Coles v Earthquake Commission
[2024] NZHC 637
•22 March 2024
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2017-409-824
[2024] NZHC 637
BETWEEN ANTONY THOMAS COLES
Plaintiff/Respondent
AND
THE EARTHQUAKE COMMISSION
Defendant/Applicant
Hearing: 18 March 2024 Appearances:
A J D Ferguson for Plaintiff/Respondent
M Eastwick-Field and M G Alison for Defendant/Applicant
Judgment:
22 March 2024
JUDGMENT OF ASSOCIATE JUDGE LESTER
COLES v THE EARTHQUAKE COMMISSION [2024] NZHC 637 [22 March 2024]
[1] Mr Coles is the owner of 25 Kellys Road, Mairehau, Christchurch (the house). The house was damaged in the Canterbury Earthquakes. Mr Coles was not the owner of the house at the time of the Canterbury Earthquakes, having purchased the property at auction on 22 August 2013.
[2] The owner of the property at the time of the Canterbury Earthquakes made a claim with the Earthquake Commission (EQC) relating to the damage to the house. EQC assessed the property. EQC’s assessment of the loss was made available to Mr Coles at the time he purchased the house. The EQC repairs were carried out after his purchase. Mr Coles says EQC’s assessment of the earthquake damage was inadequate.
[3] In this proceeding, one of the claims Mr Coles brings is in negligence, alleging in summary that EQC owes a duty of care to subsequent owners of earthquake damaged properties to take reasonable care when assessing the extent of earthquake damage and in scoping repairs. Mr Coles says that duty was breached and the proper cost to carry out the repairs is in excess of $500,000.00 which he claims as damages.1
[4] Mr Coles proceeding was commenced in 2017 and is set down for a three-week hearing beginning 8 July 2024. The delay in the matter being set down is due to Mr Coles having been charged with cannabis dealing offences which were eventually concluded by way of guilty pleas. After guilty pleas were entered, Mr Coles was sentenced in respect of those offences in February 2023.
[5] The Crown commenced proceedings under the Criminal Proceeds (Recovery) Act 2019 (the Act) in 2020. Since then, most of Mr Coles’ assets, including the house, were subject to restraining orders under the Act meaning he did not have the resources to progress this proceeding, leading to various hearing dates being vacated.2 With Mr Coles’ guilty pleas, the Commissioner of Inland Revenue
1 The repair cost pleaded is $564,966.00.
2 A 15 day hearing scheduled to commence 6 March 2023 was vacated on 5 October 2022. An earlier 15 day hearing scheduled for 18 July 2022 was also vacated. A 3 May 2021 hearing date was offered but not suitable to Mr Coles.
(the Commissioner) filed forfeiture proceedings on 30 June 2023. The original forfeiture proceedings included both the house and the benefit of this proceeding.
[6] Nonetheless, from 8 March 2023, this matter has been scheduled for hearing in July 2024.
[7] In March 2023, aware of the intention of the Commissioner to file forfeiture proceedings by the end of June 2023, EQC sought directions to see this matter timetabled through to the 8 July 2024 hearing.
[8] Mr Coles’ position in March 2023 was that this proceeding could not progress because he remained without the resources to fund the litigation due to the criminal proceeds litigation. Mr Coles’ position was the criminal proceeds recovery proceeding should be resolved before timetabling for the 8 July 2024 hearing commenced.
[9] In practical terms, the parties’ positions are now reversed. EQC seeks that this proceeding be stayed pending determination of the forfeiture proceeding and Mr Coles now wants the 8 July 2024 hearing to go ahead. The reason for that change is that in November 2023, the Commissioner, while maintaining the forfeiture application over the house, released the proceeds of this proceeding from the forfeiture proceeding along with Mr Coles’ funds in order for Mr Coles to run this case. When EQC learned of this, it advised the Court it was still considering the legal implications of proceeding to trial in this matter where, at that stage, it understood the house remained subject to the forfeiture application — that indeed now being confirmed.
[10] On 13 February 2024, EQC brought this application for a temporary stay of this proceeding until the final determination of the forfeiture proceeding and, in the alternative, an application for security for costs. Both applications are opposed.
Jurisdiction to order stay
[11] The application to stay this proceeding is made in reliance on r 10.12 and in the alternative, r 15.1 of the High Court Rules 2016 (the Rules), including the Court’s inherent jurisdiction.
[12]Rule 10.12(a) provides:
10.12 When order may be made
The court may order that 2 or more proceedings be consolidated on terms it thinks just, or may order them to be tried at the same time or one immediately after another, or may order any of them to be stayed until after the determination of any other of them, if the court is satisfied—
(a)that some common question of law or fact arises in both or all of them; or
(b)…
(c)that for some other reason it is desirable to make an order under this rule.
[13] In Lawrence Riverside v Colliers International New Zealand Ltd, the temporary stay was sought pursuant to r 10.12(c) of the Rules.3 Rule 10.12(c) has been described as a “catchall” conferring “a separate and very wide discretion”.4
[14]McGechan on Procedure at HR10.12.04 notes:5
In Lawrence Riverside Ltd v Colliers International NZ Ltd, HC Auckland, CIV-2011-404-1486, 30 June 2011, two proceedings had a “common thread”. One had a trial fixture but in the other an amended statement of claim had just been filed. The latter proceeding was stayed pending further order of the court.
[15] Rule 10.13 confirms that r 10.11 applies even though the relief claimed in the proceedings is not the same.
[16] EQC’s counsel, Ms Eastwick-Field, who presented the submissions on this part of the application, noted the purpose of r 10.12 is to encourage efficiency in court proceedings and to avoid conflicting findings and/or inconsistent decisions.6
[17] What is sought amounts to an administrative or case management stay, temporary in nature and which does not carry with it any implications as to the merits of Mr Coles’ claim.
3 Lawrence Riverside v Colliers International New Zealand Ltd HC Auckland CIV-2011-404-1486, 30 June 2011.
4 Attorney-General v Siemer [2022] NZHC 917 at [11].
5 Robert Osborne and others McGechan on Procedure (online ed, Thomson Reuters).
6 Shadbolt v Invercargill City Council [2021] NZHC 2363 at [16].
The prospect of inconsistent findings
[18] EQC’s argument in a nutshell is that if the house is forfeited, then Mr Coles can have suffered no loss and his negligence claim must fail or, at the very least, the damages based on costs to repair could not be recovered. Whatever the house’s state of repair and whatever repairs EQC did or did not do, if the house is forfeit to the Crown then that is a practical end to Mr Coles’ claim. Further, as the damages claimed are based on a cost to repair, if the property is forfeited, then Mr Coles will never be able to repair the house and therefore the cost to repair is not the appropriate measure of loss.7 In short, had the forfeiture application already been heard and determined against Mr Coles, it is hard to see how this current proceeding would have any remaining life.
[19] EQC submits if this proceeding goes ahead, the trial Judge will inevitably have to make some assessment of the strengths of the forfeiture claim in order to deal with EQC’s pleaded defence. Given the Commissioner is not a party to this proceeding, any conclusions by the trial Judge arising from the 8 July 2024 hearing will not bind the Commissioner. That means there is the prospect of two judges of this court reaching different conclusions on the same point, that is, the merits of the forfeiture application.
Does r 10.12 of the Rules apply at all?
[20] In Mr Coles’ notice of opposition, he alleges there are no “common threads” between the two proceedings. I do not accept that. The forfeiture proceeding depends on whether the Commissioner establishes the grounds for such relief. EQC submits it will, in this proceeding, canvas the elements of the forfeiture application in seeking to persuade the Judge in this proceeding that Mr Coles has suffered no loss because he will lose the house to the Commissioner.
[21] I am satisfied that r 10.12 of the Rules is applicable because of that common thread — the two proceedings will canvas the strength of the forfeiture application.
7 Depending on the nature of the forfeiture order, Mr Ferguson, counsel for Mr Coles, submitted it is possible a repair could be carried out.
Prejudice to Mr Coles
[22] I am satisfied there will be prejudice to Mr Coles in a temporary stay as inevitably a new three-week hearing will not be available for an extended period. EQC submits it is not responsible for the delay to date, with the previous hearing dates noted at footnote 2 above, vacated because Mr Coles was not in a position to proceed or did not want to accept the offered date. Once EQC was aware Mr Coles could progress this proceeding, as noted in [9] above, it moved reasonably promptly to bring this application, taking into account the Christmas break and that EQC foreshadowed in November 2023 it was having to consider the implications of this claim being released from the forfeiture proceeding along with funds being released for Mr Coles to run his claim.
[23] It could also be rightly said that, in March 2023 when EQC was the party seeking to advance the proceeding, it knew the forfeiture proceeding was coming and it should have anticipated this issue. Whether or not the forfeiture application was amended, as it now has been, EQC in March 2023 sought the preservation of the fixture date, albeit Ms Eastwick-Field submitted EQC assumed the forfeiture proceeding would have been resolved prior to the 8 July 2024 hearing.
[24] However, at the end of the day, I do not see any way of avoiding the potential for inconsistent findings. EQC pleads in its amended statement of defence (the statement of claim being amended on 2 February 2024 and the amended defence filed 13 February 2024), that:
[I]f and to the extent that the house is forfeit or required to be realised in [the forfeiture proceeding] …. the plaintiff has and will suffer no loss.
[25] Ms Eastwick-Field submitted the risk of forfeiture was not a speculative or remote event and could not be ignored. She submitted that while EQC had incomplete knowledge in relation to the forfeiture, it would nonetheless have to run what amounted to a de facto forfeiture case as part of the 8 July 2024 hearing. Ms Eastwick-Field submitted the judge in the July 2024 hearing would need to determine the likelihood of the outcome of the forfeiture application giving rise to the risk of inconsistent findings in relation to the merits of the forfeiture application in the July hearing and the forfeiture proceeding itself.
[26] The worst-case scenario for Mr Coles is the court concludes at the July hearing that, because the forfeiture claim is likely to succeed, his claim fails but he then goes on to succeed in the forfeiture claim. The stay avoids that possibility.
[27] As to the prejudice to Mr Coles, EQC says as Mr Coles has not expended the repair cost claimed from EQC, he is not out of pocket. As Mr Coles’ claim is for monetary compensation, if he is ultimately successful in both the forfeiture case and in this proceeding, damages could be awarded with reference to updated costings and/or interest. EQC notes there is authority that delay is not so much an issue in a case where the claim is for monetary compensation because delay can be addressed by interest.8 In my view, EQC, having sought the deferral of the July hearing, would be hard pressed to argue Mr Coles’ quantum based on costs of repair should not be adjusted.
[28] The impact of the forfeiture on the 8 July 2024 hearing cannot be ignored. I asked Mr Ferguson whether Mr Coles’ proceeding could continue had a forfeiture order in respect of the house already been made. Mr Ferguson frankly (and I consider properly) acknowledged that forfeiture would make Mr Coles’ case much more difficult but not impossible. EQC submits the presence of the forfeiture issue not only raises the spectre of inconsistent findings, but creates complications for the July hearing, not only in respect of causation (the idea that Mr Coles can suffer no loss if the house is forfeit), but in relation to the assessment of damages should Mr Coles establish a breach of duty. For example, if the Court concluded that forfeiture was more likely than not, but nonetheless a breach of duty had occurred, could Mr Coles still claim damages on a diminutive of value basis and if so, at what date should loss be assessed? As the parties cannot be sure of what the Court will find on the forfeiture issue they would have to prepare different damages submissions and evidence to anticipate possible outcomes creating increased costs and complexity.
[29] I have already accepted there is prejudice to Mr Coles through delay. Mr Ferguson emphasised the importance of Mr Coles being able to have access to justice. Mr Ferguson submitted that the availability of interest or a new valuation date
8 Danone Asia Pacific Holdings Pte Ltd v Fonterra Co-operative Group Ltd [2014] NZHC 1681 at [91].
does not of itself address Mr Coles being deprived of access to the court. The financial consequences of delay can be compensated financially. The access to justice point is capable of cutting both ways. EQC has been ready to run this hearing in the past and has in the past expressed concern about the effect of delay. It is far from ideal that both parties are put into the present position by the forfeiture proceeding not yet having been concluded. I also take into account that should the forfeiture application succeed, it would be unlikely that any residual life in Mr Coles’ proceeding would require a three-week hearing. Accordingly, the stay sought is capable of creating efficiencies not only for these parties but for other litigants seeking access to court hearing time.
[30] In short, the stay avoids the risk for inconsistent decisions and evidential complications in the 8 July 2024 hearing arising from the parties having to anticipate the effect of the forfeiture issue on the correct approach to damages. I recognise there is some prejudice to Mr Coles but equally, EQC has been subject to delay, as already discussed. That is not to say it is a matter of the delay each has or will endure cancelling out but in weighing all the factors, I consider the desirability of avoiding the possibility of inconsistent outcomes and the complications that forfeiture represents for the July hearing, means the July hearing should be vacated and Mr Coles’ proceeding being subject to a purely administrative stay.
[31] Accordingly, I am satisfied EQC is entitled to the orders that it seeks at paras 1 and 2 of its application dated 13 February 2024.
[32] That said, I request the Registrar to allocate a new three-week hearing for Mr Coles’ case. That should be the next available date. To avoid this issue arising again, Mr Ferguson is requested to have Mr Coles’ counsel dealing with the forfeiture matter provide me with a memorandum as to the current status of that proceeding, whether it can be set down and whether a telephone conference should be convened in that matter to ensure it proceeds promptly.
Security for costs
[33] As security for costs was sought in the alternative to the stay, that application is dismissed. Ms Alison, who presented the submissions for EQC on this issue, submitted that whether security would be appropriate in this proceeding will depend
on the circumstances pertaining at that time. I agree. This proceeding will exist in a very different context following the determination of the forfeiture proceeding, in one sense, that is the reason for the stay.
[34]Costs are reserved to be costs in the cause.
Associate Judge Lester
Solicitors:
Russell McVeagh, Auckland
Dempsey Ferguson Law Ltd, Auckland
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