Sneesby v Southern Response Earthquake Services Limited
[2023] NZHC 246
•21 February 2023
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2021-009-1694
[2023] NZHC 246
BETWEEN JOHN ARTHUR SNEESBY
Plaintiff
AND
SOUTHERN RESPONSE EARTHQUAKE SERVICES LIMITED
Defendant
Hearing: 31 January 2023 Appearances:
G Shand for Plaintiff and Mr Ressels (applicant to be joined) T Weston KC and K Paterson for Defendant
Judgment:
21 February 2023
JUDGMENT OF ASSOCIATE JUDGE LESTER
SNEESBY v SOUTHERN RESPONSE EARTHQUAKE SERVICES LIMITED [2023] NZHC 246
[21 February 2023]
[1] Mr Ressels has applied to be joined as a further plaintiff in this proceeding in which Mr Sneesby is presently the only plaintiff. It is necessary to set out the nature of Mr Sneesby’s claim and its history in order to explain why Mr Ressels wants to join the proceeding.
[2] Mr Sneesby’s house was damaged in the Canterbury Earthquakes. He lodged a claim with The Earthquake Commission (EQC) which assessed the damage to his house and organised the necessary repairs. EQC does not repair damage to driveways, fences, patios, paving and swimming pools. Damage to such items is known as Out of Scope Items (OOS).
[3] Mr Sneesby had cover for OOS with his insurer, AMI Insurance Limited (AMI), now Southern Response Earthquake Services Limited (Southern Response).
[4] Mr Sneesby’s OOS claim with AMI was accepted. AMI instructed Arrow International (Arrow) to assess the cost of repairing those items with that assessment completed in mid-2014. Arrow’s ‘Scope of Works’ recorded it would cost $29,588.70 to remediate the OOS. Mr Sneesby accepted a cash settlement at that figure.
[5] On 22 July 2021, Mr Sneesby issued proceedings in the District Court against Southern Response, alleging that the Scope of Works upon which he decided to settle was misleading because it made no express allowance for Preliminary and General (P&G), contingency or professional/design fees. Mr Sneesby alleges previous decisions have determined that a 10 per cent allowance for each item is required.1 Mr Sneesby says Southern Response misled him into settling by presenting a Scope of Works it knew did not make provision for the above allowances.2
[6] Mr Sneesby says that if 10 per cent were added for each of the three allowances above, he was short paid in 2014 by $9,793.86 and he seeks judgment for that amount plus interest.
1 Avonside Holdings Ltd v Southern Response Earthquake Services Ltd [2014] NZCA 483; Southern Response Earthquake Services Ltd v Avonside Holdings Ltd [2015] NZSC 110, [2017] 1 NZLR 141.
2 Mr Sneesby relies on Dodds v Southern Response Earthquake Services Ltd [2019] NZHC 2016, [2019] 3 NZLR 826 which was upheld on appeal in part in Southern Response Earthquake Services Ltd v Dodds [2020] NZCA 395, [2020] 3 NZLR 383.
[7] Mr Sneesby applied for leave to bring his claim as a representative on behalf of 7,500 to 9,500 other homeowners who are potentially in the same position as he is, in relation to Southern Response’s treatment of allowances for contingency, professional fees and P&G and for OOS. Mr Sneesby’s proceeding was transferred to this Court and his application to sue as a representative was dismissed by me in a judgment released 23 February 2022.3 Mr Sneesby’s application was declined. I determined his claim was without merit as, in earlier litigation against Southern Response, he had entered a comprehensive all-embracing full and final settlement with Southern Response meaning he was not a suitable representative plaintiff.
Mr Ressels enters the scene
[8] On 14 February 2022, shortly before the hearing of Mr Sneesby’s application to sue as a representative, Mr Ressels was informally put forward by Mr Sneesby’s counsel, Mr Shand, as an additional representative plaintiff. It was submitted that his circumstances differed from those of Mr Sneesby as Mr Ressels had not entered a comprehensive full and final settlement agreement with AMI. At the time, Mr Ressels was proposed as an additional plaintiff and there was no application that he be joined as a plaintiff and there was no supporting evidence.
[9] Whether Mr Ressels would have any involvement in the proceeding was deferred for him to make a formal application to add him as a plaintiff.
[10] In the meantime, an application for leave to appeal my judgment of 23 February 2022 was filed and was subsequently dismissed.4
[11] Mr Ressels applied to be joined to this proceeding as second plaintiff on 27 May 2022. On 26 July 2022, Mr Ressels filed an application seeking leave to sue as a representative duplicating the application by Mr Sneesby dismissed in February 2022.
3 Sneesby v Southern Response Earthquake Services Ltd [2022] NZHC 262.
4 Sneesby v Southern Response Earthquake Services Ltd [2022] NZHC 2100. Mr Sneesby has applied to the Court of Appeal for leave.
[12] Mr Ressels’ claim is in many respects similar to that of Mr Sneesby. Mr Ressels’ house was damaged in the Canterbury Earthquakes. The damage to Mr Ressels’ home was covered by EQC and he claimed for OOS items with Southern Response. Arrow visited Mr Ressels’ property in June 2014 to assess that damage and on 28 August 2014, Arrow created a written Scope of Works setting out the work required to remediate OOS items at a cost of $16,875.68.
[13] Mr Ressels says he settled with Southern Response on the basis $16,875.68 was his total entitlement under his policy with that amount being paid to him and his late wife, in August 2014. Mr Ressels’ Scope of Works, as in Mr Sneesby’s case, made no express provision for P&G, contingency or professional and design fees.
Mr Ressels’ formal application to join the proceeding
[14] I note here Mr Ressels applies to join this proceeding as an additional plaintiff. This is not an application by an existing party that he be joined as a plaintiff nor does Mr Ressels apply to be substituted as plaintiff in place of Mr Sneesby.
[15] The application refers to rr 4.2 and 4.56 of the High Court Rules 2016 (the Rules).
[16]Rule 4.2 of the Rules applies when a proceeding is commenced and it provides:
Plaintiffs
(1)Persons may be joined jointly, severally, or in the alternative as plaintiffs,—
(a)if it is alleged that they have a right to relief in respect of, or arising out of, the same transaction, matter, event, instrument, document, series of documents, enactment, or bylaw; and
(b)if each of those persons brought a separate proceeding, a common question of law or fact would arise.
(2)On the application of a defendant, the court may, if it considers a joinder may prejudice or delay the hearing of a proceeding, order separate trials or make any order it thinks just.
[17] In my view, it is r 4.56 of the Rules which governs the present application. Rule 4.56 is part of subpt 9, Pt 4 of the Rules which is headed “Adjusting Parties”. In
Smith v Noble Investments Ltd, Associate Judge Osborne (as he then was), confirmed that once a claim has been commenced, it is through subpt 9 of Pt 4 that adjustments of parties must occur.5
Can Mr Ressels meet the requirements of Rule 4.56
[18]Rule 4.56 of the Rules provides:
Striking out and adding parties
A Judge may, at any stage of a proceeding, order that—
(a)the name of a party be struck out as a plaintiff or defendant because the party was improperly or mistakenly joined; or
(b)the name of a person be added as a plaintiff or defendant because—
the person ought to have been joined; or
(ii)the person’s presence before the court may be necessary to adjudicate on and settle all questions involved in the proceeding.
(2)An order does not require an application and may be made on terms the court considers just.
(3)Despite subclause (1)(b), no person may be added as a plaintiff without that person’s consent.
[19] McGechan provides that an order under r 4.56 may be made upon application by a party or a non-party.6 Unsurprisingly, as Mr Ressels seeks to be joined, he consents to joinder satisfying r 4.56(3).
[20] Mr Shand, in his written submissions, focused on the considerations under r 4.2 of the Rules and did not identify which of the limbs of r 4.56(1) was relied on. The bulk of Mr Shand’s submissions focused on Mr Ressels’ application to sue as a representative.
[21] At the commencement of a proceeding, a plaintiff enjoys the breadth of r 4.2. If joined at commencement, a defendant has the onus of challenging the correctness
5 Smith v Noble Investments Ltd [2017] NZHC 447 at [25]-[28].
6 Robert Osborne (ed) McGechan on Procedure (online ed, Thomson Reuters) at [HR4.56.09].
of their joinder. However, a plaintiff does not have the benefit of the breadth of r 4.2 once a proceeding is underway – at that time joinder is controlled by r 4.56.
Rule 4.56(1)(b)(i): Ought Mr Ressels have been joined to the proceeding as a plaintiff at the outset?
[22] I am satisfied that this provision does not apply in this situation. I note McGechan states:7
… the tendency has been to regard persons as parties “who ought to have be joined” if their presence before the court is necessary to enable the court to adjudicate on the precise issues raised in the proceeding. On that approach, the ground in para (b)(i) potentially adds little to the alternative ground in para (b)(ii).
[23] Mr Sneesby’s claim is “self-contained”. While there are similarities in the circumstances of Mr Sneesby’s claim and Mr Ressels’ potential claim, Mr Ressels has nothing to add to the legal or factual issues in Mr Sneesby’s proceeding. But for the difficulties Mr Sneesby has faced in his application to sue as a representative, there would not be an application to join Mr Ressels – Mr Sneesby’s claim would have proceeded unhindered by the absence of Mr Ressels.8
Principles applying to r 4.56(1)(b) of the Rules
[24] The role of r 4.56(1)(b)(ii) of the Rules has been explained in the following terms:9
That criterion is broader than the wishes or the interests of any existing party. It permits joinder if such may be necessary to enable complete and effectual adjudication upon not just the issues raised in the pleadings at the date of joinder but all questions involved in the case. That broad phrasing must be assumed to be intention.
[25] The threshold test under r 4.56(1)(ii) is expressly focused on “the questions involved in the proceeding”.10
7 Osborne, above n 6 at [HR 4.56.08].
8 Mr Shand’s memorandum of 1 February 2022 introduces Mr Ressels as having “… indicated that he is keen to be a representative of homeowners in a similar position to Mr Sneesby”, not that his presence was necessary for Mr Sneesby to advance his claim.
9 Brooker v IAG New Zealand Ltd [2019] NZHC 1225 at [28] referring to Knight v Attorney-General
HC Wellington CP566/92, 29 October 1992.
10 Brooker v IAG New Zealand Ltd, above n 9, at [39].
[26] Thomas J in Capital & Merchant Finance Ltd (in rec and in liq) v Perpetual Trust Ltd, reviewed the authorities on this area.11 Her Honour noted that the Privy Council stated the test for joinder of a plaintiff/defendant as:12
… will his rights against or liabilities to any party to the action in respect of the subject matter of the action be directly affected by any order which may be made in the action?
[27] Thomas J recorded the test above was adopted by Barker J in Mainzeal Corporation Ltd v Contractors Bonding Ltd.13 Her Honour noted there was a subset of principles potentially applying in the judicial review context. However, outside of that context, a party must show they have a legal right or liability that will be directly affected by the decision and not merely that the decision may have financial consequences for them.14
[28] Capital and Merchant Finance Ltd involved an application by a party claiming they had sufficient interest to intervene in the proceeding. Thomas J concluded that a proposed intervenor must meet the same standard facing an intending plaintiff or defendant, namely it must show that its legal rights or liabilities will be directly affected by the proceeding.
[29] Whether Mr Ressels is viewed as applying to intervene or not, nothing turns on the distinction. In order to establish the threshold for joinder, Mr Ressels must show that his legal rights or liabilities in relation to the subject matter of the proceeding will be directly affected by Mr Sneesby’s proceeding. Commercial, financial or reputational interests in the outcome will only be sufficient in exceptional circumstances.
[30] Mr Ressels will not be bound by the outcome of Mr Sneesby’s proceeding. Whether the terms of Southern Response’s offer to Mr Sneesby was misleading or
11 Capital & Merchant Finance Ltd (in rec and in liq) v Perpetual Trust Ltd [2015] NZHC 3205, [2015] NZAR 228. I also note that her Honour did not mention r 4.2 factors in her review.
12 Capital & Merchant Finance Ltd (in rec and in liq) v Perpetual Trust Ltd, above 11, at [19] referring to Pegang Mining Co Ltd v Choong Sam (1969) 2 MLJ 52 (PC).
13 Mainzeal Corporation Ltd v Contractors Bonding Ltd, HC Auckland CL154/88, 10 February 1989.
14 Capital & Merchant Finance Ltd (in rec and in liq) v Perpetual Trust Ltd, above n 11, at [33] referring to Sanofi-Adventis Deutschland GMBH v AFT Pharmaceuticals Ltd, HC Auckland, CIV-2009-404-1795, 9 August 2011.
whether Mr Sneesby was in fact misled will not create a res judicata or issue estoppel in relation to Mr Ressels.
[31] One of the defences raised by Southern Response is that while its costings did not expressly provide for P&G, such was incorporated into the costings in the Scope of Works provided to Mr Sneesby. Assuming such a finding was made, that would not create an issue of estoppel or res judicata in relation to Mr Ressels, as Southern Response would have to demonstrate how the figures that made up Mr Ressels’ Scope of Works were calculated.
[32] As to the obligations owed by Southern Response to insureds in respect of misleading conduct, that has already been addressed by the Court of Appeal in the Dodds decision.15
[33] Whether the Scopes of Works provided to Mr Sneesby and Mr Ressels contains misrepresentations, are matters of fact.16 Each case will ultimately turn on its own facts.17
[34] Accordingly, while the claims of Messrs Sneesby and Ressels arise out of the same circumstances, in a general sense, the outcomes of their claims turn on their particular facts. Whether there was a representation in each case, whether it was incorrect and whether it was relied on, will turn on the circumstances of each claim. The correspondence received by Messrs Sneesby and Ressels in relation to cash settlement of their OOS claims was different.
[35] Similarly, in respect of obligations of good faith, the Court of Appeal made the observation that the authorities suggest the obligations that one party owes the other are context specific. The Court said:18
We consider that it is likely to be more productive to consider what obligations are implied by law, or can be implied as a matter of fact, in relation to particular aspects of the dealings between the parties.
15 Southern Response v Dodds, above n 2.
16 Southern Response v Dodds [2020] NZCA 395, [2020] 3 NZLR 383 at [123].
17 At [114].
18 At [194].
[36] The submission in Capital & Merchant Finance Ltd that a finding in that case meant it was “hard to imagine” that another Court hearing the same evidence would reach a different conclusion, was rejected in no uncertain terms.19 Mr Sneesby’s claim may fail but Mr Ressels’ claim may succeed.
[37] Accordingly, I cannot identify what legal right of Mr Ressels will be directly affected by Mr Sneesby’s proceeding. None was identified in Mr Shand’s submissions.
[38] An applicant for joinder must satisfy one of the limbs of r 4.56(1) of the Rules, in order for the Court to have jurisdiction to order joinder:20
Those requirements are technically distinct from the Court’s discretion to then allow joinder (assuming jurisdiction to exist), although in practice questions in forming both jurisdiction and the Court’s discretion tend to overlap.
[39] I conclude Mr Ressels’ application does not meet either r 4.56(b)(i) or (ii) and from which it follows jurisdiction does not exist to order his joinder. That conclusion is sufficient to deal with Mr Ressels’ application which is dismissed.
Mr Ressels’ application to sue as a representative
[40] It is not necessary for me to make any comments about this application given my dismissal of Mr Ressels’ application to be joined as a party.
Mr Ressels’ alternative argument
[41] At the commencement of Mr Shand’s oral submissions, he asked if the Court had any particular issues he should address. I asked Mr Shand to address the above jurisdictional arguments which were raised in the written submissions for Southern Response. Mr Shand did not make submissions on the above points but rather he submitted there was a “shortcut” in respect of jurisdiction which he had developed in his written reply submissions. Mr Ressels’ alternative submission relies on rr 1.2 and
1.6 of the Rules. In short, Mr Shand’s submission was that the desirability and merits
19 Capital & Merchant Finance Ltd (in rec and in liq) v Perpetual Trust Ltd, above n 11, at [48].
20 Brooker v IAG, above n 9 at [22].
of the proposed representative action were such that joinder was appropriate even if r 4.56 was not satisfied.
[42] As Mr Shand put it, if Mr Ressels’ claim had merit then he “ought to be here”, that is, he ought to be in this proceeding. Mr Shand submitted a liberal approach was consistent with the ultimate role of the Court which was to act in the interests of justice.
[43] Mr Shand submitted that it did not matter how Mr Ressels was joined as it would not make sense if the Court could not make Mr Ressels a party and a representative when his case had merit. Mr Shand submitted Mr Ressels “ticked all the boxes” as a representative plaintiff and therefore he should be joined as a further plaintiff.
[44] Mr Shand further submitted it would be contrary to r 1.2 of the Rules, which he described as the primary rule to not allow Mr Ressels to become a plaintiff and a representative when his claim had merit. Mr Shand submitted it would not make sense if Mr Ressels met the requirements of r 4.24 which controls representative actions but if he could not be added as a plaintiff in this existing proceeding.
[45] Accordingly, Mr Shand submitted that the efficient economic resolution of this proceeding and the avoidance of multiplicity of proceedings meant the Court should take a practical approach to the issue of joinder and grant Mr Ressels’ applications.
[46]Rule 1.2 of the Rules provides:
Objective
The objective of these rules is to secure the just, speedy, and inexpensive determination of any proceeding or interlocutory application.
[47]Rule 1.6 of the Rules provides:
Cases not provided for
(1)If any case arises for which no form of procedure is prescribed by any Act or rules or regulations or by these rules, the court must dispose of the case as nearly as may be practicable in accordance with the provisions of these rules affecting any similar case.
(2)If there are no such rules, it must be disposed of in the manner that the court thinks is best calculated to promote the objective of these rules (see rule 1.2).
[48] Given the joinder of parties is governed by r 4.56 of the Rules, I do not consider r 1.6 has any application.
[49] In reply, Mr Weston KC, counsel for Southern Response, submitted Mr Shand’s alternative submission in reality started with the final position as it argued backwards from Mr Ressels’ view of his role as a representative. Mr Weston submitted that Mr Shand’s alternative submission sought to avoid the need to satisfy r 4.56, a submission Mr Weston characterised as involving “reverse engineering”.
[50] Mr Weston submitted that r 1.2 was not a proviso available every time the rigour of a rule prevented an applicant meeting the jurisdictional requirements for the orders they sought.
[51] I agree with Mr Weston’s submission. Mr Ressels’ alternative argument is not a means of expanding the scope of joinder permitted by r 4.56. As Mr Weston submitted, if all one had to do was satisfy r 1.2 then the bulk of the High Court Rules would become redundant. The parties are entitled to the certainty that the Court will apply the Rules consistently with prior authority permitting recourse to r 1.2 as a proviso to every rule is not what the Rules contemplate.
[52] It follows that I do not consider Mr Ressels’ alternative submission is an answer to the jurisdictional issues that led me to dismiss his application.
[53] The reality is that had Mr Sneesby’s application to sue as a representative not been dismissed, then Mr Ressels’ present applications would not have been brought. That is because on Mr Sneesby’s case, Mr Ressels would have been within the class represented by him. While it is true that a liberal approach to joinder is taken, nonetheless, a party seeking joinder must satisfy r 4.56 of the Rules.
[54] McGechan in summarising the second leg of r 4.56(1)(b) says jurisdiction does not exist simply on the basis of justice or convenience, referring to Vandervell Trustees Ltd v White,21 yet that is the effect of Mr Ressels’ alternative submission.
Costs
[55] Mr Ressels’ application having been dismissed, there is no reason why costs should not follow the event on a 2B basis together with disbursements as fixed by the Registrar. I so order.
Associate Judge Lester
Solicitors:
Grant Shand, Auckland (for Plaintiff and Mr Ressels) Buddle Findlay, Christchurch (for Defendant)
21 Vandervell Trustees Ltd v White [1971] AC 912 (HC), Osborne, above n 6, at [HR4.56.090], at
McGechan HR4.56.09d.
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