Stanley Construction Limited v Stanley
[2025] NZHC 717
•31 March 2025
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2021-419-312 [2025] NZHC 717
UNDER The Companies Act 1993 and the Construction Contracts Act 2002 IN THE MATTER OF
The liquidations of Stanley Construction Ltd and Stanley Construction (Auckland) Limited
BETWEEN
STANLEY CONSTRUCTION LIMITED (in
liquidation) and STANLEY
CONSTRUCTION (Auckland) LIMITED
(in liquidation) First Plaintiffs
DAMIEN MITCHELL GRANT and ADAM STEVENSON BOTTERRILL
Second Plaintiffs
AND
KEVIN THOMAS STANLEY
First Defendant (Discontinued) Cont. over
Hearing: 26 November 2025 Counsel:
F Tuteja and B McGleish for the Plaintiff
C Brick for QBE Insurance (Australia) Limited
Minute:
31 March 2025
MINUTE OF ASSOCIATE JUDGE SUSSOCK
This judgment was delivered by me on 31 March 2025 at 4 pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
Waterstone Insolvency, Auckland Fee Langstone, Auckland
STANLEY CONSTRUCTION LTD (in liq) v STANLEY [2025] NZHC 717 [31 March 2025]
ROBERT STEPHEN MARSHALL
Second Defendant
CRAIG CHARLES DAVISON
Third Defendant (Discontinued)
ANDQBE INSURANCE (AUSTRALIA) LIMITED
Third Party
CIV-2023-419-140
BETWEEN QBE INSURANCE (AUSTRALIA)
LIMITED
Plaintiff
AND KEVIN THOMAS STANLEY
First Defendant
ROBERT STEPHEN HALL
Second Defendant
CRAIG CHARLES DAVISON
Third Defendant
Introduction
[1] These two proceedings have been consolidated.1 The first proceeding was filed in 2021 by the first plaintiff companies and their liquidators against their three directors (2021 Proceeding). The three directors have filed a third-party claim in those proceedings against QBE Insurance (Australia) Ltd (QBE). QBE then filed separate proceedings in 2023 against the three directors seeking declarations in respect of the directors’ and officers’ (D&O) insurance policy issued by QBE on which the directors rely in their third-party claim in the 2021 Proceeding (2023 Proceeding).
[2] Two of the three directors have settled with the plaintiffs in the 2021 Proceeding but continue to pursue their claim against QBE as a third party.
[3] The plaintiffs in the 2021 Proceeding now seek to join QBE as a defendant to the 2021 Proceeding on the following grounds:
a.[The first plaintiffs] are entitled to make a claim under the Policy; it is the insured party, the payee, and the beneficiary under the Policy.
b.[The first plaintiffs] are companies in liquidation and the Liquidators have brought the 2021 Proceeding as a means of recovery for [the first plaintiffs] and a determination that [the first plaintiffs] are entitled to receive recovery under the Policy ought to be enforceable by the Liquidators on behalf of [the first plaintiffs].
c.The Defendants are understood to be not in a good position to repay in full any adverse judgment order.
d.Whilst the Defendants have brought a claim against QBE, it is in respect of a recovery of their own individual respective liabilities following settlement with the Plaintiffs. It does not account for the Remaining Defendant’s claim. [The first plaintiffs] are not a party to those proceedings.
e.The [2023] Proceedings and 2021 Proceedings have been consolidated, thus recognising the Plaintiff’s interest as against QBE and vice versa.
f.In the event the Defendants do not, or cannot, enforce a judgment against QBE, the Plaintiffs should be able to benefit from and enforce the judgment against QBE for its obligations to the Defendants (in particular, the Remaining Defendant) and therefore [the first plaintiffs].
1 Stanley Construction Ltd v Stanley HC Hamilton CIV-2021-419-312, 23 June 2023 (Minute of Associate Judge Brittain).
[4] QBE opposes joinder as it says that any obligations under the relevant D&O policy are owed by QBE to the defendants, not to the plaintiffs in the 2021 Proceeding. QBE therefore submits that the plaintiffs have no tenable claim under the D&O policy in respect of the defendants’ liability to them and no entitlement to judgment against QBE.
[5] Furthermore, QBE emphasises that all of the issues that are required to be determined in respect of liability under the D&O policy are already before the Court so the criteria for joinder are not met. QBE submits that it is not therefore in the interests of justice for QBE to be joined as a defendant for the purpose of a direct claim by the plaintiffs, especially in circumstances where the claim has no prospect of success.
[6] I set out the principles applying to joinder below before considering whether it is appropriate for joinder to be ordered in this case.
Relevant legal principles
[7] The application to join QBE is made under r 4.56 of the High Court Rules 2016:
4.56 Striking out and adding parties
(1)A Judge may, at any stage of a proceeding, order that—
(a)the name of a party be struck out as a plaintiff or defendant because the party was improperly or mistakenly joined; or
(b)the name of a person be added as a plaintiff or defendant because—
(i)the person ought to have been joined; or
(ii)the person’s presence before the court may be necessary to adjudicate on and settle all questions involved in the proceeding.
(2)An order does not require an application and may be made on term the court considers just.
(3)Despite subclause (l)(b), no person may be added as a plaintiff without that person’s consent.
[8] The plaintiffs submit that QBE’s presence is necessary to enable the Court to settle all questions raised in the proceeding, in reliance on r 4.56(1)(b)(ii).
[9]An application for joinder under r 4.56(1)(b) involves a two-stage enquiry:2
(a)first, the Court must consider objectively whether there is jurisdiction to join the proposed parties; and
(b)second, if there is jurisdiction, it must consider whether to exercise its discretion to order joinder.
[10] In Mainzeal Corporation Ltd v Contractors Bonding Ltd,3 Barker J endorsed the following principles drawn from New Zealand and English authorities:
(a)“The rule contemplates the necessity for the presence of a further party to enable the adjudication to be effectual and complete and one which settles the issue.”4
(b)“[T]he true test lies not so much in an analysis of what are the constituents of the applicants’ rights, but rather in what would be the result on the subject-matter of the action if that right could be established.”5
(c)“[W]hen two parties are in dispute in an action at law, and the determination of that dispute will directly affect a third person in his legal rights or in his pocket, in that he will be bound to foot the bill, then the court in its discretion may allow him to be added as a party on such terms as it thinks fit.”6
2 Jessica Gorman and others McGechan on Procedure (online ed, Thomson Reuters) at [HR4.56.07].
3 Mainzeal Corporation Ltd v Contractors Bonding Ltd (1989) 2 PRNZ 47 (HC).
4 At 50, citing Taylor v McDougall [1963] NZLR 694 (SC) at 696.
5 At 50, citing Dollfus Mieg et Compagnie SA v Bank of England [1951] Ch 33, [1950] 2 All ER 605 at 611.
6 At 50, citing Gurtner v Circuit [1968] 2 QB 587 at 595.
(d)“A better way of expressing the test is: will his rights against or liabilities to any party to the action in respect of the subject matter of the action be directly affected by any order which may be made in the action?”7
[11]The Courts take a liberal approach to joinder.8 This applies especially to
joinder of defendants by plaintiffs.9
[12] The presumption is that plaintiffs can generally bring proceedings against all the defendants that they wish to sue in relation to the same matters. Defendants can then apply to strike out the proceedings if they wish.10
[13] In Sellman v Slater, Palmer J explained the policy behind the liberal approach:11
Otherwise the substance of a dispute could be the subject of shadow litigation, over whether there should be joinder, delaying substantive resolution of proceedings. Or litigation over related issues against different parties could proliferate in separate proceedings, causing coordination problems and, potentially, injustice.
[14] An applicant who wishes to join a party must show a tenable cause of action, in the sense that it would survive strike-out. There is no point in allowing a defendant to be joined if it is inevitable that a strike-out application would be successful.12
Is there jurisdiction to join QBE?
[15]To establish jurisdiction, the plaintiffs must satisfy either of the following:
(a)QBE ought to have been joined as a defendant;13 or
7 Mainzeal Corporation Ltd v Contractors Bonding Ltd, above n 3, at 50, citing Pegang Mining Co Ltd v Choong Sam (1969) 2 MLJ 52 (PC) at 56.
8 Chan v Seyip Association of New Zealand Inc [2008] NZAR 37 (HC) at [12].
9 Smith v Noble Investments Ltd (in liq) [2018] NZHC 2294 at [9], citing Sellman v Slater
[2016] NZHC 2415 at [10].
10 Sellman v Slater, above n 9, at [1].
11 At [11].
12 Bridgeway Projects Ltd v Webb HC Auckland CIV-2003-404-1965, 7 July 2003 at [10];
Roselea Funeral Home Ltd v Willetts HC Rotorua CP10/95, 8 November 1996 at 6.
13 High Court Rules 2016, r 4.56(1)(b)(i).
(b)QBE’s presence before the Court may be necessary to adjudicate on and settle all questions involved in the proceeding.14
[16] In the draft amended statement of claim attached to the joinder application, the plaintiffs allege that the D&O policy covers losses to the first plaintiff companies relating to acts and omissions by the directors. They say that the companies are entitled to judgment against QBE as the “ultimate beneficiary” of the policy.
[17]Two causes of action are pleaded against QBE:
(a)breach of the D&O policy; and
(b)breach of QBE’s duty of good faith arising from QBE’s denial of liability to the directors.
[18] Under both causes of action, the plaintiffs seek judgment for the amount the plaintiffs have claimed from the directors in respect of the sums owing to retention creditors.
[19] QBE responds that the first plaintiff companies have no cover under the policy for the amount of the directors’ liability to those companies, or any entitlement to judgment against QBE in the 2021 Proceeding.
[20] The insurance policy in issue is the QBE Directors and Officers Liability, Company Reimbursement and Defence Costs policy. Under the policy:
(a)The “Insured Person(s)” are the officers of the first plaintiff companies, including their directors. The Insured Person(s) do not include liquidators, or the companies themselves.
(b)The “Insured Organisation” is defined as Stanley Group Ltd and Tallwood Holdings Ltd and any past or present subsidiaries.
14 High Court Rules 2016, r 4.56(1)(b)(ii).
[21] QBE agrees the first plaintiff companies are each an Insured Organisation as subsidiaries of Stanley Group Ltd. However, it denies that means there is a right to recover in these proceedings as the insuring clauses under the policy do not provide cover to the first plaintiffs as an “Insured Organisation” or otherwise in respect of a claim against its directors.
[22]The insuring clauses are as follows:
Insuring Clauses
1.1Insuring clause A – Directors and Officers Liability
[QBE] agrees to pay on behalf of each of the Insured Person(s) all Loss, for which such Insured Person(s) does not receive payment by way of indemnity from the Insured Organisation, and which such Insured Person(s) becomes legally obligated to pay on account of any claims(s) made against him or her individually or otherwise, during the Policy Period for a Wrongful Act:
(a)committed, attempted or allegedly committed or attempted by such Insured Person(s) before or during the Policy Period; and
(b)reported to [QBE], in accordance with Clause 4.1, during the Policy Period or within sixty (60) days after its expiry, or, if exercised, the Extended Reporting Period.
1.2Insuring clause B – Company Reimbursement
[QBE] agrees to pay on behalf of the Insured Organisation all Loss, for which the Insured Organisation grants indemnification to any Insured Person(s) as permitted or required by law, which such Insured Person(s) has become legally obligated to pay on account of any claims(s) made against him/her individually or otherwise, during the Policy Period for a Wrongful Act:
(a)committed, attempted or allegedly committed or attempted by such Insured Person(s) before or during the Policy Period; and
(b)reported to [QBE] in accordance with Clause 4.1, during the Policy Period or within sixty (60) days after its expiry, or, if exercised, the Extended Reporting Period.
1.3Insuring clause C – Defence Costs
[QBE] agrees to pay Defence Costs up to the Defence Costs Limit of Liability on behalf of:
(a)each of the Insured Person(s) for which the Insured Person(s) does not receive payment by way of indemnity from the Insured Organisation; or
(b)the Insured Organisation for which the Insured Organisation grants indemnification to any Insured Person(s) as permitted or required by law,
on account of any claim(s) made against him or her individually otherwise, during the Policy Period for a Wrongful Act:
(a)committed, attempted or allegedly committed or attempted by such Insured Person(s) before or during the Policy Period; and
(b)reported to [QBE], in accordance with Clause 4.1, during the Policy Period or within sixty (60) days after its expiry, or, if exercised, the Extended Reporting Period.
[23] Insuring clause A provides for QBE to pay “Loss” on behalf of a director or officer in respect of a liability they have incurred in the course of their duties to the company, subject to the terms of the policy. Loss means the amount the Insured Person becomes legally obligated to pay on account of claims alleging a Wrongful Act. Cover under Insuring clause A only applies if a director is not indemnified for the liability by the Insured Organisation. There is therefore no right to cover directly for the first plaintiffs under Insuring clause A.
[24] If the Insured Organisation indemnifies the director for the relevant Loss, Insuring clause B provides that the Insured Organisation may claim the amount it has paid to the director from QBE.
[25] Section 162 of the Companies Act 1993 limits the extent to which D&O insurance may be entered into against directors’ liabilities, and the extent to which a company may provide indemnities in respect of them. Accordingly, Insurance clause B limits cover for company reimbursement to that “as permitted or required by law”.
[26] While the first plaintiffs are accepted as being Insured Organisations, they would only have a claim against QBE under the D&O policy if they had indemnified the defendant directors for liability or defence costs.
[27] As the plaintiff companies and liquidators are the entities that have brought proceedings against the directors, it is clear that they have not indemnified the directors in respect of any of the claims brought. If they had, any relief granted would
then need to be paid by the first plaintiffs as the indemnifiers meaning there would be no point in the proceedings.
[28] Defence costs are also payable by QBE in the event of a valid claim under Insurance clause C to either the Insured Person(s) or the Insured Organisation. But these are only available to the Insured Organisation if it has indemnified the Insured Person(s) for defence costs. The Insured Organisation has no entitlement to payment of its own defence costs. In any event, the plaintiff companies are not defending any claims in these consolidated proceedings, so there can be no defence costs.
[29] QBE submits that the policy follows the typical structure of a D&O policy. It refers to the Australian text Kelly & Ball which begins its description of D&O insurance as follows:15
Directors’ and officers’ insurance is a form of claims-made liability insurance. It typically insures both the directors and officers of a company or other entity, and the company or entity itself. The former are usually called “the insured persons”, while the company or entity is called “the company” or “the insured company” or “insured entity”. The policy covers the insured persons against loss that arises from liabilities they incur in connection with their duties as directors or officers of a particular company or other entity. It also insures them against costs incurred with the insurer’s consent in relation to the defence and settlement of claims, and against the cost of being legally represented in criminal proceedings and various types of official investigation, examination or inquiry. In most cases, it provides for the insurer, if it has not denied liability under the policy, to advance the costs of being legally represented as they are incurred. The insurer is entitled to recover those costs if it turns out that it is not liable under the policy. As part of the terms of their employment, many directors and officers are entitled to an indemnity from the company against liabilities that arise in connection with their duties. The policy therefore covers the company against loss arising from indemnities that it is required or permitted to provide to its officers and directors.
[30] I accept QBE’s submission that neither the plaintiff companies nor the liquidators have a tenable claim in these proceedings under the D&O policy, even if (contrary to QBE’s position) the policy is valid and provides cover to the directors for their liabilities in respect of the matters alleged by the plaintiffs. This is not a case where a full hearing is required to determine this question. It is clear on the wording of the policy.
15 Michael Ball and David Kelly Kelly & Ball Principles of Insurance Law (online edition, LexisNexis) at [14.0370] (footnotes omitted).
[31] In their joinder application, the plaintiffs say that they have an interest in the claim under the policy and wish to join QBE so that they can enforce the benefit of any judgment directly against QBE. But the policy does not provide for a direct claim by the plaintiff companies other than for reimbursement, which is inapplicable for the reasons set out above.
[32] One of the further grounds relied on by the plaintiffs is that, whilst the defendants have brought a claim against QBE, it is in respect of recovery of their own individual respective liabilities following settlement with the plaintiffs. It does not account for the plaintiffs’ claim against the second defendant which has not yet been settled or decided.
[33] The defendants’ third-party claim against QBE pleads four alternative causes of action. The relief sought for each cause of action distinguishes between relief for the first and third defendants based on the settlement sum for each and relief for the second defendant based on the “total amount of the plaintiffs’ claim” together with defence costs etcetera. I do not therefore accept the plaintiffs’ submission that the defendants’ claim against QBE does not properly account for their unsettled claim against the second defendant.
[34] I further record that, as the plaintiffs have discontinued their claims against the first and third defendants, the plaintiffs have no right of enforcement over any policy proceeds in respect of the liability of those two directors. The plaintiffs can therefore have no interest in enforcement of any judgment that the first and third defendants might obtain against QBE.
[35] If the second defendant’s liability is established and he does not have the financial means to pay the judgment debt, statutory protection for any insurance proceeds already exists. Section 9 of the Law Reform Act 1936 makes provision for a direct claim by a claimant against the liability insurer of an insured defendant, by way of a charge over insurance proceeds.16 In the event that monies are payable under the policy in respect of the defendants’ liability to a third party, a statutory charge may be created over the policy proceeds, which is enforceable by the third party.
16 Law Reform Act 1936, s 9.
[36] A third-party claimant wishing to pursue a charge under s 9 must however first obtain the leave of the Court, other than where the insured party had died insolvent, was bankrupt or, in the case of a company, was being wound up when the events giving rise to the liability to the third party occurred.17 As the second defendant is not bankrupt, the plaintiffs would therefore require leave to pursue a charge under s 9.
[37] The plaintiffs’ draft amended statement of claim does not assert a s 9 charge nor seek leave to pursue one. The plaintiffs instead plead an entitlement to payment under the policy in their own right. The s 9 issues are not therefore properly before the Court on the joinder application. I accept QBE’s submission that to grant joinder would effectively permit the plaintiffs to circumvent the operation of s 9.
[38] Finally on the jurisdiction issue, I record that the fact that the 2021 and 2023 proceedings have been consolidated does not provide a basis for allowing the plaintiffs in the 2021 proceeding to plead a claim against QBE directly if there is no basis otherwise as the plaintiffs appear to submit. The appropriateness of consolidation does not depend on all parties having claims against all other parties.
[39] I am satisfied that there is no direct claim available under the D&O policy by the first plaintiffs against QBE and that all questions in the proceedings that need to be determined are already pleaded in the existing pleadings. I do not therefore consider there is jurisdiction to order joinder as neither of the circumstances set out in r 4.56(1)(b)(i) or (ii) are met.
Conclusion
[40] The plaintiffs have failed at the first stage of an enquiry — there is no jurisdiction to join the proposed party.
[41] I do not therefore need to go on to consider the second stage, whether to exercise my discretion.
17 Section 9(4) of the Law Reform Act 1936 provides that leave of the Court is required to pursue a charge under s 9, except where s 9(2) applies. Section 9(2) applies where, on the happening of the event giving rise to the claim, the insured person has died insolvent or is bankrupt or in the case of a corporation is being wound up.
Result
[42]The plaintiffs’ application for joinder of QBE as a defendant is declined.
Costs
[43] QBE has succeeded and is entitled to costs. I ask the parties to confer and only if costs cannot be agreed for memoranda to be filed on behalf of QBE by 17 April 2025 and the plaintiff by 2 May 2025.
Associate Judge Sussock
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