Cridge v Studorp Limited - [2024] NZCA 483
Date of Judgment
26 September 2024
Decision
Cridge v Studorp Limited (PDF 754 KB)
Summary
CLASS ACTION COMMERCIAL LAW – Fair Trading Act 1986 NEGLIGENCE – duty of care, new duty
From 1987 until 2005 James Hardie manufactured and sold a sheet cladding system called Harditex for use in residential houses. A group of homeowners whose houses were built using Harditex claimed that Harditex was an inherently defective product that was not fit for purpose. They further claimed it had either caused or contributed to cause their homes to suffer water ingress and moisture-related damage.
The inherent defects relied on included the absorbent nature of the Harditex sheets and allegations that the cladding system allowed significant water ingress at various locations, principally the base of elevations, horizontal control joints, exterior corners and penetrations such as joinery/cladding junctions. It was alleged that not only was the system vulnerable to water ingress, it did not have adequate drainage and drying capabilities to manage the water that entered the wall assembly. The homeowners further alleged that Harditex required a level of building expertise beyond the skill level of a reasonably competent builder, and that James Hardie provided inadequate and misleading information to consumers and builders.
The claim pleaded causes of action under ss 9 and 10 of the Fair Trading Act and the tort of negligence, and sought to hold James Hardie liable in damages.
The named appellants filed proceedings in the High Court and were granted leave to bring their proceedings in a representative capacity on behalf of all current and previous owners of properties clad with Harditex who consented to being represented. 144 additional homeowners were part of the class. The first stage of the proceeding was to determine the claims of the named appellants and also determine, for the whole class, whether a duty of care was owed by James Hardie, if so whether the duty was breached, and whether the statements made in James Hardie’s technical literature (the JHTIs) were misleading and deceptive.
For the purposes of the proceeding eight homes were subjected to invasive testing and inspection, to analyse the extent and cause of the moisture damage (the test properties). The were numerous experts instructed by both parties. The trial record ran to over 70,000 pages.
In the High Court Simon France J held that James Hardie owed a duty of care to the homeowners, however in all other respects he rejected their claim. He found they had failed to prove Harditex was an inherently flawed product unable to deliver a watertight and durable house. He said he was satisfied that Harditex worked and that, while capable of improvements, it was fit for purpose. The Judge accepted that the test properties were water damaged and should not be. However, he concluded that the cause of the damage to the test properties was more likely to be incompetent building and poor texture coating than inherent defects associated with Harditex.
The homeowners appealed that judgment. They challenged almost all of the Judge’s factual findings. James Hardie sought to support the judgment on other grounds. Of the other grounds the Court only addressed the duty of care and limitation issues as the remainder were not of general importance.
The appeal was dismissed, and although the Court found that there was a duty of care and most claims would have been time-barred these findings were not determinative of the appeal because the Court’s factual findings on the evidence were sufficient to determine the outcome of the appeal. The appeal thus turned on whether any legal obligations - assuming they existed - were in fact breached.
Did James Hardie owe a duty of care to the homeowners? Held: yes.
After conducting the two-stage policy and proximity inquiry required when considering if it would be just, fair and reasonable to recognise a novel duty, the Court concluded the Judge was correct to find that James Hardie owed a duty of care to the homeowners.
It considered the duty of care should be formulated as follows: the manufacturer of a cladding product intended for use as a key component in the construction of a weathertight building owes a duty of care to an owner of the building to exercise reasonable care and skill in the design, manufacture and supply of the product so as to prevent loss from damage to the building caused by water ingress.
Did James Hardie breach the duty of care owed to the homeowners or ss 9 and/or 10 of the Fair Trading Act? Held: No.
The Court upheld the Judge’s findings that James Hardie did not breach their duty of care nor ss 9 and/or 10 of the Fair Trading Act. The key reasons for this were:
a) Criticisms of the Judge’s assessment of the expert evidence relating to the alleged inherent defects of Harditex and the causes of the water damage in the test properties were unjustified.
b) Its own assessment of the evidence confirmed that, generally speaking, on several key issues the James Hardie experts had greater expertise and gave their evidence in a more measured and less partisan way than some of the experts called by the homeowners.
c) Neither the evidence derived from the test properties nor the testing conducted for the litigation undermined the evidence of the James Hardie experts. On the contrary, the test properties tended to support the James Hardie claim that, when properly constructed and maintained (which the Court considered could be done by a competent builder), Harditex was fit for purpose.
d) None of the test properties had been built in full compliance with the James Hardie installation instructions and all contained significant building They did not provide a meaningful test of the Harditex system.
e) It was reasonable to assume that had any of the class members owned a property which had suffered water related damage despite being constructed in accordance with the James Hardie instructions and relevant building regulations, that property would have been selected as one of the test properties.
f) The technical instructions (including the construction details) provided by James Hardie were adequate and with one possible exception did not amount to operative misstatements.
Further, in relation to the Fair Trading Act the Court considered the Judge was correct in holding that, at least by 1991, the target audience of the JHTIs was designers and builders who had a good knowledge of the building industry and were capable of reading the relevant JHTI as a whole. The Court held the one possible misleading statement could not give rise to a breach of ss 9 and/or 10 because there was not a sufficient causal nexus and claims based on the JHTI the statement was contained in were time-barred.
Were the homeowners’ claims time-barred? Held: Likely, yes.
The Court held that all claims under the Fair Trading Act—aside from possibly those where the relevant JHTI was one of the 1998 versions—were time-barred.
For limitation purposes the homeowners’ negligence claims were governed by the Limitation Act 1950. The Court held that for the purposes of s 4 of that Act the cause of action accrued when the damage was reasonably discoverable. It noted that although the long-stop provisions in the Building Act did not apply to the homeowners’ claims, s 23B of the Limitation Act 1950 (a 15-year longstop provision) did apply. This appeared to mean that—given the proceedings were filed in August and October 2015—at best for the homeowners, only claims about properties built after August or October 2000 would likely be in time.
The Court did not make a determination on costs, but reserved leave for costs memoranda to be filed if necessary.
From 1987 until 2005 James Hardie manufactured and sold a sheet cladding system called Harditex for use in residential houses. A group of homeowners whose houses were built using Harditex claimed that Harditex was an inherently defective product that was not fit for purpose. They further claimed it had either caused or contributed to cause their homes to suffer water ingress and moisture-related damage.
The inherent defects relied on included the absorbent nature of the Harditex sheets and allegations that the cladding system allowed significant water ingress at various locations, principally the base of elevations, horizontal control joints, exterior corners and penetrations such as joinery/cladding junctions. It was alleged that not only was the system vulnerable to water ingress, it did not have adequate drainage and drying capabilities to manage the water that entered the wall assembly. The homeowners further alleged that Harditex required a level of building expertise beyond the skill level of a reasonably competent builder, and that James Hardie provided inadequate and misleading information to consumers and builders.
The claim pleaded causes of action under ss 9 and 10 of the Fair Trading Act and the tort of negligence, and sought to hold James Hardie liable in damages.
The named appellants filed proceedings in the High Court and were granted leave to bring their proceedings in a representative capacity on behalf of all current and previous owners of properties clad with Harditex who consented to being represented. 144 additional homeowners were part of the class. The first stage of the proceeding was to determine the claims of the named appellants and also determine, for the whole class, whether a duty of care was owed by James Hardie, if so whether the duty was breached, and whether the statements made in James Hardie’s technical literature (the JHTIs) were misleading and deceptive.
For the purposes of the proceeding eight homes were subjected to invasive testing and inspection, to analyse the extent and cause of the moisture damage (the test properties). The were numerous experts instructed by both parties. The trial record ran to over 70,000 pages.
In the High Court Simon France J held that James Hardie owed a duty of care to the homeowners, however in all other respects he rejected their claim. He found they had failed to prove Harditex was an inherently flawed product unable to deliver a watertight and durable house. He said he was satisfied that Harditex worked and that, while capable of improvements, it was fit for purpose. The Judge accepted that the test properties were water damaged and should not be. However, he concluded that the cause of the damage to the test properties was more likely to be incompetent building and poor texture coating than inherent defects associated with Harditex.
The homeowners appealed that judgment. They challenged almost all of the Judge’s factual findings. James Hardie sought to support the judgment on other grounds. Of the other grounds the Court only addressed the duty of care and limitation issues as the remainder were not of general importance.
The appeal was dismissed, and although the Court found that there was a duty of care and most claims would have been time-barred these findings were not determinative of the appeal because the Court’s factual findings on the evidence were sufficient to determine the outcome of the appeal. The appeal thus turned on whether any legal obligations - assuming they existed - were in fact breached.
Did James Hardie owe a duty of care to the homeowners? Held: yes.
After conducting the two-stage policy and proximity inquiry required when considering if it would be just, fair and reasonable to recognise a novel duty, the Court concluded the Judge was correct to find that James Hardie owed a duty of care to the homeowners.
It considered the duty of care should be formulated as follows: the manufacturer of a cladding product intended for use as a key component in the construction of a weathertight building owes a duty of care to an owner of the building to exercise reasonable care and skill in the design, manufacture and supply of the product so as to prevent loss from damage to the building caused by water ingress.
Did James Hardie breach the duty of care owed to the homeowners or ss 9 and/or 10 of the Fair Trading Act? Held: No.
The Court upheld the Judge’s findings that James Hardie did not breach their duty of care nor ss 9 and/or 10 of the Fair Trading Act. The key reasons for this were:
a) Criticisms of the Judge’s assessment of the expert evidence relating to the alleged inherent defects of Harditex and the causes of the water damage in the test properties were unjustified.
b) Its own assessment of the evidence confirmed that, generally speaking, on several key issues the James Hardie experts had greater expertise and gave their evidence in a more measured and less partisan way than some of the experts called by the homeowners.
c) Neither the evidence derived from the test properties nor the testing conducted for the litigation undermined the evidence of the James Hardie experts. On the contrary, the test properties tended to support the James Hardie claim that, when properly constructed and maintained (which the Court considered could be done by a competent builder), Harditex was fit for purpose.
d) None of the test properties had been built in full compliance with the James Hardie installation instructions and all contained significant building They did not provide a meaningful test of the Harditex system.
e) It was reasonable to assume that had any of the class members owned a property which had suffered water related damage despite being constructed in accordance with the James Hardie instructions and relevant building regulations, that property would have been selected as one of the test properties.
f) The technical instructions (including the construction details) provided by James Hardie were adequate and with one possible exception did not amount to operative misstatements.
Further, in relation to the Fair Trading Act the Court considered the Judge was correct in holding that, at least by 1991, the target audience of the JHTIs was designers and builders who had a good knowledge of the building industry and were capable of reading the relevant JHTI as a whole. The Court held the one possible misleading statement could not give rise to a breach of ss 9 and/or 10 because there was not a sufficient causal nexus and claims based on the JHTI the statement was contained in were time-barred.
Were the homeowners’ claims time-barred? Held: Likely, yes.
The Court held that all claims under the Fair Trading Act—aside from possibly those where the relevant JHTI was one of the 1998 versions—were time-barred.
For limitation purposes the homeowners’ negligence claims were governed by the Limitation Act 1950. The Court held that for the purposes of s 4 of that Act the cause of action accrued when the damage was reasonably discoverable. It noted that although the long-stop provisions in the Building Act did not apply to the homeowners’ claims, s 23B of the Limitation Act 1950 (a 15-year longstop provision) did apply. This appeared to mean that—given the proceedings were filed in August and October 2015—at best for the homeowners, only claims about properties built after August or October 2000 would likely be in time.
The Court did not make a determination on costs, but reserved leave for costs memoranda to be filed if necessary.