Vero Insurance New Zealand Ltd v Anthony Brendon Morrison
and Gail Cross
 NZCA 246
This is an appeal from the High Court's judgment in Morrison
v Vero Insurance New Zealand Ltd  NZHC 2344. The respondents
are the trustees of the Tony Morrison Trust (TMT), which owns a
commercial building in Woolston, Christchurch.
The High Court case considered computer modelling of the
Canterbury earthquakes, and the extent to which that modelling was
helpful for quantifying the extent of the damage to the building
caused by each of the earthquakes. It also looked at when a
building will be considered to be destroyed, under the policy.
Modelling of the damage
Vero challenged both the admissibility of the modelling
evidence, and the weight given to that evidence.
The Court of Appeal considered whether the modelling evidence
was admissible in terms of section 25 of the Evidence Act 2006.
President Ellen France, giving the judgment of the Court, said:
"In the present case, we do not
doubt that the evidence was admissible. It was plainly relevant. We
also consider it met the reliability threshold and had some
probative value. As we shall discuss, we accept Vero's
submissions that there were flaws in the model that limited its
probative value. However, we have not seen that conclusion as
requiring us to revisit the threshold question of
Instead, we focus on the weight given
to the model by the Judge because that analysis appears to us to
better capture what is truly in issue in the present
The Court of Appeal reviewed the evidence of the experts, and
noted that there were some difficulties with the model. These
included, notably, the fact that the model did not take
liquefaction into account, although this was a significant cause of
the damage in the February earthquake. It was also not clear from
the model how the extent of damage translated to produce the list
of repairs required. President Ellen France therefore said "we
consider the model was given considerably more weight than it
should have been".
She went on to consider the reports of the experts who had
viewed the building, which indicated that there was additional
damage from the June earthquake, but that this damage was for the
most part to items which were already listed as requiring
replacement. President Ellen France decided that:
"our view is that TMT has shown
the June event required some additions to the scope of repairs.
However, given the limitations of the model, particularly the
failure to take account of liquefaction and the apparent overlap in
repair items, we envisage the cost of these repairs applying
MWH's approach to costing as adopted by Whata J would be
relatively minor. We could simply set a fairly nominal figure but
that would inevitably be somewhat arbitrary. In the circumstances,
we see no alternative but to refer this matter back to the High
Was the building destroyed?
Vero also argued that the building was already destroyed (in
terms of the policy) by the February earthquake, and there would
therefore be no liability resulting from the June earthquake. The
Court of Appeal noted that:
"The policy defines
'destroyed' as meaning 'so damaged by an insured event
that the property, by reason only of that damage, cannot be
repaired'. Vero's case is that this definition contains an
implied requirement that the building cannot 'reasonably'
be repaired and the Judge was therefore wrong to ignore the
economic and practical considerations of repair in this
It was recognised by both Whata J in the High Court and the
Court of Appeal that whether a building is destroyed needs an
objective assessment. The Court of Appeal referred to its statement
in QBE Insurance (International) Ltd v Wild South Holdings
Ltd  NZCA 447,  2 NZLR 24, saying that:
"the language of the policy in
that case pointed to an objective assessment by the Court, informed
by considerations which may include any special features of the
building, the insured's intentions for it so far as they are
not eccentric or unreasonable, and the respective costs of
reinstatement and replacement. The test was not what the insured
would do if it were spending its own money."
President Ellen France noted that the building is still
functional, as evidenced by it being currently tenanted (albeit at
a reduced rental), and that the experts have agreed that the
building can be repaired, although it is more expensive to do so
than to replace it. She also considered the fact that the policy
has a constructive total loss provision, which "could have,
but did not, include economic destruction within that extended
provision." She decided that in those circumstances they
should not read in the reasonableness requirement that Vero
suggested, and upheld the finding that the building was not
The appeal was therefore allowed in part, and sent back to the
High Court for reconsideration.
The failure of a party to call a witness does not necessarily give rise to an adverse inference being drawn in accordance with Jones v Dunkel (1959) 101 CLR 298. An unfavourable inference is drawn only if evidence otherwise provides a basis on which that unfavourable inference can be drawn.
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