MOORHOUSE COMMERCIAL PARK LIMITED v VERO INSURANCE NEW ZEALAND LIMITED [2022] NZHC 3260

MOORHOUSE COMMERCIAL PARK LIMITED v VERO INSURANCE NEW ZEALAND LIMITED[2022] NZHC 3260 [6 December 2022]IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYI TE KŌTI MATUA O AOTEAROAŌTAUTAHI ROHECIV-2017-409-997[2022] NZHC 3260BETWEEN MOORHOUSE COMMERCIAL PARKLIMITEDPlaintiffAND VERO INSURANCE NEW ZEALANDLIMITEDDefendantHearing: 18-20, 22, 27-29 July, 1-3 August and 3-4 October 2022Appearances: S P Rennie, J E Bayley, S A Foss and F H Scrase for PlaintiffJ F Anderson QC, C M Brick and A R Cornwell for DefendantSee addendum regarding appearance datesJudgment: 6 December 2022JUDGMENT OF DUNNINGHAM JThis judgment was delivered by me on 6 December 2022 at 3.45 pm, pursuant tor 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:ContentsIntroduction ........................................................................................................... [1]The property and buildings ................................................................................... [8]33 – 41 Moorhouse Avenue [10]43 Moorhouse Avenue [15]The insurance policy ........................................................................................... [17]The Policy Summary [19]The Material Damage Policy [23]The earthquake damage....................................................................................... [36]The claims process .............................................................................................. [42]What does the policy standard require? .............................................................. [77]Will repairs by epoxy resin injection repair concrete elements to the policystandard? ............................................................................................................. [83]Evidence for Moorhouse [83]Evidence for Vero [97]Discussion [120]Disputed issues – repairs to 33 – 41 Moorhouse Avenue.................................. [144]The 33 – 35 intertenancy wall ........................................................................... [146]Discussion [149]41 Moorhouse Avenue northern infill panels .................................................... [153]Discussion [155]Southern and eastern infill panels to 41 Moorhouse Avenue ............................ [157]Discussion [161]Floor slab ........................................................................................................... [164]Are the slopes in the floor slab caused by the CES? [166]How should the cracks be repaired? [169]Discussion [172]Repairs to the roof ............................................................................................. [176]Discussion [177]Repair scope – 43 Moorhouse Avenue .............................................................. [180]The concrete wall panels ................................................................................... [181]Discussion [185]First floor slab ................................................................................................... [190]Discussion [194]Ground floor slab .............................................................................................. [196]Discussion [197]Hardstand area ................................................................................................... [199]Discussion [202]Is building consent required? ............................................................................ [204]Discussion [209]Indemnity entitlement ....................................................................................... [215]Discussion [224]The dispute over claims preparation costs ........................................................ [232]Relief ................................................................................................................. [235]The scope of works [236]The approach to determining indemnity value [239]The claim for interest [245]The claim for an order for an enquiry into damages [247]Liability to pay claims preparation costs and professional fees [248]Order reserving leave [251]Result................................................................................................................. [252]Costs .................................................................................................................. [253]Introduction[1] At 33 – 43 Moorhouse Avenue, Christchurch, sit two commercial buildings.They are fully functional and tenanted, although they have suffered some damage fromthe Canterbury Earthquake Sequence (CES).[2] The buildings were insured with Vero Insurance New Zealand Ltd (Vero) at thetime of the CES. The owner, Moorhouse Commercial Park Ltd (Moorhouse), lodgedclaims under its insurance policy for earthquake damage and, in due course, Veroaccepted the claims. However, more than 10 years later, they have been unable toagree on what is required to reinstate the building to the policy standard, andconsequently, on what Moorhouse should be paid.[3] At the heart of the stand-off is a dispute over whether epoxy resin will repairthe cracks in the concrete columns, beams and floors of the buildings to a conditionsubstantially the same as when new.[4] Moorhouse says epoxy repairs will not achieve this standard, and the buildingswill have to be substantially dismantled to replace these components. That work willrequire new foundations and replacement of the infill walls. The extent of the worksrequired will trigger other requirements under the Building Act 2004, includingearthquake strengthening, fire upgrades and disability access. The estimated cost ofthese works will far exceed the sum insured.[5] Vero says the use of epoxy resin is a well-accepted repair method, and it willrestore the building to the policy standard. It also says the repairs required arestraightforward and will not require building consent, nor will they cost more than theamount of approximately $1,140,000 which has already been paid to Moorhouse. Inany event, Vero says the indemnity payment (which is all Moorhouse is entitled to atthis point) cannot exceed the indemnity value of the buildings,1 and what it has paidMoorhouse to date exceeds that by some margin. Vero also disputes the plaintiff's1 Calculated in a conventional way, which may be the market value of the building or the overalldepreciated replacement value based on either physical or market depreciation.claim for around $485,000 in claim preparation costs, saying this sum was not allreasonably incurred in preparing Moorhouse's claim. Vero also says such costs arepayable within the total sum insured.[6] The primary relief sought by Moorhouse is a declaration that the structuralrepair scheme promoted by its experts is what is required to repair the buildings to thepolicy standard. That will then enable the claim to be settled on an indemnity basis,as indemnity value is calculated by reference to the cost of reinstatement less a dueallowance for depreciation and deferred maintenance. Moorhouse also seeks otherrelated declarations and orders requiring Vero to fulfil what Moorhouse says are Vero'sobligations under the policy.[7] At issue is whether the repair scope proposed by Moorhouse is the appropriatescope and whether Vero has otherwise failed to meet its obligations under the policy.The property and buildings[8] The property is a large commercial site covering approximately 4,500 squaremetres. It is situated on the north side of Moorhouse Avenue in Christchurch, but alsohas access from Selwyn Street, which runs off Moorhouse Avenue.[9] There are two buildings on the property. One is designated as 33 – 41Moorhouse Avenue, and the other as 43 Moorhouse Avenue. The external areas of theproperty are comprised of hardstand, which is mostly asphalt but with an area ofconcrete to the rear of 41 Moorhouse Avenue.33 – 41 Moorhouse Avenue[10] The building at 33 – 41 Moorhouse Avenue was progressively built andextended between 1954 and 1997. It comprises six separate tenanted areas, asidentified in the photograph below.[11] The original portion of the building, built in 1954, comprised a single-storeywarehouse (35 Moorhouse Avenue) and a single-storey office (37 MoorhouseAvenue). By 1961, a further single-storey warehouse (33 Moorhouse Avenue) wasadded to the western side of the original warehouse as well as a further standalonewarehouse to the northeast of those buildings (41 Moorhouse Avenue). In the periodfrom 1961 to 1964, a second storey was added to the office at 37 Moorhouse Avenue(37A Moorhouse Avenue) and, in 1962, the two warehouses were extended to thenorth. In 1980, there was a further extension of the warehouses to the north. Part ofthe 1962 extension, along with the 1980 extension, forms the premises at39 Moorhouse Avenue. In 1980, a mezzanine floor was added within the southern endof 35 Moorhouse Avenue. In 1992, a reinforced concrete block masonry partition wallwas added between 33 and 35 Moorhouse Avenue, and a mezzanine floor was addedwithin the two southern bays of 33 Moorhouse Avenue.[12] The building primarily comprises shallow concrete footings with concrete slabfloors, reinforced concrete columns and beams, and brick or concrete block infill wallsbetween the columns and steel rafters. The roof is comprised of corrugated asbestossheets with Georgian wired glass panels incorporated into it to let in light.2 However,the roof over 37A is corrugated iron.[13] The tenancies within the 33 – 41 building are as follows:Address: Use:33 Gymnasium on both the ground and mezzanine floors35 Retail on the ground floor with offices/storage on the mezzaninefloor37 Food retail business37A Offices39 Car workshop and offices41 Gymnasium, physio and sports testing facility[14] Since the earthquakes there have been subsequent alterations, including worksto some exterior walls at 41 and to the internal wall between 33 and 35. Where Veropaid for those works there is a dispute as to whether they are permanent or temporaryrepair works.43 Moorhouse Avenue[15] The building at 43 Moorhouse Avenue is located to the north-east of thebuilding at 33 – 41 Moorhouse Avenue. It was built around 2004 and comprises atwo-storey office building. It is constructed from reinforced concrete pre-cast tiltpanels (some of which were recycled), which are placed between concrete columnsand steel beams. The foundation comprises reinforced concrete shallow strip footingsand pads with a 100 mm thick reinforced concrete slab floor. The first floor consistsof a concrete slab cast on steel tray decking. The roof comprises long run steelsupported on steel purlins and diagonal bracing.2 There are glass panels with wire mesh embedded in them, which are incorporated in this buildingas part of the roof structure.[16] Both buildings are constructed in close proximity to neighbouring buildingswhich has limited or prevented inspection of one external wall in each case. For thebuilding at 33 – 41 Moorhouse Avenue, a large part of the west wall lies on theboundary of the property and is abutted by the neighbouring building. For the buildingat 43 Moorhouse Avenue, a large part of the east side of the building is locatedapproximately 100 mm away from the neighbouring building, making it difficult toinspect for damage and impossible to access for repairs.The insurance policy[17] At the time of the CES, Moorhouse held an insurance policy with Vero thatinsured the buildings which are the subject of these proceedings, along with anotherbuilding at 90 Hazeldean Road. The Hazeldean Road building claim was settled inlate 2019. Other buildings in Hazeldean Road and Braddon Street were owned byentities related to Mr Dennis, the director of Moorhouse, and were also insured byVero. These other claims were also settled in late 2019. Until then, the claims for allbuildings were, to a large extent, managed together, a fact which forms part of thehistory of the claims process.[18] The insurance policy which Moorhouse had with Vero at the time of the CEScomprises:(a) a four page Policy Summary outlining the cover for that period underPolicy Number HO BSP 3928629; and(b) a 25-page Vero/BrokerWeb Group Material Damage Policy in respectof the properties.The Policy Summary[19] The Policy Summary stipulates the period of insurance was 31 March 2010 to31 March 2011. It also records certain "Cover Codes" which applied as optionalextras. These codes, E and R, identified that insurance cover for the buildings includedNatural Disaster Cover (which included cover for earthquakes) and ReplacementValue Cover as defined. The cover for earthquake damage had a deductible, or excess,of 2.5 per cent of the adjusted loss, with a minimum excess of $2,500.[20] The Policy Summary states that the sum insured is $3,349,000 plus GST for"33 – 39 Moorhouse Avenue" and $1,479,000 plus GST for "41 – 43 MoorhouseAvenue". Vero acknowledges that the addresses linked to the sums insured do notmatch the physical layout of the buildings but says the parties have proceeded on thisapportionment of the sums insured, and it is too late for Moorhouse to advance adifferent approach. Moorhouse, however, says the sum of $3,349,000 plus GSTincludes the 41 tenancy and therefore pertains to the 33 – 41 Moorhouse Avenuebuilding, whereas the $1,479,000 plus GST relates to the 43 Moorhouse Avenuebuilding alone. This is supported by the fact that the valuation used to set the suminsured for "41 – 43 Moorhouse Avenue" clearly only values the two-level officebuilding at 43 Moorhouse Avenue. There is also no logical reason for part of onebuilding, being the 41 tenancy, to be insured along with the standalone43 Moorhouse Avenue building, rather than with the building it forms part of, whichis the 33 – 41 Moorhouse Avenue building.[21] While Vero says it has proceeded on the basis that the respective sums insuredshould be allocated between the buildings, as is described in the Policy Summary, andMoorhouse has not pleaded rectification, I consider it is necessary to resolve this tounderstand Vero's obligations under the policy. It is difficult to see that thedescriptions of the buildings to which each sum insured applies are anything otherthan errors which have been carried through to the policy from the erroneousdescriptions of the buildings in the valuations. Applying the standard approach tointerpretation of contracts, being to ascertain the meaning which the document wouldconvey to a reasonable person having all the background knowledge which wouldreasonably have been available to the parties at the time of the contract, I acceptMoorhouse's view that the sums insured apply to the respective separate buildings.3[22] However, this issue may not be of any consequence given the partiesacknowledged in closing submissions that unless I adopted a hybrid of the parties'3 Firm PI 1 Ltd v Zurich Australia Insurance Ltd [2014] NZSC 147, [2015] 1 NZLR 432 at[60]-[61].respective repair schemes, the allocation of the sums insured across the buildingswould have no material effect on what was to be paid.The Material Damage Policy[23] The Material Damage Policy document contains:(a) A general indemnity clause.(b) A Schedule setting out much the same information as the PolicySummary, including the period of insurance, a description of theinsured property, the sum insured and any additional cover codes. Italso sets out any special limits or sums insured for discrete aspects ofthe insurance including for some optional types of cover.(c) A section containing relevant definitions, conditions and exclusionsrelating to the policy.(d) A section containing further conditions, described as Memoranda,applying to the policy.(e) A section which sets out the terms of cover available under OptionalMemoranda if that cover has been specified in the Schedule.[24] The policy's main insuring clause (described as the Indemnity) provides:If, during the Period of Insurance, any:Physical Loss or Damage happens to any Insured Property;then subject to the terms, conditions and exclusions of this Policy [Vero] willindemnify the Insured for the loss, damage and costs.The clause also stipulates that, subject to some specified clauses (such as thatdealing with GST), Vero's liability: will not exceed the Total Sum Insured and/or Special Limits/Sums Insuredspecified in the Schedule and/or the limits specified in any Memorandum.[25] The policy's Basis of Settlement clause provides that Vero "will pay anyinsured costs and may at its option repair, reinstate or replace lost or damaged propertyor any part of it, or may pay the amount of loss or damage".[26] In the section of the policy headed "Optional Memoranda", the ReinstatementMemorandum is set out. Cover under that memorandum applies in this case, and itprovides:In the event of any Insured Property to which this Memorandum applies beinglost, damaged or Destroyed, the basis on which the amount payable under thisPolicy is to be calculated will be the cost of Reinstatement of the property,subject to the special provisions of this Memorandum.[27] The parties agree that the relevant definition of "Reinstatement" in theMemorandum for the purposes of this claim is: the repair of the damage and the restoration of the damaged portion of theproperty to a condition substantially the same as, but not better or moreextensive than, its condition when new, but incorporating such alterations asare necessary to comply with any Act of Parliament or Regulation.[28] Cover for additional work to comply with Acts and Regulations whenreinstating is further addressed in the Special Provisions of the ReinstatementMemorandum. They provide:The amount payable under this Memorandum will include the cost incurred inReinstatement which is necessary to comply with any Act or Regulation,provided that the amount payable will not include the cost incurred in worknecessary to comply with any Act, Regulation or By-Laws:(a) to the extent to which such work had already been required of theInsured by notice served prior to the happening of the loss, damage orDestruction; or(b) in respect of Undamaged property or Undamaged portions of property."Undamaged" is defined to mean "not damaged physically and directly by an insuredcontingency".[29] However, cover is expressly brought back in for compliance costs associatedwith undamaged property by two further policy memoranda. These include theRedundant Foundations Memorandum, which provides:Notwithstanding "Special Provision 1(b) of the Reinstatement Memorandum"or anything in this Policy to the contrary, where any undamaged or partlydamaged building or plant foundations are unsuitable for further use and/orare rendered redundant for any reason whatsoever in consequence of lossor damage to the superstructures or plant resting on them, the affectedfoundations will be deemed to be and treated as constructively totally lost forthe purpose of claims under this Policy and any of its Memoranda.[30] In addition, the Undamaged/Unharmed Property Memorandum provides thatthe policy covers:Costs actually incurred in the demolition, damage/destruction, removal andsubsequent repair and reinstatement of otherwise undamaged/unharmedproperty (including additional costs necessary to comply with any Act ofParliament or any regulations made under or in pursuance of any such Act orwith any By-Laws of any Local Authority) necessary to enable reinstatementof any Insured Property following its loss or damage by any insured peril.[31] A further special provision in the Reinstatement Memorandum provides:In any of the following circumstances, no payment will be made beyond theamount which would have been payable had this Memorandum not beenincorporated in the Policy:(a) if the Insured elects not to Reinstate the property;(b) if the work of Reinstatement is not commenced and carried out withreasonable despatch;(c) until the cost of Reinstatement has actually been incurred or agreedbetween [Vero] and the Insured.[32] Thus, here, where reinstatement work has not commenced,4 the parties acceptthat Vero's only obligation in terms of the damage is to pay indemnity value.Indemnity value is defined in the policy as: "The reinstatement cost of the property toa condition not better or more extensive than when new, less due allowance fordepreciation and deferred maintenance".4 Save for some minor repair work where it is contested whether it is reinstatement work asdiscussed later in the judgment.[33] There is also a Claims Preparation Costs Memorandum in the policy. Thisprovides that Vero will indemnify the insured for "all costs and expenses reasonablyincurred for the purpose of assessing, preparing, presenting or certifying any claim"accepted under the policy. No excess is payable on the claim for these costs andexpenses.[34] The Professional Fees Memorandum in the policy extends cover to include thecost of specified consultants' fees if they are "reasonably incurred in reinstatingdamage to Insured Property". Unlike the Claims Preparation Costs Memorandum, theProfessional Fees Memorandum expressly states that such fees and costs are includedin the Total Sum Insured. The Memorandum also says that it does not apply to feesfor preparing claims which are dealt with under the separate Claims Preparation CostsMemorandum.[35] There is a dispute over whether claims preparation costs fall within the totalsum insured or are to be paid in addition to it. There is also a dispute over whether theclaims preparation costs sought by Moorhouse are reasonable. In its statement ofclaim, Moorhouse sought the appointment of a mutually acceptable loss adjuster todetermine the amount of claims preparation costs owing under the policy.5 Veroresisted that relief, considering it to be of little utility in resolving what costs areproperly claimable. In closing, Moorhouse confirmed it no longer sought that relief.Instead it sought a direction that the parties consult with a view to appointing anindependent expert to resolve that dispute.The earthquake damage[36] There is agreement between the parties on the visible extent of damage,although there is disagreement as to whether it was all caused by the CES. Verocontends that much of the visible damage was pre-existing. In particular, it says manyof the cracks in concrete components of the buildings were likely shrinkage crackingwhich occurred in the first year or two since that component was constructed, orthermal cracking because of exposure to temperature changes. Vero has, however,scoped to repair all the damage where there is likely to be at least some earthquake5 Pursuant to a provision in the policy entitled Mutually Acceptable Adjustors.damage, and in respect of cracks to the beams and floors, this means repairing allcracking in excess of 0.2 mm in width regardless of its cause.[37] All the earlier engineering reports commissioned in respect of the buildingsdescribe the damage as "minor", "relatively minor", or "moderate" in nature. Thosedescriptors are certainly consistent with the extent of damage which I observed on asite visit. The visible cracks were generally very fine, and there was surprisingly littledamage to brick and block walls which are usually vulnerable to earthquake shaking.Furthermore, all the areas were functional and tenanted, reinforcing the impressionthat the damage was mostly cosmetic. However, Moorhouse, relying on adviceobtained more recently from its structural engineers, says there is likely to be otherdamage which is not visible, and which means the damage cannot be described as"minor".[38] The extent of visible damage to the building at 33 – 41 Moorhouse Avenue(whether caused by the CES or otherwise) includes the following:(a) cracking to concrete columns and beams;(b) cracking to concrete masonry block walls;(c) separation of infill walls from concrete frames;(d) cracking to areas of the concrete floor slab;(e) cracking to plasterboard linings;(f) cracking to concrete eaves near beam column joint; and(g) damage to roofing.[39] The 43 Moorhouse Avenue building exhibits similar damage. This includescracking and some spalling on pre-cast concrete wall panels, although it is agreed thatat least some of the visible damage was pre-existing. There is also damage to interiorlinings and cracking of the first floor slab (which, again, is agreed to be, at least inpart, shrinkage cracking which occurred soon after it was first poured).[40] There is also damage to the external hardstand areas. Both concrete and asphaltsurfaces are cracked, and the asphalt is out of level. Again, the cause of this damageis disputed. The drainage systems are damaged as internal inspection shows there ismud and stones in the stormwater lines and cracking of sewer lines.[41] Although much time was spent in evidence debating the causes of the visiblecrack damage in the concrete elements, Vero proposes to repair the majority of thedamage regardless of the extent to which it was caused by the CES and so, I will notdiscuss causation further unless it is relevant to the proposed repair strategy.The claims process[42] It is important to document the history of these claims as Moorhouse is criticalof Vero for not determining the cost of reinstatement sooner and then payingMoorhouse the indemnity value (calculated in accordance with the terms of thepolicy). If, as Moorhouse claims, the cost of reinstatement exceeds the sum insuredfor each building, then Moorhouse seeks an order for an inquiry into damages sufferedby it for Vero's failure to calculate and pay indemnity value within a reasonabletimeframe.[43] Moorhouse, through its director, Mr Peter Dennis, and its insurance broker,lodged claims with Vero for damage to its commercial buildings, including theMoorhouse Avenue properties, following the CES. Other buildings at Hazeldean Roadand Braddon Street, which were owned by Dennis family interests, were also thesubject of claims with Vero for earthquake damage.[44] Vero engaged MWH Mainzeal (MWH) to provide earthquake claimassessment services for Vero and, through MWH, Vero offered managed repairprogrammes for earthquake damaged buildings. Whether or not that option was taken,Vero used MWH to prepare a preliminary damage assessment and repair scope as partof Vero's claims process. Where these indicated a building was likely to be repairablewithin the sum insured, detailed repair scoping would commence along withpreparation of full engineering reports for the repair work. These reports (engineering,repair scope, and costing) could be obtained by either MWH or the insured. Once thescope and cost of repairs had been agreed, the insured could choose to have the repairsundertaken or, although outside the scope of the policy, Vero may offer a cashsettlement.[45] For Moorhouse's claims, Vero engaged external loss adjustors, CunninghamLindsey, and the claims were referred promptly to MWH. Cunningham Lindseyproduced reports in April 2011 which set out a brief description of the damageidentified following inspection and an estimate of the likely repair costs, which weremodest.[46] By that time, Moorhouse had engaged Hawkins to undertake some repairs and,as part of that work, Hawkins replaced the upper section of the concrete block fire wallbetween 33 and 35 Moorhouse Avenue with timber framing and a double-layer of GIBboard on each side. Vero agreed to meet the cost of all this work at $57,804. Verosays this was understood to be a permanent earthquake repair, but Moorhouse rejectsthat, saying it was temporary repair work only, noting the policy extends to meet thecosts of such works if they are required to secure the property or to make it safe orsuitable for continued use.[47] In late 2011, Moorhouse asked Vero to meet the cost of replacing the oldasbestos roof at 33 – 41 Moorhouse Avenue. Moorhouse obtained a quote for$137,793 plus GST from Newfield Roofing for the roof replacement, which itsubmitted to Vero. Vero approved replacement of the earthquake damaged roof,although the work was not undertaken by Moorhouse.[48] In November 2011, MWH engaged Cook Costello to provide a DetailedEngineering Evaluation (DEE) which reported on the buildings' seismic capacity andengineering design for necessary repairs, although Mr Dennis says he was not awareof this. In February 2012, Moorhouse advised it wished to have its own engineers,Structex, provide the necessary reporting. Consequently, MWH advised CookCostello to stop work. From this point, Moorhouse assumed responsibility forarranging engineering services for the earthquake repairs. However, MWH remainedinvolved on Vero's behalf to facilitate the claim verification process.[49] In May 2012, MWH arranged for a section of the northern wall at41 Moorhouse to be replaced upon instruction from Moorhouse's engineers, Structex.Vero met the cost of this work at $10,865. Vero understood this to be a permanentearthquake repair. In support of this view, Vero refers to an email dated 18 May 2012from Mr Michael Kean at Vero to Adam Walker at Structex, which says:We have decided to deconstruct and permanently replace the blockwall with ahardie board type construction at the request of the owner. Could you pleasecontact the owner (Peter Dennis) on [phone no] to confirm the type ofconstruction he would like .[50] Mr Walker confirmed by reply email that once "the detailing is complete wecan approach Peter for sign off and get the work underway". In a further email on31 May 2012, the builders provided a drawing for "the task order to permanentlyreplace blockwall (sic)", noting it had also been sent to Mr Dennis for his approval.[51] In the same month, MWH had preliminary repair scopes prepared for thebuildings, and these were provided to Moorhouse in September 2012. The repair costsat that stage were estimated at $221,164 for what was described as 33 – 39 MoorhouseAvenue and $71,537 for what was described as 41 – 43 Moorhouse Avenue. MWHadvised Moorhouse that the scopes were subject to change once the DEEs werereceived from Structex.[52] Structex's DEE report for 43 Moorhouse Avenue was prepared inSeptember 2012 but was not provided to MWH until March 2013. The DEE for43 Moorhouse Avenue stated:The damage is minor in nature and may not be the result of earthquake actions,particularly in the case of the spalled concrete between the two buildings.It recommended repairs, including repair of concrete cracking by epoxy injection.[53] At a meeting of the parties, including Moorhouse and MWH, on 7 March 2013,it was agreed Structex would complete a DEE for 33 – 41 Moorhouse Avenue, withpricing by Naylor Love. For 43 Moorhouse Avenue, it was agreed that MWH wouldhave Naylor Love price the repairs as the damage was relatively minor and nostructural design was required.[54] However, at the end of March 2013, Moorhouse removed itself from the MWHprogramme entirely. Mr Dennis said he was concerned that the MWH reports werenot detailed and were vague on repair methodology with no input from any engineer.Vero's representatives understood the owners were, among other things, dissatisfiedwith the way their claims were being progressed, including delays in getting a fullscope of repair, and dissatisfied with Vero's view that claims preparation costs shouldfall within the sum insured.[55] At that stage, Moorhouse and the related property owners had alreadyorganised a geotechnical assessment by Geoconsult for the various insured properties,which Vero had agreed to. That report advised that the foundations of the Hazeldeanproperties were considered unsuitable for the ground conditions, and deep pilefoundations should be installed if the buildings were to be replaced. In early 2013,Vero engaged its own geotechnical engineer to understand whether therecommendation was based on earthquake damage suffered at the properties or wasunrelated. A dispute arose between the Hazeldean property owners, and subsequentlyMoorhouse, over whether the policy provided cover for the new foundations thatGeoconsult had recommended. This, too, appears to have contributed to Moorhouse'sdecision to remove itself from the MWH programme.[56] Vero advised, through Cunningham Lindsey, that removal from the MWHprogramme meant that if repairs were to proceed, Moorhouse would need to provideVero with proposals and costs for the repair works before the works could go ahead.From this point, Moorhouse was responsible for providing its own repair scopes andcostings which needed to be submitted to Vero for approval prior to repairscommencing.[57] On around 9 April 2013, the Structex DEE for 33 – 41 Moorhouse Avenue wasprovided to Vero, although it was dated 4 March 2013 and thus had been preparedbefore the 7 March 2013 meeting. While the report identified limited damage to thebuilding and foundation, and said the building appeared to have "performed well inthe recent Canterbury earthquakes", it considered building consent would be requiredfor the repairs, and earthquake strengthening work would be required to obtainconsent. On receipt of this DEE, Cunningham Lindsey reported to Vero that a moredetailed quantitative DEE would be provided by Structex, which Naylor Love couldthen price. Vero says Moorhouse never provided that quantitative DEE.[58] In mid-August 2013, a request was made to Vero to make an interim paymentto Moorhouse. Vero made a progress payment of $300,000 in October 2013 in respectof the Moorhouse properties. Throughout this period, Vero says Moorhouse advisedthat its engineering reports and scoping for the Moorhouse buildings were beingprogressed, but nothing was provided to Vero, and, from Vero's perspective, the claimslargely came to a standstill.[59] In June 2014, Moorhouse provided some documentation to CunninghamLindsey for 43 Moorhouse Avenue, being:(a) a Structex earthquake remediation scope dated 5 June 2014, whichproposed crack repair by epoxy injection;(b) a costs estimate by Brendan Blackmur for repairs to 43 MoorhouseAvenue which totalled $275,989 plus GST; and(c) a cost estimate by Brendan Blackmur totalling $238,059 plus GST forexternal works, including replacement of the carpark and repair ofdrains.Nothing was provided in relation to the 33 – 41 Moorhouse Avenue building.[60] By March 2015, Vero wrote to Moorhouse, noting it had not received a claimssubmission for 33 – 39 or 41 Moorhouse Avenue. It offered assistance in obtainingdamage assessments and repair methodologies. It suggested jointly instructingStructex to provide a formal report on the earthquake damage, following which theparties could work together to obtain scopes of work covered by the policy.[61] Vero wrote a further letter to Moorhouse's agent, Mr Paul Simpson, inDecember 2015, again advising it had not received a claims submission for 33 – 39 or41 Moorhouse Avenue, and noting the policy requirement to reinstate "with reasonabledespatch". Vero also made an offer to settle the claims based on the repair costs. Itreceived no response to this letter.[62] By early February 2016, and in the absence of any response from Moorhouse,Vero engaged Morgan Property Services to carry out a complete engineering damageassessment and prepare a repair scope and costing for each of the buildings insuredunder the Moorhouse policy. Vero advised Moorhouse accordingly. A Verorepresentative wrote to the owner's broker on 25 February 2016, advising that theMoorhouse claims could not be settled without "a completed claims assessment in theform of engineering damage assessments, remediation scope and costings", and notingMoorhouse had not presented this evidence for its claims despite promising Vero thiswould be forthcoming since 2012.[63] Vero then appointed Ross Thurlow of Thurlow Consulting Engineers(Thurlow) to provide engineering advice and prepare quantative DEE reports. RPCConstruction Ltd (a building contractor) was also engaged to provide scoping forearthquake repairs using Thurlow's structural repair recommendations. At this time,surveys were produced by a surveying firm to show levels and verticality surveys foreach building, along with a topographical report in respect of the carpark. Updatedroofing reports and quotes were obtained from Newfield Roofing. In May 2016,following a request from Moorhouse, a further progress payment of $50,000 in respectof claim preparation costs was made.[64] By August 2016, Thurlow had prepared DEE reports which were provided toMoorhouse. In November 2016, RPC Construction provided tender reports whichwere based on the Thurlow repair recommendations. These assessed the worksinvolved as costing the following (excluding GST):(a) 33 – 39 Moorhouse Avenue $891,436.18;(b) 41 Moorhouse Avenue $52,544.92;(c) 43 Moorhouse Avenue $51,716.44; and(d) external hardstanding $394,960.72.[65] Although these reports were provided to the owners in November 2016, Verodid not receive a response until 5 April 2017 when Moorhouse's solicitors wroteproviding copies of further Structex reports for each property, dated 5 April 2017.They also provided a GHD report dated 27 February 2017 reviewing the Thurlowreports and, for the first time, querying the appropriateness of repair by injection ofepoxy resin. The GHD report suggested, instead, complete replacement of crackedconcrete block work, brick work and reinforced concrete panels, even for very finecracking of less than 0.2 mm. One of the criticisms Moorhouse raised with theThurlow reports is that they said they would achieve a return to the "pre-earthquakecondition" of each building, and not to the policy standard, which Moorhouse saidrequired restoration to a "when new" condition.[66] Vero also notes that around the same time, a Structex report dated21 November 2017 was prepared for 33 – 41 Moorhouse Avenue, and was submittedto the Christchurch City Council in support of a building consent application byMoorhouse for renovations at 33 Moorhouse Avenue. It stated that:Despite its predicted earthquake prone nature, the building appears to haveperformed well in the recent Canterbury earthquakes. The damage observedindicates little to no out-of-plane damage to the brick infills or to thewarehouse columns. There is no evidence of excessive deflections of thewarehouse frames in-plane.This report was not provided to Vero at the time.[67] On 21 December 2017, these proceedings were issued.[68] On 23 May 2018, and as directed at a case management conference, Vero madea further payment of $790,335.19 to Moorhouse in respect of 33 – 41 MoorhouseAvenue, 43 Moorhouse Avenue and 90 Hazeldean Road. The payment was Vero'sassessment of what was required to pay indemnity value for these buildings under thepolicy.[69] Following the issue of proceedings, Vero instructed another engineering firm,Batchelar McDougall Consulting (BMC) to prepare fresh engineering reports. Verosays it did this to bring a "fresh perspective" and hopefully break the impasse betweenthe parties. Those reports were provided to Vero in early July 2018 and were consistentwith the advice already provided by Thurlow.[70] Warren Batchelar of BMC led the preparation of these reports. He alsoparticipated in expert conferral in December 2018, along with his colleague,Mr Hobbs, and with Moorhouse's engineers; Mr Toulmin from GHD and Mr Walkerfrom Structex. However, unfortunately, due to serious health issues, Mr Batchelar hadto withdraw from involvement in the proceedings. It was for that reason Veroinstructed Dr Nicholas Brooke as its structural engineering expert.[71] While Moorhouse was critical of Vero for not calling someone from BMC togive evidence, given they were involved in the expert conferral process, I do notconsider that criticism is warranted. Dr Brooke was clearly familiar with, andendorsed the substance of, the BMC reports and was able to be questioned on themerits of the BMC repair scope.[72] In late 2018, cost estimates undertaken by Brendan Blackmur were providedto Vero based on the Structex 5 April 2017 repair scopes. These totalled approximately$9,200,000 for the repairs to the building, plus $264,554 to reinstate the hardstand areaoutside the buildings. This was a quantum leap from earlier costings and far exceededthe total sum insured.[73] In April 2019, Moorhouse replaced the two masonry infill panels at thenorthern end of the east wall of 41 Moorhouse Avenue with lightweight timber panels.This materially increased that building's seismic strength when compared toNew Building Standard (NBS), and it is now assessed by Structex to achieve at least67 per cent NBS.[74] In the same month, the Christchurch City Council placed the buildings at 33 –41 Moorhouse Avenue on the Earthquake Prone Buildings Register, and Moorhousewas given a deadline of 10 October 2026 to complete strengthening of 33, 35 and39 Moorhouse Avenue and a deadline of 10 April 2034 to strengthen 37 and41 Moorhouse Avenue.[75] On 8 August 2019, the Christchurch City Council issued the first stage of astaged building consent for works to 33 – 41 Moorhouse Avenue. The worksconcerned alterations and change of use to the building including structuralstrengthening to 89 per cent NBS and a fire upgrade. Stage 2 of that consent issuedon 18 June 2020.[76] While this work continues and indicates that Moorhouse's proposed repairscope would never, realistically, be undertaken, the repair scope remains, at least inMoorhouse's view, relevant to the calculation of indemnity value. Accordingly, thefirst issue to resolve is which repair scope will meet the policy standard.What does the policy standard require?[77] The dispute between the parties over what repairs are required rests primarilyon whether the use of epoxy resin to repair cracking in concrete will repair the propertyto the policy standard, being to a condition substantially the same as, but not better ormore extensive than its condition when new.[78] The terms "when new" or "as new", as used in insurance policies, have beenthe subject of a number of judgments relating to the CES.6 However, as Vero says,those terms on their own impose a potentially more exacting standard than the term"substantially when new", which applies in the present case.[79] I accept the policy standard does not require the insurer to restore the damagedportions of the building to exactly the same condition they were in when new. Theword "substantially" does not mean "exactly" or "completely". Rather, as the ConciseOxford English Dictionary says, "substantially" means "to a great or significant extent,for the most part, essentially".7 Whata J, in East v Medical Assurance Society,6 East v Medical Assurance Society [2014] NZHC 3399; Parkin v Vero Insurance New Zealand Ltd[2015] NZHC 1675; and Emmons Developments New Zealand Ltd v Mitsui Sumitomo InsuranceCo Ltd [2019] NZHC 277.7 Concise Oxford English Dictionary 11th ed. Oxford University Press, 2004.described a similar policy wording for the standard of repair as "an approximatestandard".8 In the same vein, Davidson J held in Emmons Developments New ZealandLtd v Mitsui Sumitomo Insurance Co Ltd, that the "substantially when new" standarddid not mean replication of every element when the building was new.9[80] I am satisfied the policy standard of repairing so that it is substantially the sameas when new does not require the building to be reinstated exactly as it was when new,but to ensure that it is, in large part, or in essence, restored to that standard. It affordsa modest degree of leeway to the insurer as to how reinstatement is to be achieved.[81] Furthermore, guidance can be taken from cases regarding the residential "whennew" standard as to how that standard should be achieved. The standard is a temporalone relating to the condition of the building when it was first built, and repairs are notrequired to bring damaged portions of the building up to modern standards exceptwhere that is required by legislation or by-laws.10[82] The "when new" standard does not require exact replication of the original;modern materials and techniques may be used.11 The standard of repair required is torender the fact of earthquake damage immaterial.12 When deciding what standard ofremediation is required by the policy, regard must also be had to the purpose of thedamaged component. Where an item has a functional purpose only, then so long asthe repair or replacement restores that functional purpose to a "when new" condition,the obligations under the policy will be met. Where the component also has anaesthetic purpose, the remediation strategy must restore the former aesthetic to a"when new" quality.138 Above n 6, at [104].9 At [81].10 Fitzgerald v IAG New Zealand Ltd [2018] NZHC 3447 at [28]–[29] and [70].11 Fitzgerald at [28].12 Parkin v Vero Insurance New Zealand Ltd, above n 5, at [117].13 At [120]–[121].Will repairs by epoxy resin injection repair concrete elements to the policystandard?Evidence for Moorhouse[83] The repair strategy advocated for by Moorhouse was prepared byMr Adam Walker, when he was a director and senior structural engineer at Structex.Mr Walker's repair schemes have been independently examined by Ms Jan Stanway,a principal structural engineer at WSP New Zealand.[84] Once this litigation commenced, Structex rejected epoxy repair as suitable forany repairs to these buildings. However, shortly before the hearing, Moorhousemodified its stance and confirmed that Mr Walker and Ms Stanway would acceptepoxy repairs to some of the pre-cast wall panels in the 43 Moorhouse Avenue buildingbut not to the floors. Given the particular structure of the 33 – 41 Moorhouse Avenuebuilding, and the concerns they had about how it had performed during the earthquake,they maintained their position that epoxy repairs would not repair that building to thepolicy standard.[85] Mr Walker was first engaged by Moorhouse in 2012 to provide advice onrepairs for the building. He acknowledges he prepared a qualitative DEE report dated4 September 2012 for 43 Moorhouse Avenue which contemplated some epoxy repair,and a DEE report dated 4 March 2013 for 33 – 41 Moorhouse Avenue which alsocontemplated epoxy resin injection of cracks to block work "where possible" andinjection of cracks to the concrete frame. However, he now says that theserecommendations were simply to achieve a functional state. They were not prepared"with a view to an insurance entitlement or detailed repair".[86] Moorhouse also says that the parties were still debating policy entitlementswhen Mr Walker later prepared a repair scope on 17 August 2014 for 33 – 41Moorhouse Avenue, which contemplated epoxy repair to beams and columns, and oneon 10 July 2015 for the building at 43 Moorhouse Avenue which proposed an epoxyrepair to the suspended floor slab. Both reports were said to be based on "the insurancepolicy response".[87] However, Moorhouse says that once Mr Toulmin, of GHD, was instructed byMoorhouse to review the engineering reports prepared by Vero's then engineers,Thurlow, he questioned the appropriateness of the proposed epoxy repairs. In hisreport dated 27 February 2017, he said:In general, [epoxy] resin injection has been specified for repairs to crackedconcrete. The process of repair of concrete using resin injection is notprescribed within the Building Code or accompanying compliance documents.There is also only limited technical data or testing of cracked concrete repairedusing resin injection. On this basis we do not consider that resin injection isan appropriate repair for structural elements to meet a substantially the sameas when new condition.This caused Mr Walker to reassess his recommendation on the use of epoxy, andMoorhouse says that Mr Walker's subsequent report, dated 5 April 2017, properlyfocused on the policy standard of reinstatement to be achieved.[88] To a large extent, Mr Walker relies on the evidence of Ms Stanway to say thatepoxy injection will not restore the buildings to the policy standard and, as aconsequence, replacement of the cracked components of the building is required.Those works will, in turn, impact on the foundation loads and will require a widerfoundation to be installed in the areas where walls and column beams are to bereplaced. This is because the new columns and beams will be heavier than the existing,meaning the requirement under s 133AT of the Building Act 2004 (which applies tothese buildings as they are subject to an Earthquake-Prone Building notice), to leavethe building no worse than existing, will not be met. In any event, the requirement tohave starter bars connecting the new walls and columns to the foundations wouldrequire new foundations to be formed regardless of any load changes. These workswill, in turn, mean the floor slab will need to be replaced as the slab will need to bedemolished in multiple areas where foundation pads are to be widened. Demolitionof the slab is also said to be required to level the areas where the floor slopes exceed1:200 (being the MBIE guidance for maximum floor slopes in residential homes) andto properly repair the cracks in the floor which have been caused, or exacerbated bythe earthquakes.[89] Ms Stanway's evidence was critical to Mr Walker's assumption that epoxyrepairs would not meet the policy standard. Ms Stanway is a Principal StructuralEngineer at WSP. She specialises in seismic design and assessment of buildings andin the seismic performance of non-structural elements of buildings. She is theco-author of a proposed MBIE Guideline document on low damage seismic design.She has been involved in the assessment of damage, and the design of repairs, fornumerous buildings following the Christchurch and Wellington earthquakes. Thisincludes assessing earthquake damage to port infrastructure in Wellington and to majorbuildings owned by Christchurch City Council.[90] Ms Stanway explains she was asked to "[c]onsider the body of professionalopinion concerning use of epoxy and the repair of earthquake damaged buildings",and "[a]dvise whether epoxy would restore the functional purpose of the earthquakedamaged structural components". At the core of her evidence is a review of literatureon the use and limitations of epoxy injection to repair damaged concrete elements.She considered the literature reviewed by Vero's expert, Dr Brooke, as well as furtherliterature which she sets out in her evidence.[91] She begins by pointing out that cracks in concrete may reduce the strength,stiffness, fire resistance and durability of structural elements. She explains that theterm "stiffness" refers to the ability of a building to resist deformation caused by forcesbeing imposed on it. When concrete is cracked during earthquake shaking, this canlead to a reduction in the stiffness of the cracked element and thus, to the building asa whole. A reduction in stiffness means the building would move further duringsubsequent earthquake events than it would have prior to the earthquake. It is aseparate concept from strength, which is the ability of the element to resist forcesexerted on it as a result of loads, including the weight of the building itself and externalloads caused by factors such as wind, snow and earthquake shaking.[92] Ms Stanway takes issue with Dr Brooke's view that "[s]tructural repairs canlargely be achieved by epoxy injection of cracks in concrete and filled concretemasonry elements". Her review of the relevant literature leads her to reach thefollowing relevant conclusions:(a) Epoxy injection will not restore the stiffness of the building to itscondition before the earthquake damage and, following epoxy injectionof cracks, one could still expect around a 20 per cent reduction instiffness of the concrete components. This results from an inability topractically inject all cracks, to access internal cracks, and to access andfully restore the bond of the concrete to the reinforcement where thathas been lost.(b) While the residual loss of stiffness is unlikely to significantly affect itsstructural performance in extreme infrequent seismic events, it wouldresult in larger displacements and greater damage in smaller events thanwould have occurred before the earthquake damage.(c) Steel reinforcement in cracked concrete elements may be damaged as aresult of it yielding in the earthquakes. Reinforcing bars that haveyielded have had some of the plastic strain capacity consumed and soit is not available for future lateral resistance. The reinforcing bars arealso likely to have hardened due to a process called "strain hardening",whereby the reinforcement becomes harder through plastic deformationwhich may occur during earthquake shaking. This can eventually leadto the bars fracturing due to low cycle fatigue.(d) The type of reinforcement generally used in the construction of 33 – 41Moorhouse Avenue, being smooth, round bars rather than deformedbars (which are steel bars with deformations or ribbing on the surface),is more susceptible to a reduction in plastic strain capacity, or strainageing, as a result of deformation during an earthquake.(e) Injected epoxy will lose strength and stiffness gains when subjected totemperatures in excess of 100°C. At 150°C, the epoxy adhesive tendsto become brittle.(f) If crack repair is delayed then, depending on environmental conditions,corrosion of reinforcement may occur where the concrete cracks reachor intersect the reinforcement. Given the time which has elapsed sincethe CES, Ms Stanway expects corrosion of reinforcement to haveoccurred where the cracks intersect the reinforcement.(g) Over time, cracks become filled with debris and algae which may beimpossible to remove. This contamination reduces the ability of theepoxy to adhere to the concrete, thus reducing its effectiveness. Whileguidance documents issued by the American Concrete Institute (ACI)on structural crack repairs of concrete using epoxy14 describe thegeneral procedures for crack injection and note that the cracks shouldbe cleaned to the extent that is possible and practical, they also note thatcontaminants in the crack will prevent epoxy penetration and bondingand reduce the effectiveness of repairs. These practical limitations onachieving a complete repair need to be taken into account.(h) Finally, she points to a report produced by the Concrete Society ofEngland which undertakes a review of the rehabilitation of previouslyrepaired concrete structures using various repair techniques, includingepoxy injection.15 She says only 25 per cent of the repairs andinterventions were judged to have been successful at 26 to 50 yearsfollowing the repair. Of the 75 per cent deemed unsuccessful,40 per cent exhibited signs of failure within five years of application.[93] Having provided this review of what the literature says about epoxy repairs,Ms Stanway goes on to explain why she considers the proposed Structex restorationscheme would properly restore the functional purpose of the cracked concreteelements while the BMC repair scheme, which Dr Brooke supports, would not. Herreasons are as follows:(a) She says there is a practical limit to the minimum width of cracks thatcan be effectively injected with epoxy. The axial load has closed the14 ACI Committee 503 Use of Epoxy Compounds with Concrete (503R-93 Reapproved 2008,American Concrete Institute, Detroit); and ACI Committee E706 Field Guide to Concrete RepairApplication Procedures: Structural Crack Repair by Epoxy Injection (ACI RAP Bulletin 1Reapproved 2009, Detroit).15 John Broomfield and others Technical Report No. 69 – Repair of concrete structures with referenceto BS EN 1504 (The Concrete Society, Camberley, 2009).cracks in the concrete columns and makes effective penetration ofepoxy resin into the full depth of those cracks impossible.(b) When epoxy is used in concrete-filled masonry block walls, there is noguarantee that all cracks in the concrete wall will align with the cracksin the masonry shell. In addition, the outcome would be affected byfactors such as whether the concrete infill has detached from masonryas a result of shrinkage of the concrete core. If it has shrunk, leaving agap between the masonry shell and the concrete core, this would causethe epoxy injection to flow into the resulting void, using substantiallymore product than expected, not necessarily filling the crack in theconcrete core, and potentially causing further damage.(c) Where cracks occur in the concrete core that do not align with cracksin the mortar and shell, the cracks in the internal concrete would not beaccessible to inject with epoxy, and this would affect the stiffness of themasonry block wall, and consequently the stiffness of the buildingstructure.(d) The concrete columns and beams which form the building frameworkare constructed with plain round reinforcement bars, and these aresusceptible to loss of bond during seismic shaking. Deformedreinforcement, which is used in modern construction, provides a higherbond resistance than plain round reinforcement by providing aninterlock between the steel and the concrete. If there has been a loss ofbond between the plain round reinforcement and the concrete in thecolumns, this will affect the future performance of the columns.Research shows that the inability to restore the bond between thereinforcement and concrete is a key reason why epoxy injection doesnot fully restore the stiffness of the cracked elements and is the primaryreason for rejecting epoxy injection as a means to restore the concretecolumns in the 33 – 41 Moorhouse Avenue buildings.(e) In this building there are concrete columns which have horizontalcracks that are more closely spaced at the bottom of the columns. Thisis indicative of transverse (east-west) flexural response of the concretecolumns during earthquake shaking. Applying a force at the top of anopen double height frame such as those which exist at 33 and35 Moorhouse Avenue will cause the structure to deform more than ifthe same force was applied to a single-storey, short, squat solid wall.Because epoxy injection will not, in Ms Stanway's view, restore the fullstiffness of the concrete columns, the building framework will suffergreater deformation in future earthquakes and so there would be agreater risk of damage to the brittle elements of the building such ascavity brick walls, plasterboard walls and ceilings and fire ratedplasterboard walls and ceiling linings.(f) The beam-column joints in the older parts of the building have beenconstructed with butt welds to connect two ¾-inch reinforcing bars ontothe top of the cut 1.5-inch main column reinforcing bars and two ¾-inchreinforcing bars welded onto the side of the 1.5-inch column bars.Ms Stanway says this connection is brittle and has low capacity to resisttransverse (east-west) building deformations before failure of the weldswould occur. Reduced residual stiffness of the building in a transversedirection following epoxy injection of the cracks to the columns in thisarea would increase the deformation of these frames and result inincreased loads on these critical connections, leading to a higher risk ofdamage to these joints. In her view, rebuilding the concrete columnswith new code compliant connections to the rafters would be requiredto restore these components of the building.(g) Structex have observed damage to the grout behind the end plates ofthe steel beams which support the mezzanine floor in 33 and35 Moorhouse Avenue. Ms Stanway expects that the damage to thegrout behind these end plates is caused by the transverse deformationof 33 and 35 Moorhouse Avenue during the earthquake. There are alsocracks in the southern concrete moment frame wall which she says isas a result of east-west deformation of the building. Ms Stanwayconsiders the concrete elements of this original portion of the buildingwere constructed with plain round reinforcing bars, and bar slip, or lossof bond, is more likely to have occurred as a result. Again, Ms Stanwayis of the view epoxy injection will not fully restore de-bonded plainround bars and so would not restore the concrete frame to an "as whennew" condition, and therefore the south end wall needs to bedemolished and rebuilt.(h) Ms Stanway considers it possible that the surface widths of the cracksin the concrete may not indicate the width of the crack underneath,saying a surface crack of 0.2 mm in a concrete beam of the buildinghad an underlying crack of 0.5 – 0.6 mm. By implication, on Vero'ssuggested approach to cracking, some cracks wider than 0.2 mm willnot be repaired relying on the width of the visible surface crack alone,which may be less than 0.2 mm.(i) Ms Stanway repeats her concerns that "[d]amage to reinforcement inreinforced concrete elements cannot be ruled out". If the reinforcementhas yielded, it is more susceptible to strain ageing and this in turn cansignificantly reduce the available strain capacity of the reinforcementwhich cannot be restored by epoxy resin.(j) She says there is a risk that cracks have led to corrosion of reinforcingbars, and epoxy injection cannot repair damage from corrosion.(k) Finally, Ms Stanway says whilst testing of epoxy injection can beundertaken, it is limited to being able to inspect the penetration ofepoxy into cracks at discrete locations. Testing to confirm the concretestrength has been restored, adhesion has not been compromised, andthe full stiffness of the building has been restored, cannot beundertaken. For this reason, she says the proposed BMC repair strategycannot be verified.[94] In terms of Vero's proposed repair strategy for 43 Moorhouse Avenue,Ms Stanway considers the verticality survey undertaken by the surveying firm, Myall& Thurlow Consultants Ltd,16 suggests the entire building has suffered a rotationaltwist during the earthquake indicating a torsional response by the building. In herview, this is likely to be the cause of the diagonal cracking and spalling observed atthe ends of the precast panels on the long eastern wall. She says that concrete cracksin excess of 0.3 mm will impact the long term durability of the wall and its stiffness.Based on the observed damage at each end of that wall, she expects there will be cracksin excess of 0.2 mm that will need restoration along the wall's length. As there is noaccess to complete restoration of the cracks, she says these panels would need to beremoved and replaced or restored to achieve an "as when new" repair.[95] In terms of the extensive cracking which has been observed on the first floorslab when the carpet tiles were removed, Ms Stanway says there is a significantdifference between cracks that form as part of the initial take-up of gravity load, andcracks that form during earthquakes. Cracks that form through shrinkage and gravityare controlled by the reinforcement which is apportioned to that area. However, cracksthat form during earthquakes can be significantly wider than those that form throughgravity, and the reinforcement in the concrete can be stretched plastically. In addition,the shear strength along the cracks, derived through "aggregate interlock",17 willdegrade under the cyclic movement that occurs along cracked interfaces. Thedegradation of aggregate interlock and the consequential reduction in shear strength ismore critical in floor slabs than in elements such as beams and columns which containshear reinforcement. Consequently, she says aggregate interlock will not be restoredto the "when new" condition through epoxy injection of cracks in the first floor slabat 43 Moorhouse Avenue.[96] Again, relying on her literature review, Ms Stanway says the stiffness of43 Moorhouse Avenue will not be restored through injecting epoxy resin in the cracks16 This is a separate but associated firm to Thurlow Consulting Engineers & Surveyors Ltd whichprovided the DEEs for Vero in August 2016, and it provided surveys which were appended tothose DEEs.17 As is explained in Dr Brooke's evidence, this is the ability of the coarse particles in concrete tocreate frictional resistance to slippage which would otherwise occur along a crack when a shearforce is applied across it. As crack widths increase, the effectiveness of aggregate interlockdecreases.in the floor slab. A reduction of stiffness of the first floor slab will increase the"liveliness" of the floor, and occupants can be sensitive to this. Accordingly, sherejects the BMC repair strategy which proposes to epoxy inject cracks in excess of0.2 mm in the floor slab and in the exterior of the eastern wall, saying this will notachieve a "when new" restoration.Evidence for Vero[97] Vero advances the structural repair recommendations prepared by BatchelarMcDougall Consulting Ltd (BMC) and reviewed by Dr Nicholas Brooke ofCompusoft.[98] Dr Brooke's areas of specialist professional expertise include the design andassessment of reinforced and pre-stressed concrete and concrete masonry structures,and the effects of earthquakes on such structures. He has taught at the University ofAuckland, Department of Civil and Environmental Engineering, primarily in relationto reinforced and pre-stressed concrete, seismic design and concrete materialstechnology. He has been a member of the review committee for the New ZealandConcrete Structures Standard (NZS3101) and technical editor of the MBIE-fundedworking group charged with improving New Zealand provisions for assessment ofexisting concrete buildings.[99] He was involved as an external peer reviewer of the literature review ofresearch pertaining to epoxy injection which was undertaken by BMC and recentlypublished in the Structural Engineering Society of New Zealand Journal. While thisdocument was provided in evidence in this hearing, he points out his review of thisdocument was undertaken prior to, and independent of, his engagement in thisproceeding. Like Ms Stanway, he also has extensive experience in assessingearthquake damage in buildings from both the CES and the Wellington earthquakes in2016.[100] Dr Brooke reviewed the BMC reports and generally agrees with the repairsproposed in those reports as achieving the policy standard. In his view, there is ampleevidence that epoxy injection is a widely accepted method of repair to cracking inconcrete and will meet the requirements of the Building Code if used appropriatelyand installed competently. He considers this is supported both by the literature and bypractical examples.[101] He points to MBIE determination 2013/071, where the Christchurch CityCouncil sought guidance on whether the repair of cracks in an unreinforced concretefoundation was a code compliant repair which was exempt from the requirement forbuilding consent. In that determination, Dr Brooke says MBIE held that crack repairsto concrete by injection with an epoxy resin or a low viscosity grout, have similarproperties to concrete. As those repair materials were comparable to the existingconcrete foundation, the work would be exempt from building consent under sch 1 ofthe Building Act.[102] He notes that epoxy injection has routinely been used in Christchurch since theearthquakes in 2010 and 2011 as a method of repair for cracking of concrete andconcrete masonry. It has been used in much more significantly damaged buildingsthan those considered here, including:(a) The Christchurch City Council offices;(b) The Crowne Plaza hotel;(c) The Novotel hotel;(d) The Millennium Hotel; and(e) The Christchurch Town Hall.[103] Dr Brooke also says that while there is no New Zealand standard covering theuse of epoxy to repair cracks in concrete, methods for repair by epoxy injection aredescribed in a bulletin published by BRANZ.18 There are also overseas standards andspecifications defining how epoxy should be used for repairing cracks in concrete. Forexample, the ACI has published numerous documents addressing the use of epoxy torepair cracks. In particular, the ACI has published the standard specification18 Formerly the Building Research Association of New Zealand.describing quality control requirements and methods of application for injection ofepoxy into cracks in concrete.19 A specification has also been published by theAmerican Society for Testing and Materials which is referenced in the ACIspecification. The appropriateness of epoxy injection as a method of repair for cracksin concrete has also been recognised by organisations such as the US Army Corps ofEngineers and the Federal Emergency Management Agency (FEMA), and standardswhich have been published in Europe and Japan.20[104] In terms of whether an epoxy repair meets the policy standard, he says epoxyis a comparable material to concrete, and concrete repaired by epoxy is not inherentlyinferior to concrete which has not been repaired in this way. In his view, concreterepaired with epoxy will have equivalent performance to the original concrete, andadditional steps can be taken to restore (or enhance) the original aesthetic. This canbe achieved by coating the wall after repair, whether with paint or with a proprietaryproduct such as Nawkaw, which will restore a concrete-like look to the surface.[105] Dr Brooke's evidence responds to the concerns raised by Ms Stanwayregarding the efficacy of epoxy injection in this particular case. While he accepts thatepoxy injection cannot repair damage to reinforcement, he does not consider there isany evidence that the reinforcement in the buildings has been damaged. First, hedefends his conclusion that the buildings suffered minor damage by noting that thecracks are "overwhelmingly narrow", typically being of hairline width. The lack ofearthquake-induced spalling of concrete and the minimal damage to brick masonryinfills in 39 – 41 Moorhouse Avenue suggests the displacement experienced by thebuildings was minimal. While Ms Stanway refers to the reinforcement "yielding",Dr Brooke says not all yielding results in damage and steel can maintain its strengthdespite deforming plastically, until very large strains are imposed. He says there is noevidence that yielding of reinforcement has occurred here, let alone yielding thatconstitutes physical damage to the reinforcement. In his view, it is implausible that19 ACI Committee 503 Specification for crack repair by epoxy injection: An ACI standard (ACI503.7-07, 2007, Detroit).20 BSEN 1504-2:2004 Products and Systems for the Protection and Repair of concrete structures –definitions, requirements, quality control and evaluation of conformity (Part 1 – 10) (BSI, 2004,London); and JBDPA (2016) Guideline for Post-Earthquake Damage Evaluation andRehabilitation (in Japanese) (2015 revised ed, Japan Building Disaster Prevention Association,Toyoko).the reinforcement in the building has been damaged, saying this would only occurwhen cracks several millimetres wide occurred, and, even taking account of thepossibility cracks may have opened then closed again, there would be residualevidence of this such as substantial spalling of concrete and more obvious damage tonon-structural components of the building.[106] In response to the suggestion that strength at cracks may reduce due todegradation of "aggregate interlock", Dr Brooke is satisfied that epoxy injection wouldrestore any lost strength. This is because it would fill the gaps around and betweenpieces of aggregate in the concrete and cause each side of the crack to reengage withthe other. As long as cracks in excess of 0.2 mm width are epoxy injected, he issatisfied the shear strength would be restored to the policy standard, and any remainingunrepaired cracks would not materially reduce the strength of the building.[107] In respect of the concern that epoxy injection of cracks would not fully restorethe stiffness of the building, Dr Brooke agrees that the literature indicates that thestiffness of a concrete element after repair by epoxy injection is generally lower thanits stiffness prior to the occurrence of any cracking. However, Dr Brooke points outthat even if a 20 per cent reduction in stiffness in the repaired element occurs, thatcannot be assumed to be equivalent to the overall change of stiffness of the Moorhousebuildings relative to their condition when new. He concludes this for the followingreasons:(a) The extent of cracking in laboratory test specimens that were repairedand retested was typically much greater than the extent of cracking inthe Moorhouse buildings, and thus the extent of stiffness reduction islikely to be less than indicated by such testing.(b) Some parts of the Moorhouse buildings are not cracked and thereforewould not have any reduction of stiffness.(c) Ms Stanway says the reduced stiffness is in part due to the loss of bondbetween the concrete and the plain reinforcing bars in the repairedelements, but Dr Brooke considers bond degradation is unlikely to besignificant unless yielding of reinforcing has occurred. He says thereis no indication of the reinforcement having yielded in this building forthe reasons already outlined.(d) The overall stiffness of the building is affected by factors other than thestiffness of individual structural elements, so even if the stiffness of therepaired superstructure reduced by 20 per cent, the impact on thebuildings' overall stiffness would be less than 20 per cent.(e) Finally, unlike a laboratory test, these buildings are likely to have hadcracks from shrinkage since new, and such shrinkage cracking wouldreduce the "when new" stiffness of the building in any event.[108] While Dr Brooke said it is not possible to precisely state what change therewould be in stiffness of the repaired building when compared to the as new building,he considers the reduction would be less than 20 per cent and more likely somewherein the range of 5 to 10 per cent.[109] While he agrees that a reduction of stiffness in the building would, on average,increase displacement during a future earthquake, the increase is equal toapproximately half the stiffness reduction. Thus, a five per cent reduction in stiffnesswould result in a 2.6 per cent increase in displacement, and a 10 per cent reduction instiffness would result in a 5.4 per cent increase in displacement. In his view, theseincreases in displacement are insignificant.[110] To illustrate, Dr Brooke explains that he anticipates the interstoreydisplacement during the February 2011 earthquake was less than 0.5 per cent drift, thatis, approximately 25 mm at the top of the columns in the highest sections in the 33 –41 Moorhouse Avenue building. A 5.4 per cent increase of these values wouldcorrespond to approximately one millimetre of additional movement. For43 Moorhouse Avenue, the likely increase in displacement would be even less. Forthe "smaller" earthquakes referred to by Ms Stanway, the displacement increaseswould be even smaller.[111] For these reasons, Dr Brooke is satisfied that epoxy injection wouldsatisfactorily restore the stiffness of the building, and although some very narrowcracks less than 0.2 mm will not be injected, any impact that these would have on theresulting stiffness of the building would be negligible.[112] In respect of the lower fire resistance of epoxy, Dr Brooke accepts that epoxyis vulnerable to damage during a fire but does not agree that this vulnerability wouldhave any material effect on the building. First, he points out that the fine crackingevident in the structural components is not sufficient to have impaired their fireresistance ratings. The cracks are generally within the range of crack widths routinelyencountered in concrete buildings and would be considered acceptable in a newbuilding according to the New Zealand Concrete Structures Standard.[113] Damage to epoxy during a fire in the building could not compromise itsstability, nor create a risk to occupants. If, after repair, a fire caused epoxy to becomecompletely ineffective (and setting aside the other impacts of a fire), the buildingwould remain stable after that fire, and standing, just as it is now.[114] While epoxy is vulnerable to damage during fire, so are most other buildingmaterials to varying extents, including concrete. Concrete strength and stiffnessdecreases when it is subjected to elevated temperatures and suffers materialdegradation at temperatures of 200°C or less. When heated to 300°C, the UK ConcreteSociety says it should be assumed concrete has lost all its strength. Given a typicalhouse fire would reach temperatures of 700 to 1000°C, such a fire would not justdamage or destroy epoxy, but cause extensive structural damage to the concrete itself.For these reasons, Dr Brooke does not consider that fire damage to epoxy wouldmaterially increase the overall difficulty or cost of repair for a building subjected to aserious fire.[115] While Ms Stanway raises the possibility of corrosion of the reinforcingoccurring at cracks, which would impact on durability, Dr Brooke does not considerthat is a concern for these buildings. He says he has seen no evidence thatreinforcement at cracks in the building has corroded, let alone materially. If materiallevels of corrosion had occurred to steel embedded in concrete, he considers this wouldbe likely to cause the concrete to spall as a result of the steel expanding, and that hasnot been observed here.[116] Dr Brooke also points out that concrete is an alkaline material and thatalkalinity effectively precludes the reinforcing steel from rusting. While cracking candisrupt the alkaline environment and therefore increase the risk of corrosion, thatwould be dependent on the width of the crack and environment conditions. Relevanttexts indicate that cracks of less than 0.3 mm – 0.4 mm width have an insignificanteffect on corrosion of reinforcement in normal environments. For example, theInternational Federation for Structural Concrete states "crack widths up to 0.4 mm donot significantly reduce the corrosion protection of the non-pre-stressed reinforcementin concrete".21 That conclusion is reflected in the fact that, in New Zealand, crackwidths up to 0.2 mm are considered acceptable in all environments, and cracks of0.3 or 0.4 mm are acceptable in "normal" interior environments.22 For these reasons,he does not expect cracks of the widths seen in the Moorhouse buildings to have adetrimental impact on the durability of their concrete elements.[117] Dr Brooke rejects the relevance of Ms Stanway's reference to research byCalder and Thomson on corrosion in cracked concrete, saying that their report lookedat the risk of corrosion of reinforcement when de-icing salts were applied to concretebridges.23 De-icing salts, which contain high concentrations of chlorides, substantiallyincrease the risk of reinforcement corrosion, but that is not a relevant factor here.Other corrosion described in the research was corrosion that routinely occurs duringconstruction, being light staining without detectable metal loss, and there was noevidence that this corrosion had developed over the duration of the experiment.[118] The last topic Dr Brooke responds to is Ms Stanway's concern that repair byepoxy injection would not be reliable and is likely to fail prematurely because ofpractical difficulties. Dr Brooke accepts that oil, grease or dirt in the cracks couldreduce the effectiveness of epoxy if present in sufficient quantities. However, he does21 Structural Concrete Textbook on Behaviour, Design and Performance Volume 2: Basis of Design(International Federation for Structural Concrete (fib), Lausanne, 1999) at 77.22 P 3101 Concrete Design Committee for the Standards Council Concrete Structures Standard(Standards New Zealand, NZS3101.1: 2006 and NZS3101.2: 2006, amended August 2017).23 AJJ Calder and DM Thompson Repair of cracked reinforced concrete: assessment of corrosionprotection (Department of Transport (UK), Research Report 150, 1998).not consider this would be a realistic concern in the Moorhouse buildings, except forthose areas of the floor slabs where oil, grease and dirt could be tracked in by vehicles.Where there was reason to consider the cracks were excessively polluted, he considersit plausible that they would be cleaned by water blasting or some other industrialcleaning technique. Indeed, such cleansing is referred to in the relevant guidelines forepoxy injection of concrete cracks.[119] In terms of the durability of epoxy repairs, Dr Brooke considers Ms Stanway'sreliance on a report produced by the Concrete Society of England is inappropriate.First, the report and the paper referenced within it, were not related to the repair ofearthquake damage. Second, the predominant reason the repairs were required in thestructures was corrosion, which is not an issue here for the reasons he gives. Third,crack injection was undertaken in only 30 per cent of the structures, but schemesinvolving crack injection were said to be "70% successful". However, as crackinjection was evidently undertaken in conjunction with other repairs, there wasinsufficient data in the literature to determine whether the repair technique wasunsuccessful in the remaining 30 per cent due to the crack injection repair or to otheraspects of the repair scheme. Importantly, the reported failure modes were not relevantto crack injection of the building, and the predominant causes of repair failure wereincorrect design, poor choice of materials, and wrong diagnosis of the causes of thedamage. Dr Brooke says these concerns are not applicable to buildings where, as here,the cause is well understood and repairs have been correctly designed usingappropriate materials.Discussion[120] Moorhouse's criticism of epoxy injection is two-fold. First, it says that repairby epoxy injection is still the subject of research and there is limited guidance on itsuse to repair structural building elements such as reinforced concrete beams andcolumns. While not going so far as to say the use of epoxy resin is unproven,Moorhouse nevertheless submitted the Court should be reluctant to endorse it whenthere were still questions about its effectiveness to repair earthquake-damagedbuildings. Second, Moorhouse does not consider the evidence shows it will achieve arepair that meets the policy standard.[121] I need say little about the first concern. I am satisfied that the evidencedemonstrates that epoxy resin is an established and widely used method for the repairof concrete structures which have been earthquake damaged. As was stated in theabstract to the document referred to as the Hamburger report,24 "for more thanforty years, epoxy injection of cracks of limited width has been commonly used toperform repair of earthquake-damaged structures". While that report went on to recordsome of the same reservations about the efficacy of epoxy repairs that Ms Stanwaygave evidence on, it still acknowledged that, depending on the extent of damage, itwas possible to repair damage to reinforced concrete structures with epoxy injectionof cracks and restore their pre-damage strength.[122] I am also satisfied that there is considerable international guidance on the useand efficacy of epoxy resin which is relevant to epoxy injection repairs undertaken inNew Zealand. This includes guidance from the ACI, the US FEMA and the UKConcrete Society.[123] While Moorhouse says there is a lack of rules or guidance from regulatory orprofessional bodies in New Zealand regarding the use of epoxy resin to repairearthquake damage, this does not detract from the fact that it is a mainstream methodfor repairing earthquake damage, and there was ample evidence that, used inappropriate situations, such repairs would comply with the Building Code. That wasconfirmed in the MBIE determination 2013/071. It held that epoxy and concrete werecomparable materials, noting they were both strong in compression, but relativelyweak in tension, they were both specifically designed to resist compressive forces, andthey both had a similar durability and a similar resistance to the long-term effects ofmoisture. Indeed, epoxy resin has been used on numerous earthquake-damagedbuildings and structures in Christchurch, Kaikoura and Wellington over the past10 years.24 Nicholas G Wetzel and Ronald O Hamburger Evaluation of Epoxy and FRP Repair of Earthquake-Damaged Concrete Structures (Simpson Gumpertz & Heger Inc, November 2014) [Hamburgerreport]. This was a report prepared for the Christchurch City Council as to whether epoxy injectionof earthquake damaged reinforced concrete structures was capable of restoring them to "as whennew" condition.[124] In terms of proving its efficacy in real-life situations, I accept the evidence ofMr Higgins, a specialist contractor with experience in undertaking epoxy repairs incracked concrete, who said that core sampling carried out under engineeringsupervision confirmed that his company was achieving successful penetration of theresin to a target of 90 to 100 per cent filling of cracks.[125] The ability of epoxy resin to successfully repair earthquake damagedreinforced concrete structures in appropriate cases is confirmed by academic literature.This included the article initially prepared by BMC, which Dr Brooke peer reviewed,entitled Epoxy Resin Injection as a Repair Strategy for Concrete, which was publishedin the Structural Engineering Society of New Zealand Journal in 2020. WhileMoorhouse sought to criticise this paper as promoting the use of epoxy to reduce cost,and thus supporting the insurer's approach rather than focusing on a policy standard,the document was, in my view, a balanced academic review of the efficacy of epoxyresin injection as a means of repairing both reinforced and unreinforced concretestructural elements. It acknowledged the need to assess the cause of the cracks andlikely extent of damage to the structure, because damaged reinforcement could not berepaired by epoxy. It also referenced a range of industry standards and guidelineswhich could assist in identifying the appropriate repair method and verifying itsperformance.[126] In fact, the acceptability of epoxy resin as a possible repair strategy was notreally in issue by the end of the hearing, particularly when it was accepted byMoorhouse that some repairs in the 43 Moorhouse Avenue building could beundertaken using epoxy resin. The real issue is whether epoxy is suitable to repair thedamaged structural elements found in these buildings, particularly those with roundbar reinforcing, to restore the buildings to the policy standard. In my view, it is.[127] While Ms Stanway's evidence was thorough, in my view, she took an overlyrisk-averse approach. Her evidence was premised on the assumption that any possiblerisk of existing damage, whether confirmed or not, must be addressed by the repairstrategy. For example, when it was put to her that she had not offered any evidencethat there has been any yielding or plastic strains at 43 Moorhouse Avenue, herresponse was that "on the balance of probabilities [she was] unable to rule out damageto the reinforcements". In other words, if she could not rule out the possibility ofdamage, she simply assumed it was there, and that it should be addressed by the repairstrategy.[128] Similarly, when she was asked why she believed the reinforcing steel in thecolumns in 33 – 41 Moorhouse Avenue had yielded, she responded saying, "I thinkactually that probably there's unlikely to have occurred in the columns. I sayunlikely". When asked whether there was any other location throughout 33 – 41 or 43Moorhouse Avenue where she believed that yielding of reinforcement had occurred,she said "I can't rule it out. Potentially in some of the beams. But I certainly I do saythere hasn't been sufficient work to be able to rule it out is my position at this time".She went on to say that bond slip or damage would happen first. However, when askedwhy she considered loss of bond had occurred, she considered this was a question ofapplying "engineering expertise" and the key indicator was the cracking in the lowerhalf of the columns, allied with her assumption there had been "deformation".[129] These issues are important because, as she said in her evidence, it was theinability to restore the bond between the reinforcement and the concrete which wasthe key reason for rejecting epoxy injection as a means to restore the concrete columnsin most of the 33 – 41 Moorhouse Avenue building. If I am not satisfied on the balanceof probabilities that such damage has occurred, her main reservation about the use ofepoxy is addressed.[130] In that regard, I agree with Dr Brooke's assessment that there is no evidencebond degradation has occurred in the 33 – 41 Moorhouse Avenue building given thelimited evidence of other damage to the building which would indicate this hasoccurred. While I accept that cracks could close again, especially under the weight ofa column, so the residual crack width does not negate the possibility of bond slip, thereis so little damage to other components of the building that I do not consider there hasbeen the degree of deformation which Ms Stanway relies on to support her conclusionthat bond slip has occurred. As Dr Brooke says in his evidence:The extent of damage visible is strong evidence about the likely lateraldeformation during the earthquakes. For these buildings, this evidence issufficient for me to discount there being material 'hidden' damage". Similarly,I accept his conclusion that it is implausible that the reinforcement in thebuildings has yielded to the point of damage.[131] In my view, Ms Stanway's analysis incorrectly focused on the lack of evidenceto disprove the existence of damage. For example, she said there had been no physicaltesting for lost strain capacity of the reinforcement. However, that is to place theburden of proof on Vero to disprove damage. In any event, in the absence of anyindication that reinforcement has yielded (such as large cracks, spalling of concrete,and damage to other elements of the building), there is no reason to assume suchdamage has occurred.[132] Having reached the view that, on the balance of probabilities, there is nomaterial damage to the reinforcement, nor is there debonding between it and theconcrete, the primary concerns about the efficacy of epoxy to restore the stiffness ofthe building are eliminated. That accords with the conclusions in the Hamburgerreport (which Ms Stanway's evidence endorses), which supports the use of epoxyrepairs for minor or moderate concrete cracking but raises doubts about its use to repairsignificant damage, or to completely restore the bond between concrete andreinforcing steel, when that has been lost.[133] For these reasons, I accept Dr Brooke's conclusion that a 20 per cent loss ofstiffness to the building as a whole is not a likely outcome. Any loss of stiffness in therepaired element must also be compared with the relative stiffness of the building notlong after construction, where I accept it may already have had a number of minorcracks due to concrete shrinkage. Furthermore, whatever the loss in stiffness is in therepaired elements, that does not mean that the building, overall, suffers that loss ofstiffness.[134] For completeness, I also consider that the literature which refers to a loss ofstiffness appeared to be addressing much more damaged structures than in the presentcase. Even the Hamburger report spoke of cracks larger than six millimetres beingevidence of significant yielding and of damage to reinforcement which could not berepaired by epoxy. The cracks in the Moorhouse building are generally very fine, andthe repair specification would see all cracks over a minimum width of 0.2 mm repairedwith epoxy.25[135] Even if there is some loss of stiffness, I found Dr Brooke's evidence of howthat would transfer to additional displacement of the building, helpful. It is clear theadditional displacement the building would suffer under a moderate earthquake wouldbe so minimal that I am readily satisfied the building would be restored to"substantially as when new". Similarly, I do not consider that the proposed epoxyrepairs would increase the risk of deformation that would put column beam joints atrisk or increase the likelihood of damage to other internal structures of the building.[136] In terms of the other questions raised over the ability of epoxy repairs to restorethe building to the policy standard, I see no realistic possibility of corrosion of thereinforcement having occurred in this building. This is because the cracks are hairlinecracks, of a size which would readily be acceptable following a new build, and this isnot a case where the structure is exposed to highly corrosive materials in theenvironment.[137] A further reason for questioning the efficacy of epoxy to meet the policystandard was the fact epoxy will lose its strength when exposed to temperatures over150°C. However, given Ms Stanway's evidence a typical fire would reach thetemperature of 700 to 1000°, where the whole structure would be compromised, anydamage to the epoxy would be irrelevant. Moorhouse focused on a narrow possibilitywhere the epoxy-repaired section was not close to the fire but nevertheless reached atemperature of over 150°C and started to lose strength and stiffness. However, asMs Stanway acknowledged in cross-examination, at a temperature in excess of 200°C,the strength and stiffness of the concrete itself would decrease, so there was only avery narrow temperature band where it was possible the epoxy could be compromised,but not the concrete. Dr Brooke's evidence was that from his own experience, whena concrete building was damaged by fire, remediation would likely be required wellbeyond the directly fire-damaged elements in any event.25 As opposed to the assumption in the Hamburger report that epoxy repairs would only beimplemented for cracks over 1 mm in width.[138] I am satisfied that there is such a narrow band of opportunity whereby theepoxy might be damaged but not the concrete, being where a repaired sectionexperiences a temperature range between 150 to 200°C but not more, that this is a deminimis departure from restoring the building to "as when new". It does not meanepoxy repairs will depart from the standard of repairing the buildings to "substantiallyas when new".[139] Any concerns about the aesthetics of an epoxy repair are addressed, asMoorhouse accepted, by the use of a proprietary coating such as Nawkaw on theconcrete.[140] Finally, Ms Stanway and Mr Walker raised concerns about the practical abilityto implement effective epoxy repairs, particularly given the passage of time since theearthquakes. However, I accept Mr Higgins' evidence, as an experienced contractor,regarding the procedures for cleaning and preparing a crack for epoxy injection, andof the likely success of those repairs. As already noted, he explained that core samplescan be taken to check that cracks are being successfully filled to the requirement ofthe supervising engineer if that is required, and in his experience, such testingdemonstrates that the resin can successfully fill the cracks. Indeed, in Mr Higgins'experience, it is the concrete that is the weak link rather than the epoxy injection. Hehas observed that in later seismic events, cracks develop parallel with the originalcrack and not on the repair itself, demonstrating the strength of the epoxy resin bond.[141] Moorhouse's experts raised practical concerns about the ability to repaircracks. For example, that cracks may be wider underneath than is apparent from thesurface, and that cracks in concrete filled masonry walls may not align or, throughconcrete shrinkage, the concrete core may have a gap between it and the masonry shellwhich would lead to substantially more product being used than expected and the crackin the concrete core not necessarily being filled.[142] However, again I found Mr Higgins' evidence of assistance. He explained howsurface grinding is carried out on a concrete element which is cracked to determinethe true width of the crack with accuracy before beginning the epoxy injection process.He also explained how the viscosity of the resin could be adjusted so that it was thinnerto ensure it could penetrate very fine cracks (indeed, even partially filling cracks thatare less than 0.2 mm in width), or thicker where it was important to avoid resin runningaway. He also explained that where access was only available to one side of astructural element, resin penetration could still be carried out to a target of 90 per centby modifying the usual technique and product used. Similarly, he saw no difficultywith filling masonry block work, saying "injection resin will follow the path of leastresistance" and would "fill any localised cracks or voids in the composite element".In short, he was satisfied that the nature and extent of cracking he observed in thebuilding was "comparable with many other concrete structures where epoxy injectionhas been successfully used as a structural repair technique", and he saw no reason thatthe cracking could not be structurally repaired using standard epoxy injection andremedial techniques that his company was familiar with. I accept that evidence asdemonstrating the practical difficulties of completing repairs were overstated byMoorhouse's witnesses, and the cracks scoped by Vero to be repaired by epoxyinjection were suitable for repair by that process.[143] It follows that, on the primary issue, I accept the BMC repair scope is theappropriate repair scope. Epoxy resin can be used to repair relevant cracks in theseparticular concrete structures to the policy standard. However, there are a number ofother discrete issues which also need to be discussed because they are in contention,regardless of whether epoxy repairs are considered appropriate, and I discuss these inthe following section.Disputed issues – repairs to 33 – 41 Moorhouse Avenue[144] The repairs scoped by Vero's experts to 33 – 41 Moorhouse Avenue are, insummary, as follows:(a) Epoxy resin repairs to all cracks over 0.2 mm in the building's concreteelements including the reinforced concrete frames, concrete slabs, andmasonry block infill panels.(b) Damage to block and brick work mortar is to be repaired by replacingthe mortar and damaged bricks and epoxy injection of the few crackedblocks and bricks. The block work infill panels at the south end of41 Moorhouse Avenue will be replaced if they are double-skin blockpanels as Vero accepts that those cannot be repaired satisfactorily byepoxy injection.(c) Replacing the original asbestos roof cladding over 33, 35, 41 and partof 39 Moorhouse Avenue with a modern profiled steel roof as pricedthrough Newfield roofing.(d) Repairing all damaged plasterboard linings.(e) Additionally, in the hearing it was acknowledged that a small numberof masonry blocks on the 33 – 35 Moorhouse Avenue east-westintertenancy wall would be replaced.[145] Leaving aside the issue of whether epoxy repairs are effective, there are severaldisputes over the extent of repairs required. These issues relate to:(a) the 33 – 35 north-south intertenancy wall;(b) the northern infill panels to 41 Moorhouse Avenue;(c) the southern and eastern infill panels to 41 Moorhouse Avenue;(d) the floor slab in 33 – 41 Moorhouse Avenue; and(e) the extent of roof repairs.I discuss each of these issues in the following paragraphs.The 33 – 35 intertenancy wall[146] Vero does not propose replacing the upper section of the 33 – 35 north-southintertenancy wall which is now timber framed and GIB-lined in accordance withspecifications provided by Powell Fenwick for a fire wall. Vero says it discharged itspolicy obligations by meeting the cost that Moorhouse incurred in 2011 to replace thisdamaged upper section at the direction of Moorhouse's own engineers.[147] Moorhouse now claims this repair was intended to be temporary work underthe policy pursuant to the memorandum which covers "temporary repairs and othermeasures to secure the property or to make it safe or suitable for continued use".Moorhouse says the timber framed upper section falls short of the policy standard,which, it says, is "like-for-like", and it is entitled to further replacement of the wall inblock masonry. It also says Vero has not pleaded that full and final settlement hasarisen.[148] However, Vero says Moorhouse gave no indication, at the time the works wereimplemented, that it saw this work as a temporary repair. If Moorhouse had said this,Vero would have inquired into why permanent works could not be done from theoutset, particularly as there was also no urgency at the time, as the relevant part of thebuilding was not tenanted. Vero notes that it was Moorhouse's property managerwhich engaged Hawkins to undertake repairs, including this repair to the upper portionof the firewall, and in the absence of Moorhouse clarifying this was a temporary repairunder the policy, it should be treated as an agreed permanent repair.Discussion[149] As with any contract, an insured party is able to agree with an insurer to haverepairs effected and paid for in a manner other than a "like for like" fashion. In thiscase, the repair which Moorhouse implemented is a properly finished repair thatrepairs the wall to an "as new standard", albeit in different materials from the original.While the materials differ from the lower half of the wall, this is not unusual in thisbuilding which was developed in stages using a range of construction materials.[150] In my view, Vero was entitled to conclude that by paying for the reinstatementundertaken by Moorhouse, it had discharged its obligation to repair this section of thebuilding. Mr Dennis accepted in cross-examination that Vero wasn't told that thisreplacement was intended to be a temporary replacement, although he says hesubsequently "chastised" the property manager for authorising Hawkins to do this.However, whatever was occurring internally within Moorhouse does not change thefact that, from Vero's perspective, Moorhouse asked for the wall to be repaired in thisway and Vero agreed, and made payment. That is reflected in Vero's pleadings.Clearly, had Vero known Moorhouse was reserving its position to have the wallreinstated in block, it would have resisted paying for works which were obviouslymore sophisticated than a temporary repair.[151] For these reasons, I do not consider Moorhouse has substantiated its claim thatthese were simply temporary works to make it safe or suitable for continued use and,therefore it cannot claim an almost equivalent cost ($40,800 plus GST) tosubsequently reinstate it in block. It agreed to a repair that restored the building to awhen new condition, albeit in different materials from the original. This aspect ofMoorhouse's claim is rejected.[152] As a consequence, I do not need to consider the claim that the whole wallshould be replaced, not just the top blocks, or the dispute about whether, if the wall isreplaced, that should be done in 150 series blocks or, as Vero says, in 200 series blocks.41 Moorhouse Avenue northern infill panels[153] The lower half of the northern wall of 41 Moorhouse Avenue was originallyconstructed of concrete block and the upper half in lightweight timber with metalcladding. In 2012, at Moorhouse's request, Vero met the cost of replacing the lowerblock work sections of the wall with similar timber and metal cladding to the upperhalf.[154] Again, Moorhouse now says this repair was not a "like for like" replacementas the lightweight lower walls are not as durable and have inferior impact resistanceto the concrete block walls. Moorhouse says the contemporaneous correspondence,which referred to it being a "permanent" replacement, was from Vero's consultantsand does not support a finding that Moorhouse accepted that those repairs werepermanent. Moorhouse also notes that the builder's tax invoice sent to Vero describedthe works as "temporary works".Discussion[155] However, again, looking at the totality of the correspondence, I am satisfiedthat Moorhouse and its agents represented to Vero that this work was to be a permanentreplacement, and Vero agreed to pay for it on that basis. As noted earlier in thejudgment, Vero recorded in an email to Moorhouse's engineer, Mr Walker, that "wehave decided to deconstruct and permanently replace the blockwall with a hardie boardtype construction at the request of the owner." Thus, the suggestion that this shouldbe a permanent repair did not come from Vero. Furthermore, when Mr Dennis wascross-examined on this issue, he acknowledged it was envisaged to be a permanentrepair, saying "I think my statement or comments were at the time were you're wastingvarious money if you're doing a temporary repair. My preference is I can't see anyreason why we can't end up with a permanent solution". While there are referencesto temporary works on some documents, including the builder's invoices, I amsatisfied that an agreement was reached to implement a permanent repair as set out inthe emails between Vero and Moorhouse's engineers, Structex, and that agreementovertook any initial plan to do temporary repairs.[156] In short, while not a like for like replacement, Moorhouse and its agentsrepresented to Vero that replacement of the lower section with similar materials to theupper half of the wall would constitute a permanent repair and Vero paid for it basedon this understanding. I do not consider Moorhouse can now resile from that position,and Vero is right to exclude further work on this wall from the repair scope.Southern and eastern infill panels to 41 Moorhouse Avenue[157] On the southern elevation there is some cracking to the block infill panels. Thiswas initially scoped to be repaired by epoxy injection on the assumption the wallconsisted of a single layer of masonry block. However, information came to hand thatthe walls were likely to be double wythe, and Vero accepts that such walls are notsuitable for epoxy repair. If the panels are double wythe, then Vero agrees that it wouldreplace the infill panels on the existing foundation. That said, there is uncertainty overconstruction of the left infill panel. If it is verified as being single wythe, I acceptVero's position that it would be suitable for repair by epoxy injection.[158] On the eastern elevation there were four masonry block infill panels. In 2019,Moorhouse replaced the northern two infill panels with lightweight timber framepanels because the existing panels were earthquake prone, having suffered cracking inthe CES, and were a concern for the tenant. Vero accepts the cost of demolishing thosewalls is part of the repair of the earthquake damage. While there is some minorcracking in the remaining infill panels, Vero points out that none of the experts haveprovided evidence that they consider the mapped cracking to be earthquake caused.Both Dr Brooke and Mr Tolley, Vero's expert building surveyor, consider the cracksthey saw were not earthquake damage. In the absence of contrary evidence, I do notconsider these cracks are the result of earthquake damage which Vero is required torepair.[159] To the extent the infill walls need to be replaced, the issue arises whether thatshould be 150 series block or 200 series block as Moorhouse submits. Mr Walkerexplains that 200 series blocks are slightly deeper (190 mm) and heavier than150 series (which are 140 mm wide). Vero proposes the use of 150 series block toachieve replacement walls which are no heavier than the existing walls, therebyavoiding any need to replace foundations.[160] Ms Stanway and Mr Walker took issue with the use of 150 series block, sayingthat 200 series block would be the usual choice for new masonry walls. This is becausethe smaller cavity inside 150 series block leaves less room for filling withreinforcement and concrete, and so walls using them are more difficult to construct.Ms Stanway also said that if 150 series walls were constructed, these would be slightlynarrower than the original wall, creating an internal setback.Discussion[161] I accept Vero's evidence that construction of walls with 150 series block iscovered by the relevant New Zealand Standard and can be constructed by qualifiedbricklayers using appropriate equipment without problems. Indeed, a number ofexisting intertenancy walls in the building are constructed with filled 150 series block.[162] I am satisfied that 150 series block is appropriate to use here where the need toreplace infill walls arises. While more care will need to be taken when constructingwalls from these slightly narrower blocks, I consider the insurer is entitled to selectthis option rather than larger 200 series blocks which would necessitate expensive anddisruptive works to replace the foundations to carry the additional weight.[163] I also accept (as Ms Stanway acknowledged in cross-examination) that wherethe reduced dimensions of the block wall would create an internal setback that is notthere at present, this could be addressed by strapping and lining the wall to match theexisting wall depth. Accordingly, if any infill walls are to be rebuilt, I accept Vero isentitled to scope those repairs using 150 series block, and where necessary, to relinethe internal wall in a way that retains the current wall depth.Floor slab[164] Moorhouse initially argued the floor slab would need replacing in the 33 - 41Moorhouse Avenue building in order to install deep pile foundations. Moorhouse nolonger considers piling to be necessary but says the floor slabs need replacement tobring the floor levels to the 1:200 standard for floor slopes stated in MBIE's guidancefor residential homes and to remediate slab cracking to the policy standard.Moorhouse relies on surveys conducted by Envivo in June 2013, and by Myall &Thurlow in June and July 2016, to show that floor slopes exceed 1:200.[165] The Myall & Thurlow survey shows the maximum vertical variation is 66 mmfrom the highest to the lowest point on the ground floor of the 33 – 39 section of thebuilding. However, the report also shows the floors are generally at or better than the1:200 tolerance for residential floor slopes. For example, in the main area of theground floor comprising 33, 35 and 39 Moorhouse Avenue, the high and low pointsare separated by 40 m, and this equated to a grade of 1:600. There is only one area ofslope at the south end of the west elevation of this area of the building which exceedsthe residential tolerance where the grade is 1:125. In 37 and 37A, the maximum localslope at the ground floor concrete slab was 1:200, and in 41 Moorhouse Avenue themaximum local slope was 1:400. Thus, generally, the concrete slab complies with theresidential tolerances, and where it departs, it is only to a modest extent.Are the slopes in the floor slab caused by the CES?[166] The next issue is whether that sloping is earthquake induced. In my view, therewas a paucity of evidence to support this. The Thurlow report, which annexes theMyall & Thurlow survey, concludes that: "The degree of out of level to thetenancies of this building, we consider, likely is due to the original construction in themain part" and "the forensic evidence on site corroborates seismic induced movementto a negligible extent, if any, to the total off level observed.[167] While, of course, the authors of the Thurlow report were not available forcross-examination, I do not consider the evidence presented at the hearing took mattersfurther. Mr Walker acknowledged that there was likely to be some historic settlement,but said that if the soil was soft enough to have produced static settlement, it was allthe more likely that there was earthquake induced settlement.[168] However, other than Mr Walker's assertion in oral evidence, there was noevidence to support the floor slopes having been materially exacerbated byearthquakes, rather than settlement over time and I am not satisfied, on the balance ofprobabilities, that there is material settlement caused by the CES.26 In my view, too,the MBIE guidance for residential homes is not directly applicable to thesecommercial/industrial buildings. The suggestion that a more level floor is required inareas where high storage racking could be installed, which is at the rear section of thebuilding, is irrelevant given the area where the maximum slope exceeds the residentialtolerance is at the oldest end of the building, being the south end, where there aremezzanine floors installed, making the installation of high storage racking impossible.How should the cracks be repaired?[169] The next issue is whether the floor slab needs replacing because of the crackingidentified in it. The amount of cracking mapped on the WSP plans is limited, and thelargest cracks are found in the southern end of 39 Moorhouse Avenue which is an areatowards the rear half of the building used for storage of cars.26 He v Earthquake Commission [2019] NZCA 373 at [32].[170] While Vero does not accept that all the cracking is caused or exacerbated bythe CES, its repair scope includes epoxy injection of floor cracking over the entirecomplex and subsequent painting of the concrete floors within 33 and 35 MoorhouseAvenue for aesthetic reasons. Vero says that epoxy injection will return fullfunctionality of the slab and painting will restore the aesthetic quality of the floorwhere that is required. For example, painting is not required in the workshop carstorage area where the slabs have little or no aesthetic function. It is also not requiredin those areas of the buildings where the floor is normally covered.[171] Moorhouse, however, says epoxy repair of the cracking will be visible in theareas where there are no floor coverings. Installing floor coverings to try and concealepoxy repairs would increase the maintenance burden and would not be appropriate insome of the tenancies. Furthermore, epoxy repairs to the slab will remove the futurepotential to have a polished concrete floor as has been done in the reception area ofthe 33 tenancy, which is rented by a gym. Moorhouse also queries whether epoxyinjection can successfully be done on floors which are heavily contaminated, such asin the 39 tenancy which is used for vehicle repairs and storage.Discussion[172] There is no doubt that much of the cracking, particularly in the 39 tenancy, waspre-existing. The cracks in that area are wide cracks with rounded edges and areheavily contaminated with grime. However, realistically, Vero accepts that somecracking was likely caused or exacerbated by the earthquake which is why it hasscoped to repair all cracks in the floor slab over 0.2 mm.[173] I accept that epoxy resin repairs will return the full functionality of the slab,and that is the slab's primary purpose in this semi-industrial building. While I acceptthat Moorhouse has polished the concrete floor in the reception area of the gym at 33Moorhouse Avenue, I see no realistic prospect that concrete polishing would beundertaken in the other more utilitarian areas of the building. These areas are eithercarpeted where they are for office use, or where there is another gymnasium facilityin the 41 tenancy, or they are used for obviously industrial purposes such as the carstorage area to the rear of the building. Furthermore, the concrete on the ground floorhas obviously been laid in stages over time, and there is nothing to suggest it wouldbe suitable for concrete polishing. There is also nothing to suggest there would be acommercial imperative to undertake such work in these premises.[174] An insurer is not obliged to repair a building to its exact state when new. InTurvey Trustee Ltd v Southern Response Earthquake Services Ltd, an insured was heldto be entitled to replace native timber floorboards with equivalent timber where theycould have been enjoyed without significant work or expense at the time of damage.27However, where the floors had floor coverings that were glued down, the insured couldnot reasonably insist on native timbers being used that could be uncovered andpolished in the future.[175] I consider the present case is similar. The insurer is not required to meet thecost of the more expensive option where the cheaper substitute would perform thesame function. Here, it is the function of the slabs, rather than their actual or potentialaesthetic value, which is of the most importance when considering appropriateremediation. I am not satisfied Moorhouse would realistically undertake the expenseof polishing the concrete floors in what is clearly a utilitarian, semi-industrial building.As a result, I am satisfied that the slab does not need to be replaced and Vero's repairstrategy is appropriate.Repairs to the roof[176] Vero has agreed to meet the cost of replacing the roof over most of the 33 – 41Moorhouse Avenue building, based on a quote obtained from Newfield Roofing.Furthermore, in the joint expert report the parties' experts were agreed that damage tothe roof would be addressed by implementation of that roof repair. That roof repair isincluded in Vero's current scope of repair works. However, at the hearing, Mr Walkersuggested a more extensive scope of works was required for the roof. His scope,contained in his supplementary brief, included not just replacement of all areas ofroofing, but also new timber battens and rigid insulation, along with new redesignedskylights to "meet current building code requirements" along with "[n]ew flashings to27 Turvey Trustee Ltd v Southern Response Earthquake Services Ltd [2012] NZHC 3344, [2013] 7ANZ Insurance Cases 61-965.suit". He did not explain why he moved from the position he took during expertconferral, where the work covered by the Newfield Roofing quote was accepted asappropriate.Discussion[177] It is not clear to me why Moorhouse now proposes a different and morecomplex solution for repairing the roof. The only apparent reason for the change wasproffered by counsel in cross-examination of Mr Tolley, the building surveyor, whichwas that asbestos roofing had better insulation characteristics than steel and so a moresophisticated roofing system was required to meet the policy standard. However,without supporting evidence I am not prepared to place any weight on thosestatements, nor depart from the joint expert report which held that replacement withmodern, lightweight metal roofing material was an appropriate repair.[178] Furthermore, what Mr Walker is now proposing appears to be a more complexroof system than is existing and is one of the reasons why he considers buildingconsent would be required for the building works. However, I accept the evidence ofMr Tolley, a very experienced building surveyor, who was satisfied that reroofing,even if it was of the entire building, was replacement of a comparable component orassembly and would not require a building consent. While closely cross-examined onthis point, he remained clear that reroofing the building would be an exempt work.This was supported by his own experience in reroofing buildings.[179] I am satisfied that Mr Tolley's repair scope, which includes replacement of theasbestos roof cladding and cracked overhead glazing/skylights at 33 – 41 MoorhouseAvenue with modern steel roofing with equivalent clear panels to let in light, isappropriate.Repair scope – 43 Moorhouse Avenue[180] A range of damage has been identified to the more modern two-storey officebuilding at 43 Moorhouse Avenue, and the primary repairs relate to cracking in theconcrete panel walls and to the first-floor slab.The concrete wall panels[181] Both parties agreed that the building was constructed from second handconcrete wall panels and there was existing damage to them prior to the earthquakes.Dr Brooke's evidence explained that there was pre-existing cracking, for example, alarge crack on the north wall which had been ground and sealed. This was supportedby the fact that the building was photographed shortly after the September earthquake,and it was recorded in the associated report that there was no earthquake damage seenon the exterior but the repaired crack is visible. However, both parties also acceptedthat there is also cracking that has been caused or exacerbated by the earthquakes.[182] Moorhouse now accepts that the north, south and west wall panels can beretained and the repairs undertaken by epoxy resin injection. However, the east wall(which cannot be fully inspected because of its proximity to an adjacent building) isscoped for replacement, as are the first and ground floor concrete slabs. In practicalterms, as Dr Brooke said, this repair scope effectively entails demolition andreconstruction of the building.[183] The primary reason for Moorhouse seeking the replacement of the east wall isbecause Ms Stanway expects cracks to have occurred along this wall "as a result of acombination of torsional response of the building, in plane shear and uplift on theends of the panels as a result of earthquake demands". To support this opinion,Ms Stanway focused on a patch of concrete spalling, with cracks which extended fromit, at the bottom corner of the south end of this wall, saying this diagonal cracking andspalling at the ends of the pre-cast panels was likely caused by the torsional responseof the building during the earthquake. Consequently, she says, "[a]s there is no accessto complete this restoration, these panels will need to be removed and either replacedor restored to achieve an [as] when new restoration". She also considers that suchcracks cannot necessarily be repaired from the interior. Epoxy resin injection wouldnot restore cracks which are in excess of 0.2 mm on the exterior of the wall if they donot extend right through to the interior face of the wall.[184] Mindful of the assertion by Moorhouse's expert advisers that there were likelyto be further cracks in the inaccessible part of the wall that required repair, Veroundertook further investigation of the wall using a camera on a three-metre long polewhich was able to show additional, but not all sections of the east elevation. AsDr Brooke says, this investigation revealed features which were not related toearthquake damage, including core holes penetrating the depth of the wall and anchorsor reinforcing bars for the first floor protruding through the wall. Some minor crackingwas observed at the northern end of the otherwise obscured part of the wall. Dr Brookeconcluded that the investigations revealed narrow cracks which would not materiallyaffect the functionality of the building. As a consequence, he remained of the viewthat repair by epoxy injection, undertaken from the interior of the building, wouldachieve the policy standard.Discussion[185] I consider Ms Stanway drew conclusions from the Myall & Thurlow verticalitysurvey which it did not appear to support. I do not consider the earthquake damage tothe concrete wall panels is as extensive as suggested by Moorhouse's experts, nor thatthe verticality survey demonstrated the building had a permanent offset resulting fromearthquake-induced torsion. In fact, the western side of the building has responded inthe opposite way from that predicted if there had been a torsional twist, and the eastside of the building had no survey points measured apart from the ends, so it is hardto infer what vertical movement there has been, if any, along that line.[186] In any event, I accept Dr Brooke's evidence that:(a) The extent to which the building verticality is out of plumb is withinthe tolerances for verticality permitted during construction of concretebuildings. The only point which is not within these tolerances in factcontradicts the torsional response which Ms Stanway concludes hasoccurred.(b) If the building had suffered a torsional response, there would be morerisk of damage to the narrower north and south walls. Such damage isnot apparent which supports Dr Brooke's conclusion that the buildingdid not deflect significantly during the earthquakes.(c) The spalling damage in the south end of the east wall is likely to haveoccurred due to over drilling of connections during construction of thebuilding. However, I accept that the cracking which extends from thisarea of spalling is likely to be caused or exacerbated by earthquakes.In summary, I consider 43 Moorhouse Avenue has suffered only minor crackingdamage as a consequence of earthquake movement.[187] In terms of the risk of there being hidden earthquake damage on the east wall,I consider the further examination of that wall demonstrates that any cracking is likelyto be minimal and of the type which is suitable for repair by epoxy injection.[188] In terms of whether the east wall can be satisfactorily repaired by epoxyinjection from the inside, I accept Mr Higgins' evidence that given the relative thinnessof the concrete panels, he would expect that the cracks would likely travel rightthrough and be visible on the inside face. As long as there was a visible crack of atleast 0.2 mm on the interior face, there would be little difficulty in satisfactorily fillingthe crack and the operator would be capable of adapting to likely problems.[189] For these reasons, I am satisfied that Vero's repair scope for the crackingobserved in the concrete walls of 43 Moorhouse Avenue is appropriate.First floor slab[190] The first floor slab was constructed by filling a proprietary metal traycontaining reinforcing with concrete. There was no dispute that such floor slabs wouldsuffer from shrinkage cracks which would have occurred in the initial period followingtheir pour. Mr Walker agreed that there was evidence of pre-existing shrinkagecracking which had been exacerbated by the earthquakes. Furthermore, the fact thatsome of the cracking was pre-existing was supported by the photographic and videoevidence taken in July 2015 when carpet tiles were uplifted and new floor coveringslaid. These visual records show that lines of carpet glue lay across existing cracks,apparently undisturbed. However, no detailed crack map was prepared at the time, sothe only evidence of the damage is what is captured in these visual records.[191] Ms Stanway's evidence was that replacement of the first floor slab is requiredrather than epoxy resin repairs because:(a) there are extensive cracks in the slab caused by the earthquakes;(b) cracks caused by earthquakes are different from cracks caused byshrinkage or gravity. Earthquake cracking can mean the reinforcementin the concrete has been stretched plastically, sometimes in localisedareas;(c) furthermore, the shear strength along the cracks, derived through"aggregate interlock", will degrade under the cyclic movement thatoccurs along the crack interfaces and aggregate interlock will not berestored to an as when new condition through epoxy injection of cracks;(d) Vero "has not established there has been no damage to thereinforcement in the first floor slab"; and(e) literature research states that stiffness will not be restored throughimplementing epoxy crack injection, and this will increase the"liveliness" of the floor, which occupants will be sensitive to.[192] Dr Brooke's view was that the visible cracks, which ranged from 0.2 to 1.0 mmwere of a size which is routinely found due to shrinkage and gravity loading ofcomposite steel floors like that in 43 Moorhouse Avenue. However, if some of thosecracks were caused by earthquakes, he did not agree that the earthquake movementhad also damaged the reinforcing steel. Dr Brooke said that research in this areashowed that where there were more significant cracks of 1.0 mm to 3.0 mm in concreteelements which were then repaired with epoxy injection, "they still observed nonegative impact from the behaviour of the reinforcing steel" even after subjecting themto many cycles of loading. While there might be yielding where cracks of0.7 – 0.8 mm had formed where they crossed a reinforcing bar, in his view, unlessthere was buckling of reinforcing bars, then there would not be damage to thereinforcing steel.[193] In that regard, there is uncertainty as to whether the floor slab contains HD10steel reinforcing bars or HRC mesh reinforcing. Dr Brooke strongly preferred theview that, relying on the construction plans, the original specification for mesh hadbeen altered to HD10 reinforcing bars. That type of reinforcement was more robustand, in Dr Brooke's view, would "obviate the need to replace reinforcement".Discussion[194] Regardless of what type of reinforcing there was, Moorhouse needed to prove,on the balance of probabilities, that there was damage to the reinforcement which wascaused by earthquake shaking and which warranted the floor being scoped forreplacement. This was not established by Moorhouse's experts simply asserting thatthey could not rule out the possibility of damage to reinforcing. On the contrary, itwas for Moorhouse to satisfy me that there had been damage to the reinforcing thataffected the performance or structural integrity of the floor.[195] I also accept Vero's submission that the reference to hearsay statementsregarding the floor being more "lively" was an insufficient basis for recommendingreplacement of the slab. While the fact there are cracks of 0.6 – 0.8 mm in width, canindicate that the reinforcing has yielded, I accept Dr Brooke's view that it does notfollow that it has been damaged. My view is also supported by Mr Higgins' evidence,where he said he had undertaken many epoxy injection repairs on this type of floorand that remediation was successful. As I am not satisfied, on the balance ofprobabilities, that the reinforcement is damaged, I consider epoxy injection repair ofthe floor slab is an appropriate way to repair the first floor slab.Ground floor slab[196] The ground floor slab has not been inspected for cracks as the majority of it iscarpeted. However, Moorhouse says that the existing foundation would need to bedemolished along the eastern elevation to remove the existing panels because they are"integrally connected to the foundation". If the ground floor slab does not need to bereplaced because of this work but is found to have cracks in it, Moorhouse says epoxyrepair of the existing foundation slab will give rise to the same aesthetic issues as forthe 33 – 41 building. Again, part of the 43 Moorhouse Avenue building concrete floorslab has been polished and exposed, and Moorhouse says there is potential for that tooccur over the remainder, warranting replacement rather than repair of the groundfloor slab if it is cracked.Discussion[197] Given I do not consider the east wall needs replacing, there is no requirementto replace the ground slab to accommodate this. I accept that the entrance andreception area of this building has a polished concrete floor. However, the officesthemselves are carpeted, and as already stated there was no evidence regarding thestate of the floors under the carpet. Moorhouse has not therefore, established there isearthquake damage to the ground floor needing repair. Even if there was, in my view,it is unrealistic to consider that in an office environment, the areas where people workwould not be carpeted as they are at present. Even if there was cracking of the groundfloor, I do not consider it would be reasonable to expect Vero to bear the cost ofreplacing the entire ground floor slab to protect what I consider is a highly unlikelyfuture option of polishing the concrete floor which is currently carpeted.[198] Once again, I accept Vero's repair scope, which is to include an allowance forinspection of the ground floor slab to determine whether there are cracks requiringepoxy injection, and then to repair those with epoxy injection, is appropriate.Hardstand area[199] The Moorhouse buildings are surrounded by a large area of hardstand, partlyconcrete and partly asphalt, laid in different sections at different times. Moorhouse'srepair scope proposes to completely replace all areas of hardstand. This is because atopographical survey which was undertaken by Myall & Thurlow shows areas ofunevenness which Moorhouse attributes to earthquake damage.[200] While Vero is sceptical that a material cause of the unevenness is earthquakedamage, it has nevertheless scoped to replace some of the hardstand area where it waspossible that cracks in the asphalt surface were earthquake induced. In respect of theconcrete hardstand area, Mr Tolley considers the cracks are generally pre-existing,having smooth, rounded, weathered edges, but others have rough, jagged edgesindicating they are more recent and, for that reason, he has also scoped to replace allthe concrete. In Mr Tolley's view, the balance of gradient across the hardstand area isconsistent with it being tilted to allow it to drain and the undulation is consistent withits age and general wear and tear. Mr Tolley also notes that the asphalt had existingpotholes and patch repairs as a result of ongoing maintenance.[201] Moorhouse's primary criticism of Vero's scope of works is that it is a"piecemeal replacement" that is not going to restore a "when-new" appearance.Discussion[202] I accept Mr Tolley's evidence, which is that the asphalt had been installed atdifferent times with different types of asphalt, so what he was doing was allowing toreplace specific sections at the existing joins, so that for each earthquake damagedsection which is replaced, it would be "as when new". I consider what Moorhouse isseeking is an improvement on "as when new" by wanting an entirely uniformhardstand area when that was not how it was originally installed.[203] In my view, Vero's proposed repairs are an appropriate response applying thepolicy standard, and Vero's scoping is to be preferred over that of Moorhouse.Is building consent required?[204] The Building Act 2004 requires building work to be carried out with a buildingconsent,28 unless the work falls within the exemption provisions in sch 1 to that Act.29[205] Where building consent is required, that triggers the following requirements:(a) the building is to comply as near as is reasonably practicable with theprovisions of the Building Code relating to means of escape from fireand, where applicable, access and facilities for persons withdisabilities;30 and28 Section 40.29 Section 42A30 Section 112.(b) in the case of a building subject to an Earthquake Prone BuildingNotice, s 133AT applies instead of s 112 and, in addition to therequirements in s 112, the building must also be seismicallystrengthened to 34 per cent NBS if the alteration is a "substantialalteration", as defined.[206] For completeness, Vero notes that where an owner changes the use of abuilding, that also triggers certain requirements. Specifically, the building is to complyas nearly as is reasonably practicable with every provision of the Building Coderelating to means of escape from fire, structural performance, fire-rating performanceand other matters specified in s 115. This is a higher standard than under s 112 and133AT, and is relevant here as Moorhouse has recently obtained building consent fora change of use of the buildings.[207] The parties were agreed that if Moorhouse's scope of works was required tomeet the policy standard, building consent would inevitably be required, triggering theneed for other relevant upgrading works which Vero would be required to fund as partof its policy response. However, if (as has transpired) I preferred Vero's scope ofworks, Vero says the works fall within the general repair, maintenance andreplacement exemptions in sch 1, pt 1, cl 1 of the Building Act, and such works canproceed without building consent. The two cl 1 exemptions relied on by Vero are:(a) repair and maintenance of an existing component or assembly, providedcomparable materials are used (cl 1(1)); and(b) replacement of an existing component or assembly with a comparablecomponent or assembly, provided replacement is in the same position(cl 1(2)).[208] Moorhouse's position is that even Vero's proposed scope of repair works wouldrequire a building consent. This relies on Mr Walker's opinion which is:(a) the new roof cladding, as proposed by Vero, would involve changes thatcould affect the weathertightness of the building, specifically in relationto the replacement of skylights, and therefore would require a consent;(b) epoxy crack injection repairs would require consent, noting that a 2012Christchurch City Council email stated that such work did not qualifyas exempt work under the Building Act sch 1 because it was not a repairusing a comparable material, although the Council would be preparedto consider exempting some injection work under the Building Actsch 1(k);31 and(c) the replacement of some block infill panels at 41 Moorhouse Avenuewith reinforced block masonry would not be exempt work because theinfill panels contribute substantially to the structural behaviour of thebuilding.Discussion[209] In my view, none of the factors relied on by Mr Walker support the conclusionthat a building consent is required to complete Vero's scope of repairs. I am satisfiedthat the replacement of the damaged asbestos roof cladding with new profiled metalcladding is replacement with a comparable component or assembly in the sameposition. Contrary to Mr Walker's understanding, the new roof will not requirefundamentally different construction methods, to the existing roof. Rather, the roofcladding will be located in the same position, using a construction method that issimilar to the existing, and the new cladding will not result in any change in the loadto the building. Despite the use of different materials, the new roofing fulfils a similarfunction. Indeed, MBIE guidance documents use the example of proposed roofreplacement as a type of work which would fit within the exemption in cl 1.[210] Mr Tolley's evidence also confirms that the proposed roof replacement overmost of 33 – 41 Moorhouse Avenue falls within the exemptions in cl 1(2) asreplacement with a comparable material or component and I accept that evidence. In31 The equivalent section in the Building Act 2004 is now sch 1 cl 2.particular, he rejects Mr Walker's suggestion that building consent will be neededbecause the roof framing will change or that there will be a change in weathertightnessdetails for the skylights. The roof framing will not change under his scope of repairs,and the skylights (which are simply clear panels designed to let in light), will simplybe replaced with additional flashings if required.[211] I also accept that the proposed epoxy crack repairs are exempt work undercl 1(1) of sch 1 as repair and maintenance with a comparable material. This issupported by MBIE determination 2013/071 which determined epoxy was similar andcomparable to concrete. The email advice from the Council to the contrary predatedthis determination and so was premised on an incorrect assumption.[212] While Mr Tolley said he would defer to engineers on this issue, here, anexperienced structural engineer, Dr Brooke, did not consider that building consentwould be required. Given the extent of epoxy injection work proposed here is notgreat given the size of the buildings, and is being used to repair relatively minordamage and fine cracking, I am satisfied, on the balance of probabilities, that the epoxyrepair work would be exempt as of right.[213] Finally, to the extent that some block infill panels may need to be replaced at41 Moorhouse Avenue, I consider this work, too, falls within the sch 1 exemption.This is because the new infill walls:(a) would be comparable to the existing infill panels as they will be locatedin the same position, perform a similar function and use a similarconstruction method to the existing walls;(b) would not be a "complete or substantial" replacement – the portions ofthe wall assembly to be replaced are less than 50 per cent; and(c) would not be significant in terms of their contribution to the building'sstructural behaviour, nor do they carry significant load. As Dr Brookesaid, they can be removed and replaced without any appreciable impacton the building.[214] Accordingly, I do not consider the works will trigger the need for buildingconsent and the associated requirement for other compliance works to be undertaken,and the scope of repair works does not need to include these.Indemnity entitlement[215] The parties are in dispute over what constitutes Moorhouse's indemnityentitlement under the policy. As already noted, the policy provides that indemnityvalue is:The reinstatement cost of the property to a condition not better or moreextensive than when new less due allowance for depreciation and deferredmaintenance.[216] The policy provides that an indemnity value claim is to be settled "at the timeany loss or damage occurs". This issue was of particular concern to Moorhouse if Iheld that its repair scope was appropriate. The cost of implementing it far exceededthe sum insured and, even taking into account a due allowance for depreciation anddeferred maintenance, Moorhouse says it would be entitled to be paid the full suminsured. A delay in paying that would mean, in practical terms, Moorhouse suffered aloss as by the time full payment was made, the value of that sum would be diminishedby inflation. That is not the position if Vero's scope of works is accepted, as indemnityvalue (however calculated) is substantially less than the total sum insured.[217] For completeness, it was acknowledged during the course of the hearing thatthere were some errors and omissions in the costed scope of works, and someadjustments would need to be made. For example, no allowance has been made forthe Nawkaw proprietary coating system to be applied and the replacement of7.5 blocks on the 33 – 35 east-west intertenancy wall was omitted from the scope. Iexpect the parties can adjust Vero's scope of works to reflect these concessions, andthe consequent calculation of indemnity value, subject to the following issue.[218] Vero's position is that its obligation to pay indemnity value is capped by theindemnity value of the building when the damage occurred, as to pay more would bea clear breach of the indemnity principle. This is still a relevant issue as Vero says ithas now paid more than indemnity value whether calculated on a depreciatedreplacement cost basis, or on market value. In that regard, Ms Brick for Vero, relieson the valuation evidence of Mr Stanely, a registered valuer, in respect of the buildings.His valuation evidence can be summarised as follows:Buildings DepreciatedReplacementCost (physicaldepreciation)Depreciatedreplacement cost(marketdepreciation)Market Value33 – 39 Moorhouse $861,305 $714,204 $742,00041 Moorhouse $159,331 $123,812 $128,00043 Moorhouse $1,387,132 $1,387,132 $1,370,000[219] Vero says the depreciated replacement costs set out above, calculated on amarket depreciation basis, are the maximum amounts Moorhouse could be entitled toas indemnity value under the policy, regardless of any findings as to the scope ofrepairs.[220] At issue between the parties is whether the definition of indemnity value in theinsurance contract means that Moorhouse could be entitled to an indemnity paymentwhich exceeds the building's indemnity value calculated in accordance with one of themethods provided in evidence by Mr Stanley.32[221] Moorhouse's position is simple: the contractual definition of indemnity valueapplies regardless of whether this exceeds market value or such other accepted methodof calculating the indemnity value of the building.[222] Vero's position is that in applying the definition, one must have regard to theindemnity principle as enshrined in the case of Castellain v Preston, which is afundamental principle of insurance law.33 When calculating indemnity value, the32 It seems to me it does not make a significant difference which method is chosen and, in any event,I did not hear full argument on this issue.33 Castellain v Preston (1883) 11 QBD 380 (CA) at 386.policy provision should be read and applied in a manner consistent with the indemnityprinciple. As was said in Castellain: the assured, in case of a loss against which the policy has been made, shallbe fully indemnified, but shall never be more than fully indemnified. That isthe fundamental principle of insurance, and if ever a proposition is broughtforward which is at variance with it, that is to say, which either will preventthe assured from obtaining a full indemnity, or which will give the assuredmore than a full indemnity, that proposition must certainly be wrong.[223] Ms Brick points out that the Supreme Court in Prattley Enterprises v VeroInsurance34 held that the statement of the indemnity principle is generally applicableto the assessment of losses under an indemnity policy, and it underlies theunwillingness of courts to construe policies so as to confer an entitlement whichexceeds the loss of the insured.35Discussion[224] I accept that where a policy is a true indemnity policy, the policy holder cannotreceive a benefit which exceeds their loss. However, policies of insurance can, byexpress terms, define how indemnity is to be measured and agree to pay the insuredsomething more. The obvious case is where a policy expressly says it will repair orreplace on a new-for-old basis. The insured will almost always be in a better positionafter making the claim than they were before.[225] In this case, while the term "indemnity" is used to describe the insured'sentitlement if reinstatement is not pursued (which suggests there was not intended tobe any element of betterment), the parties have chosen to define how indemnity valueis to be calculated. This was not the case in Prattley Enterprises which Vero relies on.[226] Instead, the indemnity entitlement of Moorhouse under the policy is to becalculated, pursuant to the definition of indemnity, by reference to the reinstatementcost of the property less due allowance for depreciation and deferred maintenance.34 Prattley Enterprises and Vero Insurance [2016] NZSC 158, [2017] 1 NZLR 352.35 At [35].[227] In Brescia Furniture Ltd v QBE Insurance, a similar situation arose.36 Theplaintiff owned a commercial building which was destroyed by fire. It claimed for itsloss under its insurance policy initially seeking reinstatement costs which exceeded$13,000,000. The insurance policy provided that if replacement, repair or rebuildingwas not commenced and carried out with reasonable dispatch, the insurer should notbe liable to pay more than indemnity value. The Court found that in the circumstancesof that case, Brescia was only entitled to be paid indemnity value.[228] The policy defined indemnity value as: the cost necessary to replace, repair or rebuild the Property Insured to acondition substantially the same as but not better or more extensive than itscondition at the time that the damage occurred taking into consideration age,condition and remaining useful life.[229] The insurer then argued that if it was liable to pay indemnity value to Brescia,it was restricted to the difference between the market value of the property before thefire and its market value after it. On the evidence that was a sum of $1,360,000, vastlyless than indemnity value as calculated in accordance with the policy definition.[230] The Court held that Brescia was "entitled to the benefit of the terms of itscontract"37 and "there is nothing in the authorities which supports the proposition thatsome overarching general principle displaces reinstatement or indemnity provisionssuch as the one in the policy".38 The Court found that that indemnity value calculatedin accordance with the policy was a little over $9,000,000 and that representedBrescia's entitlement, even though it exceeded market value by a large margin.[231] Similarly, in the present case, I consider the policy definition of indemnityvalue must prevail. Whether or not indemnity value calculated using Vero's repairscope as a starting point exceeds Mr Stanley's calculation of the indemnity value ofthe building or of its market value is unknown (although on Vero's view, unlikely).36 Brescia Furniture Ltd v QBE Insurance (Australia) Ltd [2007] NSWSC 598, (2007) ANZInsurance Cases 61-740; and Brkich & Brkich Enterprises Ltd v American Home Assurance Co(1995) 127 DLR (4th) 115 (BCCA).37 At [404].38 At [405].However, I can see no reason why, if it does exceed that value, it should not be payablein accordance with the express terms of the policy.The dispute over claims preparation costs[232] Moorhouse's amended statement of claim sought a declaration that Vero wasliable to pay Moorhouse "the claims preparation costs and professional fees due underthe policy". Moorhouse's claim for claims preparation costs and professional feestotals $485,619.04 including GST, for costs incurred to 31 May 2018 (which issix months after the litigation commenced).39 To date, Vero has paid a total of$28,649.17, being $18,649.17 for professional fees and $10,000 for claims preparationcosts.[233] Vero challenges whether the costs claimed have been "reasonably incurred" inpreparing Moorhouse's claim. A large portion of the claims preparation costs relatedto work by Moorhouse's property manager, Mr Simpson, and Vero queries whetherthis all related to preparation of the claim and not simply management of the tenancies.In terms of costs incurred in preparing expert reports, Vero resists these claims wherethe reports were never provided to Vero in support of the claim, or where they wererejected by Moorhouse, or where they scoped excessive repairs outside the policycover, such as for the deep pile foundation strategy. While I consider Vero is justifiedin expressing these concerns, I have not been asked to rule on these issues, so do notdo so. I have however, been asked to make a direction to advance resolution of thedispute over quantum. I deal with that in the next section which discusses the reliefsought.[234] Counsels' submissions also touched on the issue of whether claims preparationcosts were included within the sum insured or could be claimed in addition to it.However, neither of them expressly sought a declaration on this issue in theirpleadings. Accordingly, I do not make a formal decision on this matter either. In anyevent, given my finding as to which repair scope is preferred, the issue of whetherclaims preparations fall within or outside the sum insured is not likely to be an issue.39 Although some of these costs are attributable to the claim for 90 Hazeldean Road and otherHazeldean building claims which have now been settled.Relief[235] The relief sought by Moorhouse consisted of a range of declarations and ordersas to how Vero should perform its obligations under the policy. The relief sought wasmodified both in opening and closing submissions.The scope of works[236] The primary relief sought was a declaration that, for the purpose of establishingthe cost of reinstatement, the repair scopes prepared by Moorhouse's experts were tobe adopted and that these must include any work required pursuant to ss 112 or 133ATof the Building Act 2004 as far as that relates to fire escape, accessibility, and seismicwork.[237] It follows from my findings that:(a) Vero's scoping of repair works was appropriate;(b) such work is exempt from requiring a building consent under theBuilding Act 2004; and(c) the requirement to do additional work under ss 112(1) or 133AT(2) ofthe Building Act 2004 is not triggered,that such relief is not appropriate, and I decline to make the declaration sought.[238] It also follows that the consequent relief sought by Moorhouse for orders thatVero pay various sums which Moorhouse says it is entitled to under the policy,including the full amount of the sum insured for the buildings, is rejected.The approach to determining indemnity value[239] Moorhouse also sought a declaration that:40[I]ndemnity value under the Policy is established by:40 This is the form of the declaration sought as advised in opening and closing submissions.(i) determining the cost of the reinstatement of the property; and(ii) making a deduction for depreciation and deferred maintenanceassessed on an elemental basis having regard to the expected physicallife of the element.[240] To the extent the declaration sought simply replicates the definition ofindemnity value set out in the policy, I see no utility in making such a declaration. Theonly additional element to the declaration sought is that I specify that the deductionsfor depreciation and deferred maintenance are "assessed on an elemental basis havingregard to the expected physical life of the element".[241] I am reluctant to read into the definition of indemnity value, a requirement thatonly physical depreciation is to be considered. As Vero points out, the evidence ofMr Stanley was that an assessment of depreciation may be made on a market orphysical approach. Either approach requires the useful life of the building to beestimated in accordance with applicable valuation standards. In this case it appears itmakes little difference which approach is taken, although Mr Stanley's view is that amarket based approach to assessing depreciated replacement cost is to be preferred asit takes into account more factors than just age and condition, but also recognisesfactors such as obsolescence.[242] In my view, assessing the appropriate deduction for depreciation and deferredmaintenance is a factual assessment for the Court to make based on the circumstancesof a particular insured property. Furthermore, the parties have not sought in pleadingsa declaration on what approach should be taken in the present situation. Accordingly,I am unwilling to make a declaration which would put a gloss on the words of thepolicy and restrict this assessment to physical depreciation only.[243] To the extent Moorhouse says the deduction for depreciation needs to be madeon an elemental basis, that is, by assessing depreciation on the individual elements ofthe building which are to be replaced as part of its repair scope, that appears to beappropriate in this particular case where discrete parts of the building are beingrepaired. However, this would not always be the case. The policy itself says that:"Where any property insured under [the reinstatement memorandum] is damaged butnot Destroyed, [Vero's] liability shall not exceed the amount [Vero] could have beencalled upon to pay for Reinstatement if such property had been Destroyed." Thissuggests that an elemental approach to calculating indemnity will not always beappropriate, and where there is significant damage, an elemental approach cannot beadopted to circumvent payment of a depreciated replacement cost calculated on aholistic basis for the property.[244] Accordingly, I decline to make the declaration which is sought by Moorhousein respect of how indemnity value is to be established under the policy.The claim for interest[245] Moorhouse also seeking payment of "interest on the indemnity value at suchrate and for such period as the court should deem just". However, it is clear from thehistory of the claim, outlined at [42] to [76] above, that Vero was proactive in tryingto progress the claim in the period following the CES. Moorhouse then elected to takeover the preparation of engineering reports and repair scopes. It did not do so in atimely way, despite Vero prompting it on a number of occasions and offering to co-ordinate efforts with Moorhouse to reach an agreed outcome.[246] In my view, Moorhouse was responsible for the delay between early 2013when Moorhouse removed itself from the MWH programme and 2017, when, for thefirst time, Moorhouse said it would not accept repairs to the concrete cracks by epoxyinjection. It was that stance which led to the litigation which is addressed in thisdecision. In circumstances where Vero paid what it considered was indemnity valuein early 2018 based on updated reinstatement costs less depreciation and deferredmaintenance, and relying on a repair scope that has largely been endorsed by thisdecision, I am not satisfied it is appropriate to order that interest be paid on anyshortfall in payment of indemnity value (if, in fact, there is any).The claim for an order for an enquiry into damages[247] It follows from my various findings that I also do not consider Vero hasmaterially breached the policy, and there is no basis for an inquiry into damages as issought by Moorhouse.Liability to pay claims preparation costs and professional fees[248] Moorhouse seeks an order that Vero is liable to pay the claims preparation costsand professional fees due under the policy. There is no utility in making such an order.Vero acknowledges the policy obligation. What is disputed is whether the sumclaimed for is covered by the policy. That is yet to be determined.[249] In order to advance the dispute over the quantum of costs claimed, Moorhouseseeks that the Court make the following direction:that the parties consult with a view to agreeing an independent expert toassess whether claimed claims preparation costs and professional fees fallwithin the Policy entitlement and their reasonableness.[250] Clearly that would be a sensible course of action. However, such a directionwould be of limited efficacy if the parties cannot agree on an appropriate independentexpert. In my view, in the absence of agreement as to the appropriate course of action,it should be left to the parties to decide whether they:(a) continue negotiations on this issue between themselves;(b) appoint an independent expert to determine the issue;(c) submit the issue to a formal arbitration process; or(d) seek a determination from the courts.Accordingly, I decline to make such direction.Order reserving leave[251] Finally, Moorhouse seeks an order reserving leave to the parties generallyconcerning implementation of the above declarations and orders. Given I haverejected the relief Moorhouse has sought, this relief is not strictly relevant. However,I anticipate there may be residual issues arising as Vero's scope of works is refined inlight of concessions made during the hearing or as further investigation is undertakenof aspects of the building not yet inspected. I reserve leave to the parties to revert tothe Court on those issues alone.Result[252] The plaintiff's claim is dismissed. Moorhouse's entitlement to indemnity valueis to be calculated in accordance with the policy wording and based on Vero's scopeof works and repair costs estimates as modified by counsel and expert witnesses in thecourse of the hearing.Costs[253] Vero has been successful in its defence of the claim. Costs should follow theevent. In the usual course this would be 2B costs plus disbursements.[254] If the parties cannot agree on costs, I reserve leave to the parties to have costsdetermined by the Court. In those circumstances I direct:(a) any application for costs is to be made within 20 working days of thedate of issue of this judgment;(b) any response to that application is to be filed and served within a further10 working days;(c) any reply is to be filed and served within a further five working days;and(d) costs will be determined on the papers unless I need to hear from theparties.Solicitors:Rhodes & Co., ChristchurchFee Langstone, AucklandCopy To:Jane F Anderson KC, Barrister, AucklandADDENDUMAppearance Dates of CounselDates that trial was heard on:18-20, 22, 27-29 July, 1-3 August and 3-4 October 2022Moorhouse Commercial Park LimitedS P Rennie All dates except 3 August.J E Bayley All dates except 3-4 October.S A Foss All dates from 19 July.F H Scrase 18 July only.Vero Insurance New Zealand LimitedJ F Anderson QC 18, 19 and 20 July.C M Brick All dates.A R Cornwell All dates except 3 August and 3-4 October.