|
|
Home
| Databases
| WorldLII
| Search
| Feedback
High Court of New Zealand Decisions |
Last Updated: 12 September 2018
|
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
|
|
CIV-2015-404-2088
[2018] NZHC 1881 |
|
BETWEEN
|
DEO GRATIAS DEVELOPMENTS LTD
Plaintiff
|
|
AND
|
TOWER INSURANCE LTD
First Defendant
THE EARTHQUAKE COMMISSION
Second Defendant
|
|
|
CIV-2016-404-1786
|
|
BETWEEN
|
ANGELA STANTON AULD and ANDREW ROBER AULD
Plaintiffs
|
|
AND
|
IAG NEW ZEALAND LTD
First Defendant
THE EARTHQUAKE COMMISSION
Second Defendant
|
|
|
CIV-2016-409-722
|
|
BETWEEN
|
KEVIN BYRON THORPE and YVONNE TERESA THORPE
Plaintiffs
|
|
AND
|
THE EARTHQUAKE COMMISSION
First Defendant
AA INSURANCE LTD
Second Defendant
|
DEO GRATIAS DEVELOPMENTS LTD v TOWER INSURANCE LTD [2018] NZHC 1881 [27 July 2018]
|
|
CIV-2016-404-984
|
|
BETWEEN
|
JAMES EDWARD FRAMPTON and ANN CHARLOTTE VANSCHEVENSTEEN
Plaintiffs
|
|
AND
|
TOWER INSURANCE LTD
First Defendant
THE EARTHQUAKE COMMISSION
Second Defendant
|
|
Hearing:
|
12 July 2018
|
|
Appearances:
|
G D R Shand and N T P Lala for Plaintiffs
M H Hayes for EQC (named as Second Defendant in one proceeding and First
Defendant in three other proceedings)
|
|
Judgment:
|
27 July 2018
|
JUDGMENT OF NICHOLAS DAVIDSON J (REVIEW OF COSTS JUDGMENT)
[1] The intituling reflects four Canterbury earthquake related proceedings, all of which involve the Earthquake Commission (“EQC”), with three insurer defendants, IAG New Zealand Limited (“IAG”), Tower Insurance Limited (“Tower”) and AA Insurance Limited (“AA”). This judgment involves EQC and the plaintiffs only, and constitutes a separate judgment in each proceeding, to be filed as such.
[2] All four proceedings were discontinued as the result of settlement, but as in a number of such cases, there remained a question of costs for determination by the Court.
[3] The Associate Judge delivered a costs judgment on 23 April 2018.1 He ordered that EQC pay 75 per cent Scale costs to the plaintiffs AS and AR Auld (“the Aulds”), and 50 per cent Scale costs to the other three sets of plaintiffs. They had all sought more than 50 per cent of Scale costs but only the Aulds were successful. All plaintiffs were awarded costs, as the “successful” parties in the costs argument, despite losing on the percentage of costs argument, except in that one case.
First ground of review
[4] EQC on this review contends that the Aulds should only have been awarded 50 per cent of their Scale costs, and EQC should have been awarded costs on all the plaintiffs’ costs applications because EQC “succeeded,” or should have succeeded in the case of the Aulds, in its contention that the plaintiffs should have only 50 per cent of their costs.
[5] There is an established but not rigid approach to costs on discontinuance in earthquake list cases, endorsed by the Court of Appeal in Earthquake Commission v Whiting.2 EQC through counsel Ms Hayes says that the Court endorsed practice is that where EQC and an insurer are defendants and a plaintiff is “successful” in settlement, each defendant is liable for only 50 per cent of the plaintiff’s costs unless there is a reason to increase the contribution of one of them.3
[6] The Judge accepted that the 50 per cent approach is “readily understandable”, and that it will “usually be the just outcome where EQC and an insurer have actively defended a proceeding”.4 He applied that approach in three of the present proceedings, and EQC says the Judge should have done so in that of the Aulds.
1 Deo Gratias Developments Ltd v Tower Insurance [2018] NZHC 767 [Costs Decision]
4 Costs Decision, above n 1 at [20].
Second ground of review
[7] Otherwise, EQC says that the award of costs to the plaintiffs is in error in that 14.2(a) High Court Rules (“HCR”) applies so that a party who “fails” with an application should pay costs to the party who “succeeds”, and as EQC held the line with regard to the 50 per cent approach, it was successful and should have its costs. By the same argument, if EQC is successful in this review of the Aulds’ costs judgment, then it says it should be awarded costs.
B. REVIEW
Principles Applicable
[8] The principles are described by Kos J:5
(a) The applicant bears the burden of persuading the Court that the Associate Judge’s decision was wrong. Only if the High Court Judge considers the Associate Judge’s decision to be wrong should it be interfered with.6
(b) The applicant should, therefore, show that the Judge had acted on a wrong principle, that the Judge failed to take into account some relevant matter or took into account some irrelevant matter, or was “plainly wrong”;7 and
(c) As the decision being reviewed is a chambers decision without oral evidence, the High Court on review is not required to defer to a decision of the Associate Judge. If a High Court Judge thinks the Associate Judge was wrong, the reviewing Judge should say so forthrightly.8
C. THE 75 PER CENT COSTS AWARD TO THE AULDS
[9] Counsel for EQC, Ms Hayes, says that the Judge was “plainly wrong” under
(b) above, and as there was no oral evidence, there is no credibility issue intruding on this review.
5 Teinangaro v Fastway Couriers (NZ) Ltd HC Napier CIV-2009-441-751, 25 November 2011 at
[23] per Kos J.
6 Citing Austin Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR at [4].
8 Citing Austin Nichols & Co Inc v Stichting Lodestar, above n 6, at [3] and [16].
[10] In Whiting, the Court of Appeal referred to HCR 14.23:9
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.
[11] In the event of discontinuance, the plaintiff in principle must persuade the Court to exercise its discretion not to award costs against it. This would be a raw application of principle when a plaintiff needs to bring proceedings to get a proper result, or simply to secure its litigation position. The Court may consider the conduct of the parties and the reasonableness of their positions, including the reasons why the plaintiff brought and continued the proceeding, and why it was opposed.
[12] In van Limburg v Earthquake Commission,10 and Ryde v Earthquake Commission,11 the plaintiffs contended that EQC should be ordered to pay 100 per cent of their costs, but the Court of Appeal upheld 50 per cent awards. In Whiting, the plaintiffs did not disturb Mander J’s judgment which adopted the 50 per cent approach.
The Judge’s reasoning
[13] The Judge came to a routine conclusion under the Whiting approach in the 50 per cent costs awards in Deo Gratias, Thorpe, and Frampton. He said:
[20] The awarding of 50 per cent of the scale costs each against two defendants in earthquake litigation is readily understandable and will usually be the just outcome when both defendants have actively defended a plaintiff’s proceeding.
...
[25] The concept of a sliding scale of costs from 75 per cent (where the private insurer settles immediately after EQC’s over-cap payment) to 50 per cent (where the private insurer’s settlement is achieved a year later) cannot be justified in terms of principle. Any application for one of the two defendants to bear more than 50 per cent of the costs must be grounded in the facts (including any justified inferences) of a particular case, with consideration of the conduct of the parties, and the reasonableness of the respective
9 Whiting (CA), above n 2, at [68] and [73](a).
10 van Limburg v Earthquake Commission, above n 3, at [16].
11 Ryde v Earthquake Commission, above n 3.
stances, including how the proceeding came to be continued ... In relation to these proceedings, the Court has no evidence as to the basis of settlement with the private insurers or the negotiations between the plaintiffs and the private insurers up to and after EQC’s discontinuance. The Court is not in a position to determine reliably whether the two defendants bear differing responsibility for the continuation of the proceeding.
[14] The Judge drew an inference from the timing of settlement with the insurer, set against the timing of EQC’s decision that the claim was over-cap, so he considered it just that EQC be ordered to pay 75 per cent of the Aulds’ Scale costs. In essence, EQC’s litigation stance was judged by inference to have held up overall settlement, so that once it accepted an over-cap position, settlement followed. His Honour considered this a “reliable inference” which he explained:
[21] A different approach may be justified when the plaintiff and the private insurer are able to settle an aspect of the claim within a very short time after EQC has accepted that the claim is over cap. Until that point is reached, the plaintiff needs to retain EQC as a defendant in order to obtain the cap payment. Equally, the private insurer will generally be unable to bring about the conclusion of the proceeding by any (over-cap) payment while the plaintiff still needs to obtain EQC’s cap payment.
[15] The Judge was careful not to state an absolute position, with reference to the insurer “generally” being held up in concluding its position with the plaintiff until the over-cap setting is recognised by EQC. Whether that requires payment by EQC, as opposed to acceptance of the claim being over-cap, is a live issue on this review.
For EQC
[16] Ms Hayes says the Judge erred in departing from the 50 per cent guideline and that it is important for EQC and litigants to know when the guideline position will be adjusted. Ms Hayes recognises that every case has the potential for distinctive elements which may warrant departure from the 50/50 guidelines.
[17] Ms Hayes submits that the Judge plainly drew on the fact that settlement with the insurer was achieved shortly after EQC accepted the claim was over-cap. This was allied with the assumption that EQC must remain a defendant to get to that point, and the insurer will not generally be able to conclude the proceedings by settlement until the over-cap position is accepted.
[18] In Auld, the Judge worked on the basis that EQC advised the claim was over-cap on 10 October 2017, and the plaintiffs settled with IAG on 3 November 2017, 24 days later. He said:
[22] Mr Shand, in his oral submissions, conceded that a costs award of a standard 75 per cent of scale against EQC could not be justified either as a matter of invariable principle or on the facts of the proceedings involved here. Mr Shand recognised that the case for an award above 50 per cent of scale is substantially weaker in cases where the plaintiff, after settlement with EQC, took longer periods to settle with the private insurer. Mr Shand described the Aulds as having the strongest claim for a 75 per cent award on the basis that the plaintiffs were able to settle with IAG within one month of EQC’s advice that the claim was over cap. ...
...
[26] I am not satisfied on the evidence that it would be just to order the relevant defendants to pay more than 50 per cent of the Framptons’ and Thorpes’ costs. On the other hand, I recognise that there is a reliable inference to be drawn from the timing of the settlement of the Aulds’ claims and that it is just that EQC be ordered to pay 75 per cent of the Aulds’ costs. Orders will be made on that basis.
[19] By the time judgment was delivered, Deo Gratias had accepted a 50 per cent award was appropriate.
[20] Thus, EQC says the Judge thought there was enough evidence that EQC had held up overall settlement, so it should bear more than 50 per cent of the costs. Ms Hayes submits that this inference should not have been drawn as there was no direct evidence, nor available inference to support it, and it is wrong to assume the insurer’s hands are tied by EQC’s stance regarding the cap before its own settlement can be reached.
[21] On the facts, Ms Hayes says EQC did not advise the claim was over-cap first on 10 October 2017, but on 5 September 2017, so nearly two months passed before IAG settled. Further, EQC’s over-cap “advice” or otherwise, does not prevent settlement with the insurer. Private insurers are entitled to settle before EQC advises the over-cap status, and there is no evidence beyond the inference which the Judge drew to indicate that settlement with the insurer in Auld was linked to EQC confirming that the claim was over-cap. It is true the IAG settlement occurred soon after the over-cap advice (nearly two months later). However, a timetable had been set for the
joint experts’ process and EQC and IAG received separate engineering advice regarding the earthquake damage and repair strategy. Following that, each made separate decisions about how to resolve the claim by the Aulds. The joint experts’ report was filed on 16 June 2017, and repair costings were to be provided by 28 July 2017. EQC met the timetable and estimated repair costs of $283,579.00. IAG provided its costing of $370,000.00 on 4 August 2017. In other words, EQC and the insurer, by that last date, are submitted to have known the repair costs were over-cap, which EQC then confirmed on 5 September 2017.
[22] Ms Hayes says that EQC’s advice that the claim is over-cap is not necessarily the “key to unlock settlement” with a private insurer because in Frampton settlement came six months later, in Deo Gratias one year later, and in Thorpe it was still not settled after 11 months. In short, EQC’s advice that a claim is over-cap thus may trigger settlement with the insurer, but it is not necessarily the case. For the Aulds, Mr Shand with Ms Lala says that “in practice” payment by EQC is the trigger for settlement with the insurer and was in this case.
[23] Ms Hayes submits the insurer will carry out independent scoping and costing, and it does not depend on EQC’s advice about the cap in reaching its view about the work required to remediate, or rebuild. Thorpe reflects this, as 11 months after the over-cap advice, the scoping and costing of necessary repairs was close to conclusion. In Auld, IAG pleaded that the claim against it was unnecessary, being under-cap, and denied the costs which the plaintiffs said were required to remediate. It reached its own view whether the claim was under or over-cap, independently of EQC.
[24] The need for the insurer to reach a view of the claim independently of EQC is reflected in another judgment which held that the insurer was unreasonable to adopt EQC’s position, as its own assessment should have been obtained, which would have shown the repair costs were over-cap.12
[25] In summary, EQC says the evidence before the Judge showed that the Aulds’ costs should be fixed at 50 per cent because:
12 Ramage v Earthquake Commission [2016] NZHC 2327 at [50].
(i) Nearly two months passed between EQC’s over-cap advice and IAG’s settlement with the Aulds, not 24 days, and that puts aside the inference that EQC held up claim resolution with the insurer.
(ii) The settlements in the three proceedings other than Auld were (plainly) not linked to EQC’s over-cap advice, nor is it the case that insurers cannot settle with plaintiffs until EQC advises a claim is over-cap.
(iii) The Costs Judgment failed to recognise the Earthquake List Timetable, which generally results in EQC and insurers obtaining expert advice at about the same time under the standard directions.
(iv) IAG’s statement of defence pleaded that the claim was under-cap so IAG was not dependent on EQC’s stance as to whether the claim was over-cap.
For the Aulds
[26] On 5 September 2017, EQC wrote to the Aulds advising that it considered their claim was over-cap and intended to pay $107,572.04. Then, on 10 October 2017, it sent another letter informing the Aulds that it had made a calculation error, and its revised position was to make a payment of $101,934.38, which it did on 24 October 2017.
[27] Mr Shand says it is “well established” that until EQC makes the cap payment, it does not meet its obligation under the Earthquake Commission Act 1993 (“the EQC Act”), so that only then does the insurer becomes liable. He refers to authority including Zygadlo v Earthquake Commission:13
[53] It is settled law in New Zealand that costs in respect of discontinued earthquake proceedings should only be awarded against EQC up until the point at which EQC makes a cap payment accepted by the plaintiffs.
[28] For the Aulds, Mr Shand says the best case for more than 50 per cent costs is that EQC was first prepared to pay only $8,605.58 under its then asserted statutory
13 Zygadlo v Earthquake Commission, above n 3.
obligation and a year later it recognised remediation costs of some $280,000.00. The disparity in these figures was established through the passage of the litigation.
[29] Mr Shand says that when looking to see whether EQC should pay more in costs for “holding up overall settlement”, the relevant date is 10 October 2017 referred to in the EQC notice of opposition. The insurance policy provides for the cap payment being “paid” and this fits with the letter from Chapman Tripp for EQC dated 10 October 2017 which says:
...
EQC’s intended settlement
$12,957.42 (less the statutorily prescribed excess of $200.00) as follows:
9.1 Reinstatement in the form of the substantive works that EQC has already paid for to the amount of $876.95.
9.2 A forthcoming payment of $11,880.47.
$115,000.00 (less the statutorily prescribed 1% of excess of $970.72) as follows:
10.1 Reinstatement in the form of the substantive works that EQC has already paid for to the amount of $19,807.74.
10.2 Previous payments for urgent works and clean heat works following the 22 February 2011 earthquake that EQC has already paid for to the amount of $4,266.63.
10.3 A forthcoming payment of $90,053.91.
...
Claims against EQC now ought to be discontinued
[30] While the correspondence refers to EQC’s intention to settle a claim, the crucial date is when EQC makes payment, according to Mr Shand.
Discussion
[31] Other than the dates when EQC accepted the over-cap position, made the payment, and settlement was reached with the insurer, there is nothing to distinguish the four costs applications before the Court. While an award of costs is discretionary, the need for a consistent approach is important, particularly in the context of the many claims which have a similar narrative and features as in the Earthquake List in the Christchurch High Court Registry.
[32] The well settled guideline is readily applied in earthquake list cases to avoid the need for parties to come to court seeking costs orders, and only when differentiating features are identified should it not apply. I do not regard Zygadlo14 as an example of apportionment of the kind involved in this case. EQC was ordered to pay two-thirds of Scale costs but in respect of three steps only, associated with delay by EQC, but otherwise the 50 per cent approach was endorsed.
[33] I agree that the case of Ramage,15 does not assist and adopt the Judge’s view that the explanation for that differential costs award was that the insurer was held to have acted unreasonably by adopting the EQC stance that the claim was under-cap when it had its own evidence that it was over-cap, so this was involved apportioning responsibility and costs in circumstances which do not apply here.
[34] I do not see any advantage in the authorities referred to by the plaintiffs drawing on general comment about apportioning costs between parties,16 but the Court of Appeal points to an overall assessment made between the parties in the interests of justice and that is a broad proposition which does bear on the immediate issue.17
14 Zygadlo v EQC & Others, above n 3.
15 Ramage v Earthquake Commission, above n 12.
16 Morris v Riverwild Management Pty Ltd [2009] VSC 439.
17 Hong v Deliu [2016] NZCA 75.
[35] It comes down to the reasons for the inference drawn about the timing of the settlement of the Aulds’ claim and from that whether it is just that EQC be ordered to pay 75 per cent of the Aulds costs. I do not think there is a reliable inference to be drawn because it turns to a degree on reference to the 24 days between EQC’s over-cap advice and IAG’s settlement with the plaintiffs when nearly two months passed between EQC’s over-cap advice and settlement. I do not accept that the “gap” is to be tested against payment, but rather EQC’s clear acceptance of an over-cap setting because that is enough to tell the insurer of EQC’s position. Further, there is nothing before the Court to say the insurers cannot settle with the plaintiffs until EQC advises the claim is over-cap, although that was stated broadly by the Judge, not as a definitive proposition.
[36] However, even with an adjustment to the two months between EQC’s advice that it accepted the over-cap position and settlement with the insurer, the conclusion that there was a link which should be recognised in costs does not follow. It is, I conclude, relevant that EQC and the insurers obtained expert advice at about the same time, and it is also relevant that IAG’s statement of defence pleaded the claim remained under the statutory limit of EQC’s liability. It did not rest on EQC’s position.
[37] While it may be a matter of practice, as Mr Shand asserts from the Bar, it is not correct that IAG is in law only liable when EQC makes the over-cap payment, because the policy covers sudden accidental loss that occurs during the period of cover which is limited only by any loss covered by the EQC Act. The loss covered by the EQC Act requires objective assessment, not simply EQC’s view of that. The insurer is not bound by EQC’s subjective view.
[38] There is no principled basis to say that the insurer may refuse to make a payment until EQC makes an over-cap payment. The primary obligation of the insurer is to cover the insured for accidental loss less the amounts covered by the EQC Act. There is an element of practicality in the ways claims are conducted in practice, but the immediate discussion is concerned with the construction of the policy and EQC’s obligations. However, it is not the case that until EQC makes the over-cap payment or that the insurer only then becomes liable.
[39] I have looked at this in broad terms, as an award of costs is discretionary. To depart from the 50/50 approach requires something which attaches a greater degree of responsibility to EQC or the insurer, sometimes EQC in the context of the over-cap setting, and in this case the “reliable inference” in my view is not available. There is nothing in particular about the EQC stance in the case of the Aulds that warrants a departure from the 50/50 principle. If the evidence was that EQC “dragged the chain”, in the critical assessments of damage and repair, so as to “drag” the insurer with it, the position would be quite different. That cannot be said here.
[40] IAG has taken no part in the costs argument. The issue on review is whether the award of costs against EQC should stand, and I conclude that for the reasons set out above, guideline, of general application should apply. Therefore, the award of costs against EQC should be set at 50 per cent rather than 75 per cent in the case of the Aulds.
D. THE COSTS AWARDED
For EQC
[41] EQC says it should have had costs, not the plaintiffs, irrespective of the outcome for the Aulds’ 75 per cent award against EQC.
[42] EQC refers to HCR 14.2:
14.2 Principles applying to determination of costs
(1) The following general principles apply to the determination of costs:
(a) the party who fails with respect to a proceeding or an interlocutory application should pay costs to the party who succeeds:
(b) an award of costs should reflect the complexity and significance of the proceeding:
(c) costs should be assessed by applying the appropriate daily recovery rate to the time considered reasonable for each step reasonably required in relation to the proceeding or interlocutory application:
(d) an appropriate daily recovery rate should normally be two-thirds of the daily rate considered reasonable in relation to the proceeding or interlocutory application:
(e) what is an appropriate daily recovery rate and what is a reasonable time should not depend on the skill or experience of the solicitor or counsel involved or on the time actually spent by the solicitor or counsel involved or on the costs actually incurred by the party claiming costs:
(f) an award of costs should not exceed the costs incurred by the party claiming costs:
(g) so far as possible the determination of costs should be predictable and expeditious.
[43] Unless there are “exceptional reasons”, costs should follow the result.18 That simply reflects “success” which must be carefully measured.
[44] Three sets of plaintiffs at first sought 75 per cent of their costs from EQC. Only the Aulds (at first) succeeded, and Deo Gratias (at first) sought 100 per cent. EQC says it succeeded in three proceedings, and now the Aulds should be treated in the same way. EQC says the Judge awarded costs and reasonable disbursements to the plaintiffs without explanation as to why they were all “successful”.
[45] The first costs issue was whether the 50 per cent guideline approach applied. EQC had offered to pay costs before applications were filed, in each case costs were awarded more than EQC offered, as the plaintiffs gained some disbursements which EQC disputed,19 and other disbursements in dispute were agreed before the costs hearing. The “real issue” before the Judge was the 50 per cent approach according to EQC. Despite losing that argument, the plaintiffs received more than EQC was prepared to pay before the hearing, because of the additional disbursements awarded, but each got less than they overall sought in costs, so EQC says it was the successful party viewed “on any realistic financial analysis”.
[46] The situation where all or both parties achieve some success was discussed in
Jarden v Lumley Nominee General NZ Ltd, where the plaintiffs obtained an outcome
18 Shirley v Wairarapa District Health Board, above n 7, at [19].
better than the insurer accepted before trial in respect of one issue only, which was limited in the context of the overall claim.20 It could not be said they were successful viewed as a whole, as their failure outweighed that limited success. The Court said “rather, they have lost on by far the greater part of the claim that they brought”.21 Here, EQC says the three plaintiffs (and now the Aulds), are in that category as they lost by far the greater part of the costs claim they brought. They each obtained a small amount more than EQC agreed to pay, measured between hundreds and a few thousands of dollars, and EQC overall paid less costs than sought in a range of $4,181.25 and
$18,478.47 on each proceeding. A useful schedule was provided by counsel for EQC (Schedule One to this Judgment).
[47] Measuring success requires a “realistic appraisal of the end result”.22 Hence, EQC uses the Schedule in this judgment to submit:
(a) In Deo Gratias the plaintiffs unsuccessfully sought an order for 100% of their costs – EQC successfully limited the order to 50%.
(b) In Frampton the plaintiffs unsuccessfully sought an order for 75% costs – EQC successfully limited the order to 50%.
(c) In Thorpe the plaintiffs unsuccessfully sought an order for 75% of their costs – EQC successfully limited the order to 50%.
(d) In Auld the plaintiffs sought an order for 75% of their costs – if EQC’s review of that decision succeeds, the same position arises as for Deo Gratias, Frampton and Thorpe.
(e) The small additional amounts the plaintiffs received beyond what EQC had already accepted liability for are outweighed by the amounts EQC successfully resisted paying.
[48] Overall, Ms Hayes says that EQC succeeded, doing far better than the plaintiffs other than in Auld, and on this review, the Aulds’ percentage of costs should be reduced to 50/50 as with the other plaintiffs.
20 Jarden v Lumley General Insurance (N.Z.) Ltd [2016] NHC 2820, upheld on appeal:
Jorden v Lumley General Insurance (NZ) Ltd [2018] NZCA 6.
21 At [27].
22 Packing In Ltd (in liq) v Chilcott [2003] NZCA 124; (2003) 16 PRNZ 869 (CA) at [6].
For the plaintiffs
[49] Mr Shand says that EQC “lost” on the issue of disbursements and that explains in part the difference between the outcome offered by EQC and that which the Judge reached. He emphasises that for these plaintiffs and others like them, “every dollar counts” and while in three cases (then two) the plaintiffs lost their claim to more than 50 per cent of their costs, they were justified in pressing on as they in the end obtained more than EQC was prepared to offer. In simple terms, Mr Shand says that the plaintiffs “beat” EQC in their entitlement to costs by judgment, and that they should not be “punished” for not getting everything for which they asked. He says the Court should recognise that EQC fought these applications.
Funding
[50] Mr Shand also says that EQC at first took the position that it would not pay any costs, without costs being paid to a legal adviser. Ms Hayes says that EQC simply wanted to know the litigation funding position, but subject to knowing that legal fees would be paid some legal costs would be met. Of these claims, only that for the Thorpes was not funded.
[51] EQC first assessed the damage and the cost of repair at $39,144.10 and paid approximately $8,605.58 for emergency work. EQC then said the claim was under-cap and refused to pay more. The Aulds did not have the means to contest this, so engaged Claims Resolution Services Limited (“CRS”) to fund/manage their claim. CRS agreed to meet legal costs and disbursements and the Aulds agreed to reimburse it if they were successful. CRS paid Grant Shand solicitors $21,631.01 for legal fees and $13,862.20 for disbursements. In turn, the Aulds paid CRS these sums.
[52] The Aulds sent EQC a schedule inviting it to make an offer as to costs in November 2017. EQC would not pay costs to the Aulds because it did not know if they directly incurred costs with a lawyer, so the Aulds filed their application for costs. The application was opposed by EQC on the basis that the Aulds did not directly incur the costs but, if it was liable, it should only be required to pay 50 per cent, being
$12,759.73 (costs and disbursements).
[53] There is a line of authority to which Mr Shand refers where under funding agreements costs have been awarded, as there is still an obligation direct or indirect to pay legal costs. In one case, Ryde v Earthquake Commission and IAG, the funding agreement had no provision for payment of costs by the plaintiffs and CRS paid costs and disbursements, but the Court still ordered EQC to pay costs and disbursements.23 While EQC refers to Joint Action Funding Limited v Eichelbaum, the Court in that case was concerned with an award of costs to a lawyer who acted for himself, so had never billed or paid himself, and no costs were incurred as required by r 14.2(1)(f).24
[54] Mr Shand says that EQC does not accept the Zygadlo judgment, but did not appeal it25. That case held that the funding arrangement, unless impugned, does not influence the making of a costs award. There have been other such cases, where funding arrangements have not negated a costs order.26
[55] Ms Hayes in reply says that EQC did not refuse to pay costs based on litigation funding, and Mr Shand has mischaracterised EQC’s notice of opposition. EQC did not seek a “no costs” outcome, but wanted information about funding, and when it received that it was prepared to settle. It did not delay payment of costs as a result of the judgment in Eichelbaum.27
Aulds
[56] Mr Shand says the Aulds would have received nothing in costs from EQC had they not made application. Even at a 50 per cent award, EQC’s offer before hearing is exceeded by $2,199.37, so the Aulds have succeeded, by a lesser margin.
Frampton and Vanschevensteen
[57] Mr Shand says EQC adjusted its costs position when it accepted the plaintiffs had a liability for costs, but to less than that which was Court ordered.
23 Ryde v Earthquake Commission, above n 3.
24 Joint Action Funding Ltd v Eichelbaum [2017] NZCA 249, [2018] 2 NZLR 70.
25 Zygadlo v Earthquake Commission, above n 3.
26 For example, Driessen v Earthquake Commission [2016] NZHC 1048.
27 Joint Action Finding Limited v Eichelbaum, above n 24.
The plaintiffs obtained $4,145.51 more than offered by EQC, so in that sense they were successful.
Thorpes
[58] By the same reasoning, the Thorpes succeeded in their costs application to the extent that they received $557.50 more than offered by EQC.
Deo Gratias Developments Ltd
[59] By the same reasoning, De Gratias obtained $2,980.00 more than offered by EQC.
Discussion
[60] The issue is whether the various plaintiffs’ applications for either 75 per cent or 100 per cent costs means they “failed” when 50 per cent costs were ordered and that should dictate the costs outcome.
[61] I do not consider that foreign judgments, on a matter which is ultimately discretionary and guided by the High Court Rules, should influence the result. I agree with EQC that the particular New Zealand setting is that from which to draw the appropriate principles.
[62] Although the judgment has resulted in payments from EQC to the plaintiffs, EQC always accepted that, but the plaintiffs are right that while they lost their claim to a greater portion of their costs, they succeeded when viewed against the EQC offer.
[63] It is not right to say that EQC refused to pay costs to the plaintiffs because they did not incur costs directly with a lawyer and I do not see relevance in the Court of Appeal judgment in Joint Action Finding Limited.28 A party may not recover costs where that party carries no liability to pay a lawyer, and EQC was entitled to ask if the plaintiffs had such liability. The point was cleared away, and EQC then said it would pay 50 per cent of the costs. The funded plaintiffs were liable for their solicitors’ costs.
28 Joint Action Finding Limited v Eichelbaum, above n 24.
[64] The question comes down to whether an overall perspective should be that EQC was successful in resisting most of the costs sought, and not the plaintiffs who got more than what they were offered, but correspondingly failed to get all the costs which they sought.
[65] Although EQC won on the principal issue as to the percentage of costs which it should bear, and it has succeeded in respect of the Aulds, there remained a lesser contest as to costs and disbursements. The plaintiffs and EQC are in very different positions. These home owners fought for every element of the costs, to which they were entitled. That makes it difficult to simply set the financial result of the costs awarded against their claims to a greater percentage.
[66] I accept that the “significant economic issue” was whether EQC should pay more than 50 per cent of the costs it already agreed to pay, but in the end costs are a matter of discretion, and the Judge plainly had before him all that was necessary, including the economic positions of the parties, in coming to judgment. In my view, it cannot be said that the Judge was plainly wrong in the costs outcome, and while he did not articulate his reasons, I recognise that there are valid reasons to reach judgment as he did. One of those reasons is that here the plaintiffs have in a real sense tested the water in seeking more than 50 per cent costs and that must reflect the perspective of their very experienced counsel in this type of litigation. There is here a strong element of a test case as to where costs should fall and in what proportions, than a more pointed financial analysis of the outcome. This judgment is of wide application.
[67] Mr Shand’s submissions that all these plaintiffs, so much affected by the unfortunate circumstances in which they found themselves, were justified in bringing their costs applications, and I agree.
[68] For those reasons, the costs awards made by the Judge will stand.
E. “COSTS ON THE COSTS”
[69] The plaintiffs have produced their own calculation of these costs and say the Judge was wrong in the orders he made. The Judge was entitled to order “costs on the costs” in his discretion. It did not mean a full Scale recovery. These costs link
with the outcome of the costs outcome on settlement. There is no reason to disturb these costs ordered. The plaintiffs do not apply for review and that is enough to dispose of this. Otherwise, the plaintiffs say the Judge’s calculation of costs was “plainly wrong”, but having addressed this issue with the Judge, he issued a Minute on 9 May 2018 recording that the costs ordered were arrived at ‘deliberately”. These costs are to remain undisturbed.
F. DISPOSITION
[70] (1) 50 per cent of Scale costs are ordered in all four proceedings.
(2) The costs and disbursements ordered will otherwise stand, both those on the substantive proceedings and the “costs on costs” award.
(3) Leave is reserved for any further direction required to implement this judgment.
.................................................
Nicholas Davidson J
Grant Shand, Auckland
Chapman Tripp, Wellington
N T P Lala, Barrister, Auckland
Schedule One
|
Costs sought by the plaintiffs at time of filing
costs application
|
Amount of costs EQC accepted
liability for
|
Costs award
|
Difference between EQC’s position and award
|
Difference between plaintiffs’
application and award |
|
|
Deo Gratias
|
$33,834.95 (100%)
|
$12,323.00
|
$15,356.48
|
EQC pays
$3,033.48 more
|
Plaintiffs receive
$18,478.47 less |
|
Frampton
|
$32,432.41 (75%)
|
$11,727.48
|
$15,872.99
|
EQC pays
$4,145.51 more
|
Plaintiffs receive
$16,559.42 less |
|
Thorpe
|
$23,837.04 (75%)
|
$11,310.23
|
$11,867.73
|
EQC pays
$557.50 more
|
Plaintiffs receive
$11,969.31 less |
|
Auld
|
$26,619.90 (75%)
|
$12,759.73
|
$22,438.65
|
EQC pays
$9,678.92 more
|
Plaintiffs receive
$4,181.25 less |
|
Total
|
$116,724.30
|
$48,120.44
|
$65,535.85
|
$17,415.41
|
$51,188.45
|
If the Auld decision had also been as to 50% costs rather than 75% costs...
|
Auld
|
$26,619.90 (75%)
|
$12,759.73
|
$14,959.00
|
$2,199.27
|
$11,660.90
|
|
Total
|
$116,724.30
|
$48,120.44
|
$58,056.20
|
$9,935.76
|
$58,668.10
|
NZLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.nzlii.org/nz/cases/NZHC/2018/1881.html