The
Court of Appeal refused to increase a “full and final” Christchurch earthquake
payout of $1.05 million for the loss of iconic Worcester Towers following
claims a mistake had been made.
Worcester Towers at Cathedral Junction is
owned by trustees of the late John Britten’s estate. It housed a motorcycle museum dedicated to
his memory. Tenants in the three-storey
brick building included a cinema. The
building was demolished, damaged beyond repair after the neighbouring
Christchurch Press building fell into it during the February 2011 earthquake.
The Court of Appeal was told the trustees
settled with insurer Vero for $1.05 million in August 2011 at what they then
thought was the extent of Vero’s liability.
They later changed their mind, believing the correct assessment should
have been $1.605 million. They sued,
claiming the settlement agreement should be re-opened under the Contractual
Mistakes Act. They alleged both Vero and
themselves had made the same mistake: The damaged building should have been
valued at market value based on replacement cost.
The trustees had signed an insurance
release acknowledging the $1.05 million payment was in full and final
settlement. Compensation can be ordered
when any agreement is influenced by a mistake.
But sanctity of contract prevails. The Contractual Mistakes Act rules
out compensation where the agreement itself has one side or the other accepting
the risk of a mistake. The Court of
Appeal ruled “full and final” agreements are intended to provide closure. Money is exchanged for peace. Finality is provided with one side paid,
accepting the risk that further claims might later arise, whilst the other having
made payment is released from any further obligation.
Prattley
Enterprises v. Vero – Court of Appeal (14.03.16)
16.042