MAS v East – Need to incur the cost(s) of rebuild/repair


In Medical Assurance Society of NZ Ltd v East & ors [2015] NZCA 250, 17 June 2015 the Court of Appeal allowed the appeal by MAS against a High Court (Whata J) decision on the timing of payment of replacement cost and dismissed it on the standard of the work.

The owners’ house was damaged in the February 2011 earthquake.  The concrete slab had a floor level differential of 44mm and areas of the slab had a slope greater than .5%.  The owners proposed underpinning the slab and MAS proposed relevelling by LMG.  The owners engaged Risk Worldwide.  They sought a judgment for remediation costs of $3.096M (rebuild).  Risk Worldwide was to be paid 35% of any amount recovered above $1.4M.  The $3.096M was based on a quantity surveyor’s estimate (QS Red- Brian McMorran).  The Court noted that the QS estimate contained significant errors and the correct estimate was about $1.5M.

The Court decided that the owners were only entitled to be paid the costs of restoring the house once they had incurred those costs which could be by the entry into a build contract.  It also decided that the house must be restored to the standard required when the work was done and not the standard as to when the house was built as suggested by MAS.