Pearce v Tower Insurance
[2014] NZHC 2849
•17 November 2014
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV 2013-409-001732 [2014] NZHC 2849
BETWEEN EILEEN MARGARET PEARCE
Plaintiff
AND
TOWER INSURANCE Defendant
Hearing: 12 November 2014 Appearances:
GDR Shand for the Plaintiff
M C Harris and O L Ostrovsky for the DefendantJudgment:
17 November 2014
[RESERVED] JUDGMENT OF WYLIE J
This judgment was delivered by Justice Wylie on 17 November 2014 at 11.00 am
Pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date:
PEARCE v TOWER INSURANCE [2014] NZHC 2849 [17 November 2014]
Introduction
[1] The defendant, Tower Insurance Ltd (“Tower”), has filed an interlocutory
application. It seeks orders that:
(a) a damage assessment report prepared by Earthquake Services Ltd dated 30 July 2013 be ruled inadmissible insofar as it purports to express opinions as to the nature and extent of the earthquake damage and building work required to reinstate a property owned by the plaintiff, Ms Pearce;
(b)an undated repair and rebuild cost prepared by a Mr Stephen Betts annexed to the statement of claim be ruled inadmissible;
(c) an engineering report prepared by a Mr Pavol Csiba be ruled inadmissible;
(d)Ms Pearce be debarred from relying on any report or opinion proffered by Messrs Betts and/or Csiba; and
(e) the costs of and incidental to this application be paid by a company called Claims Resolution Services Ltd, or alternatively, by the plaintiff.
[2] The application is opposed by Ms Pearce. In her notice of opposition, she asserted that each of the challenged reports is fair and accurate, that the Court is likely to receive substantial help from them, and that their admissibility depends upon the expertise of each witness, and not his or her independence.
[3] Affidavits were filed. A Mr Ashe filed an affidavit on behalf of Tower, and Ms Pearce, Mr Betts, Mr Csiba and a Mr Bryan Staples filed affidavits in support of Ms Pearce’s notice of opposition. An affidavit in reply was filed by Mr Ashe.
[4] The application spawned two further applications:
(a) First, Mr Shand, for Ms Pearce, sought that I should recuse myself.
Two affidavits were filed in support of this request, one from a Mr Child and the other from a Mr Morriss. Both are lawyers employed by Mr Shand. They regularly appear on behalf of plaintiffs in case management conferences in the earthquake list.
(b) Secondly, Mr Harris, for Tower, applied for leave to cross-examine
Mr Betts and Mr Staples.
[5] The applications were called before me for hearing on 12 November 2014. After hearing from counsel, I advised the parties that I was recusing myself and that my reasons for that decision would follow. I now set out those reasons. Before doing so, however, I summarise the factual background.
Background
[6] Ms Pearce owns a 110 square metre house with an attached sun room located in Palmers Road, New Brighton. The house is a single-storey, timber-framed dwelling with concrete block and other exterior cladding. It has a concrete tile roof and it sits on piles and a concrete ring foundation. The attached sun room sits on a concrete slab foundation.
[7] There is also a detached garage. It sits on a concrete slab foundation.
[8] Ms Pearce says that the house, sun room and garage were damaged in the September 2010 and February 2011 earthquakes which occurred in Christchurch. She lodged a claim with EQC, and she received payment from that organisation.
[9] At all relevant times, the house was insured by Tower for its full replacement value. Ms Pearce lodged a claim with Tower. She was unable to resolve her claim against Tower and, as a result, she commenced proceedings against it in December
2013. In her statement of claim, she asserted that her house needs to be rebuilt. She said that the cost of a rebuild is $900,782.65 (inclusive of fees), and that the cost of a repair is $873,207.34 (also inclusive of fees). She asserted that it is more economic to rebuild than to repair, and sought $789,101.15 from Tower, being the estimated
cost of a rebuild, less the EQC payment she had received. In addition, she sought general damages and interest under s 87 of the Judicature Act 1908.
[10] Ms Pearce’s estimate of the costs of a rebuild came from a costing analysis prepared by Mr Betts. It was annexed to Ms Pearce’s statement of claim. The analysis was undated. It set out the works which it was said are necessary. It listed the costs said to be associated with each item of work. The single biggest item identified related to the foundations. It was stated that the floor level differentials in Ms Pearce’s house are beyond allowable tolerances and that re-piling is required as a consequence. Mr Betts allowed for screw piles up to 16 metres deep, at three-metre centres. The cost of this item was estimated to be $175,000.
[11] As part of her initial disclosure, Ms Pearce filed a report from Earthquake
Services Ltd. It purported to be an “independent damage assessment”. It was dated
30 July 2013. It recorded what was said to be the damage to the house caused by the earthquakes in issue. The report was not signed. It was prepared by a Robert van der Bersselaar and a Lawrence Garlick. They were described as being damage assessors.
[12] In its statement of defence, Tower accepted it had insured the property. It acknowledged that it is required to meet the costs incurred in repairing/rebuilding the house, unless the house is neither rebuilt nor repaired, in which case it said that it is obliged to pay Ms Pearce the indemnity value of the house. It asserted that it has the option whether to make a payment, rebuild or repair. Tower accepted that the house was damaged in the relevant earthquakes, and that there has been differential settlement of the floor slab and step cracking to the concrete block veneer cladding. It asserted that the relevant damage can be economically repaired. It said that the house can be re-levelled and that the existing foundations can be underpinned. It did accept that the sun room needs to be demolished and reconstructed. It pleaded that it has elected to settle Ms Pearce’s claim by repairing the house. It estimated the cost of repairing the house at $317,592.96; if a rebuild is required, it estimated the cost at
$444,590.69. It asserted that it has always been, and remains, willing to honour its obligations under the policy.
[13] The proceedings were called before me at an issues conference on 5 March
2014. I issued a minute which put in place a timetable to progress matters. Inter alia, I recorded that Ms Pearce preferred to resolve any issues regarding the scope of the required works, and the cost of those works, before the matter progressed. I noted that Tower had made copies of its various expert reports available to Ms Pearce, and by consent, I gave her the opportunity to provide Tower with a particularised list of her objections to the proposed repair work, supported by reports from appropriately qualified experts, on or before 30 April 2014.
[14] The Registrar was directed to allocate a further telephone conference to progress matters on the first available date after 21 May 2014, and a further telephone conference was scheduled for 17 June 2014.
[15] On 12 June 2014, Tower filed a memorandum advising that Ms Pearce had not complied with my direction. Tower advised that it had requested Ms Pearce to advise how long she wanted to particularise her objections to its repair strategy and produce a report from an expert, but that no response had been received. Tower advised that it would not oppose a reasonable extension.
[16] A memorandum was filed on behalf of Ms Pearce. It advised that she still intended to list her objections to Tower’s repair strategy, and requested that she be given until 4 July 2014 to do so. It also requested that the Court should allocate a further telephone conference on the first available date thereafter.
[17] As a result, I vacated the telephone conference on 17 June 2014, extended the time within which Ms Pearce was to provide Tower with a list of her objections to its repair strategy to 4 July 2014, and directed that there was to be a further telephone conference held thereafter.
[18] A further telephone conference was scheduled for 22 July 2014.
[19] Ms Pearce served a list of her various objections to Tower’s repair strategy,
and in support, filed a structural engineering report from Mr Csiba, on 7 July 2014.
Mr Csiba did not agree that the foundations to the house could be re-levelled and repaired as proposed by Tower. He took the view that they had to be replaced.
[20] Tower, in a memorandum filed for the telephone conference, expressed concern at Mr Csiba’s independence. It asserted that he acted on behalf of a company known as 8D Project Management Ltd and that that company was a member of the same corporate group as Earthquake Services Ltd. It alleged that the directors of 8D Project Management Ltd were Mr Betts and Mr Staples, and that Mr Staples was the sole director of Earthquake Services Ltd. It asserted that Earthquake Services Ltd was Ms Pearce’s “lay advocate” in the proceedings, and that it had a financial stake in the outcome. It recorded that it had written to Ms Pearce’s counsel raising these concerns, but that no response had been received. It said that its concerns extended to Mr Betts, given his shareholding in 8D Project Management Ltd.
[21] The day before the conference, on 21 July 2014, Tower filed a supplementary memorandum annexing a wiring diagram illustrating what it said was the structure of the corporate group it referred to as the Staples-Can group. That wiring diagram purported to show a relationship between the parent company, Staples Can Ltd, Earthquake Services Ltd, 8D Project Management Ltd, Claims Resolution Services Ltd and various other corporate entities and individuals. Relevantly, it was asserted in the diagram that Mr Betts had a shareholding in 8D Project Management Ltd and that he was a director of that company.
[22] The telephone conference proceeded on 22 July 2014. I raised with Mr Morriss, then appearing for Ms Pearce, the issues which Tower had advanced in its memorandum. I pointed out to Mr Morriss that Tower’s allegations, if correct, could have wide-ranging ramifications.1 I directed Ms Pearce to file a memorandum setting out her relationship with Earthquake Services Ltd. I also directed Mr Morriss to file a memorandum confirming whether or not the wiring diagram produced by
Tower was accurate.
1 Mr Shand acts for the plaintiffs in approximately 70 percent of the cases filed on the earthquake list. Some 360 cases had been filed as at the end of September 2014. Approximately 240 remain active. Most, if not all, of the cases filed by Mr Shand rely on a costing analysis prepared by Mr Betts and a damage report prepared by Earthquake Services Ltd.
[23] Mr Shand, on behalf of Ms Pearce, filed a memorandum advising that there was no contractual relationship between Ms Pearce and Earthquake Services Ltd, but that she had entered into an agreement with Claims Resolution Services Ltd, whereby she agreed to pay that company eight percent of the final settlement amount received from Tower, with a minimum commission payable of $5,000 (plus GST). Mr Shand confirmed that, subject to one amendment, the wiring diagram was accurate. He also advised that Mr Csiba was employed by 8D Project Management Ltd, and asserted that neither that company nor Mr Csiba had any financial interest in the proceedings.
[24] Tower also filed a memorandum. It asserted that the statements made by Mr Shand did not “tell the whole story”. Various assertions were made as to ownership of the various companies in the corporate group, and of various changes to the corporate structure it was said that Mr Staples had put in place.
[25] The matter proceeded to yet another telephone conference on 14 August
2014. I issued a minute in which I recorded that I could not resolve the competing assertions in the course of the conference. I noted that the assertions made by Tower went to the independence and impartiality of the “experts” on whom Ms Pearce had relied, and repeated that the assertions made had potentially wide-ranging import. I recorded as follows:
…If “experts” have claimed to be impartial, and to have abided by the code of conduct for expert witnesses contained in the High Court Rules, when they, or entities associated with them, have a financial interest in the outcome of the proceedings, then it is likely that the court hearing the matter will either place less weight on the evidence than would otherwise have been the case, or hold that the evidence is inadmissible. It could also find that the “expert” has perjured himself/herself. Clearly, issues of this kind are not in the best interests of the plaintiff and counsel acting on her behalf need to be aware of this.
[26] On 27 August 2014, Tower filed another memorandum. This time it asserted that Mr Betts had failed to disclose his relationship with Earthquake Services Ltd/the Staples Can group in other proceedings.2 It said that Mr Betts was, at the time, suing
another insurance company, Southern Response Ltd, and that he had denied this
2 Rout v Southern Response [2013] NZHC 3262 at [127], [128], [203].
under cross-examination. It was claimed that Mr Betts’ denial was “a bold and blatant lie”. Tower went so far as to say as follows:
The matters traversed in this memorandum raise serious questions about Mr Betts’ veracity, and underscore Tower’s concerns about his suitability as a person to carry out orders of the kind routinely made at case management conferences in the earthquake list.
Tower went on to assert that the matters raised did not go merely to the weight of Mr Betts’ evidence, but rather to the heart of his overriding duty to assist the court impartially on relevant matters within his area of expertise.
[27] I issued a minute on 10 September 2014. I reiterated my view that the matters raised by Tower could not be dealt with through competing memoranda. I stated as follows:
If Tower is correct in the assertions made on its behalf by Mr Harris, it must follow that the reports obtained by the plaintiff and filed in Court are inadmissible, either because the persons who prepared those reports are not properly qualified as experts, or because they do not have sufficient independence to properly give evidence as experts.
Whether or not the reports are admissible is a preliminary issue, which should be dealt with by way of interlocutory application.
I put in place a timetable within which Tower was to file any notice of interlocutory application. I then stated as follows:
I record that I expect the experts to be called at that hearing, to answer questions in relation to their expertise and their independence. If the plaintiff is not prepared to call the experts, then the Court will, if necessary and on application, consider issuing a subpoena to require their attendance.
[28] In the event, Tower filed the interlocutory application noted in [1] above on
30 September 2014.
The recusal application
[29] On 5 November 2014, Mr Shand filed a memorandum inviting me to recuse myself. He asserted in that memorandum that I had previously made negative oral comments about the credibility and reliability of Mr Staples and Earthquake Services Ltd’s reports, and Mr Betts, and in relation to the admissibility of anything produced
by Mr Betts. It was said the comments were contained in many court minutes issued by me, that they were made without knowledge of the expertise of Mr Staples, Mr Betts or the relationship between the parties and before the relevant legal principles had been articulated.
[30] I was not in my chambers at the time. The memorandum was referred to me. I instructed the Registrar to advise Mr Shand that there was nothing in the memorandum which I considered required me to recuse myself, but that I was prepared to hear from him in relation to the issue at the commencement of the hearing.
[31] On 10 November 2014, Mr Shand filed affidavits from Mr Morriss and Mr Child, together with submissions in support of an application by the plaintiff for me to recuse myself from the hearing. However, no application was filed at the time. It was only filed during the hearing.
[32] Mr Shand asserted that a fair-minded, lay observer could reasonably apprehend that I might not bring an impartial mind to the resolution of the matters raised by the applications. He made that assertion by reference to the following:
(a) previous oral comments which it was said I had made in case management conferences and in Court minutes concerning Mr Staples, Mr Betts and documents produced by them and/or by Earthquake Services Ltd;
(b) that I had “personally chosen to hear the application”; and
(c) that Ms Pearce had a fundamental right to a hearing by an independent and impartial judge.
[33] Mr Harris, appearing for Tower, did not take a position on the application. He did, however, submit that various minutes issued by me, which were annexed to Mr Child’s affidavit, did not show predetermination and/or bias. He suggested that the minute simply recited relevant complaints made by defendants, and recorded, for
the benefit of plaintiffs, that there was a risk of expert reports being ruled inadmissible, or being given less weight at trial than might otherwise be the case if the defendant’s contentions were correct and were upheld by the trial judge.
Analysis
[34] The critical question in determining recusal is whether there may be an appearance of bias. The test is authoritatively discussed by the Supreme Court in Saxmere Co Ltd v New Zealand Wool Board Disestablishment Company Ltd.3 It was there held that a judge is disqualified if a fair-minded lay observer might reasonably apprehend that there is a real and not remote possibility that the judge might not bring an impartial mind to the resolution of the issue before him or her. This is to be approached in two stages – first, by identifying what it is said might lead a judge to
decide a case other than on its legal and factual merits, and secondly, by articulating the logical connection between the matter and the feared deviation from the course of deciding the case on its merits.
[35] Here, I do not consider that there is anything in the affidavits of either Mr Morriss or Mr Child which could lead a fair-minded lay observer to reasonably apprehend that I might not bring an impartial mind to the resolution of the matters before me.
[36] Mr Morriss asserts that at conferences he has attended or participated in, involving plaintiffs who have utilised the services of Claims Resolution Services Ltd, that I (and Kós J – who also manages the earthquake list) have said that costings by Mr Betts are extravagant and excessive, and that anything produced by Mr Betts probably cannot be used by a plaintiff at any subsequent hearing, because of his relationship with Mr Staples.
[37] A similar allegation is made by Mr Child.
[38] I cannot of course respond to these allegations. Were I to endeavour to do so, I would be descending into the pit and would risk getting the dust of battle in my eyes.
[39] Mr Shand did assert that the affidavits filed by Messrs Morriss and Child were the only evidence before me, that they were unchallenged, and that, therefore, it was incumbent on me to accept them in their entirety.
[40] That is, with respect, an unattractive proposition. Were it correct, parties seeking to “judge shop” could make extravagant and even scurrilous allegations, which the judge concerned cannot respond to, and thereby attain their end without more. In my judgment, a judge faced with a recusal application is not bound to accept uncritically, affidavits filed in support of a recusal application.
[41] I have scrutinised the affidavits filed by Mr Morris and Mr Child.
[42] First, I note that the assertion made by Mr Morriss and Mr Child in their respective affidavits that I have made adverse comments, are vague. Neither of them has identified with any specificity at all what I am alleged to have said, or in what context, or in which case.
[43] Case law makes it clear that a judge is only disqualified if he or she has expressed views in the course of a hearing, in such extreme and unbalanced terms as to throw doubt on his or her ability to try the issue with an objective, judicial mind.4
If something of that kind is alleged, it should have been set out.
[44] It has been recognised in Australia that it is virtually unavoidable that a judge, managing a large number of cases concerning the same issues, involving a small group of defendants, and with a limited pool of witnesses, will form some views as to the content of the material being repeatedly presented. The High Court of Australia has observed that a fair and unprejudiced mind is “not necessarily a mind which has not given thought to relevant matters”, or one which, having thought
about them, has “not formed any views or inclination of mind upon them or with respect to them”.5 I agree with these observations.
[45] In my judgment, if the application was to be advanced on the basis of comments attributed to me, there was an obligation on the plaintiff to identify what those comments (if any) were, and the context in which any comments were made. As counsel know, case management conferences are recorded digitally. The recordings are retained. On request, copies of the recordings can readily be made available. They can be transcribed. If counsel wish to base a recusal argument on comments attributed to a judge, there is an obligation on them to set out the challenged comments, and to put them in context. That step has not been taken in this case.
[46] Accordingly, I do not find it necessary to recuse myself on the basis of the unfocussed allegations made by Messrs Child and Morriss in their respective affidavits about comments I am alleged to have made.
[47] Issue was also taken with the minutes which have been issued by me subsequent upon various case management conferences. Seventeen minutes are annexed to Mr Child’s affidavit. Typically, the minutes record as follows:
I record that [the plaintiff] has advised me that she has contractual arrangements with Claims Resolution Services Ltd. Mr Child has confirmed that that company is one of a number of associated companies, which includes Earthquake Services Ltd, and 8D Management Ltd. I have advised Mr Child and [the plaintiff] that there is a risk that a report from a person who has, or is employed by an entity which has, a financial interest in the outcome of the proceedings, may be held to be inadmissible, or that less weight might be attached to it than might otherwise be the case. Mr Child is to discuss that issue with his client.
There are minor variations to this wording, but it is not suggested, and I do not consider, that there is anything of significance in those variations.
[48] In my judgment, there is nothing in the minutes which would lead a fair- minded lay observer to reasonably apprehend that I might decide the issues raised in
this application otherwise then in accordance with my judicial oath. I agree with Mr Harris’ observation that the minutes do no more than warn plaintiffs that they may be at risk if defendants take issue with the expert reports obtained by them.
[49] It has to be remembered that a fair-minded observer is presumed to be intelligent and to view matters objectively. He or she is neither unduly sensitive or suspicious, nor complacent about what may influence a judge's decision. He or she must be taken to be a non-lawyer, but reasonably informed about the workings of our judicial system, as well as about the nature of the issues in the case and about the facts pertaining to the situation which is said to give rise to an appearance or
apprehension of bias.6 It can be assumed that a fair-minded observer will take the
trouble to inform himself or herself on all matters that are relevant, and that he or she is the sort of person who takes the trouble to read the text of an article as well as the headlines.7
[50] In my view, no fair-minded lay observer, reasonably informed about what occurs at issues conferences, would draw anything adverse from the minutes which I have issued.
[51] Mr Child and Mr Morriss also asserted that neither I, nor Kós J, have made adverse comments about documents prepared and relied on by EQC, or by insurers, where those documents have been prepared by employees or business partners of EQC or the insurers.
[52] Again, it is inappropriate for me to respond to this allegation.
[53] Again, the allegations are not detailed. I can say that I do not recollect any case management conference in earthquake-related cases where there has been any significant challenge to reports obtained by EQC and/or insurers. I do recollect that, on occasion, there has been the odd sniping comment made by counsel acting for
plaintiffs, but such comments have not, to my knowledge, been elevated to formal
6 Saxmere Co Ltd v New Zealand Wool Board Disestablishment Co Ltd, above n 2, at [5].
7 Helow v Secretary of State for the Home Department [2008] UKHL 62, [2008] 1 WLR 2416 at
applications challenging the admissibility of reports produced for EQC and/or insurers.
[54] Messrs Child and Morriss both asserted that plaintiffs have told them after case management conferences that they felt under attack from “the Judge”, and that the process seemed unfair and uneven to them because there was nothing said to EQC/insurers about their scopes of work and cost estimates, and that the focus was on Mr Betts and Mr Staples.
[55] Again, I cannot comment on that allegation, other than to observe that it is hearsay. I discount it accordingly.
[56] In short, there is nothing in the evidence produced by either Mr Morriss or
Mr Child which leads me to recuse myself.
[57] Nor is there anything in Mr Shand’s assertion that I “personally choose to hear the applications”. That assertion is not backed up by any evidence. It is factually incorrect. The applications were allocated to me simply because I was rostered to be in Christchurch dealing with case management conferences for cases on the earthquake list for four days as from 10 November 2014. Because a number of other cases were dealt with in advance as a result of consent memoranda filed, I became available and the applications were allocated to me by the Registry.
[58] There are, however, two areas where Mr Shand is on stronger ground.
[59] First, in his notice of opposition to the substantive application made by Tower, Mr Shand asserted that “the admissibility of expert evidence depends upon the expertise of the witness, not the independence of the witness”.
[60] It is part of Tower’s case that Earthquake Services Ltd, Mr Betts and Mr Csiba cannot be said to be independent, because they are closely related parties to Claims Resolution Services Ltd and the Staples Can group, and because Ms Pearce has agreed to pay fees to Claims Resolution Services Ltd that include a commission calculated at the rate of eight percent of the final amount (or value as the
case may be) plus GST of the figure which Tower ultimately pays out in relation to her claim.
[61] In my minute cited at [27] above, I observed that, if Tower’s allegations were correct, that it must follow that the challenged evidence is inadmissible. This observation might reasonably be seen as cutting across any argument Mr Shand might seek to advance that admissibility depends upon expertise, not independence.
[62] Secondly, Tower seeks to cross-examine Mr Betts and Mr Staples. It has filed an application in that regard under r 7.28. In my minute recorded at [27], I indicated that I expected the relevant experts to appear before the Court to answer questions in relation to their expertise and independence. Again, this indication could reasonably be considered to cut across Tower’s application to cross-examine Mr Staples and Mr Betts, and Ms Pearce’s opposition to that application.
[63] I accept that a fair-minded lay person might reasonably conclude that I have formed a view in relation to these two issues and that there is a possibility that I might not bring an impartial mind to their resolution.
[64] Accordingly, I took the view that it was appropriate for me to recuse myself.
[65] As a result, the hearing was adjourned. It is to be heard on 20 February 2015, commencing at 10.00 am, before a different Judge or Associate Judge.
[66] Mr Shand advised that he did not seek, and there is no order as to, costs.
Wylie J
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