Sanderson v IAG New Zealand Limited

[2021] NZHC 596

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2018-409-817

[2021] NZHC 596

BETWEEN

WAYNE PETER SANDERSON, GARY NEIL SANDERSON and PAUL

JOSEPH RUTLEDGE as trustees of the
NO MONEY NO HONEY FAMILY TRUST
Plaintiffs

AND

IAG NEW ZEALAND LIMITED

First Defendant

AND

VERO INSURANCE NEW ZEALAND LIMITED

Second Defendant

AND

ALLIANZ NEW ZEALAND LIMITED

Third Defendant

AND

BARRY O’CONNOR CONSTRUCTION LIMITED

Fourth Defendant

AND

QBE INSURANCE (AUSTRALIA) LIMITED

Fifth Defendant

Hearing:

(Determined on the papers)

Counsel:

G J Ryan for the Plaintiffs

A G Hazelton for the Fifth Defendant

Judgment:

23 March 2021

JUDGMENT OF ASSOCIATE JUDGE LESTER (COSTS)

This judgment was delivered by me on 23 March 2021 at 4.00 pm

pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar 23 March 2021

SANDERSON v IAG NEW ZEALAND LIMITED [2021] NZHC 596 [23 March 2021]

[1]                  On 15 December 2020, the plaintiffs filed an application seeking leave to proceed against QBE Insurance  (Australia)  Limited  (QBE)  under  the  Law Reform Act 1936 (the 1936 Act).

[2]                  While leave is required to join an insurer under the 1936 Act, in many cases insurers consent to leave which is granted on a joint memorandum of counsel, avoiding the need for a formal application.

[3]                  QBE, when first approached, refused to agree to joinder to the proceeding, which QBE confirmed to the Court in a memorandum of 10 November 2020.

[4]                  Ultimately, the plaintiffs brought an application that QBE be joined as fifth defendant.  QBE consented to that application on 5 February 2021, having not filed  a notice of opposition. Directions joining QBE were made shortly thereafter.

[5]                  The plaintiffs now  seek  costs  in  respect  of  the  application  brought  on  15 December 2020.

[6]                  The plaintiffs rely on the fact they had to bring a joinder application in which they were ultimately successful.  The plaintiffs invoke r 14.8 of the High Court  Rules 2016, which provides:

14.8     Costs on interlocutory applications

(1)Costs on an opposed interlocutory application, unless there are special reasons to the contrary,—

(a)must be fixed in accordance with these rules when the application is determined; and

(b)become payable when they are fixed.

…

The Rule provides that those costs must be fixed at the time of determination unless there are special reasons to the contrary.

[7]                  Plaintiffs’ counsel refers to the fact there was correspondence between plaintiffs’ counsel and QBE’s counsel prior to the application. That email exchange

from September 2020 is produced. In the email exchange, counsel for QBE asked on what basis Hawkins Construction Ltd (Hawkins) (for whom QBE is insurer) became aware of the claim against it in respect of the property in issue in the proceeding – namely, whether Hawkins was notified of a claim during the relevant period of insurance.

[8]                  Plaintiffs’ counsel replied that Hawkins was the project manager for the project so should have been on notice as to the defects complained of in the proceeding.

[9]                  Counsel for QBE clarified that what was sought  was information  relating to a potential claim against Hawkins in relation to the repair work, not the original insurance claim (which was for earthquake repairs to the property having been poorly carried out). Plaintiffs’ counsel in response reiterated that, as Hawkins was involved in the project, it ought to have been aware of defects in the repair work.

[10]              In resisting the costs application, counsel for QBE refers to material it says it was provided with for the first time with the joinder application, in particular, an affidavit from a structural engineer, Mr Niven.

[11]              Annexed to Mr Niven’s affidavit was a report dated 8 December 2020 (a week before the application was filed), which gives his expert opinion as to whether the alleged failings with the repair work should have been known to Hawkins.

[12]              Counsel for QBE says this is the very material that was sought in the September 2020 email exchange, that is, the basis upon which the alleged failings giving rise to the claim should have been known by Hawkins. QBE says, on receipt of this new evidence, it consented to the application. Thus, it says, there are special circumstances pursuant to r 14.8 which mean costs should be fixed at this point and that they be made costs in the cause as opposed to being made immediately payable.

[13]              I agree with that approach. Counsel for the plaintiffs was aware that QBE’s counsel wanted to know the basis upon which Hawkins should have been aware of the potential for a claim during the period of insurance. The response of plaintiffs’ counsel

was, in effect, that Hawkins ought to have known because of its role in the original repair work.

[14]              Mr Niven’s broad summary, as captured in the final paragraph of his affidavit, is as follows:

8.2 Given Hawkins’ involvement in both the preparation of the scope of works and the project management of the repair works, in my view Hawkins should have known of all these deficiencies at the time. To elaborate, I note here that a brief cursory walk around the building quickly identifies uninjected panel cracking and slab cracking that should have been obvious to a competent project manager acting in the role undertaken by Hawkins.

[15]              At its most basic, this is the position adopted by plaintiffs’ counsel in the September 2020 correspondence. However, plaintiffs’ counsel in September did not explain why the defects in the work were such that Hawkins, from its involvement, should have been on notice. This was the detail sought by QBE’s counsel.

[16]              Had Mr Niven’s report been sent to QBE prior to the application being made, then a costs award payable now in favour of the plaintiffs would be justified. However, the report was not supplied and so it was not explained to counsel for QBE why it was apparently obvious that Hawkins should have been on notice.

[17]              Consistent with the principles that apply to declining costs without a letter before action, here the application was brought by the plaintiffs without a full explanation of the basis of the application first being provided, as had been requested.1

[18]              I am not convinced on the other matters raised by QBE as to why costs should not be made payable now. QBE says that leave was always required for joinder. That may be true, but again, such is routinely dealt with by way of a consent memorandum. As to the merits of the claim against QBE being limitation and policy coverage, such are not matters that can be determined at this time as QBE has implicitly accepted by consenting to joinder.

1      Millinium Capital Managers Ltd v Soma Group Ltd [2020] NZHC 2967 at [20].

[19]              Accordingly, costs in respect of the application for joinder are fixed in the sum of $2,590 including disbursements, such to be costs in the cause.

[20]There is no order as to costs in respect of this costs judgment.

Associate Judge Lester

Solicitors:

White Fox & Jones, Christchurch (for Plaintiffs) Hazelton Law, Wellington (for the Fifth Defendant)