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Far north cyclone property buy out

From 1 news

Twenty-five severe weather-hit Far North residential properties are in the spotlight for potential buyout and relocation.

The shortlisted properties have been identified as the most damaged by the severe weather that hit the North Island during January and February 2023 storms that included cyclones Gabrielle and Hale.

Detailed council-funded analysis to confirm their North Island weather events impact and Future of Severely Affected Land (FOSAL) programme participation is now underway.

Minister for Emergency Management and Recovery Mark Mitchell said agreement to relocate was a condition of any financial buyout support.

The worst-hit properties have been earmarked as potentially severely affected and now unsafe for living in because of ongoing intolerable risk to human life, due to the danger of future flooding or land slips. Homes and marae in these areas cannot remain or be rebuilt on their current sites. Affected land will be covenanted so no future residential building will be allowed.

FNDC is developing a Future of Severely Affected Land Voluntary Buy-out and Relocation Policy to underpin the work. This must be approved by the Government’s cyclone recovery unit.

Cyclone Gabrielle flooding in Kawakawa's Johnson Park on February 13, 2023.

Cyclone Gabrielle flooding in Kawakawa’s Johnson Park on February 13, 2023. (Source: Local Democracy Reporting)

The policy is required by the Government as part of its potential shared cyclone recovery unit work buyout and relocation funding. It is based on Auckland Council, Gisborne District Council and Masterton District Council policies and is expected to be formally adopted this week.

Public consultation on the policy ended on October 10.

FNDC manager climate and action resilience Esther Powell said council staff had started working with affected property owners.

The property buyouts and relocations will likely mean big extra unbudgeted cost for Far North District Council ratepayers — even though this cost is to be shared with the Government which will fund up to half the required money under the FOSAL programme.

“The implementation of the policy has the potential to impact ratepayers through unbudgeted financial expenditure…,” Powell said.

The Far North District Council must pay for the costs of demolition or otherwise remediating properties it buys under the scheme, as well as the cost of any dispute resolution process.

Mitchell wrote to the council in August reiterating earlier calls he had made in March and May, urging the Far North District Council to speed up its recovery project timelines to provide certainty for those affected.

Floodwaters blocking traffic in the Mid North's Taumarere during Cyclone Gabrielle.

Floodwaters blocking traffic in the Mid North’s Taumarere during Cyclone Gabrielle. (Source: Local Democracy Reporting)

“It is vital that this is carried out quickly and effectively, with a clear understanding of the scope and the limitations of the pathway to avoid raising unrealistic community expectations,” Mitchell said.

“I have asked CRU [cyclone recovery unit] officials to visit you in the Far North as a matter of priority, to discuss next steps.”

Government funding towards the buyouts and relocations is only available until June 30. The Far North District Council would have to pay out full costs after this deadline.

Mitchell said due to the time that had passed since the North Island severe weather events, the Government would need to be assured any damage to the earmarked properties was specifically caused at that time and not in previous or subsequent weather events.

The Far North programme has a separate thread for marae and land held in Māori freehold title, where landowners work directly the government instead of the council policy to sort buyouts and relocations.

The draft Far North District Council policy says this separate pathway recognised how any settlement gave effect to Te Tiriti o Waitangi and previous Treaty settlements. Māori landowners could choose to go through the government pathway or the council’s policy.

Sandbagging on Paihia waterfront against angry seas whipped up by Cyclone Gabrielle.

Sandbagging on Paihia waterfront against angry seas whipped up by Cyclone Gabrielle. (Source: Local Democracy Reporting)

Te Kahu o Taonui (Northland Iwi Chairs Forum) has been appointed to work with the Government’s cyclone recovery unit on this aspect.

Mitchell said the programme supported marae and Māori land’s affected owners and residents to “relocate out of harm’s way”.

Their land ownership would be retained, but agreeing to relocate was a condition of government financial support, Mitchell said.

Land ownership will retained for the wider affected properties too. All FOSAL programme land will be covenanted to prevent residential activity once owners are relocated and the residential dwellings cleared.

The Far North District Council will have the right to demolish or remove dwellings and reinstate sites to make them safe.

The wrath of Cyclone Gabrielle has its say on Paihia waterfront.

The wrath of Cyclone Gabrielle has its say on Paihia waterfront. (Source: Local Democracy Reporting)

The Far North properties’ buyout payments will be based on the market value of their residential dwelling and improvements at February 12, 2023.

Uninsured properties will be paid 80% of their market value on that date.

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Wairoa Flooding Class Action

On 16 July 2024 Grant Shand commenced proceedings in the Napier High Court against the Hawke’s Bay Regional Council for damage caused in the flooding on 26 June 2024 that damaged about 500 properties.  Here is the website with information about the claim.  The intent  is for this to be an opt out class action.  People who are insured for the loss and damage will need to check their policy wording to establish whether the insurer may have rights to bring proceedings and give notices in any class action.

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Port Hills Fire Appeal

In February 2017, a large number of residential properties located around Worsley’s Road in the Port Hills of Christchurch were badly damaged by fire. Some were completely destroyed. About 80 owners claimed their properties would never have been damaged or destroyed had it not been for the actions of the appellant Leisure Investments NZ Limited Partnership (Leisure Investments), the owner and operator of a nearby adventure park.  The High Court entered judgment for the plaintiffs against the Adventure Park for d damages totalling $10,296,041 together with interest and costs . In the judgment 31 March 2023 in Leisure Investments NZ Ltd Partnership v Grace & ors [2023] NZCA 89 the Court of Appeal dismissed the appeal and confirmed the liability in negligence, under the Forest and Rural Fires Act 1977  and in nuisance.  It confirmed awards for damages based on reinstatement costs, alternativc accommodation and general damages.

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Council Insurance Leaky Building

In Napier City Council v LGMFL [2022] NZCA 422 the Court of Appeal allowed an appeal by the Council on its ability to recover from its insurer (“Risk Pool”) for its contribution of $12.355M to settle a leaky building claim about Waterfront Apartments.  The Waterfront plaintiffs claimed about $20M of which $16.2M comprised costs of remediation.  The relevant insurance policy excluded cover for claims about weathertightness.  The insurance policy did cover non-weathertightness defects.  Contrary to the High Court decision the Court of Appeal decided that the exclusion removed cover only for Council liability from weathertightness defects.  The Council could recover from Risk Pool for non-weathertighness defects.  The dispute was sent back to the High Court for it to apportion the settlement between weathertight and non-weathertight defects and to determine whether the settlement was reasonable.  

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Southern Response DRA group action to end

By a judgment delivered 16 December 2021 by Osborne J in Ross v Southern Response Earthquake Services Ltd [2021] NZHC the High Court has granted the representative plaintiffs (Ross) permission to end the group action against Southern Response on terms that the Southern Response package is open to eligible homeowners until at least April 2023; dissatisfied homeowners can sue Southern Response without Southern Response raising a limitation defence for a further 18 months after discontinuance and oversight/reporting by a committee to the Court.  All eligible homeowners are now free to take up the package offer and the $2000 legal fee subsidy or to sue Southern Response.  Southern Response is to pay a confidential sum of money to the litigation funder CFA.

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Insurance payments and Interest

In the Sleight v Beckia Holdings Ltd & ors [2021] NZHC 456 judgment about costs and interest Gendall J ordered IAG to pay interest at 5% pa from June 2015 under s87 of the Judicature Act 1908 on the costs to repair the Sleights’ house at 24 Kinnaird Place, Christchurch.  He ordered interest from the date that IAG was made aware that its original earthquake repairs were defective in June 2015.  He awarded interest on the cost of the repairs as quantified in mid/late 2020.  Homeowners with failed earthquake repairs ought to seek interest from when EQC/Insurer should have know about the problem.  As the Sleights commenced the proceeding pre 1 January 2018 the Interest on Money Claims Act 2016 did not apply.  IAG has appealed this judgment.

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IAG loses costs judgment on failed earthquake repairs

In Bruce & ors v IAG New Zealand Ltd & ors [2020] NZHC 3051 the High Court ordered IAG to pay costs of $83,179 and disbursements of $121,899 to the Bruces subsequent to the High Court judgment in Bruce & ors v IAG New Zealand Ltd [2018] NZHC 3444.  IAG argued that the Bruces were not successful and in fact IAG had been successful.  Mallon J disagreed and said that the Bruces were the successful party for the purposes of assessing costs.  IAG delayed admitting defects, lost trial issues and ended up paying more than it had ever previously offered.

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IAG, Farrells, QBE & Hawkins lose insurance test case

The High Court in Sleight v Beckia Holdings Ltd (in liq) & ors [2020] NZHC 2851 has found all defendants liable for $389,848 being the costs to repair an earthquake damaged house at 24 Kinnaird Place, Christchurch to the policy standard of “when new”.  IAG insured the earthquake damaged house.  IAG purported to repair the house as part of its managed repair programme with Hawkins as the project manager.  Hawkins, now in liquidation, was insured by QBE.  Farrells, now known as Beckia, was the builder that did the repairs.  The house was defectively repaired.  The build contract for the repairs was between Sleight and Farrells, but it referred to IAG and Hawkins performing roles.  The Court decided that the defendants were liable because the work done did not meet the policy standard and/or the standard required by the Consumer Guarantees Act.  The Court did not award any general damages.  Based on the written agreements between IAG and Hawkins, Iag was required to indemnify QBE for $260K of the judgment.  This is an excellent result for homeowners.  Likely to be appeals.

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Owners lose earthquake case

Owners of 12 units at 152 and 160 Salisbury St, Christchurch sued Vero Insurance seeking a declaration from the High Court that by reason of earthquake damage they were entitled to have the buildings rebuilt under their Vero insurance policy.  Vero said the buildings could be repaired to meet the policy standard of”when new”.  The High Court released its judgment in Body Corporate 335089 v Vero Insurance New Zealand Ltd [2020] NZHC 2353 on  10 September 2020  more than a year after court hearing finished.    The evidence for the owners failed to prove more than minimal earthquake damage by cracking and minor floor level changes.  The argument that because the buildings have dropped was not of itself enough to lead to rebuild as relativities with floor levels, ground levels and service slopes could be maintained. So the Court refused to make the declaration sought by the owners.  Costs will follow the event so this will be an expensive loss for the homeowners.

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Insurers lose Covid 19 Business Interruption Insurance Test Case

The recent High Court judgment 15 September 2020 in the UK test case of The Financial Market Authority v Arch Insurance (UK) Ltd & ors [2020] EWHC 2448 (Comm) is all bad for insurers of business interruption insurance claims in NZ.  It says that disease extensions provide cover as do some Government authority extensions, but most importantly it says that the case of Orient-Express Hotels Limited -v- Assicurazioni Generali S.p.A. [2010] EWHC 1186 (Comm) that insurers rely on to limit liability is wrong.

FCA is the regulator of the insurers in the UK.  It brought a test case on various specimen wordings by underwriters of business interruption insurance arising in the context of the Covid 19 pandemic.  The trial took place over Skype in front of a 2 Judge divisional court.  It considered 21 lead policies underwritten by 8 insurers.  700 types of policies by 60 insurers are affected by the test case.

The test case was a policy interpretation exercise.  It considered the application of policy clauses about indemnity for disease, government authority, trends clauses and causation.  Firstly it looked at disease clause extensions that provide  cover for business interruption arising from the occurrence of a notifiable disease within a specified radius of the insured premises.  It said that there needs to be a causal connection to the business interruption, but less than proximate/but for causation.  It is enough if there is a case within the required radius.

It looked at hybrid clauses – disease combined with government restrictions.  Inability to use following restrictions following disease.  Must be enforceable restrictions.  Guidance is not enough.

It looked at prevention of access clauses.  This is  prevention of access by government restriction.  Prevention is greater than hinderance.  It must be legally enforceable restriction.

The final issue was causation.   Insurers relied on the Oriental Express case – OEH owned a hotel in French quarter of Louisiana damaged by Hurricane Katrina.  Since hurricanes damaged the rest of New Orleans OEH still would have suffered loss even if hotel was undamaged.  So the Court then said Orient Express would have suffered the business loss even if its own building was not damaged.  Adopted “but for” causation.  The Court now said Orient Express did not apply and was wrongly decided.  It adopted too narrow a view of insured peril.  The insured peril was damage and hurricane.  So the building damage and other hurricane effects could not be excluded.

Hopefully this case encourages more people to bring BI claims against insurance companies.

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