Body Corporate 423090 v QBE Insurance (International) Limited

[2021] NZHC 2989

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2016-409-836

[2021] NZHC 2989

BETWEEN

BODY CORPORATE 423090

Plaintiff

AND

QBE INSURANCE (INTERNATIONAL) LIMITED

First Defendant

AND

QBE INSURANCE (AUSTRALIA) LIMITED

Second Defendant                continued…

Hearing:

2 November 2021 (by VMR)

Appearances:

I J Thain and M J Bell for Plaintiff

V S Wethey for First and Second Defendants

Judgment:

5 November 2021

JUDGMENT OF ASSOCIATE JUDGE LESTER

BODY CORPORATE 423090 v QBE INSURANCE (INTERNATIONAL) LIMITED [2021] NZHC 2989

[5 November 2021]

AND

FORTIS CONSTRUCTION NZ LIMITED

Third Defendant

AND

STRUCTEX HARVARD LIMITED

Fourth Defendant

AND

CALIBRE CONSULTING LIMITED

Fifth Defendant

AND

C1 GLOUCESTER STREET LIMITED

Sixth Defendant

AND

ERNEST FREDERICK MICHAEL MR DUVAL

Seventh Defendant

AND

STUDIO2 LIMITED

Eighth Defendant

[1]    This judgment is mainly concerned with an application by the first and second defendants, QBE Insurance (International)  Limited  and  QBE  Insurance  (Australia) Limited, (together “QBE”), for further and better particulars of one aspect of the plaintiff’s claim. Before turning to that application I deal with a number of other issues dealt with at the hearing on 2 November 2021 which were ultimately resolved by agreement.

Non-party discovery

[2]    As I recorded in an earlier judgment dated 25 October 2019 (the October Judgment) concerning discovery issues between the parties:1

In a nutshell, the plaintiff’s claim is that repair works undertaken following the Canterbury earthquake sequence did not restore the Pacific Tower to the standard required under the material damage insurance policy and that further works, or potentially, the replacement of the entire tower is required. The Body Corporate further alleges that the costs spent on repairs to date are now “wasted costs” and should not be included in the sum insured cap under the material damage policy. In short, $14,5 million plus GST spent on repairs by QBE was entirely wasted expenditure.

1      Body Corporate 423090 v QBE Insurance (International) Ltd [2019] NZHC 2733 at [37].

[3]    One of the issues in the proceeding is whether the lift shafts in the Pacific Tower (the Tower) were irreparably damaged in the Canterbury Earthquake Sequence, or at least whether the cost to repair the lift shafts would render repair of the Tower uneconomic.

[4]    To that end, QBE sought access to documents held by the various lift technicians that have worked on the Tower.

[5]    The plaintiff, Body Corporate 423090 (Body Corporate) has agreed to request the lift technicians provide their files relating to the Tower to the Body Corporate’s solicitors to be reviewed for relevance and/or privilege and disclosure as required.

[6]    That agreement essentially overtook that part of the application. I was told the lift technicians were waiting for the Body Corporate to confirm that the information can be provided so it now seems there is no impediment to the disclosure sought by QBE.

[7]    I do not make any orders in terms of what Mr Thain, counsel for the plaintiff, has said will be done in relation to the disclosure sought, but should any issue arise in that regard, leave is reserved for QBE to seek a telephone conference. Given the timing of the exchange of evidence, I expect Mr Thain will have requested the lift technicians’ files by the time this Judgment is released.

Expert conferral

[8]    Body Corporate’s briefs are due 26 November 2021. QBE’s briefs  are due  18 February 2022. Reply evidence from the Body Corporate is due 4 March 2022 with a trial allocated on 9 May 2022.

[9]    Formal conferral has already occurred between the parties’ structural engineers, which resulted in a joint expert statement.

[10]   QBE has sought an order that the parties’ lift and fire safety experts confer with a view to trying to reach agreement on matters in issue.

[11]   Ms Wethey, counsel for QBE, indicated at the hearing that QBE would be content with it being understood that there was no barrier to the experts being free to liaise and discuss issues between them, that is, without the need to first seek approval from their respective legal teams.

[12]   It was common ground that the experts’ obligations under the High Court Rules 2016 (the Rules) and the Code of Conduct in sch 4 of the Rules meant there should be no barriers to the experts being able to discuss issues with a view to assisting them to understand the background to the issues and, if possible, to narrow the issues in order to ultimately reduce the evidence that will be required.

[13]   Accordingly, I do not make an order as sought by QBE at paras [1.3] and [1.4] of the application given both parties accepted the experts were free to discuss issues as they saw fit. That is not to say that there should not be a formal conferral resulting in a joint expert report between the parties’ lift and fire experts. However, for present purposes I record it is agreed that the parties’ lift and fire experts (indeed all the experts) are able to have discussions in respect of the issues and their evidence.

A soft copy of QS spreadsheet

[14]   QBE has requested a soft copy of an Excel spreadsheet previously provided to them only in PDF format. It was clarified at the hearing that QBE did not seek any working papers, background or source documents, simply a copy of the spreadsheet they could work with. Without conceding there was any obligation to make a copy available, Mr Thain pragmatically agreed to do so.

[15]   Given Mr Thain’s agreement in that regard, I do not need to make an order to that effect. I leave it to Mr Thain to organise the provision of a soft copy of the spreadsheet. Leave is reserved for QBE to request a telephone conference should any issues arise in that regard. Again, I expect that it will have been provided by the time this Judgment is released.

[16]   A further issue raised at the hearing was that the hotel operation run in the Tower is apparently in the course of being sold. The October Judgment concerned the obligation of the then hotel operator to provide disclosure of the due diligence it

undertook when it purchased the hotel business after the Canterbury Earthquake Sequence.2

[17]   Mr Thain advised that the sale of the hotel remains conditional. If the sale goes through there would seem at first blush no reason why the ruling in the October Judgment would not apply to the new owner but no direction is required on that issue at present.

Further and better particulars

[18]   The Body Corporate’s claim in relation to the Tower has two broad aspects. The first is that it is uneconomic to repair the Tower to the policy standard, with the result that it is essentially a write-off and the Body Corporate is entitled to the cost of a rebuild. On that basis the Body Corporate says all of the money QBE spent in its original efforts to repair the building was wasted as it did not bring the building up to the policy standard.

[19]   The Body Corporate’s second argument is that if it is possible to repair the Tower to the policy standard, then in the course of carrying out those repairs, much of the original repair work by QBE  “will need to be undone and/or redone as a result  of the further works”.

[20]   The particulars sought by QBE relate to what are defined in the statement of claim as “Wasted Works”, that is, the work that will have to be undone or redone as  a consequence of the further repairs being carried out.

[21]   The statement of claim pleads that if repair is possible, the estimated quantum of the Wasted Works will be $11,280,167.44. A table is included in the pleading which breaks that figure down into sections under the headings: “Hotel”, “NFM Exterior”, “Apartments” and “37 Active Links”. To the total is added “Contingency”, “Margin”, “P&G” and “GST”. The Body Corporate pleads that the cost of this wasted work should not be deducted from the sums insured under the policies because it did not assist towards the reinstatement of the Tower to the policy standard.

2      Body Corporate 423090 v QBE Insurance (International) Ltd, above n 1.

[22]   Supplementing the pleading (but not actually part of it) is a spreadsheet which provides detail of the entries in the table of costs.

[23]   QBE says that the pleading does not provide it with enough information to identify what specific works are said to be wasted and why those works are said to be wasted. In short, QBE says there is no explanation as to why each item of work previously carried out will need to be undone or redone. QBE says the information provided does not link the repair scope (which is only pleaded in broad terms) with the amounts claimed as wasted costs. In other words it is said the impact or consequences of the repair strategy on the previous work is not pleaded.

The principles

[24]   The principles applying to an application for further particulars under r 5.26 of the High Court Rules 2016 (the Rules) were not in dispute.

[25]   The Court of Appeal in Price Waterhouse v Fortex Group Ltd put the test in this way:3

The pleader and Court simply ask “in the circumstances of this claim, is that statement sufficiently detailed to state a clear issue and inform the opposite party of the case to be met?”. This is not, under modern practice, simply some minimum which a Defendant needs so as to be able to plead. It is intended to supply an outline of the case advanced, sufficient to enable a reasonable degree of pre-trial briefing and preparation. Discovery and interrogatories are only an adjunct, not a substitute for pleading.

[26]   In Securitibank Ltd (in rec and in liq) v Rutherford, the Court confirmed that a certain amount of detail is necessary in order to ensure clearness and that what particulars need to be stated depend on the facts of each case.4

[27]   Mr Thain said particulars will not be ordered if a party cannot provide them. That is not a correct statement of the law. It is not a defence to a proper request for particulars that the particulars are unknown. That general rule may give way, however, where the party seeking particulars knows that the party from whom the particulars are sought does not have them and the Court considers the former is not genuinely

3      Price Waterhouse v Fortex Group Ltd CA179/98, 30 November 1998 at [19].

4      Securitibank Ltd (in rec and in liq) v Rutherford HC Auckland A355/81, 10 October 1983 at [11].

embarrassed by the lack of particulars or that the particulars sought are within the knowledge of the requesting party.5

[28]   Further, that there will be the exchange of briefs does not alter the requirement for properly articulated pleadings. However, in considering whether a party is likely to be taken by surprise the Court is entitled to have regard to whether the particulars sought are within the knowledge or control of the requesting party and the fact that briefs of evidence will be exchanged well in advance of the hearing.6

[29]   The application for particulars in this case is framed in very general terms. While correspondence between the parties after the application was filed includes discussion of the particulars sought, such is in general terms only. Some aspects of the table of wasted costs are reasonably self-explanatory. For example, repair work pleaded includes an epoxy injection of floor slab cracks. Under the heading “Hotel” the reference to carpet removal and laying conveys that, in order to access the concrete floors, the carpet needs to be removed and re-laid. However, other aspects of the schedule are more opaque.

[30]   Ms Wethey took me through the example of what are referred to in the pleading as “Active Links”. I was told active links are a seismic joint or link designed to assist the Tower to withstand earthquakes.

[31]   Paragraph [27.1.7] of the statement of claim pleads as an item of remaining damage: “Loss of strain capacity to 33 active links (in addition to the 41 active links that have been replaced).”

[32]   Paragraph [29.1] of the statement of claim pleads that the repair to the Tower would require at least “[r]eplacing the remaining 85 unrepaired active links”.

[33]   As noted earlier, one of the headings in the table of wasted costs is the heading “37 Active Links”. Mr Thain accepted there was a need to clarify the number of links in the pleading.

5      Pickard v Ambrose HC Wellington CIV-2003-091-143, 14 April 2008 at [29].

6      Body Corporate 74246 v QBE Insurance (International) Ltd [2015] NZHC 1360 at [18(i)].

[34]   In my view, on the face of the pleading, what is intended by way of repair to the active links and the consequential damage to the work previously undertaken is not clearly set out in the statement of claim.

[35]   Mr Thain disputed that and said it was possible to understand the table in the pleading and the spreadsheet by reference to a combination of the discovery documents and the experts’ reports. That is not the test for whether a pleading is adequate. I accept of course the assessment of the pleading must happen in context which assumes some knowledge of what the case is about, but it took Mr Thain some time to explain one aspect of the active link wasted repair cost claim.   In reply,     Ms Wethey, as someone very familiar with the case, said she had not made the connections explained by Mr Thain concerning the active link claim until outlined by him.

[36]   Accordingly, I am satisfied that aspects of the way in which the wasted costs claim is pleaded are not adequate. The question is what to do about that? As previously noted, the Body Corporate’s briefs  are  due  on  26  November  2021.  Ms Wethey suggested that it may be appropriate for the particulars to be provided with the Body Corporate’s briefs. In response to a question from the Court, Mr Thain confirmed that his experts’ briefs on the issue of wasted costs would be detailed, comprehensive and provide a full narrative in respect of why previous work had to be undone or redone.

[37]   The timing of the application for particulars in this case is unusual as the hearing of the application was a little over three weeks before the provision of the Body Corporate’s evidence.

[38]   The other factor I need to take into account is that the pleading must be clear to the trial Judge.

[39]At the risk of adopting an overly pragmatic approach, I direct as follows:

(1)QBE’s application for further particulars of the statement of claim is

adjourned.

(2)Following   receipt   of   the   Body    Corporate’s    evidence    on    26 November 2021, QBE may request that its application for particulars be reconvened by telephone conference.

(3)If QBE is content with the explanation of the claim for wasted costs contained in the evidence then it is to file a memorandum to that effect.

(4)If QBE files the memorandum referred to in the previous paragraph, then the Body Corporate must, in its opening, provide a full explanation of its wasted costs claim. This is to serve as a practical supplement to the statement of claim so this issue is clear to the trial Judge.

[40]   Adopting this admittedly pragmatic course is not an invitation to counsel in other cases to think that they can fall back on briefs of evidence where a statement of claim is not sufficiently particularised. It is only in the unusual circumstances of this case that I am taking this approach, and even then I leave open the option to QBE to require particulars to be provided if the evidence provided is not focused and specific. Again, I am taking this approach because the Body Corporate’s evidence will be due about three weeks after the release of this Judgment and the application for particulars was made in general terms.

Costs

[41]Costs are reserved.

Associate Judge Lester

Solicitors:

Farry & Co, Auckland (for Plaintiff) DLA Piper, Auckland

Fee Langstone, Auckland (for First and Second Defendant)