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In James Hardie New Zealand Ltd v Zurich Australian Insurance Ltd [2024] NZHC 3126, the High Court refused to grant a stay of proceedings under ss 22 and 25 of the Trans-Tasman Proceedings Act 2010 (Act) in favour of an Australian court.
The Insurance Policies
James Hardie New Zealand Ltd (James Hardie) was insured under two multiyear, multiline insurance policies issued by Zurich Australian Insurance Ltd (Zurich). The policies indemnifed James Hardie for liability to pay compensation in respect of “Property Damage” during the period of insurance as a result of an “Occurrence” happening in connection with James Hardie’s business or products (General Liability Cover). Underwriters would also defend any suit against James Hardie alleging liability insured covered by the policy. This was a claims occurring cover.
The policy also indemnifies James Hardie against such claims as James Hardie shall become legally liable to pay in regard to claims reported during the period of insurance for breach of professional conduct and execution of its professional activities and duties (the Errors and Omissions cover). This was a claims made cover.
The policies were expressly governed by the laws of Australia..
Claims and the Protocol
James Hardie made two notifications to Underwriters, in 2002 and 2004 in respect of multi-property weathertightness claims and circumstances arising from watertightness issues relating to their exterior cladding products. There was some uncertainty including as to when Property Damage occurred which was relevant to which policy applied.
Between 2004-2007 James Hardie and Zurich attempted to agree principles to simplify the claims’ administration, which resulted in a “Protocol” (notably, setting out a process for determining when Property Damage first occurred and to which of the types of cover would respond). Until 2012 the parties were content the claims were being managed in line with the Protocol, but subsequently disagreed as to the Protocol’s application, scope, and effect.
Meanwhile, in 2015, proceedings were issued by claimant homeowners against James Hardie which it successfully defended; the first, Cridge, following a judgment (see our article on the Cridge litigation), and the second, White, by an earlier discontinuance by the plaintiffs (both proceedings relating to over 1,100 properties). As a result, James Hardie claimed the defence costs from Underwriters for over NZ$32 million.
New Zealand proceedings and application for a stay
James Hardie initiated New Zealand High Court proceedings against Zurich in November 2023 seeking reimbursement of its defence costs under the policies (as varied by the Protocol). Zurich applied to stay the New Zealand proceedings under s 22 of the Act, arguing the parties had either agreed on an Australian court having jurisdiction, or at the least an Australian court was the more appropriate forum.
What did the High Court find?
There was no exclusive choice of court agreement. Although Australian law applied, the policies (neither expressly nor impliedly) gave the Australian courts exclusive jurisdiction. One provision did require Zurich to submit to an Australian court should James Hardie request that (which it did not), but it did not bind James Hardie to initiate proceedings in Australia. Further, the wider context pointed to non-exclusivity.
That left the Court to consider whether an Australian court was the more appropriate forum, having regard to relevant matters in s 24(2) of the Act. Those matters were:
(a) the principal place of business of the parties;
(b) the places of residence of the witnesses likely to be called in the proceeding;
(c) the place where the subject matter of the proceeding is situated;
(d) any agreement between the parties about the court or place in which the matters in dispute should be determined (other than an exclusive choice of court agreement); and
(e) the law that would be most appropriate to apply.
The Court considered the above matters were a mix of Australia-favourable, neutral, and New Zealand-favourable factors.
Australia-favourable factors: Agreement as to jurisdiction was a factor weakly favouring Australia (as it was non-exclusive); and the most appropriate law favoured Australia (the policies and Protocol were subject to Australian law).
The latter was not a strong factor either, because relevant New Zealand and Australian law was relatively similar. A New Zealand court could simply apply Australian law. As a general matter, this factor would have more strongly favoured Australia were there significant questions of unsettled law, or jurisdiction-specific regulatory or statutory regimes, or professional or ethical standards to consider and apply.
Neutral factors: The parties’ principal places of business, which ranged from New Zealand, Australia and Ireland; and the place of the subject matter of the proceedings, which comprised both New Zealand and Australia (with the subject of the Protocol favouring Australia, but James Hardie’s claims relating to properties in New Zealand).
New Zealand-favourable factors: A New Zealand court would be able to apply the law appropriately.
Potential witnesses’ places of residence strongly favoured New Zealand. The evidence regarding the Protocol and Australian law is likely to be much less extensive than the New Zealand based evidence regarding the properties (from Cridge and White); extensive property-related evidence from New Zealand would cause considerable practical difficulties if heard in Australia..
Ultimately, the strong New Zealand-favourable factor tipped the balance against the weaker Australia-favourable factors. Zurich’s stay application was dismissed, allowing James Hardie to continue New Zealand proceedings.
Our Comment
Where a contract is silent as to exclusive jurisdiction, this case is a useful practical example of the factors under s 24 of the Act that a court may consider when assessing whether to stay a New Zealand proceeding in favour of an Australian court. Parties should keep these factors in mind to avoid extra cost and delay by averting the risk of cross-border and parallel litigation.
However, this issue can be avoided where an exclusive choice of court/jurisdiction clause designates a New Zealand court. New Zealand insurers and contractors should be alive to this issue and, where possible, include such a clause.
If you have any questions about this decision, please get in touch with our Construction Team or the Insurance Team, or your usual contact at Hesketh Henry.
Disclaimer: The information contained in this article is current at the date of publishing and is of a general nature. It should be used as a guide only and not as a substitute for obtaining legal advice. Specific legal advice should be sought where required.
