BRUCE v IAG NEW ZEALAND LIMITED [2018] NZHC 3444

BRUCE v IAG NEW ZEALAND LIMITED [2018] NZHC 3444 [20 December 2018]IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYI TE KŌTI MATUA O AOTEAROAŌTAUTAHI ROHECIV 2016-409-1223[2018] NZHC 3444BETWEEN JOANNE TRACEY BRUCE, STEPHENLESLIE BRUCE and LESLIE GORDONWILLETTS as trustees of the JO ANDSTEPHEN FAMILY TRUSTPlaintiffsAND IAG NEW ZEALAND LIMITEDDefendantHearing: 19-22, 26 and 27 November 2018Appearances: G Shand and P Biddle for PlaintiffsR Raymond QC, O Collette-Moxon and M Booth for DefendantJudgment: 20 December 2018JUDGMENT OF MALLON JIntroduction [1]The house [4]The earthquake damage [15]The insurance claim and response [16]The policy [16]The insurer's obligation [17]The claim [22]Hawkins appointed to manage repair works [24]Repair strategy [27]The building contract [42]The handover [50]The finish to the internal walls [62]The levels [62]The original build [65]The repairs [73]The remedy [81]Submissions [87]My assessment [91]Wall verticalities [96]The standard [96]The original build [97]The repairs [99]Fault of repairs? [103]Structural and functional performance [106]Aesthetics [111]The remedy [114]Submissions [120]My assessment [123]Floor levels [129]The standard [129]The original build [133]The repairs [134]The remedy [143]The squeaky floorboards [147]The submissions [148]My assessment [150]The fireplace [157]General damages [161]The claim [161]The law [163]My assessment [168]Result [174]Introduction[1] Mr and Mrs Bruce, through a trust, own a house in Papanui, Christchurchdamaged in the September 2010 and February 2011 earthquakes. Their house wasinsured with the defendant (IAG). Under the policy IAG agreed to "repair orreplacement to the same condition and extent as when new". The policy gave IAGthe right to elect to reinstate the property or to indemnify Mr and Mrs Bruce for thecost.[2] IAG elected to reinstate the house. Mr and Mrs Bruce are unhappy with therepairs carried out pursuant to that election. They say there are numerous defects andthe result is that IAG has not met its obligation to repair their house to the samecondition as when new. IAG accepts a large number of these defects exist and that ithas responsibility to Mr and Mrs Bruce for them. The trial before me concerned theremaining alleged defects. They are: the interior finish, the wall verticalities, the floorlevels and the fireplace. A claim concerning the garage was ultimately abandoned.1[3] Pursuant to a pre-trial direction, this trial concerned whether the alleged defectsexist and what is required to remediate them.2 The cost of remediation and theappropriate remedy or quantum of damages is to be determined subsequently. Theclaim for general damages is to be considered at this trial.3The house[4] The house was designed by Darren O'Neil in 2004. He is an architecturaldesigner. His practice is O'Neil Architecture Ltd, which is a small architecturalpractice in Christchurch specialising in high quality residential design. The house wasdesigned for Mr O'Neil and his wife to live in. They had just returned from Franceand decided they would like their house in the French style.[5] The house was designed as a two-storey timber framed house with plasteredconcrete block exterior cladding. It had a pile supported concrete slab floor andfoundation, aluminium exterior joinery and a Colorsteel roof. There was an attacheddouble garage with internal entry to the house. The house had high stud ceilings,ceiling roses, handcrafted French marble fireplaces, ornate cornices, lead lights anddetailed architraves. It was sited on a large parcel of land.[6] The house was constructed by DJ Hewitt Builders Ltd (DJ Hewitt) in 2006.DJ Hewitt had been the builder selected on a lot of other O'Neil Architecture projects.Mr O'Neil selected this builder because he regarded Mr Hewitt and his tradespeopleas some of the best in Christchurch. That was also his view of Powell Fenwick, thestructural engineering firm that he used for the design. These were people with whomhis practice had existing relationships and he knew they would achieve the best house1 Counsel abandoned the claim orally in closing submissions. He was correct to do so because,despite considerable latitude provided to Mr and Mrs Bruce to pursue their concerns about thegarage size and operation, ultimately they were unable to prove that the repairs varied from thegarage as it was originally built.2 Direction of Matthews AJ, 9 November 2018.3 I attended a site visit of the house, with counsel, to gain a perspective of the evidence.for him. He was after a house constructed to the highest quality and beyond the qualityof a standard house build.[7] Mr O'Neil was involved in the construction of the house from the start anduntil it was completed. He made regular site visits and was very involved in theaesthetics and finishing. The foreman for the build was Noel Barnes. WhileMr Barnes had day to day responsibility for the job, Mr Hewitt was also involved.Mr O'Neil saw both of them on site throughout the project. The subtrades knew eachother from other projects they had worked on and this helped with the smooth runningof the build. Mr O'Neil knew the subtrades from other projects, including the plasterer(Paul Lally), the painter (Greytone Painters and Decorators Ltd (Greytone)), and thejoiner.[8] For his part, Mr O'Neil understood the people involved wanted to do a perfectjob for him. That was confirmed by them. Mr Barnes has worked for DJ Hewitt for19 years and has been in the building industry for 25 years. He confirmed he was onthe site daily. He said there was a motivation to get everything right and to producethe best quality build they could because it was to be Mr O'Neil's own home.[9] Mr Lally said it was an "O'Neil house". He knew he was an architect and was"quite fussy" and "so we knew that we needed to get his house looking good andwe had make sure it was spot on really". He said it paid off because after this he didanother house with DJ Hewitt for Mr O'Neil.[10] Anthony McKenzie, a director of Greytone, said his firm was engaged byDJ Hewitt to paint the house externally and internally. Greytone has been operatingin the upper end of the Christchurch market since 1992. DJ Hewitt asked them toproduce the best possible finish. This was echoed by Graham Wilson, another directorof Greytone. Both Mr McKenzie and Mr Wilson have about 35 years as painters anddecorators. They were asked to achieve the best possible finish and they dideverything they could to achieve it.[11] The end result was a quality building. For example, Mr O'Neil said when thehouse was built "the walls were perfectly vertical". He was challenged on this andasked whether "perfect" was achievable in practice. He said it was and another wordfor this was "flawless". He was asked if this was just an impression or if he hadmeasured them:A. Well if it's – look, I guess what you're getting at is it's pretty hard to– to – unless you measure a wall with a laser and ensure it's perfectlyvertical, but the – when you walk round it – when I built the houseeverything lined up – every architrave, every shadow line was perfect.I have – flawless, sorry – every architrave and shadow line wasflawless so it appeared perfect to me, and I've got a – I've got areasonable eye for that and so does D J Hewitt and so does his builderand all the trades that worked on the house.[12] The house was entered in the Registered Master Builders House of the Yearcompetition. This competition assesses the home on its workmanship as well as itsdesign, functionality and style, with the workmanship criteria having the greaterweighting.4 Before the awards were announced, Mr O'Neil and his wife sold the houseto Mr and Mrs Bruce. They had not intended to sell the house. They were approachedby a real estate agent who asked them if they wanted to sell it. They initially said nobut the agent went ahead and put together an offer which the O'Neils regarded as toogood to decline.[13] For their part, Mr and Mrs Bruce heard about the house from a real estate agentwho said that the newly built home was for sale. Mrs Bruce described viewing thehouse for the first time as a "wow" moment. She was impressed with the details andquality of the finish. The house was close to a decile 10 school and situated close tofamily. Mr and Mrs Bruce could not believe their luck in finding their dream home.They purchased the house for $1,350,000 and took possession on 9 June 2009.[14] Mr and Mrs Bruce were aware the house had been entered in the House of theYear competition. About a month after they moved in, the house won a "gold" award.David Sturman, who has been in the building industry for 42 years and is a past judgeof the competition, said a house had to be in "sublime" condition across all categoriesto be considered for a gold award. Mrs Bruce's evidence was that this award4 The 2017 judging criteria was in evidence. Mr Sturman gave evidence that the 2006 criteria was"pretty similar".confirmed to them the quality of the house and that having this prestigious awardwould be an excellent selling point for the future.The earthquake damage[15] The house was damaged in the September 2010 and February 2011earthquakes. The damage included: differential settlement of the concrete slab andfoundations; damage to the superstructure and garage; damage to the exterior cladding,veneer block and plaster coating; and damage to the exterior landscaping, driveway,patios and fencing.The insurance claim and responseThe policy[16] Mr and Mrs Bruce's policy with IAG provided cover for sudden accidental lossto their house and associated permanent structures (including the garage). It provided:If the house can berepairedIf the house can be repaired, we pay the reasonable cost ofthe repair. We choose to either repair it, or to pay you thecost to repair it.If you do not repair the house, the most we pay is thepresent value, plus the reasonable cost of any demolitionand removal of debris and contents which is necessary.If we settle a claim by paying for repair, we automaticallyreinstate this insurance without making any extra charge toyou.If the house cannotbe repairedIf the house cannot be repaired, we pay the reasonable costto replace it with a new one at the situation. We choose toeither replace it, or to pay you the cost to replace it.If you do not replace the house, the most we pay is thepresent value, plus the reasonable cost of any demolitionand removal of debris and contents which is necessary.If we settle a claim by replacing the house, this policyends, and we keep any premium already paid.How repair orreplacement ismadeWe pay for repair or replacement using materials andmethods which are in common use at the time of the loss.Repair or replacement will be to the same condition andextent as when the house was new. If this is notpracticable, repair or replacement will be as close as isreasonably possible to that condition and extent.You must take all reasonable action to allow repair orreplacement work to be carried out promptly.The insurer's obligation[17] There are two legal points concerning IAG's obligations that arise in this case.The first concerns IAG's obligations if it elects to repair the house rather than payingthe insured the cost of the repairs. There is no issue about this between the parties.The settled position is that where an insurer elects to reinstate, the insurance policybecomes a repair contract and is enforceable as such. The insurer is liable in damagesif the repair contract is performed inadequately.5[18] The second legal point is what is required of IAG to repair or replace to thesame condition "as when the house was new". Similar wording was considered inParkin v Vero Insurance New Zealand Limited.6 That case concerned a policy whichprovided reinstatement "to a standard or specification no more extensive, nor betterthan its condition when new".7 The High Court Judge rejected that this meanteverything damaged had to be replaced rather than repaired.8[19] In reaching that conclusion, the Judge discussed authorities which consideredthe "when new" standard to be different to an "as new" standard. As to the "whennew" standard, this included the following authorities:(a) Morlea Professional Services Pty Ltd and Pace Micrographics Pty Ltdv The South British Insurance Co Ltd where it was said:9 the reference to "condition when new" is indicative of an intentionthat the policy affords more than a true indemnity. In other words oneis not concerned with a repair of the article to its pre-fire condition.One is concerned with a replacement of the article with one equal incondition to the damaged article when new or the repair of the articleto a condition equal to its new condition.5 John Birds, Ben Lynch and Simon Milnes MacGillivray on Insurance Law relating to all risksother than marine (12th ed, Sweet & Maxwell, London, 2012) at [22-006]; Anthony A Tarr andJulie-Anne R Kennedy Insurance Law in New Zealand (2nd ed, The Law Book Company Ltd,Sydney, 1992) at 233; Robson v New Zealand Insurance Co Ltd [1931] NZLR 35; Best Food FreshTofu Ltd v China Taiping Insurance (NZ) Co Ltd [2014] NZHC 1279 at [16]-[17].6 Parkin v Vero Insurance New Zealand Ltd [2015] NZHC 1675 per Mander J.7 At [30]8 At [116] and [119]. The argument for the insured was that this required a standard of repair to acondition whereby a reasonable and informed looker would conclude the previously damaged partof the building was new and not patched or second hand.9 Morlea Professional Services Pty Ltd and Pace Micrographics Pty Ltd v The South BritishInsurance Co Ltd (1987) 4 ANZ Insurance Cases 60-777 (NSWSC) at 74,729, cited in Parkin,above n 6, at [112].(b) Lion Nathan Ltd v New Zealand Insurance Co Ltd where it was said:10 The plain language of the clauses in question makes plain, as NZIin part recognises, that the essence of the provision is the return of thedamaged property as nearly as possible to its new condition The plain meaning of the clauses is that Lion is entitled torestoration to a substantially as new condition, not pre-fire condition,wherever there has been damage as a result of a defined risk. Wherethat risk has occurred, as the exclusion clause relied upon by NZImakes plain, fair wear and tear is irrelevant (c) Colonial Mutual General Insurance Co Ltd v D'Aloia where it wassaid:11The words "equal to" mean, in our opinion, that the reinstatement doesnot necessarily have to conform precisely in appearance, structure andconfiguration to the destroyed building. But basically there must be"equality" in the sense of size, structural quality, amenities, space,plumbing, electrical, gas and like installations. [20] Picking up on the point that "when new" could take into account the nature ofthe building element that had been damaged, the Judge said:12[120] In my view, the purpose or utility to be achieved by the reinstatementof the individual item which has suffered damage cannot be divorced from thestandard of remediation required to be achieved under the policy. Broadly, thepurpose of any particular part of the house can be divided into structural orfunctional components and those which have an aesthetic purpose; each, ofcourse, is not mutually exclusive. Where an item has only a functionalpurpose, so long as the repair or replacement restores that functional purposeto a "when new" condition, the obligations under the policy will be met.[121] Where there is also an aesthetic purpose there will be a need to ensurethe remedial strategy also restores the former aesthetic to a "when new"quality. That will not necessarily mean there will be an obligation to replacelike for like, or to replace in every instance, but that may be the only realisticoption in order to meet the standard of the policy.[21] These authorities helpfully set out the standard that applies to IAG in this case.IAG was required to repair the house to its same condition as when it was originally10 Lion Nathan Ltd v New Zealand Insurance Co Ltd (1994) 8 ANZ Insurance Cases 61-217 (HC) at75,401, cited in Parkin, above n 6, at [113].11 Colonial Mutual General Insurance Co Ltd v D'Aloia (1988) 5 ANZ Insurance Cases 60-846(VSC) at 75,293, cited in Parkin, above n 6, at [114]12 Parkin, above n 6.built (as distinct from its condition immediately prior to the earthquakes). Thestandard of repair was to be to an equal condition as it was when it was built. If thiswas not practicable, the repair was to be as close as was reasonably possible to thatcondition. In assessing equality, the nature of the element was relevant. In this case,the relevant factual context includes that the house was built to a gold award winningstandard.The claim[22] Mr and Mrs Bruce lodged a claim for the September 2010 earthquake on24 June 2011 and for the February 2011 claim on 18 August 2011. IAG accepted theclaims. Frances Lyford, an IAG Canterbury Earthquake Senior Manager, was assignedto the claim around June 2011. She had knowledge of how other houses in the samestreet had been damaged by the earthquakes. Her delegation was for claims under onemillion dollars.[23] In July 2011 EQC advised Mr and Mrs Bruce that their claim was likely toexceed its statutory cap.13 As a result of this advice, IAG appointed an internal lossadjuster on 29 July 2011. The first site meeting took place on 2 August 2011. Therewas then a delay in progressing the claim with IAG because the EQC position firstneeded to be finalised. That occurred on 22 February 2012 when EQC paid Mr andMrs Bruce the EQC cover.Hawkins appointed to manage repair works[24] Because of the number of claims IAG received following the earthquakes, IAGengaged Hawkins Management Limited (Hawkins) to provide project managementand related services for the repair or rebuild of the homes of its policy holders. Wherethe house was to be repaired, a Hawkins Rebuild Solutions Manager (RSM) wasappointed. The RSM would:(a) engage contractors from a list held by Hawkins to assess the damageand report on what needed to be done;13 Under the policy, IAG was liable to pay only the amount of the loss that exceeded the EQC cover.(b) prepare a scope of works to repair the damage for review by a Hawkinsapproved builder;(c) monitor the delivery of the repair works on behalf of IAG and theinsured;(d) process and certify payments to the builder on behalf of IAG and theinsured; and(e) coordinate with IAG, the loss adjuster, the builder, subcontractors andthe insured.[25] The loss adjuster's role was to review the scope of works from a policyperspective and, if necessary, to meet with the insured to discuss any issues.[26] On 2 May 2012 Hawkins wrote to Mr and Mrs Bruce to advise of itsappointment and its role.Repair strategy[27] The RSM looked to involve those who had been involved in the original build.He engaged Matt Blyth from TM Consultants, an engineering practice, to provideadvice as he understood that Mr Blyth had carried out the work for the original buildwhen he was working for Powell Fenwick. On 7 June 2012 TM Consultants carriedout an initial inspection and provided a report detailing earthquake damage. Thisincluded that the house had settled. The report said there was no observable damageto the perimeter foundation and the house was continuing to perform well structurallyto the same degree it had prior to the earthquakes. A level survey was recommendedand undertaken.[28] The RSM approached Mr O'Neil on 20 August 2012. He told Mr O'Neil thathe had engaged Mr Blyth and the plan was also to use DJ Hewitt. Mr O'Neil repliedon 4 September 2012. He said he had looked at the site report from the engineer. Hedeclined to be involved saying:If you plan to remediate the house as per the engineers recommendations i.e.not replace the cladding, I don't think there is anything for O'Neil Architectureto do as this is a repair to original.[29] Mr O'Neil elaborated on this in his evidence. He was aware the Bruces wantedhim to be involved. He elected not to be. He was very busy at work at the time, it hadbeen his own home, there were plenty of other people who could assist, there was noneed for him to be involved, he knew all the parties (including Jim Stenberg, peoplefrom Hawkins and so on) and felt it was better if he was not involved.[30] The RSM also approached DJ Hewitt to see if they were available to carry outthe work and, if they were, to prepare a scope of works. On 6 September 2012DJ Hewitt confirmed it was keen on having the job. The RSM advised Mr andMrs Bruce of this on the same day.[31] On 18 September 2012 TM Consultants reported to the RSM on the results ofits floor level survey:The results of this levels investigation have determined the building to havesettled by up to 38mm over the area of the ground floor. The survey indicatessettlement has occurred along the northern and eastern elevations of thebuilding.[32] TM Consultants explained that after their first inspection they had thoughtfloor levelling compounds could be used to relevel the building to its pre-earthquakecondition. However, the level survey had highlighted that more significant relevellingwas required. TM Consultants proposed two relevelling solutions: one involvingdigging under the concrete strip foundations in specific areas, disconnecting the pilesand installing new ones; and the other involving breaking out the concrete slab inspecific areas and replacing it with an enhanced slab.[33] On 20 September 2012 TM Consultants' repair strategy was discussed with theloss adjuster, RSM, the Bruces and DJ Hewitt (who was invited at the request of theBruces). It appears that DJ Hewitt was pushing for a rebuild and that he did not wantto be involved in a repair. A note on IAG's file about this records the RSM's view asfollows:1414 This note appears to be recording the RSM's view at this time.Owner Preferred Builder involved. I believe this will add unnecessary delaysto the claim as builder are [sic] pushing the owners towards a rebuild.[34] Similarly, the RSM sent an email to the loss adjuster on 20 September 2012which said:Would you like me to arrange a Geotech report based on Matts conclusions, Iwill arrange them directly without the builders involvement, I have my concerns over the owners builder pushing them to a rebuild whenthe house is most likely repairable [35] The RSM engaged Aurecon to prepare a geotechnical report. Aurecon initiallyreported on 22 January 2012. In February 2013 Aurecon was engaged to carry outfurther inspection, undertake a structural engineering assessment of the foundation andprovide a solution to remediate the differential settlement to the foundation.[36] On 15 May 2013 Aurecon provided the RSM with advice on the two optionsthat TSM Consultants had proposed. Aurecon raised limitations with both options. Itnoted that a logical extension of the second option would be to replace the entire slabon the ground while the house superstructure was lifted. Under this option it wouldlikely be necessary to replace all the existing piles to meet "new design" standards.[37] In the meantime, having learned that DJ Hewitt and Mr O'Neil were not goingto be involved, Mr and Mrs Bruce had proposed that Jim Stenberg, of Jim the BuilderLimited (JTB), be appointed to carry out the repairs. Mrs Bruce explained that he hadbeen the builder of their neighbour's property and had a good reputation. Mrs Bruceasked IAG if he was on their list. On 22 May 2013 the RSM advised the Bruces thatJTB was interested in doing the repair.15[38] On 27 June 2013 IAG's loss adjuster met with the Bruces. Later that day heemailed them to explain the process going forward. He noted there were presentlythree repair options being considered and JTB was reviewing them. The repairstrategy was expected to be confirmed by 19 July 2013. This would be reviewed byIAG. The work would then by scoped by the RSM, JTB and the loss adjuster. The15 A later email, dated 5 July 2013, recorded that JTB wished to work with the RSM with whom theyworked on other jobs. IAG and Hawkins agreed to changing the RSM because Mr and Mrs Brucewere "very keen" to keep JTB on board.Bruces would be given an opportunity to review the scope and ensure all necessaryrepairs had been considered. The scope would then be signed off by the loss adjusterfor pricing by JTB and his subcontractors. This would be reviewed by a quantitysurveyor. The priced scope would be compared to the cost of a total rebuild todetermine whether the repair strategy was economic. The claim would then move intothe building contract signing stage.[39] By July 2013 Aurecon's third option, complete slab replacement andinstallation of new piles, had been settled on.[40] On 23 September 2013 the provisional scope of works had been completed.This was provided to the Bruces on 27 September 2017 in case they "have noticedsomething that has not been included or [which has been] missed from the scope".The loss adjuster would be in contact the following week to discuss any comments oramendments that might be required by the Bruces following their review. In responseto that invitation, Mrs Bruce raised a question about the garage. She had understoodit needed to be demolished due to the issues with the door and the "obvious sloping"of the floor. The loss adjuster advised that this would occur if JTB could not separatethe garage from the house.[41] The scope of works was priced over the subsequent seven months.The building contract[42] On 14 May 2014 a building contract was entered into between JTB and theBruces. The contract price was for $867,903.66 (excluding GST). The provisionalstart date was 29 September 2014 and the provisional completion date was 19 June2015. No additional sums were payable by IAG to JTB unless agreed to in writing byHawkins (other than any emergency works).[43] Under the contract JTB and the Bruces acknowledged that IAG had appointedHawkins to carry out certain services for IAG. JTB was required to forward allcertificates, invoices and other documentation to Hawkins; "comply with allreasonable instructions issued in writing by Hawkins"; and to deal with the Bruces,Hawkins and IAG in good faith. The contract required JTB to submit payment claimsto Hawkins in accordance with the milestone schedule payments set out in the contract.[44] The contract provided JTB could engage subcontractors but it would remainliable for its subcontractors' acts and omissions.[45] Practical Completion occurred when the contract works and any agreedvariations were completed except for minor omissions and defects (as furtherdescribed). The Bruces were entitled to possession following Practical Completion.JTB was liable for any defects in the works notified to JTB within 90 days afterPractical Completion. JTB was required to rectify the defects within the defects periodor such other times as agreed between the Bruces and JTB.[46] Mr Willetts, a solicitor and a trustee of Mr and Mrs Bruce's family trust thatowned the house, gave evidence about the meeting on 18 March 2014 at which thiscontract was signed. He did not recall if he had been forwarded the contract earlier(emails indicated IAG intended this was to occur) but he does recall having theopportunity to read through the contract. He said that the meeting came as a reliefafter a lot of anxiety and stress for the Bruces in getting their claim to progress to thispoint. The meeting was attended by the Bruces and Mr Willetts, a raft of IAGrepresentatives, the owner of JTB, a loss adjuster, and a Hawkins' representative.[47] Mr Willetts said it was outlined at this meeting that the house would be jackedup two or three metres to enable the new foundations to be put down. Other detailabout the remedial works was provided. He voiced his concern about whether theremedial works would succeed and asked whether it would be easier for all if the housewas rebuilt. The response was that those experienced and qualified to do so had madethe decision.[48] Mrs Bruce also gave evidence that she disagreed with the repair strategy andwas concerned about how IAG would match the quality of finish and fixtures in thehouse. This disagreement was not recorded in any of the email communications shehad with the RSM up until this point (or if it was, I was not referred to this). She saidIAG were adamant the house was to be repaired.[49] I accept Mr Willetts queried the strategy of a repair. It is less clear if Mr andMrs Bruce did, although I accept they had concerns about it. Regardless of whetherthey conveyed their concerns, it is clear IAG wished to pursue this approach. Thereis no documentation that shows any detailed consideration was given to a completerebuild. IAG had expert advice that repairs could be carried out. IAG was entitled torely on that advice.The handover[50] The work did not begin until February 2015. Practical completion andhandover occurred on 15 May 2016.[51] As this time was approaching, Mr and Mrs Bruce began to raise issuesregarding the quality of the work that had been carried out. For example, by emaildated 27 April 2016 Mr and Mrs Bruce advised IAG of a number of problems. Theseincluded "water pooling in areas". They asked for a level report to be carried out andproposed that DJ Hewitt carry this out. IAG advised that it would prefer to use AxisBuilding Consultants (Axis) because it was qualified to report on all aspects of therepair.[52] By email dated 6 June 2016, Mr and Mrs Bruce provided IAG with a full listof defects they had discovered to that point (referred to as a "snag list"). Theyexpressed a preference to involve their own contractors to remedy the work and tosend the invoices to IAG for payment. If this was not possible, they wished to beinvolved in the repair strategy. The snag list was detailed and set out numerousdefects. For present purposes the following are the relevant ones:Overall marks on walls throughout [which] have uneven sanding especially inthe hallway, entry and downstairs toilet. Marked walls and sloppy paint finishlacking finesse. We have engaged painters to check this and they agree, thegrade finish is very poor with no attention to detail, the few walls that are okhave marks on them from tradesmen's fingers or leaning up or touching themwith dirty hands.It appears the garage is smaller than it originally was around 150mm. Entryfrom the home to the garage slab drops down and is not level. Throughout Walls appear to be out, not straight.A floor board feels like it's lifting in main hallway – air bubble. Swinardshave reviewed and said this normal however every visitor who walks on theone piece in question comments without any prompting. French doors we can see light through and aren't flush [53] On 17 June 2016 a code of compliance certificate was provided by JTB toMr and Mrs Bruce.[54] IAG considered JTB had the initial responsibility to try and address the defectsin accordance with the procedure in the building contract. However, to help facilitatethis, IAG engaged Axis to inspect the house and to report on the quality of JTB's work.A floor levels survey was to be part of the assessment.[55] Brian Ellis of Axis inspected the property on 11 July 2016. He spent sevenhours on the site. He provided his report to IAG on 7 September 2016. The reportwas detailed. It included floor level and wall verticality surveys. The floor levelsurvey showed, for example, that the lowest point on the ground floor levelwas -32 mm and the highest point was in the garage at +42 mm. The wall verticalitysurvey showed the ground floor walls out of plumb in one area (by the French doors)by up to 18 mm and by amounts ranging from 5 mm to 15 mm on a number of otherwalls.[56] The report concluded:Following our visual inspection we conclude that the majority of the ownersconcerns are justified. While there is evidence of poor workmanship and non-compliant work, the majority of the issues are generally cosmetic, but they arenoticeable and are in our expert view a valid source of disappointment, as theydetract from the overall finish of the project. Most of the defects appear tohave been caused by too much rush to finish at the end of the project and couldhave been sorted earlier with more attention to detail.[57] In the meantime JTB, which had earlier changed its name to Jim Finished Ltd,was removed from the Companies Registrar on 15 July 2016.[58] IAG provided the Axis report to Mr and Mrs Bruce and JTB for discussion.Ms Lyford's evidence is that efforts to resolve the Bruces' concerns were notsuccessful by the time, in December 2016, that Mr and Mrs Bruce commenced theseproceedings.[59] While the proceedings were on foot Mr and Mrs Bruce engaged PowellFenwick, the surveyors engaged on the original report, to report on the repairmethodology and whether it had left any structural defects, and on the general qualityof the repairs. Malcolm Freeman of Powell Fenwick provided his report on 11 August2017. His report identified a number of defects including those that remain in issuenow (namely, the internal finish, the wall verticalities and the uneven slab). Hiscomments included the following:During our inspection we noted many deficient or poorly constructed andfinished non-structural items most of which are covered in the Axis report. Ingeneral the comments made in this report are consistent with our findings andopinion of the quality of the finish throughout the house.The house has suffered a significant reduction in quality as a result of therepairs which, in our opinion, were undertaken to an inferior standard.[60] IAG engaged Mr McGunnigle of McGunnigle Hodge. Mr McGunnigleprovided his report on 22 August 2017. He is a highly qualified and experiencedbuilding surveyor. He was called by IAG to provide evidence on the defects allegedby Mr and Mrs Bruce. He inspected the house on five occasions for this purpose.[61] In accordance with a court direction, on 22 November 2017 Mr Freeman andMr Lanyon, a structural engineer engaged by IAG, provided a joint report of theirareas of agreement and disagreement. On 23 November 2017 Mr Sturman andMr McGunnigle provided a joint report of their areas of agreement and disagreement.A further joint report was provided in the course of the trial. The result of this processis that agreement has been reached about most of the defective repairs. There wereother unsuccessful efforts to settle the matter – in particular a judicial settlementconference took place.The finish to the internal wallsThe levels[62] Interior plastering and painting to walls can be carried out to different standardsthat are called "levels" or "grades". For a level 5 plastering finish, the walls arecompletely covered in plaster, then sanded and smoothed. For a level 4 finish, onlythe joints are plastered, and then sanded and smoothed.[63] Mr McGunnigle said a level 4 finish is generally understood in the buildingand painting trades to be the commonly accepted level of finish for most dwellings. Alevel 5 finish is generally specified where the design of the dwelling is such thatglancing light is prevalent or where gloss or semi-gloss paints are being used.[64] The relevant standard, AS/NZS2589:2017, states:Level 5 shall be used where gloss or semi-gloss paints are used or wherecritical lighting conditions occur on flat, matt or low sheen paints.A level 5 finish is characterized [sic] by a parity of texture and porosity. Thesurface texture shall be random in fashion and monolithic, concealing jointsand fixing points.A paint or plaster material shall then be sprayed, rolled or trowelled over thedefined area.The original build[65] The contract for the original build was for a level 4 finish except for the entryand stairwell which were to be level 5. The contract also provided that the painter wasto "inspect and satisfy himself that all surfaces to be painted, varnished, etc., shall besuitable for a first clash finish". Mr McGunnigle said that this would be understoodto mean that the job should be done to standard of best practice to achieve the level offinish that has been specified.[66] Mr O'Neil's evidence was that in the course of the build the finish wasupgraded. He said a level 5 finish for the stopping and internal plastering wasachieved. He was questioned about this and said:Q. And obviously as you – the entry and stairwell was an area that youwanted to have as a better finish, correct?A. Yes that's right.Q. And –A. It was more about cost actually, because you know, I want the bestfinish everywhere, but to do it – in fact, later on as I said, when I readout, we changed our mind on it because when you get into a build,like everybody, you spend more money. So, you know, initially whenwe were doing the drawings we are just trying to watch our – watchthe cost, you know, level 5 everywhere is quite expensive, but onceyou get into the build and it's looking fabulous and you're caught upin the emotion of it, yeah, you upgrade things.Q. So did you issue a variation to the contract to change it from level 4to level 5?A. No – verbally yeah. Paul – it's a long time ago, but I told Paul and Ithink Noel Barnes to – it will be a conversation we had where theywere pointing out other areas. I said, "Well just do the whole thinglevel 5," it was verbal. And actually to be honest, I don't think thecost was that – was as much as I thought it was going to be.[67] Similarly, in a letter sent to Mr and Mrs Bruce on 3 July 2018, Mr Lally said:In 2006 Broomfield Quality Stoppers sub-contracted to D.J Hewitt Builders.Our line of work is interior plastering. The house was a Darren O'Neilarchitects own home. We produced a top-quality finish, to get this finish wehad to do a level 5 finish. When the house was completed it looked fantastic.[68] Mr Lally clarified this in his evidence. He produced a level 5 finish in criticallight areas. This included the entrance way and the stairwell. Elsewhere he carriedout a level 4 finish but to a high standard. This involved putting the plaster morewidely over the joints and putting more work in the sanding and smoothing.[69] Mr Wilson and Mr McKenzie's evidence was that Mr Lally had achieved forthe painters a level 5 finish in certain areas and what they described as a "Level 4 plusfinish". By this they meant it was better than a level 4 finish. It was a "grade 4 plaster,but to a very high standard within that grade".[70] The painting was finished to the same standard. Mr Wilson said they "wereasked to achieve the best possible finish" and they "took extra steps to ensure the finishwas as near perfect as possible". Mr McKenzie said:After this process, walls will always have fine scratches and imperfectionsthat cannot be seen until the wall is painted. We then painted the wall with athick grade 5 paint, which covers the scratches. It essentially builds up a thicklayer of paint. We then sand the wall down by hand and plaster over anyimperfections. Then we put another under coat over the plaster, and two topcoats.There may be other marks that become apparent, which we would deal withas we go. We always deal with these when we aim to achieve a high levelfinish, as we did here.We carried out the process as I described above because we were asked toproduce the best possible finish at this job by DJ Hewitt Builders.[71] Mr Barnes said he recalled the plasterers and painters putting on a level 5 finishreflecting the owner's requirements and DJ Hewitt's desire to build an award winninghome. He considered the finish had met his and Mr O'Neil's expectations.[72] In summary, both the plastering and the painting was to a level 5 finish incritical light areas (which included the entranceway and stairwell) and elsewhere itwas to a high level 4 finish.The repairs[73] The building contract for the repairs provided for a level 4 finish throughout.Generally all workmanship was to be "a first class finish". There were no additionalstipulations for the painter about achieving this as there were in the contract for theoriginal build.[74] Mr Lally was asked by Mrs Bruce to look at the interior plastering because shewas not happy with it. In a letter sent to Mr and Mrs Bruce on 3 July 2018 Mr Lallysaid: I can see imperfections on the walls and ceiling, this house was notplastered to the standard we left it in 2006. The house will need a level 5finish again.[75] He elaborated in his evidence. He said you can determine the level of finish ifyou spend half a day at a house and can see the different light changes. He said: but the time I spent there which wasn't very long and I could see where thelight was hitting off and you could see the difference between the plaster boardfinish and the plastered finish And I could see areas when the light did hitacross it wasn't a level 5 And that was in areas we definitely would've donea level 5. [QAnd what about generally in other areas Did you notice what it was?]Yeah, yeah we could notice it wasn't our standard, yes You could see thatslight mount in the joints and I could see them in like two minutes Iwouldn't like it in my house.[76] Mr Lally said it would be good enough for a lot of people. But this was anarchitectural house, not a standard subdivision house, and the standard was not anarchitectural finish. He accepted it might have met a level 4 finish under the NewZealand specifications and standards but "it wasn't my standard level 4 finish".[77] Greytone's view, as set out in a letter dated 16 August 2016, was that the finishon site was a Level 4 finish and was not the finish achieved in 2006. Similarly,Mr O'Neil said the finish he viewed on site post-repair was to a lesser standard thanwas achieved on the original build.[78] Mr Sturman said:The level of finish of JTB's remedial works is inferior to the pre earthquakedamaged finish and when it was new. It is currently level 4 at most, where theas new when built finish was level 5.This is not only a level of finish issue; it is also a paint specification and qualityof paint finish[79] Mr Sturman went on to refer to the kind of paint originally used. However,Mr McGunnigle said this was not correct according to the specifications. It is notnecessary to discuss the detail of this.[80] Mr Freeman's August 2017 report said:The standard of plaster and painting finish to the interior walls of the house.This is of an inferior quality that does not achieve what we would expect wasspecified in a house of this standard which would generally be an F5 paintfinish as a minimum.The remedy[81] Greytone provided its view of the work necessary to repair the walls to achievethe finish of the original build:4. For Greytone Painters and Decorators to undertake the remedial workwe would require the re-sanding of all walls & ceilings,sanding/stripping of all the architraves to apply a [sic];✓ All ceilings & walls need to be sanded, filled where necessary,sealed and have two coats of the appropriate ceiling paint andwall paint. (this will cover the wet areas as well)✓ All trims and doors to be sanded, filled & sealed wherenecessary, then apply 1 coat of alkyd undercoat then 1 coat ofLustaglo enamel. The reason why we prefer this option is thatit is harder wearing and provides a smoother more superiorfinish.5. The project has a reasonably high degree of difficulty to get thisproject back to the standard it once was. This project will require fourof my qualified staff members working full time for up to 4 – 5 weeks.We recommend that the homeowners move out of the home for thatperiod of time such that we get a good clear run at the project and thefumes do not affect the owners.[82] Mr Sturman said the finishing and level of finish needs to be brought up to aGold Award House of the Year standard.[83] Mr McGunnigle's evidence was:Some remedial works are needed to bring certain areas of the house to a level5 finish (if that was the standard required) These works need not disruptthe use of the house if carried out properly and carefully.However, to achieve a level 4 finish (except in the stairwell/entry), if that wasthe standard required, the work needed would be considerably less,comprising work to repair Kitchen wall 1 which has some nail pops,depressions and paint flecks on the surface, and upper level hallway 3, whichneeds visible making good for air conditioning services. All other walls andceilings meet or exceed the requirements for a level 4 finish.[84] Mr McGunnigle carried out a careful ceiling by ceiling and wall by wallinspection. He used a bright torch to scan the surface with glancing light to revealimperfections and allow detailed inspection. To achieve a level 4 everywhere exceptlevel 5 in the entry and stairwell, his conclusions were:In general the finish on the walls and ceilings in the upper floor, is currentlylevel 5. This is a superior level of finish to a level 4 and it would not makesense to do any work to make the ceilings a level 4 finish. In the upper levelhallway wall 3, visible making good for air conditioning services is requiredto achieve a level 4 finish.For the lower floor the ceilings were left in place, except for bedroom 4 andthe kitchen which were replaced to provide bracing. Annexure A to my brief,sets out that the ceilings have a level 5 finish on the lower floor includingbedroom 4 and the kitchen. Certain work is required to repair the kitchen wall1 which has some nail pops, depressions and paint flecks on surface. All otherwalls and ceilings on the lower floor meet or exceed the requirements for alevel 4 finish.The ceilings to the entry and stairwell are to a level 5 finish and do not requireany remedial work. The walls to the entry and stairwell including the centralwall adjacent the stairs exhibits blemishes which must be rectified to achievea level 5 finish. All the walls to the entry and stairwell require remediation inthe form of preparation, sanding down and repainting to achieve a level 5finish.[85] If a level 5 finish was required everywhere, Mr McGunnigle's conclusionswere:Lower floor:(a) Laundry: (no remediation required);(b) Entrance: all the walls require remediation (the ceiling does not requireremediation);(c) Hallway: the walls require remediation (the ceiling does not requireremediation);(d) Lounge: remedial work is required to the wall of the chimney breast(none of the other walls or the ceiling require remediation);(e) Dining room: one of the walls requires remediation (none of the otherwalls do);(f) Kitchen: one wall requires remediation (none of the other walls or theceilings require any remedial work);(g) Bedroom 4: (no remedial work is required to the walls or ceilings);(h) Bathroom ensuite to bedroom 4: (no remedial work required to thewalls or ceiling);(i) Scullery: (no remedial work required to the walls or ceiling);(j) WC near entrance: (no remedial work required because it iswallpapered); and(k) Garage: (no remedial work).Upper floor:(l) Hallway: two long walls require remediation (none of the other wallsor ceiling require this);(m) Bedroom 1: two walls require remediation (none of the other walls orceiling require this);(n) Dressing room off bedroom 1: (no remediation required);(o) Ensuite to bedroom 1: two walls require remediation (none of the otherwalls or ceiling require remediation);(p) Bedroom 2: one surface blemish requires remediation;(q) Bedroom 3: one wall requires remediation (none of the other walls orceiling require remediation);(r) WC near bedroom 3: (no remediation required); and(s) Bathroom: (no remediation required).[86] The walls and ceilings on the first floor were not removed. Mr McGunniglerefers to a number of rooms or walls that have glancing light other than the stairwelland entrance. His evidence that a number of walls and ceilings apart from the stairwelland entrance are already level 5 confirms the evidence of Mr O'Neil, Mr Lally and thepainters that a high standard was achieved for the original build. This is consistentalso with the evidence that the internal walls on the upper floor were left intact duringthe remediation work and therefore do not require further remediation to bring up tothe "as when new" standard of the insurance policy.Submissions[87] IAG submits the relevant comparison is as between the specifications for theoriginal build and the repair work as completed. It would be unreasonable to requireIAG to carry out the repairs to the "Level 4 plus" standard described by the witnesses.IAG could not be expected to know this was the standard without tracking down thoseoriginally involved in the work. Further, such a standard is not capable of cleardetermination.[88] IAG therefore says its obligation was to achieve a level 4 finish to all theinterior walls and ceilings, except the entrance and stairwell which was to be level 5.It accepts Hawkins should have scoped the entrance and stairwell to a level 5 finish.It will meet the cost of bringing this area up to a level 5 finish. For the balance of thework, it submits the work outlined by Mr McGunnigle at [84] above is what isrequired. IAG notes there was no serious challenge to this evidence and he was theonly one to carry out a detailed assessment.[89] The Bruces submit the relevant comparison is as between the house as it waswhen it was originally built ("as when new") and as it is now after the repairs by JTBwere completed. They say the evidence shows there was a level 5 finish in the hallwayand stairwell and other critical light areas and the rest was at the top end of a level 4standard.[90] The Bruces submit this is an architectural home, not a standard or massproduced home. Quality was important. The insurance policy required the house tobe repaired to the same condition as when it was new. That standard is easilyascertainable with reference to those involved in the original build. Their evidence isthat this standard has not been achieved. It submits the repair scope is that as providedby Greytone.My assessment[91] I accept the relevant comparison is as between the house as it was when it wasbuilt and taken possession of by the O'Neils in 2006 and as it is now after the repairsby JTB were completed. That is what the policy provides. It is a question of evidenceto establish the finish of the house when it was new.[92] Absent any other evidence, the specifications might provide the most reliableevidence of the internal finish. However, there is other reliable evidence before theCourt about the level of finish as it was when new. The architectural designer andoriginal owner of the house, the builder, the plasterer and the painters were allavailable to give evidence about what actually occurred on site. I reject IAG'ssubmission that it could not be expected to know about this without tracking downthose originally involved because the Bruces actively pushed for this and IAG in factattempted to bring them on board, as discussed above. Additionally, some of the wallsand ceilings remained intact when the house was lifted and then repositioned. Thereis expert evidence from Mr McGunnigle about the level of finish of these walls andceilings.[93] The finish of the house as originally built varied from the specificationsbecause Mr O'Neil decided he wanted a higher finish than he had specified in thecontract; Mr Lally carried out a Level 5 finish to critical light areas and carried out therest of the plastering to a higher standard than is required for a level 4 finish; Mr Lally'shigh standard enabled the painters to carry out their work to a high standard; and thepainters took extra steps to ensure the best possible finish.[94] This is confirmed by Mr McGunnigle's evidence about the level of remediationrequired if a level 5 finish is to be achieved throughout. His evidence is that in mostrooms only some or no remediation is required because the walls and ceiling arealready at a level 5 finish in critical light areas. His evidence confirms that the finishachieved on the original build was above a standard level 4 – he regards it as a level 5finish in many areas, which is consistent with the excellent work Mr Lally and thepainters carried out.[95] I consider IAG is required to remediate the walls and ceilings in accordancewith Mr McGunnigle's evidence at [85]. Mr McGunnigle has carried out a detailedassessment of the remediation work to achieve a level 4 plus/level 5 finish. Incomparison, Greytone has said all walls and ceilings need to be remediated. I preferMr McGunnigle's evidence because it is more specific and he has explained thedetailed way he went about making his assessment.Wall verticalitiesThe standard[96] The relevant standard is NZS3604:2011. This sets out the constructiontolerances for timber framed internal walls. The permitted deviation from vertical is15 mm per two storey height and 5 mm per 2.4 m. The deviation from horizontal isany length up to 10 m is 5 mm, and in any length over 10 m is 10 mm total.The original build[97] As set out above, Mr O'Neil's evidence was that "[w]hen we built the housethe walls were perfectly vertical" and "everything lined up – every architrave, everyshadow line was perfect".16 He acknowledged this was based on his visual assessmentrather than a survey, but also said he had a good eye for detail.[98] Mr Barnes said:The framing of the walls were also routinely measured throughout theconstruction. Having square and level framing that we would have the beststructure to achieve the best level of finish. There is no doubt in my mindthat the floors and walls were originally built to the industry standard beingboth plumb and level.The repairs[99] Mr O'Neil visited the house in 2016 for about two hours. He was not told ofany specific defects that he was to look for. He saw there were defects but did notdelve deeper because he was not really interested in being involved. He said:16 At [11] above.I did notice in the lounge the doors were out of alignment, you know, thearchitrave was out of alignment to the wall so I did notice that. I didn't, I didn't– nobody told me about the walls or the floor so I wasn't going there lookingfor that but I did notice the architrave was slightly off.[100] Mr Freeman's report dated 11 August 2017 identified the wall verticalities asan issue.17 His report included the following:The following structural items were noted from our review of the informationalong with what was noted from our inspection on site:• The timber framed walls of the house are not plumb. This is supportedby both the survey information and the door function within the house,particularly on the sliding doors between the lounge and living areas.• The verticality of the timber frames [sic] walls do not meet thetolerance requirements of the standards NZS3604:2011, which applyto this type of structure.• The out-of-vertical walls have induced a permanent racking into theadjoining walls leaving windows and fittings out-of-square.• The floor slab is out of level by up to 40mm from the highest point tothe lowest point and has significant variation within rooms.• The levels of the newly placed slab and foundation do not meet thetolerances of the building standard NZS3109:1997 or NZS3114:1987,which apply to this type of structure.The repairs to the property have had a detrimental effect on the originalstructure of the house. The new foundations and timber framed walls do notmeet the New Zealand Building Code in terms of the construction tolerancesrequired in the individual Standards. Amending these deficiencies will requiremajor disruptive work on the site effectively repeating the scope of work thathas already been undertaken to adequately rectify.[101] Mr Lanyon is an engineer with 45 years' experience. Using the profilescomplied by Richard Graham (IAG's cadastral surveyor), he said that most walls arewithin tolerance particularly on the first floor. He accepted that across profiles 5, 6,8, 9 and 10 there were areas that exceeded the tolerances. Specifically:17 Mr Freeman provided another report for Mr and Mrs Bruce dated 27 October 2017. In this reportMr Freeman noted that IAG's expert agreed that the verticality limits in the standard had not beencomplied with.(a) Profile 5 (inside kitchen/dining, looking east): there are horizontaldeviations of 8 mm and 13 mm below bedroom 1. These were therefore3 mm and 8 mm respectively outside the tolerance in the standard.(b) Profile 6 (inside north dining and lounge, looking north): there arevertical deviations of 8 mm, 6 mm, and another of 8 mm along theground floor wall. These were therefore 3 mm, 2 mm and 3 mm outsidethe tolerance in the standard.(c) Profile 10 (inside kitchen/dining and lounge, looking south at hallway):there is a vertical deviation of 7 mm on the ground floor below theBedroom 2 ensuite. This was therefore 2 mm outside the tolerance inthe standard.(d) Profile 8 (a two storey profile inside the entrance, looking south atstairs/laundry): this complies with the 15 mm per two storey heightvertical tolerance. There are localised areas that breach the 5 mmvertical and horizontal tolerances: a 12 mm (high) spot at the bottom ofthe laundry door and a 10 mm (depression) at the top right corner of theprofile.(e) Profile 9 (a two story profile inside the entrance, looking west at thefront door): this complies with the 15 mm per two storey height verticaltolerance. There are a number of minor breaches of the 5 mmhorizontal tolerance, with the wall having high spots ranging between6 mm to 8 mm.[102] Mr Sturman noted that the wall verticalities are greater than 3 mm outside thestandard tolerance in 16 of the 25 locations surveyed by Scott Williams (the Bruces'cadastral surveyor). Mr Sturman sought to add to this in his oral evidence by statingthere were five walls he could see that had verticality issues within five minutes ofinspecting the house for the first time. However these walls were not part ofMr Graham's or Mr Williams' survey and the manner in which they were raised didnot enable IAG to respond to them. I therefore do not place any weight on this aspectof Mr Sturman's evidence.Fault of repairs?[103] Mr Lanyon expressed the view that these breaches are likely to be pre-existingrather than a result of the repair work. He considered the bracing used made it veryunlikely that the walls had moved. If they had moved he would have expected thewalls to have been damaged. He considered the uneven floor has not caused wallverticality issues because there is no consistency in the direction the walls lean as hewould have expected if this was the case.[104] Mr Sturman considered the wall verticality issue occurred during the repair.He considered it was possible that moisture got into the frames when it was exposedand then when it dried it bent and bowed. He accepted the house was wrapped inbuilding paper when it was lifted and an competent builder ought to notice issues ifthe timber framing was affected by moisture. He also considered the uneven concreteslab was a cause of the walls deviating from the verticality standard.[105] Mr Freeman considered the verticality issues were caused partly by the unevenfloor slab but primarily because of poor construction during the repairs.Structural and functional performance[106] Mr Lanyon's expert opinion was that the exceedances of the standard have noimpact on the structural or functional performance of the house required under theBuilding Code.[107] He said the exceedances from the standard do not affect the structural orfunctioning integrity of the walls themselves. Further, the standard is an "acceptablesolution". That is, compliance with the standards provides a means of evidencingcompliance with the Building Code.18 However it is also possible to build a housethat does not comply with the "acceptable solution" of the standards but nonethelessto demonstrate compliance with the Code in another way. A structural engineer can18 See "Outcome Statement" in NZ3604:2011.be engaged to provide an expert assessment of the building against the performancecriteria of the Code. He had carried out such an assessment and provided hiscalculations in support of his assessment.[108] His conclusion was: the walls of the house meet the functional and performance requirementsof the Code. They are no more likely to rupture become unstable, loseequilibrium or collapse than walls strictly falling within tolerances of therelevant New Zealand Standards.[109] Mr Freeman's view was that the standards are the verification method formeeting the Code. He accepted this was one verification method and "unless you'representing an alternative method of complying with the Building Code that is theaccepted path". He accepted that the particular deviations from the standard in thiscase did not give rise to a structural issue. The house was not going to fall down, lifewas not going to be put at risk, and it was going to survive a ULS or SLS event.19 Heconsidered, however, that it had not been proven that the Building Code was compliedwith in this case. His evidence on this included:Q Is it something that you noticed?A The wall alignments, no I didn't.Q Well these walls with that deviation isn't going to cause a structuralfailure is it?A No it's not.Q So the question is, it's not a structural issue. The walls are sound, thehouse is not going to fall down, life isn't going to be put at risk. It isgoing to survive a ULS or SLS event?A Correct.Q And again, on that profile there's not an amenity issue either is there?A No.19 Serviceability Limit State (SLS) represents a level of stress or strain below which there is a highexpectation the building can continue to be used as originally intended without requiringsubstantial structural repair. Ultimate Limit State (ULS) is the limit state where buildings areexpected to be severely damaged, but not collapse (that is, not cause severe injury or death tooccupants).[110] Mr Freeman considered that Mr Lanyon's calculations did not take intoaccount the combinations due to gravity and wind or earthquake loads as required byNZS1170 and hence did not provide a true reflection of the suitability of the timberframing. He did not carry out his own calculations.Aesthetics[111] Mr Freeman agreed the wall verticality issue was not an "amenity" issue underthe Code. He accepted it did not prevent the enjoyment or use of the space. He saidthat, whether it was perceptible, depended on who was looking at it. He personallyhad not noticed the wall alignments as an issue.[112] Mr Lanyon said the exceedances "are not visible to the naked eye".[113] Mr McGunnigle said:In my view the amounts by which the walls are out of plumb is not visuallyperceivable. Because it cannot be perceived, the minor extent to which somewalls are not exactly plumb does not affect the visual character, use or amenityof the room spaces in any way. To repair this would involve straightening thewalls by amounts that are not visually noticeable and then would not achieveany benefit for the user.The remedy[114] Mr Freeman considered the verticality of the walls could be addressed whenthe timber structure was reconnected to the floor slab in the process of the floor slaband foundations being replaced. This evidence was premised on his view that the floorslab needed to be replaced.[115] Mr Sturman's written brief said:The high lift repair methodology has clearly failed. The floors are not leveland the walls are out of vertical. IAG and its consultants have miscalculatedthe appropriate remedial solution for the house evidenced by the resultantslab/floor levels and the framing having wracked to the extent it has. Again,because of these factors, it is my opinion the only logical method is to rebuildthe house from scratch in order to avoid another failed repair. In my opinion,the damage is too extensive for the house to be repaired.[116] In cross examination he said he had "softened a little bit" on his position thatthe house should be completely demolished and rebuilt. He proposed a method forstraightening the walls. However, he also said: the downstairs framing had lost its memory because for eight years from2010 to now it's been out of verticality, so the process in straightening thatframe becomes a tenuous exercise.[117] He agreed he had not done a wall by wall analysis as Mr McGunnigle had done.[118] Mr Lanyon considered it was not necessary to do any remedial work to thewalls. However, if it was necessary to rectify them so that they met the tolerances inthe standard, this would involve removing the internal wall linings on the affectedwalls on Profile 5, 6, 8, 9 and 10, packing out the wall framing and reattaching (orreplacing) each lining. The walls would then be repainted. On profile 8 a skim coatcould be applied to the local depression in the lining.[119] Mr McGunnigle considered that to bring the walls within the standard wouldrequire "significant" work involving the removal of the linings, packing out of thetimber frame to give a vertical surface, relining the walls, skim coating and repainting.He considered "nothing would be achieved" by this "because there is no visuallyperceptible deficiency." He added:It should be appreciated that this is not a new building with a new timberframe. The timber frame is about 14 years old. The existing timber frame wasunlikely to be perfect when built in 2004, it is not perfect now and cannot bemade perfect in a practical way. Nor is there any need for it to be made perfectbecause the areas of out of plumb wall linings are not visually apparent.Unless there are structural reasons otherwise, a rebuild is simply notnecessary.Submissions[120] The issue of whether the walls were "racked" was covered at the hearing.However there was some uncertainty about what that meant and to which walls itapplied. The evidence for Mr and Mrs Bruce on this topic lacked detail. In closingsubmissions it was not pursued.[121] IAG submits Mr and Mrs Bruce have not proven the walls are defectivebecause of the verticality issues. That is because there is no structural, aesthetic oramenity issue with them. Even if the Court concluded IAG had breached itsobligations under the policy, it would be unreasonable to replace the walls. It submitsthat the issue is whether there is any impact on market value because of the verticalityissues and the answer must be "no" because they are imperceptible.[122] Mr and Mrs Bruce submit the walls were perfectly vertical when new. Strictlythat means they should be straightened so that they have a zero mm lean. The wallframing should be replaced.My assessment[123] The wall verticalities are not as good as they were when the house wasoriginally built. The consistent evidence from those involved in the original build wasthat the work on the original build was carried out with particular care and attentionwith a high-quality outcome. I accept Mr Barnes' evidence that the walls wereroutinely measured to ensure the best structure and finish. I accept Mr O'Neil'sevidence that he has a good eye for detail and the workmanship was, essentially,flawless. The gold award was confirmation of that. That does not mean that all thewalls were at zero mm. But any variations from that would have been minor andwithin the standard.[124] That sort of care and attention did not take place with the repair. That is evidentfrom the lengthy list of defects following handover as confirmed by the experts eachside engaged. The particular process by which the repairs were undertaken meant thatthe lower floor frames were unattached from the foundations and suspended above theground. Once the foundations were repaired, the timber frames needed to be loweredand reattached to the slab. The work schedule indicates that some straightening wasnecessary as part of this process. The perhaps not surprising result was that internalwalls on the ground floor were no longer as straight as they had been before.[125] Wall verticalities have structural performance and functional, amenity andaesthetic elements. I accept Mr Lanyon's evidence, essentially confirmed byMr Freeman, that there are no structural, functional or amenity issues with the wallseven though they do not comply with the standard in a number of instances. Howeverthe variations from the standard are small. At most they are possibly visible to a verytrained and fine eye. Otherwise they are imperceptible. Therefore any aesthetic issueis at best very minor.[126] I accept Mr McGunnigle's evidence that endeavouring to straighten the wallsnow is not a reasonable response when no real benefit would be achieved from it.Mr Sturman also acknowledged the difficulty of this because of the timber's age andthe processes it had already been through. Far less is it a reasonable response todemolish the house and start again because the wall verticalities exceed the standardby small amounts in a number of places.[127] It was likely never going to be possible to have the walls as straight as theywere when the house was originally constructed. The timber frames were older andwere suspended and braced while the foundations and concrete slab were rebuilt. Thestandard required was to repair the walls as close as is reasonably possible to thatcondition. But for the house's gold award winning standard and the importance ofsuch high quality workmanship to the Bruces (and potential subsequent purchasers), Iconsider there would be no breach to the insurer's obligations on this matter.[128] The damages question is not for determination at this stage. However I suggestthe parties might be able to resolve this issue by considering whether there is anydiminution in market value because of the wall verticality issue. If not, they mightconsider whether a small loss of amenity payment might be appropriate to reflect thefact that the walls exceed the standard in some places, albeit that this is not perceptible,and this partly reflects a lesser standard of workmanship than there was for the originalbuild.20 Loss of amenity damages are discussed below under "General damages". If20 Jeremy Finn, Stephen Todd and Matthew Barber Burrows Finn and Todd on the Law of Contractin New Zealand (6th ed, LexisNexis NZ, Wellington, 2018) at 821 states: "The cost to the plaintiffwho has lost the benefit of a bargain may be measured in at least three different ways – thedifference in value between what was promised and what was supplied, the cost of curing thebreach, and, sometimes, the loss of amenity caused by the breach The choice between damagesbased on difference in value and on cost of cure has arisen frequently in the context of disputesabout the quality of work done on goods or buildings. The courts take a pragmatic attitude andadopt whichever seems appropriate. The choice ultimately is based upon considerations ofreasonableness ". See, also, E Peel Treitel The Law of Contract (11th ed, Sweet & Maxwell,London, 2015) at [20-037]-[20-046].the parties cannot resolve the matter on this basis, it will need to be considered by theCourt. Of course, at that time the Court will have the benefit of submissions on theappropriate measure of damages (if any) and evidence as to quantum and will considerthose issues afresh.Floor levelsThe standard[129] The relevant standards are NZS3109:1997 and NZS3114:1987. The expertsare not agreed about what they require in this case.[130] Mr Freeman considered the relevant part of the 1987 standard to be "Profile,Position, Position on plan or in elevation (distance to the nearest reference line)". Thisallows a tolerance of +/- 10 mm from the nearest reference line, in this case being thereduced level of the floor slab.[131] Mr Lanyon considered the 1987 standard specifies that there cannot be anyabrupt deviations for thin sheet tiles and carpet. It sets out tolerances for abrupt andgradual deviations for a U3 finish. A gradual deviation is measured over a 3 m lengthand an abrupt deviation is measured over a 200 mm length. Depending on the floorsurface, the gradual deviation tolerance is 3 mm or 5 mm. The abrupt deviation forexposed concrete is 3 mm.[132] The difference in view ultimately does not matter because the floor levels areoutside the tolerances and it is not clear that any reasonable remedial work will achievefloor levels within the tolerance. Further, Mr Lanyon accepts that typically, whenpouring the floor slab, builders will follow a BRANZ publication. This provides forthe concrete slab to be within +/- 10 mm in one room or space and a maximum of+/-3 mm in any 3 m of length; and for finished suspended timber floors to be levelwithin +/- 10 mm within a single room or space; and individual sheets or boards thatare flat and straight to within +/- 6 mm for every 3 m of length.The original build[133] Mr Barnes said the original construction of the slab was built to a highstandard. DJ Hewitt supervised and coordinated the concrete subcontractor who laidthe concrete slab. Both the foundation and the floor slab were engineered. He saidthe laying of the slab "was measured and monitored routinely using a laser level."There was no doubt in his mind that the floor was level.The repairs[134] Mr Graham carried out a laser scan survey of the ground floor and garagelevels. His survey was largely consistent with an earlier survey that Mr Williams hadcompleted for Mr and Mrs Bruce, on which Mr Freeman had relied when providinghis August 2017 report. There are depressions and high spots in the garage andthroughout the ground floor of the house.[135] Mr Freeman's August 2017 report said:The floor slab is out of level by up to 40mm from the highest point to thelowest point and has significant variation within rooms.The levels of the newly placed slab and foundation do not meet the tolerancesof the building standard NZS3109:1997 or NZS3114:1987, which apply tothis type of structure.[136] This difference of 40 mm is across the garage and the internal floor of thehouse. Mr Freeman considered this was the appropriate differential because the garageis attached to the house and they share the same concrete slab.[137] Mr Lanyon's view was that this was not the appropriate comparison. Althoughthe garage and the house sit on one concrete slab, they are separate structures andperform different functions. He considered the appropriate levels comparison was a24 mm difference between the highest and lowest points on the ground floor and a28 mm difference between the highest and lowest points on the garage floor. Heaccepted they exceed the 1987 tolerances. While he accepted this, he also said thatthe floor levels comply with the relevant standard necessary for the structuralcomponents on the house to align properly. Mr Lanyon further said that all the roomsor spaces are within the +/- 10 mm tolerance within a single room or space, except thegarage which is a non-habitable space.[138] Mr Lanyon said the rationale for the standards was to ensure a quality finish.Unlevel floors, particularly abrupt ones, will affect the floor coverings themselves andthe amenity for the user. For example, a user might feel a depression under their feet,floor coverings might squeak, feel springy or possibly break (eg if the coverings aretiles). His view was that the measured levels did not affect the building's structuralperformance and function. He was not able to see or feel any issues with the floorlevels during his site visits. He therefore considered they were not affecting theamenity or aesthetics of the house.[139] Mr McGunnigle considered the variance in floor levels was not discerniblewhen he walked across the spaces. Because of this, he considered the amenity of theroom spaces and the garage is not affected by the amounts by which the floors are notexactly level. While, for example, levels can matter in a bathroom or a kitchen becausepooled water can become a slip hazard or accumulate and cause damage, it was hisview that there were no significant level issues in rooms which could lead to damageor affect amenity.[140] Mr Graham felt a noticeable variance in the slope in the lounge and diningrooms – he could feel the depressions as he walked over them.[141] Mrs Bruce gave evidence of water running off the benches in the kitchen andit being necessary to put pieces of cardboard under furniture because of the unevenfloors. The evidence was somewhat vague. The evidence about the water was notsupported by, for example, any photographs produced at the hearing and no detailswere provided about how often this occurred or in what circumstances. No detailswere provided of which furniture needed cardboard nor whether this matched withareas of unevenness as surveyed. I therefore give this evidence no weight. I acceptmore generally that the unevenness is perceptible to some and consequently will becausing some loss of use or enjoyment of the place.[142] Mrs Bruce also said she stubbed her toe because of the difference in levelbetween the garage and the rest of the house. However this either has been or can befixed at the internal entry between the garage and the house.The remedy[143] Mr Freeman considered there were three possible ways to address the unevensurface: applying a floor levelling compound; lifting up the house and pouring aconcrete screed on top of the existing floor level; or repeating the repair processundertaken by JTB. He considered there were problems with the first two of these,leaving the third and remaining option of rebuilding the concrete slab (and retainingany existing piles that were undamaged). He considered grinding was not asatisfactory option because of concerns about whether it would affect the long termdurability and performance of the slab if the grinding was too deep. He considered itwas not known where the mesh was placed and how it lay.[144] Mr Sturman originally gave evidence that the house needed to be demolishedand the house rebuilt to rectify the uneven floors. As noted earlier, that is no longerhis view. However it remains his view that the uneven floors have not returned thehouse to the "gold award" standard it was when it was originally built.[145] Mr Lanyon considered remedial work was not necessary to correct the floorlevels. However, if the Court found that remedial work was to be carried out, it washis view that this could be done by removing the floor coverings and, in the affectedareas, either grinding down the high spot (the blue areas of Mr Graham's survey in thedining room and kitchen) or applying a levelling compound to the low spot (in thehallway, and a maximum of 12 mm to the lounge). The floor covering would then bereattached. He considered this to be a common approach to remediating floor levels.[146] Mr McGunnigle considered remedial work was not necessary to correct thefloor levels. However, if the Court found that remedial work was to be carried out, herecommended this be restricted to the garage. He considered the garage carpet couldbe removed, the surface "scabbled off" to a depth of about 15 mm and then 3 mm thickfloor levelling compound applied to provide a smooth surface about 12 mm lower thanthe existing high points which would give an overall floor variance of about 34 mm.21This work would take a few hours at most. If the work was not restricted to the garage,he considered the work should involve taking up the carpet in the lounge and applyinga floor-levelling compound over the existing concrete surface and re-laying the carpet,and this would provide an "adequate" solution.The squeaky floorboards[147] Mrs Bruce gave evidence that the floors creak. Mr Honeybone, an experiencedbuilder, gave evidence about this. He inspected the property and concluded that thewooden floors appeared to be laid correctly and met all industry standards. He gavethree possible causes for squeaky floorboards, one of which was that the concrete floorunder the flooring was not true and level. He noticed the floorboards squeaked in oneor two places around the house. While this was not "major", if this occurred in hisown house he would sort it out.The submissions[148] The Bruces submit, with the floor level across the ground floor now at 46 mmwith eight areas of slopes over 0.5 percent, it exceeds the New Zealand standardtolerances and the MBIE Guidance thresholds. They submit the differentials andslopes affect living in the house. They compare the floor level differential with thepost-earthquake floor settlement of 38 mm which resulted in IAG's decision to replacethe entire concrete slab. They say this is the only solution now. Grinding could impactupon the performance of the slab and is not a relevelling method in the MBIEGuidance.[149] IAG submits the MBIE Guidance is irrelevant. That document providesguidelines developed in response to the Canterbury earthquakes to assist engineers inassessing whether or not foundations required replacement or could be re-levelleddepending on the extent to which slabs/foundations had "settled" into the land. IAGsubmits the floor level complies with the Building Code. It is structurally sound andthere is no amenity issue in terms of something which interferes with the health,21 Scabbling is a different process to grinding.physical independence or well-being of the building's users. IAG therefore submitsthere is no defect which requires remediation.My assessment[150] I consider the floor levels have not been repaired to "as when new". Thoughthis does not give rise to structural issues, they are outside the standard and theBRANZ publication. This is perceptible to some who walk over the floor but not toothers. It may be causing floor boards to creak. More generally, the unevennessaffects the Bruces' enjoyment of the house. This is a loss of amenity in the generalsense (as compared with the narrower meaning in the Building Code).[151] In my view, this loss of amenity should primarily be assessed separately for thegarage and the rest of the house. These spaces serve different functions. While it mayhave been nice to have had the house and garage all at one level (as it was when new),the step down from one to the other can be addressed. Both the garage and the househave unlevel surfaces and, if there is a reasonable way to address this not involvingdemolishing the concrete slab and starting again, and not impacting on its structuralintegrity, the Bruces are entitled to that.[152] I do not accept the Bruces' submission that the concrete slab must be replacedin reliance on the MBIE Guidance. I agree with IAG that this mis-uses the guidanceprovided in that document. That is about settlement into the land post-earthquake. Itis not about floor levels that are uneven when built. As to that, the New Zealandstandard, the BRANZ publication and the Building Code are relevant.[153] It is unclear on the evidence if there is a reasonable and workable remedialsolution to this issue. That is because it is unclear if grinding (or scabbling) and fillingwill, if taken too far, begin to affect the integrity of the concrete slab. I acceptMr Freeman's evidence that this is possible because the exact placement of the meshis not known. I acknowledge the evidence produced by IAG to show how the slabwas constructed. But absent measurements or other more direct evidence from thoseinvolved about what actually occurred, Mr Freeman must be right that the exactplacement of the mesh is not clear.[154] I suggest the parties consider whether they can agree if it would be worthwhileto grind some of the areas and/or fill others and fix any creaking floor boards in orderto improve the floor levels to some degree. To the extent that they remain outside thetolerances of the standard, they could determine whether this has resulted in adiminution of value. If so, that might be an appropriate basis to assess damages. Ifthere is no diminution in value, it might be appropriate to make a small loss of amenitypayment to compensate for the fact that the floors are not as level as they were "whennew".[155] If the parties do not agree that some grinding and filling is worthwhile, Isuggest the same approach. They could determine whether the floors in their presentcondition have resulted in a diminution of value. If so, that might be an appropriatebasis on which to assess damages. If there is no diminution in value, it might beappropriate to make a small loss of amenity payment to compensate for the fact thatthe floors are not as level as they were "when new".[156] If the parties are not able to reach an agreement on this basis and it is necessaryto return to the Court, the appropriate measure of damages (if any) and their quantumcan be considered afresh on the basis of the submissions and the evidence on thosematters at that time.The fireplace[157] The original house had two matching handcrafted French marble fireplaces –one upstairs and the other downstairs. The upstairs fireplace was damaged in theearthquakes, the downstairs fireplace was not. IAG has provided funds for thereplacement of the marble surround for the upstairs fireplace and there is no issueabout this. The problem is that it is no longer possible to find a replacement fireboxthat matches the downstairs fireplace. Mr and Mrs Bruce consider it is important tothe aesthetics of the house that the two fireplaces match. They contend IAG musttherefore replace both the upstairs and the downstairs fireboxes to return the house to"as when new".[158] I accept the contrary submission for IAG. IAG's obligation is to "cover suddenaccidental loss to the house". Loss is defined as "physical loss or damage". Thedownstairs fireplace has not suffered physical loss or damage. The obligation is torepair or replace to the same condition and extent as when new but, if this is notpracticable, repair or replacement is to be as close as is reasonably possible to thatcondition and extent. IAG's obligation would have been to replace the firebox withthe same as what was there when new but, because that is not possible, the obligationis to instead replace it with something that is as close as is reasonably possible to whatwas there before.[159] Further, the Bruces have not called evidence to support their view that it isimportant to the aesthetics of the house that the fireboxes, as distinct from theirsurrounds, are matching. I can understand the importance of matching surrounds, butthe firebox itself is ordinarily more about function than aesthetics. This is especiallyso when, as it seems in this case, the distinctive element of them was the surround andIAG accepted its liability to indemnify the Bruces for the cost of replacing thehandcrafted French marble surround.[160] I therefore find against the Bruces on this aspect of their claim.General damagesThe claim[161] Mr and Mrs Bruce seek general damages of $50,000 for their "substantialdistress, inconvenience and mental anguish" caused by "IAG's conduct". Theirpleading refers to IAG having breached its obligations because the building work haddefects. The conduct relied on in support of the claim for general damages is nototherwise particularised.[162] In closing submissions the claim for general damages was advanced as beingbecause of the manner of IAG and its contractors in dealings with the Bruces, IAG'sdecision to repair rather than rebuild, its failure to address the defects earlier and itsfailure to fulfil its obligations under the policy.The law[163] IAG submits general damages are not available in New Zealand for a breachof an insurance case. It says the Court of Appeal decisions in Bloxham v Robinsonand Mouat v Clark Boyce are conclusive authority on this issue.22 It says theapplicable principle is that general damages are awarded for breach of a contract onlywhere it has as its principal object the provision of pleasure or enjoyment or theamelioration of distress or vexation. It says an insurance contract is not such acontract. In support of this last point, it relies on a decision of the High Court ofEngland and Wales in Pine v DAS Legal Expenses Insurance Co Ltd which concerneda contract to provide legal expenses insurance.23[164] The Bruces say that general damages are available. They say that the generaldamages they seek are in line with "leaky home" awards. They rely on Stuart vGuardian Royal Exchange Assurance of NZ Ltd (No 2 24 and a paper written by NeilCampbell, "Claims for Damages Against Insurers in New Zealand".25 Of relevancethis paper states:26Recently there has been a move, in the general law of contract, to awarddamages for non-pecuniary losses. These losses can usefully be divided intotwo categories: physical inconvenience, and mental distress. Partly becausethe former category is more objectively identifiable, both contract law ingeneral, and insurance contract law more specifically, has been fairly ready toaward damages for physical inconvenience.By contrast, New Zealand is still deciding whether, or when, to providedamages for mental distress for breach of contract, with two positions beingadopted in the Court of Appeal. The more restrictive view, in Bloxham vRobinson, is that mental distress damages are available only where the objectof the contract is to provide pleasure, enjoyment, or freedom from distress.The alternative view, in Mouat v Clark Boyce (No 2), is that such damages arerecoverable in non-commercial contracts. For insurance contract law it maynot matter too much which of these views is adopted, because many insurancecontracts fit the "freedom from distress" criterion, though usually only in thenon-commercial sphere. Thus it is no surprise that there are many examplesof awards of mental distress damages for an insurer's breach of contract. TheCourt of Appeal, obiter, has given some approval to such awards, observing22 Bloxham v Robinson (1996) 7 TCLR 122 (CA); Mouat v Clark Boyce [1992] 2 NZLR 559 (CA)23 Pine v DAS Legal Expenses Insurance Co Ltd [2011] EWHC 658 (QB).24 Stuart v Guardian Royal Exchange Assurance of New Zealand Ltd (No 2) (1988) 5 ANZ Ins Cas75,274.25 Neil Campbell "Claims for Damages Against Insurers in New Zealand" (paper presented to NewZealand Law Association Conference, Christchurch, 2001).26 Footnotes in the text are omitted.that the "mental significance [of late payment by an insurer] may well bewithin the "reasonable contemplation" of the parties."[165] I have quoted this part of the Neil Campbell paper because I consider it tocorrectly draw the distinction between the different heads of non-pecuniary loss thatmay comprise a general damages award. As is explained in McGregor on Damages ithas long been established that "[s]ubstantial physical inconvenience and discomfortcaused by a breach of contract will entitle a claimant to damages".27 Awards havebeen made under this head for the physical inconvenience and discomfort of havingto live in a house in a defective state.28[166] As also discussed in McGregor on Damages, it was once the law that nodamages could be recovered in contract for injury to the feelings. The law hasdeveloped since then, going through a period of expansion when such awards weremade, then a downturn, followed be a re-emergence of such awards led by theimportant and influential decision of Ruxley Electronics v Forsyth.29 The learnedauthors conclude:30The above views appearing in cases at the highest level, admittedly of anobiter nature, suggest that the general rule in Addis may soon be abandonedand that, in addition, one should not adhere too closely to the somewhatlimiting test, for recovery of damages for mental distress, of whether aprincipal object of the contract is to promote enjoyment or avoid distress butsimply to apply the wider, more principled test of whether recovery for theparticular loss is within the contemplation of the contracting parties. This ishow it was put by Lord Millett: "In such cases [namely, cases of ordinarycommercial contracts]", he said in Unisys, "non-pecuniary loss such as mentalsuffering consequent on breach is not within the contemplation of the partiesand is accordingly too remote."[167] An insurance contract pursuant to which an insurer elects to reinstate adamaged home is not a purely commercial one. It is a contract subject to a duty ofgood faith. It involves a commercial party on the one side and private parties on theother. It provides an indemnity for the private parties' domestic home. When aninsurer elects to reinstate, the contract becomes a contract to repair. It is akin to a27 James Edelman (ed) McGregor on Damages (20th ed, Sweet & Maxwell, London, 2018) at[5-016]-[5-017].28 At [5-018]. See, also, Finn, Todd and Barber, above n 20, at 863.29 Ruxley Electronics v Forsyth [1996] AC 344.30 At [5-034]. See, also, Finn, Todd and Barber, above n 20, at 865-867 and the decision of theSupreme Court of Canada in Fidler v Sun Assurance Co of Canada [2006] 2 SCR 3.building contract as to which general damages for physical inconvenience anddiscomfort are available. It is foreseeable that if the insurer breaches its obligationsunder the contract, stress and mental anguish is likely to follow. It is no surprise, asNeil Campbell puts it, that there are many examples of awards of mental distressdamages for an insurer's breach of contract (despite the contrary view in Pine v DASLegal Expenses Insurance Co Limited relied on by IAG).My assessment[168] As to the insurer's handling of the claim, in evidence, Mr and Mrs Brucealleged that IAG had been dismissive of their concerns throughout. This was not borneout by the evidence. Mr and Mrs Bruce may have preferred a rebuild rather than arepair, but IAG opted for a repair based on expert advice about how the house couldbe repaired. IAG approached the claim throughout in an appropriate manner, seekingto involve Mr and Mrs Bruce in all important matters (particularly, the builder to carryout the repairs and the scope of work). When Mr and Mrs Bruce provided their "snaglist", IAG responded appropriately by instructing an expert to provide a report. Theproceedings were issued soon thereafter. In the course of the proceedings, the expertshave engaged cooperatively with each other to the point that most of the identifieddefects and how they are to be resolved have been agreed. In these circumstances, aclaim for general damages for mental anguish is not made out on this basis.[169] As to IAG's breach of its obligation to repair the house "as when new", generaldamages are available. They are first available under the head of physicalinconvenience and discomfort. The house as repaired contained a lengthy list ofdefects at handover. They have not been remedied. In the meantime, Mr and MrsBruce have been living in the house. The defects are largely cosmetic in that the houseremains liveable. An award under this head must therefore be modest.[170] As for stress and mental anguish, this is partly a loss of amenity issue and partlythe stress of living in the house with the defects yet to be rectified. It is evident Mr andMrs Bruce found it stressful living through the earthquakes and the fact that theirdream home required repairs. On top of that, the repairs have been defective. As itwas put by Axis in its report dated 7 September 2016, the defects are noticeable andare a valid source of disappointment. Mr Freeman described the repairs as resultingin a significant reduction in quality. I accept that this had materially contributed to theBruces' stress and mental anguish.31[171] Mr and Mrs Bruce are entitled to modest compensation for theirdisappointment and loss of amenity in no longer having a "gold award" standard ofworkmanship once the agreed defects have been rectified and for their stress duringthe period that the defects remained unrectified. This is not to criticise IAG. It wasnot IAG's fault that JTB was not around to rectify the defects in accordance with theprocess under the building contract. However IAG accepts its liability in damages ifthe repair contract is performed inadequately. Logically, this must extend to generaldamages if they are available at law (as I consider them to be) and made out on theevidence (as I have partly found them to be).[172] Mr and Mrs Bruce have not provided examples of cases to support the quantumof their claim. IAG has not made submissions about the quantum claimed. Reflectingthat Mr and Mrs Bruce have not established part of their general damages claim andthat such awards are intended to be modest, I consider the appropriate award to be setis likely to be less than what has been claimed. I accept that there are examples ofgeneral damages in the $20,000 to $25,000 range but I would need persuading toaccept the submission that this should be double because there are two plaintiffs.[173] I do not, however, reach a final view on the award of general damages. It isnot clear from the pre-trial direction that this was envisaged. The submissions on thiswere brief (the Bruces) and non-existent (IAG). Moreover, some of the loss of amenityaspects may be subsumed with an award for diminution of value if one is made. Thiswill need to be the subject of submissions if it is necessary for the matter to return toCourt.31 Indeed, Mr Bruce gave very mixed up and unclear evidence at the trial, which I attribute to thestress he was under.Result[174] Mr and Mrs Bruce have established that IAG has not complied with itsobligations to reinstate the house "as when new" in relation to the internal finishing,the wall verticalities, and the floor levels. They have established that there is areasonable and practical way to remedy the internal finishing. They have notestablished there is a reasonable and practical way to remedy the wall verticalities orthe uneven floor levels. They have established a basis for general damages for thephysical inconvenience in living in the house in its defective condition, for the loss ofamenity because the quality of the house is diminished and for associated stress andmental anguish. The appropriate measure of damages and its quantum must bedetermined in light of these findings. The proceedings should be given a nominal calldate to assess progress on resolution of the damages – the parties can liaise withcounsel about this. I make orders to this effect.[175] Costs are reserved and may be the subject of brief memoranda if they cannotbe resolved.Mallon J