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Accident Compensation Cases

Pickard v Ambrose (HC, 16/12/05)

Judgment Text

Ronald Young J
There are two interlocutory applications for decision. 
An application to strike out both plaintiffs' claims for damages for personal injury on the basis that both had cover under the relevant Accident Compensation legislation and so cannot bring an action for damages for personal injury. 
If the first application fails an application for an order for security for costs. 
Both defendants supported each other's submissions and both plaintiffs were represented by the same counsel who made submissions in reply. 
Strike Out 
Rule 186 of the High Court Rules provides as follows: 
“186 Striking out pleading 
Without prejudice to the inherent jurisdiction of the Court in that regard, where a pleading- 
Discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading. 
the Court may at any stage of the proceeding, on such terms as it thinks fit, order that the whole or any part of the pleading be struck out. ”
The Court of Appeal in Attorney-General v Prince and Gardiner [1998] 1 NZLR 262, 267 usefully summarised the relevant principles in strike out applications. They are: 
A strike out application proceeds with the assumption that the facts pleaded in the Statement of Claim are true. However, as the Court of Appeal said in Attorney-General v McVeagh [1995] 1 NZLR 558, 566: 
“[T]here may be a case where an essential factual allegation is so demonstrably contrary to indisputable fact that the matter ought not to be allowed to proceed further. ”
Counsel for the first defendant wishes to raise such a factual issue in this case. 
The Court may strike out a proceeding where the causes of action are so clearly untenable that they cannot possibly succeed. 
The jurisdiction to strike out must be exercised sparingly and only in a clear case. Because strike out applications raise difficult questions of law does not mean they are not appropriately considered in such an application. 
Background facts 
These proceedings were originally filed in the District Court in 2003. They were transferred to the High Court when an amended Statement of Claim was filed which took the claim for damages beyond the District Court jurisdiction. The second plaintiff is the son of the first plaintiff. The allegations are against the gas fitter (the first defendant) who installed a gas heater in the plaintiff's house in 1998 and the second defendant who is alleged to be the importer, distributor and agent of the manufacturer of the heater and flu. The plaintiffs say that the first defendant failed to properly install the heater and flu, failed to obtain a correct flu and failed to recognise and rectify a problem of gas leakage when it became clear. The plaintiffs say as a result of gas leaks from the heater intermittently from 1998 through until June 2001 they suffered carbon monoxide poisoning, which in turn has caused severe headaches, drowsiness, chest pains, heart palpitations, and other medical disabilities. The plaintiffs allege against the second defendant that the heater and flu were not safely constructed. 
The plaintiffs' case is essentially therefore that the construction and installation of the gas heater allowed substantial carbon monoxide gas to escape into their house, poisoning them and causing the medical disabilities identified over an extended period beginning in September 1998 and ending when they stopped using the heater in July 2001. 
The backbone of Accident Compensation from its early days in 1974 was the principle that claimants for damages for personal injury would forgo their rights to claim such damages on the basis of a broad no fault compensation scheme. Each of the various statutes governing Accident Compensation in New Zealand have had that basic principle. Relevantly in these circumstances s 317 of the Injury Prevention, Rehabilitation, and Compensation Act 2001 provides at ss 1 as follows: 
“317 Proceedings for personal injury 
No person may bring proceedings independently of this Act, whether under any rule of law or any enactment, in any court in New Zealand, for damages arising directly or indirectly out of- 
personal injury covered by this Act; or 
personal injury covered by the former Acts. ”
“Personal injury” is defined in s 26 of the Act as follows: 
“26 Personal injury 
Personal injury means- 
the death of a person; or 
physical injuries suffered by a person, including, for example, a strain or a sprain; or 
mental injury suffered by a person because of physical injuries suffered by the person; or 
mental injury suffered by a person in the circumstances described in section 21; or 
damage (other than wear and tear) to dentures or prostheses that replace a part of the human body. 
Personal injury does not include personal injury caused wholly or substantially by a gradual process, disease, or infection unless it is personal injury of a kind described in section 20(2)(e) to (h). 
Personal injury does not include a cardio-vascular or cerebro-vascular episode unless it is personal injury of a kind described in section 20(2)(i) or (j). 
Personal injury does not include- 
personal injury caused wholly or substantially by the ageing process; or 
personal injury to teeth or dentures caused by the natural use of those teeth or dentures. 
For the purposes of subsection (1)(e) and to avoid doubt, prostheses does not include hearing aids, spectacles, or contact lenses. ”
Finally, s 355(1) and (2) provide as follows: 
“355 Claims for cover accepted under former Acts 
A person who has had a claim for cover accepted before 1 April 2002 for personal injury covered by the former Acts continues to have cover, and this Part applies accordingly. 
Subsection (1) does not apply if it is determined on or after 1 April 2002 that the person did not suffer personal injury covered by the former Acts. ”
The defendant's case in support of the Application for Strike Out can be simply stated. They say that the plaintiffs have cover under the Accident Compensation regime and therefore pursuant to s 317 they are prohibited from bringing proceedings for damages. They say that both the plaintiffs have suffered personal injury covered by the relevant Accident Compensation statutory regime. 
Some further background facts are necessary. It seems that on the 5th of August 2001 Dr T S Smith, who was the General Practitioner for Mrs Pickard and her son, filed with ACC an injury claim form on behalf of the second plaintiff. That claim form said that an accident occurred on the 9th of August 2001 at 9.00 am. The injury was said to be carbon monoxide poisoning with headaches and vomiting. The scene of the accident was said to be the home of the applicant at 3 Kakariki Grove, Waikanae. The diagnosis was accidental carbon monoxide poisoning. In addition the Doctor noted on the form as follows: 
“Request Occupational Health Specialist Assessment as I think this boy may have suffered recurrent monoxide poisoning over the last three years due to faulty gas fitting in home back lounge. ”
Apart from having a portion of his consultation fee paid by ACC, both Dr Smith and Ms Pickard say they have heard nothing further from the Corporation since. The Corporation's notes indicate that Dr Smith did ring to find out whether the applicant had cover and they confirmed that he did have cover. 
Thus the defendants say that given the second plaintiff had his claim for cover accepted by ACC and it was accepted before the 1st of April 2002 then pursuant to s 355 of the Injury Prevention, Rehabilitation and Compensation Act the plaintiff is covered under the relevant compensation legislation. 
The defendants submit given Troy's claim is a claim for damages arising from personal injury, and that the personal injury is covered by ACC, then this claim is barred pursuant to s 317 of the Injury Prevention, Rehabilitation and Compensation Act. 
As to the first plaintiff's claim, the defendants say that Ms Pickard's claim is identical to her son's and therefore, should also properly be treated in the same way. They point, in particular to s 317(7) which provides: 
“317 Proceedings for personal injury 
Nothing in this section is affected by- 
the failure or refusal of any person to lodge a claim for personal injury of the kinds described in subsection (1); or 
any purported denial or surrender by any person of any rights relating to personal injury of the kinds described in subsection (1); or 
the fact that a person who has suffered personal injury of the kinds described in subsection (1) is not entitled to any entitlement under this Act. ”
They say relevant to s 317(7) the mere fact that Ms Pickard has not currently made a claim for personal injury does not affect the prohibition under s 317(1). They say that I should assume that Ms Pickard's case is identical to her son's and that she therefore would also have cover under the Act and her failure to apply for cover cannot assist her. 
I reject the submissions of the defendants that this is a suitable case to strike out the plaintiff's action for damages because it is prohibited by the relevant Accident Compensation legislation. 
The plaintiff's claim as identified by the Amended Statement of Claim is quite different than the claim made for cover under the Accident Compensation Act by Dr Smith on behalf of Troy. The Statement of Claim is not restricted to the one event of carbon monoxide poisoning on one day at a particular time, but is based on long term carbon monoxide poisoning which is pleaded as having repetitively occurred each time the gas heater was used. Such a claim is for personal injury caused wholly or substantially by a gradual process. Where, as here, there is no work-related gradual process then it is accepted by all counsel that such personal injury (if established) is not covered by the Accident Compensation legislation. 
Section 26(2) of the Injury Prevention, Rehabilitation and Compensation Act provides as follows: 
“26 Personal injury 
(2) Personal injury does not include personal injury caused wholly or substantially by a gradual process, disease, or infection unless it is personal injury of a kind described in section 20(2)(e) to (h). ”
Section 20(2)(e)-(h) of the Injury Prevention, Rehabilitation and Compensation Act provides: 
“20 Cover for personal injury suffered in New Zealand (except mental injury caused by certain criminal acts) 
A person has cover for a personal injury if- 
the personal injury is described in any of the paragraphs in subsection (2). 
Subsection (1)(c) applies to- 
personal injury caused by a work-related gradual process, disease, or infection suffered by the person: 
personal injury caused by a gradual process, disease, or infection that is treatment injury suffered by the person:] 
personal injury caused by a gradual process, disease, or infection consequential on personal injury suffered by the person for which the person has cover: 
personal injury caused by a gradual process, disease, or infection consequential on treatment given to the person for personal injury for which the person has cover. ”
It is clear from these two provisions that when a person suffers from injury caused wholly or substantially by a non-work-related gradual process then the person will not have cover the Act. This is the first plaintiff's case. For the purpose of a strike out application the allegations of fact in the statement of claim are assured to be correct. Her pleadings identify a personal injury caused by gradual carbon monoxide poisoning. The carbon monoxide poisoning was not a work-related gradual process, but occurred in the home. On the face of it therefore, Mrs Pickard will not have cover under the relevant Accident Compensation Legislation. 
I reject the suggestion that somehow she is inevitably tied up with the second plaintiff's application for and grant of cover for accident compensation. There is, in my view, no basis for that proposition at all. Hers is an independent claim, which on the face of it seeks damages for personal injury outside of coverage under the Accident Compensation scheme. For those reasons I would not strike out the claim by the first plaintiff. 
Turning therefore to the second plaintiff. It was difficult to entirely understand the Corporation's grant of cover with regard to Troy's claim. Troy's claim involved a proposition by Dr Smith that he suffered an accident at 9.00 am on the 9th of August 2001, which was, one assumes, the ingestion of carbon monoxide, and the injury being poisoning from carbon monoxide causing headaches, vomiting and the other injuries. 
At best the only coverage sought from ACC for Troy arises from an incident on the 9th of August 2001. The second plaintiff's claim relates to events prior to (and possibly after) this time and seek damages for injury caused prior to this time. I reject the submissions of the defendant that in deciding whether or not in fact Troy is covered under the Act for these purposes this Court is bound by the assessment of the Corporation. Essentially the defendants' proposition reduces itself to the claim that even if the second plaintiff has a legitimate claim, as identified in the Statement of Claim, for damages outside of the Accident Compensation regime he would be barred from pursuing that claim for damages even if the Corporation had wrongly concluded that he had cover. I reject that approach. It is for this Court to decide if Troy's claim is outside the accident compensation scheme. 
I am satisfied that assuming the facts as pleaded are true, Troy Taylor would not have coverage under the Accident Compensation legislation for the substance of his claim. In those circumstances and for the reasons given I am satisfied that defendants have not established that the second plaintiff has no arguable cause of action. I therefore reject the application to strike out his claim. 
Security for costs 
Both defendants seek security for costs. The application for security for costs was filed at the beginning of 2005 when it became clear that this case had expanded from the District Court to the High Court and was now likely to be at least a twoweek trial. 
It is accepted the plaintiffs will be unable to pay the costs of the defendants if the plaintiffs are unsuccessful in the proceedings (see r 61 of the High Court Rules). Once this hurdle is overcome the Court has a discretion whether in the circumstances to order security for costs. 
The plaintiffs are in receipt of the legal aid. By itself legal aid does not bar an order to security for costs being awarded. It is a factor to be taken into account in the exercise of the discretion. I accept that the defendants are required to satisfy me that there is a reasonable prospect to an award of costs against the plaintiff personally. This will require a finding of exceptional circumstances where the amount of security sought is beyond the contribution ordered by Legal Services. Here the contribution ordered by the Legal Services Board is $30,000.00. The security for costs sought here by the two defendants would not exceed $30,000.00. 
The defendants therefore point to: 
the merits of the claim; 
the conduct of the plaintiffs; 
as in combination justifying security for costs here. 
The defendants say that the plaintiff's case has only a modest chance of success. They say that the medical evidence obtained by them and produced to the Court along with the decision of the Gas Fitters and Plumbers' Board arising from a prosecution of the first defendant illustrate both as to the allegations of negligence, breach of contract and breach of statutory duty that the plaintiffs chances of success are modest. They say the plaintiffs are unlikely to establish connection between the alleged carbon monoxide poisoning and any disabilities currently suffered by the plaintiffs. 
The plaintiffs say in response that they in turn have expert evidence which does establish the necessary connection between their health and the gas leak, and the Gas Fitters' Disciplinary Board's dismissal of the charges against the first plaintiff do not deal expressly with carbon monoxide leakage and in any event this Court would not be bound by those conclusions. 
It is, of course, extremely difficult to judge merit at this preliminary stage. However, based on the information I currently have I accept there is some strength to the defendants' argument that this will be a very difficult case for the plaintiffs to establish. While the High Court would not be bound by disciplinary proceedings conducted before the Gas Fitters and Plumbers' Board, it does appear on the face of it that the essential complaints by the plaintiffs about the first defendant's actions were considered and the Board reached a conclusion that the first defendant had properly carried out his function by competently installing the gas heater. There is some evidence of neurological deficit with regard to both plaintiffs, but it is notoriously difficult to establish causality. There is comprehensive medical evidence from the defendants that there is a low probability of likelihood of health problems being due to the carbon monoxide poisoning. My conclusions are therefore that this is not a clearly strong case by the plaintiffs. 
The defendants' claim that the plaintiffs have persistently failed to comply with interlocutory orders of in the Court, including constant failures to meet time tabling directions, particularly those made in 2004. And they say the pleadings still remain flawed. In particular they point to inadequacies in discovery and a series of failures in August, September, October and November 2004 relating to discovery. 
It was not until May 2005 that a second supplementary list of documents was sworn by the plaintiffs. That comprised a further 42 pages of discoverable documents. In addition, the plaintiffs were ordered to file and serve written statements of evidence by 31 October 2004. No written statements of evidence were filed until January 2005, the final statements not being received until late January 2005 - three months' late. The plaintiffs have filed a number of amended pleadings, including a significant alteration to the statement of claim in December 2004, which resulted in a transfer of the proceedings to this Court. In February of this year two thirds of the written statements of evidence were provided a month late. 
The parties had agreed to mediate and settled a date of 14 December 2005 to do so, but on the 10th of December the plaintiffs pulled out saying that they were seeking to amend their claim and that it would be significantly different and accordingly, there would be no purpose to a mediation. I note also that the plaintiffs' pleadings in relation to giving of particulars of the failure of the first defendant remain non-specific and inadequate. I note that these proceedings were filed in 2003, there has already been more than acceptable delay. 
The plaintiffs in response to the Application for Security for Costs say that that it is impossible to adequately judge merits currently and that this is not a case where the claim is wholly without merit. They accept that while they were not always expeditious with the filing of documents, that position is now essentially cured by the proper filing of briefs and amended claims. They say that as a general proposition, security should not be ordered against legally aided persons, other than in exceptional circumstances, above the legally aided party's legal contribution. They advise that the contribution here is $30,000.00 which is to be secured against the first plaintiff's equity in her home. They say that if security for costs is ordered then that would prevent the plaintiffs from bringing these proceedings and that would be unfair to the plaintiffs. They say that it should also be taken into account that the defendants have delayed in bringing an application for security for costs until now. As to this latter point I reject that submission. The defendants only brought a security for costs application when it became clear that these proceedings had substantially grown by an Amended Statement of Claim increasing the claim for damages. That occurred at the beginning of 2005 and was followed by an application for security for costs. I accept the thrust of the defendant's submission that the position changed significantly with the “new” claim and that it was entitled to reassess the question of security for costs at that time. 
I am prepared to make a modest order for security for costs because on balance the defendants have convinced me this is an appropriate case. Firstly, it is clear there is no prospect of the plaintiffs paying the defendants' costs if they lose. Secondly, as I have indicated the plaintiffs have significant impediments to a successful claim here. Thirdly, the plaintiffs have already added significantly to the cost of this litigation by their delay and the changes they have made to the original claim. 
I take into account that the first plaintiff does have assets against which security may be able to be secured. I have taken into account that she has been ordered by Legal Services to pay a substantial contribution towards the costs here. I take into account in the form of an order that while she may not be able to provide any form of cash bond, she will be able to provide a form of security for the costs. I take into account that the amount I propose to order is modest in relation to the total costs likely to be incurred by the defendants in this litigation. 
I therefore order the first plaintiff provide security for costs in the sum of $5,000.00 to both first and second defendants. In the circumstances this security should be able to be properly provided by way of a security against the first plaintiff's residence. 
I have mentioned the plaintiffs' inadequacy of pleading particularly with respect to the particulars of breach alleged by the plaintiff at paragraph 42 of the latest pleadings. The particulars alleged in paragraph 42 are the same particulars which the plaintiffs allege support claims for breach of the Consumer Guarantees Act (ss 28, 29 and 8), breach of contract and negligence. Paragraph 42 reads as follows: 
“42 The first defendant breached the statutory duty referred to in paragraph 41 by failing to carry out his service with reasonable care and skill. ”
Particulars of breach 
Failure to properly install the heater and flue. 
Failure to obtain the correct flue. 
Failure to recognise or rectify the problem with the installation when called back by the first plaintiff on numerous occasions. ”
[41] The plaintiffs need to specify as to: 
42.1: What the specific failures were in the installation of the heater and flue by the first defendant 
42.2: What the failure here constituted. 
42.3: What the specific problem(s) the first defendant failed to recognise. 
[42] I make an order that these further particulars be provided by way of an amended statement of claim to be filed by 1 February 2006 with a statement of defence to be filed by 15 February 2006. 
[43] These proceedings should now be returned to the Associate Judge to manage to hearing as soon as possible. In the circumstances I make no order for costs. 

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