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McCullagh v Underwriters Severally

McCullagh v Underwriters Severally

Case [2015] NZHC 1384 18 June 2015

Insurance Proceeds

Charge on Insurance Moneys

Extraterritoriality

Enforcement of Charge

Insurance Law

Insolvency Law

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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-1711 [2015] NZHC 1384

BETWEEN
ANTHONY JOHN MCCULLAGH AND

STEPHEN MARK LAWRENCE Applicants

AND

UNDERWRITERS SEVERALLY First Respondent

(Intituling cont'd over)

Hearing: 15 June 2015

Appearances:

D T Broadmore for Applicants
M G Ring QC and M J Francis for First Respondent
No appearance for Second Respondent

A R Galbraith QC and L J Douglas for Third Respondent L L C Cooney and A D Gormack for Fourth and Fifth Respondents

D M Cross for Third Party

Judgment:

18 June 2015

JUDGMENT OF WYLIE J

This judgment was delivered by Justice Wylie on 18 June 2015 at 4.00pm
pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date:…………………………………..

MCCULLAGH AND LAWRENCE v UNDERWRITERS SEVERALLY & ORS [2015] NZHC 1384 [18 June
2015]

BODY CORPORATE 326421
Second Respondent

AUCKLAND COUNCIL Third Respondent

BODY CORPORATE 346799
Fourth Respondent

BODY CORPORATE 324371
Fifth Respondent

BOSTIK NEW ZEALAND LIMITED Third Party

Introduction

[1] The applicants, Messrs McCullagh and Lawrence, are the liquidators of Brookfield Multiplex Constructions (NZ) Ltd (in liquidation) (“BMX”). They have applied to the Court for directions pursuant to s 284 of the Companies Act 1993. They seek a direction as to whether any monies paid or payable to BMX by its insurers under three insurance policies held by BMX are subject to a charge under s
9 of the Law Reform Act 1936 (“the Act”). In the event that the Court concludes that there is no charge, they seek a further direction permitting them to try to negotiate a reasonable settlement with the first respondent underwriters.

[2] In the event Messrs McCullagh and Lawrence did not take an active stance at the hearing. They advised through Mr Broadmore that they abide the decision of the Court.

[3] Mr Ring QC appeared for the underwriters under each of the three insurance policies and he assumed the burden of the argument that there can be no charge in the circumstances of this case. He noted that it is common ground that the underwriters have their place of business in the United Kingdom. He argued that where an insurer is based in another jurisdiction, there can be no charge under s 9(1) of the Act on any moneys that are or may become payable by the insurer to the insured, and that any moneys paid pursuant to the policy cannot subsequently become charged under s 9(1) when they are paid by the insurer to the insured.

[4] Mr Galbraith QC for Auckland Council – the third respondent - supported by Mr Cooney for the fourth and fifth respondents – both bodies corporate – argued that there is a charge under s 9(1) of the Act on moneys that are or may become payable by the insurer to the insured, that such charge cannot be enforced when the insurer is based off-shore, but that when the moneys are paid pursuant to the policy to the insured and come into New Zealand, the charge can…

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.

Continue reading McCullagh v Underwriters Severally

Details

AGLC: McCullagh v Underwriters Severally [2015] NZHC 1384
Case: [2015] NZHC 1384
Decision Date: 18 June 2015

CaseChat Overview and Summary

McCullagh and Lawrence, the liquidators of Brookfield Multiplex Constructions (NZ) Ltd, sought directions from the Court regarding the application of s 9 of the Law Reform Act 1936 to insurance policies held by BMX. The primary issue was whether any monies paid or payable by the underwriters to BMX are subject to a charge under s 9 of the Act. The Court held that any moneys paid or payable to BMX by its insurers under the policies cannot be subject to a charge under s 9 of the Act. Consequently, any moneys paid by the underwriters to BMX will fall into BMX’s general pool of assets and be subject to pari passu distribution to all of BMX’s creditors. The Court also directed that the liquidators would be acting in good faith, in a fair and principled way, and consistently with statutory requirements if they reach a reasonable settlement with the underwriters of BMX’s rights under the policies. Costs were fixed on a 2B basis, with the applicant liquidators and the first respondent underwriters entitled to their costs and reasonable disbursements, and the liability of the other parties for costs and disbursements being joint and several.

Orders