SELF-REALIZATION MEDITATION AND HEALING CENTRE CHARITABLE TRUST (NEW ZEALAND) v IAG NEW ZEALAND LIMITED [2018] NZHC 2077

SELF-REALIZATION MEDITATION AND HEALING CENTRE CHARITABLE TRUST (NEW ZEALAND) vIAG NEW ZEALAND LIMITED [2018] NZHC 2077 [14 August 2018]IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYI TE KŌTI MATUA O AOTEAROAŌTAUTAHI ROHECIV-2016-409-000816[2018] NZHC 2077BETWEEN SELF-REALIZATION MEDITATION ANDHEALING CENTRE CHARITABLETRUST (NEW ZEALAND)PlaintiffAND IAG NEW ZEALAND LIMITEDDefendantAND H CONSTRUCTION NORTH ISLANDLIMITED (FORMERLY HAWKINSCONSTRUCTION LIMITED)First third partyAND ORANGE H MANAGEMENT LIMITED(FORMERLY HAWKINS MANAGEMENTLIMITED)Second third partyAND BRENCHLEY DEVELOPMENTSLIMITEDThird third partyAND BUILDING ONWARD LIMITEDFourth third partyAND HI TECH BUILDING SYSTEMS LIMITEDFifth third partyAND ORANGE H GROUP LIMITED(FORMERLY HAWKINS GROUPLIMITED)Sixth third partyHearing: 7 August 2018Appearances: R C Harris and S D McIntyre for Fourth third partyP F Whiteside QC and T P McDonnell for Fifth third partyO Collette-Moxon for Defendant(Counsel for other parties excused)Judgment: 14 August 2018JUDGMENT OF ASSOCIATE JUDGE OSBORNEon application to set aside third party noticesIntroduction[1] Two third-parties apply for orders setting aside third party notices.1 Thedefendant, which issued the third party notices, opposes the application.[2] Either of the opposing parties, if unsuccessful in this interlocutory proceeding,stands to suffer a measure of financial cost, wastage or duplication of time, andinconvenience.[3] The determination of the application must meet the interests of justice and willturn heavily upon a weighting of the respective parties' interests against thebackground of the substantive proceeding as it is pleaded and the substantive issueswhich the Court will have to determine if there is a trial.Plaintiff's claim against defendantThe nature of the claim[4] The plaintiff owned two adjacent properties in Christchurch (one with aSawyers Arms Road address, the other with a Highsted Road address). Assets at theproperty were insured with IAG for loss or damage caused by earthquake.[5] The properties suffered loss and damage in three earthquakes in 2010/2011.[6] In September 2016, the plaintiff commenced this proceeding against IAG. Anamended statement of claim ("the statement of claim") shortly afterwards whichincluded some particulars of damage (below at [8]).1 Pursuant to r 4.16 High Court Rules.[7] In the statement of claim, the plaintiff alleges one cause of action, for breachof contract. The plaintiff alleges that the defendant failed to agree to reinstate theproperty or to pay indemnity value. The plaintiff seeks orders either that IAGspecifically performs its duties under the policy or a declaration that the propertysuffered earthquake damage in the three identified earthquakes (as identified by theplaintiff's engineer) and that the scope of works to repair the damage is as advised bythe plaintiff's engineer.[8] The statement of claim identifies the alleged loss and damage in one paragraph:On or about 4 September 2010, 22 February 2011 and 13 June 2011earthquakes occurred and the property suffered loss and damage ("thedamage").PARTICULARSThe damage to the house, as identified by the plaintiff at the time of filing isas follows:(a) Vertical cracking running through the foundation under the diningroom; significant horizontal shear cracking/debonding along theteaching room foundation.(b) Creaking to the first floor; bowed/out of plumb walls;(c) Damage to exterior cladding including cracking between repairedsheet joints to rear section, step and vertical cracking to masonry wallsand veneer;(d) Damage to interior wall and ceiling linings including cracking andbulging to ground/first floor junction, cracking around the hearth;(e) Damage to room including sagging;(f) Damage to windows and doors that are now difficult to open/close;(g) Damage to fences that have rotated; significant undulation toasphalted section of driveway; significant cracking to masonry wall;differentially settled retaining wall.[9] Subsequently, the plaintiff (in response to a notice from IAG) furtherparticularised the damage suffered on each of the properties stating:1.1 The damage is as follows:100 Highsted Road, Bishopdale– Vertical cracking through foundation in dining room; significant horizontalshear cracking along north western face of yoga room foundation;– Creaking to the first floor south-eastern bedroom;– Bowed walls and out of plumb;– Mortar cracking;– Lateral movement of down pipe;– Diagonal cracking to plasterboard;– Vertical cracking to wall lining under meditation room window;– Separation to wall joinery;– Shearing of pain at internal wall corners;– Sagging of lower portion of roof over garage;– Water damage to first floor bedroom 7;– Rotation of boundary fences along southern edge;– Racking of cupboard doors in yoga room;– Cracking to junction between external paving and chimney foundation;– Separation between skirting board and wall;– Significant bowing of driveway fence.233a Sawyers Arms Road, Bishopdale– Damage to flooring in lounge room, hallway and water closet;– Cracking to foundation;– Bowed walls; out of plumb;– Damaged interior wall and ceiling linings;– Cracking to brickwork mortar;– Damaged roof tiles;– Damaged windows and doors;– Rotated section of fence;– Ground undulation.[10] The plaintiff further stated that all the earthquake damage identified remainedto be reinstated.IAG's statement of defence[11] IAG denies that it has breached its obligations under the policy and it saysfurther that:a Brenchley Developments Limited scoped and carried out repairs tothe earthquake damage at the properties under the Policy in 2011 and2012;b The defendant has paid a total of $504,646.66 to the plaintiff and tothird parties on the plaintiff's behalf in relation to repair works arisingfrom earthquake damage to the properties;c The plaintiff has received $76,162.89 in cash settlements from thedefendant in relation to repair works arising from earthquake damageto the Properties.d The Policy does not indemnify the plaintiff for defective buildingwork and to the extent that the claim is for such work, the defendantis not liable for the cost of remediating or rebuilding same asundertaken by the plaintiff and/or its contractors.[12] In short, IAG asserts that it has paid for Scope repairs and that any liability fordefective repairs lies with others.IAG's third party claims[13] IAG has issued claims against six third parties.[14] Three of the third parties were within the Hawkins Group of companies whichhad a relationship with IAG under the Rebuild Solution Master Agreement of October2010. Each of the sued Hawkins companies is now in liquidation. Accordingly, thosethree claims are stayed.2[15] The other three third parties joined by IAG are all builders. The plaintiffentered into building agreements with them successively.[16] Under a heading "first repairs", IAG alleges that Brenchley Developments Ltd(Brenchley) undertook repairs from early 2012 on both Highsted Road (costed at$131,400) and Sawyers Arms Road (costed at $34,090).[17] Under a heading "second repairs", IAG alleges that Building Onward Ltd("Onward") from around April 2014 undertook repairs at both Highsted Road (costedat $172,716.15) and Sawyers Arms Road (costed at $31,161.20).[18] Under a heading "third repairs", IAG pleads that Onward was replaced with HiTech Building Systems Ltd ("Hi Tech") from about June 2015, pursuant to a scope ofworks initially costed at $33,047.05 (but finally costed at $73,047.05).Restated position of plaintiff[19] In a letter to Onward's solicitors in August 2018, Mr Hooker for the plaintiffrestated the plaintiff's pleaded position:• We can confirm that plaintiff's position is that the work carried out bythe proposed fourth, fifth and sixth defendants does not form the basisor any part of the claim by the plaintiffs against the defendants.2 Section 248(1)(c) Companies Act 1993.• The basis of the plaintiff's claim against the defendant is that the workcarried out and paid for by the defendant does not meet the policystandard.• We reiterate that the plaintiff is not pleading that the repairs weredefective.Development of IAG's third party claimsIAG's characterisation of the plaintiff's pleading of damage[20] In its original statement of claim against the third parties, IAG pleaded that theplaintiff had alleged (through its amended statement of claim and its furtherparticulars) that the plaintiff's properties "have the following damage", thereafterduplicating the details of damage set out in the plaintiff's particulars.3 IAG's pleadingwas exactly repeated in its amended statement of claim.[21] IAG's pleading materially misstates what the plaintiff had alleged (at [8] and[9] above). The plaintiff's allegations are specifically of the damage caused by threeidentified earthquakes in 2010 and 2011. The plaintiff does not allege that theproperties still have the pleaded damage (emphasis added).IAG's cause of action[22] In its initial statement of claim, IAG pursued relief in three parallel causes ofaction against each builder:(a) equitable contribution or indemnity for breach of the owner/buildingcontract;(b) contribution or indemnity for liability incurred as a joint tortfeasorbreaching a duty of care to the owner;(c) contribution or indemnity pursuant to a special condition in theowner/builder building contract which imposed obligations on the3 Emphasis added.builder in favour of IAG (with enforcement sought in reliance on theContracts Privity Act 1982).[23] After Onward filed these applications, IAG filed an amended statement ofclaim. The claims for contribution were abandoned (implicitly in recognition that theywere flawed). In the amended statement of claim, IAG pursues relief under threecauses of action:(a) a declaration that each builder is liable (for breach of contract) to theplaintiff for an amount to be particularised before trial;(b) a declaration that each builder is liable (for negligence) to the plaintifffor an amount to be particularised before trial;(c) (contractual) indemnity for breaches of a special condition in theowner/builder building contract in favour of IAG (with enforcementpursuant to ss 12 and 17 Contract and Commercial Law Act 2017).Looking behind the plaintiff's pleaded caseThe pleadings[24] The plaintiff by its pleadings has avoided making any allegation in its claimagainst IAG that repairs effected by the builders were substandard or defective. Theplaintiff does not assert a claim for the cost of remediating substandard or defectivework. The plaintiff instead bases its claim on the obligation of IAG to reinstate theproperties or pay indemnity value, which it says IAG has breached. It is commonground that the plaintiff, when pursuing the various repair arrangements which wereembarked upon, did not enter into any contractual discharge of IAG from itsobligations under the policy.The evidence of damage behind the plaintiff's claims[25] A deponent for IAG, Matthew Gorinski (a project manager), has exhibited tworeports of Terra Consultants, a firm of structural engineers. The reports were obtainedby the plaintiff. One relates to Sawyers Arms Road and was released on 31 August2016. The second relates to Highsted Road and was released on 16 January 2017.Each is entitled "Structural Damage Assessment Report" and is based on inspectionsconducted on both properties on 16 and 18 August 2016. Those inspections post-datethe repair work undertaken on the two properties and pre-date the plaintiff's pleadedidentification of damage (provided in its particulars of damage reproduced at [9]above).[26] There is a close relationship between what is particularised as damage in theplaintiff's further particulars and the damage as assessed in the two Terra Consultants'reports. It appears likely that the plaintiff's particulars are based on those reports.IAG's substantive caseThe claim against the builders[27] IAG joined the various builders as third parties in order to avoid the risk ofhaving a judgment relating to the costs of remediation entered against it in a situationwhere the present cost of remediation may have resulted at least in part from buildersperforming defective repairs or omitting to effect repairs for which they have beenpaid. Given the way in which the plaintiff pleads its claim (without reference to theexistence or possibility of defective or omitted repair work), IAG observes that anissue for trial will be whether IAG's obligation extends to indemnifying defectivework by a builder carried out under a contract with the plaintiff.[28] For IAG, Mr Collette-Moxon introduced what he submitted is the need for asingle trial in the following way:The plaintiff asserts against IAG that the standard of repair set out in the policywas not met. It does this on the basis of alleged substandard workmanshipand building defects; from the expert reports, the houses are unlikely to fallshort of the policy standard for any other reasons. So the repair work done bythe third parties is directly and predominantly the subject of the factual enquirybefore the court.As is usual in construction cases, the crux is what is wrong with each buildingand who caused it. These questions are intensely factual and give rise toallegations plaintiff-defendant and defendant-third party with a high degree ofcommonality. As such, they are not amenable to separate trials.The claim for Highsted Road (against Onward)[29] IAG's case, as further particularised, is that Onward breached its contract withthe plaintiff by undertaking defective work and by not completing other work. Itparticularised that work as including:(a) Hairline cracks at corner of skylight frame in Mahasaya room at 100Highsted Road;(b) Separation of the interior lining of the healing/waiting room at 100Highsted Road;(c) Minor separation at column and wall in the healing/waiting room at100 Highsted Road;(d) 0.5mm separation of skirting in the healing/waiting room at 100Highsted Road;(e) Dips in the replaced driveway by the front entrance of 100 HighstedRoad;(f) Repaired internal linings had separations between the skirting andwall joint, and ceiling and wall joint throughout the houses at theProperties.[30] IAG expressly bases its particulars on evidence of Ruchika Kaur, a structuralengineer employed by Thornton Tomasetti. Ms Kaur inspected the two properties inMarch 2017. She produced a schedule of 36 items of earthquake-related structuraland non-structural defects or unrepaired damage at Highsted Road, of which in heropinion, the most significant omission from the scope of work prepared by theHawkins companies was that the building slab and foundation of Highsted Roadrequired relevelling. (On the plaintiff's case as at present pleaded, there is not anallegation that the slab and foundations are out of level). Ms Kaur's scheduleidentified in relation to Highsted Road's eight areas of defective workmanship and tenareas of what she describes as "unrepaired earthquake damage". Nineteen areas werenot ascribed any damage category.[31] Ms Kaur concluded that the Hawkins companies, Brenchley and Onward hadeach carried out repair work at both properties which had poor workmanship. Sheconcluded that the Hawkins companies were involved in 30 instances; Brenchley ineight instances and Onward in four instances. There was overlap on all four items onwhich Ms Kaur listed Onward as a relevant party – Ms Kaur identified in all four casesHawkins, Brenchley and Onward.[32] For IAG, Mr Gorinski then undertook an estimation of the likely costs to rectifyOnward's defective and substandard workmanship, estimating the cost at $66,529.02(including GST) for Highsted Road.[33] Mr Collette-Moxon submits that in the context of this setting aside application,the Court should have its primary focus (as on a strike out application) on the casespleaded against the defendant and the third parties. He emphasises that there isdetailed development of evidence to come.[34] To the extent the Court is in a position to consider evidence which maypotentially be called, Mr Collette-Moxon invites the Court to focus on the TerraConsultants' reports. Although those reports have clearly been used in the preparationof the plaintiff's particulars as to earthquake damage (and not of substandardworkmanship), there are repeated instances in the reports where the builders'workmanship is criticised or questioned. Examples include:the existing crack repairs do not appear to penetrate the full depth of theobserved cracking and as such has not structurally repaired the cracked sectionof the foundation to an as when new condition.Popping of nail heads [on first floor deck] was also noted this will lead tofailure of the waterproofing.Terra did note some mortar cracking [in the exterior cladding] and poorlyperformed repairs.Substandard exterior cladding repair using non suitable materialsPoorly completed ceiling repairs were noted on the first floor, differentfinishes were clearly visible.This wall has been repaired utilising caulking. Terra notes that this is not anadequate repair method.The repaired section of the masonry retaining wall have not been finished tomatch the existing.[35] The declaration sought by the plaintiff, if granted, would require IAG to repairthe damage identified by the plaintiff's engineer (Terra Consultants) in accordancewith Terra Consultants' scope of works. That being the case, IAG's obligation wouldinclude repair of defective work if established on the evidence.The claim for Highsted Road (against Hi Tech)[36] IAG asserts also that Hi Tech breached its contract with the plaintiff byundertaking defective work and by not completing other work. IAG has not furtherparticularised allegations of defective or incomplete work on the part of Hi Tech.[37] In her report on Highsted Road, Ms Kaur records:Hi Tech Building Systems Limited performed work on the first floor deck andlounge ceiling among other work, which from my visual observationsappeared satisfactory. However, the plaintiffs' expert Terra Consultants havenoted issues with the work completed by Hi-Tech. They note that no consentdocumentation was filed for the first floor deck rebuild. I did not find aconsent application or the pre application meeting minutes in the documentsavailable to us.[38] Mr Gorinski then reviewed Ms Kaur's evidence, the expert reports from TerraConsultants and other information. (He refers in his report also to his "ownobservations" but as there is no evidence that he visited the site I discount that). MrGorinski nevertheless deposes that on the basis of the material he identifies he hasestimated the likely cost to rectify all allegations of defective and substandardworkmanship against Hi Tech (before margins) to be $38,276.62 (excluding GST). Ofthat total, $6,434.63 relates to lounge and first floor balcony issues which may berelated directly to Hi Tech's contracted work. The remaining $31,841.99 is for whatMr Gorinksi identifies as "assumed value of foundation and associated repairs". MrGorinski's ascribing of this cost to Hi Tech appears to relate back to an opinionexpressed by Ms Kaur that the scope of work prepared by the Hawkins' companiesdid not allow for the relevelling of the slab and foundations and restoration of wallverticality. Mr Gorinski does not explain in his report why he attributes this omissionto Hi Tech when the work was not included in its contract with the plaintiff.[39] In his submissions for IAG, Mr Collette-Moxon referred to pleaded obligationswhich Onward and Hi Tech had assumed under their respective building contracts withthe plaintiff. In Mr Collette-Moxon's oral submissions, Onward and Hi Tech haddesign obligations in their contracts with the plaintiff. He invokes clauses in the HiTech contract which required Hi Tech to engage such design, engineering and otherservices as were required to obtain consents and approvals and to carry out the contractworks in accordance with all laws and legal requirements. Mr Collette-Moxon did notrefer me to a parallel clause in Onward's contract.[40] On the basis of the pleadings (particularly the plaintiff's pleading andparticulars which do not refer to an out-of-level foundation as damage) and theevidence, the claim which IAG suggests the plaintiff might have had (for breach of adesign responsibility on the part of the builders) is not part of the plaintiff's case.Rather, what Mr Collette-Moxon indicates is that IAG wishes to advance, as part ofits case, the proposition that the plaintiff would be entitled (if it chose) to assert thebreach of a design obligation.[41] In a related argument, Mr Collette-Moxon submits that in those areas wherethe builder omitted to effect contracted repairs at all, IAG would have the right to havethose brought into account in relation to the assessment of any recoverable amount ofmoney. The proposition is that the plaintiff is entitled to recover any sum of moneywhich it pays to a builder on account of a contracted item of work which the builderdoes not perform. If IAG were ordered (in terms of the plaintiff's primary prayer forrelief) to specifically perform its duty of reinstatement of the property, and did so, MrCollette-Moxon submits that IAG would be entitled by right of subrogation to enforcethe plaintiff's entitlement to reimbursement of any excessive payment to the builder.The claim for Sawyers Arms Road (against Onward only)[42] I need not analyse in detail IAG's contentions concerning the Sawyers ArmsRoad property. Out of the combined evidence of Ms Kaur and Mr Gorinski, thehighest it is put for IAG is that the total cost to rectify all of the allegations of defectiveand substandard workmanship on the Sawyers Arms Road property is $5,882.52(including GST). Mr Gorinski identifies that as a potential claim against Onward only(not Hi Tech).[43] As a stand-alone item of claimed damage (or even as an added item of claimeddamage), the amount of that claim could never justify the involvement of the builderin question as a third party in the claim pursued by the building owner against itsinsurer in High Court proceedings of some complexity. I disregard for the purposesof the present application, matters relating to Sawyers Arms Road.IAG's reliance on contractual provisions for its benefit[44] IAG has pleaded as its third cause of action against both Onward and Hi Techspecial conditions requiring the builder to deal with (amongst others) IAG in goodfaith and to not damage IAG's business. IAG initially pleaded the former Contracts(Privity) Act 1982 provisions but in its amended claim pleads ss 12 and 17 Contractand Commercial Law Act 2017.[45] Mr Whiteside QC described IAG's reliance on this provision as a "make-weight" argument. In the sense that it appears to add little, if anything, to the causesof action in contract and tort, that may be a fair description. IAG has not pleaded anyparticulars of bad faith as it would have if it was relying on such an allegation. Instead,it has pleaded that IAG is entitled to indemnity if (which IAG denies) the plaintiff'sallegations of damage and loss are correct. It is those allegations in the first and secondcauses of action on which this judgment focuses.Applications to set aside the third party noticesThe applications[46] Onward and Hi Tech, both on 21 May 2018, filed their applications for orderssetting aside the third party notices issued to them by its notice. Onward expresslyrecognised (as must be the case) that any order setting aside the notices would bewithout prejudice to the right of IAG to pursue a claim against the third party in anindependent proceeding.[47] The grounds of the respective applications were:Onwarda. The pleadings and further particulars are not particular enough for thefourth third party to determine or to answer the case against it. Itwould be appropriate for any loss in relation to the alleged defects tobe crystallised in the current proceeding and to then be pursued in aseparate proceeding.b. There is an absence of any complaint by the plaintiff as to the workdone by Building Onward and it would therefore be counter to theinterests of justice for the plaintiff to have to respond to any evidenceof Building Onward.c. The addition of the Fourth Third Party to these proceedings wouldneedlessly prolong the proceedings. Delays will be caused by thelikely addition of experts and requisite expert conferral and reporting.The length of trial will also be extended.d. It is out of all proportion to the extent of the particularised defects forBuilding Onward to be involved throughout the length of this process,and to sit idly by while issues between the plaintiff and the defendant,and potentially the defendant and its third party project managers, aredetermined.e. Securing a just, speedy and inexpensive determination of theproceeding would not be advanced with Building Onward remainingas a Third Party.Hi Tech(a) The works carried out by the Fifth Third Party under its buildingcontract with the Plaintiff dated 9 June 2015 was completed inaccordance with that contract and has not been the subject of anyallegation of defective workmanship from the Plaintiff.(b) The alleged earthquake damage the Plaintiff alleges remains to bereinstated was not the subject of the works carried out by the FifthThird Party under the building contract dated 9 June 2015.(c) If the Plaintiff had any complaint about defective work under thebuilding contract dated 9 June 2015, that could have been resolved ina far more efficient and cost effective manner under the disputesprovisions in that contract.Onward's evidence[48] For Onward, Ms Harris emphasised as relevant a number of matters referredto in the evidence filed and, in particular, the affidavit of Nicholas O'Neill, soledirector and shareholder of Onward.[49] Mr O'Neill deposed:(a) IAG engaged Onward to undertake construction works left undone byBrenchley.(b) During construction, Onward had significant difficulties gaining accessto both properties as the plaintiff would often refuse access.(c) Onward stopped work around August 2014 upon the basis that Onwardcould not complete the works due to the plaintiff's refusing it access.(d) Ms Kaur (in her evidence for IAG) failed to distinguish between thework undertaken by Brenchley and Onward respectively.(e) The plaintiff never raised any issue as to the level of Onward'sworkmanship – Mr O'Neill exhibited an email from the plaintiff dated1 May 2014 stating:The workmanship is great. Nicholas [O'Neill] is doing a goodjob.(f) Onward, after it concluded its work, attended to defects in accordancewith the maintenance provisions of the contract and did not receive afurther defect list.(g) The contract contained a mandatory mediation process and an optionalarbitration process which the plaintiff did not pursue.Hi Tech's evidence[50] The evidence in support of Hi Tech's application was provided by Justin Kent,Hi Tech's Contracts Manager. Mr Kent's evidence included that:(a) He was introduced to the task of completing some remaining buildingwork on the plaintiff's properties by loss adjusters for whom he hadcompleted many difficult earthquake repair projects.(b) The main work for Hi Tech was at Highsted Road with only somemortar work (labour cost of $682 plus GST) to be completed at SawyersArms Road.(c) Hi Tech completed its work in terms of the scope of works in itsbuilding contract.(d) The plaintiff's proprietor raised two issues as to specific items close toor upon the completion of Hi Tech's work, which Hi Tech attended to.The proprietor raised a further allegation as to damage to tiles which HiTech did not accept.(e) Apart from the damaged tiles issue, the plaintiff never raised any issuewith Hi Tech about the quality of its workmanship or a failure to carryout any required work.(f) Nor did the plaintiff invoke any of the dispute procedures under thebuilding contract.(g) A building consent in relation to work on the deck was not obtainedbecause after a Council pre-application meeting, it was determined thatconsent was not required.[51] In the course of his submissions, Mr Whiteside for Hi Tech focussed onevidence of Ms Kaur. He noted particularly that when she summarised in her schedulethe structural and non-structural defects, and the identification of the "relevant partyinvolved", not one of her identified defects was attributed to Hi Tech. This, MrWhiteside noted, was consistent with Ms Kaur's narrative evidence that from hervisual observations Hi Tech's work on the first floor deck and lounge ceiling amongother work appeared satisfactory. When she refers to the lack of a consent applicationor pre-application meeting minutes, she does not directly assert that a consent was infact required. Ms Kaur refers to conclusions reached in the Terra Consultants' reportswhich do not differentiate between the work of the various builders. Nor does MsKaur seek to differentiate Hi Tech's work other than through her comment that itappeared (from her visual observations) satisfactory.Arbitration provisions[52] The notice of application of Hi Tech included a ground that any issues whichthe plaintiff had over defective work could have been resolved in a far more efficientcost-effective manner by utilising the disputes provisions in that contract. Theapplication did not contain an assertion that Hi Tech would have been entitled to a stayof any civil proceeding brought against it by the plaintiff. Nevertheless, in hissubmissions, Mr Whiteside, by reference to the 1958 decision in Haddow v NewZealand Insurance Company Ltd, submitted that Hi Tech's entitlement to have anyworkmanship dispute determined by arbitration was fatal to IAG's third party notice.4[53] I note that the plaintiff in fact had an opportunity to assert any such entitlementwhen IAG had to apply for leave to issue the third party notice against Hi Tech. IAG,rather than opposing such course, consented to it. On that basis alone, this basis ofobjection advanced through argument rather than in the application must fail.[54] I therefore do not deal with alternative submissions of Mr Collette-Moxon inwhich he submitted that Haddow should not be regarded as authoritative in relation tothe Arbitration Act 1996, whose related provisions are materially different.Setting aside a third party noticeThe jurisdiction to set aside a third party notice[55] The Court's jurisdiction to set aside a third party notice arises under r 4.16(3)which provides:(3) In either case, the court may—(a) set the third party notice aside and dismiss the defendant'sstatement of claim against the third party—(i) on the merits; or(ii) without prejudice to the right of the defendant topursue that claim against the third party in anindependent proceeding; or(b) give other directions.4 Haddow v New Zealand Insurance Company Ltd [1958] NZLR 704.[56] I adopt my observations as to the general functions of third party proceedingsas identified in TSB Bank Limited v Burgess.5[36] In approaching the jurisdiction in relation to third party-proceedings,the most important background is the general functions of third partyproceedings. Those functions were identified by Scrutton LJ in Barclays BankLtd v Tom:6(a) To safeguard against differing results, and to ensure that thethird party is bound by the decision between the plaintiff andthe defendant. If instead separate proceedings are taken, theCourt hearing the second action is not bound by the decisionin the first action;(b) To ensure the question between the defendant and the thirdparty is decided as soon as possible after the decision betweenthe plaintiff and the defendant; and(c) To save the expense of two trials. A party commencingseparate proceedings unnecessarily where an additional claimcould have been used may be penalised in costs.[57] I also adopt from TSB Bank Limited v Burgess the distinction betweenapplications to strike out pleadings and applications for orders setting aside third partynotices.7[37] It is sometimes observed that orders setting aside third party noticesare granted on the same principles as applications to strike out pleadings underr 15.1 High Court Rules.8 That observation is correct in relation to asignificant proportion of orders setting aside third party notices. But thestatement is incomplete in that it does not recognise the broaderconsiderations, such as convenience and overall justice, which may separatelyjustify an order setting aside a third party notice.[58] In TSB Bank Limited v Burgess, I gathered together from the authorities 13principles which inform the exercise of the jurisdiction in this area, which may besummarised as being:9(a) The Court has a wide discretion to set aside third party notices.5 TSB Bank Limited v Burgess [2013] NZHC 1228, at [36].6 Barclays Bank Ltd v Tom [1923] 1 KB 221 (CA) at 224.7 TSB Bank Limited v Burgess, above n 5, at [37].8 For instance, see McGechan on Procedure (online looseleaf ed, Thomson Reuters) at [HR4.16.01].9 TSB Bank Limited v Burgess, above n 5, at [38].(b) Analysis of the merits of an application conveniently commences withthe criteria (in relation to the issuing of a third party notice) set out inr 4.4(1) High Court Rules(c) Where the application is based on one or more of the grounds fordismissing a pleading under r 15.1 High Court Rules, the applicationto set aside the third party notice will be considered on the sameprinciples as apply under that rule.(d) Where the third party claim is based on the r 4.4(1)(a) ground that thedefendant is entitled to a contribution or indemnity from the thirdparty, the concepts of contribution or indemnity are those astraditionally understood to arise between co-obligors such as jointdebtors, co-sureties, and joint tort-feasors under the Law Reform Act1936.(e) Where the third party claim is based on the r 4.4(1)(b) ground that therelief claimed from the third party is connected with the subject matterof the proceeding and is substantially the same as that claimed by theplaintiff against the defendant, important considerations indetermining whether the relief falls within such categories are: thedegree of factual overlap; whether the joinder of the third party willdetermine the ultimate imposition of financial burden.(f) The test of "substantially the same relief or remedy" is not merely metby the defendant including a claim for damages which is equal to theclaim by the plaintiff against the defendant. Nor when the defendantpursues a form of relief, such as specific performance, which isidentical to that claimed by the plaintiff against the defendant. Theremust also be a similarity of facts whereby the third party claim isintended to determine whether the defendant or the third party shouldultimately bear the plaintiff's loss.(g) Where the third party notice is based on a common question or issueunder r 4.4(1)(c) or questions or issues under r 4.4(1)(d) which aresubstantially the same as between plaintiff and defendant on the onehand and defendant and third party on the other hand, the Court willconsider the extent to which the claims are independent or areinterrelated.(h) The justification of a third party notice under any one of the heads ofr 4.4(1), such as there being a common issue or question, is closelyrelated to the desirability of comprehensively dealing with MammoetShipping B V Compter but such considerations may have to yield toothers including the weighing of the convenience to the parties,including in relation to matters such as unreasonable delay.(i) The Court may in the balancing consider in most cases the strength ofthe defendant's case, both in defending the plaintiff's claim and inpursuing the third party claim. This may not be so where the settingaside application is made on a strike out basis. On such an application,the third party claim should not be set aside unless it is clear beyonddoubt that it cannot succeed.(j) The weighing of the convenience to the parties will involveconsiderations such as whether the third party will, if the third partynotice is sustained, be idly involved in a trial involving issues asbetween the plaintiff and defendant, and vice versa.(k) The weighing of the convenience to the parties will includeconsiderations of any delay to the plaintiff - this is an expressconsideration arising under r 4.8(1) when the Court is considering anapplication for leave to issue a third party notice(l) The Court should be forward-looking when considering delay to theplaintiff. What matters is the prospect of future delay.(m) When all the circumstances of a proposed third party joinder havebeen taken into account, the overriding consideration is the interestsof justice. In KPMG Peat Marwick v Cory-Wright & Salmon Ltd (inRec) the Court of Appeal said:The interests of justice between all parties must be paramount ifthere is delay it will be regrettable but the attainment of justiceby the most efficient means has to be the overriding consideration.Discussion of principles[59] Counsel for Onwards and Hi Tech referred to the principles identified in TSBBank Limited v Burgess and put emphasis upon some in particular. Mr Collette-Moxon, for IAG, did not take issue with those principles. He referred in more detailto Robin v IAG New Zealand Ltd.10 The thrust of his submission is captured in aparagraph of his written synopsis where he stated:Similar factors were considered by the High Court in the recent interlocutorydecision Robin v IAG New Zealand Limited While in the context of anapplication to join further defendants, not third parties, it has persuasive valuefor the third party regime. It illustrates the lengths to which it may beappropriate for a court to go to ensure all necessary parties are joined into oneproceeding. With reference to "the wider interests of pragmatism", the Courtsaid "it is in the interests of justice that the proposed defendants be present todeal with all relevant issues, to represent their own interests and to avoid amultiplicity of hearings". A similar determination earlier in the judgementwas that a particular factor (inconvenience to the plaintiff in that case) "doesnot outweigh the benefit of having all necessary parties before the Court andpreventing the need for a possible second trial later".(footnotes omitted).[60] In Robin v IAG New Zealand Ltd, the plaintiff/house owner sued IAG as herinsurer of earthquake damage. IAG, as here, joined the Hawkins companies. IAG10 Robin v IAG New Zealand Ltd [2018] NZHC 1464.also sought orders joining as defendants other entities which had carried out work onthe plaintiff's property pursuant to contracts with her. On review, the Court made anorder joining the three defendants. It appears that the key issue in Robin was a choicebetween joining the additional parties as either defendants or third parties.11 Whatdistinguishes Robin from the present case is that in Robin, the plaintiff's case was notagainst the insurer alone. Ms Robin was also suing (as a second defendant) CanterburyReconstruction Ltd (CRL), as the party appointed by Hawkins to carry out and managethe house repairs. Ms Robin alleged against CRL a breach of the duty of care to ensurethat repairs were carried out to a good standard of workmanship.[61] Gendall J explained the significance of Ms Robin's claim against CRL:12[37] Ms Robin suggested that the repairers themselves were not necessarilynegligent or their work defective and noted she is suing IAG ratherthan pursuing those repairers. However, that is not her entire case. Sheis also suing CRL in tort for breaching its duty of care to carry out therepair of the house to a good standard of workmanship so that allearthquake damage was properly repaired. While IAG's obligationunder the policy standard is fundamentally different from the tortiousobligations owed by the proposed defendants, those obligations aresimilar to the tortious obligations CRL owes Ms Robin. Ms Robin'ssubmissions overlook this important point.[62] For their part, both Mr Whiteside and Ms Harris here put the emphasis of theirsubmissions upon the plaintiff's case as pleaded and upon the weighing ofconvenience to the parties. In my identification of principles in TSB Bank Limited vBurgess, as principle (j), I referred to the Court's concern to avoid having a joinedparty "idly involved in a trial". Counsel referred to the source of that approach, namelythe judgment of McGechan J in Mammoet Shipping BV v Compter, where his Honourobserved:13One hearing can in the end gain little if, the third party joined must sit idlythrough issues as between plaintiffs and defendants in which it is littleinvolved, and vice versa as regards the plaintiff.11 In Robin v IAG New Zealand Ltd [2018] NZHC 204, the Associate Judge declined the applicationto join the additional parties as defendants. On review in Robin v IAG New Zealand Ltd [2018]NZHC 1464 at [59], the Court noted that the plaintiff had not contested in any real way that joinderas third parties would have been appropriate.12 Robin v IAG New Zealand Ltd, above n 10, at [37].13 Mammoet Shipping BV v Compter HC Whangarei CP13/86, 6 July 1987 at [16].[63] Counsel for the third parties emphasised also the concern which the Court willhave in the closely related situation where the main allegations in the case indicate thatthe third party's involvement is peripheral. In Turner v First Fifteen Holdings Ltd,Barker J set aside a third party notice because the test for joinder was not made out(the defendant architects owing to the plaintiff's duties which were different to andgoverned by different contracts to those of the intended third party). Barker J wouldalso have set aside the third party notice upon a weighing of a convenience to theparties:14I add that there is a wide discretion in the Court to set aside third party noticesin r 160. Even if the notice could have been sustained under r 75, I should havebeen minded to set it aside. I note that the engineer's involvement is somewhatperipheral to the main allegations against the architects. It is not sufficient forthe architects to assert that breaches alleged against them are really theresponsibility of the engineer, for the architects cannot be held liable in thesubstantive trial for breaches not their own.Thus, the architects could only ever look to the engineer as a third party to theextent that the plaintiffs allege against them a failure to supervise the engineer.Yet an examination of the pleadings reveals that at no point do the plaintiffsspecifically allege against the architects a failure to supervise the engineer.Most of the numerous claims against the architects involve direct allegationsof faulty design work by them or else a failure to supervise the builders. Ofthe 17 claims against the architects, only three at most are sufficiently broadlyworded to possibly encompass a failure to supervise the engineer.The account rendered to the plaintiffs by the engineer amounts to only$2,425.50, whereas the builders' tender to the plaintiffs was $365,925 subjectto price escalation and exclusive of GST; the architects' fee was 10 per centof the building contract price. The engineer was a very minor player in thewhole scenario. I should need to be satisfied that any potential liability of theengineer to the architects was central to a resolution of the issues in this casebefore it would be appropriate to involve the engineer in what willundoubtedly be complex and time-consuming litigation.Discussion[64] A significant feature of this earthquake litigation is that the plaintiff chooses tosue only its insurer and thereby to enforce its rights under its contract of insurance.The plaintiff has chosen not to sue for defects which have arisen in the context ofbuilding repairs undertaken pursuant to contracts between builders and the plaintiff.14 Turner v First Fifteen Holdings Ltd (1991) 3 PRNZ 145 at 149-150.[65] Mr Collette-Moxon's careful analysis of the Terra Consultants' reportsobtained by the plaintiff indicates that while there may have been significant defectsin work undertaken by one or more of the builders, the plaintiff does not seek damagesfor any such defects (or omissions to complete contracted work). Analysis of MsKaur's detailed list of defects and unrepaired earthquake damage indicates thatpredominantly the relevant parties involved were either the Hawkins companies aloneor the Hawkins companies and Brenchley together. As counsel for the third partiesidentified in the course of their submissions, very few of the allegations, if any, areagainst Onward, or Hi Tech or both. The related analysis of Mr Gorinski, with hisproject management expertise, has to be treated with care. Mr Gorinski, unlike MsKaur, did not visit the site and inspect the work. Yet it is he who reaches some"assumptions" as to work required in relation to the third party's alleged substandardworkmanship and the cost of putting that right. His evidence is in tension with that ofMs Kaur – Mr Gorinski concluded that Hi Tech caused the plaintiff financial damagewhereas on Ms Kaur's visual observations, Hi Tech's work "appeared satisfactory".[66] In the way the plaintiff has brought this proceeding, it is focused on thecontractual responsibilities of IAG as the insurer. IAG, through joining the Hawkinscompanies and Brenchley will have the opportunity through the one proceeding toobtain any relevant findings and judgment that arise from the work undertaken by theentities which Ms Kaur's evidence suggests were most centrally involved in any repairdeficits. The Court recognises that an order striking out the third party claims againstOnward and Hi Tech will expose IAG to a degree of the risk identified by Scrutton LJin Barclays Bank Ltd v Tom.15 To be weighed against that risk, however, is the riskthat two builders, whose role even on Mr Gorinski's figures appears to have beenmodest, will be drawn into all the interlocutory issues, briefing of experts and costs oftrial which are associated with earthquake claims which involve repair methodologyand the scoping and costing of remediation. This is a case where there is a grave riskto the third parties that they would sit idly by while the plaintiff's pleaded claim takesup the preponderance of preparation and trial time.15 Barclays Bank Ltd v Tom, above n 6.[67] This is not a case where a relevant limitations period looms as a difficulty forIAG. If, through the judgment in this proceeding. IAG is of the view that a claimremains as against Onward, Hi Tech or both, there will be the opportunity to pursuethat in a manner which is focused on alleged shortcomings of either builder. MrCollette-Moxon, in his submissions, emphasised that IAG, in the event it makespayment of repair costs to the plaintiff, will acquire through subrogation the rights ofthe plaintiff as against the builders.[68] Some delay may ensue to IAG. But the Court of Appeal's observations inKPMG Peat Marwick v Cory Wright and Salmon Ltd (in Rec) are appropriately to berepeated:16The 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.Outcome[69] The applications of Onward and Hi Tech will be granted.[70] Costs must follow the event. I anticipate that counsel will agree that theyshould be on a 2B basis and without a certificate for second counsel. In the event thereis disagreement on the fixing of costs and disbursements, the following timetable willapply:(a) Costs memoranda to be limited to four pages;(b) Applicants for costs to file and serve their memoranda within fiveworking days;(c) Respondent on costs application to file and serve their memorandawithin five working days;(d) Court to then determine the costs applications on the papers;16 KPMG Peat Marwick v Cory Wright and Salmon Ltd (in rec) (1994) 7 PRNZ 549.(e) In the event that no memoranda is filed as to costs, there will be noorder as to costs.Orders[71] I order:(a) The third party notices issued to Building Onward Ltd and Hi TechBuilding Systems Ltd are set aside;(b) Costs and disbursements are reserved.Associate Judge OsborneSolicitors:Joynt Andrews, ChristchurchCounsel: P F Whiteside QC, ChristchurchRhodes & Co, ChristchurchDuncan Cotterill, Auckland