I am just asking questions. But they need to be asked. What did Minister of CERA Gerry Brownlee know about Southern Response’s apparent policy to mislead claimants about the amount they should have been repaid? Because this was not a one off event, it appears that it was business as usual for Southern Response.
The detail is provided in this Court of Appeal decision. Mr and Mrs Dodds sued Southern Response essentially on the basis that they had been unlawfully misled about their actual entitlement under the policy with Southern Response. The summary of the background is contained in this passage:
The Dodds entered into a Settlement Agreement with Southern Response under which they settled their insurance claim on the basis that a “fair and reasonable estimate for the rebuild cost of the insured property, and the sum insured under the policy, is $907,321”. This figure was based on the figure shown in the Abridged [detailed rebuild/repair analysis document], with some adjustments that are immaterial for present purposes. The Dodds subsequently discovered that a more extensive DRA had been prepared by Arrow for Southern Response (the Complete DRA). The Complete DRA set out a number of additional costs that Arrow estimated Southern Response would incur if the house was rebuilt on its existing site, including allowances for professional fees and contingencies. Those additional costs amounted to approximately $205,000.”
The Court held that Southern Response’s behaviour constituted a misrepresentation under section 35 of the Contracts and Commercial Law Act 2017 which justified an award of damages and that it also breached Fair Trading Act in that it was misleading and deceptive conduct. From the Judgment:
We consider that the Judge was right to find that Southern Response had made misrepresentations about its estimate of the cost of rebuilding the house, and about the absence of any other report from Arrow setting out a different rebuild cost. The Judge was also right to find that by making these misrepresentations, Southern Response breached the [Fair Trading Act].”
Pretty clear eh. The kicker for Southern Response is that it appears this was not a one off event. From Radio New Zealand:
Lawyer for the Dodds, Peter Woods, said the decision delivered “clarity” in spades.
“The Court of Appeal was absolutely clear Southern Response had made representations that were false, that the Dodds had relied on those, they were induced to enter into an agreement based on those misrepresentations, that the misrepresentations were also misleading and deceptive, and the Dodds were entitled to almost their full claim, so it totals up to about $250,000.”
Woods said the government should now have “perfect clarity”, which could apply to thousands of other cases.
“In the High Court, Southern Response’s evidence was there was at least 1600 other claims in a similar position. If they are all valued at $250,000 then you do the maths on that … the government’s probably exposed to in excess of $500 million as a result of this.”
And one of the successful plaintiffs, Karl Dodds, has asked some very pertinent issues. Again from Radio New Zealand:
[Dodds] said decisions were made by the “highest level of the organisation” and renewed his call for an inquiry into Southern Response, by the likes of Dame Silvia Cartwright.
It would need to be similar to the inquiry into EQC, but with one difference.
“EQC made a lot of mistakes but they were really caught off guard. Nobody expected the magnitude of the disaster. They were understaffed, ill-equipped and perhaps one could say they did their best, but with that said we spent the first two years battling EQC, with letters flying backwards and forwards and getting more and more fiery as we went.
“But with Southern Response they don’t have the same excuse. They came into existence after the disaster and therefore were well-equipped to behave professionally and competently and this they failed to do.
“When an independent person digs deep enough they will be able to find all sorts of additional dubious practices of which we are well aware but we are not going to disclose at this point in time, which will really push the whole case, as to their behaviour, beyond another level.”
So at what level was the decision made to engage in what the Court of Appeal has said was misleading and deceptive conduct and what did Brownlee know about it? We deserve an answer. After all it seems that 1,600 Christchurch residents and couples have been short changed by about half a billion dollars because of this decision.