Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Judgment: BFSL 2007 Ltd & Ors v Peter David Steigrad

[Judgment: SC_19_2013__BFSL_2007_Ltd__Ors_v_STEIGRAD_and_SC_21_2013__HOUGHTON_v_AIG_Insurance_New_Zealand_Ltd__Ors_Civil_Judgment.pdf]

Supreme Court of New Zealand

23 December 2013

MEDIA RELEASE – FOR IMMEDIATE PUBLICATION

BFSL 2007 LIMITED & ORS v PETER DAVID STEIGRAD

(SC 19/2013)

ERIC MESERVE HOUGHTON v AIG INSURANCE NEW ZEALAND LIMITED (FORMERLY CHARTIS INSURANCE NEW ZEALAND LIMITED) & ORS

(SC 21/2013)

[2013] NZSC 156

PRESS SUMMARY

This summary is provided to assist in the understanding of the Court’s judgment. It does not comprise part of the reasons for that judgment. The full judgment with reasons is the only authoritative document. The full text of the judgment and reasons can be found at www.courtsofnz.govt.nz.

These two appeals concern the effect of s 9 of the Law Reform Act 1936, which imposes a statutory charge over insurance money payable to an insured to indemnify the insured for damages or compensation payable to third party claimants.

The issue in these appeals is the nature and effect of such a charge and in particular:

(a) whether the charge secures whatever is eventually held to be the full amount of the insured’s liability to the third party claimant, with no payments


under the policy able to be made which would deplete the insurance money available to meet the insured’s liability to the third party should it be established; or

(b) whether the charge secures the insurance money that remains at the time of judgment on, or settlement of, the third party claim against the insured, allowing in the meantime the payment of other sums (including defence costs) that fall due for payment under the policy even if that depletes the sum available to meet the third party claim.

Both appeals relate to actions brought against the directors of certain companies that have collapsed. The first appeal (SC 19/2013) concerns an action brought by the receivers of the Bridgecorp group of companies against the former directors, including Mr Steigrad. The second appeal (SC 21/2013) concerns an action brought by Mr Houghton in a representative capacity on behalf of shareholders who invested in Feltex Carpets Ltd, against a number of parties, including the directors of Feltex.

The directors in both appeals are covered by directors’ liability insurance policies. The insurance policies in both cases cover not only claims for losses resulting from breaches of duty as directors but also the costs of defending any actions brought against them. The limit of indemnity provided under the policies constitutes combined policy limits, which apply to the aggregate of liability to third parties and defence costs. In both cases, the damages claimed against the directors far exceed the policy limits in each insurance policy.

The appellants in both appeals submit that they have a statutory charge over the insurance moneys payable to the directors in respect of their claims, with the effect that defence costs cannot be paid under the policies if to do so would deplete the funds available to meet the directors’ liability if eventually established (being the interpretation set out at (a) above). This interpretation was held to be correct by the High Court in the Bridgecorp proceedings.

The respondents argue that s 9 is not designed to interfere with the contract between the directors and their insurers and therefore that, until liability is established, payments for defence costs may be made as they fall due under the policies (being the interpretation set out at (b) above). The respondents’ interpretation was upheld on appeal in both the Bridgecorp and Houghton cases in the Court of Appeal.

The Supreme Court has, by majority (comprising the Chief Justice, Glazebrook and Anderson JJ) held that the statutory charge covers whatever the amount of liability to the third party eventually turns out to be. Reimbursement to the directors of their defence costs is not within the statutory charge. It is immaterial under the statute that the contractual obligation to pay the directors’ defence costs arises when the costs are incurred and that liability on the claim for damages is not yet determined or payable. The effect of the charge is that payments under the insurance policy to meet the directors’ defence costs can be met only at the peril of the insurer when there is insufficient insurance cover under the limit of the policy to meet both insurance obligations.

McGrath and Gault JJ would have upheld the Court of Appeal’s decision that the statutory charge did not have the effect of preventing the directors from accessing the insurance money to cover their defence costs.

In accordance with the views of the majority, the appeal is allowed.


[Judgment: SC_19_2013__BFSL_2007_Ltd__Ors_v_STEIGRAD_and_SC_21_2013__HOUGHTON_v_AIG_Insurance_New_Zealand_Ltd__Ors_Civil_Judgment.pdf]

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

BusinessDesk: APN's NZME Sees Future In Paywalls, Growth In Digital Sales

APN News & Media has touted a single newsroom concept for its NZME unit in New Zealand, similar to what Germany's Die Welt uses, saying an 'integrated sales proposition' is helping it win market share, including ... More>>

Labour Party: Global Milk Prices Now Lowest In 6 Years

The latest fall in the global dairy price has brought it to the lowest level in six years and shows there must be meaningful action in tomorrow’s Budget to diversify the economy, says Labour’s Finance spokesperson Grant Robertson. “Dairy prices ... More>>

BusinessDesk: NZ Inflation Expectations Creep Higher In June Survey

May 19 (BusinessDesk) - New Zealand businesses lifted their expectations for inflation over the next two years, sapping any immediate pressure on the Reserve Bank to cut interest rates, and prompting the kiwi dollar to jump higher. More>>

BusinessDesk: Lower Fuel Costs Drive Down NZ Producer Input, Output Prices

May 19 - Producer input and output prices fell in the first quarter, mainly reflecting lower fuel costs and weakness in prices of meat and dairy products. More>>

Media: Fairfax Media NZ Announces Senior Editorial Team

Fairfax Media New Zealand has today confirmed its new editorial leadership team, as part of a transformation of its newsrooms aimed at enhancing local and national journalism across digital and print. More>>

Science: Flavonoids Reduce Cold And Cough Risk

Flavonoids reduce cold and cough risk Research from the University of Auckland shows eating flavonoids – found in green tea, apples, blueberries, cocoa, red wine and onions – can significantly reduce the risk of catching colds and coughs. The research, ... More>>


BusinessDesk: RBNZ House Alert Speech The Catalyst For Government Action

Prime Minister John Key all but conceded that pressure from the Reserve Bank of New Zealand for concerted action on rampant Auckland house prices was one of the main catalysts for the government's weekend announcements about tightly ... More>>

BusinessDesk: How To Fall Foul Of The New Housing Tax Rules: Tips From IRD

Just because you rented out your investment property doesn't absolve you from paying tax, says the Inland Revenue Department in a summary of commonly made mistakes by non-professional property investors when it comes to their tax liability.More>>

Legal: Superdiversity Law, Policy And Business Stocktake Announced

Mai Chen, Managing Partner at Chen Palmer New Zealand Public and Employment Law Specialists and Adjunct Professor of Law at the University of Auckland, today announced the establishment ... More>>

Housing: More House Price Gains Expected

House price expectations remain high, with a net 56% of respondents expecting house prices will increase. Fears of higher interest rates are fading, consistent with the RBNZ’s signals this year. Affordability and a lack of houses for ... More>>

TDDA: State-Of-The-Art Drug Testing Laboratory To Open In Auckland

World leading drug testing agencies, The Drug Detection Agency (TDDA) and Omega Laboratories, open New Zealand laboratory More>>

Network: Bigpipe Launches Ultra-Fast Broadband Into Wellington

Bigpipe Launches Ultra-Fast Broadband into Wellington Naked broadband provider Bigpipe has extended its national reach, announcing today, the launch of its unlimited UFB offering into Wellington. The Spark Venture business is giving Wellingtonians the ... More>>

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news