Carter Holt Harvey Ltd v Minister of Education

JurisdictionNew Zealand
CourtSupreme Court
JudgeO'Regan J
Judgment Date29 July 2016
Neutral Citation[2016] NZSC 95
Docket NumberSC 93/2015
Date29 July 2016

[2016] NZSC 95

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

Elias CJ, William YoungGlazebrook, Arnold and O'Regan JJ

SC 93/2015

BETWEEN
Carter Holt Harvey Limited
Appellant
and
Minister of Education
First Respondent
Secretary for Education
Second Respondent
Ministry of Education
Third Respondent
Board of Trustees of Orewa Primary School
Fourth Respondent
Apperances:

D J Goddard QC I M Gault and J Q Wilson for Appellant

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

Appeal against a Court of Appeal (CA) decision refusing to strike out causes of action in negligence and negligent failure to warn – cross-appeal by the respondents in relation to the CA's decision to strike out a negligent misstatement claim – the appellant manufactured cladding sheets and cladding systems that had been installed in various schools throughout New Zealand which were owned or administered by one or more of the respondents – a large number of school buildings had been affected by weathertightness issues and it was alleged that those problems had arisen because the cladding sheets and cladding systems supplied by the appellant were defective – whether the appellant owed the respondents a duty of care – whether the appellant had a duty to warn – whether the respondents' claims in negligent misstatement were arguable – whether s393 Building Act 2004 (“BA”) (limitation defences) applied to the respondents claims.

The issues were: whether Carter Holt owed the respondents a duty of care; whether Carter Holt had a duty to warn; whether the respondents' claims in negligent misstatement were arguable; and whether s393 Building Act 2004 (“BA”) (limitation defences) applied to the respondents' claims.

Held: % The approach to determining whether it was fair, just and reasonable to impose a duty of care focuses on proximity between the parties and policy considerations. The cladding product was a specialist product; it could be anticipated that it would be bought by building professionals not end users as happened in the present case; the defects were not visually apparent, they took some time to develop, and needed scientific analysis to establish them; and the product was promoted for use as an exterior product, which meant that its quality should have included providing weatherproofing. The existence of a chain of contracts was not, of itself, decisive in respect of the existence of a duty of care. The contractual matrix did not render unarguable the respondents' proximity argument.

As a manufacturer and supplier of building components, Carter Holt had not been under any direct statutory duty under the BA at the time it supplied its cladding sheets and cladding systems for the respondents' buildings. Although the BA and the building code did not apply to manufacturers, the cladding sheets and cladding system produced by Carter Holt were “building elements” and “building supplies” to which certain requirements of the building code and BA applied.

While Carter Holt was not, itself, required to comply with the BA and the building code, the fact that its products were being used by practitioners who were required to comply with those requirements and were to be used in buildings which had to be code compliant meant that the standards imposed by the BA and the building code were relevant to questions of proximity and foreseeability of harm. The claim under the CGA and the significance of liability under that Act (if any) on the negligence claim could be evaluated at the trial.

It was arguable that there was sufficient proximity. It was arguable that Carter Holt owed a duty of care to all or some of the respondents. There was nothing preventing concurrent liability in contract and tort. There was no other available form of protection, given that the defects were defects that had only been identified with specialist assistance. The respondents could not have been expected to know of the defects and take steps to protect themselves. In those circumstances, vulnerability factor did not have much significance and, to the extent that it did, it did not militate against the finding of a duty of care.

There were a number of issues in relation to the proximity analysis which would need to be carefully evaluated at the trial. There was no error in the approach taken by the CA requiring that those issues be resolved at trial, rather than at the strike-out stage

The policy factors to be considered in determining whether the imposition of a duty of care would be fair, just and reasonable in the circumstances were matters that would need to be explored fully at the trial, once the contractual relationships have been clearly established. A tortious duty of care standing alongside the statutory protections (the deemed warranties in the BA and the statutory guarantees under the CGA) did not make the law incoherent.

It was doubtful the pleaded duty to warn, added much to the negligence cause of action, but it was not appropriate to strike it out. Whether the product caused damage to property or to the health of the occupants and what Carter Holt knew about those risks were intensely factual issues which were best resolved at trial.

It was not clear at this stage whether the negligent misstatement cause of action added anything to the negligence claim. An issue as to whether there needed to be proof of actual reliance by the respondents may arise but it was premature to see those concerns as fatal to the claim

The applicability of s393 BA turned on whether the respondents' claims were civil proceedings relating to building work. Section 7 BA (building work) defined “building work” as “for, or in connection with, the construction, alteration, demolition, or removal of a building”. The Building Code made an important distinction between building elements and building work. The term “building elements” was defined in the Building Code as: any structural or non-structural component and assembly incorporated into or associated with a building. There was no dispute that the acts or omissions of Carter Holt were not building work. It was also common ground that cladding sheets were building elements for the purposes of the building code. The present proceedings were not proceedings arising from building work or the performance of a function under the BA and therefore were not within the scope of s393 BA. The fact that Carter Holt had not undertaken building work did not necessarily stop the respondents' claim against it from being civil proceedings relating to building work. Section 393(1) BA seemed to serve no obvious purpose, in that it simply declared that another statute, the Limitation Act 2010 (“LA”), applied to proceedings of the kind described in s393(1) BA. The fact that building work was treated as distinct from building products made it clear that the legislation, when referring to building work, was not referring to building products or building methods. The essential nature of the claim related to the allegedly defective quality of cladding sheets and the cladding system. That was a building material. The nature of the claim did not relate to building work. It was best to leave determinations of the application of s393 BA to specific factual situations to cases where the facts were established.

There was no appellate authority on whether a contribution claim would be time barred by the longstop provision. The LA provided for a generic longstop period of 15 years, subject to an exception for fraud. Suppliers in the position of Carter Holt would be able to rely on that provision.

Carter Holt's appeal was dismissed. The respondents' cross-appeal was allowed. The CA's order striking out their negligent misstatement claim was quashed.

JUDGMENT OF THE COURT
  • A The appellant's appeal is dismissed.

  • B The respondents' cross-appeal is allowed.

  • C The order striking out the negligent misstatement cause of action is quashed.

  • D The appellant must pay to the respondents (collectively) costs of $45,000 and reasonable disbursements, to be fixed if necessary by the Registrar.

REASONS

(Given by O'Regan J)

Table of Contents

The respondents' claims

[1]

Grounds of appeal

[5]

Pleaded defects

[7]

Pleaded loss

[9]

Strike-out principles

[10]

Are the respondents' claims in negligence arguable?

[13]

Is it arguable that CHH owes the respondents a duty of care?

[14]

Proximity

[16]

The parties' relationship

[17]

Contractual matrix

[20]

Statutory framework

[29]

Vulnerability

[43]

Conclusion on proximity

[56]

Policy factors

[57]

Incoherence, commercial certainty and contractual chains

[59]

Loss and damage claimed

[63]

Health and safety

[69]

Statutory framework

[71]

Conclusion on duty of care

[72]

Is it arguable that CHH had a duty to warn?

[73]

Are the respondents' claims in negligent misstatement arguable?

[78]

Does s 393 of the 2004 Act apply to the respondents' claims?

[86]

Meaning of the words

[90]

Scheme of the Act

[98]

The nature of the claim

[101]

Statutory history

[105]

Particular building

[109]

Case law

[112]

Anomalous results

[116]

Position of regulatory

[122]

Contribution

[126]

Conclusion on s 393(2)

[129]

Result

[132]

Costs

[133]

The respondents' claims
1

The appellant, Carter Holt Harvey Limited (CHH), manufactures cladding sheets and cladding systems that have been installed in various schools throughout New Zealand owned or administered by one or more of the respondents. The cladding sheet product is known as “Shadowclad”. The respondents say that a large number of school buildings have been affected by weathertightness issues and allege that these problems have arisen because the cladding sheets and...

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  • Smith v Fonterra Co-Operative Group Ltd
    • New Zealand
    • Court of Appeal
    • 21 October 2021
    ...at [76]. 75 North Shore City Council v Attorney-General, above n 7, at [157]–[160]; and Carter Holt Harvey Ltd v Minister of Education [2016] NZSC 95, [2017] 1 NZLR 78 at 76 Todd, above n 11, at [5.4]. 77 High Court judgment, above n 1, at [81], [92] and [98]–[99]. 78 At [82]. 79 Todd, abo......
  • Smith v Fonterra Co-Operative Group Ltd
    • New Zealand
    • Court of Appeal
    • 21 October 2021
    ...at [76]. 75 North Shore City Council v Attorney-General, above n 7, at [157]–[160]; and Carter Holt Harvey Ltd v Minister of Education [2016] NZSC 95, [2017] 1 NZLR 78 at 76 Todd, above n 11, at [5.4]. 77 High Court judgment, above n 1, at [81], [92] and [98]–[99]. 78 At [82]. 79 Todd, abo......
  • Smith v Fonterra Co-Operative Group Ltd
    • New Zealand
    • Court of Appeal
    • 21 October 2021
    ...at [76]. 75 North Shore City Council v Attorney-General, above n 7, at [157]–[160]; and Carter Holt Harvey Ltd v Minister of Education [2016] NZSC 95, [2017] 1 NZLR 78 at 76 Todd, above n 11, at [5.4]. 77 High Court judgment, above n 1, at [81], [92] and [98]–[99]. 78 At [82]. 79 Todd, abo......
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    ...per Lord Wright. 66 North Shore City Council v Attorney General, above n 1 at [158]–[160]; Carter Holt Harvey v Minister of Education [2016] NZSC 95, [2017] 1 NZLR 78 at 67 See, for example, Attorney General v Prince & Gardner, above n 1, at 267–277; North Shore City Council v Attorney......
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