Campbell v Southern Response Earthquake Services Limited [2014] NZHC 1650 (14 July 2014)

Last Updated: 19 August 2014

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2013-409-000681 [2014] NZHC 1650

BETWEEN	RUSSELL JOHN CAMPBELL and TANYA MAREE CAMPBELL Plaintiffs
AND	SOUTHERN RESPONSE EARTHQUAKE SERVICES LIMITED Defendant

Hearing:	14 July 2014
Appearances:	J Johnson and AEA Shaw for the Defendant (Applicant) T J Rainey for the Plaintiffs (Respondents)
Judgment:	14 July 2014

_{JUDGMENT OF ASSOCIATE JUDGE MATTHEWS}

[1] In December 2011 the plaintiffs’ house was inundated in a flood. At the time they held insurance cover with AMI, now the defendant, in respect of damage to both the home and its contents.

[2] The Campbells issued this proceeding against Southern Response and a separate proceeding against the Tasman District Council, the latter in the Nelson Registry of the Court. During the interlocutory phases of this proceeding various minutes were issued dealing with whether the two proceedings should be consolidated, but in the end consolidation was not ordered. Rather, consecutive trials were proposed. However, the Campbells settled their claim against the Tasman District Council in February 2014. This claim against Southern Response is to be heard on Monday 21 July 2014.

[3] On 4 July 2014 Southern Response applied for an order for particular discovery under r 8.19, in the following terms:

CAMPBELL v SOUTHERN RESPONSE EARTHQUAKE SERVICES LIMITED [2014] NZHC 1650 [14 July

2014]

a. That the Respondents provide to the Applicant’s counsel a copy of all documents or all documents recording the details of the Respondents’ settlement with the Tasman District Council of High Court Proceeding CIV 2012-442-168;

b. The Applicant’s counsel will receive discovery of those documents on a confidential basis. No copies will be taken, no electronic copies will be forwarded to anyone including the Applicant and all copies will be destroyed or returned to the Respondent’s counsel at the end of this litigation.

[4] In its application Southern Response says the main head of relief sought by the Campbells against the Tasman District Council was the same as the relief it sought against Southern Response in this proceeding, until the filing and service of an amended statement of claim in March 2014. Southern Response says that the settlement agreement, and documents relating to it are relevant to a matter in question in this proceeding, namely “the (Campbells’) entitlement to the cost of repairing flood damage arising out of the flood event on 14 December 2011”. Southern Response says the discovery sought is necessary for the parties and the Court to be certain that there is no element of “double dipping or double recovery” in the event the Campbells are successful in their claim against Southern Response.

_{[5] The Campbells, in their notice of opposition, say:}

Discovery of the settlement documents is not necessary for the applicant and the Court to be certain that there is no element of double dipping or double

_recovery.

The Campbells have confirmed in writing that the settlement with the Tasman District Council related to remedial work required to their land to stop overland flows occurring in heavy rainfall, and expressly entitles the Campbells to continue to pursue this proceeding insofar as it relates to losses

_{arising from damage to the Cambells’ house.}

This is made clear in the amended statement of claim served on 24 March

_2014.

These matters have been confirmed again by counsel in a memorandum dated

_{23 April 2014.}

There is no ground for rejecting these statements.

The application is made “far too late”. Notice of the fixture was given in

December 2013, Southern Response has been aware of the settlement since

10 February 2014 and was informed by the Court by minute dated 29 April

2014 that an interlocutory application would be required if this issue was to be pursued. Notwithstanding this, the application was not filed until 2 July.

The Campbells asked Southern Response to participate in their litigation against Tasman District Council but it elected not to. Had it done so in all

_{likelihood it would have been privy to the terms of the settlement.}

Obligations on the Campbells under the policy to co-operate with Southern Response and provide information as requested by it no longer apply, and did not apply in February 2014 at the time of the settlement with the Tasman

_{District Council.}

The respective positions of the parties

[6] Mr Johnson for Southern Response makes two principal points in relation to relevance. First, he says that the claim against the Tasman District Council was in effect an alternative claim to the present one, and it is relevant to his client’s case to compare the settlement sum and terms with the quantum previously claimed against the Tasman District Council for land remediation. This comparison will enable him to see whether the settlement figure goes beyond a sum which might be reasonably contemplated for remediation of the land, and thus it may show whether there is any element of compensation in the settlement, in respect of the house.

[7] Secondly, Mr Johnson notes the affirmative defence pleaded by Southern Response in reliance on clause 3(b) of the policy. This clause provides that the policy does not cover loss or damage caused directly or indirectly by any fault or inherent or existing defects in the construction of the house or materials used, or any error or omission in design of the house. It is pleaded that because of the finished

floor levels of the house, as constructed, it does not comply with the building code, and thus clause 3(b) applies, with a result that the damage to the house is not covered under the policy.

[8] Mr Johnson then notes the pleading in the Campbell’s statement of claim of May 2012 in which the Campbells say that during the construction of their house the Tasman District Council failed to ensure that it was built in such a way as to comply with the requirements of the building code, and in particular so as to be free from the risk of damage or loss from flooding or inundation of the plaintiffs’ property, for a 50 year period.

[9] Mr Johnson says that, in effect, the Campbells sued the Council in part on the basis that the floor level was not high enough, but now maintain that cause 3(b) of the policy does not apply because the building was built in accordance with the building code.

[10] Based on what he sees as these contradictory positions, he says the settlement agreement should be discovered to determine whether it has any provision of relevance to this issue.

[11] Mr Rainey says that the Campbells are bound by a confidentiality clause in the settlement agreement with the Council, and that after approaching the Council in relation to the request by Southern Response the Council has confirmed its requirement of confidentiality. Mr Rainey accepts however that the Court may nonetheless make an order requiring discovery of the document, and confirms that such an order would not have the effect of rendering void the settlement agreement reached between the Campbells and the Tasman District Council. The Campbells themselves do not have any specific difficulty with discovery being ordered if the document is relevant.

[12] Mr Rainey says there are many ways in which compliance with the performance requirements of the building code can be achieved, apart from the way in which the house is built. An example is the creation of a channelled overland flow path for floodwaters, which is now being done. He says that had a close of pleadings

date been set in this case, Southern Response would have an insurmountable problem with this application as it could not show that it is necessary for this application to be brought now, instead of before the close of pleadings date.

[13] Finally Mr Rainey says that he has already assured Southern Response that there is no element of double dipping in the claim as it now stands.

[14] Both counsel indicated that it may be appropriate for me to inspect the settlement agreement in order to make a ruling on this application. I accepted the agreement in a sealed envelope on the basis that I would inspect it if I thought it necessary, but not otherwise.

Discussion

[15] In the statement of claim filed in this proceeding in April 2013 the Campbells claimed under their policy:

(a) Costs related to remediation work on the home, and in relation to the contents, $1,942,104 plus GST;

(b) The costs of re-contouring the site and installing a swale on the property to redirect the overland flow path from the house, $287,677 plus GST;

(c) Costs by way of professional fees and other incidental expenses; (d) Damages for stress, anxiety and inconvenience.

[16] In the amended statement of claim filed on 28 March, after the settlement with the Tasman District Council, the plaintiffs’ claim has altered significantly. First, the claim for repair of damage to the house has been amended to $422,916.32 including GST. Secondly, there is no longer a claim for the cost of re-contouring the site and related work.

[17] There is also a claim for rental for alternative accommodation which does not appear in the first claim but it is not of present relevance.

[18] The claim as it now stands is a relatively straight forward claim under an insurance policy, for stipulated sums, together with a claim for other comparatively minor incidental losses, and general damages. There is no claim, now, in relation to required remedial works on the land, as distinct from the house, and the claim in respect of the house has reduced this significantly. The claim against the Tasman District Council both in its original form when filed in May 2012 and in its amended form filed on 18 October 2012 sought damages for remediation of the house and the land in the same sums as appeared in the first statement of claim against Southern

Response.¹ It follows that any settlement of the claim against the Tasman District

Council may theoretically have included a sum of money towards the cost of remediation of the house, as well as a sum in relation to remediation of the land.

[19] Shortly after the settlement the claim against Southern Response was reduced to a little under one quarter of the amount initially claimed for remediation of the house, and as far as I can see on the information provided to me no explanation has been given for this. On that basis, it seems to be open for speculation that the Tasman District Council may have settled at a figure which encapsulated not only the cost of remediation of the land but also part of the cost of remediation of the house (and for that matter, repair or replacement of the chattels). Whilst an assurance that in the claim as it now stands against Southern Response there is no element of double dipping, that does not deal with the point of whether part of the claim in respect of these items might have been met in the settlement with the Council. It only means that no part of the reduced sum now claimed has already been received. The assurance, therefore, whilst clear and, I accept, responsibly given, does not necessarily cover the point now raised.

[20] A simple example demonstrates the point. As I have said, the sum claimed for remediation of the land was $287,677 plus GST, $330,828.55. If the settlement

_{sum exceeds that, any excess may be for reimbursement of professional fees or costs,}

¹ Diminution in value of the Campbells’ property was also sought.

but also may be part of the damages claimed in respect of the house and contents, which has been very substantially reduced since the settlement.

[21] I do not think it could sensibly be suggested that the sum paid in settlement by the Council may have been so great that there could, in fact, still be an element of double dipping in the balance of the claim, but the possibility that the Council settled for more than the claim for land remediation is relevant to the argument that there may be inconsistency in the plaintiff’s claim against Southern Response and its claim against the Council, as I have described. Although the pleading in the statement of claim against the Tasman District Council, in paragraph 56(c), that the Council failed to ensure that the house and other buildings were being built in such a way as to comply with the requirements of the building code, is not repeated in the amended statement of claim against the Council filed in October 2013, the amended statement of claim contains extensive pleadings in relation to the building consent. It is an issue for trial whether there is an inconsistency in the plaintiffs’ position as Mr Johnson argues, but it is possible that the settlement agreement contains material of relevance to it.

[22] Mr Rainey says the possibility of relevance is not sufficient, but in this case, I think it is. There is no practical avenue for Southern Response to obtain information which could lift the level of likelihood. And there is really no countervailing argument of sufficient weight to hold the argument of relevance in check.

[23] Although both counsel referred to the late timing of this application I think this point is subsidiary in weight to the relevance of the document which must, in my view, drive the outcome of this application. Certainly this application is very late and it could and should have been made when the point was first raised in April.²

However, if the document is discovered and is thought to be of relevance it is likely to be introduced into evidence by cross-examination of the relevant witness for the plaintiffs and neither counsel suggested that the evidence in this case, which has been exchanged for some time, will need substantial amendment. There does not

_{appear to be any risk to the fixture proceeding, if the document is discovered.}

² At that point I issued a minute indicating that I would not deal with a request for further discovery by way of memoranda which had been filed, and required an interlocutory application. The application was not filed until early July, just over two weeks before the fixture.

[24] On balance, and for the reasons given, I am satisfied that the document should be discovered.

[25] I record that I have not inspected the document. I indicated to counsel a significant reservation I hold in relation to doing so. Whatever the document may provide, I am not in a position to consider it in the context of all the evidence which is to be given at the trial. Nor can I speculate on the reasons for which either the Campbells or the Council may have reached a contractual settlement of the issues between them. In this context I note that the Campbells’ property is surrounded by a number of other titles in the rural area in which they live. If floodwaters are making their way across the Campbells’ property it seems that there may be a problem for other property owners apart from the Campbells and settlement by the Council may well be part of a larger scheme affecting not just the Campbells but other property owners. In short I think that any view I might form on the relevance of the document from reading it would be without detailed context and would have a prospect of being wide of the mark.

[26] I make an order in terms of the application including the specific safeguards proposed to ensure confidentiality is protected.

_{[27] As discussed with counsel costs are reserved.}

J G Matthews

Associate Judge

Solicitors:

Wynn Williams & Co, Christchurch

Rainey Law, Auckland