Earthquake Commission v Whiting, Jones and Peebles

• Jurisdiction: New Zealand
• Judge: White J
• Judgment Date: 04 May 2015
• Neutral Citation: [2015] NZCA 144
• Date: 04 May 2015
• Court: Court of Appeal
• Docket Number: CA459/2014 CA709/2014

[2015] NZCA 144

IN THE COURT OF APPEAL OF NEW ZEALAND

Court:

White, Fogarty and Dobson JJ

CA459/2014

CA708/2014

CA709/2014

Between

Earthquake Commission

Appellant

and

J E Whiting, K J Jones And R S Peebles

First Respondents

Iag New Zealand Limited

Second Respondent

Between

Earthquake Commission

Appellant

and

W Van Limburg

First Respondent

Tower Insurance Limited

Second Respondent

Between

Earthquake Commission

Appellant

and

S R Ryde And C A Ryde

First Respondents

Iag New Zealand Limited

Second Respondent

Counsel:

P R Jagose and N S Wood for Appellant

D A Webb and M R Bendall for First Respondents in CA459/2014

N R Campbell QC and I R Shennan for First Respondents in CA708/2014 and CA709/2014

No appearances for Second Respondents

Appeal by the Earthquake Commission (EQC) against three adverse costs awards in the High Court (HC) following the exercise of the Court's discretion in r15.23 High Court Rules (HCR) (Unless … the court otherwise orders, a plaintiff who discontinues a proceeding against a defendant must pay costs to the defendant …)— respondents were homeowners whose houses were damaged in the 2010 and 2011 Canterbury earthquakes — the EQC initially assessed the damage to the properties as being below the $100,000 recovery cap in s18 Earthquake Commission Act (ECA) (residential buildings) — as a consequence the respondents could not pursue their private insurers for the cost of the remaining damage — the respondents initiated proceedings against the EQC and private insurers — EQC re-evaluated earlier assessments so that the damage exceeded the recovery cap — the respondents discontinued their claims and sought costs — HC awarded 50 per cent costs to each plaintiff — EQC appealed — second and third respondent cross-appealed on the basis that they were entitled to 100 per cent of costs from the EQC — whether the discretion to displace the presumption that a discontinuing plaintiff had to pay costs in r15.23 was of limited ambit — whether it was just and equitable to exercise the discretion in this case — whether r14.14 HCR (Joint and several liability for costs) applied to allow the respondents to recover 100 per cent of their costs.

The issues were: whether the discretion to displace the presumption in r15.23 was of limited ambit; whether it was just and equitable to exercise the discretion in this case; and, whether r14.14 HCR (Joint and several liability for costs) applied to allow the respondents to recover 100 per cent of their costs.

Held: Rule 15.23 HCR imposed a mandatory obligation on a plaintiff who discontinued a proceeding to pay the costs of the defendant in the discontinued proceeding. There were, however, two important exceptions to this obligation: the defendant could agree “otherwise” or the court could order “otherwise”. Unless one of the exceptions applied, costs followed the event when a notice of discontinuance was filed.

The HC had recognised that the discretion to order “otherwise” could be exercised in the interests of justice where it was “just and equitable to displace the [r 15.23] presumption” (Kroma Colour Prints Ltd, Powell). While discontinuance was a matter for consideration, it did not fetter the discretionary exercise ( Fordyce v Fordham). In deciding whether it was just and equitable to exercise the discretion, the Court could 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.

When a proceeding was discontinued as a result of a supervening event the proper exercise of the discretion might ordinarily be to make no order for costs. At the same time, however, where one of the parties had acted unreasonably or was almost certain to have been unsuccessful if the proceeding had not been rendered unnecessary, that party might be ordered to pay the costs of the proceeding. The Court would not, however, undertake a review of the merits of the plaintiff's claim unless they were immediately apparent as this would result in a trial which would be contrary to the object of r15.23.

The decision in Powell was not inconsistent with the approach in Kroma Colour and Fordyce.

In this case, the Judges correctly followed the well-established approach to the interpretation and application of r15.23 and the exercise of the Court's discretion. In particular, they accepted that the onus was on the respective respondents and found that the respondents had discharged the onus. By submitting that costs should lie where they fell, the EQC had effectively conceded that the presumption was rebutted in the R and V claims. The Judges had decided that the issue of the proceedings by the respondents was justified and accepted that when the EQC changed its position the respondents were justified in discontinuing their proceedings because they had achieved what they sought.

While the Judges proceeded on the assumption that the respondents' 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 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 s29 EQC Act “as soon as reasonably practicable”. Furthermore, the EQC had not applied to have the proceedings struck out 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. The EQC had therefore not shown that the Judges were “plainly wrong” in proceeding on this basis.

Secondly, 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. These conclusions were open to the Judges on the evidence.

Thirdly, 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 respondents to issue their proceedings and then to discontinue them when EQC reassessed each claim. The Judges did not err in concluding that the respondents 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 insurer

R and V were not entitled to 100 per cent of their costs. Rule 14.4 HCR did not apply as there was no joint and several liability because no orders had been made against the private insurers. It was therefore open to the judge to award only 50 per cent costs.

Further, while the EQC's delay in resolving the respondents' claims was the primary cause of the respondents' issuing and prosecuting the proceedings and while might they might not recover costs from their private insurers, the respondents 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.

Appeal and cross-appeal dismissed.

JUDGMENT OF THE COURT

• A The appeals and the cross-appeals are dismissed.

• B In each appeal the appellant must pay the first respondents' costs for a standard appeal on a band A basis with usual disbursements. We certify for second counsel.

• C The first respondents in CA708/2014 and CA709/2014 must pay the appellant's costs on their cross-appeals for a standard appeal on a band A basis with usual disbursements. We certify for second counsel.

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...