New Zealand Local Authority Protection Programme Disaster Fund v Auckland Council

[2013] NZHC 631

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-2864 [2013] NZHC 631

BETWEEN  NEW ZEALAND LOCAL AUTHORITY PROTECTION PROGRAMME DISASTER FUND

Plaintiff

ANDAUCKLAND COUNCIL Defendant

Hearing:         26 March 2013

Counsel:         M Ring QC for Plaintiff

N R Hall for Defendant

Judgment:      27 March 2013

JUDGMENT OF MILLER J

[1]   This judgment responds to applications by the plaintiff for an order that interrogatories be answered, and by each of the plaintiff and defendant for particular discovery.

[2]    The plaintiff is described as a charitable trust established in 1993 as a cash accumulation pool to help New Zealand local authority members pay their share of infrastructure replacement costs for services damaged by natural disasters.   It is a kind of insurer.  The former Papakura District Council and North Shore City Council were members of the plaintiff.  On 1 November 2010 they were subsumed, pursuant to legislation, into the defendant, which has succeeded to their liabilities.

[3]    A dispute has arisen over $1,068,283.30, representing the Papakura District

Council’s and North Shore City Council’s contributions to the plaintiff for the 2011-

2012 fund year.  It is said that in order to avoid this liability the Councils concerned, or the Auckland Transition Agency on their behalf, had to give notice of withdrawal

N Z LOCAL AUTHORITY PROTECTION PROGRAMME DISASTER FUND v AUCKLAND COUNCIL HC AK CIV-2012-404-2864 [27 March 2013]

from  membership  of  the  plaintiff  before  30  June  2010.    This  notice,  which  is

provided for in the plaintiff’s trust deed, was not given.

[4]    The defendant formerly responded that an email of 25 May 2010 constituted sufficient notice of withdrawal, but it has very recently abandoned that defence.  It now relies on affirmative defences that the plaintiff is estopped, that implied terms of good  faith  and  commercial  fairness  excuse it,  and  that  the agreement  has  been frustrated.   Specifically,  the defendant says that after 1 November 2010 a very substantial  portion  of  two  Council’s  assets  were  vested  in  Watercare  Services Limited but the sum claimed by the plaintiff assumes that these assets were still owned by the defendant.  It says that the plaintiff is estopped requiring payment of the invoice because it knew, following the dissolution of the two Councils and the vesting of their assets in the defendant and Watercare, that from 1 July 2011 the defendant had no infrastructure for which it required coverage.  The plaintiff is said to be in breach of an implied term of good faith and commercial fairness, in that it invoiced the defendant when it knew that no cover was required.

[5]    It is evident from the argument before me both that the defence is still evolving and that the defendant has not fully thought through what it must prove to establish its affirmative defences.  Notably, it is not enough in law to show that the plaintiff knew of the transfer of assets to Watercare, especially in circumstances where the defendant itself knew better than anyone what its asset position was; further, it is not self-evident that upon amalgamation the defendant would cease to have an insurable interest in Watercare assets, let alone other assets of the predecessor Councils.  The evolving nature of the defence appears to explain why counsel have not reached sensible agreements about discovery and interrogatories.

[6]   At the hearing I directed that the defendant must answer the amended interrogatories sought and make any necessary disclosure about its own decisionmaking process regarding coverage in the relevant year.   It must disclose anything that goes to the question whether it relied to its detriment on any representations made by the plaintiff.

[7]    I  also  directed  that  the  plaintiff  must  discover  documents  relating  to  its processes pursuant to the trust deed for setting premiums or contributions and how those  premiums  or contributions  were set  in  the relevant  year,  as  requested  by Ms Hall in her amended schedule.  It is conceivable that a failure of process on the plaintiff’ part might have caused the defendant to fail to advise that it now had no assets that needed cover.  It is true, as Mr Ring observed, that the defence does not yet put this process in issue, but I understand that it will soon do so, and I made the order in anticipation of that pleading.  I do not mean to suggest, of course, that any such defence will succeed at trial; as Mr Ring noted, it must raise causation issues in circumstances where the defendant was actively reviewing its insurance needs.

[8]    I am not prepared to order discovery of documents relating to premiums or contributions set in the succeeding year.  Ms Hall was not able to demonstrate to my satisfaction why they are relevant.  Because the plaintiff has pleaded that it reinsured in reliance on the defendant’s membership, it must disclose those arrangements to the extent it has not already done so.  Documents held by its administration manager must be within its power, so must be discovered to the extent that they are relevant.

[9]    Nor am I prepared to go behind the affidavits of documents that have been sworn for the defendant by ordering renewed efforts to locate documents.  Mr Ring criticised the defendant’s discovery with some justification, but it is commonly the case that locating relevant papers is an iterative exercise, as it has been for the plaintiff too.   More importantly, I am not satisfied that the defendant must have relevant documents which have not been located.   I find plausible Ms Hall’s submission that the defendant and its staff and agents had bigger things to worry about and did not spend much time on the relationship with the plaintiff.  It appears from the affidavits of Mr Singh that diligent inquiries have been made.

[10]  I do not think it necessary to further particularise these orders, but counsel will have leave to apply by memoranda if clarification is needed.

Solicitors:

Burrowes and Company, Wellington for Plaintiff

Simpson Grierson, Auckland for Defendant

Miller J