Newlands v Sovereign Assurance Company Limited
[2014] NZHC 803
•16 April 2014
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2012-404-002618 [2014] NZHC 803
BETWEEN JAMES GORDON NEWLANDS
Plaintiff
AND
SOVEREIGN ASSURANCE COMPANY LIMITED
First Defendant
AND
BRUCE GRAHAM CORTESI Second Defendant
AND
PLANWISE FINANCIAL SERVICES LIMITED
Third Defendant
Hearing: 14 February 2014 Appearances:
G Keene and P Kemps for the Plaintiff
R Hern for the Second and Third DefendantsJudgment:
16 April 2014
INTERIM JUDGMENT OF ASSOCIATE JUDGE SARGISSON
This judgment was delivered by me on 16 April 2014 at 4.30 p.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date.......................................
Solicitors: Kemps Weir, Auckland
McElroys, Auckland
Case officer: Sharon Chivers
NEWLANDS James Gordon v SOVEREIGN ASSURANCE COMPANY LIMITED [2014] NZHC 803 [16 April 2014]
[1] James Newlands commenced this proceeding against Sovereign Assurance Company Limited on 14 May 2012. Almost a year later on 9 April 2013 he joined Bruce Cortesi and Planwise Financial Services Limited to the proceeding as second and third defendants. Mr Cortesi and Planwise apply for a summary judgment to dismiss Mr Newlands’ claim against them.
[2] The application revolves essentially around the issue whether the claim is time barred. Mr Cortesi and Planwise say none of the causes of action against them can succeed. They rely on a single ground - that the remaining live causes of action against them were brought after the expiration of six years from 20 November 2005, being the date the causes of action accrued, and that being the case, the causes of action are plainly time barred under s 4 of the Limitations Act 1950.
[3] Mr Newlands opposes the application. He acknowledges his causes of action in contract cannot succeed but he contends that those founded on tort are arguably not time barred. The grounds he relies on are broadly twofold:
a) First, if he is able to demonstrate that Mr Cortesi and Planwise were negligent as alleged in the statement of claim, his first loss attributable to their negligence occurred in July 2007 at the earliest. As his causes of action in tort accrued upon his first loss, the period allowed for bringing the proceeding did not expire for a further six years, until 28 July 2013.
b)Alternatively, if as the defendants contend, his first loss occurred in November 2005, the allowable period for bringing the proceeding did not begin to run until 28 July 2007 at the earliest as this is a case of fraud or mistake which gives rise to a postponement under s 28 of the Limitation Act 1950.
[4] The onus is on Mr Cortesi and Planwise to show that none of the remaining live causes of action can succeed.
Background
[5] Planwise was established in November 2001 by Mr Cortesi to carry on business as a provider of financial and insurance advice to its business and lifestyle customers. Mr Cortesi, a registered financial advisor, has been sole director of Planwise since its inception. He deals with financial and insurance service providers including Sovereign on behalf of Planwise’s customers.
[6] In early 2005 Mr Newlands was in business as a drainage contractor with his then partner, Selena Martin. They operated the business through two companies, Newlands Drainage & Bulldozing Limited and Andlands Limited.
[7] Mr Newlands first consulted Mr Cortesi and Planwise in February 2005 about refinancing an existing property. Together with Ms Martin he consulted Mr Cortesi again in July 2005 about their personal financial and insurance positions, and about insurance to safeguard the position of their companies in the event of his death or illness.
[8] Mr Cortesi conducted an analysis of Mr Newlands’ and Ms Martin’s personal financial positions and that of their companies with a view to implementing a risk protection plan. As part of that process, Mr Cortesi recommended Sovereign’s BusinessCare policy, a portfolio of life, trauma and total permanent disability insurances. Mr Cortesi arranged for Mr Newlands and Ms Martin to apply for
$150,000 worth of cover each for death, total permanent disability and trauma. He provided them with an application for BusinessCare cover which they completed and returned to him. There was some further communication between Mr Newlands and Mr Cortesi about the importance of the health declarations in the applications, and on 15 November 2005 Mr Cortesi resubmitted the applications to Sovereign.
[9] On 20 November 2005 Sovereign accepted the applications and issued a BusinessCare policy. The issued policy was for a period of 19 years and was subject to annual CPI adjustments and readjustments of premiums. It provided “life assurance” cover and “living assurance” cover. The latter was limited in that it covered “critical illness” which did not extend to any illness deemed by the insurer to be less than critical.
[10] The policy document was sent by Sovereign to Mr Newlands via Mr Cortesi and Planwise. Mr Newlands contends that the policy was not accompanied by two appendices that set out details of the life cover benefit and the living assurance benefit and when the latter would apply.
[11] On 24 May 2006 Mr Newlands sought an increase in his cover under the policy. He requested Sovereign to increase the life assurance and the living assurance covers by $145,000. Sovereign gave approval on 6 June 2006. A second policy document was issued with the same terms but with the requested increased amount. There was no need for Mr Newlands to complete any additional forms at this time as the increase was arranged under a “business safeguard facility benefit” which enables a life assured to increase the sum assured where a financial need warrants it. Mr Newlands did however have an ongoing duty to disclose all relevant information.
[12] From November 2006 Mr Newlands suffered a series of “blackouts” which involved him collapsing and losing consciousness. Mr Cortesi was informed about this. Mr Newlands continued to work, but at a reduced capacity.
[13] On 24 January 2007 Mr Newlands suffered a heart attack and decided to make a claim with Sovereign. In February 2007 he made a claim for living costs under the two policies of $295,000. Because of his deteriorating health, his driver’s licence was suspended in March 2007. This prevented him from working at all.
[14] Sovereign ultimately declined the claim on 27 July 2007. It notified Mr Newlands that the claim had been declined on the basis of non-disclosure of certain medical conditions when applying for insurance in November 2005.
[15] Mr Cortesi approached Sovereign on Mr Newlands’ behalf. On
24 September 2007, in a letter he sent to Mr Newlands, Mr Cortesi discussed Sovereign’s declinature for non-disclosure and steps he had taken on Mr Newlands’ behalf to “renegotiate” with Sovereign. The letter states:
Dear Jim
I have held off sending this letter to you detailing Sovereign’s decision to decline your claim pending information from your Doctor that would give Sovereign a cause to consider a benefit payment under the terms and conditions of the policy wording.
Sovereign cancelled your insurance on July 27th, and you have not paid any premiums to them since that date, and were in fact in arrears prior to this decision but they held off cancelling your policy due to your pending claim.
The letter attached clearly outlines information supplied from your Doctor that you had Blood Pressure/Chest Pains etc prior to completing your application for insurance. This means that had they been aware of these medical issues they would not have offered the critical illness cover for heart condition etc.
I have tried to renegotiate with Sovereign on the grounds that you were in an emotional state when completing the application, however, on both applications none of this information was disclosed.
As we have no further medical information to substantiate a claim, and given that Sovereign cancelled the policies back in July, there is very little else I can do in this regard. I am sorry we can no longer pursue this avenue to assist your current financial situation.
However, once your property sells, the plan I have previously forwarded to you will assist and improve your financial situation greatly. I would therefore suggest you focus on making this happen as soon as possible, and I assure you Planwise will assist you in every way possible to meet this objective.
In closing Jim, I know this will be a disappointment, it would be easy to blame Sovereign, however, an independent medical adviser has been involved, and the decision has been based on the information sent by your GP.
[16] Mr Newlands was disappointed. He commenced this current proceeding on
14 May 2012 against Sovereign, claiming for wrongful declinature. Sovereign filed a statement of defence relying essentially on two defences. The first is that there had been material non-disclosure by Mr Newlands. The second is that Mr Newlands did not meet the criteria for a payout under the policy.
[17] The second criteria for declinature by Sovereign raised the question of whether Mr Newlands obtained the policy he requested. On 9 April 2013
Mr Newlands filed an amended statement of claim adding Mr Cortesi and Planwise as defendants. In it he says that he, his partner and Mr Cortesi agreed that the insurance policy would provide cover for any form of accident or illness that would prevent either of them from working normally for a period of three or more months. The policy however only provided for loss of income due to a critical illness.
The claim against Mr Cortesi and Planwise and the summary judgment application
[18] The essential allegation is that Mr Cortesi did not obtain the exact cover Mr Newlands asked for. The causes of action against Mr Cortesi and his employer, Planwise, rely on breaches of duties of care owed by financial and insurance advisers. In particular, Mr Newlands alleges that the defendants breached their duties by failing to ensure the cover procured from Sovereign corresponded exactly with the cover that Mr Cortesi had agreed to obtain. A loss of $335,000 is claimed plus general damages for mental stress.
[19] In a joint statement of defence filed on 14 May 2013 Mr Cortesi and Planwise have denied all liability. They plead that Mr Newlands agreed to Sovereign’s BusinessCare policy and as such that Mr Newlands agreed to a policy that does not provide cover for the condition he later claimed for, and even had the policy so provided, his material non-disclosure would have deprived him of cover. Relevantly, they also plead, by way of affirmative defence, that they have a complete defence under s 4 of the Limitation Act 1950 in that the time allowed for commencing a claim against them had expired by the time the amended statement of claim joining them as defendants was filed. They say the time limit was up on
21 November 2011.
[20] Mr Cortesi and Planwise filed their summary judgment application out of time on 16 October 2013. At the fourth case management conference held on
18 October 2013, Associate Judge Bell granted leave to all defendants to apply for summary judgment, but only on the question of limitation. That direction gave Mr Cortesi and Planwise the retrospective leave they required to make their application.
[21] Sovereign was given until 1 November 2013 to file its application, but it has elected not to proceed with summary judgment.
[22] On 26 November 2013 Mr Newlands filed a reply to the affirmative defences. It concedes that the causes of action in contract are time barred; and at the hearing Counsel confirmed that Mr Newlands does not resile from this position. But, as set out in the reply, he contends that the negligence causes of action are viable because:
a) The earliest time that Mr Newlands’ financial loss occurred as a result of the alleged negligence was in July 2007 upon Sovereign’s declinature, and this brings the action within the statutory period;
b)Even if loss did occur earlier, at the inception of the policy, Mr Cortesi concealed his negligence in obtaining the wrong policy by equitable fraud within the meaning of s 28(b). Alternatively, the cause of action was concealed by a genuine mistake by Mr Cortesi as to what was covered, resulting in a postponement under s 28(c).
[23] The reply is notable for the complete absence of particulars setting out what the assertion of equitable fraud is based on. No particulars are presented in Mr Newlands’ opposition to the application for summary judgment. The same goes for the assertion based on the cause of action for relief from the consequences of a mistake.
[24] In their submissions for summary judgment, the defendants responded to Mr Newlands’ allegation of fraudulent concealment in his reply: Mr Cortesi and Planwise deny they fraudulently concealed the cause of action. They argue that firstly, they did not know that Mr Newlands’ claim would be denied by Sovereign on the basis of non-disclosure, and hence could not have revealed this information to him before the declinature in July 2007. And secondly, the defendants argue that Mr Cortesi did not know that Mr Newlands was not covered by the policy because he did not know Mr Newlands’ exact medical condition, and hence did not conceal this information.
[25] With regard to the claim for relief from the consequences of the mistake, the defendants argue that the alleged mistake of not providing the requested policy is not a constituent of the cause of action.
[26] Mr Newlands’ evidence in his amended statement of claim is essentially founded on the allegation that he requested Mr Cortesi to broker a policy that would cover him for loss of income of three months or more due to any genuine illness or accident. However, there appears to be a discrepancy between this claim and Mr Newlands’ affidavits. In his first affidavit in opposition to application for summary judgment Mr Newlands states that following initial discussions with Mr Cortesi he understood the policy would cover “virtually any situation” where he or his partner were unable to work. In his second affidavit Mr Newlands states that
Mr Cortesi gave him the understanding early on that “the insurance would cover almost any situation” where Mr Newlands or his partner were unable to work for genuine reasons. Essentially the affidavits show that during the initial discussions with Mr Cortesi Mr Newlands understood there were limitations to his insurance cover and that he would be covered in some situations but not in others.
The issues for determination in the summary judgment application
[27] Given Mr Newlands’ concession in respect of the contract causes of action, it remains for Mr Cortesi and Planwise to show that their limitation defence to the causes of action in negligence is unassailable.
[28] It is common ground that:
a) If Mr Newlands did suffer loss in July 2005 upon the inception of the policy, these causes of action must have accrued from the inception of the policy - in which case the period of limitation for bringing them terminated on 21 November 2011 unless the commencement of that period was postponed by the operation of s 28.
b)For there to be postponement under s 28 Mr Newlands must have a cause of action against Mr Cortesi or Planwise that was concealed by fraud or that involves as an essential element mistake within the scope of s 28.
[29] This gives rise to the following issues for determination:
a) Did Mr Newlands first suffer loss at the inception of the policy? Or was it not until July 2007 at the earliest that he first suffered loss? In the latter case, his claim is within the limitation period for commencement of proceedings.
b)If the loss occurred at inception, is it possible that the time for commencement was postponed for either of the following reasons:
[i] The right of action Mr Newlands relies upon against Mr Cortesi and Planwise was concealed by the fraud of the defendants?
[ii] The right of action relied upon for relief follows from the consequences of the mistake?
c) When does Mr Newlands say he had discovered the fraud or mistake?
If it was more than six years before 9 April 2013 (when proceedings were filed against Mr Cortesi and Planwise), then the claim is time barred. If it was less than six years before 9 April 2013, then the claim is not time barred.
Relevant legal principles
Summary judgment
[30] The applicants rely on rule 12.2 of the High Court Rules, which relevantly provides:
12.2 Judgment when there is no defence or when no cause of action can succeed
(1) ...
(2) The court may give 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.
[31] The legal principles applying to applications for summary judgment when sought by a defendant were stated by Elias CJ in Westpac Banking Corporation v M M Kembla New Zealand Ltd.1 The defendant has the onus of proving that, on the balance of probabilities, the plaintiff cannot succeed.2 Summary judgment will be given only where the defendant can provide a complete defence to the plaintiff’s claim.3
[32] Summary judgment will be inappropriate where material facts are disputed or cannot be concluded from affidavits.4 Importantly, where the plaintiff can show a theoretical possibility on the evidence that its claim could succeed, and where the outcome is potentially dependent on the facts, summary judgment for the defendant would be inappropriate.5 Summary judgment will also be inappropriate where it is
1 Westpac Banking Corporation v M M Kembla New Zealand Ltd [2001] 2 NZLR 298.
2 At [61].
3 At [61].
4 At [62].5 Jones v Attorney-General [2004] 1 NZLR 433.
possible for the plaintiff to amend its claim so as to remedy the defects relied on by the defendant.6
[33] Essentially, the defendant must do more than just show that the plaintiff’s claim has weaknesses. The Court must be satisfied that none of the claims can succeed.7
Limitations
[34] Where the issue on summary judgment is whether the plaintiff’s claim is time barred, the onus is on the defendant to show that the plaintiff’s cause of action is so clearly statute-barred that it can be regarded as frivolous, vexatious, or an abuse of process.8 In Nicholson v Maultsaid9 the Court stated that unless these requirements are met, limitation questions are best addressed at trial, in the context of all evidence.10
[35] Sections 4 and 28 of the now repealed Limitation Act 1950 remain in force through s 59 of the Limitation Act 2010. Relevantly s 4 provides:
4Limitation of actions of contract and tort, and certain other actions
(1) Except as otherwise provided in this Act ... the following actions shall not be brought after the expiration of 6 years from the date on which the cause of action accrued, that is to say,—
(a) Actions founded on simple contract or on tort
[36] A cause of action in negligence accrues when the plaintiff first sustains loss attributable to the breach of duty of the defendant.11
[37] Actual loss may occur in two ways:12
a) Immediately when the alleged negligence occurs. If one party receives a damaged asset as a result of another’s negligence, they will suffer an immediate loss; or
6 Commentary on Civil Procedure (online looseleaf ed, Brookers) at [12.2.05]; Westpac Banking
Corporation v M M Kembla New Zealand Ltd, above n 1, at [66].
7 At [64].
8 Trustees Executors Ltd v Murray [2007] NZSC 27 at [33].
9 Nicholson v Maultsaid HC Napier CIV-2011-441-95, 16 June 2011.
10 At [8].
11 Thom v Davys Burton [2008] NZSC 65; [2009] 1 NZLR 437 at [15].12 At [40].
b)At a later point in time if the loss is contingent on another event occurring.
[38] If one party receives a damaged asset as a result of another party’s alleged
negligence, then it will suffer an immediate loss.13
[39] The effect of s 4 on the obligation to bring a timely action may be postponed in certain circumstances. Section 28 provides:
28 Postponement of limitation period in case of fraud or mistake
Where, in the case of any action for which a period of limitation is prescribed by this Act, either—
(a) The action is based upon the fraud of the defendant or his agent or of any person through whom he claims or his agent; or
(b) The right of action is concealed by the fraud of any such person as aforesaid; or
(c) The action is for relief from the consequences of a mistake,—
the period of limitation shall not begin to run until the plaintiff has discovered the fraud or the mistake, as the case may be, or could with reasonable diligence have discovered it.
[40] Section 28(b) postpones the limitation period in circumstances where a person fraudulently conceals the cause of action until the plaintiff has discovered (or could reasonably have discovered) the fraud. Section 28(c) postpones the limitation period until the mistake is (or could reasonably have been) discovered when the action is for relief from consequences of a mistake.
[41] The fraud exception to limitation in s 28(b) extends to both common law and equitable fraud.14 Only non-disclosure in breach of a fiduciary duty, or in breach of another recognised special duty, will amount to equitable fraud within the meaning of s 28(b).15 If non-disclosure of this nature exists, it will postpone the limitation period until the time of discovery of the fraud. A defendant will be liable if it would be unconscionable for him to be able to rely on the lapse of the limitation period to avoid liability.16 However, “the defendant must know all the facts which together constitute the cause of action”17 and he must have wilfully concealed the
13 At [25].
14 Inca Ltd v Autoscript (New Zealand) Ltd, [1979] 2 NZLR 700 (SC), at 711.
15 At 709.
16 Applegate v Moss [1971] 1 QB 406.17 Inca Ltd v Autoscript (New Zealand) Ltd, above n 14, at 711.
cause of action.18 The cause of action may have been concealed dishonestly or passively, but fraudulent concealment will only exist where, firstly, there was a duty of disclosure created by a fiduciary or other special duty; and secondly, the plaintiff’s right of action was concealed from him.19 Where the defendant was unaware of his breach, he will not be liable, and the limitation period will not be postponed.
[42] Section 28(c) has not had much judicial attention.20 The provision applies only where the mistake is an essential ingredient of the cause of action.21 The statement of claim must set out the mistake and its consequences and seek relief from the consequences.22
Discussion
[43] I begin with the first issue. Did Mr Newlands first suffer loss at the inception of the policy? Or was it not until July 2007 at the earliest that he suffered loss?
[44] It is common ground that loss must occur as an essential ingredient of a claim in negligence, and that the limitation period begins to run when all the ingredients of the negligence claim are present.
[45] Without conceding liability for negligence, counsel for Mr Cortesi and Planwise argues that it is plain that any loss arising from the alleged negligence would have to have occurred immediately at inception in November 2005. He submits:
a) Mr Newlands’ own case is that had the policy been what he wanted it to be, it would have also covered less serious illness that affected his ability to work, but what he obtained was a deficient policy that covered critical illness only.
b)It follows that Mr Newlands would have to have suffered loss from the date the policy was issued in 2005, as the policy was a defective
18 At 711.
19 At 711.
20 James v McMahon [2013] NZHC 3018 at [55].
21 At [55].22 Phillips-Higgins v Harper [1954] 1 All ER 116 (QB); Trewin v Flower [1965] NZLR 8.
asset and had materially less value to Mr Newlands than he anticipated. For this reason the loss occurred immediately.
[46] Counsel draws similarities with Singh v Sovereign Assurance Co Ltd,23 where, albeit in a different context, the Court rejected the contention that the loss occurred when the insurer declined a claim; rather the loss was immediate and occurred at the inception of the policy. In that case because the policy was defective, the period of limitation ran from the time of inception, when the loss occurred.
[47] In Singh the Court also held that the liability of the defendant insurance broker expires with the period of limitation, even if the insurance company is found to be liable.24
[48] Counsel for Mr Newlands acknowledges that it is Mr Newlands’ case that the policy did not achieve what Mr Newlands expected it to achieve, but he submits that does not mean loss occurred at inception of the policy. He submits:
a) No actual financial loss was suffered when the policy was issued.
Rather, Mr Newlands did get a policy that had some value to him, though he did not get the full cover he wanted and he missed the opportunity to pay a higher premium for that more comprehensive cover.
b)Any loss arising from the less than comprehensive policy was contingent on his being unable to work for a period of three or more months through accident or illness not covered by the policy.
c) Financial loss resulting from the alleged negligence arose only after July 2007, when the insurer advised Mr Newlands that his illness was not covered under the policy.
[49] I agree with counsel for Mr Cortesi and Planwise that the submission for Mr Newlands cannot be right. The loss that Mr Newlands relies on – that he lacked cover for non-critical illness – means the loss had to have occurred when the policy was issued. The policy was not what he asked for; it was a defective policy at inception. It could never have provided him with the extensive cover he says he
contracted for. This is in accordance with the decision in Thom v Davys Burton, where an agreement that was not legally enforceable was held to be defective and to have caused immediate loss.
[50] Accepting that the loss occurred at the inception of the policy in November 2005, the defendants have prima facie proved that Mr Newlands’ claim is time barred. Consequently, Mr Newlands may now only rebut the defendants’ answer to the claim by arguing for the postponement of the limitation period on the basis of fraud or mistake under s 28.
[51] I therefore turn to the second issue: was the right of action relied upon by
Mr Newlands against Mr Cortesi and Planwise concealed by their fraud?
[52] In order to determine whether the right of action was concealed by the
defendants’ fraud, three elements of fraudulent concealment must be established:25
a) The circumstances must be shown to have been such that the defendant had a duty of disclosure. If he had no such duty then the fact that he did not disclose does not avail the plaintiff.
b)Having such duty, the failure to disclose must be wilful. One cannot conceal something of which he is unaware.
c) For the concealment to be wilful the defendant must be shown to have known the essential facts constituting the cause of action. It is the right of action which must be concealed by the fraud of the defendant.
[53] Wilfulness in regard to breach of fiduciary obligation will suffice for fraudulent concealment.26
[54] Counsel for Mr Newlands submits that there are two occasions when Mr Cortesi and Planwise concealed, by equitable fraud, the existence of causes of action in negligence:
a) When Sovereign sent the policy document to Mr Newlands via
Mr Cortesi and Planwise in November 2005; and
b)Between November 2006 and February 2007, when Mr Cortesi and Planwise became aware of Mr Newlands’ illness and inability to work.
[55] As to the first occasion, counsel submits that:
a) An insurance broker owes a fiduciary duty to his client to notice if there are shortcomings in the nature of the insurance cover provided27and that this duty was breached by reason of negligence on the part of Mr Cortesi and Planwise.
b)Alternatively, Mr Cortesi and Planwise were aware that Mr Newlands is partially literate and thus breached their fiduciary obligation to ensure that he understood the policy and whether the policy provided the kind of cover anticipated.
c) Either way, they concealed the breach by equitable fraud, which resulted in Sovereign issuing a policy that did not provide the cover Mr Newlands thought he was receiving and he had no way of knowing that the policy document did not provide him with such cover.
[56] Counsel submits that it would be unconscionable to allow Mr Cortesi and Planwise to rely on the limitation period as starting in 2005. In this case where Mr Newlands never received a copy of the document (namely the two appendices), and cannot be deemed to have had notice of the document’s contents, he submits that Thom and Singh can be distinguished.
[57] As to the second occasion, counsel for Mr Newlands submits that:
a) Over the period November 2006 and February 2007, in a series of conversations, Mr Cortesi gave Mr Newlands the understanding that he was covered under the policy. At this time Mr Cortesi continued as a fiduciary, and owed Mr Newlands a fiduciary duty to investigate whether Mr Newlands was actually covered by the policy.
b)Mr Cortesi failed to advise Mr Newlands that his cover was only for extreme illnesses and that Mr Newlands’ illness may not be covered. This constitutes concealment by equitable fraud.
c) Consequently it would be unconscionable for Mr Cortesi and Planwise to rely on the limitation period to avoid liability for not disclosing to Mr Newlands that only extreme illnesses were covered, and that his illness is only moderate.
[58] Counsel for Mr Cortesi and Planwise submits that:
a) There is no evidence to support the claim that Mr Cortesi concealed information from Mr Newlands; and
b)In order for a person to conceal something, they must first know what they are concealing. Until July 2007 Mr Cortesi did not know that Sovereign would allege that Mr Newlands did not disclose important information.
c) Mr Cortesi had no knowledge of the plaintiff’s exact medical condition in November 2006, and thus did not know that it may not be covered by the policy. This lack of knowledge made it impossible to conceal whether cover would apply.
[59] I am satisfied that there is no basis for Mr Newlands’ claim of fraudulent concealment that satisfies s 28, though for reasons that depart from those Counsel for Mr Cortesi and Planwise relies upon. I pause momentarily to note that for the purpose of the limitation defence, Counsel for the defendants accepts that Mr Cortesi was Mr Newlands’ fiduciary. This is in line with the finding in Attorney-General v AON New Zealand Ltd that an insurance broker is the insured’s
fiduciary.28
[60] I come then to my reasons.
[61] First, Mr Newlands’ live causes of action against Mr Cortesi and Planwise are in negligence and are founded essentially on the allegation that Mr Cortesi was negligent in his fiduciary duties by failing to arrange the policy Mr Newlands
requested. To establish fraudulent concealment under s 28 Mr Newlands must lay the foundation of concealment of the particular negligence causes of action that are pleaded. To do so he must plead by reference to the essential elements of concealment: that Mr Cortesi knowingly concealed, by non-disclosure, his failure to arrange the requested policy.
[62] However, there is nothing to that effect in any of Mr Newlands’ pleadings or evidence. Further, counsel’s submissions do not rely on knowing concealment of the essential facts of that failure in the cause of action, nor do they address the key element of fraudulent concealment: the breach of the duty to disclose the failure. Instead the submissions rely on wholly different assertions that are based on Mr Cortesi’s fiduciary duties to investigate and explain the full extent of the cover to Mr Newlands. The suggestion counsel deduces from this is that if Mr Cortesi performed these duties, he would have, or should have, known that the policy did not provide the full extent of the required cover. But this suggestion does not amount to a claim that Mr Cortesi knew that the policy he arranged for Mr Newlands was not the one requested and then failed to disclose this to Mr Newlands.
[63] Knowledge is an essential element of concealment. The onus is on the plaintiff to show that the defendant knew the essential facts constituting the cause of action. This means that in order for there to be fraudulent concealment within the meaning of s 28(b), the defendant must have had knowledge of his own negligence coupled with active or passive concealment. An assertion that one should have had knowledge is not sufficient to set up fraudulent concealment. The defendant must have had knowledge of his own negligence that he then concealed, either actively or passively.
[64] I emphasise again that Mr Newlands’ claim is only that the defendants were negligent by failing to ensure that the policy issued by Sovereign provided the cover Mr Newlands wanted, and by failing to investigate and explain the extent of the cover. However, neither Mr Newlands, nor his Counsel, asserts that the defendants knew of their negligence. Without this knowledge, the defendants could not have concealed the cause of action. Moreover, the submissions do not give rise to an inference of knowledge or concealment.
[65] As such, there can be no fraudulent concealment contemplated by s 28 that allows postponement of the limitation period. This answer to the defence of limitation must therefore fail.
[66] I turn now to the third issue – that of mistake and whether it is arguable that the negligence causes of action are for relief from the consequences of a mistake.
[67] The only remaining leeway for Mr Newlands to successfully rebut the defence of limitation is to show that the action is for relief from the consequences of a mistake. If this argument is successful, the limitation period will be postponed and time will begin to run from discovery.
[68] In James v McMahon29 Allan J followed the approach in Phillips-Higgins v Harper30 and Trewin v Flower.31 There it was held that s 28(c) is available only where a mistake is an essential part of the cause of action.32 The plaintiff must plead and prove a cause of action that involves a mistake as a necessary ingredient.33 The statement of claim must set out the mistake and its consequences, from which the plaintiff prays for relief.34
[69] The defendants submit that the alleged mistake is not a constituent of the negligence causes of action. They contend that Mr Newlands’ claims are for straightforward negligence rather than mistake.
[70] The basis of Mr Newlands’ argument is that the defendants made a careless mistake in not noticing that the policy differed from the one requested. However, as Counsel for Mr Newlands concedes in his submissions, this was a careless mistake that amounts to negligence. The cause of action is therefore not grounded in the mistake, as required by s 28(c), and by James v McMahon, Phillips-Higgins v Harper, and Trewin v Flower. Instead, Mr Newlands’ cause of action is grounded in negligence. It follows that in this case mistake is not the necessary ingredient for the cause of action – negligence is however.
[71] On this basis, this answer to the limitation defence also fails. There can be no postponement of the limitation period by reason of mistake.
[72] Lastly, I will turn to the issue of discovery as discovery is an essential element of postponement of the limitation period. If there is a postponement, time runs from discovery. A party seeking to rely on postponement must show that the
29 James v McMahon, above n 20.
30 Phillips-Higgins v Harper, above n 22.
31 Trewin v Flower, above n 22.
32 James v McMahon, above n 20, at [60].
33 At [61].34 Phillips-Higgins v Harper, above n 22.
fraud or mistake (as those terms are understood under s 28) was discovered within six years before the proceedings were filed.
[73] Since I have found that there was no fraudulent concealment and no mistake under s 28, it follows that the time of their discovery is irrelevant.
[74] I conclude therefore that Mr Newlands’ remaining live causes of action in
negligence are barred under the Limitation Act 1950.
Result
[75] The application is for summary judgment under r 12.2(2). To give judgment the Court must be satisfied that no causes of action can succeed.
[76] At the hearing counsel for Mr Newlands did not formally withdraw his contract causes of action. Should he not do so it would seem uncontroversial that they should be struck out and an order for summary judgment made on the remaining causes of action.
[77] In case there is anything controversial about this approach, I issue this judgment as an interim judgment. The proceeding is to be listed in the Chambers list on 2 May 2014 at 2.15 pm. At that time I will hear Counsel on the appropriate orders and any costs issues that they have been unable to resolve.
Associate Judge Sargisson
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