Macalister Todd Phillips Bodkin v AMP General Insurance Limited HC Christchurch CIV 2003 485 2433

[2005] NZHC 1707

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV 2003 485 2433

BETWEEN

MACALISTER TODD PHILLIPS BODKINS A PARTNERSHIP OF BARRISTERS AND SOLICITORS PRACTISING IN QUEENSTOWN AND WANAKA

First Plaintiff

AND

GRAEME MORRIS TODD, OF WANAKA, SOLICITOR

Second Plaintiff

AND

AMP GENERAL INSURANCE LIMITED A DULY INCORPORATED COMPANY HVING ITS REGISTERED OFFICE AT WELLINGTON

Defendant

Hearing:

7 and 8 March 2005

Appearances: E D Wylie QC for Plaintiffs

N A Till for Defendant Judgment:  12 May 2005

JUDGMENT OF CHISHOLM J

[1]    In substance the first plaintiff, a firm of lawyers, is seeking indemnity under a professional indemnity insurance policy issued by the defendant. The second plaintiff, a partner in the firm, was the partner primarily responsible for the events giving rise to the claim, namely, the failure of a trust of which he was a trustee to pay GST. There is no dispute about the existence or currency of the policy. The only issue is whether the events giving rise to the claim for indemnity are covered by the policy and, if so, the amount payable.

MACALISTER TODD PHILLIPS BODKINS And Anor V AMP GENERAL INSURANCE LIMITED HC CHCH CIV 2003 485 2433 12 May 2005

[2]    The plaintiffs seek $72,000 (being the amount paid by the first plaintiff to the Inland Revenue Department) together with interest and the costs incurred by the firm in negotiating a settlement with the IRD. A comprehensive agreed statement of facts is before the Court. In addition the second plaintiff gave evidence and expert evidence from a senior Christchurch solicitor was adduced on behalf of the plaintiffs. Both witnesses were cross-examined.

Background

[3]    Since the 1980s Macalister Todd Phillips Bodkins (“the firm”), in particular Mr Todd, had acted for Basil Walker, his wife Catherine, and for members of their immediate family. Mr Todd did not have any personal relationship with members of the Walker family and all his dealings with them were in his professional capacity. Mr and Mrs Walker and the various entities with which they were associated were charged by the firm at the firm’s normal rates.

[4]    This proceeding arises from Mr Todd’s status as a trustee of the Walker Family Trust which was created by deed dated 20 April 1993. Basil Walker was effectively the settlor of the trust. His brother, Lindsay Walker, was Mr Todd’s co- trustee. The primary beneficiaries under the trust were Basil and Catherine Walker and their children.

[5]    The firm acted on the creation of the trust and thereafter in relation to all the matters discussed below. Although Mr Todd carried primary responsibility for advising and acting for the trust, other partners and staff also fulfilled that role from time to time.

[6]    In April 1994 the trustees purchased a property at Towne Place, Queenstown, (“Towne Place”) with the intention of constructing seven residential units under the Unit Titles Act 1972.  Substantial finance was provided by BNZ.  With the consent of the trustees Basil Walker personally undertook development of the Towne Place units. He liased with the trustees on a regular basis and agreed to attend to the

necessary GST and other tax returns as well as all other accounting matters in relation to the development.

[7]    Vacant rural-residential land at Lake Hayes (“Lake Hayes”) was purchased by the trustees in October 1994. This purchase was funded by a first mortgage advance from Southland Building Society and a second mortgage advance from Basil and Catherine Walker.

[8]    The following month Basil Walker entered into an agreement as agent for the purchase of two vacant lots at 221 Frankton Road, Queenstown (“Frankton Road”) and the trustees became the nominated purchasers. Settlement was to be effected on 1 April 1995. It was anticipated that the trustees would be able to use the sale proceeds of the Towne Place units to complete this purchase. However, there were delays in completing the Towne Place units and it became necessary for the trustees to arrange further funding from BNZ to settle the Frankton Road purchase.

[9]    When the sales of the Towne Place units were progressively settled from March to May 1995 it was overlooked by Mr Todd and the legal executive assisting with the conveyancing that GST was payable on each sale. The net proceeds were paid to BNZ in reduction of its mortgage without any provision being made for the payment of GST.

[10]   It was not until he received a telephone call from the IRD on 13  October 1995 that Mr Todd realised that there was a problem. He was informed that there were GST arrears of $61,433.39 arising from the sale of the Towne Place units and that Basil Walker had not honoured arrangements with the Department for those arrears to be paid. Mr Todd then spoke to Basil Walker and arranged for  him to meet with IRD and to put in place arrangements to secure payment of  the outstanding GST. He followed that up with a letter to IRD.

[11]   The following month the firm received a notice under s43 of the Goods and Services Tax Act 1985 requiring it to deduct the GST arrears from any amount that was or would become due by the trustees. Because there were no such amounts it

was decided by the trustees that the only way the trust could clear the GST arrears was by the sale of assets.

[12]   Attention was focussed on the Frankton Road property where Basil Walker had been working on a 13 unit title development. Unfortunately there were  numerous complications. Ultimately the trustees entered into an agreement for the sale of the property on the basis that they retained the right to develop three future development units on the property. That sale was settled in October 1996 but there were no surplus funds available to meet the GST arrears. Subsequently the trustees borrowed funds from Southland Building Society with the intention of developing the three future development units but this proposal was ultimately abandoned (with the consent of the Southland Building Society) in favour of developing the Lake Hayes property.

[13]   Further problems surfaced. A memorandum to the trustees from the trust’s accountants in late 1997 alerted the trustees to the fact that there were outstanding taxation returns relating to the trust. Up to this time they had been relying on Basil Walker to attend to such matters. It transpired that the trust’s accountants had been receiving assessments from IRD and forwarding them to Basil Walker who was managing the trust’s affairs. No-one had brought the problem to the attention of the trustees. Having become aware of the situation Mr Todd asked Mr  Walker  to provide all necessary information to the accountants so that the taxation returns  could be completed.

[14]   On 17 February 1999 Mr Todd received a demand from IRD for $172,958.55 payable by the trust. This comprised GST on the sale of the Towne Place units (which, with penalties, had now increased to $90,957.34), unpaid income tax of

$80,826.12 and PAYE, Employer ACC premiums and fringe benefit tax. In their capacity as trustees Lindsay Walker and Mr Todd were personally liable for these amounts. The letter from IRD indicated that if payment was not made bankruptcy proceedings would follow.

[15]   Verbal notice of the firm’s and Mr Todd’s potential liability was given to AMP (through brokers) the same day. The next day Mr Todd made arrangements

with IRD for further action to be deferred so that the trustees could put a proposal in place. The trustees proposed to clear the IRD debt by selling the Lake Hayes property. However, the Southland Building Society mortgage had fallen into arrears and a Property Law Notice was issued. The three Frankton Road future development units were sold in December 1999 but there was no surplus to meet taxation arrears. Lake Hayes was sold by way of mortgagee sale in April 2000 but again there was no surplus. Effectively the trust was insolvent and had been for some time.  The  trustees were facing personal liability.

[16]   The insurance broker then put Mr Todd in touch with Mr Everard, an Auckland barrister, who had been retained by AMP. Correspondence passed  between Mr Everard and the firm. Judging from the correspondence it was Mr Everard’s view that there was no cover under the policy primarily because the tax liability had been incurred by a trust in respect of which Mr Todd was a trustee and was thereby excluded by Exclusion 8 of the policy. In January 2001 the firm was notified that Lindsay Walker intended to make a claim against Mr Todd for any sums that he (Mr Walker) had to pay to the IRD in relation to taxation arrears.

[17]   With the approval of Mr Everard, Mr Todd and Mr Wylie QC met with IRD on 15 March 2001. An offer was made to pay $72,000 in full satisfaction of any claim against Mr Todd. By that time the total amount of tax outstanding, including arrears, was $278,330. The Department was not prepared to make a final decision until there was more certainty about Lindsay Walker’s position.

[18]   On 11 September 2001 Lindsay Walker issued proceedings against Mr Todd alleging breach of duty as a solicitor trustee and seeking a declaration that he was entitled to indemnity from Mr Todd in relation to any taxation liability. AMP took over the defence of this proceeding and issued a counterclaim against Mr Walker seeking half the amount that it was expected Mr Todd would pay to IRD ($72,000). A third party notice was also issued on behalf of Mr Todd seeking indemnity from the trust’s accountants in relation to any liability that Mr Todd might have to Mr Walker.

[19]   Settlement was progressively achieved between the various parties during 2002. IRD accepted $72,000 from Mr Todd and $30,000 from Mr Walker in satisfaction of their personal liability as trustees. The firm borrowed money and met Mr Todd’s liability. Later Mr Todd’s claim against the trust’s accountants was settled by the accountants paying $20,000 and Mr Walker’s claim against Mr Todd was settled by the payment of $27,000 plus a share of the mediator’s fee. The firm contributed $20,000, being the excess under the policy, and AMP contributed the balance required to complete this part of the settlement.

[20]This proceeding was issued on 4 November 2003.

The Policy

[21]The operative clause of the policy relevantly provides:

“AMP agrees, subject to the terms, limitations, exclusions and conditions of this Policy to indemnify the Insured in respect of claims first made against, or losses first discovered by the Insured after the inception of this Policy arising out of the conduct of the Professional Services of the Insured for

1.claims (including claimants’ costs) made against the Insured arising out of civil liability, and losses incurred by the Insured due to dishonesty of employees.

2.other costs and expenses incurred by the Insured in the defence and/or settlement of claims or losses under Operative Clause 1.

…”.

There is no policy definition of the words “claims”, “losses” and “civil liability”.

[22]“Professional Services” carries the following definition:

“… shall mean all advice or services performed in the conduct of the profession, which shall also include when acting as trustees, stated in the Schedule by or on behalf of the Insured or duties undertaken by the Firm or Practice as agents of other practitioners excluding any individual personal appointments of a present partner, outgoing partner, sole practitioner or employee of the Firm or Practice as a Director or Officer unless liability arises from the professional advice given in the capacity of the profession as stated in the Schedule.”

The profession stated in the schedule is that of solicitors.

Plaintiffs’ Case

[23]   This policy was intended to provide indemnity insurance protection to solicitors for claims made against solicitors arising from the carrying out of every day legal work. When the operative clause is analysed it can be seen that there are three elements: a “claim” or “loss”; “arising out of the  conduct  of  the  Professional Services of the insurer”; “for claims … made against the Insured arising out of a civil liability”. Each element is satisfied in this case.

[24]   There were effectively three “claims”: by IRD against Mr Todd; by Lindsay Walker against Mr Todd; and by Mr Todd against his firm.  In relation to the first  and third claims AMP was kept aware of attempts being made to settle with IRD and elected to take no role. It did not require Mr Todd to contest his personal liability or to issue proceedings against the firm. In the case of Mr Walker’s claim proceedings were issued and AMP managed the defence of those proceedings.  Significantly AMP admitted on behalf of Mr Todd that he had been appointed trustee in his professional capacity as a solicitor/trustee, that he had been engaged by the trustees on that basis to act on the trust’s behalf to manage its affairs, and that in his capacity as a professional solicitor/trustee he owed a duty of care to Mr Walker as his co- trustee to manage the affairs of the trust in a competent manner.

[25]   As to the requirement that the claim or loss must arise out of the conduct of the insured’s professional services, the relevant profession is that of a solicitor. Mr Todd only became a trustee because he was a solicitor and he was acting as a solicitor when he advised the trustees and when he carried out (or failed to carry out) his duties as a trustee. The wide definition of “professional services” encompasses all advice or services performed in the conduct of a solicitor including when acting  as a trustee. In Hansen v Young [2003]1 NZLR 83 at 102-105 it was accepted that a solicitor who was the executor of an estate had acted in that role as a solicitor. The practice of solicitors acting as trustees of estates and inter vivos trusts is commonplace in New Zealand and on the evidence before the Court was normal for

the firm. At  all relevant times Mr Todd’s trustee role was being undertaken by him in his capacity as a solicitor.

[26]   Finally, as to the element that the claim must arise out of civil liability, there is an element of tautology in the operative clause by virtue of the repetition of the word “claims”.  Any ambiguity should be resolved in favour of the insured.   There is no requirement for the claim to be in the context of formal legal proceedings and the claims in this case arose out of civil liability as opposed to criminal liability. There was nothing to preclude Mr Todd in his capacity as a third party trustee suing the firm, it having been accepted by Mr Todd, his firm, and presumably by AMP,  that Mr Todd was negligent in his capacity as a solicitor/trustee. This is also reinforced by the expert evidence adduced on behalf of the plaintiff. It is unlikely that AMP would have required the firm to contest any legal proceedings Mr Todd may have brought. Although AMP has had the advantage of the settlement achieved by the firm it is unfairly refusing to accept liability for payment.

[27]   To the extent that AMP had advanced a positive defence based on Exclusion 8 under the policy, that defence is without merit. Exclusion 8 provides:

“AMP shall not indemnify the insured against a claim or loss…arising from their trading loss or trading liability incurred by a business managed by or carried on by the Insured.”

The claims in this case do not arise out of either a trading loss or liability incurred by a business managed by, or carried on, by the insured. The loss arose from the firm’s negligence/breach of duty in failing to ensure that provision was made for GST, failing to properly advise Mr Todd and Lindsay Walker as trustees, failing to properly manage the affairs of the trust, and failing to properly monitor the actions of Basil Walker. The only business carried on by the insured was the business of solicitors, and Mr Todd’s services as a trustee were undertaken by him as a solicitor.

[28]   In relation to the defendant’s submission that if the plaintiffs succeed they should pay a further excess, there are two responses. First, there is nothing in the policy permitting the deduction of an excess. Secondly, there is in reality only one claim and the plaintiffs have already paid the excess. It would be wrong and in breach of the policy to require a further excess in the context of the present claim.

Defendant’s Case

[29]   The purpose of the policy is to insure solicitors against liability to third parties and not to protect them against their own internal mismanagement. Before  the operative clause can apply there has to be a claim against the insured by a third party plus liability of the insured to that third party. This reflects the terms of the policy, texts on insurance law and authority on the point ( Goddard & Smith v Frew [1939] 4 All ER 358 and Walton v National Employers’ Mutual General Insurance [1974] 2 Lloyd’s Rep.385). In this case neither of those requirements can be met.

[30]   There was no claim by a third party. By virtue of the policy definitions of “insured” and “professional services” there is no distinction between the firm, Mr Todd in his capacity as a solicitor, and Mr Todd in his capacity as  trustee.  Given that Mr Todd acted as trustee with the actual authority of his partners in the course of the partnership business his liability as trustee was not only his own but also that of his partners. Consequently, the liability for payment of GST was that of Mr Todd and all of the partners. Any notional claim by Mr Todd against the firm was a claim by himself against himself, or by the firm against the firm, or by an insured against an insured, and not a claim by a third party against an insured.

[31]   No loss has been sustained by Mr Todd in his capacity as trustee. The trust funds in respect of which he had obligations were credited with the GST and were not diminished by the obligation to pay other taxes. His personal/professional loss resulted from the absence of a solvent trust fund against which to enforce his right of indemnity.

[32]   No civil liability has been established by the trustees against the firm, nor by Mr Todd in his capacity as a solicitor against himself. Although the claim by the IRD was a claim by a third party it was not a claim of the kind covered by a professional indemnity policy because the liability to pay GST is a statutory liability akin to the client’s claim for monies had and received in Goddard & Smith v Frew and the failure to deliver the share scripts in Walton v National Employers.

Alternatively, if the operative clause is found to apply to the IRD’s claim for GST then such claim is excluded by Exclusion 8 in that it is a trading liability incurred by the trust’s business carried on by Mr Todd and the firm.

[33]   If the plaintiffs are entitled to indemnity in respect of civil liability to the IRD there is a second excess payable because the IRD liability arises out of a separate source, cause or event (in terms of the definition of “Each claim or loss)” to that in respect of which the first excess was paid. Mr Walker’s claim was for negligence, whereas the claim by the IRD arises from trading and revenue statutes. However, if the plaintiffs are found to be entitled to indemnity in respect of civil liability to Mr Todd it is conceded that only one excess is payable and that it has already been paid

Discussion

[34]   These competing arguments appear to reflect fundamental differences between the parties as to the interpretation of the underlying events rather than any deep disagreement about the construction of the policy. The terms of the policy are, of course, crucial. While it is true that there is an element of tautology in  the operative clause arising from the repetition of the word “claims”, I do not think that this gives rise to any major difficulty in construing the policy.

[35]   In terms of the operative clause AMP agreed to provide indemnity in respect of :

“…claims…arising out of the conduct of the Professional Services of the Insured for…claims….made against the Insured arising out of civil liability…”

Except to the extent that relevant definitions are provided in the policy these words should be construed in their plain, ordinary, and popular sense, there being nothing  to suggest that they should carry any particular meaning in the field of indemnity insurance. Like Mr Wylie, I find it convenient to break the operative clause into its essential components.

[36]   Indemnity is provided in relation to “claims”. I agree with Mr Wylie that in its ordinary sense this word does not require the formal issue of proceedings. The New Shorter Oxford English Dictionary (Fourth Edition) includes the following definitions of “claim”:

“…Demand … one’s due …require as a right…Assert or demand recognition of … represent oneself as having…assert, contend…”

The words “claims” or “claim” are sprinkled throughout the policy and on each occasion they are used in a sense that is entirely consistent with the dictionary definition. Equally importantly “claim” and “legal proceedings” are both used in Condition 2 of the policy in a context that dispels any possibility that a claim is intended to be synonymous with the issue of proceedings.

[37]   To qualify under the policy a claim must also “arise out of the conduct of the Professional Services of the Insured”. By definition “Professional Services” means all advice or services performed in the conduct of the profession of solicitors, including when acting as trustees. “Insured” includes the firm, partners, employees, and consultants involved in the conduct of the firm’s professional services.  It follows that the scope of activities potentially covered by the policy is very wide. In particular there is cover for professional advice or services provided both in the capacity of a solicitor and in the capacity of a trustee.

[38]   The next requirement is that the claim must be “made against” the insured which I interpret as a requirement for there to be a claim by a third party. The  critical issue is whether a claim by Mr Todd in his capacity as a trustee of the Walker family trust qualifies. Amongst other things the policy provides indemnity in respect of claims against the firm arising from failure to exercise proper care and skill as a solicitor, including claims by trustees in situations where the client affected is a trust. At law there is no distinction between a trust and its trustees: Commissioner of  Inland Revenue v Chester Trustee Services Ltd [2003] 1 NZLR 395 at paragraph [37]; Wilmott v Johnson [2003] 1 NZLR 649 at paragraph [31]. Given the definition of “Professional Services” it goes without saying that both the insurer and the insured realised that members of the firm might act as trustees which carries the implication that a situation could arise where in his or her capacity as a trustee a

member of the firm would have to utilise s33A of the Trustee Act 1956 which relevantly provides:

“Notwithstanding any rule of law or practice to the contrary, a trustee … may sue … himself in any other capacity whatsoever, including his personal capacity …”.

Put quite simply, the parties to this policy can be taken to have contemplated the  very situation that arose in this case. However, while they chose to include in the policy 15 particular situations where cover was to be excluded, they elected not to exclude cover in a situation where a member of the firm sues the firm in his capacity as a trustee. It would not have been difficult to add another clause under the heading “Exclusions” to cover that situation. I interpret the absence of any such clause as a clear indication that it was the intention of the parties that indemnity should be available in the situation under consideration (so long as other policy requirements are met). It follows that a claim by Mr Todd in his capacity as trustee qualifies as a claim “made against” the insured. Application of the contra preferentum rule would also produce the same result.

[39]   Finally, the claim must arise “out of civil liability”. In my view those words indicate that liability must arise under the civil, as opposed to criminal, law. The importance of the distinction between an indemnity policy providing cover against civil liability and a fidelity policy providing cover in relation to criminal conduct is illustrated by Goddard & Smith v Frew. Mr Till claimed that in any event statutory liability to pay GST is not within the contemplation of the policy. In my view that proposition is too wide. Whether or not the failure to pay GST falls within the scope of the policy will depend on all the circumstances including the underlying cause of the failure and the effect upon the claimant. I will return to those issues later.

[40]   With the benefit of that analysis of the policy document I now consider whether the events giving rise to this proceeding are covered by the policy. With reference to professional indemnity insurance the authors of The Laws of New Zealand, Part 14, Insurance comment at paragraph 483:

“Regardless of how the insured’s client frames his or her case against the insured, the Court must ascertain, by reference to the ascertainable facts, what the real essence of the client’s case is.”

In relation to the GST payment of $72,000 the plaintiffs and defendant seem to have entirely different views as to the real essence of the claim against the firm. That conflict needs to be resolved.

[41]   Mr Todd was invited to become a trustee of the Walker Family Trust because he was a solicitor. Having accepted that appointment he was the primary legal adviser to the trust. More importantly I am satisfied on the evidence that the conveyancing role which gave rise to the GST problems was undertaken by Mr Todd in his capacity as a solicitor. At this point I pause to note that although the plaintiffs relied on Hansen v Young, that decision was overturned by the Court of Appeal on the facts: [2004] 1 NZLR 37. However, it is unnecessary to make any further reference to those decisions because they are plainly distinguishable on the facts and there do not appear to be any observations in the Court of Appeal decision that call into question the conclusion I have just reached on the facts before me.

[42]   In his capacity as a solicitor Mr Todd failed to exercise proper care and skill when acting on the sale of the units. Failure to make provision for GST speaks for itself. Mr Todd accepts that he was negligent. Expert evidence from Mr Mackintosh supports that conclusion and no serious argument to the contrary was advanced on behalf of the defendant. The firm was, of course, responsible for Mr Todd’s negligence.

[43]   Failure to pay GST from the sale proceeds of each Towne Place unit carried the direct, although not immediate, consequences that the tax could not be met from the assets of the trust and the trustees became personally liable for the tax and penalties under the Goods and Services Tax Act. This situation would not have  arisen if the firm (through Mr Todd) had properly discharged its conveyancing responsibilities when acting on the sale of each unit.

[44]   Initially the trustees were hopeful that it would be possible to retrieve the situation by selling trust assets. In fact, however, despite their best efforts  the trustees were unable to retrieve the situation. The trust was insolvent. Consequently the trustees faced the prospect of meeting the GST and penalties from their own pockets. This was directly attributable to the firm’s negligence. If the firm had not

borrowed the money and paid the sum of $72,000 to IRD, Mr Todd would have been entitled to issue proceedings and recover from the firm the amount that he was required to pay to IRD (in all probability much more than $72,000). The firm’s acknowledgment of liability and willingness to settle with IRD to avoid an escalating claim was plainly sensible. The insurer was kept informed throughout and it is difficult to imagine that the outcome would have been any different if the insurer had been handling the claim. It might also be  added that  if Mr  Walker’s claim against Mr Todd had gone the full distance it would not have been surprising if the trust’s accountants had taken steps to join the firm.

[45]   Mr Till maintains that there was no loss because the trust was credited with the GST and that Mr Todd’s loss resulted from the absence of a solvent trust fund against which to enforce his right of indemnity. I do not accept those submissions. Mr Todd’s liability to pay GST and penalties out of his own pocket was directly attributable to the firm’s negligence. Without that negligence there would not have been any question of Mr Todd having to pay GST and penalties on behalf of the trust because they would have been met by the trust out of the sale proceeds of each unit.

[46]   The underlying reality of the claim against the firm can now be stated. In his capacity as a trustee of the Walker Family Trust Mr Todd had a valid claim against the firm for its negligence (so did Mr Walker). This was acknowledged by the firm. AMP chose not to be directly involved in the efforts of the firm and Mr Todd to settle Mr Todd’s claim as expeditiously as possible. Although the settlement with IRD (funded by the firm) avoided the necessity for Mr Todd to formally bring his claim and issue proceedings, it does not alter the reality that Mr Todd (and Mr Walker) had a valid claim against the firm which fell within the operative clause of the policy.

[47]   The next issue is whether Exclusion 8 of the policy applies. This provision excludes claims or losses “arising from a trading loss or trading liability incurred  by a business managed by or carried on by the Insured”. The defendant maintains that the tax liabilities arose from the trust’s losses and from trading managed and/or carried out by the plaintiffs. In my view that proposition distorts the actual situation. The claim in this case arose from the firm’s failure to make provision for GST when

acting on the sale of the Towne Place units. It did not arise from a trading loss or trading liability incurred by a business managed or carried on by the insured. The insured was carrying on business as solicitors, not as a property developer operating under the name of the Walker Family Trust.

[48]   In the end result I am satisfied that the first plaintiff is entitled to indemnity under the policy in relation to the sum of $72,000 paid by it to IRD. Given Mr Till’s concession (see paragraph [33]), it is my understanding that the conclusion I have reached (and the path by which it has been reached) means that the defendant concedes that the first plaintiff has paid the excess under the policy. Even if the defendant had not made that concession I would still have held against the defendant on the excess issue. The plaintiffs’ are also entitled to interest and to be reimbursed for the proportion of Mr Wylie’s fee that is attributable to the settlement with the Inland Revenue Department.

Outcome

[49]The first plaintiff is entitled to judgment against the defendant in the sum of

$72,000, interest to the date of judgment, and $10,000 in relation to Mr Wylie’s account. No issue appears to have been taken with the interest rates at p131 of the agreed bundle. Those rates are endorsed and I assume that the parties will be able to reach an agreed figure as at the date of judgment. I note that Mr Wylie’s account includes disbursements and assume that the figure of $10,000 mentioned by Mr Todd in his evidence includes disbursements. However, I reserve leave to the parties to apply further on any of these matters should the need arise.

[50]   My initial impression is that the first plaintiff is entitled to costs on the 2B scale. Hopefully the parties can settle costs on that basis. If this is not the position counsel should submit memoranda so that costs can be fixed by the Court.

Solicitors:Richard Burtt and Associates, Christchurch for Plaintiff (Counsel: E D Wylie QC) Kensington Swan, Auckland for Defendant (Counsel: N Till)