Gold Coast City Council v Lasica
[2002] QDC 261
•16 October 2002
DISTRICT COURT OF QUEENSLAND
CITATION:
Gold Coast City Council v Lasica [2002] QDC 261
PARTIES:
COUNCIL OF THE CITY OF GOLD COAST
Plaintiff
v
BOGDAN LASICA
Defendant
and
JOHN McDONALD
First Third Party
and
MICHAEL SING & ASSOCIATES, GADENS LAWYERS
Second Third Parties
FILE NO/S:
D1089 of 2001
DIVISION:
PROCEEDING:
Assessment of damages
ORIGINATING COURT:
District Court at Southport
DELIVERED ON:
16 October 2002
DELIVERED AT:
Brisbane
HEARING DATE:
9 September 2002
JUDGE:
McGill DCJ
ORDER:
Damages assessed at $37,232.
CATCHWORDS:
INSURANCE – Fire – quantification of loss – lessor of part of park reserve – damaged building demolished – determination of true value of building to lessor.
LANDLORD AND TENANT – Covenants – To Insure – breach – assessment of damages – lease of part of park reserve – determination of true value of building to lessor.
AFG Insurances Ltd v Brighton City Council (1972) 126 CLR 655 – applied.
Lucas v The New Zealand Insurance Co Ltd [1983] 1 VR 698 – considered.COUNSEL:
A P Collins for the plaintiff
D L K Atkinson for the third parties
SOLICITORS:
Gall Standfield & Smith for the plaintiff
Cranston McEachern for the defendantBarry & Nilsson for the third parties
By this action the plaintiff sought from the defendant moneys payable pursuant to a lease, and damages for breach of the lease. On 22 February 2002 his Honour Judge Hall gave judgment for a certain sum for moneys owing under the lease, and judgment pursuant to r 190 for damages to be assessed in respect of the plaintiff’s claim for damages particularised in paragraph 4 of the plaintiff’s statement of claim. Paragraph 4 alleged that, as a consequence of a fire by which the demised premises suffered extensive damage, the plaintiff (the lessor) had suffered loss being the value of the premises at the date of the fire and the cost of demolition.
The defendant has brought third party proceedings, which have not yet been tried. The third parties were given leave to appear at the assessment and to protect their interests, by cross-examination and submission: UCPR r.203(1), and r.510. The assessment is analogous to a trial (r.509), and in the circumstances I considered that that was appropriate.
Damages for what?
The defendant was the assignee of the lessee under the lease: Exhibit 11. The lease contained a covenant by the lessee to keep the building and all improvements fixtures and fittings therein insured in the name of the plaintiff as owner (and the lessee) against loss or damage inter alia by fire “in the full replacement value thereof”: Exhibit 8, clause 4(b). The defendant had not kept the premises insured in respect of the plaintiff’s interest, and as a result when the premises were extensively damaged by fire the plaintiff suffered loss, in that it lost what it would have been paid by the insurance company if there had been in place at that time an insurance policy in accordance with the requirements of the lease. The issue on this assessment is, what is the amount of that loss? That is to say, what amount would the plaintiff have been paid under the insurance policy had there been an insurance policy in place as required by the lease?
Ordinarily, a policy of insurance being a contract of indemnity, the lessor’s loss in such circumstances will be the cost of the damage done by the fire, not exceeding the limit of the indemnity under the policy.[1] But in the present case there was some debate as to exactly what the extent of the plaintiff’s loss was, because of the unusual nature of the demised premises.
[1]Ivamy “Fire and Motor Insurance” 4th Ed 1984 p.164; British Traders Insurance Co Ltd v Monson (1964) 111 CLR 86.
The demised premises
The plaintiff was, pursuant to an order in council made in 1969, given by the Crown control and management of an area of land set apart as a reserve for park purposes: Exhibit 8. The park in question is the strip of parkland immediately behind the foreshore at South Broadbeach, in the vicinity of Kurrawa Surf Lifesaving Club.[2] In 1987 the plaintiff, being concerned to enhance the amenity of the park by the establishment of a kiosk and restaurant, granted, with the consent of the Minister for Lands, Forestry and Police, a lease of a small portion of land in the park for a term of 20 years, commencing from 1 April 1984. By clause 10 of the lease the lessee covenanted with the plaintiff to construct at the cost of the lessee a building suitable for use as a kiosk, based on a sketch provided by the plaintiff and in accordance with the lessee’s tender, at a cost of not less than $95,000, and install plant and equipment costing not less than $25,000. The rent was determined bearing in mind that the lessee had the obligation to construct the building and maintain and operate the kiosk as an amenity in the park: p.56.
[2]Prior to its dedication as a park the land had been a sand mining site. No doubt but for that it would have become freehold land like most of the rest of the foreshore land on the Gold Coast.
The building was duly constructed on the site. It was an hexagonal building of which a little under one-sixth was a snack bar, with the balance being largely occupied by a restaurant, kitchen, storeroom and other amenities: Exhibit 7. It remained in operation at the park until damaged by fire on or about 9 August 2001. It was accepted that there was no obligation on the defendant to repair or rebuild the building: p.37.
Following the fire, the building was inspected and had suffered extensive damage, particularly in certain areas where the fire had been concentrated. Some photographs of the damage are Exhibit 2. Because of the fire and in view of certain other breaches of the lease by the defendant the plaintiff terminated the lease in September 2001: Exhibit 6. The remains were demolished, a process which involved digging up and removing the concrete foundations (p.7), filling the hole thereby created with soil, and turfing over the site so as to reinstate as lawn that section of parkland on which the building had previously been constructed: Exhibit 3.
What would have happened without a fire?
The lease was in 1999 assigned to the defendant with the consent of the plaintiff: Exhibit 11. The defendant at that time by a deed of covenant inter alia acknowledged that the plaintiff would grant no further extension of the lease subsequent to its expiry date on 31 March 2004: Exhibit 11, clause 1(f), and see p.40. Since the 1980’s the approach of the plaintiff to the use of parkland in this way has changed somewhat, and, so far as it is possible to tell at the moment, the policy of the council, had the lease run until 2004, was likely to be that at that time the premises would have been vacated and either demolished or made available to some community group for some use consistent with the use of the whole reserve as a park: p.40-1.
This is not just a matter for choice of the plaintiff; because the land is held as a reserve by the council any lease requires the consent of the Minister, and the attitude of the Minister to a commercial development in the area may well be very different now from what it was in the 1980’s. There is the consideration that the area in the vicinity of this park is now amply supplied with restaurants, and to some extent snack bars, because there is a substantial shopping centre directly across the road from the Surf Lifesaving Club: p.42. Although the snack bar would be more convenient as a source of snacks for people on the beach, the facility otherwise appears to me to have no relevance to the current use of the park as a park, or to satisfy any public need for such an amenity. The plaintiff may well have thought the same.
The difficulty in assessing the value of the building is that, because of the circumstances under which it came to be held by the plaintiff, and the restrictions on its use, the building does not really have a value in the ordinary sense. It could not have been sold by the council, so its value is not what the demised land could have been sold for as freehold, less whatever it could have been sold for as vacant land.[3] There was no evidence that the structure was capable of being removed, and no evidence of its value for removal, and I will assume that it would not have been practicable to remove the building to another site, so that it had no value on that basis.
[3]There is no evidence on this point, Mr Kennedy being unwilling to express an opinion (p.23), but I suspect that, had such a sale been possible, there would have been little difference before the fire, and no difference after the fire.
If the lease had continued, it presumably would have continued to generate rent for the plaintiff for the balance of the term, so the building can be said to have had a value as the source of a stream of income for the balance of the term. Apart from that however it becomes more difficult to assess the value of the building. The effect of the evidence was that, if the building had still been there when the lease came to an end (or was earlier terminated), one of three things would have happened: the building would have been demolished and the land reinstated as parkland, or the building would have been retained but made available to some community group for some public purpose, at a nominal annual rent,[4] or the site would have been made available by tender[5] for commercial use.
[4]The typical rent in such circumstances was $100 per annum: p.55. Some community groups had been interested in the site: p.36.
[5]Any such use would have involved calling commercial tenders: p.43.
Hypothesis 1: commercial redevelopment
On the evidence, the third of these would have been the least likely (p.42, p.53), but it would have been possible depending on the attitude to such a use of this part of the park by the plaintiff and the State Government. Given the site, it is likely that there would have been considerable commercial interest in it, and the plaintiff’s coordinator of civic property gave evidence that on one occasion a potential assignee of the lease of the site had indicated an intention to spend $800,000 on updating and improving the facility, “bringing it up to speed”: p.52. It is difficult to think that very much of the existing structure, the aesthetics of which were referred to somewhat unfavourably by the witnesses,[6] would have been of much benefit in circumstances where such an extensive renovation was contemplated.[7] Indeed, there was no evidence that, if the plaintiff were to make the site available for commercial development, it would receive a more favourable proposal from any potential developer as a result of the presence of the previous structure on the land, or a less favourable proposal as a result of its being in its damaged state following the fire.
[6]See eg Mr Kennedy “dated” (p.25); Mr Madden “its in the eyes of the beholder”: p.53.
[7]The plaintiff’s valuer Mr Kennedy was of the opinion that any purchaser of the property would have wanted to redevelop it: p.16.
My own view is that, if any developer were contemplating spending something of the order of $800,000 on redevelopment of the site, the existing structure would have been largely irrelevant, and indeed the site may actually be more attractive to a developer without it. My view is not evidence of course, but in circumstances where there is an absence of evidence to the contrary I am not persuaded that, viewed as a potential commercial redevelopment site, the premises became less valuable to the plaintiff as a result of the damage they suffered in the fire. In other words, I am not persuaded that any damage done would not have been subsumed anyway in the demolition associated with any redevelopment, and would therefore have been irrelevant to the economic value of the site to the plaintiff as a redevelopment site. In theory the plaintiff has lost the salvage value of the materials in the structure,[8] but there was no evidence that they had any.
[8]Falcon Investments Corporation (NZ) v State Insurance General Manager [1975] 1 NZLR 520.
Hypothesis 2: demolition
If the premises were going to be demolished anyway by the plaintiff when the lease expired, the only way in which the plaintiff is worse off as a result of the fire is that it has been put to the cost of demolition earlier than would otherwise have been the case, and it has lost the rent that it would otherwise have received from the defendant during the period prior to the expiration of the lease. The plaintiff has already obtained judgment for $7,643.34 in respect of unpaid rent, which included rent for the quarter July – September 2001: Exhibit 12. Accordingly the loss has been three and a half years rent, which at the rate when the lease was terminated ($2,547.78 per quarter) is $35,668.92. Strictly speaking this figure should be discounted to allow for its receipt as a lump sum rather than over the period of the balance of the lease; however the lease provided for some indexation of rent, which I have to ignore because there is no way that I can determine what the indexation rate would have been, and these two factors would tend to cancel out.
Demolition of the premises cost the plaintiff $9,500 (Exhibit 1) and it spent a further $8,910 on reinstating the lawn in the park: Exhibit 3. This work occurred in the latter part of 2001, and would presumably otherwise have occurred in the latter part of 2004, so the plaintiff should recover this amount, less the value, in the latter part of 2001, of the cost of the work in three years time. The present value of $18,410 in three years time, discounted at 3% per annum, is $16,847, so the loss suffered by the plaintiff as a result of the demolition being brought forward three years was $1,563. Accordingly if the plaintiff was going to demolish the building anyway once the lease expired, the loss the plaintiff suffered as a result of the fire was $37,232.
Hypothesis 3: community use
The more difficult question is how the value of the building is to be assessed if its future was as premises made available to some community group for a nominal rent for community purposes consistent with the use of the reserve as a park. In those circumstances the premises would have been of little commercial value to the plaintiff, but the plaintiff is not simply a commercial organisation; much of its property is devoted to non-commercial purposes for the benefit of the community (p.56), but that does not mean that that property has no value and no insurable value. In that context it is relevant in my opinion to consider what might be described as the non-commercial special value of the premises to the plaintiff. If a Council structure is performing an important and necessary but non-commercial function, so that if it is damaged or destroyed it will be repaired or rebuilt, then the value to the Council and therefore the insurable loss can be readily identified as the cost of repair or reinstatement.[9]
[9]See the example of a church given in Ivamy, op cit, p.173. See also AFG Insurances Ltd v Brighton City Council (1972) 126 CLR 655.
The difficulty here is that any such community purpose use would probably not really be consistent with the existing nature of the structure, so that it would be a building made available for some community purpose because it happened to be available rather than because it was necessarily particularly suitable to that purpose. If a new building were being provided for the particular community purpose I expect something different and more suited to the requirements of that purpose would be constructed. What the plaintiff has lost on this hypothesis is the benefit of a structure which could have been used for a community purpose but was not really suitable for that use. That may be properly valued at something less than the repair or replacement cost.
That is shown by the fact that, confronted with the building in its damaged state, the plaintiff chose not to repair it notwithstanding that it had the benefit of an estimate from a building engineer that the repair cost would be in the general vicinity of $65,000: Exhibit 9, p.51. The fact that the plaintiff chose not to spend that money on repairs indicates that, from the plaintiff’s point of view, this building as a public amenity or site for some community use was not worth $65,000.
The plaintiff’s case
The plaintiff’s case was that the amount recoverable from the insurer under the policy was either the cost of replacing the building, or, if the building were not replaced, the value of the asset lost to the plaintiff, in each case plus the cost of demolishing the building. In the latter case, the cost of reinstatement of the lawn in the park was also claimed. In support of this there was evidence from a valuer, Mr Kennedy, who prepared a valuation on a replacement basis of the undamaged building inclusive of internal walls but excluding furniture, fixtures and fittings at $202,150: Exhibit 4. Mr Kennedy derived the valuation by reference to a publication Rawlinsons Building Costs Estimates, which is commonly referred to in respect of replacement costs: p.14. In doing his calculation he attributed no value to the existing walls of the building in its damaged state: p.16.
Mr Kennedy also valued 40.8 square metres of covered paved area at $6,120, and 67.2 square metres of covered outdoor eating area at $3,360. However, it is not apparent to me that either of these were constructed on any part of the land which was leased to the first defendant, and accordingly there would not have been any obligation to provide insurance cover in respect of them under the provision in the lease requiring cover for the demised premises. In any case, there was no evidence of any damage to these parts; they may well now have been removed, but that was as a result of the plaintiff’s decision to reinstate the area as lawn. Mr Kennedy said that the concrete paving would have been replaced because it was dated and unattractive rather than because of the damage done to it in the fire: p.18. The replacement value of the building therefore was $202,150.
Mr Kennedy expressed the opinion however that the value of the existing structure as it was immediately before the fire (again disregarding fixtures and fittings) had what he described as a depreciated value of approximately $165,000. This simply represented some allowance for the fact that what was there at the time was not a new building, and if the restaurant was reconstructed the plaintiff would end up with a new building rather than one which was almost 20 years old. The valuation of the depreciated structure was determined bearing in mind what a prudent purchaser would have paid for it prior to the fire: p.16.
There was some criticism of Mr Kennedy’s valuation, because it was based on a publication dealing with standard building costs, from which a figure was calculated by reference to the area, and was not specific to the nature of the site or the type of building that would be constructed. Further, there was no entry really suitable for buildings in this category, and Mr Kennedy had chosen a figure which was intermediate between an industrial construction and an office commercial structure: p.20. It was not half way in between, being closer to the office rate, as a matter of expert judgement by Mr Kennedy: p.21. Mr Kennedy however has no expertise in building cost as such.
Another way to value the property would be to value it as a commercial enterprise, that is as a source of a stream of rent. Such a valuation makes no assumption about what will happen in future, other than the fairly general assumption that the premises will continue to be used as a restaurant. The valuation process on a capitalisation of earnings basis involves determining the net rental return on an annual basis and then multiplying that by a suitable capitalisation rate: p.26-7. Mr Kennedy said that, on the basis of his general experience, a capitalisation rate of the order of 8 to 12 per cent would be appropriate. Assuming a rate of 10 per cent applied to the annual rent of $10,191.12 (assuming that the lessee paid all the outgoings) that produces a valuation on this basis of $101,911.20. A valuer would adopt the figure of $100,000 (p.28); Mr Kennedy did not give that particular figure in evidence, but it follows mathematically from the approach to valuation which he described. That suggests that either his valuation of the premises was too high, or the rental being charged under the lease was too low. The latter may well be the case, given that the lease was originally granted on the basis that the improvements be constructed on the land; one would expect a rental under such a lease to be less than normal market value for rental of the premises in their improved state.[10] Mr Kennedy said that such a calculation should be carried out on the basis of a market rent, which he could not assess on the spot: p.27.
[10]Mr Madden thought that a commercial rent for the site would have been much greater than was being achieved: p.50. No party objected to this evidence, although it is not clear that he was able to give such evidence.
There was some criticism about the approach adopted by Mr Kennedy, but there is no other evidence of the value in the sense of the market value of the building prior to the fire, and if it were necessary for me to make a finding about that amount I would accept Mr Kennedy’s figure of approximately $165,000. Ultimately I did not understand that the plaintiff was pressing for the full replacement cost. That in my opinion was realistic. Although in a particular case if there was a policy a good deal would depend on the wording of the policy concerned, generally speaking providing an indemnity against loss does not require the insurer to pay the cost of new premises without there being some allowance made for the “new for old” factor: Vintix Pty Ltd v Lumley General Insurance Ltd (1991) 24 NSWLR 627 at 634. It may be appropriate indeed to apply principles of betterment even where the measure of indemnity is the cost of repairs, although that is not necessarily the case and it seems that there is at least an evidentiary onus on an insurer to establish that, without some deduction for betterment, the effect of paying the cost of repair will be that the insured is obtaining more than an indemnity: General Accident Insurance Asia Ltd v Sakr (2001) 11 ANZ Insurance Cases #61-508.
The authorities
It seems to me that the authorities generally support the statements in Ivamy “Fire and Motor Insurance” 4th edition 1984 p.164 and 170: “In the case of a partial loss, where the subject matter has not been destroyed, but damaged, the insured, being entitled to an indemnity only, cannot recover more than the amount of the damage sustained. … In the case of a partial loss, the cost of reinstatement is in many instances the only available measure of indemnity.” A useful general statement of principle in this area may be found in Lucas v The New Zealand Insurance Co Ltd [1983] 1 VR 698 at 701-2:
“In determining the value of the property lost it must be borne in mind that it is not the value in an abstract sense that is to be assessed, but the value of the property to the insured. That is to say that it is the insured’s actual loss that is recoverable: See Canadian National Fire Insurance Co v Colonsay Hotel Co [1923] 3 DLR 1001. So, if the insured should have a house property on the market for sale for a stipulated price at the time of its destruction by fire then the ‘real value’ to the insured of the property, and so the measure of his loss, is that price (less the site value) and not the cost of its replacement: Leppard v Excess Insurance Co Ltd [1979] 1 WLR 512. Or, should the insured of a house property be intending at the time of its being destroyed by fire in the near future to demolish the house in preparation for the development of the site, then the value of the house to the insured may be little more than the value of salvage materials upon its demolition: Falcon Investments Corporation (NZ) v State Insurance General Manager [1975] 1 NZLR 520. On the other hand, the property in question may have a value to the insured beyond the market value because it was held by him for the purpose of using it enjoying it as a house – see Bowen LJ in Castellain v Preston [(1883) 11 QBD 380] at 400 – or in carrying on his business: Grant v Aetna Insurance Co (1862) 15 Moo 516 at pp.518-9; 15 ER 589, where there is set out the direction given to the jury the correctness of which in this connection was not challenged on appeal to the Privy Council. In such cases, the insured can be granted the full indemnity to which he is entitled only if there is such restoration as to permit his continued use and enjoyment of the property or its use in the carrying of his business. The cost of reinstatement is the measure of indemnity in such circumstances even though that cost may be in excess of the market value. It is often more likely that where the loss is partial only, then, indemnification will require payment of the cost of repairs. Theoretically this cost should be the same as market value, but experience shows that this is rarely so – even if some allowance is made for the ‘new for old’ principle (which it is not suggested should be applied in this case). For the purpose of assessing the correct indemnity to be made the determination of whether a loss is total or partial is a question of fact: see Ivamy, Fire and Motor Insurance, 3rd edition, pp.164-9; Sutton Insurance Law in Australia and New Zealand, (1980) para 15.64; and Elcock v Thomson [1949] 2 KB 755 at 764.”
His Honour went on to conclude that on the facts of that case the actual loss to the plaintiffs was the cost of repairs necessary to reinstate the fire caused damage, which had caused partial but by no means complete destruction of the improvements.
Another case where it was held that the cost of repairs was the appropriate measure of indemnity where a building had been extensively damage by fire was Marek v CGA Fire & Accident Insurance Co Ltd (1985) 3 ANZ Insurance Cases #60-665. There an historic home was very extensively damaged, and it was held that because of the particular nature of the structure, which effectively made it irreplaceable in the market, the proper measure of indemnity was the cost of repair even though that exceeded its market value prior to the fire. In the earlier case of Duke of Newcastle v Broxtowe Hundred (1832) 4 B&Ad 273, 110 ER 458, in respect of riot damage to Nottingham Castle, indemnity required payment for the cost of repairs rather than a figure based on the rental value.
However, in the present case the opposite appears to be the situation. The only evidence of the cost of repairs was the figure of $65,000 in Exhibit 9. My impression from that exhibit (and the person responsible for that estimate was not called) is that it was a very rough, and perhaps superficial, estimate, but it was admissible against the plaintiff as an admission, and neither the plaintiff nor any other person called any other evidence of the cost of repairs.[11] As with the evidence of Mr Kennedy, notwithstanding any reservations I might have as to its reliability, it is the best available evidence and therefore doing the best I can I should accept it. There was no evidence that the premises as repaired would have a market value less than the value before the fire. Given the considerations referred to earlier, in my opinion it is most unlikely that there would have been any difference. In these circumstances it is difficult to see how an insurance policy which would have been a policy of indemnity would have provided the plaintiff with more than the cost of repair.
[11]Mr Madden said that this did not include the cost of repairs to the roof, which was a further $30,000: p.54. However, there is a figure of $10,000 included in Exhibit 9 which covers a number of things including “roof”; and it may be that Mr Madden was speaking of a modification of the roof on aesthetic grounds.
The decision of AFG Insurances Ltd v Brighton City Council (1972) 126 CLR 655, is of assistance. Some Crown land had been leased to the respondent on which was erected a swimming baths, a restaurant and a manager’s residence. The restaurant was subleased, and covered by a policy of fire insurance. It was extensively damaged by fire. Mason J (as he then was), with whom the other members of the High Court agreed, said at p.660: “Had it not been for the existence of a covenant to repair contained in clause 2(e) of the Crown lease and a liability under clause 2(g) to reimburse the Crown for the cost of repairs which it carries out, the value of the respondent’s interest as lessee and the measure of its loss would have been restricted to the cost of the reinstatement of the manager’s flat and the present value of the loss of future rents [of the restaurant]. The appeal turns therefore on the extent of the respondent’s liability under the covenant to repair.” His Honour then dealt with the submission that there was a contractual right under the lease in the circumstances which would avoid the liability to repair, so that the matter turned on whether the respondent was obliged to exercise that right, or rather was to have its loss calculated on the assumption that the right would be exercised. Mason J said at p.663: “Although an insured person is in general not entitled to recover more than an indemnity under a policy of fire insurance, he is entitled to recover a full indemnity. If effect be given to the appellant’s submission, the respondent would recover less than a full indemnity. The respondent by taking a course designed to avoid liability under the covenant to repair would continue as lessee of premises without the benefit of the valuable improvements forming part of the premises. The respondent terminated the sublease with the consequence that it could not look to the sublessee for payment of rent during the balance of the term of the Crown lease. Even if the sublease had not been terminated by the respondent, payment of rent was suspended during such time as the premises were unfit for occupation and use in consequence of fire damage. … The respondent recovers no more than a full indemnity if it recovers the insurance money and rebuilds. It is then restored to its enjoyment of its rights as a lessee of the demised premises, with all improvements, and the right of removal which attaches to those improvements under clause 3(e).” On that basis the appeal against a judgment for the cost of reinstatement of the building (up to the limit of liability under the policy) was dismissed.
For the present purposes what is significant about this decision is that the restaurant was treated as a valuable improvement, which the respondent presumably wanted to retain. In that case the repair costs was apparently less than the value of the premises calculated on a capitalisation of earnings basis. But the earlier passage suggests to me that, if the respondent had not intended to rebuild the restaurant, it would have recovered only the loss of future rents under the existing sublease, a much lower amount. In my opinion the position of the plaintiff, as trustee of the land, is analogous to the position of that respondent as lessee. Both have only a limited interest in the land. In my opinion the passage at p.660 provides useful guidance as to the correct measure of the plaintiff’s true loss.
Conclusion
The fact that the building was not repaired indicates that its value to the plaintiff in its repaired state was less than the cost of repair. That was because, for the reasons referred to earlier, the real value of this building to the plaintiff was not its market value. If it had been repaired, the measure of the plaintiff’s loss would have been the cost of repair. But in my opinion its value was not that great, or the repairs would have been undertaken.
If the building had been regarded by the plaintiff as a valuable public amenity, or at least something worth preserving as a public amenity, it is still unlikely that it would have been reinstated, but it was open to the plaintiff to rebuild it as something more suitable for a use appropriate for premises within a recreation reserve. If the plaintiff had taken that step, the cost of that rebuilding may well have been recoverable, perhaps subject to some allowance for “betterment”. This building might have been worth something to the plaintiff as a public amenity, in the sense that it may well have been used in that way after the expiration of the lease rather than being demolished (p.36, p.43), but that does not mean that it had any particular value to the plaintiff as a public amenity. If the plaintiff is indifferent as to whether the property is used for some public purpose, or reverts to the park, or prefers the latter, it is difficult for me to see why the hypothetical insurer should be required to pay by way of indemnity the cost of achieving the former rather than the loss flowing from the latter outcome.
This is a very unusual situation, and it must be assessed on the basis of the facts in this particular case. The issue is, what amount has to be paid to the plaintiff in order to indemnify it against the loss it has suffered as a result of the fire damage to this building, and therefore as a result of the failure on the part of the defendant to carry out his contractual obligation to provide insurance cover. Ultimately I am not persuaded that the plaintiff has shown that its loss was greater than the loss of rental during the balance of the term of the lease, and the loss flowing from the circumstance that the demolition of the building and reinstatement of the park was brought forward by three years. This figure was calculated earlier at $37,232. I therefore assess damages at that sum. I will circulate these reasons, and invite submissions in relation to the costs of the assessment.
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