Vero Insurance New Zealand Limited v Weathertight Homes Tribunal [2014] NZHC 342 (3 March 2014)

Last Updated: 20 March 2014

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2013-404-004125 [2014] NZHC 342

UNDER The Judicature Amendment Act 1972 and the High Court's inherent power of review

IN THE MATTER of an application for review of a decision made pursuant to the Weathertight Homes Resolution Service Act 2006

BETWEEN VERO INSURANCE NEW ZEALAND LIMITED

Applicant

AND WEATHERTIGHT HOMES TRIBUNAL First Respondent

BODY CORPORATE 194736

Second Respondent

R PALA and R BEN & ORS Third Respondents

continued: .../2

Hearing: 5 February 2014

Appearances: P Hunt and A Praulx for Applicant

S M Thodey and S Mitchell for Fourth Respondent

Judgment: 3 March 2014 at 3pm

_{(RESERVED) JUDGMENT OF ANDREWS J}

This judgment is delivered by me on 3 March 2014 at 3pm pursuant to r 11.5 of the High Court Rules.

Solicitors:

McElroys, Auckland

Crown Law Office, Wellington

Heaney & Co, Auckland

Legal Vision, Ponsonby, Auckland

Neilsons, Onehunga, Auckland

..................................................... Registrar / Deputy Registrar

VERO INSURANCE NZ LTD v WEATHERTIGHT HOMES TRIBUNAL [2014] NZHC 342 [3 March 2014]

_.../2

AUCKLAND COUNCIL Fourth Respondent

STEPHEN LLOYD WOODHAMS Fifth Respondent

DAVID STEPHEN HUGHES Sixth Respondent

MARK JAMES PATERSON Seventh Respondent

BAYS HOUSE INSPECTION SERVICE LTD

Eighth Respondent

ROBERT JOSEPH BARNES Ninth Respondent

PREMIUM PROPERTY MANAGEMENT LTD Tenth Respondent

JAMES HARDIE NEW ZEALAND Eleventh Respondent

Contents

Introduction ..........................................................................................................[1]

Background...........................................................................................................[2] The Tribunal’s decision......................................................................................[12] Application for judicial review..........................................................................[15] Removal of a party under s 112 of the Act – legal principles .........................[17] Was there an error of law? ................................................................................[23] Was there an error of fact?................................................................................[30] Does the exclusion clause apply? ......................................................................[38] Conclusion as to errors of law and fact ............................................................[54] Relevant/irrelevant considerations ...................................................................[56] Insufficient evidence...........................................................................................[58] Result ...................................................................................................................[61]

Introduction

[1] This proceeding is an application for judicial review of a decision of Mr K D Kilgour (“the Tribunal member”) of the Weathertight Homes Tribunal (“the Tribunal”), refusing the application by Vero Insurance New Zealand Ltd (“Vero”) for an order removing it as a party to a proceeding before the Tribunal (“the removal decision”).¹

Background

[2] The proceeding before the Tribunal is a leaky home claim in respect of the

“John Jennings” complex of 18 townhouses, constructed at Albany, Auckland, during

1998 and 1999 (“the complex”). The body corporate and owners of the townhouses (“the claimants”) began a proceeding in the Tribunal on 27 June 2012, claiming the costs of repairs to the townhouses against eight parties. The parties include the Council and Mr Stephen Woodhams, director of the Vance Commercial Ltd (later called Woodridge Construction Ltd) which built the townhouses (“Woodridge”).²

[3] On 26 September 2012 a case officer in the Tribunal asked Mr John Swan, the general manager claims at Vero Liability Insurance Ltd (“Vero Liability”),³ to search for insurance held by Woodridge during the period 1998 to 2000. At that time, Vero was not a party to the proceeding. A search of Vero’s “Solvit” electronic records system, revealed a policy, reference HO BIP 0600831. Mr Swan believed that the policy would have been a Royal & Sun Alliance policy, so provided the

Tribunal with a copy of the Royal & Sun Alliance Business Plan policy wording

(“the RSA policy”) which was applicable at the relevant time.

[4] The Council then applied to join Vero to the proceeding under s 111 of the

Weathertight Resolution Services Act 2006 (“the Act”) and 9 of the Law Reform Act

1936. Vero did not oppose the application, as it considered that the RSA policy did not provide grounds to do so. An order was made joining Vero to the proceeding on

_{14 January 2013.}

1. Body Corporate 194736 v Auckland Council Weathertight Homes Tribunal TRI 2012-100-51, Procedural Order 14, 20 June 2013.

² _{Woodridge Construction Ltd was struck off the Companies Register on 31 January 2004.}

³ Vero Liability manages historical leaky building claims on behalf of Vero.

[5] In April 2013, the Council’s solicitors queried with Vero’s solicitors whether the correct policy had been provided. In particular, it was noted that the reference number and brand of policy did not correspond with advice they had earlier been given by Woodridge’s insurance broker. Vero’s solicitors were asked to search for an AMP policy, and it was suggested that the reference number might be BIP 5511054. Vero’s solicitors referred the query to Mr Swan.

[6] Mr Swan referred the query on to Mr Karl Orsler, a senior claims consultant at Vero. Mr Orsler has specialised knowledge of references to policy wording in the Solvit system. Mr Orsler’s searches revealed that Woodridge had in fact held an AMP Business Pack policy from 30 January 1997 to 30 January 2002, reference HO BIP 0600831, which replaced a policy with the reference number BIP 5511054. A copy of the AMP Business Pack policy HO BIP 0600831 was provided to the Tribunal on 15 May 2013.

[7] In an affidavit sworn on 22 May 2013, Mr Orsler said that Solvit records showed that Woodridge has an AMP Business Pack policy issued by AMP General Insurance Ltd, from 30 January 1997 until 30 January 2002. Mr Orsler said that he had made enquiries to ascertain if the underwriting file was available, and had learned that it no longer existed, and would have been destroyed by the document storage company after seven years, in accordance with standard business practice. Mr Orsler also said that he had retrieved archived policy wordings from AMP, and that the applicable wording was dated “2/97”.

[8] In a second affidavit, sworn on 7 June 2013, Mr Orsler concluded that Mr Swan had made a mistake in providing the RSA policy, believing it applied to Woodridge. Mr Orsler noted that all of the Solvit entries for Woodridge included the entry “AMPG” in the field “Word” which, he said, confirmed that the applicable policy wording was that of AMP General Insurance Ltd. The prefix “BIP” before the reference number confirmed that the policy was an AMP Business Pack policy.

[9] Mr Orsler’s evidence was that the applicable policy wording includes (in the

“Product and Public Liability Insurance” section) the following exclusion clause:

But we will not pay for...

...

Some other events and items

We will not pay for any claim caused by or arising directly or indirectly from:

_...

_...

Building or construction works where the total value of the works is more than $100,000

[10] In its application for a building consent, Woodridge stated that the value of construction work for the complex was $1.5m. The same figure is given for the value of the work in the Code of Compliance certificate issued by the Council on

3 November 1999.

[11] On 22 May 2013, Vero applied to the Tribunal for an order that it be removed from the proceeding, under s 112 of the Act. The ground on which removal was sought was that the insurance policy which applied to Woodridge was the AMP Business Pack policy dated 2/97. As a result of the exclusion clause in this policy, Vero was not liable to indemnify Woodridge, therefore it was fair and appropriate in the circumstances to order that Vero be removed from the proceeding. The application was opposed by the Council, and by the claimants.

The Tribunal’s decision

[12] The Tribunal member determined that Vero had not met the requirements of s

112, so declined the application. Having referred to the Council’s query concerning the policy Vero had previously disclosed, the member recorded that Vero’s “further search investigations revealed that indeed the applicable insurance policy was in fact an AMP business pack policy and not the policy initially disclosed.”⁴ The member then said:⁵

I accept fully the explanation advanced clearly by Vero in ... its application for removal. The copy policy first disclosed by Vero was a Royal & Sun Alliance policy which at the time Vero thought was applicable and on the basis of the wording of that policy Vero considered it had no grounds to

⁴ Removal decision, above n 1, at [6].

oppose joinder. Further investigation and search by Vero of its records prompted by the requisition from Auckland Council, Vero discovered that in fact the applicable policy was an AMP business pack policy and Vero submits that the wording of the AMP policy contains clear exclusions which have the effect of excluding a claim by Woodridge Construction and on this basis Vero now seeks to be removed.

[13] After referring to the submissions filed on behalf of Vero, the claimants, and the Council, the member said:⁶

[15] It does seem that the best available evidence regarding the type and extent of cover held during the relevant period by Woodridge Construction is that contained in the two affidavits from Mr Orsler. This is because Vero’s documentation has been destroyed and any better evidence may not be forthcoming.

[15] I do accept completely Vero’s explanation as to why it did not oppose leave and joinder when first given the opportunity and why it is now seeking removal.

[14] The member went on to conclude:⁷

[18] I accept the submissions advanced by the claimants and the [Council] notwithstanding the evidence from Mr Orsler, that there is still a marginal factual dispute over the wording of the applicable policy and as to whether it responds to the claim against Mr Woodhams and particularly Woodridge Construction and as to the breadth and otherwise applicability of the exclusion clause explained by Vero.

[19] I do accept that the actual and correct cover and extent of the insurance is probably a fact only established by the correct insuring certificate and schedules and these have been destroyed by the insurer or its broker or underwriter. The burden of proof that an exclusion clause applies lies with the insurer. I accept the submissions of the [Council] and the claimants that on construction of the wording which Vero explains to be the applicable policy and the breadth of the exclusion clause, it remains arguable that the exclusion may not stand. This factual issue is better explained in paragraphs 20-29 of the [Council’s] submissions of 11 June 2013.

[20] Taking into account all the material presently before me I am not satisfied that Vero has met the requirements of s 112. Caution is required against removing a party at this preliminary stage where the claims asserted whilst tenable are perhaps marginal, for the reasonably disputed factual issues advanced by the claimants, and, especially the [Council] could impact significantly on the success or otherwise of the claims. Whilst I am sceptical as to whether more particularised details or better evidence of the actual insurance cover can be produced that is Vero’s difficulty, I need to be [wary] of attempting to resolve such matters in the context of a removal application. I accept that there remain genuinely and reasonably disputed factual issues

⁶ At [15]–[16].

surrounding the insurance of Woodridge Construction but a too broad approach to removals at this preliminary stage could involve a risk of injustice to the claimants.

Application for judicial review

[15] In its statement of claim Vero alleges that in deciding to decline the application for removal, the Tribunal member:

(a) made errors of law; (b) made errors of fact;

(c) failed to take relevant considerations into account, and took irrelevant considerations into account; and

(d) concluded that there was a “marginal factual dispute” on insufficient

evidence.

[16] The Council has filed a statement of defence, denying Vero’s allegations. The Tribunal (the first respondent), the claimants (second and third respondents), and the sixth respondent abide the decision of the Court, reserving rights and seeking to be heard on any application as to costs. None of the other parties have taken any steps in the judicial review proceeding.

Removal of a party under s 112 of the Act – legal principles

[17] Before turning to consider Vero’s arguments, it is appropriate to refer to s 112 of the Act, and High Court authorities concerning the correct approach to removal of a party under s 112.

[18] Section 112 provides:

112 Removal of party from proceedings

(1) The tribunal may, on the application of any party or on its own initiative, order that a person be struck out as a party to adjudication

proceedings if the tribunal considers it fair and appropriate in all the circumstances to do so.

(2) This section is subject to section 57(2).

Section 57(2) of the Act provides that “in managing adjudication proceedings, the

tribunal must comply with the principles of natural justice”.

[19] The Tribunal’s jurisdiction to remove a party from proceedings is akin, but not completely analogous, to the jurisdiction of this Court to strike out proceedings under r 15.1 of the High Court Rules, under which a pleading may be struck out if (among other things) it “discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading”.⁸ The Tribunal’s jurisdiction is to order removal if it is “fair and appropriate in all the circumstances to do so”. It has been recognised that the Tribunal’s jurisdiction is wider, and that it may be “fair and appropriate” to strike out a party in circumstances other than where no reasonable cause of action is disclosed. ⁹

[20] Further, it was recognised in Yun & Phon v Waitakere City Council that the Tribunal’s different approach is consistent with its inquisitorial role, and the scheme and purpose of the Act.¹⁰ This is because the Tribunal’s processes ensure that a claimant’s eligibility is determined by an assessor’s threshold factual enquiry. Thus, once a claim in commenced, the Tribunal has the assessor’s determination, as well as other factual material. When considering an application for removal, the Tribunal is,

therefore, much better informed as to the relevant facts than this Court is when hearing an application to strike out.

[21] In Saffioti, Katz J agreed with the analysis in Yun & Phon and concluded, with respect to the proper approach:¹¹

[44] Nevertheless, it is my view that the cases where it will be “fair and appropriate” for the Tribunal to remove a party from a proceeding in circumstances where the relevant causes of action would not be struck out on a traditional strike out grounds will be relatively rare. Section 112 should not be seen as providing carte blanche to strike out parties at a preliminary stage in circumstances where the claims asserted against them are tenable, but weak. Often in litigation claims which appear weak at an early stage

⁸ High Court Rules, r 15.1(1)(a), and see Attorney-General v Prince & Gardner [1998] 1 NZLR

_{262 (CA), at 267; and Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 (SC).}

⁹ See, for example, Saffioti v Jim Stephenson Architect Ltd [2012] NZHC 2519 at [27]–[28] and North Shore City Council v Wightman HC Auckland CIV 2010-404-3942, 30 November 2010 at [58].

¹⁰ Yun & Phon v Waitakere City Council HC Auckland CIV 2010-404-5944, 15 February 2011 at

_[57]–[64].

¹¹ Saffioti, above n 10, at [44]–[45].

may gain momentum at trial, whereas other claims which appeared strong at the outset are later revealed to be fatally flawed.

[45] It is necessary to be cautious when approaching applications under s 112 in order to prevent injustice to claimants who may in fact have a good claim once all the evidence is before the Tribunal, including through cross- examination in appropriate cases. Too broad an approach to the jurisdiction under s 112 would involve a risk of injustice to claimants. It is important that claims which may ultimately prove to be meritorious not be prematurely struck out at an interlocutory stage.

[22] While recognising the need to prevent injustice to claimants, however, it is also necessary to consider the interests of those against whom claims are made. With respect, I agree with the comment of Ellis J in Yun & Phon:¹²

[70] In terms of what might be regarded as the relevant underlying policy considerations it seems to me that the Tribunal is required to deal on a daily basis with claims that are technically and factually complex. As a result of the rush to spread, share or avoid liability, many of these claims frequently involve numerous defendants as well as a plethora of second, third and even fourth parties. If there is to be any prospect of hearing and determining such claims in an expeditious and cost-effective way, the Tribunal must be able to perform an active gate-keeping role in terms of both joinder and removal of parties.

Was there an error of law?

[23] Mr Hunt submitted for Vero that the Tribunal member made an error of law in applying Saffioti to find that there remained “genuinely and reasonably disputed factual issues surrounding the insurance of Woodridge Construction”, which could not be determined in the context of a removal application.¹³ He submitted that the facts of the present case are entirely distinguishable from those in Saffioti, in particular, that there is no genuine or reasonable dispute as to the applicable policy

wording.

[24] Mr Hunt further submitted that the Tribunal member made an error of law in failing to perform an “active gate-keeping role”, as required by Yun & Phon. He submitted that the member should have made an early assessment of Vero’s evidence, as against that of the Council and the claimants, and determined which policy wording applied, and the appropriate construction of the exclusion clause.

[25] Mr Hunt referred to the judgment in Body Corporate 83501 v Christchurch City Council.¹⁴ In that case, Fogarty J held that it was appropriate to determine the central issue of the construction of a defendant’s insurance policy on an interlocutory application to join the defendant’s insurer as a third party. Mr Hunt submitted that this judgment supported Vero’s submission that the issues in this case of what policy applied, and the construction of the exclusion clause, were appropriate for

determination in an application for removal.

[26] Ms Thodey submitted that Vero’s submissions confused judicial review with appeal, and that the issue to be determined was whether the Tribunal member had applied the correct test, not whether he had reached the wrong conclusion after applying the test. She further submitted that the member had applied the correct test, and had properly applied the Saffioti principles. Thus, she submitted, there had been no error of law.

[27] I am satisfied that the Tribunal member improperly limited his jurisdiction, by concluding that he could not consider Vero’s argument that the AMP Business Pack policy excluded coverage in respect of the complex. As in Body Corporate

83501, determination of the applicable insurance policy and construction of the exclusion clause were matters that could be determined in an interlocutory application (in this case, a removal application). Determination of the issue would also have been consistent with the principles set out in Yun & Phon.

[28] An application for removal will always be determined in the context of the particular facts in the case before the member. The outcome of applications for removal in other cases will not determine the outcome in this case, when the factual context is different. I accept Mr Hunt’s submission that the factual context in Saffiioti is different from the present case: There, as Katz J recorded, the evidence was contentious and challenged, and the veracity of Mr Stephenson (who was

seeking removal) was “squarely put in issue”.¹⁵ That is not the case here, as the key

issues are which policy wording applies, and whether the exclusion clause applies.

[29] Therefore, I am satisfied that the Tribunal member made an error of law. I turn to consider Vero’s submission that the member made an error of fact. It is under this heading that it is more appropriate to consider whether there is a genuine or reasonable dispute as to which policy wording applies.

Was there an error of fact?

[30] Relying on essentially the same argument put forward in respect of error of law, Mr Hunt submitted that the member made errors of fact in finding that there remained genuine and reasonable factual disputes as to the applicable policy wording, and as to the application of the exclusion clause. I turn first to consider whether the member made an error of fact in finding there was a genuine and reasonable factual dispute as to the applicable policy wording.

[31] Mr Hunt submitted that having accepted that Mr Orsler’s evidence was “the best available evidence” regarding the type and extent of Woodridge’s insurance cover,¹⁶ and in the circumstances that no evidence was given to the contrary, the Tribunal member erred in fact in then saying that there was still a “marginal factual dispute over the wording”,¹⁷ and that “the actual and correct cover and extent of insurance is probably a fact only established by the correct insuring certificate and schedules”.¹⁸

[32] Ms Thodey submitted that the Tribunal member was entitled to reach the decision that he did on the information before him, and that there remains a factual dispute as to policy wording. She further submitted that the courts are properly reluctant to interfere with decisions on factual grounds (in a judicial review proceeding), as these are more properly the subject of an appeal.

[33] As to the disputed facts, Ms Thodey referred me to evidence given by Mr Woodhams, where he said that he believed that Woodridge had public liability cover for its liabilities. She also referred me to the fact that Mr Swan had advised

_{the Tribunal that the RSA policy was the applicable policy. She submitted that}

¹⁶ _{Removal decision, above n 1, at [15].}

¹⁷ At [18].

Mr Swan had not asserted that this was a mistake until “very recently”, and that the

member was entitled to draw an adverse inference from his silence.

[34] Further, Ms Thodey submitted that there was evidence that the relevant policy number was “BIP 5511054”, but that Vero had not provided a copy of that policy wording. She referred to advice from the insurance broker as to the likely historical policy number, Vero’s own evidence as to BIP 5511054 being the historical policy number, and the fact that the wording for BIP 5511054 had not been provided. She also submitted that policy wordings had changed on other insurance policies, and the member was entitled to draw an inference that all policies were amended around 2000, to account for concerns around “Y2K”.

[35] In Woods v Legal Complaints Review Officer, Kós J said:¹⁹

Error of fact is a problematic concept in the spectrum of judicial review grounds. Factual challenge is more normally the subject of appellate rather than review jurisdiction. Where review is concerned, the courts take a circumspect view of factual error. But the courts will intervene where factual error undermines jurisdiction, where the factual inquiry was clearly inadequate or otherwise the product of an unfair process or where a finding of fact is utterly unsupportable on the evidence.

[36] I accept Mr Hunt’s submission that none of the matters referred to by Ms Thodey support a conclusion that there is any genuine and reasonable factual dispute as to which was the applicable policy. In the terms used by Kós J, that finding was unsupportable on the evidence. I address the matters referred to by Ms Thodey below:

(a) Mr Woodhams’ evidence was that “each project would have an insurance cover, a public liability”. He later said that he had “no documents whatsoever on [Woodridge]”. His evidence does not relate to which particular insurance cover applied for the John Jennings complex. It does not raise any doubt or dispute as to whether HO BIP 0600831 was the applicable policy during construction of the

_complex.

¹⁹ Woods v Legal Complaints Review Officer [2013] NZAR 577 at [39], citing Matthew Smith New

Zealand Judicial Review Handbook (Thomson Reuters, Wellington, 2011) at 719.

(b) Mr Swan’s error was referred to in Mr Orsler’s second affidavit, sworn on 7 June 2013. The error was also referred to in Vero’s reply submissions to the Tribunal, dated 18 June 2013. Annexed to the reply submissions was an email from Mr Swan, confirming that he had sent the RSA wording to the Tribunal in error. I accept Mr Hunt’s submission that there can be no question as to Mr Swan’s error, and there is no “adverse inference” to be drawn from “Mr Swan’s silence”. Indeed, the member did not draw any adverse inference; he accepted that the RSA policy had been provided to the Tribunal in

error.²⁰ The error does not lead to a conclusion that HO BIP 0600831

was not the applicable policy.

(c) The broker’s reference to the historical reference number does not raise any issue that BIP 5511054 may be the insurance policy that applied when the complex was constructed. In the Solvit records, the “inception date” for policy HO BIP 0600831 (an AMP Business Pack policy) is recorded as 30 January 1997 (prior to construction of the complex) and it is recorded that it “replaces policy” BI 5511054. That policy is recorded as the “old policy number”.

(d) The submission that the member could infer that “all policies were amended” was not supported by any evidence, and was contrary to Mr Orsler’s evidence that for AMP policies, the wording of HO BIP 0600831 remained the same from its inception until it was cancelled in 2002. I accept Mr Hunt’s submission that there is no basis on which the member could have inferred that the policy was amended.

[37] I am satisfied that the on the information before him, the Tribunal member erred in fact in finding that there was a genuine and reasonable factual dispute as to the applicable policy.

Does the exclusion clause apply?

[38] Mr Hunt further submitted that the Tribunal member made a error of fact in finding that “it remains arguable that the exclusion may not stand”.²¹ This was, he submitted, for two reasons: first, because the wording of the exclusion does not require Woodridge’s liability to be caused by the fact that the total value of the construction work exceeded $100,000 and, secondly, construction of the exclusion clause in accordance with its natural and ordinary meaning would not make the

insurance policy illusory, or deprive it of its efficacy. As Mr Hunt’s submissions focussed on the proper interpretation of the exclusion clause, this aspect of the application for review is better considered under the heading of alleged error of law.

[39] At the judicial review hearing, it became apparent that Ms Thodey’s submission that there is a factual dispute as to the applicability of the exclusion clause rested on s 11 of the Insurance Law Reform Act 1977 (“the ILR Act”), which provides:

11 Certain exclusions forbidden

Where–

(a) By the provisions of a contract of insurance the circumstances in which the insurer is bound to indemnify the insured against loss are

so defined as to exclude or limit the liability of the insurer to

indemnify the insured on the happening of certain events or on the existence of certain circumstances; and

(b) In the view of the Court or arbitrator determining the claim of the

insured the liability of the insurer has been so defined because the happening of such events or the existence of such circumstances was in the view of the insurer likely to increase the risk of such loss occurring,–

the insured shall not be disentitled to be indemnified by the insurer by reason only of such provisions of the contract of insurance if the insured proves on the balance of probabilities that the loss in respect of which the insured seeks to be indemnified was not caused or contributed to by the happening of such events or the existence of such circumstances.

[40] There was no direct reference to s 11 in the Council’s submissions before the Tribunal, in the removal decision, or in the Council’s written submissions on judicial review. For this reason, I gave leave for the parties to file further submissions after the hearing.

[41] Ms Thodey accepted that there was no explicit reference to s 11 in the submissions to the Tribunal, but submitted that there was implicit reference, in that counsel for the Council submitted that the exclusion clause was a “temporal” clause, and that it was therefore necessary for the insurer (Vero) to establish a clear causal link between the circumstances described in the clause (construction work valued at more than $100,000) and the increase in risk.

[42] Ms Thodey further submitted that when s 11 is raised there are two factual issues to determine. In the present case, the first issue is whether Vero can establish that construction work that has a value of more than $100,000 would necessarily increase the risk to it as insurer. The second is whether the insured (Woodridge) can establish that the fact that the value of the construction was more than $100,000 has not given rise to the liabilities that may attach to them. She submitted that for both issues, arguments may be made either way. Accordingly, she submitted, the applicability of s 11 to the exclusion clause is not suitable for summary determination, and the member did not err in fact in declining to determine it.

[43] Mr Hunt first submitted that there was no explicit or implicit reference to s 11 in the Council’s submissions to the Tribunal, and that the Council’s submissions to the member did not include any analysis of how s 11 applied to the exclusion clause. He submitted that the authority referred to in the Council’s submissions²² was not an example of the application of s 11 (or any Australian equivalent). He further submitted that judicial review of the member’s decision should involve consideration of the submissions and information before the member and that it is not, therefore, necessary to reach any conclusion as to the applicability of s 11.

[44] In the alternative, Mr Hunt submitted that it is clear that s 11 does not apply to the exclusion clause. He submitted that the fact that the value of the construction work is more than $100,000 does not increase the risk of occurrence of loss arising from the insured being liable to pay compensation and, if the value of the

_{construction work was likely to increase the risk of loss, Woodridge could not}

²² Bashtannyk v New India Assurance Co Ltd [1968] VicRp 74; [1968] VR 573: a case concerning the application of an exclusion in a motor vehicle policy which provided that the policy did not cover “loss damage liability” or compensation for damage “while the motor vehicle is being used whilst in an unsafe condition”.

establish that the loss was caused or contributed to by the fact that the value of the work was over $100,000.

[45] Whilst the Tribunal member did not refer to s 11 in the removal decision, I accept that there is an oblique reference to a “factual” argument as to whether the exclusion clause can be relied on, in the member’s statement that “[t]his factual issue is better explained in paragraphs 20-29 of the [Council’s] submissions...”²³ The paragraphs of the submissions for the Council referred to by the member include submissions that “[t]he burden of proof that an exclusion clause applies lies on the

insurer. These clauses are usually construed strictly against the insurer” and “[i]t is submitted that on construction it is arguable the exclusion may not stand if the fact that the buildings and construction being worth more than $100,000 did not cause the liability”.

[46] Given that reference, I have concluded that it is appropriate to address s 11, now that it has been raised expressly.

[47] In New Zealand Insurance Co Ltd v Harris, the Court of Appeal said:²⁴

Section 11 contemplates a two step inquiry where the contract of insurance excludes or limits the insurer’s liability on the happening of certain events or the existence of certain circumstances. The first is to determine whether the insurer’s liability has been so defined because the happening of the events or the existence of the circumstances was in the view of the insurer likely to increase the risk of occurrence of the loss. That inquiry rests on an assessment of the bona fide view of the insurer in relation to the matter.

Even where the purpose of the limitation is entirely legitimate the insured is not necessarily disentitled to be indemnified. That is for consideration at the second step. The inquiry there is whether the loss in respect of which the insured seeks to be indemnified was caused or contributed to by the happening of the event or the existence of the circumstances. The onus of proof rests on the insured ...

[48] In relation to the first step, Mr Hunt referred me to the coverage section of the AMP Business Pack policy wording:

²³ _{Removal decision, above n 1, at [19] (set out in full at [14], above).}

²⁴ New Zealand Insurance Co Ltd v Harris [1990] 1 NZLR 10 (CA) at 15.

We will pay...

Product liability

If you are legally liable to pay compensation for personal injury or damage to property that happens during your period of insurance with us and:

the injury or damage results form an occurrence connected with your business and caused by the nature, condition or quality of any products sold or supplied by you then we will indemnify you:

up to the product liability sum insured for the compensation.

[49] I accept Mr Hunt’s submission that the particular loss covered is Woodridge’s liability to pay compensation for property. I also accept his submission that the value of construction works affects the size of any loss that may result from property damage, but does not affect the risk of such damage occurring. I accept his submission that the size and value of a construction project cannot in and of themselves increase the risk of damage occurring, as that risk depends on the acts or omissions of the insured.

[50] Further, in Barnaby v The South British Insurance Co Ltd, it was held that s 11 did not apply to an exclusion clause relating to construction work.²⁵ In that case, the plaintiffs had obtained a home insurance policy. The policy contained a clause providing that “this policy does not cover ... fault, defect, error or omission in design”. The plaintiffs sought cover when a retaining wall failed, and Hardie Boys J held that s 11 did not apply, so coverage was excluded. His Honour said²⁶

The key to [s 11] is to be found in the last words of par. (b): the section is designed to deal with those kinds of exclusion clauses which provide for circumstances likely to increase the risk of a loss which the policy actually covers. The most common examples are found in the field of motor vehicle insurance, such as driving a motor vehicle whilst under the influence of alcohol, or driving a motor vehicle which is in an unsafe condition. The section is not designed to deal with exclusion clauses which specify the kind of loss or the quantum of loss to which cover does not apply at all. The latter is the case here. ...

[51] In Hall v FP North Ltd (In Liq), Associate Judge Abbott said:²⁷

The principle to be taken out of Barnaby is that s 11 does not apply to exclusion clauses which determined the scope of cover under an insurance

²⁵ _{Barnaby v The South British Insurance Co Ltd (1980) 1 ANZ Insurance Cases 77,003 (HC).}

²⁶ _{At 77,008.}

²⁷ Hall v FP North Ltd (In Liq) (2010) 16 ANZ Insurance Cases 77,946 (HC at [25].

policy by specifying a kind of loss or quantum that is not indemnified. It is intended to apply to clauses which purport to exclude liability for a loss that is otherwise covered.

[52] In the present case, the exclusion clause provides that there is no cover for any claim arising from construction works valued at over $100,000. The construction of the John Jennings complex was valued at $1.5m, so is excluded from cover. I accept that s 11 does not apply. In the light of that conclusion I do not need to consider whether Woodridge would be able to establish that the value of the construction work did not cause or contribute to the loss.

[53] I am satisfied that the Tribunal member made a further error of fact in concluding that there was a factual dispute as to the application of the exclusion clause.

Conclusion as to errors of law and fact

[54] I am satisfied that the Tribunal member both could and should have determined the issue of the applicable policy wording and the application of the exclusion clause. Determining those issues would not have caused any injustice to the claimants, and would have been consistent with the Tribunal’s function of determining claims in an expeditious and cost-effective way.

[55] Further, I am satisfied that there can be no dispute as to the applicable policy wording, or as to the application of the exclusion clause. The applicable policy was HO BIP 0600831, and the applicable wording was the AMP Business Pack policy dated 2/97. Further, I am satisfied that the exclusion clause applies and that the John Jennings complex construction is not covered by the policy.

Relevant/irrelevant considerations

[56] Mr Hunt’s submissions in support of Vero’s contention that the Tribunal member failed to take into account relevant considerations and took into account irrelevant considerations reflected his submissions in relation to error of law and error of fact. In essence, he submitted that the member failed to take into account his finding that Mr Orsler’s evidence was likely to be the best evidence, and the

evidence that Woodridge’s policy certificate and schedule had been destroyed in accordance with standard business practice (relevant considerations), and took into account the liability and insurance cover of employees such as Mr Woodhams, and the terms of other policies (irrelevant considerations).

[57] Vero’s arguments on this aspect of the appeal have substantially been addressed in my discussion of his submissions as to errors of law and fact, and as I have found there were errors of law and fact, it is not necessary to repeat that discussion.

Insufficient evidence

[58] The final ground on which Vero sought judicial review of the removal decision was that the only reasonable conclusion available on the evidence before the Tribunal contradicts the removal decision. In support of this submission he referred to the judgment of John Hansen J in Ramsay v Accident Compensation Corporation, where his Honour said:²⁸

A decision-maker’s treatment of facts can amount to an error of law. There will be an error of law where there is no evidence to support the decision, the evidence is inconsistent with and contradictory of the decision, or the true and only reasonable conclusion on the evidence contradicts the decision.

[59] Mr Hunt submitted that in this case, the true and only reasonable conclusion on the evidence (as given by Mr Orsler, that the AMP Business Pack policy HO BIP 0600813 is the applicable policy) contradicts the member’s decision that there is a factual dispute as to the applicable policy.

[60] As Mr Hunt acknowledged, this ground reflects the matters raised in relation to errors of fact, which have already been addressed. I do not need to address them

_again.

²⁸ Ramsay v Accident Compensation Corporation [2004] NZAR 1 at [11], citing Edwards v

Bairstow [1955] UKHL 3; [1956] AC 14 (HL).

Result

[61] I am satisfied that the Tribunal member made errors of law and fact. The application for judicial review therefore succeeds. I am satisfied that it is appropriate to make the order sought by Vero, to set aside the removal decision, pursuant to s 4(2) of the Judicature Amendment Act 1972, and to order that Vero is removed from the tribunal proceeding. I so order.

[62] Costs (on a 2B basis) should follow the event. If costs cannot be agreed between the parties then memoranda may be filed: that for Vero within 21 days of the date of this judgment and that for the Council within a further 14 days. A decision will then be made on the papers, unless counsel agree that an oral hearing

_{is required.}

Andrews J