Michalik v Earthquake Commission - [2015] NZHC 490

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2013-485-3167 [2015] NZHC 490

BETWEEN
P W MICHALIK

Plaintiff

AND

EARTHQUAKE COMMISSION Defendant

Hearing: On the papers

Counsel:

P W Michalik in person
J A Knight and N S Wood for Defendant

Judgment:

16 March 2015

JUDGMENT OF WILLIAMS J (COSTS)

[1] In a reserved judgment issued on 17 September 2014, I found in favour of the Earthquake Commission (EQC) in relation to Mr Michalik’s claim for cover of his damaged retaining wall under the EQC Act.1 The issue was whether EQC properly calculated its liability under the Act, in particular whether it used the correct methodology for assessing “indemnity value” pursuant to s 19(b). I concluded:2

… that EQC adopted the correct approach when it applied depreciated replacement cost methodology to derive the indemnity value of the wall. In my view that approach is consistent with the terms of the EQC Act, relevant legislative history and with generally applicable principles of insurance law.

[2] As to costs, I foreshadowed at [97]:

EQC will be entitled to costs. I apprehend that the time and energy put into defending this application reflected its significance to EQC as a potential precedent. EQC will be entitled to some costs – after all the plaintiff commenced the proceeding – but an appropriate deduction will be made in light of the wider significance of the questions raised in the application.

1 Michalik v Earthquake Commission [2014] NZHC 2238.
2 At [48].

MICHALIK v EARTHQUAKE COMMISSION (COSTS) [2015] NZHC 490 [16 March 2015]

[3] Both parties have filed memoranda at my invitation, following disagreement as to the correct approach to costs in this case.

[4] Both EQC and Mr Michalik agree that Mr Michalik should pay a reduced sum of costs. The extent of the reduction is the issue. Although not accepting usual
2B costs should be departed from, EQC indicates it would accept 75 per cent of its scale costs and full (scale) disbursements. Mr Michalik suggests a ‘logical division’ of costs based on [97] above. That is, EQC should pay for the costs attributed to “the time and energy put into defending this application”, while Mr Michalik is responsible for the steps in commencing the proceeding.

[5] The submissions raise two issues that bear on the correct measure of costs, namely:

(a) To what extent did this litigation represent a ‘test case’ for EQC?

(b) Did EQC make a Calderbank offer to Mr Michalik?

A test case?

Submissions

[6] As to this first point, EQC notes that this would have been a test case had it brought the proceeding. In defending Mr Michalik’s claim, however, EQC submits that the ultimate judgment in its favour will be “helpful precedent for the future” but a judgment was not required by it in order to settle other similar claims. EQC says it was “satisfied that the interpretation it applied of its statute was correct in the relevant aspects”, and has been able to settle claims like Mr…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2015] NZHC 490
Decision Date: 16 March 2015

CaseChat Overview and Summary

Michalik v Earthquake Commission was a case before the High Court of New Zealand, involving a dispute between P W Michalik and the Earthquake Commission (EQC). Michalik sought cover for damage to his retaining wall under the EQC Act, and the court had to determine whether EQC properly calculated its liability using the correct methodology for assessing indemnity value. The court found in favour of EQC, concluding that it had adopted the correct approach in applying depreciated replacement cost methodology to derive the indemnity value of the wall. Regarding costs, EQC was entitled to some costs, but an appropriate deduction would be made in light of the wider significance of the questions raised in the application.

The court had to decide the extent of the reduction in costs that Michalik should pay. EQC proposed that it should receive 75 per cent of its scale costs and full disbursements, while Michalik suggested a 'logical division' of costs based on the court's earlier statement that EQC should pay for the time and energy put into defending the application, while Michalik is responsible for the steps in commencing the proceeding. The submissions raised two issues that bear on the correct measure of costs: (a) the extent to which the litigation represented a 'test case' for EQC, and (b) whether EQC made a Calderbank offer to Michalik. The court concluded that EQC was entitled to 75 per cent of its scale costs and full disbursements, amounting to $13,432.50 in costs and $2,175.40 in disbursements.

The court found that the litigation did not represent a test case for EQC, as it had been able to settle similar claims with its long-standing approach to the legislation since 1984. The court also noted that EQC's offer to Michalik did not affect the ultimate award of costs. The court decided that a 25 per cent reduction in EQC's entitlement to costs was a fair assessment of the wider advantage to EQC in having the matter at issue resolved by the court, as opposed to the potential private advantage to Michalik if he had been successful. The court further stated that any material submitted by Michalik regarding a without prejudice meeting would not have altered the conclusion as to costs.

Orders