Glenn William Starr v Insurance Australia Limited

District Court of NSW|2017-10-12

Solicitors: Laxon Lex (plaintiff) Holman Webb (defendant) File Number(s): 2016/00154366

INTRODUCTION

The plaintiffs are the owners of a rural property at 104 Yarras Lane at Forrest Grove which is between Lithgow and Bathurst. They insured their property with the defendant.
On 3 September 2015 their home on the property was totally destroyed by fire. A swimming pool near the house was also damaged at that time.
The plaintiffs claimed upon the defendant under the contract of insurance. The defendant offered to pay $494,414 which it asserted was the reasonable cost of re-building the home. It was not disputed that the home could not be repaired.
The plaintiffs eventually accepted the payment of $494,414 but without prejudice to their right to claim more under the policy. The plaintiffs commenced proceedings in the Supreme Court against the defendant, and those proceedings were later transferred to this court.
The plaintiff's brought their claim on two grounds: 1. The plaintiffs asserted that they were entitled to be paid $854,437 instead of the amount proffered by the insurance company - the difference being $360,023; 2. In the alternative, the plaintiffs asserted that the amount proffered and paid by the insurance company did not represent the reasonable cost of re-building the home and the pool.

THE POLICY

The plaintiffs insured their property with the defendant under an NRMA Insurance Home Plus Buildings and Contents Policy (the policy). They initially took out the policy in 2011 and renewed it year by year, the last renewal before the fire being on 2 August 2015. References to page numbers below are references to page numbers in the policy.
The policy is a "plain English" policy. It states that the insurer covers the home and contents "when certain things happen - for example, fire" (p 25). The Buildings sum insured is the amount of insurance for which the insured chooses to cover their home (p 25). The current Certificate of Insurance shows the amount of insurance which the insured has under the policy as the Buildings sum insured (p 25).
The 2015-2016 Certificate of Insurance records the Buildings sum insured as $854,437.
Under Buildings Insurance, the defendant insured "Your home" which was defined to include (p 29):

Domestic residential buildings at your site that can be locked up
Home improvements at your site - for example, garage, carport, in-ground pool
Fixtures or items permanently attached or fixed to your home - for example, light fixtures, built-in wardrobes, kitchen cupboards and floating floor boards

One of the events covered is fire (p 37). Section 6 of the policy deals with "Claims and what we pay". Page 73 of the policy sets out the following under the heading "What we pay for - Buildings Insurance": "What we pay for - Buildings Insurance If we agree to cover your claim under Buildings Insurance, then we will: ► pay the cost to repair or rebuild the part of your home that was damaged (whichever is lower) ► pay for any extra costs we cover under 'other cover' - see below. The most we pay The most we pay for your home is the Buildings sum insured. Other cover We may also pay some costs on top of the Buildings sum insured under 'other cover' for: ► Safety net (Home Plus policy only) - see page 31 ► Temporary accommodation for home owners - see page 35 ► Loss of rent for landlords - see page 36 ► Mortagee discharge costs - see page 38. How we settle your buildings claim We will choose to settle your claim for loss or damage to your home or 'other cover' in one of the following ways: 1. Arrange for repairers, builders or suppliers to repair or rebuild your home. If you agree, we can arrange for our preferred repairers, suppliers or buildings to repair or rebuild your home. 2. Pay you the reasonable cost to repair or rebuild your home. We can choose to: ► pay you ► pay your nominated repairer, supplier or builder, or ► provide you with store credits from one of our nominated suppliers. For example, we may pay you directly when: ► you decide not to repair or rebuild your home, or ► you don't start repairing or rebuilding your home within 6 months from when the damage takes place, or within any longer period we agreed to in writing. 3. Pay you the buildings sum insured We may do this when we consider your home to be a total loss or when we choose to do so. If we pay you the Buildings sum insured, then your policy ends and you don't get a refund of your premium. We will continue your liability cover (see pages 41 to 43) for up to 6 months from when the listed event took place. However, liability cover will end during this period if: ► construction starts at your site, or ► you sell the land, or ► you take out a new Buildings Insurance policy for your site. 4. Paying for other cover If we agree to pay you for 'other cover' then we will choose the method of settlement. When you have a Home Plus policy the extra costs we pay under Safety Net cover do not apply to 'other cover'. We provide examples of how we calculate claims under Buildings Insurance - see pages 63-65."

CONSTRUCTION OF THE POLICY

On any view of the evidence, the cost of repairing the plaintiffs' house and pool is less than the "Buildings sum insured" of $854,437.
On the first claim made by the plaintiffs, the fundamental question is whether, when the plaintiffs' loss is well below the sum insured, is the insurer obliged to pay the reasonable cost of re-building, or is the insurer liable under the policy to pay the figure of $854,437?
The defendant's policy is a policy of indemnity. Nowhere in the policy are there any words to indicate that if a certain event occurs, the parties have agreed that a set sum of money will be paid. This is not an "agreed value" policy.
The legal principles applicable to an indemnity policy are well-known, and have conveniently been collected in the recent decision of Justice Stevenson in Mobis Parts Australia Pty Ltd v XL Insurance Co SE (No. 7) [2017] NSWSC 1321 [as follows]: 986 The general principle was stated in D Kelly and M Ball, Kelly and Ball Principles of Insurance Law, (2nd ed, 2001, LexisNexis) at [12.0120.25] as follows: "…while an insured who has been paid on the basis of the replacement value is not normally under an obligation to expend the money on reinstatement of the property, a court may decline to assess the insured's loss on the basis of replacement value if it believes that the insured may not intend to reinstate the insured property, or where reinstatement is impossible…". 987 The learned authors referred to the decision of the Court of Appeal in Leppard v Excess Insurance Co Ltd [1979] 2 All ER 668; 1 WLR 512. The issue in that case was whether the insured was entitled to indemnity on the basis of the costs of reinstatement or market value. The Court concluded that the insured was entitled to recover his real loss, but not exceeding the cost of replacement, and that the real loss was the market value of the insured property. 988 The Court referred to the general principle enunciated in Castellain v Preston (1883) 11 QBD 380 in which Brett LJ said (at 386): "The very foundation, in my opinion, of every rule which has been applied to insurance law is this, namely that the contract of insurance…is a contract of indemnity, and of indemnity only, and that this contract means that the assured, in the case of a loss against which the policy has been made, shall be fully indemnified but shall never be more than fully indemnified." 989 The question was also considered by the High Court in British Traders' Insurance Co Ltd v Monson (1964) 111 CLR 86. The issue in that case was whether the insured could recover the full insured value of property destroyed by fire or merely a loss of their interest (as lessee) of the property. 990 The plurality (Kitto, Taylor and Owen JJ) said (at 94): "…no approach can be valid which fails to accept as its first step that a policy showing, as the policy here shows unmistakably, that it is intended as a policy of fire insurance must be construed as a contract for indemnification only. The celebrated judgments in Castellain v Preston…show that that is the fixed and central point to which all else in the policy is subordinate. It could not be otherwise, for as Lord Cockburn CJ said in charging the jury in Chapman v Pole [(1870) 22 LT 306 at 307], the law will not allow of gambling in the form of insurance."
Counsel for the plaintiff submitted that there was ambiguity in the payment clause contained on page 73 of the policy. He submitted that if there was ambiguity, then the contra proferentem rule should be applied, and the policy should be construed against the insurer.
I find no ambiguity in the wording of the payment clause on p 73 of the policy.
It gives the insurer a clear choice to settle a buildings claim by the insurer electing to make a payment in accordance with one of paragraphs 1, 2 or 3.
As will be discussed later in this judgment, the defendant offered to meet the plaintiffs' claim in accordance with paragraph 1 by arranging for one of its preferred builders to rebuild the home. However, the plaintiffs did not agree. Under paragraph 1 that option for settling the claim was closed off.
The insurer then had the option of settling in accordance with paragraph 2 by paying the plaintiffs the reasonable costs to rebuild home. The defendant eventually paid the plaintiffs what the defendant says is the reasonable cost of rebuilding the home. The plaintiffs dispute that that amount was the reasonable cost of rebuilding the home, and that dispute is the subject of the second way in which the plaintiffs put their claim. That will be considered below.
The first column on page 73 of the policy says under the heading "The most we pay" that "the most we pay for your home is the Buildings sum insured". As a matter of plain English and ordinary construction of the policy, that phrase sets the upper limit which the defendant will be obliged to pay if the home is damaged by fire.
Paragraph 3 in the third column on p 73 gives the insurer the option to choose to settle the claim by paying the Buildings sum insured when the insurer considers the home to be a total loss. This phrase "total loss" is not defined in the policy. I find that what the phrase means is that where the damage to the home is so great that the cost of repair exceeds the Buildings sum insured, the insurer is not obliged to pay out more than the Buildings sum insured (of $854,437), but can simply pay this amount out to the insured.
Any other construction, which obliged the insurer to pay out $854,437, when the home could be rebuilt for a lesser sum, would provide a windfall to the insured rather than an indemnity.
This precise policy wording was considered by Judge P. Taylor SC in Kenwright v Insurance Australia Limited [2013] NSWDC 255. His Honour recited the same words of the policy as are reproduced above in relation to the obligation of the insurer to pay for damage to a building. His Honour then set out the legal principles referring, as did Justice Stevenson, to Leppard, Castellain and Kelly & Ball.
His Honour said that the NRMA policy was similar to the policy considered in the unreported Court of Appeal decision of Raso v NRMA Insurance (New South Wales Court of Appeal, 14 December 1992, unreported). In that case the Court of Appeal held at [17]: "The language of the policy ('we may choose to') confers an option on the underwriter to either pay the sum insured or to reinstate or pay the cost of reinstatement. The underwriter did not exercise the option. However it is clear from The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 92-93 and the cases there cited that 'where there are two or more ways in which a defendant might perform the contract, the court in assessing damages adopts the mode of performance which is most beneficial to the defendants'."
The Court of Appeal also held at [19]: "Because an insurance contract is a contract of indemnity, the amount recoverable under the policy could not exceed the sum necessary to indemnify the insured against the loss actually sustained by them in consequence of the fire. An assured is not entitled to recover the amount specified in the policy unless it represents his actual loss. The amount specified fixes only the maximum liability of the insurer under the policy."
Judge Taylor also referred to the decision of the High Court in British Traders' Insurance Co Limited v Monson (1964) 111 CLR 86 at 94: "No approach can be valid which fails to accept as its first step that a policy showing, as the policy here shows unmistakably, that it is intended as a policy of fire insurance must be construed as a contract for indemnification only."
Counsel for the plaintiffs put one further argument in relation to the operation of the policy. This argument was that, on the facts, the duty of utmost good faith, and the course of dealings between the insurer and the insured, meant that somehow the insurer was obliged to pay out the full sum insured, even though the loss was less than that amount. I asked counsel for the plaintiff whether there was any authority for that proposition and counsel frankly told me that he could find no such authority.
It was submitted that the fact that the defendant had collected premiums from the plaintiff for several years before the year of the loss somehow meant that it was obliged to payout the full sum insured even though the loss was less. It was also submitted that the insurer had unilaterally been increasing the amount insured each year and had thus collected additional premiums. There was no evidence of this latter allegation, and in any event the evidence from the first plaintiff was that the plaintiffs themselves had increased the amount insured quite dramatically in an earlier year, and that small increments had been added in subsequent years by the insurer. No doubt these increments were added because of some agreement between the parties. It is not unusual in an insurance arrangement for the parties to have agreed that there will be some sort of uplift each year in the value of the property insured.
No authority was cited for the proposition that even if those events occurred, that somehow obliged the insurer to pay out the top figure. Once again, I fail to see why those events would have any bearing upon the construction of the contract or the obligation of the insurer under the contract.
I therefore reject the submissions made on behalf of the plaintiff and find that the obligation of the insurer, once the plaintiffs had rejected the offer of the insurer arranging a builder to repair the home, was an obligation to pay the reasonable cost of rebuilding the home.
I find that on the proper construction of the contract, and in the events which occurred, the insurer was not under an obligation to pay out the full amount of the Buildings sum insured, when the reasonable cost of repairing the home was less than the sum insured. This was an indemnity contract and the obligation of the insurer was to provide indemnity. It said that it did but the plaintiffs, in their alternative argument, said that the insurer was not offering indemnity but something less. I turn to deal with that second way in which the plaintiffs put their claim.

REASONABLE COST TO REBUILD THE HOME

The defendant arranged for the plaintiffs' home to be inspected by two of its preferred builders. Both provided quotations for rebuilding the home. GC & JM Blow Building Contractors quoted the sum of $574,209. PCR Building Services Pty Limited (PCR) quoted the sum of $494,414.44.
The defendant offered by an email dated 19 April 2016 to authorise PCR to undertake the rebuilding of "the property back to a similar structure, fittings and inclusions as it was prior to the fire". The defendant also said in the same email: "We would manage the repair process and offer a Lifetime Guarantee on those repairs on completion".
The plaintiffs declined to accept the nomination of PCR as the rebuilder of the home. As previously recited, the parties eventually came to a resolution which involved the defendant paying the plaintiffs the figure of $494,414 to the plaintiffs, without prejudice to their right to claim more in these proceedings.
The question which falls for decision is whether the figure in the PCR quote was the reasonable cost of rebuilding the home.
There was evidence from the author of the PCR quote Mr Robert Varndell. He gave evidence-in-chief by an affidavit affirmed on 21 July 2017 and was cross-examined. Mr Varndell impressed me as a witness of truth. He answered every question in a direct fashion. There was a challenge made to his expertise, which I will deal with below.
The evidence-in-chief of Mr Varndell, which I accept, was as follows. He has been employed by PCR since 2005. He started out as an apprentice carpenter and completed his tradesman qualifications in 2010. Since 2010 his role at PCR has focussed entirely on inspecting and estimating the cost of building works, together with project management of building jobs that are undertaken by PCR.
In mid-January 2016 PCR received a notification from the defendant that a new building job was open for tender. Mr Varndell attended the plaintiffs' property at Forrest Grove on 1 February 2016 and there met the first plaintiff. He conducted an inspection of the property, obtained measurements and took photographs.
Prior to attending at the property Mr Varndell had been provided, by Mr Ian Watson from the defendant, with a list of rooms, fixtures and fittings which were in the property and which had been destroyed. He used this list to assist in his assessment of the work which would be required to rebuild the property to the standard it was in, prior to destruction by fire. He discussed the list with the first plaintiff. The first plaintiff indicated that he had prepared the list and that the rooms and items on that list were the features of the home which needed to be rebuilt.
Mr Varndell took measurements of the dimensions of the home with a laser measurer and measured the size of the verandah with a tape. He prepared a drawing showing these dimensions, which both parties now accept were accurately recorded by him.
The list prepared by the first plaintiff, and handed to the defendant and on to Mr Varndell, was put in evidence by both parties. It recorded that the home had the following rooms: an L-shaped dining room, an office, a laundry, a kitchen, a hall, four bedrooms plus a master bedroom, an en suite bathroom and a main bathroom. The list also set out details of the fixtures in the house such as lights, cupboards, bench tops, kitchen fittings and bathroom fittings. The list indicated that prior to its destruction the house had slab heating throughout and under floor heating in the tiled areas of the kitchen, the dining room and the two bathrooms.
The list stated that there was damage to the pool as follows: "Pool cover and liner ripped when fire fighters put pump into the pool".
Based upon his inspection, his conversations with the defendant and the plaintiff, and the list, Mr Varndell prepared a spreadsheet entitled "Budget Sheet". This listed the building costs for various areas and associated structures in the home. While the spreadsheet had a column entitled "margin %", there was nothing in that column. Mr Varndell explained that he had quoted dollar figures for each line item in the budget sheet, and those dollar figures included the margin or profit which PCR calculated it would make on the rebuild. Mr Varndell quoted for 195 square metres of living area and 70 square metres of verandah. His rate for construction of the living areas was $1,409.09 per square metre. His rate for construction of the verandah was $545.45 per square metre. As previously stated, both of these numbers included margin or profit.
The Budget Sheet included $8,182 for "pool liner and install".
In his affidavit Mr Varndell explained that the Budget Sheet included the cost of work involved in the demolition and removal of the rubble, a rebuild of the residential property and repairs to the pool. The demolition costs included the cost of removal of asbestos, the presence of which had been advised to him by the defendant.
In relation to the per square metre rate, Mr Varndell indicated that this was the rate at which PCR would charge for completion of building works in a residential context, and that the rate included PCR's business considerations, including costs and margins.
Mr Varndell said that in 2016 PCR rebuilt three homes based on the standard square meterage rate, those homes being located in Griffith, Narrandera and Ganmain.
In paragraph 20 of his affidavit Mr Varndell said: "My Budget Sheet is not a provisional sum, nor an estimate. It is the total price for which PCR was willing to complete the work required to reinstate the Property at the time the quote was prepared in 2016."
While challenges were made to the expertise of Mr Varndell to prepare a quote in the first place, there was no challenge to paragraph 20 of the affidavit, nor did the plaintiffs directly attack any of the line items in the budget, for example by suggesting that a particular figure was unrealistically low.
Instead, the plaintiffs tendered the expert reports of a builder Mr Frizzell. Mr Frizzell was not asked to critique the PCR quote. Instead, he was asked to give his estimate of the building costs.
The defendant conducted a similar exercise through its expert Mr Zakos.
Both experts acknowledged that the exercise upon which they embarked was not preparation of a quotation to do the work, or an analysis of the PCR quote. Instead, each expert used publications put out by quantity surveyors, to come up with an estimate of the rebuilding costs. Both experts came up with figures which were higher than the PCR quote.
I have already indicated that I accept Mr Varndell as a witness of truth. I have also indicated that no direct attack was made upon the figures in his budget sheet.
So far as the challenge to his expertise, I find that it failed. True it is that Mr Varndell is a carpenter and not a licensed builder. However, since 2010 his entire job has been to quote and price building work for his employer PCR. Further, he has project managed the jobs taken on by PCR over the last 7 years. There was no evidence that only a licensed builder could prepare an accurate quote. It seems to me that Mr Varndell had precisely the kinds of hands-on experience necessary in the real world to come up with realistic quotes to do building work such as the rebuilding of fire-damaged residential properties. Neither expert said, or was even asked, whether a person with the experience and training of Mr Varndell was or was not qualified to prepare a quote for the reasonable cost of rebuilding.
In those circumstances I find that the figure in the PCR quote represented the reasonable costs of rebuilding the plaintiffs' home.

FIVE BEDROOMS OR FOUR BEDROOMS?

However, it is necessary to deal with other submissions made on behalf of the plaintiffs. The plaintiffs pointed to an internal document of the defendant entitled "Tender Details".
Under the heading "Case Manager's Comments" appears the following. "The house has sustained severe fire damage (total loss). The house is constructed of brick veneer with a cement tile roof and is approximately 310 m². A make safe was arranged for PVA spraying of the asbestos and install temporary fencing."
Further down in the document is the scope of works for which the quote is required, together with variations. That part of the document reads: "Quote - Rebuild Dwelling for the construction of new four bedroom brick veneer cement tile roof dwelling to match original before fire damage like for like with living area 195m² and under roof verandah area 57m² with all inclusions on list supplied to PCR from NRMA and some extras given to me on site with Insured he forgot to give NRMA security camera system, hardwood frames and trusses and timber shutters to all windows, also includes connecting into existing sceptic tank. Pool liner and cove install is also included. '- Demolition of Dwelling. For removal of friable asbestos and demolition of entire fire-damaged dwelling including removal of concrete slab approximately 247m². Price: $66,584.44 incl GST." (emphasis added)
Counsel for the plaintiffs submitted that the reference to a four bedroom brick veneer house was an indication that they were not getting like for like, and further it was put that this was a reason for reaching a conclusion that the PCR quote was not the reasonable cost of rebuilding. After all, the house before the fire had five bedrooms not four, and an office. The first plaintiff gave evidence that he rejected the quote because it was not like for like, as he should not be forced to accept a four bedroom home when he had a five bedroom home before the fire. However, there was no evidence as to how he came to the view that the insurer had been providing a quote for a four bedroom home.
There was no cross-examination of Mr Varndell, for example, to suggest that he had said to the first plaintiff that he was quoting on a four bedroom home. There was no evidence from the first plaintiff that anyone from NRMA had ever said that to him verbally. It is to be suspected that in the course of this litigation the plaintiffs have seen the defendant's discovered documents, and learnt for the first time that someone within NRMA wrote down that the house had four bedrooms.
I find that Mr Varndell was quoting on a five bedroom and not a four bedroom home. He said that he quoted upon the list prepared by the first plaintiff, and that list made it plain that the house had five bedrooms. Further, I asked Mr Varndell the direct question as to whether he was quoting on four bedrooms or five, and he said five. I find that when the PCR quote was prepared, and the defendant contacted the plaintiffs to offer PCR as the rebuilder of the home, the plaintiffs had no reason to believe that the PCR quote was for a four bedroom home. There was also the suggestion in the plaintiff's evidence that somehow the rebuilt home was not to have an office, but again I find that Mr Varndell did quote to build an office and that the plaintiffs were not told at that time that there would be no office.
To a lay person it may seem surprising that there would be little difference between the cost of rebuilding a five bedroom home as opposed to a four bedroom home. However, Mr Varndell explained, and the experts agreed, that a brick veneer home is one of simple construction, and it almost does not matter how many rooms it has; in other words the number of rooms and their location is just something that will be incorporated into a per square metre building cost.
In the light of those findings, the plaintiffs' submission that the PCR quote was not providing them with a like for like replacement is rejected.

DAMAGE TO THE POOL

The plaintiffs also submitted that the pool required a lot more than just the liner being renewed. After the fire the plaintiffs attended the property and noticed that the water in the pool had dropped dramatically. While they believe that this was due to the fire fighters putting a pump into the pool, that was never proved. However, it is certainly an available inference. What is certain is that before the fire the pool did not lose water, but that immediately after the fire there was substantial rip in the pool liner. This necessitated the liner being replaced, as the minimum repair required for the pool. The PCR quote included replacement of the entire liner.
The plaintiffs had the pool inspected by Mr Dean, an engineer, after the liner had been removed. He found the pool to be of fairly ancient construction and observed and photographed a hole in the concrete wall near the base of one wall. This hole was nowhere near the rip in the liner.
There is no evidence that the hole was caused by the fire. It could well have been there beforehand but the continuous liner within the pool could well have restrained the water. Mr Dean hypothesised that the hole in the wall could have been caused by the pool being emptied and by hydrostatic pressure forcing a hole through the wall. There was no evidence that that was how the hole got there. Given the antiquity of the pool, and the method of construction which nowadays would not be employed, that hole could have been there for a long time.
I find that the plaintiffs have not discharged their onus of proving that the hole in the concrete wall of the pool was caused either by the fire or by the fire fighting or by any later deterioration of the pool because of any damage sustained during the fire or its aftermath.
In those circumstances the PCR quote covers the reasonable cost of repairing the pool.

EXPERT EVIDENCE

I will deal briefly with the evidence of the experts. Mr Frizzell, the expert for the plaintiffs, said that in his experience builders would not be prepared to do a job of this sort for a 5% profit margin. He said that any builder would want about 25% profit margin. However, this margin included, in his view, the capital and running costs that any builder incurs, which includes preliminaries on a site, office expenses and administration. On the other hand, Mr Zakos said that for a simple job like this there would be many builders who would do it for a 5% margin. He said that work which involved repair would be done on a higher margin as there was a greater risk of something going wrong, but that a builder starting with a clean slate to demolish this site and rebuild could have confidence in doing it correctly and making a profit even if the margin was 5%.
In any event, this issue of an appropriate percentage margin was, in my view, a false issue. The two experts came up with different estimates because they used different source materials upon which to base their estimate.
I have already indicated that Mr Varndell said that his per square metre rate included whatever profit that PCR would accept to do the job. I have also indicated that I accept the evidence of Mr Varndell generally.
While I regard the issue of percentage margin as a false issue, I will indicate my findings on it. PCR used a rate of $1,409.09 per square metre. Mr Frizzell used two quantity surveyors' publications. The BMT rate was $1,835 per square metre. This included a margin. The Cordell rate was $1,021 per square metre, but this had no margin built in. If a 25% margin is added to the Cordell rate, this comes to $1,276.25 per square metre.
Mr Zakos used the Rawlinson publication which had a rate of $1,757.50 per square metre, which included margin.
The approach taken by Mr Frizzell was to regard the BMT rate as too high and the Cordell rate as too low. He therefore added them and divided them by two. If I add the BMT rate of $1,835 per square metre (which includes a margin) with the adjusted Cordell rate of $1,276 per square metre (which includes a notional 25% profit margin), I get a figure of $3,111. Dividing this by two gives $1,555 per square metre, this being the average of the BMT rate and the Cordell rate once a margin is added.
I note that this is more than the PCR rate of $1,409.09 per square metre, but not dramatically so. I note that it is less than the Rawlinson rate of $1,757 per square metre.
I do not need to decide what the appropriate per square metre rate was for the reasonable cost of rebuilding. Firstly, this is because the two experts were only giving estimates, which must yield to what both counsel described as "real world evidence" of the actual cost of rebuilding. Secondly, the PCR rate of $1,409.09 per square metre is that real world evidence, and is not so far away from the figures calculated by both experts (as estimates only), to cause me to have any doubt about the PCR quote.
I do note that Mr Frizzell took one approach to a per square metre rate which I regard as unacceptable. The cost to rebuild a brick veneer home per square metre is much greater than the cost of rebuilding a verandah which consists of a floor, some columns and a roof. A verandah has no walls or fittings or fixtures unlike a dwelling house. The PCR quote used a much lower per square metre rate for the rebuilding of a verandah. So did Mr Zakos in his calculations. By contrast, Mr Frizzell said that on his understanding of the BMT rate and the Cordell rate, you simply applied an all-up per square metre figure, no matter how much of the building was residential and how much was simply a verandah. This cannot be right. However, I do not need to consider it further, but Mr Frizzell's average rate, when re-calculated by me, was $1,555 per square metre. If I took account of the fact that his per square metre rate overstates what would be needed to rebuild this house, because verandahs are cheaper than rooms, I would come to a figure which may well be very close indeed to the PCR rate. However, that is all theoretical.
I find that the PCR quote represented the reasonable cost of rebuilding this house and its associated fixtures, at the time the quote was given.

CONCLUSION

I find that the obligation of the defendant to the plaintiffs, in the circumstances which occurred, was to pay to the plaintiffs the reasonable cost to rebuild the home, and no more.
I find that the defendant did that.
I find that both arguments put forward for the plaintiffs fail. The first fails as a matter of law and the second fails on the facts.
In the result there will be judgment for the defendant.

ORDERS

My orders are: 1. Judgment for the defendant. 2. Order the plaintiffs to pay the defendant's costs. 3. Grant leave to the parties to approach my Associate, should either party wish to seek a different costs order. 4. Order that the costs payable by the plaintiffs to the defendant be on the ordinary basis up to and including 25 July 2017 and thereafter on an indemnity basis.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 23 October 2017

At a glance

Court

Decision date

Source

Judgment (11 paragraphs)

Parties

Cases Cited (4)