AVONDALE GOLF CLUB INC v LUMLEY GENERAL INSURANCE (NZ) LIMITED [2015] NZHC 1627 [13

July 2015]

IN THE HIGH COURT OF NEW ZEALAND

CHRISTCHURCH REGISTRY

CIV-2013-409-000896

[2015] NZHC 1627

BETWEEN

AVONDALE GOLF CLUB INC

Plaintiff

AND

LUMLEY GENERAL INSURANCE (NZ)

LIMITED

Defendant

Hearing:

25 June 2015

Appearances:

J E Bayley for the Plaintiff

C R Langstone for the Defendant

Judgment:

13 July 2015

JUDGMENT OF NATION J

The applications

[1] These proceedings have been set down for hearing over two weeks beginning

3 August 2015. The parties have begun exchanging briefs. The defendant (Lumley)

has filed an application for orders ruling inadmissible all the evidence of Mr Keys

for the plaintiff (Avondale) and part of the evidence of Mr Turnbull. In the

alternative, they seek orders with regard to further discovery.

Background

[2] From the pleadings, from information contained in briefs provided to the

Court with Lumley’s application and from submissions, it is apparent that certain

aspects of the background to this application are not in dispute.

[3] Avondale has, for many years, owned and run a golf club in the north eastern

area of Christchurch.

[4] Avondale’s facilities, including the buildings which are its most valuable

assets, were significantly damaged in the earthquakes of 4 September 2010 and 11

February 2011. They also suffered damage in other significant earthquakes

including those of 13 June 2011 and 23 December 2011.

[5] Despite that damage and subsequent periods of disruption associated with

particular earthquake events, Avondale continued to use the course and its associated

facilities including most of the buildings. It is committed to remaining on that site.

[6] Pursuant to cl 2.2 of the insurance policy (the Policy), Lumley agreed to

indemnify Avondale for any loss that happened to the insured property, subject to the

terms of the Policy.

[7] Lumley also agreed to provide replacement cover in respect of certain

property which Avondale had chosen to insure for replacement or reinstatement

value. Avondale’s buildings were insured for replacement/reinstatement value in that

way.

[8] Pursuant to cl 2.2.1, Lumley’s liability in respect of each event and loss was

limited to certain maximums in relation to property damage. In respect of buildings,

that maximum was approximately $2,012,000. There is disagreement between the

parties as to the extent of damage sustained to Avondale’s buildings in each event.

[9] Clause 2.2.2 of the Policy states:

2.2.2 Basis of indemnity applicable to this section

Payment/Repair/Replacement

We will indemnify You by payment, repair or replacement of your Property

at Our option.

(1) For the following Property We will indemnify You on the following

basis.

[There is then a reference to certain categories of property which are

not at issue.]

(2) For all other Property, we will indemnify You on the following basis:

(a) the reasonable cost of repairing the Property to the condition it was

in immediately preceding the Loss; or

(b) the cash amount equal to the reasonable cost of repairing it; or

(c) replacing the Property with similar Property in a similar condition;

or

(d) the cash amount equal to the market value of the Property; or

(e) the replacement cost, but only for that Property designated in the

Schedule as being insured for replacement value, subject to the

reinstatement clause in the Policy.

[10] Lumley says they have elected to meet their liability under the Policy by

making a payment to Avondale. Lumley says that it has done this to the extent of its

current liability by making a payment to Avondale for certain repair costs that

Avondale has already incurred and by paying $877,306.25 on 11 July 2013 which it

said was the pre-event market value of the buildings, less the excess and payments

made by EQC. Lumley acknowledges that it has a liability to pay further repair

costs for the building up to the maximum available under the Policy when those

costs are incurred.

[11] Clause 2.4.2 of the Policy sets out Lumley’s obligations in respect of property

which has been insured for replacement or reinstatement value. In that section,

reinstatement means:

Where Property is damaged but not Destroyed, the restoration of the

damaged portion of the Property to a condition substantially the same as, but

not better or more extensive than, its condition when new.

[12] The obligation to provide such reinstatement cover does not apply:

If You elect not to reinstate the Property;

If the work of Reinstatement is not commenced and carried out with

reasonable despatch;

Until the cost of Reinstatement has been actually incurred.

[13] Although there was a suggestion in the pleadings that Lumley might be

contending Avondale would not be entitled to reinstatement cover because it had not

already undertaken the appropriate repairs with reasonable dispatch, Mr Langstone

confirmed this was not Lumley’s position. Rather, Lumley has referred to this

limitation because it says its obligation to pay for the cost of repairs will not arise

until the cost of reinstatement has been actually incurred.

[14] Avondale has pleaded that Lumley has elected to indemnify by payment and

accordingly now owes either:

(a) the cost of repair for each event limited by the sum insured per event; or

alternatively

(b) the depreciated cost of repair for each event, again limited by the sum

per event (with depreciation being determined after consideration of the

age and condition of the elements comprising the buildings).

[15] On that basis, its claim is presently for $5,202,114.41.

[16] Risk Worldwide New Zealand Limited (Risk Worldwide) entered into a

consulting agreement with Avondale dated 10 April 2012. Risk Worldwide have

been employed as Avondale’s consultant to assist in presenting and settling

Avondale’s claims for loss suffered in the Canterbury earthquakes. Avondale has

agreed to pay “for such services in the amount of 35 percent of the total payments of

any amounts recovered by settlement, or award or judgment plus expenses advanced,

exclusive of GST, over and above the likely offer of $2,012,000” by Lumley. That

fee is to be calculated on the proceeds received before expenses are deducted and

reimbursed. If there is no recovery from Lumley, Avondale will not be responsible

for paying the consultancy fee or expenses to Risk Worldwide. If the sums

recovered do not cover all expenses advanced, Avondale will not be responsible for

any shortfall. Avondale will be responsible for all expenses if it elects to settle the

insurance claim or if it instructs Risk Worldwide to stop the presentation of the claim

against the advice of Risk Worldwide.

Mr Keys’ evidence

[17] In his evidence, Mr Keys advances the proposition that Lumley’s liability is

to pay the repair or replacement cost of the buildings, less depreciation. He adopts

an elemental approach to assessing that depreciation, putting forward a percentage

for depreciation against replacement/repair cost. Rather than consider an allowance

for depreciation for the buildings as a whole, he calculates it item by item. This has

involved looking at different parts of different buildings, referring to alterations or

improvements made to the buildings at certain times, estimating the age of the

particular parts, estimating the future period over which those parts could still be

used and then arriving at a percentage by which the cost of replacement for those

particular parts should be depreciated.

Mr Turnbull’s evidence

[18] Mr Turnbull is the President of Avondale. Lumley objects to those parts of

the evidence in which Mr Turnbull refers to various parts of the buildings and

summarises work or improvements made to them at certain times in the past and

says when those changes occurred. The evidence is to be presented in support of Mr

Keys’ evidence as to the allowance which he says should be made for depreciation.

Those parts of Mr Turnbull’s evidence will be relevant and admissible if Mr Keys’

evidence is relevant and admissible.

Submissions for Lumley

[19] Lumley objects to all Mr Keys’ evidence and part of Mr Turnbull’s evidence,

firstly, on the basis that such evidence is irrelevant to the issues which have to be

determined and is thus inadmissible.1 Further submissions were as follows:

(i) The evidence from Mr Keys is irrelevant because, pursuant to cl 2.2.2

of the Policy, Lumley can choose how it meets its obligation to

indemnify.

(ii) The situation involving these parties and this policy can be

distinguished from that dealt with by the Supreme Court in Tower

Insurance Ltd v Skyward Aviation 2008 Ltd.2 Given the wording of this

Policy, only Lumley has the choice as to how it will indemnify

Avondale.

1 Evidence Act 2006, s 7(2).

2 Tower Insurance Ltd v Skyward Aviation 2008 Ltd [2014] NZSC 185.

(iii) Lumley has chosen how it will indemnify Avondale: by paying the cash

amount equal to the pre-event market value of the property in

accordance with cl 2.2.2(2)(e) of the Policy. Lumley also agrees it will

pay the repair costs for the buildings when those costs have been

incurred, subject to limitations under the Policy for each event or each

policy period. Mr Keys’ evidence is not relevant to any assessment of

market value and his evidence as to depreciated value is irrelevant as to

what Lumley might have to pay for replacement or repair costs if

Avondale does carry out repairs.

[20] Mr Langstone explained that Lumley was challenging the admissibility of Mr

Keys’ evidence to avoid the burden and cost which Lumley would incur in having to

brief its own expert to address the issues which Mr Keys is dealing with in his

evidence. He said there would be a real benefit to Lumley and to the interests of

justice generally, as the exclusion of this evidence could potentially shorten the

scheduled hearing by at least one and a half days.

[21] Mr Langstone acknowledged that Lumley could choose not to call expert

evidence in response to Mr Keys’ evidence on the basis that, if they are right in the

way they are approaching the proceedings, Mr Keys’ evidence will be irrelevant to

the determination of issues in the case. He said that Lumley would, nevertheless,

have to provide such evidence to the Court out of an abundance of caution.

[22] Avondale has been put on notice as to the potential irrelevance of Mr Keys’

evidence. Mr Langstone acknowledged that, if Lumley’s approach is right, the

financial consequences for Lumley of having to address Mr Keys’ evidence could

potentially be wholly or partly remedied through an order for costs against Avondale.

[23] Lumley also challenged the admissibility of Mr Keys’ evidence on the basis

that he does not have the expertise to express an opinion about the way in which

Avondale’s should be calculated, the way in which Lumley should have to meet a

liability to pay repair costs, the way in which any allowance should be made against

the cost of repairs or what the appropriate allowance should be for depreciation in

respect of either the whole or parts of a building. Mr Langstone says that Mr Keys’

involvement in making allowances for depreciation on numerous material damage

insurance claims does not mean that he has any expertise in the area.

[24] Mr Langstone submitted Mr Keys’ lack of expertise is reflected in the fact

that there is no general professional acceptance of the method of depreciation which

he uses. He submits that, to the extent Mr Keys has experience that might qualify

him as an expert, it is experience which is almost entirely based outside New

Zealand, mainly in the United States.

[25] Consistent with his alleged lack of expertise, Mr Langstone says Mr Keys’

elemental approach to assessing depreciation was criticised by Dunningham J in

Prattley Enterprises Limited v Vero Insurance New Zealand Limited.3 In her

Honour’s substantive judgment, she stated:

[133] Given my findings as to the appropriate method of calculating

Prattley’s loss, I do not need to discuss, in any detail, the differences

between the approach of Mr Keys, and the local valuers. However, I observe

that the approach used by Mr Stanley is an orthodox approach mandated by

the International Valuation Standards and New Zealand valuation practice.

The Australian and New Zealand Valuation Guidance Note 13 does not

provide support for an elemental approach to depreciation as it consistently

refers to the physical life of an asset not of its component parts.

[134] I also record that I placed little, if any, reliance on Mr Keys’

assessment of the appropriate depreciation rate to apply to the individual

items. No clear rationale was articulated for the adopted depreciation rate

for each element (whether 0 per cent, 10 per cent, 25 per cent or 50 per cent).

In the absence of a clear and full explanation of the evidence and

assumptions that were relied on to support each depreciation rate adopted, I

did not find his evidence about the depreciation rate to be applied to each of

the various elements of the building either reliable or helpful.

[26] Lumley also objects to Mr Keys giving evidence on the basis he cannot give

evidence as an independent expert because, through Risk Worldwide, he has a direct

financial interest in the outcome of the case.

Submissions for Avondale

[27] For Avondale, Mr Bayley submits that, under the Policy, Lumley must

immediately indemnify Avondale for its loss or damage. He submits that Avondale

3 Prattley Enterprises Limited v Vero Insurance New Zealand Limited [2015] NZHC 1444.

is entitled to indemnity by way of payment because Lumley has already elected to

meet its liability for indemnity in that way. Mr Bayley submitted that depreciated

repair costs are the appropriate measure of indemnity under the Policy.

Consequently, he submits Mr Keys’ evidence concerning the age of the buildings,

repairs and allowance for depreciation is fundamental to an issue in the proceedings.

Further submissions on this point were:

(i) Mr Bayley acknowledges Avondale’s entitlement to recover full

reinstatement costs, through the replacement or reinstatement cover,

only arises once the reinstatement costs have been incurred. He

nevertheless contends that, once Lumley elected to meet its liability to

indemnify by payment, it was Avondale who could choose the basis on

which that payment should be assessed, having regard to the options in

cl 2.2.2(2). He submitted, relying on Skyward Aviation 2008 Ltd v

Tower Insurance Ltd, that the applicable measure of indemnity under cl

2.2.2(2) must be dictated by the circumstances of Avondale and its

election, rather than any election by Lumley.4

(ii) Avondale has chosen to have that payment assessed on the basis of cl

2.2.2(2)(a), that is, on the reasonable cost of repairing the property to

the condition it was in immediately preceding the loss.

(iii) Basing the indemnity payment on a market value for the building was

inappropriate, particularly where the buildings were damaged from

multiple earthquake events. In a situation where it was agreed the

buildings had not been “destroyed” within the meaning of the Policy

wording but, rather, where the property is repairable, a payment based

on market value, is not the appropriate measure of indemnity. Mr

Bayley referred to some overseas judgments which supported his

argument that market value will not be the appropriate measure of

indemnity value where a property can be repaired and the insured has

no intention of selling the property.5

4 Skyward Aviation 2008 Ltd v Tower Insurance Ltd [2014] NZCA 76, [2014] 2 NZLR 713.

5 Lucas v New Zealand Insurance Company Limited [1983] 1 VR 698 (VSC) at 701 per Crockett

(iv) There have been cases in New Zealand where the Court or the parties

had recognised that, in terms of the relevant policy, the principles of

indemnity required indemnity value to be based on the cost of repair or

reinstatement of the property to the condition it was in before the

event.6

(v) If the Policy is to be interpreted and applied in the way Avondale

contends, all evidence addressing the age and condition of the buildings

will be relevant, as would be Mr Keys’ assessment of depreciation. If

the Policy is applied in the way Avondale contends for, Mr Keys’

assessment of depreciation will be fundamental to the assessment of the

indemnity payment which Avondale says it is entitled to.

[28] With regard to Mr Keys’ ability to give evidence as an expert, Mr Bayley

referred to Mr Keys’ involvement in assessing depreciation in more than 10,000

material damage insurance claims over 35 years of handling claims. He said this

experience qualified Mr Keys as an expert. He also referred to the recent judgment

in Prattley Enterprises Ltd v Vero Insurance New Zealand Ltd, where Dunningham J

said that, in respect of depreciation, Mr Keys has “the expertise to assist the Court in

determining the proper approach to take on this issue”.7

[29] With regard to Mr Keys’ independence, Mr Bayley acknowledged that Mr

Keys does have a direct pecuniary interest in the outcome of the litigation but says,

referring to authority, there is no requirement that an expert be independent. He

submitted that Mr Keys’ interest in the outcome of the proceedings should be

relevant only to the weight which might be attached to his evidence rather than the

admissibility of that evidence.

J; TJK (NZ) Ltd v Mitsui Sumitomo Insurance Co Ltd [2013] NZHC 298; Reid v Tasmanian

Government Insurance Board [1990] TASSC 26. 6 Marriott v Vero Insurance Limited HC Christchurch CIV-2013-409-1310, 26 November 2013 at

[77]; Vero Insurance New Zealand Ltd v Morrison [2015] NZCA 246 at [16]; Morrison v Vero

Insurance New Zealand Ltd [2014] NZHC 2344 at [25]. 7 Prattley Enterprises Limited v Vero Insurance New Zealand Limited [2015] NZHC 411 at [10].

[30] Mr Bayley referred to observations by the Court of Appeal that relevance can

be difficult to assess at a pre-trial stage. He submitted that this Court should be

mindful of the Court of Appeal’s observation that:8

Rulings on admissibility are better made at trial, where the Judge has an

understanding of the nature and scope of the issues in the litigation and the

evidence tendered by both parties.

Discussion

[31] I am not willing to rule Mr Keys’ evidence or, consequently, the disputed

parts of Mr Turnbull’s evidence inadmissible at this stage.

[32] As to Mr Keys’ lack of independence, the Court of Appeal has stated:9

… there may be cases in which the position of the proposed expert is so

lacking in independence as to make it obvious that an opinion he or she

expresses in evidence will not be able to be substantially helpful, and in

those circumstances it may be appropriate to rule out the evidence at the pre-

trial stage in order to avoid the costs which may otherwise be incurred in

responding to it.

In all the present circumstances of this case, I am not willing to take that step.

[33] To the extent that Mr Keys is giving evidence as an expert, it is his claimed

expertise not his independence which qualifies him to do so.10

[34] Other Judges have recognised that the way in which evidence is ultimately

given can be relevant in deciding whether a lack of independence requires a Court to

reject evidence presented by an expert.11

[35] In Jarden v Lumley General Insurance (NZ) Ltd, there was an attack on the

evidence given by a witness called as an expert.12

Kós J stated:13

8 Commissioner of Inland Revenue v BNZ Investments Ltd [2009] NZCA 47, (2009) 19 PRNZ 553

at [45]. 9 At [22].

10 Geddes v New Zealand Dairy Board HC Wellington, CP52/97 at [73]-[74], per Wild J;

Commissioner of Inland Revenue v BNZ Investments, above n 8, at [21]-[22]. 11

Vero Insurance Limited v Morrison above n 6, at [83]; Morrison v Vero Insurance NZ Limited

above n 6, at [25]. 12

Jarden v Lumley General Insurance (NZ) Ltd [2015] NZHC 1427. 13

At [39].

But at the end of the day the hallmarks of an expert witness are two: the

objective accuracy of their assessments, and their willingness to consider

alternative perspectives. In the case of the former, Mr Cowie’s

measurements (if not all his conclusions) were accepted by all other experts

as accurate. As to the latter, he made appropriate concessions under cross-

examination. I was left with no concerns about Mr Cowie’s compliance with

schedule 4 of the High Court Rules, the code of conduct for expert

witnesses.

[36] At this stage, Mr Keys’ lack of independence is a matter which may affect the

weight to be attributed to his evidence. As the Court of Appeal has noted, an

assessment as to the weight to be given to expert evidence where there is a lack of

independence “is properly to be made by the Judge in his role as a fact finder”.14

Necessarily, that assessment by a Judge in the role of fact finder has to be at trial.

[37] As to his expertise, Mr Keys claims to have had considerable experience in

assessing depreciation in relation to material damage claims. Whether or not that

experience is of particular relevance in the New Zealand context may depend

ultimately on how the Policy is to be interpreted and applied and the approach

required to be taken under New Zealand law on these issues. Only when decisions

have been made on those matters of law can the relevance of Mr Keys’ previous

experience be properly assessed.

[38] I note that, in Prattley Enterprises Ltd v Vero Insurance New Zealand Ltd,

Dunningham J stated:15

It is clear that the approach to depreciation is a live issue in the proceeding,

and both Mr Key and Mr Stanley have the expertise to assist the Court in

determining the proper approach to take to this issue.

Despite her ultimate criticisms of Mr Keys’ evidence, referred to earlier,

Dunningham J did not conclude that his evidence should be simply disregarded as

irrelevant and thus inadmissible. In that case, Mr Keys was permitted to give

evidence as to his elemental approach to allowing for depreciation.

[39] I am not willing to rule Mr Keys’ evidence inadmissible at this stage either on

the basis of insufficient expertise or lack of independence. Whether or not his

14

Commissioner of Inland Revenue v BNZ Investments Ltd, above n 8, at [23]. 15

Prattley Enterprises Limited v Vero Insurance New Zealand Limited, above n 7, at[10].

evidence should ultimately be rejected on either basis will depend on the assessment

I make as to the way in which he gives his evidence as an expert and the extent to

which that evidence is thus helpful to me in determining the issues I have to deal

with. That assessment should be made in the context of all the evidence that is given

at trial and the issues as they ultimately emerge.

[40] It will be apparent from the submissions I have referred to earlier that the

relevance and thus admissibility of Mr Keys’ evidence will depend on whether or

not, in terms of the Policy, the indemnity value of the buildings can, at the option of

Avondale, be assessed on a depreciated replacement/repair cost basis. Whether or

not that is so will turn firstly on how I interpret and apply the Policy and its relevant

clauses.

[41] Avondale’s case, that it can choose how the value of indemnity is to be

assessed, also depends on if and how the Supreme Court judgment in Tower

Insurance Limited v Skyward Aviation 2008 Limited is to be applied.16

This will

determine, in turn, whether it is Avondale or Lumley can choose how an indemnity

payment is to be assessed with regard to the options referred to in cl 2.2.2(2).

[42] A number of the observations made by the Court of Appeal in Commissioner

of Inland revenue v BNZ Investments are pertinent. There, the Commissioner was

seeking to have evidence of certain experts ruled inadmissible in advance of trial. It

was submitted for BNZ Investments that, if those witness statements were ruled out,

there would be no real possibility of challenging that finding. Further, if it ultimately

turned out that the exclusion of the evidence was incorrect, that would occur after the

trial and lead to the need for a rehearing.

[43] It was relevant to the Court of Appeal that there were difficulties for the

Court in expressing a view on relevant legal tests in advance of the trial, given they

did not have a full understanding of all the issues which would arise at the trial or the

evidence that would be presented and there was a high degree of likelihood the

16

Tower Insurance Ltd v Skyward Aviation 2008 Ltd [2014] NZSC 185, [2015] 1 NZLR 341.

outcome in the High Court would be subject to a subsequent appeal to the Court of

Appeal.17

[44] I face those difficulties in being asked to effectively decide now how the

Policy should be interpreted and applied and how, if at all, the judgments in Tower

Insurance Limited v Skyward Aviation 2008 Limited might be applied to the present

situation. I also have regard to the likelihood that, if I make rulings at this stage

significantly limiting the way in which Avondale wishes to pursue its claim, those

rulings could well be challenged on appeal, resulting in a need either to adjourn the

current hearing or a need for a complete rehearing of all issues if such an appeal

were to ultimately succeed.

[45] In Commissioner of Inland Revenue v BNZ Investments, MacKenzie J

declined to rule on the admissibility of the challenged statements or particular

paragraphs of the statements at an interlocutory stage in the proceedings. The Court

of Appeal agreed with McKenzie J’s statement “that such rulings on admissibility are

better made at trial, where the Judge has an understanding of the nature and scope of

the issues in the litigation and the evidence tendered by both parties”.18

[46] I consider, in the context of this case, my rulings as to how the Policy should

be interpreted and applied and as to the relevance of the judgments in Tower

Insurance Limited v Skyward Aviation 2008 Limited will be best made when I know

what all the evidence is to be in relation to the Policy, the way in which claims have

been pursued and the potential costs or losses for which Avondale is to be

indemnified in terms of the Policy.

[47] The Courts have noted there may be circumstances in which a ruling as to the

admissibility of evidence may be justified to remove the burden and costs which a

party will otherwise face in dealing with that evidence.19

In this instance, Mr

Langstone has said that, if Mr Keys’ evidence is admitted, Lumley will be able to

brief witnesses to respond to it. He has said that he considers the admission of Mr

Keys’ evidence could potentially lengthen the proceedings by approximately one and

17

Commissioner of Inland Revenue v BNZ Investments Ltd, above n 8, at [22]-[24]. 18

At [45]. 19

Parihoa Farms Ltd v Rodney District Council (2010) 20 PRNZ 8 (HC) at [5].

a half days. It is possible that Mr Keys’ evidence will ultimately be irrelevant to the

issues which have to be determined at trial. The potential costs which Lumley will

incur in responding to Mr Keys’ evidence are likely to impact on a costs award if

Avondale’s claim, based on Mr Keys’ evidence, is unsuccessful.

[48] Lumley has indicated that, in addition to the indemnity payment it has

already made, it will meet the repair costs to the maximum extent of its liability

under the Policy when those costs have been incurred. In his brief, Mr Turnbull says

Avondale intends to continue to operate and reinstate the buildings.

[49] There may ultimately be a real issue as to why Avondale needs to pursue an

increased indemnity payment based on the basis which makes Mr Keys’ evidence

relevant.

[50] At this stage, it appears to me that, to the extent a trial might result in an

award to Avondale of more than $2,012,000.00 by way of an indemnity payment, the

major beneficiary of that will be Risk Worldwide. The costs of obtaining that award

will be borne by Avondale. Thirty five per cent of the excess over and above

$2,012,000.00 will go to Risk Worldwide. Those costs and the amount payable to

Risk Worldwide will then reduce the amount Avondale has available to it for the cost

of the repairs or replacement which it is committed to. If those costs are not part of

an indemnity payment, they would still be payable by Lumley, subject to the extent

of their liability under the Policy when those costs are incurred. Those potential

consequences will not necessarily affect my judgment as to how the Policy is to be

interpreted and applied in the context of the claim which is currently being pursued.

They may ultimately have an impact when/if I have to deal with costs.

[51] The defendant’s application to have all Mr Keys’ evidence and certain parts

of Mr Turnbull’s evidence ruled inadmissible is thus declined.

[52] I do note that, despite the ruling of Dunningham J in Prattley Enterprises

Limited v Vero Insurance New Zealand Limited, Mr Keys is intending to give

evidence as to how his elemental depreciation approach was used by the valuers in

the Morrison v Vero case. In seeking to admit in evidence the depreciation joint

report, Mr Keys is seeking to put in evidence the opinion of other valuers involved in

that case without their being called to give evidence in this case. For the reasons

articulated by Dunningham J in her judgment, I consider the evidence Mr Keys is

proposing to give in paragraph [16] of his brief of evidence is likely to be

inadmissible.20

Counsel should consider this further before that brief is read into

evidence at trial.

Discovery

[53] Lumley also sought an order requiring Avondale to make discovery of its

annual accounts for the years since 1993 and for discovery of all documentary

evidence relating to repairs and maintenance carried out on its buildings, including

invoices and quotes. Lumley says, with justification, that such documents are

relevant. Mr Keys, in his evidence, assumes that such maintenance and repairs were

carried out. He also says that the nature and extent of that work affects the extent of

the depreciation that should be offset against the cost of repairing the damage done

in the various earthquakes, thus affecting the indemnity value which Avondale says

Lumley is obliged to make to Avondale. Mr Langstone says these documents were

requested from Avondale by letter dated 19 May 2015, without response.

[54] Mr Bayley said that Avondale was endeavouring to obtain those documents

that still exist and that he would be doing what he can to ensure they are made

available to Lumley by Friday 3 July 2015. He suggested that the Court simply note

that discovery was to be made on this voluntary basis and that leave be reserved to

Lumley to seek a further order with regard to discovery if that is necessary.

[55] In the hope that it will avoid the need for either of the parties to have to make

a further application to the Court, I will make orders now:

(a) granting leave to Lumley to make a further application for discovery; and

(b) requiring Avondale to make discovery to Lumley by no later than 15 July

2015 of:

20

Prattley Enterprises Limited v Vero Insurance new Zealand Limited, above n 7, at [15].

(i) all annual financial statements for Avondale for the years from 31

March 1993 to date; and

(ii) all documents including invoices and quotes relevant to the repairs,

maintenance, alterations which are referred to in the evidence of Mr

Keys and Mr Turnbull and the evidence they give in relation to Mr

Keys’ elemental depreciation approach.

Costs

[56] The plaintiff will be entitled to costs on this application. Given the initial

categorisation of these proceedings, my tentative view is the plaintiff is entitled to

costs on this application on a 2B basis. If costs cannot be agreed, submissions can

be made in relation to costs for this application after judgment has been given in

relation to the substantive proceedings which are to go to hearing on 3 August 2015.

Solicitors: Rhodes & Co., Christchurch Jones Fee, Christchurch