Here is a link to Tower’s 29 November 2016 announcement to the market about its $21.5M loss for the year to 30 September 2016 and its intent to try to separate out its Canterbury earthquake liabilities into a Ru off company.  It says that it has 564 claims unsettled in Canterbury for which it has made a gross provision of $149M.  It says of this 564 there are 311 that are complex and challenging.  The provision works out at $264,000 per claim.  Seems a bit low to me.  It is also uncertain who and how the Run off company will be funded.  Tower proposes informing shareholders of the plan details in March 2017.  If you have an unsettled claim with Tower to maximise recovery insureds need to aggressively pursue the claim now. Sue it if you have not already and squeeze an outcome quickly.

EQC expects 50,000 claims from the Kaikoura earthquake(s).  It has received about 10,000 so far.  EQC received more than 460,000 claims for 166,000 buildings in Canterbury.  EQC says it has about 5000 failed remedial work claims to deal with.  EQC says that it has 3647 land claims to settle in Canterbury.  It says it has resolved 49,000 land claims so far.  Resolved to EQC means EQC has paid what it think it owes.  The Crown has not received any payments from EQC for land damage to red zone land acquired by the Crown.

Below is a memo from the Property Law Section of the NZ Law Society about property settlements post earthquake(s).

Post-Quake Property Settlement Considerations

Recent events have not only changed the physical landscape, but also that of conveyancing and settlements. The purpose of this memo is to raise awareness of some of the factors that must now be considered when advising clients and determining the most appropriate course of action to take. While it is impossible to address every scenario, the matters raised below should allow an application of general principles to most situations.

1.  Insurance Issues

Many of you will be aware that insurers have placed embargoes on any new insurance policies being accepted within certain areas. Some have excluded all areas stretching from Canterbury all the way north to the Bay of Plenty. That will of course be problematic for imminent settlements where insurance is yet to be arranged.

The experience in Christchurch was for a purchaser to apply to the vendor’s insurer for a continuation of insurance (in the purchaser’s name). Arguably in that case there is no ‘new’ risk, merely a continuation of the existing risk.

That option also avoids the potential debate where a new insurer may claim that the damage was prior to them accepting the risk. Often any new insurer will require specialist reports on the building (and possibly a geotechnical report on the land stability) prior to accepting the risk.

The delays in obtaining insurance cover may well result in a delay of settlement as no mortgagee will advance without cover being in place.

In Christchurch it has become standard practice to have the vendor execute a Deed of Assignment in favour of the purchaser for any interest, be it current or residual, of any EQC or insurance claim.

It is accordingly important to ensure that claims are lodged by the owner at the time of the quake with EQC and their insurer for any potential damage. There may be structural issues that are not readily apparent from mere visual, non-invasive inspection. A failure to lodge a claim from the outset could result in a time bar for any future claim. Furthermore, once the vendor has settled there will be little incentive for their co-operation.

2. Banks

Some banks are understandably ‘nervous’ about advancing funds on properties that may have sustained damage. For example, ANZ has specified various zones around the country and linked additional requirements as a pre-requisite for drawdown of funds. (See attached link to ANZ requirements).

These requirements will necessitate some form of inspection and may cause delays in settlement. Justification for cancellation of an agreement for damage is addressed in Clause 4.2 of the ADLSi Agreement for Sale and Purchase form. The options are quite limited.

The client needs to be advised of the risk of penalty interest for late settlement, but on balance they need to ensure other aspects have been addressed as outlined in this memo prior to settlement. It is also important to remain aware of the obligations to the mortgagee as a client and ensure compliance with the letter of instruction and Solicitor’s Certificate.

3.  Acting for a Purchaser – Agreement conditional

Where an Agreement is still conditional upon finance, there is an opportunity for adding the requirements of the mortgagee, such as additional engineering or building inspections.

The other additional clause to include is the requirement for the vendor to warrant that EQC and insurance claims have been lodged (if applicable) and that the vendor will upon settlement provide a Deed of Assignment of such claims. (The Deed of Assignment is to be prepared by the purchaser based on the claim number information provided by the vendor.)

Where an Agreement is being negotiated, it may be desirable to insert a condition that the Agreement is subject to the Purchaser being able to arrange adequate insurance cover on the property.

4. Acting for a Purchaser – Agreement unconditional

This scenario is more problematic, especially where the mortgagee may now be imposing additional requirements to those in the original approval letter. They are of course contractually entitled to do so in terms of their approval letters and loan agreements where there is any ‘material change in circumstances’.

A pragmatic approach is recommended. If the vendor does not co-operate with the purchaser in complying with the mortgagee’s requirements, there will inevitably be an inability to settle which disadvantages both parties. Co-operation is the only practical solution here.

5.  Acting for a Vendor – Agreement conditional

The flip-side of the recommendations to the purchaser above applies here. From a purely contractual perspective, if the agreement is conditional upon finance approval and the mortgagee requires a building report, engineer’s report or geotechnical survey then they are all part of that approval. It may well mean that an extension of time for satisfaction of that condition is required and possibly deferring the settlement date, but that is better than no settlement.

6.  Acting for a Vendor – Agreement unconditional

Quite simply, if the purchaser’s mortgagee withdraws its finance approval or imposes additional inspection requirements, then, the vendor is largely in the same position as if the agreement remained conditional. There is little to be gained by not co-operating and simply insisting on settlement and then issuing a default notice and claim for penalty interest. Again a degree of pragmatism must prevail.

Duncan Terris
NZLS Property Law Section

16 November 2016

Here is the 2016 Report on the Christchurch Earthquake Litigation List by the Chief High Court Judge.  Points of note are:

  1.  302 new proceedings since 30 September 2015;
  2.  This includes 53 cases involving alleged defective or inadequate repairs;
  3.  More Judges to be allocated to earthquake cases;
  4.  In the year 125 cases were settled and discontinued and only 2 required a full hearing and judgment;
  5.  There are 400 active cases of which 55 are set down for trial and 345 are in the case management process;
  6.  More Judge time will allocated to early judicial settlement conferences;
  7.  Only 1 case awaits disposal in the Court of Appeal.


We are fast approaching 6 years since the 22 February 2011 earthquake.  This is to remind people of limitation issues that were highlighted prior to the 6 year anniversary of the 4 September 2010 earthquake.  IAG said that it would not extend any limitation period for claims by body corporates or commercial claims.  Other insurers have also not provided a global extension for commercial claims.  So to be safe these ought to be filed in a Court by 21 February 2017.  AA, Tower, FMG, MAS and Vero have agreed not to plead a limitation defence to any claims filed before 4 September 2017.  Southern Response will not rely on a limitation defence in any court proceedings filed before 4 September 2018. IAG had said via the insurance council that it would not plead a limitation defence to any claims filed before 4 September 2017.    Subsequently in a press release it altered that date to June 2018.  EQC has said that it will consider the 6 year limitation period runs from where a claim is settled that date, where claim is not settled when it settled or declined the claim and/or when it declined the claim the date of declinature.   None of the above has any effect on claims against insurance brokers etc that are related to the earthquake(s).

It is coming up to 6 years since Western Pacific Insurance Ltd (“in liq”) was placed into liquidation by its shareholders on 1 April 2011.  Time is fast running out to sue insurance brokers who placed insurance cover with Western Pacific in circumstances where there were solvency issues.  We are aware of about 6 court proceedings against brokers arising out of Western Pacific from unsatisfied earthquake claims.  We are also aware that brokers have notified their insurers of a likelihood of many more claims from the earthquakes.  The six period for suing the broker(s) is running out.

In Ramage v EQC & Southern Response [2016] NZHC 2327 the High Court considered an award of costs against Southern Response after it settled a claim at a mediation, but with costs not agreed.  EQC prior the Court hearing had agreed to pay costs of $32,677.51.  The judgment is notable at para [27] for the statement that success against EQC is determined by whether EQC concedes the claim is over cap.  If so, then EQC should be liable for costs of at least 50%.  Southern Response was found to have acted unreasonably by not disclosing complete DRA’s.  It also acted unreasonably by agreeing with EQC’s position that the claim was under cap when its own assessments showed that it assessed the claim as over cap.  Notwithstanding the success by the Ramages in getting a settlement from Southern Response above previous offers the Court only awarded 25% of the costs from Southern Response.  This % is difficult to reconcile with previous decisions.

On 13 October 2016 the current controllers of the High Court Earthquake list presented information about its operation.  Here are some interesting stats.  Court filings by year: 2010-1; 2011- 3; 2012- 52; 2013- 196; 2014- 135; 2015-66; 2016-283.  Percentage of cases disposed of by year: 2010-100%; 2011- 100%; 2012-98%; 2013- 89%; 2014- 66%; 2015-23%; 2016-1%.  52% of cases settled with less than 1 month before the trial date.  The 2016 spike is caused by the pre limitation period expiry for the 4 September 2010 earthquake.   We expect a similar spike in early 2017.


The Court of Appeal in Yarrall & anor v EQC [2016] NZCA 517 dismissed an appeal against a costs judgment where the High Court had ordered the homeowner to pay EQC costs of $23,482 plus disbursements of $121.40.  The homeowners sued EQC challenging the apportionment of damage between the quakes.  Before the homeowners commenced the proceedings in August 2013 the insurer had accepted the EQC apportionment and had agreed to replace the house.  The dispute proceeded through the High Court earthquake list process until in May 2014 the homeowners accepted that the proceeding would serve no practical purpose.  On 23 May 2014 the homeowners filed a notice of discontinuance.  EQC applied for costs.  The costs award is understandable.  The homeowners achieved nothing by the proceeding.  EQC did not change its position and the apportionment had no prejudice to the homeowners.