IAG NEW ZEALAND LIMITED v QBE INSURANCE (AUSTRALIA) LIMITED [2022] NZCA 208

IAG NEW ZEALAND LIMITED v QBE INSURANCE (AUSTRALIA) LIMITED [2022] NZCA 208 [25 May2022]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA659/2020[2022] NZCA 208BETWEEN IAG NEW ZEALAND LIMITEDAppellantAND QBE INSURANCE (AUSTRALIA)LIMITEDRespondentCA156/2021BETWEEN IAG NEW ZEALAND LIMITEDAppellantAND JOAN MARGARET FRASER SLEIGHTAND ALAN LEITHFIELD SLEIGHTFirst RespondentsQBE INSURANCE (AUSTRALIA)LIMITEDSecond RespondentHearing: 14 and 15 September 2021Court: Kós P, French and Collins JJCounsel: N S Gedye QC, O V Collette-Moxon and M K Booth forAppellant in CA659/2020 and CA156/2021D H McLellan QC, S D Galloway and B K McLay forRespondent in CA659/2020 and Second Respondent inCA156/2021D J Cooper and M J Borcoski for First Respondents inCA156/2021Judgment: 25 May 2022 at 11.30 amJUDGMENT OF THE COURTA The appeal in CA659/2020 is allowed.B The respondent's cross-appeal in CA659/2020 is allowed.C Leave is reserved to the parties in CA659/2020 to seek further orders inrespect of quantum and the form of final judgment orders in light of thisjudgment in the event the parties are unable to agree on quantum.D Leave is reserved to the parties in CA659/2020 to seek orders as to costs inthe event costs are unable to be agreed.E The appeal in CA156/2021 is allowed and the decision of the High Courtawarding interest to the first respondents is quashed.F There is no award of costs in CA156/2021.____________________________________________________________________REASONS OF THE COURT(Given by French J)Introduction[1] This case concerns defective repairs to an earthquake damaged home. Thehomeowners sued their insurance company IAG New Zealand Ltd (IAG), the repairer,the project manager monitoring the repairs and the project manager's insurancecompany.[2] In the High Court, Gendall J upheld most of the homeowners' claims againsteach of the four defendants and awarded damages representing the cost of thenecessary further remedial work. He also upheld but only in part a cross-claim madeby IAG against the project manager under an indemnity clause in the contract betweenthose parties.11 Sleight v Beckia Holdings Ltd [2020] NZHC 2851 [Substantive judgment].[3] IAG now brings two appeals. The first CA659/2020 relates to the Judge'srefusal to allow all of its indemnity claim against the project manager. The secondappeal CA156/2021 relates to the Judge's decision to award the homeowners interestdating back to 2015 on the damages.2[4] For its part, the project manager cross-appeals one aspect of the Judge'sfindings regarding the extent of its liability to indemnify IAG.Background[5] Mr and Mrs Sleight owned a house in Christchurch. It was damaged in theChristchurch earthquakes of 2010 and 2011. They made a claim on their insurancepolicy with IAG and elected to repair the house. IAG accepted the claim.[6] It had become apparent to IAG that its usual administrative resources wereinsufficient to manage the large volume of claims it received as a result of theChristchurch earthquakes. It took a number of steps including the establishment of aManagement Repair Programme with a project management company called HawkinsManagement Ltd (Hawkins) and a number of selected builders. One of those builderswas Farrell Residential Ltd (Farrells).[7] In 2010 following the first earthquake, IAG entered into a contract withHawkins called a Rebuild Solution Master Agreement (RSMA). Amongst otherthings, the RSMA detailed the services Hawkins undertook to provide. A secondreplacement RSMA was signed in August 2012. It is the 2012 RSMA that is theoperative document in these proceedings and accordingly we refer to it throughout theremainder of this judgment as the RSMA, with the earlier RSMA being cited as the2010 RSMA.[8] Some of the key features of the RSMA were as follows.2 Sleight v Beckia Holdings Ltd [2021] NZHC 456 [Costs and interest judgment].[9] Throughout the document, references were made to the "Rebuild Solution".That term was defined as "the works required to make good the damage to theproperty".[10] Clause 3.1 required Hawkins to perform the services listed in sch 2. The listruns for two and a half pages. The services are grouped under five headings"Pre-qualification" (which relates to checking the builder's credentials), "Scoping"(the work to be done), "Costing", "Customer/Builder Alignment" and "ConstructionCoordination".[11] Of the services, it is those under cl 5 of sch 2 "Construction Co-ordination"that are of significance in this case and in particular cl 5.6.[12] The full text of cl 5 reads as follows:5. CONSTRUCTION COORDINATION: Hawkins will monitor thedelivery of each Rebuild Solution, which shall include the following:5.1 Monitor all Builders in accordance with the processes and proceduresagreed between the parties and promptly notify IAG NZ where itbelieves that any Builder no longer meets the Pre-QualificationStandards (as may be updated and amended by parties).5.2 Use reasonable endeavours to assist IAG NZ's Loss Adjusters toensure that the Rebuild Solution, when completed, complies with thescope of works for that Rebuild Solution (as may be updated toaccount for any variations).5.3 Ensuring the implementation and completion of and monitoring thedelivery of each Rebuild Solution in accordance with its RebuildPriority and within its Solution Budget (as updated in accordance withclauses 4.5 and 4.6(b) of the Agreement).5.4 Provide evidence to IAG NZ and its Loss Adjusters that the Builderhas obtained all permits and consents in respect of the RebuildSolution (including a Code Compliance Certificate).5.5 Immediately notify IAG NZ and its Loss Adjusters upon becomingaware that a Code Compliance Certificate may not be able to beobtained for any Rebuild Solution.5.6 Inspect the progress of each Rebuild Solution in order to certifycompletion of each Solution Milestone.5.7 Agree with IAG NZ standard inspection and sign-off processes andprocedures to be carried out at the completion of each RebuildSolution (including in relation to any defects).5.8 Carry out a final inspection and sign-off of the Rebuild Solution withthe Customer in accordance with the processes and procedures agreedwith IAG NZ under paragraph 5.6 above.5.9 Maintain minimum levels of contact with each Customer (includingsite visits to the Customer's property) in accordance with theprocesses and procedures agreed between the parties from time totime.[13] The term "Solution Milestone" which appears in cl 5.6 was defined in theRSMA as "the milestones in respect of the relevant Rebuild Solution triggeringpayment of Rebuild Solution Payment Claims". Essentially, the milestones were thespecified stages of the repair work at which a progress payment to the builder wouldbecome due. For each individual repair job, a "Milestone Payment Schedule" wasprepared identifying the operative milestones.[14] The regime relating to milestone payments was detailed in cl 9. Clause 9.1obliged Hawkins to ensure that the builder's form and content of Rebuild SolutionPayment Claims complied with certain requirements. As regards certification, cl 9.2relevantly stated:9.2 Certification as to Payment claims: Hawkins will:(b) certify completion of the relevant Solution Milestone and/or RebuildSolution (as applicable) under the relevant Customer Building Contract; and[15] Under cl 9.3, Hawkins warranted that each Rebuild Solution Payment Claimsubmitted to IAG for payment was "properly due and payable by IAG NZ inaccordance with [Hawkins'] provision of the Services as set out in Schedule 2".[16] The RSMA also provided a procedure for the approval of changes to pricingand variations to the Solution Budget. Once works pursuant to an approved variationorder were complete, Hawkins was to inspect and certify the works for payment.[17] IAG encouraged its policy claimants including Mr and Mrs Sleight to arrangefor their houses to be repaired under its Management Repair Programme. It arrangedfor Farrells as one of its designated builders to be assigned to the Sleight job and itadvised the Sleights that Hawkins would act as project manager to monitor the repairs.[18] On 14 October 2013, the Sleights signed a standard building contractwith Farrells. Schedule 2 of the building contract listed ten milestones attractingcorresponding payments. The number of milestones was amended during the courseof the work.[19] Farrells carried out repair work on the Sleights' house in 2014 and 2015.Between February 2014 and 23 June 2016, Hawkins made approximately 30 site visits.Some of these visits were for the purpose of approving variations and provisionalsums. Others were for the purpose of undertaking milestone inspections. After eachmilestone inspection, Hawkins certified to IAG that a progress payment was payable.In total Hawkins certified 15 solution milestones.[20] Unfortunately, the repair work undertaken by Farrells was defective. And on1 May 2015, the Sleights terminated the building contract. They asked IAG toundertake or fund the further work which was required to remedy the defective workand complete the repairs.[21] IAG commissioned a company called Axis Building Consultants Ltd toinvestigate the Sleights' concerns. The subsequent report from Axis confirmed theexistence of significant defects in the repair work.[22] IAG received the report on 19 June 2015. On 29 June 2015, it wrote to Mr andMrs Sleight denying any obligation regarding the defective work and pointing out thatit was not a party to the building contract.[23] IAG maintained that position and finally in 2017 Mr and Mrs Sleight issuedcourt proceedings. By that time, both Farrells and Hawkins were in liquidationoperating under different names.3 However, Hawkins had been insured with QBE3 Beckia Holdings Ltd and Orange H Management Ltd respectively.Insurance (Australia) Ltd (QBE) and accordingly the Sleights joined QBE as a fourthdefendant under the provisions of the Law Reform Act 1936.4[24] IAG filed a cross-claim against Hawkins/QBE relying on an indemnity clausein the RSMA and seeking a total indemnity for any liability it might be held to haveto the Sleights. The clause in question provided that if building owners bring a claimagainst IAG and IAG incurs any liability to those owners as a result of any breach byHawkins under the RSMA then Hawkins must indemnify IAG. The clause read:17.2 Hawkins indemnity: Hawkins indemnifies IAG NZ to the maximumextent permitted by law for all claims (including third party claims), liability,costs (including reasonably incurred legal costs on a solicitor-client basis),losses and damages incurred by IAG NZ as a result of any breach by Hawkinsof its obligations under this Agreement or any reckless, fraudulent or wilfulact or omission by Hawkins or any of its personnel.[25] During its site visits, Hawkins had not noted any of the defects alleged by theSleights and in certifying that milestone payments were due to Farrells had notreported any of the defects to IAG. IAG contended that its failure to do so amountedto a breach of its monitoring and certifying obligations under the RSMA. IAG'sposition in the High Court was that Hawkins was responsible under the RSMA forensuring the work was carried out in accordance with the agreed scope of work to areasonable, proper and lawful standard of workmanship (except for latent defects notreasonably discoverable) and was not certified for payment unless it met that standard.[26] In addition to its cross-claim, IAG also filed a contribution claim againstHawkins/QBE. As the Judge put it, the contribution claim was a backup claim in theevent IAG failed or was only partially successful in its cross-claim.5[27] The hearing in the High Court took place in June and July of 2020. As at thatdate, the house was still unrepaired.4 Law Reform Act 1936, s 9(1) and (4): the effect of these provisions is that because Hawkins wasin liquidation, the Sleights are entitled to a charge on all insurance monies payable to Hawkinsunder its indemnity policies with QBE as a result of the Sleights claim against Hawkins.5 Substantive judgment, above n 1, at [17].The High Court decision[28] Because the two appeals have a limited focus, it is only necessary to provide arelatively brief summary of the High Court findings.[29] As the Judge noted, all parties accepted there were numerous defects in therepair work. He identified the defects as being generally of three types:6(a) Scoping defects — that is, work that should have been included in theoriginal scope of works but was not.7(b) Key defects — exterior cladding and windows, structural defectsrelating mainly to the foundations and sub-floor and first-floorbalcony.8(c) Remaining defects — miscellany of matters which the Judge describedas minor.9[30] He found that the total cost of remedying these defects to enable the Sleightsto obtain a code compliance certificate for their house amounted to $389,848.00.10[31] As regards the liability of the various parties, the Judge held that Farrells wasliable to the Sleights in contract and in negligence as well as under the ConsumerGuarantees Act 1993 for its defective and inadequate repair work.11 Judgment wasduly entered against Farrells for the full cost of the remedial work.12[32] The Sleights were also successful in their claim against Hawkins (and henceQBE) under the Consumer Guarantees Act.13 Hawkins was found to have held itself6 At [581].7 At [582]–[595]. On appeal, IAG does not contend that Hawkins is liable to it in relation to scopingdefects.8 At [596]–[608].9 At [609]–[625].10 At [709].11 At [709(b)].12 At [716(a)].13 At [360] and [709(c)]. The Judge held that a claim in negligence (which the Sleights had alsoadvanced) was subject to a clause limiting liability to $10,000: at [388]–[389].out to the Sleights as providing the services of a project manager including monitoringthe delivery of the repair works, ensuring that Farrells would undertake properlyscoped repairs in a tradesman like manner and ensuring that Farrells would onlyreceive properly certified milestone payments. The Judge accepted on the evidencethat Hawkins had failed to carry out those services with reasonable care and skill.14He therefore awarded judgment against Hawkins for the full cost of the repairs andentered judgment against QBE for the same sum less its excess of $50,000.15[33] As regards IAG's liability to the Sleights, the Judge held that the insurancepolicy was a policy to pay rather than a reinstatement policy. Under the policy, theelection to repair rested with the Sleights. IAG's policy obligation was simply to meetthe cost of the policy standard once that election was made.16 The relevant standardwas expressed to be "when new", the policy containing a statement "we'll pay thecost of repairing or rebuilding the home to a condition as similar as possible to whenit was new".17 IAG had failed to discharge that obligation and had therefore breachedits contract.18[34] The Judge further held that IAG was liable to the Sleights under the ConsumerGuarantees Act for failing to appoint a suitable builder, ensuring the scope of workswas appropriate, ensuring that Hawkins had adequately monitored the work andproperly certified for instalment payments and that Hawkins used reasonable care andskill.19[35] In respect of both causes of action (breach of contract and breach of theConsumer Guarantees Act), the Judge held that like the other three defendants IAGwas liable to pay the cost of carrying out the necessary work to remediate the defectsand repair the house to a condition such that a final code compliance certificate couldbe issued.2014 At [380].15 At [710].16 At [153].17 Emphasis removed.18 At [195].19 At [291]–[295].20 At [194]–[195], [295].[36] In addition to the damages award, the Judge issued a declaration that IAG,Farrells, Hawkins and QBE were jointly and severally liable to pay the costs ofalternative housing for the Sleights at a rate of $685 per week while the remedial workwas being undertaken.21[37] Having found that IAG was liable to the Sleights, the Judge then turned toIAG's cross-claim against Hawkins. It will be recalled this was based on an indemnityclause under which Hawkins indemnified IAG in respect of any liability IAG mightincur as a result of any breach by Hawkins of its obligations under the RSMA.[38] That of course raised the issue of what exactly was the scope of Hawkinsobligations under the RSMA, in particular its monitoring and certifying obligations.[39] The Judge held that on a proper construction of the RSMA, IAG and Hawkinshad agreed that Hawkins was not to be responsible for the quality of the repair worksnor was it to be responsible for monitoring the quality of Farrells' workmanship.It was accordingly not a project manager in the usual sense.22[40] However, it did have an obligation to ascertain whether the work justifying theprogress payment had been completed. That meant, the Judge said, that Hawkins hadto provide a suitably qualified person to undertake a reasonable naked eye observationof the work and be satisfied the work in question was in place and generally carriedout properly although workmanship and quality issues might still need to be addressedby Farrells later through the snag list or otherwise if they arose.23[41] Purporting to apply this interpretation of the RSMA to the facts, the Judge saidhe was satisfied there were three instances in respect of which Hawkins had clearlybreached its certifying payment obligations to IAG under the RSMA.2421 At [677]. The Judge dismissed claims of negligence and estoppel also made against IAG becauseof an exclusion clause in the building contract: see at [244]. The estoppel claim was also time-barred: see at [325].22 At [473].23 At [474]–[475] and [496].24 At [496].[42] The first two instances related to its certifications in June 2014 and September2014 of two milestone payments relating to the foundations and sub-floor. The workin those areas was the Judge found on the evidence "entirely deficient work whichwould be obvious on any cursory examination [by a rebuild solution manager]".Hawkins' failure to properly identify this "obviously defective and incomplete area ofwork" led to IAG making an overpayment to Farrells. The cost of fixing the defectiveand sub-floor work was $60,000 and that, the Judge held, was a loss which IAG hadsuffered as a result of Hawkins' failure to comply with its payment certificationobligation and was therefore covered by the indemnity clause.25[43] The Judge further found that Hawkins had breached its obligations to IAGunder the RSMA in December 2015 by certifying the final payments totalling$70,468.96 in circumstances where Hawkins was aware of the existence of reportsidentifying deficiencies in the repairs.26[44] However, with the exception of these three instances, the Judge held there hadbeen no breach by Hawkins of any other obligation under the RSMA. The upshot wasthat Hawkins' liability under the cross claim was limited in total to the sum of$130,468.96 ($60,000 plus $70,468.96).27[45] As regards IAG's claim against Hawkins/QBE for contribution, the Judge heldcontribution under s 17 of the Law Reform Act was not available to IAG because of afinding that neither IAG nor Hawkins was liable to the Sleights in tort and thereforewere not joint tortfeasors. Nor was contribution available in equity in light of hisfinding that Hawkins was not responsible for ensuring the quality of Farrells'workmanship. That finding meant IAG and Hawkins did not have shared liability forthe same damage and it also meant the substantial justice of the case did not favourcontribution being awarded against Hawkins over and above that achieved throughthe cross-claim.2825 At [498]–[508].26 At [509]–[511].27 At [520]–[521].28 At [547]–[555].[46] On IAG's view of it, the Judge's finding about the limited and narrow scope ofHawkins' responsibilities to IAG under the RSMA is inconsistent with his findingsabout the extensive quality obligations Hawkins owed to the Sleights. We address thatargument in more depth later. At this juncture it is sufficient to note that the Judgeacknowledged the inconsistency but justified it primarily on the basis that IAG'smarketing material provided to the Sleights represented Hawkins as having a greaterrole than it actually did under the RSMA. Hawkins was represented to the Sleights asbeing a project manager with a quality assurance role. Hawkins was aware of the wayit had been described in the material and did nothing to correct that impression.It effectively acquiesced in that portrayal of its functions and therefore accepted thoseobligations. The Sleights had no knowledge of the RSMA.29The appeal and cross-appeal relating to IAG's indemnity claim against HawkinsCA659/2020The position taken by the parties[47] The Judge's finding upholding part of IAG's indemnity claim against Hawkinsis the subject of both an appeal by IAG and a cross-appeal by Hawkins/QBE.IAG contends it should have been awarded the full amount of the damages it had topay the Sleights except those relating to the scoping defects. For its part,Hawkins/QBE does not challenge the Judge's finding against it in relation to thefoundations and sub-floor but contends he erred in finding it had breached the RSMAin December 2015 by certifying the final payments.[48] Prior to the appeal hearing, IAG's counsel Mr Gedye QC filed a memorandumadvising that IAG would no longer be opposing the cross-appeal. He said that IAGaccepted the Judge's decision in relation to the final payments was erroneous and couldbe set aside.[49] IAG's concession was appropriate. There were a number of difficulties withthe Judge's finding on this point. IAG's claim for indemnity was indemnification forthe amount of its liability to the Sleights, not reimbursement of any overpaymentto Farrells. The basis of the Judge's finding appears to have been Hawkins' knowledge29 At [261]–[266].of the defective nature of the earlier repair work it had already certified. However,given that IAG itself also knew of the defects at the time of the final payments, thatwas clearly not a tenable basis of liability and nor in any event was it an argumentadvanced by IAG at trial. Further, there was evidence that after considering whetherpayment should be withheld, IAG instructed Hawkins to approve the works forpayment.[50] In short, as submitted by Mr McLellan QC for QBE, even ifHawkins' certification of the final payments was a breach of the RSMA, IAG did notrely on the certification and nor did it cause IAG loss.[51] The cross-appeal is therefore allowed and the relevant finding of theHigh Court quashed.[52] Turning then to IAG's appeal.[53] At the hearing before us, it became clear that in some ways the parties werenot quite so far apart in their respective interpretations of the RSMA as might at firsthave appeared. Both agreed that the concept of completion is critical and that thescope of Hawkins' responsibility for the defects primarily turns on what was meant by"completion" in cl 5.6 of sch 2 and cl 9.2(b).[54] The parties also agreed that while the RSMA did not require Hawkins tounderwrite or guarantee Farrells' workmanship, or to carry out a painstaking audit ofthe work, it did nevertheless impose a limited quality obligation. The burning questionwas how limited — where on the spectrum between a full warranty of quality and zeroresponsibility did it properly fall?[55] While there are passages in the High Court decision that suggest the Judgeconsidered Hawkins had no responsibility at all for the quality of the repair work, hedid nevertheless find Hawkins was in breach of the RSMA in relation to thefoundations and sub-floor under a naked eye test.[56] Both parties endorse the Judge's naked eye test but differ on what it entails andhence the dispute.[57] IAG's position is that while there was a limited quality role it was intended tobe a meaningful one and that was adequately captured by the Judge's naked eye test.According to IAG, that test means that where visibly defective work existed, theRSMA obliged Hawkins to decline to certify payment. The Judge's error lay in failingto apply the same test to the other defects, all of which were plainly visible.[58] Developing this central thesis, IAG submitted that it is actually not necessaryin this case to determine the precise point where Hawkins' quality obligations sit onthe spectrum between zero responsibility and a full warranty as to quality. That isbecause the evidence shows there are certain minimum standards which the partiesintended to apply and those standards are sufficient on the facts of this case to showbreaches. The Judge's naked eye test captures those minimum standards even if hedid not apply it consistently.[59] Insofar as some passages of the judgment suggested a narrower test, Mr Gedyesubmitted they were the result of a series of errors made by the Judge in interpretingthe RSMA:(a) failing to give primacy to the text;(b) making inappropriate use of inconclusive pre-contract negotiationsevidence;(c) wrongly relying on differences between the RSMA and the 2010RSMA;(d) mischaracterising the status, meaning and effect of operationaldocuments which provided for quality obligations by Hawkins;(e) failing to take into account relevant and cogent subsequent conductevidence;(f) failing to take into account industry practice and understanding ofrelevant terms in the RSMA;(g) taking into account evidence of circumstances arising after contractformation which did not constitute subsequent conduct probative ofcontractual intention;(h) wrongly distinguishing between Hawkins' liability to the Sleights andits liability to IAG; and(i) adopting an interpretation that did not make commercial sense.[60] QBE disputes IAG's interpretation of the naked eye test and says IAG'sreference to minimum standards is imprecise and vague. In QBE's submission, thefoundation and sub-floor defects were in a different category to the other defects andthe Judge was justified in distinguishing between them. QBE emphasises that thecontractual standard is completion and the Judge's test involves a naked eyeassessment of completion, not freedom from visible defects.Analysis[61] In our view, the wording of the RSMA and the circumstances in which it cameinto existence fully support the conclusion that Hawkins was only to have a verylimited quality assessment function. Its primary role under the RSMA was one ofadministration and co-ordination.[62] The 2010 RSMA had been developed in response to the September 2010Christchurch earthquake. It placed express obligations on Hawkins to "[monitor] thedelivery of each Rebuild Solution to ensure the quality, timeliness and cost efficiencyof the work undertaken by the relevant Builder". The RSMA at the centre of this casewas however negotiated against the different background of the 2011 earthquakeswhich were of far greater severity than the one in 2010. The damage caused by the2011 earthquakes was far greater and more widespread.[63] The negotiations between IAG and Hawkins for a new RSMA commenced inNovember 2011 and continued for several months. In our view, the Judge was entitledto have regard to these as illuminating joint intention and thereby the objectivemeaning of the terms of the RSMA.30[64] Early drafts submitted by IAG imposed obligations on Hawkins that includeda warranty it had inspected the rebuild solution and that it had been completed to anacceptable trade standard. During the negotiations, Hawkins expressed strongopposition to this and other provisions that might make it liable for the quality,timeliness or cost efficiency of the builders. Its position throughout the negotiationswas that because of the scale of the repair programme, it could no longer carry the riskof ensuring the quality of building work and did not have sufficient resources to beable to supervise the quality of the repair work. Responsibility for the quality of thebuilding work needed to rest with the builder. IAG responded by removing those draftprovisions.[65] Final agreement was reached in August 2012.[66] Contrary to a submission made by Mr Gedye, we consider it is instructive andlegitimate to compare the provisions of the concluded RSMA with the 2010 version.The case he cites in support of a contention that it was wrong in principle for the Judgeto do so (Newfoundworldsite Site 2 (Hotel) Ltd v Air New Zealand Ltd) is not apposite.The purpose of the comparison in this case was to identify differences, not similaritiesbetween the two documents.31[67] In our view, the comparison between the two documents enhances theprobative value of the negotiation evidence, thus providing further support for thecontention that one of the central purposes of the new RSMA was to limitHawkins' role in response to the changed circumstances.30 Bathurst Resources Ltd v L & M Coal Holdings Ltd [2021] NZSC 85, [2021] 1 NZLR 696 at [76]–[79] per Winkelmann CJ and Ellen France J.31 Newfoundworld Site 2 (Hotel) Ltd v Air New Zealand Ltd [2018] NZCA 261, [2018] NZCCLR 22at [53].[68] That is apparent from a number of key differences between the two contracts.For example, in addition to the clause quoted above which was part of the 2010definition of management services, the definition of service levels under the 2010RMSA contained an express reference to "quality of the works and services".There was also a clause that imposed responsibility on Hawkins for ensuring that eachcustomer was "satisfied with the quality and workmanship in respect of therelevant Rebuild Solution". Significantly too, the 2010 contract expressly describedHawkins as the project manager.[69] In stark contrast, the 2012 contract does not contain a single reference to"quality".32 As mentioned, in sch 2 it lists in over two and a half pages the servicesHawkins must provide. The list does not include any obligation to monitor or assessthe quality of the repair work. As QBE put it, the word "quality" is conspicuous byits absence. Mr Gedye attempted to overcome this difficulty by pointing out there wasno clause expressly excluding quality either. However, in our view, the absence of aprovision expressly excluding the obligations IAG contends exists is not a proper basisfor finding the obligations existed. The parties effectively excluded them by omission.[70] In our view it is also significant that unlike the 2010 RSMA, the 2012 contractdoes not contain any reference to Hawkins being a project manager.33 Further andvery importantly, the price IAG was to pay Hawkins for each rebuild solution wasreduced in 2012. Under the 2010 RSMA a rebuild solution fee of 3.5 per cent hadbeen payable together with agreed hourly rates. Under the new contract the amountpayable was a service fee of 0.39 per cent, the hourly rates remaining the same asbefore..[71] The significant reduction in rate is in our view clearly consistent with greatlyreduced obligations. It would not make commercial sense for Hawkins at a time when32 Schedule 3 of the RSMA refers to a role styled "Quality Controller". However the uncontestedevidence was this was a desk-based role and related to ensuring the quality of documentationcompiled and kept by Quantity Surveyors and Rebuild Solution Managers.33 There is a reference to "project management services" in a clause prohibiting Hawkins fromproviding "project management services (which includes services equivalent to those providedunder this Agreement)" to any competitor of IAG. However, the use of that phrase in the contextof an exclusivity clause does not take matters any further. The perceived need for the words inbrackets also militates against IAG's interpretation of the RSMA.it had significant bargaining power (given the demands for its services in Christchurchfrom IAG's competitors) to have accepted the same risk for significantly lessremuneration.[72] Regard must also be had to IAG's standard building contract and in particularthe existence of provision for a defects liability period. That clearly suggests theparties contemplated a payment certificate could be given by a rebuild solutionmanager despite the presence of defects that could be addressed during the defectsliability period.[73] As submitted by QBE, it is also clear that the milestone payments were notintended as quality control checkpoints. This is apparent from the nature of themilestones themselves which include tasks such as "begin foundation repairs" and"begin exterior painting". The structure and content of the milestone system all pointto its primary purpose as being to provide positive cashflow for the builder and therebylimit insolvency risk for builders which would have consequences for the wider repairprogramme and IAG's clients.[74] In our view all of the above background must inform the meaning to beattributed to "completion" as it appears in the RSMA.[75] As previously noted, QBE says the test is a naked eye assessment ofcompletion, not freedom from visible defects. But that begs the question of what ismeant by completion if it does not mean freedom from visible defects.[76] The three main clauses on which IAG relies as importing a quality obligationof the scope it contends for are cl 5.6 of sch 2 and cls 9.1(d) and 9.3.[77] For convenience we set them out:5.6 Inspect the progress of each Rebuild Solution in order to certifycompletion of each Solution Milestone.9.1 Payment claims: Hawkins shall ensure that each payment claim inrespect of any Rebuild Solution ("Rebuild Solution PaymentClaim") must:(d) contain sufficient information to enable IAG NZ to establishthe accuracy of the Rebuild Solution Payment Claim, including(without limitation) a description of the work undertaken and adetailed breakdown of the trades and materials used and the associatedrates;9.3 Warranty as to Payment Claims: Hawkins warrants the accuracyof each Rebuild Solution Payment Claim and any associatedinformation submitted to IAG NZ for payment and that each RebuildSolution Payment Claim is properly due and payable by IAG NZ inaccordance with the provision of the Services as set out in Schedule2.[78] IAG submits that work cannot be regarded as completed if it is defective.If defective, it is of necessity not finished (completed) because there is more work tobe done. Likewise, how can payment for observably defective work be "properly"due. Or warranted as "accurate". How could work and materials be assessed withoutconsidering the quality of the work? A description of the work undertaken inherentlyincludes its quality or whether it has defects and is thus incomplete.[79] We agree that as a matter of language, the concept of completion carries withit an element of qualitative assessment. That is to say, we agree that it is not solely aquantitative exercise as to whether for example the builder has installed the contractednumber of piles. It may encompass, as the Judge found and indeed QBE has accepted,considerations relating to the quality of the method of installation.[80] However we do not agree that the existence of any defect visible to the nakedeye of itself renders the work incomplete and means the payment claim is not accurateor properly due. That in our view is an untenable proposition in light of the text of theRSMA and its context. It would in our view impose an obligation on Hawkins fargreater than was intended and effectively reinstate the 2010 position. It would alsoignore the fact that it is implicit in the building contract that not all defects are animpediment to certification.[81] We have considered whether the operational documents relied upon byMr Gedye detract from this analysis. The documents in question are documents thatwere created after the RSMA was signed, in one instance some two years later.They include a manual containing procedures and processes as well as variousinspection forms and the building contract specifications. According to Mr Gedye'ssubmission, the RSMA was deliberately high level and general, the partiescontemplating that the detail of what would happen on the ground would be providedin these operational documents.[82] There is no doubt that these documents contain references to quality. However,we are not prepared to attach the weight to them that IAG would have us do.[83] First, the documents do not have contractual status and cannot be read as partof the RSMA. There is no basis on which they could be incorporated into the contractby reference. Secondly, insofar as IAG relies upon them as evidence of subsequentconduct shedding light on the parties' intentions, there was no evidence that thepersonnel who drafted them had any involvement in negotiating the RSMA and knewof its background. How then can it be said, as required by the Supreme Court inBathurst, that they represent the views of the relevant corporate party at the time thecontract was formed?34[84] Thirdly, and in any event, while there are references to quality in theoperational documents, the references are not necessarily inconsistent with a limitedrole regarding quality and therefore do not take matters too much further. As forprovisions in the building contract that refer to the quality and standard of buildingwork, they are essentially directed at the builder.[85] In our view, properly construed "completion" turns not only on the visibilityof the defect but also the nature of the defect, its seriousness in terms of the integrityof the building as a whole and the extent of the repairs necessary to fix it. Finishingdetails and minor defects would clearly not be an impediment to certification.Unfortunately in applying the naked eye test, the Judge did not articulate the basis ofthe distinction between the foundations and the other defects including in particularthe cladding and the windows. That is so even though the cladding and the windows34 Bathurst Resources Ltd v L & M Coal Holdings Ltd, above n 30, at [90] per Winkelmann CJ andEllen France J.were both classified as key defects and cost more to remedy than thedefective foundations.[86] In rejecting IAG's broader formulation of the naked eye test, we have notoverlooked the other criticisms made of the Judge's reasoning. However for reasonswe now explain we are satisfied they lack substance whether viewed individually orcollectively.[87] First the issue of industry practice. There was evidence about understandingsin the building and insurance sector as to the meaning of terms used in the RSMA suchas "monitor" and "deliver", evidence which supported IAG's interpretation.We acknowledge that evidence of industry practice and understandings of commonlyused expressions can be a useful aid to interpretation.35 However in the circumstancesof this case we are not persuaded it is particularly cogent. That is because we agreewith the Judge that the RSMA was a bespoke contract responding to an unprecedentedsituation.[88] Mr Gedye also relied on evidence from Mr Geraghty a former Hawkinsemployee and the builder Mr Farrell that some Hawkins rebuild solution managers didtake steps to promote building work quality on the ground. However there was noevidence they did this in response to an instruction from those at a senior level inHawkins let alone anyone responsible for the negotiation and conclusion ofthe RSMA. We therefore agree with the Judge that little or no weight can be attributedto this subsequent conduct evidence.[89] Another criticism made of the Judge's reasoning was inconsistency betweenhis treatment of the liability of Hawkins to the Sleights vis-à-vis its liability to IAG.IAG says his findings in relation to the services provided by Hawkins to the Sleightsshould have informed his interpretation of the RSMA obligations owed to IAGbecause these were based on the same facts in respect of Hawkins' role and what it didor did not do. The effect of the decision, Mr Gedye says, is that while carrying out thesame task Hawkins owed different duties to the insurer and the insured. And thatcannot be right.35 At [157] per Winkelmann CJ and Ellen France J.[90] The different findings were of course based on different legal pathways and itis well-established that liability arising out of the same act to different people may beconcurrent but not necessarily co-extensive. The liability of Hawkins to the Sleightswas founded in the tort of negligence and the Consumer Guarantees Act (ie imposedas a matter of law), whereas as between IAG and Hawkins it was exclusively a contractissue. Of itself the fact of different duties is not heretical.[91] The existence of the promotional material and Hawkins' apparent acquiescencecould however, we accept, be capable of being evidence of subsequent conduct bearingon the interpretation of the RSMA. It is reasonable to ask why would Hawkins havenot objected to being represented as a project manager with a quality assurance role ifthat were not in fact its role. Why too would IAG have intended Hawkins to oweowners wide project management duties but only narrow duties to IAG the very entitythat was making the payments on behalf of the owners?[92] There are however answers to these questions in the evidence. The evidenceshowed that the contracting parties, IAG and Hawkins, had in fact addressed this veryissue in the course of pre-contractual negotiations relating to the scope of theindemnity IAG would give to Hawkins.[93] In a letter dated 23 May 2012, Hawkins' lawyer expressly recorded thatrepresentations to homeowners that Hawkins would ensure quality were contractuallynot the position vis-à-vis IAG. Significantly the letter also stated:There is a distinction between contractual duties arising between Hawkins andIAG on the one hand, and tortious duties which might arise between Hawkinsand the homeowner on the other. The homeowner is not a party to theIAG/Hawkins agreement. It is however not only possible, but likely, that ahomeowner faced with a defective workmanship issue would include Hawkinsin any proceedings against the builder (for example) particularly if the builderis not of any substance. Whether or not a duty is owed to the homeowner byHawkins will be a matter for the Court and will depend on the particular factsthat arise. Given Hawkins limited role under Schedule 2, it is simply unacceptable thatan indemnity for third party claims arising from negligence is not given — asdrafted there is simply no indemnity as at best, all the current version wouldcover is [sic] irrecoverable costs on an unsuccessful third party claim.[94] The terms of the indemnity provision were modified accordingly as per cl 17.1of the concluded RSMA:17.1 IAG NZ indemnity: IAG NZ indemnifies Hawkins to the maximumextent permitted by law for all claims (including third party claims),liability, costs (including reasonably incurred legal costs on asolicitor-client basis), losses, penalties and damages (including arisingin tort, including negligence) incurred by Hawkins arising from or inconnection with this Agreement, except to the extent caused by abreach of this Agreement or by any reckless, fraudulent or wilful actor omission by Hawkins or any of its Personnel or Hawkins or itsPersonnel acting outside the scope of their responsibilities under thisAgreement.[95] In those circumstances, we are firmly of the view that any significance thatmight be attributed to the legal relationship between Hawkins and the Sleights for thepurposes of interpreting the RSMA is negligible.[96] Finally we address IAG's argument that the High Court's findings offendcommercial common sense. Mr Gedye submitted in effect that if the Judge wascorrect, what was the point of IAG engaging Hawkins if its role was one that conferredonly marginally greater benefits beyond those which certification by the builder itselfwould have conferred. Under the Judge's interpretation, the builder was the partysolely responsible for quality and yet the whole RSMA system was substantially basedon distrust of builders and the need to check their output. Mr Gedye further submittedIAG could not have intended that it would be required to pay for defective work, thescale of the earthquake repair programme making such an intention less likely, notmore as the Judge assumed.[97] These submissions were essentially premised on the basis that the Judge foundHawkins was to have no responsibility at all for the quality of a builder's work.But that was not the case and nor is it the case under the expanded test we haveformulated. What in our view would not make commercial sense would be forHawkins to have agreed to obligations that mirrored the obligations it had under theprevious contract for significantly less money. It would also not make sense for twocommercially sophisticated legally represented parties to have failed to spell out inexpress terms what would be one of if not the most important of Hawkins' obligationsin the contract and instead chosen to leave it to "inherent" reasoning. That would bea very oblique approach to contract drafting.[98] Drawing all these threads together, we have reached the following conclusions:(a) It was a breach of Hawkins' monitoring and certification obligationsunder the RSMA to certify completion of work if that work containeddefects that were both visible to the naked eye and of a significantnature in terms of the integrity of the building as a whole and the extentof the repairs necessary to rectify them.(b) Applying that construction of the RSMA to the facts of this case,viewed globally, the defects as found by the Judge relating to thecladding and the windows including the structural defects of thefirst-floor balcony were an impediment to certification.(c) Those defects were in the same category as the foundations andsub-floor defects.(d) All other defects found by the Judge were not an impediment tocertification.Outcome of IAG's appeal against Hawkins/QBE in CA659/2020[99] Both the appeal and cross-appeal are allowed.[100] As to the monetary consequences of our decision, the parties sought anopportunity following determination of the appeal issues to reach agreement on thesums owing by each to the other in light of our determinations.[101] We agree that is appropriate. In the event agreement cannot be reached on thecalculations, we reserve leave to the parties to seek further orders in respect ofquantum and the form of final judgment orders.[102] We also reserve the question of costs with leave being granted for the partiesto come back to the Court in the event costs are unable to be agreed.Appeal against the decision to award interest CA156/2021[103] This appeal is a dispute between IAG and the Sleights.[104] As mentioned, the Judge awarded damages against IAG in the sum of$389,848.00 representing the cost of remedying the defective repairs. In a separatejudgment, he awarded interest on that figure from 19 June 2015 to the date of thesubstantive judgment, 30 October 2020.36 The significance of 19 June 2015 is thatthis was the date on which IAG received the Axis report identifying significant defectsin the repair work and the Sleights requested funds to undertake the necessaryremedial work.[105] The award of interest was made under s 87 of the Judicature Act 1908.37Section 87(1) states:(1) In any proceedings in the High Court, the Court of Appeal, or theSupreme Court for the recovery of any debt or damages, the courtmay, if it thinks fit, order that there shall be included in the sum forwhich judgment is given interest at such a rate, not exceeding theprescribed rate, as it thinks fit on the whole or any part of the debt ordamages for the whole or any part of the period between the date whenthe cause of action arose and the date of the judgment:provided that nothing in this subsection shall—(a) authorise the giving of interest upon interest; or(b) apply in relation to any debt upon which interest is payable asof right, whether by virtue of any agreement enactment, orrule of law, or otherwise; or(c) affect the damages recoverable for the dishonour of a bill ofexchange.36 Costs and interest judgment, above n 2, at [28].37 The interest regime under s 87 of the Judicature Act 1908 has been replaced by the Interest onMoney Claims Act 2016. However, the latter only applies to proceedings filed after 1 January2018. Under the relevant transitional provision, in pt of sch 1 of the Interest of Money ClaimsAct, proceedings filed before that date continue to be governed by s 87. The Sleights filed thisproceeding on 6 October 2017.[106] The damages awarded to the Sleights were calculated on the basis of currentrepair costs, not the rates prevailing in 2015. The Judge acknowledged the existenceof authority cited by IAG which has held that in such a situation interest should not beawarded. However, in his view, justice in the circumstances of this case required thatinterest should be paid in order to fairly compensate the Sleights.38 The Judge saidthat there were various factors that supported this conclusion.[107] The first was that the cases cited by IAG were distinguishable because theyinvolved tort claims whereas the claim against IAG was for breach of contract.39[108] The second factor was that delay in making payment had caused the Sleightsreal and further losses for which they should be compensated. If IAG had honouredits contractual obligations, the Sleights would have been able to complete the repairsand would then have had the benefit of a house that was properly repaired and whichthey could have rented or sold for its true value. As it was, they had to wait. They weredeprived of money to which they were entitled in 2015.40[109] Thirdly the Judge questioned whether in any event the damages had beenassessed at repair rates that were current at the time of trial.41Grounds of appeal[110] It was common ground that the decision whether to award interest under s 87involves the exercise of a discretion. That is to say, it was common ground that beforeappellate intervention was warranted, we needed to be satisfied that the Judge hadmade an error of principle or had taken into account an irrelevant factor or failed toconsider a relevant factor or had been plainly wrong.38 Costs and interest judgment, above n 2, at [25]–[26] citing Bowen v Paramount Builders(Hamilton) Ltd [1977] 1 NZLR 394 (CA); and Tocker & Bayliss v Goodwill Holdings Ltd HCTauranga CP 39/87, 5 March 1993.39 At [27(a)–(b)].40 At [27(c)].41 At [27(d)].[111] Mr Gedye for IAG acknowledged there was jurisdiction under s 87 to make anaward of interest in this case because it involved a proceeding for the recovery ofdamages. However, he submitted the Judge had erred in three key respects:(a) the Judge failed to properly characterise IAG's underlying obligation;(b) the Judge should have applied the well-established approach that wherepresent day costs are awarded, interest should not run from an earlierperiod; and(c) the Judge wrongly awarded interest to compensate for stress andinconvenience.For reasons we now go on to explain, we uphold the second ground of appeal and havedecided to reverse the interest award.AnalysisDid the Judge fail to properly characterise the underlying obligation?[112] In advancing this ground, Mr Gedye submitted that it is the underlyingobligation that should control interest. IAG's underlying obligation was not toproduce a repaired house but rather simply to pay whatever the cost of repairs were ifand when they were incurred. It was in the nature of a reimbursing obligation.It followed that as at June 2015 the right to be paid anything under the policy had notyet come into existence. No money was payable under the policy in June 2015 becausethe Sleights had not elected to carry out remedial works or hired a builder.Any liability IAG had in June 2015 to pay was at best contingent liability only andcases such as Doig v Tower Insurance42 and Myall v Tower Insurance43 show thatcontingent liability is not sufficient for the purposes of a pre-judgment interest award.[113] We do not accept this argument which has an air of sophistry about it. We agreewith Mr Cooper, counsel for the Sleights, that the underlying obligation must be as42 Doig v Tower Insurance Ltd [2019] NZCA 107, [2021] 2 NZLR 127.43 Myall v Tower Insurance [2019] NZHC 528.determined by the pleadings and the Judge's substantive findings. IAG's contentionson this issue are not consistent with the way the claim was pleaded and run at trial.They are also not consistent with the relevant findings of the Judge about the natureof IAG's breach. Those findings have not been appealed and cannot now properly berevisited through the vehicle of an argument about interest.[114] The claim against IAG was never pleaded as a claim for an insurable lossarising from defective repair. That is to say, it was never pleaded as a fresh insuranceclaim arising from the defective work and requiring a new election to repair.Defective workmanship was expressly excluded from the policy. There was only oneinsurable event, namely the damage to the house caused by earthquakes.[115] The claim that was argued at trial and upheld by the Judge was that under theinsurance policy IAG had an obligation to fund earthquake repair work to the extentnecessary to produce a certain result. As at June 2015 it refused to provide any furtherfunding despite the fact the promised result had not been achieved. It was thereforein breach of the policy.44[116] We conclude this first ground of appeal is not sustainable.It was an error to award interest from June 2015 when the damages representedpresent day costs of repair[117] The first issue under this head is whether the damages did in fact representpresent day costs of repairs — the Judge appears to suggest the damages he awardeddid not or may not have done. However, as Mr Gedye points out, that suggestion isnot supported by the evidence. All parties adduced evidence of current repair costsand no party advanced a case based on 2015 rates. There was disagreement as tocurrent rates but the Judge must be taken to have resolved that disagreement by makingthe damages award in the sum he did. For completeness we would add that no partyadduced evidence of future cost increases.44 See Substantive judgment above n 1, at [109], [194]–[195] and [709].[118] It follows that insofar as the Judge appears to have relied on the quality of theevidence about costs to justify his decision to award interest, that was plainly an error.[119] Turning then to the key issue raised by the second ground of appeal.[120] The general principle is that interest is awarded from the date of loss — in thiscase the date of entitlement to payment. That is because the defendant has had the useof the money pending judgment and the plaintiff has been out of pocket.45Where however repair damages are calculated on the basis of present day costs, theaccepted practice as evidenced in Bowen and Tocker is not to award interest.46 That isbecause an award of interest would duplicate an allowance already built into thedamages calculation. The gain to the defendant is removed because it now has to paya higher sum than it would have paid at the time of breach and the loss to the plaintiffis removed because it will recover more than the loss as at the time the cause of actionarose, that is as at the time it was entitled to payment.[121] In declining to follow the approach taken in Bowen and Tucker, the Judge wasinfluenced by two factors.[122] The first was that Bowen and Tucker were negligence cases in tort and in theview of the Judge, that meant the payment obligation arose only upon entryof judgment. In contrast, IAG had been in breach of a direct payment obligation underits contract with the Sleights since 2015.[123] No authority was cited in support of that proposition and the reasoning appearscontrary to general principle. It has never been the law that where the plaintiff suingin tort has not actually incurred the repair costs, they are not to be regarded as havingsuffered any loss until that loss is quantified at judgment. The correct position is thatthey have an entitlement to damages once all the elements of the tort have come into45 Worldwide NZ LLC v New Zealand Venue and Event Management Ltd [2014] NZSC 108, [2015]1 NZLR 1 at [57] and [74]; and Westpac Banking Corporation v Nangeela Properties Ltd [1986]2 NZLR 1(CA). See generally BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979] 1 WLR 783at 845–846.46 Bowen v Paramount Builders (Hamilton) Ltd, above n38, at 411; and Tocker & Bayliss v GoodwillHoldings Ltd, above n 38, at 98–99.existence or are reasonably discoverable and that will of course always occur beforetrial and judgment.[124] We agree the fact that Bowen and Tocker were tort cases was not a proper basisfor distinguishing them from the present case and therefore the Judge took anirrelevant factor into account and made an error of principle.[125] Mr Cooper wisely did not seek to justify the award of interest on the groundsof a distinction between contract and tort. Rather he sought to endorse the Judge'ssecond reason for not following Bowen and Tucker which was that the s 87 discretionwas a means by which the Sleights could be fairly compensated for losses arising fromthe delay in receiving payment. Mr Cooper emphasised the breadth of the discretionconferred by s 87 and submitted there is no mandated approach. All depends on theinterests of justice in the particular circumstances.47[126] In support of that proposition, he referred us to a decision of the English Courtof Appeal in Woodlands Oaks Ltd v Conwell.48 In that case despite the fact thatremedial rates had been calculated at contemporary rates, the Court neverthelessupheld an award of interest on the grounds that to deny interest would produce anunjust result.[127] Woodlands Oak was however a radically different case to the present one.It involved both a claim and a counter-claim. The claim was by a builder for moniesowing under the building contract with the homeowner, and the homeowner'scounterclaim was for remedial work caused by defective workmanship. Both theclaim and the counter claim succeeded and awards of interest were granted in respectof each. However the trial Judge awarded the builder interest on the full amount of itsclaim rather than (as should have been done) on the balance remaining after setting-offthe counterclaim. In circumstances where the appeal court was being asked to quashthe award of interest on the counterclaim only, it is hardly surprising it would decline47 Citing Worldwide NZ LLC v New Zealand Venue and Event Management Ltd, above n 45, at [25]–[26], [32], [36] and [57]. Mr Cooper also pointed out that in Bowen interest was not a contestedissue.48 Woodlands Oak Ltd v Conwell [2011] EWCA Civ 254.to do so. That would have been patently unjust because it would have resulted in theclaimant builder receiving interest which they were not entitled to receive.[128] Woodlands Oak is certainly not authority for the proposition that interest canbe used as a back door method for compensating losses that are more properly withinthe realm of heads of damages and which need to be formally claimed and supportedby evidence. Yet in our view that is exactly what the Judge has done in this case.The sorts of losses identified by the Judge as the basis of his interest award in this case— namely an inability to tenant the house or sell it — were opportunity or expectationlosses. Those sorts of losses were never claimed or advanced as the basis forcompensation.[129] Those being the circumstances, we consider there was no justification fordeparting from the standard practice of not awarding interest when damages areassessed as at the date of quantification rather than the date of entitlement. The Judge'sexercise of his discretion under s 87 was wrong in principle and cannot stand.[130] Although that conclusion is dispositive of the appeal, it is strictly speakingunnecessary for us to consider the third ground of appeal which was that the Judge hadwrongly relied on stress and inconvenience as a basis for awarding interest.The Sleights had made a claim for general damages but the Judge had declined toaward them. The Sleights have not appealed that decision.[131] Against that background, we agree that if the Judge had awarded interest onthe basis of a claim which he had already rejected that would be an error. However,the interest judgment makes no reference to stress or inconvenience and we decline tointerpret it in the way IAG suggests.[132] Finally for completeness, we note that the interest judgment makes noreference to the Sleights' successful claim against IAG under the ConsumerGuarantees Act. However for the purposes of interest, exactly the same principlesapply.Outcome of IAG's appeal against the Sleights CA156/2021[133] The appeal is allowed and the decision of the High Court awarding interest tothe first respondents is quashed.[134] As regards costs, counsel advised us that neither party to this appealsought costs. We agree that is appropriate and therefore make no award of costs.Solicitors:DLA Piper, Wellington for Appellant in CA659/2020 and CA156/2021Hazelton Law, Wellington for Respondent in CA659/2020 and Second Respondent in CA156/2021Saunders Robinson Brown, Christchurch for Respondent in CA156/2021