Australian High Court shuts down insurers' NZ class action appeal

The High Court of Australia has rejected an appeal bid by Zurich Insurance PLC (Zurich) and Aspen Insurance UK Ltd (Aspen) to suppress a class action over a defective residential building in New Zealand, potentially opening insurers up to unexpected claims in the New South Wales courts.

The ruling means that the class action from NZ-based Victopia Apartments registered proprietors can directly proceed against both insurers in New South Wales (NSW) in reliance on the Civil Liability (Third Party Claims Against Insurers) Act 2017 (Claims Act).

The High Court of Australia appeal decision, which backed a ruling by the New South Wales Court of Appeal, has showed that insurers that write business in New Zealand could face legal action in NSW even if the case in question appears to have a limited connection to the region, according to Kennedys partner Matt Andrews and Kennedys special counsel Mairead Kusack, Andrews and Cusack.

“The decision is important because the court found the proceedings against the insurers were properly brought despite the circumstances of the case having limited connection to NSW,” the pair said in a blog on Kennedys website.

Victopia class action – what was the High Court of Australia ruling on?

Zurich and Aspen were the insurers of Brookfield Multiplex Constructions (NZ) Ltd (BMX NZ), which designed and built the Victopia Apartments in Auckland.

According to the Kennedys blog on the High Court of Australia decision, Dariusz Koper sought to pursue Zurich and Aspen directly in NSW via a class action as a representative owner.

Why was the NZ Victopia class action filed in NSW?

The class action was filed against the insurers in NSW due to the following reasons, according to Kennedys:

• With BMZ NZ in liquidation, the liquidator had insufficient funds to pursue the insurers on behalf of the creditors;
• If the liquidator had funding, he may only pursue claims in Australia due to the insurance policy’s exclusive jurisdiction clause;
• The owners were unable to pursue the insurers in New Zealand; and
• Under set circumstances, NSW's statutory regime enables third-party claimants to directly access insurance proceeds.

Why insurers appealed NSW class action decision to High Court of Australia

Andrews and Cusack said: “Pursuant to section 4 of the Claims Act, a third-party claimant may, in certain circumstances, bring proceedings in a court of NSW to recover the proceeds of insurance directly from insurers. If leave is granted under section 5 of the Claims Act, the insurers stand in the place of the insured in the proceedings.”

The insurers appealed to the court on the grounds that Koper's ability to bring the proceedings hinged on whether the claims against BMX NZ could have been brought in a NSW court.

“The practical effect of the judgment is that the primary judge's decision to grant Mr Koper leave to commence the proceedings directly against the insurers remains undisturbed,” Andrews and Cusack said.

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