Mathias v Toka Tū Ake - Natural Hazards Commission
[2025] NZHC 1170
•15 May 2025
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2021-009-2441 [2025] NZHC 1170
BETWEEN CAROL ANN MATHIAS
Plaintiff
AND
TOKA TŪ AKE – NATURAL HAZARDS COMMISSION
Defendant
Hearing: 20 February 2025 Appearances:
G D R Shand for Plaintiff
J A Tocher, E R Gatenby and C J Curran for Defendant
Judgment:
15 May 2025
JUDGMENT OF ASSOCIATE JUDGE PAULSEN
SECURITY FOR COSTS AND FURTHER DISCOVERY
This judgment was delivered by me on 15 May 2025 at 11.30 am pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date:
MATHIAS v TOKA TŪ AKE – NATURAL HAZARDS COMMISSION [2025] NZHC 1170 [15 May 2025]
Allocation of trial fixture [5]
Parties’ positions [6]
My assessment [17]
Re-categorisation of the proceeding [26]
The law [29]
Parties’ positions [37]
My assessment [42]
The application for security for costs [45]
The law [48]
My assessment [50]
The application for further discovery [71]
Are the documents sought relevant? [76]
Are there grounds for belief that the documents sought exist? [77]
Is discovery proportionate? [81]
Is an order appropriate? [82]
Future timetable [84]
Result [86]
[1] Ms Mathias purchased a property damaged in the Canterbury earthquake sequence (CES) and upon which the Earthquake Commission (EQC) had undertaken repairs under its Christchurch Home Repair Programme. She also took an assignment of her vendor’s rights, interests and title in respect to claims against EQC (now Toka Tū Ake – Natural Hazards Commission (NHC)) under the Earthquake Commission Act 1993 (the Act).
[2] Ms Mathias says the repairs were not to the standard required by the Act and she is now faced with an uninsured gap, being the difference between her statutory entitlement and the actual cost to repair the property to the required standard, which she seeks to recover in this proceeding.
[3] Ms Mathias was granted leave under r 4.24 of the High Court Rules 2016 (the Rules) to serve as a representative plaintiff on behalf of other on-sold homeowners in her position.1 The common issue to be determined at stage I of the proceeding is:2
Whether, when settling a claim for natural disaster damage to a residential building pursuant to ss 18 and 29 of the Act, EQC owed a duty of care to a future purchaser of that residential building to:
(a)exercise due skill and care in its recording, scoping and costing of the natural disaster damage; and/or
(b)if a managed repair occurred, to provide/produce a repair that met the standard required by the EQC Act.
[4] Ms Mathias’s claim is ready to be set down for trial but a number of issues have arisen that must first be resolved. This judgment concerns the following matters:
(a)allocation of dates for the trial;
(b)an application by NHC to re-categorise the proceeding as category 3 for costs purposes;
(c)an application by NHC for security for costs;
1 Mathias v The Earthquake Commission [2022] NZHC 2097.
2 At [24].
(d)an application by NHC that Ms Mathias provide further discovery; and
(e)the making of pre-trial directions.
Allocation of trial fixture
[5] The parties agree the case should be set down for trial. What divides them are their very different estimates of the length of the trial, which has implications for available trial dates.
Parties’ positions
[6] NHC estimates 35 days will be required for the trial. On that basis the trial could commence on 12 April 2027 and dates are being held.3 NHC argues such a lengthy hearing is necessary, reasonable and proportionate because:
(a)of the complexity of the issues raised by the claim and its defence;
(b)of the number of witnesses and scale of the evidence it intends to present;
(c)this is a representative proceeding and a trial of 35 days is consistent with the length of other representative proceedings and large earthquake claims; and
(d)the number of represented claimants and the magnitude of NHC’s potential liability.
[7] NHC has explained how it arrived at its estimate by reference to the number of witnesses to be called, whether they are witnesses of fact or experts, the subject matter of the evidence of its witnesses, and the time required for opening and closing submissions.
[8]It appears approximately 25 witnesses will be called in total by both parties.
3 There are only 34 consecutive sitting days available but I understand it is accepted the hearing could be completed in that period.
[9] Ms Mathias will call three fact witnesses and two or three experts. NHC has allowed seven days for the presentation of Ms Mathias’s opening, NHC’s mini-opening and the evidence of Ms Mathias’s witnesses. It considers that Ms Mathias’s evidence and cross-examination alone will likely take two days.
[10] NHC will call at least 19 witnesses, including nine experts in several disciplines and expects its evidence (and cross-examination) will take 21 days.
[11] NHC has allowed an additional two days for evidence from other members of the represented class (on the assumption that one or other party may call such evidence).
[12]NHC has allowed five days for closing submissions.
[13] Ms Mathias contends the case can be heard in five days but would not object to 10 days being set aside. She considers that a shorter estimate of time for the trial will result in an earlier hearing date, although no alternative dates are proposed. She argues NHC is exaggerating the time required for the trial as part of a strategy of delay and to “chip away” at class members to reduce the size of the represented class and to justify its application for security for costs.
[14] Ms Mathias contends that NHC’s position, both as to the number of witnesses it will call and duration of the trial, is inconsistent with similar cases. Her counsel, Mr Shand, says his experience as a lawyer in earthquake litigation, the experience of other counsel bringing claims against NHC, and common-sense shows that such a long hearing is not required.
[15] Ms Mathias has filed affidavits from three lawyers. They have identified claims against NHC in which they have been or are presently involved and the hearing time allocated for them. In two instances the lawyers express opinions that this case should take just one week or five days to hear. Mr Shand submits this evidence should be accepted as uncontested.
[16] Ms Mathias also argues there is no need for NHC to call most of its expert witnesses because this is a simple single dwelling building defects case and to the extent that expert evidence is required it would only be in relation to the nature and extent of the earthquake damage, the building work required to repair it and quantum, which are standard issues arising in earthquake cases and upon which the experts can confer to shorten the hearing. Mr Shand submits it is not clear why NHC would call 15 of its 19 proposed witnesses.
My assessment
[17] The allocation of trial dates requires the exercise of judgement, based on an understanding of the nature of the case, the information provided by the parties as to the matters in issue and number, type and characteristics of the witnesses, counsel’s estimates of the trial length and, to a large extent, experience.4
[18] The ability to allocate trial dates is, of course, also subject to available judicial and court resources. In this instance, Ms Mathias’s belief that an earlier hearing will be available for a shorter trial is correct only to an extent. An earlier date would be available if the trial was set down for less than 15 days but I do not believe there is any prospect the trial could be completed within that timeframe. I also consider the Court should be wary of the risks of a late adjournment or the case being adjourned part-heard if there is insufficient hearing time.
[19] I do not accept the submission that NHC is “making the claim bigger than it really is” to delay the trial or to secure a tactical advantage by way of a large order of security for costs. In my view there is nothing to support those submissions. To the contrary, it was NHC that asked to reserve the 2027 dates. Had it not done so even those dates may not have been available.
[20] I also do not accept the submission this is a simple single house building defects claim or that it ought to be “done in 5 days” as Mr Shand puts it. As Mr Curran correctly submits, this is a representative proceeding which asserts a multi-part and novel duty of care owed by a public sector actor delivering a large-scale emergency
4 High Court Rules 2016, rr 7.6(2), 7.12 and 7.13.
response in a distinctive statutory context over a period of around 10 years. Applying the correct approach to determining whether such a duty of care was owed as set out by the Supreme Court in North Shore City Council v Attorney-General, the Court must examine complex factual and legal issues that go well beyond particulars of damage and the adequacy and cost of repairs undertaken to Ms Mathias’s property.5 Furthermore, a great deal is at stake when Ms Mathias is the representative plaintiff for around 228 class members with total claims estimated at around $80 million.
[21] The evidence given by lawyers for other plaintiffs who have brought claims against NHC was not helpful. Each of the lawyers referred to a single case which they considered raised similar issues as this one that were set down for trial over 15 days, 15 days and 10 days. However, in two instances the cases did not go to trial and the third is yet to be heard. Furthermore, none of the cases were representative proceedings and while they may have had some precedential value for other cases it would be limited unless they were taken on appeal. The number of witnesses to be called in those cases was also markedly fewer than in this case. It is apparent NHC has taken a different approach to the defence of this claim given its representative nature and the magnitude of liability at stake.
[22] Two of the lawyers expressed opinions that this case should take “about a week” or “within 5 days” of hearing time. Neither of them is involved in this case to the best of my knowledge. Neither gave their evidence in compliance with the Code of Conduct for Expert Witnesses.6 Their opinions that this is a “single house claim” and “a case about a small single house” do not reflect the reality of this litigation and their estimates of the length of the trial, while coinciding with Mr Shand’s view, are incorrect.
[23] NHC’s counsel provided data as to the length of other stage I trials in representative proceedings which typically take longer than 35 days.7 Of course the issues that arose in those cases were different from this one, but it appears
5 North Shore City Council v Attorney-General [2012] NZSC 49, [2012] 3 NZLR 341.
6 Evidence Act 2006, ss 25 and 26; and High Court Rules, Sch 4.
7 Counsel referred to Strathboss Kiwifruit Ltd v Attorney-General [2018] NZHC 1559 which was heard over 57 days; Cridge v Studorp Ltd [2021] NZHC 2077, [2022] 2 NZLR 309, heard over
74.5 days; and Houghton v Saunders [2014] NZHC 2229, [2015] 2 NZLR 74 which took 52 days of hearing time.
representative proceedings generally result in lengthy hearings, and I believe this case will be no exception.
[24] NHC’s estimate of the duration of the trial has been carefully prepared with a detailed understanding of the issues that arise and the case it intends to bring at trial. There is room to question some aspects, such as the two days for evidence from class members (who may not be called) and five days for closing submissions (which I think is excessive), but on the other hand there is no provision for response evidence from Ms Mathias nor any room for unexpected events and slippage during the course of what will be a long trial.
[25] I am satisfied NHC’s estimate is reasonable and this case should be set down for trial commencing 12 April 2027 with 34 days reserved.
Re-categorisation of the proceeding
[26] NHC applies to have this proceeding re-categorised as a category 3 proceeding for costs purposes.
[27] For a telephone conference held on 20 October 2023 counsel filed memoranda with NHC arguing the proceeding should be categorised as category 3 and Ms Mathias’s counsel arguing for category 2. Associate Judge Lester issued a minute on 24 October 2023 ordering that the proceeding was category 3 up to the end of the opt-in period but thereafter was to be treated as category 2.
[28]The Associate Judge’s reasoning was as follows:
[12] This case has had two distinct phases or limbs. The representative action steps, in my view, warrant being classified as Category 3. Resolving issues relating to the representative action involved considerable detailed work and some complexity.
[13] However, had Ms Mathias’ case not been a representative action then it would be a Category 2 matter. Now that the details of the representative action are on the “back burner”, advancing the substance of Ms Mathias’ case, in my view, should be treated as Category 2.
[14] I determine that this proceeding is Category 3 until the end of the opt-in period. While there remain some issues in relation to confirming the class, those issues are themselves not complex as they involve assessing the
circumstances of individuals who have opted in against the class criteria. That Ms Mathias’ claim involves a novel duty of care does not make the substance of her claim Category 3. Novel duties of care are routinely resolved as Category 2 proceedings.
[15] Accordingly, this proceeding is Category 3 to the end of the opt-in period and thereafter it is Category 2.
The law
[29] Rule 14.3 deals with the categorisation of proceedings and describes category 2 and category 3 proceedings as follows:
...
Category 2 proceedings Proceedings of average complexity requiring counsel of skill and experience considered average in the High Court Category 3 proceedings
Proceedings that because of their complexity or significance require counsel to have special skill
and experience in the High Court
[30]Relevant for present purposes is r 14.3(2) which provides:
14.3 Categorisation of proceedings
...
(2)The court may at any time determine in advance a proceeding’s category, which applies to all subsequent determinations of costs in the proceeding, unless there are special reasons to the contrary.
[31] It has been held that r 14.3(2) permits re-categorisation of proceedings for costs purposes if there are special reasons for doing so. In my view, a special reason is something which is particular to the facts of the case at hand, distinguishing it from the usual case of its type. The authorities shed some light on what may amount to special reasons.
[32] In Paper Reclaim Ltd v Aotearoa International Ltd, the Court of Appeal refused to re-categorise a proceeding as category 3 after completion of the substantive hearing where it did not accept there had been a change to the character of the proceeding after it had been categorised.8 The Court of Appeal said:
8 Paper Reclaim Ltd v Aotearoa International Ltd [2007] NZCA 544, (2007) 18 PRNZ 743.
[29] The proceeding started with an application for an interlocutory judgment. At that time, the proceeding was categorised as category 2. Where such categorisation is done at an early stage, the category applies to all subsequent determinations of costs in the proceeding unless there are special reasons to the contrary: r 48(2). The idea behind early categorisation is that it assists the parties in calculating, as a proceeding goes forward, their potential exposure to costs. In that way, it assists general principle (g) as set out in r 47, namely that “so far as possible the determination of costs should be predictable and expeditious” (emphasis added).
[30] At no stage after that categorisation did Aotearoa suggest it had become inappropriate. It is far too late to be suggesting a recategorisation after the substantive hearing and after the result is known. Would Aotearoa be asking for a recategorisation had it failed in the proceeding? Of course not.
[31] Mr Grant seeks to justify the recategorisation on the grounds that the litigation changed character after the original categorisation. We do not accept that, at least if attention is confined (as it must be) to the case on which Aotearoa succeeded. This case did to some extent spiral out of control, especially in view of the amount of money truly at stake. But it remained at its core a proceeding “of average complexity requiring counsel of skill and experience considered average in the High Court”. Both sides chose counsel of above-average skill and experience, but that was their choice, and it is a fundamental premise of the High Court costs regime that the losing party is responsible only for a contribution towards the costs of the notional counsel suitable for the particular proceeding, not the actual counsel involved: see r 47(e).
[32]Mr Grant has not established special reasons for recategorisation.
[33] In Heslop v Cousins, Chisholm J considered there were special reasons to re-categorise the proceeding from category 2 to category 3 after judgment because the parties had seriously underestimated the complexity of the proceeding, including the length of trial.9
[34] In J v J, Chisholm J re-categorised the proceeding as category 3 from the point at which trial preparation had begun, because from that point in time it was obvious that complex factual and legal issues had arisen and it would have been “grossly unfair to the plaintiff” for the earlier category 2 categorisation to remain.10 He noted the earlier categorisation of costs had not influenced the parties’ conduct of the proceeding and it could be safely inferred that the defendant would have defended the claim regardless of the categorisation.11
9 Heslop v Cousins HC Christchurch CIV-2005-409-2833, 6 August 2007.
10 J v J [2013] NZHC 1822 at [11].
11 At [12].
[35] In Body Corporate 207624 v Grimshaw & Co, Tahana J was asked to re-categorise a proceeding after judgment.12 Her Honour noted that when the parties had agreed the proceeding was category 2 they had underestimated the number of witnesses to be called at trial and also noted there was extensive discovery. Relevant to the present case, Tahana J stated:
[14] While the causes of action (negligence and breach of contract) were reasonably straightforward, the factual background spanned more than a decade, during which time there was legislative change raising issues as to the duty of care owed by Grimshaws when advising on a contract made while the previous legislation was in force. There were also issues as to the scope of the duty of care and whether this extended to losses arising from delayed construction. Grimshaws advanced many defences including statutory limitation, contributory negligence, estoppel, betterment, standing, and the existence of the litigation funding agreement. Grimshaws also asserted that the damages claimed were too remote and unrecoverable.
[15] I am satisfied that the complexity of the proceeding required counsel to have special skill and experience in the High Court and it is appropriate to re-categorise the proceeding as category 3.
(footnote omitted)
[36] In Dovey Aviation Consulting Ltd v The Attorney-General of New Zealand, Mallon J was not prepared to re-categorise a proceeding in circumstances where it “was on the cusp of category 3 but is debatable”, the nature of the case was known at the outset and re-categorisation had been proposed only after the substantive hearing when the result was known.13 In those circumstances Mallon J did not consider there were special reasons for re-categorisation.
Parties’ positions
[37] NHC argues there are special reasons to re-categorise this proceeding because complex and significant factual and legal issues have arisen, demonstrating that this is plainly a category 3 proceeding. It notes that its discovery alone took 98 days of billed solicitor time reflecting the importance and wide-ranging nature of the issues, the trial will be long, a novel duty of care is pleaded that will require the parties to grapple with complex and significant questions of fact and law, and that this is a representative action with approximately 228 class members and potentially with wider implications
12 Body Corporate 207624 v Grimshaw & Co [2023] NZHC 3381.
13 Dovey Aviation Consulting Ltd v Attorney-General of New Zealand [2021] NZHC 1224 at [7].
for hundreds of other homeowners and the future operation of New Zealand’s natural disaster response strategies.
[38] Second, NHC argues that re-categorisation is in line with other representative proceedings and that every other representative proceeding in New Zealand has been classified as category 3 for costs purposes for stage I through to trial.14 It submits there is no reason to maintain the bifurcated categorisation that Associate Judge Lester adopted here between representative action steps and the stage I trial.
[39] Third, NHC says the Court now has much greater information than was available to Associate Judge Lester such that the previous categorisation of the proceeding has proven inadequate, and a previous costs categorisation in a case management conference is not binding where it becomes clear the proceeding is more complex than previously anticipated.15
[40] NHC then says, here, the categorisation was made without the benefit of all submissions following the filing of brief memoranda and it is clear from the reasons given by Associate Judge Lester that two matters have changed. First, that the stage I hearing will not “in reality, [be] confined” and nor is this a “routine” novel duty case. Second, it is not accurate now to say the representative action will be on the “backburner” until completion of the stage I trial as the complexity and significance of the stage I trial are substantively influenced by the representative nature of the proceeding.
[41] Ms Mathias says there is no substantial change in the manner in which her claim is advanced or in the nature of the case to justify re-categorisation. She submits the extent of discovery and the issues arising were all known at the time the case was first categorised, and NHC’s discovery may have taken a long time but that does not mean it was complex but merely time consuming.
14 See White v James Hardie New Zealand [2019] NZHC 188, (2019) 24 PRNZ 493; and Houghton v Saunders [2015] NZHC 548.
15 Heslop v Cousins, above n 9; Body Corporate 189855 v North Shore City Council HC Auckland CIV-2005-404-5561, 2 October 2008 at [4].
My assessment
[42] In my view, there are special reasons to re-categorise this proceeding. First, I agree with NHC’s submission that when categorising the proceeding Associate Judge Lester focused on the procedural dimensions of the representative orders and did not appreciate the substantive effect they would have on the future conduct of the proceeding and the trial. The fact that a decision will create a res judicata in respect of a large class, with potentially wider implications to other homeowners, will necessarily affect the approach the parties take to the stage I trial, adding to its duration and complexity and requiring counsel with special skill and expertise. I also do not think that Associate Judge Lester anticipated the extent of the discovery NHC has had to provide or that the trial would take 34 days.
[43] Also relevant is that NHC has not waited until after the substantive hearing to make its application to re-categorise the proceeding but has done so prior to the making of pre-trial directions and more than two years before trial. There is nothing to suggest that Ms Mathias would have responded differently in the conduct of her case had the proceeding been category 3 at the outset.
[44] I am satisfied there are special reasons to re-categorise the proceeding and that it would be wrong not to do so. This is a proceeding that requires counsel with special skill and experience in the High Court and should be category 3 for costs purposes.
The application for security for costs
[45] NHC applies for security for costs in an amount of $1,299,545 as set out in attached Schedule A.
[46] Ms Mathias is being funded by Canterbury Litigation Funding Ltd (CLFL). CLFL was incorporated on 9 December 2021. Its director is Douglas Austin Cowan, an Auckland lawyer. The shares in the company are owned by DCBS Trustee Services No 18 Ltd, a company owned by Mr Cowan. It appears that CLFL is funding one other representative proceeding against NHC.16 There is no evidence that it has any
16 Freer v Toka Tū Ake HC Christchurch CIV-2021-409-428.
prior experience as a litigation funder or as to its financial position and ability to pay costs following trial if Ms Mathias is unsuccessful.
[47] A copy of an undated and unexecuted litigation funding agreement obtained from the website maintained by CLFL for this proceeding includes the following terms, and there is no suggestion that these terms are not the basis upon which it is providing funding to Ms Mathias.
INTRODUCTION
…
F. The percentage of the Proceeds of the Claim payable to the Funder in accordance with this agreement represents an acceptable commercial rate of return to the Funder based on several factors, including the assessment on the quantum of the Claims, the expected resolution timeframes and the uncertainties and the risks involved in achieving success (or otherwise) in respect of the Claims and/or the Proceeding.
…
1.Interpretation
1.1Definitions
...
Claims means the claim or claims the Claimant and other Registered Claimants have or may have against the Defendant in relation to losses suffered due to the Earthquake Commission: a) failing to correctly determine the relevant natural disaster damage; and / or b) failing to complete the work to remedy the natural disaster damage, caused by the Canterbury Earthquakes of 2010/2011 prior to them becoming the owner.
Claim Costs means the costs and expenses incurred in relation to the Claims and/or the Proceeding (inclusive of any GST), including:
a.professional fees and disbursements of the Lawyers;
b.any Costs Orders;
c.Court filing fees and all other fees;
d.experts’ fees and expenses;
e.witnesses’ fees and expenses; and
f.third party fees necessarily incurred assisting the Lawyers and the Claimants with claim management and administration.
…
Costs Order means an order made by the Court in the Proceeding requiring one of [sic] more parties to the Proceeding to pay the costs incurred by another party or parties to the Proceeding.
…
2.OBLIGATIONS OF THE FUNDER
2.1The Funder is liable for and shall pay all the Claim Costs.
2.2The Funder shall pay, or procure a third party to provide, any security for costs in the Proceeding, in the form and in the amount that the Court orders, or in the absence of any order in such other form and amount as the Funder determines and the Defendant accepts. The Claimant directs the Lawyers to take all reasonable steps at the conclusion of the Proceeding to ensure that any security for costs provided by the Funder that is not required to satisfy any Costs Order is promptly returned to the Funder or its nominee.
2.3The obligations of the Funder to make payments in accordance with the preceding two sub-clauses of this agreement will not apply if the Claimant and/or any Registered Claimants are in material breach of their obligations under the relevant agreements.
...
4PAYMENT TO THE FUNDER
4.1Upon the Lawyers receiving the Proceeds of the Claim in their Solicitors’ Trust Account, the Claimant authorises and directs the Lawyers, as soon as is reasonably practicable, to pay to the Funder fifteen percent (15%) of the gross Proceeds of the Claim.
The law
[48] While applications for security for costs are usually made under r 5.45, New Zealand Courts recognise that defendants facing funded representative proceedings are entitled to security for costs and that such security will be ordered on a generous basis in the exercise of the Courts’ inherent jurisdiction.17 As that is the circumstance facing NHC, it says it is entitled to a full measure of security for costs.
17 Saunders v Houghton [2009] NZCA 610, [2010] 3 NZLR 331; White v James Hardie New Zealand, above n 14, at [12]; Strathboss Kiwifruit Ltd v Attorney-General [2015] NZHC 1596, (2015) 23 PRNZ 69 at [79]; Walker v Forbes [2017] NZHC 1212 (which was a funded but not a representative proceeding).
[49] In Saunders v Houghton, the Court of Appeal discussed the approach that should be taken to applications for security for costs in funded representative proceedings and said:18
[36] The making of orders for both representation and admission of a funder substantially alters the balance between plaintiffs and defendants. We consider that the change is so radical as to justify the High Court, in exercise of its inherent jurisdiction under s 16 of the Judicature Act 1908, to consider ordering security as a term of such orders, even where numerous natural persons are among the plaintiffs, as the price of the privilege to employ such a procedure. That is in order to protect defendant against the effect of a procedure which could otherwise be oppressive. The facts that the funder has no personal right at stake, that takes part of the proceeds of any claim, and that it is motivated by the financial considerations that gave rise to the common law prohibition of champerty point to the need for the funder to provide security for costs in most cases. Arkin v Borchard Lines Ltd (Nos 2 and 3) ... applied to a litigation funder Lord Denning MR’s dictum in Hill v Archbold ... that maintenance “[i]s lawful, provided always that the one who supports the litigation if it fails, pays the costs of the other side”. Where there is doubt about the bona fides of the funder or bad behaviour on the funder’s part, the case for declining approval or ordering such security, perhaps on an indemnity basis, is strengthened. Where an application for approval of a funder is met by an application for security for costs the enquiry may include not only the funder’s means but also whether it is of such standing that its decision to fund provides a worthwhile pointer to the merits of the case. We make no comment on the competing views in Jeffery & Katauskas, which turned on the terms of a costs rule which has no New Zealand equivalent. But the result, where the funder of a failed case escaped liability for costs, provides a cautionary example.
[37] McGechan on Procedure records at HR5.45.03(2) that in considering applications for security the court will try as far as possible to assess the merits and prospects even though in a case of any complexity that will be no more than an impression. It must do its best with what is before it. Security for costs can be a matter for continuous review, with a staged process for reappraisal which might increase or reduce security as more is learned about the case. There is a sliding scale: a case with slight merits may warrant a substantial order for security at least for an initial stage and may extend to provide indemnity to the opposing party. An apparently strong case may warrant reduced or no security. There will be cases where an order under r 7.70 for interim payment by the defendant is justified.
My assessment
[50] Ms Mathias argues that NHC is not entitled to security for costs, but if security is to be awarded the amount claimed is excessive. She argues security should not be awarded because:
18 Saunders v Houghton, above n 17.
(a)security for costs can only be ordered under r 5.45 and NHC has not established that she is unable to meet an award of costs;
(b)CLFL has met all awards of costs made in the proceeding to date;
(c)awarding security for costs is not in the interests of justice and may impede access to justice; and
(d)this is a meritorious claim brought in the public interest and NHC does not need the protection of an award of security for costs.
[51] The position that security for costs can only be awarded under r 5.45 and not the inherent jurisdiction of the Court is contrary to the authorities and I do not accept it. The requirements of r 5.45 do not need be satisfied in circumstances where a defendant is facing a funded representative proceeding. That also deals with the assertion that Ms Mathias is not impecunious and is good for an award of costs that may be made against her. However, if r 5.45 applied I would not be satisfied on the evidence that Ms Mathias will be able to pay a costs award of the magnitude that may be made against her if she is unsuccessful.
[52] Mr Shand submits that the cases upon which NHC rely concern overseas funders whereas CLFL is a New Zealand company. In the present context that is a distinction without a difference. The concerns underlying the Court’s approach apply equally to overseas and local funders. The authorities are clear that a funder like CLFL, which involves itself in a proceeding for commercial gain, should contribute significantly to costs if unsuccessful. Mr Shand refers me to 100 Investments Ltd v Walker and Manhire v Tuatara Structures Ltd which involved funded proceedings where security was not ordered, but neither was a funded representative proceeding.19
[53] There is legitimate concern about CLFL’s ability to pay costs of the magnitude that will be ordered following a substantive hearing. It has provided no evidence of prior experience in litigation funding, its capital or asset position or of its ability to
19 100 Investments Ltd v Walker [2023] NZHC 2584; Manhire v Tuatara Structures Ltd [2024] NZHC 930.
pay costs. There is also no publicly available information bearing on its ability to pay costs. CLFL does not have a proven track record of meeting substantial costs awards and is funding only one other representative proceeding. Any costs awards it has paid are nominal when compared to the amount that will be payable by Ms Mathias if she is unsuccessful at stage I.
[54] Mr Shand argues it is not in the interests of justice to order security because CLFL is not supporting Ms Mathias for commercial gain but to assist homeowners to get justice. He considers it significant that CLFL takes only 15 per cent of amounts recovered inclusive of GST, costs and disbursements whereas other litigation funders are said to charge up to 35 per cent plus GST, costs and disbursements. However, as the terms of its funding agreement make clear, CLFL has assessed its charges on the basis that they provide it with an acceptable commercial return.
[55] Mr Shand also submits that awarding security for costs is not in the interests of justice and may impede access to justice. It is not explained how that is so unless it is because CLFL is concerned it may not be able to provide security, in which case that is a very cogent reason why it should be ordered.
[56] Insofar as Mr Shand also argues that NHC does not need the protection of an award of security for costs because it is a public entity, that has not been recognised as a reason to refuse security for costs.20
[57] I accept the merits of a case are relevant, in that an apparently strong case can warrant reduced or even no security.21 Given that Ms Mathias pleads a novel cause of action in a complex factual and statutory context and this is a funded representative claim, I consider the merits are a largely neutral factor.
[58] As noted above, Ms Mathias also argues that the quantum of security sought by NHC is excessive because:
20 See for instance Strathboss Kiwifruit Ltd v Attorney-General, above n 17. Costs awards are, of course, routinely made in favour of public and Crown entities.
21 Saunders v Houghton, above n 17, at [37].
(a)awards of security for costs are forward looking and NHC has delayed in making this application;
(b)the assessment is based on a 35-day trial;
(c)the assessment is based on a category 3 proceeding; and
(d)the expert and professional fact witnesses’ fees (experts’ fees) claimed are not justified when there is no evidence to explain the need for the witnesses or to support the amount of the fees claimed.
[59] There is no hard rule that security for costs are forward looking and nothing in the facts of this case lead to a conclusion that NHC should be deprived of security because of delay in bringing this application. It was not until November 2023 that the terms upon which Ms Mathias would bring her claim as a representative proceeding were resolved. Before that it would have been premature for NHC to seek security for costs.
[60] In November 2023 counsel agreed that the issue of security for costs would be deferred. This is recorded in a minute of Associate Judge Lester of 12 December 2023 when he said:
[4] From EQC’s point of view, the scope of discovery feeds into the approach to security for costs. Mr Shand, counsel for Ms Mathias, recorded in his memorandum of 11 December 2023, that he was happy to defer consideration of security for costs issues.
[61] Having agreed to defer the issue while the parties undertook discovery, Ms Mathias cannot now legitimately raise delay as a reason security should not be ordered. NHC has not sought security in respect to any steps prior to discovery.
[62] Ms Mathias’s challenges to quantum based on the length of the trial and categorisation of the proceeding as category 3 have been resolved earlier in this judgment.
[63] The one issue raised for Ms Mathias which gives me pause is the sum sought in respect to experts’ fees. NHC’s approach has been to allow $43,000 on average per
witness for 11 witnesses, comprising nine expert witnesses and two professional fact witnesses. It says disbursements can be recovered for the fact witnesses where the witness is a professional person entitled to charge for their time in giving evidence in a professional capacity and there are several of them in this case. It says the amount claimed is reasonable when compared with awards in recent representative proceedings and complex trials. The examples relied upon include Strathboss Kiwifruit Ltd v Attorney-General where around $65,000 per witness was allowed, and, in a security for costs context, Walker v Forbes where an allowance of $50,000 per expert was made.22 NHC accepts that some experts’ fees will be higher and lower than the average, but submits that several of its key witnesses will charge well in excess of the average so there is no risk of actual disbursements being lower than sought. In addition, NHC has estimated travel and accommodation costs of counsel of at least
$27,750 on the basis there will be three out of town counsel with a modest allowance of $250 per night for each. It has not yet sought any expenditure for meals.
[64] While I acknowledge the approach in other cases, here the amount of experts’ fees claimed is a large proportion of the total amount sought as security for costs. There is also uncertainty about what costs will actually be incurred; albeit there is no doubt the experts’ fees will be significant. I consider this can be resolved by making a more modest allowance than sought and staging security for costs, so to the extent that the allowance made is shown to be inadequate it can be reviewed prior to trial. I expect that at that stage it will also be relatively easy to make an assessment of the additional costs that will be incurred for experts’ attendances at trial.
[65] NHC has sought an uplift on band C costs in respect to discovery, preparation of briefs of evidence and preparing for the hearing. This was not a focus of Ms Mathias’s challenge to the quantum of security sought. Rule 14.6(3)(a) is relevant here and provides:
22 Strathboss Kiwifruit Ltd v Attorney-General [2019] NZHC 62; Walker v Forbes, above n 17.
14.6 Increased costs and indemnity costs
...
(3)The court may order a party to pay increased costs if—
(a)the nature of the proceeding or the step in it is such that the time required by the party claiming costs would substantially exceed the time allocated under band C; ...
[66] In determining costs in Cridge v Studorp, Simon France J relied upon r 14.6.3(a) to grant an uplift in relation to discovery from 13 to 65 days, an uplift for the preparation of witness briefs to 198 days (which was roughly calculated on the basis of four days per brief and a further 20 days for the evidence of one witness calculated separately), and an uplift for trial preparation from 45.25 days to 165 days or approximately two days per day of hearing time.23 He noted of r 14.6(3)(a) that “[i]ts sole role is these cases where band C is not a realistic basis for awarding costs. It recognises that some litigation simply occurs in a different space.” There are several cases referred to by Simon France J where uplifts had been granted on band C costs against which he assessed the reasonableness of the claims made.24
[67] Here NHC has sought an uplift for discovery from the scale figure of seven days by 12 days to 19 days. It says the number of documents listed was extensive, and required a great amount of time to locate and review documents relating to a period of at least 10 years. The actual costs incurred for discovery reflected 784.5 solicitor hours or 98 days work. I agree that in relation to the actual time taken for discovery and the awards made in other like cases the uplift is reasonable.
[68] In relation to briefing witnesses (along with preparing the list of issues and common bundle for the hearing) the scale figure is 21.25 days and the uplift claimed is for an additional 54 days to 71.25 days. In circumstances where NHC will be calling 19 witnesses that is similar to the allowance made in Cridge v Studorp and less than the allowance in other cases.25 I consider the claim is reasonable.
23 Cridge v Studorp [2022] NZHC 2024.
24 At [77]–[92].
25 Mainzeal Property and Construction Ltd v Yan [2019] NZHC 1637; Trustpower Ltd v Commissioner of Inland Revenue [2014] NZHC 3590; and Strathboss Kiwifruit Ltd v Attorney- General, above n 17.
[69] In respect to preparation for the hearing, the scale figure is 21.25 days and the uplift claimed is 35 days to 56.25 days which is an allowance of a little over 1.6 days per day of the trial and is at the lower end of allowances in like cases. That is reasonable in my view but given my decision to stage security for costs it will not have a direct impact on the orders made at this stage.
[70] NHC’s application for security for costs is allowed on a staged basis as set out in the orders I make below.
The application for further discovery
[71] The parties agreed to provide tailored discovery and filed a memorandum of the orders sought. Consent directions were made by the Registrar on 22 December 2023. However, counsel agreed that if dissatisfied further discovery could be sought in additional categories. Since Ms Mathias filed her affidavit of documents, NHC has sought further discovery but requests were ignored.26 As a result, this application was made. Ms Mathias’s approach has been to oppose the application on the basis her affidavit of documents is conclusive without filing any evidence to respond to NHC’s concerns.
[72] NHC applies for further discovery in seven categories. The documents sought in the first three categories fall within the existing tailored discovery order, whereas the four remaining categories were the subject of the requests for discovery to which I referred. The categories of further discovery are attached as Schedule B.
[73] NHC’s application is made in reliance upon rr 8.17 and 8.19, which relevantly provide:
8.17 Variation of discovery order
(1)Subject to rule 7.7, a party may apply for an order varying the terms of a discovery order.
(2)The variation may be granted by a Judge on the ground that—
(a)compliance or attempted compliance with the terms of the order has revealed a need for a variation; or
26 The correspondence is dated 11 April 2024, 29 April 2024, 11 June 2024, and 20 November 2024.
(b)there has been a change of circumstances that justifies reconsideration.
...
8.19 Order for particular discovery against party after proceeding commenced
If at any stage of the proceeding it appears to a Judge, from evidence or from the nature or circumstances of the case or from any document filed in the proceeding, that there are grounds for believing that a party has not discovered
1 or more documents or a group of documents that should have been discovered, the Judge may order that party—
(a)to file an affidavit stating—
(i)whether the documents are or have been in the party’s control; and
(ii)if they have been but are no longer in the party’s control, the party’s best knowledge and belief as to when the documents ceased to be in the party’s control and who now has control of them; and
(b)to serve the affidavit on the other party or parties; and
(c)if the documents are in the person’s control, to make those documents available for inspection, in accordance with rule 8.27, to the other party or parties.
[74] The key issue in applications under r 8.19 is whether there are grounds for believing a party has not discovered documents that should have been discovered. The Courts generally adopt the four-stage approach outlined in Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd in considering applications under r 8.19:27
(a)Are the documents sought relevant, and if so how important will they be?
(b)Are the grounds for belief that the documents sought exist? This will often be a matter of inference. How strong is that evidence?
(c)Is discovery proportionate, assessing proportionality in accordance with Part 1 of the Discovery Checklist in the High Court Rules?
(d)Weighing and balancing these matters, in the Courts discretion applying r 8.19, as an order appropriate?
27 Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd [2015] NZHC 2760 at [14].
[75] It is unacceptable that Ms Mathias’s lawyers did not respond to correspondence concerning discovery issues, forcing NHC to make an application for further discovery and then to oppose the application without evidence. Such failure to engage is a waste of the parties’ and the Court’s resources. For the reasons that follow, and adopting the approach in Assa Abloy, I consider NHC is entitled to the orders it seeks.
Are the documents sought relevant?
[76] It is not suggested the documents sought are either not relevant or are insufficiently relevant to any issues arising in the proceeding; it being Ms Mathias’s position that they either have been disclosed or do not exist.
Are there grounds for belief that the documents sought exist?
[77] In respect to the category (a) documents, NHC relies on email correspondence disclosed by Ms Mathias (identified as M0038 and M0043) concerning insurance for the subject property which refers to attachments that have not been disclosed.
[78] In respect to the category (b) documents, NHC relies on email correspondence disclosed by Ms Mathias (identified as M0028 and M0029) that again refers to attachments concerning the purchase of the subject property which have not been disclosed.
[79] In respect to the category (c) documents, NHC relies on email correspondence from the lawyers acting for the vendor from whom Ms Mathias purchased the subject property which refers to information having been provided by the land agent to Ms Mathias concerning the scope of works and confirmation of repairs undertaken by EQC. The information has not been disclosed.
[80] In respect to the four additional categories of documents for which discovery has not previously been ordered, I am satisfied there are credible grounds to believe that such documents are or may have been in the possession of Ms Mathias because:
(a)In respect to the category (d) documents, Ms Mathias pleads that since purchasing the property she became aware of unrepaired earthquake damage and issued this proceeding.
(b)In respect to the category (e) documents, I accept it is commonplace for owners to carry out maintenance and repairs on a property, especially when they consider there is unrepaired damage. At no point in response to NHC’s requests has Ms Mathias indicated that she has not completed maintenance or repairs on the property.
(c)In respect to the category (f) documents, Ms Mathias pleads loss amounting to a quantified cost of repair so the assumption can be made that quotes and other documents in relation to such repairs have been obtained. Ms Mathias has also recently indicated that she prices the required work at about $350,000. This amount must be based on a quote or other document. Mr Shand acknowledges there is a report by Grant Hunt provided to NHC on 1 March 2024 containing the costing which details defects, damage and remedial costs that has not been listed by Ms Mathias.
(d)In respect to the category (g) documents, the Canterbury Home Repair Programme attracted wide and regular media attention in Christchurch for several years following the CES. It is reasonable to believe that Ms Mathias would have had some awareness of this prior to purchasing the property.
Is discovery proportionate?
[81] Ms Mathias does not offer any evidence to suggest that undertaking searches for the documents would not be proportionate.
Is an order appropriate?
[82] Given the importance of the proceeding, the amounts at stake and that it is brought on behalf of a large class, I accept that NHC is entitled to expect there will be
strict compliance by Ms Mathias with her discovery obligations and that full disclosure is made in respect to matters going to NHC’s defences.
[83] There shall be an order that Ms Mathias is to provide further discovery of all the categories of documents set out below.
Future timetable
[84] Subject to the matters determined by this judgment the case is ready to be set down for hearing. A minute will issue with a suite of proposed pre-trial directions. I will be directing counsel to confer and submit a preferably joint memorandum of any suggested changes to those directions.
[85] I should add that in my view, despite the fact the trial is presently two years in the future, I consider that the parties should get on with preparation of the case for trial. In this way there will be opportunity to review the estimate of trial duration following the exchange of evidence and to take advantage of any earlier hearing dates that may become available if other cases fall out of the Court’s calendar.
Result
[86]This case is to be set down for trial for 34 days commencing 12 April 2027.
[87]This proceeding is re-categorised for costs purposes as category 3.
[88]Insofar as security for costs are concerned, I make the following orders:
(a)Ms Mathias shall provide by 1 August 2025 a first tranche of security for NHC’s costs and disbursements in the sum of $628,882.50 in respect to the following:
(i)discovery of document ($67,070.00);
(ii)inspection of documents ($21,180.00);
(iii)preparation of briefs/list of issues, authorities and agreeing on common bundle ($265,632.50); and
(iv)experts’ fees (allowance of $275,000 based on 11 witnesses at
$25,000 per witness).
(b)Ms Mathias shall provide the security for costs in a manner to the satisfaction of Registrar.
(c)Except to the extent hereby dealt with, NHC’s application for security for costs is adjourned to be brought back before the Court on three days’ notice if following the exchange of evidence the parties are unable to agree on the amount and timing of a further tranche of security for costs in respect to remaining steps in the proceeding and any review of experts’ fees.
(d)I reserve leave to NHC to apply for a stay of this proceeding in the event Ms Mathias does not comply with the order in [88](a) and (b) above.
[89] In relation to NHC’s application for further discovery, Ms Mathias shall file and serve a further affidavit of documents by 27 June 2025 specifying:
(a)whether the documents described in Schedule B are or have been in her control;
(b)if they have been but are no longer in her control, her best knowledge and belief as to when the documents ceased to be in her control and who now has control of them; and
(c)the searches she has undertaken to locate the relevant documents.
[90] Ms Mathias is to provide all documents listed in her further affidavit to NHC for inspection by 11 July 2025.
[91] In relation to costs, I can see no reason why NHC would not be entitled to costs on its applications. If there is disagreement about costs the parties may file memoranda by 5 June 2025 (no longer than six pages) and I will determine costs on the papers.
O G Paulsen Associate Judge
Solicitors:
Grant Shand, Auckland Russell McVeagh, Wellington
SCHEDULE A
Estimate of scale costs and disbursements to stage one trial
| Step | Time allocation (band C) | Uplift (days) | Daily rate (Category 3) | Total | |
| 20 | List of documents on discovery | 7 | 12 | 3,530 | $67,070.00 |
| 21 | Inspection of documents | 6 | 3,530 | $21,180.00 | |
| 33 | Preparation of briefs, list of issues, authorities and agreeing common bundle (35 hearing days) for witness hearing | 21.25 | 54 | 3,530 | $265,632.50 |
| 33B | Preparing for witness hearing (35 hearing days) | 21.25 | 35 | 3,530 | $198,562.50 |
| 34 | Appearance at hearing for principal counsel (35 hearing days) | 35 | 3,530 | $123,550.00 | |
| 35 | Second counsel if allowed by court (35 hearing days) | 17.5 | 3,530 | $61,775.00 | |
| 35 | Subsequent counsel if allowed by court (35 hearing days) | 17.5 | 3,530 | $61,775.00 | |
| $799,545.00 | |||||
| Disbursements | $500,000.00 | ||||
| Total | $1,299,545.00 | ||||
SCHEDULE B
Categories of further documents sought
(a)documents relating to the plaintiff’s efforts to obtain insurance for [the subject property], including but not limited to the plaintiff’s correspondence with Ms Fitzsimon, and correspondence between Ms Fitzsimon and State Insurance (and any other insurers contacted);
(b)documents attached to the two emails dated 24 September 2015 and identified in the plaintiff’s affidavit of documents as M0028 and M0029;
(c)documents provided to the plaintiff by the land agent;
(d)documents relating to the plaintiff’s awareness of issues with [the subject property] after her purchase, including any inspections arranged or carried out by, or on behalf of, the plaintiff after her purchase, and related communications;
(e)documents relating to any repairs carried out by, or on behalf of, the plaintiff after her purchase of [the subject property], and related communications;
(f)documents relating to the plaintiff’s ability, intention and / or plans to repair [the subject property], including documents relating to the cost of repairs, and related communications; and
(g)documents relating to the plaintiff’s awareness, at the time of purchasing [the subject property], of concerns about repairs made to earthquake-damaged properties in Christchurch.
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