Kleef v Colonial Mutual General Insurance Company HC Timaru Ap6/2001

[2001] NZHC 410

IN THE HIGH COURT OF NEW ZEALAND
TIMARU REGISTRY AP6/2001

BETWEEN J C van KLEEF
Appellant

AND COLONIAL MUTUAL GENERAL INSURANCE COMPANY (NZ) LIMITED Respondent

Hearing: 9 May 2001

Counsel: J A Firth for Appellant
C R Langstone for Respondent

Decision: 24 May 2001

RESERVED DECISION OF McGECHAN J

The Appeal

[1] This is an appeal (quantum only) by an insured against a decision of the District Court at Timaru delivered 15 February 2001 upon a claim made on a motor vehicle insurance policy.

[2] The Appellant (“Insured”) succeeded in establishing that a purported cancellation by the Respondent (“Insurer”) was unlawful, and a corresponding breach of contract when the Insurer declined to pay, but was awarded no more than the cost of vehicle repairs. The Insured asserts loss of the vehicle and other indebtedness resulting from the Insurer's breach, but was refused that additional recovery. The Insured asserts misapplication of remoteness of damage principles, and appeals that refusal.

[3] The appeal raises questions as to the identification and application of principles of remoteness of damage canvassed in McElroy Milne v Commercial Electronics Ltd [1993] 1 NZLR 39 CA within an insurance policy context. The situation, while somewhat extreme, is one which occurs with some regularity and is not without its difficulties.

Background Facts

[4] I need not explore the circumstances of creation, cancellation, and corresponding breach of the policy concerned in any detail. There is no cross-appeal by the Insurer against the finding of liability.

[5] The Insured owned and ran a small business in Waimate involving the capture and sale of wild wallabies. He purchased a Toyota Hilux truck for the purpose. It was purchased on ANZ Bank finance, with security to the bank. He was in a tolerably substantial way at the time, owning a house and section in Waimate and to all appearances was solvent.

[6] In May 1995 he signed an insurance proposal in relation to the truck and other assets and indeed income/life protection. On 13 June 1995 his proposal was accepted. The policy was in standard form, with the interest of the ANZ bank noted.

[7] There were some mysterious difficulties over payments of monthly premiums due pursuant to bank automatic payment authorities given to the Insurer. Between August 1995 and October 1995 the Insurer purported to cancel the policy on the grounds of non payment. The Insurer overlooked so informing the Insured.

[8] On 2 May 1996 renewal premiums were offered and received. Shortly afterwards, on 7 May 1996, the truck was extensively damaged.

[9] The truck was sent to a repairer. A repair bill of $16,052.48 was incurred. The Insurer took the view that the policy had been cancelled, and on 15 May 1996
notified the Insured accordingly and refused to pay the repair bill.

[10] The Insured was unable to fund the repair bill himself. His difficulties in that respect were compounded by late payment of some $46,000 due to him by an American wallaby purchaser. The repairer claimed lien rights. The ANZ Bank and the Insured took legal proceedings against the repairer claiming the ANZ security took priority. Those proceedings failed. The repairer successfully counterclaimed for repair costs. The Insured incurred legal costs of $2854.90 in consequence. The repairer sold the truck under lien for $14,377.50. The Insured alleges its pre-accident value was $33,000. After credit given for the sum received for the truck, the Insured still owed the repairer $5735 including interest and costs. The Insured managed to borrow that sum from family, and paid the repairer so as to avoid bankruptcy.

[11] In the result, in terms of the contract claim in his Amended Statement of Claim dated 7 August 2000, the Insured claimed against the Insurer for:

“(a) $33,000 “representing the value of the loss of the vehicle”.

(b) “Interest on the sum of $33,000” from 4 September 1996. [This is a claim for Judicature Act interest, not for interest paid upon ongoing loan liabilities to the ANZ. The 4th September 1996 is the date on which the repair account issued].

(c) “Legal expenses” of $2854.90 incurred in respect of proceedings against the repairer “and in mitigation of losses”.

(d) Damages of $5735 paid to the repairer on the repairer’s counterclaim.

(e) Interest on the $5735 at 11% per annum.

There seas no claim for loss of profits as such.”

District Court Decision

[12] Having found the policy was in effect as at the date of the accident, and that the Insurer’s refusal to pay was in breach of the insurance contract, the District Court turned to quantum questions.

[13] The Judge noted (a) the Insurer contended the Insured was entitled to be put as nearly as possible in the position which would have been occupied if the contract had been performed, that being said to be limited to the cost of repairs (b) the Insured contended for full recovery on the basis of Harris v The New Zealand Insurance Co Ltd (1987) 4 ANZ Insurance Cases paras 60-817 and Stuart v Guardian Royal Exchange Assurance of New Zealand Ltd (No. 2) (1988) 5 ANZ Insurance Cases paras 60-844 allowing recovery of the severer financial consequences.

[14] The Judge noted the leading case on remoteness of damage in a breach of contract context is now McElroy Milne v Commercial Electronics Ltd supra. That case was seen as emphasising that when assessing what part of the loss suffered arose naturally from breach (the classic Hadley v Baxendale formulation) “reasonable contemplation or reasonable foreseeability will generally provide the best measure”. The Judge quoted in support an abridgement of the observations of Cooke P (as he then was) at p 43 lines 24-43:

“. . . It is clear at least that reasonable foresight or contemplation. which appear to be interchangeable terms, are always an important consideration. I doubt whether they are the only consideration. Factors including directness, ‘naturalness’ as distinct from freak combinations of foreseeable circumstances, even perhaps the magnitude of the claim and the degree of the defendant's culpability, are not necessarily to be ignored in seeking to establish a just balance between the parties . . . .

. . . In the end it may be best, and may achieve more practical certainty in the New Zealand jurisdiction, to accept that remoteness is a question of fact to be answered after taking into account the range of relevant considerations, among which the degree of foreseeability is usually the most important”.

[15] The District Court also invoked earlier remarks of Cooke P (page 41 lines 25-29) put as stating that in the final analysis assessment of damages is a question of fact, with the ultimate question being whether “the particular damage claimed is sufficiently linked to the breach” to merit recovery in the circumstances.

[16] The District Court also observed that while in general the measure of damages in contract is now the same as in tort, there is a qualification. If a contractual loss arises from circumstances which are out of the ordinary it must be established that at the time of contract the defendant had actual knowledge that type of loss might occur in event of breach.

[17] The Judge then turned to the facts.

[18] The Judge looked first at the position of the Insured under the proposal completed in May 1995. The Insured at that time owned a home and another apparently tenanted property in Waimate, owned a truck, was in business on his own account, and had bank accounts with two banks. (I note that the Judge does not place values or figures on these items, or refer to indebtedness). Even if knowledge of subsequent pre-accident events was relevant, that was to the effect that the Insured had acquired a third property in which the ANZ Bank had an interest.

[19] The Judge then looked at the factor variously described as “the circumstances which caused [Insurer’s] breach of contract to have such disproportionate consequences for [Insured]”, and as “post-accident events”.

[20] The Judge accepted it was Insured’s “then precarious financial circumstances” which meant he could not pay the repairer and obtain return of the truck. The Judge found (on totality of the Insured’s own evidence) that “the most significant factor in that context” was the late payment by the Insured’s debtor. Although there was “a vicious circle element”, if the debtor had paid the Insured he would have been able to pay the repairer. (I note that in the next paragraph, and despite the reference as above to the bad debt as “the most significant factor”, the Judge finds that “undoubtedly” the Insurer’s refusal to pay was “a significant contributing factor” to the Insured’s problems from September 1996 onward).

[21] The Judge then concluded that “against that background” the proper measure of damages is the cost of repairs. Amplifying, it was said that while the Insurer’s refusal to pay was “a significant contributing factor” to the Insured’s difficulties:

“There is no basis on which it can be said either that those consequences were a reasonably foreseeable result of [Insurer’s] breach of its contract with [Insured] or, that when the policy was taken out, [Insurer] was aware there might be such adverse consequences were it to refuse to indemnify in respect of any properly-claimable loss”.

[22] To the contrary, the Judge noted, as at May-June 1995 there was nothing out of the ordinary in the Insured’s financial circumstances.

[23] The Judge regarded the Harris and Stuart cases as readily distinguishable on the facts, without amplifying the basis for such distinction.

Submissions for Appellant Insured

[24] The Insured submitted the pre-accident value of the vehicle, plus interest on that value, were losses which were reasonably foreseeable at the time of contract (and at the time of breach) and were recoverable accordingly. Loss of the vehicle and interest were losses which were “not unlikely”, and which therefore were reasonably foreseeable. It was wrong to elevate the delay in payment of the debt to being the “most significant factor”. The immediate cause of loss was not that, but was breach by the insurance company.

[25] In that light, Appellant submitted the District Court erred in law through (i) failing to apply principles laid down in McElroy Milne v Commercial Electronics Ltd [1993] 1 NZLR 39 CA (ii) treating the delayed payment of the debt as causative of loss in itself rather than as part of a freak combination of foreseeable circumstances (iii) failing to accept that breach of the policy contract was the direct cause of the losses (iv) treating certain losses which were “not unlikely” as occurring because of post-accident events other than breach of the policy contract.

[26] Developing those matters further, it was said the Judge ought to have followed underlying principles which Cooke P “clearly considered still applied”. The Judge ought to have considered each of the heads of loss claimed, considering in respect of each whether it could have arisen out of the breach of contract, and whether it was reasonably foreseeable by the Insurer at the time of contract and at the time of breach.

[27] Further, there was said to be an analogy with Great Lakes SS Co v Maple Leaf Milling Co (1924) 41 TLR 21 PC (noted in McGregor on Damages 16th Edition Para 260). In that case plaintiffs ship was kept waiting for lighterage in breach of charter, as a result of which the ship grounded upon an anchor which unknown to anyone lay beneath. The Privy Council ruled it was the breach of contract through delay in lighterage which caused the damage: the fact damage might not have occurred if the anchor had not been present made no difference. The “precise nature of the damage occasioned” was not material. The Insured’s submission is that delay in payment of the Insured’s debt can be equated to that anchor: the fact of its being there and causing the damage is immaterial. It was the breach of the insurance contract which caused the damage. Other circumstances, such as the delay in payment of the debt, were merely “freak combinations” not causative of the loss.

[28] Submissions noted further that the District Court recognised there is liability for losses which result naturally and foreseeably from breach of an insurance contract, but also recognised a need to establish actual knowledge loss might occur in respect of circumstances out of the ordinary. The submission appears to be that the Insurer, from its knowledge of circumstances and an asserted greater level of knowledge to be taken as existing amongst insurers, did have such knowledge.

Taking into account imputed and actual knowledge, losses claimed—and indeed other losses such as loss of profits—were “not unlikely” and thus were reasonably foreseeable. In particular, it was “not unlikely” insured might lose the vehicle completely. The Stuart case is advanced as exemplifying recoverability on grounds of foreseeability (general damages), and the Harris case as exemplifying recoverability as consequential damage of amounts paid to a finance company.

Submissions for Respondent Insurer

[29] Submissions for the Insurer start from the basic obligation to restore the Insured to the position which would have been occupied if the insurance contract had been performed (Stirling v Poulgrain [I980] 2 NZLR 402, 419 Cooke J).

[30] On that approach, if the insurer had performed the contract Appellant would have received repair costs of $16057.40, but not more.

[31] The sum of $33,000 sought “is simply not the loss suffered”. (There was no finding as to pre-accident value).

[32] As to consequential losses ($2854.90 and S 5735), original Hadley v Baxendale doctrine is modified by Cooke P in McElroy Milne v Commercial Electronics Ltd [1993] 1 NZLR 39 CA so as to postulate a “not unlikely” test, with emphasis placed upon reasonable foreseeability. Counsel distilled the principles applicable currently in relation to remoteness of damage in contract cases as being:

“l. The plaintiff is only entitled to recover such part of the loss actually arising as may fairly and reasonably be considered as arising naturally from the breach of the contract (McElroy Milne).

2. Whether the loss could be so reasonably regarded is to be judged as at the time of the contract.

3. It is not necessary that the party in breach actually ask themselves what loss was likely to arise from a breach. It is enough that if they thought about it they would, as a reasonable person, have concluded that the loss in question was “liable to result” (Began Investments Limited v Black Hall and Struthers No 2 [1978] 2 NZLR 97 at 116, 117).

4. If the loss arises from special circumstances (not arising in the usual course of things) then it is necessary for a plaintiff to allege and prove that the defendant had actual knowledge that the type of loss might occur in the event of a breach. Where the loss does not arise from special circumstances, then it is necessary to prove that the loss was a type which was reasonably foreseeable at the time the contract was made (Hadley v Baxendale)”.

Insured’s evidence was put as being that he could not pay for the repairs due to the delay in payment of the debt. That, it was said, is the evidence on which the District Court based its decision. That, it is submitted, could not have been foreseen by the Insurer at the time the contract was entered into, a time at which the Insured appeared solvent. All other costs claimed were “unlikely”: they could not reasonably have been anticipated.

[33] The District Court Judge, it is said, accordingly applied the principles in McElroy Milne v Commercial Electronics Ltd [1993] 1 NZLR 39 CA.

Decision : Principles

[34] Counsel were agreed that the present current leading authority as to principle in this country is the judgment of Lord Cooke (then Cooke P) in McElroy Milne v Commercial Electronics Ltd [1993] 1 NZLR 39 CA. In that light, I will take the same approach, although no judgment in this field can be expected to cover all possible nuances or to stand in perpetuity.

[35] It is important to read Lord Cooke’s judgment as a whole. There has been a tendency, all too prevalent in New Zealand approaches, to search within the judgment for some single touchstone or catch phrase which can be used to solve all problems. Although the District Court here reminded itself of the necessity to read Lord Cooke’s judgment in totality, there are some signs of that occurring nevertheless. The District Court elevated or condensed Lord Cooke’s remark (supra paragraph 14) that it “may be best” to accept remoteness is a question of fact to be answered on a “range of relevant considerations” among which the degree of foreseeability “is usually the most important” into an approach that “reasonable foreseeability” “will generally provide the best measure”.

[36] Lord Cooke starts by propounding a view there is no universal rule (41):

“. . .in the end assessment of damages is a question of fact: . . .there is no such thing as a rule, as to the legal measure of damages, applicable to all cases, and . . .the ultimate question as to compensatory damages is whether the particular damage claimed is sufficiently linked to the breach of the particular duty to merit recovery in all the circumstances”.

[37] That, of course, raises a further question as to how one determines whether damage is “sufficiently linked to the breach” so as “to merit recovery” in particular circumstances. The tendency is to run straight to a shopping list of recognised factors. The opening inquiry should be wider. It is identified by Lord Cooke’s reference, almost in passing (probably because it is taken as obvious) to (43)

“. . .seeking to establish a just balance between the parties”.

(The point perhaps is developed more clearly by Hardie Boys J, 45, when speaking of “. . .a result that is just to both plaintiff and defendant, for that is always the ultimate objective”). In determining whether damage is sufficiently linked to the breach to merit recovery the law seeks to strike a just balance between plaintiff and defendant. As with most just balances, neither is likely to gain all which could be sought.

[38] In striking that “just balance” the question of “reasonable contemplation” (“reasonable foreseeability”) obviously is important. It commonly is just that one should bear consequences which are reasonably foreseeable. It commonly is less just one should bear consequences one could not reasonably foresee. That obvious morality is carried into the law.

[39] Unsurprisingly, Lord Cooke (pp 42-43) turns straight to this question of contemplation (foreseeability). The situation “rarely if ever” is to be put in classic Hadley v Baxendale terms requiring a plaintiff to prove damages “would” arise in “most” cases of the kind. Lord Cooke considers “something less, reasonably to be contemplated or foreseen, is commonly enough”. Precision is not attempted: “precisely how the test in contract should be formulated . . .remains obscure”. With some diffidence, Lord Cooke advanced as “the nearest approach to a consensus on the topic the test put in C Czarnikow Ltd v Koufos in the terms “not unlikely”. This, it was recognised, meant Hadley v Baxendale was wrongly decided: a requirement upon a plaintiff to prove damage was “not unlikely” to arise differs from a requirement to prove damage “would arise . . .in most cases”.

[40] How is the Court to decide whether damage is “not unlikely”? Lord Cooke’s words (43) bear re-quotation:

“It is clear at least that reasonable foresight or contemplation, which appear to be interchangeable terms, are always an important consideration. I doubt whether they are the only consideration. Factors including directness, ‘naturalness’ as distinct from freak combinations of foreseeable circumstances, even perhaps the magnitude of the claim and the degree of the defendant’s culpability, are not necessarily to be ignored in seeking to establish a just balance between the parties”.

[41] Two points arising warrant emphasis.

[42] First, Lord Cooke was not attempting an exhaustive list. He inclines before long towards categorising remoteness as “a question of fact” to be assessed after taking into account “the range of relevant considerations”.

[43] Second, while reasonable foreseeability is important—variously described as “always an important consideration” and as “usually the most important” consideration—it is not the only consideration. Other relevant factors are not necessarily ignored. The question, after all, is whether damage was “not unlikely”: that is a question of fact, and a step on the path to the ultimate “just balance” between the parties.

[44] There is also an addendum. Lord Cooke does not reject Hadley v Baxendale entirely. Lord Cooke recognises (42) that case “does draw a distinction which has proved viable between the usual course of things and communicated special circumstances” in determining the “not unlikely”, and the necessary just balance. Actual knowledge of the unusual remains properly recognisable.

Decision : This Case

[45] No question arises as to the repair costs of $16,057.48. The issues are as to the other items. It is not suggested the Insured could recover both pre-accident value put at $33,000 and repair costs of $16,057.48. That would be double recovery to the extent of the latter figure.

[46] There are issues both as to causation, and as to remoteness otherwise even if causation is established. I will segregate these to assist analysis, although the borderline is not always clear.

[47] The Insured advances a causative link or chain between the breach (refusal to pay repair costs under the policy) and the additional damage items (as pleaded, paragraph 11 above) along the following lines.

(a) Due to breach, Insured did not receive funds to pay for repairs carried out

(b) Insured, due to late payment by the American debtor, did not have other funds from which to make payment

(c) The repairer threatened sale under lien

(d) The Insured necessarily took proceedings seeking to prevent sale under lien (endeavouring to mitigate damage) but was unsuccessful and incurred further costs of $2,854.90

(e) The repairer sold under lien at a depressed price which left $5,375 including interest and costs still outstanding, a sum which the Insured necessarily borrowed and paid.

[48] Causation, so far as the common law is concerned, is less a matter of rigorous philosophical analysis than of common-sense. Whether approached on a “but for” or on a less demanding contributory basis, the failure by the Insurer to pay the repair cost figure was a factor leading to loss of the vehicle through sale under the repairer’s lien, and the costs of attempted mitigation and deficit which ensued. If the repair costs had been paid, these results would not have occurred.

[49] It is true, of course, that if the American debtor cashflow problem had not coincided, these results would not have occurred either. That does not mean non payment by the Insurer is to be ignored as not causative. On such an approach, with one causative factor to be ignored because of the existence of another causative factor, the reverse must also apply, and neither factor can be causative, and we have the absurdity of no cause at all. Both were contributing causes. The District Court evaluated the American debtor cashflow problem as “the most significant factor” in the inability to pay the repair account, relegating the Insurer’s breach to a mere “significant contributing factor”. I have considerable doubts whether that comparison is tenable. Both components were essential ingredients of the problem. “But for” Insurer’s breach the damage would not have ensued, and I put that breach as at least equally causative. However, the comparison in the end may not much matter. Even on a lesser “significant contributing factor” basis a causative link between the Insurer’s breach and the further damage is made out. The District Court judgment did not, in the end, indeed turn upon the question of relative causation, but upon reasonable foreseeability.

[50] I accept causation, as distinct from other elements of remoteness, is established.

[51] I turn next to other remoteness aspects. A party breaching a contract is not automatically liable for all damage caused, however remote from the original breach. The old proverbs saying that but for a nail the Kingdom was lost does not represent common law. The damage must be not unlikely.

[52] The first (but not only) question is reasonable foreseeability (usually taken at the time the contract was entered into) that the breach would cause damage of the character concerned.

[53] If the Insurer had been aware at the time the policy was entered into that the Insured was strapped for cash, there would have been an at least tenable argument that the Insurer should reasonably have foreseen a wrongful refusal to pay could lead to loss of the vehicle and consequential expenses. That would be a case of knowledge of special circumstances, which even Lord Cooke appears to have recognised remains a valid consideration. Indeed, if the Insurer had been aware at that time of some greater than normal likelihood that the Insured may encounter severe cashflow difficulties during the term of the policy, the same might be said.

[54] However, there was no such fact or awareness at the time the policy was entered into in this case. So far as the Insurer was aware, the Insured was in a satisfactory financial situation, with properties, stock, an established business, and a truck (albeit with the latter on ANZ finance, as is usual enough). The foreseeability that future breach by refusal to pay repair costs might cause loss of the vehicle and associated expenses fell for evaluation or notional evaluation in an entirely normal way.

[55] This case, nevertheless, is more marginal than some. The amount which the Insurer was declining to pay approximated half the apparent value of the vehicle. It was perhaps more predictable that a small trader like the insured would suffer some strain in finding a sum in that proportion to pay for the repairs, enabling retention of the vehicle, than sums of a comparatively lesser character.

[56] However, the sum is not large enough in absolute terms to satisfy me that an insurer reasonably should have foreseen at the time of policy inception a likelihood that it could not be done. The Insured, as noted, at that time appeared to be in a satisfactory financial situation. The combination of property, stock, and a vehicle would have presented as providing a potential cash or borrowing cushion. The existence of the ANZ interest in the vehicle, at least in the absence of information as to the amount remaining owing, would have presented neutrally. While notice that the Insured held only an equity in the vehicle, it likewise was notice there was a bank involved which ordinarily would not wish to see a sacrificial loss. As noted, it would reasonably be foreseen breach by refusal to pay repair costs was likely to occasion some financial strain, but not the total loss of the vehicle and financial consequences which followed.

[57] Reasonable foreseeability, while the usual starting point, is not the end of the matter. As Lord Cooke observes, other factors can play their part in recognition of the “sufficient link” and the “just balance” between the parties through determination whether damage was “not unlikely”. Usually, those other factors are seen as limiting the consequences which would follow from reasonable foreseeability. I leave open the question whether such factors could justify the finding of a sufficient link in the absence of reasonable foreseeability, but so assume for present purposes.

[58] I do not see other factors as significant to that point. Breach by non payment of repair costs was a significant cause of loss, but as discussed was not the only cause. Its “directness”, a term which appears to be used in contrast to consequential character, is diluted to that effect. I would not go quite so far as to discount the role of that breach as being part of a “freak combination[] of foreseeable circumstances”. The combination of non payment of repair costs and of a major single interruption to cashflow, both “foreseeable circumstances”, was not so extraordinary as to be a “freak” event. However, at a lesser level, that furnishes some guiding analogy. The magnitude of the claim is not such, in itself, as to require exceptional treatment. The Insurer’s culpability, while established, is not exceptional. Nor do I see other cause for an exceptional approach notwithstanding absence of reasonable foreseeability.

[59] I am not much assisted by authorities cited on either side.

[60] Great Lakes SS Co v Maple Leaf Milling Co (1924) 41 TLR 21 PC involved a ship charter containing provision obliging the charterer to unload (lighter) cargo immediately upon arrival at a designated port facility. The charterer (which also controlled that port facility) failed to do so. The water fell (by wind action, not through inevitable tidal action). The ship settled upon an anchor which happened, unknown to either party, to rest on the bottom beneath it, and was seriously damaged. The ship owners sued for the damage. The Ontario Court of Appeal held against liability, and further ruled that the damage was too remote. The Privy Council held, per Lord Carson 23 as follows:

“There can be no doubt that it was from breach of the contract immediately to lighter that the vessel grounded by reason of the lowering of the water, the very thing which it was anticipated might occur and which rendered the immediate lightering so important, and it must, in their Lordships’ opinion, be held that it was the breach of contract in not lightering the vessel which was the immediate cause of the damage, and the fact that such damage might not have occurred if the anchor had not been sunk can make no difference. If grounding takes place in breach of contract, the precise nature of the damage incurred by grounding is immaterial.”

(I note these words are more extensive than the extract quoted ostensibly verbatim in “McGregor on Damages” (16th Edition, para 260)). Insured’s submissions equate delayed payment of the American debt and the unknown anchor on the seabed: the unknown character of the delayed payment, and the precise nature of the damage which followed from the Insurer's breach by non payment, do not prevent recovery.

[61] Great Lakes SS Co, as the discussion in McGregor op. cit. illustrates, is one of a line of cases to the effect that “physical injury or damage within the contemplation of the parties is recoverable even if occurring to an unanticipated degree” (ibid, 260). While Great Lakes SS Co is not cited by Lord Cooke, a successor in a line of cases to like effect (put by McGregor op. cit. 261 as “the strongest support” for that approach) namely Parsons Limited v Uttley Ingham & CO (1978) 1 QB 791 gains citation (43). It is referred to along with other leading cases as illustrating the “wide fluctuations in English law”; law which “should not automatically be adopted in New Zealand”. In that light, to say nothing of the age of the case and possible differences as between physical damage and economic loss, I prefer to adopt statements as to principle by Lord Cooke as the more appropriate point of departure.

[62] Harris v NZ Insurance Co (1987) 4 ANZ Insurance Cases 60-817 Gallen J, and Stuart v Guardian Royal Exchange Assurance of New Zealand Ltd (No 2) (1988) 5 ANZ Insurance Cases paras 60-844 Heron J must be read in the light of questions of remoteness being, at bottom, questions of fact. They are decisions on their own facts, and in particular on assumptions made as to foreseeability.

[63] In Harris’ case the insured owned a tractor on which a considerable sum was outstanding to a finance company. The existence of a finance company interest was known to the insurer. The tractor was destroyed by fire. The insurer wrongly declined liability. Without payment by the insurer the insured was unable to gain considerable discount benefits arising from early repayment. Gallen J considered (75,028) the insurer must be deemed to have been aware of the possibility of “consequential loss” if the insured was unable to meet his “financial obligations” in event the insurer declined. Within that, Gallen J recognised the insurer deprived the insured of the opportunity of substantially reducing his indebtedness, and allowed recovery of amounts the insured was obliged to pay to the finance company in consequence. In Stuart’s case, an insurer wrongfully denied liability under a standard domestic dwelling policy. The insured claimed interest on his mortgage down to the date of the payment of the reinstatement sum due under the policy, rates, alternative accommodation expenses, maintenance costs, and general damages for distress. Heron J adopted the “not unlikely” test, and an approach on the basis of restoration to position subject to reasonable contemplation. His Honour allowed all items claimed (except repairs, which would have been incurred in any event). Except in relation to the claim for general damages for distress, there was no further reference to, let alone analysis of, “reasonable contemplation” factors. That attribute appears to have been assumed.

[64] The District Court regarded the Harris and Stuart cases as distinguishable. I regard them as turning on their own facts; in particular findings that the items concerned in the circumstances of those cases were to be regarded as within the reasonable contemplation of the insurers. I do not presume to doubt the correctness of either case in those terms; but those cases are not our case. In our present case there was no reason to suppose the insured would incur, or would be “not unlikely” to incur, losses of the character claimed in the event of breach.

[65] In the result, albeit on a somewhat differently weighted view of causation, and on a somewhat broader approach to remoteness extending beyond reasonable foreseeability, I concur with the District Court as to outcome. The appeal cannot succeed.

Order

[66] (1) The appeal is dismissed.

(2) Respondent will have costs in this Court on a B.2 basis together with reasonable disbursements including travel and accommodation expenses of counsel as approved by the Registrar.

(3) Costs in the District Court are reserved for that court.