IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA CA416/2017 [2018] NZCA 239 BETWEEN AND QBE INSURANCE (INTERNATIONAL) LIMITED Appellant ALLIANZ AUSTRALIA INSURANCE LIMITED Respondent Hearing: 28 March 2018 Court: Counsel: Judgment: French, Brown and Gilbert JJ P Davies and C R Langstone for Appellant C M Laband and A R Tosh for Respondent 5 July 2018 at 11 am JUDGMENT OF THE COURT A B The appeal and cross-appeal are dismissed. The appellant must pay the respondent costs for a standard appeal on a band A basis and usual disbursements. There is no award of costs on the cross-appeal. REASONS OF THE COURT (Given by French J) QBE INSURANCE (INTERNATIONAL) LTD v ALLIANZ AUSTRALIA INSURANCE LTD [2018] NZCA 239 [5 July 2018]
Introduction [1] At 4.35 am on 4 September 2010, a major earthquake struck Christchurch. It caused significant damage to a commercial property owned by Body Corporate 74246. The property was insured with QBE Insurance (International) Ltd. [2] The QBE policy was due to expire at 4 pm that same day. A month earlier, QBE had advised the insurance broker acting for the Body Corporate it did not want to renew the policy. The broker had accordingly organised new cover with a different insurance company, Allianz Australia Insurance Ltd. The policy schedule provided by Allianz stated that the effective period of insurance was 04/09/2010 to 4pm on 04/09/2011. [3] QBE accepted it was liable for the earthquake damage under its policy. However, it sought a 50 per cent contribution from Allianz on the grounds that as at 4.35 am on the 4 September 2010, the property was insured by both companies. Allianz disputed this and QBE then issued proceedings in the High Court. [4] It was common ground that the Allianz policy commenced on 4 September 2010. The issue was the start time. Did it commence, as QBE claimed, at 12 midnight on 4 September 2010, in which case the property was doubly insured at the time of the earthquake and Allianz liable to contribute? Or did it commence at 4 pm on the expiry of the QBE policy, in which case Allianz was not on risk at the earlier time of the earthquake? [5] In the High Court, Whata J held that, correctly construed, the Allianz policy commenced at 4 pm and therefore Allianz was not liable. 1 Although it was not necessary to his decision, the Judge also addressed a fall back argument raised by Allianz that if the policy did mean what QBE claimed, then it should be rectified. Justice Whata held rectification was not available. 2 1 Body Corporate 74246 v QBE Insurance (International) Ltd [2017] NZHC 1473 [HC decision] at [42] and [67]. 2 At [63] [66].
[6] QBE now appeals the decision. Allianz cross-appeals the Judge s ruling on rectification. Factual background [7] The insurance broker acting for the Body Corporate was Mr James. He had worked in the insurance industry for over 40 years. After QBE notified him it did not want to renew the policy, he consulted the Body Corporate and was instructed to find a new underwriter. Mr James had heard that Allianz was looking to gain a foothold in the New Zealand property market. Accordingly on 19 August 2010, he emailed Allianz s business development manager asking him if he would: like to provide terms for The attached Body Corp. at present with QBE. Apparently does no longer fit into their category [8] Attached to the email was a summary Mr James had prepared detailing the terms of the expiring QBE policy. The summary showed the period of insurance was 04/09/2009 to 04/09/2010. [9] On receipt of the email, Allianz used the information from the schedule to load the risk onto its computer system. The computer system then produced premium figures which Allianz s business development manager Mr Lowe emailed to Mr James the following day saying: thanks for submission on above. Is there a valuation on the building? Looking at following:- MD comp rate.105%, Eq rate.065% BI comp prem $175, Eq rate.065% Pl/Sl comp prem $275. per standard Allianz wordings, including Property Owners Endorsement on the PL Any queries let me know. [10] Mr James responded saying the figures looked good and that there was no current valuation. [11] Following the exchange of emails, Mr Lowe confirmed to Mr James that all was in order. Mr James took instructions from the Body Corporate. In accordance
with those instructions, he then verbally accepted Allianz s quote and instructed Allianz to hold the risk covered from 4 September 2010. It appears the placing of the insurance was done verbally over the telephone at some time prior to 4 September 2010. [12] It was common ground that at no stage did Mr James or Mr Lowe ever specifically discuss the start time for the Allianz policy. It was also common ground that the Body Corporate never instructed Mr James to obtain double insurance. Nor did Mr James ever ask Allianz to provide cover that overlapped with the QBE policy. [13] In accordance with standard insurance practice, Mr James was required to send Allianz the closings within 30 days of the policy start date. This he did in the form of an insurance summary which he forwarded to Allianz on 16 September 2010. It was similar to a summary he had earlier sent to the Body Corporate on 4 September 2010. [14] The summaries both contain a reference to the period of insurance as being 04/09/10 to 04/09/11. [15] When Allianz received Mr James summary, it was scanned into the company s computer system and an employee manually added the effective date and the expiry date. This generated a welcome letter which Allianz sent to the Body Corporate. The letter dated 19 November 2010 enclosed an invoice for the total annual premium as well as the policy schedule. Both the invoice and the schedule contained the following notation: Period of Insurance: Effective Date: 04/09/2010 Expiry Date: 4pm on 04/09/2011 Insured: Body Corporate 74246 [16] Evidence was given that at the relevant time the Allianz computer system did not have a time field for the effective date and therefore it was not possible to type in a start time. There was also evidence that when employees manually entered the start date, the computer system automatically assumed the risk was to expire 12 months in the future. It was possible to manually override this to cater for the situation where the policy period was not 12 months. However, it was not possible to
override the 4 pm expiry date on the computer system because all Allianz policies expired at 4 pm. [17] Finally, we note that following the 4 September earthquake, Mr James lodged a claim only with QBE. The High Court decision [18] In the High Court, Whata J focused on the interpretation of the phrase in the Allianz policy schedule 4/09/2010 [to] 4pm on 4/09/2011. He held that having regard to the factual matrix, those words should be interpreted to mean that the policy did not incept until 4 pm on 4 September 2010. 3 The Judge further held that if necessary he would have been prepared to imply a term to that effect. 4 He did not consider that rectification, as sought by Allianz, was either necessary or appropriate. 5 Arguments on appeal [19] In its written submissions, QBE contended Whata J reached the wrong conclusion because he wrongly considered double insurance was an evil and wrongly approached the case from the standpoint of whether or not the parties to the Allianz contract had intended to create a situation of double insurance. QBE argued this error affected virtually all aspects of the judgment and resulted in the Judge accepting and relying on evidence of the subjective thoughts, opinions and intentions of those involved in the negotiations of the Allianz policy. [20] According to QBE, the correct approach was for the Judge simply to determine the meaning of the Allianz contract by applying ordinary principles of interpretation and then examining what consequences might flow from that determination. To put it another way, the correct question was not whether the parties had intended to contract for double insurance but rather whether that was the result of the words they used. QBE submitted the plain meaning of the Allianz policy was that it came into force at midnight on 4 September 2018. This being the plain and unambiguous meaning, no 3 At [67]. 4 At [57]. 5 At [63].
further interpretation or addition of words was either required or justified. Words should mean what they say. Analysis [21] It is not surprising that the Judge focused on the interpretation of the words in the schedule because the schedule was the focus of the pleadings. However, the schedule should not have been the focus. That is because, in our view, the correct analysis of the evidence is that the contract of insurance had already been formed before the schedule came into existence. The schedule may be an aid to interpreting the contract but it was plainly not the contract itself. [22] We consider the contract of insurance was formed by the email and telephone communications between the broker as agent for the Body Corporate and Mr Lowe for Allianz. They negotiated and agreed on cover. A binding contract of insurance thus came into existence well before 19 November 2010 when Allianz first created its schedule. [23] We further consider that it is immaterial Messrs James and Lowe did not discuss a specific start time. What they did discuss and agree on was that the contract was to take over from the existing QBE policy on the expiry of that policy, whatever time that might be. That was the whole purpose of the contract. Whether or not they each subjectively assumed that would be 4 pm, because of their own usual practices or understanding of industry norms, is essentially beside the point. [24] When we put this analysis to counsel for QBE at the hearing, Ms Davies agreed the contract was formed by the communications between the broker and Mr Lowe and that the schedule was not part of the contract. She said she had made that point to Whata J in the High Court but it had not been addressed in the judgment. However, she submitted the analysis was not fatal to QBE s argument because of the reference to standard Allianz wordings in Mr Lowe s email of 20 August 2010. That reference meant, in her submission, that Allianz s policy document but not the schedule was incorporated into the contract. And because of the way the policy document defined period of insurance it meant the effective date was 4 September 2010.
[25] We accept that may well be the case but it does not answer the critical point that viewing the communications objectively what was sought and what was agreed to be provided was a policy that incepted on the expiry of the QBE policy. The reference to 4 September 2010 in the policy documents is not inconsistent with that. 4 September 2010 was undoubtedly the agreed effective date. But also agreed was that the specific start time on the effective date was to coincide with the expiry of the QBE policy. [26] It follows the appeal must fail. [27] It also follows there is no room for an implied term and no basis for rectification. Rectification is a remedy that only arises where the recorded terms of a contract do not reflect the true agreement between the parties. 6 That is not the situation in this case. The cross-appeal must therefore fail. Costs [28] As regards costs, counsel agreed these should follow the event and be calculated on the basis of a standard appeal. [29] Counsel did not however agree on the issue of whether there should be allowance for two counsel. Counsel for Allianz, Ms Laband, submitted two counsel should be allowed because of the volume of legal analysis required. We do not accept that submission. This case was, correctly analysed, a simple one. We therefore do not consider it appropriate to certify for two counsel. [30] Counsel also disagreed as to how an unsuccessful cross-appeal should impact on costs. Ms Davies argued that if QBE were to lose on the appeal but win on the cross-appeal then costs should be viewed in the round and costs on the appeal accordingly reduced. Ms Laband submitted that costs should lie where they fell on the cross-appeal and full costs be awarded on the appeal. 6 Hanover Group Holdings Ltd v AIG Insurance New Zealand Ltd [2013] NZCA 442, (2013) 13 TCLR 702 at [30]; Davey v Baker [2016] NZCA 313, [2016] 3 NZLR 776 at [37] and [40]; Swainland Builders Ltd v Freehold Properties Ltd [2002] EWCA Civ 560 (CA) at [33]; and Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101 at [48].
[31] For the reasons traversed above, we consider the rectification argument was misconceived. But it occupied a minimal amount of hearing time and in those circumstances our view is that it would be unjust to reduce the costs otherwise payable to Allianz. Outcome [32] The appeal and the cross-appeal are dismissed. [33] The appellant must pay the respondent costs for a standard appeal on a band A basis and usual disbursements. There is no award of costs on the cross-appeal. Solicitors: Fee Langstone, Auckland for Appellant DLA Piper, Auckland for Respondent