Steigrad v BFSL 2007 Limited HC Auckland CIV-2011-404-611 - [2011] NZHC 1037

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-611

BETWEEN PETER DAVID STEIGRAD, BRUCE NELSON DAVIDSON AND GARY KENNETH URWIN
Plaintiffs

AND BFSL 2007 LIMITED, BNL 2007
LIMITED, B2B BROKERS LIMITED AND OTHERS
First Defendants

ANDBRIDGECORP LIMITED AND BRIDGECORP MANAGEMENT SERVICES LIMITED (BOTH IN RECEIVERSHIP AND LIQUIDATION) Second Defendants

ANDQBE INSURANCE (INTERNATIONAL) LIMITED
Third Defendant

Hearing: 25 and 26 August 2011

Appearances: B Keene QC and J Little for plaintiffs
M Tingey and D J Friar for first defendants and receivers of second defendants
A Challis for third defendant

Judgment: 15 September 2011 at 11:30 AM

JUDGMENT OF LANG J

This judgment was delivered by me on 15 September 2011 at 11.30 am, pursuant to
Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

STEIGRAD & ORS V BFSL 2007 LTD & ORS HC AK CIV-2011-404-611 15 September 2011

[1] The Bridgecorp group was comprised of finance companies that borrowed money from the investing public to fund property developments in New Zealand, Australia and Fiji. The group collapsed and was placed in receivership from 2 July
2007, owing investors nearly $500 million.

[2] The plaintiffs, Mr Steigrad, Mr Davidson and Mr Urwin (“the directors”), are three of six former directors of companies within the Bridgecorp group. The other directors are Mr Roest, Mr Petricevic and Mr O’Sullivan. The first and second defendants (“the Bridgecorp defendants”) are companies within the Bridgecorp group that are all in receivership and/or liquidation.

[3] Although Mr Urwin is named as a plaintiff, his counsel has received no instructions from him for some time. At the commencement of the trial I granted Mr Keene leave to withdraw as counsel for Mr Urwin. As a consequence, only Mr Steigrad and Mr Davidson proceeded to trial.

[4] The directors face numerous criminal and civil claims following the collapse of the Bridgecorp group. These include civil and criminal proceedings that the Securities Commission has instituted. The criminal proceedings are based on allegations that the directors made false statements in prospectuses, extension certificates and investment statements that the Bridgecorp companies issued to prospective investors. The trial was due to commence in this Court on 5 September
2011, but has now been delayed until 10 October 2011 because of difficulties encountered by some of the accused in obtaining legal representation. The civil proceedings have been stayed pending disposition of the criminal proceedings.

[5] In addition, the Bridgecorp defendants have advised the directors that they intend to institute civil proceedings against them. The proceedings will allege that the directors managed the Bridgecorp defendants in a manner that breached their statutory and common law duties to the companies. The Bridgecorp defendants will seek orders requiring the directors to pay the Bridgecorp defendants more than $450 million.

[6] Bridgecorp companies incorporated in Australia have also indicated that they intend to issue civil proceedings against the directors seeking compensation for breach of common law and statutory duties under the Australian companies legislation.

[7] The Bridgecorp companies have held a directors and officers insurance…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Steigrad v BFSL 2007 Limited HC Auckland CIV-2011-404-611

Details

AGLC: Steigrad v BFSL 2007 Limited HC Auckland CIV-2011-404-611 [2011] NZHC 1037
Case: [2011] NZHC 1037
Decision Date: 15 September 2011

CaseChat Overview and Summary

The High Court of New Zealand considered whether a charge under section 9 of the Law Reform Act 1936 prevented the insured from accessing the insurance policy to meet defence costs. The plaintiffs, former directors of the Bridgecorp group, sought a declaration that the charge did not prevent them from having access to their directors and officers insurance policy to meet defence costs. The defendants claimed that if the charge did not prevent the directors from accessing the policy, the amount that the insurer was liable to pay for defence costs was limited to $500,000. The court considered that the charge prevented the directors from having access to the policy to meet their defence costs. The reasoning was based on the purpose of the charge, which was to provide a means of redress against the insurer of a person responsible for an event giving rise to a claim for damages or compensation in circumstances where proceedings against the insured cannot be maintained. The court concluded that the charge had priority over all other charges affecting the insurance money, and any payment made by the insurer to the insured for defence costs would be a volunteer. The outcome was harsh for the directors, but it was in accordance with the object and purpose of the statutory charge.

Orders