Body Corporate 200200 v Defemdamts amd QBE Insurance (International) Limited HC Auckland CIV 2003 404 000512

[2008] NZHC 2493

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2003 404 000512

BETWEEN  BODY CORPORATE 200200

Plaintiff

AND  1ST - 13TH DEFENDANTS AND

QBE INSURANCE (INTERNATIONAL) LIMITED

Fourteenth Defendants

AND1ST - 3RD THIRD PARTIES WATTYL NZ LIMITED

4th Third Parties

AND  5TH - 30TH THIRD PARTIES

Hearing:         On the papers

Counsel:         Paul R Grimshaw for plaintiffs, Body Corporate 200200

Michael O Robertson for 14th Defendant
John Bierre for 4th Third Party

Judgment:      11 August 2008 at 2:00pm

JUDGMENT OF WILLIAMS J [as to Costs]

This judgment was delivered by The Hon. Justice Williams on

11 August 2008 at 2:00pm

pursuant to R 540(5) of the High Court Rules

……………………………………………..

Registrar/Deputy Registrar

BODY CORPORATE 200200 V QBE INSURANCE HC AK CIV 2003 404 000512  11 August 2008

A.       Wattyl’s application for costs against QBE is dismissed.

B.       The claim is settled as between Wattyl and QBE.   Leave is granted to discontinue their mutual and other claims.

Issue

[1]      As the entituling to this judgment shows, this litigation was one of the largest, if not the largest, of the “leaky building” cases filed in significant numbers in High Court registries over recent years.

[2]      Following a judicial settlement conference on 12 and 13 November 2007 which was unsuccessful in settling the claim the principal parties arranged mediation on 19 December 2007.  That effectively ended the litigation.  The settlement was on the basis that a significant sum was contributed by various parties to the plaintiffs. All those participating settled on the basis that none would claim costs against any other  participant.     The  Fourteenth  Defendant,  QBE  Insurance  (International) Limited, did not participate in the mediation.

[3]      The only issue outstanding – and the issue with which this judgment deals – is that, for the reasons later discussed, the Fourth Third Party, Wattyl NZ Ltd, claims what it submits is an appropriate proportion of its costs (including experts’ fees) against QBE.

[4]      The claim concerned the 153 units in the Sacramento development which, though designed by the one architect and certified by the one building certifier, were built in three stages by three separate companies each of which became, in due course, a defendant.  Though putting it this way is a major over-simplification of the issues, the essential allegations were that either the cladding or the roofing incorporated in the units was defectively manufactured or applied, thus permitting the ingress of water which caused the claimed damage.

[5]      One builder was Link Construction Limited.  It was the head contractor for

57 units being Stage 2 of Sacramento.  Several companies which were collectively called  Sigatoka  and  all  who  went  later  into  liquidation  were the  developers  on Sacramento.  Link claimed it held public liability insurance with QBE with Sigatoka as named insureds during the period 30 April 2000-30 April 2003.

[6]      As might be expected in a claim involving so many plaintiffs, defendants and third parties, in addition to the factual and legal complexities, the litigation rapidly became procedurally very complicated.

[7]      The case was managed principally through a number of conferences with counsel but was unable to make much progress towards hearing until the plaintiffs were able to particularize their claims fully.  That required extensive investigation and particularization of experts’ reports which were provided in April 2005 and refined later.  Though earlier pleadings had been particularized as much as was then possible, it was only on delivery of that report that the defendants and third parties – particularly Wattyl - had a clear idea of the claims they had to meet and their quantum.

[8]      In March 2007 directions were made for the filing of statements of defence and for a judicial settlement conference.

[9]      One of the builders joined Wattyl as a Third Party in October 2003, and amended its claim in March 2004 but, because of the then state of the plaintiffs’ pleadings, the allegations were restricted in number and fairly broad in phrasing. The claim did not allege defects in the integrity of Wattyl’s textured coating system.

[10]     Six  other  parties  also  claimed  against  Wattyl,  essentially  adopting  the builder’s pleading, but because the builder and some of those went into liquidation, some of those claims were automatically stayed.

[11]     QBE claimed against Wattyl on 11 April 2006.   Its claim was very much more detailed than  the other  assertions  against  Wattyl,  and  included  allegations concerning the adequacy of Wattyl’s textured coating system.

[12]     It is pivotal to Wattyl’s costs claim against QBE that it says that after the builder claiming against Wattyl went into liquidation on 22 June 2004, QBE was the only party to the litigation actively pursuing it, a situation which, Wattyl contended, continued until it settled with the other parties on 19 December 2007.  During that period, Wattyl asserts it incurred significant legal costs in relation to briefing witnesses and experts to meet QBE’s claim and it is those it seeks to recover on a Category 2B basis.

Submissions

[13] For Wattyl, Mr Bierre recounted the history just summarized. Because QBE seeks to discontinue its claim against Wattyl, he relied on R 476C as presumptively entitling Wattyl to costs against QBE, “of and incidental to the proceeding up to and including the discontinuance”. He relied on Air New Zealand Ltd v Commerce Commission (2007) 18 PRNZ 406, 416, 419 paras [47], [64] as authority for the proposition that a successful party is generally entitled to recover the actual expenses of its expert witnesses provided they are reasonable and necessary and pointed to the extensive particularization of QBE’s claim against Wattyl as justifying Wattyl’s expenditure in response.

[14]     For QBE, Mr Robertson reviewed the history summarized in this judgment, emphasizing that all other parties settled without contributing to others’ costs.

[15]     For the plaintiff, Mr Grimshaw supported QBE’s opposition to the costs application pointing to the claims made against Wattyl and its cross-claims against numerous other parties to found a submission that Wattyl was substantially involved in the proceedings involving a number of claims against and by it – not least by the plaintiffs - before QBE was joined about October 2005.   Its participation included compliance with discovery and obtaining inspection.   He pointed to the fact that Wattyl’s defence to the QBE claim was only filed in April 2007.   It was a short document denying the claim principally on the basis of insufficient particularization. It also filed defences to three other claims at the same time and settled one of its claims in March 2007 on the basis of there being no issue as to costs.

[16]     Mr Grimshaw also made the point that the plaintiffs filed a separate claim against Wattyl in September 2007 to avoid limitation issues.   That claim largely reflected QBE’s allegations.  It was not served before settlement.

Discussion and Decision

[17]     The principal factors on which Wattyl relies as entitling it to an order for costs against QBE are that QBE was the only party actively pursuing its claim against Wattyl on the basis of a detailed pleading.  Wattyl accordingly had to incur its legal costs and experts’ fees in order to meet that claim during the period mentioned.

[18]     That approach, however, overlooks a number of factors.

[19]     The first of those is that the pleadings generally in the claim were far from complete  by March  2007  when  the  judicial  settlement  conference  was  ordered. Significant amendments could have been expected to the existing claim as the parties refined their positions in light of much greater particularization of the plaintiffs’ claims.  The obligation for the parties to refine their claims and defences was largely put on hold (apart from directing the filing of defences) by the order for the judicial settlement conference.

[20]     Coupled with that is the virtual certainty that, had the pleadings been ordered to be completed with the case approaching a substantive hearing, Wattyl’s position would undoubtedly have been reconsidered by QBE and all other parties.   They might well have concluded they had a claim against it – or their existing claims required amendment.   It would have been required then to meet claims by other parties which would probably have largely reflected QBE’s claim against it.   The plaintiffs’ separate proceeding is an example.

[21]     In that event, the significant expenditure of meeting the allegations against it would have been incurred not just in defending QBE’s claim but all the other claims against it.   It was therefore largely a matter of chance that, as it happened, the expenditure was largely incurred to meet QBE’s claim (and those by the plaintiffs).

It would have been required to meet the plaintiffs and other claims made or likely to be made against it.  That expenditure appeared to have been of significant advantage to Wattyl at the judicial settlement conference.  Doubtless the information provided was utilized at the mediation.

[22]     In all those circumstances, the appropriate conclusion is that no case has been made out to compel QBE to meet Wattyl’s costs application just because, as it happened, the costs and expenses were largely incurred in meeting that claim when it would have been of assistance in the settlement process and in meeting other claims had the matter not settled.

[23]     An additional reason for reaching the view that Wattyl’s costs application should be dismissed is that all parties have settled the litigation on the basis of no party contributing to any other party’s costs.  On the principle that equality is equity, that, too, is a reason for reaching the view that QBE should not be required to meet Wattyl’s costs.

Result

[24]     In the result, Wattyl’s application for an order  for  costs  against  QBE  is dismissed.

[25]     The claim is therefore settled as between Wattyl and QBE.  Leave is granted to discontinue their mutual and other claims.

…………………………………

WILLIAMS J.

Solicitors:

Grimshaw & Co, P O Box 6646 Auckland 1001, for plaintiff

Shieff Angland, P O Box 2180 Auckland 1010, for QBE Insurance Ltd

Morgan Coakle, P O Box 114 Auckland 1001, for Wattyl NZ Ltd

Copy for:

Case Officer:              Indr[email protected]