Mathias v Earthquake Commission
[2022] NZHC 2941
•9 November 2022
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2021-009-2441
[2022] NZHC 2941
BETWEEN CAROL ANN MATHIAS
Plaintiff
AND
THE EARTHQUAKE COMMISSION
Defendant
Hearing: 8 November 2022 (By telephone) Counsel:
G Shand for Plaintiff
C J Curran and M L Campbell for Defendant
Judgment:
9 November 2022
JUDGMENT OF ASSOCIATE JUDGE LESTER
(Application for directions in relation to interim settlements and access to funding agreement)
MATHIAS v THE EARTHQUAKE COMMISSION [2022] NZHC 2941 [9 November 2022]
[1] The background to this judgment is set out in my judgment of 23 August 2022.1 Ms Mathias was granted leave on an unopposed basis to sue as a representative plaintiff.
[2] Ms Mathias purchased a property in September 2015 that had been damaged in the Canterbury Earthquakes but which she understood had been repaired by The Earthquake Commission (EQC). Ms Mathias says after purchasing the property she discovered the EQC repairs did not remediate the property to the standard required by the Earthquake Commission Act 1993 (the Act) and the additional repairs required to bring the work up to the standard under the Act exceed the statutory cap. Ms Mathias brings a claim in negligence against EQC.
[3] On 14 November 2022 a hearing is scheduled to determine the notice to be provided to class members, and Ms Mathias’ application to vary the class.
The current applications
[4] On 25 October 2022, EQC sought two orders on an urgent basis. The first is that EQC may continue on an interim basis to negotiate and settle with individual customers who fall within the represented class with whom the process of resolving their individual claim is underway or, the customer is already participating in the Government’s on-sold policy. Second, directing counsel for the plaintiff to disclose the litigation funding agreement between the plaintiff and Canterbury Litigation Funding Ltd (the Funding Agreement), subject to any reasonable redactions relating to confidential, litigation sensitive or privileged information.
[5]Both applications are opposed.
Orders preserving EQC’s ability to settle
[6] The Court’s supervisory jurisdiction over representative proceedings extends to settlement communications with potential class members.2 Pursuant to that
1 Mathias v The Earthquake Commission [2022] NZHC 2097.
2 Ross v Southern Response Earthquake Services Ltd [2021] NZHC 2453 at [4(a)]. For more on the supervisory jurisdiction, see further Southern Response Earthquake Services Ltd v Ross [2020] NZSC 126, [2021] 1 NZLR 117 at [81], [85], [87] and [89]; Ross v Southern Response Earthquake
jurisdiction, the Court exercises a protective role over potential class members.3 The Court is concerned to prevent communications to class members that are misleading, coercive, or similarly unacceptable and where that is the case it may intervene to permit those communications.4
[7] The Court will be conscious of the potential for class members to be confused by communications from either party (or both) following an application by a representative plaintiff for approval of a class notice.5 A communication standing alone must be clear and where there is potential for them to be read around the same time as each other, competing communications should not lead to confusion or misunderstanding.6 The Court may intervene to prevent confusing communications.
[8] Counsel for EQC is concerned that competing communications from the plaintiff, being the proposed class notice to be approved pursuant to the hearing on 14 November 2022, and the defendant’s communications about what it calls its “new settlement package” could confuse potential class members. EQC seeks, for the avoidance of doubt, an order confirming its validity to settle individual customer’s claims in the period until the Court determines both parties’ class communication applications.
[9] Mr Shand, counsel for Ms Mathias, in his submissions firstly disputes the need for urgency and indeed the need for the order at all when, in the judgment of 23 August 2022, it was ordered:7
[29] The plaintiff and any individual class member(s) remain free to settle and/or discontinue her or her individual claim without the leave of the Court, so long as it does not involve class wide settlement.
Services Ltd [2019] NZCA 431, (2019) 25 PRNZ 33 at [105]; and Southern Response Earthquake Services Ltd v Southern Response Unresolved Claims Group [2017] NZCA 489, [2018] NZLR 312 at [78]-[82].
3 See Ross v Southern Response Earthquake Services Ltd [2021] NZHC 2451 at [144]-[145]; and
Southern Response Earthquake Services Ltd v Ross, above n 2, at [81].
4 Ross v Southern Response Earthquake Services Ltd, above n 3, at [170]-[172]; and
Ross v Southern Response Earthquake Services Ltd, above n 2, at [25].
5 Ross v Southern Response Earthquake Services Ltd, above n 3, at [175].
6 Ross v Southern Response Earthquake Services Ltd, above n 3, at [175].
7 Mathias v The Earthquake Commission, above n 1.
[10] Accordingly, the plaintiff and any other potential member of the class remained free to settle with EQC pursuant to this order. The existing order is wider than the interim orders now sought by EQC. The above order is not limited to EQC customers who are already participating in the on-sold programme or customers where the process of resolving their claim is already underway.
[11] I have some sympathy for Mr Shand’s position. The ability to continue to settle was preserved in the existing order. However, EQC are proposing that any settlement offer it makes between the date of this judgment and the outcome of the applications to be heard on 14 November 2022, will be accompanied by a settlement notice in which EQC makes reference to the representative proceedings and gives customers Mr Shand’s contact details so they can find out about the proceeding. EQC says its proposed settlement notice will ensure no relevant EQC customer is misled by settling with EQC in ignorance of the representative proceeding.
[12] EQC’s preparedness to send its proposed notice puts a further gloss on the freedom it already enjoys pursuant to the order of 23 August 2022.
[13] Mr Shand said he understood EQC had already been providing customers with its proposed notice. While maintaining his objection to the application, Mr Shand said EQC could “keep on doing what it is doing”.
[14] I can see no prejudice to potential class members in them having this additional advice which is not provided for in the 23 August 2022 order. It can only be in the interests of class members who are contemplating a full and final settlement with EQC that they have notice of Ms Mathias’ representative action and have the ability to make enquiries in relation to that action and take their own advice. That is all EQC is proposing.
[15] While Mr Shand is correct that strictly speaking the leave sought is not required, given he has expressed some concern as to the nature of communication between EQC and customers potentially in the class, formalising the type of notice on an interim basis will go some way to addressing his concern.
[16] Accordingly, orders are made in terms of paragraphs 1(a), 1(b) and 1(c) of EQC’s application dated 25 October 2022.
Application and access to Funding Agreement
[17]EQC says disclosure of the Funding Agreement is:
(a)required by the case law governing such disclosure because it is plainly relevant to the plaintiff’s application to approve her draft class notice; and in any event
(b)required in the exercise of the Court’s supervisory jurisdiction … as the Court must be satisfied the class notice does not mislead potential class members.
[18] EQC says that unless it is able to submit on, and the Court verify the plaintiff’s description of the Funding Agreement in the notice, the Court cannot be sure the class notice is not misleading.
[19] Mr Shand’s submissions review the New Zealand authorities on when the Court will order the production of a funding agreement as follows.
[20] In Cooper v ANZ Bank of New Zealand Ltd,8 the Court said it was not prepared to “check the content of the notice for accuracy as to matters such as the funding arrangements”.
[21] This position was confirmed in Ross v Southern Response Earthquake Services Ltd,9 and Southern Response Earthquake Services Ltd v Ross,10 where the Court noted that this checking of the content of the notice for accuracy was seen as something for which the plaintiffs’ legal advisers were responsible.
[22] In Ross (SC), the Supreme Court considered it would be premature to say there is an expectation11 that any litigation funding agreement should routinely be provided to the Court as part of an application under r 4.24(b).
8 Cooper v ANZ Bank of New Zealand Ltd [2013] NZHC 3116 at [16].
9 Ross v Southern Response Earthquake Services Ltd [2021] NZHC 2452 (notification) at [18].
10 Southern Response Earthquake Services Ltd v Ross, above n 2 at [57].
11 Southern Response Earthquake Services Ltd v Ross, above n 2, at [86].
[23] The Supreme Court in Waterhouse v Contractors Bonding Ltd,12 on an application for disclosure of a litigation funding agreement decided that:
(1)It is not the role of the Courts to act as general regulators of litigation funding arrangements.13
(2)The fact that there is a funder and the funder’s identity along with whether the funder is subject to the jurisdiction of New Zealand Courts should be disclosed.14
(3)No litigation-sensitive material need be disclosed, including the terms on which funding may be withdrawn.15
(4)There is no need to disclose details of the financial standing of the litigation funder.16
(5)Where an application for a stay on abuse of process grounds is made (or any other application where the terms of a funding agreement may be relevant), then the courts may order disclosure of the litigation funding agreement, subject to redactions relating to confidentiality, and litigation sensitive and privileged matters.17
(6)The existence and terms of a litigation funding agreement may be relevant to an application for security for costs and to an application for costs.18
[24] Mr Campbell, who presented the submissions for EQC on this part of its application, relied on [76](c) of Waterhouse set out above at [23](5). Mr Campbell submitted EQC can here rely on the reference in brackets to “… any other application where the terms of a funding agreement may be relevant …” to say that disclosure of
12 Waterhouse v Contractors Bonding Ltd [2013] NZSC 89.
13 Waterhouse v Contractors Bonding Ltd, above n 12 at [76](f).
14 Waterhouse v Contractors Bonding Ltd, above n 12 at [76](a).
15 Waterhouse v Contractors Bonding Ltd, above n 12 at [76](b).
16 Waterhouse v Contractors Bonding Ltd, above n 12 at [76](b).
17 Waterhouse v Contractors Bonding Ltd, above n 12 at [76](c).
18 Waterhouse v Contractors Bonding Ltd, above n 12 at [76](d).
the Funding Agreement is necessary to ensure the class notice fairly informs potential class members of the Funding Agreement.
[25] Mr Campbell submitted disclosure was required because it was “plainly relevant” to Ms Mathias’ application to approve her class notice and in the exercise of the Court’s supervisory jurisdiction over the representative proceedings as the Court must be satisfied the class notice does not mislead potential class members.
[26] In my view, Mr Campbell gives too much life to the words in brackets from [76](c) of Waterhouse. It is clear from Waterhouse as a whole, in particular [60] and [73], that disclosure is not expected to be a routine step.
[27] I accept the force of Mr Shand’s submission that, if EQC’s argument is accepted, all funding agreements would have to be disclosed whenever a court was considering a class notice. A defendant would always be able to say disclosure was necessary to enable the Court to check class members are not exposed to the risk of being misled. Mr Campbell agreed if his submissions were accepted, disclosure would become the default position.
[28] Mr Shand submitted there is no relevant application to which the Funding Agreement was relevant. That EQC wants to cross-check the accuracy of the Funding Agreement against the draft notice to the class does not qualify. In short, checking the accuracy of the information about the Funding Agreement in the draft notice, which Mr Shand says appears to be EQC’s key concern, is not a valid reason for ordering production.
[29] The Supreme Court in Southern Response Earthquake Services Ltd v Ross said:19
On the question of notice, we do not agree with Southern Response that the High Court20 and the Court of Appeal21 to date have disavowed any role in approving notices in opt in proceedings. In the first of the cases relied on, Cooper v ANZ Bank New Zealand Ltd, the High Court did in fact “review and
19 Southern Response Earthquake Services Ltd v Ross, above n 2, at [57].
20 Cooper v ANZ Bank New Zealand Ltd, above n 8.
21 Southern Response Earthquake Services Ltd v Southern Response Unresolved Claims Group, above n 2.
comment” on the plaintiffs’ notice, albeit reserving the position as to whether or not this was an appropriate course.22 What the Court was not prepared to do was to “check the content of the notice for accuracy as to matters such as the funding arrangements” in place.23 That was seen as something for which the plaintiffs’ legal advisers were responsible. In Southern Response Earthquake Services Ltd v Southern Response Unresolved Claims Group, the Court of Appeal’s disavowal of a role in “approving” materials was directed to marketing materials and funding arrangements.24 Finally, in the Houghton litigation, the High Court reviewed the draft opt in notice.25
[30] In the above passage, the Supreme Court did not accept Southern Response’s submission that the High Court and Court of Appeal had disavowed any role in approaching notices in opt-in proceedings. The Court went on to summarise what Cooper v ANZ Bank New Zealand Ltd was authority for. That is, that the Court was not prepared to “check the contents of the notice for accuracy as to matters such as the funding arrangements” in place. As the Supreme Court said, this was something for which the plaintiffs’ legal advisers were responsible.
[31] This was not the Supreme Court disagreeing with what was said in Cooper v ANZ Bank New Zealand Ltd but rather it was the Court describing the breadth of that authority and of the Court of Appeal authority in Southern Response Earthquake Services Ltd given Southern Response’s submission the Court had disavowed any role in approving notices.
[32] The opt-in notice includes details of the Funder and how the funding commission is to be calculated. Mr Shand says he has confirmed the accuracy of the information with EQC.
[33] I agree with Mr Shand’s submissions that the disclosure of funding agreements is not the default position. Other than EQC wanting to check the terms of the Funding Agreement against the notice (and submitting the Court should), no other factor is raised.
22 Cooper, above n 8, at [15].
23 Cooper, above n 8 at [16].
24 Southern Response Earthquake Services Ltd v Southern Response Unresolved Claims Group, above n 2, at [79].
25 Houghton v Saunders HC Christchurch CIV-2008-409-348, 19 May 2010 at [25]-[73].
[34] Mr Shand has formally confirmed to the Court in his submissions and during the telephone hearing that the terms of the Funding Agreement as disclosed in the proposed class notice are accurate. I have no reason not to accept Mr Shand’s formal confirmation to the Court as to the accuracy of the notice.
[35]Accordingly, EQC’s application for access to the Funding Agreement is
declined. Should circumstances change, a further application can be made.
[36]Costs are reserved.
Associate Judge Lester
Solicitors:
Grant Shand, Auckland (for Plaintiff)
Russell McVeagh, Wellington (for Defendant)
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