Sovereign Assurance Company Limited v Scott HC Rotorua CIV 2008-463-909

[2010] NZHC 285

IN THE HIGH COURT OF NEW ZEALAND

ROTORUA REGISTRY

CIV 2008-463-909

BETWEEN  SOVEREIGN ASSURANCE COMPANY

LIMITED Appellant

ANDDOUGLAS NORMAN SCOTT Respondent (applicant)

Hearing:         16 February 2010

Appearances:  B J Burt for appellant

P Michalik for respondent (applicant) Judgment:        26 February 2010

JUDGMENT NO.2 OF ALLAN J

In accordance with r 11.5 I direct that the Registrar endorse this judgment

with the delivery time of 2 pm on Friday 26 February 2009

Solicitors:

Chapman Tripp, Auckland [email protected]

Morrison Kent, PO Box 10035 Wellington [email protected]

SOVEREIGN ASSURANCE COMPANY LIMITED V DOUGLAS NORMAN SCOTT HC ROT CIV 2008-

463-909  26 February 2010

[1]      Mr Scott applies for leave to appeal  to  the  Court  of  Appeal  from  my

judgment of 30 September 2009.  There, I had allowed an appeal from a decision of Judge   Cooper   in   the   Taupo   District   Court   dismissing   Sovereign’s   strike   out application advanced on the ground that Mr Scott’s claim was statute barred.  Judge Cooper held that the claim was not barred;  I held that it was.

[2]      The appropriate  test  is  well  established: Cuff  v  Broadlands  Finance  Ltd

[1987] 2 NZLR 343, Waller v Hider [1998] 1 NZLR 412, and Downer Construction (New Zealand) Ltd v Silverfield  Developments  Ltd  [2008] 2 NZLR 591. The proposed appeal must raise some question of law or fact capable of bona fide and serious argument in a case involving some interest, public or private, of sufficient importance to outweigh the cost and delay of a further appeal.

[3]      This litigation had its genesis in a critical illness cover policy, taken out by Mr Scott  with  Sovereign’s  predecessor,  which  took  effect  on  1  January  1994.                   It provided for payment of a benefit of $100,000 where any one of a number of defined events occurred; a stroke was one of those events.  The term “stroke” was defined in the policy. In order to attract cover any such stroke had to be permanent.

[4]      On  1  January  1997  Mr  Scott  suffered  a  stroke. On  14  January  1997  he submitted a claim to Prudential (a predecessor of Sovereign). On 14 February 1997

Prudential  declined  the  claim.   The  insurer  considered  the  respondent’s  stroke  did not  fit  the  policy criteria,  in  that  there were  no  significant  permanent  neurological sequelae.

[5]      Thereafter, over a period of some years, there was desultory correspondence between the parties. On several occasions the insurer reiterated its refusal to meet Mr  Scott’s claim. On 27 September 2006 he issued proceedings in the Taupo District Court. Judge Cooper considered that the question of whether or not the sequelae became permanent was a matter of fact for determination at trial.  Implied

in his judgment was a ruling that time did not start running against Mr Scott until the consequences of the stroke could be shown to have become permanent.   The Judge considered that the plaintiff might be able to establish at trial that the  sequelae

became permanent during the period of six years immediately preceding the filing of proceedings in the District Court.

[6]      In this Court I adopted a line of English authority referred to in the judgment

of  Associate  Judge  Abbott  in  Arnold  v  American  International  Assurance  Co Bermuda Ltd HC Auckland CIV-2008-404-6987, 4 June 2009.   The English cases included  Virk  v  Gan  Life  Holdings  Plc  [2000]  Lloyds  Rep  IR  159  (CA)  and Callaghan  v  Dominion  Assurance  Co  Ltd  [1997]  2  Lloyds  LR  541.   There  it  was held  that,  in  respect  of  a  policy  of  indemnity,  time  begins  to  run  as  soon  as  the insured event occurs, even though no claim has been made.

[7]      Mr Michalik seeks an order granting leave for Mr Scott to refer to the Court

of Appeal the following questions:

a)        “Given that time runs for limitation purposes from the time of accrual

of a cause of action, and given that the cause of action in the present case  is  for  breach  of  contract  of  insurance,  does  New  Zealand  Law provide   a   special   rule   for   insurance   contracts,   under   which   the insurance company is to be treated as having breached its contract on the  happening  of  the  event,  or  contingency  insured  against,  so  that time for limitation purposes begins to run from the happening of the insured event?”

b)“Are  insurance  contracts  to  be  treated  in  the  same  way  as  other contracts, so that the cause of action for breach of contract arises, and time  begins  to  run  for  limitation  purposes  from  the  time  that  the insurance  company  commits  a  breach  of  contract  (as  by  refusing  to pay a just claim)?”

[8]      In my opinion the contemplated appeal will be of no utility to Mr Scott. I held that the rule articulated in the English cases applies to his claim. Accordingly, time began running from the date of the stroke, and his claim became statute barred

on 1 January 2003.  But even if I was wrong in following the English cases, Mr Scott

is still faced with an insuperable  difficulty  by  reason  of  the  ordinary  limitation

principles governing claims in contract.  It is common ground that in such cases time begins to run as from the date of the breach.

[9]      Here  the  breach  occurred,  if  at  all,  no  later  than  14  February  1997  when Sovereign’s predecessor declined Mr Scott’s claim on the ground that there were no permanent  sequelae.  If,  contrary  to  the  insurer’s  position,  there  were  permanent sequelae  (albeit  at  that  time  Mr  Scott  may not  have  been  in  a  position  to  provide medical evidence to establish his claim), then the insurer was in breach and time had begun to run.

[10]     Mr Michalik disagrees.  He contends that the insurer would be in breach only

if  it  declined  the  claim  in  the  face  of  available  medical  evidence  capable  of establishing  Mr  Scott’s  case  on  the  balance  of  probabilities. Accordingly,  he maintains, the insurer was not in breach until on a later occasion (he does not specify which)  the  insurer  can  be  shown  to  have  declined  a  claim  which  it  ought  to  have accepted in the face of such evidence.  He argues that it remains open to Mr Scott to show that the insurer’s breach occurred within six years of the date of issue of the proceedings. The  precise  breach  date  would  need  to  be  determined  at  trial,  he argues, because it will depend upon a finding of fact.

[11]     I am unable to accept the correctness of that approach.   It appears to me to amount to a thinly disguised argument for a reasonable discoverability exception to ordinary  limitation  principles.           Such  exceptions  are  limited  and  well  established: Murray v Morel & Co Ltd [2007] 3 NZLR 721. As Tipping J observed at [69] of Murray:

Save   when   the   Limitation   Act   itself   makes   knowledge   or   reasonable discoverability relevant, the plaintiff’s state of knowledge has no bearing on limitation  issues.   Accrual  is an  occurrence-based, not  a knowledge-based, concept.        The   Limitation   Act   as   a   whole   is   structured   around   that fundamental starting point.

[12]     Mr Scott’s argument is that because there were difficulties in persuading the appellant to accept the claim, the running of time should be suspended until proof became available. In the light of the established approach to limitation issues in this country, I do not see how that  argument  could  succeed. If,  as  Mr Scott  now

contends, he meets the policy criteria, then he met them from the date of the stroke, even though he had been unable to persuade the insurer of the strength of his medical evidence.

[13]     In such circumstances the insurer’s  decision  to  decline  the  claim  on  14

February  1997  would  have  placed  the  insurer  in  breach  and  time  began  to  run  in respect of Mr Scott’s cause of action based upon breach of contract.

[14]     Accordingly, I do not consider Mr Scott to have raised a question of law or fact capable of bona fide and serious argument.   Even if he is able to persuade the Court of Appeal that I was wrong to follow English authority which held that time begins  to  run  on  an  indemnity policy from  the  date  upon  which  the  event  insured against occurs, he would still be obliged to persuade that Court that time began to run at a later date than 14 February 1997.  In my view he would be unable to do that.

[15]     It follows that the grant of leave to appeal would serve no useful purpose.  A

review by the Court of Appeal of the relevant English authorities should await a case

in  which  the  review  will  be  determinative  of  an  issue  between  the  parties  to  a proceeding.

[16]     For these reasons Mr Scott’s application for leave to appeal is dismissed.

[17]     Sovereign  is  entitled  to  costs.      Counsel  may  file  memoranda  if  they  are unable to agree.

C J Allan J