Below is a communication from the Property Law Section of the NZ Law Society.


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26 July 2013

Dear Grant

Availability of insurance
The recent earthquakes in central New Zealand have prompted insurers to limit the availability of new insurance policies in Wellington and Marlborough.  This reaction from the insurance companies is consistent with that in Canterbury when issue of new insurance policies was suspended after each of the significant earthquake events in 2010 and 2011.

This can create difficulties in property transactions, especially those which are due to settle in the coming days.  However, it does not necessarily follow that settlement cannot occur.

I recommend that those who have clients settling soon should treat each case individually and contact the vendor’s insurer.  There may be scope to arrange cover:

  1. Where the vendor and purchaser are clients of the same insurer;
  2. Where the vendor’s insurer is willing to provide cover to the purchaser;
  3. Where both parties would prefer to delay settlement to allow time to arrange appropriate cover.

Those entering into Agreements for Sale and Purchase over the coming days and weeks should consider including an insurance clause as a further term.  Members may want to consider the example insurance clauses in Part H of the recently launched NZLS/REINZ Useful Clauses Booklet.  Members should also expect real estate licensees to add such a clause into Agreements.

BNZ Lending Centre Wellington
The BNZ Wellington building will  be closed for the foreseeable future.

BNZ Lending Services Wellington has redirected its fax and phone numbers to Auckland Lending Services which has picked up the work in the meantime. Solicitors can continue to use the numbers they already have. If they have any concerns as to whether the requests have been received, please ask them to call Auckland Lending Services on 09 3671781 for disbursements and 09 9766652 for discharges of mortgages.

If there are any concerns or issues, please feel free to call Lending Services Wellington Manager Leigh Costello on 029 2005160.

Christchurch City Council consenting issues
You may remember an email bulletin on 8 July advising you that the section was making enquiries regarding the issue of building consents by Christchurch City Council.  We are currently considering an initial response from the Government on the matter and will revert back to you with further details in due course.  In the meantime, lawyers must give careful consideration to the advice given to clients in relation to consents.

Kind regards

Andrew Logan

Property Law Section, New Zealand Law Society, 26 Waring Taylor Street, PO Box 5041, Wellington 6145, DX SP20202 Phone: 04 472 7837 Fax: 04 463 2983 | Contact Us

Recently the High Court considered the quantification of rebuild costs under Southern Response’s Rental Policy for a “red zone” house where the insured elected the buy another house option under the insurance policy.  The disputed items were margin, professional fees, contingency and external works.  In his decision in Avonside Holdings Ltd v Southern Response Earthquake Services Ltd [2013] NZHC 1433 MacKenzie J decided that an appropriate margin was 10%.  He declined to award any contingency component because in his view the house would not actually be rebuilt so there were no risk factors.  He used the same reasoning to award only $29,000 in professional fees. Notwithstanding that the external works were within the definition of “house” under the policy and that Southern Response had concerned that the “house” must be rebuilt the Court only awarded the cost to restore damaged external work and not all of the external work. The decision is likely to be appealed to the Court of Appeal.



In the case of Ridgecrest New Zealand Ltd v IAG New Zealand Ltd [2013] NZCA 291 the Court of Appeal considered a claim by an insured for damage that occurred in four separate earthquakes all within the one insurance policy period.  The property was damaged by successive earthquakes and eventually damaged beyond repair.  The sum insured was $1,984,000 which was greater than the cost to rebuild the building.  The insured claimed it was entitled to the estimated cost of all repairs.   The insurance company said that it was only liable for the costs of repairs undertaken and the maximum amount payable for any one happening was $1,940,000.  The Court of Appeal decided that IAG was only liable to pay the cost of repairs actually carried out after each earthquake plus the cost of a replacement building up to the maximum policy limit.

Insurance companies have to date adopted the position that they will not pay professional fees associated with rebuilding a house unless those fees are actually incurred.  Southern Response particularly regards them as “additional costs”  and not part of the “rebuild cost”.  In McLean & ors  v IAG New Zealand Ltd [2013] NZHC 1105 the High Court (Whata J) decided that “professional fees” were necessarily incurred as part of a rebuild.  It did not matter that the costs were not incurred.  The costs were part of the calculation of the rebuild costs.

The floor level differential is an important item of information used by EQC and insurance companies to assess the earthquake damage to a building.  It is a major factor in the MBIE Guidelines.  Here is an article by a surveyor, Adrian Cowie on the topic.  Mr Cowie is an excellent surveyor and very good witness in Court.

In the recent High Court decision of Maryville Courts Trusts Board v EQC [2013] NZHC 1575 the Court (Associate Judge Osborne) had to consider the ability of the Maryville Courts Trust Board to recover $1,201,815 from EQC that represented the difference due from EQC by reason of a change in apportionment by EQC from 49% Sept/51% Feb to 10% Sept/90% Feb.  EQC had originally apportioned the damage at 49/51.  In reliance on this apportionment the MCTB settled the claim with its insurer for a certain anount.  EQC later sought to change its apportionment to 10/90 with the effect that there was a shortfall to the MCTB.  It sought summary judgment against EQC alleging that it was bound by its original apportionment.  The court in the context of a summary judgment could was not satisfied that EQC had no defence to the claim against it.  So the claim will proceed through the Court process as usual.  The estoppel cause of action against EQC looks to be a good case because there were representations by EQC, that were relied on by the MCTB to its financial detriment so that it would now be unfair to permit EQC to resile from the representations.

The liability insurer of the Christchurch City Council, Riskpool, on 5 July 2013 announced that it would not provide insurance cover for the Council for its role/liability under the Building Act 2004 from 1 July 2013.  Here is the link to the information on the Council website about its insurance position.   The cover ceases for insurance claims made after 1 July 2013.

Since its inception Justice Miller has run the earthquake list.  However, he has recently been appointed to the Court of Appeal.  So the earthquake list will be run by Justice Wylie.  The list current to 10 June 2013 is a available here.

This is a link to a clip about the claim by Conrad Walton and EQC & Fletchers that I am currently running through the District Court.  An example of what can go wrong with EQC & Fletchers.