The Court of Appeal issued its decision on the Christchurch Adventure Park Port Hills fire case (Leisure Investments NZ Limited Partnership v Grace & Ors)1. This affirmed the High Court’s decision that the Adventure Park are liable to the neighbouring property owners in negligence, nuisance and under the Forest and Rural Fires Act 1977 (Act). The Adventure Park’s key failure was in its delay to remove the chairs from the chairlift, which caused a further fire to ignite.
Leisure Investments owns the Adventure Park in the Port Hills of Christchurch. Mountain bikers, zipliners and sightseers are carried by a chairlift to the top of the park.
On Monday 13 February 2017, a fire was started by an arsonist in the area of the Port Hills known as Marleys Hill, north of the Adventure Park (Marleys Hill fire).
The Park kept the chairlift running through Monday night in order to protect the chairlift rope from heat concentration and potentially snapping. This decision was made in reliance on the chairlift manufacturer’s operation and service manual, and the fire safety plan.
On Tuesday 14 February, the Marleys Hill fire spread into the Adventure Park. The chairlift had started showing signs of possible failure and the Adventure Park considered removing the chairs and bike carriers off the chairlift. It did not do so due to difficulties with the type of chairlift. That night, the Marleys Hill fire was seen crossing the chairlift line.
It was not until the morning of Wednesday 15 February that the Adventure Park began to remove the chairs and carriers. However, some of the chairs remained and caught fire. As the chairlift was still running, these chairs dripped molten plastic onto flammable forestry slash below, setting it ablaze.
The parties accepted that had the chairs not caught on fire, the Marleys Hill fire would have safely passed south of the owners’ properties and those properties would not have been damaged or, in some instances, destroyed.
High Court decision
The owners of the affected properties brought proceedings against Leisure Investments alleging liability under s 43 of the Act, and in negligence and nuisance. The High Court found that Leisure Investments were liable. This was, in part, because a reasonable operator would have appreciated that the plastic on the chairs could melt and create a fire spread risk, and would have removed the chairs much earlier.
Court of Appeal decision
Leisure Investments appealed the High Court decision. This was on the grounds that it had relied on the chairlift manufacturer’s operation and service manual and the fire safety plan and acted in accordance with best practice.
However, the Court of Appeal found that the High Court was correct to hold Leisure Investments liable. This was because Leisure Investments was aware of the:
- close proximity of the fire;
- reasonable possibility of a major forest fire in the chairlift corridor;
- fact that the seats on the carriers were coated in plastic; and
- considerable quantities of dry slash and flammable matting underneath the chairlift, and the elevated fire risk in the Port Hills area.
Leisure Investments knew it was possible to remove the chairs but did not begin to do so until it was too late. The Court concluded that there was a risk of the fire spreading into the Adventure Park from the Monday night onwards.
The Court of Appeal also upheld Leisure Investments’ liability in nuisance and under s 43 of the Act.
Measure of damages
The Court of Appeal’s approach to the measure of damages is of note. The Court found that the High Court did not err by awarding damages based on a “notional reasonable cost of reinstating [a] house” that was completely destroyed. This was despite the fact that the owners had no intention to reinstate the house. The usual starting point for the appropriate measure of damages is that in the absence of an intention to reinstate, the measure of damages should be the loss of value, rather than the cost of cure. However, the Court found that there were compelling circumstances justifying a departure from the usual approach.
This decision serves as useful guidance on the approach to the measure of damages. Litigants should be mindful that the courts may take a more flexible and pragmatic approach to the measure of damages. Here, for example, this meant that for one homeowner who had suffered a “particular and tragic situation”, they received damages on a “notional reinstatement basis” rather than simply the actual rebuild costs, despite having no intention to reinstate the house.
This decision will also be of particular interest to insurers that are setting claims reserves. The fact that the Court of Appeal emphasised the more flexible approach to the measure of damages perhaps indicates that insurers should be prepared to opt for a more conservative claims reserve from the outset of a claim.
Please feel free to contact Ben Sanders or Daniel Cook if you want to discuss this decision or issues raised in the case further.
1  NZCA 89.