Ressels v Southern Response Earthquake Services Limited
[2024] NZHC 2148
•2 August 2024
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2023-009-975
[2024] NZHC 2148
BETWEEN TREVOR STUART RESSELS
Plaintiff
AND
SOUTHERN RESPONSE EARTHQUAKE SERVICES LIMITED
Defendant
Hearing: 22 July 2024 Counsel:
G D R Shand for Plaintiff (by VMR)
T C Weston KC, K M M Paterson and L C Elliott for Defendant
Judgment:
2 August 2024
JUDGMENT OF ASSOCIATE JUDGE LESTER
(leave to appeal)
RESSELS v SOUTHERN RESPONSE EARTHQUAKE SERVICES LIMITED [2024] NZHC 2148
[2 August 2024]
[1] The plaintiff, Mr Ressels, says Southern Response Earthquake Services Limited (Southern Response) misrepresented the amount he was entitled to be paid for damage to his property not covered by the Earthquake Commission (EQC). This type of damage is known as “Out of Scope” items (OOS). Southern Response cash settled Mr Ressels’ claim. Mr Ressels does not plead the particular damage which was covered by the cash payment.
[2] Mr Ressels pleads Southern Response assessed the cost of repairs to his OOS items and provided him a written “Scope of Works” which showed the cost to remediate. Mr Ressels pleads that he understood the sum specified by Southern Response “represented his remedial cost entitlement under the policy for damage to Out of Scope items”.
[3] Mr Ressels says the cost represented by Southern Response was inaccurate as it made no allowance for Preliminary and General (P&G), contingency or professional fees (the allowances).
[4] Mr Ressels says an appropriate allowance for each of these components is 10 per cent meaning he should have received $22,461.53 for the OOS items, not the sum of $16,875.68 offered and accepted.
[5] Mr Ressels says he is not the only Southern Response policyholder to be underpaid for OOS items as a result of Southern Response not including allowances in its offers. Mr Ressels sought leave to sue as a representative plaintiff on behalf of these other Southern Response policyholders who he says are in the same position as him. There may be as many as 9,500 policyholders in the proposed class.
[6] Mr Ressels’ application for leave to sue as a representative plaintiff came before me in November 2023. On 23 November 2023, I issued a decision declining Mr Ressels’ application (the November 2023 Judgment).1
[7]Mr Ressels seeks leave to appeal.
1 Ressels v Southern Response Earthquake Services Ltd [2023] NZHC 3344.
Leave to appeal principles
[8] Section 56 of the Senior Courts Act 2016 (the Act) governs the position in relation to appeals from decisions of the High Court made on interlocutory applications.2 Section 56 does not set out the legal test to be applied;3 this instead has been formulated by case law. The parties are largely in agreement as to the applicable principles.
[9] A high threshold exists for the granting of leave under the Act.4 The High Court in Finewood Upholstery Ltd v Vaughan succinctly outlined the purpose of s 56 of the Act as:5
[13] The requirement for leave to appeal should serve as a “filtering mechanism”, to ensure that unmeritorious appeals of interlocutory orders, or appeals of interlocutory orders of no great significance to either the parties or more generally, do not unnecessarily delay the proceedings in which the orders were made.
[14] Ultimately, and taking into account those considerations set out at [9] above, the court hearing an application for leave to appeal from an interlocutory order will need to stand back and assess, in a pragmatic and realistic way, whether the interests of justice are served by granting leave to appeal.
(emphasis added)
[10] The Court of Appeal has subsequently confirmed that “[t]here is no doubt that s 56(3) was intended to reduce the volume of appeals to this Court from interlocutory decisions in the High Court”.6
[11] The relevant considerations in determining an application for leave to appeal have been consistently confirmed as:7
(a)the applicant must identify an arguable error of fact or law;
2 Jessica Gorman and others (ed) McGechan on Procedure (online ed, Thomson Reuters) at [SC56.01].
3 Li v Chief Executive, Ministry of Business, Innovation and Employment [2018] NZHC 1171, [2018] NZAR 1134 at [9].
4 Greendrake v District Court of New Zealand [2020] NZCA 122 at [6(a)] and [16].
5 Finewood Upholstery Ltd v Vaughan [2017] NZHC 1679.
6 Ngai Te Hapu Inc v Bay of Plenty Regional Council [2018] NZCA 291 at [15].
7 Finewood Upholstery Ltd v Vaughan, above n 5, at [9], referring to A v Ministerial Affairs [2017] NZHC 887 at [10]-[12]. Affirmed in Greendrake v District Court of New Zealand, above n 4, at [6]; and more recently in Ding v James [2021] NZCA 578 at [18].
(b)the alleged error should be of general importance warranting determination or otherwise of sufficient importance to the applicant to outweigh the lack of general or precedential value; and
(c)the circumstances must warrant incurring further delay.
[12] The ultimate question is whether the interests of justice are served by granting leave.8
[13]More recently, the Court of Appeal has framed the test as being:9
… leave to appeal should only be granted where the significance or implications of an arguable error of fact or law, either for the particular case or for the applicant or as a matter of precedent, warrants the further delay which the appeal process would involve.
(emphasis added)
[14] In essence, the Court must undertake a balancing exercise to determine whether the factors weighing in favour of granting leave to appeal outweigh those against.10
Why was Mr Ressels’ application dismissed?
[15] The November 2023 Judgment identified what Mr Ressels had to establish pursuant to r 4.24 of the High Court Rules 2016 (the Rules) to be granted leave to sue as a representative plaintiff.11
[16] One of the key matters Mr Ressels had to demonstrate was that his case involved an issue of fact or law common to and of significance to the members of the proposed class. This is called the ‘same interest requirement’.
[17] With reference to the recent Court of Appeal decision, Simons & ors v ANZ Bank New Zealand Ltd, Mr Shand adopted para [41] of that judgment which provides:12
8 Finewood Upholstery Ltd v Vaughan, above n 5, at [14].
9 Ngai Te Hapu Inc v Bay of Plenty Regional Council, above n 6, at [17].
10 Finewood Upholstery Ltd v Vaughan, above n 5, at [15(e)].
11 Ressels v Southern Response Earthquake Services Ltd, above n [1], at [13].
12 Simons & ors v ANZ Bank New Zealand Ltd [2024] NZCA 330.
The “same interest” requirement of r 4.24 is a relatively low hurdle.13 The rule “does not require identity of claim or even the same cause of action”. As the language of r 4.24 indicates, it is enough that there is “the same interest in the subject matter of the proceeding”.14
[18] In the Simons case, the Court of Appeal was satisfied that all of the class members shared a common interest in resolving the meaning of s 22 of the Credit Contracts and Consumers Finance Act 2003 so as to determine whether or not their claims could continue.15
[19] A common or shared interest between all members of the proposed class has been described as a fundamental pre-requisite to obtaining leave to bring a representative action.16
[20]As I said in the November 2023 Judgment:17
…the identification of a common issue is:18 “essential to the decision as to the practicability of a representative order and identification of whether, and, if so, what res adjudicata arises.”
[21] While I concluded in the November 2023 Judgment that Mr Shand’s formulation of the claimed common issue was inadequate, I went on to consider whether Mr Ressels’ proceeding did disclose a common issue that would assist the proposed class.
[22] The case advanced by Mr Shand in the November 2023 hearing was that Mr Ressels had an entitlement to the allowances, and in particular, the allowance for professional fees, whether repairing the damage to his property required the involvement of professionals or not. In other words, Mr Ressels had an absolute entitlement to the allowance irrespective of the nature of the OOS damage.
13 Cridge v Studorp Ltd [2017] NZCA 376, (2017) PRNZ 582 at [11(c)], [11(d)] and [11(h)], citing
Saunders v Houghton [2009] NZCA 610, [2010] 3 NZLR 331 at [12] and [38].
14 Credit Suisse Private Equity LLC v Houghton [2014] NZSC 37, [2014] 1 NZLR 541 at [55] per Elias CJ and Anderson J and [129]-[131] per McGrath, Glazebrook and Arnold JJ; Saunders v Houghton [2009] NZCA 610, [2010] 3 NZLR 331 at [13]-[14]; Cridge v Studorp Ltd [2017] NZCA 376, (2017) PRNZ 582 at [11(e)]; and Southern Response Earthquake Services Ltd v Southern Response Unresolved Claims Group [2017] NZCA 489, [2018] 2 NZLR 312 at [36].
15 Simon & ors v ANZ Bank New Zealand Limited, above n 12, at [59].
16 Ideal Investments Ltd v Earthquake Commission [2022] NZCA 641 at [17].
17 Ressels v Southern Response Earthquake Services Ltd, above n 1, at [17].
18 Saunders v Houghton, above n 13, at [20].
[23] Based on that alleged entitlement and because the Scope of Works does not disclose that the allowances had been included, Mr Ressels says the Scope of Works misrepresented to him the true cost of the repairs.
[24] As I put it in the November 2023 Judgment: “The proposition underlying [Mr Ressels’] present application is that: “P&G, margin, professional fees and contingency” are an essential part of a true remedial costing”.19
[25] Mr Shand’s position was that allowances had to be included in the costings that Southern Response sent to each OOS claimant regardless of the type of OOS damage claimed for.
[26] I rejected that proposition as a tenable common issue as each policyholder’s entitlement in respect of OOS items turned on the facts of that policyholder’s claim. I did not accept it was an arguable default position that each and every OOS claimant was entitled to an allowance for professional fees regardless of the type of damage each insured had suffered.
[27] How such an entitlement might arise was not articulated by Mr Shand in the November 2023 hearing and I recorded in the November 2023 Judgment that:20
Mr Shand in response to a question from me said whether there should be an allowance for a professional cost could only be determined once there was evidence from witnesses with expertise on those particular topics.
[28] I considered this response undermined Mr Shand’s submission that the default position was that professional fees were payable irrespective of the circumstances, that is, irrespective of the evidence as to the nature of the damage and what was required to repair it.
[29] Mr Ressels’ insurance policy required Southern Response to pay him “[t]he cash equivalent of the cost of repairs”. Whether the cash equivalent of the cost to repair a particular policyholder’s damage required the input of professionals was dependent on the nature of damage in each claimant’s case. I considered Mr Ressels’
19 Ressels v Southern Response Earthquake Services Ltd, above n 1, at [33].
20 At [36].
claim was founded on the incorrect assumption that an allowance for professional fees should have been automatically added to his payment whether the damage to his property required the involvement of professionals or not.
[30]I concluded my November 2023 Judgment:21
[47] The flaw in Mr Ressels’ application is that it adopts a one size fits all approach to what is an inherently factual issue in respect of each insured, that is, the amount required to meet the individual insured’s cost of repairs.
The grounds of appeal on this issue
[31] The draft notice of appeal that accompanies the application for leave asserts there are a number of errors in the November 2023 Judgment. Mr Shand does not develop why the challenged conclusions are wrong. For example, para [7] of the draft notice of appeal says that the Scope of Work was a misrepresentation:
…because the scope omitted contingency, professional fees, and P&G. It is a breach of the respondent’s obligations to policyholders.
[32] Just what that obligation was, that is, what right Mr Ressels had to receive the allowances, is not articulated in the draft notice of appeal nor was it developed in argument during the leave application, as I will refer to below.
[33]The draft notice of appeal at para [8] says:
Lester AJ was wrong to find at para [35] that each policyholder’s entitlement in respect of OOS items turns on its facts so there is no common issue.
The draft notice goes on to say:
Mr Ressels … says professional fees are payable to all.
[34]Why professional fees are payable to all is not explained.
[35] During the application for leave hearing, I sought to explore with Mr Shand the legal basis for Mr Ressels’ asserted absolute right to receive an allowance for professional fees.
21 Ressels v Southern Response Earthquake Services Ltd, above n 1.
[36]I put it to Mr Shand that:
…. if the evidence is in fact that [Mr Ressels] did not require an engineer, is it accepted that his claim for … professional fees will not succeed?
[37]Mr Shand replied:
No…. .. that’s hypothetical and down [the] track after argument, after evidence, after submissions.
Mr Shand ultimately refused to answer the Court’s question.
[38]I rephrased the question and asked:
Is Mr Ressels saying that if the evidence is that no engineering input was required, that he is entitled to the money?
[39] Mr Shand said, “I have to ask him” and that he was “not going to get badgered into some sort of position”.
[40] It is clear from the proposed notice of appeal and from the arguments raised at the first hearing that Mr Ressels’ claim is advanced on the basis that he has an absolute entitlement to the allowances. No legal basis is articulated for such an absolute entitlement to professional fees where the input of professionals was not required to remediate Mr Ressels’ OOS damage and where Mr Ressels’ policy entitlement to cash is to a sum the “…equivalent of the cost of repairs”.
[41] Mr Shand summarised the position as being that Mr Ressels was entitled to the professional fee entitlement of 10 per cent as deriving:
… from the Avonside judgments, … from Mr Harrisons’ affidavit, [and] from the practice of Southern Response paying professional fees on out of scope items in other circumstances.
[42]As to the Avonside Holdings Ltd v Southern Response Earthquake Services Ltd
judgment, I said at [46] of the November 2023 judgment:22
Mr Ressels’ statement of claim relies on Avonside v Southern Response, as setting allowances for margin, professional fees and contingency at
22 Avonside Holdings Ltd v Southern Response Earthquake Services Ltd, above n 1; and Avonside Holdings Ltd v Southern Response Earthquake Services Ltd [2014] NZCA 483.
10 per cent. That case, however, is not authority for the proposition that an insurer must always pay the allowances whenever an insured has a claim for damage to their property. If the Avonside decision was authority for that proposition, there would be no need for this representative action application.
(footnote omitted)
[43] As to Southern Response’s practice of paying out professional fees on OOS items in other circumstances, I said:
[37] Mr Shand’s response … was that Southern Response must be obliged to pay OOS claimants each allowance, as when Southern Response makes a payment in respect of a house rebuild where there are also OOS items, it pays P&G, contingency and professional fees on the entire cost, including OOS items. However, how that practice might create a right enforceable by Mr Ressels is not explained – nor is that the way the statement of claim is framed.
[44] As to the affidavit of Mr Harrison, he is a quantity surveyor who filed an affidavit in another proceeding (Mr Weston KC, counsel for Southern Response, did not object to the affidavit being referred to), where Mr Harrison gave his opinion that an allowance for professional fees should be included. Mr Harrison’s opinion as a quantity surveyor does not found a legal entitlement where none previously existed.
[45] The inability of Mr Shand to articulate a legal basis for Mr Ressels having an absolute right to an allowance for professional fees is the other side of the coin of Mr Ressels’ entitlement under his policy being fact dependent. Mr Shand cannot identify a tenable cause of action which Mr Ressels could bring that would create a res judicata for the proposed class — that is why Mr Ressels’ application was declined.
[46] I am satisfied that Mr Shand has not identified a reasonably arguable error in respect of this aspect of the November 2023 Judgment.
[47] Mr Shand, in his written submissions, submits there is “an evidential basis for the Ressels claim and it meets the requirements of a provisional assessment of the merits”. That submission begs the question of the merits of what? If it is the proposition that Mr Ressels along with the other members of the proposed class have an absolute entitlement to receive all the allowances, then Mr Shand advances no legal or evidential basis for that proposition. If it is that the circumstances of
Mr Ressels’ own OOS damage claim meant he should have been paid an allowance for professional fees then first, that is not the case he has brought and second, that would only emphasise the fact specific nature of Mr Ressels’ case and that a finding in his favour would not assist other members in the proposed class whose entitlement to professional fees would depend upon their own circumstances. Southern Response’s position is that professional fees were paid where the nature of the claim required.
Contingency and P&G
[48] I recorded in the November 2023 Judgment that Southern Response accepts that its OOS payments were required to include an allowance for P&G and contingency.23 Southern Response’s position is that P&G was in fact included in the amount it paid Mr Ressels (which he disputes). Southern Response acknowledges liability for contingency.
[49]I recorded in the November 2023 Judgment:24
[52] Mr Weston, having formally acknowledged on behalf of Southern Response that it is liable for P&G and contingency, a proceeding to establish Southern Response’s liability on those issues is not required. Southern Response having resisted this application on the basis of a formal acknowledgment to the Court that it is liable for these matters, is not […] able to retract that concession.
[50] Mr Weston suggested I may not have accurately recorded his acknowledgment, but no request to recall the judgment was made.
[51]Mr Shand’s draft notice of appeal says:
13.Lester AJ is wrong to find at para [52] that a proceeding is not required to establish the respondent’s liability for contingency and P&G. SR has never made any offer to Mr Ressels to pay him contingency or P&G. So, clearly there is a need for the claim and to establish the respondent’s liability to Mr Ressels and 9,500 others.
[52] At no point has Mr Shand suggested Mr Ressels’ proposed representative action could go forward only in respect of contingency and P&G. That no offer has
23 Ressels v Southern Response Earthquake Services Ltd, above n 1, at [51].
24 At [52].
been made by Southern Response to Mr Ressels for P&G is not surprising given its position its offer to Mr Ressels included P&G. That no offer has been made for contingency does not cut across [48] above.
[53] Southern Response, in its written submissions, accepts that contingency is payable to Mr Ressels. It is offering to pay that via its compensation package. In my view, Mr Ressels is not restricted to the compensation package given Southern Response has acknowledged he is entitled to that payment.
[54]In respect of P&G, Mr Weston submitted:
20.It was entirely within Lester AJ’s discretion to decline the application to sue as a representative. There is no obligation on a Judge to work with counsel for the plaintiff to rectify significant defects in the common issues proposed, particularly given the (prolonged) history of this proceeding. No error of law arises in this approach.
…
29.The plaintiff makes no attempt to say how the claim for P&G gives rise to a common legal issue. Of course, it cannot. Southern Response accepts that Mr Ressels was entitled to be paid P&G — and says it did so. There is only an individual factual issue as to whether, in fact, he was paid PRG.
(footnote omitted)
[55] In respect of both contingency and P&G there is no res judicata to be obtained for the benefit of the proposed class. Southern Response accepts these were payable.
[56] With Southern Response having accepted policyholders were entitled to contingency and P&G, the issue in respect of each policyholder becomes whether they were in fact paid these sums.25 That factual issue would be determined at a stage two hearing which would follow if a stage one hearing date had been required to determine Southern Response’s liability for these allowances. There is nothing stopping policyholders advancing their claims for these amounts (subject to limitation) and nothing stopping Mr Shand undertaking the type of advertising exercise that would take place in a representative class action in order to reach such policyholders.
25 Southern Response relies on a limitation defence in relation to P&G as recorded in the decision sought to be appealed.
[57] A representative action is not required because Mr Ressels says he was not paid contingency or P&G. Whether Mr Ressels received P&G is a factual question concerning the quantification of his insurance payment. Again, this is a one size fits all argument.
Decision
[58] I am satisfied that the application for leave to appeal does not raise an arguable error of fact or law in respect of the November 2023 Judgment. The application for leave is therefore declined.
Costs
[59] There is no reason why costs should not follow the event on a 2B basis and that will be the costs award (along with disbursements as fixed by the Registrar), if no cost memoranda (no more than five pages) is filed in the next 10 working days.
Associate Judge Lester
Solicitors:
Grant Shand, Auckland (for Plaintiff)Buddle Findlay, Christchurch (for Defendant)
Copy to counsel,
T C Weston KC, Christchurch (for Defendant)
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