Prattley Enterprises Limited v Vero Insurance Limited

[2015] NZHC 411

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV2013-409-001511 [2015] NZHC 411

BETWEEN

PRATTLEY ENTERPRISES LIMITED

Plaintiff

AND

VERO INSURANCE NEW ZEALAND LIMITED

Defendant

Hearing:	9 March 2015
Appearances:	FMR Cooke QC with S P Rennie for Plaintiff D J Goddard QC with SWB Foote and C M Brick for Defendant
Date ofRuling:	10 March 2015

RULING 1 OF DUNNINGHAM J

[1]      In  a  memorandum  dated  20  November  2014,  the  defendant  signalled  a challenge to the admissibility of some sections of the evidence of the plaintiff’s witness,  George Wilton  Keys,  who  gives  expert  evidence  on  the  approach  to depreciation to be adopted when assessing the indemnity value of the plaintiff’s building.

[2]      As agreed at the outset of the hearing, the issue of its admissibility was deferred to be considered later in the hearing, and when the context in which the evidence was to be given was clearer.   I therefore heard submissions on the admissibility challenge when the hearing resumed on 9 March 2015.

[3]      The particular passages of concern are found in paragraphs 13 and 18 of

Mr Keys’  brief  of  29  August  2014,  and  in  paragraph  6  of  his  reply  brief  of

PRATTLEY ENTERPRISES LIMITED v VERO INSURANCE NEW ZEALAND LIMITED [2015] NZHC 411 [10 March 2015]

14 October 2014.  The paragraphs concern the approach to depreciation adopted in another proceeding, Morrison and Cross v Vero Insurance Limited.1

[4]      The first  challenged passage refers to  a letter from the defendant to the plaintiffs in the Morrison proceeding regarding its approach to depreciation in that case.  The other challenged passages of the evidence refer to the outcome of expert witness conferral in the Morrison proceedings, as Mr Keys seeks to rely on the outcome of that to support his opinion as to the appropriate approach to, and allowance for, depreciation of the building that is the subject of the current proceeding.  In its current form, his evidence references both the defendant’s letter, and the joint expert report on depreciation in the Morrison proceeding, although their inclusion in the common bundle was objected to by the defendant.

[5]      The defendant submits that both its stance on depreciation as identified in the letter,  and  the  outcome  of  witness  conferral  in  the  Morrison  proceeding,  are irrelevant and should not be admissible in this hearing.   It says that the Morrison case concerned a claim against the defendant by a different plaintiff for damage to a different building.   As a consequence, the approach taken by Vero, or by expert witnesses in that case are neither relevant nor admissible in this proceeding as they cannot shed light on the correct interpretation of a policy or on its application to the facts in the present case.   The defendant seeks orders ruling all three identified passages, and the documents they refer to, as inadmissible.

[6]      The plaintiff argues that the three identified passages should be admissible. First,  an  issue  in  dispute  in  the  present  proceedings  is  the  correct  depreciation method to adopt when calculating indemnity value.   There is a contest between Mr Keys’ adoption of a physical depreciation method as opposed to the defendant’s expert, Mr Stanley’s, economic depreciation method.  The plaintiff says Mr Keys is giving admissible expert evidence to the agreed approach taken by the experts in Morrison, because it forms part of his experience and is an example of the industry

adopting and applying the approach which he advocates.

1      Morrison and Cross v Vero Insurance Limited [2014] NZHC 2344.

[7]      While the plaintiff accepts that the issue of the weight to be put on the evidence is  for the Court  to  determine,  Mr Cooke QC  submits  the evidence is substantially helpful noting that Mr Keys is one of the authors of the joint report of experts prepared in the Morrison hearing, the other experts agreed with it, and the evidence was given and accepted by the Court.

[8]      Mr Cooke rejects the argument that the evidence is hearsay as it is evidence that Mr Keys himself gives, by way of a recent example of what he says is industry practice.  He accepts that, technically, the view of the other experts is hearsay, but says this is a situation where the exception found in s 18 of the Evidence Act 2006 (“the Act”) applies.  Section 18 provides that a hearsay statement can be admissible if the circumstances relating to the statement provide reasonable assurance that the statement is reliable, and where undue expense or delay would be caused if the maker of the statement was required to be a witness.   In circumstances where the statement was prepared for the Court, by acknowledged experts, and where one of the experts is available for cross-examination, the plaintiff submits it is reasonable to rely on s 18 to admit the hearsay evidence of the other two experts.

[9]      Finally, the plaintiff submits that the evidence is plainly relevant.   It falls within s 25 of the Evidence Act 2006 which governs when expert opinion evidence will be admissible, in that:

(a)       it forms part of Mr Keys’ expert opinion derived from his recent experience, of the correct approach to depreciation;

(b)      it is evidence of the common knowledge of the industry under s 25(2).

Discussion

[10]     It is clear that the approach to depreciation is a live issue in the proceeding, and  both  Mr  Key  and  Mr  Stanley  have  the  expertise  to  assist  the  Court  in determining the proper approach to take to this issue.  Thus, in a general sense, the reasoning he applied in the Morrison case, may be relevant in this proceeding and thus meet the test in ss 7(2) and 7(3) of the Act.  However, even if it is relevant (and cannot be determined without testing), I must exclude evidence under s 8 where its

probative value is outweighed by the risk that the evidence will have an unfairly prejudicial effect on the proceeding or needlessly prolong the proceeding.

[11]     In the present case, I am satisfied that the letter from the defendant, Vero, referred to in paragraph 13 of Mr Keys’ primary brief of evidence is inadmissible because  it  is  almost  certainly  irrelevant.    As  Mr  Goddard  QC  points  out,  the approach adopted by the defendant in a different case, on different facts, may well not be relevant to the assessment of the appropriate measure indemnity in this case. In fact the defendant could have been wrong in its approach in the previous case. However, equally importantly, time will needlessly be spent on exploring whether, in fact, Vero’s approach in the previous case was applicable to this case, and whether its approach was correct.   I see no point in exploring those issues when the question before me is simply what the correct approach is in this particular case.

[12]     Similarly, the results of expert conferral in another case may or may not be relevant to this case, but even if they are relevant, significant time would need to be spent in evidence-in-chief and cross-examination about what happened in that case in order to determine whether, and to what extent, the opinion of Mr Keys and the other experts was correct, and has a bearing on the result in this case.  I do not think that would be a fruitful exercise and therefore consider the test in s 8 of the Act is not satisfied.

[13]     Mr Goddard also asserted that Mr Keys’ opinion evidence in the Morrison case should be excluded under s 23 of the Act, because it could not satisfy the tests in ss 24 or 25, I accept that, as fact finder, I am unlikely to derive substantial help in understanding the evidence in this case by reference to views expressed by Mr Keys (and others) about depreciation of another building in another proceeding.   The central issue for me is to understand how valuers approach this task in a general sense and what factors in this case direct that one approach is to be preferred over another.

[14]     I do not accept that the outcome of witness conferencing in the Morrison case is either evidence of a fact on which the opinion is based, or is material which forms part of the general bank of information available on the particular topic on which he

is called to express his opinion.  It is a single selected example of another consonant opinion, and therefore is too limited an example to demonstrate an agreed industry approach.

[15]     Mr Goddard also argued that the statement was inadmissible under s 35 of the Act as being a prior consistent statement, and under s 17 as it records the hearsay opinions of other experts.   I accept that, to the extent the results of expert conferencing in Morrison are introduced in the evidence, the statements of the other two experts are hearsay, and the defendant is disadvantaged by being unable to cross-examine  them.    The  plaintiff  would  have  the  benefit  of  them  bolstering Mr Keys’ opinion, without their evidence being tested in that way.

[16]     I am less convinced that the material is necessarily excluded under s 35. Certainly an expert witness can give evidence about the normal practice, and the approach that they would take in a case such as this, but I think such an opinion can be couched in general terms and by reference to the principles which guide the experts’ decision, rather than by selecting one specific example which would then need to be tested for its relevance to the present case.

Conclusion

[17]     Accordingly, I am not satisfied that the three passages satisfy the test for admissibility.  I consider that the degree of relevance under s 7 is doubtful, but more importantly, I consider the evidence fails the test in s 8(1) of the Evidence Act.

[18]     Accordingly, I direct:

(a)      the last sentence of paragraph 13 and the whole of paragraph 18 of Mr Keys’ brief of evidence dated 29 August 2014 are inadmissible and may not be read in evidence at trial;

(b)      the last two sentences of paragraph 6 of Mr Keys’ reply brief dated

14 October 2014 are inadmissible and may not be read in evidence at trial;

(c)       the documents referred to in those two passages are inadmissible and may not be referred to in evidence at trial.

Solicitors:

Rhodes and Co., Christchurch

Jones Fee, Auckland