BRUCE & ANOR v IAG NZ LTD [2019] NZCA 590

BRUCE & ANOR v IAG NZ LTD [2019] NZCA 590 [26 November 2019]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA45/2019[2019] NZCA 590BETWEEN JOANNE TRACEY BRUCE, STEPHENLESLIE BRUCE AND LESLIE GORDONWILLETTS as Trustees of the JO ANDSTEPHEN FAMILY TRUSTAppellantsAND IAG NEW ZEALAND LIMITEDRespondentHearing: 15 October 2019Court: Miller, Simon France and Hinton JJCounsel: M V Robinson and P H Biddle for AppellantsM G Ring QC and O V Collette-Moxon for RespondentJudgment: 26 November 2019 at 2.30 pmJUDGMENT OF THE COURTA The appeal is allowed in part. We set aside the finding that the Bruceshave not established that there is a reasonable and practical way to remedythe wall verticalities or the uneven floor levels. Those issues must bedecided at the second trial. The appeal is otherwise dismissed.B The cross-appeal is dismissed.C The respondent must pay costs to the appellants for a standard appeal ona band B basis with usual disbursements. We certify for second counsel.____________________________________________________________________REASONS OF THE COURT(Given by Miller J)Introduction[1] This is a case about substandard repairs to an earthquake-damaged house.Narrative[2] The house is the family home of the appellants Joanne and Stephen Bruce. It isa modern house, completed in 2006, and it was built to a very high standard. It won"gold" awards in the 2006 Master Builders House of the Year competition.The evidence is that its pile-supported concrete slab floor was level and its interiorframed timber walls true.[3] The house was damaged in the Christchurch earthquakes. IAG, the insurer,elected to repair it rather than rebuild. Under the policy standard repairs must becompleted to "the same condition and extent as when the house was new". If that was"not practicable", repairs would be "as close as is reasonably possible to that conditionand extent".[4] The necessary repairs were extensive. The concrete slab on which the houseand garage stood was no longer level. The house was lifted so the slab could beexcavated and replaced. It was then lowered and its exterior and interior walls werefixed to the new slab. Much consequential work was required to make it good.[5] It is not now in dispute that the builder engaged by IAG did not meetthe policy's "as when new" standard in a number of respects. The Bruces pleaded nofewer than 135 defects. Shortly before trial IAG conceded almost all of them.Four were disputed at trial: the floor level, the verticality of interior walls, the qualityof wall finishes required and achieved, and the fireplace. The last of these is not inissue on appeal.[6] The trial Judge, Mallon J, found that in each of the first three areas the workfailed to meet the contractual standard.1 The Bruces' appeal concerns the Judge'sfindings about what needs to be done to repair the house. They say that the work mustbe done again and the Judge wrongly excluded that option, finding rather thata combination of remedial work and damages would sufficiently compensate them.For its part, IAG does not now dispute that the "as when new" standard could havebeen met, but was not, with respect to the slab and the wall finishes. It cross-appealswith respect to wall verticalities, saying that it was not practicable to achievean as-when-new standard and on the Judge's factual findings she ought to haveconcluded that the work met the fallback standard of "as close as is reasonablypossible" to the as-when-new condition and extent.The procedural history[7] The appeal and cross-appeal have their genesis in a decision made, on IAG'sapplication and only 10 days before trial, to split the trial into two stages.The judgment under appeal dealt with the first stage, being identification of defectsand what was needed to remedy them. The second, which is to address cost of repair,has not been tried. Much of the argument before us was addressed to the propositionthat Mallon J decided issues that had been reserved for the second stage. In particular,the Bruces say she impermissibly ruled out as unreasonable their preferred solutionfor the floor slab, a complete rebuild. To explain this, we must say something aboutthe claim and the decision to split the trial.[8] The Bruces pleaded that the repairs were defective, complying neither withthe contractual standard nor regulatory standards, and the home now requiresextensive remedial work including replacement of the piles and floor slab and whatwe infer is new interior wall framing. The schedule of works listed appears to amountto a complete rebuild (which was and remains their preferred outcome). They seekremediation costs of $2,056,221 and general damages of $50,000.1 Bruce v IAG New Zealand Ltd [2018] NZHC 3444 [High Court judgment] at [95], [123]–[124]and [150].[9] IAG's pleading generally denies the claim, including liability for damages.Its position is that the insurance contract is still on foot, meaning that it maycommission any remedial work required, and until it has exercised its election in thatregard no question arises of any payment being made to the Bruces.[10] The trial was set down for 19 November 2018 and allocated two weeks' hearingtime. On 9 November a telephone conference was held before Matthews AJ, at IAG'srequest. It appears that IAG had revised its view of the claim after service ofthe plaintiffs' briefs. We record that IAG explains this by saying the claim was amoving feast and it had done its best to engage the Bruces' solicitors in attempts toclarify the issues. We are in no position to decide where fault lies, and we need not doso. What matters for present purposes is that IAG invited the Associate Judge to directthat the evidence of quantity surveyors, which went to cost of remediation, should notbe called at the 19 November trial. IAG argued that the first question was "the extentto which the repairs are defective and what is required to fix them". The policyremained on foot and IAG claimed to retain the right to undertake any necessaryrepairs; that being so, it was premature to order any payment to the Bruces.IAG contended that it would be a waste of time and resources to lead the quantitysurveyor evidence at that stage. The Associate Judge recorded that:2[8] IAG says that it should not have to produce [quantity surveyor]evidence at trial because the Court is yet to decide exactly what has to be done.Once the Court has decided that, [quantity surveyor] evidence can be preparedwhich is directed with precision at the Court's findings. [11] The Associate Judge accepted this argument. He concluded that the mostefficient way to resolve the issues was for the trial starting on 19 November"to concentrate on what is wrong with the house and what needs to be done toremediate it. Once that is established the question of the cost to do so can beestablished."3 He accordingly directed that quantity surveyor evidence be reserved fora second trial. He added that the first trial would deal with a claim for generaldamages.42 Bruce v IAG New Zealand Ltd HC Christchurch, CIV-2016-409-1223, 9 November 2018.3 At [9].4 At [11].Remediation and reasonableness[12] The split between defects and what was needed to fix them, on the one hand,and the cost of remediation, on the other, may have seemed straightforward. It hasnow proved to be anything but.[13] It is uncontroversial that IAG, having elected to repair and commissionedthe work, was liable to meet the contract standard. The work does not conform to thatstandard. The question is what is to be done about it. The rule prima facie applicableto breaches of building contracts is that the builder is liable to meet the cost of workneeded to conform to the contractual standard; that being so, the measure of damagesrecoverable by the owner is the difference between the contract price of the workcontracted for and the cost of making the work conform to the contract.5 The HighCourt of Australia stated in Bellgrove v Eldridge:6 the [Owner] was entitled to have a building erected upon her land inaccordance with the contract and the plans and specifications which formedpart of it, and her damage is the loss which she has sustained by the failure ofthe [Contractor] to perform his obligation to her. This loss cannot be measuredby comparing the value of the building which has been erected with the valueit would have borne if erected in accordance with the contract; her loss can,prima facie, be measured only by ascertaining the amount required to rectifythe defects complained of and so give to her the equivalent of a building onher land which is substantially in accordance with the contract.[14] However, there is a qualification to this rule. It has been attributed tothe judgment of Cardozo J in Jacob & Youngs Inc v Kent7 and was adopted byHudson's Building and Engineering Contracts in the 7th edition (published in 1946)and by the High Court of Australia in Bellgrove,8 which decision was in turn approvedby the House of Lords in the celebrated case of Ruxley Electronics and ConstructionLtd v Forsyth.9 The qualification is that the remedial work must be a reasonable courseto adopt. As the High Court of Australia explained in Bellgrove:10 the cost of the work, whether it be necessary to replace only a small part,or a substantial part, or, indeed, the whole of the building is, subject to5 Hardwick v Lincoln [1946] NZLR 309 (SC).6 Bellgrove v Eldridge (1954) 90 CLR 613 at 617.7 Jacob & Youngs Inc v Kent (1921) 230 NY 239 at 244–245.8 Bellgrove v Eldridge, above n 6.9 Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344 (HL) at 366–368.10 Bellgrove v Eldridge, above n 6, at 618–619.the qualification which we have already mentioned and to which we shallrefer, together with any appropriate consequential damages, the extent of thebuilding owner's loss. The qualification, however, to which this rule is subjectis that, not only must the work undertaken be necessary to produce conformity,but that also, it must be a reasonable course to adopt. As to what remedialwork is both "necessary" and "reasonable" in any particular case is a questionof fact.[15] In New Zealand, this Court adopted Bellgrove in Bevan Investments Ltd vBlackhall and Struthers (No 2) and in Warren & Mahoney v Dynes.11 In his judgmentin Altimarloch (which was not a building case) Tipping J discussed the circumstancesin which a performance measure of damages will be adopted and held, citing RuxleyElectronics, that reasonableness plays a central part in determining whether damageswill be calculated according to the cost of reinstatement or some other measure,usually diminution in value.12[16] Whether it is reasonable to insist on the performance measure is a question offact. However, Ruxley Electronics is authority for the proposition that it would not bereasonable to so insist when the cost would be wholly disproportionate to the benefitperformance would deliver.13 The benefit is gauged by comparing what was deliveredagainst what was specified, and proportionality is gauged by assessing the benefitagainst the cost of making the work conform to the contractual standard. The analysismay determine what measure of damages is adopted. As Lord Mustill explained inRuxley Electronics:14 the test of reasonableness plays a central part in determining the basis ofrecovery, and will indeed be decisive in a case such as the present whenthe cost of reinstatement would be wholly disproportionate tothe non-monetary loss suffered by the employer.[17] We add two points for completeness. First, the court's assessment ofthe reasonableness of insisting on performance may be influenced by the impact ofthe defect on the building's market or amenity value.15 Second, a plaintiff who pleads11 Bevan Investments Ltd v Blackhall and Struthers (No 2) [1978] 2 NZLR 97 (CA); and Warren &Mahoney v Dynes CA49/88, 26 October 1988.12 Marlborough District Council v Altimarloch Joint Venture Ltd [2012] NZSC 11, [2012] 2 NZLR726 at [159]–[162] citing Ruxley Electronics, above n 9, at 358–359, 361 and 370–371.13 Ruxley Electronics, above n 9, at 356 and 361.14 At 361.15 Atkin Chambers (ed) Hudson's Building and Engineering Contract (Sweet & Maxwell, London,2015) at [7–009].a performance interest and seeks damages that exceed the alternative measure, whichmay take the form of diminution in value or loss of amenity, must genuinely intend tospend the award to protect that performance interest.16 If it were otherwise it wouldbe wrong to say that the cost of performance is the true measure of the plaintiff's loss.17[18] It seems that these authorities were not cited before Mallon J, but as will beseen she evidently had in mind the uncontroversial principles for which they stand.We turn to her findings.The Judge's findings[19] The Judge accepted this was originally a quality building which had beencompleted to a very high standard.18 Workmanship was a leading criterion forthe Master Builders award. The concrete slab had been measured and monitored witha laser level when laid. The original architect had not measured the walls with a laserbut he said that they were "flawless"; every architrave and every shadow line wasperfect. Interior walls had been plastered and finished to a level 5 finish in criticallight areas and to a higher than level 4 finish elsewhere.19The floor slab[20] The floor slab suffered differential settlement of as much as 38 mm in theearthquakes. It could not be remedied using floor level compounds.[21] The new slab is structurally sound, but it is out of level by up to 46 mm acrossthe entire slab, including the garage. There is now a step of 15 mm down intothe garage. In eight areas, four of which are in the garage, it exceeds a slope thresholdof 0.5 per cent set by MBIE as a standard for concrete slab floors.20 It also exhibitsvariations within rooms. Within the garage, which is the worst-affected room, there isa 28 mm differential. Within the lounge the differential is 12 mm.16 Altimarloch, above n 12, at [161].17 Ruxley Electronics, above n 9, at 372–373.18 High Court judgment, above n 1, at [11].19 At [93].20 New Zealand Standard 3109:1997 — Concrete construction (Standards New Zealand, 2004), table5.2.[22] Mallon J found that the repairs were not completed to an "as when new"standard.21 They are outside the New Zealand standard and BRANZ publication.The dislevelment, an ugly but accurate term, is perceptible to some people walking onthe floor and it may cause floorboards to creak. It detracts from the Bruces' enjoymentof this house, which the Judge found to be a loss of amenity.[23] The remediation options before Mallon J were: applying a floor levellingcompound to low areas and grinding or scabbling the concrete in high areas,22 whichwould mitigate but not eliminate the overall differential; lifting the house and applyinga concrete screed; or repeating the slab replacement process.23[24] Mallon J dismissed the Bruces' claim that the slab must be replaced.24 She heldrather that they were entitled to a reasonable method of levelling the floors of the houseand garage, which should be treated separately, if a way could be found that did notinvolve demolishing the slab and starting again.25 The Judge's rationale for adoptinga room by room basis rested on the proposition that dislevelment caused the Brucessome loss of amenity value. She reasoned that that loss should be assessed on a roomby room basis because the garage serves a different function from the rest of the house.[25] The evidence did not allow Mallon J to say, however, whether the combinationof filling and grinding or scabbling was viable. She explained that if taken too fargrinding or scabbling would begin to affect the integrity of the slab and what was toofar depended on the location of steel reinforcing mesh within the slab. That being so,the Judge was unable to say on the evidence whether there is a "reasonable andworkable remedial solution".26 She invited the parties to investigate further:[154] I suggest the parties consider whether they can agree if it would beworthwhile to grind some of the areas and/or fill others and fix any creakingfloor boards in order to improve the floor levels to some degree. To the extentthat they remain outside the tolerances of the standard, they could determinewhether this has resulted in a diminution of value. If so, that might bean appropriate basis to assess damages. If there is no diminution in value, it21 High Court judgment, above n 1, at [150].22 Scabbling refers to the use of an impact tool such as a hammer to remove the surface. Grindingis a slower process.23 High Court judgment, above n 1, at [143].24 At [152].25 At [151].26 At [153].might be appropriate to make a small loss of amenity payment to compensatefor the fact that the floors are not as level as they were "when new".[26] The Judge then suggested how damages might be assessed if filling andgrinding or scabbling was not worthwhile:[155] If the parties do not agree that some grinding and filling is worthwhile,I suggest the same approach. They could determine whether the floors in theirpresent condition have resulted in a diminution of value. If so, that might bean appropriate basis on which to assess damages. If there is no diminution invalue, it might be appropriate to make a small loss of amenity payment tocompensate for the fact that the floors are not as level as they were "whennew".[27] In the event the parties could not agree, the Judge stated that they could returnto Court, where the appropriate measure of damages, if any, and their quantum, couldbe considered afresh on the basis of the evidence and argument at that time.27The interior wall verticalities[28] During construction of the new slab the house was suspended abovethe ground. It was then lowered and the lower wall frames walls were fixed to the newslab. Some straightening work was required. Subsequent surveys showed that someinterior walls are out of plumb. As noted above, there was evidence that they wereoriginally "flawless".28 After being re-fixed they are structurally sound but do notcomply with NZS3604:2011, which sets construction tolerances for timber-framedinterior walls. The permitted deviation from the vertical is 15 mm per two storeys and5 mm per 2.4 m. The permitted deviation from the horizontal is 5 mm per 10m.[29] Most walls in the house are within those tolerances, but some are not. They areup to 8 mm outside the tolerances.[30] Mallon J found that the house had been built with close attention to detail andthe walls had been measured routinely during the build.29 Following repair, wallverticalities are not as good as they were. However, deviations from the standard are27 At [156].28 At [11].29 At [123].small and there are no resulting structural, functional or amenity problems.30Deviations are possibly visible to a very trained and fine eye, leading at worst toa minor aesthetic issue.[31] It is necessary to set out in full what the Judge had to say about breach andwhat should happen now:[126] I accept Mr McGunnigle's evidence that endeavouring to straightenthe walls now is not a reasonable response when no real benefit would beachieved from it. Mr Sturman also acknowledged the difficulty of this becauseof the timber's age and the processes it had already been through. Far less isit a reasonable response to demolish the house and start again because the wallverticalities exceed the standard by small amounts in a number of places.[127] It was likely never going to be possible to have the walls as straightas they were when the house was originally constructed. The timber frameswere older and were suspended and braced while the foundations and concreteslab were rebuilt. The standard required was to repair the walls as close as isreasonably possible to that condition. But for the house's gold award winningstandard and the importance of such high quality workmanship to the Bruces(and potential subsequent purchasers), I consider there would be no breach tothe insurer's obligations on this matter.[128] The damages question is not for determination at this stage.However I suggest the parties might be able to resolve this issue byconsidering whether there is any diminution in market value because of thewall verticality issue. If not, they might consider whether a small loss ofamenity payment might be appropriate to reflect the fact that the walls exceedthe standard in some places, albeit that this is not perceptible, and this partlyreflects a lesser standard of workmanship than there was for the original build.Loss of amenity damages are discussed below under "General damages".If the parties cannot resolve the matter on this basis, it will need to beconsidered by the Court. Of course, at that time the Court will have the benefitof submissions on the appropriate measure of damages (if any) and evidenceas to quantum and will consider those issues afresh.(Citation omitted)[32] As noted earlier, in its cross-appeal IAG contends that the Judge ought to haveheld that there was no breach because it was not practicable to achieve an as-when-new standard and the work met the fallback standard. We address that argument at[46] below. In this section of the judgment we are concerned with the Bruces' claimthat the Judge exceeded the scope of the first trial. We observe that the Judge didconclude that the contract was breached and we focus on what she said about remedial30 At [125].action. It will be seen that she held that endeavouring to straighten the walls nowwould not be a reasonable response when no real benefit would be achieved from it;and further, that it would be a far less reasonable response to demolish the house andstart again. She invited the parties to consider whether there was any diminution inmarket value, and if there was not, whether a small loss of amenity payment might beappropriate.The interior wall finishes[33] The Bruces' case is that the interior walls ought to have been finished to alevel 5 finish throughout. That involves plastering an entire wall then sanding andsmoothing it, concealing joints and fixing points.31 The repair contract specified alevel 4 finish, in which only joints between sheets of cladding are plastered and sandedand smoothed.32 A level 4 finish is commonly accepted for most houses.[34] As noted at [19] above, Mallon J accepted that interior walls were finished toa level 5 standard in "critical light areas" and a better than level 4 standard elsewhere.She held that IAG must remediate the walls accordingly.33 The Bruces do notcomplain that she exceeded the scope of the hearing. They complain rather that shepreferred IAG's evidence as to what remediation entailed. We address that issue at[55] below.Did the Judge's findings as to reasonable remediation exceed the scope of the firsttrial?[35] We have explained that Mallon J was charged with deciding what was wrongwith the house and what was required to remediate it. The cost of repairs was left forlater assessment. Unfortunately, the decision about repair methodology inevitablyraised questions of reasonableness, and hence cost, which plainly were not foreseenwhen the trial was split. A technically feasible repair strategy might be ruled out onthe ground that its cost was out of all proportion to its limited benefit.31 Australian/New Zealand Standard 2589:2017 — Gypsum linings — Application and finishing(Standards New Zealand and Standards Australia, 2017) at 3.1.5.32 At 3.1.4.33 High Court judgment, above n 1, at [95].[36] The Judge did not cite cost when deciding that IAG need not replace the slaband straighten the interior walls, but she did reject these options on reasonablenessgrounds without adopting alternative means of remediation. She decided rather thatthe Bruces must accept a lower standard than "when as new"; there would be noremedy for the walls and the suggested potential remedy for the slab would not resultin it being levelled. We record that it is not suggested that it was or is impracticableto achieve a level slab.[37] The Bruces say that the Judge failed to establish what must be done to remedythe defects to meet the contract standard; further, the evidence did not addressthe question of cost, which had been reserved for the second trial, so she was in noposition to say their preferred repair methodology was unreasonable. The cost beingunknown, it could not be said that it was out of all proportion to the benefit.They invite us to find that the only viable method of remediating the slab to as whennew standard is to replace it. Mr Robinson, for the Bruces, accepted that the costmight be found disproportionate to the benefit gained, but he argued that that must bedecided at the second hearing.[38] We conclude that the Judge was right to decline to adopt a repair methodologythe cost of which was unknown. We are not prepared to approve a methodology thatmight be found unreasonable either.[39] However, replacement cannot be excluded at this time either. We acknowledgethat it might be thought self-evident that the cost of again lifting the house andreplacing the slab would be out of all proportion to the resulting benefit. The new slabis structurally sound. The Judge knew what the original repairs hadcost — $1.4 million — and she had before her the Bruces' pleading, which claimed amuch larger sum for all repairs. She did not know the cost of straightening the walls,but she was satisfied that the benefit of doing so was minimal given that they exceededverticality tolerances by very small and essentially indiscernible margins. She wasplainly pointing the parties in the direction of an agreed solution.[40] But evidence of cost is relevant to the decision to exclude a given methodologyas unreasonable, and as a matter of trial process the Bruces are entitled to lead it beforetheir preferred solution is excluded. The evidence should be led at the second trial andassessed along with the merits and cost of the alternative of filling and grinding orscabbling, which would mitigate the defects in floor level without wholly eliminatingthem. It may also be necessary to determine whether the Bruces actually intend tohave the remedial work performed.34 Evidence should also be led as to the cost ofremedying the wall verticalities.[41] We also bear in mind Mr Robinson's submission that the cost of achievingconformity for the slab and walls ought not be considered in isolation. We notedearlier that IAG now accepts most of the 135 defects pleaded. We were given tounderstand that the cost of repairing those items has not yet been established andincurred. Many of the items appear trivial, but some may not be. We do not knowwhether any of the costs of remediating those items might be avoided werethe High Court to adopt the Bruces' preferred methodology.[42] We conclude that it was open to the Judge to decide at the first trial whetherIAG breached the contract by failing to meet its repair standards with respect tothe slab, the interior wall verticalities, and wall finishes.[43] We further consider that she was right to decline to adopt the Bruces' preferredmethodologies for remediating the slab and wall verticalities, since those may proveto be unreasonable. We respectfully consider, however, that she ought not to haveexcluded those methodologies as unreasonable at this stage since their cost is notknown.[44] The sealed judgment of the High Court records that:The plaintiffs have not established that there is a reasonable and practical wayto remedy the wall verticalities or the uneven floor levels.[45] This finding is set aside. The consequence is that the Bruces' appeal is allowedto the extent that the judgment precluded them from contending for any givenremediation option. The reasonableness of the options for which the parties contend34 IAG argued that the evidence establishes that they do not. But on our reading the evidence isequivocal, and Mallon J evidently was not asked to make a finding about it.must be revisited at the second trial. We record that breach is established, subject tothe cross-appeal to which we next turn.Did IAG breach the contract with respect to interior wall verticalities?[46] This brings us to the question whether the Judge was correct to find that IAGbreached the contract with respect to wall verticalities. It is not in dispute thatthe walls do not meet the primary as-when-new standard. As explained earlier, IAGsays that was not the applicable standard, for the Judge had accepted evidence that itwas not practicable to meet it. The fallback standard applied; when it is not practicableto achieve the as-when-new standard, repairs must be "as close as is reasonablypossible" to that standard. IAG says that the repairs meet the fallback standard.[47] We have set out the Judge's conclusions at [28]–[32] above. We now focus onher findings of fact. Mallon J noted evidence that it was difficult to straighten the wallsbecause of the age of the timber and the processes it had been through.35 There wasevidence that after the earthquakes and the repair work, during which the walls weresuspended and exposed to weather, it would have lost its "memory".36 The Judgestated that "It was likely never going to be possible to have the walls as straight asthey were when the house was originally constructed."37 She added that the standardrequired was to repair the walls "as close as is reasonably possible" to that condition.It is evident from her use of that phrase that she had in mind the fallback standard.[48] However, we do not accept Mr Ring's submission, for IAG, that the Judgeconcluded the repairs were in fact as close as reasonably possible to as-when-new,with the result that she ought to have found there was no breach of contract. We thinkshe must be taken to have concluded that it was reasonably possible to do more thanIAG did to meet the contract standard. That is we think implicit in her emphasis in[127] on the high standard of the original workmanship. The fact that she applied thefallback standard but found IAG in breach supports that interpretation. Indeed, it ispossible that she accepted it was feasible to repair the walls to the as-when-newstandard.35 High Court judgment, above n 1, at [126].36 At [116].37 At [127].[49] We add that in our own view the evidence sufficiently establishes that it waspossible to meet the as-when-new standard. The principal IAG witness on this point,Mr McGunnigle, contended that because there was no real benefit to be gained it wasnot reasonable to try to straighten the walls now, but as we have explained above thatis to make a different point. He accepted in evidence that it was possible to makethe walls plumb, and he also explained how it would be done; it would involveremoval of the wall linings, packing out the timber frame and relining and finishingthe walls. One Bruces' witness, Mr Sturman, agreed (in cross-examination) thatthe walls could be made vertical in that way. The experts diverged rather on whetherthe work needed to be done in circumstances where the defects could be described asimperceptible.[50] Mr Ring argued in the alternative that the de minimis principle applies;the parties must be presumed to have adopted it in the absence of evidence thatthe contract was negotiated by reference to a "perfect" standard. Mr Robinsonresponded that the de minimis exception is narrow and does not apply here, sincethe contract already prescribes when departures from the as-when-new standard arepermissible.[51] We accept that the de minimis principle may be available to answer a claimwhich is adjudged trivial.38 The contract does not exclude it by providing for a fallbackstandard, since that applies only when it is impracticable to meet the principalstandard. De minimis measures the degree of departure from the standard andimpracticability addresses the difficulty of meeting it. But we observe that the trialJudge made no such finding; on the contrary, she found that the contract had beenbreached. It appears she was not asked to address the de minimis principle.[52] Further, we are not satisfied that the non-conformity can be characterised asde minimis by reference to the principal standard which, though exacting, could havebeen met. As noted above, the walls deviate from the horizontal by as much as 13 mmper 2.4m, exceeding not only the contract standard but also the tolerance for error inNZS3604:2011, and this is visible to a skilled observer.38 Veba Oil Supply & Trading GmbH v Petrotrade Inc [2001] EWCA Civ 1932, [2002] 1 All ER 703at [44].[53] For these reasons we do not accept that the Judge was wrong to find IAG inbreach of contract in respect of the wall verticalities. The cross-appeal is dismissed.Wall finishes[54] As noted, the question here is not whether it is possible to meet the as-when-new standard. IAG accepts that it is. Nor does IAG contest the Judge's conclusionthat the house had originally been finished to a level 5 standard in some areas and toa level 4 plus standard elsewhere. The question is to what extent the work done failsto meet that standard.[55] The Bruces say that the Judge ought to have accepted what the originaldecorators had to say about the extent and quality of the work required. One of them,Mr Wilson, deposed that IAG had achieved only a level 4 finish for stopping andinternal plastering and it was not to the same standard as he and his colleague,Mr McKenzie, had achieved originally. What had been achieved originally wasa better than level 4 finish throughout the entire interior and a level 5 finish "in certainareas". Mr Wilson and Mr McKenzie, who also gave evidence, accepted betweenthem that the level 5 finish was in the hallways and entrance way and stairwell.They confirmed that the work elsewhere was a "good" level 4.[56] The Judge accepted Mr McGunnigle's evidence about the specific workrequired on a room by room basis. She summarised this at paragraph [85] of herjudgment. Her conclusion was:[95] I consider IAG is required to remediate the walls and ceilings inaccordance with Mr McGunnigle's evidence at [85]. Mr McGunnigle hascarried out a detailed assessment of the remediation work to achieve a level 4plus/level 5 finish. In comparison, Greytone has said all walls and ceilingsneed to be remediated. I prefer Mr McGunnigle's evidence because it is morespecific and he has explained the detailed way he went about making hisassessment.[57] We are not persuaded that the Judge was wrong to prefer Mr McGunnigle'sevidence. He assessed each room, and he gauged the work required by reference toboth level 4 and level 5 standards, the requirements of which he explained.He accepted that it was appropriate to use a level 5 standard in the stairwell and entryarea. He explained the difference between his view and that of Messrs Wilson andMcKenzie by observing that they had not done a detailed assessment of the remedialwork with attention to glancing light, texture and visibility to joints, all of which hehad addressed. Indeed, it is arguable that his evidence favoured the Bruces, becausethe Judge stated that she adopted his room by room list of remedial work required ifthe standard was level 5 everywhere. However, IAG has not taken issue with herfinding in that regard. The appeal fails on this point.General damages[58] The Judge did not award general damages, but she accepted that they areavailable in law.39 She held that the Bruces are entitled to general damages forthe physical inconvenience of living in the house in its damaged condition and fordisappointment and loss of amenity in no longer having a gold standard house.40She also accepted that they have experienced stress and mental anguish. She deferredany assessment, noting that submissions on the issue had been brief (the Bruces) ornon-existent (IAG).41[59] Neither party has appealed. However, Mr Ring addressed the issue in hissubmissions on the cross-appeal, contending that general damages are available forthe adverse mental effects of a breach only where the primary purpose of the contractwas to deliver peace of mind or enjoyment or where adverse mental effects areconsequential upon physical discomfort or inconvenience.42 He submitted thatan insurance contract is not a peace of mind contract; rather, it indemnifies an insuredagainst certain kinds of financial loss.43[60] We think it premature to decide this issue. Apart from the absence of a cross-appeal, the questions whether the Bruces have experienced such losses, and if so,whether they are consequent upon physical discomfort or inconvenience, have yet tobe answered at first instance.39 See Stuart v Guardian Royal Exchange Assurance of New Zealand Ltd (No 2) (1988) 5 ANZ InsCas 75,274 (HC); and James Edelman (ed) McGregor on Damages (20th ed, Sweet & Maxwell,London, 2018) at [5-016]–[5-018].40 High Court judgment, above n 1, at [169]–[171].41 At [173].42 Ruxley Electronics, above n 9, at 374 citing Addis v Gramophone Co Ltd [1909] AC 488 (HL).43 Pine v DAS Legal Expenses Insurance Co Ltd [2011] EWHC 658, [2012] Lloyd's Rep IR 346(QB).Decision[61] The appeal is allowed in part. We set aside the finding that the Bruces havenot established that there is a reasonable and practical way to remedy the wallverticalities or the uneven floor levels. Those issues must be decided at the secondtrial. The appeal is otherwise dismissed.[62] The cross-appeal is dismissed.[63] The Bruces have succeeded in part on their appeal, and on the cross-appeal.They will have costs as for a standard appeal on a band B basis with usualdisbursements. We certify for second counsel.Solicitors:Grant Shand, Christchurch for AppellantsDLA Piper, Wellington for Respondent