A lesson in proving damage: Body Corporate 328564 v Vero Insurance New Zealand Limited [2022]

The plaintiff was the owner of an apartment building consisting of 40 residential units over four storeys with a basement carpark, damaged in the Christchurch Earthquake Sequence. At the time of the earthquakes, the building was insured by the defendant (Vero).

The plaintiff sought a declaration that the building required significant demolition and reconstruction, including of the foundation system. Vero contended that the foundation system was intact and that damage to concrete elements could largely be remediated using epoxy injection.

At trial, the plaintiff sought a partial adjournment in respect of whether the piles were damaged to enable further testing and expert conferral, on the basis of its modelling and expert opinion that damage to the piles could not be ruled out. Vero argued that the plaintiff had had every opportunity to prove their case and had failed to do so.

The Court observed that the plaintiff had elected not to inspect or investigate allegedly damaged elements in several instances, including the piles. It found the plaintiff had not proven the pile damage and rejected its application for a partial adjournment. The plaintiff had relied unnecessarily on modelling, which the Court found was both inaccurate and unreliable. The plaintiff had produced successive iterations of a simplified model, each with differing conclusions as to what was damaged and the extent of damage. The Court found this modelling was flawed, unreliable and should be disregarded, not least because the results did not accord with the observed damage on site.

In relation to the use of epoxy injection, the Court found that this repair methodology was appropriate for minor or moderate damage where there had been no yielding of the concrete reinforcing, or spalling, or cracking in the magnitude of several millimetres. In such a case epoxy injection was accepted as being sufficient to restore strength, stiffness and does not affect the element’s fire resistance.

Ultimately, the Court did not make declarations in favour of the plaintiff’s proposed repair scope and on the whole preferred the remediation strategy advanced by Vero.

Where the plaintiff has the onus of proving damage, the best evidence is observable damage.

The Court endorsed the principle that the plaintiff should undertake the required investigations to establish the damage it alleges so that it can bring its best evidence on the day.

Modelling is an appropriate substitute only where observation or testing is not possible, but it will not be reliable evidence unless:

1. the model used is fit for the particular purpose;
2. the correct parameters and inputs are used; and
3. the results accord with observations on site.

The appropriate remediation strategy for each building is always a matter of engineering judgement, taking into account its characteristics and the level of damage. However, the outcome in this case echoes the findings of the High Court in other cases such as Fitzgerald v IAG New Zealand Ltd [2018] NZHC 3447 and Body Corporate 335089 v Vero Insurance New Zealand Limited [2022] NZHC 2353 that epoxy injection can be used to repair earthquake damaged concrete elements, and represents a clear rejection of the unorthodox minority view against its use.

This publication is intended as a general overview and discussion of the content dealt with. It should not be used in any specific situation, in which case you should seek specific legal advice.