Dowsett v Earthquake Commission
[2015] NZHC 1373
•17 June 2015
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2013-409-1512 [2015] NZHC 1373
BETWEEN LINDA ADELE DOWSETT AND
MICHAEL ROY DOWSETT Plaintiffs
AND
EARTHQUAKE COMMISSION First Defendant
AA INSURANCE LIMITED Second Defendant
Hearing: 17 June 2015
(On the papers)
Appearances:
AJD Ferguson for Plaintiffs
G T Carter for First Defendant
P Hunt for Second DefendantJudgment:
17 June 2015
JUDGMENT OF MANDER J
[1] The plaintiffs have sought leave to file and serve a second amended statement of claim. Leave is opposed by the second defendant. The plaintiffs have discontinued their claim against the first defendant. The first defendant does not oppose the amended pleading insofar as it reflects the agreed position between those two parties. The first defendant otherwise abides the Court’s decision.
Background
[2] The plaintiffs claim their house was damaged by earthquakes in September
2010 and February 2011. They lodged claims with the defendants, the Earthquake
Commission (EQC), and their insurer, AA Insurance Ltd (AA Insurance). The claims were not settled, and proceedings were commenced in late 2013.
DOWSETT v EARTHQUAKE COMMISSION & ANOR [2015] NZHC 1373 [17 June 2015]
[3] In April 2015, EQC advised the parties that it considered the plaintiffs claim was over cap for the damage caused by the February 2011 earthquake. It paid the full amount claimed for the February earthquake and an additional payment for the earlier September earthquake. Previously, EQC had taken the position that the damage to the property was under the statutory cap. This change in its position has resulted in the discontinuance of the proceeding against it, subject only to the resolution of costs.
[4] On 25 May 2015, at the instigation of the plaintiffs, the proceeding was the subject of a telephone conference before Dunningham J. The telephone conference was initiated by the plaintiffs because of non-compliance by the defendants with timetabling directions for service of evidence-in-chief. Until confirmation by EQC that the claim was over cap, the second defendant had taken the position that it had no claim to defend, as its liability under the insurance policy was not triggered until EQC cover was exhausted.
[5] During the course of the telephone conference, clarification was sought regarding the plaintiffs’ position in respect of EQC, in light of its revised position regarding the statutory cap. At that time, it appeared there remained some dispute between the plaintiffs and EQC as to whether the latter had met its obligations to pay for damage incurred in the September earthquake. Dunningham J observed as follows:
[5] If the plaintiffs wish to keep the first defendant in the frame, because of a risk that the second defendant will argue that the claim has been wrongly apportioned, then the plaintiffs will need to seek leave to amend their pleadings after the close of pleadings. Failing that, it is to be expected that the plaintiffs will discontinue the claim against the first defendant, as was the first defendant’s understanding when it made the payments. Provision for this is made in the timetabling directions below.
[6] A further issue raised at the time of the telephone conference related to the plaintiffs’ pleaded relief in respect of the second defendant. AA Insurance raised a concern that the plaintiffs’ sought a monetary award against the second defendant for the cost to rebuild their house. It was submitted the pleaded relief erroneously assumed that the second defendants obligations were to make a cash payment, when in fact the second defendants obligation under the policy was to undertake
reinstatement work. The second defendant submitted the proper claim for relief was to seek a declaration as to the scope of works which must be undertaken to rebuild the house to the standard provided in the policy, and that amendment of the statement of claim should be made in advance of trial, and not during it. Dunningham J observed that it was for the plaintiffs to decide how to plead their claim. She noted, however, that it would tell against the granting of leave if amendment was sought at a later stage of the proceedings if the plaintiffs had ignored earlier advice that the relief sought was inappropriate.
[7] A timetabling direction required the plaintiffs to file any application for leave to amend its pleading by 5 June 2015.
[8] On 5 June, the Court received the plaintiffs’ (informal) application for leave to file and serve a second amended statement of claim. The application was made by way of a memorandum from counsel.
[9] In a minute of 9 June, Dunningham J observed that the application to file a second amended statement of claim in response to her timetabling direction of 25
May was not consistent with the amendments that were discussed at that time. The proposed second amended statement of claim neither completely discontinued against EQC (as it still sought costs), nor did it make any claim in relation to the September event.
[10] The Court noted the real change to the pleading was to add a claim based on implied terms of the policy and breaches of the Fair Insurance Code, and that it now sought a significantly reduced sum for what is described as “reinstatement costs”. A timetable was put in place, by which opposition by either defendant to the proposed amended pleading was to be filed. The Court would then deal with the matter on the papers, as I now proceed to do.
The extent of the amendments in respect of which leave is sought
[11] Neither defendant opposes leave being granted to amend the pleadings to reflect the recent payments by EQC to the plaintiffs and their discontinuance against the first defendant.1
[12] The second defendant also does not oppose leave being granted to amend the pleadings to reflect the amended quantum now claimed, or the amended prayer for relief in respect of the first cause of action.2
[13] The second defendant, however, opposes amendments to the plaintiffs’ pleading, which introduce implied terms of the policy, namely that the second defendant would:
(1) Process a claim within a reasonable period of time;
(2) Act reasonably in handling any claim under the policy; (3) Pay a valid claim with [sic] a reasonable time.
[14] The plaintiffs have also introduced into their pleading reference to the Revised Fair Insurance Code, alleging that the second defendant “is/was required to”:
(1) Settle all valid claims quickly and fairly;
(2) Meet best practice timeframes for responding to a claim, until the claim is resolved;
(3) Communicate reasonably and effectively with the plaintiff concerning disclosure of key information;
(4) When a catastrophe/disaster strikes:
(a) Use its best efforts to meet all of the its commitments to the
Code;
(b) Respond as quickly as possible and in a professional, practical and compassionate manner;
(c) Prioritise service for its most vulnerable customers.
1 Paragraphs 13 and 14 of the proposed second amended statement of claim.
2 Paragraphs 17 and 18.
[15] The inclusion of alleged implied terms of the policy and the Revised Fair Insurance Code is the basis upon which a previously unpleaded second cause of action against the second defendant is sought to be introduced into the plaintiffs’ statement of claim. It is described as an action for “breach of obligations”.3
[16] Finally, new particulars of loss are pleaded. The statement of claim originally read as follows:4
10By an earthquake on 22 February 2011 the plaintiffs suffered sudden and accidental loss to their house, including inter alia:
(1) Cracking to internal linings;
(2) Differential settlement with a floor level differential of 56 mm;
(3) Cracking to ring foundation; (4) Plumbing apparatus damage; (5) Damage to subfloor structure; (6) Liquefaction beneath floor;
(7) Property dropped 200 mm.
To that list of specified loss it is proposed to add:5
(8) Concrete slab extension bulged in lounge and kitchen;
(9) Concrete wall between neighbours house fell onto the external cladding;
(10) Support framing for header tank on roof became unstable; (11) Floor on entry to lounge felt as though it dropped slightly; (12) Some doors and windows became hard to open and close;
(13) Extensive sub-floor damage from ponding caused by severed waste pipe to washing machine and multiple leaks from hot water cylinder and associated pipes.
3 Paragraphs 22-26.
4 Paragraph 10(1)-(7).
5 Paragraph 10(8)-(13)
The second defendant’s opposition
[17] The second defendant opposes these amendments. It submits the new cause of action alleging “breach of obligations”, based on alleged failure to comply with conditions and the Revised Fair Insurance Code, will require it to prepare and file substantially more evidence. It has served its briefs of evidence. The evidence it has prepared and filed is directed at addressing the existing cause of action, based upon the plaintiffs’ entitlement under the policy. Additional evidence would need to be briefed relating to the way in which it processed, handled and responded to the claim. Furthermore, it would require further and better particulars in the absence of any pleaded detail as to how it has breached the Revised Fair Insurance Code, or how the alleged implied terms of the policy have been breached.
[18] In relation to the newly pleaded particulars of loss, the second defendant submits that for some two years now the main issue in the case was the alleged deterioration of the floor, subfloor and joist structures of the house, caused by exposure to moisture from a damaged hot water cylinder connection. It has referred to a number of documents which identify the issues in dispute between the parties. None of those documents makes reference to the new particulars of loss now alleged, nor the allegation based on breach of implied terms or the fair insurance code.
[19] These documents include the plaintiffs own memorandum for the issues conference on 17 December 2013, which identifies the damage or loss relied upon being the first six listed particulars contained in the statement of claim. In a minute of Wylie J of 17 December 2013, the nature of the claim is recorded in accordance with the terms put forward by the plaintiffs in their memorandum, as previously described.
[20] The plaintiffs’ memorandum of 21 August 2014, filed for the purpose of a telephone conference, provides the same description of the damage to the house limited to the deterioration of the floor. In the subsequent minute of Kos J, made in the wake of a joint report by the parties’ experts, he records disagreement regarding the appropriate method to remediate the damage to the house. This relates to the
type of piles required to effect the repair. The identification of the dispute between the parties does not extend beyond this disagreement.
[21] The second defendants submit that the conferral of experts to date and the subsequent prepared briefs of evidence have been directed to the pleaded issues as they have so far been defined. The addition of previously unidentified heads of damage or loss, including, for example, external cladding, stability of a header tank on the roof, and issues with windows, will require it to make further inquiries of its experts and prepare further evidence.
Decision
[22] In the absence of opposition, the plaintiffs have leave to amend their pleading to reflect the payments from EQC and the discontinuance of their claim (apart from costs) in respect of that party.6 Leave is also granted to amend the pleading to reflect the revised quantum of the plaintiffs’ claim.7 Similarly, in respect of the amended prayer for relief for the first cause of action, leave is granted. With one exception,
leave is otherwise declined.
[23] The plaintiffs have filed a memorandum, which annexes the proposed second amended statement of claim, but have provided no justification or submission in support of why some four weeks from trial they have sought to expand their claim in the manner proposed. The amendments do not accord with those previously discussed and contemplated by Dunningham J at the telephone conference on 25
May 2015.
[24] The plaintiffs’ claim was commenced in September 2013. Until the plaintiffs’ application to amend its pleading on 5 June 2015, the parties have proceeded on the understanding that the plaintiffs’ claim was based on the express written terms of the policy of insurance, and sought recovery of the cost to remediate damage caused to their house as a result of the February 2011 earthquake. The parties proceeded on the basis of the plaintiffs’ description of the sudden and accidental loss to their
house, particularised in their statement of claim. Experts were instructed. They met
6 Paragraphs 13 and 14.
7 Paragraphs 17 and 18.
and conferred on the basis of the identified damage the subject of the claim. A joint report was subsequently received based on that claim.
[25] In the absence of any assistance from the plaintiffs in explanation or support of the amendments sought, and with the exception of what appears to be particularisation of subfloor damage, the additional particulars of loss now sought to be introduced do not appear to have been raised previously, and have not to this point featured in this proceeding.
[26] An amendment is sought to add a further particular of sudden and accidental loss suffered by the plaintiff, being:
(13) Extensive sub-floor damage from ponding caused by severed waste pipe to washing machine and multiple leaks from hot water cylinder and associated pipes.
[27] This particularised source of damage appears to have some overlap with the original claim that the main damage to the house was caused by exposure to moisture from a damaged hot water cylinder connection. I also note that, arguably, it is a subset of the original damage pleaded, described as “(4) Plumbing apparatus damage”. I am therefore prepared to grant leave to add those particulars to the alleged damage pleaded by the plaintiffs.
[28] With regard to the additional particulars relating to separate discrete alleged areas of damage leave is not granted as it will require further evidence to be briefed in relation to issues which have not previously been formally identified to the second defendant.
[29] The additional new second cause of action “for breach of obligations”, based on alleged implied terms of the policy and the Revised Fair Insurance Code, opens up an entirely separate and fresh claim that, to date, has not previously been raised, and in respect of which the second defendant has received no prior notice.
[30] The proposed allegations raise entirely new issues not previously contemplated by the proceeding, nor referred to by the plaintiffs during the course of this matter. Notwithstanding amendment of the plaintiffs’ pleading, including
amendment of the pleaded relief, being the subject of discussion at the telephone conference of 25 May, no mention was made of these proposed significant additions to the plaintiffs’ claim. To allow such amendments would prejudice the second defendant. It would be required at late notice to brief a significant body of fresh evidence to meet these previously undisclosed allegations.
[31] Accordingly, other than those parts of the proposed amended pleading in respect of which there is no opposition, and the identified particular of loss which I have identified as being supplementary, or in amplification of already pleaded earthquake damage, the plaintiffs’ application to amend their pleading is declined.
[32] I direct the plaintiff to file an amended statement of claim which accords with this ruling.
[33] Costs on the plaintiffs’ application are reserved.
Solicitors:
Grand Shand, Christchurch
Chapman Tripp, Christchurch
McElroys, Auckland
0
0
0