Turvey Trustee Limited v Southern Response Earthquake Services Limited [2012] NZHC 3344 (11 December 2012)

Last Updated: 12 December 2012

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2012-409-615 [2012] NZHC 3344

BETWEEN TURVEY TRUSTEE LIMITED Plaintiff

AND SOUTHERN RESPONSE EARTHQUAKE SERVICES LIMITED

Defendant

Hearing: 15 November 2012

Counsel: G D Trainor for plaintiff

C R Johnstone and S E Waggott for defendant

Judgment: 11 December 2012

_{RESERVED JUDGMENT OF DOBSON J}

[1] In these proceedings, the plaintiff trust (the insured) sues as the owner of an Edwardian style villa in suburban Christchurch, claiming on a more extensive basis than the defendant insurer of the property (the insurer) considers is the limit of its liability under the relevant policy that was in place at the time the property was irreparably damaged. That occurred in the February 2011 earthquake.

[2] There has been a measure of co-operation between the parties in distilling questions for argument on a summary judgment basis, with a view to the answers to the interpretation issues either enabling remaining issues, including those of quantum, to be resolved between the parties, or at least for them to be substantially narrowed. When that course was proposed, the parties had three issues of interpretation of the insurance policy, but those have now been reduced to two.

[3] The insurer was formally AMI Insurance Limited, and appears to have insured the property for a substantial period of years. The house policy was on the

TURVEY TRUSTEE LIMITED v SOUTHERN RESPONSE EARTHQUAKE SERVICES LIMITED HC CHCH CIV-2012-409-615 [11 December 2012]

most comprehensive of three alternative forms of cover offered by AMI, being categorised in a proposal completed many years before the loss as “full replacement cover”. By the time of the claim under the policy, it was styled as “premier house cover”.

[4] The relevant terms of the policy included the following:

1 What we will pay a. We will pay to repair or rebuild your house to an ‘as new’ condition, up to the floor area stated in the Policy Schedule.

b. We will use building materials and construction methods in common use at the time of repair or rebuilding.

c. If your house is damaged beyond economic repair you can choose any one of the following options:

i to rebuild on the same site. We will pay the full replacement cost of rebuilding your house.

ii to rebuild on another site. We will pay the full replacement cost of rebuilding your house on another site you choose. This cost must not be greater than rebuilding your house on its present site.

iii to buy another house. We will pay the cost of buying another house, including necessary legal and associated fees. This cost must not be greater than rebuilding your house on its present site.

iv a cash payment. We will pay the market value of your house at the time of the loss.

...

cover for additional costs

We will pay for the following additional costs.

....

4 Compliance with building legislation and regulations

1. If additional work is required, we will pay the reasonable costs for compliance with building legislation and rules.
   

b. However, we will not cover the additional work required if:

i a notice has been served requiring compliance with the Building Act 1991 or the Resource Management Act 1991 before the loss or damage occurred, or

ii your house did not comply with the relevant governing building controls when it was built or at the time of any alteration.

[5] The provisions for payment of additional costs also acknowledged the insurer’s liability to pay costs of demolition and debris removal, and also for removal of household contents when that was necessary to carry out repair or reinstatement.

[6] A definitions section at the end of the policy included the following:

Full replacement means replacement with a new item, or repairing an

item to an ‘as new’ condition.

[7] The policy provided “top up” cover for damage by earthquake, on the basis that if the Earthquake Commission (the Commission) agreed to pay a claim for loss or damage to the house, the insurer would provide earthquake top up cover for loss or damage not covered by the Commission, up to the limit of the insurer’s liability under the policy.

[8] The insured property suffered damage in earthquakes on 4 September 2010 and 22 February 2011, and in subsequent aftershocks. The insured’s claims for earthquake cover under the Earthquake Commission Act 1993 have been settled, and the present dispute is over how the insurer’s liability to top up those payments is to be quantified.

[9] The insured has elected to make its claim under clause 1c.ii of the terms of cover, and counsel advised that construction of a new house had begun on the day of the hearing, on another residential site in a different part of the greater Christchurch area (the new site). I am mindful that the insured having an option under the policy to elect where to rebuild, and the insurer’s acceptance of the site chosen by the insured, are features that are likely to distinguish this dispute from many others arising out of the Christchurch earthquakes.

[10] The insured’s claim is that the insurer is required to pay to replicate the previous house in all of its distinctive early 20th century features. The insured’s summary judgment application was supported by two experts’ affidavits, one from Mr Julian Mace, a senior Christchurch quantity surveyor, and a second from Mr Julian Moss, a former master builder in business in Masterton whose specialty has been the reproduction of dwellings inspired by New Zealand architecture in the

period between 1880 and 1940. Both men identified distinctive design features of the former house in similar terms. Mr Moss’s list of features was as follows:

I have inspected the house at 23 Aynsley Terrace and can confirm that in my view it includes many features found in an Edwardian masonry corner angle bay villa. Notable features include but are not limited to:

Masonry structure (consisting of double brick); Tongue and groove timber soffits;

Two single and a double chimney;

Elaborate external joinery, including detailed timber gabling and bay windows and veranda balustrading;

Internal solid (what appears to be) rimu (but in any event definitely

NZ native timber) doors, architraving and skirting;

Tongue and grooved native timber flooring;

Built-in (what appears to be) rimu (but in any event definitely NZ

native timber) joinery fittings; and

Fibrous plaster cornices and ceiling rosettes.

[11] The insured seeks to have the insurer’s liability quantified at the cost of replicating the house including all these features. The insured seeks the cost of doing so in the same materials as originally used or, where original materials are no longer procurable, the nearest available equivalent to those materials.

[12] The evidence for the insurer included a detailed breakdown of the materials that would be used for an equivalent house. That has been prepared by an independent project management company, Arrow International (NZ) Limited, that has been retained by the insurer to undertake such projections following the Christchurch earthquakes. I was not given any item-by-item comparison of what the insurer was prepared to pay for, relative to the components for which the insured sought payment. For the insurer, Mr Johnstone ventured the suggestion that the differences discussed thus far between the insurer’s projections and the insured’s projections of the cost of different materials might amount to 20 per cent.

Question One: The obligation to replace the building “as new” using materials

and methods “in common use”

[13] Each party purported to define the interpretation questions for the purposes of the summary judgment in somewhat different terms, but there is no prejudice to the insurer in adopting the insured’s formulation of the first question, which was put in the following terms:

What is the meaning of the obligation upon the [insurer] to “rebuild your house to an as new condition using building materials and construction methods in common use at the time of rebuilding”?

[14] The insurer’s relevant commitment here is to pay the full replacement cost of rebuilding the insured’s house on their alternative site, using building materials and construction methods in common use in 2012. The insurer’s liability will be capped at the sum that it would have cost to effect the rebuilding on the site where the irreparable house was (the existing site).

[15] Mr Trainor cited Canadian authority that acknowledged that the notion of “replacement” does not have a meaning peculiar to insurance policies, and that decision adopted a Shorter Oxford Dictionary definition of “replace” as to put back in place, to take the place of, succeed, be substituted for or provide substitution.1

[16] On the basis of research undertaken for the insurer, Mr Johnstone submitted that use of the expression “as new” in the context of a policy of replacement insurance is less common than the alternative expression of replacing damaged or destroyed property to the same condition as “when new”.

[17] There has been consideration of phrases in policies such as an obligation to reinstate or repair to a condition “equal to but not better or more extensive than the condition when new”.2 Although Mr Johnstone acknowledged that the Lion Nathan

_{decision appeared to use the phrases “as new” and “when new” as synonymous, I}

1. Chemainus Properties Ltd v Continental Insurance Company [1990] ILR 1-2574, 43 CCLI 146 (BC SC) at [16]-[17].

2 See, for example, Spina v Mutual Acceptance (Insurance) Ltd (1984) 3 ANZ Insurance Cases

60-554; Lion Nathan Ltd v NZI Insurance (1994) 8 ANZ Insurance Cases 75-398; Colonial

Mutual General Insurance Co Ltd v D’Aloia (1988) 5 ANZ Insurance Cases 60-846.

accept his submission that “when new” suggests a narrower basis for comparison between the insured item and its replacement than “as new”, which conveys a sense of comparison between old and new, rather than direct replacement.

[18] Both parties cited the Queensland Supreme Court decision in Spina,3 which involved a dispute over the extent of indemnity required, being argued on the basis that replacement would involve an allowance for the extent of betterment. That factor does not arise here, given the nature of a replacement insurance policy which assumes the prospect of betterment when a claim is met.

[19] Mr Trainor relied on the following passage in the reasoning:4

... it is proper to take into account the opinion, advanced on behalf of the plaintiffs, that tongue and groove timber is more consistent with the architectural style of the buildings, as well as being the type of material that was originally used. Although tongue and groove timber emerged as being somewhat dearer than gyprock (by how much, was not established), there is no suggestion that it was so rare as to be difficult to procure and, overall, I come to the conclusion that its use would not be extravagant or unreasonable in view of the obligation of the defendant to pay the cost of reinstatement in a condition ‘equal to’ the original structure.

[20] Mr Johnstone sought to distinguish this approach because the starting point in Spina was an analysis of the state of the house when it had been new. He argued that that was different from the insurer’s obligation in the present case to provide a substitute for the insured house to the level of cost necessary to produce the equivalent of the house as it was prior to the irreparable damage, in an “as new” state.

[21] Both counsel also cited the approach in D’Aloia.5 The policy there rendered the insurer liable to pay the cost of reinstatement of the buildings “... in a condition equal to but not better or more extensive than their condition when new”. The dispute over the extent of that insurer’s liability was considered first by a Full Court of the Supreme Court of Victoria. Dealing with a phrase that does not arise in the

_{present policy, that Court considered:}6

3 _{See n 2 above.}

4 _{At 78,345.}

5 See n 2 above.

The words “equal to” mean, in our opinion, that the reinstatement does not necessarily have to conform precisely in appearance, structure and configuration to the destroyed building. But basically there must be “equality” in the sense of size, structural quality, amenities, space, plumbing, electrical, gas and like installations.

[22] The claim was remitted by the Full Court to the Supreme Court of Victoria for further determinations under the policy.7 Crockett J’s analysis of the insurer’s response included the following:8

However, it was contended by the defendant that it was reasonable for, and therefore to be expected of, the plaintiff in preparing specifications for the notional construction of the Edwardian-style building to specify the use of materials used in accordance with current (1983) building practice if to do so would materially reduce the costs of construction whilst equalling if not increasing its efficiency and provided that the use of such materials was non- detectable upon normal use of the premises and, accordingly, did not detract from the authenticity which the replica of a period building was designed to achieve. In particular, the evidence sought to establish that it was appropriate to expect plaster board be used as wall lining instead of lath and plaster, floorboard sheeting in place of Baltic pine strip boards and radiata pine instead of oregon timber for the wood frame. The plaintiff did not agree that the new materials met the tests for their use in the postulated circumstances, i.e. were as good or did not impair authenticity. I have had some reservations about the floorboards, but, on balance, I am satisfied that the evidence does establish the matters which afford the foundation for the defendant’s submission.

...

However, to use in some respects less costly and more efficient materials does not necessarily or always mean that the building is not reinstated to the relevant condition.

[23] Shortly after that reasoning, the Judge observed:9

I am persuaded that the notion of reasonableness does have a part to play and that in this case that meant that it is appropriate to calculate the cost of reinstatement on the basis of the use in construction of the modern materials that have been identified.

[24] The insurer’s obligation under this policy is not an absolute one to pay for replacement of the existing structure. The primary constraint on that obligation is that the insurer is obliged to pay for building materials and construction methods that

_{are in common use at the time of the rebuilding. That constraint, together with the}

7 _{D’Aloia v Colonial Mutual Insurance Co Ltd (1990) 6 ANZ Insurance Cases 61-009.}

8 At 76,745.

comparative connotation of “as new”, conveys the sense of the new structure being the equivalent of the old, rather than a replication of the original. Adopting the approach to equivalence in the Full Court decision in D’Aloia, it would be measured by size, functionality, relative quality and reasonably addressing the re-creation of character and appearance.

[25] A component of that equivalence is considered by reference to materials or construction methods that are “in common use”. I do not see that as requiring that the materials or methods be used in, for instance, any particular proportion of house building nationally or in the locality of the insured property. The requirement for them to be “in common use” is likely to have been included so that the insurer would not be liable for rare materials or outdated construction methods that would now be substantially more expensive in relative terms than more recently introduced methods or materials. Given that intention, common use of materials or methods is likely to be made out at a relatively low threshold, if indeed the materials are reasonably available, and their use (rather than any more commonly used equivalent) is warranted because of some aspect of appearance or functionality that was distinctive of their use in the original house.

[26] On this approach, an insured could not insist on replicating the precise item used in construction 80 or 110 years ago if, in the type of rebuilding involved, an equivalent material or method is used predominantly and to an extent that the original material or method is no longer recognised as being commonly used in comparable rebuilding situations. An insured is not required to show that their nominated method is the most common; only that it has not been superseded to an extent that renders the original material rare so that it would be disproportionately expensive, relative to a commonly used equivalent.

[27] Applying the concept of equivalence to some of the proposed materials apparently in issue here provides guidance for the parties in this case but may be idiosyncratic to the extent that it does not provide useful guidance in other cases.

[28] One item discussed at some length was tongue and groove native timber flooring. Given the age of the existing house, it seems likely that the floors would

have been heart rimu or possibly matai. The insured’s quantity surveyor, Mr Mace, has opined that native timber tongue and groove flooring remains in common use as a building material. His opinion does not go into detail as to whether materials currently available would replicate the materials originally used. Counsel contemplated the prospect that recycled native timbers might be used for flooring.

[29] A further issue is whether the attribute for which that building material was distinctive, namely its pleasing appearance as uncovered, finished timber, was utilised in the house at the time that it was damaged beyond repair. I was told by counsel that, at least in part of the house, native timber tongue and groove floors had been covered with carpets that were treated as not secured because they were merely tacked down around the edges of the relevant rooms. Should the insured be entitled to the cost of replacing that native timber? The floors were described as being in a prepared state that would have been appropriate for exposed floorboards without further work, should the owners have chosen to replace the tacked carpets with exposed floorboards supplemented by occasional rugs.

[30] Mr Johnstone conceded that the insurer would treat the issue of flooring in the part of the house where native tongue and groove floorboards in a polished or finished state were completely covered by carpet as still reflecting potential use of the exposed floorboards because of the lack of permanent fixing of the carpet. In those circumstances, the distinctive feature of exposed, polished native wood floorboards could be enjoyed without any significant work and expense. On the view I take of the test for replacement materials, that is a concession in favour of replacing native tongue and groove floorboards with the same material or its nearest equivalent. This is because the distinctive feature of the appearance of such old polished tongue and groove native timbers was not being utilised in the house at the time it was damaged, but presumably could be without work or expense and therefore had an identifiable value.

[31] If the insurer is prepared to treat that part of the house which was carpeted in the way I have described as making use of the attributes of the original native timber floorboards, then the insured could make out their claim for the cost of the currently

available equivalent of that distinctive material.10 However, in such circumstances, it might equally be open to the insurer to resist that component in a claim because, for floors permanently covered by carpet, there would be no purpose in replacement with native timber floorboards when some conventional form of chipboard flooring is equally functional to be covered with carpet.

[32] Again, I am somewhat hampered by the generality of the evidence adduced for argument on the present summary judgment. I infer that the insurer’s concession that the tongue and groove floorboards were a design feature of the house, despite being covered by tacked carpets, reflects an acknowledgement that because of the ready potential to use the floorboards in their exposed state, the flooring of that quality had real value to the insured, despite it not currently being utilised. This illustrates that the dividing line between existing functionality and appearance, and potential changes to that, needs to be approached reasonably by the parties on a case-by-case basis.

[33] In other parts of the house, I understand that the floors had been covered by vinyl or tiles that are glued down. In that situation, the attribute of the original flooring is permanently hidden, and no claim for replacement could reasonably insist on such floor areas being in timbers appropriate for polishing and use in an uncovered state when chipboard-type material would be perfectly adequate (if not preferable) as the material on which to glue vinyl or tiles.

[34] The same consideration applies to internal timbers such as doors, skirting boards and architraves: if they had originally been exposed timbers but were, at the time the house was rendered irreparable, a painted finish, then the rationale for specifying a native timber appropriate for a clear finish is lost. The equivalent would be, say, a pinus radiata or similar moulding of the same dimensions that is perfectly adequate for a paint finish, as would have been the case in the house when it suffered irreparable damage. In this respect, I adopt what I consider to be the common sense

_{approach of Crockett J in the second D’Aloia decision.}11

10 Counsel were unclear as to what that would be. Possibly recycled native timbers, or possibly recently milled native timbers permitted on a sustainable basis, and available in sufficient quantities to service the needs of those recreating the colonial-era character of such flooring.

11 See [22]-[23] above.

[35] A further example is the prospect of including embossed ceilings or what may have been hard plaster features in a 1911 villa. As I understood an example cited by Mr Johnstone, such features might today be replicated by use of a polystyrene mould and plaster covering, at a lower cost but with no material difference in appearance. Clearly, a current practice for that sort of interior design detail is the appropriate measure of the insurer’s liability and an insured could not claim for replacement using 1911 methods.

[36] I was left unsure of the difference, if any, between the parties in respect of the cost of replacing chimneys. The detailed projection for the insurer included, in relation to the appropriate rooms:

Allow to form chimney but no heating replacement as existing open fire cannot be replaced under current regulations and was non-compliant at the time of the event and was not used as a heat source.

If I understand correctly, that reflects an acknowledgement by the insurer that it would pay for a mock-up of fireplaces, but they would not be functional because they could not be lawfully used. I consider that approach appropriate.

[37] The matter of chimneys was not specifically argued by Mr Trainor, and if indeed the insured contends for a different quantification on this item that was not argued and he wishes to reserve the point, then I invite him to do so by way of memorandum.

[38] I endorse the suggestion that an insurer and insured working through the detail of a claim in circumstances such as the present should both be required to measure the liability involved, reasonably. It is relevant in the limited sense that entitlement of an insured or limitation on liability for an insurer in relation to particular items can seldom be resolved in absolute terms. I acknowledge that beyond that qualification, imploring parties to such a dispute to be reasonable cannot lead to an objective resolution when reasonableness can so easily be in the eye of the beholder.

[39] I accordingly answer question one that the insurer’s obligation is to meet the

cost of constructing a new house of the same style and quality of materials as the

property insured. That is subject to the requirement that the materials and methods proposed are in common use in the erection of Edwardian-style villas in Christchurch in 2012, as discussed in [25]-[26] above, and the requirement for reasonable consideration of substitute materials or methods of construction where that would not affect the quality or character of the replacement structure.

Question Two: How is the insurer’s liability to compensate for “additional costs” to be quantified?

[40] The second question raises the issue as to how the terms of the policy are to be applied to quantify the insurer’s liability to compensate the insured for additional costs of rebuilding that are occasioned by the need to comply with the current Building Act and codes.12 The issue arises because the core full replacement cover is intended to fund the notional cost of rebuilding the equivalent of the house as insured, using materials and methods currently in common use. Particularly with a house of any significant age, as is the case here, there will be aspects of its design and construction that would no longer comply with current standards required under

the Building Act or codes. Examples relevant to the house in this case are its unreinforced masonry structure consisting of double brick, which would no longer comply, the current equivalent being a reinforced block wall structure most likely lined with a brick veneer to present the equivalent external appearance. Similarly, a house of this age would typically have had single glazed windows, whereas building codes require double-glazed windows in new residential structures.

[41] The parties tended to argue past each other on this point. The insured argued that the calculation of a notional rebuilding of the house on its original site could not be completed realistically without including an allowance for the additional costs involved in upgrading or altering the original construction to make the new structure compliant with the Building Act and codes.

[42] In contrast, it was argued for the insurer that the quantification of this aspect of its liability was recognised as a category of cost additional to the cost of

12 The policy wording is “... costs for compliance with building legislation and rules”, but counsel used the terms “Building Act and codes” as more clearly reflecting the source of constraints and obligations contemplated.

constructing the equivalent structure using methods and materials in common use. Those additional costs are not a component of the notional costing for rebuilding on the original site, but a reflection of the actual additional costs incurred in constructing the new house on the chosen alternative site.

[43] Mr Johnstone advised that the insurer has not precisely quantified the financial difference that would arise in this case, if any, depending on which approach is adopted. There was no evidence as to whether in the present case the existing and new sites are similarly zoned for the purposes of geotechnical and other code requirements. Depending on any differences in structural requirements reflecting the assessment of, for example, seismic risks which may vary in different zones, the additional costs required to comply with the Building Act and codes may either be more or less in original and proposed alternative sites. To the extent that home owners have suffered irreparable damage in the areas of Christchurch worst hit by the earthquakes, they are likely to seek to rebuild in other areas. The worst-hit areas are likely to be rated more highly in terms of geotechnical requirements for foundations of new structures, leading to the prospect that rebuilding in the worst-hit areas would involve higher costs for complying with local codes than would be incurred in new subdivisions away from the worst-hit areas. Mr Johnstone indicated that it was a point of principle likely to be of some importance to the insurer.

[44] The structure and wording of the policy supports the insurer’s approach to quantification of this additional cost. The quantification exercise begins with an election by the insured as to which of the four options available in clause 1c. the insured will rely on in pursuing its claim. If that election is to claim under 1c.ii (as here), then the insurer is not liable for a cost greater than that of rebuilding the house on its original site. That does introduce a notional exercise of assessing the extent of that cost. Separately from that, additional cost liabilities acknowledged by the insurer are in respect of costs that may or may not in fact be incurred. The most logical approach to quantifying any additional costs is to assess what additional costs are in fact incurred in the particular circumstances following the insured’s election. In the present case, the insurer will ascertain the extent of additional work required in the process of rebuilding on a new site, in order to comply with provisions in the

Building Act and codes that the existing structure did not comply with before becoming irreparably damaged.

[45] Alternatively, if an insured elected to rebuild on the existing site, then the additional costs component will reflect the additional costs that will actually be incurred in rebuilding on the existing site. That becomes a relevant exercise because it is the activity for which the insured is covered, that is going to occur.

[46] The approach contended for the insured would introduce an additional artificiality that is unnecessary. For example, the insured could elect to rebuild on a new site that is zoned differently from the existing site, in respects that affect the requirements for foundations for the equivalent house. Greater costs would have been incurred at the existing site in complying with those additional requirements than at the new site, resulting in the insured claiming a windfall in the sense of an “additional cost” that they will not in fact incur.

[47] If, however, the difference in requirements for foundations was the other way around, so that an additional cost would be incurred at the new site but would not have been necessary at the existing site, then the insured would be left out of pocket for those additional costs actually incurred, if the approach argued for here governed the application of the “additional costs” provision in the policy.

[48] Mr Trainor argued that the insurer would not be complying with its primary obligation to pay the full replacement cost of “rebuilding your house” if the costing failed to take account of additional or different work required to comply with the current Building Act and codes, because it would then be costing a house that could not lawfully be built. However, so long as the quantification of the insurer’s primary liability recognises that a discrete exercise needs to be done under the “cover for additional costs” portion of the policy, then there is neither a practical nor legal impediment to calculating the full extent of liability in the two stages that follows from the interpretation I have proposed.

[49] Accordingly, I interpret the policy as quantifying the insurer’s liability to

compensate for additional costs of rebuilding, to the extent they are occasioned by

the need to comply with the current Building Act and codes, as those costs are actually incurred at the new site.

[50] I appreciate that the facts in the present case make the outcome more straightforward than in a range of other circumstances because the new site has been chosen and there is no suggestion that the insurer takes issue with it. In other factual situations it may be important to an insured to reach agreement on the extent of cover for notional replacement of the irreparably damaged house on its existing site, without a new site having been settled on. Those situations are likely to introduce the prospect of the quantification exercise being done in two stages, with the insurer’s liability under the “additional costs” component of the policy having to wait until a new site for the rebuilding is identified to enable the actual extent of additional costs to be measured.

Proposed third question

[51] Mr Trainor’s submissions also sought a ruling on a third proposition, namely that the conduct of the insurer thus far constituted a breach of its obligations under the policy. Determining that proposition in the general terms in which it was asserted would require a far more detailed assessment of the reasonableness of the conduct by the insurer to date, and is inappropriate for determination at summary judgment.

[52] In addition, as Mr Trainor developed this aspect of his argument, it became apparent that the proposition on behalf of the insured of breach by the insurer depended on the Court accepting the interpretation arguments on the prior two points entirely as contended for on behalf of the insured. I have not done that, and accordingly the premise on which the insured argued that the insurer was in breach could not be sustained in any event.

Outcome

[53] This decision determines two questions on an application for summary judgment, as follows:

(a) Question One: What is the meaning of the obligation upon the insurer to “rebuild your house to an as new condition using building materials and construction methods in common use at the time of rebuilding”?

Answer: The insurer’s obligation is to meet the cost of constructing a new house of the same style and quality of materials as the property insured. That obligation is subject to the requirement that the materials and methods proposed are in common use in the erection of (in this case) Edwardian-style villas in Christchurch in 2012, and the requirement for reasonable consideration of substitute materials or methods of construction where that would not affect the functionality or character of the replacement structure.

(b) Question Two: Is the insurer’s separate obligation to compensate the insured for additional costs of rebuilding that are occasioned by the need to comply with the current Building Act and codes to be measured by reference to the notional cost of rebuilding on the existing site, or, where the insured elects to rebuild elsewhere, by reference to the actual costs incurred in rebuilding the house on the new site?

Answer: The additional cost of this type is to be calculated by reference to the actual costs incurred at the new site.

Costs

[54] Mr Johnstone submitted that costs should be reserved, given the range of ultimate outcomes not directly determined by these answers. I agree that is appropriate. My provisional view on the present argument is that costs would be

_{likely to lie where they fall.}

Solicitors:

Trainor MacLean, Christchurch for plaintiff

Wynn Williams, Christchurch for defendant

Dobson J