co-tortfeasor under s 17(1)(c) of the Law Reform Act 1936 or as equitable contribution, in reliance upon the principles in Hotchin v New Zealand Guardian Trust Company Ltd.3 IAG’s fourth and fifth causes of action against QBE seek declarations that, should the Heales prove their claims against IAG, Hawkins will similarly be liable to them for breaches of a duty of care or the Consumer Guarantees Act 1993, and that QBE must indemnify them for such loss as they have suffered.
[14] Against Buildtech and EDC, IAG pleads the same two contribution pathways. IAG also seeks declarations against Buildtech that it is directly liable to the Heales in contract, in negligence and under the Consumer Guarantees Act 1993. Against EDC,
3 Hotchin v New Zealand Guardian Trust Company Ltd [2016] NZSC 24, [2016] 1 NZLR 906.
IAG seeks declarations that it is liable to the Heales in negligence and under the Consumer Guarantees Act 1993.
Legal principles
[15]Rule 4.4 of the High Court Rules 2016 provides:
4.4 Third parties
(1)A defendant may issue a third party notice if the defendant claims any or all of the following:
(a) that the defendant is entitled to a contribution or an indemnity from a person who is not a party to the proceeding (a third party):
(b) that the defendant is entitled to relief or a remedy relating to, or connected with, the subject matter of the proceeding from a third party and the relief or remedy is substantially the same as that claimed by the plaintiff against the defendant:
(c) that a question or issue in the proceeding ought to be determined not only between the plaintiff and the defendant but also between
–
(i)the plaintiff, the defendant, and the third party; or
(ii)the defendant and the third party; or
(iii)the plaintiff and the third party:
(d) that there is a question or an issue between the defendant and the third party relating to, or connected with, the subject matter of the proceeding that is substantially the same as a question or an issue arising between the plaintiff and the defendant.
(2)A third party notice must be issued within –
(a) 10 working days after the expiry of the time for filing the
defendant’s statement of defence; or
(b) a longer time given by leave of the court.
(3)A third party notice may be issued only with the leave of the court if an application for judgment is pending under rule 12.2 or 12.3.
[16]Rule 4.8 provides:
4.8 Court’s power and discretion
(1)On an application seeking leave to issue a third, fourth, or subsequent party notice, the court must have regard to all relevant circumstances, including delay to the plaintiff.
(2)On the making of an application of that kind, the court may grant or refuse leave or grant leave on just terms.
[17] Mr Gedye submitted that underlying applications to join third parties is the important principle that all persons potentially responsible for a loss should be parties and present in the same action and at the same trial. The one-action, one-trial principle is supported, he said, by two main considerations: practicalities and justice. The first consideration is important, but the latter is the overarching consideration. It is unjust, he argued, that one party should face a claim, and potentially have judgment entered, for all of the loss which other parties have caused or contributed to, and it would be unjust, also, that the parties responsible for a plaintiff’s loss should escape responsibility, or that their liability should be determined a long time later and in a different proceeding and/or trial.
[18] I accept Mr Gedye’s submissions, which are consistent with the functions of third party proceedings identified by Associate Judge Osborne in TSB Bank Ltd v Burgess, as follows:4
(a)to safeguard against differing results, and to ensure that the third party is bound by the decision between the plaintiff and the defendant;
(b)to ensure the question between the defendant and the third party is decided as soon as possible after the decision between the plaintiff and the defendant; and
(c)to save the expense of two trials.
4 TSB Bank Ltd v Burgess [2013] NZHC 1228 at [36], citing Barclays Bank Ltd v Tom [1923] 1 KB 221 (CA) at 224.
[19] In TSB Bank, with reference to third party proceedings, Associate Judge Osborne noted the following relevant principles:5
(h)The justification of a third party notice under any one of the heads of r 4.4(1), such as there being a common issue or question, is closely related to the desirability of comprehensively dealing with Mammoet Shipping B V v Compter but such considerations may have to yield to others including the weighing of the convenience to the parties, including in relation to matters such as unreasonable delay.
….
(j)The weighing of the convenience to the parties will involve considerations such as whether the third party will, if the third party notice is sustained, be idly involved in a trial involving issues as between the plaintiff and defendant, and vice versa.
(k)The weighing of the convenience to the parties will include considerations of any delay to the plaintiff – this is an express consideration arising under r 4.8(1) when the Court is considering an application for leave to issue a third party notice. The context of the consideration of delay was explained by Smellie J in Nissan Datsun Holdings Ltd v R Savory Ltd:
It [the determination of whether to grant leave to issue a third party notice] is a question of weighing the respective interest of the parties and in this case comparing the prejudice of delay and possible escalation of issues to be argued so far as the Plaintiff is concerned against the danger faced by the Defendant of having to conduct two trials with possible inconsistent results.
(l)The Court should be forward-looking when considering delay to the plaintiff. What matters is the prospect of future delay.
(m)When all the circumstances of a proposed third party joinder have been taken into account, the overriding consideration is the interests of justice. In KPMG Peat Marwick v Cory-Wright & Salmon Ltd (in Rec) the Court of Appeal said:
The interests of justice between all parties must be paramount
… if there is delay it will be regrettable … but the attainment of justice by the most efficient means has to be the overriding consideration.
[20] This final point was made also in Turpin v Direct Transport Ltd when Cooke J observed:6
5 At [38] (footnotes omitted). Whilst Associate Judge Osborne was concerned with applications to set aside third party notices under r 4.16, the principles are applicable in the present context also.
6 Turpin v Direct Transport Ltd [1975] 2 NZLR 172 (SC).
Ultimately the determining considerations seems [sic] to be to me the requirements of justice to all parties and a reasonably speedy and convenient resolution of all issues.
Applications to join Buildtech and EDC as third parties
[21] It is convenient to deal first with IAG’s application to join Buildtech and EDC as third parties. The application to join QBE raises discrete considerations.
[22] As IAG did not issue third party notices to Buildtech and EDC within 10 working days after the expiry of time for filing its statement of defence, it must now seek leave of the Court to do so.7
[23] Based on the principles noted above, the issues that arise in relation to these applications are as follows:
(a)Are IAG’s claims covered by one of the four grounds set out in r 4.4(1)
of the High Court Rules 2016?
(b)Should the Court exercise its discretion to join Buildtech and/or EDC having regard to all relevant circumstances, including delay to the Heales?
Does r 4.4(1) apply?
[24] It was not seriously contended that jurisdiction under r 4.4(1) to join Buildtech and EDC as third parties was not established. The real dispute is whether the Court should do so having regard to discretionary factors. Nevertheless, I address the jurisdiction question.
[25] A defendant may issue a third party notice where any one of the four grounds set out in r 4.4(1) applies. Mr Gedye’s submissions focused on r 4.4(1)(a); that IAG is entitled to a contribution or an indemnity from Buildtech and EDC. Rule 4.4(1)(a) is clearly engaged. In my view rr. 4.4(1)(c) and (d) apply also, as there is a great deal
7 High Court Rules 2016, R 4.4(2).
of overlap of both facts and issues between the Heales’ claims and IAG’s third party claims.
[26] The Heales have sued IAG under the policy, under the Fair Trading Act 1986 and as a tortfeasor (for negligence). IAG pleads that both Buildtech and EDC owed and breached a duty of care to the Heales to exercise reasonable care and skill in the performance of the repair work and that it is entitled to claim contribution from them as co-tortfeasors under s 17(1)(c) of the Law Reform Act 1936. I am satisfied that such a claim is clearly arguable on the facts and the law.
[27] In addition, IAG claims contribution in equity in accordance with the principles enunciated in Hotchin.8 In this regard, it is not necessary that contributors be liable to a plaintiff in tort. Persons sued in contract or under statute, as IAG is in this case, can claim contribution from others who are responsible for the same damage regardless of the source of their obligation.9 The essence of the right lies in the liability to a common demand. Elias CJ stated in Hotchin:
[152] … Contribution is an equitable principle which expresses natural justice in its recognition that it is unjust for the burden of meeting a loss for which others share responsibility to be borne by one party, to the benefit of those who escape liability. The obligations need not be identical in their source or extent. Nor is it necessary that they have the same legal character. It is enough that the responsibility for the harm is shared. This is an inquiry that is practical and directed at the substance of the matter in the particular case. Although the basis on which contribution is made has often been elaborated in “particular pockets of doctrine” (such as in respect of co-insurance, co-sureties, and trustees), as Kirby J noted in Burke v LFOT Pty Ltd, the cases rest on more general principles of justice.
[153] I consider that the statutory requirement of liability for the “same damage” adopted in s 17(1)(c) of the Law Reform Act, reflects the principles of the common law of contribution, from which it was derived. “Coordinate liability” in this context is liability for the same harm. It is sufficient for contribution if parties are liable to another person in respect of the same damage. On that view, the reform achieved by s 17(1)(c) and its predecessors was simply to remove the impediment formerly presented by Merryweather v Nixan, leaving the principles on which contribution is based equally applicable whether contribution falls within s 17(1)(c) or the common law.
8 Hotchin v New Zealand Guardian Trust Company Ltd, above n 3 (footnotes omitted).
9 Goff and Jones The Law of Restitution (7th ed, 2007) at 385.
[28] The same damage requirement is met in this case. The Heales claim to have suffered damage represented by accommodation costs, building costs and loss of value on sale of their home. These are the same forms of damage IAG claims that Buildtech and EDC are liable for.
Discretionary considerations
Buildtech
[29] It was argued that the Heales’ claims against IAG are primarily for breaches of the policy and for misrepresentation of the repair timeframes. These claims, it was submitted, do not involve Buildtech. For this reason, it was argued, Buildtech will not be involved in most of the factual and legal matters in issue.
[30] The Heales’ election to frame IAG as solely responsible for their complaints was not accepted by IAG and is unrealistic. It ignores, and seeks to evade, the building contract (which was with Buildtech), the Heales’ pleadings (making many allegations against Buildtech), and email correspondence between Mr Heale, Buildtech and IAG (to which I shall refer in the context of the application to join QBE). The trial of the Heales’ claims will necessarily involve a detailed analysis of Buildtech’s acts and omissions in undertaking the repairs on the Heales’ home.
[31] To illustrate the point, paragraphs 16, 18, 19, 20, 21 31, 35 and 39 of the statement of claim contain allegations against or concerning Buildtech. At paragraph 21, the Heales plead that IAG and Buildtech breached the building contract (despite IAG not being a party to it) and provide 21 subparagraphs of particulars of the breach. Many of those relate to Buildtech and include allegations of delay, incompetence, lack of communication, demands for unexpected payments, and oppressive behaviour. These allegations against Buildtech were supplemented by the Heales’ responses to a request by IAG for further particulars. IAG’s statement of defence puts all contentions regarding Buildtech in issue.
[32] At trial, the building contract between Buildtech and the Heales will necessarily come under close-scrutiny. Buildtech’s documents and its interactions with the Heales, Hawkins, IAG and EDC are all inseparably linked with the Heales’
claim against IAG. It is to be expected that Buildtech will be substantially involved in the proceeding, whether it is joined as a third party or not, as discovery of its documents will be required and its personnel will likely be required as witnesses.
[33] The Heales and Buildtech relied upon Self-Realization Meditation and Healing Centre Charitable Trust (New Zealand) v IAG New Zealand Ltd, which involved successful applications to strike out third party notices against builders. 10 One of the reasons for that was the risk that the third parties would sit idly while the plaintiff’s claim against the defendant took up the preponderance of preparation and trial time. Self-Realization does not represent, as I understood was suggested, a change of approach to third party joinder in the post-earthquake environment. Cases where joinder applications are refused due to discretionary considerations inevitably turn on their own facts. The facts of the present case are quite different from those in Self- Realization where the third party builders had very little involvement in the work that was the subject of the claim and very few of the allegations made involved them.11 That is not the case with Buildtech.
[34] Buildtech argued that IAG carried an onus to provide a reason for a 13-month delay in making this application and the inference should be drawn that this application represents a change in its litigation strategy. Delay is not a matter that Buildtech can rely on for two reasons. First, it has not been involved in the proceeding to date and has not been affected by the delay. Second, there is a reasonable explanation for the delay. A perusal of the court file reveals that progress of this claim was been slowed by Mr Heale’s ill-health, the Heales’ change of counsel and because until late March 2019 it appeared that the Heales might consent to the joinder of third parties.12 When it was clear the Heales would not consent, IAG moved promptly to join additional parties in accordance with a direction of the Court of 25 March 2019.
[35] The Heales argued that the joinder of third parties would cause future delay because of the need for the third parties to provide discovery and undertake inspection
10 Self-Realization Meditation and Healing Centre Charitable Trust (New Zealand) v IAG New Zealand Ltd [2018] NZHC 2077 (2018 decision); Self-Realization Meditation and Healing Centre Charitable Trust (New Zealand) v IAG New Zealand Ltd [2019] NZHC 763 (2019 decision).
11 2018 decision, above n 10, at [65]-[66].
12 I understand the Heales originally did not oppose the joinder of QBE but have now changed their position.
and that the trial would be extended from three to 10 days. In reliance upon TSB Bank Ltd v Burgess, it was argued that the joinder of additional parties creates a greater risk of appeals.13 These submissions do not have significant weight in this case. The concerns about discovery and inspection can be assuaged through appropriate case management. The case is still at a relatively early stage, no trial date has been allocated and there will be sufficient time for interlocutory steps to be completed by third parties without delaying the trial. The estimation of the duration of the trial of just three days is unrealistic when one considers the issues that IAG intends to raise in defence. In so far as the duration of the trial is extended, this can be compensated in costs. I also do not accept that the joinder of additional parties increases the risk of an appeal. It could be convincingly argued that additional parties increase the likelihood of settlement by bringing all potentially liable parties to the negotiating table.
[36] It was argued that joining third parties will result in an escalation of the issues from those presently pleaded by the Heales. I accept this is so, notably in relation to IAG’s claims against QBE, but its significance should not be overstated. This is because the submission wrongly characterised the Heales’ claim as being based primarily upon the policy and thereby failed to recognise Buildtech’s role (and potentially, liability for) the matters the Heales complain about. The following issues that Buildtech identified as issue escalations are in fact matters that will necessarily be the subject of the hearing between the Heales and IAG:
(a)the interpretation of the building contract;
(b)whether Buildtech acted negligently;
(c)what contractual obligations Hawkins, as project manager, owed to the Heales, and whether those were breached;
(d)whether Hawkins acted negligently; and
(e)whether EDC acted negligently.
13 TSB Bank Limited v Burgess, above n 4, at [70].
[37] In reliance upon Self-Realization, it was submitted that uncertainty as to IAG’s entitlement to declaratory relief is a factor the Court should consider in exercising its discretion to disallow joinder. The strength of IAG’s case against the proposed third parties is a relevant factor to be considered but IAG does not seek only declaratory relief.
[38] It was submitted that there is no risk of inconsistent findings if the proposed third parties are not joined. I do not accept that submission. The Heales’ case is not specific in nature or confined to enforcing their rights under the policy. It involves a range of legal and factual issues involving not only IAG but Hawkins, Buildtech and EDC. To take an example, at trial it will be in issue whether and to what extent IAG is responsible for acts and omissions of Buildtech and whether those acts and omissions were causative of the Heales’ claimed losses. If Buildtech is not joined as a party, it will not be bound by the findings of the Court and there is a clear risk of differing results in any later proceedings between it and IAG.
[39] It was submitted it is significant that the Heales have chosen to proceed against only IAG and that if third parties are joined the Heales and the proposed third parties will be unfairly pressured to settle. In Self-Realization, Nation J noted:14
The well-recognised risks, costs and burdens of litigation are often a major inducement to settle proceedings such as these. Joining Onward as a third party would create a risk that, through the costs and burden of being a party to the proceedings, Onward could be unfairly pressured to contribute to a settlement of a dispute which, in essence, is between Self-Realization and IAG, and now between IAG and QBE. The potential for the joinder of a third party to cause unfair pressure to be put on a party to resolve its part in proceedings in a way that might be unjust was a factor which McGechan J took into account in declining leave to allow a third party in Mammoet.
[40] Mr Gedye argued that IAG must be entitled to assert and adduce evidence on the true substantive issues and causes of alleged harm, regardless of any “artful framing” of their case by the Heales. He also argued against the adoption of a principle that joinder may be refused where the third party may be unfairly pressured to settle, which he said is dubious and not supported by the leading authorities. There is support for such a principle in Mammoet Shipping BV v Compter, to which Nation J referred,
14 2019 decision, above n 10, at [109] (footnotes omitted).
but I accept that was a very different case from the present. 15 The concern there was that if the Watersiders Workers’ Union was joined as a third party, the plaintiff, who was part of a major shipping line, could be subject to industrial pressure and forced to give up its claim.
[41] What Nation J was concerned with in Self-Realization was the prospect of the builders being pressured to settle rather than bear the costs and burden of litigation which to a large extent did not concern them. He emphasised this at [109] when he said the dispute, “in essence, is between Self-Realization and IAG, and now between IAG and QBE.” In this case, the acts and omissions of Buildtech will be the focus of a great deal of the hearing. I have no reason to believe that if Buildtech (or EDC for that matter) is joined, any party will be unfairly pressured to settle other than on the merits.
[42] It was argued that IAG may bring its claims against Buildtech in other proceedings. That would be inefficient, run the risk of inconsistent decisions and would not bind Buildtech to findings made in this proceeding. These are all results that the third party procedure is intended to avoid.
EDC
[43] In admirably focused submissions, Mr Morrison argued that r 4.4 was an enabling procedure of convenience. The Heales’ claims were founded upon the policy, he said, and IAG’s third party claim against EDC was not identical with the Heales’ claim against IAG nor so closely related as to require EDC to be a party to it. The argument that EDC owed the Heales a duty of care in respect of delay could not stand in the absence of a stipulation of time for performance in the contractual arrangements between Buildtech and EDC. EDC had very little involvement with the matters in issue and such involvement as it did have could not be construed as causative of any loss claimed by the Heales. EDC should not therefore be put to the cost and inconvenience of being joined as a third party.
15 Mammoet Shipping BV v Compter HC Whangarei CP13/86, 6 July 1987.
[44] It is the case that EDC had less involvement in the repair work than either Hawkins or Buildtech. EDC has filed an affidavit of Mr Learman as to EDC’s limited involvement and denies that EDC approved the foundation works or a re-level design and says it did not cause or contribute to delays. However, Mr Learman had only peripheral involvement with the work and his evidence is disputed and not easy to reconcile with the facts that EDC undoubtedly provided geotechnical and structural engineering reports to Buildtech in September and October 2013 and advice in respect of the repair strategy and foundation works proposed by Buildtech. Mr Morrison responsibly accepted that there are factual disputes, including as to EDC’s contractual arrangement with Buildtech, which cannot be determined on this application.
[45] In my view, IAG has laid an adequate evidential foundation to show that EDC did contribute in a more than peripheral way to delays in the repairs and the extent to which it caused delays will form a not insignificant part of the trial evidence and the Court’s findings.
Conclusion
[46] There are significant benefits to IAG, but also to the Heales, Buildtech and EDC, and in respect of the efficient use of the Court’s resources, in making orders joining Buildtech and EDC as third parties. To refuse the application would mean:
(a)the loss of opportunity to have all issues as between all the parties resolved in one trial;
(b)the consequential possibility that inconsistent decisions occur;
(c)the reality that separate proceedings will result in a duplication of costs;
(d)the avoidance of confusion, prejudice or oppression for individual parties; and
(e)a higher prospect of a final resolution by alternative dispute resolution should all relevant parties be involved.
[47] I accept that joining third parties may result in some delays and escalation of the issues to be determined at trial. However, in circumstances where the attainment of justice by the most efficient means is the overriding consideration, I am satisfied Buildtech and EDC should be joined as third parties.
Application for leave to join QBE as a third party
[48] At material times, Hawkins held professional indemnity and general liability policies of insurance with QBE. Hawkins is in liquidation and cannot meet its liabilities. IAG claims that it has a charge on the insurance monies that are or may become payable in respect of Hawkins’s liability to IAG under s 9(1) of the Law Reform Act 1936. IAG requires leave to join QBE as a third party.
[49]Relevantly, ss 9(1) and (4) of the Law Reform Act 1936 provide:
(1) If any person (hereinafter in this Part referred to as the insured) has, whether before or after the passing of this Act, entered into a contract of insurance by which he is indemnified against liability to pay any damages or compensation, the amount of his liability shall, on the happening of the event giving rise to the claim for damages or compensation, and notwithstanding that the amount of such liability may not then have been determined, be a charge on all insurance moneys that are or may become payable in respect of that liability.
…
(4)Every such charge as aforesaid shall be enforceable by way of an action against the insurer in the same way and in the same court as if the action were an action to recover damages or compensation from the insured; and in respect of any such action and of the judgment given therein the parties shall, to the extent of the charge, have the same rights and liabilities, and the court shall have the same powers, as if the action were against the insured:
provided that, except where the provisions of subsection (2) apply, no such action shall be commenced in any court except with the leave of that court.
[50] For present purposes, the relevant insurance policy between QBE and Hawkins is professional indemnity policy number 800039638PLI. It is a claims-made-and- notified policy. The insuring clause reads as follows:
The Insurer agrees to indemnify the Insured for any sum or sums which the Insured may become legally liable to pay to third parties arising from any Claim first made against the Insured during the Period of Insurance and notified to the Insurer during the same period, arising out of any act, error or
omission in connection with the Professional Activities and Duties of the Insured.
[51]A “Claim” is defined under the policy as follows:
“Claim” shall mean:
(a)the receipt by the Insured of any written notice or demand for compensation made against the Insured; or
(b)any writ, statement of claim, summons, application or other originating legal or arbitral process, cross-claim, counterclaim or third or similar party notice served upon the Insured; or
(c)any circumstances of which the Insured shall become aware during the Period of Insurance which may give rise to a claim under (a) or (b) above against the Insured.
[52] In the event of any Claim, Hawkins’s duties under the policy were to give notice to QBE as soon as practicable during the Period of Insurance and within 28 days of the end of the Period of Insurance of any Claim under the Insuring Clause, notify circumstances which might give rise to a Claim under the Insuring Clause during the Period of Insurance and not to admit any liability or settle or make or promise any payment in respect of any Claim which may be the subject of an indemnity under the policy without QBE’s written consent.
[53] It is common ground that Hawkins did not notify QBE of any circumstance that might give rise to a Claim under the policy during the Period of Insurance (or within 28 days of the end of the Period of Insurance) in respect of the repair work at 9 Snowdon Road. For present purposes this is not material. The effect of s 9 of the Insurance Law Reform Act 1977 is that an insurer can only decline cover on the basis of an insured breaching a policy condition requiring the insurer to be notified of a claim in a particular manner or within a particular time, if the insurer has not been so prejudiced by the insured’s failure that it would be inequitable if the provision did not bind the insured.16 QBE did not raise the question of prejudice in response to this application.
[54] It is agreed that to obtain leave under s 9(4), a claimant must satisfy the following three criteria:
16 Sinclair Horder O’Malley v National Insurance Company of New Zealand Ltd [1992] 2 NZLR 706 (HC) at 714.
(a)there is a prima facie claim against the insured;
(b)the insured has a prima facie claim under the policy of insurance; and
(c)the insured is not a perfectly good common law defendant.
[55] QBE accepted that criteria (a) and (c) are met in this case. Only criterion (b) is in issue.
[56] The relationship between IAG and Hawkins at the relevant times was founded on the RSMA. QBE accepted that Hawkins’s performance of its functions under the RSMA falls within the policy’s definition of Professional Activities and Duties of the Insured.
[57] At trial there will be differences between IAG and QBE as to the scope of Hawkins’s responsibility under the RSMA. I understand that it is accepted that it is not appropriate, nor necessary, to review the nature and extent of Hawkins’s role under the RSMA in any detail because a proper analysis can only be undertaken at trial within the relevant factual matrix. Mr McLellan submitted that IAG’s application should proceed on the assumption that IAG’s pleadings are accepted.
[58] Against this background, the key issue is whether, during the relevant Periods of Insurance, Hawkins became aware of circumstances in relation to 9 Snowdon Road which may have given rise to a Claim against it.
[59] Before turning to consider that issue, it is necessary to deal with an objection by QBE to the affidavits of Craig Harvett filed on behalf of IAG in support of its application.
Affidavits of Craig Harvett
[60] Mr Harvett has experience and qualifications in project management in the construction sector. He made a substantive affidavit dated 23 August 2019, which was updated on 16 September 2019. He was asked by IAG to provide expert opinion on issues surrounding the project at 9 Snowdon Road and specifically:
(a)What responsibilities did Hawkins have in its capacity as project manager for the repair work?
(b)What parts of the Heales’ complaints contained in their statement of
claim relate to areas which Hawkins was responsible for?
(c)What would Mr Harvett’s response have been to emails that were sent by Mr Heale with complaints during the repair project (to which I will soon refer in more detail)?
[61] QBE argued that Mr Harvett’s affidavits should be ruled inadmissible because the Court is unlikely to obtain any substantial help from his evidence in understanding the other evidence or in ascertaining any fact that is of consequence to the determination of the proceeding.
[62] IAG argued that Mr Harvett’s affidavits are admissible as a relatively high- level summary of Hawkins’s role and responsibilities in the repair process and useful also to give the Court an understanding whether a reasonable project manager in Hawkins’s position would have been aware of circumstances that might give rise to a claim. To the extent that there might be criticisms of Mr Harvett’s evidence, it was submitted that these go to weight rather than admissibility.
[63] On the view I have taken, the admissibility of Mr Harvett’s affidavits makes no difference to the outcome of this application and therefore I shall state my views on QBE’s objection briefly.
[64]The starting point is s 25 of the Evidence Act 2006 which states:
(1)An opinion by an expert that is part of expert evidence offered in a proceeding is admissible if the fact-finder is likely to obtain substantial help from the opinion in understanding other evidence in the proceeding or in ascertaining any fact that is of consequence to the determination of the proceeding.
(2)An opinion by an expert is not inadmissible simply because it is about
–
(a) an ultimate issue to be determined in a proceeding; or
(b) a matter of common knowledge.
…
[65] Mr McLellan also relied on r 9.43 of the High Court Rules 2016 and the Code of Conduct for Expert Witnesses in sch 4. The requirements of the Code include that:
(a)an expert has an overriding duty to assist the court impartially on relevant
matters within the expert’s area of expertise;
(b)an expert is not an advocate for the party who engages the witness;
(c)in any evidence given by an expert witness, the expert witness must:
(i) state the issues the evidence of the expert witness addresses and
that the evidence is within the expert’s area of expertise;
(ii) state the facts and assumptions on which the opinions of the expert witness are based; and
(iii) state the reasons for the opinions given by the expert witness.
[66] In providing his opinion, Mr Harvett reviewed several documents, all of which are before the Court. Ultimately, at trial these documents will be subject to detailed analysis to determine exactly what obligations Hawkins owed to the Heales and IAG. On this application, the Court is well-equipped to analyse those documents for itself (without the benefit of expert opinion) bearing in mind also that it is accepted by QBE the Court should proceed on the assumption that IAG’s pleadings are accepted.
[67] In so far as Mr Harvett expresses a view as to how he would have responded to Mr Heale’s emails, that evidence is clearly unhelpful in circumstances where (as I shall come to) the test to be applied is what a reasonable person standing in Hawkins’s shoes would have understood from them. In addition to that, what is particularly troubling about Mr Harvett’s affidavits are his strong and prejudicial factual conclusions combined with pejorative language that indicates a lack of independence. Mr McLellan submitted, and I accept, that expressions in Mr Harvett’s affidavit are illustrative of an extravagant and, against the limited information he has reviewed, partial attitude to his role. I do not find Mr Harvett’s affidavits helpful and do not have regard to them in reaching my conclusions on this application.
Circumstances and emails
[68] Both parties agree that the relevant test of what amounts to a notifiable circumstance is as set out in Attorney-General v AON New Zealand Ltd where, following a review of the authorities, Mallon J said:17
… the test is an objective one, requiring notice when a reasonable person in the insured’s position would consider that there was a reasonable possibility of a claim. Notice is not required if the possibility of a claim is remote or unlikely. However, providing there is a real or definite risk of a claim, notice is required even if the claim is not probable.
[69] In J Rothschild Assurance plc & Ors v Collyear & Ors, Rix J noted the dual purposes of provisions that either require or permit the insured to notify its insurer of circumstances that may give rise to a claim.18 First, these provisions are essential to the operation of a claims-made policy because otherwise, by the time a claim came to be made, it is quite likely that it would have become impossible to obtain cover, either at all or on any but prohibitive terms. Second, these provisions enable underwriters to adopt or require such immediate steps as they think appropriate to minimise or avoid any potential loss. Rix J considered that the test for materiality for notice is a weak one – “which may give rise to a claim”, not “which is likely to give rise to a claim.”
[70] In Ministry of Education v McKee Fehl Constructors Ltd, the Minister of Education sued a range of parties when a school developed water leaks.19 The parties included RDT, which was the project manager of the school construction. One of the allegations was that the roofing membrane used in the construction was different from that specified in the plans. RDT wanted to argue that the architect for the project owed it a duty of care to ensure that it did not use the wrong roofing membrane. By the time of the litigation, the architect no longer existed and RDT wished to pursue its insurers under s 9(4) of the Law Reform Act 1936. The insurers resisted the application by arguing that the architect did not know of any circumstances during the policy period that it should have notified.
17 Attorney-General v AON New Zealand Ltd HC Wellington CIV-2005-485-1814, 10 April 2008 at [66]. The test has been applied in Minister of Education v McKee Fehl Constructors Ltd [2018] NZHC 1177, [2018] NZAR 970 at [42] and Barnes v QBE Insurance (International) Ltd HC Auckland CIV-2010-404-5651, 4 April 2011.
18 J Rothschild Assurance plc v Collyear [1998] All ER (D) 431, [1999] Lloyd’s Rep IR 6.
19 Minister of Education v McKee Fehl Constructors Ltd, above n 17.
[71] Thomas J undertook an analysis of the authorities and of the evidence and found that during the currency of the relevant insurance policy the architect had effective notice that the school had developed a weathertightness issue, that the project manager had asked the architect whether it had approved a change of roofing membrane and that the Ministry of Education was considering legal action. She was satisfied, given this information, that a reasonable person in the architect’s position would have considered that a claim was a definite risk or real possibility, as opposed to a remote possibility. She stated:20
[The architect’s] knowledge of potential liability was considerably more than general knowledge of a product defect or class action in respect of a defective product. The information before [the architect] was project and contract- specific, having the effect of identifying a breach of its contractual obligations. The prospect of a claim clearly sprang to Mr Watson’s mind, leading him to enquire about legal action.
[72] Most recently in Euro Pools plc v Royal v Royal & Sun Alliance Insurance plc, the Court of Appeal in England considered the principles relevant to determining whether there had been a notification of circumstances for the purposes of an insurance policy.21 Euro Pools claimed to be entitled to indemnities under policies of professional indemnity insurance that had been in operation between 2006 and 2008 in respect of swimming pools it had installed for third parties. The issue that arose was whether expenses incurred in installing a new hydraulic system to power movable booms at several pools were incurred to mitigate potential claims arising from circumstances notified by Euro Pools during the first 2006/2007 policy of insurance or whether they arose from circumstances notified under the second policy of insurance. This was relevant because different limits of indemnity applied.
[73]In her judgment, Dame Gloster noted “a provision which refers to
circumstances that ‘may” give rise to claims’ sets a deliberately undemanding test.”22
20 At [57].
21 Euro Pools plc v Royal & Sun Alliance Insurance plc [2019] EWCA Civ 808, [2019] All ER (D) 85.
22 At [39].
[74]Males LJ observed:23
“Circumstances” is a broad term. Sometimes the insured will be able to specify with a high degree of precision what it is that gives rise to the possibility of a Claim. On other occasions, however, it may be able to do little more than to point to the fact that something is not working for a reason which has yet to be ascertained – sometimes referred to as a “can of worms” or “hornet’s nest” notification. Provided that this is something which might reasonably be expected to produce a Claim by a customer for which the insurer may (not necessarily will, but may) be liable under the policy, there is no reason in principle why a notification should not be in these terms.
[75] In the case of HLB Kidsons (a firm) v Lloyds Underwriters, the general approach to an analysis of a notification clause was set out by Toulson LJ.24 Notably, at [134] he said:
There are two parts to that phrase: the awareness of a circumstance, which is a pure matter of fact, and the characterisation of the circumstance as one which may give rise to a claim against the insured.
[76]To similar effect, in Minister of Education v McKee Fehl Constructors Ltd,
Thomas J considered that the two questions that the Court needed to consider were:25
(a)what was the Insured’s position; and
(b)would a reasonable person in that position consider there was a reasonable possibility of a claim?
[77] Against that background, it is now convenient to turn to emails sent by Mr Heale to Buildtech, IAG and Hawkins which IAG says put Hawkins on notice that there was a real and definite risk of a claim being made against it arising out of the repair project at 9 Snowdon Road.
[78] The emails begin with a chain between Mr Alvin Wade, project manager of Buildtech, and Mr Heale between 6 March 2014 and 10 March 2014. A Mr McCallum, of Hawkins, was blind-copied into this email chain by Mr Heale. The building contract had been signed but work had not begun. Mr Heale was unhappy with Buildtech. In his 10 March 2014 email, he said that he was hurried to sign the building contract and posited he may have been “deliberately duped into signing that
23 At [94].
24 HLB Kidsons (a firm) v Lloyds Underwriters [2008] EWCA Civ 1206 at [134] – [142].
25 Minister of Education v McKee Fehl Constructors Ltd, above n 17, at [43].
contract.” He said he had suffered “detriment and loss” and that there was no way that Buildtech could finish the work on time. He disbelieved Buildtech’s assertion that it had been waiting on an asbestos report before it could commence work. Mr Heale said that he would provide an “accurate costing” of the amount per week that he would seek to recover from Buildtech for delay, to be assessed at the end of the project. He complained of unnecessary upheaval, pointless expense, distress, anxiety and a complete inability to make plans “all inflicted through casual indifference.”
[79] On 10 March 2014 also, Mr Heale emailed Mr McCallum and complained that Buildtech had not been keeping him informed (but misinformed), did not enjoy his confidence and, “I do not think the [building contract] can any longer be considered as binding on me.” He asked whether Hawkins had another firm of builders who could take over the project.
[80] There was then a gap in the Heales’ complaints until August 2014. There was an email chain from 8 August 2014 to 19 August 2014 between the Heales, IAG, Hawkins and Buildtech. Mr Heale was disbelieving of a report from Buildtech that internal works were “progressing well.” Mr Heale was concerned about the lack of progress and communication. He complained that no-one had been on the property over the last week. It appears that relations with Buildtech had not improved.
[81] On 2 September 2014, Mr Heale emailed IAG and Hawkins complaining about delays and an absence of understanding of their cause. He also complained about a lack of communication, pointedly noting, “we should be quite clear that in exchange for no information we now receive wrong information…”. He noted that little progress had taken place over the last month and that the project was to be finished by the end of June 2014, but he had been told the house would be finished by the end of October 2014. He was seeking confirmation that this date was “real” because “if the current rate of work progress continues the house will, of course, never be repaired.” He noted the delays were incurring inconvenience and costs.
[82] On 8 September 2014, Mr Heale emailed IAG, Hawkins and Buildtech. Mr Heale complained of falsified timesheets, referred to financial loss and said, “there
is no way that I am prepared to bear any of the costs incurred through this
discrepancy.”
[83] On 17 September 2014, Hawkins was copied into an email Mr Heale sent the previous day to his insurance broker and lawyer. This had been forwarded to IAG and then emailed by Sharon Moore, at IAG, to Mr Cunningham and to Buildtech. Ms Moore was plainly concerned at the possibility that the Heales would take legal action. She stated, “we need to report urgently as the customer is looking to go legal.” She had sympathy for Mr Heale’s complaints and referred to his significant financial hardship. The 16 September 2014 email, which had caused this concern, was a tirade. It referred to 9 Snowdon Road being a total constructive loss and the house being no use to the Heales. Mr Heale complained of the delays and referred to quality issues. He referred twice to advice that he had received from “our engineer” thus indicating that he had retained expert advice on issues of concern to him. He referred repeatedly to compensation and stated, “the house is a total loss. I want this ended” and finishes, “we look forward to our trust being justified … preferably with a cheque from [IAG] for the full amount.”
[84] On 29 November 2014, Mr Heale emailed Mr Burling of IAG. This was forwarded to Hawkins the next day. He continued to be aggrieved about delays, costs and management of the repair project. He noted that he had told his broker that he wanted to make a claim, “for a total loss on the house.”
[85] On 3 March 2015, Mr Heale sent an email to Mr Burling complaining about Buildtech and costs and the need to contain the situation. Mr Burling told him he would discuss these matters with the manager at Hawkins.
IAG’s position
[86] IAG argued that Mr Heale was vocally and justifiably aggrieved about many aspects of the repair project over a long period. Mr Heale’s experience with Buildtech was highly unsatisfactory and there was mention on several occasions by Mr Heale of losses and/or compensation. The repair project on the Heales’ home had undeniably gone badly, and Mr Heale was disputatious, resourceful and articulate and a person
who, from all appearances, was more, rather than less, likely to pursue claims. Hawkins had a central role in pre-qualifying and recommending Buildtech, monitoring aspects of its work and inspecting work and certifying payments. Hawkins had an obvious exposure to complaints about any aspect of Buildtech’s work. IAG argued that these factors, in combination with the email chain, particularly the 17 September 2014 email from IAG and the 16 September 2014 email from Mr Heale to his broker and his lawyer, met the required test for circumstances that may give rise to a claim.
QBE’s position
[87] Mr McLellan submitted that the circumstances must disclose a definite risk, or reasonable possibility, of a claim. The possibility of a claim must be more than remote or unlikely and where an insured purports to give notice in relation to a project, and is not able to identify any systemic failure, there must be some specificity in the circumstances which discloses a real risk of a claim in relation to that project. He submitted that there were no such notifiable circumstances during the relevant periods of insurance for several reasons.
[88] First, in Mr Heale’s email correspondence there was no criticism of Hawkins and nothing, Mr McLellan submitted, to indicate that Hawkins had or might receive a demand for damages and/or compensation or be held liable for any of the Heales’ losses. He submitted that Hawkins was only copied into correspondence to assist in co-ordinating a response to Mr Heale’s concerns.
[89] Second, Mr McLellan relied upon Rothschild, where Rix J expressed the view that, “… it is legitimate to test a view of what the future may bring, where that view has been contemporaneously and prophetically expressed, against what happened in due course.”26 In this case, Mr McLellan said, the opposite is true because the future has clearly demonstrated that the Heales were never intending to issue legal proceedings against Hawkins and did not see a connection between Hawkins and Buildtech as IAG asserted. He relied upon Mr Heale’s affidavit of 21 June 2019.
26 J Rothschild Assurance plc v Collyear, above n 18.
[90] Third, Mr McLellan argued that it is significant that the Heales’ complaints were made during the construction process, but they subsequently signed a notice of practical completion on 9 March 2015 and no claim was then made for several years. This served to confirm that no notifiable circumstances existed during the period relied on.
[91] Fourth, Mr McLellan countered an argument for IAG that because of Hawkins’s contractual obligations to IAG, a claim against Hawkins by IAG was an equally obvious prospect in any case where the owner was aggrieved, by referring to the RSMA which notably contained, at cl 18.3, that IAG had no recourse to Hawkins and Hawkins no liability to IAG for any loss, costs, damages or otherwise whatsoever for any delays in reinstating any particular project.
[92] Fifth, Mr McLellan argued that it is highly significant that notice of a potential claim in respect of 9 Snowdon Road was first provided by IAG to QBE on 6 July 2018 after the lapse of Hawkins’s insurance policies. He submitted that, if in the period March 2014 to March 2015 there really were circumstances indicating a claim by IAG against Hawkins, it would be expected that IAG would have given notice to Hawkins earlier than four years after the period identified as relevant by IAG.
[93] Sixth, Mr McLellan argued that the key issue in the application can be tested by considering whether, had Hawkins given timely notification to QBE of all the circumstances relied upon by IAG, QBE would have been able to reject the purported notification. He submitted that all Hawkins would have been able to tell its insurer during the policy periods relied upon by IAG was that one of the homeowners was slightly concerned about some of the workmanship of its builder and vocally aggrieved about substantial delays in the repair process, which was not an uncommon complaint in the context of the Christchurch Rebuild. Hawkins would not, he contended, have been able to point to any specific complaint that had been levelled against it, or any factual allegation that indirectly implicated Hawkins. On this analysis, the correspondence would not have met Rix J’s weak test for materiality of notice in Rothschild.
Discussion
[94] In the present context, IAG is not required to definitively prove that the policy responds to IAG’s claim against Hawkins. This will ultimately be a question for trial, where the parties will have the benefit of discovery and, presumably, after hearing evidence from the Heales as well as Buildtech’s and Hawkins’s personnel. Mr McLellan has accepted this approach and reserves QBE’s position under s 9 of the Insurance Law Reform Act 1997 and has not advanced any evidence or argument about late notification prejudice. All IAG presently needs to show is a prima facie case that notifiable circumstances arose during the relevant period of insurance.
[95] The kernel of Mr McLellan’s argument was that in all the circumstances, including the content of Mr Heale’s emails, there was never any specific complaint or suggestion of a potential claim against Hawkins. Based on the authorities, particularly Rothschild and Euro Pools, I do not accept that there needed to be an express reference to a complaint or claim against Hawkins to satisfy the relevant test. Subparagraphs
(a) and (b) of the definition of “Claims” in the policy deal with the circumstance where a specific complaint or claim is made, but subparagraph (c) must include facts falling short of express advice of a potential claim or express advice of alleged wrongdoing.
[96] In my view, in circumstances where threats of seeking compensation against Buildtech had been made repeatedly, involving aspects of the project over which Hawkins had a central involvement, it would be reasonable to assume that if any claim eventuated the Heales might also look to Hawkins. Mr Gedye pointed out, correctly in my view, that it is apparent from Mr Heale’s email to Hawkins of 10 March 2014 that he regarded Hawkins responsible for builder selection which was one of his major complaints. It is also significant that Mr Heale copied Hawkins in on these complaints. While Mr McLellan submitted this was because he was looking to Hawkins to assist in co-ordinating Buildtech’s response, it is equally likely that he regarded Hawkins as having a responsibility for the situation that had developed.
[97] I do not find Mr Heale’s evidence that he and his wife “have no complaint or claim against Hawkins” and have “no knowledge of actions which would give rise to a claim against Hawkins” at all convincing. Mr McLellan accepts that the evidence is
not determinative. There is much in Mr Heale’s affidavit which I do not accept as contrary to the contemporaneous documents and his own email correspondence. His efforts to distance his complaints from Buildtech is one example.
[98] I do not accept, either, the view of Rix J in Rothschild that it is helpful to have regard to what happened when assessing objectively whether circumstances existed at a relevant time in the past. That is a logical fallacy. But in any event, Mr Gedye is correct that IAG did in fact bring a claim against Hawkins derived from the delays and the other complaints voiced by Mr Heale in 2004 and 2005.
[99] I am not assisted by Mr McLellan’s argument that the key issue can be tested by considering whether QBE could have, or would have, rejected a notification from Hawkins at the relevant time. That is just a restatement of the key issue in another guise. How QBE might have responded to that notification had it been made is irrelevant. IAG does not need to show that QBE would have agreed with Hawkins’s view on the possibility of a claim at the time.
[100] Whilst Mr McLellan relied on the generality in Mr Heale’s complaints, it appears to me that there was adequate specificity in them to demonstrate that a claim was reasonably possible and that such claim could be brought against Hawkins by either the Heales, IAG or indeed Buildtech. Hawkins’s contractual role in project managing the work, coupled with the repeated nature of the Heales’ complaints, which were specifically directed to aspects of the project for which Hawkins had responsibility, was sufficient to put it on notice that there was a very serious problem with Buildtech’s performance which might result in a claim. By 17 September 2014, Hawkins was aware that matters had escalated to the point where the Heales had involved their lawyer. Hawkins knew a great deal more than that the Heales were “slightly concerned” about some aspects of the workmanship of its builder and “vocally aggrieved” about substantial delays in the repair process. Mr Heale was, from the very start of the contract, under the belief that he had been duped, that Buildtech was not up to the job and should be replaced and that the delays and other faults had cost him losses for which he was intending to seek compensation. The information was project and contract-specific and identified breaches of contract by
Buildtech that involved Hawkins. The prospect of a claim was obvious to IAG and that was notified to Hawkins.
[101] IAG has, at this interlocutory stage, satisfied me that there is an arguable case that notifiable circumstances existed during the relevant period of insurance. IAG will accordingly be given leave to commence proceedings against QBE.
Result
[102] IAG is granted leave under s 9(4) of the Law Reform Act 1936 to continue its third party statement of claim dated 31 August 2018 against QBE Insurance (Australia) Ltd and to join QBE as the first third party.
[103]IAG is also granted leave pursuant to r 4.4 of the High Court Rules 2016:
(a)joining Buildtech Restorations Ltd as the second third party in this proceeding;
(b)joining Engineering Design Consultants Ltd as the third third party in this proceeding; and
(c)that the third party notice and the statement of claim by IAG against Buildtech and EDC is to be filed within 10 working days of this order and served upon Buildtech and EDC as soon as reasonably practicable thereafter.
[104] If any party seeks costs, memoranda should be filed within 14 days with 14 days to reply. I will determine any issue of costs on the papers.
[105] The case will be set down for a telephone conference at 2.15 pm on Wednesday, 4 December 2019. Counsel should file memoranda at least three working days prior to the conference. The issues for discussion at the conference shall be all matters listed in sch 5 of the High Court Rules 2016.
O G Paulsen Associate Judge
Solicitors:
Saunders & Co, Christchurch DLA Piper, Wellington Hazelton Law, Wellington
Parry Field Lawyers, Christchurch Rainey Collins, Wellington
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