BUSBY v IAG NEW ZEALAND LTD [2019] NZHC 1852 .

BUSBY v IAG NEW ZEALAND LTD [2019] NZHC 1852 [1 August 2019].IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYI TE KŌTI MATUA O AOTEAROAŌTAUTAHI ROHECIV-2018-409-464[2019] NZHC 1852BETWEEN PAUL JAMES BUSBY and MARGARETLETITIA BUSBY AS TRUSTEES OF THEBUSBY TRUSTPlaintiffsAND IAG NEW ZEALAND LIMITEDDefendantHearing: 26 July 2019(On the papers and by way of telephone conference)Counsel: D J C Russ and J A Maslin-Caradus for the PlaintiffsC M Laband, S R Hudson and I J Thain for the DefendantJudgment: 1 August 2019JUDGMENT OF ASSOCIATE JUDGE LESTERThis judgment was delivered by me on 1 August 2019 at 3pmpursuant to Rule 11.5 of the High Court RulesRegistrar/Deputy Registrar1 August 2019[1] The plaintiffs have applied for this proceeding to be transferred to theCanterbury Earthquakes Insurance Tribunal ("the Tribunal").[2] The application is made pursuant to s 16 of the Canterbury EarthquakesInsurance Tribunal Act 2019 ("the Act").[3] The relevant parts of s 16 of the Act provide:16 Claim brought by transfer of proceedings from court(1) If a person who is a policyholder or an insured person (or both) isa plaintiff in court proceedings relating to an insurance claim indispute, a Judge may, on the application of that person or onthe Judge's own motion, order that the proceedings be transferred tothe tribunal.(2) An order to transfer proceedings may be made under subsection (1)only if –(a) the proceedings meet the eligibility criteria for a claim undersection 9 (however, the proceedings may also includeadditional parties to those referred to in section 8, but may notinclude a class action – see clause 6(2) of Schedule 2); and(b) the other party or parties to the proceedings have been givena reasonable opportunity to comment; and(c) the Judge making the order believes that the transfer is in theinterests of justice.[4] The defendant, IAG New Zealand Ltd ("IAG"), opposes the application on tworelated grounds.[5] The first ground is that an aspect of the plaintiffs' claim is not an eligible claimas required by s 16(2)(a) of the Act.[6] IAG's second ground is that the determination of whether the issue said byIAG not to be eligible to be transferred involves novel and complex legal issues notpreviously dealt with by this Court and that complexity favours the proceedingnot being transferred.Canterbury Earthquakes Insurance Tribunal Act 2019[7] The Act was passed in response to what Parliament perceived as being delaysin the resolution of issues between homeowners and insurance companies arising fromthe Canterbury earthquake sequence.[8] Under s 5 of the Act, the Tribunal's jurisdiction to deal with insurance claimsis limited to claims arising from earthquakes that occurred between 4 September 2010and subsequent earthquakes and aftershocks until the close of 31 December 2011.Accordingly, by the time the Act was passed on 31 May 2019 it was nearly eight anda half years since the last possible earthquake that could be dealt with by the Tribunal.[9] The passage of time since the Canterbury earthquake sequence covered by theAct and Parliament's intention to deal with the perceived delays are reflected inthe purpose of the Act.[10] Section 3 of the Act provides:3 PurposeThe purpose of this Act is to provide fair, speedy, flexible, andcost-effective services for resolving disputes about insurance claimsfor physical loss or damage to residential buildings, property, and landarising from the Canterbury earthquakes.[11] The Act confers on the Tribunal significant and flexible powers. It has thepower to direct that the parties attend mediation.1 It can adopt an inquisitorial processpursuant to s 40 of the Act. It can appoint expert advisers2 and if the Tribunalconsiders it appropriate can refer questions of law to this Court.3[12] A significant aspect of the Tribunal's processes is that the costs of mediation,the obtaining of expert reports, the obtaining of legal opinions from this Court andindeed the Tribunal hearings, are not met by the parties.1 Section 24(1)(g).2 Section 24(1)(f).3 Section 53.[13] There are rights of appeal from the Tribunal. In the first instance, the right ofappeal under s 54 is to this Court but requires the leave of this Court.[14] Accordingly, in relation to those affected by the Canterbury earthquakesequence, an appeal from the Tribunal will be to the High Court at Christchurch ratherthan to the Court of Appeal at Wellington which would have been the case had theirclaim been determined in this Court.[15] If the need for an appeal eventuates, that will represent a further saving to aninsured and to insurance companies who are represented by counsel based inChristchurch.Submissions in support of transfer[16] The plaintiffs explain that they did not wish to issue these proceedings. Theysought that IAG agree to a "standstill" agreement in relation to limitation, which wasdeclined, and which the plaintiffs say left them with no option but to issue theseproceedings.[17] The plaintiffs say that since 2014 they (and IAG) have obtained various expertreports about the damage and what repairs are needed.[18] At a telephone conference held on 26 July 2019 to consider counsels'submissions, the plaintiffs' counsel said the plaintiffs were in effect worn out by thecost and delay of what has occurred to date and the prospect of the Court processahead.[19] Mr Busby in his affidavit in support said:We are heartened by the establishment of the [Tribunal]. We are heartened bythe ability of the [Tribunal] to appoint an impartial and independentengineering expert to consider the evidence to date and potentially bea "circuit breaker." We are heartened by the mediation service offeredthrough [the Tribunal]. We are heartened by the lower cost of the [Tribunal]processes.[20] The plaintiffs say the claim is an eligible claim and that the transfer of thisproceeding, which reflects some five years of issues between the parties, is the verytype of claim for which the Tribunal was established.The grounds of opposition[21] I have summarised these already. It is necessary to describe the damage saidto give rise to the eligibility issue.[22] It seems to be common ground that the property suffered both differentialsettlement and global settlement. It is not in issue that the differential settlement wasdamage caused by the Canterbury earthquake sequence to which the IAG insurancepolicy will respond, although there are issues about the extent of the damage, the repairstrategy and the costs of that strategy.[23] The real issue is whether the global settlement that the property has suffered isdamage covered by the policy.[24] IAG's argument is that its policy does not apply to damage to land. IAG'sposition is that one of the heads of damage contained in the statement of claim is thatthe property has suffered "global settlement of 100mm". IAG says that such globalsettlement is a result of damage to the land and not to the building and is therefore notcovered by the policy. IAG relies on Earthquake Commission v Insurance Council ofNew Zealand Inc in support of its submission that where there has been globalsettlement and that global settlement has not damaged the building (in contrast tothe differential settlement that IAG admits has caused damage to the building), thenthe global settlement is damage to the land.4[25] Section 9 of the Act dealing with eligibility provides:(1) The eligibility criteria to bring a claim before the tribunal are that theclaim –(a) must arise from a dispute between the parties under section 8;4 Earthquake Commission v Insurance Council of New Zealand Inc [2014] NZHC 3138, [2015]2 NZLR 381 at [87].[26] Section 8(1) of the Act provides:This Act applies to disputes between policyholders and insurers aboutinsurance claims for physical loss or damage arising from the Canterburyearthquakes to a residential building or residential property.[27] Thus, IAG's argument is that damage to land is not "physical loss or damage to a residential building or residential property" for the purposes of the Act.Plaintiffs' response[28] The plaintiffs' response is that they do not accept IAG's arguments and arguethat Rout v Southern Response Earthquake Services Ltd applies in thesecircumstances.5[29] The plaintiffs say the authority relied on by IAG, EarthquakeCommission v Insurance Council of New Zealand Inc, only applies where:6 there has been no change to the physical state or integrity of the structureor materials that comprise the body of the house erected on the land includingits foundations [30] The plaintiffs say that in this case there has been actual physical damage to thehouse and foundation and therefore that is within the principles set out by this Courtin Rout.7Discussion[31] Whether the foundation has suffered damage through global settlement towhich the insurance policy must respond is one of the ultimate issues between theparties. IAG's submission on jurisdiction/eligibility assumes that its argument iscorrect. IAG says this aspect of the claim is not eligible to go to the Tribunal as itis IAG's position that the policy does not respond.5 Rout v Southern Response Earthquake Services Ltd [2013] NZHC 3262.6 Earthquake Commission v Insurance Council of New Zealand Inc, above n 4, at [87].7 Rout v Southern Response Earthquake Services Ltd, above n 5.[32] Under s 8(1) the Tribunal has jurisdiction over: disputes between policyholders and insurers about insurance claims forphysical loss or damage [33] That is the type of issue that exists between the parties here. They havea dispute about the insurance claim made by the plaintiffs as to whether it relates tophysical loss to which the policy will respond. If IAG succeeds on this point, then thedispute in that regard will have been determined in its favour and that aspect of the losswill not be covered by the policy. That issue can only be resolved once a hearingprocess has been concluded.[34] Whether the policy will respond or not is not a jurisdictional issue but an aspectof IAG's defence to the plaintiffs' claim.[35] For the same reason, I do not accept IAG's submission that if this case istransferred, the Tribunal would have to immediately determine whether it hadjurisdiction. An order of this Court transferring the claim is a finding that the Tribunalhas jurisdiction. The Tribunal will then be seized of the dispute which it will resolve.Complexity[36] IAG submits that if the plaintiffs intend to argue that EarthquakeCommission v Insurance Council of New Zealand Inc is distinguishable, that argumentwill involve a novel point of law not previously dealt with by this Court. Further, thesubmission is that the point is not only novel but also complex and as such it shouldremain in this Court.[37] IAG's counsel foreshadows difficulties arising from the Tribunal's powerunder s 53 of the Act:53 Questions of law may be referred to High Court(1) If a question of law arises during any case management process underthis Act or at the hearing of a claim, the tribunal—(a) may (if a member is acting as the tribunal, with the writtenapproval of the chairperson) refer the question to theHigh Court for its opinion; and(b) may delay the hearing until it receives the court's opinion.(2) The tribunal must give the parties a reasonable opportunity tocomment on whether the question should be referred to theHigh Court.(3) The High Court must give the tribunal its opinion on the question,following which the tribunal must continue the hearing of the claimin accordance with the opinion.[38] IAG's submission is that it considers that the eligibility issue will requirereferral.[39] I do not accept this. I agree with the submission made for the plaintiffs that itis up to the Tribunal whether it will refer a matter to this Court.[40] The reality is earthquake cases that have not been resolved by this stage maywell involve complex factual, expert or legal issues. The disputes that remainoutstanding are the cases which Parliament intended to give policyholders the abilityto seek that their dispute be dealt with in the Tribunal. That a case may be legallycomplex or factually involved is not of itself a reason not to transfer a case whencomplexity is likely to be a factor as to why resolution was not reached years ago.That Parliament passed s 53 as a means to resolve involved or complex legal issues ofitself is consistent with such cases being able to be transferred to the Tribunal.Parliament anticipated that complex legal issues may arise in cases transferred to theTribunal and created a mechanism to deal with such issues.[41] Mr Thain for IAG, raised the possibility that there could be an application forjudicial review of the decision of the Tribunal to seek to refer a question of law to thisCourt under s 53 of the Act. He also anticipated potential difficulties in formulatingthe question to be referred to this Court, particularly if it was factually dependant.Such theoretical possibilities in my view are not relevant to the application.Discussion[42] The issue in this application is whether a transfer to the Tribunal is in theinterests of justice.8 In any view, determining whether that is the case involves an8 Section 16(2)(c).examination of whether the transfer will meet the purpose of the Act as set out ins 3 and whether there are any other factors that arise in this particular case.[43] IAG does not suggest that a transfer to the Tribunal will of itself result in delay,a lack of fairnesss or flexibility or extra costs, they being the factors referred to in s 3.IAG's concern is the possibility of what IAG characterises as the complex legal issueabout global land settlement may result in the Tribunal referring that issue to thisCourt. Indeed, the submission is made that:Resolution of that issue will almost inevitably involve [the High Court] and ifthe matter were first transferred to the Tribunal there is the real prospect thatit would go back and forth between the two before a final determination of theclaim was reached.[44] Such a submission in my opinion gives insufficient credit to the Tribunal.It assumes that it is inevitable that the question identified by IAG will be referred tothis Court and that it will be referred in a form that will not be capable of a clear andprecise answer. Again, such a hypothetical submission in my view does not assist indetermining the present application. Section 53(3) contemplates that a hearing maybe left part heard while the referral is responded to as the section refers to the Tribunalcontinuing the hearing in accordance with this Court's opinion on the referral.[45] It follows that I do not accept the submissions made by IAG as to why transferwould not be in the interests of justice.[46] The concrete benefits transfer will bring in terms of the Tribunal's flexibleprocedures, its ability to instruct independent experts, the absence of hearing fees(which in lengthy High Court hearings can add tens of thousands of dollars) and itsability to closely manage cases, outweigh when considering the interests of justice, thepossibility that the Tribunal may use the power in s 53. Indeed, the possible use bythe Tribunal of s 53 is inherent when any case is transferred. In my view, that theTribunal may use a power conferred on it by Parliament is not a promising start to anargument that transfer is contrary to the interests of justice.[47] Accordingly, in terms of s 16(2)(c) of the Act I am satisfied transfer of thisproceeding to the Tribunal is in the interests of justice and I direct that the file betransferred to the Tribunal.Costs[48] Counsel did not make submissions on costs. While the application for transferhas been granted, my preliminary view is that as this was one of the first opposedtransfers that it is appropriate that costs lie where they fall. If the plaintiffs do notagree, submissions may be filed (not more than three pages in length) within fiveworking days of the date of this judgment. The defendant may reply (not more thanthree pages in length) within five working days thereafter.______________________________Associate Judge LesterSolicitors:Fletcher Vautier Moore, NelsonDLA Piper New Zealand, Auckland