Christchurch Anglican Diocese received a windfall $9.8 million gain on its insurance payout following the 2010 and 2011 earthquakes after a GST miscalculation. High Court approval was needed to approve a pro rata allocation of the surplus to church parishes and schools suffering earthquake damage.
Entitlement to share in the $9.8 million surplus was left hanging because of the way Christchurch Diocese arranged insurance. Church Property Trustees manages diocesan assets across Canterbury and Westland. It is paid a management fee from rents, interest and dividends on diocesan investments. The High Court was told building and content insurance for diocesan churches and schools was covered by a global policy, in the name of Property Trustees but for the benefit of specific diocesan property. As a matter of practical necessity, Church Property paid annual premiums out of its funds, later seeking reimbursement from individual parishes.
After the 2011 earthquake, Property Trustees received an insurance payout totalling some $183 million, including an allowance for payment of GST. It was later discovered that no GST was payable. Under terms of the payout, Property Trustees was entitled to keep this over-payment; it did not have to be refunded to the insurer. This left Property Trustees holding surplus insurance monies relating to assets it did not own; it holds diocesan assets in trust. The High Court was asked to approve a proposed distribution.
First, reimbursement was made to those parishes which made ‘free will offerings’ towards premium renewals in the year following the earthquake series. Cost of earthquake insurance rose dramatically after the quake. For 2012/2013, parishes voluntarily contributed $241,000 of an annual premium renewal for property insurance then exceeding $1.1 million. Property Trustees initially sourced this $1.1 million payment out of its insurance recovery; it was the only source of ready cash at the time. Justice Mander ruled Property Trustees could dip into the insurance surplus to recover this $1.1 million cost as reimbursement for the expense incurred, but it was appropriate to then repay the $241,000 contributed by individual parishes. Property Trustees should not recover its costs without reimbursing parishes that later contributed, he said.
Second, the remaining money was added to individual trusts held by Property Trustees on behalf of each diocesan property damaged in the earthquakes, divided according to the value of their claims. The insurance payout was triggered by losses parishes and schools suffered. The fortuitous surplus should be divided between them according to the value of claims each made, Justice Mander ruled.
Church Property Trustees v. Carrell – High Court (20.05.21)
21.083