IAG New Zealand Ltd v QBE Insurance (Australia) Ltd

The Court of Appeal of New Zealand was required to decide two main issues in this case. The first issue concerned the extent of the liability of Hawkins Management Ltd (Hawkins), the project manager, to indemnify IAG New Zealand Ltd (IAG), the insurance company, for any breach of obligations under the Rebuild Solution Master Agreement (RSMA). The second issue was whether interest should have been awarded to the homeowners for the delay in receiving damages. The court had to interpret the RSMA to determine the scope of Hawkins' obligations, particularly in relation to the quality of the repair work. The court also had to decide whether the award of interest under section 87 of the Judicature Act 1908 was appropriate given that the damages were calculated based on current repair costs rather than the rates prevailing in 2015. The Court of Appeal concluded that Hawkins was only to have a very limited quality assessment function under the RSMA, primarily an administrative and coordination role. The court found that the High Court had erred in its interpretation of the RSMA and in the application of the naked eye test. The court allowed both the appeal and cross-appeal, quashed the relevant findings of the High Court, and reserved leave to the parties to seek further orders in respect of quantum and the form of final judgment orders. As for the second issue, the Court of Appeal held that the award of interest was improper because the damages were calculated on the basis of present day costs of repairs, not the rates prevailing in 2015. The court allowed the appeal, quashed the decision of the High Court awarding interest, and made no award of costs.