This claim arose from the Government’s use of a cladding product known as Shadowclad in schools throughout New Zealand.
This product was manufactured by Carter Holt Harvey (CHH).
The thrust of the claim brought by the Minister of Education (MoE), was that a number of school buildings had been affected by weathertightness issues because of the defective cladding sheets installed.
The key criticisms of these sheets were:
• The preservative treatment is below the level required by the relevant standard and insufficient to prevent fungal rot.
• These sheets are inherently prone to absorbing significant amounts of moisture. In part, this is because the end grains are exposed on all edges of the sheets. The absorbed moisture then gets transferred to the adjacent timber framing.
• Aspects of the cladding system allow water to penetrate behind the cladding sheets.
The claim was before the Supreme Court on appeal. The issues before the Supreme Court were:
1 Are the claims in negligence arguable?
2 Are the claims for negligent misstatement arguable?
3 Does Section 393 of the Building Act 2004 (longstop limitation provision) apply to claims as against a supplier of building materials?
It is important to note this was effectively a strike out application only.
A key argument put by CHH was that there was no available arguable claim in negligence because a duty of care could not be established for want of proximity.
In particular, that the contracts as between MoE/the head contractor, head contractor/CHH controlled the allocation of risk, and principles of negligence ought not to overwrite these allocations. This argument was rejected by the Supreme Court as not being applicable in this instance.
CHH also argued that since the Building Act 2004 (at time of supply) placed no statutory duty upon CHH as to the supply of building materials, the courts ought not to impose a duty of care.
This argument was also rejected by the court. In response, the court ruled that even if CHH need not comply with the Building Act 2004, the building practitioners to whom it supplied its goods needed to comply with the Building Act 2004.
It follows the lack of a statutory duty upon CHH did not prevent the potential of a duty of care being owed by CHH to its end users.
Accordingly, it was ruled that the claims brought by the MoE were arguable, and it was not appropriate to strike them out.
Ultimately, the court ruled that the determination of whether a duty of care was owed ought to be resolved at trial.
The court ruled that the negligent misstatement cause of action was at least arguable. It was reinstated.
The nature of that claim was that CHH had carried out promotional activities in which it made representations that would lead the reasonable person to believe that the cladding sheets, when affixed to buildings, would meet recognised building standards.
Section 393 is the 10-year longstop limitation period for all civil proceedings that relate to building work. The issue at stake was whether these proceedings related to building work.
CHH argued that whilst the manufacture of, and supply of, cladding sheets was not building work, the claim brought against them is that their product, when installed on the said buildings, did not comply with the relevant building standards.
In this way, they argued the claim relates to building work, even though the acts or omissions of CHH that underlie the claims are not, themselves, building work.
The Supreme Court ruled in the first instance that since building work is treated separately from building products, that the definition of “building work” did not cover building products or methods.
It then went on to consider CHH’s argument that the nature of the claim brought against CHH still related to “building work”.
The court considered that the essence of the claim was that cladding sheets are inherently defective because of their proneness to absorb moisture.
The fact that the buildings to which the sheets have been affixed do not comply with the building code does not alter the essential nature of the claim which relates to the allegedly defective quality of cladding sheets and the cladding system.
Accordingly, it ruled that the claim relates to CHH’s manufacture and supply of cladding products that were allegedly defective. It is not a claim relating to “building work”.
Accordingly, the MoE was not restricted by the “longstop” limitation period.
CHH lost on every count in the Supreme Court, and we can now watch with interest how this claim is ultimately determined, if not resolved, in the interim.
Note: This article is not intended to be legal advice (nor a substitute for legal advice). No responsibility or liability is accepted by Legal Vision or Building Today to anyone who relies on the information contained in this article.