Myall v Tower Insurance Ltd

JurisdictionNew Zealand
JudgeDunningham J
Judgment Date21 March 2019
Neutral Citation[2019] NZHC 528
CourtHigh Court
Docket NumberCIV-2015-409-000230
Date21 March 2019
Between
Paul Geoffrey Myall
Plaintiff
and
Tower Insurance Limited
Defendant

[2019] NZHC 528

CIV-2015-409-000230

IN THE HIGH COURT OF NEW ZEALAND

CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA

ŌTAUTAHI ROHE

Insurance — property damaged in Canterbury earthquakes and had t be demolished — dispute over full replacement value — interim payments made before final settlement — interest in interim payments — waiver of requirement to rebuild

Appearances:

K P Sullivan for Plaintiff

M C Harris for Defendant

JUDGMENT OF Dunningham J

1

Mr Myall, the plaintiff, owned a fully restored historic mansion, known as Riverlaw, in the suburb of Opawa in Christchurch. It was so badly damaged in the Canterbury earthquakes of 2010–2011 that it had to be demolished. Mr Myall initially hoped to rebuild Riverlaw. However, disputes arose with his insurers over what sum comprised full replacement value and no steps were taken while these were being resolved. The reasons for the disputes included that Mr Myall had not insured the house for its true floor area and the parties disagreed on how the policy determined the specifications for the rebuild.

2

On 23 February 2017, I gave a judgment on the disputes which affected the calculation of full replacement value. 1 That judgment was appealed and cross-appealed on various grounds. With those issues resolved, the parties have

recently agreed that the amount which represents full replacement value is $5,273,021.71, and on the costs payable in the High Court
3

The parties had hoped that would be the end of the matter. However, it was not. Two issues were identified as outstanding. The first is whether Mr Myall must account for use of money interest on the interim payments that were made to him in 2012 and 2013. Tower Insurance Ltd (Tower) says it raised this point in argument before the High Court but that point was not determined. It says it is a significant point of principle and one that is worth a substantial sum here as the interim payments totalled nearly $3,000,000. Mr Myall resists this claim.

4

The second issue is whether Mr Myall is still required, in accordance with the policy, to rebuild or replace his home before the balance is paid, or whether Tower has waived this requirement when it elected to cash settle, and cannot now insist on it.

5

These issues were initially raised in memoranda filed in the Court late last year. Given the importance of them to the parties, and the amounts at stake, I agreed to hear counsel on these issues. In the course of exchanging submissions, a third issue was identified by the plaintiff which was whether he was entitled to interest as provided for in r 11.27 of the High Court Rules 2016 on what was described as the “judgment sum” from the date of the High Court judgment to the date of payment.

The insurance policy
6

Before dealing with the three issues arising, it is necessary to briefly recap the relevant provisions of the insurance policy. The defendant, Tower, agreed to pay the “full replacement value” of the house when it suffered “sudden and unforeseen accidental loss or damage”. “Full replacement value” was defined in the policy as “the costs actually incurred to rebuild, replace or repair your house to the same condition and extent as when new and up to the same area as shown in the certificate of insurance”. However, Tower was not bound to “pay more than the present day value until the cost of replacement or repair is actually incurred”. “Present day value” was defined to mean:

…the cost at the time of the loss or damage of rebuilding, replacing or repairing your house … to a condition no better than new less an appropriate allowance for depreciation and deferred maintenance.

7

Importantly, the policy gave Tower options for how it settled a claim. It said “we will arrange for the repair, replacement or payment for the loss, once your claim has been accepted”. In other words, Tower could either rebuild the property itself or it could choose to meet its obligations through payment of a monetary sum sufficient to do this.

8

In summary, where Tower did not undertake the repair or rebuild itself, its obligation was to pay the insured the indemnity value of the house until the insured had incurred the cost of replacement or repair, at which point it would meet those additional costs.

The relevant background events
9

The claim for total loss of Riverlaw was accepted by Tower in July 2011. In a letter sent to Mr Myall at the time, Tower explained how it proposed to meet its policy obligations, saying:

Although we are obtaining a costing to rebuild your house, we understand that you may not wish to rebuild. Without making a decision yet on what option Tower wishes to take to resolve your claims, we will, in the meantime, also obtain valuations for market value and present day value as at 21 February 2011.

10

On 23 January 2012, Tower forwarded three valuations to Mr Myall along with advice that it would make payment of what it described as an “interim discharge” totalling $1,359,000.

11

Mr Myall's lawyers replied to Tower's lawyers on 27 January 2012, rejecting the valuations relied on by Tower to calculate present day value and advising that he would be replacing the existing house.

12

Based on a report by its quantity surveyor, Tower then calculated that a further $1,612,644.12 would constitute full replacement value and proposed paying that amount to settle Mr Myall's claim. Mr Myall's lawyers advised that Tower could make payment of that amount to their trust account on a “without prejudice” basis and it would be accepted as a partial payment.

13

By 31 August 2012, Tower had not heard anything further from Mr Myall. It forwarded a settlement and discharge form and said that:

…any shortfall identified over and above the amount as detailed in the settlement and discharge form will need to be documented, costed and fully justified before Tower would entertain any increase in its liability in respect of these two claims.

14

The response from Mr Myall's lawyers was that any payment made would not be accepted as full and final settlement of the claim, but rather as a “progress payment”.

15

In April 2013, having made little further progress, Tower made what it describes as a “final payment” totalling $1,612,644.12 in respect of Mr Myall's claim. This figure relied on the cost of rebuild which had been calculated by its quantity surveyor, Mr Eggleton. Mr Myall did not accept Mr Eggleton's calculation of replacement value and matters remained unresolved.

16

On 16 June 2014, Tower's lawyers wrote to Mr Myall's lawyers noting that Tower had made the two interim payments in January 2012 and 9 April 2013, and the payments were expressly made and received on the basis they were not in full and final settlement of Mr Myall's claim. They then stated:

Tower's position was — and is — that further payments would be considered and made as and when additional costs were actually and reasonably incurred in rebuilding the insured property … Tower remains ready, willing and able to meet its obligations under the policy to your client. It is prepared to pay further sums actually and reasonably incurred in rebuilding the insured property.

17

Mr Myall's solicitors replied on 2 July 2014. They agreed that the insurance policy “is a typical replacement value policy” under which Tower had an immediate obligation to pay the “present day value” which they described as the “depreciated replacement cost”. The letter went on to discuss some of the issues which should be taken into account in reaching a depreciated replacement cost, including the extensive recent restoration of the property, and concluded by saying “we are instructed that it is our client's present intention to rebuild the property”.

18

Tower responded promptly and reminded Mr Myall's lawyers that it was not:

…obliged to pay [Mr Myall] more than the market value of the property, less the value of land, until the costs of rebuilding the insured house are actually incurred.

19

On 8 April 2015, after further correspondence regarding how full replacement value should be calculated, Mr Myall's lawyers stated:

Our client is intending to replace the house. So, in the meantime and in accordance with your previous acknowledgment, he is entitled to be paid the replacement value less an allowance for depreciation and deferred maintenance… Given our client's house had only recently been fully and completely renovated prior to the damage, then the assessment would be close to the full replacement value (and certainly well in excess of what your client has paid already). If you disagree please let us know your reasons.

20

By October 2015, Mr Myall had cooled on the idea of rebuilding. Instead, through his lawyers, he broached the option of using the insurance money to replace the house, with Mr Myall's lawyers noting that:

…the policy is quite clear on this issue and indeed was sold on the basis that if the house was demolished then Tower would pay the full replacement value on another site of Mr Myall's choice.

21

His lawyers asked Tower to confirm that “Mr Myall may sell the section without it affecting his insurance entitlement”.

22

In an email on 27 October 2015, Tower noted that it remained willing to “manage a rebuild on the current site”, which would avoid “the need to litigate rebuild costs”. However, it said:

[W]e take it from your enquiry of 16 October that Mr Myall does not wish to pursue that option, but we are nevertheless instructed to confirm that it is from Tower's perspective a serious route to resolution that is still available.

The “off-site” settlement options — buying or building elsewhere — can be chosen by the customer where, as here, the house is damaged beyond repair and Tower has elected to settle in cash. Skyward governs. We agree that Tower cannot in these circumstances insist upon an...

To continue reading

Request your trial
1 cases
  • IAG New Zealand Ltd v QBE Insurance
    • New Zealand
    • Court of Appeal
    • 25 May 2022
    ...[27(a)-(b)]. 40 At [27(c)]. 41 At [27(d)]. 42 Doig v Tower Insurance Ltd [2019] NZCA 107, [2021] 2 NZLR 127. 43 Myall v Tower Insurance [2019] NZHC 528. 44 See Substantive judgment above n 1, at [109], [194]–[195] and 45 Worldwide NZ LLC v New Zealand Venue and Event Management Ltd [2014......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT