Smith v Claims Resolution Service Ltd - [2019] NZHC 127

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2018-409-000643

[2019] NZHC 127

BETWEEN
KARLIE MARGARET SMITH

Plaintiff

AND

CLAIMS RESOLUTION SERVICE LIMITED

First Defendant

GRANT SHAND BARRISTERS AND SOLICITORS

Second Defendants

Hearing: 17 and 18 December 2018

Counsel:

A S Butler and E J Flaszynski for Plaintiff

A Barker QC and G Davis for First Defendant A B Darroch for Second Defendants

Judgment:

12 February 2019

JUDGMENT OF GENDALL J

SMITH v CLAIMS RESOLUTION SERVICE LIMITED [2019] NZHC 127 [12 February 2019]

Introduction

[1] The plaintiff, Karlie Margaret Smith (Ms Smith), as a former client of the first defendant Claims Resolution Service Limited (CRS) and the second defendants Grant Shand Barristers and Solicitors (Shand Solicitors) sues these defendants in what is stated to be a representative proceeding brought on her behalf and on behalf of a group of others. As the owner of a home damaged in the Canterbury earthquake sequence of 2010 – 2011, Ms Smith had engaged CRS to pursue her unresolved earthquake claim against her insurer. She says CRS in turn engaged Shand Solicitors as her lawyers for this claim. Ms Smith contends that CRS, Shand Solicitors and other closely held companies related to CRS and its principal, all had an undisclosed joint venture arrangement. Ms Smith advances claims against CRS and Shand Solicitors alleging breach of fiduciary duty and unconscionable bargain with respect to the joint venture and other arrangements pursuant to which what were represented to be independent professional services were allegedly provided in breach of obligations owed to Ms Smith regarding her earthquake insurance claim.

[2] Ms Smith, in her present application before the Court, seeks leave to bring this proceeding as a representative action under r 4.24 High Court Rules, along with associated orders which include directions for the further conduct of the proceeding. Ms Smith maintains this is a representative proceeding which she seeks to advance for the benefit of a large number of former clients of CRS and Shand Solicitors. She describes these people as vulnerable and as a group who, but for this representative vehicle, would have no realistic prospect of proceeding individually.

[3]This leave application is opposed by the first and second defendants.

Background

[4] The Canterbury earthquake sequence caused major damage to buildings throughout Christchurch and the region. This resulted in a great number of home owners needing assistance resolving their claims with both their insurance providers and the Earthquake Commission (EQC). Those in this situation often faced very difficult financial and living situations, especially as time passed. For a significant number of people, this caused much stress.

[5] In August 2012, CRS was incorporated. Bryan Douglas Staples (Mr Staples) was its principal, having set up the company and been its sole director, CEO and manager. Shand Solicitors, headed by Grant Donald Richard Shand (Mr Shand), was established that same month.

[6] From an early stage CRS and Shand Solicitors (the defendants) began working closely together and, as I…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2019] NZHC 127
Decision Date: 12 February 2019

CaseChat Overview and Summary

Karlie Margaret Smith, a former client of Claims Resolution Service Limited (CRS) and Grant Shand Barristers and Solicitors (Shand Solicitors), is suing these defendants on behalf of herself and a group of others. Ms Smith, as the owner of a home damaged in the Canterbury earthquake sequence, had engaged CRS to pursue her unresolved earthquake claim against her insurer. She claims that CRS and Shand Solicitors, along with other closely held companies, had an undisclosed joint venture arrangement. She alleges breach of fiduciary duty and unconscionable bargain regarding the joint venture and other arrangements. Ms Smith seeks leave to bring this proceeding as a representative action under r 4.24 High Court Rules, along with associated orders for the further conduct of the proceeding.

The key issue under r 4.24 is what constitutes "the same interest in the subject matter of a proceeding." In this case, the commonality in the way Group members entered into a contractual relationship with CRS and Shand Solicitors and the subsequent way the defendants are alleged to have operated in that relationship means that the factors considered to establish these two causes of action will be largely similar. An affirmative answer can be expected to benefit all Group members. Ms Smith and some of her other supporting deponents indicate that they would not be able to afford to bring disparate proceedings against the defendants. Representative proceedings would ensure that all the Group members are able to have their claims against the defendants put to the test and to gain any relief they are found to be entitled to. It also serves the wider public policy ends of deterring the alleged wrongdoing in cases such as this and thus ensuring that minor but widespread harm will result in litigation.

The Court grants leave for this proceeding to proceed as a representative action, with an "opt in" period of four months for potential Group members to decide whether to join. The starting point of the "opt in" period, and the effective date from which this order and the further directions for the conduct of this proceeding are to take effect, is to be determined in a subsequent decision to be issued by the Court. Ms Smith is entitled to an award of costs in the usual way, and a further direction is to follow, also allowing counsel an opportunity to file memoranda on costs.

Orders