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Court of Appeal of New Zealand |
Last Updated: 19 May 2015
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IN THE COURT OF APPEAL OF NEW ZEALAND
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BETWEEN
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Second Respondent |
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Second Respondent |
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JUDGMENT OF THE COURT
____________________________________________________________________
REASONS OF THE COURT
(Given by White
J)
Table of Contents
Para No
Introduction [1]
Background [8]
The Whiting claim [25]
The Ryde claim [43]
The van Limburg claim [53]
Submissions [59]
Costs on discontinuance [62]
Application here [73]
Cross-appeals [79]
Result [84]
Introduction
[1] These three appeals by the Earthquake Commission (EQC) challenge three High Court decisions awarding costs to the respective first respondents when, as plaintiffs, they discontinued their High Court proceedings against EQC arising out of the Canterbury earthquakes.[1]
[2] EQC submits that the respective High Court Judges erred in their costs decisions by making significant errors of principle and fact when finding that the plaintiffs had rebutted the presumption under r 15.23 of the High Court Rules which provides that:
Unless the defendant otherwise agrees or the court otherwise orders, a plaintiff who discontinues a proceeding against a defendant must pay costs to the defendant of and incidental to the proceeding up to and including the discontinuance.
[3] The first respondents in the second appeal (Mr van Limburg) and the third appeal (Mr and Mrs Ryde) also cross-appeal against the decisions of Kós J in their cases awarding them only 50 per cent of their costs in the High Court. They claim they should have been awarded 100 per cent of their costs. Although the first respondents in the first appeal (Ms Whiting and Messrs Jones and Peebles) were also awarded only 50 per cent of their costs, they have not cross-appealed.
[4] The second respondents (the first respondents’ private insurers) have taken no part in the appeals.
[5] EQC acknowledges that as the appeals are against discretionary decisions they must persuade us that there was an error of law or principle in the High Court decisions, irrelevant considerations were taken into account, relevant considerations were not taken into account or the decisions were plainly wrong.[2] Mr van Limburg and Mr and Mrs Ryde make similar acknowledgements in respect of their
[6] While the parties were not able to agree whether the appeals should be described as “test cases”, they did accept that a relatively large number of other cases would be likely to be affected by our decision. Indeed, since the hearing of the appeals, counsel have provided us with another High Court decision involving costs on the discontinuance of another Canterbury earthquake claim against EQC.[3]
[7] We propose to describe the background to the three High Court proceedings, which is largely undisputed, and the three decisions in that Court before considering the issues raised by the parties on the appeals.
Background
[8] It is convenient to refer to the first respondents collectively as the plaintiffs in the High Court and individually by reference to their claims as the Whiting claim, the van Limburg claim and the Ryde claim.
[9] Each of the claims against EQC related to houses owned by the plaintiffs which were damaged in the Canterbury earthquakes in 2010 and 2011 (the earthquakes). The houses were insured respectively by the private insurers.
[10] There is no dispute that under s 18 of the Earthquake Commission Act 1993 the houses were residential buildings deemed to be insured against natural disaster damage up to a cap of $100,000 (plus GST, but less a 1 per cent excess) for each earthquake.[4] By virtue of the provisions of the respective insurance contracts, the private insurers were liable for any amounts over the cap.[5]
[11] Following each of the earthquakes, the plaintiffs lodged claims with EQC and their private insurers in respect of damage to the houses caused by individual earthquakes. In each case one or more of the claims was for an amount over $100,000.
[12] Details of the claims and EQC’s responses are given later when we describe the individual claims.[6] At this stage it is sufficient to note that EQC referred the plaintiffs’ claims to the Canterbury Home Repairs Programme (CHRP) which meant that:
- (a) they were being treated as claims for repairs for amounts below the cap; and
- (b) EQC was likely to exercise its right to reinstate damage rather than make a cash payment in settlement.
[13] The fact that EQC was treating the claims as being for amounts below the cap meant that the plaintiffs were unable to pursue their claims against their private insurers.
[14] In each case the plaintiffs obtained expert professional advice to support their claims for amounts exceeding the $100,000 cap and, for reasons described in more detail later,[7] issued proceedings against EQC and their private insurers for the full amounts of the damage to their houses which they claimed had been caused by the earthquakes.
[15] Underlying each of the proceedings were the plaintiffs’ concerns that EQC had not settled their claims within a reasonable time. This concern was pleaded expressly in the Whiting claim and is implicit in the other claims.
[16] An obligation to settle claims within a reasonable time is imposed on EQC by s 29(4) of the Earthquake Commission Act which provides:
Subject to any regulations made under this Act and without limiting the liability of the Commission under this Act, any payments or expenditure for which the Commission may be liable under this section shall be made as soon as reasonably practicable, and in any event not later than 1 year after the amount of the damage has been duly determined (which determination shall be made as soon as reasonably practicable).
[17] Also relevant in this context is cl 6 of the Canterbury Earthquake (Earthquake Commission Act) Order 2012 which provides:
- Exemption from 1-year time limit in Act if settling claims by reinstatement
(1) This clause applies if the Commission decides to settle by reinstatement a claim relating to a residential building or residential land affected by the Canterbury earthquakes.
(2) The Commission is exempted from section 29(4) of the Act to the extent that the provision requires that any payments or expenditure for which the Commission may be liable under section 29 of the Act must be made not later than 1 year after the amount of the damage has been duly determined.
(3) To avoid doubt, this clause does not exempt the Commission from the requirements that—
(a) the Commission must determine the amount of the damage as soon as reasonably practicable; and
(b) the Commission must make any payments or expenditure for which the Commission may be liable under section 29 of the Act as soon as reasonably practicable.
[18] As EQC did not decide to settle the claims until after the plaintiffs issued their proceedings and their claims were reassessed, cl 6 was not applicable. This meant that the requirements imposed on EQC by s 29(4) to determine the amount of the damage “as soon as reasonably practicable” and to make any payments for which EQC may be liable “as soon as reasonably practicable, and in any event not later than 1 year” after the determination of the amount of the damage applied.
[19] EQC’s position was that it was under no obligation to make any payments unless and until it “determined” the amount of the damage of a claim and, in the circumstances of the Canterbury earthquakes, it was not “reasonably practicable” to do so at any time before the plaintiffs issued their proceedings. EQC referred to the fact that it faced some 424,536 exposures in relation to damage to residential buildings arising from 15 separate earthquakes. The resolution of claims was complex and time consuming.
[20] There is no dispute, however, that after the plaintiffs issued their proceedings EQC revisited the various claims, accepted in each case that one or more of the claims exceeded the cap and paid the plaintiffs the amounts due. The plaintiffs were then able to pursue their claims against their private insurers in respect of the amounts over the cap.
[21] Once EQC accepted the plaintiffs’ claims, the plaintiffs discontinued their proceedings and sought costs against EQC on the ground that they had been successful.
[22] EQC opposed the applications and sought costs against the plaintiffs. EQC argued that it had not admitted the claims as a result of the proceedings and denied breaching any legal obligations owed to the plaintiffs. It said that it had settled the claims independently of the proceedings and on the same basis as it would have settled if there had been no proceedings.
[23] In each case the Court exercised its discretion under r 15.23 to make orders against EQC for 50 per cent of the quantum of costs sought by the plaintiffs.
[24] It is convenient now to refer to the individual claims in further detail.
The Whiting claim
[25] The house the subject of the Whiting claim was purchased by the Whiting plaintiffs in September 2012. The vendors, who had lodged claims with EQC and their private insurer (IAG New Zealand Ltd) in respect of the September 2010, February 2011 and June 2011 earthquakes, assigned their claims to the Whiting plaintiffs on settlement.
[26] EQC inspected the house after each earthquake and prepared an initial scope of works assessment on each occasion. Its initial apportionment of the damage between the three earthquakes was “23%: 55%: 22%” respectively. On this basis EQC considered that none of the claims exceeded the cap and, accordingly, in October 2012 referred the claims to CHRP.
[27] In September 2012 the Whiting plaintiffs received a report from their engineer that the cost to repair the house would be well over the $100,000 cap for one or more of the events. The Whiting plaintiffs therefore took steps in late 2012 to “opt out” of CHRP.
[28] In early 2013 EQC’s assessor carried out an “opt out” inspection of the house. There is evidence from one of the Whiting plaintiffs that he was told by the assessor that EQC would not be changing its position. There was no response from the assessor challenging this evidence.
[29] In any event the Whiting plaintiffs considered that they had reached a deadlock and therefore issued their proceeding against EQC and IAG in January 2013. They claimed a total of $1,146,073.04 which they apportioned between the three earthquakes on the basis of EQC’s apportionment as follows:[8]
September
2010 (23%) $263,359.67
February 2011 (55%) $630,340.15
June
2011 (22%) $252,136.06
____________
$1,146,073.04
____________
[30] Then, on the basis of the cap, they sought judgment against EQC for $341,550, being $100,000 per earthquake plus GST and less the excess, and against IAG for the balance of $800,835.88.
[31] EQC, in its statement of defence filed in March 2013, denied liability for the amount claimed by the Whiting plaintiffs. EQC pleaded that it had assessed the natural disaster damage to the property from the earthquakes at $134,471.21 apportioned as follows:
September
2010 (23%) $31,255.00
February 2011 (55%) $73,471.21
June
2011 (22%) $29,905.46
__________
$134,471.71
__________
[32] EQC also pleaded that it was:
... in the process of carrying out further engineering assessment of the property and will review the amount of insured natural disaster damage when that additional assessment is completed.
[33] EQC then pleaded that it:
... will settle the plaintiffs’ insurance claim (by payment, replacement or reinstatement) to the extent which it is liable under the Earthquake Commission Act 1993, as soon as reasonably practicable after the engineering assessment pleaded ... above is completed.
[34] Following a judicial direction at the first case management conference in April 2013, the parties’ engineers met on site to discuss the scope of the work required. The engineers prepared a schedule of agreed and disagreed matters in July 2013.
[35] The engineers’ meeting led to the filing of amended pleadings in August and November 2013 with the plaintiffs reducing their claim to $990,655 but still seeking $341,550 from EQC. EQC’s defence accepted damage of $153,767.33 still apportioned as previously pleaded with none of the earthquakes exceeding the cap.
[36] A mediation was then proposed, but before it occurred EQC altered its position in respect of both the total damage involved and the apportionment of the damage between the three earthquakes. In particular, EQC accepted that the damage to the property was in fact greater than the cap for the February 2011 earthquake. EQC’s decision was conveyed to the lawyers for the Whiting plaintiffs by EQC’s lawyers in a letter dated 22 April 2014 which stated that EQC had “assessed all of the available expert evidence” and that it intended “to settle its insurance obligations” by a further payment of $107,552.30 calculated as follows:
Apportioned
amounts of damage
September 2010 (19.18%) $ 31,257.49
February 2011
(76.88%) $124,964.77
June 2011 (4.14%) $ 6,746.92
Apportioned
amounts with the cap applied
September 2010 $ 31,257.49
February
2011 $115,000.00
June 2011 $ 6,746.92
__________
$155,057.46
Less payments already made
($2,053.05
in respect of
September 2010 and $43,769.00
in respect of February
2011) $ 45,822.05
Less excess for each claim
September 2010 $
333.11
February 2011 $ 1,150.00
June
2011[9] $ 200.00
$107,552.30
__________
[37] EQC’s lawyers asked whether:
... the plaintiffs accepts [sic] that EQC’s further payment will settle the plaintiffs’ EQC claims for the residential building and that the proceeding against EQC will be discontinued on payment.
[38] As the Whiting plaintiffs considered that they had obtained what they set out to achieve, namely payment and acceptance by EQC, at least in respect of one earthquake, that the damage exceeded the cap, they discontinued their claim against EQC in June 2014 and made their claim for costs.
[39] In the High Court Mander J, after referring to the factual background which we have summarised above, the submissions for the parties, and the relevant legal principles summarised in McGechan on Procedure,[10] decided that the Whiting plaintiffs should receive an award of costs against EQC for the following reasons:
- (a) Faced with the position taken by EQC, it was not an unreasonable step for the Whiting plaintiffs to commence the proceeding when they did.[11]
- (b) By issuing the proceeding the Whiting plaintiffs were attempting to persuade EQC to change its position in respect of the cap.[12]
- (c) As the claim had not been settled before April 2014 because of the position taken by EQC, the decision to commence the proceeding in January 2013 was not premature.[13]
- (d) While the scale of the task faced by EQC was “an overarching consideration which ought not to be forgotten”, the circumstances of each individual case must be assessed on their merits in terms of whether EQC settled the claim “as soon as reasonably practicable”.[14]
- (e) EQC had not explained why it took some 15 months from January 2013, when the proceeding was commenced, until April 2014, when it recognised that its previous stance was incorrect. Nor had it provided any reason for its change of stance.[15]
[40] Mander J then said:
[48] I have reached the conclusion that the letter from EQC of 22 April 2014 is confirmation of the reasonableness of the plaintiffs’ action not only in bringing the proceeding but in continuing with its prosecution. I have already acknowledged that in terms of quantum, the plaintiffs accepted a lower level of liability on the part of EQC than was pleaded. It must be recognised however that once EQC acknowledged that the claim was over cap the extent of that liability was by some margin of secondary importance. While I accept the obligation on EQC to accurately determine its liability by way of rigorous process, the change in its position which the April correspondence represented was significant and came after years of firmly holding a contrary view.
[41] In view of this conclusion, Mander J decided that the Whiting plaintiffs had “substantially succeeded”.[16] As the presumption contained in r 15.23 had in the particular circumstances of the case been rebutted, it would be neither just nor equitable for the Whiting plaintiffs to pay EQC’s costs.[17] As EQC ultimately acknowledged, the Whiting plaintiffs’ position was vindicated.
[42] On the question of quantum, Mander J accepted the submission for EQC that only 50 per cent of the Whiting plaintiffs’ costs and disbursements should be met by EQC because they should be shared between EQC and IAG.[18]
The Ryde claim
[43] Mr and Mrs Ryde lodged claims with EQC and their insurer (IAG) for damage to their Christchurch house after each of the three earthquakes of September 2010, February 2011 and June 2011. EQC inspected the house after each claim was lodged and in September 2011 estimated total repair costs at $126,718 apportioned “17%: 65%: 18%” between the three earthquakes. As this meant the cap was not exceeded, the claims were referred to CHRP.
[44] Having obtained their own estimate of the cost of repairs ($524,147.30), Mr and Mrs Ryde opted out of CHRP in August 2012 and, when EQC’s position remained unchanged, issued their proceeding in May 2013 against EQC and IAG. They claimed a total of $524,147.30 which they apportioned as follows:
September 2010 (17%) $
89,891.26
February 2011 (65%) $337,760.52
June 2011 (18%) $
96,495.52
_________
$524,147.30
[45] Then, on the basis of the cap, they sought judgment against EQC for $298,372.91 plus $50,000 general damages.
[46] In June 2013, a month after the proceeding was issued, an EQC assessor visited the house again and found that the September 2011 assessment was incorrect. EQC came to the view that damage from the February 2011 earthquake was likely to exceed the cap.
[47] After reviewing the amount of the damage and the apportionment between the three earthquakes, EQC advised Mr and Mrs Ryde by letter dated 11 September 2013 that its assessment of the total repair costs was $210,992.32 with 72.33 per cent apportioned to the February 2011 earthquake which meant that the cap was exceeded for that claim.
[48] On this basis EQC paid Mr and Mrs Ryde $171,179.20 on top of an emergency repair payment of $3,978.08 previously paid. Then, in October 2013, EQC revised the total cost of repairs up further to $264,509.84.
[49] Eventually, in June 2014, Mr and Mrs Ryde accepted the EQC’s payments fulfilled its obligations and discontinued their proceeding against EQC and applied for costs.
[50] In the High Court Kós J, after referring to the factual background which we have summarised and the relevant legal principles, including the decision of Mander J in Whiting v Earthquake Commission, decided that Mr and Mrs Ryde should receive an award of costs against EQC for the following reasons:
- (a) Their action in issuing the proceeding to vindicate a statutory obligation for payment of a larger sum than EQC was willing to pay, based on its flawed methodology, was plainly reasonable.[19]
- (b) It was reasonable for EQC to defend the proceeding.[20]
- (c) The proceeding was discontinued because EQC agreed the February 2011 claim was over cap.[21]
- (d) The merits were not so obvious that they should influence the costs outcome.[22]
- (e) It was just and equitable that the presumption in r 15.23 should not apply because EQC had effectively conceded that Mr and Mrs Ryde had discharged their onus by submitting that costs should lie where they fell.[23]
- (f) The outcome represented a vindication of the commencement of the proceeding to the extent that EQC was propelled into prompt action and made the payments.[24]
[51] Kós J said:
[44] I am prepared to infer that the issuing of proceedings propelled EQC into prompt action and that the August 2013 payments – three months after proceedings were issued – were at least partly a consequence of their issue. I accept that EQC’s position here was not intransigent. But it is quite unclear when it might have made its final assessment but for the issue of proceedings. A correct and final assessment probably should have been made earlier in time. The plaintiffs cannot be blamed for that evaluation becoming so protracted. And EQC’s initial methodology for repair was flawed. Earlier recognition of that fact would have seen the plaintiffs’ entitlements paid earlier.
[52] In view of this conclusion, Kós J exercised his discretion to grant Mr and Mrs Ryde half their costs up to the point at which EQC paid the sums which they ultimately accepted met EQC’s statutory obligations. Costs after that date were to lie where they fell. The award was for 50 per cent only because their claim against IAG remained live.[25]
The van Limburg claim
[53] Mr van Limburg lodged one claim with EQC and his insurer (Tower) for damage to his Christchurch flat following the February 2011 earthquake. After inspecting the flat in September 2011, EQC estimated the repair costs at $74,783.11. As this figure was below the cap, the claim was referred to CHRP.
[54] Having obtained his own estimate of the cost of repairs ($537,519.82) and not having received any payment from EQC, Mr van Limburg issued his proceeding against EQC and Tower in June 2013. He claimed the cost of repairs was over the cap.
[55] After subsequent inspections, EQC concluded on 6 August 2013 that the cost of repairs would be $262,194.17. By letter dated 28 August 2013, EQC advised Mr van Limburg of this and that it had forwarded $85,050.55 to his mortgagee as the terms of his mortgage required. That sum was accepted as full settlement of the claim because it emerged that Mr van Limburg’s flat was insured for a specified EQC sum of only $75,000 (excluding GST).
[56] Mr van Limburg filed a notice of discontinuance on 26 March 2014 and applied for costs against EQC. EQC conceded that costs should lie where they fell, but opposed any order in favour of Mr van Limburg.
[57] In the High Court Kós J, after referring to the factual background and his decision in Ryde v Earthquake Commission, decided that Mr van Limburg should receive an amount for costs against EQC for the following reasons:
- (a) It was reasonable for Mr van Limburg to bring the proceeding because EQC’s September 2011 assessment, albeit not final, was “woefully inadequate” and, at the time of filing, he had an arguable claim that EQC had breached its obligations under s 29 of the Earthquake Commission Act.[26]
- (b) It was reasonable for EQC to defend the proceeding.[27]
- (c) The proceeding was discontinued because Mr van Limburg received the concession from EQC that his claim was over the cap. Discontinuance was not an acknowledgment of defeat.[28]
- (d) The merits of the case were not so obvious that they should influence the costs outcome.[29]
- (e) EQC conceded that the presumption in r 15.23 was displaced.[30]
- (f) The outcome represented a vindication of the commencement of the proceeding.[31]
[58] For these reasons, Kós J exercised his discretion to award Mr van Limburg half his costs up to the date he was paid his statutory entitlement. Costs otherwise were to lie where they fell. The award was for half the costs only because EQC was one of two defendants.[32]
Submissions
[59] For EQC, Mr Jagose submitted that the High Court Judges had erred in making their decisions under r 15.23 because:
- (a) They proceeded on the erroneous assumption that the plaintiffs’ statutory causes of action against EQC had accrued before they issued their proceedings when, in terms of s 29 of the Earthquake Commission Act, the causes of action did not accrue until EQC had made the requisite “determinations” as to the amounts of the damage that had occurred following the earthquakes. These determinations were not made until after the proceedings had been issued and shortly before the letters to the respective plaintiffs were sent.[33] There was no proper basis for EQC to make its determinations until it did.
- (b) Taking into account the number and nature of claims arising from the earthquakes, there was no basis for concluding that EQC was in breach of its statutory obligations to make the determinations “as soon as reasonably practicable”, especially as this was an issue that would have required evidence and a trial to resolve.
- (c) The plaintiffs’ proceedings raised issues of quantum and timing, not the issue whether the damages were over the cap. It was not obvious or clear that the plaintiffs would have succeeded on the merits at trial. The Judges ought not to have “speculated” on the outcomes.
- (d) The residual discretion to displace the presumption order r 15.23 is of limited ambit. Comments in authorities suggesting a wider “just and equitable approach” taking into account “the whole landscape comprising the course of the proceedings” were wrong.[34] The approach adopted recently by this Court in Powell v Hally Labels Ltd was to be preferred.[35]
[60] Counsel for the first respondents supported the decisions of the High Court Judges. For the Whiting plaintiffs, Mr Webb submitted the High Court Judge was correct in principle and that no errors of law or fact sufficient to found an appeal were made. There were also additional relevant considerations, including public policy considerations in the courts being open to homeowners in ensuring that EQC met its statutory obligations to reinstate earthquake damage property.
[61] For Mr van Limburg and the Rydes, Mr Campbell QC submitted that a plaintiff can overcome the presumption under r 15.23 by showing that the defendant has done what the plaintiff sought so that the plaintiff has succeeded. That is what happened here when the plaintiffs obtained payment and an acceptance that at least one of their claims was over cap so that the private insurer’s liability would be engaged. No further assessment of the merits of the plaintiffs’ proceedings was required. The High Court Judges did not err in law or reach decisions that were plainly wrong.
Costs on discontinuance
[62] The starting point is r 15.23 itself which, as we have already noted, provides:
Unless the defendant otherwise agrees or the court otherwise orders, a plaintiff who discontinues a proceeding against a defendant must pay costs to the defendant of and incidental to the proceeding up to and including the discontinuance.
[63] The rule imposes a mandatory obligation on a plaintiff who discontinues a proceeding to pay the costs of the defendant in the discontinued proceeding. There are, however, two important exceptions to this obligation: the defendant may agree “otherwise” or the court may order “otherwise”. Unless one of the exceptions applies, costs follow the event when a notice of discontinuance is filed.
[64] The first exception applies frequently in practice when in the context of a negotiated settlement parties agree that a proceeding should be discontinued and the costs should not be paid by the plaintiff. The parties may agree they should each bear their own costs (costs lie where they fall) or the defendant should meet the costs of the plaintiff in whole or in part.
[65] The second exception applies when a plaintiff successfully seeks an order from the Court that the mandatory obligation to pay the defendant’s costs on the discontinued proceeding should not apply. There is no doubt that when considering a plaintiff’s application for an order of this nature, the Court has a discretion to order that costs should lie where they fall or that the defendant should pay the costs of the plaintiff in whole or in part. This discretion reflects the general rule that all matters relating to costs are at the discretion of the Court.[36] The discretion is not unfettered, but is qualified by the specific costs rules.[37]
[66] In the case of r 15.23, this Court has recognised that the discretion to order “otherwise” may be exercised in the interests of justice where it is “just and equitable to displace the [r 15.23] presumption”.[38] This approach does not support Mr Jagose’s submission that the discretion is of “limited ambit”.
[67] A broader approach to the scope of the discretion is also supported by New South Wales Court of Appeal decisions relating to the equivalent Australian rules. Recognising the diversity of potentially relevant circumstances, the Court has held that courts should look at discontinued claims in the “whole landscape comprising the course [of] the proceedings”, including having regard “among other things, to the abandonment of the claims”.[39] As McColl JA put it in Fordyce v Fordham:[40]
... the power to make an order ... preserves the Court’s discretion as to the appropriate costs outcome. While one matter for consideration is the reason the proceedings are being discontinued ... the fact of discontinuance ... does not fetter the discretionary exercise.
[68] It is accepted that there is an onus on the plaintiff to persuade the Court to exercise its discretion.[41] In deciding whether it is just and equitable to exercise the discretion, the Court may consider the parties’ conduct in the matter and the reasonableness of the parties’ respective stances, including the reasons why the plaintiff brought and continued the proceeding and the defendant opposed it.[42]
[69] Courts have been persuaded to exercise the discretion when:
- (a) the defendant’s acts or omissions have caused the litigation and then rendered it unnecessary;[43] and
- (b) an intervening governmental or third party decision has rendered the proceeding redundant.[44]
[70] As Australian authorities recognise,[45] when a proceeding is discontinued as a result of a supervening event the proper exercise of the discretion may ordinarily be to make no order for costs. At the same time, however, where one of the parties has acted unreasonably or was almost certain to have been unsuccessful if the proceeding had not been rendered unnecessary, that party may be ordered to pay the costs of the proceeding.
[71] At the same time, however, the Court has also made clear that it will not undertake a review of the merits of the plaintiff’s claim unless they are immediately apparent.[46] To undertake a disputed merits review would result in a trial which would be contrary to the object of r 15.23.
[72] We have not been persuaded by Mr Jagose that the approach of this Court in Kroma Colour Prints Ltd v Tridonicato NZ Ltd and of the New South Wales Court of Appeal in Fordyce v Fordham was wrong. Nor have we been persuaded that the decision of this Court in Powell v Hally Labels Ltd is inconsistent with that approach. We are therefore not prepared to overrule the well-established approach to the interpretation of r 15.23 and the scope of the Court’s discretion under the rule.
Application here
[73] As our summary of the three High Court judgments under appeal has shown, the Judges correctly followed the well-established approach to the interpretation and application of r 15.23 and the exercise of the Court’s discretion. In particular, they:
- (a) accepted that the onus was on the respective plaintiffs;
- (b) found that the plaintiffs had discharged the onus. As Kós J recognised, by submitting that costs should lie where they fell, EQC had effectively conceded that the presumption was rebutted in the Ryde and van Limburg claims;[47]
- (c) decided the issue of the proceedings by the plaintiffs was justified; and
- (d) accepted that when EQC changed its position the plaintiffs were justified in discontinuing their proceedings because they had achieved what they sought. The practical effect of EQC’s subsequent decisions that in each case at least one of the claims was in fact for an amount over the cap meant that the plaintiffs achieved the result they sought in issuing their proceedings.[48]
[74] It was therefore open to the Judges in the exercise of their discretions to decide that the default position under r 15.23 should not apply and that EQC should pay 50 per cent of the costs of the respective plaintiffs.
[75] We are not persuaded that there was any error of law or principle by the High Court Judges or that they took into account any irrelevant considerations or failed to take into account any relevant considerations. Their decisions could not be described as plainly wrong.
[76] We do not accept the submissions for EQC. First, while the High Court Judges did proceed on the assumption that the plaintiffs’ statutory causes of action had accrued before they issued their proceedings, this assumption was not established to be erroneous when on the face of the respective chronologies it was open to the Judges to hold, as they effectively did, that in each case it was at least arguable that EQC had in fact failed to make the requisite “determinations” as to the amounts of damage under s 29 of the Earthquake Act “as soon as reasonably practicable”.[49] Furthermore, EQC did not apply to have the proceedings struck out in the High Court on the ground that they disclosed no cause of action. Nor did EQC submit on appeal that, if it had, it would have been successful. EQC has therefore not shown that the Judges were “plainly wrong” in proceeding on this basis.
[77] Second, the Judges did not overlook the pressures on EQC resulting from the number and nature of claims following the Canterbury earthquakes. The Judges considered, however, that EQC’s initial assessments of damage were inadequate and the subsequent significant delays in making the reassessments that led to the settlement of the claims were unexplained.[50] These conclusions were open to the Judges on the affidavit evidence before them.
[78] Third, the Judges correctly avoided speculating on the ultimate outcome of the proceedings. Instead, they focused correctly on determining objectively whether it was, in all the circumstances of these claims, reasonable for the plaintiffs to issue their proceedings and then to discontinue them when EQC reassessed each claim. The Judges did not err in concluding that the plaintiffs acted reasonably and were in fact ultimately successful in obtaining payment for substantially increased amounts so that at least one claim in each case exceeded the cap, triggering the liability of the private insurers.
Cross-appeals
[79] The Rydes and Mr van Limburg challenge by way of cross-appeal Kós J’s decisions that they should receive awards of only 50 per cent of their costs. The grounds of their cross-appeals are:
- (a) Under r 14.14 of the High Court Rules, the liability of EQC and the private insurers for costs was “joint and several”.
- (b) EQC’s “(mis)conduct” was the primary cause of the plaintiffs having to issue and prosecute the proceedings.
- (c) The Ryde and van Limburg plaintiffs may not recover costs from their private insurers.
[80] The short answer to the first ground is that r 14.14 does not apply. It provides:
The liability of each of 2 or more parties ordered to pay costs is joint and several, unless the court otherwise directs.
[81] Here there is no question of “joint and several liability” because no orders have been made against the private insurers. In the absence of any orders against the private insurers or any suggestion that the quantum of costs should await the outcome of the claims against them, it was open to Kós J, in the exercise of his discretion, to make awards of 50 per cent of the plaintiffs’ costs in the same way as Mander J did in the Whiting claim.
[82] The second and third grounds do not establish an error in Kós J’s approach. While it is true that EQC’s delay in resolving the plaintiffs’ claims was the primary cause of the plaintiffs’ issuing and prosecuting the proceedings and while they may not recover costs from their private insurers, the plaintiffs were not under any obligation to discontinue their proceedings before resolving their claims against their private insurers. If they had waited, the quantum of costs would have been dealt with by the Judge in the light of the outcome of those claims.
[83] The cross-appeals must therefore fail.
Result
[84] For the reasons given, the appeals and cross-appeals are dismissed.
[85] To the extent that these three appeals by EQC might be viewed as test cases, EQC ought to pay the respondents their costs in respect of them.[51] But, in any event, we are satisfied that costs on these appeals and the cross-appeals should follow the event in the ordinary way.
[86] We therefore order that:
- (a) in each appeal EQC must pay the first respondents’ costs for a standard appeal on a band A basis with usual disbursements. We certify for second counsel; and
(b) the first respondents in CA708/2014 and CA709/2014 must pay EQC’s costs on their cross-appeals for a standard appeal on a band A basis with usual disbursements. We certify for second counsel.
Solicitors:
Chapman Tripp,
Wellington for Appellant
Lane Neave, Christchurch for First Respondents in
CA459/2014
Grant Shand, Christchurch for First Respondents in CA708/2014 and
CA709/2014
[1] Whiting v Earthquake Commission [2014] NZHC 1735 (Mander J); van Limburg v Earthquake Commission [2014] NZHC 2764 (Kós J); and Ryde v Earthquake Commission [2014] NZHC 2763 (Kós J).
[2] Kacem v Bashir [2010] NZSC 112, [2011] 2 NZLR 1 at [32]. See also Shirley v Wairarapa District Health Board [2006] NZSC 63, [2006] 3 NZLR 523 at [15].
[3] Lee v Earthquake Commission [2015] NZHC 477 (Wylie J).
[4] Although for Mr van Limburg the sum insured with EQC was lower, see below at [55].
[5] Earthquake Commission Act 1993, s 30(2).
[6] Below at [25], [43], and [53].
[7] Below at [29], [44] and [54].
[8] There seems to be an arithmetical error in these calculations and those below at [31]. This is immaterial for present purposes.
[9] The excess is the lesser of 1 per cent of the amount of insurance and $200.
[10] Whiting v Earthquake Commission, above n 1, at [31]; Andrew Beck and others McGechan on Procedure (online looseleaf ed, Brookers) at [HRPt15.23.01].
[11] At [39] and [41].
[12] At [40].
[13] At [42].
[14] At [43].
[15] At [44].
[16] At [49].
[17] At [50].
[18] At [52]–[56].
[19] Ryde v Earthquake Commission, above n 1, at [31]–[34].
[20] At [35].
[21] At [36]–[37].
[22] At [38]–[39].
[23] At [40].
[24] At [41]–[45].
[25] At [46].
[26] van Limburg v Earthquake Commission, above n 1, at [8]–[10].
[27] At [11].
[28] At [12].
[29] At [13]–[14].
[30] At [15].
[31] At [16].
[32] At [16].
[33] 22 April 2014 for the Whiting plaintiffs, 11 September 2013 for the Rydes and 28 August 2013 for Mr van Limburg.
[34] Kroma Colour Prints Ltd v Tridonicato NZ Ltd [2008] NZCA 150, (2008) 18 PRNZ 973 at [12]; and [29] and Fordyce v Fordham [2006] NSWCA 274, (2006) 67 NSWLR 497 at [79].
[35] Powell v Hally Labels Ltd [2014] NZCA 572 at [19].
[36] High Court Rules, r 14.1.
[37] Manukau Golf Club Inc v Shoye Venture Ltd [2012] NZSC 109, [2013] 1 NZLR 305 at [7]; and Beck, above n 10, at [HRPt14.1.02].
[38] Kroma Colour Prints Ltd v Tridonicato NZ Ltd, above n 34, at [12] and [29]. See also Powell v Hally Labels Ltd, above n 35, at [22].
[39] Abigroup Contracts Pty Ltd v ABB Service Pty Ltd [2004] NSWCA 181, (2005) 21 BCL 12 at [167]–[169]; Fordyce v Fordham, above n 34, at [79]; Ralph Lauren 57 Pty Ltd v Bryon Shire Council [2014] NSWCA 107, (2014) 199 LGERA 424 at [16]; and G E Dal Pont Law of Costs (3rd ed, LexisNexis Butterworths, Australia, 2013) at [14.63].
[40] Fordyce v Fordham, above n 34, at [78].
[41] Powell v Hally Labels Ltd above n 35, at [21]; Fordyce v Fordham, above n 34, at [3]; Rupert Jackson and others Civil Procedure (Sweet & Maxwell, London, 2014) at [38.6.1]; and Peter T Hurst, Civil Costs (5th ed, Sweet & Maxwell, 2013) at 48.
[42] Kroma Colour Prints Ltd v Tridonicato NZ Ltd, above n 34, at [12] and [29]; Powell v Hally Labels Ltd, above n 35, at [22]; Beck and others, above n 10, at [HRPt15.23.01]; and Dal Pont, above n 39, at [14.64].
[43] Beck and others, above n 10, at [HRPt15.23.01]; Dal Pont, above n 39, at [14.64]; Kroma Colour Prints Ltd v Tridonicato NZ Ltd, above n 34, at [12] and [29]; and Powell v Hally Labels Ltd, above n 35, at [21].
[44] Powell v Hally Labels Ltd above n 35, at [22]; Dal Pont, above n 39, at [14.65]; Hurst, above n 41, at 49; Australians for Sustainable Development Inc v Minister for Planning (No 2) [2011] NSWLEC 70 at [11].
[45] Dal Pont, above n 39, at [14.65].
[46] Powell v Hally Labels Ltd above n 35, at [23]–[24].
[47] Ryde v Earthquake Commission, above n 1, at [40]; van Limburg v Earthquake Commission, above n 1, at [15].
[48] Carmel College Auckland Ltd v North Shore City Council HC Auckland CIV-2007-404-5894, 20 January 2009 at [19].
[49] Whiting v Earthquake Commission, above n 1, at [43]–[45]; van Limburg v Earthquake Commission, above n 1, at [10]; and Ryde v Earthquake Commission, above n 1, at [33].
[50] These delays were three years for the Whiting claim, two years for the Ryde claim, and just under two years for the van Limburg claim.
[51] Beck and others, above n 10, at [HRPt14.17(1)].
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