Morrison v Vero Insurance New Zealand Limited
[2014] NZHC 3229
•15 December 2014
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2013-409-000792 [2014] NZHC 3229
BETWEEN ANTHONY BRENDON MORRISON and
GAIL CROSS Plaintiffs
AND
VERO INSURANCE NEW ZEALAND LIMITED
Defendant
Hearing: 15 December 2014
(On the papers)
Counsel:
S P Rennie and J E Bayley for Plaintiffs
M Ring QC and P Hunt for DefendantJudgment:
15 December 2014
JUDGMENT OF WHATA J
[1] In my judgment on this matter I resolved the following:1
[181] I am satisfied that:
(a) The modelling used by TMT is reliable and substantially helpful for the purpose of quantifying the capacity of earthquake events to cause damage and as an input to the assessment of the allocation of damage per event of loss;
(b) The September, February and June earthquake events caused additional material damage to the building; and
(c) Vero is liable to indemnify the loss caused by those events in terms of the cost of repairs as per:
(i) the Vero assessment for the purposes of the
September event;
(ii) the repair recommendations of the Weidlinger report
(March 2014) for the February event ;
1 Morrison and Cross v Vero Insurance New Zealand Limited [2014] NZHC 2344.
MORRISON and CROSS v VERO INSURANCE NEW ZEALAND LIMITED [2014] NZHC 3229 [15
December 2014]
(iii) the repair recommendations of the Weidlinger report
(March 2014) for the June event.
[182] I am not prepared to provide a judgment sum at this stage. Instead I
propose to make the following declarations:
(a) Vero has paid the sum owing in relation to the September earthquake event;
(b) Vero must pay the repair cost for the repair recommendations of the Weidlinger report at page 5 (March
2014) for the February event (such repair cost to be based on
the costing methodology adopted by MWHR);
(c) Vero must pay the repair cost for the repair recommendations of the Weidlinger report at page 6-7 (March 2014) for the June event (such repair cost to be based on the costing methodology adopted by MWHR);
(d) The application of the “deductible” is to be determined at a hearing with evidence about its meaning of the term in insurance practice;
(e) The cost of the new pilings is not to be included for the purpose of calculating the indemnity payment, but must be included for purposes of reinstatement.
[183] I make no orders at this stage in relation to the P&G, contractors’ margin, professional & consent fees. This aspect was barely argued before me and I simply invite the parties to consider their position in light of my judgment and revert to me if necessary in the course of making submissions in accordance with my direction at [185].
[184] As to reinstatement, I do not consider it is appropriate to make declarations largely in the abstract, that is without any clear evidence that reinstatement is likely. I have addressed the provisions of the policy dealing with reinstatement at [45]-[52], [156]-[157], and [171]. This should provide sufficient guidance as to their scope and purpose.
Process from here
[185] The parties have 20 working days to file submissions on the final form of the declarations, the judgment sum, costs, and the timetable for addressing the issue of the deductible. The submissions must not be greater than 15 pages in length. It may be that the parties would prefer to finalise matters after the deduction issue is finally resolved or on some other basis. I do not foreclose that possibility and leave is reserved to the parties to approach me on that basis.
[2] Submissions in relation to the above directions were lodged by the parties. Agreement was reached on the final form of declarations in relation to the September earthquake event and the February earthquake event. It was also agreed that the
deductible issue should be deferred pending the outcome of an appeal to the Court of
Appeal which is due to be heard in February next year.
[3] The remaining issue of substance is the quantification of the damages award in relation to the June event. Caucusing between Dr Jain and MWH was undertaken and a joint expert report was filed with the Court on 9 December 2014.
[4] I also now have submissions from counsel on costs.
[5] The parties have asked that I make my final judgment as soon as possible given the impending Court of Appeal hearing, and for that purpose I understand that they are content with me to resolve the final issues on the papers.
[6] I propose therefore to deal with the final judgment in the following manner: (a) The final declarations.
(b)The judgment sum (but without consideration as to the treatment of the deductible).
(c) Costs and disbursements. (d) Expert fees.
[7] I note that I have not received submissions dealing with P & G, contractor’s
margin, professional and consent fees. I do not advance that aspect further.
Declarations
[8] I make the following declarations:
(a) Vero has paid the sum owing in relation to the September earthquake event but must pay interest on that sum, in the amount of $10,428.16.
(b)Vero has paid the sum owing in relation to the February event, subject to any additional payment that may be determined as due in respect of the deductible.
(c) Vero must pay the repair costs for the repair recommendations of the Weidlinger Report at page 6-7 (March 2014) for the June event, in the sum of $489,627, together with interest:
(i)Payable from 16 December 2011 (being the interest date previously adopted by Vero) down to the date of the final judgment to be issued, which interest shall be calculated daily at a rate of 5% per annum; and
(ii)Payable in accordance with r 11.27 HCR at the rate prescribed under s 87 of the Judicature Act 1908 from the date of the final judgment to be issued.
(d)The cost of the new pilings is not to be included for the purpose of calculating the indemnity payment, but must be included for the purpose of reinstatement.
Assessment of quantum
[9] In my minute of 18 November 2014, I made the following direction:
Dr Jain and MWH are to confer to identify line items per the WAI report for June damage. They are then to report to the Court with agreed line items and items not agreed…
[10] Agreement was reached on one line item, namely the definition of rear addition.
[11] The areas of disagreement concern the interpretation of my judgment as to the basis for reaching agreement. MWHR has approached caucusing on the basis of my direction at [182](b) of the judgment, namely:
(b) Vero must pay the repair cost for the repair recommendations of the Weidlinger report at page 5 (March 2014) for the February event (such repair cost to be based on the costing methodology adopted by MWHR);
[12] By comparison, Weidlinger has taken the direction provided at [2] of the
18 November 2014 minute to the further reference to [155] of the judgment, to mean that the per event repairs (March 2014 report) to the building were developed subsequent to the conclusion of all events, therefore the repair for one event cannot be considered in isolation to the repairs required for the other events.
[13] My judgment proceeded on the basis that the plaintiffs had agreed to MWHR’s methodology for quantifying the scope and cost of repairs. That is the basis upon which the assessment was to be made. Weidlinger proposes to modify the quantification by reference to what it calls the proper sequencing of repairs. The case was not presented to me on that basis, and it did not form part of my judgment. I therefore prefer the approach taken by MWHR. Quantification therefore is fixed at
$649,334.67 for an undepreciated cost of repair. A depreciated cost of repair is
$489,267.03.
Costs
Principles
[14] The principles for cost considerations are well settled, first by part 14 of the High Court Rules and then by various authorities.2 I have a broad discretion to impose costs, but the primary principle is that costs follow the event.3 Particularly relevant to the present claim is r 14.6(3) and r 14.7 dealing with increased or reduced costs award.
[15] TMT seeks costs on a 3C basis, together with an uplift on the basis that Vero contributed unnecessarily to the time and expense of the proceeding and conducted
the litigation in a manner as to justify an uplift. It is submitted that, in particular:
2 Glaister v Amalgamated Dairies Ltd [2004] 2 NZLR 606 (CA) at [24] and [28]; Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA); Bradbury v Westpac Banking Corp [2009] 3 NZLR
400 (CA) at [27] and [94].
3 High Court Rules, r 14.2(a).
(a) Vero ultimately accepted, after the conclusion of the trial, that the merger and/or frustration would not apply despite maintaining this in its 2 May 2014 statement of defence, that the damage “is subject to the doctrine of merger and/or frustration”.
(b)It was not until 14 days before trial that Vero agreed to make an additional indemnity payment (capped at the sum insured).
(c) It was not until four days before trial that Vero agreed to make an additional indemnity payment for the September event.
(d) Vero’s witnesses “appeared at times to be treating it from agreed
positions”.
(e) Vero called numerous expert witnesses who had not engaged in the
Court assigned pre-hearing caucusing.
(f) Vero served nine supplementary briefs of evidence during the trial.
(g) A solicitor acting for Vero effected “the completion of a joint
statement on a topic of central importance, the resolution of the case”.
[16] In light of the above, a 75 per cent uplift on costs is appropriate, yielding a total of $251,847.75. Disbursements are claimed in the sum of $353,804.53, less an Injasuti of $2,840.50. The total therefore claimed is $602,811.78.
[17] Vero accepts that TMT is entitled to an award of scale costs, however says that costs should also recognise that TMT has only been partially successful, and also that it has claimed for unnecessary steps such as briefs of evidence for witnesses not called.
[18] As to scale costs:
(a) Category 2 costs were agreed at case management.
(b) Band B is applicable to all steps.
[19] Vero also submits that there should be a reduction in scale costs given the disparity between the sums claimed and the sums recovered (ie, for the September event TMT sought $2,979,047 and received $85,630, and for the June event TMT claimed $1,895,757 and will receive $489,627). Vero submits that a 30-35 per cent discount is appropriate in the circumstances.
[20] Vero responds to the various issues raised for uplift. I do not propose to dwell on most of them because, as I will shortly explain, I do not consider that an uplift of 75 per cent is justified or Band C categorisation. I propose however simply to uplift costs by 10 per cent. I address Vero’s submissions in my reasons.
[21] I consider that the matters recorded at [14] (a)-(c) are ordinary incidents of litigation of this nature, as are the matters raised by Vero for the purposes of seeking a cost reduction. Furthermore, for the most part the evidence needed to be traversed in any event, so I do not think that the material additional costs were incurred as a consequence of the late withdrawal of certain defences; the payment of a sum reflective of the defendant’s acceptance of part of the judgment sought or in terms of the relatively limited success achieved by TMT.
[22] I do consider however that the matters identified at (d)-(g) are relevant, though only partially so. I record at [179] of my judgment the various problems incurred as a consequence of an imperfect caucusing process, including the late introduction of experts by Vero after caucusing on a particular area had been completed, poor conduct of an expert for Vero that required the introduction of a new expert during the hearing, and the (good faith but misdirected) interference with the caucusing process by a solicitor for Vero. This inevitably increased the length of the hearing, attendances by counsel, experts and the Court.
[23] Balanced against this, as I stated in the judgment, I am satisfied that the deficiencies were unintentional. I also accept that Counsel endeavoured to remedy the problems proactively through the hearing process. But as is evident from the submissions of counsel on costs, 3 witnesses were not made available for caucusing.
I do not find the explanations for this satisfactory. All three gave evidence on matters amenable to caucusing. In addition, while Dr Brooke could not realistically be expected to caucus because he was not going to be called, his predecessor (who was removed for his conduct during the hearing) should have been available to caucus.
[24] Overall, the evidence became a constantly evolving exercise to accommodate the deficiencies just mentioned. I therefore uplift the costs order by 10% to reflect my estimate of the inefficiencies caused by the management of Vero’s experts.
Disbursements
[25] Vero disputes significant elements of the costs and disbursements. Vero objects to various of the cost itemisations. In particular it is noted:
Numerous memoranda were filed throughout the proceeding. However, only
7 of the memoranda filed by TMT can properly be said to be for the purpose of a case management conference or mentions hearing as envisaged by step
11 in schedule 3 (r 14.5). The majority of TMT’s memoranda related to
other matters, for example in relation to expert conferral, filing of amended
pleadings, Mr Morrison’s medical condition, seeking an urgent trial date,
seeking a separate questions hearing (which was not granted) and providing submissions on the joint conferral conference. They have been removed from the schedule.
[26] TMT responds that the filing of the memoranda took time, was reasonably necessary and often did involve case management issues such as in respect of expert conferral and trial timing. If it cannot rely on step 11, it relies on step 36 catchall for other steps in the proceeding not specifically mentioned.
[27] At this distance, it is difficult, if not impossible, for me to verify the purpose of the individual memoranda. That has not in fact been undertaken by counsel to any degree. Nevertheless, I accept at face value Mr Ring QC’s submission that the memoranda identified are not strictly speaking step 11 memoranda. They may well be caught by step 36 catchall. They appear to be directed to the management of experts and pleadings. In any event, I do not consider it is necessary to impose a costs order in relation to them. Any unfairness to that is accommodated by my proposed uplift on costs.
Expert costs
[28] I am not prepared to finally resolve the issue of disbursements without appropriate affidavits from the relevant experts confirming that the costs were specifically incurred for the purposes of the litigation and that the costs are reasonable. I note in this regard that Vero expresses some concern that the costs were incurred well before TMT commenced proceedings. In particular there is reference to Weidlinger expenses incurred in respect of reports which were issued before the proceeding was commenced. The extent to which those instructions relate specifically and reasonably to the conduct of the proceeding, and are reasonable in amount, needs to be demonstrated on affidavit evidence as required by r 14.12(2)(b)-(d).
Process from here
[29] I note that Harrison J, in his minute dealing the Court of Appeal matters, did not consider that a final judgment as to quantum or costs was necessary for the purposes of the hearing by the Court of Appeal. On that basis, I propose simply to defer the assessment of expert costs, as I say, until the affidavit evidence is filed. This should not prevent the sealing of judgment, and in particular of the declarations that have been made by me.
[30] I am content to afford counsel the opportunity to reach agreement on the residual issue of expert costs so I will not fix a timetable for the filing of affidavits and submissions. I otherwise approve costs and disbursements on a 2B basis, less the sums claimed in relation to the various memoranda deleted by Vero, but uplifted by
10 per cent
Solicitors:
Rhodes and Co, Christchurch
McElroys Litigation Lawyers, Auckland
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