Kilduff v Tower Insurance Limited

[2018] NZHC 1243

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2016-409-000344

[2018] NZHC 1243

BETWEEN

ELIZABETH MARY KILDUFF AND VERITAS (2012) LIMITED
Plaintiffs

AND

TOWER INSURANCE LIMITED

Defendant

Hearing:

Determined on the papers Memoranda:

Joint – 4 May 2018
Plaintiff – 4 May 2018 and 16 May 2018
Defendant – 15 May 2018

Appearances:

C R Johnstone and H Bowering-Scott for Plaintiffs M C Smith and S S McMullan for Defendants

Judgment:

30 May 2018

JUDGMENT OF GENDALL J

KILDUFF v TOWER INSURANCE LTD [2018] NZHC 1243 [30 May 2018]

Introduction

[1]        On 17 April 2018 I issued my substantive judgment in this proceeding (the judgment).

[2]        On 4 May 2018, the parties filed a joint memorandum alleging errors in the calculation of Tower’s maximum liability in the judgment which they say can be corrected under the “slip rule”, r 11.10 of the High Court Rules. The parties could not agree, however, over the implications of those errors and the mathematically correct outcomes that should follow. They have since filed memoranda on those issues. Those memoranda have also addressed other issues of interest calculations and consultants’ fees. These were reserved at [135] in the judgment, and directed at [136] to be the subject of further written submissions.

Errors in judgment calculation

[3]        The plaintiffs submit that the method of calculating the repair cost in the judgment is accurate (that is, basing it off the joint quantity surveyors’ report) but that two of the stated amounts were in error. These errors affected the final sum.

[4]        The plaintiffs are correct that the “base construction cost” referred to at [100] should have been $493,077 rather than $489,077.26 and that the amount for P & G and margin allowances requires a revised calculation. In addition, the stated figure for professional  fees  also  referred  to  at  [100] should  have  been  $81,100  rather than

$61,750. I mistakenly took the total for the latter from Mr Eggleton’s estimate, rather than the sum in accordance with the joint findings made. I apologise for these errors. This means, too, that Tower’s total construction cost (including GST) liability for the purposes of [101] should have been recorded as $871,042.14 rather than $840,330.88.

[5]        In response, Tower suggests that the method of calculation in the judgment was in error. Mr Smith for Tower submits that Mr Eggleton’s costing should have been taken as the starting point. From that point, the additional allowances awarded in the judgment, he says, should have been added. If that approach is taken, the total gross construction cost for repairs, Tower says, comes to $832,727 (including GST).

[6]        The parties’ different methods result in a total difference of $38,315.14. This difference reflects the fact that there were some differences between the costings used in the joint quantity surveyors’ report and the parties’ individual quantity surveyor costings.

[7]        Tower criticises the Court’s use of the joint report as its starting point. Counsel claims that it became outdated given the adjustments made to both experts’ costings before, during and after trial and up to and including the parties’ joint memorandum on 13 December 2017. However, as the plaintiffs note, Tower referred to and relied on the joint report in its closing submissions, albeit noting that it reflects the position as at 27 October 2017.

[8]        Finally, Tower suggests that using the joint report introduces “unnecessary additional complexity”. I disagree. In my view, it is appropriate for the Court to take account of agreement between the parties and the joint report is the only time the quantity surveyors recorded their agreed quantum. I do not consider that using the joint report as a starting point is in error. The totals calculated in it were not affected by later changes to the parties’ positions.

Slip rule

[9]        The mistakes highlighted by the plaintiffs can be corrected under r 11.10 High Court Rules as they are a “clerical mistake or an error arising from an accidental slip or omission”. The sums referred to by the plaintiffs, which I note above, do reflect my intention in the judgment. The power under r 11.10 is discretionary but I consider it should be exercised here. This case has involved a clear mistake that has a marked effect on the outcome of the judgment. Crucially, it does not affect the Court’s reasoning.

[10]      I have broadly rejected the contentions advanced for Tower over changes it suggests are required in the judgment. But, in any event, the mistakes claimed by Tower, in my view, are not suited to amendment under the slip rule as they generally require an alteration to the method by which my calculations were made. Moreover, Tower has provided no sufficient justification as to why its method of calculation should replace the Court’s.

[11]Directions regarding the changes to be made to the judgment are to follow.

Interest

[12]      Turning now to the reserved interest question, Tower submits that interest under the Judicature Act 1908 is not appropriate here. It says this is because the Court has not awarded a money judgment, rather it has established Tower’s maximum liability under the insurance contract.

[13]      However, Mr Smith for Tower does go on to state that, in the spirit of the Court’s suggestion regarding construction cost increases, Tower will make an offer to the plaintiffs for full and final settlement, on the basis of the judgment amount (being the net repair cost) and an allowance for interest of 5 per cent per annum from 14 December 2017 to the date the offer is made.

[14]      Initially, the plaintiffs submitted that interest might more reasonably be calculated from the date the trial commenced, 6 November 2017, rather than the scheduled final hearing date which was vacated, 14 December 2017. However, counsel did not strongly push this submission.

[15] Considering Tower’s concession, it is appropriate for the Court to record Tower’s stated intention. Little would be gained by taking the issue further, and a declaration to the effect outlined at [13] above, amended to provide for interest to be paid to the actual date of payment (given that this is to reflect escalating building costs), will follow.

Plaintiffs’ consultant fees

Submissions

[16]      The plaintiffs pursue reimbursement of the costs of hiring four consultants (from mid-2014 to early 2015) as part of the declaratory relief. The costs total

$24,339.13. The plaintiffs note that those fees do not constitute a disbursement incurred in relation to the proceeding, as per r 14.12.

[17]      On this aspect, at para [125] of the judgment I expressed certain provisional views along the following lines:

[125] But, as to the first aspect, being the plaintiffs’ $24,339.13 claim for consultants’ fees incurred prior to April 2015 noted at [102](a) above, I am of the view that, in all the circumstances prevailing here and in the broad interests of justice, this might represent a justified claim by the plaintiffs. This would be on the basis that they are a proper disbursement incurred from mid-2014 to early 2015 in assisting the plaintiffs in this whole claims process and in galvanising Tower into obtaining proper and reliable damage reports for the house some three to four years after the initial claims.

[18]      The plaintiffs submit that they hired the consultants while Tower was still relying on an inadequate assessment of July 2012. They took this step, the plaintiffs say, because Tower was not making progress. Tower did not accept the consultant’s advice. However, the plaintiffs submit that their reports caused Tower to accept that its existing settlement offer was inadequate. Tower then acted to engage its own consultants. The plaintiffs argue that while none of the four consultants appeared as expert witnesses, their involvement constituted the first substantial investigative steps to ascertain the extent of the earthquake damage.

[19]      The plaintiffs submit that the fees should be compensated as they were incurred for the direct and sole purpose of the notified insurance claims.

[20]      In response, Tower contends that there is no legal basis on which the Court could award these costs. It argues that this claim was advanced as a claim for general damages based on breach of the policy. However, the Court found that there was no breach. Counsel submits that it is not clear what the plaintiffs mean by declaratory relief but there cannot be any relief ordered without a breach of contract.

[21]      Tower claims that it requested information about the fees when Ms Kilduff first raised the issue on 10 June 2015. This claim is strongly disputed by the plaintiffs. Tower says it has still not received that information. It notes that the general basis of the reimbursement request set out in Ms Kilduff’s email of 10 June 2015 was that Tower allegedly would not engage appropriate professionals to progress the repair strategy. However, Tower argues that on 17 July 2014 it offered to do just that but Ms Kilduff resisted. Tower submits it is not consistent with the correspondence for

the plaintiffs to now allege that Tower’s failure compelled them to seek their own reports.

[22]      Tower  nevertheless  has  agreed  to  reimburse  the  plaintiffs  $1,939  for  Mr Sturman’s fees. It says it makes this offer because it concedes that his work in drafting general queries on Tower’s scope of 10 June 2014 may have influenced Tower’s assessment. However, Tower argues the balance of the fees claimed relate to work that did not change Tower’s position. Therefore, it considers it should not be liable for the plaintiffs’ decision to get their own advice.

[23]      The plaintiffs, in reply submissions, state that Tower received the invoices it seeks in June 2015 and discovery provided Tower with all the documentation that exists for the engagement and involvement of all four consultants. Tower also had the benefit of Ms Kilduff’s evidence at trial. The plaintiffs argue that there is no more “supporting information” to be provided.

[24]      The plaintiffs submit that Tower’s approach that it will only meet the costs of consultants where their advice influenced Tower’s assessment is not reflective of the policy wording. They argue that it is also not expressly referred to in Tower’s email to Ms Kilduff on 10 June 2015. Tower said in that email:

… we will consider payment of these fees based on receipt of all supporting information. Please provide full details of costs, including invoices and details of instructions provided when they were engaged.

[25]      The plaintiffs say that Ms Kilduff believed hiring these consultants was absolutely necessary to advance her claim with Tower. As a result of their work, Tower conceded that its June 2014 offer was based on “limited information” and was “out of date”.

Analysis

[26]      It is clear that the costs claimed by the plaintiff cannot be awarded as a disbursement because they were not incurred (or indeed used at the hearing) for the purpose of the present proceeding. The plaintiffs claim the costs as part of “declaratory relief”, but it is unclear what this refers to. Declaratory relief involves

the Court declaring something to be the correct legal position or establishing a person’s rights, and does not necessarily involve the Court ordering a monetary sum be paid.

[27]      I agree with Tower that relief can only be ordered here if a breach of contract is found. This is consistent with how the plaintiffs originally advanced the claim as a claim for general damages based on a breach by Tower of its insurance policy obligations. However, in the judgment I found that there was no breach of the policy. Therefore, there is a reasonably strong argument here that the Court has no power to award the costs sought by the plaintiffs.

[28]      The plaintiffs submit, however, that Tower’s approach is not reflective of the policy wording. The policy wording, however as I see it, does not require Tower to pay the plaintiffs’ costs here. The policy requires Tower to “pay architects’ engineers’ and surveyors’ fees in respect of the rebuilding or repairs where authorised by [Tower]”. The fees claimed by the plaintiffs do not fall under this as Tower was unaware that the plaintiffs had engaged these consultants. Had the plaintiffs put Tower on notice around mid-2014 by indicating that, as a result of Tower’s intransigence and its reliance on a wholly inadequate assessment made in July 2012 the plaintiffs had no choice but to get their own experts’ reports to achieve some progress in their (otherwise stalled) claim, in my view, the position may very well have been different. This would stem from Tower’s general implied duty to act in good faith in addressing the plaintiffs’ claim under the policy. But, as I understand the position, the plaintiffs at the time did not put Tower on such notice. Notwithstanding what I have outlined at para [17] above relating to the preliminary comments I made at [125] of the judgment, in my view, this tends to support the position that Tower should not be responsible in all the circumstances here for the early consultants’ fees incurred by the plaintiffs, particularly where those consultants were not relied upon at trial.

[29]      It is true that by its email of 10 June 2015, Tower did indicate that it would consider paying the plaintiffs’ costs. However, that email provided no indication as to how the assessment would be made. Although there must be some real sympathy here for the position the plaintiffs found themselves in around 2014/2015, in all the circumstances here, but only by a reasonably fine margin, I find that the plaintiffs have no clear legal basis to criticise Tower’s approach that it would only meet the costs of

the plaintiffs’ consultants where obtaining their reports was pre-approved by Tower, or where the consultant’s advice influenced Tower’s assessment.

[30] On all this, however, as I note at [22] above, Tower has agreed to reimburse the plaintiffs an amount of $1939 for Mr Sturman’s fees. An order to this effect is to follow.

Result

Errors in judgment calculation

[31]      Pursuant to r 11.10 High Court Rules (the slip rule) I direct that my substantive judgment dated 17 April 2018 in this proceeding is recalled and reissued with the following consequential changes as noted above:

(a)At para [100] the figure $489,077.26 in line 2 is deleted and substituted is the figure $493,077.00.

(b)At para [100] the figure $61,750.00 in line 3 is deleted and substituted is the figure $81,100.00.

(c)At para [101] the figure $730,722.50 in line 1 is deleted and substituted is the figure $757,427.94.

(d)At para [101] the figure $840,330.88 in line 2 is deleted and substituted is the figure $871,042.14.

(e)At para [132] the figure $840,330.88 in line 3 is deleted and substituted is the figure $871,042.14.

(f)At para [132] the figure $597,804.75 in line 5 is deleted and substituted is the figure $628,516.01.

(g)At para [134] the figure $597,804.75 in line 5 is deleted and substituted is the figure $628,516.01.

Interest

[32] As noted at [13] above, a declaration is now made that the plaintiffs are entitled to interest calculated at 5 per cent per annum on the amount of $628,516.01 noted at [31](g) above, from 14 December 2017 to the date of payment by Tower to the plaintiffs of this amount.

Plaintiffs’ consultants’ fees

[33] As noted at [30] above, a declaration is now made that the plaintiffs are to be reimbursed by Tower the agreed amount of $1939.00 for Mr Sturman’s fees.

Costs on this proceeding

[34]      As to any issues which remain outstanding relating to costs and disbursements on the hearing of this proceeding on which the plaintiffs have largely succeeded, in the event that counsel are unable to agree between themselves on this issue then they may, if required, file further memoranda sequentially for consideration by the Court.

...................................................

Gendall J

Solicitors:

Wynn Williams, Christchurch Gilbert Walker, Auckland

Copy to Richard Johnstone, Barrister, Christchurch