LYTTELTON PORT COMPANY LIMITED v AON NEW ZEALAND [2018] NZHC 568

LYTTELTON PORT COMPANY LIMITED v AON NEW ZEALAND [2018] NZHC 568 [28 March 2018]IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYI TE KŌTI MATUA O AOTEAROAŌTAUTAHI ROHECIV-2015-409-000428[2018] NZHC 568BETWEEN LYTTELTON PORT COMPANY LIMITEDPlaintiffAND AON NEW ZEALANDDefendantHearing: 23 March 2018Appearances: N R Campbell QC and S D Williams for PlaintiffL J Taylor QC and Z G Kennedy for DefendantJudgment: 28 March 2018JUDGMENT 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. Shortlythereafter, the assets of LPC were severely damaged in the 2010/2011 Canterburyearthquake sequence. When LPC came to assess its position it found that it had nottaken 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 thatupdated valuations of LPC's key assets should be undertaken, and provided to theprospective insurers who would participate in issuing a material damage policy forthese assets. In a draft statement of claim against Colliers International Valuation(CHCH) Ltd (Colliers) and Opus International Consultants Ltd (Opus), Aon pleadsthat LPC engaged Colliers and Opus to carry out valuations.[3] The assets for which cover was not taken out in the insurance renewalprogramme can conveniently be considered in two groups:(a) Assets grouped under the heading "Excluded as Agreed Assets" whichare –• Water reticulation assets• Storm water and drainage assets(b) Harbour structures including an asset known as number 1 Breastwork.[4] LPC says that responsibility lies with Aon for insurance on these assets notbeing renewed in 2010. Aon says that it is now in possession of information whichshows that fault lies with Colliers in respect of the first group of assets, and with Opusin respect of the second group of assets, as these companies did not provide valuationsof 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 ofcare it owed to LPC. Colliers engaged another firm, Darroch Ltd (Darroch), to valuesome of the assets LPC had engaged it to provide valuations for. Aon says Colliersnegligently failed to value the Excluded as Agreed Assets, or to instruct Darroch tovalue them. It says that as a result Colliers submitted a schedule of assets, withoutvaluations in respect of the Excluded as Agreed Assets. The term Excluded as Agreedarises from a notation on the schedule next to the assets in question.1 Aon says thatColliers caused or contributed to LPC's loss because their actions compromised LPC'sinsurance claims under the material damage policy which LPC took out. As a resultAon 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 insurancevaluations of a group of assets including, amongst others, LPC's harbour structures, a1 It is evident on the materials before the Court that Darroch was not instructed to value the Excludedas Agreed assets so does not bear liability for not doing so.term that includes the asset known as number 1 Breastwork. Aon says that Opusprepared a spreadsheet setting out LPC's harbour structures which identified number1 Breastwork as an asset which Opus was required to value. Opus then provided LPCand Aon with a spreadsheet containing its insurance valuations for LPC's harbourstructures, but there was no reinstatement cost estimate for number 1 Breastwork andthe entry "0" was recorded in the column headed "Insurance Replace Cost 2010". Ina subsequent updated version of this spreadsheet there was still no reinstatement costestimate for number 1 Breastwork, and the same entry in the Insurance Replace Cost2010 column.[7] Aon says that Opus owed LPC duties in contract and in tort to exercisereasonable care and skill in carrying out its instructions to undertake a valuation ofnumber 1 Breastwork and to include a valuation for that asset in the spreadsheet to beprovided to LPC and its insurers. It says, as it does with Colliers, that Opus is liableas 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 arrangingmaterial damage cover for assets. Consequently cover was not taken out in respect ofthe assets in the two classes described. When the earthquakes struck LPC wasuninsured 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 anyor all of the following:(a) that the defendant is entitled to a contribution or an indemnityfrom a person who is not a party to the proceeding (a thirdparty):(b) that the defendant is entitled to relief or a remedy relating to, orconnected with, the subject matter of the proceeding from a thirdparty and the relief or remedy is substantially the same as thatclaimed by the plaintiff against the defendant:(c) that a question or issue in the proceeding ought to be determinednot 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 thethird party relating to, or connected with, the subject matter ofthe proceeding that is substantially the same as a question or anissue 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 thedefendant'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 anapplication 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 thirdparty notice the Court must have regard to all relevant circumstances including delayto the plaintiff.[11] LPC does not dispute that Aon could have issued a third party notice againsteach of Colliers and Opus under r 4.4(1) had it done so within the 10 working dayperiod set out in r 4.1(2).[12] The general principles which guide the Court on an application for leave aresummarised 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 ofthe four grounds set out in r 4.4(1). A defendant may join the third partyas of right within the time limit set down in r 4.4(2)(a). An applicationoutside 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 ofthe grounds in r 4.4(1) exists and secondly whether to exercise itsdiscretion to join the third party: ANZ Banking Group (NZ) Ltd v DairyContainers Ltd CA156/92, 17 December 1992.(c) In exercising its discretion, the Court must have regard to all relevantcircumstances, 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 justiceby the most efficient means is an overriding consideration: KPMG PeatMarwick v Cory-Wright & Salmon Ltd (in rec and in liq) CA77/94,20 May 1994.2 Westwood Group Holdings Ltd v Rilean Construction (South Island) Ltd [2013] NZHC 1739 at[15].(e) Where the defendant has not been guilty of unreasonable delay, a factorin favour of exercising the discretion will be whether the defendantcould have joined the third party as of right if it had applied within thetime limit: ANZ Banking Group (NZ) Ltd v Dairy Containers LtdCA156/92, 17 December 1992.(f) Equally, unexplained or unacceptable delay by the defendant may resultin leave being refused: Meroiti v National Australia Finance LtdCA128/90, 6 December 1990.(g) In cases of serious delay that risk prejudicing the plaintiff, the court maybe prepared to make an order for joinder on conditions designed topreserve the hearing date for the plaintiff's claim against the defendant:Total Air Supply Company Ltd v Total Air Supply Company (2007) LtdHC Auckland CIV-2008-404-7627, 10 January 2011.(h) Avoiding duplicity of proceedings and preventing the same questionbeing tried with different results militate in favour of allowing theapplication. The overriding purpose of the third party rules is to enableall the issues to be dealt with in one action: Turpin v Direct TransportLtd [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 theissues between the defendant and the third party is a consideration.Equally, it can be oppressive and unjust to involve a third party in aproceeding where much of the proceeding will not involve that thirdparty.(j) The Court may have regard to the relative strengths and weaknesses ofthe parties' cases, including the case against the proposed third partyand 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 bejoined to this proceeding. LPC filed the proceeding in 2015, extensive discovery hasalready been undertaken and other interlocutory issues raised and dealt with, exceptthat the parties await a decision from a Judge on a review of a decision of an AssociateJudge declining leave to issue a third party notice against the solicitor acting for LPCat the time of the events in issue. Save for that, and amendment to the pleadings ofeach party, the case is now ready to go to trial. A trial is in prospect in the second orthird quarter of 2019, an earlier trial date in June of this year having been vacated asthe case was not ready to be heard. It seems both Mr Campbell and Mr Taylor for Aonare confident that the case will be ready for trial by then, but Mr Campbell says thatwill 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 hastaken 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 andarranging insurance renewals, it was aware at the outset that Colliers and Opus (andfor that matter, Darroch) were closely involved in the events in issue, and Aon couldand 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 analyseliability with care before acting, an approach which is responsible. He says Aon hadto be confident it had a proper basis for proceeding against either of these parties, orfor that matter Darroch or LPC's solicitor, before taking steps to have all or any ofthem 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 6,300documents in the open section. As Aon was alive to the prospect of there beingliability on the part of the three valuation firms concerned, and their files were notdisclosed in LPC's initial discovery, Aon sought those files in order to establish exactlywhat had happened at the time of the insurance renewals. In August 2016 it appliedfor a particular discovery against LPC. This application was declined by the Court inDecember 2016, though with a reservation of leave to apply further. Aon sought areview of that decision but the issue was resolved by agreement and the files of Opuswere discovered on 8 March 2017, those of Darroch on 12 May 2017, and those ofColliers on 22 June 2017.[19] Aon then reviewed the documents within those files and sent letters to each ofOpus, Darroch and Colliers asserting liability in October 2017.[20] A response from Darroch's solicitors satisfied Aon that it had not beeninstructed by Colliers to value the Excluded as Agreed assets. This application to joinOpus and Colliers was filed in December 2017 at a point when Aon had decided thatthere was a proper basis to bring a claim against each.[21] Mr Taylor accepts that there was a possibility of claims being brought againstColliers and Opus as at March 2016 but the time taken between that date and the filingof these applications in December 2017 reflects a wish on the part of Aon to ensurethat any such claims are properly founded before being filed. Mr Taylor sees thisposition as vindicated by the fact that full analysis of all relevant documents, includingthose drawn to its attention by Darroch's solicitors, resulted in a third party claimagainst that firm not being pursued.[22] In my opinion no criticism can be levelled against Aon for not filing the presentapplications shortly after it was served with these proceedings. Any attempt to joinColliers 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 gavediscovery in order to obtain a fuller picture. It is clear on the evidence before the Courtthat 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 theposition recorded on paper by reference to the documents held by LPC. Discovery ofLPC's documents was extensive and a significant amount of time would necessarilyhave 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 particulardiscovery against LPC, including the files of the three valuers. It was not untilDecember 2016 that the Court issued a judgment declining that application. Thenthere were discussions which resulted in agreement that the files of the three firmswould be made available without a review of the decision of the Court having toproceed, 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 weresought and obtained. In my opinion it was reasonable and responsible for Aon to waituntil it had this material. There were five parties engaged in the renewal process andprior to receiving the valuers' files Aon only had the documents of two of them, itsown and LPC's.[23] The valuers' files were reviewed and it was around four months before letterswere sent to the solicitors for Colliers, Darroch and Opus. Possibly a decision to claimagainst those parties could have been made more expeditiously; in the end six monthswas lost between receipt of the last of the valuers' files and the filing of the presentapplications. At most, however, a period of perhaps three months would ideally havebeen saved in this process.[24] Overall, however, the length of time it has taken to get to this point is not, inmy 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. Itcomprises 70 pages plus schedules, but pleads only briefly a first cause of action forbreach of contract and a second for negligence. The factual pleadings are plainlyextensive. 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 thepresent point more promptly, I do not consider that in all the circumstances the amountof 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 LPCcould 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 thosetwo parties itself, based on the information it then had, and on the basis of liability ineither contract or tort, as it may have considered fit. His response was that LPC wasat liberty to sue whoever it chooses, a proposition which I accept. Exercise of thatchoice, though, in favour of suing just one of at least three parties who played key andcontemporaneous roles in the insurance renewal exercise inevitably had the potentialto have the consequence that the selected defendant would seek to bring the otherparticipants before the Court if it considered that any or all of them might also bearresponsibility to LPC. From the time Aon had digested the extensive discovery givenby LPC in around mid-2016 it has been engaged in the process of finding out whethersuch 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 alldocuments relevant to this proceeding (which as counsel pointed out may be moreextensive than just the files disclosed so far), questions of potential liability as jointtortfeasors might have been brought before the Court by the simple expedient of crossnotices served by late 2016 at the latest. Electing to proceed as it did, therefore, thoughentirely within LPC's rights, appears to be a significant factor in the amount of time ithas 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 factorwhich weighs significantly against leave to issue third party proceedings againstColliers and Opus being granted.Delay until trial[27] A date for trial of this case has not yet been allocated. Presently, it appearslikely 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 furtherparties is likely to extend trial duration,3 but as time has not yet been set aside for thetrial 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 ruledout. Nor can interlocutory applications. These steps, if taken, carry with them achance of reviews or appeals. The prospect of a trial commencing in 12 months' timewould 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 temperedto a degree by the following factors. First, Colliers and Opus have already providedtheir valuation files. Whilst their obligations to give discovery in accordance with therules may be more extensive than this, it would not appear that either company will beinvolved in an exercise of great magnitude, requiring extended periods of time. Foreach company this was a large valuation exercise, but it was completed over a confinedperiod of time. By their very nature the documents discovered so far are likely tocomprise the bulk of documents required to be discovered.[30] Secondly, I think it unlikely that either company would apply to strike out therelevant third party claim, or for that matter seek summary judgment on it. It is plainon the material presently before the Court that there are substantial and material issuesof fact which require determination at trial. It seems likely that on analysis eachcompany is likely to conclude that such applications would bear a limited prospect ofsuccess at best.[31] Thirdly, I proposed to counsel during argument, and gauged a level ofagreement, that remaining interlocutory steps should be managed closely and on thebasis that there will be a fixed trial date around 12 months hence. Whilst each ofColliers and Opus would be facing a large and complex claim as I have said, neithercompany is a stranger to this case now. Each has been aware of it and assisted withdiscovery whilst a non party. Each received a letter claiming liability last October. Ihave no doubt that each will be aware of the present applications, and that each willhave taken legal advice in relation to its own position based on the allegations madeby 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 trialbeyond a likely starting date 12 months hence cannot be ruled out there is a very goodprospect that a trial date, allocated shortly, for the second quarter of 2019 will be heldonto. Thus a delay to the start of the trial, whilst a factor to be taken into account onthis 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 andOpus. He says the Court should decline this application and leave it to Aon to take itsown case and, as he puts it, see if it can get it ready for trial in 12 months, in whichcase 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 wouldremove the risk of LPC's case being delayed. If the new proceeding were ready to betried at the same time, however, a late consolidation with the present case would resultin a trial which, if longer, would not necessarily be able to be accommodated withinthe court schedule. If the reasons for consolidation justified it, LPC's fixture wouldhave 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 nowtake steps to ensure that all the claims are dealt with at the same time. It will result inthe attaining of justice for all parties by the most efficient means. First, as I have saidthe actions of LPC, Aon, Colliers, Opus (and indeed Darroch) all took place in thesame confined time period. It is clear on the material before the Court that there areemails from one to the other as well as the passing of documents and other informationbetween them. I have no doubt there will have been conversations. If LPC's claimagainst Aon is tried separately it is inevitable that witnesses from Opus and Collierswill be called in order for the Court to establish exactly what happened, and liability.Problematically, though, those persons are employees or officers of companies whichwould not be parties to the case. The Court would not, therefore, be in a position tomake findings against those companies which would bind those companies. Rather,in the separate proceedings which Aon would bring against those companies, finaldecisions would be made on the liability of Opus and Colliers, but those findings mightdiffer from the findings in the LPC case against Aon. On any view of it this isunsatisfactory.[36] Secondly, additional Court time would inevitably be taken by two trials. Allthe witnesses on the events which occurred would have to give evidence twice. Thisis inefficient from the perspective of the Court, but also inefficient from theperspective of Aon and LPC.[37] Thirdly, the premise underlying r 4.4 is that the Court should determine on oneoccasion all issues between parties involved in a transaction who are alleged to haveliability to one or more of the other parties. The same premise appears in r 4.56 whichprovides that a Judge may order that the name of a person be added as a plaintiff or adefendant because that person's presence before the Court may be necessary toadjudicate on and settle all questions involved in the proceeding. In relation toapplications for leave to issue third party proceedings, the Court of Appeal in KPMGPeat Marwick v Cory-Wright & Salmon Ltd (in rec & in liq) said:4The interests of justice between all parties must be paramount If there isdelay it will be regrettable but the attainment of justice by the most efficientmeans has to be the overriding consideration.[38] In my opinion justice between all parties can only be attained by all the issuesnow raised being tried in the same proceeding, or by consolidation. An applicationfor consolidation is not before the Court, and I do not find it attractive to defer how allthe causes of action are to be tried until a later date, while Aon sues Colliers and Opusseparately and then makes such an application. Efficiency for the Court and theparties, cost effective procedure from now to trial, and above all the objective ofsecuring a just outcome for all parties clearly favour granting leave as sought. Thefacts must all be tried once, and once only.[39] The comparatively modest risk of some delay to trial is outweighed in my viewby the compelling reasons to make the orders now sought.Outcome[40] There is an order granting leave to Aon to issue third party notices againstColliers and Opus.4 KPMG Peat Marwick v Cory-Wright & Salmon Ltd (in rec & in liq) CA 77/94, 20 May 1994, at5.[41] Costs will follow the event; LPC will pay costs to Aon on a 2B basis withdisbursements fixed by the Registrar._______________________J G MatthewsAssociate JudgeSolicitors:Chapman Tripp, ChristchurchMinter Ellison Rudd Watts, Auckland