Carter Holt Harvey Ltd v Minister of Education and Others

JurisdictionNew Zealand
CourtCourt of Appeal
JudgeStevens J
Judgment Date23 Jul 2015
Neutral Citation[2015] NZCA 321
Docket NumberCA238

[2015] NZCA 321

IN THE COURT OFAPPEAL OF NEW ZEALAND

Court:

Randerson, Stevens and Cooper JJ

CA238

BETWEEN
Carter Holt Harvey Limited
Appellant
and
Minister of education
First Respondent
Secretary Foreducation
Second Respondent
Ministry of education
Third Respondent
Board of Trustees of Orewa Primary School
FourthRespondent
Counsel:

D J Goddard QC, I MGault and J Q Wilson for Appellant

J A Farmer QC, N F Flanagan and K C Chang for Respondents

Appeal against a High Court refusal to strike out claims against the appellant in negligence, breach of the Consumer Guarantees Act 1983 (CGA) and Fair Trading Act 1986 — product liability claims related to cladding systems installed in schools which were affected by weathertightness issues– whether it was arguable that the relationship between manufacturers and suppliers and the end user of the product was sufficiently proximate for the duty of care to exist — whether imposing a duty would cut across contractual allocation of risk — whether the absence of statutory duties on manufacturers and suppliers of building products told against the imposition of a duty — whether the CGA applied where a supplier acquired goods from a manufacturer, and used those goods to produce a different product that was then supplied to the relevant consumer — whether what was supplied to the respondents were whole or parts of whole buildings which were not covered by the CGA — whether the proceeding related to building work so that s393 Building Act 2004 (Limitation defences) applied to bar the respondents’ claims.

The issues were: whether it was arguable that the relationship between manufacturers and suppliers and the end user of the product was sufficiently proximate for the duty of care to exist; whether imposing a duty would cut across contractual allocation of risk; whether the absence of statutory duties on manufacturers and suppliers of building products told against the imposition of a duty; whether the CGA applied where a supplier acquired goods from a manufacturer, and used those goods to produce a different product that was then supplied to the relevant consumer; whether what was supplied to the respondents were whole or parts of whole buildings (which were not covered by the CGA); and whether the proceeding related to building work so that s393 BA appliedto bar the respondents’ claims.

Held:

Held: Foreseeability was established. As a designer and manufacturer of shadowclad and associated cladding systems, Carter Holt must have been able to foresee that negligence on its part might very well result in the types of losses the respondents suffered. The respondents had pleaded that shadowclad had been defectively designed and manufactured. Proof or otherwise of such defects would be a matter for trial. For present purposes, the pleaded defects were capable of supporting a claim in negligence.

The contractual matrix was not determinative, either as a matter of principle, or as matter of fact in this case. As a matter of principle the question of proximity sought to investigate everything bearing on the relationship between the parties. The contractual links between the parties links (particularly the content of the applicable contracts) had to be placed in context of everything bearing on the relationship (Rolls-Royce News Zealand Ltd v Carter Holt Harvey Ltd).

It was not untenable that Carter Holt would owe a duty to an end-consumer to manufacture its product carefully. Tortious liability to a consumer could potentially exist, notwithstanding the various contractual relationships by which Carter Holt's products reached them.

The absence of breaches of relevant provisions of the BA or the Building Code imposing duties on building suppliers was not decisive of proximity in this situation. The presence of a statutory obligation to take care in respect of a particular act or omission was a factor indicating it was reasonable to foresee potential harm in relation to those acts or omissions (and the people in respect of whom they were made). But the absence of any direct statutory obligations was not decisive against a duty of care.

While there were no direct obligations on manufacturers and suppliers of building products under the BA, it would be odd if Carter Holt, in producing building products intended for use in code-compliant buildings (to be purchased by individuals who were subject to duties under the BA) would have no regard to that Act. The standards the BA imposed were relevant to questions of proximity, foreseeability of harm, and the contemplated end-users of products used in buildings, who ought to be protected from that harm. The absence of a statutory duty did not rule out a tortious duty and such a duty was not clearly untenable on the legislation. These were issues best determined at trial.

The approach to vulnerability in Brookfield Multiplex was not one that had found favour in New Zealand (Spencer on Byron per McGrath and Chambers JJ). The question was whether the respondents could have been expected to know of, and take steps to protect itself against, the risks in shadowclad. The respondent said that the defects were latent and identifiable only by expert examination. It was arguable the respondents were not in a position to protect themselves from these risks and it was therefore arguable Carter Holt owed a duty to them in light of that inability. The relevant vulnerability was not met by the suggested ability to negotiate for warranties.

Policy issues relating to tort cutting across that contractual realm were relevant factors but they should be considered at trial. These factors did not operate with such certainty as to render the duty unarguable. A duty of care arguably might exist in respect of manufacturers’ liability on orthodox negligence principles. Moreover, tortious liability was arguably capable of operating independently of the contractual context.

Modern trends towards mass production of consumer products meant that a direct contractual nexus between manufacturers and consumers had become rare. The relationship between the consumer and the manufacturer in terms of direct contractual chains, therefore, was not determinative. As a matter of policy, for the purposes of strike-out there was an arguable duty, established on the facts.

The position as to loss was arguable. New Zealand courts had firmly rejected a clear delineation between economic loss and physical damage in terms of recoverable loss. It would be similarly artificial to uphold a distinction between the defective chattel and the harm it would cause by the very nature of its defect, as well as the preventative measures that could be taken to prevent that harm. The nature of loss was not a policy factor which supported striking out the claim as untenable.

Given the clear health and safety considerations applicable in the target market for the products, it was arguable that a manufacturer such as Carter Holt should bear responsibility in tort for the design and manufacture of products carrying risk to the health of the occupants of buildings such as schools. These factors were therefore relevant policy considerations and arguably weighed in favour of the imposition of a duty.

Whether the courts would impose a duty of care for negligent misstatement in a given case required consideration of proximity and policy considerations. The establishment of requisite proximity was particularly important as statements had the potential to give rise to indeterminate liability to an indeterminate number of people. The concepts of assumption of liability, foreseeability and reasonable reliance therefore operated as checks on the extension of liability under the enquiry of proximity. The key limiting factor in the present context was reliance. The respondents had not pleaded membership of a specific class, in respect of whom Carter Holt could be said to have reasonably foreseen they would rely on its statements. The pleading referred to a generic, diffuse representation, made apparently to the world (consumers at large), not limited to any specific transaction or context. A duty could not be imposed on the basis of so broad and disparate a representation, made to a vague class of individuals.

The negligent misstatement claim was struck out.

The tortious duty of care could include a duty to warn customers or users if the product had dangerous features or potentially harmful qualities. Traditionally the duty to warn arose in circumstances where the manufacturer held knowledge or information about the danger that the consumer could not reasonably be expected to possess. The imposition of a duty to warn was needed to address or rectify the imbalance. The respondents pleaded that Carter Holt knew or ought to have known its products had a range of risk characteristics and that, if they were installed on school buildings, they could or would cause damage to those buildings. The pleadings raised sufficient factual issues relating to the risk characteristics and knowledge of such on the part of Carter Holt that it was at least arguable the facts might give rise to a duty to warn consumers about them. This was a matter to be established at trial.

The HC found it was arguable consumers who acquired goods without contact with the manufacturer could still have a claim against the manufacturer under the CGA. Whether liability applied under any one or more of the guarantees in s6 (Guarantee as to acceptable quality), s8 (Guarantees as to fitness for particular purpose), s9 (Guarantee that goods comply with description) and s13 (Express guarantees) CGA would ultimately depend on the nature of the supply of shadowclad and cladding systems and the circumstances in which those occurred. On the evidence it was not untenable to propose the supply was within the ambit of the CGA and that the cladding constituted a good to which the CGA applied.

Policy considerations behind the longstop provision supported the view...

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5 cases
  • Carter Holt Harvey Ltd v Minister of Education
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