Court of Appeal Confirms James Hardie Not Liable

The Court of Appeal has confirmed that manufacturers of products which form key components in the construction of weathertight buildings owe a duty of care to the owner. However, the Court of Appeal rejected the homeowners’ case that James Hardie was liable because its product was defective and/or too difficult to build.

Two homeowners brought representative proceedings on behalf of 146 owners against James Hardie New Zealand Limited for inherent defects in its Harditex product. They alleged:

1. Harditex allowed significant water ingress at specific locations, including the base of cladding sheets, horizontal control joints, corners and penetrations such as joinery and cladding junctions and that it did not have sufficient drainage or drying qualities.
2. Construction of Harditex required a level of building expertise beyond the skill level of a reasonably competent builder.
3. Misleading and deceptive conduct under the Fair Trading Act.

The Court of Appeal found that James Hardie, as the manufacturer of a cladding product intended for use as a component in the construction of weathertight buildings, owed a duty of care to the owners of the buildings to exercise reasonable skill and care in the design, manufacture and supply of the product so as to prevent loss from damage caused by water ingress. This duty was not limited to residential homes.

Further, that any issue arising directly from the James Hardie Instructions (JHIs) would fall within a cause of action for negligent misstatement, not negligence. The duty of care as framed above did not refer to the JHIs.

The Court of Appeal made the following findings in relation to the homeowners’ allegations regarding the fitness for purpose of the Harditex product.

• They failed to prove that the absorbency of the Harditex sheet was an inherent defect and that it did not adequately manage the draining and drying of water that penetrated the cladding system.
• There was no evidence that micro-organisms would penetrate the cement matrix in the Harditex to feed on cellulose fibres.
• Differential movement was not a cause of water ingress.
• Lack of flexural strength was not a cause of water ingress.
• The ‘h’ mould used to join Harditex to sheets was not established as a defective element in the product system.
• Although lack of adequate moisture protection at the base of the Harditex sheets was a cause of moisture ingress, that was due to defective construction, not defective design.
• It had not been established that Harditex required a level of building expertise beyond the skill and care of a reasonably competent builder.

The Court of Appeal found that the representation in the JHIs that Harditex was “completely unaffected by water” was potentially misleading. However, that cause of action failed on causation grounds. There was no evidence that any of the homeowners had relied on representations made in the JHIs at the time of purchase. There is no causal nexus between the representations and the homeowners’ individual losses.

Harditex was a feature in a significant number of the properties which were the subject of litigation in the leaky building context. The High Court, and now the Court of Appeal, have found that Harditex was not unfit for purpose or defective. It follows that the reason Harditex was a feature of so many leaky buildings arose from deficient construction practices. This was borne out in this case where none of the eight test properties had been built in compliance with the JHIs. That fact does suggest the JHIs are difficult to follow. Anecdotally that fits with the product featuring in so many leaky buildings.

This case points towards a major cause of the leaking building crisis being deficient building practices, rather than defective products, at least in this instance.

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