Education Ministry's leaky school claim against Carter Holt about a year away

Friday 22nd June 2018

The Ministry of Education's claim Carter Holt Harvey's Shadowclad product is defective and caused leaks in 833 school buildings will probably reach the courtroom in 12 months in a multi-staged trial, after five years of pre-hearing skirmishes that have already reached the Supreme Court.

In the High Court in Auckland, Justice Sally Fitzgerald yesterday accepted the ministry's preferred approach to trial, saying it was "the first step in the determination of the substance of the ministry's claim". The ministry's approach would first test whether the cladding is defective as claimed, which the judge said was "an evidential issue on which the ministry takes the risk" and if it can't prove that "the entire proceedings (or at least its primary claim of negligence) will come to an end."

The education ministry submitted the proceeding could be held in about 12 months and would exclude the 50-plus local body councils Carter Holt has joined to the action as third parties facing a suit from the building products company if it's found liable, meaning the discovery process would be smoother. The government department estimates the trial would take 10-to-12 weeks, and if successful would be "highly likely to facilitate settlement," the judgment said.

The second stage, if needed, would deal with the individual causation and loss of each building.

Carter Holt disagreed with that approach, saying it ignored the real issue, which it claims is why the buildings leak. The company proposed a non-binding test case of 20 buildings in the first-stage to provide guidance for the balance of the claim and would be "more likely to drive settlement", although it would take a year longer than the ministry's approach.

Unlike its rivals James Hardie and CSR Building Products, Carter Holt didn't reach a deal with the ministry and instead sought to strike out the claim. The government entity launched its representative action against the firms in 2013 seeking contributions for what it initially thought would be between $1.3 billion to $1.8 billion. The predicted cost of remediation was later revised down to between $1.1 billion and $1.3 billion. It successfully sued the former Hawkins construction business, H Construction North Island, earlier this year for $13.4 million to go towards repairing nine leaky school buildings.

The ministry wants Carter Holt to pay all costs associated with the removal and replacement of the cladding and is also suing for the cost of fixing damage caused by the leaks.

Justice Fitzgerald wasn't convinced the additional time and complexity of Carter Holt's proposal garnered enough benefit from the guidance it would provide, particularly "when it will delay resolution of the three core aspects of the ministry's claim, resolution of any one of which in Carter Holt's favour may well bring the proceedings to an end".

(BusinessDesk)

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