Freer v Earthquake Commission

[2024] NZHC 1346

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2021-409-428

[2024] NZHC 1346

BETWEEN

ANDREW ROBERT FREER and LUCINDA RAE McEVEDY
Plaintiffs

AND

EARTHQUAKE COMMISSION

Defendant

Hearing:

On the papers

Counsel:

G D R Shand for Plaintiffs

C J Curran and N J C Wilson for Defendant

Judgment:

27 May 2024

JUDGMENT OF ASSOCIATE JUDGE PAULSEN

(Costs)

This judgment was delivered by me on 27 May 2024 at 3.15 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date:

FREER v EARTHQUAKE COMMISSION [2024] NZHC 1346 [27 May 2024]

[1]                  The plaintiffs applied for leave under r 4.24 of the High Court Rules 2016 to represent owners of residential properties whose claims made to the Earthquake Commission (EQC) for increased liquefaction vulnerability (ILV) and increased flooding vulnerability (IFV) land damage under s 19 of the Earthquake Commission Act 1993 (the Act) were settled by payment on a diminution of value (DOV) basis. The application was opposed by EQC  and determined by me in  judgments  dated  29 May 2023,1 and 14 December 2023.2

[2]                  In the judgment of 29 May 2023 (the first judgment), I found the plaintiffs had not identified a suitable common issue as to whether EQC’s use of DOV was in accordance with its obligations under s 19 of the Act. I adjourned the application to allow the plaintiffs a further opportunity to adequately identify a suitable common issue.

[3]                  The plaintiffs then filed an amended application under r 4.24. In my judgment of 14 December 2023 (the second judgment), I granted the plaintiffs leave to bring a representative proceeding but on more limited terms than had been sought.

[4]                  The plaintiffs applied by separate applications for leave under s 56(3) of the Senior Courts Act 2016 to appeal to the Court of Appeal from the first judgment and aspects of the second judgment. EQC applied for leave to appeal aspects of the second judgment only. Each party opposed the other’s application/s for leave to appeal.

[5]                  In a judgment of 24 April 2024, I granted the plaintiffs leave to appeal both judgments and EQC leave to appeal the second judgment.3 In respect of costs, I noted both parties had mixed success. My initial view was that costs should lie where they fall but if either party wished to seek costs I allowed them to apply by memorandum.4

[6]                  The plaintiffs have applied for costs. EQC considers costs should lie where they fall.

1      Freer v Earthquake Commission [2023] NZHC 1301.

2      Freer v Earthquake Commission [2023] NZHC 3662.

3      Freer v Earthquake Commission [2024] NZHC 912.

4      At [46].

The plaintiffs’ submissions

[7]                  The plaintiffs argue that they are entitled to costs because, overall, they were the successful party. This is because they say they were successful in obtaining leave to appeal on two applications whereas EQC was successful in obtaining leave to appeal on only one application.

[8]                  The plaintiffs argue that while all the arguments they advanced in support of their applications for leave to appeal were not accepted, success on more limited terms is still success.5 They further submit it is undesirable if they, as the successful parties, were deprived of costs merely because they did not succeed on all grounds or issues canvassed in the hearing.

[9]                  A second argument advanced by the plaintiffs relies upon r 14.10 and 14.11 of the High Court Rules 2016. They submit EQC rejected a without prejudice save as to costs offer whereby each party would mutually consent to the other’s application/s for leave to appeal. The plaintiffs submit that the offer effectively replicated the result of my judgment granting both parties leave to appeal, and it is therefore just that costs be awarded to the plaintiffs.

[10]              The offer is said to have been made in an email dated 28 February 2024 between counsel which was headed “McEvedy/EQC – WOPSATC” and read:

I refer to our telephone discussion earlier this afternoon

I proposed to you mutual consent to leave to appeal. You said no and that EQC opposed Mcevedy [sic] & Freer getting leave to appeal anything.

My analysis

Were the plaintiffs the successful party?

[11]              While all issues of costs are discretionary, the court must exercise its discretion having regard to the principles in the High Court Rules which include that the party who has lost should pay the costs of the party who has won unless there are exceptional

5      Weaver v Auckland Council [2017] NZCA 330 at [26].

reasons to the contrary.6 Once the court has determined who is the successful party overall it may refuse to award costs if “that party has failed in relation to a cause of action or issue which significantly increased the costs of the party opposing costs”.7

[12]              It is not always straightforward to determine which is the successful party. As Brown J noted in Lawrence v Glynbrook 2001 Ltd, this assessment requires both a consideration of which party won the principal contests of law and fact and a realistic appraisal of the end result.8

[13]              The position taken by the plaintiffs that they were successful overall because they obtained leave to appeal on two applications is not correct. Leave to appeal was sought for decisions made in relation to just one application, that is the plaintiffs’ application to bring a representative action under r 4.24. The plaintiffs filed two applications for leave to appeal only because their application under r 4.24 as originally advanced was held in my first judgment to be deficient, and they were effectively granted an indulgence to amend their application and try again.9 It would be bizarre if their lack of success on their first attempt should now benefit them in a costs context.

[14]              Further, as EQC correctly points out, there was no need for the plaintiffs to make two applications for leave to appeal, they could have simply amended their original application for leave to appeal to include the second judgment. EQC is again correct when it says that the plaintiffs’ procedural choices should not distort the costs position.

[15]              If I was inclined to decide the issue of which party was successful on strictly numerical terms it would not be on the basis of the number of applications filed. A better measure would be the parties’ respective success on issues advanced at the hearing. If the matter was looked at in that way, I would consider EQC was the successful party and would be entitled to costs. I note the Court undertook such an

6      High Court Rules 2016, r 14(1)(a); Shirley v Wairarapa District Health Board [2006] NZSC 63, [2006] 3 NZLR 523 at [15] and [19].

7      High Court Rules 2016, r 14.7.

8      Lawrence v Glynbrook 2001 Ltd [2015] NZHC 1005 at [8].

9      Freer v Earthquake Commission, above n 1, at [103].

analysis in Emmons Developments New Zealand Ltd v Mitsui Sumitomo Insurance Co Ltd but ultimately held that success could not be determined on that basis alone, and I do not do so here.10

[16]              The reality is that the plaintiffs made one application for leave under r 4.24. Both parties were equally successful in obtaining leave to appeal the Court’s rulings on that application and equally unsuccessful in opposing each other’s application for leave to appeal.

The without prejudice save as to costs offer

[17]              There is no evidence in relation to the circumstances under which the email of 28 February 2024 was sent but, on its face, it does not contain an offer but merely records a discussion between counsel. Counsel wishing to make an offer under r 14.10 should do so explicitly and not in a manner that is abstruse.

[18]              The plaintiffs’ position also assumes that the Court will simply rubberstamp an agreement between counsel and grant leave to appeal without further costs being incurred. That is not the case. In deciding applications under s 56(3) of the Senior Courts Act the court exercises an important function to filter out unmeritorious appeals and will only grant leave where the significance or implications of an arguable error of fact or law warrants it.11 It is up to the parties to satisfy the Court such circumstances exist.

[19]              The fact counsel agree as between themselves that leave should be granted does not release the court from the obligation of making a decision on the matter. This is well known to counsel in this case who acted in Ideal Investments Ltd v Earthquake Commission where, despite EQC not opposing leave to appeal being granted, the Court required submissions to be filed by the applicant and then refused to grant leave.12

10     Emmons Developments New Zealand Ltd v Mitsui Sumitomo Insurance Co Ltd [2020] NZHC 932 at [30]–[35].

11     Finewood Upholstery Ltd v Vaughan [2017] NZHC 1679 at [9] and [13].

12     Ideal Investments Ltd v Earthquake Commission [2022] NZHC 1079 at [5] and [9].

[20]              It follows that even if the email of 28 February 2024 was to be regarded as an offer under r 14.10 which EQC should have but did not accept (and I do not consider that is the case), that did not have significant costs consequences for the plaintiffs. To the extent the plaintiffs chose to oppose EQC’s application for leave to appeal, that can only have been a tactical decision in circumstances where they considered such leave should be granted. Furthermore, as far as their own application is concerned they were always going to be required to establish to the satisfaction of the Court that leave to appeal should be granted, regardless of what position EQC took on the matter.

Result

[21]              I reject the two bases upon which the plaintiffs seek costs on the applications for leave to appeal. Costs on those applications shall lie where they fall.

O G Paulsen Associate Judge

Solicitors:

Grant Shand, Auckland Russell McVeagh, Wellington