Port Hills fires: What duty do you owe your neighbour?

The appellant operates Christchurch Adventure Park (Park), located in the Port Hills of Christchurch.  The Park had a chairlift which operated in a 12–20 metre wide corridor of cleared pine trees and was used to ferry mountain bikers, zipliners and sightseers.  At the material time the area below the chairlift line held substantial quantities of dry pine slash.

In the afternoon of 13 February 2017, a fire started in the Port Hills on Early Valley Road below some power lines.  A few hours later, an arsonist lit a second fire in an area called Marleys Hill, only 500 metres from the top station of the Park’s chairlift.

The Park took the decision early on to keep the chairlift running as long as possible based on recommendations in the manufacturer’s manual.  This was done in order to prevent damage to the chairlift’s haul rope. The fire had arrived near the top section of the chairlift by 15 February and ignited chairlift chairs which were on their way up to the top station.  As the chairs came down the hill, they dripped molten material and set fire to the area underneath the chairlift corridor.  The front of the fire then progressed through the Park, merged with the Early Valley Road fire coming from the other direction, and advanced toward the properties on and near Worsleys Road.

The Park accepted that had the chairs not transported the fire in this fashion, it would have safely bypassed those properties instead of destroying them.

The plaintiffs, who were the owners of homes and vehicles damaged or destroyed in the fire, sued the Park under s 43 of the now-repealed Forest and Rural Fires Act 1977,² in negligence and in nuisance.  In the High Court Justice Gendall found the Park liable in all three.

There were several novel features of the High Court’s approach to damages, some born out of the unique circumstances of individual claimants, and others due to the way the plaintiffs advanced the case and it was defended by the Park:

1. The plaintiffs’ claims were advanced on the basis of the amount paid by their insurers to settle their claims, plus any additional uninsured losses. This was the basis of the trial judge’s award.
2. In several cases, His Honour also awarded the full cost of reinstatement to plaintiffs who had lost their property and who either did not intend to reinstate, having relocated elsewhere following the fire, or who had reinstated with a lesser property. This was a departure from earlier authorities which largely required that the claimant intend to reinstate before the Court would consider awarding the cost of reinstatement, so as to deny the claimant any possibility of a windfall. However, His Honour held that in the circumstances of this case, there was no windfall to be had, and it was appropriate to award full reinstatement costs to compensate the plaintiffs for their loss.
3. The plaintiffs called a loss adjuster to give evidence in support of their claims for loss, rather than calling each individual plaintiff to give this evidence. The loss adjuster reviewed each claim and produced a report on the reasonableness of the amount claimed for each item. The trial judge accepted this.

The full amount of damages ultimately awarded totalled over $10 million.

On appeal, the Park challenged the High Court’s findings on liability under all three causes of action, arguing essentially that it had behaved responsibly and done as well as it could with the knowledge it had.  It also challenged the High Court’s approach to awarding damages.

Liability

The Court of Appeal upheld the findings of the High Court in respect of all three causes of action.

On negligence, the Court found that in assessing the “standard of effort” required from the Park in the circumstances, its lack of responsibility for the fire was a factor, alongside its own knowledge and resources.  The Park was not responsible for the fire, but it knew that it was possible to remove the chairs from the chairlift, that there was dry slash under the chairlift line, and it should have known that the chairs would be flammable as they were coated in plastic.  It should have attempted to remove the chairs from the chairlift as early as 14 February.

The Court found the Park liable in nuisance via a slightly different route than the trial judge.  It held that where a nuisance is caused by the unauthorised actions of a third party (in this case, the arsonist), the owner or occupier is not strictly liable.  However, if they continue the nuisance, they will be liable.  This includes knowingly failing to take steps to remove or abate the nuisance.

Damages

The Park challenged the admission of the loss adjuster’s evidence, as well as the award of damages on the basis of the owners’ insurance payouts.   It stressed the absence of evidence from the plaintiffs in question that they had suffered that loss.

The Court found:

1. Admitting the loss adjuster’s evidence was not an error in the circumstances. Requiring each of the plaintiffs to give evidence of their losses would have extended an already lengthy trial by three weeks, and in any event the majority of the loss adjuster’s evidence would fall within the business records exception to the hearsay rule.
2. The requirement that the plaintiff must intend to reinstate in order to be awarded the costs of reinstatement is not a rigid rule but a “statement of a prima facie approach”. Damages should reflect the loss actually suffered by the claimant.  The question is what is reasonable in the circumstances, and compelling circumstances will be required for the higher measure to be awarded in the absence of an intention to reinstate.
3. A person who claims special damages such as the cost of alternative accommodation must prove it. However, even though some of the plaintiffs who were awarded alternative accommodation expenses did not give evidence, it is obvious from the circumstances that they would have incurred these expenses, and they were properly awarded.

The Court of Appeal’s decision includes some useful guidance on how parties who are not responsible for the initial hazard but who may have inadvertently perpetuated it may be liable in negligence and in nuisance.

It also provides welcome clarification on the correct approach for assessing the appropriate measure of damages in tort.  The courts are evidently prepared to be flexible and award reinstatement damages even if the plaintiff does not intend to reinstate if there are sufficiently compelling circumstances such as those faced by several of the plaintiffs.  This is a new factor for insurers to take into account in their assessment of liability and reserves.

1. mcelroys.co.nz/port-hills-fire-case/
2. This article does not examine the decision in respect of the Forest and Rural Fires Act 1977 in detail as the provision no longer exists.