Southern Response asks Appeal Court to strike out class action

The group of dissatisfied policyholders had come together because they had similar stories about delays.

Southern Response Earthquake Services, the government-owned insurer, has asked the Court of Appeal to strike down a class action lawsuit from Christchurch homeowners whose claims haven't been settled six years after the earthquakes that damaged their properties.

The group, which started off as 47 claimants in February 2016 but has since dropped to 26, gained approval for legal action against Southern Response from the Christchurch High Court in December last year. Southern Response was established following the February 2011 quake when failed insurer AMI said it didn't have enough money to cover its liability, prompting the Crown to inject $500 million and assume control of the unwanted business.

Mark O'Brien QC, lawyer for Southern Response, told the court today that the claimants hadn't outlined a common issue binding them together, so the class action shouldn't continue.

"We say you should ask early, how are you going to manage it? How does this case work?" O'Brien said. "You would have these 26 claimants being grouped together, some will be languishing while issues which do not affect them get resolved possibly in the High Court, possibly in the Court of Appeal. It's not the best way to go."

Southern Response "would help" if a test case was brought forward, or if the claimants divided themselves into sub-groups with specific issues, O'Brien said.

Francis Cooke QC, counsel for the group of claimants, said they had a common interest, which was that they had been "subject to a strategy by Southern Response designed to minimise its financial exposure" after all their homes were damaged by the same earthquake.

The group of dissatisfied policyholders had come together because they had similar stories about the delays caused by the insurer's approach and "almost identical" communications from Southern Response about their options, he said. The group needed to come together to push for full discovery.

"This is an insurer which is managing a multi-billion dollar liability across all claimants and adopting approaches to deal with it. You need equality of arms," Cooke said. "If they are as pure as they say, let's see their documents. If they've got nothing to hide, discovery shouldn't be a problem for them."

Cooke said the individuals in the claim couldn't have afforded to bring individual legal action and wouldn't have been able to get litigation funding if they had tried to do so individually.

The six-year delay in settling the claims was of concern to the bench, with both sides arguing it was the other's fault. Justice Rhys Harrison said he thought the two QCs should have been able to sit down and pinpoint the key contractual areas of dispute and make plans to resolve them by now.

"It seems to me that would free up a great deal of the logjam inherent in this litigation," Justice Harrison said. "Headway's not being made where it should be made."

O'Brien said he had the distinct impression that the group was more interested in bringing the complaint and building the book of the group than in getting individual claims resolved.

The hearing, set down for one day, also includes a cross-appeal from the group. The High Court judge ruled members of the group may have been "technically... to a limited extent misled by some of the statements made" on the group's website and in other material, so ordered an explanatory letter to be sent to the group members, which the group's lawyers disagreed with.

(BusinessDesk)

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