JCS Cost Management Limited v Johnston - [2014] NZHC 2718

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-004-000330 [2014] NZHC 2718

BETWEEN
JCS COST MANAGEMENT LIMITED

First Plaintiff

STEPHEN ROY JOHNSTON Second Plaintiff

AND

QBE INSURANCE (INTERNATIONAL) LIMITED

Defendant

Hearing: 28 October 2014

Appearances:

I J Thain and C D Herbert for Plaintiffs
P J Napier and A Hyde for Defendant

Judgment:

3 November 2014

JUDGMENT OF ASSOCIATE JUDGE MATTHEWS

This judgment was delivered by me at 4.00 pm on 3 November 2014 pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:
DLA Phillips Fox, Auckland.
Keegan Alexander, Auckland.

JCS COST MANAGEMENT LTD & JOHNSTON v QBE INSURANCE (INTERNATIONAL) LTD [2014] NZHC 2718 [3 November 2014]

[1] In October 2011 the plaintiff (JCS) entered a contract of insurance with the defendant (QBE) by which QBE agreed to provide professional indemnity insurance to JCS and to its director, the second plaintiff, Mr S R Johnston.

[2] Shortly after that, JCS sought indemnity under the policy in relation to a claim brought against Mr Johnston as third party in proceedings by the Johnson No.
2 Family Trust (the Johnson Family Trust) against Auckland City Council (the Council). The trust sought damages in relation to the condition of a house it had bought, which had been damaged by water ingress. The Council claimed contribution or indemnity from Mr Johnston, maintaining that he provided advice to the Johnson Family Trust on the condition of the house before the trust bought it.

[3] The claim against Mr Johnston was dismissed at trial and he was awarded costs. The fees he incurred exceeded the sum he received from the Council. In this proceeding he seeks to recover the difference under his professional indemnity policy, less the policy excess of $10,000. JCS and Mr Johnston also claim compensation for damage to the business of JCS, and general damages.

[4] QBE says that Mr Johnston’s claim is not a valid claim, as defined in the policy. Valid claims are those alleging civil liability by any act, error or omission in connection with an insured’s professional business practice, in this case as a quantity surveyor and project manager. The claim by the Council, QBE says, did not allege civil liability in these terms. Rather, it alleged that he was engaged by the trust to provide advice on the condition of the house, that he did so, and in reliance on that advice the trustees bought the property. QBE says these actions were not taken in connection with the insured’s professional business practice as defined.

[5] QBE applies for summary judgment. Rule 12.2 of the High Court Rules 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.

[62] Application for summary judgment will be inappropriate 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. It…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2014] NZHC 2718
Decision Date: 3 November 2014

CaseChat Overview and Summary

JCS Cost Management Limited and its director, Stephen Roy Johnston, brought a claim against QBE Insurance (International) Limited seeking to recover costs and damages under a professional indemnity insurance policy. The plaintiffs argued that QBE was obliged to cover the costs Johnston incurred in defending a claim brought against him by the Johnson Family Trust, as well as damages to JCS’s business and general damages. QBE argued that the claim against Johnston did not allege civil liability in terms of the policy, and sought summary judgment.

The central issue before the court was whether the claim against Johnston, as alleged by the Council in the Johnson Family Trust proceeding, constituted a "valid claim" under the policy, defined as any claim alleging civil liability by an act, error or omission in connection with the insured's professional business practice. The court held that the claim against Johnston was not within the scope of the policy because it did not allege civil liability in connection with Johnston's professional business practice as defined. The court found that the nature of the claim, as pleaded by the Council, was the relevant factor, and not what Johnston may have said or done at the inspection of the property.

The court granted summary judgment in favour of QBE, holding that the claim against Johnston did not constitute a "valid claim" under the policy. The plaintiffs were ordered to pay QBE’s costs on a 2B basis, plus disbursements fixed by the Registrar.

Orders