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Bligh v Earthquake Commission [2019] NZHC 2236 (6 September 2019)

Last Updated: 11 September 2019

JUDGMENT OF ASSOCIATE JUDGE LESTER

(Costs)

This judgment was delivered by me on 6 September at 3.00pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar 6 September 2019

BLIGH v EARTHQUAKE COMMISSION [2019] NZHC 2236 [6 September 2019]

INDEX

Background [1]

Costs against Mr Bligh [8]

The remaining costs claims [16]

Quantification of EQC’s wasted costs [19]

EQC’s and Mr Bligh’s costs on the wasted costs hearing [24]
Costs reserved in the 18 December 2017 decision [24]

Quantification of Mr Bligh’s costs against CRS on setting

aside judgment [29]

Attendance on and briefing expert witnesses [42]

Non-party costs application by EQC and IAG – costs claim

paras [16](c) and [17](a) [48]

EQC’s application [48]

IAG’s application [49]

Non-party costs: the law [50]

The parties’ respective positions [58]

EQC [58]

IAG – claim against CRS [64]

CRS – response [65]

EQC – reply to CRS [66]

IAG – reply to CRS [75]

CRS’s reply [84]

EQC’s reply [91]

Analysis [94]

Quantum of CRS’s liability [140]

Responsibility for costs as between Mr Bligh and CRS [152]

IAG’s claim [154]

Costs on this application [160]

Background

[1] These proceedings arose out of a claim by the late Mr Bligh (the plaintiff) against the Earthquake Commission (“EQC”) (the first defendant) and IAG New Zealand Ltd (“IAG”) (the second defendant) after the Canterbury Earthquake Sequence of 2011. In this judgment I will refer to Mr Bligh rather than to his estate. There is a new parties order making Geoffrey Falloon and Rebecca Jenkins, as executors of Mr Bligh’s estate, the plaintiffs in place of Mr Bligh.

[2] Mr Bligh entered into a contract on 28 November 2012 for his claim to be funded by a litigation funder, Claims Resolution Services (“CRS”) (the non-party/respondent in this application).

[3] In the lead up to hearing scheduled to start on 31 October 2016, Mr Bligh’s lawyers (Grant Shand, Barristers and Solicitors) began expressing doubts as to the merits of Mr Bligh’s claim. CRS disagreed with the lawyer’s assessment and provided some encouragement to Mr Bligh to proceed with his claim. Shortly before trial, CRS changed its view and advised Mr Bligh to settle because he had a weak claim. When Mr Bligh refused to settle, CRS exercised its contractual right to withdraw funding which it did on the morning the trial was to commence.

[4] With funding withdrawn, Mr Bligh’s lawyer, Grant Shand, then withdrew from acting. Mr Bligh did not appear. The trial was aborted, and the Court entered judgment by default against Mr Bligh shortly after.

[5] Mr Bligh, with the benefit of alternative representation, applied to set aside the judgment entered against him after the aborted trial. Associate Judge Matthews granted that application on 16 May 2017.¹ Mr Bligh’s revived claim failed in the High Court in 2018 in a hearing that ran from 19 February to 6 March 2018.

[6] After Mr Bligh’s claim was revived he, EQC and IAG all sought costs against CRS for wasted costs in preparation for the aborted hearing. Associate Judge Osborne (as he then was) granted EQC and IAG their costs applications, apportioning liability

¹ Bligh v Earthquake Commission [2017] NZHC 995.

for costs as follows: 40 per cent to CRS, 40 per cent to Grant Shand and 20 per cent to Mr Bligh.² On review, Nation J reviewed the costs orders made against Grant Shand.³

[7] The first and second defendants now apply for costs both against Mr Bligh and for non-party costs against CRS. Mr Bligh’s counsel in a memorandum dated 16 October 2018 advised that Mr Bligh did not contest EQC or IAG’s claims for costs and would abide the Court’s decision on costs.

Costs against Mr Bligh

[8] EQC and IAG seek costs against Mr Bligh on a 2B basis in respect of the proceeding for the period up to the four days covered by the costs award made by Associate Judge Osborne, which dealt with costs from 28 October 2016 to 31 October 2016.

[9] In respect of attendances after 31 October 2016, EQC seeks costs on a 2B basis and IAG on a 2A and 2B basis with an uplift of 50 per cent.

[10] There is no reason why costs should not follow the event, nor any reason why scale costs on the basis sought are not appropriate.

[11] Accordingly, there is an order that EQC is entitled to costs on a 2B basis against Mr Bligh for the proceeding of $100,959.00, less any steps covered by Associate Judge Osborne’s decision (if any). EQC is also entitled to its disbursements which are quantified in its memorandum dated 9 October 2018 in the sum of
$112,859.18.

[12] As to the uplift sought by IAG for steps after 1 November 2016, the uplift is said to be justified on a number of grounds, including Mr Bligh’s failure to accept no less than five Calderbank offers; three being made prior to the aborted hearing and two after. The last offer, for $250,000.00, was made on 17 February 2018. The offers were made jointly with EQC.

² Bligh v Earthquake Commission [2017] NZHC 3179.

³ Bligh v Earthquake Commission [2018] NZHC 2392.

[13] Mr Bligh’s claim failed in its entirety. The Calderbank offers were made with detailed reasons. Mr Bligh’s rejection of the offers, especially those made after the aborted hearing when he had received unequivocal advice from Mr Shand’s firm and CRS that his claim lacked merit and that he would be well advised to settle at around
$150,000.00, was unreasonable.

[14] In the circumstances, I find that a 50 per cent uplift on steps post 30 September 2016 (the date of the first Calderbank offer) is warranted and I so order. Accordingly, there is a costs order in favour of IAG against Mr Bligh in the sum of
$118,747.50 and disbursements of $84,056.27 as set out in the second defendant’s submissions of 5 October 2018.

[15] In respect of both IAG and EQC I certify second counsel.

The remaining costs claims

[16] EQC applies for:

(a) quantification of wasted costs on a solicitor/client basis, that Mr Bligh and CRS have already been held liable to pay to EQC for the four-day period leading up to the aborted October 2016 hearing;⁴

(b) costs on the wasted costs hearing (including EQC’s June 2017 non-party costs application against CRS) before Associate Judge Osborne in November 2017;

(c) EQC’s non-party costs claim against CRS for EQC’s costs and disbursements in the proceeding from commencement until 27 October 2016 being $44,849.00 together with disbursements of $79,051.92 giving a total of $123,900.92; and

(d) costs in respect of this application for non-party costs.

⁴ Bligh v Earthquake Commission [2017] NZHC 3179 at [130].

[17] IAG applies for:

(a) non-party costs against CRS for IAG’s costs and disbursements in the substantive proceeding covering the period from commencement and ending 31 October 2016. While IAG was awarded its reasonable solicitor/client costs for the period 28 - 31 October 2016 in the November 2017 decision, its present application sought costs on a 2B basis from commencement to 31 October 2016 rather than it seeking to quantify its solicitor/client costs for the last four days of that period. CRS did not object to that approach. It seeks costs of $35,680.00 plus disbursements of $45,799.59,⁵ a total of $81,479.59;

(b) costs in respect of this application for non-party costs.

[18] Mr Bligh seeks the following costs against CRS:

(a) forty per cent of the total liability for solicitor/client costs for the setting aside application of $47,150.00, including disbursements of $9,020.04; and

(b) costs on Mr Bligh’s successful non-party costs application of
$13,380.00 and disbursements of $2,441.41.

Quantification of EQC’s wasted costs

[19] This is the claim at [16](a) above. In his judgment of 18 December 2017, Associate Judge Osborne ordered Mr Bligh and CRS to pay EQC its “reasonable solicitor/client costs and disbursements incurred in relation to this proceeding in the period 28 – 31 October 2016”.⁶ Leave was reserved to request the Court determine those costs in the event of any dispute between the parties.

5. Originally, this figure was quoted as $84,056.27. This was corrected in submissions in reply for the second defendant dated 10 May 2019.

⁶ Bligh v Earthquake Commission [2017] NZHC 3179 at [151].

[20] EQC says that neither Mr Bligh’s estate nor CRS has filed a memorandum outlining any reasoned challenge to the costs EQC claims for that four-day period. EQC sets out the costs as:

at $8,692.00; and

(d) preparation for hearing on 31 October 2016 on an indemnity basis at $5,330.00.

[21] EQC’s disbursements include:

(a) flights between Christchurch and Wellington at $944.20;

(b) accommodation in Christchurch for Sunday 30 and Monday 31 October at $996.00;

(c) taxis at $203.22; and

(d) couriering material to the hotel at $63.80.

[22] The total claimed is $30,709.00 in wasted costs and a further $2,207.22 in wasted disbursements.

[23] I find these costs to be reasonable and they are payable by CRS and Mr Bligh to EQC by virtue of [151](a) and [151](b) of the 18 December 2017 decision of
Associate Judge Osborne.⁷ The liability of Mr Bligh and CRS for those costs is joint and several.

EQC’s and Mr Bligh’s costs on the wasted costs hearing

Costs reserved in the 18 December 2017 decision

[24] These are the costs applications set out at paras [16](b) and [18](b) above. EQC and Mr Bligh seek costs arising from their successful application for non-party costs determined by Associate Judge Osborne in his decision of 18 December 2017. The decision records that those costs were reserved. Both EQC and Mr Bligh seek costs on a 2B basis given they were both successful in that application.

[25] CRS has accepted that costs should follow the event on a 2B basis and I agree that is appropriate.

[26] EQC has calculated its costs at Schedule C of its memorandum of 21 December 2018 with that schedule differentiating between the costs sought against Mr Bligh and CRS. No dispute is taken with that schedule. Accordingly, there is a costs order in favour of EQC in respect of the costs reserved arising from the decision of 18 December 2017 in terms of EQC’s Schedule C. That costs award being against both Mr Bligh and CRS and their liability for the costs is joint and several.

[27] Mr Bligh also seeks costs against CRS again on the basis that he was successful. CRS say in relation to the costs application heard by Associate Judge Osborne that Mr Bligh was not completely successful against CRS. In that application he sought against CRS and Grant Shand that they jointly and severally pay any costs awarded against him. Mr Bligh was awarded 40 per cent of the total sum awarded against him. CRS says this was not a total win. CRS says that it should only be liable to 40 per cent of Mr Bligh’s costs on the application, being $6,328.56. I do not accept this. Mr Bligh’s success was more than minimal. “Success on more limited terms is still success”.⁸ I see no basis for differentiating between the success achieved

⁷ Bligh v Earthquake Commission, above n 2.

⁸ McGechan on Procedure (loose-leaf ed, Thomson Reuters) at [14.2.01(1)(b)].

by Mr Bligh and EQC and as a matter of consistency I consider costs on a 2B basis appropriate.

[28] The memorandum of 14 March 2019 filed on behalf of Mr Bligh sets out a category 2 costs schedule with different bands being adopted for different steps, with the amount claimed being $13,380.00. That approach is approved as are the disbursements set out at para [32] of that memorandum being $2,441.41. There is an order for costs against CRS in favour of Mr Bligh for these amounts.⁹

Quantification of Mr Bligh’s costs against CRS on setting aside judgment

[29] This is the quantification of costs referred to at [18](a) above. These costs are payable by CRS under [151](f) of the 18 December 2017 decision.¹⁰

[30] Mr Bligh’s counsel in a memorandum of 14 March 2019 quantified Mr Bligh’s solicitor/client costs said to be payable under [151](f) at $22,468.02, being 40 per cent of Mr Bligh’s total solicitor/client costs of $47,150.00 (including GST) plus disbursements of $9,020.04.

[31] Mr Bligh’s solicitors, in explaining how the total fee was arrived at, refer to the risk they undertook in accepting instructions. I do not accept that there was a relevant risk factor as the solicitors took a first mortgage security over Mr Bligh’s property as security for their costs.

[32] I accept that a significant amount of time was required of Mr Bligh’s new solicitors to get to grips not only with the merits of Mr Bligh’s claim, but also with the history of the proceedings and the events that led to the abandoned hearing.

[33] However, there is merit in CRS’s position that it should not be liable for all of the costs incurred in Mr Bligh’s new solicitors getting up to speed with the proceeding. If CRS had terminated its funding agreement with Mr Bligh considerably earlier than it did, and had new solicitors been instructed, then those solicitors would have had

⁹ Bligh v Earthquake Commission, above n 2.

¹⁰ Bligh v Earthquake Commission, above n 2.

to undertake substantially the same exercise as Mr Bligh’s replacement solicitors did to get up to speed.

[34] However, additional work was clearly required to understand events that immediately preceded the abandoned hearing and those leading to Clark J entering judgment against Mr Bligh.¹¹

[35] CRS makes the point that the experts’ reports that were obtained became a large part of the plaintiff’s claim in the substantive proceeding.

[36] Counsel for CRS has identified that 10.5 hours had been claimed for the taking of instructions as part of the initial review of the proceedings and documents. Counsel for CRS submit this step was undertaken for the benefit of the substantive proceedings and that cost should not be allocated entirely to preparation for the setting aside application. I agree with that submission.

[37] Similar submissions are made in respect of the time incurred in briefing expert witnesses. Again, I accept that the bulk of that time was not wasted in the sense that it had to be incurred solely for the setting aside application.

[38] I do consider that the substantial time claimed in preparing the application and the supporting affidavits was required. Creating a cohesive narrative of what occurred was an essential part of the application to set aside.

[39] Mr Bligh’s counsel has detailed how the time spent has been made up.

[40] Time units totalling one hundred and five are claimed for to taking instructions and the initial review of the pleadings and documents. Almost none of this time was wasted in the sense that it was not relevant to the continuation of the proceedings. Some of the time was directly relevant to the application to set aside as some of it related to discussions with counsel for all parties in attendance at the aborted hearing. On a “broad brush” basis, I allow a quarter of this time.

¹¹ Bligh v The Earthquake Commission [2016] NZHC 2619.

[41] Time units totalling one hundred and twelve are claimed for case management steps. I consider all of this time is attributable to the application to set aside. Essentially, Mr Bligh’s new counsel had to “keep the balls in the air” while they prepared their application and brought it to hearing

Attendance on and briefing expert witnesses

[42] There is merit in CRS’ point that none of this time was wasted as it would have been utilised for the substantive hearing. I do not allow the time claimed under this head.

[43] There is then the items described at paras [20](d) – [20](h) of Mr Bligh’s counsels’ memorandum of 14 March 2019, which cover preparation of the application and supporting affidavits. It is acknowledged that there is some overlap with the earlier steps for the preparation of the submissions and bundles for the hearing, preparation for the hearing itself, appearing at the hearing, and all incidental costs.

[44] Again, on a “broad brush” basis, I consider most of this time was not able to be carried over, that is a significant amount of this time was only relevant to the setting aside application, but again a substantial amount of the knowledge and familiarity with the file gained at this stage would have been carried over. I consider two-thirds of this time is properly chargeable under this head.

[45] In respect of disbursements, in line with the way I have treated the time claimed for briefing of experts I do not consider that the disbursement for the experts’ fee totalling $8,165.00 should be allowed. All of this work was able to be carried over to the substantive hearing.

[46] Mr Bligh’s counsel are to recalculate the solicitor/client costs on the above basis. No premium is to be allowed for risk given the mortgage security held. Nor do I consider an adjustment for interest on the fee is appropriate given there is no suggestion that interest was expressly negotiated with Mr Bligh as part of the fee arrangement. In other words, the uplifts described in the affidavit of Ms Cameron of 14 March 2019 are not allowed.
[47] Once that quantification has been completed by Mr Bligh’s counsel that figure is to be set out in a memorandum filed with the Court and copied to CRS.

Non-party costs application by EQC and IAG – costs claim paras [16](c) and [17](a)

EQC’s application

[48] EQC seeks against CRS its costs in the proceeding from commencement to the aborted hearing (excluding the four-day period between 28 and 31 October 2018). It seeks costs in the amount of $44,849.00, along with disbursements of $79,051.92. That makes a total amount of $123,900.92.

IAG’s application

[49] IAG seeks costs against CRS from the commencement of the proceedings until 31 October 2016. IAG seeks scale costs against CRS of $35,680.00 (Schedule 7 to IAG’s submissions of 3 October 2018) and disbursements of $45,799.59.

Non-party costs: the law

[50] Matters relating to costs are at the general discretion of the Court.¹² Prior to Aiden Shipping v Interbulk, it was widely thought that the Courts’ general discretion to award costs was limited to the parties involved in litigation.¹³ However, in Aiden, the House of Lords held that non-parties could be ordered to pay costs where justice so required.¹⁴ Aiden was applied in New Zealand by this Court in Carborundum Abrasives Ltd v Bank of New Zealand (No 2).¹⁵

[51] That decision has been followed in the New Zealand courts and authoritatively confirmed by the Privy Council in Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2).¹⁶ In that case, the Privy Council granted Dymocks’ petition and ordered the litigation funder which had supported the Todds and their companies (in an

¹² High Court Rules 2016, r 14.1.

¹³ Aiden Shipping Co Ltd v Interbulk [1986] AC 965 (HL).

¹⁴ At 980.

¹⁵ Carborundum Abrasives Ltd v Bank of New Zealand (No 2) [1992] 3 NZLR 757 (HC)

¹⁶ Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2) [2004] UKPC 39, [2005] 1 NZLR 145.

unsuccessful defence) to pay Dymocks’ costs in the Court of Appeal and Privy Council.

[52] There, the Privy Council set out the following principles applicable to non-party costs awards.¹⁷ It confirmed that a costs order against a non-party should be made only in “exceptional” circumstances, where exceptional means “outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense”.¹⁸ It said that “although costs orders against non-parties were to be regarded as exceptional, the ultimate question was whether in all the circumstances it was fair to make the order”.¹⁹

[53] Dymocks summarised that litigation funding takes two common forms.²⁰ The first has come to be called “pure funding”, which is where the funders’ essential motivation is to enable the funded party to litigate what the funders perceive to be a genuine case. Pure funders were described in Hamilton v Al Fayed (No 2) as “those with no personal interest in the litigation, who do not stand to benefit from it, are not funding it as a matter of business, and in no way seek to control its course”.²¹ As a general rule, a costs order will not be made against ‘pure funders’ of litigation.

[54] The second type of litigation funding is where the claim would be impossible without it, but the funder’s primary motivation is to turn a profit. The Courts appear to view the profit-making form with grudging tolerance. This is partly because, although access to justice is a by-product of commercial funding, it is not its essential motivation.²² In Dymocks, The Privy Council recognised that in cases where a non-party has both controlled the proceeding and funded it, or is to benefit from it, justice will require that if the proceeding fails, the non-party will pay the successful party’s costs.²³

17. Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2) above n 16 at [25]; approved in Mana Property Trustee Ltd v James Developments Ltd [2010] NZSC 124, [2011] 2 NZLR 25 at [10].

¹⁸ Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2), above n 16 at [25](1).

¹⁹ At [25].

²⁰ At [25](2).

²¹ Hamilton v Al Fayed (No 2) [2002] EWCA CIV 665, [2003] QB 1175 at [40].

²² Excalibur Ventures LLC v Texas Keystone Inc [2016] EWCA CIV 1144 at [1].

²³ Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2), above n 16 at [25](3).

[55] Whether liability for costs will attach to non-parties turns not only on whether they fund a proceeding but also on whether they substantially control it or are to benefit from it.²⁴ The question is whether the funder is “the real party” to the litigation.²⁵

[56] In summary, therefore, the practical threshold for a costs order is crossed when the non-party:²⁶

(a) in the hope of gaining a benefit, funds litigation the plaintiff could not have begun or continued without that funding; or

(b) initiates, controls or promotes litigation having a direct personal financial interest in the consequences.

[57] The ultimate question in determining such applications is whether in all the circumstances it is just to make the order. As with all costs awards, the Court’s power to order costs against non-parties is discretionary, and the jurisdiction is a fact-specific one.²⁷

The parties’ respective positions

EQC

[58] EQC says that CRS funded Mr Bligh’s litigation against the defendants until 27 October 2016. It says that CRS both substantially controlled and stood to benefit from the proceeding. It says that it is fair that CRS pays costs for the period claimed.

[59] In terms of the benefit CRS stood to gain, it quotes cl 7 of the service agreement between Mr Bligh and CRS which stated:

Claims Resolution Service Ltd takes on the prosecution of the claim on a No Win No Pay basis for 10% of the Final Settlement plus all Costs including, legal, quantity surveyor, independent reports and assessment costs. Costs are limited to a maximum of $10,000. Any cost above this amount are borne by Claims Resolution Service Ltd.

²⁴ Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2), above n 16 at [25](3).

²⁵ At [25](3) citing Metalloy Supplies Ltd (in liq) v MA (UK) Ltd [1996] EWCA Civ 671; [1997] 1 WLR 1613.

26. Chris Nicoll “Non-Party Costs and Security Where Litigation Funders Are Involved” (2018) 24 NZBLQ 237 at 247.

²⁷ Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2), above n 16, at [25].

[60] EQC says that CRS effectively prosecuted this proceeding for Mr Bligh. CRS was not a pure funder, it took on the claim for reward. Further, the agreement was on a “No Win, No Pay” basis. If successful, CRS stood to gain 10 per cent of the final settlement or award. CRS took the financial risk the proceeding might fail.

[61] EQC submits that it is inherently wrong for a funder to stand to gain the benefits of litigation succeeding without incurring the risk of adverse costs if the litigation fails. It points to the decision of Associate Judge Osborne and notes that CRS has already been required to pay non-party costs for the four day period leading up to the aborted hearing. It says CRS should be liable for the full period leading up to the time it withdrew.

[62] In that judgment, Associate Judge Osborne had come to the view that CRS’s consistent position was that Mr Bligh’s lawyer’s negative view of the claim was inadequately researched, and that Mr Bligh’s case was sound. CRS only changed its approach on 26 October 2016.²⁸

[63] In the circumstances, where CRS and its associated companies gave bullish and incorrect advice to Mr Bligh and then belatedly agreed that advice was wrong, EQC says CRS should be jointly and severally liable for costs from the outset of the proceeding.

IAG – claim against CRS

[64] IAG’s submission essentially mirrors those by IAG submitting that the reasons that led Associate Judge Osborne ordering CRS to pay the wasted costs of the aborted hearing apply equally to the full time that CRS funded Mr Bligh’s claim.

CRS - response

[65] CRS opposes the application for non-party costs. It says:

(a) any costs arising from the substantive hearing are a direct result of the actions of Mr Bligh;

²⁸ Bligh v Earthquake Commission, above n 2.

(b) Mr Bligh had complete control over the proceeding throughout the course of the litigation and refused to take the advice of his lawyers and CRS;

(c) Mr Bligh misrepresented the extent of earthquake damage by overstating it to CRS;

(d) it would be manifestly unjust to order costs against CRS when the consequences were brought about by a refusal by Mr Bligh to take what amounted to fair, reasonable and correct advice (in light of the substantive judgment);

(e) if a costs judgment is ordered against CRS in light of the circumstances in this case, it will encourage other CRS clients to ignore advice knowing there is little risk of costs being awarded against them (or that is CRS made jointly and severally liable), that CRS will be a more attractive target for non-party costs claims such as this);

(f) CRS is providing a public good. To allow costs against it might impact on the ability of CRS to continue to provide a public good;

(g) CRS has already incurred significant costs in relation to the matter;

(h) if CRS is liable for any sum of costs, it should be no more than 40 per cent; and

(i) finally, if CRS is found liable in any sum for costs it disagrees with the scale costs sought.

EQC - reply to CRS

[66] EQC rejects CRS’s assertion that Mr Bligh retained complete control over the proceedings. It says the control exercised by Mr Bligh must be viewed in the wider context of the advice that CRS continued to give to Mr Bligh. It says that it is unsurprising that Mr Bligh refused to settle given he had been repeatedly bolstered in
his bullish views by the equally bullish view of Mr Staples.²⁹ When Mr Staples changed his mind a short time before the trial it was unlikely that Mr Bligh would follow suit.

[67] EQC says that CRS failed to undertake any due diligence in respect of Mr Bligh’s claim. The only investigation undertaken by CRS was a report commissioned before proceedings began in 2013. There was no indication the ‘damage assessors’ who completed the report had any qualifications. CRS should have chosen a suitably qualified engineer at the outset. It continued to support Mr Bligh’s claim without sufficient evidence, even in the face of his lawyer and engineers disagreeing.

[68] EQC says that CRS withdrew funding so close to the aborted hearing that Mr Bligh did not have time to deal with the situation. His inability to change his view was likely given the context of the negotiations up to that point, his stress, and his health issues. In EQC’s submission, CRS was the author of the misfortune, not Mr Bligh. It failed to give Mr Bligh ongoing and adequate advice in relation to the claim. It encouraged him into an entrenched position and then withdrew without giving him much of a real ability to change his mind.

[69] EQC states in relation to allegations that Mr Bligh misrepresented the damage to CRS, that even if that were true, it was CRS’s obligation to give independent advice about the claim and continue to guide Mr Bligh. It was not appropriate for it to undertake no due diligence and rely only on Mr Bligh’s advice for three years and then change its mind at a later stage.

[70] In relation to the claim that it would be manifestly unjust to order costs against CRS, when CRS did in fact give correct advice to settle, EQC says that the advice was too late to absolve CRS of responsibility for the time where it provided incorrect advice.

[71] EQC further rejects the submission that an award of costs will encourage CRS clients to refuse to settle because they would no longer face costs awards. Those

²⁹ Bligh v Earthquake Commission, above n 2, at [122].

clients would be jointly and severally liable along with CRS. EQC says that CRS chooses its clients (unlike the defendants it sues). If CRS considers there is a risk that clients may refuse its advice, then it should choose clients more carefully or factor that advice into its decision-making. In any event, CRS can terminate its funding arrangements if its advice is not taken. As to the risk of CRS being sued for having ‘deeper pockets’, EQC says that is a natural consequence of funding asset poor plaintiffs. CRS knew that Mr Bligh was of limited means.

[72] EQC rejects the claim that CRS should avoid non-party liability because it is providing a public good. EQC says that allegedly providing a public good is not a proper ground on which to avoid a costs liability that would otherwise follow. Most businesses or organisations could be said to provide a public good, but they are generally liable to pay costs if they are the unsuccessful party to litigation. CRS is not a pure funder and must accept the cost consequences of failed litigation.

[73] CRS complains that it has already incurred various unrecoverable costs. EQC says there is nothing in this point. CRS has funded hundreds of successful claims and must be prepared to pay the costs of unsuccessful ones within its business model.

[74] EQC says costs should be awarded against CRS on a joint basis with Mr Bligh and at the amount sought by EQC.

IAG – reply to CRS

[75] IAG submits that this is a case where non-party costs orders are appropriate. It says that CRS is a non-party that not only funded the proceeding but also substantially controlled it or benefitted from it.

[76] It rejects CRS’s submission that Mr Bligh had “complete control” of the proceedings or that CRS took a “back-seat role”. It points to CRS’s funding agreement with Mr Bligh including the term that:

The claimant agrees that Claims Resolution Services Ltd will manage all damage and loss claims relating to the property subject to the engagement terms...”

But it went on to state that CRS was to give ongoing advice about the merits of the claim and strategy, and to give advice about settlement. Mr Bligh was required to co-operate with CRS and to give it instructions which allowed it to properly and fully act in the claimant’s best interests.

[77] IAG notes that Mr Staples of CRS was positively supportive of Mr Bligh’s case. Mr Staples said he thought Mr Bligh had a strong case and that Grant Shand Lawyers were not making the strongest case possible to EQC and IAG. Internal emails from CRS indicated that Mr Staples had taken a position at odds with the experts and lawyers and that Mr Bligh had picked up on that and was influenced by it into taking a hard-line approach to litigation.

[78] There were various exchanges where the lawyers indicated that Mr Bligh had a weak case. Mr Staples emphatically disagreed in his emails in response, urging the lawyers to recheck their experts and to visit the site.

[79] IAG summarises three additional rationales raised by CRS as to why it should not be liable for any costs award:

(a) CRS says that it would be unfair to award costs against it when Mr Bligh refused to accept its advice to settle;

(b) it also says it provides a public good and that it is counter to public policy if costs awards are made against it; and

(c) the costs award sought against it would be disproportionate, given the costs it incurred in support of Mr Bligh’s claim and how much it stood to profit from a successful claim.

[80] In response, IAG says that CRS refused to accept expert advice. Its aggressive support of Mr Bligh’s position, at odds with his counsel, meant Mr Bligh was disinclined to accept settlement advice from his counsel.

[81] Any public good CRS provides is incidental to its primary aim of profit. It should not be shielded from costs associated with the risk of litigation. As a matter
of public policy, the Court should balance the public good of promoting access to justice while on the other hand ensuring that defendants are not disproportionately exposed to costs.

[82] The costs ordered are not disproportionate. They are within the scope of costs that could be expected in involving itself in High Court litigation. If CRS is correct, then it would open litigation funders to join litigation without doing due diligence as to the appropriateness of proceedings.

[83] CRS further submits that if it is liable for costs, they should be capped at 40 per cent. IAG submits this is out of line with the Court’s traditional approach.

CRS’s reply

[84] CRS says it should not pay non-party costs for the period between when it provided funding to Mr Bligh and when it cancelled the contract.

[85] CRS says that it would be unfair to award costs against it when Mr Bligh refused to accept its advice to settle. It alleges that Mr Bligh misrepresented the nature of the damage to the property upon which the claim was to be made. When it became clear what the real nature of the damage was, CRS recommended settling. When Mr Bligh made it clear he would pursue an unmeritorious case anyway, CRS withdrew funding. Mr Bligh went on to pursue the case with other counsel.

[86] CRS says it exercised very little control over the litigation. It says this is evidenced by the fact that Mr Bligh ignored CRS’s advice and that litigation continued even after CRS had cancelled its funding. It also says that once it cancelled the contract, CRS did not stand to benefit from the litigation.

[87] In terms of causation, Mr Bligh was able to obtain alternative and experienced representation. This case can be distinguished from the cases above in which non-party orders were made. Had Mr Bligh accepted the advice given by CRS a full settlement would have been reached which included costs.
[88] CRS accepts that a litigation funder should carefully consider the merits of litigation when entering a funding arrangement. It says, however, that a funder should be able to withdraw from a funding arrangement when it becomes evident the claim is likely to be unmeritorious. CRS says when it realised the faults in Mr Bligh’s claim it sought to encourage him to settle and then withdrew. CRS says the situation cannot be compared to a claim where a litigation funder allowed a party to continue with a claim and caused costs to be incurred.

[89] CRS says the costs award sought against it would be disproportionate. If anything is awarded, it should be at a reduced rate. It also says it provides a public good and that it is counter to public policy if costs awards are made against it. CRS says that any costs award should reflect the costs it incurred in support of Mr Bligh’s claim, and given how much it stood to profit from a successful claim.

[90] It says that if an award is made, it should be in line with the 40 per cent awarded by Associate Judge Osborne in the High Court. CRS says there is no authority to suggest that joint and several liability should be awarded between CRS and Mr Bligh. It submits that is in direct conflict with the orders made by Associate Judge Osborne and Nation J. CRS further states that EQC is seeking a costs award for a substantial portion of the steps in the proceeding simply because they were completed before the end of October 2016.

EQC’s reply

[91] EQC rejects the assertion that Mr Bligh “misrepresented” the damage. It was CRS’s job to gather relevant information and make its own determination as to the strength of Mr Bligh’s claim. Even if there was a misrepresentation, this would not be relevant to whether non-party costs should be awarded between CRS and EQC and IAG.

[92] EQC says CRS chose to take on Mr Bligh’s claim, recommended he bring the proceedings, and funded those proceedings for three years through to the aborted hearing. CRS’s failure to conduct proper due diligence during that time should not absolve it from facing non-party costs. It says CRS gives no explanation for why it changed its position at such a late stage.
[93] It rejects CRS’s assertion that costs should be reduced. It says that costs awards are joint and several unless the Court orders otherwise. It says the 40 per cent allocation referenced was directed to the apportionment as between CRS, Mr Shand and Mr Bligh for their joint and several liability to IAG. EQC did not seek costs against Mr Shand. To the extent that any such apportionment is relevant, EQC submits that Associate Judge Osborne held between them that Mr Bligh was to bear
33.3 per cent and CRS 66.7 per cent.

Analysis

[94] It is necessary to consider what role CRS had in the commencement of the ill-fated proceedings and their pursuit up until 28 October 2016.

[95] Mr Staples gave evidence of the history between CRS and Mr Bligh. The relationship commenced in late 2012 with the Services Agreement between them being entered into in November 2012.

[96] Mr Staples in his affidavit of 21 July 2017 said:

CRS’s procedure for new clients at that time was to first assess the house and produce an Initial Damage Assessment Report (IDA). The IDA was done through a company called EQ East Limited (EQES) and involved an inspection of the house to identify earthquake damage. EQES employees carried out an IDA inspection on 19 December 2012. The IDA report, dated 22 January 2013, is annexed and marked “B”.

[97] The report annexed was in fact written by a company called “Earthquake Services Ltd”, a company of which Mr Staples is the sole director.

[98] The report was prepared by two individuals, both described as being damage assessors. Their qualifications are not stated. The report is some 45 pages in length and begins:

This report summarises the methods used by Earthquake Services Limited based on its experience to provide an opinion on the extent of damage caused to the relevant premises as a result of the Canterbury Earthquakes 2010 and 2012.

[99] I note Nation J in his judgment of 11 September 2018, in which he reviewed the non-party costs judgment of Associate Judge Osborne, recorded that neither of the assessors were engineers.³⁰

[100] In his July 2018 affidavit, Mr Staples seeks to shift responsibility for the conclusion in the report that Mr Bligh’s property was a full rebuild onto Mr Bligh. He says that he:

... and the experts trusted Mr Bligh’s account of the events and damage he saw after the earthquakes.

[101] That suggestion is inconsistent with the very purpose of the Earthquake Services Ltd’s report set out at [98] above. In the report prior to the detailed review of the property, there appears at pg 5 the following:

³⁰ Bligh v Earthquake Commission, above n 2 at [46].

[102] Given the express purpose of the report and its conclusion that occupies an entire page of the report, Mr Staples’ attempt in his July 2018 affidavit to shift responsibility onto Mr Bligh for the findings in the Earthquake Services Ltd’s report are not convincing. Mr Staples advised Mr Bligh that his best option was to file proceedings. Mr Staples does not suggest that decision was based on reports other than that prepared by his own company, Earthquake Services Ltd. CRS had a substantial role in the proceedings being commenced. CRS instructed Mr Shand’s office to draft the proceedings.

[103] The evidence of the history of the proceedings from the time the proceedings were issued in July 2013 to the time the plaintiff’s evidence was served in April 2016 is limited. At an unknown time, but prior to the plaintiff’s evidence being supplied, Mr Bligh’s solicitors were aware that an engineer, a Mr Wilkinson, who had visited Mr Bligh’s property in the mid-2000s, did not support Mr Bligh’s claim that the property had suffered earthquake damage. Mr Wilkinson’s report is described as unhelpful to Mr Bligh’s case.

[104] Mr Ferguson, the solicitor at Mr Shand’s office who had carriage of Mr Bligh’s case in the lead up to the scheduled hearing, says in his affidavit of 13 July 2017 that it was CRS who appointed Messrs Csiba and Johnstone as two of Mr Bligh’s experts. Mr Ferguson says that Mr Csiba’s evidence did not link the damage to the property to his suggested repair strategy.

[105] Mr Johnstone is described as having been involved with the case for a long time and was of the view that the damage to the house was limited to the unreinforced brick walls of the house.

[106] Mr Ferguson also refers to the evidence of a Mr Williams, who was a builder, and that Mr Williams was of the view that the house had suffered earthquake damage.

[107] Significantly, the plaintiff’s case was not supported by a brief of evidence from an engineer. The plaintiff’s solicitor had the report from Mr Wilkinson who had been familiar with the property pre-earthquake but which, as noted, was unhelpful to the plaintiff’s case.
[108] Mr Ferguson does not say whether or not his office provided reports from time to time to CRS.

[109] Mr Staples does not say that he was not kept appraised of the progress of the proceedings. He says at para [12] of his 31 July 2017 affidavit, referring to what occurred after the proceedings were issued, as follows:

From that point on, CRS took a backseat role in the claims resolution process and simply acted as a litigation funder. I do not recall meeting with Mr Bligh again until I visited his property shortly before trial as I described below. Neither I nor CRS in general played an active role in the management of the Court proceedings – that was left to his lawyers.

[110] Mr Staples in this evidence was seeking to give the impression that CRS cut itself off from the proceedings from the day they were issued. Assuming for the moment that evidence is correct, I do not accept it was reasonable for CRS to have taken this step. As funder CRS should know what was going on with the proceedings. The Service Agreement entered into between the parties describes CRS’s role as:

(3) Claims Resolution Services will:

(a) act in the claimant’s best interests;

(b) give ongoing advice about the merits of the case and future claim resolution strategy;

(c) give advice about claim settlement. (my emphasis)

[111] At para [11] of the Service Agreement it states:

(11) Claims Resolution Services may terminate this Agreement if:

(a) the claimant does not keep to its responsibilities, or;

(b) the claimant rejects Claims Resolution Services Ltd’s advice; or

(c) previously undisclosed new information that affects the claim comes to light.

[112] Paragraph [3] of the Service Agreement states what CRS will do. CRS could only give advice about the merits of the claim by keeping informed of the case’s progress. The uncontradicted evidence of Mr Ferguson is that CRS appointed two experts to give evidence. In order to do that, CRS would have to know what the issues
in the case were and what gaps existed in the evidence. Had CRS not been told about the unhelpful Wilkinson report then I would have expected Mr Staples to have said so, particularly when in his December 2018 affidavit he seeks to cast responsibility for the course of the proceedings onto Mr Bligh.

[113] I am satisfied that if Mr Staples could have said that CRS was unaware of the evidentiary issues around proving earthquake damage well before the days immediately prior to October 2016, that he would have said so. In an email to Mr Ferguson on Sunday 23 October 2016, eight days before the hearing was about to begin, Mr Staples said: “My suggestion is now as it has always been” (my emphasis), and he says Mr Ferguson should visit Mr Bligh’s property along with suggesting the experts needed to recheck what they were saying about the garage. The highlighted opening line of his email suggests that Mr Staples had been urging the lawyers to revisit their view of the case for some time and the reference to the experts suggests he was aware that the experts took a different view from him, at least in respect of the garage.

[114] The point is the proceeding was commenced on CRS’s recommendation based on the Earthquake Services Ltd’s report. Having set that process underway and having committed to provide advice as to the merits of the claim and future claim resolution, CRS had the ability to exert significant, and indeed ultimate, control on the proceeding by cancelling the funding if its advice was not accepted. CRS either gave incorrect advice or failed to give advice when it committed to do so. Again, having recommended the proceeding, funded the proceeding, selected the solicitors, nominated some of the experts and committed to providing advice in respect of the proceeding, CRS had real control and responsibility for the proceedings.

[115] I have not overlooked para [38] of Mr Staples’ December 2018 affidavit, but that evidence is given in general terms.
[116] At para [42] of Mr Staples’ December 2018 affidavit, he referred to what he considered was Mr Bligh choosing to ignore aspects of the IDA report and then said:

I do not think it is relevant to go through every report but just noting that first one shows Mr Bligh’s attitude which was notwithstanding what he was being told, he refused to accept any advice, even from his own side.

[117] In fact, a review of the reports received, their timing and what advice CRS or Mr Shand gave to Mr Bligh in respect of those reports was exactly what was called for. Once Mr Bligh refused to accept what the experts were saying, the alarm bells should have been ringing for a litigation funder, especially one experienced with earthquake litigation which, to a large extent, is driven by expert opinion. If the reports received, other than the original one from Earthquake Services Ltd, showed that it was reasonable for Mr Bligh to pursue his claim, I would have expected Mr Staples to have referred to those as showing that CRS’s continued support was reasonable.

[118] Again, the evidence is unclear as to the exact timing of when the reports that Mr Bligh allegedly would not accept came to hand. But the fact that the Wilkinson report must have been to hand prior to the plaintiff’s evidence being served was of itself a significant indicator that not all was well with the case.

[119] Mr Staples’ December 2018 affidavit acknowledges that immediately prior to the abandoned hearing, he doubted the lawyer’s advice as to the lack of merit of the plaintiff’s claim, and he acknowledges in his affidavit that:

... with hindsight, I should have pulled back and let the lawyers do their job and CRS has learnt its lesson from the significant costs it has had to pay on the wasted costs application not taking action a lot earlier and invoking its right to cancel the contract a lot earlier (when Mr Bligh was first in breach in not taking the advice of his lawyers).

[120] Mr Staples does not say when Mr Bligh was first in breach, but this evidence strongly suggests that CRS was aware Mr Bligh was not taking the advice of his lawyers, but nevertheless did not take any steps to exercise the control it had over the litigation in those circumstances.

[121] Mr Staples in his December 2018 affidavit also says that while his opinion of Mr Bligh’s chances differed from Mr Ferguson’s opinion, he did not copy Mr Bligh in
to those emails. However, Mr Staples visited Mr Bligh prior to the hearing. Mr Bligh’s emails to Mr Ferguson indicated that Mr Bligh considered Mr Staples supported his position. Mr Staples’ emails to Mr Ferguson referring to Mr Staples’ visit to the property show that Mr Staples was adamant that the property had been earthquake damaged and that Mr Ferguson would be convinced by a visit to the property. This strongly suggests what Mr Staples said to Mr Bligh during those visits.

[122] In an email from Mr Staples to Mr Ferguson, Mr Staples refers to his visit to Mr Bligh’s property a few weeks before the scheduled hearing date when the property was being visited by a Barry Searle. Mr Staples said the visit was a farce and:

... Mr Searle pointed out all the areas where there was no damage and ignored the damaged areas. He said that proved the earthquake did not do it. Every time I pointed out damage Searle turned away and pointed out another area without damage.

[123] Mr Bligh in an email to Mr Staples on 29 September 2016 refers to Mr Searle’s visit saying:

Great to see you and thanks very much for the support, pity the engineer wasn’t there he could shoot them down in flames.

[124] In the immediate run-up to the hearing, Mr Staples was sending emails which, in blunt language, conveyed his view to Mr Ferguson that Mr Staples considered the property had suffered significant earthquake damage. This was based on Mr Staples’ own inspection of the property. This was despite Mr Ferguson explaining that the plaintiff’s evidence in that regard was equivocal. Mr Ferguson’s email of 22 October 2016 begins:

Essentially, even Bligh’s experts are equivocal about whether the damage that they have identified was caused by the earthquakes so I am not confident we can prove the earthquake damage.

[125] Some indication of Mr Staples’ impact on Mr Bligh can be found in Mr Bligh’s email to Mr Ferguson in response to Mr Ferguson sending an email to Mr Bligh about Mr Bligh’s costs exposure if the proceedings were unsuccessful. Mr Bligh, having referred to his belief that he considered adverse costs were a risk for CRS says; “I’m sure Brian Staples is confident you will win!”.
[126] What is clear to me is that CRS was not a pure funder, indeed was far from it.

[127] In this case, CRS operated as the funder of the litigation. It was not a ‘pure funder’ in that it had an interest in the litigation. As Associate Judge Osborne noted:³¹

CRSL is not a “pure funder” as that term was used by the Privy Council in Dymocks. CRSL had, through its funding contract, a personal interest in the litigation and did stand to benefit from it as part of its business. It had the contractual right to manage and prosecute Mr Bligh’s claim. The claim would not have been pursued to the 31 October 2016 trial date but for CRSL’s funding arrangements.

[128] That finding was not reviewed by CRS.

[129] The issue to determine is whether CRS as a non-party should be liable for scale costs up to the point it cancelled its funding agreement with Mr Bligh; approximately three years. The rationale for non-party orders stems from the general principle that costs follow the event. In other words:

If one party causes another unreasonably to incur legal costs he ought as a matter of justice to indemnify that party for the costs incurred.³²

[130] In Arklow Investments Ltd v MacLean, Fisher J summarised the rationale for non-party costs awards thus:³³

[It] is wrong to allow someone to fund litigation in the hope of gaining a benefit without a corresponding risk that that person will share in the costs of the proceedings if they ultimately fail.

[131] In such cases, the general rule is that the funder pursuing its own interests should not escape liability for costs if the proceeding fails. I note that in Dymocks the Privy Council approved the observations of Tomkins J in Carborundum Abrasives Ltd v Bank of New Zealand (No 2) that:³⁴

... it would rarely be just for such a person pursuing his own interests, to be able to do so with no risk to himself should the proceedings fail or

³¹ Bligh v Earthquake Commission, above n 2, at [131].

³² Arkin v Bourchard Lines [2005] EWCA CIV 655, [2005] 1 WLR 3055 at [23].

33. Arklow Investments Ltd v MacLean, HC Auckland CP49/97, 19 May 2000 at [21], cited with approval in Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2), above n 16.
34. At [25], citing Carborundum Abrasives Ltd v Bank of New Zealand (No 2) [1992] 3 NZLR 757 at 765.

be discontinued. That will be so whether or not the person is acting improperly or fraudulently.

[132] It is clear to me that CRS, in the hope of gaining a benefit, funded Mr Bligh’s litigation.

[133] The disputed issue is the extent to which Mr Bligh or CRS controlled the proceedings. EQC says that CRS effectively prosecuted this proceeding for Mr Bligh. CRS denies that it had effective control. It says that its lack of control is exemplified by the way that Mr Bligh continued the litigation without its support. EQC’s position is not that CRS controlled the litigation in an absolute sense. Rather, it is that CRS was in a position of considerable influence. It encouraged Mr Bligh’s erroneous view of the merits of his claim over the three years prior to the aborted hearing when it had the ability to intervene if the claim was pursued by Mr Bligh against advice.

[134] CRS says it was misled by Mr Bligh. It says that it was induced into funding Mr Bligh’s claim by his misrepresentation as to the damage. It says that when the true nature of the damage emerged it encouraged Mr Bligh to settle. His failure to settle at that point was indicative of the level of control CRS had over the outcome. It says that after that point, it withdrew funding. CRS had negative control in that it could intervene if Mr Bligh sought to pursue the claim against advice.

[135] CRS’ position fails to recognise the major part it played in the proceedings prior to ending its support. CRS recommended the litigation be brought. CRS recommended Mr Bligh obtain a report on earthquake damage (referred to at [98] and
[101] which proved to be wrong). I accept the submission that CRS should have undertaken proper due diligence as to the strength of Mr Bligh’s claim. Instead it referred him to a company controlled by Mr Staples. As Associate Judge Osborne said:³⁵

[122] It would have been evident to legally experienced people well before the weekend of 29 – 30 October 2016 that a number of problems could confront Mr Bligh as the trial date arrived. Mr Bligh’s bullish view of his prospects was reinforced up until a very late point by the equally bullish view taken by Mr Staples of CRSL. There was a great likelihood that, if Mr Staples’s view were to be changed near trial,

³⁵ Bligh v Earthquake Commission, above n 2, at [122].

then Mr Bligh would not be persuaded to accept that view. The prospect of cancellation of the funding contract was not raised with Mr Bligh until the last working day before trial.

[136] I find that CRS exercised a considerable amount of control over the commencement and contravention of the claim. That control is clear from the fact that Mr Bligh followed Mr Staples’ advice as to the merits of his claim and rejected Mr Shand’s assessment of the merits of the claim. CRS’s continued encouragement of the claim from which it stood to benefit means that it must bear responsibility for the adverse costs of the proceeding.

[137] CRS was dealing with a client who was vulnerable by virtue of his financial position and poor health. It encouraged Mr Bligh into litigation by providing a report which promised a rebuild. It bolstered his view over the course of three years, at least at times against the advice of lawyers and experts (Mr Wilkinson) or, as I have said (if Mr Staples’ evidence is accepted), it failed to provide the advice on the claim that it committed to provide. Mr Staples’ claim that he left everything to the lawyer showed (if nothing else) that CRS failed until the eleventh hour to meet its self-imposed obligation to provide advice to Mr Bligh. CRS cannot reverse its advice one week before the trial and not take responsibility for the proceeding based on its earlier advice having run on in the meantime.

[138] CRS is a claims funder which operates to make a profit. It took on Mr Bligh’s claim with the intention of making money. If it fails to operate carefully then it may face costs orders. That is a risk that CRS must consider when funding claimants and encouraging them to commence and continue litigation without proper due diligence and in the face of contrary legal advice. I am not satisfied that the access to justice which CRS provides as collateral to its primary profit motive would be severely limited by a costs order.

[139] The interests of justice support the making of an order for non-party costs against CRS in favour of EQC and IAG and I made such orders.

Quantum of CRS’s liability

[140] Having concluded that the circumstances warrant an award of non-party costs against CRS, the next question is quantum.

[141] CRS suggests that it should only be liable for 40 per cent of EQC and IAG’s claimed costs not the full scale costs they claim.

[142] EQC and IAG seek that CRS be made jointly and severally liable for the costs payable by Mr Bligh in respect of the proceeding up to 28 October 2018 in the case of EQC and 31 October for IAG with EQC submitting:

Joint and several liability is the norm; as High Court Rule 14.12 provides, unless the Court otherwise directs, the liability of each of two normal parties ordered to pay costs is joint and several.

[143] CRS argues that the amount of non-party costs it should be liable for (if a liability finding is made), should be reduced because of the costs it has already been exposed to as a result of the wasted costs awards, what it says was a relatively small amount it stood to recover if the litigation was successful and the role it says Mr Bligh played in the litigation.

[144] I do not find CRS’s arguments convincing. If under its Service Agreement, it chose a fee of 10 per cent of the insurance pay-out in addition to costs, then that was the fee it was content with. If anything, that the fee was at this level should have led CRS to keep a tight rein on the proceedings. That CRS was made liable for the wasted costs of the aborted hearing does not mean it should not be liable for costs in respect of earlier stages of the litigation.

[145] As for Mr Bligh’s role, I have touched on this already. The report commissioned by CRS at the outset confirmed to Mr Bligh that his property was a rebuild. CRS held itself out as the expert in respect of earthquake repairs and commissioned the report of Earthquake Services Ltd, which referred Mr Bligh back to CRS and Mr Staples with the report telling him: “CRS takes on your insurance company to get you your full entitlement”. See the table from the CRS report at para [101] above.
[146] Given CRS commissioned another company of Mr Staples’ to report specifically on whether earthquake damage had occurred, in my view, CRS cannot now be heard to say that the report it recommended could not be relied on. The decision to commence litigation was based on the report commissioned by CRS.

[147] Under the High Court Rules, the starting position is that liability for costs is joint and several liability unless the Court directs otherwise.³⁶ I do not see any reason to depart from that Rule. Joint and several liability applied to the wasted costs award made by Associate Judge Osborne.

[148] It is in this regard that Mr Staples’ failure to address the reports obtained during the course of the litigation which I commented on at para [116] above, stands against treating CRS differently from Mr Bligh. Had the reports supported a continuation of the litigation, the reports would have been produced. It does not assist CRS to say it left matters to the solicitors that it had appointed as CRS committed to provide advice to Mr Bligh.

[149] CRS’s agreement gave it a significant degree of control. If CRS failed to exercise the control available to it (as seems to be Mr Staples’ position), then it ran the risk that meritless proceedings it recommended be brought would be pursued. If it in fact exercised control, then it is directly responsible for the state of affairs that existed unfolded.

[150] Having told Mr Bligh from the outset that it would take on his insurance company and that CRS worked for him and would give him advice as set out in the Service Agreement, it is not tenable for CRS to raise as a defence that it abdicated control. If that is the case, then it is responsible for the consequences of that abdication of control.

[151] I find that CRS is jointly and severally liable to EQC and IAG for the costs awards that I have made against Mr Bligh for costs of this proceeding from commencement to 28 October 2016.

³⁶ High Court Rules 2016, r 14.14.

Responsibility for costs as between Mr Bligh and CRS

[152] In respect of EQC, Associate Judge Osborne in his 18 December 2017 judgment ordered that the wasted costs in favour of EQC as between Mr Bligh and CRS were to be borne 33.3 per cent by Mr Bligh and 66.7 per cent by CRS.³⁷ I adopt the same proportions in respect of the non-party costs ordered at para [151] above. I do so because if anything Mr Bligh’s responsibility for those costs is less than the costs covered by the wasted costs judgment. I say that as it seems it is only at the eleventh hour that Mr Bligh received advice that his claim lacked merit and should be settled. Up until that point and commencing with the Earthquake Services Ltd report obtained pre-litigation, it seems Mr Bligh did not receive a critical analysis of the merits of his claim. It is not suggested that even when Mr Wilkinson’s unhelpful report was received, Mr Bligh’s case received a critical analysis of his case called for by the fact that an engineer familiar with his property could not support the claim.

[153] CRS allowed the proceedings to run on for the best part of three years without properly exercising the control it undoubtedly had. Associate Judge Osborne apportioned liability as between CRS and Mr Bligh 66.7 per cent and 33.3 per cent. This covered the period when Mr Bligh was not accepting advice that his clam lacked merit so his responsibility for the costs for the four days covered by the Judge’s decision, if any, is less than his responsibility for the earlier period when it seems he was not getting the robust and direct advice about his case that only came at the end. In those circumstances, to maintain the 66.7 per cent/33.3 per cent split is to give the benefit of the doubt to CRS. Accordingly, I fix the responsibility for costs payable by Mr Bligh and CRS under [151] as between them as to Mr Bligh 33.3 per cent and to CRS 66.7 per cent.

IAG’s claim

[154] Associate Judge Osborne treated responsibility for IAG’s costs as between Mr Bligh and CRS differently as IAG had sought non-party costs against Mr Shand.

³⁷ Bligh v Earthquake Commission, above n 2.

[155] Associate Judge Osborne made a non-party costs award against Mr Shand and he directed that he be responsible for 40 per cent of the non-party costs, CRS be responsible for 40 per cent of the non-party costs, and Mr Bligh responsible for 20 per cent.

[156] Associate Judge Osborne’s order, insofar as it concerned Mr Shand, was subject to review in Nation J’s decision of 11 September 2018.³⁸

[157] I do not see any reason to treat Mr Bligh and CRS’s responsibility for IAG’s costs any differently from EQC’s costs.

[158] Accordingly, as between CRS and Mr Bligh, Mr Bligh is liable for
33.3 per cent and CRS is liable for the balance.

[159] Should there be any error in the amounts that I have taken into this judgment from the various memoranda and schedules produced by the parties, leave is reserved for correction to be sought by memoranda.

Costs on this application

[160] Both EQC and IAG seek costs against CRS on their application for non-party costs (paras [16](d) and [17](b)). There is no reason why costs should not follow the event and there is a costs order against CRS in favour of EQC and IAG in respect of their application for non-party costs on a 2B basis plus disbursements as fixed by the Registrar.

Associate Judge Lester

Solicitors:

GCA Lawyers, Christchurch Chapman Tripp, Wellington Duncan Cotterill, Auckland

J Moss, Barrister, Christchurch

³⁸ Bligh v Earthquake Commission, above n 3.