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Under Cover August 2023

Extending the Reach of Third Party Claims Against Insurers


Introduction


This month’s edition of Under Cover focuses on the decision of the High Court of Australia in Zurich Insurance Company Ltd v Koper [2023] HCA 25 (8 August 2023).


This decision is essentially about legislation which streamlines the service of process between Australia and New Zealand and the validity of that legislation under the Australian Constitution. Even so, it has deep and wide-reaching ramifications for insurers in ways which may never have been anticipated and which may require certain risks to be reconsidered.


Background


Parties


Brookfield Multiplex Constructions (NZ) Ltd (Brookfield) was incorporated in New Zealand. It never had any assets or any presence in Australia.


Brookfield designed and built the Victopia Apartments which are in Auckland, New Zealand. There were defects in the design and construction of those Apartments.


Zurich Insurance Company was Brookfield’s professional indemnity insurer.

Mr Koper owned a residential unit in the Apartments.


The New Zealand Proceedings


Mr Koper, as the representative of the other owners of the Victopia Apartments, commenced proceedings in the High Court of New Zealand against Brookfield seeking damages in respect of the defects.


The High Court of New Zealand awarded damages against Brookfield in the sum of approximately NZ$53 million which Brookfield was unable to pay. Brookfield went into liquidation.


New South Wales Proceedings


The Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) permits third parties to bring proceedings against insurers directly if they have the Court’s permission beforehand.

Mr Koper applied to the Supreme Court of New South Wales for permission to bring proceedings against Zurich in that Court to recover the shortfall in the damages payable by Brookfield.


Permission to Proceed


The parties limited[1] the question of Mr Koper’s standing to make this application, to whether he could have brought the representative proceedings in the Supreme Court of New South Wales. In that context, the question becomes one of service. Could Mr Koper serve an initiating document filed in the Supreme Court of New South Wales on a party wholly based in New Zealand?


Sections 9 and 10 of the Trans-Tasman Proceedings Act answer that question


Section 9(1) permits an initiating document issued by an Australian court that relates to a civil proceeding in that court to be served in New Zealand, without need for the court to give leave for that service and without need for the court to be satisfied that there is a connection between the proceeding and Australia.


Section 9(2) qualifies the permission granted under s 9(1) by requiring the initiating document to be served in New Zealand in the same way that the initiating document is required or permitted to be served in accordance with the relevant Australian procedural rules for service.

Section 10 provides that service of an initiating document in New Zealand under s 9 has the same effect, and gives rise to the same proceeding, as if the initiating document had been served in the place of issue.


All that remained to be decided therefore, was whether these sections of the Trans-Tasman Proceedings Act are valid under the Constitution. The High Court of Australia unanimously held that they are valid.


Ramifications


Mr Koper and the other owners are now able to pursue Zurich in the New South Wales Supreme Court to recover the shortfall of the amount owing by Brookfield pursuant to the terms of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW).


This may not have been part of Zurich’s plan at the time it wrote the Brookfield risk.


Mark Sheller

Principal | Sheller

SHELLER | Clarence Chambers | Level 13 | 111Elizabeth Street | Sydney NSW 2000 | Australia

Insurance & Commercial Law contact@shellerlegal.com | www:shellerlegal.com


DISCLAIMER

This newsletter is intended to provide a general summary only and does not purport to be comprehensive. It is not, and not intended to be, legal advice.


© Sans Limitations ServicesPty Limited

Edition 8 - August2023


[1] The High Court suggests that there may have been other foundations for Mr Koper’s standing but noted that as these foundations had not been raised by the parties, there was no basis for it exploring them in greater detail.

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