Skyward Aviation 2008 Limited v Tower Insurance Limited

[2013] NZHC 2452

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2012-409-002722 [2013] NZHC 2452

BETWEEN	SKYWARD AVIATION 2008 LIMITED Plaintiff
AND	TOWER INSURANCE LIMITED Defendant

Hearing:	15 July 2013
Appearances:	K P Sullivan and GDR Shand for Plaintiff R B Stewart QC and M C Smith for Defendant
Judgment:	19 September 2013

JUDGMENT OF D GENDALL J AS TO COSTS (DEALT WITH ON THE PAPERS)

[1]      In a judgment I gave in this matter on 30 July 2013, which answered three preliminary questions put before the Court for determination, I reserved costs.

[2]      Counsel for the defendant has now filed a memorandum seeking costs dated

20 August  2013.    Counsel  for  the  plaintiff  has  responded  opposing  costs  in  a memorandum dated 30 August 2013.

[3]      I now give my decision on the question of costs.

[4]      Counsel for the defendant seeks costs on this matter and the hearing on a category 2B basis (with the exception of written submissions on which costs on a

2C basis are sought) totalling $19,303.  In addition, disbursements totalling $2308.81 are sought.   Further, counsel for the defendant seeks an additional $995 which he

says relates to the costs of preparing the costs memorandum itself.

SKYWARD AVIATION 2008 LIMITED v TOWER INSURANCE LIMITED [2013] NZHC 2452 [19 September

2013]

[5]      Counsel for the plaintiff opposes any order for costs being made here, but goes on to indicate that if costs are to be awarded, issues are taken with certain aspects of the claim made by counsel for the defendants.

[6]      In  the  hearing  of  this  matter  before  me,  generally  I  found  in  favour  of Tower’s position on three of the four questions which were before the Court for determination  and  effectively  I  endorsed  an  earlier  decision  of  this  Court, O’Loughlin v Tower Insurance Ltd1 which the plaintiff contended had been wrongly decided.

[7]      In particular, in my decision on what were Tower’s identical policy terms I

held that:

(a)      if Tower chooses to settle Skyward’s claim by making a payment to Skyward, “it’s obligation is to pay only the ‘present day value’ up front ‘until the cost of replacement or repair is actually incurred’ and then to indemnify Skyward as the insured for costs if and when they are incurred above this sum” (at [39];

(b)if Tower chooses to settle Skyward’s claim by paying the cost of buying  another  house,  the  amount  payable  by  Tower  is  to  be calculated on the basis of the fair price of a replacement house which is to a reasonable and practical extent comparable, of the same 207m2 size  and  construction  (as  far  as  may  be  possible),  in  the  same condition, and of the same style and extent (more or less) as the Kingsford Street house was when new (at [121](a));

(c)      it is Tower’s choice under the insurance policy whether to settle Skyward’s claim by paying the cost of buying another house (at [66] and [121](b));

(d)      if Tower chooses to settle Skyward’s claim by making payment, it is

Tower’s choice in terms of the policy whether that payment is to be

1      O’Loughlin v Tower Insurance Ltd [2013] NZHC 670.

made based on the cost of rebuilding, repairing or replacing the house

(at 76] and [121](c)); and

(e)      Tower has not made any election irrevocable about how it will settle

Skyward’s claim (at [120] and [121](d)).

[8]      As a result, Tower being largely successful with respect to the questions at

[7](a), (c), (d) and (e) above, it seeks payment of scale costs from the plaintiff.

[9]      A first issue to be determined is whether costs should be assessed now on what  was  effectively  a  preliminary  issues  hearing  or  whether  they  should  be deferred.

[10]     On this aspect, the Court of Appeal in Phillips v Ngati Tama Custodian Trustee Ltd2 confirmed that the ordinary rule that costs should follow the event and be determined at the time a decision is made applies and it is appropriate therefore to make an award of costs following the determination of a preliminary question.  At paragraph [33] of this decision the Court stated:

[...] the normal rule is that costs follow the event including in interlocutory matters.  The Judge could see no reason why the usual approach should not apply in this case.  Nor do we.  The fact that the plaintiffs may ultimately be successful  in  their  proceedings  is  not  sufficient  to  displace  the  usual approach in the present circumstances, nor does the fact that all parties benefitted from the early determination of the preliminary questions.

[11]     Applying this principle, I am satisfied there is no reason here why costs should not be assessed now on the application which was before me and to follow the event in the ordinary way.  What is clear in this case is that as part of its present application the plaintiff chose to challenge certain findings that had already been made by this Court in O’Loughlin with respect to the insurance policy terms.  The plaintiff chose also to ask the Court to determine its position on “election” on the part of the insurer as a preliminary issue.  Largely, on three of the four questions as I have noted above, matters were determined in Tower’s favour and this may well have resulted in savings of time and expense should a full trial become necessary

later.

2      Phillips v Ngati Tama Custodian Trustee Ltd [2011] NZCA 650.

[12]     In opposition to these matters, counsel for the plaintiff contends that:

(a)      The  preliminary  questions  hearing  was  to  resolve  a  key  part  of Tower’s policy, one that it needs clarification on for a multitude of earthquake claims it is facing out of the Christchurch earthquakes.

(b)The idea for a “preliminary issues hearing” it is said came about in the proceeding of Snow & Ors v Tower CIV-2102-409-2628 on the basis that Miller J saw the potential for the resolution of this preliminary issue to be dispositive, one way or the other, being Tower’s approach to valuing a comparative second hand house following the dicta of Asher J in O’Loughlin v Tower Insurance Ltd.

(c)      Skyward was asked to consider being involved in the hearing as the same or very similar issues arose. Skyward agreed.

(d)This is a case therefore where, particularly from Tower’s perspective, there was public interest in having this issue clarified and Skyward acted reasonably in relation to it – Rule 14.7(e).

(e)      According to the plaintiff, unfortunately the hearing has not proved to be dispositive.  This in large part is due to the uncertainty that exists about the estimated costs to repair and the basis upon which Tower has put forward its proposal as to the cost of being another house.

(f)       Tower still relies for its valuation on the value of a second hand house comparable to 108 Kingsford Street prior to the earthquake.  Tower it is said did not win on its key point.

(g)The Court held that any assessment of the costs of a comparable house must be as to an “as new’ house.   The plaintiff says this is fundamentally different to the position taken by Tower in its “take it

n

have alerted Tower to the fact that a comparison was needed of a house in “as new” condition and yet the plaintiff maintains Tower still
asserted that the policy wording justified a settlement based on  a replacement second hand house, rather than an “as new” house.
(h)	Given all the above matters and the fact the hearing it is claimed has not been dispositive with the present proceedings remaining on foot,
the plaintiff contends that costs should be reserved and resolved in the substantive proceeding.
[13]	Taki	g into account all these matters, I am of the view here that this is a

 

matter where costs should simply lie where they fall and there will be no order made as to costs.  I reach this conclusion for several reasons.

[14]     First, I note rule 14.7(e) of the High Court Rules referred to me by counsel for the plaintiff notes:

14.7     Refusal of, or reduction in, costs

Despite rules 14.2 to 14.5, the Court may refuse to make an order for costs or may reduce the costs otherwise payable under these rules if –

...

(e)       the proceeding concerned a matter of public interest and the party opposing costs acted reasonably in the conduct of the proceeding...

[15]     Here, the decision on the preliminary questions as I have noted above would seem to have general effect for a number of earthquake related policyholders (both in Christchurch and elsewhere) of Tower.  To an extent, this would suggest that the present  matter  concerns  certain  issues  which  are  of  a  wider  or  possibly public interest and this needs to be taken into account here.

[16]     Secondly, as I have noted at paragraphs [6] and [8] above, before me Tower was largely successful with respect to its interpretation of the preliminary questions noted [7](a), (c), (d), and (e) which I have outlined.  Significantly, however, as I see

offer here to the plaintiff around 6 May 2013 to make a payment under the policy to Skyward, said to be based on a 100 year old second hand house only in average condition and not necessarily of the same size or quality as the Kingsford Street house. That differs markedly from the requirement under Tower’s policy which I interpreted as outlined at [7](b) above. Although that conclusion may also have differed somewhat from the contentions which were being advanced by counsel for the plaintiff here, in my view it is fair to say that Tower’s position on that aspect was substantially wrong.

[17]     Finally, given the matters I have noted above, it is reasonable to arrive at the conclusion that in adopting the positions they have, both Skyward and Tower have each received a measure of success with my decision on the preliminary questions. Further, these are issues which, as I have suggested above, have wider implications for many Tower policyholders and which  arise it might be argued at  one level because of a degree of uncertainty arising from Tower’s own choice of wording in its own policies.

[18]     For all these reasons I am of the view that this is an appropriate case for costs to lie where they fall.

[19]     There will be no order made as to costs here.

...................................................

D Gendall J

Solicitors:

Kevin Sullivan, P O Box 5817, Lambton Quay, Wellington

Grimshaw & Co, Unit 1, 33 Mandeville Street, Christchurch

R B Stewart QC, P O Box 2302 Shortland Street, Auckland