Inicio Ltd v Tower Insurance Ltd
[2020] NZHC 90
•7 February 2020
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2019-409-000176
[2020] NZHC 90
BETWEEN INICIO LIMITED
Plaintiff
AND
TOWER INSURANCE LIMITED
Defendant
Hearing: 9 December 2019 with further submissions in writing provided by Counsel on 16 December 2019. Appearances:
R J Hargreaves for Plaintiff
M C Smith and H E Savage for Defendant
Judgment:
7 February 2020
JUDGMENT OF ASSOCIATE JUDGE PAULSEN
This judgment was delivered by me on 7 February 2020 at 12.30 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
INICIO LTD v TOWER INSURANCE LTD [2020] NZHC 90 [7 February 2020]
Introduction
[1] The plaintiff, Inicio Ltd (Inicio) owned a house damaged beyond economic repair in the 22 February 2011 earthquake. The house was insured with the defendant, Tower Insurance Ltd (Tower) for its full replacement value. Tower contributed its assessment of its full replacement value liability under the policy towards the building of two new units (the units) on the same property for Inicio under a construction contract dated 18 September 2012. The units were completed in April 2013. Inicio says that Tower undervalued its insurance claim. It seeks to recover as damages the unpaid balance of what it alleges was the full replacement value of the house.
[2] Tower applies for summary judgment. Tower argues that Inicio’s causes of action are time-barred and, in so far as that is not the case, the allegations made do not give rise to a valid claim. Inicio opposes the application.
Facts
[3] Inicio was the owner of 531 Cashel Street. The house on the property was extensively damaged in the 22 February 2011 earthquake. It was insured with Tower. The terms of Inicio’s Provider Rental House policy with Tower included:
(a)The insured property was Inicio’s “house”:
House means the domestic building(s) shown in the certificate of insurance you own at the situation, including its fixtures and fittings (other than floor coverings not permanently fixed or glued in place, blinds and drapes), walls (other than retaining walls), gates, fences, underground and overhead services extending to the public mains, permanent swimming pools and spa pools and any other domestic structure on the same site (other than metal driveways or paths).
(b)The “house” was insured against “sudden and unforeseen accidental physical loss or damage” save as excluded under the policy. The “house” was insured against natural disaster damage on the following basis:
If your house suffers natural disaster damage, we will pay the difference between the amount paid under EQCover and the sum insured shown in the certificate of insurance.
(c)The terms that applied to settlement of claims under the policy included the following:
We will arrange for the repair or replacement or payment for the loss, once your claim has been accepted.
We will pay either:
● the full replacement value of your house at the situation; or
● the present day value;
As shown in the certificate of insurance.
[ … ]
In all cases:
● if, as a result of changes in government or local body by-laws, you are not able to rebuild or repair the damaged part of your house to the same specifications as before the loss or damage occurred, we will pay any additional costs incurred to rebuild the damaged part; [ … ]
● we have the option whether to make payment, rebuild, replace or repair your house; [ … ]
● we will pay architects’, engineers’ and surveyors’ fees in respect
of the rebuilding or repairs where authorised by us;
● we will pay the cost of demolition and removal of debris including the contents;
● we will use building materials and construction methods
commonly used at the time of loss or damage; [ … ]
We are not bound to: [ … ]
● pay more than the present day value if you have full replacement value until the cost of replacement or repair is actually incurred. If you choose not to rebuild or repair your house we will only pay you the present day value; [ … ]
● pay the cost of replacement or repair beyond what is reasonable, practical or comparable with the original;
● repair or reinstate your house exactly to its previous condition.
[ … ]
Full replacement value means the cost actually incurred to rebuild, replace or repair your house to the same condition and extent as when new and up to the same area as shown in the certificate of insurance,
plus any decks, undeveloped basements, carports and detached
domestic outbuildings, with no limit to the sum insured. [ … ]
[4] In August 2011, Tower assessed the house a total loss. The parties exchanged rebuild estimates. In September 2012, Tower assessed the full replacement value of the house on a notional basis to be $321,797. Tower agreed to contribute this amount towards the cost of the units. As Inicio was not rebuilding the house this was beyond what Tower was required to do under the policy.
[5] Initially, Stonewood Homes was to be the builder of the units and the project was to be managed by Tower’s external loss adjuster and project manager Stream Group. However, ultimately, John McMillan Builders was contracted to undertake the building works. The construction contract was signed on 18 September 2012. It provided for a build cost of $546,295. Tower would contribute $321,797 (including EQC payments of $128,686) and Inicio would contribute $224,498.1
[6] Inicio paid its contribution and EQC payments to Tower. Tower managed the payments to the builder. Some minor variations were approved. The practical completion certificate was issued on 14 April 2013. Tower did not require Inicio to sign a final settlement and discharge agreement.
[7] The evidence of Catherine Dwan, a director of Inicio, is that before the construction contract was signed the company’s directors expressed concern that Tower’s costings were deficient and that Bill Ogg, of Stream Group, told them they should not complain as they were “lucky to get a new house out of it” and “don’t even think about it, that’s all you’re getting” (or words to that effect). Mrs Dwan alleges that Mr Ogg also said that Inicio’s claim would only be resolved and settled once construction was complete. This evidence, concerning what Mr Ogg said, is disputed.
[8] In December 2015, Tower issued a public statement concerning claims arising out of the Canterbury earthquakes. It stated that Tower’s interpretation of the law was that the six-year limitation on legal action applied from the time a claim was “settled
1 The construction contract names the directors of Inicio as the “owner” of the property. Nothing turns on this. The figures stated in this judgment have in most cases been rounded to remove reference to cents.
or rejected” rather than from the “original incident”. Tower said it would not plead a limitation defence for any claim relating to the earthquake events where proceedings were filed in the courts before 4 September 2017.
[9] On 22 August 2017, Tower received an email from Mrs Dwan, that Inicio did not believe that its claim had been settled in full by Tower. On 17 October 2017, Mr and Mrs Dwan met with Tower. Following the meeting, Tower instructed an independent quantity surveyor to provide a rebuild estimate for the house at 2012 rates. Based on this, Tower offered Inicio a further $55,030 in settlement of its claim.
[10] Tower formally made its offer in a letter of 2 February 2018. I set out the letter below in full:
2 February 2018
TOWER
Insurance
Customer reference: 21373112
Catherine and Matthew Dwan PO Box 76-232
Northwood Christchurch 8548
Dear Catherine and Matthew,
Claim reference: 27907031
Description of damage: Earthquake damage at 531 Cashel Street, Linwood,
Christchurch
We have reviewed your concern that your claim for earthquake related damage to your property at 531 Cashel Street, was settled (by way of a managed rebuild) without taking into account the special features in the damaged property. These special features relate to ornate/leaded windows, rimu joinery and other features that were documented in a report by AP Design dated 16 May 2011 and supplemented with a document that you provided to us at our meeting on 17 October 2017. Specifically you have noted that reinstatement of these features was not available to you by pursuing a Stonewood Home rebuild as was offered to you by Tower.
Following our meeting with you we have engaged a quantity survey, Rapid Project Solutions, to itemize and quantify the special features that were not included in the Stonewood Home cost that formed the basis of Tower’s settlement to you. These items have been costed with reference to rates that were current in 2012. The Rapid Project Solutions report is attached, and quantifies these additional features at $55,030.08.
Based on the legal advice we have received this represents the extent of Tower’s outstanding liability with your claim. Please note we have not factored in consideration for deduction of additional professional fees that we believe we are entitled to on the basis of the additional fees incurred for design of the two replacement units.
Tower is prepared to make payment to you of $55,030.08 in full and final settlement for the earthquake related damage to your property at 531 Cashel Street. The offer is open until 23 February 2018.
We enclose a discharge document and Deed of Assignment of EQC Claims for you to sign and return if you wish to accept the offer. These documents contain other important terms of the offer and Tower encourages you to take independent legal and other professional advice before accepting or rejecting the offer.
We look forward to hearing from you whether you wish to accept our cash settlement and to resolving your claim.
Yours sincerely, “Emily Riley” Emily Riley
Claims Settlement Manager – TOWER Insurance Ph: 0800 369 939 ext 36651
[11] Tower extended the offer on three occasions. It was not accepted. Tower withdrew the offer on 28 March 2018. In a letter of the same date, Tower made a further settlement offer of $28,216. Tower reduced its previous offer by removing a professional fees allowance that it considered should not have been included in its contribution to the cost of the units. The second offer was not accepted by Inicio either and was withdrawn on 7 May 2018.
[12] Inicio then instructed lawyers. Parry Field wrote to Tower on 5 October 2018 alleging that Tower had breached the policy in failing to correctly assess the full replacement value of the house and claimed $882,221 was owed to Inicio.
[13] This was rejected by Tower’s lawyers, Gilbert Walker. In a letter of 19 December 2018, Gilbert Walker advised that any claim for breach of the policy was time-barred. It stated Tower’s position that the six-year limitation period in which to bring claims arising out of the Canterbury Earthquakes ran from the date that a claim was settled and that this position had been publicly notified since December 2015. In
Inicio’s case, Tower considered that the limitation period for the making of a claim expired six-years following the execution of the construction contract, that is on 17 September 2018.
[14] On 9 April 2019, Inicio commenced this proceeding. This was well outside the six-year periods following both the 22 February 2011 earthquake and the date of the construction contract. It was however, by just five days, within the six-year period following practical completion of the units.
The causes of action
[15] The relevant pleading is Inicio’s amended statement of claim dated 19 July 2019. There are two causes of action.
[16] The first cause of action is for breach of the policy. Inicio pleads that Tower was obliged to pay the full replacement cost for the house to the standard required by the policy. It alleges that Tower breached the policy in that it:
(a)inaccurately assessed the full replacement cost for the house and, accordingly, its contribution under the construction contract; and
(b)refused to pay the costs required to reinstate the house to the requisite standard under the policy in accordance with Inicio’s entitlements under the policy.
[17] Inicio also pleads that Tower acknowledged it had a further liability under the policy at the meeting of 17 October 2017 and in its letters of 2 February 2018 and 28 March 2018.
[18] As a second cause of action, Inicio alleges that Tower engaged in misleading and deceptive conduct in trade in breach of s 9 of the Fair Trading Act 1986. This cause of action was not pleaded in Inicio’s original statement of claim. It is a response to Tower’s limitation defence.
[19] Tower is said to have engaged in misleading or deceptive conduct in the following respects:
(a)inaccurately assessing the full replacement cost for the house by failing to take account of its character features;
(b)refusing to negotiate or consider any further negotiation with Inicio over the terms of the notional rebuild cost for the house;
(c)representing that Inicio’s claim would only be finally resolved and
settled once the rebuild was complete;
(d)appointing its agent as project manager to manage and administer the works; and
(e)stating in public statements that the six-year limitation period began from the time that a claim was settled or rejected without clarifying that in some cases a claim would be settled on the date that the parties entered into a rebuild contract rather than on practical completion or on the date of final payment by Tower under the policy.
[20] Inicio pleads that in reliance upon Tower’s alleged misleading and deceptive conduct it:
(a)agreed to enter into the construction contract when Tower’s
contribution did not meet its obligations under the policy; and
(b)failed to file a statement of claim until after September 2018.
[21] In respect of both causes of action, Inicio seeks damages for $708,870 which represents what it considers is the unpaid balance of the full replacement value for the house under the policy.
Summary judgment principles
[22] Tower’s application is made under r 12.2(2) High Court Rules 2016, which provides that the court may give summary 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. The proper approach to a defendant’s application for summary judgment is set out in Bernard v Space 2000 Ltd,2 and Westpac Banking Corporation v M M Kembla New Zealand Ltd.3
[23] The defendant’s summary judgment procedure is not directly equivalent to the plaintiff’s summary judgment procedure.4 Summary judgment is only appropriate if the defendant has a clear answer to the plaintiff’s claim. The defendant bears the onus of satisfying the court that none of the plaintiff’s claims can succeed.5 It is not enough that the plaintiff’s case has weaknesses and the assessment made by the court is not to be arrived at on a fine balance of the available evidence, such as is appropriate at trial.6 The procedure will not be appropriate where there are disputed issues of material fact or where material facts need to be ascertained by the court and cannot confidently be concluded from affidavits.7 Although legal issues may be decided on a summary judgment application, if the issue is novel or concerns a developing area of law its resolution may require the context provided by trial to provide the court with enough perspective.8
[24] The defendant’s summary judgment procedure is also not equivalent to the procedure available to strike out a plaintiff’s claim. Where a claim is untenable on the pleadings as a matter of law, it will usually be appropriate for a defendant to apply to strike out the claim. The summary judgment procedure is not to circumvent the restrictions on adducing evidence in support of an application to strike out a cause of action.9 The court should not allow the summary judgment procedure to unfairly
2 Bernard v Space 2000 Ltd (2001) 15 PRNZ 338.
3 Westpac Banking Corp v M M Kembla New Zealand Ltd [2001] 2 NZLR 298; (2000) 14 PRNZ 631 (CA).
4 At [59].
5 At [64].
6 At [64].
7 At [62].
8 At [62].
9 Bernard v Space 2000 Ltd, above n 2, at [20].
create an issue estoppel against a plaintiff. Entering summary judgment is discretionary and the court should not hesitate to exercise that discretion against a defendant if the application could more appropriately have been made by an application to strike out the plaintiff’s causes of action.10
The first cause of action
[25] It is common ground that Inicio’s cause of action for breach of the policy is subject to a six-year limitation period running from “the date of the act or omission on which the claim was based”. Section 11(1) of the Limitation Act 2010 relevantly provides:
(1) It is a defence to a money claim if the defendant proves that the date on which the claim is filed is at least 6 years after the date of the act or omission on which the claim is based (the claim’s primary period).
[26] Section 12(1) of the Limitation Act 2010 defines (subject to some exceptions in s 12(3) that do not apply here), the term money claim as a claim for monetary relief at common law, in equity, or under an enactment. It is not disputed that Inicio has brought such a claim.
[27] There is no definition in the Act of the words “date of the act or omission on which the claim is based” reflecting the Law Commission’s view that their meaning is clear.11
[28] Time ceases to run when the claim is filed, which in the case of civil proceedings mean the statement of claim or an originating document containing the claim is filed.12
[29] The orthodox approach is in the case of property insurance the time within which a claim must be brought against an insurer begins to run from the date that the
10 At [20].
11 Law Commission Limitation Defences in Civil Proceedings (NZLC R6, 1989) at [168] – [169].
12 Limitation Act 2010, s 6.
insured peril occurs.13 In this case, that would be 22 February 2011, when the earthquake damaged the house.
[30] Noting that this approach has been subject to some academic and judicial criticism,14 as well as the lack of an authoritative statement on the issue in New Zealand, Tower does not ask the court to make a finding on that matter. Tower proceeds on the basis, more favourable to Inicio, that time began to run from when Inicio alleges that Tower breached the policy which, it says, occurred, at the latest, when the construction contract was signed.
[31] Mr Hargreaves argued that time did not begin when the construction contract was signed but when practical completion was achieved because it was only then that Tower had no further obligation under Inicio’s insurance claim and it could be considered settled. Until then, he submitted, Tower had the opportunity to reassess its contribution. I can find no support for Mr Hargreave’s submission in the case law or as a matter of principle. The argument runs counter to Inicio’s case that its claim has not been settled in accordance with the policy and, of course, if Tower’s contribution was inadequate it could reassess that at any time, before or after completion of the construction contract.
[32] I agree with Tower’s analysis. Inicio’s pleaded claim is for damages for Tower’s alleged breach of policy. The breach (the act or omission, for the purposes of s 11) on which Inicio’s claim is based is Tower’s alleged refusal to indemnify it for its full loss in accordance with the terms of the policy. The amount Tower agreed to pay under the policy was known and effectively fixed by the construction contract. In so far as there was a “refusal” by Tower to honour the terms of the policy that had occurred upon the signing of the construction contract. Consistent with this, Inicio’s evidence is that Tower refused to negotiate with it on the amount of its contribution. Time had begun to run against Inicio, at the latest, when the construction contract was signed.
13 Robert Merkin and Chris Nicoll Colinvaux’s Law of Insurance in New Zealand, (2nd ed, Thomson Reuters, Wellington, 2017) at 510-511. Globe Church Inc v Allianz Australia Insurance Ltd [2019] NSWCA 27.
14 Andrew McGee, Limitation Periods (8th ed, Sweet & Maxwell, London, 2018) at 199. Malcolm Clarke, Julian Burling and Robert Purves The Law of Insurance Contracts, (6th ed, Informa, London, 2009) at 1001. Carillion Construction Ltd v AIG Australia Ltd [2016] NSWSC 495.
[33] The better argument advanced by Mr Hargreaves is that Tower’s settlement offer of 2 February 2018 acknowledged Tower’s liability to Inicio under the policy engaging s 47 of the Limitation Act 2010. The section applies where a claimant proves that the defendant acknowledged to the claimant in writing a liability or made a payment to the claimant in respect of that liability. The claimant is deemed to have a fresh claim on the day after the date of which the acknowledgment or part payment was given or made.
[34] There does not appear to be any relevant case law on s 47. I accept Mr Smith’s submission that authorities under the Limitation Act 1950 and United Kingdom equivalents provide guidance as to the section’s application except to the extent that they follow from the more limited scope of the previous regimes.
[35]Section 47 relevantly provides:
(1)This section applies if the claimant proves that, after the start date of a claim’s primary period, longstop period, or Part 3 period, the defendant—
(a) acknowledged to the claimant in writing a liability to, or the right or title of, the claimant…
(b) made a payment to the claimant in respect of a liability to, or the right or title of, the claimant.
(2)If this section applies, the claimant is deemed for the purposes only of this Act to have a fresh claim on the day after the date, or the latest of the dates, on which an acknowledgment or part payment was given or made.
(3)An acknowledgment or part payment of the kind specified in subsection (1)—
(a) is binding on the defendant’s successors; and
(b) may be given or made by the defendant or an agent of the
defendant and to the claimant or an agent of the claimant…
[36] The document alleged to contain an acknowledgment must be read as a whole15 and having regard to the context in which the words are used.16 Contrary to a Law
15 In re Flynn, decd (No 2) [1969] 2 Ch 403 at 412.
16 Heli Holdings Ltd v Helicopter Line Ltd [2016] NZHC 976 at [726].
Commission recommendation, there is no requirement there be proven reliance upon the acknowledgment or part payment, which impliedly would have meant any acknowledgment or part payment would have engaged the section only if it occurred before any relevant limitation period expired.17
[37] There is case law under s 25(4) of the Limitation Act 1950 and UK equivalents which provides guidance concerning what amounts to an acknowledgement of a liability to a claimant. The issue was dealt with in Surrendra Overseas Ltd v Government of Sri Lanka, which concerned s 23(4) of the Limitation Act 1939 (UK), where Kerr J said:18
What I draw from these authorities, and from the ordinary meaning of “acknowledges the claim” is that the debtor must acknowledge his indebtedness and legal liability to pay the claim in question. There is now no need to go further to seek for any implied promise to pay it. That artificiality has been swept away. But taking the debtor’s statement as a whole as it must be he can only be held to have acknowledged the claim if he has in effect admitted his legal liability to pay that which the plaintiff seeks to recover. If he has denied liability whether on the ground of what is pleaders language is called “avoidance”, or on the ground of an alleged set off or cross claim, then his statement does not amount to an acknowledgment of the creditor’s claim.
[38] In respect of a money claim it is not necessary for an acknowledgement to be in respect of a definite amount due or an amount ascertainable by mere calculation. There is authority that a defendant can acknowledge liability for an amount that is less than the whole claim, in which case it would constitute an acknowledgement as to the lesser sum only.
[39]In Bradford & Bingley plc v Rashid, Lord Brown said: 19
Assume, for example, that a creditor seeks to recover an outstanding debt of
£1,000 and the debtor, asserting that he has made a number of unreceipted cash payments in partial repayment, admits that he owes something but not as much as £1,000 … Dungate v Dungate, however, appears to me clear authority for holding that it would be an acknowledgment (although, had the debtor in fact admitted liability only for £500 rather than some unspecified sum short of £1,000, that, in my opinion, would constitute an acknowledgment of the
17 Law Commission, Report No 6 Limitation Defences in Civil Proceedings at [273] and see generally discussion at [268] to [274].
18 Surrendra Overseas Ltd v Government of Sri Lanka [1977] 2 All ER 481 at 489. Shell Oil New Zealand Ltd v Deep Sea Fisheries Ltd HC Napier CP 44/88, 14 October 1988.
19 Surrendra Overseas Ltd v Government of Sri Lanka [1977] 2 All ER 481 at 490. Bradford & Bingley plc v Rashid [2006] URHL 37, [2009] 4 All ER 705 at [58].
claim only to the extent of £500-see Kerr J’s judgment in Surrendra Overseas Ltd v Government of Sri Lanka [1977] 1 WLR 565).
[40] Mr Smith argued that, read in context, Tower’s letter of 2 February 2018 was not an acknowledgment of liability by Tower. He submitted the letter was an offer to settle a disputed claim for damages and that s 47 was not, therefore, engaged. He advanced five grounds in support of this submission.
[41] First, that Tower was not acknowledging liability to pay the $55,030 “come what may” but only as a bargain in exchange for Inicio giving up any rights it may have and conditional upon execution of the documents that accompanied the letter.
[42] The letter of 2 February 2018 refers to Inicio’s earthquake claim and Inicio’s complaint that Tower had failed to take account of “special features in the damaged property.” It also refers to the cost of those special features having been assessed and that “[b]ased on the legal advice we have received this represents the extent of Tower’s outstanding liability with you claim.” Consistent with this, Tower offered to make payment to Inicio of $55,030 in full settlement for the earthquake related damage to the house. The letter is an acknowledgment of Tower’s liability to Inicio and its intention to pay its liability. That Tower required Inicio to accept the sum offered in full settlement and sign documents commonly required of an insured upon settlement of an earthquake claim is not inconsistent with Tower’s acknowledged liability to Inicio.
[43] Second, that it is a necessary corollary of an acknowledgment that the defendant has given up its right to defend the substantive claim and Tower was clearly not relinquishing its right to defend Inicio’s claim either as to the $55,030 offer or generally.
[44] There is no such requirement in s 47. Mr Smith relied upon Fog v Frimley Estate Ltd20 and Heli Holdings Ltd v Helicopter Line Ltd,21 but neither case is authority for the proposition he advances.
20 Fog v Frimley Estate Ltd [2015] NZHC 3301 at [38].
21 Heli Holdings Ltd v Helicopter Line Ltd [2016] NZHC 976 at [726].
[45] In Fog, the plaintiff sought repayment for subscriptions of shares offered unlawfully without a prospectus under s 37 of the Securities Act 1978. The defendant had made an unsuccessful application for relief from the consequences of issuing securities without a prospectus and then raised a defence that the plaintiff’s claim to recover the original subscription was time-barred. The plaintiff argued the defendant’s application was an acknowledgment of her claim for the purposes of s 25(4) of the Limitation Act 1950. Palmer J did not accept that submission as the application did not explicitly concede the claim. Whilst the Judge did say the defendants could not be taken to have intended by making their application they were giving up their rights to defend the substantive claim, he was not suggesting an acknowledgment of their liability would be ineffective for the purposes of s 25(4) unless they had done so.
[46] In Heli Holdings Nation J relied upon Fog, but only as authority for the unremarkable proposition that “[t]he extension of the limitation period, in the circumstances provided for in [s 25(4) of the Limitation Act 1950] also results from some act or acknowledgment which inherently involves an admission of liability.”
[47] Third, that the letter of 2 February 2018 stated that Tower had not factored in a deduction which it believed it was entitled to. Mr Smith argued that the necessary implication was that the offer was for a greater sum than what Tower believed any liability it had to Inicio could be.
[48] Section 47 will be engaged when a defendant has acknowledged to the claimant in writing “a liability to…the claimant.” Whether Tower’s letter is to be taken as an acknowledgment of liability for the $55,030 offered or a lesser sum, the section was engaged.
[49] As authority for this, Smith v Smith concerned an action between the executrices of the wills of two brothers who had been in partnership together for the taking of partnership accounts.22 The defendant pleaded the Statute of Limitations in defence of the claim. The plaintiff relied upon a letter written by the defendant
22 Smith v Smith [1926] NZLR 311.
executrix which it was argued acknowledged the right to an account. In his judgment, Sim J said:23
Where the acknowledgment is coupled with other expressions, such as a promise to pay at a future time or on a condition, or an absolute refusal to pay, it is for the Court to say whether these other expressions are sufficient to qualify or negative the implied promise to pay … If some debt is acknowledged it is immaterial that the correctness of the amount claimed is disputed in the acknowledgment.
[50] Fourth, Mr Smith argued that the parties’ subsequent correspondence showed that they did not regard Tower as having made an irrevocable acknowledgment or admission.
[51] This submission assumes that once given, an acknowledgement complying with s 47 may be revoked on the whim of the defendant. The section would have no utility if a defendant, against whose interest an acknowledgment has been given, could simply revoke the acknowledgement at will and raise a limitation defence. In any event, the conduct Mr Smith relied upon was conduct of Tower only.
[52] Fifth, Mr Smith, argued that read in context the words used in the letter – “[b]ased on the legal advice we have received this represents the extent of Tower’s outstanding liability with your claim” – was a statement of what Tower believed its maximum possible liability for the claim could be, being put forward as a pragmatic settlement offer.
[53] This adds nothing to Mr Smith’s first submission. It may be Tower considered it was acting pragmatically and offering the full amount that could be owed to Inicio. Nonetheless, the letter contained an acknowledgement of liability for Inicio’s claim.
[54] I find against Tower’s arguments that its letter of 2 February 2018 was not an acknowledgment of liability to Inicio for the purpose of s 47 of the Limitation Act 2010. Tower has not satisfied me that Inicio’s first cause of action, based on breach of the policy, is time-barred. Tower has not satisfied me that none of the causes of
23 At 314.
action in Inicio’s statement of claim can succeed. Tower is not entitled to summary judgment.
[55] My finding does not prevent Tower making the same arguments in the substantive proceeding. It also will not prevent Tower arguing, as Mr Smith advanced, that if Tower’s letter of 2 February 2018 was an acknowledgment for the purposes of s 47, it was only as to $55,030 or a smaller sum.
The second cause of action
[56] As it will not alter the result of this judgment, I offer my views on Inicio’s Fair Trading Act claim only briefly.
[57] Section 9 of the Fair Trading Act provides that “no person shall in trade, engage in conduct that is misleading or deceptive or likely to mislead or deceive." In AMP Finance NZ Ltd v Heaven, Tipping J held that whether there has been a breach of s 9 of the Fair Trading Act can be addressed in three steps:
(a)ask whether the conduct was capable of being misleading;
(b)decide whether the plaintiff was in fact misled by that conduct; and
(c)decide whether it was reasonable for the plaintiff to have been misled by that conduct.24
[58] The applicable limitation period for this cause of action at the relevant time was set out in s 43(5) of the Fair Trading Act which read:
An application under subsection (1) may be made at any time within 3 years after the date on which the loss or damage, or the likelihood of loss or damage, was discovered or ought reasonably to have been discovered.
24 AMP Finance NZ Ltd v Heaven (1997) 8 TCLR 144, (1998) 6 NZBLC 102,414 (CA).
[59] Section 43(5) was in materially equivalent terms to the current s 43A Fair Trading Act.25 In Cygnet Farms Ltd v ANZ Bank of New Zealand Ltd Palmer J noted that for the purposes of s 43A:26
In Commerce Commission v Carter Holt Harvey the Supreme Court has clarified that:
(a) time starts running when the applicant discovers or ought to have discovered that loss or damage has already occurred, or is likely to occur in the future”;
(b) discovering loss means being aware of it;
(c) being likely to occur means loss is more probable than not; and
(d) the loss that must be discovered is more than minimal loss.
[60] The Court of Appeal has noted the difficulty that a defendant faces obtaining summary judgment in respect of claims based on the Fair Trading Act because such cases almost inevitably raise questions of fact that are unsuitable for determination at the summary judgment stage. 27
[61] Tower argues the allegations that it breached s 9 in the respects set out in paragraphs 47 (a), (b) and (d) of the amended statement of claim (see paragraphs [19](a), (b) and (d) above) are time-barred as its claim was not filed within three years of the signing of the construction contract on 18 September 2012 (that is by 17 September 2015). Those allegations concern Tower’s assessment of the full replacement value of the house, Tower’s appetite for negotiation and the management of the construction contract by Tower’s project manager. The alleged conduct pre- dates the signing of the construction contract.
[62] Inicio argues that those allegations are not time-barred as it “did not know for sure” that Tower’s assessment of the house’s replacement value was inadequate or that it had suffered loss and damage until January 2018, when the special features of the house omitted from Tower’s assessment were costed.
25 Substituted from 3 May 2001 by the Fair Trading Amendment Act 2001.
26 Cygnet Farms Ltd v ANZ Bank of New Zealand Ltd [2016] NZHC 2838, [2017] 2 NZLR 538 at [176].
27 Luxottica Retail New Zealand Ltd v Specsavers New Zealand Ltd [2012] NZCA 357 at [51]. Cambridge Homes Holdings Ltd v Santner [2019] NZHC 1922.
[63] I do not consider that Tower’s alleged refusal to negotiate or its appointment of its agent as project manager of the construction works was conduct that contained any representation capable of misleading Inicio. Furthermore, Mrs Dwan’s evidence is that before signing the construction contract she and her husband considered Tower’s notional replacement value costing was inadequate because it omitted the character features of the house and they informed Tower of this. As Inicio understood Tower’s assessment was deficient it could not have been misled by it in any of the pleaded respects. More relevantly in relation to the limitation point that is taken by Tower, Inicio must have known (or at least ought to have known) that in entering into the construction contract based on Tower’s deficient costing it would likely suffer loss. I therefore agree with Tower’s submission that time was running from at least the date the construction contract was signed and that these aspects of Inicio’s claim are time- barred.
[64] The remaining allegations set out in paragraphs 47(c) and (e) of the amended statement (see paragraphs [19](c) and (e) above) concern alleged representations as to when Tower would regard Inicio’s claim as settled and how it would apply the Limitation Act to claims made against it arising out of the Canterbury earthquakes. Tower accepts that these allegations are arguably made in time but says that they are incapable of giving rise to a cause of action.
[65] The allegation that Mr Ogg represented that Inicio’s claim would only be resolved and settled once the rebuild was complete is disputed and whether such a representation was made cannot be determined on this application. Mr Hargreaves submitted the representation was capable of being misleading if Tower subsequently said the claim was settled when the construction contract was signed and not completed. This is an incorrect hindsight analysis.28 Furthermore, Mrs Dwan said in her second affidavit that the statement was made in the context of whether Tower would be liable for variations and cost increases under the construction contract. Clearly the application of the Limitation Act was not in contemplation at that time. A statement of the kind Mr Ogg is said to have made could not reasonably be taken as a statement on behalf of Tower about how the Limitation Act would apply to Inicio’s
28 Commerce Commission v Sportzone Motorcycles Ltd (in liq) [2013] NZHC 2531, [2014] 3 NZLR 355.
claim. I do not consider Inicio’s claim based on Mr Ogg’s alleged statement can succeed.
[66] The final allegation concerns Tower’s public statement on its website. I note that nowhere in Mrs Dwan’s affidavit is there unequivocal assertion that Tower’s statement was in fact relied upon by Inicio in any of the pleaded respects. Leaving that matter aside (the point not have been taken by Tower), Tower argues that the statement was not misleading and simply presents a common-sense layman’s explanation of how it interpreted the Limitation Act. The issue is what effect the statement would have on reasonable members of the class to whom it was directed.29 Here, it was directed at customers of Tower who considered they had unresolved earthquake claims. Even if the statement was literally true this does not preclude a finding of misleading or deceptive conduct or the likelihood of such conduct.30 To my mind it is this one aspect of Inicio’s Fair Trading Act claim that is tenable. This is because the issue raised is one that I am not confident can be satisfactorily addressed and determined except by means of a trial following discovery and at which trial evidence will be given and witnesses cross-examined.
Result
[67]Tower’s application for summary judgment is dismissed
[68] If the parties cannot agree on costs I reserve leave for Inicio to file a memorandum by 14 February 2020 and any memorandum in reply from Tower to be filed by 28 February 2020. The memoranda should be no longer than 5 pages.
O G Paulsen Associate Judge
29 Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177.
30 Luxottica Retail New Zealand Ltd v Specsavers New Zealand Ltd [2012] NZCA 357 at [51].
Solicitors:
Wynn Williams, Christchurch Gilbert Walker, Auckland
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