James Hardie & Coy Pty Limited v Seltsam Pty Limited (64-98) Dec

The High Court of Australia considered an appeal concerning the liability of James Hardie & Coy Pty Limited (James Hardie) to Seltsam Pty Limited (Seltsam) for the costs of rectifying defective building products. Seltsam had manufactured and supplied fibre cement sheeting containing asbestos, under licence from James Hardie, and sought an indemnity from James Hardie for the costs incurred in rectifying and replacing these defective products, which had been installed in various buildings. The dispute centred on the interpretation and application of a licence agreement between the parties and the extent of James Hardie's liability for defects in the products manufactured by Seltsam.

The primary legal issues before the High Court were whether James Hardie was liable to indemnify Seltsam for the costs of rectifying the defective sheeting, and if so, the extent of that liability. This involved determining whether the licence agreement imposed an obligation on James Hardie to indemnify Seltsam for such costs, particularly in circumstances where the defects arose from Seltsam's manufacturing processes. The court also had to consider the nature of the defects and whether they fell within the scope of the warranties and indemnities contemplated by the agreement.

The High Court, in a joint judgment, found that James Hardie was not liable to indemnify Seltsam for the rectification costs. The court reasoned that the licence agreement did not impose a broad indemnity on James Hardie for all defects, but rather limited its liability to specific circumstances. The agreement contemplated that Seltsam, as the manufacturer, bore the primary responsibility for the quality of the products. The court concluded that the defects in question arose from Seltsam's manufacturing process and were not attributable to any breach of warranty or obligation by James Hardie under the licence agreement. Therefore, the contractual provisions did not support Seltsam's claim for an indemnity.

The High Court allowed the appeal and set aside the orders of the lower courts.