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High Court of New Zealand Decisions |
Last Updated: 10 April 2018
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IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
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CIV-2015-409-000428
[2018] NZHC 568 |
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BETWEEN
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LYTTELTON PORT COMPANY LIMITED
Plaintiff
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AND
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AON NEW ZEALAND
Defendant
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Hearing:
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23 March 2018
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Appearances:
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N R Campbell QC and S D Williams for Plaintiff L J Taylor QC and Z G
Kennedy for Defendant
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Judgment:
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28 March 2018
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JUDGMENT OF ASSOCIATE JUDGE MATTHEWS
[1] In 2010 Lyttelton Port Company Ltd (LPC) engaged Aon New Zealand (Aon) to act as its broker in arranging renewal of insurance cover over its assets. Shortly thereafter, the assets of LPC were severely damaged in the 2010/2011 Canterbury earthquake sequence. When LPC came to assess its position it found that it had not taken out cover through Aon on certain assets, as it had intended to do.
[2] As part of the insurance renewal programme in 2010 Aon advised LPC that updated valuations of LPC’s key assets should be undertaken, and provided to the prospective insurers who would participate in issuing a material damage policy for these assets. In a draft statement of claim against Colliers International Valuation (CHCH) Ltd (Colliers) and Opus International Consultants Ltd (Opus), Aon pleads that LPC engaged Colliers and Opus to carry out valuations.
LYTTELTON PORT COMPANY LIMITED v AON NEW ZEALAND [2018] NZHC 568 [28 March 2018]
[3] The assets for which cover was not taken out in the insurance renewal programme can conveniently be considered in two groups:
(a) Assets grouped under the heading “Excluded as Agreed Assets” which are –
(b) Harbour structures including an asset known as number 1 Breastwork.
[4] LPC says that responsibility lies with Aon for insurance on these assets not being renewed in 2010. Aon says that it is now in possession of information which shows that fault lies with Colliers in respect of the first group of assets, and with Opus in respect of the second group of assets, as these companies did not provide valuations of these assets even though instructed to do so.
[5] So far as Colliers is concerned, Aon says that if it is found liable to LPC, Colliers is also liable to LPC as a concurrent joint tortfeasor, as it breached a duty of care it owed to LPC. Colliers engaged another firm, Darroch Ltd (Darroch), to value some of the assets LPC had engaged it to provide valuations for. Aon says Colliers negligently failed to value the Excluded as Agreed Assets, or to instruct Darroch to value them. It says that as a result Colliers submitted a schedule of assets, without valuations in respect of the Excluded as Agreed Assets. The term Excluded as Agreed arises from a notation on the schedule next to the assets in question.1 Aon says that Colliers caused or contributed to LPC’s loss because their actions compromised LPC’s insurance claims under the material damage policy which LPC took out. As a result Aon says it is entitled to recover a contribution from Colliers pursuant to ss 17(1)(c) and 17(2) of the Law Reform Act 1936.
[6] In relation to Opus, Aon says that LPC engaged Opus to undertake insurance valuations of a group of assets including, amongst others, LPC’s harbour structures, a
term that includes the asset known as number 1 Breastwork. Aon says that Opus prepared a spreadsheet setting out LPC’s harbour structures which identified number 1 Breastwork as an asset which Opus was required to value. Opus then provided LPC and Aon with a spreadsheet containing its insurance valuations for LPC’s harbour structures, but there was no reinstatement cost estimate for number 1 Breastwork and the entry “0” was recorded in the column headed “Insurance Replace Cost 2010”. In a subsequent updated version of this spreadsheet there was still no reinstatement cost estimate for number 1 Breastwork, and the same entry in the Insurance Replace Cost 2010 column.
[7] Aon says that Opus owed LPC duties in contract and in tort to exercise reasonable care and skill in carrying out its instructions to undertake a valuation of number 1 Breastwork and to include a valuation for that asset in the spreadsheet to be provided to LPC and its insurers. It says, as it does with Colliers, that Opus is liable as a concurrent joint tortfeasor with Aon if Aon is found liable to LPC.
[8] Aon says that it used the valuations provided by Colliers and Opus in arranging material damage cover for assets. Consequently cover was not taken out in respect of the assets in the two classes described. When the earthquakes struck LPC was uninsured in respect of these assets.
Principles to be applied
[9] Rule 4.4 of the High Court Rules 2016 provides as follows:
4.4 Third parties
(1) A defendant may issue a third party notice if the defendant claims any or all of the following:
- (a) that the defendant is entitled to a contribution or an indemnity from a person who is not a party to the proceeding (a third party):
- (b) that the defendant is entitled to relief or a remedy relating to, or connected with, the subject matter of the proceeding from a third party and the relief or remedy is substantially the same as that claimed by the plaintiff against the defendant:
- (c) that a question or issue in the proceeding ought to be determined not only between the plaintiff and the defendant but also between
–
(i) the plaintiff, the defendant, and the third party; or
(ii) the defendant and the third party; or
(iii) the plaintiff and the third party:
(d) that there is a question or an issue between the defendant and the third party relating to, or connected with, the subject matter of the proceeding that is substantially the same as a question or an issue arising between the plaintiff and the defendant.
(2) A third party notice must be issued within –
(a) 10 working days after the expiry of the time for filing the defendant’s statement of defence; or
(b) a longer time given by leave of the court.
(3) A third party notice may be issued only with the leave of the court if an application for judgment is pending under rule 12.2 or 12.3.
[10] Rule 4.8 provides that when considering an application for leave to issue a third party notice the Court must have regard to all relevant circumstances including delay to the plaintiff.
[11] LPC does not dispute that Aon could have issued a third party notice against each of Colliers and Opus under r 4.4(1) had it done so within the 10 working day period set out in r 4.1(2).
[12] The general principles which guide the Court on an application for leave are summarised in Westwood Group Holdings Ltd v Rilean Construction (South Island)
Ltd:2
(a) The defendant’s claim against the third party must be covered by one of the four grounds set out in r 4.4(1). A defendant may join the third party as of right within the time limit set down in r 4.4(2)(a). An application outside this time limit requires leave of the Court (r 4.4(2)(b)).
(b) Where leave is sought, the Court must consider firstly whether one of the grounds in r 4.4(1) exists and secondly whether to exercise its discretion to join the third party: ANZ Banking Group (NZ) Ltd v Dairy Containers Ltd CA156/92, 17 December 1992.
(c) In exercising its discretion, the Court must have regard to all relevant circumstances, including delay to the plaintiff (r 4.8).
(d) The interest of justice between all parties, however, is paramount. While any delay to the plaintiff is regrettable, the attainment of justice by the most efficient means is an overriding consideration: KPMG Peat Marwick v Cory-Wright & Salmon Ltd (in rec and in liq) CA77/94, 20 May 1994.
(f) Equally, unexplained or unacceptable delay by the defendant may result in leave being refused: Meroiti v National Australia Finance Ltd CA128/90, 6 December 1990.
(g) In cases of serious delay that risk prejudicing the plaintiff, the court may be prepared to make an order for joinder on conditions designed to preserve the hearing date for the plaintiff’s claim against the defendant: Total Air Supply Company Ltd v Total Air Supply Company (2007) Ltd HC Auckland CIV-2008-404-7627, 10 January 2011.
(h) Avoiding duplicity of proceedings and preventing the same question being tried with different results militate in favour of allowing the application. The overriding purpose of the third party rules is to enable all the issues to be dealt with in one action: Turpin v Direct Transport Ltd [1975] 2 NZLR 172 (SC).
(i) There is, however, a need to strike a balance between all the parties’ interests. The extent to which the plaintiff is necessarily involved in the issues between the defendant and the third party is a consideration. Equally, it can be oppressive and unjust to involve a third party in a proceeding where much of the proceeding will not involve that third party.
(j) The Court may have regard to the relative strengths and weaknesses of the parties’ cases, including the case against the proposed third party and the likelihood of recovery: Dairy Containers Ltd v NZI Bank Ltd [1993] 1 NZLR 160 (HC) at 167.
[13] Counsel concentrated their attention on delay in bringing this application, possible delay to the trial proceeding, and the issues summarised in paragraphs (h) and (i).
[14] In the present case, therefore, the issues to be considered are:
(a) Delay in bringing these applications;
(b) Delay until trial;
(c) The issues in (h) and (i) above, which I describe as how best to proceed.
Delay in bringing these applications
[15] For LPC, Mr Campbell’s position is that it is too late for third parties to be joined to this proceeding. LPC filed the proceeding in 2015, extensive discovery has already been undertaken and other interlocutory issues raised and dealt with, except that the parties await a decision from a Judge on a review of a decision of an Associate Judge declining leave to issue a third party notice against the solicitor acting for LPC at the time of the events in issue. Save for that, and amendment to the pleadings of each party, the case is now ready to go to trial. A trial is in prospect in the second or third quarter of 2019, an earlier trial date in June of this year having been vacated as the case was not ready to be heard. It seems both Mr Campbell and Mr Taylor for Aon are confident that the case will be ready for trial by then, but Mr Campbell says that will be put in jeopardy if Colliers and Opus are joined, as discussed below.
[16] By straightforward observation of the calendar it is clear that this case has taken a long time to get to this point. It was filed two years and nine months ago. Mr Campbell says that as Aon was closely involved in the obtaining of valuations and arranging insurance renewals, it was aware at the outset that Colliers and Opus (and for that matter, Darroch) were closely involved in the events in issue, and Aon could and should have joined them as third parties at a much earlier point.
[17] Mr Taylor says that Aon’s approach to joinder of third parties was to analyse liability with care before acting, an approach which is responsible. He says Aon had to be confident it had a proper basis for proceeding against either of these parties, or for that matter Darroch or LPC’s solicitor, before taking steps to have all or any of them joined as third parties. Therefore Aon required, and was entitled to require, discovery of relevant documents before making a decision. That is how it acted.
[18] LPC gave its initial discovery of documents in March 2016, with some 6,300 documents in the open section. As Aon was alive to the prospect of there being liability on the part of the three valuation firms concerned, and their files were not disclosed in LPC’s initial discovery, Aon sought those files in order to establish exactly what had happened at the time of the insurance renewals. In August 2016 it applied for a particular discovery against LPC. This application was declined by the Court in
December 2016, though with a reservation of leave to apply further. Aon sought a review of that decision but the issue was resolved by agreement and the files of Opus were discovered on 8 March 2017, those of Darroch on 12 May 2017, and those of Colliers on 22 June 2017.
[19] Aon then reviewed the documents within those files and sent letters to each of Opus, Darroch and Colliers asserting liability in October 2017.
[20] A response from Darroch’s solicitors satisfied Aon that it had not been instructed by Colliers to value the Excluded as Agreed assets. This application to join Opus and Colliers was filed in December 2017 at a point when Aon had decided that there was a proper basis to bring a claim against each.
[21] Mr Taylor accepts that there was a possibility of claims being brought against Colliers and Opus as at March 2016 but the time taken between that date and the filing of these applications in December 2017 reflects a wish on the part of Aon to ensure that any such claims are properly founded before being filed. Mr Taylor sees this position as vindicated by the fact that full analysis of all relevant documents, including those drawn to its attention by Darroch’s solicitors, resulted in a third party claim against that firm not being pursued.
[22] In my opinion no criticism can be levelled against Aon for not filing the present applications shortly after it was served with these proceedings. Any attempt to join Colliers and Opus then would have been based solely on information it then held, including documents in its possession. It was entitled to wait at least until LPC gave discovery in order to obtain a fuller picture. It is clear on the evidence before the Court that there were communications at the time of the insurance renewal between LPC, Aon, Colliers, Opus and Darroch. At the very least it was necessary to establish the position recorded on paper by reference to the documents held by LPC. Discovery of LPC’s documents was extensive and a significant amount of time would necessarily have been taken in analysing them. The documents Aon wanted were not discovered, so by August 2016 it was necessary for an application to be made for particular discovery against LPC, including the files of the three valuers. It was not until December 2016 that the Court issued a judgment declining that application. Then
there were discussions which resulted in agreement that the files of the three firms would be made available without a review of the decision of the Court having to proceed, and the last of the files was then made available late in June 2017. In effect, therefore, there was at least a 10 month period while the files of the valuers were sought and obtained. In my opinion it was reasonable and responsible for Aon to wait until it had this material. There were five parties engaged in the renewal process and prior to receiving the valuers’ files Aon only had the documents of two of them, its own and LPC’s.
[23] The valuers’ files were reviewed and it was around four months before letters were sent to the solicitors for Colliers, Darroch and Opus. Possibly a decision to claim against those parties could have been made more expeditiously; in the end six months was lost between receipt of the last of the valuers’ files and the filing of the present applications. At most, however, a period of perhaps three months would ideally have been saved in this process.
[24] Overall, however, the length of time it has taken to get to this point is not, in my view, a factor which carries much weight against the applications being granted. This is a complex case. This is illustrated by LPC’s amended statement of claim. It comprises 70 pages plus schedules, but pleads only briefly a first cause of action for breach of contract and a second for negligence. The factual pleadings are plainly extensive. This is borne out too by the extent of discovery, the amount claimed of
$181,728,615, and the present estimate that a 10 to 12 week trial will be required. Although it is understandable that LPC might have wished its claim to reach the present point more promptly, I do not consider that in all the circumstances the amount of time taken on the various interlocutory steps to date is either wasted or excessive.
[25] In argument I raised with Mr Campbell the fact that at the time it says LPC could and should have issued third party proceedings against Opus and Colliers (shortly after service of the proceeding), it too could have taken the step of suing those two parties itself, based on the information it then had, and on the basis of liability in either contract or tort, as it may have considered fit. His response was that LPC was at liberty to sue whoever it chooses, a proposition which I accept. Exercise of that choice, though, in favour of suing just one of at least three parties who played key and
contemporaneous roles in the insurance renewal exercise inevitably had the potential to have the consequence that the selected defendant would seek to bring the other participants before the Court if it considered that any or all of them might also bear responsibility to LPC. From the time Aon had digested the extensive discovery given by LPC in around mid-2016 it has been engaged in the process of finding out whether such steps could responsibly be taken. Had LPC sued Colliers and Opus at the outset, with the result that these parties would also have given discovery by early 2016 of all documents relevant to this proceeding (which as counsel pointed out may be more extensive than just the files disclosed so far), questions of potential liability as joint tortfeasors might have been brought before the Court by the simple expedient of cross notices served by late 2016 at the latest. Electing to proceed as it did, therefore, though entirely within LPC’s rights, appears to be a significant factor in the amount of time it has taken to reach the current point in the life of this case.
[26] I conclude that the time taken to file the present applications is not a factor which weighs significantly against leave to issue third party proceedings against Colliers and Opus being granted.
Delay until trial
[27] A date for trial of this case has not yet been allocated. Presently, it appears likely that a trial will be allocated in the second, or possibly third, quarter of 2019. Estimates of likely trial duration are between 10 and 12 weeks. Joinder of further parties is likely to extend trial duration,3 but as time has not yet been set aside for the trial the joinder of additional parties will not of itself affect the commencement date, from the perspective of the Court.
[28] Mr Campbell points out that if additional parties are joined they must plead, and give discovery. He says the prospect of applications to strike out cannot be ruled out. Nor can interlocutory applications. These steps, if taken, carry with them a chance of reviews or appeals. The prospect of a trial commencing in 12 months’ time would be put in jeopardy if joinder is permitted.
3 See discussion below at [34].
[29] There is obvious force in Mr Campbell’s submission, but it may be tempered to a degree by the following factors. First, Colliers and Opus have already provided their valuation files. Whilst their obligations to give discovery in accordance with the rules may be more extensive than this, it would not appear that either company will be involved in an exercise of great magnitude, requiring extended periods of time. For each company this was a large valuation exercise, but it was completed over a confined period of time. By their very nature the documents discovered so far are likely to comprise the bulk of documents required to be discovered.
[30] Secondly, I think it unlikely that either company would apply to strike out the relevant third party claim, or for that matter seek summary judgment on it. It is plain on the material presently before the Court that there are substantial and material issues of fact which require determination at trial. It seems likely that on analysis each company is likely to conclude that such applications would bear a limited prospect of success at best.
[31] Thirdly, I proposed to counsel during argument, and gauged a level of agreement, that remaining interlocutory steps should be managed closely and on the basis that there will be a fixed trial date around 12 months hence. Whilst each of Colliers and Opus would be facing a large and complex claim as I have said, neither company is a stranger to this case now. Each has been aware of it and assisted with discovery whilst a non party. Each received a letter claiming liability last October. I have no doubt that each will be aware of the present applications, and that each will have taken legal advice in relation to its own position based on the allegations made by Aon some five months ago. Thus, if joined, each party will hit the ground running.
[32] My conclusion is that although a delay in the commencement of the trial beyond a likely starting date 12 months hence cannot be ruled out there is a very good prospect that a trial date, allocated shortly, for the second quarter of 2019 will be held onto. Thus a delay to the start of the trial, whilst a factor to be taken into account on this application, is not one of significant weight in the circumstances of this case.
How best to proceed
[33] Mr Campbell says that Aon can issue a new proceeding against Colliers and Opus. He says the Court should decline this application and leave it to Aon to take its own case and, as he puts it, see if it can get it ready for trial in 12 months, in which case the Court might consider consolidating it with the present case at a later date.
[34] That is one way the Court could now proceed. Its advantage is that it would remove the risk of LPC’s case being delayed. If the new proceeding were ready to be tried at the same time, however, a late consolidation with the present case would result in a trial which, if longer, would not necessarily be able to be accommodated within the court schedule. If the reasons for consolidation justified it, LPC’s fixture would have to be vacated. In the end I think little would be gained by proceeding that way.
[35] There is, however, a further and overarching reason why the Court should now take steps to ensure that all the claims are dealt with at the same time. It will result in the attaining of justice for all parties by the most efficient means. First, as I have said the actions of LPC, Aon, Colliers, Opus (and indeed Darroch) all took place in the same confined time period. It is clear on the material before the Court that there are emails from one to the other as well as the passing of documents and other information between them. I have no doubt there will have been conversations. If LPC’s claim against Aon is tried separately it is inevitable that witnesses from Opus and Colliers will be called in order for the Court to establish exactly what happened, and liability. Problematically, though, those persons are employees or officers of companies which would not be parties to the case. The Court would not, therefore, be in a position to make findings against those companies which would bind those companies. Rather, in the separate proceedings which Aon would bring against those companies, final decisions would be made on the liability of Opus and Colliers, but those findings might differ from the findings in the LPC case against Aon. On any view of it this is unsatisfactory.
[36] Secondly, additional Court time would inevitably be taken by two trials. All the witnesses on the events which occurred would have to give evidence twice. This
is inefficient from the perspective of the Court, but also inefficient from the perspective of Aon and LPC.
[37] Thirdly, the premise underlying r 4.4 is that the Court should determine on one occasion all issues between parties involved in a transaction who are alleged to have liability to one or more of the other parties. The same premise appears in r 4.56 which provides that a Judge may order that the name of a person be added as a plaintiff or a defendant because that person’s presence before the Court may be necessary to adjudicate on and settle all questions involved in the proceeding. In relation to applications for leave to issue third party proceedings, the Court of Appeal in KPMG Peat Marwick v Cory-Wright & Salmon Ltd (in rec & in liq) said:4
The interests of justice between all parties must be paramount ... If there is delay it will be regrettable ... but the attainment of justice by the most efficient means has to be the overriding consideration.
[38] In my opinion justice between all parties can only be attained by all the issues now raised being tried in the same proceeding, or by consolidation. An application for consolidation is not before the Court, and I do not find it attractive to defer how all the causes of action are to be tried until a later date, while Aon sues Colliers and Opus separately and then makes such an application. Efficiency for the Court and the parties, cost effective procedure from now to trial, and above all the objective of securing a just outcome for all parties clearly favour granting leave as sought. The facts must all be tried once, and once only.
[39] The comparatively modest risk of some delay to trial is outweighed in my view by the compelling reasons to make the orders now sought.
Outcome
[40] There is an order granting leave to Aon to issue third party notices against Colliers and Opus.
[41] Costs will follow the event; LPC will pay costs to Aon on a 2B basis with disbursements fixed by the Registrar.
J G Matthews Associate Judge
Solicitors:
Chapman Tripp, Christchurch
Minter Ellison Rudd Watts, Auckland
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