Vero’s
demand for full recovery of defence costs to penalise private litigation funders
disputing insurance payouts has been rejected by the Court of Appeal.
Insurance companies are taking aim at
private funders assisting insurance claimants.
Funders bring more cash and often greater expertise into battle. Insurers prefer claimants to be lighter armed
and more disorganised; private individuals, with little or no knowledge of
insurance law, no money and desperate for any payment so they can get on with
their lives.
After successfully defending attempts to
overide a “full and final” insurance settlement paid to owners of the earthquake-damaged
Worcester Towers in Christchurch’s CBD, Vero Insurance applied for an increased
contribution to its defence costs. The
owners were paid $1.05 million in an insurance settlement six months after the
2011 earthquake. They later considered
payment should have been $1.605 million. Their further claim was funded by Risk
Worldwide New Zealand Ltd. At one point,
Risk Worldwide was claiming $8.8 million. It undertook to pay all the costs of
litigation. In return it was to receive
a substantial share of any extra payment.
The Court of Appeal ruled the $1.05 million
“full and final” settlement stood. As
the winning litigant, Vero is entitled to costs; a contribution towards its
legal costs on a set scale, payable by Risk Worldwide as the losing side’s litigation
funder. Vero asked for the full 100 per
cent of its legal costs, over and above the set scale. It argued the claim had
been vexatious and improper. The case
should never have been brought to trial, Vero said. The Court ruled it is not appropriate to award
full costs merely because a litigation funder with a profit motive stands
behind the losing party. Risk
Worldwide’s case was not hopeless, it said.
The dispute raised legal issues requiring consideration.
As an aside, the Court of Appeal was
harshly critical of Mr George Keys giving evidence for Worcester Towers’ owners
on questions of property valuations. Mr
Keys owns one-third of Risk Worldwide.
The Court said Mr Keys was not impartial, had a powerful financial
interest in the outcome and his two roles as an advocate and a supposedly
unbiased expert witness were incompatible.
Prattley
Enterprises v. Vero – Court of Appeal (14.03.16)
16.043