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He v EQC & Offshore Market Placements Limited (CIV-2013-409-1775) - High Court decision in EQC’s favour


In September 2017 the High Court released a judgment which accepted EQC’s assessment that Mr Xiaoming He’s property sustained minimal earthquake damage.  The High Court rejected Mr He’s claim that his property required rebuilding at a cost of $1 million and his claim has been dismissed.
 
A copy of the judgment can be found here

EQC welcomes the High Court’s decision as it follows on from other recent decisions (Sadat; Kelly) that confirm EQC’s approach to assessing and determining earthquake damage in these cases is correct.

Some of the key outcomes of this decision can be summarised as follows:

  • EQC’s approach to assessing damage was correct: it reinforces that the approach taken by EQC’s technical experts to assess earthquake damage is correct. In particular, EQC’s approach to look for observable damage, over and above damage that can be shown to have occurred historically, then using when necessary calculations as a ‘sanity check’ to confirm the lack of damage was considered useful (at [152]). 
     
  • EQC’s view of what constitutes “damage” was correct: In order for there to be “damage” there needs to be a material physical change to the building element and impairment to its value and usefulness (at [67]). For example, the Court considered that if any of the cracks (on the already cracked exterior walls) had been caused by the earthquakes, their effect was so insignificant, when the general state of the exterior was considered, that they could not be considered to constitute damage (at [166]).
     
  • EQC’s assessment of its liability for pre-existing damage is correct:  Properties that have pre-existing defects that are “so pronounced or extensive that minor additional damage may make no material difference to the utility or value of the property” is unlikely to be deemed “damage“  that is covered by EQC (at [67]). 
     
  • EQC’s “Clean Heat Programme” was endorsed: The High Court endorsed EQC’s position in respect of Mr He’s chimney settlements.  EQC has discharged its settlement obligations in relation to a chimney once it has completed emergency works to decommission a chimney (e.g. removing the chimney to roof level, confirming that the balance of the chimney was not damaged and patching the roof) and where a customer has signed a consent form to have a heat pump installed in place of a replacement fireplace and rebuilt chimney as part of the Chimney Replacement Programme (at [120]).
     
  • The conduct of the parties will impact the credibility of their evidence: The day before the trial, Mr He sent threatening emails to the tenant of the property who was to provide evidence for EQC.  Mr He’s correspondence to the tenant intimated that the tenant would be liable for Mr He’s legal costs if he lost the claim. Justice Dunningham said that threats of this nature were consistent with her “overriding impression of Mr He which was that he appeared to be willing to do whatever was in his power to advance his claim whether justified by the facts or not” and that he had a “willingness to say what seemed advantageous to his claim, whether he had reasonable grounds to do so or not” (at [83]).
     
  • The plaintiff must provide credible technical expert evidence to prove the loss they allege they have sustained: The judgment is a reminder to homeowners that they have the burden of proof to prove, on the balance of probabilities, the loss they believe they have sustained as a result of an earthquake (at [55]).  The High Court is unlikely to rely solely on the testimony of a homeowner to support a claim that a property has sustained earthquake damage. In this case the homeowner evidence was inconsistent with the expert evidence call by EQC that explained why there was no evidence of earthquake damage.
     
  • Expert witnesses must engage in a meaningful fashion with the Court process: During the course of the hearing Justice Dunningham urged the parties’ structural engineers to confer with each other to narrow down the technical issues in dispute.  However,  Mr He’s structural engineer, Brett Gilmore, was found to have adopted a “defensive stance” towards conferring with the defendants’ structural engineer.  This meant in little was achieved in terms of reducing the issues in dispute during the joint expert conferral process (at [47]).  Her Honour held the approach taken by Mr Gilmore had both procedural and substantive consequences that put the hearing at risk of being adjourned (at [48]-[50].
     
  • Unreasonable delays may result in costs being awarded against the defaulting party: Mr He engaged six different structural engineers over the course of the proceeding and tendered new evidence on the eve of the hearing (at [46]).  The High Court has previously awarded costs to EQC and OMPL as a result of Mr He’s delays.  Justice Dunningham has now awarded further costs to EQC and OMPL.  Her Honour also indicated that an increase in the costs award may be appropriate given Mr He’s conduct throughout the claim (at [217]).  

Cost Judgment 

On 8 February 2018, Justice Dunningham issued her costs judgment which ordered Mr He to pay EQC the sum of $272,458.02 for its costs and disbursements.  Her Honour also awarded OMPL the sum of $244,327.24 for its costs and disbursements. 

A copy of this costs decision can be found here

Her Honour deemed it appropriate to make a 50% uplift on the costs due to EQC and OMPL in recognition of Mr He’s poor conduct throughout the proceeding (full details of Mr He’s conduct can be found at paragraph 27 of the judgment).

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