IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE	
CIV-2018-409-817
[2024] NZHC 2738	

BETWEEN	WAYNE PETER SANDERSON, GARY NEIL SANDERSON and PAUL JOSEPH
RUTLEDGE as trustees of the NO MONEY NO HONEY TRUST
Plaintiffs	
AND	IAG NEW ZEALAND LIMITED
First Defendant

VERO INSURANCE NEW ZEALAND LIMITED
Second Defendant

ALLIANZ NEW ZEALAND LIMITED
Third Defendant

... continued over	

Hearing:	On the papers	
Appearances:	L J Lindsay and G J Ryan for Plaintiffs
B R D Cuff, A L Sherriff and N S P Laing for First, Second and Third Defendants	
Judgment:	20 September 2024	

JUDGMENT OF ASSOCIATE JUDGE PAULSEN
(Costs and Discovery)

This judgment was delivered by me on 20 September 2024 at 3.30 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date:

SANDERSON v IAG NEW ZEALAND LIMITED [2024] NZHC 2738 [20 September 2024]

BARRY O’CONNOR CONSTRUCTION LIMITED
Fourth Defendant

QBE INSURANCE (AUSTRALIA) LIMITED
Fifth Defendant

BARRY MICHAEL O’CONNOR
Sixth Defendant

[1]	In a judgment dated 30 April 2024 I granted the plaintiffs leave to proceed with applications against the first, second and third defendants (the insurers) for further particulars and discovery after close of pleadings (the leave judgment).1 Then, in a judgment dated 14 June 2024, I ordered the insurers to provide further particulars of their statement of defence and to file a further affidavit as to steps taken to satisfy their discovery obligations (the main judgment).2

[2]	This judgment concerns applications by the plaintiffs:

(a)	for increased costs in respect to the leave judgment and the main judgment;

(b)	for costs on an application made for correction of the main judgment; and

(c)	for compliance with the main judgment ordering the insurers to file a further affidavit in respect to steps taken to comply with their discovery obligations.

[3]	The insurers’ position is that:

1	Sanderson v IAG New Zealand Ltd [2024] NZHC 1003 [leave judgment].
2	Sanderson v IAG New Zealand Ltd [2024] NZHC 1570 [main judgment].

(a)	the plaintiffs are entitled to 2B scale costs only on the applications in [2(a)];

(b)	costs should not be awarded on the application for correction of the main judgment; and

(c)	they have complied with the main judgment.

Costs on the leave application

[4]	On 5 March 2024 the plaintiffs filed the application requiring further particulars of the insurers’ statement of defence and further discovery. They required leave to make that application after the close of pleadings date. The issues of further particulars and discovery had been raised prior to the close of pleadings but the application not filed until that date had passed.

[5]	The plaintiffs wished to have their application for leave and the substantive application heard together. The insurers disagreed and considered the plaintiffs were first required to obtain leave before the substantive application could be considered. I directed that the leave application be dealt with on the papers. On 30 April 2024 I granted the plaintiffs leave to proceed with the substantive application and reserved costs.3 I subsequently heard that application upon which the plaintiffs were substantially, but not entirely, successful.4

[6]	The insurers have agreed to pay costs on the leave and substantive applications on a 2B basis and have made payment of what they consider was owed. The plaintiffs are not satisfied with scale costs. They want an uplift on scale costs and there are some disbursements in dispute also.

[7]	The plaintiffs rely on r 14.6(3) of the High Court Rules 2016 (the Rules) which provides as follows:

3	Leave judgment, above n 1.
4	Main judgment, above n 2.

14.6	Increased costs and indemnity costs

...

(3)	The court may order a party to pay increased costs if—

...

(b)	the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—

(i)	failing to comply with these rules or with a direction of the court; or

(ii)	taking or pursuing an unnecessary step or an argument that lacks merit; or

(iii)	failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; or

(iv)	failing, without reasonable justification, to comply with an order for discovery, a notice for further particulars, a notice for interrogatories, or other similar requirement under these rules; or

(v)	failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule 14.10 or some other offer to settle or dispose of the proceeding; or

...

(d) some other reason exists which justifies the court making an order for increased costs despite the principle that the determination of costs should be predictable and expeditious.

...

[8]	All issues of costs are discretionary.5 A party seeking increased costs bears the onus of demonstrating that such costs are justified. Rule 14.6(3)(b) is concerned with improper or unreasonable conduct on the part of the party against whom increased costs are sought. Increased costs are not intended to be punitive and will not be appropriate where there is some reasonable explanation for the losing party’s conduct.6 Furthermore, an uplift on scale costs is justified only to the extent that a party’s failure to act reasonably contributed to the time and expense of the proceeding or some step in it. The correct approach is set out in Holdfast NZ Ltd v Selleys Pty Ltd, and usually

5	Shirley v Waiarapa District Health Board [2006] NZSC 63; [2006] 3 NZLR 523.
6	Valmar Trustee Ltd v Smart Water Technology [2016] NZHC 1583 at [12].

involves the party applying identifying particular steps in respect to which the other party’s unreasonable conduct contributed to increased costs.7 However, where increased costs are sought because the losing party’s position lacked merit, it may be appropriate for increased costs to apply to all steps.8

[9]	The plaintiffs say the insurers failed to act reasonably and contributed to the time and expense of the proceeding, justifying an uplift on scale costs in the following ways. First, they say that under r 14.6(3)(b)(i) and (iv) the insurers failed to comply with the Rules or with a direction of the Court in that they failed to comply with:

(a)	an order for informal discovery made on 4 November 2019; and

(b)	a notice issued by the plaintiffs on 8 December 2023 to provide further and better particulars.

[10]	Second, they say the insurers adopted unmeritorious legal positions. In relation to the leave application, the plaintiffs argue the insurers’ approach in opposing the hearing of the leave and substantive applications together was unreasonable. They say the insurers should have consented to leave being granted.

[11]	In relation to the discovery application, where the plaintiffs were seeking discovery of documents in the possession of loss adjusters and consulting engineers engaged by the insurers, the plaintiffs say the application was only necessary because the insurers would not respond to straightforward queries as to whether they had sought and obtained documents from the third parties which were in the insurers’ control.

[12]	In relation to the application for particulars, the plaintiffs submit they were substantially successful and that orders requiring particulars were inevitably going to be ordered.

7	Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA) at [44]-[47].
8	NR v MR [2014] NZCA 623, (2014) 22 PRNZ 636 at [51]-[52]; and Broadspectrum (New Zealand) Ltd v Nathan [2017] NZCA 434 at [57].

[13]	The plaintiffs also argue that there are other reasons for ordering increased costs in reliance on r 14.6(3)(d). They submit that since the handing down of the main judgment two further matters have arisen. First, they were forced to file an application to correct errors in the main judgment because the insurers would not agree to the corrections. Second, in relation to the discovery affidavit the plaintiffs were ordered to provide, it falls substantially short of what was required.

[14]	The plaintiffs then say that, as a consequence of these matters, increased costs are justified on certain steps in the proceeding. In relation to the leave application, the plaintiffs say the need for obtaining leave would have been avoided altogether had the insurers acted reasonably. They seek an increase on 2B scale costs for steps 11, 13 and 24 totalling $5,258 (based on 2.2 days) to $7,170 (based on three days) for those steps (an increase of $1,912).

[15]	In respect of the main judgment, the plaintiffs say had the insurers taken a more realistic approach the plaintiffs’ submissions would have been “substantially less detailed” and the hearing would have been shorter. In respect to the second of these matters, the plaintiffs acknowledge that scale costs allow for time actually incurred for the hearing but say that the increased complexity and length of the hearing justifies an allowance for second counsel. They seek an increase on 2B scale costs for steps 24 and 26 totalling $4,780 (based on 2.0 days) to $6,572.50 (based on 2.75 days) for those steps (an increase of $1,792.50).

[16]	As far as disbursements are concerned, the plaintiffs have sought travel and accommodation expenses of Auckland based counsel. The insurers oppose this claim but give no reason other than to assert it is not appropriate.

[17]	I do not award increased costs on either the leave application or the substantive application. There are several reasons for this. First, r 14.2(1)(g) provides that so far as possible the determination of costs should be predictable and expeditious. The Courts’ discretion to award costs should be exercised in accordance with the costs provisions of the Rules unless there is good reason to take a different approach. The Court should not encourage tinkering with scale costs where the time and expense of seeking an increase is likely close to or exceeds the amounts at stake.

[18]	Second, while the plaintiffs say the insurers failed to comply with an order for informal discovery made on 4 November 2019 and a notice issued by the plaintiffs on 8 December 2023 to provide further and better particulars, the insurers did provide discovery and did respond to the notice for particulars. To submit that the plaintiffs failed to comply in these respects is just another way of saying that the insurers’ opposition to the leave and substantive applications lacked merit. While I did not consider the insurers’ opposition to those applications was strong, I also do not consider that the positions taken were not reasonably arguable and in respect to the plaintiffs’ application for particulars the insurers had some success.

[19]	While I accept the insurers’ position regarding the leave application might be regarded as pedantic, the granting of leave after the close of pleadings has the potential to disrupt both the Court’s timetable and the parties’ trial preparation and should only be granted in appropriate cases. Here, it was acknowledged that the timetable would likely be affected and there were genuine reasons for the insurers opposing the granting of leave, albeit I came to a clear view that leave should be granted. Also, as I noted in my leave judgment, the plaintiffs should have made application sooner and thereby have avoided the need to seek leave altogether.9

[20]	The fact leave was dealt with as a separate matter did not cause any delay in the proceeding as that application was dealt with quickly on the papers. I also do not consider it likely that the approach taken added to the plaintiffs’ costs. The plaintiffs were always going to have to prepare submissions to satisfy the Court that leave should be granted and there was no hearing. It appears to me that ultimately the insurers’ approach has simply increased their liability for Court awarded costs without significantly adding to the plaintiffs’ actual costs.

[21]	I do not accept that the applications were so complex so as to warrant an allowance for second counsel as the plaintiffs contend. These were ordinary interlocutory applications of no more than average complexity.

[22]	I also do not consider the plaintiffs can justify increased costs in reliance upon events that have occurred since the main judgment was issued. I agree with the

9	Leave judgment, above n 1, at [23].

insurers that such post-judgment events do not provide justification for an uplift on scale costs.

[23]	I accept the plaintiffs are entitled to reimbursement for the travel and accommodation costs of counsel. Both the plaintiffs and the insurers instructed Auckland counsel to attend the hearing of the substantive application. They clearly considered the matter was of sufficient importance to justify that approach. However, I note that the plaintiffs’ counsel claimed for two nights’ accommodation. It is not clear to me why that was necessary, and I allow for one night’s accommodation.

[24]	The plaintiffs are awarded 2B scale costs on the leave and substantive applications in the amount of $13,384 as set out in schedule A to the plaintiffs’ counsel’s memorandum of 12 July 2024, and disbursements as claimed, with the exception that there is an allowance of only one night’s accommodation for Auckland counsel.

Costs on the application for correction of the judgment

[25]	Following the issue of the main judgment the plaintiffs’ lawyers wrote to the insurers’ lawyers stating there were errors in the judgment in two respects. They sought confirmation the insurers were happy for these matters to be corrected, and anticipated a consent memorandum would be provided to the Court at the same time as the order for sealing. The plaintiffs’ lawyers advised that if there was no agreement to this they expected their clients would file an application under the slip rule, and sought a response by 3 July 2024.10

[26]	The insurers’ lawyers responded on 4 July 2024 that they did not see any error in the judgment and were complying with it.

[27]	On 10 July 2024 the plaintiffs filed their application seeking correction of the judgment.

10	High Court Rules 2016, r 11.10.

[28]	In a memorandum of 24 July 2024, the insurers’ lawyers advised that they neither consented nor opposed the application, although they questioned whether the plaintiffs’ application should be for recall or review of the main judgment. They appeared to acknowledge, whilst not expressly stating so, that the judgment did contain an error in one respect raised by the plaintiffs. They considered it was appropriate for the matter to be referred to me to determine because:

(a)	the orders said to be in error were open to me to make and were consistent with my reasoning;

(b)	there was no obvious error or slip;

(c)	because there was no obvious error, I was the appropriate judicial officer to consider whether the orders made contained the mistakes alleged; and

(d)	it was premature to consider the plaintiffs’ application prior to 31 July 2024 as the insurers were filing an amended pleading on that date which might render the application redundant.

[29]	The insurers filed their amended statement of defence on 31 July 2024 which the plaintiffs accepted provided the particulars it was said the Court had omitted to order in the main judgment. The application came before me at a telephone conference on 21 August 2024, where I recorded that the plaintiffs no longer pursued the application except in relation to costs.

[30]	The plaintiffs’ argument for costs is that if the insurers intended to provide the particulars omitted from the main judgment they should have said so immediately, and avoided the need to make the application for correction of the judgment. They say that by answering the relevant particulars the insurers effectively conceded the application and should pay costs.

[31]	I consider that no order for costs should be made in respect to the plaintiffs’ application. I accept there were errors in my judgment. However, the plaintiffs did not require the insurers’ agreement to bring those errors to my attention. Ultimately whether there were errors and how they were to be corrected were matters that needed

to be referred to the Court to determine. I therefore do not accept that had the insurers taken a different position no application to the Court would have been necessary.

[32]	Furthermore, as the plaintiffs’ counsel states in her submissions, the plaintiffs sought to have the judgment corrected because they did not wish to be reliant upon the reasonableness of the insurers only to be “accused later of sitting on their hands”. It follows that whether the insurers consented or not, the plaintiffs intended to seek correction of the judgment.

[33]	It is not necessary for me to consider the insurers’ submissions that making the application under the slip rule was not the correct approach, or that as the plaintiffs have withdrawn their application the presumption in r 15.23 applies.

The discovery orders

[34]	The main judgment deals with the issue of whether the insurers had taken reasonable steps to obtain documents from companies engaged by them to handle the plaintiffs’ insurance claims that are the subject of the proceeding. The background to this is set out in [48]–[60] of the main judgment.

[35]	I accepted the plaintiffs’ position that the insurers had not directly responded to queries as to steps taken to obtain documents from these companies. I said:

[59]	... There is no clear statement from the insurers, or their advisers, that the companies were requested to provide all relevant documents, that they were received, that they have been sorted for relevance or that they were discovered.

[60]	Whilst it would not be appropriate at this late stage to order the insurers to provide formal standard discovery, I do consider it is necessary they provide an affidavit stating what steps were taken to obtain documents from the companies, that each has provided its documents and that all relevant documents have been discovered.

[36]	The orders made were:

[61] In respect to the discovery application, I order that within 21 days the insurers are to file an affidavit addressing the matters outlined above at [60]. I grant leave to the plaintiffs to further apply in respect of any issues arising from that affidavit.

[37]	In response, the insurers filed an affidavit of Christopher Warwick dated 8 July 2024. His role is specialist technical claims adviser at the first defendant. The relevant part of his affidavit is as follows:

3.	I confirm my understanding that our solicitors have made inquiries of the Companies and are in receipt of all relevant documents in the Companies’ control. I make the following particular comments:

3.1	Our solicitors contacted Mr Keegan Harpur, Senior General Adjuster at McLarens Young International, which holds the files for McLarens Young International, Cerno NZ and Crawford & Company. Our solicitors requested copies of their files held for 21 Dalziel Place. They received files held which have been reviewed, and all relevant documents held by McLarens Young International, Cerno NZ and Crawford & Company have been discovered.

3.2	Our solicitors contacted Ms Leticia Lum, Associate Principal and Structural Engineering Team Leader, at Babbage Consultants. Our solicitors requested copies of their files held for 21 Dalziel Place. They received files held which have been reviewed, and all relevant documents held by Babbage have been discovered.

4.	To the best of my knowledge and belief, this affidavit is correct in all respects and faithfully carries out IAG’s obligations under the discovery order.

[38]	The plaintiffs argue the discovery affidavit is deficient for two principal reasons. First, there are no particulars of the dates when queries were made of the companies to provide documents or when documents were reviewed. They say this is particularly relevant where the issues in the proceeding have changed over time. As an example, a pleading that the insurers had elected to repair the property was inserted in the third amended statement of claim of 8 August 2023, so any files reviewed prior to that date would not have been reviewed correctly for relevance.

[39]	Second, there are no particulars of what types of files were requested, and what steps the companies were asked to take and did take to search their files. The plaintiffs say the insurers have previously confirmed that McLarens Young International’s document management systems had not been searched, and that complying with the discovery order requires those systems to be searched and the discovery affidavit did not address this.

[40]	In short, the plaintiffs say neither the plaintiffs nor the Court can assess the adequacy of the insurers’ discovery in relation to the companies’ documents with any confidence.

[41]	The insurers argue they have complied with the Court’s discovery order and their discovery obligations under the Rules. They say it is not appropriate to make further orders because the plaintiffs are seeking to go beyond what was previously ordered and what could be expected to be included in a standard affidavit of documents filed in response to a formal discovery order. They also say the plaintiffs’ affidavits of documents do not contain the level of detail the plaintiffs now require of the insurers.

[42]	I agree with the plaintiffs that Mr Warwick’s affidavit is unsatisfactory. I consider this to be the case for several reasons. First, Mr Warwick speaks to his “understanding” of what inquiries the insurers’ lawyers have made rather than his personal knowledge of those inquiries. Similarly, he says the lawyers have received and reviewed all relevant documents but I do not see how he can know that is the case.

[43]	Second, he says the lawyers “requested copies of their files” relating to the plaintiffs’ properties. If that is the extent of their requests, I do not consider that complies with their duty to ensure the insurers fulfil their discovery obligations.11 It also can give neither the Court nor the plaintiffs any comfort that the companies have made reasonable searches for all relevant documents (including electronic files).

[44]	Third, while the insurers complain that what the plaintiffs are seeking goes beyond what is required to comply with a standard discovery order, I do not consider that is the case. An affidavit of documents needs to give sufficient particulars of the document location process followed so that the party receiving discovery can be reasonably assured that the discovering party has complied with a discovery order. The affidavit of Mr Warwick falls well short of achieving that in my view. Furthermore, the discovery order was made on an application for further and better discovery in circumstances where there was reason to be concerned that proper

11	High Court Rules, r 8.13.

inquiries had not been made of the companies in compliance with the insurers’ discovery obligations.

[45]	For those reasons, I will direct the filing of a further affidavit on the terms set out below. I also consider the plaintiffs are entitled to costs on seeking these further orders.

Result

[46]	The plaintiffs are awarded costs on the leave application and the substantive application for discovery and further particulars as set out in [24] above.

[47]	There shall be no order for costs on the application to correct the main judgment.

[48]	The insurers shall within 14 days of the date of this judgment file a further affidavit (or affidavits if necessary) addressing the following matters:

(a)	when the insurers’ lawyers requested copies of documents from the companies (McLarens Young International, Babbage, and Crawford & Company NZ) for discovery purposes;

(b)	confirmation the companies were asked to search all relevant hardcopy and electronic files/systems which may hold documents relevant to the matters arising in this proceeding (including the ClaimNet and MYI systems operated by McLarens);

(c)	that the companies have confirmed they searched all relevant hardcopy and electronic document files/systems and provided all such documents as were located to the insurers’ lawyers; and

(d)	confirmation that all documents received were searched for relevance and all relevant documents have been discovered.

[49]	I reserve leave to the plaintiffs to apply further in respect to any issues arising from the affidavit/s.

[50]	I award the  plaintiffs  costs  for  the  preparation  of  their  submissions  of  28 August 2024 regarding the discovery issue on a 2A basis in the sum of $1,195.

O G Paulsen Associate Judge

Solicitors:
White Fox & Jones, Christchurch Duncan Cotterill, Wellington Anderson Lloyd, Christchurch Hazelton Law, Wellington