Sadat v Tower Insurance Ltd
[2017] NZHC 1550
•6 July 2017
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2014-409-000207 [2017] NZHC 1550
BETWEEN SAYAD MOSTAFA SADAT and
MASTOREH SADAT Plaintiffs
AND
TOWER INSURANCE LIMITED First Defendant
AND
EARTHQUAKE COMMISSION Second Defendant
Hearing: 22-29 March 2017 and 6-7 April 2017 Appearances:
K T Dalziel & J R Pullar for the Plaintiffs
M C Harris & S F Alawi for the First Defendant
N S Wood & J W Upson for the Second DefendantJudgment:
6 July 2017
JUDGMENT OF NATION J
SADAT v TOWER INSURANCE & EQC [2017] NZHC 1550 [6 July 2017]
Table of Contents
Background............................................................................................................. 2
Summary of defendants’ positions...................................................................... 19
Evidence and the evidential burden ................................................................... 23
The 2008 Hayward report ................................................................................... 25
The August 2010 Tower report............................................................................ 37
Geotechnical evidence .......................................................................................... 44
Introduction ............................................................................................................ 44
The experts’ joint report – areas of agreement....................................................... 46
The joint report – areas of disagreement ............................................................... 47
Council records ...................................................................................................... 51
Mr Thompson’s initial brief of evidence................................................................. 52
Mr Learman’s initial brief of evidence ................................................................... 59
Mr McDowell’s initial brief of evidence................................................................. 63
Mr Thompson’s new evidence ................................................................................ 68
Concluding assessment of geotechnical expert witnesses.................................... 101Conclusions as to geotechnical evidence ............................................................. 105
The Sadats’ evidence .......................................................................................... 106
The initial post-earthquake assessments .......................................................... 137
The 8 September 2010 Hargreaves inspection for Tower .................................... 137The Jones’ assessment of 9 December 2010 for EQC .......................................... 146
Structural engineering evidence ....................................................................... 152
Evidence of Samuel Polson, structural engineer for Tower ................................. 152
Evidence of Simon Finn, structural engineer for EQC ........................................ 167
The experts’ joint report ....................................................................................... 194
Evidence of Dr Wu, structural engineer for the Sadats ....................................... 195
Damage to the garage .......................................................................................... 234Damage to concrete paths and driveway ............................................................. 240
Conclusions as to the damage caused by the September 2010 earthquake .. 247
Payments made and sought ............................................................................... 256
Claim against Tower .......................................................................................... 260
Rebuild costs and under-insurance .................................................................. 292
Claim against EQC ............................................................................................ 299
General damages ................................................................................................ 308
Conclusion........................................................................................................... 313
[1] The plaintiffs’ (the Sadats) home may have had inadequate foundations for the site it was on from the time it was built. Subsidence of the foundations may have resulted in damage to those foundations and to the structure of the home before the Canterbury earthquakes. The Sadats had insured their home with the first defendant (Tower) and had Earthquake Commission (EQC) cover, but only at the time of the September 2010 earthquake. That earthquake may have resulted in further damage to the foundations and the structure of the home. The problems with the foundations cannot be fixed through repair. A rebuild of the home will cost some $762,000 including GST. The broad issue here is whether EQC and Tower are liable for rebuild costs.
Background
[2] The Sadats were refugees from Afghanistan. In 2006 they purchased what they regarded as their dream family home at 3 Victors Road, Hoon Hay, Christchurch for $235,000. They insured it with Tower.
[3] In September 2008, there was a potential sale of the property. The prospective purchaser arranged for a building inspection of the home. The report indicated there had been significant subsidence of the foundations, resulting in sloping floors and significant cracks in the exterior cladding of the home and through the foundations. The purchase went no further.
[4] In August 2010, the Sadats made a claim on their Tower house insurance policy for damage caused by water leaking from the kitchen waste under the house. An assessor, Mr Eric Dann, visited the property on 19 August 2010 to assess the situation. He noted and reported on extensive cracking to the foundation and the cladding and significant cracking on interior walls. He recommended the claim be declined on the basis the damage was excluded from the policy because it was gradual damage and damage from subsidence.
[5] On 4 September 2010, in the early hours of the morning, an earthquake (the September 2010 earthquake) occurred. The event was frightening for the Sadats and their family. There was significant shaking of their house and they subsequently resided away from the home for several days.
[6] The Sadats lodged claims with EQC and Tower. On 8 September 2010 an assessor for Tower, Mr Hargreaves, made a brief inspection of the property and took some photographs. He considered the property was habitable but noted the Sadats were nervous about residing in the home. Mr Hargreaves recommended the Sadats have a hot water cylinder repaired. EQC reimbursed them for the plumbing costs incurred of $200.39.
[7] On 9 December 2010, an assessor Mr Jones and a builder inspected the property for EQC. Without knowledge of the 2008 report and the August 2010
Tower report, Mr Jones produced a scope of works and estimate of costs for repairing the damage of $30,600.
[8] On 12 January 2011, Tower gave notice that it was cancelling its policy with effect from 26 January 2011. This was because, on the basis of the August 2010
Tower report, Tower considered the condition of the property made it a poor risk.
[9] This meant the Sadats did not have insurance cover for the February 2011 or later earthquake events. From January 2011 through to about May 2013, the Sadats, mainly through Mrs Sadat, complained of Tower’s cancellation of the policy. The validity of Tower’s cancellation is not, however, now challenged by the Sadats.
[10] On 22 February 2011, the second major Canterbury earthquake occurred at about 1.00 pm.
[11] On 20 August 2012, EQC wrote to the Sadats (through a letter to their daughter) advising that, allowing for their statutory excess and consistent with Mr Jones’ costs estimate of $30,600, $30,290.50 had been paid to their bank mortgagee in settlement of their claim arising out of the September 2010 earthquake.
[12] On 30 January 2013, EQC costed a further scope of works for what they were treating as damage from the September 2010 earthquake. The total cost was
$43,682.41. EQC paid $12,946.33 initially to the Sadats’ bank but then to the Sadats directly in May 2013. That cheque was sent to Mr and Mrs Sadat with a letter of 14
May 2013 setting out how, with that payment, they had received a total of
$43,586.72. The letter advised the Sadats that they could bank the cheque but doing so would not affect their current or any future entitlements. EQC sent the Sadats a copy of the further scope of works on 3 July 2013.
[13] In 2013, 3 Victors Road was advertised for sale “as is, where is”. The advertisement advised the vendors were prepared to transfer $43,000 to the new purchaser in EQC payout and that there were “no EQC claims, insurance has lapsed, no insurance will be transferred with this property”. The advertisement advised the owners were committed to sell. At that time, they appeared to be proceeding on the basis they would have no further insurance entitlement.
[14] On 21 October 2013, the Sadats’ solicitors in these proceedings wrote to Tower and EQC advising that they were acting for the Sadats in relation to their claim arising out of the September 2010 earthquake and that they had expert advice that the Sadats’ claim would be for more than the $100,000 EQC cap and more than the $43,000 the Sadats had already been paid. They attached with their letter a report from Earthquake Services Limited (Earthquake Services).
[15] The report began by summarising the methods used by Earthquake Services to provide an opinion on the extent of damage caused to the relevant premises as a result of “the Canterbury earthquakes 2010 and 2012 [sic]”. They said the purpose of the report was to assess the level of damage caused by “the series of earthquakes” that had occurred in the Canterbury region since 4 September 2010.
[16] Earthquake Services’ estimate was for total repair costs of $864,214.15 including GST. Their repair strategy involved the lifting of the dwelling, the removal of the ring foundation and piles, and then replacement with a new ring foundation and piles. On that basis, they recommended rebuild as the more economical option.
[17] On 11 April 2014, the Sadats filed a claim in the High Court for damages for the full replacement value of the house estimated at $864,214.15 and general damages in the sum of $50,000 for anxiety and emotional distress. As against EQC, their claim was for $70,263 and general damages of $50,000.
[18] In July 2014, Tower and EQC both filed statements of defence.
Summary of defendants’ positions
[19] EQC and Tower both deny liability on the basis the Sadats cannot prove that there was damage to their home which was materially different from damage which their home had already sustained before the September 2010 earthquake. EQC and Tower both say, if there was any damage resulting from the September 2010 earthquake, what was required to remedy that damage was not materially different from what would have been necessary to remedy pre-existing defects and damage.
[20] Tower’s liability for earthquake damage is for damage exceeding EQC’s cap of $100,000 plus GST. As against Tower, the Sadats need to prove that there was damage caused by the September 2010 earthquake for which they have cover under the Tower policy and which will cost more than $115,000 including GST to remedy.
[21] As against EQC, the Sadats have already been paid $43,586.72. EQC denied that, in all the circumstances they are now aware of, they were liable to pay that amount. EQC are, however, not seeking to recover that amount from the Sadats. To succeed against EQC, the Sadats had to prove that, as a result of the September 2010 earthquake, EQC have a liability for damage resulting from that earthquake and that the cost of remedying that damage is more than $43,586.72.
[22] My ultimate determination as to the Sadats’ entitlement, and Tower and EQC’s defences, essentially turns on what the Sadats have proved in relation to the damage suffered in the September 2010 earthquake as against pre-existing damage and defects in their home.
Evidence and the evidential burden
[23] The evidential onus of proof in these kinds of cases was discussed in
O’Loughlin v Tower Insurance Ltd:1
[146] The general principles as to onus of proof are clear. The onus is on the insured to prove the existence of the contract, and show that the event in
1 O’Loughlin v Tower Insurance Ltd [2013] NZHC 670, [2013] 3 NZLR 275 (footnotes omitted).
question was covered by the policy and claimable loss has been suffered. On the other hand, an insurer has to prove that a claim to which the risk insured against otherwise applies, falls with[in] an exception or exclusion.
[24] The evidence relevant to deciding the principal issue in this case, namely what, if any, damage has been caused to the Sadats’ home as a result of the September 2010 earthquake, relates primarily to a series of reports commissioned by the parties for various purposes. These include: a 2008 building inspection report, when the property was for sale; an August 2010 report commissioned for Tower; an assessment by a Mr Hargreaves in September 2010 immediately following the earthquake; a Harrison Grierson report for the defendants of August 2015; a report from the plaintiffs by Dr Wu of 15 May 2015; a joint structural engineers’ report to the Court of 10 March 2016; and a joint geotechnical experts’ report of 16 December
2016. The witnesses involved in those reports also gave briefed evidence and, for the most part, were examined on it. The Sadats have also given evidence.
The 2008 Hayward report
[25] Mr Grant Hayward was called as a witness for EQC. In 2008, he had national certificates in carpentry and carpentry (advanced), and some 16 years building experience. In 2008, he had been working as a building inspector for some two and a half years. At the request of a real estate agent, he inspected the property on 2 September 2008 and subsequently produced a detailed inspection report for 3
Victors Road (the 2008 Hayward report).
[26] Mr Hayward recalled the house being relatively tidy inside and a family being there during the inspection. He remembered the exterior of the house was not in good condition and especially remembered a crack in the cladding below the kitchen window. He also recalled subsidence to “part of the floor”. Mr Hayward said it was his normal practice to inspect the roof first, then the exterior of the house, the interior – room by room, the roof space and finally the sub-floor space. He said his inspection of the property would have lasted around two and a half hours but that his report was intended as a general outline of his significant findings and to “identify significant defects visible at the time of inspection”. It was not intended to be a complete record of every crack or other defect in the house.
[27] In his summary, he referred to some positive aspects to the home such as a new roof, PVC spouting and other items. He then reported:
There are two significant issues that need further investigations using our structural engineer. The south bedroom and kitchen show to have a significant fall, approximately 50mm over 3.5m. it is likely that there are two contributing factors to what has made the cracks to the concrete window sills and exterior plaster. We think that the bedroom subsidence is likely related to a few soft spots in the soil and that the kitchen exterior cracks are related to the glass blocks placed to a load bearing wall. The property file showed that Geotech Consultants Ltd stated that the ground was soft – firm grey clay silt in 1992 when surveying the ground for the new garage and subdivision. The other cracks to the home are likely related to a combination of natural settlement and subsidence from the south bedroom and kitchen. Viewing the subfloor showed no real problems, though it was difficult to evaluate if any movement was occurring as the bearers ran parallel to the south wall. Soil testing and survey levelling is recommended in this situation…
[28] He made certain recommendations as to work that should be carried out on the property. He noted that plain glass had been fitted lying flat on a porch over- hang. He considered this very dangerous and that it should be removed immediately as it had already cracked in two areas. It did not appear to have a safety glass sticker and “therefore could fall at any moment”.
[29] There was a section in his report for what he considered were necessary urgent repairs. In that section, he referred to “the issues relating to the subsidence of the bedroom and kitchen” which he said required a structural engineer to better evaluate as to the cause and method of repair. He said the use of glass blocks through the kitchen exterior wall was not allowed as it had weakened the load- bearing wall. He said that no lintel appeared to be present because of the significant visible crack. He said the kitchen floor showed to be running downwards.
[30] Attached to the report were coloured photographs showing some of the defects referred to in the report and matters requiring attention. Two such photographs showed a major crack on the western exterior kitchen wall running through the sill of a window vertically down to a line of glass bricks. There is some apparent displacement of the windowsill consistent with there being some differential downward movement in the structure at the point of the crack. There was also a photograph of a crack on the southern wall of the home with an apparent
crack to the exterior sill below the bedroom window, running approximately vertically down to a vent and then through the foundation. It appears, from the photograph, that some attempt may have been made to fill part of that crack.
[31] Mr Hayward said it was not his practice to measure floor levels unless he saw or felt a slope. During cross-examination of various experts, and in submissions, it was suggested that Mr Hayward’s evidence as to a 50mm fall should not be relied upon because of the manner in which he had taken the level. Under cross- examination he said he had used a laser from a point in the kitchen where it would have projected a level through to the bedroom in the south-west corner. That would have been over only a portion of the bedroom given the laser level had to go through a doorway. It was suggested the 50mm slope, as recorded, was inconsistent with levels taken at various times after the earthquake, including levels taken by Earthquake Services over 11 March 2013, 21 August 2014 and 18 November 2016.
[32] I do not consider that the evidence of Mr Hayward, as to the sloping floors, should be discounted on that basis. His evidence was that there was a slope of that magnitude in both the kitchen and south-west bedroom area. His report referred to there being such a slope over a length of 3.5m. That slope could have been from where the laser was situated towards the exterior kitchen wall as well as the exterior bedroom wall. He did not specify where the drop towards the perimeter in the bedroom area began so that it could have been from the doorway to the exterior wall.
[33] As was pointed out by several expert witnesses, Mr Hayward’s measure was not intended to be absolutely precise. Mr Hayward himself described it in his report as “approximate”. Consistent with the differing floor-slope measurements taken at different times, even by the same business, a number of factors can influence the precise measurement. Even with similar methods adopted in similar circumstances, there could reasonably be a variation in the results obtained of 10mm plus or minus.
[34] The measurement Mr Hayward made was consistent with what he had observed and felt. The slope was so significant that it would have been felt by anyone going to those areas. His measurement was consistent with the measurements of floor dislevelment included in Mr Jones’ report for EQC of 9
December 2010 and also the measurements referred to in the Harrison Grierson report of June 2015.
[35] Mr Hayward’s measurement and the slope in the floor to the kitchen and south-west bedroom area is also consistent with the significant cracking of the exterior wall which he observed outside those rooms.
[36] It is also of significance that Mr Hayward’s report did not state that the cracks in the kitchen wall or the south-west bedroom wall were the only cracks observed. After referring to the crack outside on the kitchen wall, he said “the other cracks to the home are likely related to a combination of natural settlement and subsidence from the south bedroom and kitchen”.
The August 2010 Tower report
[37] Following the Sadats’ claim in August 2010 against Tower under their policy, an assessor, Mr Eric Dann, visited the property to assess the situation and to report on the claim. At the time, Mr Dann had been employed as an assessor by Tower for about four years. He ended that employment in 2011. He recorded observations from his visit on 19 August in a report dated 26 August 2010 (the August 2010
Tower Report) which he referred to in giving evidence as a witness for Tower.
[38] In Mr Dann’s report, the orientation of the house was rather different to the orientation which other witnesses and I have used. In referring to his evidence, I have referred to the appropriate orientation as generally referred to by others.
[39] Mr Dann observed that the water level in the area was extremely high. There was water sitting on the surface of land across the road from the Sadats’ house. He noted there was bad smelling, grey water under the floor of the house which appeared to have been released down the south side of the house under the floor, spreading some distance but no more than two piles under the house down the (eastern) side. He noted that on the (eastern) side of the house there was water inside the foundation but this was clear and resembled that of a high water table. His recorded observations as to the structure of the house included the following:
To the exterior of the house there are extensive cracking [sic] to the foundation and also the cladding of the house which is solid plaster over brick or block work.
…
[East] side: Cracking to wall by front door. Insured said he repaired it 1 yr ago but it has opened up. Horizontal cracking to the right of the front door. This has been repaired. Cracking under window through cladding and foundation. This has been filled and painted over to cladding. Movement cracks to side of windows.
[West] side: 3-4 big cracks to the wall plastering and substrate.
[South] side: Wall appears to have sunk under window with Horizontal cracking to the wall under window. Multiple cracking around vents to the foundation. Multiple crack [sic] to the house cladding.
Interior:
Bedroom by Victors Road cracking to stippled ceiling.
Back bedroom crack through ceiling, crack to wall above window. Hall: cracks to the lining, 5 cracks.
Cracks to the bedroom on the [south-western] corner. Exterior wall has dropped, cracking to lining in the wardrobe.
Living room: Cracks above door frame, Crack to end wall where join in lining.
Cracking to the interior of the house is constant around the entire house and not limited to the kitchen area where the water has leaked from the kitchen waste. Under insured policy I believe this to be gradual damage as the cracking has happened over time. It appears that the house has subsided and this maybe because of the extremely high water table in the area…
[40] Associated with his report were photographs showing some of the defects he referred to, including:
(a) a photograph of a large crack in the lath and plaster lining of the wardrobe and a separation in the internal lining at the corner intersection of two walls in the south-western bedroom area;
(b) a photograph showing a crack on the eastern wall near the entrance to the home running from the windowsill down and through the foundation;
(c) photographs of a major crack running horizontally on an area of wall to the right of a window on the eastern side of the house (the hose reel crack). The photograph showed an attempt had been made to patch that crack but it had opened up;
(d) photographs of a crack running from the corner of a windowsill on the southern side of the house running down to a vent in the foundation and from a corner of that vented area of the foundation to the ground level of that foundation. A close up showed an attempt had been made to fill the crack but that it had opened up nearer the windowsill;
(e) photographs showing a horizontal crack from a windowsill on the eastern side of the house to the right of the hose reel;
(f) several photographs of the crack on the western exterior kitchen wall running from the windowsill down to a line of glass bricks, then from the bricks down to the foundation, horizontally along the top of the foundation to a vent and then down from the corner of the vent through the foundation. One of those photographs showed a hole had been dug next to the foundation. There was grey water in it to a level just below the ground.
[41] Under the heading “underwriting considerations”, Mr Dann noted “subsiding cracking to interior and exterior cladding and foundation of the dwelling”. Ultimately, his report recommended the claim be declined, on the basis the damage was excluded as being due to gradual damage and damage from subsidence.
[42] Mr Dann was not a structural engineer. His focus was on the claim for damage relating to a leaking pipe under the kitchen and possible other explanations for that damage. He had not been asked to provide a detailed report as to the structural state of the whole building. The state of the building was however such that it led him to make some general observations and to bring to Tower’s notice particular matters which were of concern to him. His general observations were consistent with major subsidence to the foundations and significant structural damage before the earthquake.
[43] Mr Dann’s report did not itemise or refer to all the cracks or defects which others identified in the building after the earthquake when responding to the claim arising out of the earthquake and in relation to these proceedings. However, I do not
consider that inconsistency detracts from the value of his observations or the weight that should be given to them.
Geotechnical evidence
Introduction
[44] Geotechnical evidence is potentially relevant because of the way ground conditions at 3 Victors Road might have contributed to pre-earthquake damage or have made it more likely significant damage would have resulted from the September 2010 earthquake.
[45] The geotechnical engineers were Giles Learman of Engineering Design Consultants Limited (EDC) for Tower, Barry McDowell of Tonkin and Taylor for EQC and Owen Thompson of Thompson Geotechnical Limited for the Sadats. They jointly inspected the property on 21 October 2016 and submitted a joint report to the Court of 16 December 2016. All three possessed the necessary expertise, independence and qualifications to give evidence as experts.
The experts’ joint report – areas of agreement
[46] Matters they agreed on included:
(a) A summarised sub-ground profile based on the hand auger, scanner penetrometer and CPT investigations referred to in the report of EDC, Mr Learman, of 12 August 2016 as follows:
Depth range Description 0 – 0.4m Fill/Topsoil, soft, moist 0.4 – 0.8m Silt, soft, wet 0.8 – 1.2m Silt, soft, saturated 1.2 – 1.6 - 2.2m Organic Silt, Silt some peat, soft, saturated 2.2 – 6.3 Interbedded firm to stiff Silt and loose Sand layers,
saturated
6.3 – 7.0 Sand, loose to medium dense, saturated 7.0 - >7.6m Gravel mixture, dense, saturated
Liquefaction assessments carried out by EDC indicated that liquefaction might occur in sand/silt layers between 2.0m to 3.5m depth and 5.0m to
7m depth.
(b) The bearing capacity of the soil supporting the footings of the dwelling was likely exceeded at the time of construction, leading to compression of the soil, movement of the footings and damage to the dwelling;
(c) Damage described in the 2008 Hayward report and August 2010 Tower report included several cracks in the internal cladding and ring foundation. These indicated pre-existing and gradual settlement of the building due to poor ground conditions and/or adverse ground water levels;
(d) Reference to damage, as described in the Jones/EQC site report of December 2010, the report of Earthquake Services dated 27 March 2013, the Harrison Grierson report of 14 August 2015 and a comparison between August 2010 photographs and 2015 photographs. The experts agreed “in general it appears that the cracking noted after the earthquakes has occurred at pre-existing cracks, either widening of existing cracks or reopening of sealed and painted cracks”. Cracks are described as 0.5mm to 2mm wide, occurring across cladding and ring foundations, inclined, horizontal and stepped, in the south-west, north-west and north-east elevations. The cracking pattern suggested differential settlement of the ring and supporting floor levels;
(e) Reference to various floor levels surveys, which they agreed broadly showed the building was hogged due to settlement of the ring foundation and external walls;
(f) Pesometer monitoring records in the neighbourhood suggested a variation of about 0.5m to 1m in the depth of the water table on a seasonal basis, with low levels occurring from about February to April and high levels occurring from about July to October. In general, they considered the ground water on the property would vary between 0.5m and 1.5m depth below the ground surface. The likely depth of the water
table was 0.42m below the ground surface in September 2010 and 1.32m below the surface in February 2011.
(g) The peak ground accelerations, associated with the major earthquakes of
4 September 2010 and 22 February 2011, exceeded the serviceability limit state of liquefaction in susceptible layers (but those layers were agreed to be between 2.0m to 3.5m depth and 5.0m to 7.0m depth);
(h) It was likely that earthquake damage to the foundations of the house and possible non-liquefaction-related ground movements/changes were initiated in the September 2010 earthquake with further incremental damage possible in following earthquakes.
(i) Strutek (Dr Wu) had reported the concrete ring foundation might be supported by 0.6m square concrete pad footings at approximately 1.6m centres. Excavations by EDC had extended to 0.45m and 0.6m depths without finding the underside of concrete at the two locations where they had excavated holes close to the foundations. EDC had not found evidence of systematic concrete pad footings as indicated by Strutek. The experts assumed that the base of the pad footing was approximately
0.8m to 1.0m below ground level, approximately the level that ground water was encountered in the hand auger investigations made by EDC on
16 June 2016.
The joint report – areas of disagreement
[47] The report included a table setting out areas of disagreement. Mr Learman and Mr McDowell, for reasons given, considered the floor level surveys could not be relied upon to accurately quantify the movement of the dwelling post-earthquake. Mr Thompson said he shared the concern that caution must be exercised when interpreting floor level surveys where measurements were done by different companies at different times and on a deformed floor, but said he believed the data showed the house had been progressively settling post-earthquake.
[48] Mr Learman and Mr McDowell considered that, while it was possible for foundations to ratchet, ie rock, in an earthquake event, there was unlikely to be a
long-term increase in load on the soil. Mr Thompson considered degradation in soil stiffness could have triggered another cycle of consolidation settlement after the September 2010 earthquake.
[49] Mr Learman and Mr McDowell considered there was potential for some ongoing movement of the structure and possibly the ground once there were cracks in the cladding and footing, due to the seasonal variation in ground water levels. In this context, Mr Thompson said the opening of cracks around the house after they had been filled could be readily explained by settlement processes.
[50] Mr McDowell said it was not possible to estimate the amount of building settlement that may have occurred due to the earthquake and hence the proportion of earthquake damage caused by settlement against seismic shaking of the structure. Mr Thompson said “determining the magnitude of earthquake-induced settlements at the site is no easy task”. He said that there are “various input parameters that are used to assist this that are either unknown or highly uncertain”. He also said that it was difficult to estimate the amount of settlement that afflicted the structure following the September 2010 earthquake. However, based on his experience, he believed seismic induced compression of the soft foundation could have been large enough to deform floors and rack window and door frames as reported by the owners following the September 2010 earthquake.
Council records
[51] In 1992, 3 Victors Road was subdivided and a house was built on the subdivided section to the north of the Sadats’ home. Council records associated with the building permit application for that house recorded that the ground conditions in the area were known to be of a low load-bearing capacity. As part of the application, the Council required penetrometer testing of soil-bearing capacity as a foundation check for the intended structure. Ground tests were carried out by Geotech Consulting Limited. Four holes at the four corners of the proposed building were investigated to a depth of 2.1m. The results obtained were broadly consistent with the profile adopted by the geotechnical experts in their joint report based on the investigations carried out by EDC. At all four sites, “roots and small wood
fragments” were found between 0.6m and 1.5m depth below ground level. Silty fine sand and sandy silt (the ground prone to liquefaction) was found at three sites between 1.6m and 2.1m depth and at one site between 1.5m and 2.1m depth.
Mr Thompson’s initial brief of evidence
[52] Mr Thompson provided an initial brief of evidence for the plaintiffs dated 9
December 2016. In general, the views expressed in that evidence were consistent with his views as expressed in the joint experts’ report. I note, in particular, he confirmed:
· when the home was built, the weight of the building was greater than the
“carrying” or “bearing” capacity of the soil;
· the building subsequently settled into the foundation soils through consolidation settlement;
· the consolidation process had finished many years after the house was constructed; and
· the widening of cracks, as apparent from photographs, supported the view the foundation moved “as a result of the Canterbury Earthquake Sequence”.
[53] He believed the September 2010 earthquake was likely to have triggered foundation movement due to cyclic loading and ratcheting of the house into the weak foundation soils, and that cyclic degradation/remoulding of the organic soils fabric would have led to a re-initiation of the consolidation process.
[54] In general, the magnitude of building movements that occurred via the processes he described was “not able to be determined based on the available data within a reasonable degree of accuracy”. As such, quantifying the amount of settlement induced by ratcheting effects following the September 2010 earthquake was not possible.
[55] Generally, he considered that reconsolidation in liquefiable materials at various points between 1.7m and 7.0m below ground level would have resulted in
total settlement of the structure but was “not suspected of inducing significant differential settlement of the structure”.
[56] He believed that, of the Canterbury Earthquake Sequence, the September
2010 earthquake would have had the most impact on the property. This was because the water table was within 1.0m of the ground surface and the foundation was therefore at its weakest during this event. He considered that, in dryer conditions, the ground in February 2011 would likely have been stronger and stiffer, so better able to resist the effects of cyclic loading and the triggering of ground movements occasioned by the earthquake.
[57] Of the foundations overall, Mr Thompson said that the house’s foundation system “has failed to cope with the ground conditions in both static2 and dynamic scenarios3”.
[58] Mr Thompson said, to provide a code compliance foundation for the structure, reinstatement methodologies would need to mitigate the soft soil hazard within the upper 2.0m depths below ground level and the potentially liquefiable layers between 2m and 7m depths. He thus considered piling to dense gravel below
7m depths would be needed.
Mr Learman’s initial brief of evidence
[59] In his evidence of 17 February 2017, Mr Learman referred to the investigations he had conducted when preparing his EDC report and what they showed of the soil profile on the site. He noted the seasonal variation in ground water depth. He referred to MBIE-endorsed methods for analysing the potential for liquefaction and said such analysis suggested that the soils between ground level and
2.0m were non-liquefiable. He said clay-like soils can soften and fail under cyclic loading but were considered non-liquefiable because they do not exhibit typical
liquefaction features. He said, typically, cyclic softening4 (deformation) was
2 Non-earthquake with just the load of the building on underlying ground.
3 An earthquake is a dynamic scenario.
4 Mr McDowell explained that cyclic softening was the process equivalent to liquefaction for cohesive soils such as plastic silts and clays. Liquefaction occurs in soils that have little or no cohesion, such as sand and non-plastic silts. When cyclic softening occurs, repeated cycles of
possible only in normal to lightly consolidated clay-like soils. For reasons explained in his report, he did not consider significant cyclic softening of the soils was likely. However, he noted that his analysis of the soils through the use of hand augers indicated the soils were not entirely homogenous, and therefore the possibility of localised cyclic softening could not be discounted. He said, putting aside the observed damage, it was likely, from a theoretical perspective, that the dwelling had undergone static settlement prior to the earthquake. Quantifying that settlement was however difficult.
[60] In response to Mr Thompson’s evidence, Mr Learman accepted that it was theoretically possible that ground movements could have stabilised well before the earthquake but said other factors, including construction of the adjacent garage and leaking water pipes, could have changed soil conditions. He considered the significant internal and external cracking observed in August 2010, along with the opening up of cracks which Mr Sadat had filled before August 2010, indicated the house was still settling only weeks before the September 2010 earthquake.
[61] Mr Learman did not accept Mr Thompson’s view that, because the water table was higher, the September 2010 earthquake was likely to have been more damaging to the house than the February 2011 event. Rather, he considered more damage could have been caused by the February 2011 earthquake because of its higher peak ground acceleration.
[62] Although the water table was higher in September 2010, Mr Learman considered the residual strength of the ground was likely to have been less in the February 2011 event because the ground would have been weakened in the September 2010 event. While the ground water level, as recorded in September
2010, was higher, the depth between the base of the foundation and ground water in
the February 2011 event was still likely to have been small.
strong shaking reduces the contact and cohesion between soil particles. The ground softens for a short period during the cyclic (earthquake) event but does not turn to liquid. After a relatively short period of time, the ground returns to its previous strength.
Mr McDowell’s initial brief of evidence
[63] Mr McDowell summarised his evidence in a brief of 29 March 2017 as follows:
(a) Pre-earthquake consolidation settlement was the main cause of the foundation settlement at the property. There was also likely to have been a small amount of non-earthquake-related post-earthquake consolidation settlement ongoing from 2010 to the present day.
(b) Given the ground and ground water conditions at the time of the Canterbury earthquakes, those events may have caused a comparatively minor amount of the overall foundation settlement.
(c) Given the ground conditions and the evidence of pre-earthquake settlement, he would have expected to see about the same extent of foundation settlement he observed in 2016, even if the earthquakes had not occurred. In the absence of reliable before and after measurements, he did not consider it possible to quantify precisely how much, if any, foundation settlement occurred as a result of the earthquakes.
[64] Mr McDowell referred to the most significant features of the ground conditions at 3 Victors Road in understanding the current condition of the house. They were consistent with the information in the joint experts report. He considered the soft silt and organic soils in the upper 2.2m had a limited bearing capacity to support shallow house footings. With the seasonal variation in the depth of the water table, there was a greater potential for ratcheting and settlement of the house foundation under earthquake shaking loads in a period of high ground water conditions. The thickness and composition of organic soil layers between 1.2m and
2.2m depth varied across the footprint of the house. This variation had the potential to complicate the pattern of settlement experienced by the house so that there could be a greater amount of settlement in some parts of the house than in others.
[65] Mr McDowell gave evidence of observations as to foundation settlement. Settlement of the house foundations had occurred, as apparent from site observation and the various floor level surveys. The floor levels showed the floors towards the
centre of the house were higher than those around the perimeter walls, resulting in the kind of deformation known as “hogging”. The likely cause of hogging was settlement of the ring foundation. Based on visual observations, photographs and descriptions, he considered foundation settlement had occurred prior to the Canterbury Earthquake Sequence.
[66] Mr McDowell considered, having regard to the 2008 and August 2010 Tower reports, floor levels and the Harrison Grierson report from August 2015, that the location and scale of foundation and exterior wall cracking prior to the earthquake sequence was broadly similar to what he observed on site in October 2016. He considered the cracking he observed in the exterior of the house was typical of perimeter foundation settlement with foundation cracks at vent holes and cracking reflected up through the walls to windowsills. He noted that the rear, western side of the house had been unpainted since before 2008 and the cracks he saw in the walls appeared to be unchanged across photographs taken in 2008, August 2010 and 2015.
[67] Mr McDowell did not consider earthquake-related liquefaction would have caused any settlement of the foundations of the house. In his view, any liquefaction caused by the September 2010 and February 2011 earthquakes would have been at depths greater than 3.0m below the surface. There had been no ground surface evidence of liquefaction. There had been no evidence of cracks to the land on this property. If there had been sub-surface liquefaction, he considered it would have also occurred across neighbouring land. It would not have accounted for the differential settlement here. Mr McDowell rejected Mr Thompson’s theory that there could be a re-initiation of static consolidation settlement of the foundations following remoulding or physical changes in the soil fabric after the earthquakes. As Mr Learman had also stated, Mr McDowell said there was no evidence or experience of such changes elsewhere as a result of the Canterbury earthquakes.
Mr Thompson’s new evidence
[68] Mr Thompson provided a further brief of evidence dated 16 March 2017. The nature of that evidence and its delivery so close to the scheduled hearing date of
20 March 2017 caused EQC, Tower and their experts’ considerable concern. It
resulted in two telephone case management conferences, was the subject of my comments in Minutes of 20 March 2017 and 21 March 2017, and resulted in the commencement of the hearing being delayed from 22 March 2017.
[69] It was appropriately titled as a “supplementary brief of evidence” when it was filed with the Court. The evidence purported to be in the nature of a reply but was largely not. In this brief, Mr Thompson said he was submitting “new evidence, descriptions, explanations and comments”.
[70] Mr Thompson said he had arranged for a hand augered borehole analysis of ground conditions near the south-west corner of the house. He had also carried out a vein-shear test to measure the undrained shear strength of the ground in that location. He said this was key to determining the bearing capacity of silts and clays in the ground at that area and to determine the sensitivity of the soil. Sensitivity is a measure that reflects the ease with which soil can experience re-moulding and strength loss when ground is disturbed. He also arranged for holes to be dug at various points around the perimeter of the house. As a result, he identified that the bottom of the perimeter foundations were at shallow depths of 0.2m to 0.3m below ground level but there were two pad footings in the south-west and south-east corners. The bottom of these was at 0.6m. Although there was no excavation at the north-east corner of the house, he assumed there was no pad footing there. An excavation indicated there was no pad footing at the north-west corner of the house and there were no pad footings at regularly spaced intervals around the perimeter.
[71] The excavations and hand-augered borehole tests were carried out between 6 and 15 March 2017 without Mr Thompson advising the defendants’ geotechnical experts of what he was doing. Borehole testing and ring foundation exposures were done by Geotechnics and were the subject of a report dated 17 March 2017 attached to Mr Thompson’s further evidence.
[72] Mr Thompson said the ground analysis showed that, in the south-west corner, in dry conditions a surface crust had formed and there was “more than enough ground strength to support the static loading of the pad footings, without consolidation settlement being triggered”. However, when ground water saturated
the sub-soil layers, softening could take place and the strength of the ground would be reduced such that consolidation settlement could occur. He said that, in dryer periods of the year (summer and autumn), the house would remain stable but, as the ground water rose during winter, softer conditions would prevail, consolidation could reactivate and this “would continue until the consolidation process has had sufficient time to fully consolidate the soils in their softened state”.
[73] The particular ground analysis indicated to Mr Thompson that the silt/immediate soils within the immediate depths below the pad foundation in the south-west corner were sensitive. He relied on this to avoid allowing for a 40 per cent increase in the strength of the ground which would normally be appropriate when assessing the bearing strength of the ground during an earthquake.
[74] Mr McDowell said he did not agree with Mr Thompson’s classification. He said it was based on soil conditions from an investigation when the ground was dry and very stiff. He said that, if the analysis was undertaken using the soil conditions likely to have been present during the September event, the soil would be classified as being “insensitive” or “medium sensitive”. Using the measure of soil strengths, as observed on site, the results indicated to Mr McDowell that cyclic softening was unlikely to have occurred. Mr McDowell was not aware of any residential site where the mechanism of foundation settlement by cyclic softening has been recognised as resulting from the Canterbury Earthquake Sequence. Mr Learman acknowledged under cross-examination that there was a possibility of cyclic softening but said all the information he had looked at led him “to believe, in all probability, you are not going to get a huge amount of softening in the soil”.
[75] Mr Thompson said the hand auger test had indicated that, because the ground was of “low plasticity” and was sensitive to disturbance, it was highly likely the fabric of the silty soils immediately below the footing degraded during the shaking of the September 2010 earthquake. Relying on that information, he calculated the bearing capacity of the ground beneath the foundations. Relying on his calculations, he then said “gross settlements” could have been expected as a result of the earthquake.
[76] Mr McDowell criticised Mr Thompson’s conclusion in this regard, in particular, his exclusion of the 40 per cent allowance which was acknowledged to be normally appropriate. Mr McDowell considered it appropriate to apply the usual 40 per cent allowance when assessing the soil’s bearing capacity under seismic/earthquake loading because he did not consider the soils to have a high likelihood of cyclic softening. Applying that allowance and Mr Thompson’s other assumptions, Mr McDowell considered that it was unlikely the foundations would have failed to carry the loading on them during the September 2010 earthquake.
[77] Mr Thompson, relying on a particular paper published by the Department of Civil and Environmental Engineering at the University of California, considered that, with the ground water table at a 0.4m depth, the foundation pads would have been founded in or near to materials that liquefied and/or experienced substantial strength loss during the September 2010 earthquake. From that assessment, he considered it was “highly likely that the pad footings around the house settled into the liquefaction/weakened foundation” as a result of the September earthquake. He did however acknowledge that, with what may have been an appropriate adjustment to the inputs to his modelling, “essentially no liquefaction would have been triggered within the upper one metre depth profile”. With that concession, he said the upper levels should be classed as “borderline materials that could behave as either cohesionless or cohesive materials”.
[78] Mr McDowell pointed out that all geotechnical experts had agreed at the time of the joint report that any liquefaction that occurred beneath the property would have occurred at a depth that would be unlikely to have caused any differential settlement of the house. He therefore could not accept Mr Thompson’s analysis in this later evidence. He said he had checked the analysis and the results that were obtained at the time of the joint report and had not found any justification for changing what had been agreed to at the time of that report. Mr McDowell said he did not consider liquefaction had contributed to any differential settlement of the foundations of the house as a result of the September earthquake.
[79] Mr McDowell said he had re-run a liquefaction analysis with Tonkin &
Taylor’s in-house software, using Mr Learman’s ground analysis data and the input
parameters that Mr Thompson had used. That produced a different conclusion to Mr Thompson’s analysis. Mr McDowell’s analysis showed there would be no liquefaction triggered above a 2.0m depth with ground water at 0.4m below the ground level. He said his analysis produced similar results to the analysis performed by Mr Learman in 2016 which the experts had agreed, in their joint report, was correct.
[80] EDC, through Mr Learman, prepared a report for Tower dated 12 August
2016. It was checked by Gareth Williams, senior geotechnical engineer and a director of EDC. The report stated it was completed in accordance with the MBIE guidance documents “Repairs and Rebuilding Houses Affected by the Canterbury Earthquakes”. The stated objective of the report was “to determine ground conditions and likely performance in an earthquake event”. To do this, the geotechnical investigation included hand augers and Scala penetrometer tests. The Scala penetrometer/hand auger tests were carried out at two locations adjacent to the south-west corner of the home, the south-east corner and near the north-west and north-east corners of the home. Four cone penetration tests were made in similar situations with a further cone penetration test on the eastern side of the house. There was no evidence of a peaty layer in any of those investigations.
[81] In their joint report of 16 December 2016, Mr Learman, Mr McDowell and Mr Thompson considered it appropriate to express their opinions as to the significance of the sub-surface ground profile based on the hand auger, Scala penetrometer and CPT investigation reported by EDC. On that basis, all experts agreed to the generalised sub-surface profile referred to at [46] above.
[82] On the basis of that information, the experts agreed that liquefaction might occur in sand/silt layers between 2.0m and 3.5m in depth and 5.0m to 7m in depth. This was well below the 0.8m to 1.0m below ground level depth which they were willing to adopt for the bottom of the foundations in the absence of specific information as to this. It was also significantly below the depth of the bottom of the foundation beam at 0.4m below ground level or the bottom of the two pads at 0.65m, as identified through the March 2017 excavations carried out by Geotechnics (report of 10 March 2017) for Dr Wu and Mr Thompson.
[83] In his new evidence, Mr Thompson said the hand auger analysis had revealed there was a 50mm thick layer of peaty material directly below the footing at 0.9m. He referred to a paper which indicated peat was up to 20 times more compressible than regular clay and silty soils. Mr Thompson accepted that the peaty layer would have compressed over the 50 years the building had been sitting on top of it.
[84] Under cross-examination, Mr Thompson accepted that the EDC hand augers had not identified any peaty material at 50mm depth and therefore accepted that the layer of peaty material might possibly be discontinuous.
[85] Mr McDowell’s opinion in that regard seems logical and appropriate, and consistent with Mr Thompson’s opinion that a peaty layer would have been “highly compressible”.
[86] Based on judgements he had made as to the nature of the soils and their load carrying capacity, Mr Thompson calculated the potential for them to fail during an earthquake. To do this, he used the calculations of Dr Wu, who also produced an evidential report for the plaintiffs as to the loading that would be carried by the pads. Those calculations were also made just prior to the hearing without the other experts involved with what Dr Wu was doing.
[87] Mr Finn, of Harrison Grierson, was critical of the assumptions which Dr Wu had made in making these calculations. He said that Dr Wu had assumed the two pads on the south-western and south-eastern corners of the house would be carrying the whole load of the southern end of the house. He said that assumption was not justified because the load of the house would be carried by the whole of the foundation beam along that end of the house and the pads. The pads would be supporting the beam that was directly above them. However, the beam between the pads was designed to be supported by the ground between the pads.
[88] Mr Finn also said Dr Wu’s calculations assumed the load during an earthquake would be the earthquake loading for which buildings now have to be designed according to current design criteria, although he acknowledged that Dr Wu had made some adjustment to allow for what he was doing.
[89] Mr Finn explained that current code requirements are based on the load that would be on foundations as a result of an earthquake as if it was located close to the epicentre of a potential earthquake of a certain level. He said the loading in an earthquake that a new house has to be designed to withstand is thus assessed conservatively. He said that, even with the acknowledged adjustment, Dr Wu’s calculations started with the assumption the house at 3 Victors Road was in the worst possible location at the time of the September earthquake, when this was simply not the case.
[90] Mr Polson, the structural engineer for Tower, essentially made the same criticism of the assumptions which Dr Wu had made in his calculations, namely that Dr Wu had assumed the foundation beam was being carried by the two pad foundations and that the perimeter beam spanned onto those pads. Like Mr Finn, Mr Polson said, in reality, the pads and the perimeter foundation would be supporting the house. He said that, in Dr Wu’s calculations, the figures he had arrived at were for point loads on each pad. Mr Polson said he had used the concept of the load being shared more or less equally between the pad footings and the perimeter foundation and had come up with a pressure underneath the pads of approximately half of what Dr Wu arrived at.
[91] In his supplementary evidence, Dr Wu simply said he had made these calculations and produced details of his calculations as an annexure to his brief. Under cross-examination, he said he had calculated the force that would be applied to the bands by calculating upper and lower bands. He said the upper band assumed the loading of the house would be on the whole of the perimeter foundation. His lower band assumed the loading of the house was based on the pads taking all the weight.
[92] I have examined the way in which Dr Wu describes the calculations he made as referred to in the annexure to his evidence. I consider his ultimate conclusion was based on the pads carrying the weight of all the foundation and building on the south side without any allowance for the foundation also being supported, to some extent, by the ground between the pads.
[93] Mr Thompson also accepted that Dr Wu’s calculations as to the loading on the pads assumed that each pad was a regular shape, 1100mm x 1100mm. Dr Wu accepted the size of the pads mattered in his calculations. In doing that, he was making an assumption because the excavations had exposed only the sides of each pad outside the foundation without any indication of how the pad was shaped on the inside. I infer from that, the pads could have been significantly less than assumed if, on the internal side of the pad, they were irregular in shape or if they were in the shape of a triangle under each corner of the foundation on the south-west and south- east side.
[314] The situation the Sadats face with their home is thus difficult for them. It would have been a windfall for them if the September 2010 earthquake had resolved all these problems by requiring EQC and their insurer to pay for a new home. Whether or not EQC and Tower were legally required to do this, fell squarely for determination with regard to Tower’s obligations under its insurance policy, and EQC’s obligations under the EQC Act.
[315] Unfortunately for the Sadats, on considering the evidence and having identified the defendants’ legal obligations, I cannot hold either Tower or EQC liable to meet the costs of a new home for them.
[316] On the plaintiffs’ claims against them, Tower and EQC are entitled to
judgment, and the claims are accordingly dismissed.
[317] The defendants are entitled to costs. There may be an issue as to whether the Sadats’ experts, Mr Thompson and Dr Wu, should have to personally make a contribution towards the defendants’ costs, particularly so because of the new evidence they presented just prior to the hearing. Earthquake Services Limited was a litigation funder for these proceedings.
[318] The Sadats are to provide the defendants with full details as to the terms of the litigation funding agreement with Earthquake Services Limited or any other litigation funder forthwith.
[319] EQC and Tower are to file memoranda as to costs within 28 days of receiving that information. Counsel for the Sadats is to ensure those memoranda are forwarded to Earthquake Services Limited, Dr Wu and Mr Thompson. Memoranda for those three parties and the Sadats are to be filed in response to the defendants’ memoranda within a further 21 days. The defendants are to file memoranda in reply within a further 14 days. The memoranda are to be no longer than 10 pages.
[320] I will deal with costs issues on the basis of the written memoranda unless, after considering those memoranda, I consider it would be appropriate to hear further
submissions from all parties or if any of those concerned in their memoranda ask to be heard further as to costs issues.
Solicitors:
Taylor Shaw, Christchurch Gilbert Walker, Auckland Chapman Tripp, Wellington.
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