PINOT PROPERTIES LIMITED v VERO INSURANCE NEW ZEALAND LIMITED [2019] NZHC 2244

PINOT PROPERTIES LIMITED v VERO INSURANCE NEW ZEALAND LIMITED [2019] NZHC 2244 [6September 2019]IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYI TE KŌTI MATUA O AOTEAROAŌTAUTAHI ROHECIV-2018-409-000103[2019] NZHC 2244BETWEEN PINOT PROPERTIES LIMITEDPlaintiffAND VERO INSURANCE NEW ZEALANDLIMITEDDefendantHearing: 4 September 2019 (by telephone conference)Appearances: M J Borcoski for PlaintiffF A Darlow for DefendantJudgment: 6 September 2019JUDGMENT OF OSBORNE J(Transfer application)Introduction[1] Pinot Properties Ltd (Pinot), as the plaintiff in this Court in a claim on anearthquake insurance policy, applies for an order transferring the proceeding to theCanterbury Earthquakes Insurance Tribunal (the Tribunal). The defendant, VeroInsurance New Zealand Ltd (Vero) opposes the application.[2] The application has been dealt with in accordance with the Practice Note inrelation to such applications.11 Practice Note "Canterbury Earthquakes Insurance Tribunal Act 2019: Arrangements for transferof proceedings" (1 July 2019) HCPN 2019/2 (civ).[3] The single issue is whether Pinot's claim meets the criteria for a claim to bebrought before the Tribunal. Pinot says that the insured building and propertyconstitute a residential building and/or residential property. Vero says that they do not.Outcome[4] In this judgment I determine that Pinot's building and property do notconstitute a residential building or residential property. This flows from the Court'sconclusion that those terms primarily refer to the use to which the building andproperty is intended to be put and is put. Pinot's claim in relation to their damage inthis case does not meet the eligibility criteria to come before the Tribunal.The statutory regime[5] The Tribunal was established under the Canterbury Earthquakes InsuranceTribunal Act 2019 (CEIT Act) to:2 provide fair, speedy, flexible, and cost-effective services for resolvingdisputes about insurance claims for physical loss or damage to residentialbuildings, property, and land arising from the Canterbury earthquakes.[6] Section 9 of the CEIT Act specifies the claims which may be brought beforethe Tribunal:9 Eligibility criteria to bring claim before tribunal(1) The eligibility criteria to bring a claim before the tribunal are that theclaim—(a) must arise from a dispute between the parties under section 8;and(b) must seek resolution of liability, or remedies, or both; and(c) must be within the jurisdiction of the tribunal to make an orderunder section 46.2 Canterbury Earthquakes Insurance Tribunal Act 2019, s 3.[7] The application of the CEIT Act to damage arising from the Canterburyearthquakes to a residential building or residential property is provided for in s 8 ofthe CEIT Act, which materially states:8 Application of Act(1) This Act applies to disputes between policyholders and insurers aboutinsurance claims for physical loss or damage arising from theCanterbury earthquakes to a residential building or residentialproperty.(5) For the purpose of subsection (1), residential building andresidential property—(a) include similar terms (such as home) used in a contract ofinsurance between a policyholder and an insurer; and(b) have the meanings given in a contract of insurance toresidential building, residential property, or any similar term.[8] Section 16 of the CEIT Act provides for transfer of proceedings from a courtto the Tribunal:16 Claim brought by transfer of proceedings from court(1) If a person who is a policyholder or an insured person (or both) is aplaintiff in court proceedings relating to an insurance claim in dispute,a Judge may, on the application of that person or on the Judge's ownmotion, order that the proceedings be transferred to the tribunal.(2) An order to transfer proceedings may be made under subsection (1)only if—(a) the proceedings meet the eligibility criteria for a claim undersection 9 (however, the proceedings may also includeadditional parties to those referred to in section 8, but may notinclude a class action—see clause 6(2) of Schedule 2); and(b) the other party or parties to the proceedings have been givena reasonable opportunity to comment; and(c) the Judge making the order believes that the transfer is in theinterests of justice.Pinot's property[9] Pinot described its property in its statement of claim in the following terms:The Building on the PropertyThe plaintiff owns Lot 2, Deposited Plan 45933 (title reference CB27B/666),known as 205 Manchester Street, Christchurch (Property).At all material times, a building was situated on the Property (Building).Particulars4.1 The Building was originally constructed in 1882, and is a three storeybuilding comprising office space, a ground floor restaurant, and abasement used for storage, along with ancillary hard landscaping.4.2 Structural strengthening works were undertaken to the Building in1982.4.3 The main structural system is unreinforced masonry brick wallsaround the perimeter with timber frames internally (gravity loads).4.4 A new iron roof was installed in approximately 2008, along with newparapets and valley gutters.4.5 The Building has a floor area of approximately 1112m2.[10] The statement of claim goes on to assert that at 4 September 2010 the buildingwas leased to three tenants, being:(a) a company operating a café and bar business on the basement, groundfloor and northern courtyard areas (including two car parks);(b) a company whose business use was defined as "offices, signage, carparking and accommodation" on the first floor (including sevencarparks); and(c) a company whose business was defined as "offices andaccommodation" on the second floor (including one carpark).[11] In support of Pinot's application for transfer, its director Stephen Cohenprovided an affidavit. Mr Cohen identified the three tenants. He continued:8. The First Floor and the Top Floor were both purposed for residentialliving. They contained the following amenities:8.1 In respect of the First Floor:(a) Two toilets;(b) One full bathroom, including a shower and a toilet;(c) One kitchen, and(d) 7 bedrooms that could be easily occupied as such or,alternatively, used as offices.8.2 In respect of the Top Floor:(a) Two toilets;(b) One full bathroom, including a shower, a bath and atoilet;(c) One kitchen;(d) 4 bedrooms that could be easily occupied as such or,alternatively, used as offices;(e) Two large living areas; and(f) One balcony facing north.9. When the plaintiff purchased the building back in 1992 the Top Floorat the time was renovated to make it suitable for apartment use. Thiswas of long term appeal as my family lived in Melbourne and it wouldprovide a 'bolt hole' in Christchurch for when we retired.10. In addition, soon after the plaintiff purchased the building a Pat andJenny Scott lived on the Top Floor. After that, Lily Cooper also livedthere before the earthquakes. In addition, before Melbourne Limitedtook over the First Floor, an owner of a finance company lived andworked there for some time. As such, the Property has been used forresidential purposes throughout the time that the plaintiff has ownedit.[12] Mr Cohen concluded his affidavit by referring to claims made to theEarthquake Commission (EQC) in relation to earthquake damage to the Property. Heexhibited two letters from EQC to Pinot dated 16 September 2014, relating to theProperty, in which EQC referred to Pinot's "dwelling" and set out a calculation ofPinot's cash settlement entitlement for two claims. In each letter it was stated that: your dwelling has been referred to your private insurer as the damageexceeds EQC's liability under the Act.[13] Counsel for Vero has produced the lease agreements for the first and secondfloors each of which begin their description of the premises with "first floor offices"and "second floor offices" respectively. Both recognise under the heading "Businessuse" that the permitted use is both offices and accommodation.[14] The agreement to lease for the second floor includes a marked-up plan of thesecond floor. It shows several partitions or room walls on that floor which are to beremoved up to the main beams leaving some existing posts (together with some otheralterations). The special terms of lease require the landlord to remove the identifiedwalls and provide that the tenant will not replace those walls on termination. Theeffect of the wall removals is to leave the majority of the top floor as an open plan area(contrary to Mr Cohen's description of it as containing "4 bedrooms"). It does retaina number of named rooms such as toilet, shower, laundry and kitchen.Additional matters identified by Vero[15] Vero refers to matters in evidence or lacking in the evidence:(a) There is no evidence that the building was being used for residentialpurposes at the time of the earthquakes or recently beforehand;(b) Pinot had not insured the building for EQC cover for the period 1 June2010 to 1 June 2011, Pinot's broker having confirmed that they werenot aware that there was a residential component to the building whenthey placed cover;(c) Mr Cohen advised Vero's loss adjuster on 3 May 2012 that:The EQC [sic] was claimed by way of procedure but as noresidential tenancy the claim was rejected by eqc;(d) Mr Cohen advised Vero in October 2012 that the first floor hadpreviously been rented to a domestic tenant, that the tenancy hadreverted to commercial offices about 15 years previously, and that ithad remained so through to the earthquake. Mr Cohen had explainedthat there was therefore no need for EQC cover; and(e) EQC's payments to Pinot had been on the basis that it would coverresidential portions of the building, EQC calculating one residentialunit on the second floor as 33 per cent of the building and the rest ofthe building as "commercial" (67 per cent).Further information from Pinot[16] Counsel for Vero advises that Mr Cohen has explained in relation to the EQCclaim that:(a) the non-payment of EQC levies for 2010/2011 was as a result of brokermisunderstanding;(b) EQC initially rejected Pinot's claim; and(c) EQC ultimately accepted that cover applied to part of the building (byinference one residential unit accounts for 33 per cent of floor space).Approach to residential buildings and property under the EarthquakeCommission Act 1993[17] I will briefly consider the EQC position, but not extensively as the definitionsof "residential building" are materially different under the Earthquake CommissionAct 1993 (EQC Act) and under the CEIT Act.[18] Given that the EQC Act contained definitions, it must be taken that Parliamentintentionally set to one side the definitions in that Act in order to have, for theeligibility criteria in the CEIT Act, definitions specifically designed for the CEIT Act.[19] The Earthquake Commission Act draws a distinction between "residentialbuildings" and "dwellings" – recognising that there may be one or more "dwellings"within a "residential building".[20] On the information here provided to the Court it is apparent that EQCconducted a dwelling apportionment and concluded that a dwelling within the buildingaccounted for 33 per cent of the building. EQC therefore accepted liability for thedamage to that dwelling (referred to in its letter also as a "residential unit") but wasnot the insurer of the remaining (commercial) portion of the building. That wasbecause the building failed to qualify as a "residential building" under the definitionin EQC Act.3The character and use of Pinot's building and propertyPinot's evidence[21] Mr Cohen's evidence concerning the building is set out at [10] above.[22] Mr Cohen did not exhibit copies of the agreements to lease. Those for the firstand second floors were produced by Ms Darlow for Vero. What Mr Cohen referred toin his affidavit as the "top floor" is the same as the "second floor", as referred to in therelevant lease document.Vero's position[23] Vero relies substantially on the nature of the policy taken out by Pinot as beinga standard policy for commercial premises.[24] To the extent Vero was able to refer to knowledge of the actual use of thebuilding, it produced (through counsel) the two agreements to lease to which I havereferred. Ms Darlow noted also other matters of evidence as set out at [14] above.Conclusions as to how the building was being used[25] I am satisfied that at the time of the Canterbury earthquake sequence thebuilding and property were primarily being used as hospitality and commercialpremises. The ground floor and basement were primarily occupied for the purposesof a café and bar business. The first floor was primarily occupied for office purposes.The second (top) floor was primarily occupied for office purposes.3 Applying Earthquake Commission Act 1993, s 2, the dwelling or dwellings in Pinot's propertywere found to constitute less than 50 per cent of the total area of the building.[26] The upper two floors, incorporating toilets, bathrooms and kitchens, had thepotential for residential use and I am satisfied that historically there may have beenresidential use. But the single example cited by Mr Cohen of someone living in thepremises before the earthquakes falls short of identifying the relevant period of use orindeed the extent of the premises so occupied. The fact that the agreement to lease forthat floor involved a clear redesign of the floor to make it suitable for open-plan officeuse indicates that, at least from late-2008, that office use was its primary intended use.[27] In summary, this was, at the time of the Canterbury earthquake sequence, abuilding for hospitality and commercial use albeit with the capacity for people to beaccommodated on the upper two floors if they wished. I am not satisfied, on MrCohen's evidence, that anyone used it as their residence at the time of the earthquakesor at the time the insurance policy was taken out.Application of the ActSubmissions for Pinot[28] Ms Borcoski submitted that the property is a residential building and/orresidential property. She submitted that it is evidenced by the fact that EQC respondedto claims in relation to the property. Ms Borcoski submitted that the purpose of thedefinitional guidance given in s 8(5) of the CEIT Act is to provide guidance on whatis a residential building for the purpose of s 8(1). Ms Borcoski submits that the CEITAct permits guidance to be obtained from contracts of insurance by referring todescriptions or defined words used in such contracts to describe a residential buildingor property (such as the word "home"). She submits that it is not a requirement of theCEIT Act that the contract of insurance must include the terms "residential building"or "residential property" or similar, or that those terms be defined in that contract ofinsurance. She notes that s 8(5)(a) is expressly an inclusionary definition. She submitsthat, if s 8(5) prescribed the only circumstances in which a building or property willbe "residential" for the purpose of the CEIT Act, then it would create unintendedconsequences. For instance, she submits that owners of residential units in a unit titledevelopment could not lodge claims with the Tribunal as the development would beinsured under a commercial policy rather than a domestic policy. Such would beinconsistent with the purpose of the CEIT Act.[29] Ms Borcoski submitted that the interpretation of the terms "residentialbuilding" and "residential property" must have regard to the purpose of the CEIT Act,citing examples of provisions (ss 8(3), 8(7) and 11) which have inclusionaryprovisions (that is, extending what might otherwise be a more limited scope ofoperation of the CEIT Act).[30] Finally, Ms Borcoski submitted that the natural and ordinary meaning of theterm "residential" as used in the CEIT Act means something that is suitable orallocated for residence. Ms Borcoski submitted that the term "residential building"and "residential property" should not be interpreted so as to confine them to premisesused at a particular time (such as the date on which the policy was issued or the insuredevent occurred). She observed that residential premises may be out of residential useat a particular time but still be suitable and intended for resumed residential use.Submissions for Vero[31] Ms Darlow submitted that the terms "residential building" and "residentialproperty" as used in the CEIT Act must be construed as referring to a building orproperty which is in use as a residence. The fact that a property is capable of beingused as residential accommodation does not automatically mean that the premises are"residential" for the purposes of the CEIT Act.[32] Ms Darlow rejected Pinot's proposition that such an interpretation wouldexclude claims by unit owners in unit title developments from eligibility to theTribunal. The commercial policies which cover such properties and units contemplatethat the properties are actually being used for residential purposes.DiscussionThe Canterbury Earthquakes Insurance Tribunal Act itself[33] As provided by the Interpretation Act 1999, the meaning of an enactment mustbe ascertained from its text and in the light of its purpose.44 Interpretation Act 1999, s 5(1).[34] The ordinary meaning of the term "residential", as used in connection with"residential building" or "residential property", has a focus on its use or service asexemplified in the first definition in the Oxford English Dictionary:5Serving or used as a residence; in which one resides; providingaccommodation in addition to other services.[35] The term "residence" is defined in the Oxford English Dictionary as:The circumstance or fact of having one's permanent or usual dwelling placeor home in or at a certain place[36] These constructions of the term "residential" in the CEIT Act focus on the useto which premises are being put. I recognise that Ms Borcoski contends for anextended interpretation which goes beyond use to potential use or suitability, whetheror not so used.[37] The primary focus on the use to which premises are put is not the only meansof determining the eligibility of a claim before the Tribunal. A claim in relation to abuilding will not lose its eligibility by dint of having been temporarily unoccupied (forinstance being unoccupied between a sale and purchase). But what is required in thatsituation is that there remains an intended use of the building as someone's residence.The fact that a building might remain suitable to be used as a residence does not ofitself constitute the building for the purpose of the CEIT Act a "residential building"or "residential property".[38] The provisions of the EQC Act do not assist with the correct interpretation interms of "residential building" and "residential property" as they appear in the CEITAct. The purposes of the two statutes are different in nature and the concepts of"residential property" involved in each Act are materially different. Parliament chosenot to carry the definitions in the EQC Act into the CEIT Act.5 Oxford English Dictionary (3rd ed, 2010, online ed).Parliamentary materials in relation to the Act[39] The Court is permitted to use Parliamentary history to assist in construinglegislation but not so as to alter the meaning where the statutory words are clear.6[40] Between the introduction of the Canterbury Earthquakes Insurance TribunalBill (as a Government Bill) to Parliament and the Bill being reported back from theGovernance and Administration Committee, an amendment was made to introduceexpress reference to the term "home" in clause 8(5). The initial Bill had containedonly what is now s 8(5)(b), giving "residential building" and "residential property" themeanings given in a contract of insurance to those or similar terms. On thereintroduction of the Bill, what became s 8(5)(a) was introduced so that the terms"residential building" and "residential property" include similar terms (such as"home") used in a contract of insurance between a policy holder and an insurer.[41] At the Court's direction, counsel provided additional Parliamentary materialsin relation to the CEIT Act. Ms Borcoski submitted, in her supplementarymemorandum providing the materials, that none directly assisted with theinterpretation of "residential building" or "residential property" beyond what isalready defined in the CEIT Act.[42] The Cabinet paper referred to "homeowner" in explaining that the Tribunalshould be "homeowner oriented", but that discussion was in the context of thepolicyholder (rather than insurers or EQC) having the right to initiate process.[43] That said, the Cabinet briefing, in explaining the mischief being addressed,referred to the time (then) taken to resolve claims which: adversely impacts on homeowners' mental health and wellbeing. Theuncertainty makes it hard for people to get on with their lives.[44] This wording was subsequently picked up in the Explanatory note to the Billwhen it was introduced to Parliament, stating that the Tribunal would "assist6 See the discussion in Ross Carter Burrows and Carter on Statute Law in New Zealand (5th ed,LexisNexis, Wellington, 2015) at 290 – 301.policyholders and insured persons to obtain some closure and help them get on withtheir lives".[45] The various Ministers, on the first, second and third readings of the Bill,referred interchangeably to "homeowners" and "policyholders".7[46] These materials confirm what is evident from the final form of the CEIT Actitself, particularly with its express reference to "home" in s 8(5)(a) of the CEIT Act.There is a legislative focus on homeowners. The term "residential building" takes thatsense of the place used by one or more persons as their home. In short, the legislativehistory reinforces the ordinary meaning of the term "residential" as "serving or usedas a residence".Application of the eligibility provisions of the ActThe insurance policy[47] The insurance policy entered into between Pinot and Vero is expressly entitled"material damage and business interruption policy". It contains standard policyprovisions and extensions of the nature one would expect in relation to commercialpremises. In the "material damage" section of the policy (the first page of narrative),express provision is made in relation to stock, the cost of rewriting of records, moneyand other property. There are then extensive provisions including in relation to suchproperty. The "material damage" section is then followed by a "business interruption"section.[48] The single reference in the policy to residential use (headed "MD29Residential Accommodation") is in a provision extending cover to the insured for thereasonable expenses of finding alternative accommodation where residentialaccommodation insured by the "material damage" section is rendered uninhabitable.The expenses covered are specifically those "incurred by the Insured or the occupant(being an employee of the Insured)".7 Minister for Courts, Hon Andrew Little, on the First Reading, 4 September 2018; Acting Ministerof Justice, Hon David Parker, on the Second Reading, 11 April 2019; Minister of Police, HonStuart Nash, on the Third Reading, 23 May 2019.Discussion as to the nature of the policy[49] The policy was plainly taken out by Pinot to insure commercial premises(which happen to have within them some accommodation suitable for residence)rather than a policy taken out for a "home" or residential premises.[50] The terms and the nature of the policy also accord with such evidence as hasbeen provided as to the actual use of the premises at the time the policy was written.The premises were being used for hospitality and commercial purposes, not residentialpurposes. The fact that the building had some capacity for accommodation (in aminority of its area) does not alter the correct characterisation of the building ascommercial or non-residential.Outcome[51] The dispute between Pinot and Vero about Pinot's claim is not a claim forphysical loss or damage to a "residential building" or "residential property" as thoseterms are used in the CEIT Act. As such, it does not meet that eligibility criterion tobring a claim before the Tribunal under s 9(1)(a) of the CEIT Act.[52] Section 16(2) of the CEIT Act precludes the transfer of this proceeding giventhat it does not meet the eligibility criteria for a claim under s 9.[53] The application for transfer will accordingly be dismissed.Costs[54] Costs must necessarily follow the event.[55] Costs have been kept to a minimum because the parties have complied withthe Practice Direction in relation to transfer.[56] Counsel for the defendant was required to file a single memorandum both inopposition and submission, and to then appear (by way of telephone conference) at ashort hearing. In the absence of Items in Schedule 3 High Court Rules applyingspecifically to these steps, I proceed by analogy to Item 10 (preparation for first casemanagement conference) and Item 13 (appearance at first or subsequent casemanagement conference). The appropriate band is Band B.Orders[57] I order:(a) The plaintiff's application for transfer of the proceeding to theCanterbury Earthquakes Insurance Tribunal is dismissed.(b) The plaintiff is ordered to pay to the defendant in any event the costs ofthe application in the sum of $1,561.Case management[58] I adjourn the proceeding to a case management conference (by telephone) at2.45 pm, 17 September 2019 (Gendall J). Counsel are to file five working days beforea joint memorandum detailing interlocutory progress, identifying any directionsrequired to take the proceeding to trial, and covering all Schedule 5 matters.Osborne JSolicitors:Saunders Robinson Brown, ChristchurchFee Langstone, AucklandThis judgment was delivered by me on 6 September 2019 at 4.00 pm pursuant to Rule 11.5of the High Court RulesRegistrar/Deputy RegistrarDate: