EQC Action Group v Earthquake Commission

[2016] NZHC 1335

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2015-409-000754 [2016] NZHC 1335

UNDER

the Declaratory Judgments Act 1908 and

the inherent jurisdiction of the High Court of New Zealand

BETWEEN

EQC ACTION GROUP Plaintiffs

AND

EARTHQUAKE COMMISSION Defendant

Hearing:	20 June 2016 (Determined on the papers)
Counsel:	P Woods for Plaintiffs J A Knight for Defendant
Judgment:	20 June 2016

COSTS JUDGMENT OF ASSOCIATE JUDGE MATTHEWS

[1]      The plaintiffs are owners of residential buildings adversely affected by the Christchurch earthquake sequence, and collectively describe themselves as the EQC Action Group (the Group).  The defendant is a Crown entity under the Earthquake Commission Act 1993.  The Group brought this application seeking declarations in relation to the obligations of the Earthquake Commission (EQC) under the Act. When the proceeding was filed on 17 November 2015 the Group also filed two affidavits in support.

[2]      The proceeding was filed after negotiations between the Group and EQC, and those negotiations continued after service of the application, finally resulting in a joint press statement being released, and the plaintiffs discontinuing this proceeding.

[3]      The Group  and  EQC  entered  a  settlement  agreement  recording,  amongst other matters:

EQC ACTION GROUP v EARTHQUAKE COMMISSION [2016] NZHC 1335 [20 June 2016]

If either party wishes to seek costs in the Proceeding it must apply to the Court within ten working days of the filing of the Notice of Discontinuance. If no application is made within that period then the parties agree that the costs in the Proceeding will lie where they fall.

[4]      The Group and EQC both seek costs.

[5]      Rule 15.23 of the High Court Rules requires a plaintiff, on discontinuing a proceeding, to pay the defendant’s costs unless the defendant agrees otherwise, or the Court otherwise directs.  No agreement has been reached.

[6]      The principles to be applied by the Court in this circumstance are discussed in Earthquake Commission v Whiting, van Limburg and Ryde: The Court said:1

...  There is no doubt that when considering a plaintiff’s application for an order of this nature, the Court has a discretion to order that costs should lie where they fall or that the defendant should pay the costs of the plaintiff in whole or in part.   This discretion reflects the general rule that all matters relating to costs are at the discretion of the Court.   The discretion is not unfettered, but is qualified by the specific costs rules.2

[7]      After noting that the discretion in the Court may be exercised in the interests of justice where it is just and equitable to displace the r 15.23 presumption,3  the Court went on to say that in deciding whether it is just and equitable to exercise its discretion,  the  Court  may  consider  the  parties’ conduct  in  the  matter  and  the reasonableness of their respective stances, including the reasons why the plaintiff brought and continued the proceeding and the defendant opposed it.   Finally, of

relevance to the present case, the Court of Appeal also said it will not undertake a review of the merits of the plaintiff’s claim unless they are immediately apparent because to undertake a review of this kind would result in a trial, which is contrary to the object of r 15.23.

[8]      Given  the  mandatory  requirement  in  r  15.23  that  the  plaintiff  pay  the

defendant’s costs unless the parties agree, or the Court orders otherwise, the starting point where agreement has not been reached is with EQC’s application for costs

1      Earthquake Commission v Whiting, van Limburg and Ryde [2015] NZCA 144 at [63]-[69].

2      At [65], citing Manukau Golf Club Inc v Shoye Venture Ltd [2012] NZSC 109, [2013] 1 NZLR

305 at [7].

3      Citing Kroma Colour Prints Ltd v Tridonicato NZ Ltd NZCA 150, (2008) 18 PRNZ 973 at [12]

and [29].

against the Group.  EQC’s position is straight-forward.  It says that the Group has not displaced the rule by showing any sound basis upon which the Court should make any order other than that the Group should pay EQC’s costs.  It claims costs on a 2B basis for five attendances relating to management conferences in the EQC List in the Christchurch Court, and seeking timetable variation.   The sum claimed is $4,237. No disbursements have been incurred.   Unless the Group can show that the Court should direct otherwise, EQC is entitled to costs as claimed.

Has the Group shown that an order should be made directing incidence of costs different from that specified in r 15.23?

[9]      The first point made by the Group is that the settlement agreement overrides the presumption in r 15.23 as it expressly allows for either party to apply to the Court, if that party wishes to seek costs.   I do not accept that submission.   The reference in the settlement agreement to applying to the Court is necessarily acceptance of the role of the Court in fixing costs where they are not agreed.  The Court has an overall discretion in relation to costs, but must apply that discretion on a principled basis taking into account the specific provisions of the High Court Rules which are relevant. This includes r 15.23.

[10]     Secondly, the Group says its proceeding was “clearly justified” because EQC did not take any action to strike it out, or to file a defence, and was only discontinued because EQC agreed to issue a joint press statement as the plaintiffs’ solicitors had suggested a few months before the proceeding was  filed.   The Group  says the proceeding was settled in the manner the plaintiff had proposed and EQC’s objection to  resolving  any  differences  it  had  with  the  Group  only  fell  away  when  the proceeding was issued.

[11]     In response EQC says that the proceeding was susceptible to being struck out but EQC did not do so because the Group agreed to discontinue it.  It preferred to settle the agreement rather than to spend money and time on an interlocutory application, not because it considered the proceeding had any merit.

[12]     This element of the Group’s argument appears to suggest that as it was able to

resolve  its  differences  with  EQC  by  way  of  settlement,  which  resulted  in  a

discontinuance, it follows that the presumption is displaced.  I do not accept that the presumption in r 15.2 is displaced merely because a defendant does not apply to strike out, or because an acceptable resolution is achieved by agreement.  The very fact that costs were not agreed as part of that resolution, but were left for later agreement  or  determination  by  the  Court,  demonstrates  the  fallacy  in  this proposition.

[13]     The third, but related point made for the Group is that the practical effect of the joint statement is the same as if the Group had obtained declarations from the Court.   With this submission EQC takes strong issue.   It says that the agreement reached did not remove any ambiguity or inconsistency, that being the Group’s claimed reason for applying for declarations, that the agreement records that EQC will act in accordance with the Earthquake Commission Act 1993, which it has never disputed, and that it had agreed with the Group on key aspects of the agreement before the proceeding was commenced.   It says that although the Group refers to several examples of individual EQC personnel and contractors allegedly applying a different interpretation of the Act this does not evidence a genuine or indeed any dispute between EQC and the Group as to the proper interpretation of the Act.  The declarations raised matters of interpretation, not the application of that interpretation to any individual case.

[14]     After reviewing the respective positions of the parties in relation to this case it can be said, in my view, that the Group has, by negotiation, achieved a modest degree of success in relation to interpretation of EQC’s responsibilities, but little if any more than that.   It is not clear that it was necessary for the proceeding to be brought in order to achieve the agreed outcome.  Negotiations were underway on the points raised before the proceeding was brought, and continued afterwards, without EQC even engaging in the case.  The Group claims a change of stance by EQC after the proceeding was filed.  Negotiations are a dynamic process and various factors are catalysts for different stances taken by parties at various times.  The service of the proceeding may have inspired EQC to focus more on resolving the issues raised by the Group than it had before but I do not see anything to suggest a major shift in EQC’s position in relation to interpretation which could not have been achieved without the proceeding having been brought.  Thus, although it is not for the Court

on this application to embark on a review of the merits of the Group’s claim I can safely go so far as to say that I am not satisfied that the Group could regard the outcome of the case as an achievement in the context of the declarations it sought, or in any real sense as a win.  I think the proceeding is better regarded as a step in the overall process of the Group trying to achieve acceptance of its interpretation of certain of EQC’s responsibilities.

[15]     It follows that I do not see the outcome of the case as a factor which should persuade the Court that the presumption in r 15.23 should not apply.

[16]     Finally, the Group refers to the extent of the evidence which it prepared and filed  in  support  of the  application.    It  says  this  was  the  foundation  for  EQC’s admission in the joint statement released by the Group and EQC in respect of criteria to be applied in relation to floor levels.   This relates to the application of MBIE guidelines.4    The impression I have formed is that the evidence presented on this point for the Group is likely to have been a causative factor in achieving the final outcome, but in the context that, as EQC points out, in C & S Kelly Ltd v Earthquake Commission, the parties and the Court proceeded on the basis that EQC’s repairs to

any earthquake damage to the floors of the building in issue were to be undertaken to replacement value standard.  In other words, neither the parties nor the Court in that case proceeded on the basis that the MBIE guidelines were more than just that.5   I do not  think,  therefore,  that  weight  should  be  given  to  the  extent  of  the evidence

prepared for the Group on the issue now before the Court.

4      Ministry  of  Building  Innovation  and  Employment  guidance  document  “Repairing  and

Rebuilding houses affected by the Canterbury Earthquakes”.

5      C & S Kelly Ltd v Earthquake Commission [2015] NZHC 1690.

Conclusion

[17]     For the reasons given I conclude that the Group has not demonstrated that it would be just and equitable to displace the presumption in r 15.23.  It follows that I award costs to EQC in a sum of $4,237, noting that it does not claim any sum by

way of disbursements.  I decline the application by the Group for costs.

J G Matthews

Associate Judge

Solicitors:

Anthony Harper Lawyers, Christchurch. Chapman Tripp Sheffield Young, Wellington.