Southern Response Unresolved Claims Group v Southern Response Earthqake Services Ltd
| Jurisdiction | New Zealand |
| Judge | Mander J |
| Judgment Date | 24 February 2016 |
| Neutral Citation | [2016] NZHC 245 |
| Docket Number | CIV-2015-409-000530 |
| Court | High Court |
| Date | 24 February 2016 |
IN THE MATTER OF an application for leave to bring proceeding as a representative action
[2016] NZHC 245
CIV-2015-409-000530
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
Application by the plaintiff under r4.24 High Court Rules (persons having same interest) for leave to bring the proceeding as a representative action in the name of its nominated representative, together with associated orders to facilitate the progress of the proceeding in that form — the plaintiff was an unincorporated body of 46 persons who had unresolved insurance claims with the defendant — the claimants had houses insured under the same or substantially similar policies of insurance with the defendant on a full reinstatement basis — their houses had been damaged in the Canterbury earthquakes but their insurance claims remained unsettled — the plaintiff had singed a litigation funding agreement — whether the claimants had a common interest.
FMR Cooke QC, M S Smith and N Shah for Plaintiff
M D O'Brien QC, D J Friar and K M Venning for Respondent
JUDGMENT OF Mander J
The Southern Response Unresolved Claims Group (the Group) is an unincorporated body of 46 persons, the members of which have unresolved insurance claims with Southern Response Earthquake Services Limited (Southern Response). A statement of claim has been filed alleging breach of contract by Southern Response for failing to meet its obligations under the insurance policy and for breach of what are described as process rights, and duties of good faith owed by Southern Response to members of the Group.
The Group makes application for leave to bring the proceeding as a representative action in the name of its nominated representative, Mr Cameron Preston, together with associated orders to facilitate the progress of the proceeding in that form. The application is opposed by Southern Response.
Some five years have elapsed since the first of the Canterbury earthquakes on 4 September 2010. The houses of the Group's members were insured under the same or substantially similar policies of insurance with Southern Response on a full reinstatement basis. Their insurance claims remain unsettled. It is the Group's position that Southern Response has failed to discharge its obligations to them under the insurance policy, and the intervention of the Court is required to have their claims resolved. Each claim has been the subject of a long period of delay, and there remain significant disputes between Southern Response and the policyholders.
The Group seeks to bring the proceedings as a representative action on the basis they share common disputed issues concerning the interpretation and application of the policy which require determination by the Court. It is envisaged that at a later stage in the proceeding a process will be put in place for resolving the individual claims based on the resolution achieved in relation to those generic issues. Several members of the Group have filed affidavits in support of the application which detail the history of their claims and their involvement with Southern Response.
A prime reason put forward in support of the representative action is that none of the members of the Group individually would be able to afford to bring separate proceedings against Southern Response to resolve their individual claims. The Group, however, has obtained the services of a litigation funder, Litigation Lending Services (New Zealand) (“LLS (NZ)”) to fund a representative action. Each member has signed a litigation funding agreement with LLS (NZ).
Southern Response is an entity established for the singular purpose of settling claims by policyholders of the insurance company, AMI, as a result of damage caused by the Canterbury earthquakes. Following the second major earthquake on 22 February 2011, AMI considered it did not have sufficient reserve funds and reinsurance to cover its liability. Following an approach by AMI, the Crown agreed to provide a capital injection of $500 million pursuant to the terms of a Crown support deed. This resulted in a restructuring of AMI. Its ongoing day-to-day insurance business was sold and its liability arising from the Canterbury earthquakes transferred to a Crown owned company, Southern Response.
Southern Response became responsible for some 7,626 claims where the amount exceeded the Earthquake Commission (EQC) cap of $100,000 (plus GST). Of these overcap claims, 6,684 claims have been settled, although claims are still being passed to Southern Response from EQC, albeit at a reduced rate in recent times. The 46 claimants with an interest in the present proceeding are part of a group numbering some 2,587 whose claims have not been resolved with Southern Response.
Leave to bring a representative action is provided by r 4.24 of the High Court Rules (the Rule):
4.24 Persons having same interest
One or more persons may sue or be sued on behalf of, or for the benefit of, all persons with the same interest in the subject matter of a proceeding—
(a) with the consent of the other persons who have the same interest; or
(b) as directed by the court on an application made by a party or intending party to the proceeding.
The identification of a sufficient common interest has been observed in case law to be relatively low. 1 An overarching consideration guiding the application of the Rule is the Court's need to take an approach which is consistent with the “just, speedy, and inexpensive determination” of proceedings, which is the objective of the High Court Rules. 2
The community of interest required by the Rule is that persons have “the same interest in the subject matter of [the] proceeding”. This will be satisfied if there is a common interest in “the determination of some substantial issue of law or fact”. 3
The approach to be taken in New Zealand was summarised by Elias CJ in Credit Suisse as follows: 4
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(a) the [representative] order cannot confer a right of action on a member of the represented class who would not otherwise have been able to assert a claim in separate proceedings and cannot bar a defence otherwise available in a separate action;
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(b) there must be a common issue of fact or law of significance for each member of the class represented; and
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(c) it must be for the benefit of the other members of the class that the plaintiff is able to sue in a representative capacity.
In Credit Suisse, the Supreme Court rejected an argument that a representative claim is limited only to the determination of issues common to all those represented. In that case, the appellants contended that for the purposes of the application of the Limitation Act 1950, the representative order only applied to the extent of their common interest. This was confined to the issue of whether there had been a breach of common law and statutory duties, and could not extend to individual claims for damages, which it was argued would have to be the subject of separate proceedings and would thereby sit outside the statutory limitation period.
Elias CJ, in delivering the reasons of herself and Anderson J, considered this argument to be inconsistent with settled authority that representative claims may be brought under the rule where some substantial question is common to a number of litigants, or the claims of a number of potential litigants arise out of the same transaction or series of transactions. Requiring additional separate proceedings for consequential issues which are limited to an individual or a subgroup of those
In approaching the application of the rule, the Group rightly emphasised the liberal and flexible approach to representative actions endorsed by New Zealand Courts. Once common issues have been resolved, the balance of issues relating to the hearing and determination of the individual aspects of members' claims within the representative proceeding become a matter of case management. 6
The Supreme Court endorsed the approach of McGechan J in R J Flowers Ltd v Burns that the scope of the rule may legitimately be developed to ensure the overall objective of the High Court Rules is achieved. Subject to ensuring that representative actions not be allowed to work injustice to deprive a defendant of a defence upon which it could have otherwise relied in a separate proceeding, or to enable a person within the representative class to succeed where they would not have otherwise been able to bring an individual claim, the rule should be applied anddeveloped to meet modern requirements. 7
Southern Response did not dispute the facilitative approach that a Court is required to take to the application of the rule. However, it emphasised that sufficient commonality of interest must first be established. It is necessary for there to be a common question of fact or law of significance to each member of the class represented before the statutory threshold of common interest can be made out. That question needs to be a substantial one which is shared by the membership of the group seeking to take the representative action. 8 The identification of the common issue or issues of significance for each member of the group will effectively define membership of the group able to be represented in the proceeding.
In an earlier round of the so called Feltex litigation, the Court of Appeal examined the requirements of the rule. 9 Its approach, which was substantially approved by the Supreme Court in Credit Suisse in a later strand of that litigation,
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