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High Court lets Carter Holt drag councils into leaky schools lawsuit

Tuesday 20th March 2018

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Carter Holt Harvey won its bid to drag local authorities into its protracted leaky schools court case with the Ministry of Education, although the judge excluded buildings captured by a time-bar, and gave the building products maker a hurry-up to lodge more detailed claims.

In the High Court in Auckland, Justice Sally Fitzgerald rejected an application by 54 councils to strike out Carter Holt's bid to add them as a third party to the broader leaky school claim while filing separate proceedings to seek contributions from the local bodies if it's found liable. The building products company owned by billionaire Graeme Hart is being sued by the Education Ministry over supplying defective cladding products that were installed in 833 school buildings across the country. The ministry wants damages for the removal and replacement of the cladding, repairs to related damage, and any health problems arising from mould growth. 

The Jan. 26 judgment, recently published on the Justice Ministry's website, shows Carter Holt denies its Shadowclad cladding product was defective or caused any damage, but says if it's liable, local authorities should contribute for signing off on compliance certificates. 

Carter Holt tried to have the ministry's claim thrown out before the substantial hearing, going all the way to the Supreme Court which sided with the ministry, letting it mount a case that the building products maker misstated a variety of claims about the Shadowclad cladding. 

The building products maker refrained from making third-party claims against the councils because of the strike-out applications, saying it didn't want to put the local bodies on notice unnecessarily, although it didn't serve third-party notices after losing the first appeal, instead of waiting until December 2016, Justice Fitzgerald said. 

The councils argued they were "seriously prejudiced by the excessive delay" because at least 49 buildings were time-barred and they weren't able to inspect buildings that had been repaired or demolished in the interim. The local authorities also claimed another 326 buildings fell outside the 10-year limit for the third party notices and another 90 in the contribution proceedings fell outside the limit. The local bodies also contended Carter Holt's claims weren't detailed enough. 

"I am concerned at the present state of CHH's pleadings and have a sense of disquiet at any prospect of the court being seen to sanction the broad and generic type of pleading in its present form," the judge said. "Further, there is an irony in CHH's present position given the councils' complaints in relation to CHH's pleadings almost CHH's own complaints in relation to the ministry's earlier pleadings in the main proceedings and which were the subject of Justice Fogarty's judgment on CHH's application for further and better particulars." 

Still, Justice Fitzgerald chose not to strike out the claims given the practical realities of the complex case, and because the councils hadn't sought further and better particulars. 

"Striking out the claim is, in a sense, a matter of last resort, and the court will have regard to whether the defects can be remedied by way of further particulars," she said. 

The judge concluded longstop provisions applied to contribution claims and struck out obviously time-barred buildings. She said the parties have to engage in resolving buildings where there was less certainty on the time-bar and gave them 20 working days to file a joint memorandum on further particulars from Carter Holt. 

The Education Ministry launched a claim against cladding manufacturers Carter Holt, James Hardie Industries and CSR in April 2013 to help cover a bill that was estimated to be as much as $1.5 billion. It has since reached confidential settlements with James Hardie and CSR, though there are some cross-claims against those parties as at least 73 school buildings used a mixture of cladding products.


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