BLIGH v THE EARTHQUAKE COMMISSION and IAG NEW ZEALAND LTD [2017] NZHC 995

[16 May 2017]

IN THE HIGH COURT OF NEW ZEALAND

CHRISTCHURCH REGISTRY

CIV-2013-409-001333

[2017] NZHC 995

BETWEEN

DEREK RICKY BLIGH

Plaintiff

AND

THE EARTHQUAKE COMMISSION

First Defendant

IAG NEW ZEALAND LIMITED

Second Defendant

Hearing:

9 May 2017

Appearances:

R Lynn for Plaintiff

N S Wood and J W Upson for First Defendant

P M Smith for Second Defendant

Judgment:

16 May 2017

JUDGMENT OF ASSOCIATE JUDGE MATTHEWS

[1] This proceeding was brought by Mr Bligh against his insurer, IAG New

Zealand Limited (IAG) and the Earthquake Commission (EQC) in respect of damage

said to have been caused to his home in Waddington, Canterbury, in the sequence of

earthquakes in 2010 and 2011. He applies to set aside a judgment of Clark J dated

2 November 2016 in which her Honour entered judgment for the EQC and IAG

under r 10.8 of the High Court Rules.1 EQC and IAG oppose the application.

[2] Rule 10.8 provides that if a defendant appears at a hearing, but the plaintiff

does not, the defendant is entitled to judgment dismissing the proceeding, unless the

defendant has admitted all or part of the claim, which is not the position in this case.

In the circumstances which follow, Mr Bligh did not appear at the trial of his claim

against EQC and IAG.

1 Bligh v The Earthquake Commission [2010] NZHC 2619.

[3] Mr Bligh relies on r 10.9:

Judgment following non appearance may be set aside

Any verdict or judgment obtained where one party does not appear at the

trial may be set aside or varied by the court on any terms that are just if there

has, or may have been, a miscarriage of justice.

[4] The Court is required to consider this application in the way directed by the

Court of Appeal in Russell v Cox,2 confirmed in Mathieson v Jones:

3

The test against which an application to set aside a judgment should be

considered is whether it is just in all the circumstances to set aside the

judgment, and the several factors mentioned in the judgments discussed

should be taken, not as rules of law, but as no more than tests by which the

justice of the case is to be measured, in the context of procedural rules whose

overall purpose is to secure the just disposal of litigation.

[5] Since Russell v Cox was decided the High Court has instituted a system of

case management. As well, because Mr Bligh’s case was a claim in respect of

damage alleged to have been caused to his home by earthquakes in the Canterbury

earthquake sequence, it was managed under a specific case management scheme put

in place by the Court in Christchurch for such cases. In my opinion the reference to

the context of procedural rules in Russell v Cox should, in the present case, include

the case management system under which this case was procedurally conducted.

[6] In Russell v Cox, the Court of Appeal noted the following passage from

Paterson v Wellington Free Kindergarten Association Inc:4

In approaching an application to set aside a judgment which complies with

the rule, the Court is not limited in the considerations to which it may have

regard, but three have long been considered of dominant importance. This

was accepted by the Chief Justice in the Court below and by all counsel in

this Court. They are, 1. That the defendant has a substantial ground of

defence; 2. That the delay is reasonably explained; 3. That the plaintiff will

not suffer irreparable injury if the judgment is set aside …

2 Russell v Cox [1983] NZLR 654 (CA) at 659.

3 Mathieson v Jones CA198/92, 11 December 1992.

4 Paterson v Wellington Free Kindergarten Association Inc [1966] NZLR 975 at 983.

[7] In Russell v Cox the Court went on to say:5

We think that in the light of Evans v Bartlam the passage to which reference

has just been made should be read as doing no more than emphasising three

matters which, as a matter of commonsense and practice, the Court will

generally regard as of importance in deciding whether it is just to set aside a

judgment. But it should not be regarded as laying down a general rule that

an application to set aside a judgment must satisfy these conditions as a

necessary prerequisite to the exercise of the discretion …

[8] In Vermeulen v The Department of Health, Russell v Cox was cited to Thomas

J, but he indicated a preference to adhere to the terms of the rule, as he put it, and

thus to consider whether the judgment which had been entered should be set aside on

the ground that there is or may have been a miscarriage of justice.6 Thomas J also

postulated a distinction between an application by a defendant (as in Russell v Cox)

from an application by a plaintiff (as here):7

Thirdly, I consider that a distinction may possibly be drawn between an

application by a plaintiff to set aside a judgment entered by default and an

application by a defendant to set aside a judgment. In the latter case the

plaintiff will be held out of the fruits of his or her judgment – assuming that

they are eventually successful. It is appropriate then that the defendant

demonstrate a sound case why the proceeding should be reinstated. Where

the application is the plaintiff’s, however, this consideration does not apply

or apply to the same extent. On the contrary, it simply means that the

defendants will be called upon to meet the claim, albeit at a later date than

that originally contemplated.

[9] In argument, various factors were emphasised by counsel in support of

opposing arguments on whether there has been a miscarriage of justice in this case.

Before turning to these arguments it is necessary to set out in some detail the events

which occurred in the period running up to, and on the day of, the trial.

Events leading up to the entry of judgment

[10] Mr Bligh is retired. He has Parkinson’s disease and heart disease. Since

2010 he has suffered from bowel cancer and he has terminal T cell Lymphoma. He

says that one of the consequences of Parkinson’s disease is that his mind is easily

overwhelmed in stressful situations.

5 At 659.

6 Vermeulen v The Department of Health HC Whangarei A76–85, 6 December 1991.

7 At 4–5.

[11] In November 2012 Mr Bligh engaged companies operated by Mr Bryan

Staples to handle his claims for damage he believed had been caused by the

earthquakes, against both EQC and IAG. Documents produced in evidence refer to

Earthquake Services Limited, EQ East Solutions Limited and Claims Resolution

Service Limited. Any distinction between these entities is irrelevant to the issue

presently before the Court. I refer to Mr Staples’ companies as CRSL in this

judgment.

[12] Material produced by Mr Bligh shows CRSL describing itself as

Christchurch’s leading independent earthquake damage assessors. There is reference

to a “no win no pay” service being offered. Mr Bligh’s evidence is that his

understanding was that he may be required to pay court filing fees, but that if he did

not win his case he would not pay legal fees to his lawyer or to EQC or IAG. He

was not advised at any point until the last working day before the trial that he may be

liable for an adverse costs award by the Court if he did not win. He also recalls

Mr Staples saying the arrangement was “no win no pay” so he always thought that if

he did not win he would not pay anything.

[13] Mr Bligh says that initially he was required by Mr Staples to be represented

by Mr Grant Shand, solicitor, but later he was informed that Mr Shand would no

longer be conducting his case, this would be undertaken by Mr Ferguson. Mr Shand

is the principal of the firm Grant Shand, and Mr Ferguson and Mr Morriss (who

assisted Mr Ferguson) are solicitors employed by him.

[14] In December 2015, at the conclusion of the Earthquake List case

management process, the Court allocated a seven day fixture for this case, to

commence on Monday, 31 October 2016. By August 2016 the majority of the briefs

of evidence of witnesses to be called at trial had been served. On 10 October 2016

Davidson J made a pre-trial direction that the Court would inspect Mr Bligh’s home

which is in Waddington at 8.30 am on Monday 31 October prior to the hearing

commencing in court in Christchurch. On Friday 28 October Mr Ferguson served

Mr Bligh’s opening address.

[15] However, on or about 20 October Mr Ferguson rang Mr Bligh’s son, Hayden,

and told him that he did not think that Mr Bligh would win his case. Hayden Bligh

passed this on to his father. However, in the immediately preceding three weeks,

advice from Mr Staples himself differed from the view given by Mr Ferguson to

Hayden Bligh. On 28 September Mr Staples came to the property to carry out a site

visit and during that visit told Mr Bligh that earthquake damage to his garage alone

would put the cost of repair over the EQC cap ($100,000 plus GST) and that he

would arrange for builders to visit the site and take the level of the garage roof. The

following day Mr Staples published a post on the Facebook page of his company,

Earthquake Services Limited. It is titled “Rumours, Rumours, Rumours”. After

stating that he wished to dispel some rumours, without identifying them, and

reference to an unidentified person called “Ian”, Mr Staples said:

Rumour No. 1. It is true EQC are taking a dying man named Ricky Bligh to

Court over an argument about his house located just 12 klms [sic] from the

Darfield quake. EQC say it’s not over cap and they are willing to stake HIS

life on it. The rumour is my friend Ian is doing this to help my business

because the publicity around this case will be enormous. That is NOT true, I

doubt my friend Ian even knows about this case as it’s being run by lawyers.

It is true the publicity will be great for everyone still stuck in the clutches of

EQC. When you hear Ricky’s story, it will give us all the strength not to

give up and keep fighting until you get justice. We are doing a video

interview with Ricky in the next week or so, stay tuned to our FB. It will

wrench your heart.

[16] A few days after that some builders called at Mr Bligh’s property, inspected

the garage and informed Mr Bligh that they thought the levels of the garage were

“out”. On 5 October three engineers from Terra Consultants carried out an

assessment of the property. Mr Bligh does not know who arranged this, or why it

was thought that a new engineering report was needed. As by then Mr Ferguson had

control over the running of the case and Mr Staples was also involved, it seems

likely that one or other arranged this inspection.

[17] Two weeks after that visit, Mr Hayden Bligh received Mr Ferguson’s call.

Mr Bligh says that Hayden’s advice that this call had taken place was the first time

he had heard that his lawyers doubted that he would win. At that time he did not

take issue with Mr Ferguson about this. He did not know him well and he did not

want to compromise his relationship before trial by chastising him about his having

called Hayden Bligh and not having called him direct.

[18] Events unfolded daily in the week before the trial. On Tuesday, 25 October,

Mr Bill Dwyer from CRSL visited the property with another engineer Pavol Csiba.

In an email I refer to below, Mr Dwyer describes himself as a commercial and

corporate lawyer, and as General Manager, Earthquake Services. They looked at the

property and Mr Bligh pointed out to them the damage he believed had been caused

by the earthquakes.

[19] On 26 October Mr Bligh was contacted by Ms McInnes who is the assistant

to Mr Mark Kearney, another engineer with Terra Consultants, based in Auckland.

She said that Mr Kearney wanted to visit the property on 31 October, which was the

day the trial was due to start. As Mr Morriss had informed her that the trial Judge

would probably be attending the property early that morning, she asked if

Mr Kearney could arrive straight after that visit. Mr Bligh agreed to this. Again, it

seems that this was organised by CRSL or Mr Ferguson or Mr Morriss.

[20] On Thursday 27 October Mr Ferguson, Mr Morriss and Mr Csiba visited the

property. On that occasion Mr Ferguson told Mr Bligh in person, for the first time,

that he thought that he had a weak case and should settle. Mr Bligh does not recall

Mr Ferguson explaining why he thought the case was weak.

[21] Later that afternoon Mr Ferguson sent Mr Bligh an email explaining his

exposure to defence costs if he proceeded with the case and lost in face of an offer

that had been made to him by EQC and IAG. Mr Bligh says he did not give this

much thought as he could not understand how he could lose the case, a view based

on his belief about the extent of the damage to his home caused by the earthquakes.

[22] The next day was the working day before the trial. At 6.43 am, Mr Ferguson

sent another email to Mr Bligh repeating the point in his previous email about cost

exposure and telling Mr Bligh that it would be difficult to prove earthquake damage.

Mr Bligh says that as far as he can recall this was the first time that he had been told

that his lawyers thought it would be difficult to prove earthquake damage. Although

he had understood that the advisors to EQC and IAG were of this view, he found it

confusing that his lawyers were now of this opinion. He had thought that the experts

which they had engaged were supportive of the case. He had also understood that

under his agreement with Mr Staples’ firm he would not have to pay if he did not

win. He sent an email back within a few minutes, to that effect.

[23] Later that morning a Mr McLean, a quantity surveyor engaged by CRSL,

arrived at the property saying he was there to update the cost of rebuilding because

the engineer engaged to give evidence had not allowed for asbestos removal or made

an allowance for double glazing. This information reinforced Mr Bligh’s

understanding that he was claiming for the cost of rebuilding the house, a point made

by Mr Ferguson in his email of 27 October, though at variance with the amended

statement of claim which seeks the cost of repairs (and which Mr Bligh says he did

not see prior to it being filed).

[24] At 12.03 pm Mr Bligh received an email from Mr Dwyer. In this email

Mr Dwyer advised that he agreed with Mr Ferguson’s assessment. Mr Dwyer told

Mr Bligh that his chances of success were not great, that clause 11 of the services

agreement signed in 2012 gave CRSL the right to terminate the agreement in the

event he rejected its advice, that its advice was to settle, that in the event he chose to

continue with the court proceedings CRSL would terminate its agreement with him,

and that while he could continue to use Mr Ferguson as counsel he would have to

pay for his services.

[25] Mr Dwyer also advised that Mr Bligh would be liable to pay any costs that

may be awarded in favour of EQC and IAG, and that this amount would be

substantial. Mr Dwyer said that if he chose to settle in accordance with the advice

given, CRSL would waive its fees and costs. Mr Dwyer concluded by saying that if

he did not hear from Mr Bligh by the end of the day, CRSL would assume that

Mr Bligh was “moving towards trial” and would terminate the agreement.

[26] At 2.39 that afternoon Mr Staples emailed Mr Bligh. He endorsed

Mr Dwyer’s email, and said:

We don’t believe you will win what you think you will. I simply cannot

support a case that [sic] winning is doubtful.

As Bill has stated we will wave [sic] our fee and our own costs. Also I will

wave any 3rd

party costs that are not recoverable from EQC and the insurer.

Once we cancel the contract you are fully exposed.

Please give instructions to Andrew to start negotiating a deal.

[27] As the events I have described so far are a backdrop to the events which took

place between Friday, 28th and the day of the trial, Monday, 31st, I will set out in full

Mr Bligh’s description of his position by Friday evening. After saying that he was

surprised and shocked by the emails, that he did not respond to them, and that his

phone records show a number of conversations with Mr Ferguson, Mr Morriss and

Mr Dwyer before Monday morning which he can no longer recall, Mr Bligh says:

59. At this time I still did not understand why Mr Ferguson and now CRSL

thought I did not have a good claim. I knew that my Property had

suffered earthquake damage and that I was insured. Up until this point I

thought that Mr Staples considered that the buildings had to be rebuilt.

I thought that he and CRSL supported me and would support me

through my court case. They had after all not only assessed my claim

but along with Mr Shand had arranged for the court case based on their

work. I was confused about why they were threatening to withdraw

now, the working day before the hearing, especially when that morning

they had sent a QS to do another rebuild assessment of my property. I

had been consistently told that my house was a rebuild but now even the

estimated cost of repairs to the house that CRSL had given me could not

be covered by the amount that they were suggesting I negotiate at. I

was in a state of shock and did not know how to respond or what to do.

[28] Notwithstanding all that had been said in the previous few days, on Saturday,

29 October, Mr Ferguson served on EQC and IAG a further brief of evidence of a

Mr Johnstone.

[29] I turn now to the following working day, the day of the trial. Clark J came to

Mr Bligh’s home as arranged. She was accompanied by two court officers, four

counsel representing EQC and IAG, and Mr Ferguson and Mr Morriss. Mr Bligh

waited in his car as he was not to attend the site visit. During that time he spoke to

Mr Staples by phone. Mr Staples told him that he was not going to win the case

because the defendants would throw everything at it, and it was best to negotiate. He

told Mr Bligh that if he did not, they would withdraw funding. Mr Bligh says he was

confused by what he saw as the mixed messages he had received leading up to the

trial, and he did not see how he could lose because he thought the evidence of the

damage was conclusive. He therefore told Mr Staples that he would not negotiate.

[30] When everyone but Mr Ferguson and Mr Morriss had left, Mr Bligh and

Mr Ferguson had a conversation. Mr Ferguson wanted him to negotiate a settlement

at an amount below the sum which Mr Bligh considered was needed to reinstate his

property to its pre-earthquake state. Mr Bligh told Mr Ferguson that he had a full

replacement policy and he was not prepared to settle at the level Mr Ferguson

thought he should negotiate at, particularly when CRSL had engaged a quantity

surveyor who had given an estimate of the cost of repair and the cost of rebuilding,

both of which were significantly higher than Mr Ferguson was now telling him to try

to settle at.

[31] Mr Bligh says that as Mr Ferguson was leaving, he told him that he should be

at court at 11.00 am, instead of 10.00 am when court was originally meant to begin.

Mr Bligh thinks that Mr Ferguson told him that he had to withdraw as counsel but he

is not sure. He says he was feeling very overwhelmed by the process and he does

not recall if Mr Ferguson explained what the consequences of his withdrawing were.

Mr Bligh does recall, however, telling Mr Ferguson that if he was running late to let

the Judge know and if necessary let one of the witnesses, Mr John Johnstone, give

evidence first.

[32] It will be recalled that Mr Kearney was to visit the property after the Judge’s

inspection, as arranged by CRSL. Mr Bligh says there should have been enough

time for him to let Mr Kearney into the property so he could do the inspection, and

to get to court in time. He says, however, that looking back he now believes that he

was too upset by what was happening to think clearly and that he did not understand

what was going to happen. Before they left, either Mr Ferguson or Mr Morriss

spoke to Mr Kearney by phone to see how far away he was. At that point

Mr Kearney’s flight had been delayed and he was just leaving Christchurch Airport

and making his way to Mr Bligh’s home in Waddington.

[33] Mr Bligh says that at that time he believed he had no choice but to wait for

Mr Kearney to ensure that he had access to his house and garage. Because

Mr Ferguson had told him, and earlier his son, Hayden, that his case was weak,

Mr Bligh was pinning all his hopes on Mr Kearney who he understood could prove

that there was earthquake damage. As Mr Bligh puts it:

I thought he was my last chance to save my case and my home and that it

was very important for me to stay with him and point out the before and after

damage. At that point, although Mr Kearney had prepared a brief of

evidence, he had relied on reports from some of his employees. I thought

that it was one thing to rely on the reports and photos from his employees

following their visit earlier that month but nothing beats a physical visit. I

was also able to show him my before and after photos taken by my Engineer

Grant Wilkinson of Ruamoko Solutions in 2007 and 2010.

[34] Mr Kearney arrived about 10.30 am. Mr Bligh showed him the damage in

question. He says:

Because Mr Ferguson, Mr Staples and Mr Dwyer did not believe that I could

win the case, I thought I needed to make sure Mr Kearney had all the

information he needed to be able to prove the earthquake damage in Court.

At this point I was absolutely desperate and thought Mr Kearney was

perhaps my saviour. His advice and that of his colleagues had been an

absolute breath of fresh air. They were very helpful and proactive and I

thought that Mr Kearney was therefore my only chance.

[35] At 11.49 am, while he was still at home, Mr Bligh had a call from

Mr Ferguson and two minutes later a call from Mr Morriss. He thinks Mr Ferguson

told him that he had withdrawn because CRSL had withdrawn its funding. Mr Bligh

says that although Mr Ferguson may have explained this to him earlier in the day

before he left the property, this was the first time that he thinks he really understood

that CRSL had actually withdrawn funding support and that Mr Ferguson would

abandon his representation, and that the trial would not proceed. He says

Mr Ferguson went on to advise him that it was “absolutely important” for him to get

to the court as soon as possible. Mr Morriss said there would be a judgment and that

“I either had to contact the court or go in there”. At the time he did not understand

what a judgment meant and he was still feeling quite shocked. He needed time to

recover. By the time he arrived at court later that day the Judge had already left.

[36] The Judge records the events which unfolded at court in her judgment issued

two days later on 2 November. To complete a description of events which occurred

on the first day of the trial I set out relevant paragraphs of her Honour’s judgment:

[3] On returning to the court following the site visit I was advised that

plaintiff’s counsel wished to address me in chambers concerning a recent

development. The matter was called shortly before 11:30am and

Mr Ferguson advised that the plaintiff’s litigation funder had terminated his

agreement with Mr Bligh on the basis of Mr Bligh’s “non-cooperation”.

Consequently Mr Bligh has no ability to pay his legal advisers and in the

absence of any agreement about payment Mr Ferguson sought leave to

withdraw.

[4] In response to my concern and queries about Mr Bligh, Mr Ferguson

confirmed he had advised Mr Bligh:

(a) that he, Mr Ferguson, would be making an application to the

Court for leave to withdraw;

(b) that Mr Bligh should be in attendance;

(c) that Mr Bligh had been advised of the consequences of the

withdrawal of funding; and

(d) in response to Mr Bligh saying he wished to arrange legal aid,

that it was unlikely he could do that in the time available before

the hearing was due to commence and that Mr Bligh should come

and speak to the Court about it but it appeared he had chosen not

to do so.

[5] My further exchanges with Mr Ferguson were to satisfy myself that the

application to withdraw was not attributable to a breakdown in the

relationship which might be reparable.

[6] I viewed as inevitable the grant of Mr Ferguson’s application for leave to

withdraw there being no basis upon which Mr Ferguson could be required to

commit to completion of a seven-day trial spread over a fortnight. Before

formally granting the application I heard from Mr Wood and Mr Smith,

counsel for the first and second defendants.

[7] Counsel had only become aware of the withdrawal of funding and of

Mr Ferguson’s intended application to withdraw at 11.00am. In

circumstances where Mr Bligh had not even turned up, notwithstanding that

he had been advised by his counsel to do so, counsel sought judgment

dismissing the proceeding. There had been significant wasted costs and

serious inconvenience and expense for witnesses including experts.

[8] Mr Ferguson, albeit acknowledging his dubious standing to do so, urged

the Court to consider that in not attending Mr Bligh was not being

disrespectful. He may have been attempting to arrange legal aid. I draw no

inferences from Mr Bligh’s conduct. I have little basis for doing so and I

bear in mind that he is very ill.

[37] After his visit to the court Mr Bligh contacted his present solicitors, GCA

Lawyers, and saw his counsel, Mr Lynn, of that firm that day. Mr Lynn prepared a

memorandum which is dated 31 October 2016, though court records show it was

received on 1 November. Again, it is necessary to set out passages from that

memorandum, as they explain the information before the Judge at the time she

issued her judgment on 2 November. Mr Lynn said:

1. We have been instructed by the Plaintiff, Mr Derek Ricky Bligh, at

approximately 6:00pm today.

2. In the time available the Plaintiff has briefly explained:

a. His Counsel has withdrawn on the first day of an 8 day hearing;

b. The Plaintiff was not in Court when this occurred. He had been

lead [sic] to believe through his Counsel that he should remain at

the property to which these proceedings relate to meet an engineer.

This appears to have been a result of a break down in

communications between the Plaintiff and Counsel and no

disrespect to the Court was intended;

c. Despite withdrawal of his former Counsel, the Plaintiff wishes to

see these proceedings to their conclusion.

3. Accordingly the Plaintiff respectfully requests the hearing be adjourned

to a later date on the basis that we anticipate being able to act for the

Plaintiff going forward.

4. Given the late withdrawal of the Plaintiff’s former counsel (and our late

instruction) we have not yet had an opportunity to review the pleadings,

evidence and submissions.

5. Practically then, if your Honour were minded to grant an adjournment:

a. Due [to] the Plaintiff’s health there is real urgency that this matter

be heard as soon as possible (we are instructed that the Plaintiff

suffers from Parkinson’s disease and terminal cancer, and in

December 2013 was given a prognosis he was likely to live for a

further 3 months to a year). However given the realities of what

will be required for new counsel to come to terms with the

proceedings we do not believe it is possible to reconvene the

proceedings within the current allocated hearing time;

b. For the same reasons we are not in a position [to] advise the Court

as to when the Plaintiff may be in a position to reconvene the

hearing;

c. However, we expect to be able to come to terms with the

proceedings to the extent necessary to be able to address these

issues by 3 November 2016, and respectfully request a case

management conference be convened at a time convenient to your

Honour and Counsel for the Defendants, on or after 3 November

2016, to discuss the steps necessary for this matter to be

reconvened.

d. In the circumstances, should an adjournment be granted we

respectfully request that costs to date be reserved.

6. A notice of change of representation will be filed tomorrow.

[38] As predicated, documents effecting a change of solicitor were filed on

1 November. Up until that point, and thus throughout Monday, 31 October,

Mr Grant Shand had been the solicitor on the record. He had not taken any of the

steps required by the High Court Rules to change that position.8 This point is not

referred to by the Judge in her judgment.

[39] Her Honour does refer to Mr Lynn’s memorandum, however. Her Honour

refers to Mr Lynn’s explanation for why Mr Bligh was not in court when

Mr Ferguson sought leave to withdraw. Her Honour said:

[14] ... Because it is an important point, and the explanation is at odds with

the explanation given by Mr Ferguson, I set out the relevant paragraph of

Mr Lynn’s memorandum which was emailed to the registry on the evening

of 31 October.

In the time available the Plaintiff has briefly explained:

The Plaintiff was not in Court when this [withdrawal of counsel]

occurred. He had been lead [sic] to believe through his Counsel that he

should remain at the property to which these proceedings relate to meet an

engineer. This appears to have been a result of a break down in

communications between the Plaintiff and Counsel and no disrespect to

the Court was intended.

[15] Mr Ferguson has responded to correct one factual aspect of the

memorandum. As it is the correction of a key fact I set out Mr Ferguson’s

response in full.

On 31 October 2016 counsel for the plaintiff advised the plaintiff that he

had to attend the Court for the hearing. He was specifically advised not to

wait to meet with the engineer who was looking at the property that

morning.

After counsel for the plaintiff was informed that the funder had cancelled

its contract with the plaintiff, counsel told the plaintiff again not to wait

for the engineer but go to the Court for the hearing.

[16] I accept Mr Ferguson’s account, as I did when he provided it. I accept

also that Mr Bligh meant no disrespect to the Court but the fact remains he

failed to appear. And the decision not to appear was made in the face of his

counsel’s advice.

[17] It seems to me that an attempt is now made by Mr Bligh to offer an

explanation for his non-appearance which suggests a misunderstanding of

the type which sometimes leads a court to stand a matter down while

inquiries are made and to adjourn the trial.

[40] Although by now he had engaged Mr Lynn, neither he nor Mr Bligh had an

opportunity to respond to Mr Ferguson’s view of the information provided by

8 Rule 5.41.

Mr Lynn. There were therefore two factual accounts before the Court. Her Honour

accepted Mr Ferguson’s account.

[41] Her Honour concluded her judgment by stating:

[19] I do not consider an adjournment of the trial is warranted in the

circumstances of this case. A court faced with an application for

adjournment must take account of the interests of other litigants as well as

the public interest in achieving the most efficient use of court resources. The

proceeding has been afoot since 2013. The defendants are entitled to

certainty and to judgment under r 10.8. Any miscarriage of justice thought

to arise from that course may be addressed by an application to set this

judgment aside.

[42] Her Honour went on to give Mr Ferguson leave to withdraw and to enter

judgment for EQC and IAG under r 10.8. Costs were reserved. Leave to file

memoranda was given, but memoranda have not been filed. Rather, the question of

costs was raised on the present application.

The issue for determination

[43] There is only one issue in this case: has there been, or may there have been, a

miscarriage of justice.

[44] To arrive at their respective positions on this issue, counsel concentrated their

argument on the three factors identified in Paterson v Wellington Free Kindergarten

Association Inc as having long been considered of dominant importance.9 I will

discuss these subsidiary issues in turn.

Does Mr Bligh have a case of substance?

[45] It is not the role of the Court on an application to set aside a judgment entered

against the plaintiff by default to undertake a detailed analysis of the evidence and

form a view on the likely outcome of a trial. That level of factual analysis, and legal

analysis, must await the trial which will take place if the default judgment is set

aside. Mr Lynn submits that Mr Bligh has a prima facie case against both the first

and second defendants. Mr Wood candidly accepted that he could not submit that

9 Paterson v Wellington Free Kindergarten Association Inc, above n 4, at 983.

Mr Bligh could not establish a case at trial, but he submits that the likelihood is that

he will not do so. He says that the Court should be cautious of accepting the

evidence of Mr Kearney, on whom Mr Bligh relies, whose evidence Mr Wood says is

given on the basis of reports of other persons, and on information provided by the

plaintiff, and on photographs. Conversely, witnesses to be called for the defendants

both inspected the property and say it has not been damaged by the earthquakes.

Mr Smith endorses this submission.

[46] If the approach to this issue described by Thomas J in Vermeulen is adopted

little weight would need to be given to this issue in assessment of the principal issue

to be decided. I need not diminish the relevance of this factor in the present case;

my conclusion is that there is an arguable case and, in my opinion, I need not be

satisfied that the case is any stronger than that.

[47] In the days leading up to the trial there was a flurry of activity orchestrated by

Mr Bligh’s then advisors, whether Mr Dwyer, Mr Staples, Mr Ferguson or

Mr Morriss, apparently aimed at bolstering the evidence which has already been

provided as directed by the Court. This included visits by builders, engineers from

Terra in Christchurch, a quantity surveyor, Mr Kearney from Terra in Auckland,

Mr Bligh’s then legal counsel and Mr Dwyer and Mr Csiba. Why this level of

activity was left to the last few days when Mr Bligh’s advisors had had four years to

prepare the case, were under case management directions of the Court, and had been

given deadlines in relation to finalisation of pleadings and provision of evidence, is a

mystery and one which may need examination in another context. In the present

context I refrain from making a stronger observation than that it would appear to be

an entirely unsatisfactory way to prepare a significant case for trial. This activity,

coupled with the adamantly held view of the four persons I have mentioned that

Mr Bligh must settle the claim, suggests that in their judgment they had not obtained,

even by the last week before trial, evidence which they thought could establish

Mr Bligh’s claim on a balance of probabilities. That may well have been the

position. I am mindful though that Mr Kearney did in fact come to the property and

inspect it, and has now filed evidence by way of affidavit on this application in

which he gives a professional opinion that the buildings at Mr Bligh’s property have

undergone earthquake-related structural damage. There is, of course, evidence to the

contrary from expert witnesses for EQC and IAG, but short of trial I am not

persuaded that the strength of Mr Bligh’s case should be assessed at a level below it

being arguable.

Is there a reasonable explanation for Mr Bligh not being present in court?

[48] It is necessary to view Mr Bligh’s actions on the day of the trial in the context

of all that occurred in the run up to the trial, which I have set out in detail, and in the

context of his health and his consequent ability to cope under stress.

[49] It is also necessary to remember that these events took place at the very end

of a period of almost four years during which Mr Shand and his employees had had

the running of the case. At the outset and during that period they had encouraged in

Mr Bligh an expectation that his case would succeed in achieving an outcome by

which his property would be rebuilt. His evidence is that he kept being told by what

he saw as Mr Staples’ office (though that may be a generalisation and not technically

accurate) that the buildings on his property were more than likely to be rebuilt

because the top storey was severely damaged and the local council would not allow

the top storey to be built on the existing bottom storey which consisted of

unreinforced concrete walls. He says he was told that the opinion of the engineer

engaged by his advisors was that the whole property would need to be pulled down

and rebuilt. He says these views were repeated to him when a Mr Johnstone and a

Mr McLean carried out their investigations, and at one point he was even told that

the cost of rebuilding would be more than they had originally thought, perhaps about

$1,400,000. His recollection is that Mr Betts of Urban Structural Services which had

been engaged by CRSL told him this.

[50] Only in the final days leading up to the trial did fractures appear in what, on

the evidence before me, seems to have been a consistently positive exposition to

Mr Bligh of his case. In my opinion it is little wonder that he was confused by the

late and apparently sudden change of position about the strength of his case. Nor is

it any wonder that he was confused by the stance taken by CRSL on the Friday

before the trial, by which he was to be cut loose from his expectation of a “no win no

pay” outcome unless he did as he was told. Leaving aside any questions there may

be over the conduct of the two solicitors involved in those communications

(Mr Ferguson and Mr Dwyer) and the other two solicitors who were acting on

Mr Bligh’s behalf at the same time (Mr Morriss and Mr Shand), but taking into

account the state of health and consequent state of mind when under stress that

Mr Bligh has deposed to, it is scarcely surprising that by Monday morning the

position was entirely unclear to him. On the one hand there were communications

saying that funding had been cut, but on the other there were clear indications

throughout the week before and on Monday morning that he still had his legal

advisors acting for him. Mr Ferguson and Mr Morriss were present at the site

inspection, and Mr Kearney, a key witness, was on his way.

[51] As I have indicated, there were two conflicting stories about what Mr Bligh

was told by Mr Ferguson when Clark J came to make her decision. There are two

conflicting stories now. They cannot be resolved on the present evidence. The

context, however, of the events of Monday morning is critical to an assessment of

how the Court should now act in relation to Mr Bligh not attending court. I accept

his evidence that given the sudden and unexpected announcement by his legal team

of their views of the weakness of his case, he was justified in placing considerable

reliance on Mr Kearney. I accept that he was entitled to remain at his property when

Mr Ferguson and Mr Morriss left in order to await Mr Kearney’s arrival, which was

known to not be far off, and to let him into the house so he could conduct an

inspection. This visit had been arranged by one or other of his legal team or related

advisors. They must have thought it necessary or they would not have arranged it.

Further, they had not called it off even though it must have been obvious to them that

if they were not going to appear for Mr Bligh, the trial was not going to proceed.

Mr Bligh wanted Mr Kearney’s evidence, so he must have thought the trial was

going to proceed.

[52] There remains a question mark about the advice Mr Ferguson gave Mr Bligh,

which he says was that Mr Bligh must attend court. Even if that is so, however,

Mr Ferguson knew Mr Bligh was remaining at the property to let Mr Kearney in.

Once he knew that, it must have been obvious to him, given his decision (or perhaps

instruction from Mr Shand and/or CRSL) not to continue to represent Mr Bligh, that

Mr Bligh was critically at risk of his case being struck out. In that circumstance, and

knowing Mr Bligh’s state of health, it may be that Mr Ferguson should have insisted

that a key be left for Mr Kearney and that Mr Bligh come with him to the city

straight away. Be that as it may, it seems that Mr Bligh did not grasp the seriousness

of the situation which was going to unfold, and in all the circumstances that I have

outlined it is readily understandable why. Mr Bligh did know that he had to go to

court, because in the end he did, but he does not seem to have registered the urgency.

In my view it is likely that either he was not told in the clearest terms what might

occur if he was not there when Mr Ferguson withdrew, or he did not understand it.

He says there was reference to a judgment, but he did not understand what that

meant.

[53] As soon as he found out what had occurred, he sought other legal advice. It

is at least arguable that if he had understood this earlier, and in particular on the

previous Friday, he would have gone to seek other legal advice then. If Mr Bligh’s

advisors had told him of their views and intentions a good deal earlier, instead of at

the last minute, he would have had ample opportunity to engage other solicitors and

counsel and protect his position. Why this issue was not raised and faced when all

the briefs of evidence had been exchanged is not explained.10

[54] In this context I will refer to one other point, as it is relevant to the overall

assessment of whether there has been a miscarriage of justice. When Mr Ferguson

appeared before Clark J in chambers, he sought leave to withdraw. There is no

record in the judgment of Clark J that Mr Ferguson sought an adjournment on behalf

of Mr Bligh, or even asked that the case be stood down until a little later, to give

Mr Bligh time to get to town. Mr Ferguson left Mr Bligh’s property knowing he was

still there. He also had an instruction from Mr Bligh to call the first witness,

Mr Johnstone. He travelled to town and he appeared in chambers at a time when

Mr Bligh had not arrived, yet he knew that Mr Bligh was remaining behind to let

Mr Kearney in. It does not seem that he knew how long that would take. As far as

can be ascertained on the evidence it does not seem that any further inquiry was

made by Mr Ferguson about where Mr Bligh was.

10

The exchange of evidence in this case was very poorly handled, necessitating the intervention of

the Court: see Minute dated 5 August 2016.

[55] The judge records that Mr Ferguson urged her not to consider that by not

attending court Mr Bligh was being disrespectful.11

Her Honour accepted that, but

Mr Ferguson’s submission missed the point. He must have known what would

happen if the case was not adjourned or stood down until Mr Bligh arrived. He had

two defendants with the benefit of r 10.8 at their fingertips who were inevitably

going to ask the Court to make an order under that rule. I do not have the benefit of

having heard from Mr Ferguson on this point, but the judgment shows that neither an

adjournment, nor a direction standing the case down until later in the day, was

sought.

[56] At least arguably, the proper course was for Mr Ferguson to explain that his

client was not in court, that he had instructions to seek leave to withdraw, to ask for

an adjournment or that the case be stood down for a brief period until his client

arrived, and to defer seeking leave to withdraw until his client’s interests had been

properly protected.

[57] This provisional view is fortified by the provisions of the Lawyers and

Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008, which bound

Mr Shand, Mr Ferguson and Mr Morriss. Rule 4.2 provides:

Duty to complete retainer

4.2 A lawyer who has been retained by a client must complete the

regulated services required by the client under the retainer unless –

(a) the lawyer is discharged from the engagement by the client; or

(b) the lawyer and the client have agreed that the lawyer is no

longer to act for the client;

(c) the lawyer terminates the retainer for good cause and after

giving reasonable notice to the client specifying the grounds for

termination.

4.2.1 Good cause includes –

(a) instructions that require the lawyer to breach any

professional obligation;

(b) the inability or failure of the client to pay a fee on the

agreed basis or, in the absence of an agreed basis, a

reasonable fee at the appropriate time;

(c) the client misleading or deceiving the lawyer in a

material respect;

11

Bligh v The Earthquake Commission, above n 1, at [8].

(d) the client failing to provide instructions to the lawyer in a

sufficiently timely way;

(e) except in litigation matters, the adoption by the client

against the advice of the lawyer of a course of action that

the lawyer believes is highly imprudent and may be

inconsistent with the lawyer’s fundamental obligations.

4.2.2 None of the matters set out in rule 4.1.1 is good cause to

terminate a retainer.

4.2.3 A lawyer must not terminate a retainer or withdraw from

proceedings on the ground that the client has failed to make

arrangements satisfactory to the lawyer for payment of the

lawyer’s costs, unless the lawyer has –

(a) had due regard to his or her fiduciary duties to the client

concerned; and

(b) given the client reasonable notice to enable the client to

make alternative arrangements for representation.

4.2.4 A lawyer who terminates a retainer must give reasonable

assistance to the client to find another lawyer.

[58] It will be noted that the definition of good cause in cl 4.2.1(e) does not apply

in litigation matters. In any event, whilst it might be arguable that the three lawyers

concerned regarded Mr Bligh’s refusal to take their advice on settlement as highly

imprudent, it is not immediately apparent how this might also be inconsistent with

the fundamental obligations each held in this case.

[59] Further, r 4.2.3 is directly applicable. The reason that each of the lawyers

withdrew from acting for Mr Bligh was that CRSL had withdrawn its funding, for

the reasons given by Mr Dwyer and Mr Staples. In that circumstance, each of the

lawyers concerned was required not to terminate his retainer or withdraw from the

proceeding unless he had had due regard to his fiduciary duties to Mr Bligh and, in

addition, had given him reasonable notice so as to enable him to make alternative

arrangements for representation. Further, r 4.2.4 provides that a lawyer who

terminates a retainer must give reasonable assistance to the client to find another

lawyer.

[60] There is nothing in the material before me to see that any regard was had to

the fiduciary duty Mr Ferguson and Mr Shand owed to Mr Bligh, nor that Mr Bligh

was given reasonable notice which would have enabled him to make alternative

arrangements for representation, nor that either of them gave any assistance to

Mr Bligh to find another lawyer.

[61] I do not draw any firm conclusions on the conduct of Mr Shand, Mr Ferguson

or Mr Morriss as none of them has been heard on the point. The apparent (but not

established) breaches of professional obligations to which Mr Bligh was entitled is a

factor which, in my opinion, weighs in favour of a finding on this application in

favour of Mr Bligh. The rule in question is directed squarely at ensuring that a party

to litigation is not left in the position of Mr Bligh. I add that there is no basis to

consider that Mr Morriss was in a position to exercise a judgment or act

independently of his senior, Mr Ferguson, or his employer, Mr Shand.

[62] In my opinion, it can fairly be concluded that Mr Bligh acted in the period

after the inspection of the house in a way which was aimed at best protecting his

claim by ensuring his key witness, whose evidence by then was seen to be even more

crucial than it might have been earlier, could re-inspect the house. It is a reasonable

conclusion that he did not fully understand the risk to his case that lay in his not

immediately going to the court, otherwise it is in my view likely he would have done

so, Mr Kearney’s visit notwithstanding. I also take into account the very mixed

messages he had been receiving over a period of a few days prior to Monday

morning right up to and including the site visit and Mr Kearney’s visit. Both visits

could be seen as inconsistent with the position conveyed to him on Friday by his

advisors.

[63] For the purposes of this application it is not necessary for me to be satisfied

that Mr Bligh had a specific justification for not going to court. It is sufficient to

take into account all that occurred on Monday morning and in the days leading up to

it in deciding whether there has been a miscarriage of justice.

Will either of the defendants suffer irreparable harm if the judgment is set aside?

[64] There can be no question that setting aside the judgment would be to the

detriment of each defendant, in the sense of each having to face the claim once more.

In the case of EQC, Mr Wood also pointed out that, as some six years has now

passed since the Canterbury earthquake sequence, his client is trying to complete its

outstanding claims, and has restructured the organisation which it put together for its

response to those earthquakes. It is now engaged in responding to later events in

accordance with its statutory role.

[65] As a consequence, each of the defendants would be put to further expense in

continuing to maintain a defence to Mr Bligh’s claim. Conceivably, depending on

how Mr Bligh’s claim were handled, should it be reinstated, that could involve

further preparation of defence evidence and submissions. Conversely, if the case

were to remain on its present footing without material amendments to the pleadings,

any variation to the respective cases of the defendants may be comparatively modest.

[66] It is frequently the response of the Court, when setting aside a judgment

entered by default against a plaintiff, to make an award of costs to affected

defendants, in respect of wasted attendances. Both EQC and IAG seek such orders.

This is discussed below. In this case there is no suggestion that setting aside the

default judgment and allowing the case to proceed will have an incurable

consequence, such as, for example, leaving a defendant exposed because of

unavailability of a witness. In my view, any adverse effect on either defendant could

be cured by a measure of costs directed at ensuring that reinstatement of the case

after the default judgment was fairly compensated.

[67] I find that neither defendant will suffer irreparable injury if the judgment is

set aside. Any adverse effect of the case continuing is more than outweighed by the

interests of Mr Bligh.

Conclusion

[68] Taking into account all factors, I find that there has been a miscarriage of

justice. This should be cured by the judgment being set aside.

[69] As indicated, both EQC and IAG seek costs both on this application, and in

respect of the expense to which they have been put as a result of the case not

proceeding on its allocated fixture day. Indeed, EQC optimistically seeks costs on

the entire proceeding, from the preparation of its statement of defence right through

to the entry of the default judgment.

[70] Costs on this application should be reserved. It will be apparent from this

judgment that there are significant issues in relation to the conduct of Mr Bligh’s

appointed litigation funder and the solicitor and counsel whom that funder required

him to instruct. Those issues cannot be decided and should not be the subject of

further comment at present, as those involved must have an opportunity to be heard

on the issues which I have identified, and any other issues that Mr Bligh may be

advised to raise. The Court has power to direct that payment of costs be made by a

non party. At this point I do not rule out the prospect of that occurring.

[71] The same applies in relation to the applications for wasted costs. In relation

to this aspect of a costs award, there is a further factor to be taken into account.

Until it is known how the case will proceed, a fair assessment cannot be made of

which part of the attendances of either defendant has been wasted. Plainly enough,

this will be the costs of attending in Christchurch, no prior notice of the decision of

the plaintiff’s legal advisors and funder having been given to counsel for either

defendant. Whether wasted costs extend beyond that will be a matter for analysis at

a later point.

[72] For these reasons all issues as to costs are reserved.

Outcome

[73] The judgment entered on 2 November 2016 is set aside.

[74] Costs are reserved.

[75] A case management conference will be held in approximately six weeks.

Prior to that conference the plaintiff is to file and serve a memorandum setting out

with precision how he intends to proceed with the case and proposing a timetable for

any amendment to the pleadings, any other intended interlocutory steps, and the

position in relation to the provision of further evidence, if any. This is to be filed and

served no later than seven working days before the conference and counsel for the

defendants are asked to file and serve memoranda in response no later than two

working days before the conference.

[76] The issue of costs will not lie in abeyance indefinitely. The defendants have

applied for wasted costs. Any application for costs against any non-party is to be

filed and served within 20 working days and given its first call at the conference

which will be attended also by any respondent non-party.

_______________________

J G Matthews

Associate Judge Solicitors: GCA Lawyers, Christchurch Chapman Tripp, Wellington Duncan Cotterill, Auckland