Carter Holt loses bid to toss out huge leaky schools suit

Friday 29th July 2016

Carter Holt Harvey has lost its final bid to throw out a claim that it's liable for the cost of fixing about 890 leaky schools, with the Supreme Court siding with the Ministry of Education.

Chief Justice Sian Elias and Justices William Young, Susan Glazebrook, Terence Arnold and Mark O'Regan today dismissed Carter Holt's application to strike out a claim that the building products maker was negligent in the way it sold plywood cladding product, known as Shadowclad, which the ministry says caused weather-tightness problems at a large number of schools. The country's top court turned down the Auckland-based company's appeals that the negligence claim was arguable and dismissed its bid to impose a 10-year limitation period that could have excluded about 600 buildings from the suit.

"Many of CHH's arguments are variations on arguments made (and rejected) in the earlier cases before this court where this court ruled that striking out claims would be inappropriate," the judgment, delivered by Justice Mark O'Regan, said. "That suggests that, contrary to CHH's submissions, the duty of care said to arise in the present case is not novel, given the decisions of this court in negligence cases decided over the last 10 years."

The claim "requires a close analysis of the facts, which makes the case unsuitable in an application to strike out."

The 10-year limitation claim is being closely watched by two separate class suits against cladding maker James Hardie Industries, as the time-bar had deterred homeowners from pursuing action.

The Supreme Court also allowed the ministry's appeal allowing it to mount a case that the company had negligently misstated a variety of claims about the cladding product, saying the context of a trial was the best forum for it to be tested and analysed.

The Education Ministry launched a claim against cladding manufacturers CHH, James Hardie 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.

At the same time as the school action, CHH has been in the process of being prepared for sale by its owner, billionaire owner Graeme Hart. Plans for an initial public offering of its Carters building supplies business were shelved over volatility in equity markets, having already been pared back the inclusion of his New Zealand and Australian timber processing and building supplies businesses.

The Supreme Court ordered Carter Holt to pay costs of $45,000 and reasonable disbursements to the ministry.

BusinessDesk.co.nz

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