PRATTLEY ENTERPRISES LIMITED v VERO INSURANCE NEW ZEALAND LIMITED [2015] NZHC 411

PRATTLEY ENTERPRISES LIMITED v VERO INSURANCE NEW ZEALAND LIMITED [2015] NZHC 411 [10 March 2015]IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYCIV 2013-409-001511[2015] NZHC 411BETWEEN PRATTLEY ENTERPRISES LIMITEDPlaintiffAND VERO INSURANCE NEW ZEALANDLIMITEDDefendantHearing: 9 March 2015Appearances: FMR Cooke QC with S P Rennie for PlaintiffD J Goddard QC with SWB Foote and C M Brick forDefendantDate of Ruling: 10 March 2015RULING 1 OF DUNNINGHAM J[1] In a memorandum dated 20 November 2014, the defendant signalled a challenge to the admissibility of some sections of the evidence of the plaintiff'switness, George Wilton Keys, who gives expert evidence on the approach todepreciation to be adopted when assessing the indemnity value of the plaintiff'sbuilding.[2] As agreed at the outset of the hearing, the issue of its admissibility was deferred to be considered later in the hearing, and when the context in which the evidence was to be given was clearer. I therefore heard submissions on the admissibility challenge when the hearing resumed on 9 March 2015.[3] The particular passages of concern are found in paragraphs 13 and 18 of Mr Keys' brief of 29 August 2014, and in paragraph 6 of his reply brief of14 October 2014. The paragraphs concern the approach to depreciation adopted in another proceeding, Morrison and Cross v Vero Insurance Limited.1[4] The first challenged passage refers to a letter from the defendant to the plaintiffs in the Morrison proceeding regarding its approach to depreciation in that case. The other challenged passages of the evidence refer to the outcome of expert witness conferral in the Morrison proceedings, as Mr Keys seeks to rely on the outcome of that to support his opinion as to the appropriate approach to, and allowance for, depreciation of the building that is the subject of the current proceeding. In its current form, his evidence references both the defendant's letter, and the joint expert report on depreciation in the Morrison proceeding, although their inclusion in the common bundle was objected to by the defendant.[5] The defendant submits that both its stance on depreciation as identified in the letter, and the outcome of witness conferral in the Morrison proceeding, are irrelevant and should not be admissible in this hearing. It says that the Morrisoncase concerned a claim against the defendant by a different plaintiff for damage to a different building. As a consequence, the approach taken by Vero, or by expert witnesses in that case are neither relevant nor admissible in this proceeding as they cannot shed light on the correct interpretation of a policy or on its application to the facts in the present case. The defendant seeks orders ruling all three identified passages, and the documents they refer to, as inadmissible.[6] The plaintiff argues that the three identified passages should be admissible. First, an issue in dispute in the present proceedings is the correct depreciation method to adopt when calculating indemnity value. There is a contest between Mr Keys' adoption of a physical depreciation method as opposed to the defendant'sexpert, Mr Stanley's, economic depreciation method. The plaintiff says Mr Keys is giving admissible expert evidence to the agreed approach taken by the experts inMorrison, because it forms part of his experience and is an example of the industry adopting and applying the approach which he advocates.1 Morrison and Cross v Vero Insurance Limited [2014] NZHC 2344.[7] While the plaintiff accepts that the issue of the weight to be put on the evidence is for the Court to determine, Mr Cooke QC submits the evidence is substantially helpful noting that Mr Keys is one of the authors of the joint report of experts prepared in the Morrison hearing, the other experts agreed with it, and the evidence was given and accepted by the Court.[8] Mr Cooke rejects the argument that the evidence is hearsay as it is evidence that Mr Keys himself gives, by way of a recent example of what he says is industry practice. He accepts that, technically, the view of the other experts is hearsay, but says this is a situation where the exception found in s 18 of the Evidence Act 2006("the Act") applies. Section 18 provides that a hearsay statement can be admissible if the circumstances relating to the statement provide reasonable assurance that the statement is reliable, and where undue expense or delay would be caused if the maker of the statement was required to be a witness. In circumstances where the statement was prepared for the Court, by acknowledged experts, and where one of the experts is available for cross-examination, the plaintiff submits it is reasonable to rely on s 18 to admit the hearsay evidence of the other two experts.[9] Finally, the plaintiff submits that the evidence is plainly relevant. It falls within s 25 of the Evidence Act 2006 which governs when expert opinion evidence will be admissible, in that:(a) it forms part of Mr Keys' expert opinion derived from his recent experience, of the correct approach to depreciation;(b) it is evidence of the common knowledge of the industry under s 25(2).Discussion[10] 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. Thus, in a general sense, the reasoning he applied in the Morrison case, may be relevant in this proceeding and thus meet the test in ss 7(2) and 7(3) of the Act. However, even if it is relevant (and cannot be determined without testing), I must exclude evidence under s 8 where itsprobative value is outweighed by the risk that the evidence will have an unfairly prejudicial effect on the proceeding or needlessly prolong the proceeding.[11] In the present case, I am satisfied that the letter from the defendant, Vero,referred to in paragraph 13 of Mr Keys' primary brief of evidence is inadmissiblebecause it is almost certainly irrelevant. As Mr Goddard QC points out, the approach adopted by the defendant in a different case, on different facts, may well not be relevant to the assessment of the appropriate measure indemnity in this case. In fact the defendant could have been wrong in its approach in the previous case. However, equally importantly, time will needlessly be spent on exploring whether, in fact, Vero's approach in the previous case was applicable to this case, and whether its approach was correct. I see no point in exploring those issues when the question before me is simply what the correct approach is in this particular case.[12] Similarly, the results of expert conferral in another case may or may not be relevant to this case, but even if they are relevant, significant time would need to be spent in evidence-in-chief and cross-examination about what happened in that case in order to determine whether, and to what extent, the opinion of Mr Keys and the other experts was correct, and has a bearing on the result in this case. I do not think that would be a fruitful exercise and therefore consider the test in s 8 of the Act is not satisfied.[13] Mr Goddard also asserted that Mr Keys' opinion evidence in the Morrisoncase should be excluded under s 23 of the Act, because it could not satisfy the tests in ss 24 or 25, I accept that, as fact finder, I am unlikely to derive substantial help in understanding the evidence in this case by reference to views expressed by Mr Keys (and others) about depreciation of another building in another proceeding. The central issue for me is to understand how valuers approach this task in a general sense and what factors in this case direct that one approach is to be preferred over another.[14] I do not accept that the outcome of witness conferencing in the Morrison case is either evidence of a fact on which the opinion is based, or is material which forms part of the general bank of information available on the particular topic on which heis called to express his opinion. It is a single selected example of another consonant opinion, and therefore is too limited an example to demonstrate an agreed industry approach.[15] Mr Goddard also argued that the statement was inadmissible under s 35 of the Act as being a prior consistent statement, and under s 17 as it records the hearsay opinions of other experts. I accept that, to the extent the results of expert conferencing in Morrison are introduced in the evidence, the statements of the other two experts are hearsay, and the defendant is disadvantaged by being unable to cross-examine them. The plaintiff would have the benefit of them bolstering Mr Keys' opinion, without their evidence being tested in that way.[16] I am less convinced that the material is necessarily excluded under s 35. Certainly an expert witness can give evidence about the normal practice, and the approach that they would take in a case such as this, but I think such an opinion can be couched in general terms and by reference to the principles which guide the experts' decision, rather than by selecting one specific example which would then need to be tested for its relevance to the present case.Conclusion[17] Accordingly, I am not satisfied that the three passages satisfy the test for admissibility. I consider that the degree of relevance under s 7 is doubtful, but more importantly, I consider the evidence fails the test in s 8(1) of the Evidence Act.[18] Accordingly, I direct:(a) the last sentence of paragraph 13 and the whole of paragraph 18 of Mr Keys' brief of evidence dated 29 August 2014 are inadmissibleand may not be read in evidence at trial;(b) the last two sentences of paragraph 6 of Mr Keys' reply brief dated14 October 2014 are inadmissible and may not be read in evidence at trial;(c) the documents referred to in those two passages are inadmissible and may not be referred to in evidence at trial.Solicitors:Rhodes and Co., ChristchurchJones Fee, Auckland