Alexander v Southern Response Earthquake Services Limited
[2020] NZHC 1660
•10 July 2020
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2018-409-000694
[2020] NZHC 1660
BETWEEN DAVID JAMES ALEXANDER, KATRINA JANE ALEXANDER and ESTUARY
TRUSTEES LIMITED as trustees of the DAKA TRUST
Plaintiffs
AND
SOUTHERN RESPONSE EARTHQUAKE SERVICES LIMITED
Defendant
Hearing: Determined on the papers Counsel:
P J Woods and K L Vilsbaek for Plaintiffs
R Hargreaves and H Bowering-Scott for Defendant
Judgment:
10 July 2020
INTERIM JUDGMENT OF ASSOCIATE JUDGE PAULSEN
This judgment was delivered by me on 10 July 2020 at 3.00 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
ALEXANDER v SOUTHERN RESPONSE EARTHQUAKE SERVICES LTD [2020] NZHC 1660 [10 July 2020]
The application for a wasted costs order
[1] The plaintiffs’ property at Quarry Road, Mount Pleasant suffered earthquake damage. The plaintiffs seek primarily declaratory relief against their insurer as to their entitlements under their insurance policy. After four judicial settlement conferences were allocated and abandoned the parties agreed to refer the claim to the Greater Christchurch Claims Resolution Service (GCCRS). Southern Response now applies for wasted costs on the abandoned settlement conferences and related attendances.
Background
[2] The claim was filed in September 2018 and managed in the Earthquake List. At the first case management review it was directed the parties’ structural engineers were to confer and file a joint experts’ report by 8 April 2019. There was to be a judicial settlement conference on 10 June 2019. The structural engineers (the experts) met on 21 March 2019. The plaintiffs’ expert (Mr Langford of PSL) was to prepare the first draft of the report.
[3] The report was not prepared and without it the first judicial settlement conference was abandoned. A new judicial settlement conference was allocated for Tuesday, 27 August 2019. It was directed the joint experts’ report was to be completed by 2 August 2019.
[4] The defendant’s solicitors made several enquiries of the plaintiffs’ solicitors about when they could expect the draft of the joint experts’ report. On 10 July 2019, the plaintiffs’ solicitors advised it would be provided by 16 July 2019. It was not provided.
[5] On 29 July 2019, the defendant requested the second judicial settlement conference be vacated with costs of the memorandum and the teleconference awarded to it. The plaintiffs, unrealistically in my view, took the position that the judicial settlement conference could proceed without the joint experts’ report. On 9 August 2019, I adjourned the judicial settlement conference to 2 December 2019 and directed the defendant’s expert (Mr Day) to complete the first draft of the report by 6 September
2019. PSL was to respond by 27 September 2019 and the report was to be finalised by 18 October 2019. I reserved costs for reasons as follows:1
… having reviewed counsels’ memoranda and the correspondence that was put before me, on balance I must accept that the delays rest, to a greater or lesser extent, on both experts who, I understand, are likely to be working under considerable pressure because of the limited number of experts available to prepare such reports.
[6] The first draft of the experts’ report was circulated and PSL made changes to it and returned it to Mr Day by 18 September 2019. PSL asked that the amended draft report be provided for final review by 7 October 2019. This occurred but PSL did not promptly complete its final review. It was not until 22 November 2019, after follow- up by the defendant’s solicitors, that the joint experts’ report was completed and signed.
[7] Due to the delay in finalising the joint experts’ report, the defendant could not produce costings in time for the judicial settlement conference scheduled for 2 December 2019. It was therefore vacated. A further judicial settlement conference was allocated for 9 March 2020.
[8] The parties agreed to attend an informal settlement meeting on 18 December 2019, but the plaintiffs cancelled the meeting because they said they were obtaining a new costing and because PSL wished to revise its view and issue a new report. That report was not provided until 26 February 2020. There was insufficient time for the defendant to review this new material and the parties requested the judicial settlement conference be adjourned once more.
[9] The parties then reached agreement the claim should be transferred to the GCCRS subject to the defendant’s application for wasted costs. The defendant applied for an order in regard to wasted costs on 31 March 2020 and the plaintiffs’ response was filed on 23 April 2020. I convened a telephone conference on 4 June 2020. Importantly for present purposes, Counsel advised I am to deal with the matter on the
1 Alexander v Southern Response Earthquake Services Ltd HC Christchurch CIV-2018-409-694, 9 August 2019 at [5].
papers without affidavit evidence or a further hearing. Counsel did file supplementary memoranda after the teleconference on other matters discussed which I considered.
Principles
[10] Wasted costs have been claimed and awarded in Earthquake List cases including cases where delay has been caused by a parties’ expert2 or for repeated breach of timetable directions.3 The principles upon which they are awarded are well- known.
[11] All matters of costs are at the discretion of the Court. The Court can order costs against a party whose default causes a fixture or event to be vacated.4 Wasted costs fall into an exception to the general rule that costs follow the event,5 as “the event” has not occurred.
[12]In Burgess v Monk Heath J summarised the jurisdiction as follows:6
There is no doubt that this Court has jurisdiction to order that wasted costs be paid when, through the fault of one or more parties, a trial has been postponed, to the detriment of others. The concept of “wasted costs” includes those incurred for work undertaken that will not have any further benefit to the case of the claimant party, as well as the value of work that will be duplicated in order to prepare for a trial in the future.
[13]In EBR Holdings Ltd (in liq) v van Duyn Venning J put the matter this way:7
A wasted cost award is to compensate a party who has incurred costs that are wasted and for which any ultimate cost award will not compensate. It recognises that the issues will need to be revisited and some steps repeated. Hence the Judge’s reference to costs “thrown away”. There is generally no obligation to exclude the steps considered in the granting of the wasted costs award from the ultimate costs award made at the end of the trial. The two awards are distinct in nature. In some cases it may, however, be appropriate to deduct the amount of a wasted costs order from the sum ultimately payable. Heath J did so in the present case.
2 Nielsen v Earthquake Commission [2019] NZHC 629.
3 Moulin v Earthquake Commission [2020] NZHC 490.
4 Jeffreys v Morgenstern [2013] NZHC 1361 at [31].
5 High Court Rules 2016, r 14.1(a); Andrew Beck and others McGechan on Procedure (looseleaf ed, Thomson Reuters) at [14.16A].
6 Burgess v Monk [2015] NZHC 1881 at [15].
7 EBR Holdings Ltd (in liq) v van Duyn [2018] NZHC 1065 at [14].
[14]There are practical reasons for making such orders, as noted by Venning J in
Jeffreys v Morgenstern:8
… default that leads to vacation of fixtures leads to inconvenience and costs not only to the other parties to that proceedings but to other parties awaiting fixtures in the Court. Fixtures allocated by this Court are commitments of limited judicial and Court resources. Time is booked for the case. Other parties who might otherwise have had their cases allocated hearing time are disadvantaged by default which leads to late vacation of fixtures.
That is further reason which supports an award of wasted costs. The Court should apply sanctions to parties who, through their own default, cause fixtures to be vacated.
[15]In the case of wasted costs, the rationale for providing a costs award is:
(a)to compensate the other party who has wasted costs; and/or
(b)to impose a sanction on the defaulting party, to avoid wastage of costs, judicial and court resources and inconvenience to other parties awaiting fixtures.9
[16] In deciding the quantum of an award, only costs wasted as a result of the discontinuing of the hearing will be awarded.10 The amount awarded is largely “a matter of impression and best judgment” at the time.11
The submissions
The defendant
[17] The defendant seeks indemnity costs in relation to preparing for and vacating the June 2019, December 2019 and March 2020 judicial settlement conferences. The amount claimed is $5,988.05 (GST inclusive). It also seeks 2B scale costs for its 29 July 2019 memorandum and for attending the 9 August 2019 teleconference
8 Jeffreys v Morgenstern, above n 4, at [31]-[32].
9 Marley New Zealand Ltd v Skellerup Rubber Services Ltd [2013] NZHC 3040 at [11]; Jeffreys v Morgenstern, above n 4, at [31]-[32]; Fu Hao Construction Ltd v Landco Albany Ltd HC Auckland CIV-2004-404-6608, 23 May 2008 at [10].
10 Andrew Beck (ed) McGechan on Procedure (looseleaf ed, Thomson Reuters) at [14.16A(4)].
11 Opua Coastal Estate Ltd (in liq) v Mulholland [2014] NZHC 1467 at [22] citing Simpson v Hubbard [2012] NZHC 3020 at [28]; and Jeffreys v Morgenstern, above n 4, at [34].
amounting to $1,673. Scale costs are claimed because that is what was sought in counsel’s 29 July 2019 memorandum and I had reserved my ruling on costs.
[18] The defendant submits the plaintiffs repeatedly failed to comply with timetabling requirements in relation to the preparation of the joint experts’ report. As a result, three judicial settlement conferences were abandoned. Then, following the finalisation of the report the plaintiffs advised that PSL would give updated advice. There was a delay in the provision of that advice. When it was provided shortly before the judicial settlement conference of 9 March 2020, the plaintiffs’ position had changed substantially, and the settlement conference could not proceed as there was insufficient time for the defendant to respond. The defendant argues that upon each abandoned settlement conference costs were thrown away and it is not unreasonable the plaintiffs bear the consequences of their expert’s failure to attend to the judicial settlement conferences or complete his additional report in a timely manner.
The plaintiffs
[19] The plaintiffs submit it is premature to decide whether costs have been wasted and inappropriate to review the experts’ conduct as, under the High Court Earthquake List protocols, the meeting of experts is privileged. If, notwithstanding those submissions the Court decides to consider wasted costs, the plaintiffs do not accept they have been responsible for inordinate delay and argue the defendant has not identified any wasted costs. The plaintiffs contend there have been delays on both sides, but in any event the fact that three of the four judicial settlement conferences were vacated by agreement is fatal to any claim for wasted costs in respect of them. They argue also the defendant cannot claim wasted costs in respect of the 29 July 2019 memorandum or the August judicial settlement conference as costs were reserved.
[20] Furthermore, the plaintiffs contend they were willing to attend the settlement conferences on 27 August 2019 and 9 March 2020 and it was the defendant who wished to vacate them. In relation to the March 2020 settlement conference, the plaintiffs submit it would have been more wasteful to continue with an incorrect scope of works. The requirement for further expert advice was only brought to PSL’s
attention by the plaintiffs after the joint experts’ report was completed but the joint experts’ report has not been wasted and will be relied upon by both parties.
Discussion
[21] The defendant is entitled to pursue this application. There is an argument that it would have been more efficient to deal with it in the GCCRS and that, potentially, the GCCRS would be in a better position than the Court to determine, after a full consideration of the evidence, what costs were wasted. However, the Court is seized of the matter and to the extent it is unable to make such a determination the risk falls upon the defendant.
[22] I do not accept the plaintiffs’ submission that the Court cannot review the experts’ conduct under the High Court Earthquake List protocols. It is only the meeting of experts and the matters they discussed that are privileged.
[23] I am not prepared to make any costs order in relation to the vacation of the 10 June 2019 and 27 August 2019 judicial settlement conferences in light of the finding, recorded in my minute of 9 August 2019, that the delays (to that point) rested with both experts or external factors. I am not able to revisit that finding. Also, in reserving costs the intention was they would be considered upon the final determination of the proceeding.
[24] That leaves the costs in relation to the December 2019 and March 2020 settlement conferences. I am satisfied those settlement conferences were abandoned because of the plaintiffs’ default. I am also satisfied the defendant incurred wasted costs as a result. It is necessary to look at the chronology of events more closely.
[25] In my minute of 9 August 2019, a settlement conference was set down, for the third time, on 2 December 2019 against the background of lengthy delays. Whereas previously PSL was to prepare the first draft of the joint experts’ report I directed Mr Day to complete the first draft by 6 September 2019. PSL was to respond by 27 September 2019 and the report was to be completed by 18 October 2019.
[26] In accordance with the timetable Mr Day prepared a first draft and PSL edited the draft. On 5 October 2019 (a Saturday) PSL advised that Mr Langford was having his tonsils removed on 8 October 2019 and asked for the revised report by Monday, 7 October for final review. The request was complied with but PSL did not approve the revised draft within a reasonable time-frame. The defendant’s counsel corresponded with the plaintiffs’ counsel about that on several occasions as follows:
(a)18 October 2019
I can see that the joint experts report was due to be filed today. Have you seen a copy of it? We don’t have one.
I understand from Southern Response’s engineer that he sent a finalised version for Daniel Langford’s review on 7 October, but hasn’t heard back. I understand Mr Langford may have had his tonsils removed and been out of action. Do you have any update from the Plaintiff’s engineer on whether he has finalised the report?
(b)24 October 2019
Are you able to please provide a response to Richard’s email below? I note that the joint reporting has been ongoing for quite some time; it would be helpful to have an indication from Mr Langford as to his expected timeframes.
(c)1 November 2019
Just following on from your telephone conversation with Richard Hargreaves yesterday, have you heard back from Daniel Langford about the status of the joint report?
[27]The plaintiffs’ counsel responded on 4 November 2019:
Mr Langford has informed us that he hopes to have the JER back to Mr Day this week. You will appreciate that Mr Langford recently had surgery and that has caused a delay.
[28] On 8 November 2019, the joint experts’ report was not returned and counsel for the defendant followed up once again:
Tim Day advises that he has still not heard back from Daniel Langford with a signed report. We understand the Joint Report should have been able to be finalised within a day and was in a relatively final form. We are aware that Mr Langford got his tonsils removed on 7 October however we were not expecting that this would hold up
finalisation of the Joint Report by another month (bearing in mind the site visit was in March 2019).
The JSC is now 3 weeks away. Unfortunately, we are now in a position similar to the last two JSC dates, where the viability of going ahead with the JSC is uncertain.
Even if the report were finalised on Monday, three weeks is a tight turnaround time for a costing report.
Can you please urgently update us on the status of the report? Hazel and I are unfortunately both out of the office today, though returning on Monday if you need to discuss anything.
[29] The joint experts’ report was fully executed by both engineers by 22 November 2019.
[30] Following review of the joint experts’ report, counsel for the defendant wrote to the plaintiffs’ counsel to discuss next steps:
We have now had a chance to review the Joint Experts’ Report. As you will be aware from our previous correspondence to you, Southern Response will obtain a costing based on its expert’s position in the Joint Experts’ Report. With the JSC now less than a week away, we find ourselves in the same position we were in when the JSC was vacated in June and August.
The structural engineering experts first attended site in March 2019 and agreed Mr Langford would produce the first cut of the joint report. We understand this was held up due to Mr Langford’s capacity so, in August, the parties agreed Mr Day would attend to the first cut of the joint report and circulate by 6 September 2019. This was sent to Mr Langford on 5 September 2019. Mr Langford provided an updated draft at the end of September 2019. Mr Day then reviewed and re-circulated this to Mr Langford on 7 October 2019. It was then held up with Mr Langford until mid-November 2019 while he had his tonsils removed.
We have now been provided with the Joint Experts’ Report, a week before the scheduled JSC. We are currently enquiring with an independent builder, however it is very unlikely that a builder can provide a costing (based on the Joint Report) in less than a week. Southern Response is a Government claims handling company and while Southern Response’s priority is to settle claims, it will not be able to resolve the claim without any justification. We do not see that there is any utility in attending a JSC without a costing, as there will be no ability for Southern Response to settle the claim without this advice.
We are conscious however, that this is the third fixture that has become unfeasible because of the overdue Joint Experts’ Report. Now that the parties have received the Joint Report we suggest that
the parties vacate the JSC to allow Southern Response time to receive a builder’s costing and instead attend an informal settlement meeting later in December 2019 to try and resolve the claim before the end of the year. We have spoken with the Court and there is no availability for a JSC until March 2020. Please advise whether your clients would agree to an informal settlement meeting before the end of the year on the basis that a JSC cannot go ahead.
[31] The parties agreed to vacate the 2 December 2019 settlement conference, so the defendant had time to obtain a cost estimate. The parties also agreed to attend an informal settlement meeting on 18 December 2019. The defendant obtained and served a costing on 17 December 2019 but that day the plaintiffs cancelled the meeting because they were obtaining a new costing and PSL wished to revise its views and issue a new report.
[32] Counsel for the defendant followed up with the plaintiffs’ solicitor on progress with the new advice and costing as follows:
(a)13 February 2020
Are you able to provide an update on your clients’ revised engineering advice (and any consequential costing updates, if any).
I note that we have another JSC scheduled for 9 March 2020, which is now only a few weeks away. If your client has new engineering and costing information, Southern Response will need this sufficiently in advance of the JSC to have time to consider it.
(b)24 February 2020
I note that the JSC is scheduled for two weeks from today. We still do not have any indication from your clients as to their updated structural engineering position (and any flow-on costs consequence).
If Mr Langford intends to provide an updated report, creating new scope and costings from your clients (which is what you indicated at the end of 2019), then two weeks is insufficient for Southern Response and its experts to review a report and costings, and consider any implications before a JSC. Once again, the JSC may need to be postponed to allow your clients’ experts further time.
However, I am conscious that we cannot keep extending this proceeding indefinitely and need some update from your clients. At the very least, Mr Langford and your clients’ costing experts should be able to provide firm timeframes for the provision of the updated report and costings.
[33] On 26 February 2020, the plaintiffs served an updated report dated 19 February 2020. It increases the scope of the works and the plaintiffs’ quantum position from their previous costing by $108,642.56, from $285,182.42 to $393,824.98. The parties agreed there was insufficient time for the defendant to review the new report before the 9 March 2020 settlement conference. On 5 March 2020 they filed a joint memorandum requesting a further adjournment of the settlement conference.
[34] What this chronology shows is a high degree of diligence on the part of the defendant and its expert but not on the part of the plaintiffs and their expert. The judicial settlement conference of 2 December 2019 was vacated due to the late finalisation of the joint experts’ report and the fault for that lies with the plaintiffs and PSL. Despite requesting the revised report be provided by 7 October 2019, so PSL could complete it before Mr Langford had a tonsillectomy, it was not completed. The defendant’s solicitors were diligent sending several emails requesting information as to when the finalised report would be available and received no replies to several emails. Only on 4 November 2019 was the report promised later that week and then not provided. The failure of the plaintiffs’ solicitors to respond to correspondence and the weak excuse that Mr Langford’s surgery was the cause of delay demonstrates a lack of attention to the matter that caused the settlement conference to be adjourned.
[35] The fourth judicial settlement conference was also vacated due to the plaintiffs’ default. Having indicated on 17 December 2019 the plaintiffs would not attend an informal settlement conference on 18 December due to Mr Langford’s desire to revise his view from the joint experts’ report, his updated report was not provided until over two months later. The plaintiffs’ say the delay was caused because the plaintiffs pointed out to Mr Langford damage to the property that was not identified and scoped. If that is the case, it demonstrates a failure on the part of the plaintiffs to properly instruct Mr Langford or a failure on his behalf to undertake an adequate inspection. In any event, as Mr Langford inspected the property on 2 December 2019 with proper diligence he had sufficient time to complete a revised report in time to allow the 2 March 2020 settlement conference to proceed but did not do so.
[36] It is no answer to the defendant’s claim for wasted costs that it agreed to vacate the settlement conferences or that the plaintiffs were prepared to proceed with them.
I consider that in the circumstances that existed it was inevitable the judicial settlement conferences would be adjourned, and no purpose would have been served in proceeding with them. From experience, settlement conferences are invariably unsuccessful if the parties do not have all the information before them that is required to assess their position and risk. In earthquake cases that will almost always include a joint experts’ report.
[37] I must therefore consider the quantum of the wasted costs. All that has been provided is a general description of attendances said to be wasted and a figure of
$5,207 ($5,988.05) which represents the indemnity cost of steps taken based on time records. I do not have a breakdown of the attendances nor do I have the time records. Whilst the assessment of wasted costs is not exact the Court must have a reasonable evidential basis for any award. I require more information to conclude my decision.
Result
[38] I find that the defendant is entitled to recover wasted costs incurred on the vacation of the judicial settlement conferences of 2 December 2019 and 9 March 2020. I am unable on what is before me to assess the quantum of such award. I direct the defendant to file and serve a schedule of all attendances for which an award of wasted costs is sought (including the time and cost of the attendances) and any supporting time records by 20 July 2020. The plaintiffs shall file any response by 27 July 2020. I will then issue a further judgment fixing the quantum of the award.
[39] Costs on this application shall be reserved pending the issue of my further judgment.
O G Paulsen Associate Judge
Solicitors:
Anthony Harper, Christchurch for Plaintiffs
Wynn Williams, Christchurch for Defendant
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