New Zealand Fire Service Commission v Legg

[2017] NZHC 29

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2014-409-000681 [2017] NZHC 29

BETWEEN

NEW ZEALAND FIRE SERVICE

COMMISSION Plaintiff

AND

SELWYN DISTRICT COUNCIL Second Plaintiff

AND

ROSS JOHN LEGG AND ANNETTE JILL LEGG

First Defendants

AND

EVOLVING LANDSCAPES LIMITED Second Defendant

AND

AMI INSURANCE LIMITED First Third Party

AND

LUMLEY GENERAL INSURANCE (NZ) LIMITED

Second Third Party

Hearing:	On the papers
Counsel:	G K Rippingale & R M Dixon for the Plaintiffs A Riches & J Taylor for the First & Second Defendants I Thain & V Cress for the First Third Party J Parker & J Herd for the Second Third Party
Judgment:	20 January 2017

JUDGMENT OF NATION J

[1]      In  a  judgment  of  1  July  2016,  the  first  and  second  plaintiffs  obtained judgment against the first and second defendants for costs which the plaintiffs had incurred fighting a fire originating from the first defendants’ property on 10 January

2013.  I held that the first defendants (the Leggs) were entitled to indemnity from the

NZ FIRE SERVICE COMMISSION v LEGG & EVOLVING LANDSCAPES [2017] NZHC 29 [20 January

2017]

first third party (AMI).  The second defendant, Evolving Landscapes Limited (ELL) was entitled to indemnity from the second third party (Lumley).   AMI have subsequently appealed that judgment to the Court of Appeal.

[2]      In my judgment, I gave the parties leave to file memoranda as to costs if there was any dispute over those.   Memoranda were subsequently filed on behalf of all parties.

The plaintiffs’ position

[3]      The first  and  second  plaintiffs  seek  indemnity  or increased  costs  on  the grounds that the defendants’ failure to admit substantiated claims against them until just prior to (the Leggs) or at trial (ELL), was improper conduct under r 14.6(4)(a) of the High Court Rules.   The plaintiffs characterise the defendants’ liability as “objectively obvious from the start”.

[4]      The   amount   sought   is   $141,204   for   legal   fees   and   $13,511.61   for disbursements.   By comparison, the quantum of 2B scale costs is $47,724.   The plaintiffs also seek 2B scale costs in respect of the two costs memoranda filed on this application.

The defendants’ position

[5]      The Leggs and ELL were both represented in the proceedings by Saunders & Co.  They do not oppose an award of costs against them on a 2B basis but oppose an order for increased or indemnity costs as sought by the plaintiffs.

[6]      ELL seeks indemnity or increased costs against Lumley on the basis their defence to the third party claim lacked merit in that it was based primarily on an alleged failure of ELL to take reasonable precautions to avoid the fire which had occurred, a defence which had a high threshold and which could not reasonably be made out on the evidence.

[7]      The Leggs submitted that costs on the third party claim should be payable by

AMI on a 2B basis.

[8]      Both the Leggs and ELL seek an order that any costs which they should have to pay to the plaintiffs for the period after 10 March 2015 should be payable by the third parties jointly and severally.

The third parties positions

[9]      AMI accepts that it should pay 2B costs to the Leggs but only in relation to the third party claim against AMI.  AMI say they should not have to meet any costs award which the plaintiffs obtain against the Leggs.

[10]     Both AMI and Lumley support the defendants in opposing the claim made by the plaintiffs for indemnity or increased costs.

[11]     Lumley joins  with AMI in  resisting the defendants’ claim  that AMI and Lumley  jointly  and  severally  indemnify  the  defendants  for  any  liability  the defendants may have to the plaintiffs for costs.

[12]     Lumley accept that ELL is entitled to costs against Lumley on a 2B basis but only in relation to the third party claim.  The oppose ELL’s claim for indemnity or increased costs on the third party claim.

The plaintiffs’ claim for indemnity or increased costs

[13]     The plaintiffs submit that the defendants should pay the plaintiffs’ actual and reasonable costs on the basis that the defendants “acted vexatiously, frivolously, improperly or unnecessarily in … defending a proceeding”.1

[14]     The plaintiffs submit the defendants should have known any defence to the

plaintiffs’ claim was hopeless because they knew from an early date that the fire on

10  January  2013  occurred  as  a  result  of  the  re-ignition  of  the  fire  lit  by  the defendants on 16 December 2012.  The plaintiffs say the defendants did not have any legal basis to avoid liability for the fire costs under the strict liability test of s 43 of

the Forest and Rural Fires Act 1977 and that this was recognised by their counsel

1      High Court Rules, r 14.6(4)(a).

saying at the case management conference on 18 February 2017 that the defendants were likely to admit liability to the plaintiffs.

[15]     The defendants say that both insurance policies included standard clauses whereby admission of legal liability could negate cover under the policy.  Counsel for the  defendants  wrote to  both  third parties  on  10  March  2015  seeking their consent for the defendants to admit liability.  They say, and this is not contradicted by the third parties, it was not until days before trial that AMI gave consent for the Leggs to admit liability and during the trial that Lumley gave consent to ELL to admit liability.

[16]     Counsel  submitted  that,  in  these  circumstances,  it  cannot  be  said  the defendants’ acted badly or very unreasonably in defending the proceedings as long as they did.  The Leggs did admit liability to the plaintiffs shortly before the hearing. While  the  hearing  began  with  ELL still  denying  liability  to  the  plaintiffs,  that defence was abandoned during the hearing and liability was admitted once evidence was completed.

[17]     The award of indemnity costs under r 14.6(4)(a) is exceptional and, as such, “require(s) exceptionally bad behaviour”.2  The Court of Appeal has said that such an order  is  seldom  justified  “except  in  rare  cases  generally  entailing  breach  of confidence or flagrant misconduct”.3

[18]     Given the constraints which the defendants reasonably considered they were under, namely the implications for their insurance policies if they were to admit liability to the plaintiffs, I do not consider this was a case where it can be said they were guilty of flagrant misconduct or exceptionally bad behaviour in refusing to admit liability to the plaintiffs until either shortly before or during the trial.

[19]     I  also  consider  it  was  reasonable  for  the  defendants  to  deal  with  the proceedings in a way that ensured the plaintiffs and their witnesses would remain

involved with the trial on an independent basis.  Under the Forest and Rural Fires

2      Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400 at [28].

3      Bradbury v Westpac Banking Corporation, above n 2, at [28] referring to a statement from the

Supreme Court in Prebble v Huata [2005] NZSC 18, [2005] 2 NZLR 467 at [6].

Act 1977, the plaintiffs were public bodies with the responsibility for fighting rural fires of the sort that occurred here and investigating their cause.   With that responsibility and the powers associated with it, there was always potential for them to have to be involved in proceedings that might be necessary to resolve potentially difficult issues as to the precise cause of a fire and how liabilities should be borne between multiple parties associated with such an event.

[20]     As a result, there was always the potential for them to incur costs associated with such proceedings.   Balanced against that has to be the benefit the legislation provides for them to be able to recover fire fighting costs on a strict liability basis and their legislative ability to obtain the funding they require to carry out their duties.

[21]     The plaintiffs’ continued involvement in the proceedings was consistent with their having to be involved because of the particular information they were able to provide in relation to all that was at issue.   The common bundle of documents included the report of the plaintiffs’ fire investigator, Mr King.  That was a report with appendices of some 115 pages.  Mr King was the only expert fire investigator called as a witness by any party.  He was called as a witness by the plaintiffs.

[22]     In counsel’s memorandum in reply for the plaintiffs, reference was made to the “factually intense nature of these proceedings” and also to the fact the senior counsel and solicitor on the record instructed by the plaintiffs did not appear at trial as a result of issues for the plaintiffs being narrowed at  that point.   Given the comments  made  by the  defendants’ counsel  prior  to  the  first  case  management conference and the plaintiffs’ assertion that there was no legal basis on which the defendants could defend the claim made by the plaintiffs, while the plaintiffs were named as a party to the proceedings they should have been able to ensure the legal work required of them was done in the most economical way possible.   In these circumstances, the recovery of costs on a 2B basis enables them to recover what the rules contemplate as being a reasonable contribution towards the costs which would be incurred in the legal steps that had to be taken for the plaintiffs in issuing and continuing with the proceedings.

[23]     In   Bradbury   v   Westpac   Banking   Corporation,   the   Court   of  Appeal emphasised that Mr Bradbury’s case was “hopeless from its inception” as were remaining causes of action.4    Mr Bradbury should have known from the outset that his contractual arguments were untenable.   Westpac was under no contractual obligation to retain Mr Bradbury’s law firm so long as it satisfied performance standards and loyalty obligations.  The Court of Appeal held that his principal claim infringed the basic rule of law and of professional ethics.   On that basis, Mr Bradbury’s conduct could be categorised as flagrant misconduct.

[24]     The plaintiffs relied on New Zealand Home Bonds v Davenports West to suggest this was the truly exceptional case which justified an award of indemnity or increased costs.5    In New Zealand Home Bonds, the defendant pursued a “wholly unmeritorious and hopeless defence”, combined with a hopeless interpleader proceeding and breach of solicitor’s undertaking.6

[25]     The plaintiffs’ counsel referred to Mueller v Hendren.7     That was a case where the Judge held the circumstances would have justified an award of indemnity costs but, in the exercise of his discretion, made an order for a lesser amount.  Heath J held that “unnecessarily”, as it appears in r 14.6(4)(a), involves a connotation of “distinctly bad behaviour”.8   He held the caveator’s conduct, in seeking to maintain a legally unsupportable caveat for a collateral purpose, could be characterised as involving  “flagrant  misconduct”  within  the  meaning  espoused  by  the  Court  of Appeal in Bradbury v Westpac Banking Corporation.

[26]     I do not consider the defendants’ conduct is of the sort that could justify an indemnity award of costs as categorised by Sheppard J in Colgate-Palmolive Co v Cussons, adopted by Goddard J in Hedley v Kiwi Co-operative Dairies Ltd, and as

approved by the Court of Appeal in Bradbury v Westpac Banking Corporation.9

4      Bradbury v Westpac Banking Corporation, above n 2, at [29], endorsing Hedley v Kiwi Co- operative Dairies Ltd (2002) 16 PRNZ 694 (HC) at [11], in which Goddard J adopted Sheppard J’s summary in Colgate Palmolive Co v Cussons Pty Ltd [1993] FCA 801, (1993) 46 FCR 225.

5      New Zealand Home Bonds v Davenports West HC Christchurch CIV-2008-409-2862, 29 June

2009.

6 At [21].

7      Mueller v Hendren (2009) 19 PRNZ 432 (HC).

8 At [25].

9      Colgate Palmolive Co v Cussons Pty Ltd, above n 4; Hedley v Kiwi Co-operative Dairies Ltd,

[27]     Ultimately, all costs decisions are at the discretion of the Court.

[28]     As  Sheppard  J  noted  in  Colgate  Palmolive  Co  v  Cussons  Pty  Ltd,  the question must always be whether the particular facts and circumstances of the case in question warrant the making of such an order.10

[29]     In  the  particular  circumstances  of  this  case,  I  consider  the  defendants’ decision not to formally admit the plaintiffs’ claims against them until late in the day cannot be characterised as vexatious, frivolous, improper or unnecessary, or that their conduct was generally of such a flagrant and exceptional nature as to justify an award of indemnity costs.

[30]     It was also submitted for the plaintiffs that, if the Court declined to award indemnity costs, there should be an award of increased costs with an uplift of at least

75 per cent above scale costs.

[31]     In Holdfast NZ Ltd v Selleys Pty Ltd, the Court of Appeal provided guidance on the correct approach to an award of increased costs.11    In terms of quantum, the Court said:

[47]     An increase of 50% on scale costs should therefore grant the costs- claiming party a fair recovery for the step unnecessarily forced on it, assuming that the time allocated to the step has been reasonably calculated under the bands or under r 48C(3)(a) [the precursor to r 14.6(4)(b)].  Any greater recovery than that would mean that the party paying costs is contributing to the other party’s choice of special counsel.

[32]     In Mueller v Hendren, Heath J found that a 75 per cent uplift on 2B costs was justifiable but that was in a case where he found the defendant’s conduct in seeking to maintain a legally unsupportable caveat for a collateral purpose brought the case “squarely within the category of proceedings for which indemnity costs might be

ordered”.12   For the reasons already discussed, this was not such a case.

above n 4; Bradbury v Westpac Banking Corporation, above n 2, at [29].

10     Colgate Palmolive Co v Cussons Pty Ltd, above n 4, at 234.

11     Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA).

12     Mueller v Hendren, above n 7, at [25]-[29].

[33]     Increased costs may be ordered where there was a failure by the paying party to act reasonably.13

[34]     For the reasons I have already discussed, I do not consider the defendants’ position in refusing to admit liability until just prior to or during the trial can be so categorised.  For that reason, it is not appropriate for the plaintiffs to obtain an award of increased costs.

[35]     The plaintiffs are entitled to costs from the defendants on a scale 2B basis. There was no dispute that the amount the plaintiffs are entitled to on a 2B basis is

$47,724, together with disbursements (excluding GST) of $13,511.61.

ELL’s claim for indemnity/increased costs against Lumley

[36]     ELL has sought indemnity or increased costs against Lumley on the basis that they unreasonably denied liability on the third party claim against them.

[37]     I do not consider Lumley’s defence of the third party claim against them was so obviously without merit and unreasonable as to require an award of either indemnity or increased costs.  There was some evidence from a witness to the effect that Mrs Legg had admitted lighting a fire at a time when it would have been so reckless to do so that this might have provided a defence to the third party claim. Ultimately,  the  evidence  from  that  witness  was  discredited  but  it  was  not unreasonable for Lumley to want to have that potential issue tested through all the evidence which was available, including cross-examination.

[38]     As against Lumley, ELL also had to prove that the re-ignition of the fire and its escape to other properties resulted from the actions of Mr and Mrs Legg as directors or employees of ELL (it was not just Mr Legg who was a director).  This was not necessarily a straight-forward issue as it required ELL to establish that there was a connection between the burning of material from the landscaping business and the  fire  that  occurred  on  10  January 2013.    It  was  only after  all  the  evidence

(including  evidence  from  Mr  and  Mrs  Legg  and  the  evidence  of  the  fire

13     Bradbury v Westpac Banking Corporation, above n 2, at [27].

investigator), had been given that Lumley accepted there was a sufficient connection between ELL and what occurred.  Lumley acted reasonably in accepting that was the position.   I do not consider that, in the circumstances, their delay in making that decision  was  so  unreasonable  as  to  justify  an  award  to  ELL  or  indemnity  of increased costs.

The extent of the defendants’ entitlement to costs from both third parties

[39]     Both AMI and ELL submit the defendants should be entitled to costs against them on a 2B basis but only in relation to costs that are specifically attributable to the third party claim against each insurer.   On a 2B basis, AMI says it accepts it should be liable to the Leggs for 2B costs and disbursements in the amount of

$17,146.52.  However they contend that they should not be liable to the Leggs for any costs liability which the Leggs may have to the plaintiffs.  Lumley adopts the same position.

[40]     The  defendants  say they  wrote  to AMI  and  Lumley on  10  March  2015 seeking their consent for the defendants to admit liability.  AMI and Lumley did not give their consent to this at that stage.  The defendants say that, as a result, they were unable to admit the claims the plaintiffs were making against them and, in that way, AMI and Lumley were responsible for the plaintiffs incurring the legal costs which have now resulted in the plaintiffs obtaining a costs order against the defendants. The defendants say the third parties should thus pay the costs which the plaintiffs are entitled to from the defendants for the period from 10 March 2015 onwards.

[41]     The defendants refer to the relevant policies as providing additional grounds justifying the appropriateness of an indemnity for such costs.

[42]     The Lumley policy provided:

In addition to the applicable limit of indemnity Lumley will pay costs and Expenses  necessarily  and  reasonably  incurred  in  relation  to  any  claim against the insured for which there is cover under this Policy …

[43]     The AMI policy provided:

[W]e will also pay any reasonable legal expenses you incur that are first approved by us or any legal expenses that are recoverable from you by any claimant.

[44]     The defendants say that AMI and Lumley should be jointly and severally liable to indemnify the defendants for the costs payable to the plaintiffs.

[45]     It was argued for AMI in a submission, also adopted by counsel for Lumley, that the insurers should not be responsible for any costs due for the period of the proceedings between 19 September 2014 and 10 March 2015 when the insurers were asked to consent to the defendants admitting liability.   The costs the plaintiffs are entitled to, on a 2B basis for that period, total $8,955.   They relate to the commencement of proceedings and preparation for and attendance at the initial case management conference.  The only disbursement for that period would appear to be the filing fee on the statement of claim of $1,173.91.

[46]     It was submitted for AMI they should not be liable for any costs payable by the Leggs to the plaintiffs with regard to the continuation of the proceedings, including the hearing after AMI consented to the Leggs admission of liability on 20

November 2015.

[47]     Lumley adopts the submission made by AMI in this regard except that it was only during the trial, and not beforehand, that Lumley gave consent to ELL to admit liability to the plaintiffs.

[48]     The  costs  to  which  the  plaintiffs  are  entitled  for  attendances  after  20

November 2015 on a 2B basis comprise:

Preparation for hearing	$6,690
Appearance of counsel at hearing	$6,690
Other steps in proceeding	$1,592
TOTAL	$14,972

[49]     It would appear that the disbursements which the plaintiffs will be recovering for this period include:

High Court hearing fees  $6,956.52

Counsel travel expenses for trial  $1,200.31

Counsel accommodation during trial                 $1,718.36

TOTAL  $9,875.19

[50]     AMI (and  thus  also  Lumley)  argue  that  the  insurers should  not  have  to indemnify the insured against the costs which the defendants have to pay to the plaintiffs for the period from 11 March 2015 to 20 November 2015 on the basis that the defendants could have admitted liability to the plaintiffs without first obtaining the consent of the insurer and, in doing so, could thus have avoided incurring the costs to the plaintiffs for which I have now held they are liable.

[51]     The insurers accept they did not consent to an admission of liability at the relevant time.  AMI referred to the relevant clause of the AMI policy, which stated “there is no cover for legal liability if you have agreed to accept liability when otherwise you would not have been liable”.  They argue that, because of the wording of the policy, AMI could not have relied on the policy to deny cover given that the Leggs would have been liable to the plaintiffs independent of any admission they might make.  They also said s 11 of the Insurance Law Reform Act 1977 would have prevented AMI from relying on the admission where this had not caused the relevant liability,  citing  AMP  General  Insurance  (NZ)  Limited  v  Hugo  t/a  Hugh  Auto

Services.14  AMI argue that the Leggs could have accepted liability without prejudice

to their right as against the insurer to obtain cover under the policy.   It was also argued for AMI that, at the very least, the Leggs should have come back to AMI when they did not receive the requested consent to make a further request for consent and to provide further reasons as to why they considered it would be appropriate for them to admit liability to the plaintiffs.  AMI argue that it was the Leggs’ conduct which has caused the plaintiffs to incur costs and any costs payable to the plaintiffs

should be paid by the Leggs.

14     AMP General Insurance (NZ) Limited v Hugo t/a Hugh Auto Services (2003) 10 TCLR 626 (CA).

[52]     AMI also say it was liable for legal costs only if they had been first approved by AMI.

[53]     Counsel for Lumley has not referred to or relied on any particular terms of the Lumley policy for ELL.

[54]     The relevant condition of the Lumley policy as to admitting a claim was different from that in the AMI policy.  It was a condition of the Lumley policy that “the insured shall not, without Lumley’s prior written consent, make any admission, offer, promise or payment in connection with any occurrence or claim”.

[55]     In the Lumley policy, Lumley agreed, subject to the policy terms, to:

… indemnify the insured for all amounts the insured shall become legally liable to pay for compensation in respect of … Property Damage that occurs within the Territorial Limits and that:

(a)   happens during the Period of Insurance; and

(b)   is caused by an Occurrence in connection with the Insured’s Business.

[56]     Under its policy, AMI agree to cover, unless excluded by the policy, the Leggs’ “legal liability, arising from or in connection with [their] farming operation, for accidental damage to other people’s property occurring anywhere in New Zealand”.  In connection with that, AMI stated they would pay:

(a)  up to $2 million for any claim or series of claims arising from any one event; and

(b)  “… any reasonable legal expenses you incur that are first approved by us, or any legal expenses that are recoverable from you by any claimant”.

[57]     The AMI policy stated that special covers were automatically included.   In that section of the policy there was express reference to:15

Forest and Rural Fires Act 1977

15     There remains an issue as to whether, when the policy was issued, there was agreement that cover for any liability under the Forest and Rural Fires Act 1977 would be limited to $2 million or $1 million.

a.     We will cover you for any liability under the Forest and Rural Fires Act

1977 up to $2 million, including defence costs, except that for levies imposed by a Fire Authority under Section 46 of the Act, we will cover

you up to $250,000.

[58]     I do not accept that either the Leggs or ELL should be denied indemnity for the costs they must pay the plaintiffs on the basis they should have admitted liability to the plaintiffs without the express consent of the insurers after 10 March 2015.

[59]     At that time, neither insurer suggested there could and should have been an admission without the insurers consent.

[60]     The insurers argue the defendants should have proceeded on the basis their admission of claims would not have prejudiced their position vis-à-vis the insurer.  If it would have been reasonable for the defendants to proceed on that basis then, so also, it would have been reasonable for the insurers to proceed on that basis.  With their  experience  of  this  sort  of  litigation  and  the  issues  that  could  arise,  it  is reasonable to assume that the insurers would have had, and certainly should have had, the specialist knowledge and advice to be aware of this.  If they accepted, and should have accepted, that the admission of claims would not have prejudiced the defendants’ right to cover under their policies, the insurers should have consented to the defendants admitting the plaintiffs’ claims against them at that early date.  At the very least, they could have agreed that the claims could be admitted without prejudicing the defendants’ claims as against the respective insurers.

[61]     Whatever the ultimate legal position might have been for the defendants, vis- à-vis their claim for cover against the insurers, it was reasonable for the defendants to take a cautious approach in deciding not to admit the plaintiffs’ claims without the express consent of the third party insurers.

[62]     I do  not  consider that  either insurer should  be  able to  avoid  liability to indemnify for those costs for which the defendants are liable after AMI agreed the Leggs could admit liability to the plaintiffs on 20 November 2015.   As already mentioned, the rationale for claiming such a limitation on their liability to indemnify is not available for Lumley.

[63]     After 20 November 2015, both insurers were continuing to deny they had any liability to cover the defendants against the claims which were being made against them by the plaintiffs.

[64]     Determination of the issues with regard to this required detailed evidence as to  what  happened  with  the fire and  the investigation  as  to  its  cause.    In  these circumstances, it was understandable and reasonable that the plaintiffs had to remain as  a  party to  the  proceedings  and  were  involved  in  further  preparation  for  the hearing, with attendance by their counsel throughout the hearing.

[65]     In the exercise of my discretion, I have also had regard to the fact both the Leggs and ELL must have incurred significant legal costs in responding to the claim which was made against them by the plaintiffs.  I have found that AMI and Lumley were both contractually bound to indemnify the respective insured against liability arising out of the claims that had been made against them.  In both cases, the policies required the insurers to indemnify the respective insured for defence costs. Although this may have been subject to the insured first obtaining the consent of the insurer to the incurring of such costs, given the insurers were liable to provide cover under their policies, it would have been reasonable for them to either assume the burden of instructing counsel to respond to the claims, or to agree that they would indemnify the defendants for the costs they incurred in instructing their own counsel to deal with the claims.

[66]     In  the  memorandum  filed  by  counsel  for  the  defendants,  the  defendants sought  an  order  that  the  insurers  indemnify  the  defendants  for  steps  in  the proceedings after 10 March 2015.  That involves a significant concession on the part of both defendants.

[67]     Lumley formally advised ELL that the Lumley policy did not apply “cover” on the basis the occurrence was not in connection with the insured’s business and on the basis that ELL had not taken reasonable precautions to comply with statutory obligations in a letter of 13 November 2013.

[68]     As early as 10 March 2014, AMI suggested there was an exclusion clause in the policy which could apply.  In a letter from their solicitors of 9 April 2014, AMI formally advised the Leggs that AMI would not be accepting liability to indemnify.

[69]     The  uncertainties  with  regard  to  the  insurance  situation  meant  it  was inevitable that all the circumstances surrounding the fire would be the subject of civil proceedings.  The initial stance taken by the insurers must have at least contributed significantly to the plaintiffs having to bring proceedings to pursue their claims.  I have found that the insurers were wrong to have declined cover.  That being the case, it would have been reasonable for the insurers to indemnify the defendants against the plaintiffs’ costs for steps taken before 10 March 2015 for which the defendants are liable.

[70]     I have considered whether the costs for which the defendants are liable to the plaintiffs should be apportioned as between the two insurers rather than be costs for which AMI and Lumley should be jointly and severally liable.  I consider this is a case where each insurer should be liable to indemnify their respective insured for those costs and that would have remained so had only one of the insurers been legally obliged to indemnify its insured for the defendants’ costs liability to the plaintiffs.  Given that assessment, it is appropriate that AMI and Lumley jointly and severally indemnify their respective insured against the costs which they must pay the plaintiffs.

Conclusion

[71]     I make an order that the abovenamed first and second defendants are jointly and severally to pay to the plaintiffs for costs a total of $47,724 and disbursements of

$13,511.61.

[72]     The abovenamed first defendants’ (the Leggs) are entitled to costs from the first third party, AMI, in respect of their third party claim against AMI on a 2B basis together with disbursements.

[73]     The second  defendant,  Evolving  Landscapes  Limited, is  entitled  to  costs against the second third party, Lumley, on the third party claim also on a 2B basis, together with disbursements.

[74]     Both AMI and Lumley accept that they should have been liable for costs to their respective insured  on  a 2B basis.    Counsel  for AMI produced  a schedule indicating those costs would be $17,146.52.  It is not clear whether this is accepted by the Leggs.   If there is any continuing dispute over what such costs should be, leave is reserved to file memoranda so that any issue can be resolved by the Court.

[75]     The defendants have sought indemnity for costs due to the plaintiffs only for the period after 10 March 2015.   That being the case, the first and second third parties, AMI and Lumley, are to jointly and severally indemnify their respective insured for the costs liability which their insured has to the plaintiffs in the sum of

$38,769 and for disbursements to the extent of $12,338.70.

[76]     The  plaintiffs  were  not  successful  in  their  application  for  indemnity  or increased costs.   Both third parties were unsuccessful in resisting the defendants’ claim for indemnity in respect of the costs the defendants must pay the plaintiffs. ELL was unsuccessful in their claim for increased indemnity or increased costs as against Lumley.  In all the circumstances, all parties are to bear their own costs in resolving cost issues.

Solicitors:

Saunders & Co, Christchurch

DLA Piper, Auckland

Chapman Tripp, Wellington

Morrison Kent, Wellington.