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High Court of New Zealand Decisions |
Last Updated: 14 March 2016
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2014-409-000124 [2016] NZHC 320
BETWEEN
|
BODY CORPORATE 78462
Plaintiff
|
AND
|
IAG NEW ZEALAND First Defendant
|
AND
|
EARTHQUAKE COMMISSION Second Defendant
|
Hearing:
|
24 February 2016
|
Appearances:
|
K J Crossland and J S Langston for VXJ Holdings Ltd
(Applicant for joinder)
H C Matthews for Plaintiff (Respondent on joinder application) A R
Armstrong for First Defendant (abiding the Court’s decision)
N S Wood for EQC (abiding the Courts’ decision) (attendance
excused)
|
Judgment:
|
1 March 2016
|
JUDGMENT OF ASSOCIATE JUDGE OSBORNE
Introduction
[1] VXJ Holdings Limited (VXJ) asks the Court to join it as a defendant in a proceeding brought by the Body Corporate 78462 (the Body Corporate) in respect of a multi-unit complex (the complex) at Sumner. The complex suffered extensive damage in the Christchurch earthquake sequence. The first defendant, IAG, was the insurer of the complex. The second defendant, EQC, has its liability under the Earthquake Commission Act 1993. The Body Corporate sues for an order requiring IAG to reinstate the complex or to pay a sum equivalent to the reinstatement cost. The Body Corporate also sues EQC in relation to its liability arising from the
requirement to allocate payments between damage-causing
earthquakes.
BODY CORPORATE 78462 v IAG NEW ZEALAND [2016] NZHC 320 [1 March 2016]
Facts
An insured complex
[2] The complex of which the plaintiff is the body corporate
involves four separate buildings comprising 49 residential
apartments and a
commercial building which operates as a tavern. It is the latter building of
which by VXJ is the unit holder.
The different positions of the parties
[3] Before turning to the pleadings, it is possible to state generally
the different positions of the parties.
[4] The Body Corporate asserts that it suffered insured damage to the
complex through more than one earthquake, that there is
cover under the first
policy for the year ending 5 June 2011, and further cover under the second
policy for the year commencing 5
June 2011. The Body Corporate asserts that the
damage needs to be allocated between the two years.
[5] For the purposes of the present application, there is no material
difference between the parties as to the terms of the
insurance policies. The
total sum insured under each policy taken out by the Body Corporate was
$15,938,000. The total sum insured
under each policy was split between
VXJ’s tavern ($771,000) and the apartments ($15,169,000).
[6] The Body Corporate asserts that the complex requires demolition and
reconstruction. IAG puts in issue the extent of demolition
and reconstruction
required, the periods in which relevant damage was sustained, and
quantum generally. IAG has paid
to the Body Corporate what IAG calculates to
be the entitlement. IAG also says affirmatively that the complex had weather
tightness
defects which were excluded by the policy.
[7] EQC puts in issue the correct allocation of damage as between parts of the complex and as between the two years.
Pleadings
[8] The pleadings reflect in more detail the parties’ different
positions as I have
summarised them.
[9] In paragraph [23] of the Body Corporate’s first amended
statement of claim, it pleads damage to the complex which
occurred as a direct
result of the earthquake of 22 February 2011 (that is to say, in the first
year).
[10] Paragraphs [25] and [26] of the amended statement of claim plead the
consequences of the 13 June 2011 earthquake (that is to
say, in the second
year):
25. As a direct result of the Earthquake on 13 June 2011 (Earthquake
2), the Complex has suffered damage during the period of
Policy 2,
including:
25.1 Widespread new damage to the basement car park. The repair
completed on the sumps post-February was undone causing
further flooding. The
earlier repair methodology was overtaken by the exacerbation of the February
damage and was no longer appropriate.
25.2 The differential settlement to Block 3 meant the concrete slab did
not meet tolerance guidelines set out by the Ministry
of Business, Innovation
and Employment. It would prove more cost effective to demolish and rebuild the
entire block.
25.3 There are no cost effective repairs or long-term solutions that would enable the basement to be returned to its pre 13
June 2011 condition. All evidence supports a re-build
requiring reinstatement of the buildings that sit atop the basement,
namely the Tavern, Block 2 and Block 3.
26. Except for Block 4, there is no economically feasible or
practically possible re-levelling solution to restore the Complex
to either the
condition it was in prior to the June 13 earthquake and/or a condition
substantially the same as when new. Accordingly
the Complex requires demolition
and reconstruction with appropriate foundations to meet the New Zealand Building
Code.
[11] By its pleading, IAG has denied all the Body Corporate’s pleadings at paragraphs [25] and [26].
What VXJ would assert
A need for demolition of the basement?
[12] Within the Body Corporate’s pleading as to the requirement to
rebuild the complex is an allegation that the basement
must be rebuilt.
VXJ’s tavern is constructed over the basement. VXJ would assert that the
basement does not have to be rebuilt.
[13] The position of VXJ in relation to this application was supported
by an affidavit of its sole director and joint shareholder,
Peter Foster. Mr
Foster deposes that, in addition to his involvement on behalf of VXJ as a unit
owner in the complex (and his wife’s
ownership of a unit), he has wide
experience in property-related matters, including as a real estate sales person.
He managed private
property and land development companies and has been involved
in the construction of “several hundred homes” in Christchurch
from
1969 to 1998. He says that his final development project was of the very
Sumner complex which is the subject of the insurance
claim. Mr Foster
refers in detail to expert reports which have been obtained by various
parties in relation to the
complex and exercises he has carried out in relation
to scoping works.
[14] Mr Crossland, in his submissions, succinctly summarised Mr
Foster’s concerns which relate to what Mr Foster
views as two particular
errors in the two reports relied upon by the Body Corporate. These are the
Structura and Powell reports.
First, Mr Foster views the two reports as
containing or perpetuating false assumptions that seawater (“brackish
water with
high salt content”) is entering the basement. Secondly, Mr
Foster identifies as false another assumption that there is a tanking
membrane
at basement level which cannot be reinstated. Mr Foster refers to other
material, including his own reports, which identify
what he says is the correct
position. His concern is that the assumptions he has identified have led the
Body Corporate to base
its insurance claims on a need to reinstate the complex
as opposed to undertaking repairs only.
[15] The concern of Mr Foster, as VXJ’s director and part-shareholder, is to avoid an outcome where the Body Corporate proceeds on the basis that what is factually
required is a demolition and reinstatement of the complex. The figures he
gives in his evidence suggest that if the basement below
the tavern is
repairable, the tavern does not need to be demolished. On the other hand, if
the basement is not repairable (the position
taken by the Body Corporate in this
proceeding) the amount available will be insufficient to effect demolition
and rebuilding
(taking into account the policy limit or cover on the
tavern).
[16] Mr Foster’s concerns are not newly raised in the context
of the present application. He has been involved in
detailed exchanges of his
information with both the Body Corporate and the insurers. The reports he has
obtained from his own experts
have been provided to all parties in this
litigation. In mid-2014, Mr Foster went so far as to prepare the scope of works
I have
referred to, together with an indicative cost of repairing the basement.
He provided those to all the parties.
VXJ’s other concerns as to the litigation
[17] Mr Foster deals with some matters beyond the state of the complex
and its repair needs. He makes comment as to the conduct
of the Body
Corporate’s committee: He deposes that in 2014:
... my relationship with Mr White, the Body Corporate Committee and some of
the Body Corporate members was not good. I had voiced
by concerns about how
the Body Corporate was being run. Some members of the Body Corporate also
blamed me for the water-tightness
issues affecting the complex. Some Body
Corporate members felt that my action, in informing the Earthquake Commission
that the basement
could be repaired, jeopardised discussions with IAG. That was
not my intention.
And later in his affidavit, Mr Foster concludes:
As referred to earlier, I have a number of concerns regarding the operation
of the Body Corporate. I do not seek to address those
concerns in this
proceeding.
[18] For completeness, I also record that Mr Crossland spoke in his submissions of a further tension between Mr Foster and the Body Corporate committee, which does not appear to be a subject of the evidence filed. It is this. Mr Crossland notes that by reason of the extent of damage to the Complex, there is a live issue as to under-insurance. Mr Foster apparently holds the Body Corporate committee
responsible for any such under-insurance and has told the committee as much.
In the event of a challenge of the decision-making of
the Body Corporate
committee, Mr Foster considers that one or more members of the committee may be
conflicted by reason of his or
her prior involvement and should not have been,
or continue to be, involved in decision-making affecting other unit
holders.
Joinder of a defendant – the jurisdiction and
principles
The rule
[19] Rule 4.56 High Court Rules provides, as relevant to this
application:
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 terms the
court considers just.
The role of the two limbs of the joinder rule
[20] The Court of Appeal in Newhaven Waldorf Management Limited v
Allen observed that the first limb under r 4.56(1)(b) addresses persons
whose presence is necessary for the Court to adjudicate the exact
issues arising
on the pleadings.1 (As in Newhaven, this limb is
inapplicable in this case.)
[21] In delivering the judgment of the Court in Newhaven, Kós J observed that the second limb of r 4.56(1)(b), “has other and more extensive work to do”.2 The Court
of Appeal identified the correct approach to the second limb by
reference to the Privy
1 Newhaven Waldorf Management Limited v Allen [2015] NZCA 204, [2015] NZAR 1173 at [42].
2 At [42].
Council (on appeal from Malaysia) authority.3 The relevant
English rule was materially the same as r 4.56(1)(b)(ii).
[22] In Newhaven, the Court of Appeal held:
[43] It is correct that in Pegang Mining Co Ltd v Choong Sam the Privy
Council suggested that an appropriate test was to ask:4
Will [the intended party]’s 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?”
But the approach in Pegang is subject to two important qualifications. The first is that in adopting it the Privy Council expressly endorsed the decision of the Court of Appeal in Gurtner v Circuit.5 That was a running down case where the defendant had emigrated and could no longer be found. The police attending the accident had noted that he was insured, but had not recorded by whom. The Motor Insurers’ Bureau applied to be joined so they could contest the action. They had no legal obligation to the plaintiff, but they had agreed with the government to meet any judgments against insured motorists not paid by the insurers within seven days. The obligation to the plaintiff was described by counsel for the Bureau as moral rather than legal. The Court of Appeal directed it be joined. Lord Denning MR observed:6
It seems to me that when 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.
[44] The second, more important qualification is that the Privy Council
was at pains to avoid adopting any fixed, general rule
in relation to joinder,
recognising the wide variation in circumstances attending any particular case. A
distinction between “legal
interests” and “commercial
interests” was expressly rejected as unhelpful. Rather, the Privy Council
observed:7
In their Lordships’ view one of the principal objects of the rule is to
enable the court to prevent injustice being done to
a person whose rights will
be affected by its judgment by proceeding to adjudicate upon
3 Pegang Mining Co Ltd v Choong Sam [1969] 2 MLJ 52 (JCPC) at 56.
4 Pegang Mining Co Ltd v Choong Sam, above n 3, at 56.
5 At 55; Gurtner v Circuit [1968] 2 QB 587 (CA).
7 At 55.
the matter in dispute in the action without his being given an opportunity of
being heard. To achieve this object calls for a
flexibility of approach
which makes it undesirable in the present case, in which the facts are
unique, to attempt to lay
down any general proposition which could be
applicable to all cases.
Partly in consequence of that, partly reflecting Equity’s more
expansive attitude to participation,8 and perhaps partly a reflection
of the inherent jurisdiction to also permit intervention, the approach taken in
New Zealand to joinder
has long been regarded as
liberal.9
[23] Kós J then completed the analysis of the correct approach by
turning to New
Zealand authority:
[45] In McKendrick Glass Manufacturing Company Ltd v Wilkinson
Richmond J referred to Equity practice, citing Mitford:10
It is the constant aim of a Court of equity to do complete justice by
deciding upon and settling the rights of all persons interested
in the subject
of the suit, to make the performance of the order of the Court perfectly safe to
those who are compelled to obey it,
and to prevent future litigation. For this
purpose all persons materially interested in the subject ought generally
to be parties
to the suit, plaintiffs or defendants, however numerous they
may be, so that the Court may be enabled to do complete justice
by deciding upon
and settling the rights of all persons interested, and that the orders of the
Court may be safely executed by those
who are compelled to obey them, and future
litigations may be prevented.
That practice was found to have made its way into the rules, governing
actions of all kinds, and to underlie what is now the
second limb of r
4.56(1)(b).11
[46] This Court has previously noted that r 4.56 imposes “a fairly
low threshold”.12 A cause of action need not necessarily be
advanced (or lie) against a defendant to be added.13 Indeed,
where the plaintiff
8 McKendrick Glass Manufacturing Company Ltd v Wilkinson [1965] NZLR 717 (SC) at 723—
725.
9 See for example McKendrick Glass Manufacturing Company Ltd v Wilkinson, above n 8; Westfield Freezing Co Ltd v Sayer & Co (New Zealand) Ltd [1972] NZLR 137 (CA); Arklow Investments Ltd v Ngai Terangi Iwi Inc CA 42/94, 1 June 1994.
10 McKendrick Glass Manufacturing Company Ltd v Wilkinson, above n 8, at 723; John Mitford A
Treatise on the Pleadings in Suits in the Court of Chancery (5th ed, V&R Stevens and G S Norton, London, 1847) at 190.
11 At 724—725.
12 Beattie v Premier Events Group Ltd [2012] NZCA 257 at [24].
13 See the authorities collected in A C Beck and others, McGechan on Procedure (online looseleaf
opposes joinder, a cause of action against the additional defendant may not be apparent unless the Court orders re-pleading by the plaintiff. It is the nature of the impact of the proceeding on the additional defendant's rights that is important. As Pegang and Gurtner make clear, these are not necessarily confined to legal rights, although the case for joinder may be stronger in such a case.14
Joinder for the defendant is not without risk, of course. It will be bound
directly by an adverse outcome, and exposed to costs.
The Court’s discretion on joinder
[24] In Newhaven, the Court of Appeal left open a question as to whether the approaches identified in the cited authorities are jurisdictional in nature or involve the exercise of a discretion.15 Kós J, having referred to a previous decision in which
a joinder order was regarded as an exercise of a discretion,16
continued:
[53] ... It is clear that r 4.56(1)(b)(ii) imposes no bright line
jurisdictional threshold. Rather, as we have explained, it
imposes a flexible
standard. The application of that standard will depend on contextual analysis.
As the authors of McGechan on Procedure
observe, “the jurisdictional
question has tended to become intertwined with the discretionary question
[whether joinder should
be ordered], particularly the different approaches as to
exercise of discretion depending upon whether application is made by plaintiff,
defendant, or otherwise”.17
[25] The authors of Sim’s Court Practice succinctly and
accurately record this in relation to the discretion:18
The court retains a discretion as to whether or not to strike out or add
parties under the rule. Where jurisdiction exists under the
rule the court will
favour joinder. Issues of delay and prejudice to other parties may be relevant
to the exercise of the discretion,
but do not fundamentally alter the principles
to be applied: Electrical Control Systems Ltd v Gregor Electrical Ltd
(High Court, Christchurch CP 217/98, 11 August 2000, Chisholm
J).
[26] The exercise of the discretion varies according to whether an application is made by the plaintiff, defendant, or a non-party or outsider (an “intervener”).19 The
recent judgment of Thomas J in Capital & Merchant Finance Ltd (in
rec and in liq) v
ed, Thomson Reuters) at [HR4.56.09].
14 Pegang Mining Co Ltd v Choong Sam, above n 3; Gurtner v Circuit, above n 5.
15 At [53] to [54].
16 Puredepth Ltd v NCP Trading Limited [2010] NZCA 392 at [16],
17 Puredepth Ltd v NCP Trading Ltd, see Beck & Ors, above n 16, at [HR 4.56.08].
18 Sophie Young (ed) Sim’s Court Practice (online looseleaf ed, LexisNexis) at [HCR4.56.7].
19 See Beck & Ors, above n 13, at [HR4.56.10].
Perpetual Trust Ltd involved an application to be joined only as an
interested party.20
Her Honour observed of the intervention principles:21
[8] It is important at the outset to note that Mr Stewart does not
seek to be added as a plaintiff or a defendant, but as an
interested party. The
difference is significant.
[9] It appears, however, that the Court may be influenced by broader
considerations than on applications for joinder of plaintiffs
or defendants.
This corresponds to the more limited rights acquired by interested
parties/interveners.
Discussion
Jurisdiction and discretion
[27] The authorities establish that the Court, in considering an
application for joinder of a party, is engaged on both a jurisdictional
enquiry
and in the exercise of a discretion (although the considerations may somewhat
merge).
[28] As I have come to the view that the application must be dismissed
(if for no other reason) as a matter of the Court’s
discretion, I will
only touch on some matters which engaged a significant portion of
counsel’s submissions. They relate primarily
to the jurisdictional
threshold. For the purposes of the discussion which follows as to the
discretion, I will assume (without deciding)
that VXJ may be able to satisfy the
jurisdictional threshold.
Jurisdictional considerations
[29] Upon the basis of the authorities recognised by the Court
of Appeal in Newhaven, a significant jurisdictional requirement
confronting VXJ is the requirement that the proceeding will directly
affect either its legal or commercial interests (or both).
[30] Upon the pleadings a judgment in this proceeding may determine
two issues:
21 At [8] – [9].
(a) Is the damage sustained by the complex to be allocated to one or
more earthquake events?
(b) What is the extent of IAG’s obligation (either reinstatement
or repair) (the alternative remedies sought being orders
to reinstate or to pay
a sum equivalent to the cost of reinstatement).
Mr Crossland identified two respects in which VXJ will be affected.
[31] First, Mr Crossland submitted that the litigation will impact on
VXJ’s legal rights because any orders made against
IAG upon the basis of
reinstatement may result in the VXJ’s unit (including the title to it) no
longer being available to VXJ.
If the amount to be received on account of
reinstatement is inadequate to enable the Body Corporate to effect a
reinstatement, the
provisions of the Unit Titles Act 201022 relating
to cancellation of the unit plan may be implemented. I doubt that the
occurrence of such consequences means that the determination
of this litigation
directly affects the legal rights of VXJ.
[32] The second effect identified by Mr Crossland is the effect
on VXJ’s commercial interests. In the judgment
of Lord Denning MR in
Gurtner v Circuit the relevant requirement was expressed as being that
the “dispute will directly affect a third person... in his pocket, in that
he will be bound to foot the bill”.23
[33] The Court in Gurtner found that test satisfied because the
Motor Insurers Bureau, which applied to be added as a defendant, could be
compelled (if judgment
was given for the injured plaintiff) to satisfy the
judgment.
[34] The financial impact of the determination of this litigation cannot readily be equated to that in Gurtner. There is an impact but one which is less direct. The direct impacts on VXJ will come from the decisions which the Committee of the Body Corporate makes in relation to the future of the complex once the outcome of
the litigation is known. Even if the Court in this proceeding orders
IAG to reinstate
22 Unit Titles Act 2010, Pt 4.
23 Gurtner v Circuit, above n 5, at 595.
the complex, there will be decisions ahead for the Body Corporate before the
litigation outcome has a direct impact on unit owners.
[35] It may be that on a somewhat generous approach to the concept of
“directly effected” the Court might conclude
that the jurisdictional
threshold has been established. For my part, I am not inclined to that view but
refrain from determining
the application upon that basis, having regard to the
decision I now come to upon the basis of the discretion.
Considerations informing the discretion
The Body Corporate’s pursuit of this claim
[36] Pursuant to s 135(1) Unit Titles Act, the Body Corporate created on
the deposit of the Unit Plan (as in the case of the plaintiff)
must insure and
keep insured the improvements on the base land.24 The scheme of the
Act is that a body corporate will effect insurance and pursue insurance
entitlements for the development as a whole.
For instance, in the event of the
dissolution of a body corporate when a unit plan is cancelled, one of the assets
to be distributed
is money, which is expressly stated to include
“insurance money received by the body
corporate”.25
[37] The Act contains detailed provisions26 for the meetings
and voting which a body corporate might require. For a special resolution to
pass, a majority of 75 per cent of
the eligible voters who vote on the
resolution is required.27 Thus it is the scheme of the Act that
the view of a 75 per cent majority of eligible voters voting as to what each
views as the preferred
approach or outcome prevails.
[38] A body corporate may delegate most of its duties or powers to the body corporate committee.28 Exempted from the subject matter of delegation are
decisions relating to the application of insurance monies in or towards
reinstatement
24 The right of any particular unit owner to take out its own insurance policy against destruction of
or damage to the unit owner’s unit is expressly preserved. Unit Tiles Act 2010, s 137(1)(a).
25 Unit Titles Act 2010, s 185(2)(b).
26 Unit Titles Act 2010, ss 88 to 104.
27 Unit Titles Act 2010, s 98.
28 Unit Titles Act 2010, s 108(1).
of the development,29 but other matters relating to insurance,
such as litigation in relation to a claim are not exempt. The body corporate
committee decides
matters by a simple majority of
votes.30
[39] As identified in the express purposes of the Act, under s
3, the legal framework for the ownership and management
of land and associated
buildings and facilities is to be “on a socially and economically
sustainable basis by communities of
individual owners” with bodies
corporate created to operate and manage the
development.31
[40] If voting in relation to a body corporate’s insurance
interests has taken place irregularly, there are legal avenues
open to a unit
owner (such as through judicial review) to address decisions or actions taken
unlawfully. Otherwise, it follows from
the scheme of the Act that the interests
of the body corporate and the unit owners in relation to insurance effected by
the body
corporate will be pursued in accordance with decisions regularly made
by the prescribed majorities.
[41] The scheme of the Act implicitly recognises that in
decision-making on significant issues the preferences or arguments
of
individual unit owners may have to defer to the majority decision.
[42] Nothing in the evidence filed points to a failure by the plaintiff to pursue its insurance entitlements in accordance with the regime of the Unit Titles Act. Claims were properly notified to the insurers. A period of expert analysis was embarked upon both by the insurers and by the Body Corporate. The bundle of documents for this hearing included over 150 pages of reports and correspondence from and between experts dating from 2013. The Body Corporate commenced this proceeding on 6 March 2014. The Earthquake Commission was added as a defendant on 19
February 2015. The Court made directions by consent as to expert reporting. In July
2015, the experts retained by the three existing parties provided their draft
report to the Court as to the outcome of their conference
and as to areas of
agreement and
29 Unit Titles Act 2010, s 108(2)(d).
30 Unit Titles Act 2010, s 113.
31 Unit Titles Act 2010, s 3(b).
disagreement. The proceeding has yet to be allocated a trial date but the
Court expects to be at that point shortly.
The pursuit of VXY’s arguments
[43] I have referred at [15] to Mr Foster’s concern should the
basement below
VXY’s tavern be demolished.
[44] In his submissions, Mr Crossland developed the consequential
difficulties which would then confront VXJ (and the Body Corporate).
Given an
inability on the part of the Body Corporate to reinstate the complex according
to the unit plan, cancellation of the
unit plan may follow,32
with the extinguishment of every registered
interest.33
[45] The difficulty for VXJ, in seeing its arguments pursued, is that the
Body Corporate (by its constitutional decision-making
process) and in accordance
with the expert evidence it has obtained, is pursuing orders against
IAG which would calculate
costs upon the basis of demolition and
reinstatement.
[46] On the other hand, the Body Corporate’s position is not
accepted by IAG as defendant. For different reasons to those
of Mr Foster,
IAG has an interest in ensuring that the ultimate determination of the nature of
damage and what is required by way
of repair is at the lowest point appropriate
in fact and law. To that extent, the VXJ factual arguments may be said to be
already
represented in this proceeding.
[47] In the course of his oral submissions, Mr Crossland identified the concern which Mr Foster has with the conduct of this litigation as being that “VXJ is stuck with the [Body Corporate committee] running it”. It is undoubtedly against that background that Mr Foster considered it appropriate to take his information and costings to the defendants as well as providing it to the Body Corporate. It appears from the evidence adduced that Mr Foster has exercised the freedom to seek to
persuade the defendants and/or their experts as to his view of the
factual position.
32 Unit Titles Act 2010, Pt 4.
33 Unit Titles Act 2010, s 183.
[48] The experts retained by the parties in this litigation have their
obligations of independence and impartiality under the
High Court Rules.34
It is improbable that material of relevance provided to any of the experts
will not be taken into account in their future reports
and
conferences.
Prejudice
[49] An important consideration in the exercise of the discretion is any
prejudice which joinder may cause to the conduct of the
litigation or to the
existing parties. It is unnecessary to define the types of prejudice which may
arise. An example lies in situations
where joinder would delay a trial
(particularly of long-standing litigation). It is appropriate to ask the
question, where is the
harm?35 The creation of little or no harm by
joinder does not of itself satisfy the jurisdictional threshold but may be taken
into account
in the exercise of a discretion.
[50] The harm to a plaintiff of having another party joined who advocates
for relief at a lower level than the plaintiff pursues
is self-evident. There
is a potential for the undermining of the existing plaintiff ’s claim,
both as it is presented in the
course of negotiations and (if the case does not
settle) at trial. VXJ’s application is for an order that it be joined as
a defendant. The reality is that its role would be more akin to that of a
plaintiff pursuing a different outcome. In terms of rights
under the insurance
policy, it could not do that in a separate proceeding because it is not a party
to the contracts of insurance.
Accordingly, there is not the capacity for a
separate proceeding to be issued by VXJ followed by a consolidation of the two
proceedings.
[51] I am not satisfied on the evidence provided by Mr Foster that the Court’s refusal to join him as a defendant will substantially affect the defendants’ advancement of such reliable evidence as Mr Foster is able to produce. He has shown a willingness to provide such information and to enter into discussions with the defendants already, apparently to the chagrin of the Body Corporate. There is no
suggestion that he will cease to take that avenue if the
present application is
34 High Court Rules, pt 9, sub-pt 5. Particularly r 9.43 and the Code of Conduct under sch 4.
35 As adopted by Thomas J in Capital & Merchant Finance Ltd (in rec and in liq) v Perpetual Trust
Ltd, above n 20, at [63].
declined. Accordingly, I do not recognise a significant harm
accruing to VXJ through non-joinder in relation to the substance
and quality
of defendants’ arguments at trial.
[52] Mr Crossland developed a further submission as to the prejudice VXJ
would suffer if not joined in the current proceeding.
He submitted that VXJ
“may be later prevented in any future s 74 Scheme application from arguing
that the basement should
be repaired [as against demolished and
reinstated]”.
[53] Mr Crossland submitted that VXJ will be regarded as a privy of the
Body Corporate and thereby estopped in any subsequent
litigation from disputing
or questioning the judgment in this proceeding.
[54] The scheme, in relation to which Mr Crossland submits an estoppel
would arise, is the scheme which a body corporate, a unit
owner or other
identified persons may ask the High Court to settle under s 74 of the Unit
Titles Act when a building has been damaged
or destroyed but the unit title not
cancelled.
[55] VXJ will not be issue estopped in the circumstances
suggested by Mr
Crossland.
[56] The probability is that in any event, as identified by Mr Matthews,
matters will in fact be settled without trial as between
the Body Corporate and
the insurers, with no final judicial decision pronounced.
[57] More directly on the estoppel point, Mr Matthews (on behalf of the
Body Corporate) has in his submissions expressly disavowed
the possibility that
VXJ would not be permitted to argue for a different repair or reinstatement
methodology in the context of a
s 74 scheme. The Court will not impose an
estoppel where a party involved in litigation has expressly disavowed
future reliance
on an estoppel applying in a particular (later)
context.
[58] Secondly, the submission for VXJ involves a blurring of the separate functions of this litigation and an application for a s 74 scheme. The function of the
first is to produce a judgment as to the liability of the insurers to the
Body Corporate as the insured. The second, separate function
is that of the
Body Corporate (either itself or through High Court order) in arriving at a
decision as to how to deal with the fruits
of the judgment against the insurers.
Unit owners voting on the decision as to how to proceed in relation to the
complex will not
be bound by findings which lead the Court to make its order as
to the insurers’ liability.
Outcome
[59] On an assumption that the applicant is able to satisfy the
jurisdictional threshold for joinder (which is not determined
in this
proceeding), I am satisfied that it is neither just nor appropriate to join VXJ
as a defendant in this proceeding.
[60] I have considered a fall-back position advanced by Mr Crossland in
the course of oral submissions. He suggested that with
the more restricted role
which the Court may allow an intervening party in a proceeding, pursuant to the
inherent jurisdiction, the
Court might constitute VXJ an “Interested
Party” for the purposes of the proceeding.
[61] In my judgment, considerations stand in the way of the joinder of
VXJ as an interested party which are very similar to those
which weigh against
the application as framed. I therefore refrain from granting leave to VXJ to
informally amend its application.
Such application, if made, would have
been refused for identical reasons.
Costs
[62] Counsel agreed that costs would follow the event and that an award
on a 2B
basis would be appropriate.
Orders
[63] I order:
(a) The application of VXJ Holdings Ltd dated 2 November 2015 is dismissed;
(b) VXJ Holdings Ltd is to pay to the plaintiff the costs of the application on a 2B basis together with disbursements to be fixed by the Registrar.
Associate Judge Osborne
Solicitors:
Shieff Angland, Auckland
White Fox & Jones, Christchurch Young Hunter, Christchurch Chapman Tripp, Christchurch
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URL: http://www.nzlii.org/nz/cases/NZHC/2016/320.html