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| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA | |
| CA466/2019 [2020] NZCA 395 |
| BETWEEN | SOUTHERN RESPONSE EARTHQUAKE SERVICES LIMITED |
| AND | KARL GREGORY DODDS, ALISON ROMA JACQUELINE DODDS AND ST MARTINS TRUSTEE SERVICES LIMITED AS TRUSTEES OF THE MATTSON TRUST |
| Hearing: | 26–27 May 2020 |
Court: | Miller, Clifford and Goddard JJ |
Counsel: | T C Weston QC, D J Friar and N F D Moffatt for Appellant |
Judgment: | 7 September 2020 at 3.00 pm |
JUDGMENT OF THE COURT
A The appeal is allowed in part. The damages awarded to the respondents in the High Court are reduced by $10,656.44.
BThe appeal is otherwise dismissed.
CThe cross-appeal is dismissed.
____________________________________________________________________
Table of contents
Para No
Background
The policy
Out of policy options
The DRA
Southern Response’s decision to provide Abridged DRA to customers
Abridged DRA provided to the Dodds
The election process — the 26 September 2012 letter
Information sheets
January 2013 meeting(s), the MOU and Build Decision documents
Settlement Election Form
The settlement
The Avonside Holdings decisions
The claim
High Court judgment
Which costs came within the cap?
Claim One: Misrepresentation
Claim Two: Misleading and deceptive conduct under the FTA
Claim Three: Common law breach of the duty of good faith
Effect of full and final settlement clause
Damages calculation
Issues on appeal
Misrepresentation claim
The issue
What representations (if any) did Southern Response make to the Dodds?
Were the representations false?
Were the Dodds induced to enter into the Settlement Agreement by the misrepresentations?
Relief under s 35 of the CCLA
FTA claim
Misleading and deceptive conduct?
Loss or damage resulting from misleading conduct
Relief under CCLA and FTA
The issues in relation to relief
Approach to quantification of damages
Costs relevant to calculation of cap
Calculation issues
General damages
Order setting aside the Settlement Agreement?
Claim for breach of duty of good faith
Result
REASONS OF THE COURT
(Given by Goddard J)
Mr and Mrs Dodds lived in a house in the Port Hills in Christchurch. The house was owned by them and St Martins Trustee Services Ltd as trustees of a Family Trust. The Dodds insured the house on a replacement basis with the appellant, Southern Response Earthquake Services Ltd (Southern Response), which was then called AMI Insurance Ltd. The house was damaged beyond economic repair by the 2010/2011 Canterbury earthquake sequence — in particular, the February 2011 earthquake. Under their insurance policy, the Dodds had a number of options for settlement of their claim. The option they chose was to buy another house. The policy provided that if they chose the “Buy Another House” option, Southern Response would pay the cost of buying that other house, capped at the cost of “rebuilding your house on its present site”.
In order to quantify that cap, an estimate needed to be made of what it would cost to rebuild the house…
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- Case
- [2020] NZCA 395
- Decision Date
CaseChat Overview and Summary
The legal issues before the court included whether Southern Response was obligated to cover the cost of demolishing the Dodds' existing house as part of the 'Buy Another House' settlement option and whether the Dodds were correctly informed of their options and the associated costs under the policy. The court needed to determine if the communications between Southern Response and the Dodds were clear and sufficient in guiding the Dodds through their rebuilding options and if the insurer had adequately explained the financial implications of each option.
The court found that Southern Response had not clearly communicated the financial implications of the rebuilding options to the Dodds. It was determined that the insurer had a duty to provide clear and accurate information to assist the insured in making informed decisions about their rebuilding options. The court held that the communications from Southern Response to the Dodds were not sufficient to ensure that the Dodds fully understood their options and the associated costs, particularly regarding the cost of demolition and the rebuilding budget. The court found that the insurer had breached its duty to act in good faith and to provide clear and accurate information to the insured.
The court ordered Southern Response to pay the Dodds' costs of the proceeding and made a declaration that Southern Response had failed to adequately explain the financial implications of the rebuilding options to the Dodds. This decision underscores the importance of clear communication between insurers and insured parties in ensuring that policyholders are fully informed about their options and the costs involved in exercising those options.
Orders
Orders of the court
Full text does not contain this section.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Full text does not contain this section.
Ratio Decidendi
Legal Principle Established
In the MOU Southern Response recorded on the first page under a heading “1. DRA (Detailed Repair / Rebuild Analysis) preparation” the following: Arrow will have completed a DRA on behalf of Southern Response. The DRA records a description of your house and the damage to it. It also identifies the building work required based on the cover under your insurance policy. The DRA is an important document. …(Emphasis added). Then paragraph three of the MOU states:3. Choosing to replace your previous house under the terms of the policy or building something different.If your house is ‘beyond economic repair’ and you have decided that you want Southern Response and Arrow to manage the building work, you have two options regarding build and design decisions:·Replicate to Policy: Under this option you can choose to have your house rebuilt to its previous characteristics, using building materials and construction methods in common use today based on the terms of the policy. ·Build to budget: Under this option you can take the cost to rebuild your previous house determined by using information from the DRA to form a budget. You can then apply that budget to build a new house that may differ from your previous house (for example you may choose to change the layout of your house). In some circumstances you can also choose to contribute more to the cost of your new house than the budget. …(Emphasis added). The importance of the DRA which had been provided to the Dodds is emphasised at paragraph four of the MOU:4. Using the DRA to establish the scope of the rebuildThe DRA is important for both of the rebuild options outlined above. If you choose to have your house replicated to policy, the DRA and the insurance policy wording will be the guiding documents to define the type of house that will be rebuilt …If you choose the Build to Budget option the DRA and the insurance policy wording will still be used to define your previous house. Additions made by you which push the building cost over that budget will need to be paid for by you … Up to the end of January 2013 the Dodds were still considering their various options under the policy, including out of policy options such as the build to budget option. On 11 February 2013 Southern Response sent the Dodds a further document called a ‘Settlement Election Form’. This form set out the Dodds’ options and the settlement arrangements for each option in table form. The entry for the Buy Another House option read as follows (emphasis added): Mr Dodds sent an email to Southern Response seeking clarification about this option. The email said “The cost of re-building/replacing our home is $894137”, and went on to ask if the cost of demolition of their existing house would come out of that sum. Southern Response replied the next day and advised that the demolition costs “are not part of the ‘Buy another House’ settlement. Those costs are not taken from the $894,137.00 as they are a cost we incur.” The email from Southern Response did not comment on Mr Dodds’ statement that the cost of rebuilding was $894,137.[6][6]It is not apparent why the figure in the email differs by $800 from the figure used in the September 2012 letter — this may simply have been a typographical error on the part of Mr Dodds.