EQC declaration sets 'as new' standard for repairs and cash settlements

A group of 98 Canterbury homeowners has won a landmark settlement with the Earthquake Commission that may cost millions of dollars and result in hundreds of reappraisals of home earthquake repairs.

The settlement follows a declaratory judgment in the High Court that came only after  a group of Christchurch  homeowners asked the EQC to change its reliance on Ministry of Business Guidelines and instead pay for repairs that would bring homes back to an as new condition.

The EQC refused, so the group took it to the High Court, not seeking damages but rather seeking a declaratory judgment, which has led to today’s settlement.

EQC Action Group founder and committee chairman Warwick Schaffer says the settlement is a huge victory, and will have far-reaching consequences for all EQC claimants.

The clarifications in the settlement may pave the way for thousands of claimants to seek a re-appraisal of aspects of their repairs or cash settlements following Canterbury's major earthquakes.

A joint statement by EQC and the EQC Action Group claims the settlement removes ambiguity and inconsistency for EQC repair standards.

The settlement clarifies EQC’s obligations under the EQC Act. It removes EQC’s reliance on Ministry of Business re-levelling guidelines (allowing a 50mm tolerance), and confirms EQC reinstatement standards are set to “as when new.”

The deal also corrects how EQC's cash payment is calculated.

Group members have been working with law firm Anthony Harper for three years to achieve this agreement with EQC.

They were assisted by volunteers from Law for Change, a group of law students from the University of Canterbury.

The group had offered to settle with EQC by issuing a joint statement in September 2015.

This was rejected by EQC, forcing the group to take its claims to the High Court .

The action sought clarification on specific interpretations under the EQC Act.

One of these related to the MBIE Guidelines on re-levelling damaged floors.

Under the guidelines, floors less than 50mm out of level were not repaired by EQC.

The settlement with EQC states the MBIE Guidelines will not be used to determine if a floor needs to be re-levelled. Neither will it be used to determine how level a floor needs to be once repaired. Instead, EQC must return the floor to a condition substantially the same as when new and compliant with regulations.

The requirement to repair homes to a condition substantially the same as when new, rather than their condition just before to the earthquakes, is also confirmed in the settlement.

EQC has previously used phrases such as “pre-earthquake standard” and “like for like” when describing its obligations.

The agreement also covers repair to undamaged parts of a property, such as old wiring that needs to be replaced as part of the earthquake damage repair.

EQC has refused to undertake repairs when it would be required under building regulations to significantly upgrade items such as wiring.

In other cases, homeowners paid to replace the old wiring to allow work to go ahead.

Sometimes EQC paid homeowners cash for the work, excluding the cost of the required upgrade, leaving homeowners with a substantial bill to complete the repair to their homes.

The settlement clarifies that EQC will cover the cost of repair or replacement of undamaged parts if this is required to repair the earthquake damage.

The settlement also confirms that, if EQC elects to pay the homeowner, it must base its cost on a reinstatement strategy that returns the damaged part to a condition “substantially the same as when new” as defined by the act.

A final clarification relates to the EQC Act clause 9 (1)(a) of the third schedule.

EQC considers this clause modifies the repair standard required.

The Action Group and EQC have agreed that this provision only applies when EQC elects to repair or replace the damage and not when it pays the homeowner for the reinstatement of the damage.

This is likely to mean that some of those who have been paid by EQC may be able to challenge the way EQC has calculated that payment.

“There has been widespread concern EQC was scoping repair work that did not meet the standard under the act,” the Action Group says.

“EQC has been using the same scope of works whether it elected to do the work or pay the homeowner. In most cases a different scope will be required if EQC elects to cash settle."

The action taken by law firm Anthony Harper was an application for declaratory relief rather than damages.

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