Monsbourgh v KLC Limited
[2021] NZHC 1553
•29 June 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-1904
[2021] NZHC 1553
BETWEEN CATHERINE MARY MONSBOURGH AND ELIZABETH TERESIA MARIA HERMSE
Appellants
AND
KLC LIMITED
Respondent
Hearing: 22 April 2021 Counsel:
H Waalkens QC and S Beattie for Appellants E Kerr for Respondent
Judgment:
29 June 2021
JUDGMENT OF WHATA J
This judgment was delivered by me on 29 June 2021 at 4.00 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date: ………………………….
Solicitors: Wotton + Kearney, Wellington
Meredith Connell, Auckland
MONSBOURGH v KLC LIMITED [2021] NZHC 1553 [29 June 2021]
Introduction
[1] Ms Monsbourgh and Ms Hermse (the homeowners) claim that KLC Limited (KLC) supplied weatherboards for their home that were defective. The District Court did not accept this claim.1 It was not satisfied that the homeowners had proven that KLC had negligently supplied defective weatherboards or that the weatherboards failed to comply with a guarantee of acceptable quality.2 This is their appeal, which I uphold in part. The District Court did not adequately engage with and pre-emptively dismissed the homeowners’ claims. I was invited to resolve the merits of their claims to a definitive conclusion, and to this end I canvas the respective claims and evidence in considerable detail. However, as I will explain below, important matters, not addressed in the District Court judgment and not argued before me, require argument and separate resolution.
Background
[2] The timber under scrutiny was originally part of a batch of 12,000 lineal metres C2 grade (that is No 2 Clears grade) timber processed by KLC for Abodo Wood Limited (Abodo) in about April 2012.3 No 2 Clears must be of “clear” of significant blemishes on one face. The timber was sourced from a mill in Rotorua and, KLC claim, treated with Alkaline Copper Quaternary (ACQ) to the H3.2 treatment level. H3.2 timber is regarded as suitable for a 50-year service life for timbers exposed to exterior conditions and dampness and an acceptable solution for achieving compliance with clause B2 of the New Zealand Building code.4
[3] The timber was previously destined for export to Europe as decking but was not the right size for Abodo. The timber was then sold to South Pacific Timber 1990 Limited (SPT) in September 2012. It was a special deal to move the Abodo stock. Following discussion with the general manager at SPT, Dave Harding, KLC
1 Monsbourgh v South Pacific Timber (1990) Ltd [2020] NZDC 18255.
2 At [31], [41], [64],[65],[69],[74],[83].
3 The exact date is not clear from the evidence. Mr Attwood of KLC refers to the purchase of 12,000 lineal metres of timber from Abodo in March 2012 while also referring to the processing of the same timber in April 2012 by KLC.
4 See NZS 3602:2003 “Table 1 – Requirements for wood-based building components to achieve a 50-year durability performance”.
remachined the ACQ H3.2 timber into 142 x1 8 Bevel Back weatherboard profile. KLC then applied two coats of PPG 669 Wood (acrylic, water borne) primer.
[4] Once dry, according to Trevor Attwood, National Sales Manager at KLC, a KLC sticker was added and the weatherboards were wrapped in plastic. Ms Monsbourgh says there was no such sticker on the weatherboards. The KLC sticker includes instructions as to the application of top coats, including:
PROTECT FROM WEATHER UNTIL TOP COATING IS COMPLETED
… It is essential that this product be maintained in a dry environment … until sealed as specified below.
The following paint specification is recommended:
1. Remove any dirt and surface contamination by sanding and dusting down. Prime immediately any exposed bare timber with a coat of premium exterior alkyd primer, allow overnight dry and then apply Premium Acrylic Primer Undercoat to those areas that have been primed as above …
2. Apply two coats of Premium Exterior 100% Acrylic house paint at coverage rate no greater than 12m2 per litre per coat, minimum two coats …
3. Final top coats should be applied within 30 days of the completion of the surface preparation item 1. Do not use Alkyd High Gloss paint for a finishing coat as it becomes brittle over time.
WHERE THE PRIMED TIMBER HAS BEEN EXPOSED TO THE WEATHER FOR OVER 6 WEEKS OF THE PRE-PRIMED SURFACE IS UNSOUND:
1. Prepare surface as in 1 above,
2. Apply one full coat of acrylic undercoat and finish as in 2 above.
Carry out all painting work in accordance with the appropriate clauses of AS/NZS2311 Guide to Painting of Buildings
[5] The boards were delivered to SPT’s site in September in plastic wrapping and stored in its warehouse. In March 2013, SPT then supplied the weatherboards to Timberworld East Tamaki Limited (Timberworld), who in turn agreed to supply 3,000 lineal metres to New Forest Homes Limited (New Forest). New Forest was contracted to build the homeowners’ home and garage at Pakiri.
[6] The first of the weatherboards were delivered to the Pakiri site still covered in plastic about the middle of March 2013. After each delivery, the homeowners would
remove the plastic and immediately take the timber under cover. To keep costs down they undertook the exterior painting of the weatherboards. They purchased their painting requirements from Guthrie Bowron, who recommended including Dulux Ultraseal Quick Dry Primer Undercoat and Dulux Weathershield X 10 Semi-Gloss. The Dulux primer undercoat was an alkyd paint.5 They then painted every surface with one coat of the primer undercoat before they were installed on the house by the builders. The weatherboards were stored indoors during the primer process and they only painted in dry weather.
[7] The installation of the weatherboards by the builder, Mr Mark Sorrenson, commenced in March 2013, initially on the garage and then on the main house. As soon as sections of the weatherboards were installed, under the direction of the builder’s foreman, Mr Heith Cheesman, the homeowners applied sealer under each board where they overlapped. As each section of the walls of the buildings was completed, the homeowners applied three topcoats, as suggested by Mr Sorrenson. The colour of the paint was called “Ohakea”. Mr Cheesman checked on progress with the painting on an almost daily basis.
[8] In late April 2013, when the cladding with only primer undercoat applied, Ms Monsbourgh noticed significant cracks and splits in boards and drew this to Mr Sorenson’s attention. Mr Cheesman responded by beginning to fill some of the cracks with epoxy resin and replacing others that were too severely affected to be filled with epoxy. Then, on 14 May 2013, Mr Attwood visited the site, having been invited to do so by Mr Sorrenson to inspect some of the weatherboards. By this time, about 90 per cent of the cladding was installed and all boards were painted with the primer undercoat. About a third had been painted with two coats of topcoat. Mr Attwood identified a total of 20 weatherboards that he said had “fine splits” and “hairline cracks”. He thought they may have been damaged in transit. Based on what he was shown, he estimated a total of 50 to 60 lineal metres of weatherboards appeared to be affected by fine splitting. He expected a small claim for cracked weatherboard. However, about 175 lineal metres of weatherboard was replaced over the following two months.
5 Ms Monsbourgh says she did not use an alkyd product as a finishing coat.
[9] Construction continued. During this time Ms Monsbourgh noted more boards cracking and splitting. She estimated that between 10 per cent and 20 per cent of the house showed fine cracks. The weatherboard installation was completed sometime in July or August 2013, with Mr Cheesman continuing to fill in the cracks with epoxy resin. The homeowners finished the painting of the boards in September 2013, but the condition of the weatherboards remained an ongoing concern to them. The final notice of completion in October 2013 excluded the weatherboards.
[10] At about this time Mr Attwood visited the site again. He said he was shown where the paint had developed small ridges. He did not consider this a major issue. It therefore came as a surprise to him when he was shown, in February 2014, an invoice rendered to Timberworld for $7,446.37 for the cost of replacing about 175 lineal metres of weatherboard, which had been undertaken in May and June 2013.
[11] Throughout 2014 and 2015, Ms Monsbourgh continued to press Mr Sorrenson for an explanation about the weatherboards. She feared she was looking at a substantial bill to remedy the issues. By the start of 2016, more weatherboards started to crack and split, which Ms Monsbourgh estimated to be approximately 30 to 35 per cent of the installed weatherboards. Ms Monsbourgh took up the issue with Mr Carpenter of Timberworld. She claims Mr Carpenter proposed a three-way split. He denies this. In any event, the issue remained unresolved and Mr Sorrenson proved largely unresponsive until he sent an employee to take some samples in October 2016.
[12] Frustrated and concerned about the weatherboards, Ms Monsbourgh enlisted the help of their designer, Mr Allen. This appears to have stimulated Mr Sorrenson into action. On 13 February 2017, Mr Carpenter emailed KLC, SPT and Mr Sorrenson to say that Mr Sorrenson had come to his office with samples and said that the problem with the weatherboards had worsened. On 17 February 2017, Mr Attwood then collected the samples and took them to PPG Industries, a paint company, for examination. Their analysis showed that the two coats of acrylic primer applied by KLC had a thickness ranging from 71 to 86 microns, with the majority in the high seventies. This was relayed to the homeowners in March 2017 with advice to say that KLC’s test results indicate insufficient paint had been applied to protect the weatherboard.
[13] The homeowners decided to make a fresh start and contacted a local builder, Brent Courtney, on 30 March 2017. He noted that the weatherboards had severe cracking and splitting and advised a complete reclad was necessary. The homeowners also obtained two reports from Dulux. Both concluded failure of the paint system was a consequence of inadequate and insufficient protection of the primers by the top coat layers.6
[14] However, Optimech International Limited, a material and testing company, was also engaged to examine two sample weatherboards. The weatherboards examined were identified in the report as “finger jointed pine with corner boards”.7 The report observed that the average paint thickness was 132 to 172 microns and stated this was an acceptable dry film thickness. It also observed that the premature failure of the paint coating was likely due to poor adhesion between the factory pre-primer and the topcoats. The extensive fine cracking of the weatherboards is said to indicate also that there could have been a fault with the supplied wood due to moisture content or chemical treatment.
[15] The homeowners then contacted an expert, Dr Robin Wakeling. He undertook an examination of ten samples. His advice in July 2017 was to replace the cladding as soon as possible. Dr Wakeling also visited the site and set aside boards he wanted to examine further once the reclad was underway. These were later delivered to him. The balance of the weatherboards affixed to the house (but not the garage) were destroyed.
[16] The recladding was a significant task. New architectural drawings were needed. Building consent issued on 22 August 2018. A different cladding was used – Pallisade – though the pricing of it was comparable to using timber weatherboard. Certificate of compliance was issued on 2 April 2019. The cost of the reclad was
$201,955.52.
6 The author of the reports was not called to give evidence. Admissibility is challenged. However, the reports are relevant to the extent that they were obtained and the contents of them known to the homeowners at the time they decided to reclad.
7 Under cross examination, Mr Vincent, a director of SPT said the weatherboards were not finger jointed.
Litigation process
[17] The homeowners commenced their claim against five defendants, SPT, Newforest, Mr Sorrenson, Timberworld and KLC. On the last day of the trial, they filed a further amended statement of claim (FASOC) against Newforest and KLC only. Newforest has not traded since 2018 and the District Court judge proceeded on the basis that the claim against it is no longer advanced.
[18] The FASOC claims that KLC breached its statutory guarantee affirmed in s 6 of the Consumer Guarantee Act 1993 (CGA). The pleading does not expressly plead the terms of the guarantee, but it is evident that the homeowners claim that KLC undertook to supply weatherboards of an acceptable and merchantable quality and that were reasonably fit for the purpose of providing weatherproof cladding for the dwelling and garage.8 It claims further that KLC was under a statutory duty to reasonably and promptly investigate any reports of defects in the weatherboards and remedy and replace the same as required. It is further pleaded that KLC breached this guarantee, referring to the following particulars about the weatherboards:
The weatherboards were not of merchantable quality and/or were of inadequate quality, not reasonably fit for the purpose of cladding particulars of which include:
(a)Containing juvenile hardwood of low density.
(b)Containing wide growth rings and reaction wood.
(c)Containing a large proportion of latewood.
(d)Containing soft rot decay.
(e)Containing large variation of grain orientation (flat sawn through approximately ¾ sawn).
(f)Containing excess of moisture content.
(g)Treated by ACQ preservative which increases the risk of dimensional instability.
(h)Coated with primer that was inadequate to enable the adhesion of subsequent paint coats.
(i)Converting from decking timber including by reprofiling.
8 Through apparent slip, the FASOC does not expressly plead a duty to manufacture timber weatherboards of acceptable quality, but that pleading can be readily inferred from the allegations of breach.
(j)Failing to meet minimum preservative retention requirements for ACQ treatment and/or failing to meet requirements in accordance with NZS 2640:2003 of 0.35 minimum preservative retention.
[19] The homeowners also plead reliance on the doctrine of res ipsa loquitur. That is, the failure of the weatherboards speaks for itself in terms of the apparent negligence and/or breach of statutory duty.
[20] KLC defends the claim on multiple bases. It says that it owed no duty of care to the homeowners and that the CGA does not give rise to an actionable duty to them. It also denies the weatherboards were defective or that it failed to reasonably investigate the same. Two affirmative defences are also pleaded. First, contributory negligence, in that the homeowners failed to take reasonable care to protect their own interests by failing to ensure proper standards and quality of painting, including failing to comply with AS/NZS 2311:2009. Second, exclusion of liability under the CGA because of actions of third parties, including failure of the builder to properly install the weatherboards, misrepresentations by intermediary suppliers as to the purpose of the weatherboards and lack of maintenance by the homeowners.
The expert evidence
[21] The homeowners called two experts to give evidence, Mr Jonathan Smith and Dr Robin Wakeling. Messrs Coveny, O’Sullivan, and Paykel gave evidence for KLC. Given the evidence was not adequately addressed in the District Court judgment, I will review it in some detail. The essential contest between the experts was the extent to which the weatherboard failure was caused by inherent defects or the painting system adopted by the homeowners.
Mr Smith
[22] Mr Smith is a materials engineer with 30 years’ experience working with both metals and polymers. He holds a Bmet (1984) and a PhD (1988). He confirms that he inspected two samples in 2017. His assessment is that the total paint dry thickness applied was acceptable. Further, premature failure of the paint coating was likely due to poor adhesion between the factory pre-primer and the topcoats. The partial internal failure of the factory primer coating in adhesion tests indicated the coating was also
affected by the condition of the weatherboard prior to painting and, in particular, the moisture content of the weatherboard prior to painting or chemical treatment.
[23] In oral evidence, Mr Smith added the fact that weatherboards had to be removed prior to the final topcoats being applied was an unusual feature suggesting an issue with the quality of the boards. He also said that the second coating of primer by the homeowners could not explain the condition of the weatherboards and that cracking extending through the timber and through recently applied paint was unheard of. He identified problems with the Leica stereo microscopic analysis used by Mr Coveney insofar as it relies on flakes, which Mr Smith says can deteriorate by the time of measurement as a result of UV light.
[24] Under cross-examination Mr Smith acknowledged the samples he used were not finger jointed as his report had said. It was put to him that the weatherboards he examined had yellow or tan factory primer, whereas there was evidence that the colour of the factory primer of the weatherboards supplied by KLC was olive green.9 Mr Smith conceded it was not ideal to apply an oil based primer over an acrylic paint, as occurred here, but that with adequate sanding it should not cause any problems. He also noted it was common practice for builders to only lightly sand the factory primer. He agreed that the weatherboards in poor condition had a slightly lower micron reading but considered the result still within acceptable limits. He confirmed the sample of weatherboard supplied for testing was in very poor condition and “showed evidence of fine cracks and was slightly bowed”. In re-examination, he was taken to the KLC sticker which states that “Prime immediately any exposed bare timber with a coat of Premium Exterior Alkyd Primer” and otherwise only cautioned against use of “alkyd high gloss paint for a finishing coat as it becomes brittle over time”. Mr Smith said that even if an alkyd paint system was applied over an acrylic primer, it should not spoil within 36 months.
9 Ms Monsbourgh said that the primer was “light olivey green” but other evidence did not necessarily support her observation about the colour of the primer. For example, Dr Wakeling’s report described it as light yellow and PPG described it as “beige” or yellow.
Dr Wakeling
[25] Dr Wakeling is a biodeterioration consultant and wood protection scientist. He holds a BSc (Hons), an MSc and a PhD. He has considerable experience in the assessment of wood samples in a leaky building context. He refers to his initial report involving ten samples and three types of board: good condition; cracked paint; and very little paint remaining. He referred to “significant cracking and splitting and general deterioration within the weatherboard, as well as visible deterioration of the paint.” It was obvious to him that the weatherboards examined by him had an inherent defect given the patterns of failure.
[26] He identified juvenile heartwood, very wide growth rings, reaction wood (wood exposed to excessive stress during tree growth), soft rot decay, fungal growth, paint adhesion problems and paint deterioration. He noted that nine of the 10 samples had been treated with ACQ and one with light organic solvent preservative or LOSP, which he considered to be superior. It is well established, Dr Wakeling says, that ACQ induced dimensional instability.
[27] In his first report he concluded that the primary cause of inadequate weatherboard performance was defects and deficiencies inherent in the weatherboards at the time they were provided. Paint performance, including a poor bond between the wood and the factory primer, was a compounding factor and excessive moisture within the timber may have contributed to the dimensional instability. He was and remains of the opinion that all the weatherboards had to be replaced.
[28] He also undertook an evaluation of a further 56 samples, with the following results:
(a)The failure of the weatherboards within five years was extensive and showed a gross failure to meet normal life expectations;
(b)The failure was linked to the inherent inadequacies of the weatherboards and linked to the ACQ treatment, which was water- based, and poor wood quality;
(c)The paint problems were in part the end result of a lack of adhesion of the factory applied, solvent-based, primer to the surface wood cell layers, and to the denser and smoother latewood in particular;
(d)The factory applied primer was understood to be a solvent based primer subject to overly rapid evaporation which can result in inadequate absorption of the paint into the surface of the wood; and
(e)Where there is multi-layered paint coating, as here, the end result is only as good as the weakest layer and, in this case, the factory primer did not adequately adhere to the structure of the wooden weatherboards, resulting in the entire multi-layered paint surface detaching.
[29] Overall, his opinion was that the weatherboards were not of merchantable quality and not fit for purpose given the features noted above. More specifically, in his opinion the failure rate of the weatherboards, paint failure and its very early onset soon after installation clearly demonstrated an inherent defect in the weatherboards. The latter point was particularly significant given the New Zealand Building Code has a minimum requirement of 15 years for cladding performance.
[30] Furthermore, that paint covering both intact wood and wood that had succumbed to the effects of dimensional instability (splits and cracks) reinforced his opinion that the factory applied paint primer was at fault. The cause of the primer paint failure is a moot point given resilience is a basic requirement for the functionality of painted weatherboards and given that failure to achieve this occurred well before any paint maintenance should have been required.
[31] Under cross examination, Dr Wakeling maintained that paint could not account for the level of dimensional instability on a weatherboard reasonably shortly after installation. He also accepted testimony from builders would be more reliable than post facto assessment of paint thickness. He also commented that Mr Coveny’s assessment is not statistically valid. He accepted, however, that the KLC sticker made it clear that the application of a premium acrylic coating to the weatherboards is essential to protect the weatherboards. He was taken to a video showing some of the
weatherboards and noted that they were likely to be finger boards. He confirmed that three of samples he had investigated had been treated with LOSP. But he emphasised that the problem associated with the LOSP boards was not similar to problems with the ACQ treated boards, and that the main issue with the ACQ treated weatherboard is that most of the deterioration occurred on the latewood. He also noted that ACQ treated latewood has a different chemistry and that it is unusual to treat weatherboards with ACQ. He also considered it was speculation to suggest the paint job caused the failure and maintained that the cause of the weatherboard failure is multifactorial.
[32] Dr Wakeling acknowledged that the New Zealand standards for treatment do not exclude ACQ and that the same standards for timber do not set a maximum width for growth rings. He maintained nevertheless that neither ACQ treatment nor juvenile heartwood were suitable for weatherboards, noting the standards only provide a backdrop. He also stated there was a strong correlation between the failure and the late wood; that the soft rot arrived prematurely, and that soft rot is not normally found in weatherboards after four or five years. He emphasised that while ACQ treatment meets the durability standard, the use of ACQ is a manufacturing issue.
[33] Dr Wakeling also rejected the suggestion that LOSP weatherboards suffered from the same issues as the ACQ weatherboards, noting the sample size was overly small and statistically invalid. He conceded that he erred in assuming the primer used by the KLC was a solvent based primer, not a water-based primer. However, he maintained that, in terms of the key issue of evaporation, there was no material difference.10 He was tested about whether ACQ could be used if properly handled. However, when trying to explain what would be necessary, Dr Wakeling noted there was considerable uncertainty and he was unwilling to undertake the work required to resolve the issue.
[34] Dr Wakeling was taken to a comment in his first report that “there was no apparent suggestion of any preservative treatment or related manufacturing source on the defects demonstrated by the samples examined.” He explained, however, that this comment related to the cupping issue seen on both the LOSP and ACQ treated
10 He described the difference as pedantic.
weatherboards. He was also asked about his observation in 2017 that “it is likely that both pre-existing defects within the weatherboards and defective paint effects were involved in a lack of adequate service life of the weatherboards” and his 2020 conclusion that “the problem has always been with the weatherboards was in no way related to the application of the paint”. It was put to him that these two statements were inconsistent. Dr Wakeling said the primary issue remained the substrate. Further, the second assessment based on 56 samples confirmed the earlier assessment based on 10 samples. He said that there “was a consistent message throughout the evidence trail that large numbers of boards were adversely affected and damaged to the point where replacement was the only viable option.” Dr Wakeling estimated that of the 66 samples between three and eight were treated with LOSP. He also accepted that one of the LOSP samples (130) had essentially the same weatherboard damage as an ACQ treated weatherboard (102).
[35] In re-examination Dr Wakeling said it was hard to think of a scenario where any amount of poor paint practice could produce the early catastrophic failure which all experts agreed occurred. He also said in answer to a question from the Court that ACQ treatment is used for decking, usually for export.
Mr O’Sullivan
[36] Mr Philip O’Sullivan is a director of Prendos. He has a Bachelor of Engineering and is a registered surveyor and has been a member of the Institute of Building Surveyors since 1996. He is also a Licensed Building Professional to Design Level 3 and has extensive experience in the building trade. He was President of the Claddings Institute of New Zealand from 1999 to 2009. He has provided advice to BRANZ in relation to good timber cladding practice and was a member of the Building Industry Authority’s E2/AS1 work group which developed the Acceptable Solution to Clause E2 External Moisture of the New Zealand Building Code. He was a member of an advisory group appointed to revise the Acceptable Solution B2/AS1 dealing with the specification of insect and decay treatment for treating timbers.
[37]Mr O’Sullivan’s view is that the damage to the weatherboards was caused by:
(a)The insufficient dry film thickness of the paint;
(b)The weather event where the weatherboards were exposed to 10 days of rain; and
(c)The effect of both these factors on the natural features of timber including:
(i)Timber latewood bands;
(ii)Timber longitudinal splitting.
[38] Mr O’Sullivan collected 11 samples for his evaluation. He sent one set to Mr Coveny for paint testing, one set to AgriSolutions for treatment retention testing and retained the third set. The results for the paint testing were addressed by Mr Coveny. He confirms that H3.2 ACQ remains the approved treatment for timber weatherboards under NZS 3640:2003 Chemical Preservation of Round and Sawn Timber. He provides a summary of the paint test results as follows:
Location Number Appearance Primer Thickness
µ
Topcoats (including undercoat) thickness
µ
Overall thickness
µ
DDAC
%
w/w
East 1 Poor 28 36 64 0.340 East 2 Average 77 0.189 East 3 Good 88 0.381 North 4 Poor 71 0.492 North 5 Average 71 0.212 North 6 Good 50 62 112 0.087 West 7 Poor 33 42 76 0.050 West 8 Average 100 0.288 West 9 Good 45 111 156 0.127 South 10 Good 112 0.023 South 11 Good 87 0.093 1. Prendos sample nos and appearance observation 2. Mr Coveny’s DFT results 3. AgriSolutions Certificate – Appendix 1
Appearance Mean OA paint thickness Mean DDAC %
w/w
Poor 70 0.294 Average 83 0.230 Good 111 0.142
[39] Based on these results, Mr O’Sullivan says there is a very clear correlation between the mean overall paint thickness and the appearance of the paint coating. This indicates a direct causal link between the paint thickness and the condition of the weatherboards. That is, the weatherboards with insufficient paint thickness are the ones that are showing damage. He also says that while his analysis is not comparable to Mr Smith’s, which was only based on two samples, it does confirm there is inconsistent paint coverage across the weatherboards Mr Smith tested and the samples he took. The overall thickness ranges from 64 microns to 156 microns. He further noted the homeowners applied an alkyd-based undercoat over a water based primer and that this is not normal practice.
[40] Mr O’Sullivan observed timber will often form longitudinal splits at the surface due to the outer timber drying and shrinking while the internal timber retains dampness and does not shrink. If the timber arrives on site with an elevated moisture content, he would have expected to see evidence of exposed white undercoat just under the overlapping weatherboards due to normal timber shrinkage. As he saw no evidence of timber shrinkage on the weatherboards on the garage, this suggested to him that the weatherboards were dry and once installed, the moisture content increased.
[41] Mr O’Sullivan also reviewed the weather records during March and April 2013. From 15 April to 24 April 2013, there is a record of 10 days during which 47mm of rain fell in Wellsford and the average of relative humidity was 85 per cent. Average daily sun light was just under two hours. He says that ten days is a prolonged period of such weather; three days is more common. During this time, the weatherboards were in various stages of installation. His evidence is that during this period the moisture content of the weatherboards on the north and east elevations would have increased considerably. It is likely the absence of topcoats would then have exacerbated moisture uptake and the splitting that subsequently occurred.
[42] He observed that latewood, in combination with the inadequate dry film thickness of the paint, caused the paint to locally delaminate (as can be seen in three samples). In relation to one sample, this delamination could have been mistaken for a timber crack and may explain what Ms Monsbourgh saw. He also notes that in seven
samples, the paint film is 77 microns or greater and there is no paint delamination. This establishes a correlation between the paint dry film thickness and adhesion to latewood.
[43] Under cross-examination he was taken to the timber standard as it relates to minimum preservation retention levels. He saw no correlation between the ACQ treatment and paint failure, so he dismissed it as a cause. He also said that if the boards were showing rotting or decay, he may have considered retention levels. When asked about whether ACQ was a permanent wood preservative, he responded it was “really getting outside my expertise” as was not a “timber preservation expert”. But he did not accept that the AgriSolutions results show a very poor performance in terms of meeting the minimum preservation standard of 0.35. He noted that they only measured for DDAC and not for copper and there was no correlation between the retained DDAC measure and the paint behaviour. He also said that while the boards looked terrible, he would not have removed them all based on what he had seen. He understood the homeowners’ concerns given the advice they had received from a builder and Dr Wakeling.
[44] Mr O’Sullivan accepted that badly damaged boards should have been replaced rather than filled in with epoxy. But he maintained that paint damaged weatherboards do not necessarily have to be replaced for weathertightness reasons, and he noted that where thicker paint had been applied, the boards were in better condition. He accepted he was at a disadvantage having seen the weatherboards six years after they were installed but referred to a good video recording which he found very helpful.
[45] Mr O’Sullivan noted that the paint failure pattern here was quite unusual. He accepted Dulux recommended 25 micron thickness (as against his 30 micron average) and that KLC recommended two top coats (not three as he had assumed). He maintained however that there was a clear correlation between paint thickness and the condition of the weatherboard. He accepted the assessment of weather and moisture involved a degree of speculation. He was also taken to evidence that Mr Attwood had moisture tested some of the boards, and found them to be in the range of 12 to 15 per cent, which Mr O’Sullivan accepted to be “perfect and good”, though he said moisture levels can go up and down quite rapidly.
[46] He accepted that the degree of cracking so quickly was very unusual, but also maintained that using an alkyd paint over a water based one was unusual. The stress caused by this to the bond meant there was less adhesion to the latewood and, in combination with rain and the absence of topcoats to protect the weatherboard, an unexpected failure eventuated. Mr O’Sullivan said the timber was normal, but conceded he was not qualified to undertake a forensic examination of the weatherboard and he did not arrange for any analysis of the weatherboards.
[47] Under re-examination, he noted that if he wanted to properly check the treatment retention levels, he would ask Agri-Solutions to check the copper levels and to look at the heartwood and other matters that would affect the retention level. This is because some timber does accept treatment, and some does not. It was clear that Mr O’Sullivan simply dismissed Dr Wakeling’s opinion without obtaining an informed opinion from a suitably qualified expert. Mr O’Sullivan dismissed concerns about compression, having examined that issue at length previously. He maintained that he did not see any warping or cupping of the weatherboards on the garage which were quite normal. He said, in response to a question about what should be done in this context to identify the problem, sampling of the paint is required and, secondly, looking at any unusual features. He noted that “ACQ is a bit unusual, don’t use it much”. He said a paint chemist needs to be involved also and he did not know how the timber could have caused the paint to become chalky. He also expressed doubt about the accuracy of Mr Attwood’s assessment of moisture levels.
Mr Paykel
[48] Mr Simon Paykel is a registered surveyor with 32 years’ experience. He is a Weathertight Homes Resolution Service assessor and has acted as a panel member of the Department of Building and Housing (DBH) in relation to determinations. He worked as a building inspections officer and building surveyor before establishing Maynard Marks. A large part of his work over 14 years has been in relation to weathertightness assessments. He has been involved in over 300 claims where building code defects have been alleged. His evidence focused on building standards.
[49] Mr Paykel notes that, in relation to the subject dwelling, the weatherboard grade supplied was assessed as being No 2 clears. The applicable standard requires that where weatherboards are to be painted with a paint system, it must be in accordance with Australian/New Zealand Standard AS/NZS 2311: 2009 Guide to the painting of buildings (AS/NZS 2311). He also refers to documents produced by the Building Research Association of New Zealand (“BRANZ”) as a recognised source of information about appropriate use of building and construction materials and methods.
[50] In his evidence in chief, Mr Paykel responds to each of the problems identified by Dr Wakeling with the weatherboards as follows (in summary):
(a)Weatherboard containing juvenile heartwood of low density, wide rings, reaction wood and a large proportion of latewood: the NZS 3631 does not provide guidance on permitted allowances for these features, the alleged defects are all naturally occurring and the weatherboards meet the requirements of the Building Code.
(b)Weatherboard containing soft rot decay: the superficial soft rot is almost certainly the result of a sustained period (up to four years) of being exposed to excessive moisture due to the fact that the paint had deteriorated, noting also that there is no evidence that the weatherboards were supplied with decay.
(c)Weatherboards containing large variation of grain orientation (flat sawn through approximately ¾ sawn): sloping grain is not restricted for this grade of timber and BRANZ literature says that “quarter sawing produces the most stable boards”.
(d)Weatherboards containing excessive moisture content: Table 2A of NZS3602 identifies moisture content of less than 18 per cent as permissible. AS/NZS 2311 also provides that moisture content of the timber at the time of priming should be near the equilibrium moisture content pertaining to the particular locality in which it is used. The standard further states that up to four hours of windy or sunny weather
may be necessary to dry timber surfaces moistened by overnight fog or mist. A longer time may be need to dry timber after more serious moisture ingress. The plaintiff’s photographs show post installation shrinkage at the laps. As noted in a BRANZ publication, if the size of the boards is larger than factory settings, then it may contain excessive moisture, and this supports the opinion that moisture content may well have been excessive at the time of installation. The installer was responsible for checking this. Further, with reference to AS/NZS 2311, when installed, timber with high moisture content will shrink until it reaches the EMC. This will crack the paint and detract from the overall appearance of the finished surface. But there is no evidence the weatherboards contained excessive moisture content when the primer was applied.
(e)Weatherboards treated by ACQ preservative increases the risk of dimensional instability: Table 2A of NZ3602 requires the use of H3.1 treatment (or above) for Radiata Pine weatherboards. ACQ is an acceptable preservative treatment. Contrary to Dr Wakeling’s assertions, core industry documents do not record any concerns about ACQ preservative being inferior or unsuitable.
(f)Weatherboards coated with primer that was inadequate to enable the adhesion of subsequent paint coats: Dr Wakeling says that the solvent based primer was at fault because it evaporates too fast. But the primer used by KCL was a waterborne system, not a solvent based primer as assumed by Dr Wakeling. Moreover, exposure of primer to the weather and/or UV light may cause it to deteriorate. For this reason top coats should be applied without undue delay and testing of the adhesion of the primer to the timber is recommended in AS/NZS 2311. Mr Paykel was unable to confirm whether and to what extent the primed weatherboards (either factory primed surfaces and or site primer) were exposed to weather/UV and whether this was a contributory issue.
[51] Overall, Mr Paykel considered the application of the coating systems on site to be the probable cause of the early paint deterioration issues, potentially including inadequate preparation prior to the installation of first coats, inadequate application of the topcoats, and paint applied in hot or windy conditions. He reiterated also the significance of the moisture content of the weatherboards. Those installing them should have been aware of the need to check the moisture content of the boards and that weatherboards should only be painted when dry and the board is near equilibrium moisture content (BRANZ advice is moisture content less than 16 per cent).
[52] As to application of topcoats, Mr Paykel refers to Dulux reports that suggest the primer may have been well over recommended thickness at 56 microns while the Optimech reports suggests average thickness to be 132 to 172 microns and adequate. In contrast, the PPG Industrial Coatings analysed paint samples concluded that the thickness ranged from 71 to 86 microns, and inadequate. He also refers to a BRANZ guide on weatherboards notes that a total or even partial failure of protective coatings can result in extensive damage to weatherboard cladding and associated components over time. Mr Paykel was unable to confirm the conditions on site when the painting was completed. He also notes that inadequate fixings may have contributed to excess moisture absorption because the screw fixing appeared to be contrary to best practice.
[53] Mr Paykel added that from 14 May 2013 it was apparent the weatherboards were failing but nothing was done about it. He says he would have expected a:
… prudent builder/head contractor and/or supervising designer and/or painter to have investigated or engaged a suitably qualified person to investigate the cause of the known coating issues prior to allowing the installation of the boards to practically complete.
[54] He also refers to the BRANZ Timber Cladding Good Practice Guide (2006) which states that:
Repainting is recommended as soon as the first sign of deterioration in the existing coating is identified.
[55] He says had they been repainted properly the weatherboards would have performed satisfactorily. He concludes that once the decision was made to leave the paint in a deteriorated condition, it was inevitable that further (accelerated)
deterioration would result. Finally, Mr Paykel did not consider that a full reclad was necessary. A reasonable repair would have been to remove the existing paint and apply a new coating.
[56] Mr Paykel noted in questions from counsel that Dr Wakeling confirmed in caucusing that the soft rot occurred after delivery to the site; the weatherboards did not arrive on site in that condition. On the period of exposure, his view was that timber-based products would ideally be coated within a two week period but definitely within a four week period. He confirmed he is not a paint expert. However, he understood the weatherboards may have been painted during winter months. If they were wet at the time paint was applied, then that would be a contributing cause to the failure of the weatherboards. He did not think the profile of the boards meant they were dimensionally unstable.
[57] He also did not think the early signs of splits and cracks indicated something was wrong with the weatherboards, because it is critical to get top coats applied in a reasonably short period of time. Although he is not a paint expert, he had been involved in examining coating failure of paint systems and put recommendations to clients. His understanding was that until top coats are applied, the painting system is ineffective and the weatherboards are susceptible to absorption of greater volumes of moisture. The completed painting system, not just the primer, protects the weatherboard. However, he confirmed he had not inspected any of the timber. What he had seen in photos of the weatherboards was an issue with the LOSP and finger- jointed weatherboards not supplied by KLC.
[58] Mr Paykel did not accept that if one board was damaged, that would or could contribute to systemic failure of other boards if the other boards were properly painted. He conceded, however, that without having examined the weatherboards, he was speculating about the state of the weatherboards themselves. He also accepted that if the evidence was that the filling took place before painting, as Ms Monsbourgh described, then the fixing issues he identified would not be a contributing cause. He was also cross examined on what the homeowners should have done when addressing the damage. He maintained they should have engaged a paint expert. He accepted,
however, that dimensional instability may be a problem completely aside from paint issues.
Mr Coveny
[59] Mr Coveny holds a Bachelor of Science in Chemistry and has worked in the paint industry for 50 years. He was the National President of Surface Coatings Association New Zealand, and has, among other things, supervised post graduate students undertaking polymer research and development from 2013 to 2018. He explains that paint is not waterproof, but it reduces or slows the amount of water going through to the surface or substrate beneath. Furthermore, fully dried opaque paint contains two components, pigment and polymer (often referred to as resin). Pigments protect the polymer from degrading. Polymer binds the coating containing the pigment to the substrate and confers all the coatings mechanical and chemical resistance performance with the suspended pigment particles. The level of protection provided by the coating depends on the nature of the polymer within the coating and its ability to penetrate into the substrate, repel water and block the transmission of water and water vapour through its film. It is the major component in a painting system which protects substrates from water damage.
[60] Mr Coveny noted that water-based primers and topcoats are made using polymer emulsions as their primary binder and are much more durable than their solvent based alkyd counterparts. But they do not penetrate the timber. In contrast, solvent based paints are transported deep into the capillaries of the timber. Paint companies recommend water-based paints be applied at 100 microns wet (which will become 40 microns when dry). Water based paints are also more permeable than solvent based paints.
[61] There is very little difference between top coats and primers in terms of penetrative qualities. The degree of retardation of the passage of water to the substrate depends on the chemistry of the polymer, the dry film thickness and the integrity of the film and its ability to penetrate and seal the substrate. It is also important to note that paint will let water in and need to be given a chance to let the water out. Having regard to the evidence that there was an unusually large amount of rainfall at the time
of installation, while the weatherboards had varying degrees of undercoat and topcoats, the protection afforded to the weatherboards would have been compromised at this stage of the process.
[62] Provided an acrylic paint system was formulated using an industry approved polymer and stable pigmentation, a three-coat acrylic will give adequate protection, especially if applied directly to bare timber. Where, however, the weatherboard remained wet, it would be impossible for a water based acrylic paint system to prevent some water ingress even if all three coats were applied. Indeed, once the water is in, it is hard to get out. The other mechanism for water entry is vapour. Given the conditions during installation, there was ample opportunity for vapour to enter the weatherboards. Furthermore, a solvent based undercoat develops rigidity when applied to bare timber. If a water-based layer exists below, this will cause cracking at the surface. Moreover, if a water-based primer is used then the whole coating system needs to be water based.
[63] Mr Coveny also assessed 11 weatherboard samples provided by Mr O’Sullivan. He cut flakes from them, and assessed their thickness using a Leica stereo microscope. His results and observations are summarised in Mr O’Sullivan’s table above. In his opinion, the test results establish performance is related to coat thickness and the mode of failure indicates insufficient coating thickness has allowed moisture and solar radiation to reach the timber causing dimensional instability, possibly with cellulose breakdown, which has destroyed what adhesion the primer offered. This adhesive breakdown would he says have been compounded by the mismatch of tensile rigidity of the solvent based primer over the water based one. He also noted that the plaintiffs had not achieved requisite thickness of 120 microns on any of the samples reviewed that had poor or average appearance.
[64] Under further questioning in chief, he explained that the effect of dimensional instability is to make the weatherboard swell and shrink. This is common where the paint film breaks down and cracks over many years where the paint film will crack right back to the timber.
[65] He refuted criticism of testing using flakes, noting that it is the preferred method provided the microscope is calibrated properly. He accepted that unless the paint was measured at the time of application, the only method for measuring paint thickness is after the fact. He also explained that the solvent paint will, as it becomes more rigid, tear a water-based primer off the surface and once this adhesion is lost, cracks develop and the whole system will fail and crack to the substrate.
[66] Mr Coveny conceded under cross examination that he would have preferred to visit the site but was told it was not necessary. He also accepted that 11 samples was a small sample and that he would normally take three or four samples from each wall. It was further put to him that the weatherboards had been coated with two factory primer coats but within two months of installation there was cracking appearing beneath to the surface of the substrate. He agreed this was an extraordinary and unusual outcome.
[67] He was unable to estimate how long it would take for the solvent over water- based paint impacts to show. He noted that without the topcoat the “whole lot would be exacerbated by the ready availability of the alkyd to oxygen in the air and UV and then so its cure would take place, its further cure would take place quite quickly”. But he conceded that it has not been studied. When it was put to him that this would not account for cracking within the substrate, he said “the first cracking would be between the original primer and the substrate but then that very quickly allows water and UV to get in and water is very susceptible to both of those factors, so you would see it quite quickly”.
[68] When it was also put to him that it is speculative to suggest there was a high level of rain at the times the weatherboards were installed and, if there was, he could not possibly know how long the plaintiffs left the boards before painting them, he answered “No, you’d have to measure the water content within the timber.” He agreed it was reassuring that Mr Attwood’s measurements found moisture levels between 12 and 15 per cent. He accepted that if the plaintiffs did not paint during heavy rain or rainfall and stopped painting and let the surface dry out before applying the next coat of paint, that would be consistent with the moisture levels Mr Attwood detected.
[69] Evidence was also given by Mr Vincent, a director of SPT. While he was not giving evidence as an independent expert, he addressed claims made by Dr Wakeling in terms of alleged defects based on industry experience. In summary, he said that the presence of juvenile wood, latewood, wide growth ring or reaction wood were no basis for his firm to reject the weatherboards supplied to it by KLC. The timber supplied met the grading requirements for No 2 clears with these features. He was further unaware of any concerns in industry about the ACQ treatment and SPT has sold weatherboards using this treatment without issue.
The District Court judgment
[70] In the District Court, the homeowners made the basic claim that the catastrophic failure of the weatherboards within two months of installation inevitably meant the weatherboards were defective. Given this, the doctrine of res ipsa loquitur applied, with the result that KLC should be found negligent and in breach of the CGA. KLC submitted that inadequate painting by the homeowners was the cause of the weatherboard failure.
[71] The Judge made the following key findings. First, the maxim, res ipsa loquitur did not apply because KLC had provided sufficient evidence to show that the cause of the weatherboard failure may be attributable to the inadequate painting undertaken by the homeowners.11 Second, the timber treatment, ACQ, met the requirements of NZS364012 and the timber in question was treated to a hazard class rating of H3.2 which is regarded as suitable for 50-year service life for timbers exposed to exterior weather conditions and dampness.13 The timber supplied by KLC was therefore produced according to the relevant New Zealand standards, and according to the same process used for significant amounts of timber produced by KLC.14 Third, the timber used in this instance was only sourced timber from New Zealand15 and only “clean” timber was supplied. As it passed through the hands of SPT and Timberland, there was no alteration to the weatherboards.16
11 Monsbourgh v South Pacific Timber (1990) Ltd, above n 1, at [31].
12 At [38].
13 At [39]
14 At [41].
15 At [41].
16 At [64].
[72] Fourth, referring to the evidence of Dr Wakeling and Ms Monsbourgh, defective “LOSP” and finger jointed weatherboards not supplied by KLC were found to have been used as cladding.17 So:
[74] For the reasons stated, not all the weatherboards came from KLC. Some had been treated with LSOP, and others were finger jointed. As confirmed by Dr Wakeling some of that timber deteriorated to the same extent as the timber treated with ACQ. That leads to the conclusion that some cause, other than the process of manufacturing caused the deterioration.
[73] Fifth, the homeowners had not established that any one of the pleaded particulars of defect was responsible for the deterioration in the timber18 and claims linking the reprofiling to the weatherboard defects are dismissed. Sixth, no other defects had been reported from any of the 12,000 lineal metres of the timber that was supplied to SPT.19
[74]The Judge then concluded:
[83] I am of the view therefore that the plaintiffs have not discharged the burden of proof to establish that all of the weatherboard timber supplied by KLC was defective because other timber affixed to the house and not supplied to KLC was also defective.
[84] Furthermore, the proportion of the allegedly defective timber supplied by KLC cannot be established because, apart from the 53 samples provided to Dr Wakeling, the remainder of the weatherboards were destroyed.
[85] That being so KLC cannot be in breach of the Consumer Guarantees Act, even if that statute applies to the supply of timber because not all of the defective timber was supplied by KLC.
[86] By the same token, KLC has not been established to have been negligent in the manufacture of the timber because not all of its timber it supplied was affixed to the house, and in any event the precise cause of the failure was not established.
[75] The Judge also observed, without forming a final view on it, that while the plaintiffs took appropriate advice on its application and were appropriately supervised, Dr Wakeling confirmed that both ACQ and LOSP treated weatherboards displayed
17 At [52], [65], [67] and [68].
18 At [79].
19 At [82].
paint failure and damage. As such, those differently treated weatherboards deteriorated to the same extent, suggesting the paint system was at fault.20
Threshold
[76] The homeowners’ bear the onus of satisfying me that I should come to a different decision to the one under appeal. Only if I consider the decision under appeals is wrong is there is any basis for interfering with it. I must however undertake my own assessment of the merits of the case and no deference to the decision under appeal is necessary apart from the customary caution in dealing with the evidence of witnesses where, for example, credibility is in issue.21
Did the judge err?
[77]The homeowners’ points on appeal claim that the Judge erred:
(a)In failing to find that prior to the deterioration of the weatherboards, within two to three months from the delivery and installation, all of those weatherboards had been supplied by KLC; and/or
(b)In rejecting the application of the principle res ipsa loquitur;
(c)In failing to conclude, in any event, the weatherboards manufactured and supplied by the respondent were in some way defective and or not fit for purpose in that there was serious deterioration with the weatherboards; and/or
(d)Finding that the respondent was not in breach of the Consumer Guarantees Act.
[78]KLC respond (in summary) that:
20 At [87]-[90].
21 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141.
(a)There was clear evidence at trial that there were other weatherboards on the property which showed signs of damage and, because of a tactical decision made by counsel, there was no evidence as to when those weatherboards were affixed.22
(b)There was extensive evidence as to what caused the weatherboard damage, including evidence to show that the homeowners did not paint the weatherboards correctly, so res ipsa loquitur has no logical application;
(c)There was insufficient evidence to show that the weatherboards were inherently defective and conversely there was evidence to show that the boards were manufactured in accordance with applicable New Zealand standards and were likely to have been free of any defects; and
(d)The homeowners did not establish that the weatherboards were not of acceptable quality and the homeowners’ actions excluded any claim under the CGA.
[79] In oral argument, Mr Waalkens QC focused on the Judge’s finding that as not all weatherboards came from KLC, some cause, other than the process of manufacturing caused the deterioration.23 He contends the Judge was plainly wrong about this given the clear evidence that weatherboards unequivocally supplied by KLC deteriorated within two months of installation and thus the presence of other damaged boards was irrelevant. He says that once that consideration is put to one side, the evidence is clear that the weatherboards were inherently defective and not fit for purpose at the time of installation and that the subsequent weathertightness damage cannot be attributed to allegedly poor painting by the homeowners.
[80] Ms Kerr responds that the judge’s finding as to the presence of other damaged wood is unimpeachable, and his conclusion must be understood in light of the
22 The homeowners’ opposed the defendant’s application to have the builder give evidence, the effect of which was that the timing of the installation of the other “LOSP” treated weatherboards could not be established.
23 Refer Monsbourgh v South Pacific Timber (1990) Ltd, above n 1, at [74].
evidence, the judge’s other key findings noted above and the fact that the timing and extent of other weatherboards not supplied by KLC (that is weatherboards treated with LOSP and or finger jointed) has never been established.24
The CGA
[81] It is helpful to frame my assessment by reference to the key elements of the homeowners’ claims. While “negligence” is mentioned, the pleaded claim is for breach of statutory guarantee of “acceptable quality” affirmed by s 6 of the Consumer Guarantees Act 1993 (CGA). Whether negligently manufactured or not, where goods are supplied that are not of an acceptable quality, the CGA provides consumers with a statutory right of redress against the manufacturers of those goods.25
[82]Acceptable quality means:
7 Meaning of acceptable quality
(1)For the purposes of section 6, goods are of acceptable quality if they are as—
(a)fit for all the purposes for which goods of the type in question are commonly supplied; and
(b)acceptable in appearance and finish; and
(c)free from minor defects; and
(d)safe; and
(e)durable,—
as a reasonable consumer fully acquainted with the state and condition of the goods, including any hidden defects, would regard as acceptable, having regard to—
(f)the nature of the goods:
(g)the price (where relevant):
(h)any statements made about the goods on any packaging or label on the goods:
(ha)the nature of the supplier and the context in which the supplier supplies the goods:
24 At [70].
25 Sections 6 and 26, Consumer Guarantees Act 1993. See also Contact Energy Ltd v Jones [2009] 2 NZLR 830 (HC) at [133].
(i)any representation made about the goods by the supplier or the manufacturer:
(j)all other relevant circumstances of the supply of the goods.
…
[83]In Nesbitt v Porter, the Court of Appeal stated:26
… goods are of acceptable quality only if fit for all purposes for which goods of the type in question are commonly used and they meet the other standards referred to in s 7(1), including being free of minor defects, with all of these matters being tested against the opinion of a reasonable and fully-acquainted consumer having regard to the matters in paras (f) to (j) of that subsection.
[84]In Contact Energy Ltd v Jones, Miller J helpfully observed that:27
[94] The hypothetical reasonable consumer is taken to be fully acquainted with the “state and condition” of the goods, including any hidden defects. Less obviously, he or she must also be taken to know the nature of the goods, all relevant circumstances of supply and any representations made about the goods by the manufacturer or supplier, so far as relevant. That is so because it is the hypothetical consumer who determines by reference to those considerations whether the goods are acceptable. The test is objective, but it is applied to the particular goods and circumstances.
[85]That case concerned the supply of electricity. Miller J relevantly noted:
[98] … the hypothetical consumer’s knowledge extends beyond the physical properties of electricity at the point of supply to the nature of electricity and attributes of the transmission and distribution systems, so far as such nature and attributes may determine its fitness for purpose, or cause it to suffer defects, or affect its safety.
[99] To state the obvious, it does not follow that the reasonable consumer must find acceptable all known risks inherent in the nature of the goods or the distribution system. That would leave the consumer without recourse no matter how frequent, how extreme, or how dangerous, the voltage fluctuation or outage. Acceptability is a composite quality, depending on the extent to which the goods prove to be fit for the purposes for which they are commonly sold, price of goods, representations made about them by the retailer and all relevant circumstances for supply.
[86] Miller J also addressed the availability of s7(4) proviso to the guarantee of acceptable quality in s 7(4), which states:
26 Nesbitt v Porter [2000] 2 NZLR 465 (CA) at [52].
27 Contact Energy Ltd v Jones, above n 25.
(4)Goods will not fail to comply with the guarantee of acceptable quality if—
(a)the goods have been used in a manner, or to an extent which is inconsistent with the manner or extent of use that a reasonable consumer would expect to obtain from the goods; and
(b)the goods would have complied with the guarantee of acceptable quality if they had not been used in that manner or to that extent.
[87] This section contemplates that goods may be used for some purpose for which they were sold, but will do so in an unreasonable manner or to an unreasonable extent.28 As Miller J explained, the availability of s7(4) is “a question of fact in the consumer’s circumstances”29
[88] Further, there is an exception to the right of redress in circumstances where the goods fail to comply only because of an act or default or omission by any person other than the manufacturer or servant or agent of the manufacturer.30 The Court of Appeal has determined the purpose of this exception “is to ensure that a person who falls within the definition of manufacturer is not held liable for breaches of guarantees which are completely beyond his or her control”.31 It is a “limited absence of fault defence”.
[89] In light of the foregoing, the availability of the s 6 guarantee of acceptable quality:
(a)Does not depend on proving fault;
(b)Will be assessed against the opinion of a hypothetical reasonable consumer taken to be full acquainted with:
(i)the state and condition of the goods, including any hidden defects;
28 Contact Energy Ltd v Jones, above n 25, at [118].
29 At [118].
30 Section 26, Consumer Guarantees Act 1993.
31 James Hardie Plc v White [2018] NZCA 49, [2019] 2 NZLR 49 at [112].
(ii)the nature of the goods and all relevant circumstances of supply, representations made about them, all known risks inherent in the nature of the goods and relevant circumstances for supply;
(c)Will depend on the reasonableness of the consumer’s use of the goods;
(d)Will be vitiated where the goods fail only because of default or omission of any person other than the manufacturer.
Building standards
[90] In considering the nature of any guarantee as to acceptable quality it is necessary to refer to the applicable building standards as they relate to timber weatherboards. A hypothetical reasonable consumer of timber weatherboard cladding will know both the nature of timber weatherboards and the building standards attaching to their use or act on advice about the same. Accordingly, the building standards set the framework for scope of any guarantee and reasonableness of the homeowners’ use of the weatherboards.
[91] Various building standards apply to the manufacture, use and protection of timber weatherboards. 32 Some key standards for present purposes are:
(a)Timber weatherboards must meet the durability requirements of B2 Durability of the New Zealand Building Code which demands that wall cladding must last at least 15 years with normal maintenance.33
(b)All timber and wood-based products shall be protected to minimise increases in moisture content or physical damage which can reduce their durability or structural strength prior to installation.34
(c)Installation moisture for weatherboards is to be 18 per cent or less.35
32 I have referred only to the Standards included in the common bundle.
33 See also NZS 3602:2003, cl 111.1.
34 NZS 3602:2003, cl 103.9.1.
35 Table 2A of NZS 3602:2003.
(d)Primer paint will deteriorate if left exposed and top coats should therefore be applied without undue delay. If the primer is exposed for more than a month, re-priming may be necessary.36
(e)“For no finish” or “stained finish” condition only the following species are permitted –redwood, heart, cypress, western red cedar and sawn H3.2 treated Radiata pine.37
(f)Members exposed to exterior weather cladding and dampness must be treated to H3 level.38
[92] AS/NZS 2311 deals with the management and painting of weatherboards. It states:
2.2TIMBER
2.2.1Nature of timber
Timber type can greatly influence the performance of paint applied to it. Some species are very dense and non-absorbent. Other species show a distinct seasonal variation in growth, indicated by prominent annual rings. The darker portion of those rings (the latewood) is denser, and in softwoods more resinous than the earlywood, and is less likely to provide a good bond with the coating.
Softwoods often provide a better base for coatings than hardwoods; however, there are many exceptions. Softwoods having high resin content are usually relatively poor substrates for paint. Softwoods, too, are more likely to contain knots, which present a difficult surface to coat satisfactorily for long-term external performance.
Some species contain extractives that are readily leached from the wood by water and thus have the potential to discolour painted surfaces. This may happen, for example, when external cladding that has not been primed on all surfaces is subjected to heavy rain, and water that has penetrated the joins emerges at a lower level with coloured extractives that discolour the paintwork. Therefore, a suitable primer coat should be applied to all surfaces of timber cladding and joinery prior to installation and painting.
Timbers containing preservatives including CCA and LOSP are popular building materials which require specific consideration prior to painting and are discussed in detail in Clause 1.5.2.7 and Table 5.2.
36 NZS 3602:2003, cl 103.9.4.
37 NZS 3602:2003, cl 111.2.5.
38 NZS 3602:2003, cl 105.1.
[93] It also refers to moisture content and the potential effect of the content on timber:
2.2.2Moisture content
Timber is a hygroscopic material that will gain or lose water according to the prevailing atmospheric humidity. Moisture change will cause the timber to expand or contract resulting in stressing and destruction of the paint finish.
Timber reaches a state of equilibrium in keeping with the humidity of the surrounding atmosphere, and in most populated areas of Australia the equilibrium moisture content (EMC) is typically in the range 10% to 17%. ln New Zealand, the EMC is typically in the range of 14% to 18%. These limits are extended in very dry inland areas or tropical areas, whereas air-conditioned buildings usually have a humidity level that produces an EMC of 8% to 12%.
…
2.2.5 External applications
External paint applications will be assisted by design considerations such as the following:
(a) …
(g) ...
(h) When installed, timber with high moisture content will shrink until it reaches the EMC (equilibrium moisture content). This will crack the paint and detract from the overall appearance of the finished surface.
[94] AS/NZS 2311 also provides the following guidance on painting and timber moisture content:
3.2.1 General
Most exposed timbers used in building construction are supplied in the dressed condition, e.g., cladding, panels, windows and mouldings. Such materials should not be delivered until just before they are to be incorporated in the building, unless on-site storage facilities are available, and should be in a clean, dry, freshly prepared condition. On-site storage should be such that it will allow that condition to be maintained. It is important that timber be allowed to equilibrate in a location protected from weather to near its final in- service conditions. to avoid shrinkage or swelling after installation and painting. On-site storage should be such that it will allow that equilibrium to be achieved. This may take several days for small relatively dry timber specimens to many weeks for large wet timber specimens that have been stored outdoors.
Some timber products are delivered pretreated with water repellents or preservatives. Such products may present difficulties when coated with latex
systems. Where such treatments are known to have been used, the paint supplier’s advice should be sought.
….
3.2.5 Moisture content of timber
Ideally, the moisture content of timber at the time of priming should be near the equilibrium moisture content pertaining to the particular locality in which it is being used.
The priming of timber should not be carried out at a time when the moisture content of its surface has been temporarily raised. This may occur, without it being obvious, during fog or mist. Fitness for painting cannot be accurately assessed by visual appearance; however, a suitable moisture meter may be used to give an indication of the surface moisture. Up to 4 h of windy or sunny weather may be necessary to dry timber surfaces moistened by overnight fog or mist. A longer time may be needed to dry timber after more serious wetting.
[95]Clauses 3.2.8 and 3.2.9 also relevantly note:
3.2.8Pre-primed timber including light organic solvent preservative (LOSP)
Modern practice uses factory methods to machine (in-line) prime timber before sale, and it particularly applies where ‘finger-jointed’ Pinus radiata is used for exterior applications.
There is a range of different coloured pre-primed timber products available in the market place. Some are coated with a quality architectural primer and are ready for the final coat painting system. These can typically be identified by the presence of a manufacturers’ brand and will have associated recommended finishing paint guidelines. In this situation the manufacturers’ guidelines should be followed for application of finishing systems.
There are other pre-primed timber products where the pre-priming is only designed to temporarily protect the timber. Where there is any uncertainty or the pre-primed timber does not have the manufacturers’ finishing system recommended guidelines then testing the adhesion of the primer to the timber as per Clause 7.3.1 is recommended. If any of the existing coating comes off it is unsound and must be removed by sanding. If in any doubt sand the entire surface bare before painting.
NOTE: LOSP treatments contain water-repellents which can cause waterborne coatings not to spread uniformly and wet the surface. This can occur even with acrylic topcoats applied over an oil based primer, as the water-repellent can dissolve into an oil based coat. If water- repellents are detected or suspected the boards should be appropriately cleaned to remove any surface contamination.
3.2.9Preservatives
A range of preservative formulations are used for preserving timber. These preservatives are not restricted to a single hazard c]ass (see AS 1604). It is
important to determine whether the timber to be painted has been treated, and to obtain the appropriate specification prior to the design of a painting system, as some treatments and paint systems are incompatible.
Most dyes and water repellents used in LOSP formulations are solvent mobile and it is therefore important, when these preservatives are being overpainted, the paint system is not likely to immobilize the dye and bleed through can be visible.
Factual findings
[96] The Judge’s findings in respect of compliance with timber treatment standards, the New Zealand source of the KLC timber and the presence of similarly defective non-KLC timber were broadly available to him. To this extent, the decision is unimpeachable.
[97] However, there was no substantive engagement by the Judge with the homeowners’ claim of rapid “catastrophic” weatherboard failure. And, if there was such rapid failure, the Judge does not explain why it occurred (other than tentatively). In this regard, the findings in respect of the claimed defects do not address the expert evidence in any detail and appear conclusory. Nor is there any discussion of the approach to be taken to the CGA, including the assessment of acceptable quality, or definitive findings about the reasonableness of the homeowner’s use of the weatherboards and whether their actions were responsible for the weatherboard damage. The homeowners’ claim that KLC failed to investigate is also not addressed. Furthermore, as the Court of Appeal put it in Belgiorno Nettis, how the evidence worked to achieve the result is largely left unstated and open to speculation.39 I therefore consider that the Judge erred and the merits must be revisited, which as requested by the homeowners, I propose to do as far as I am able.
[98] Before doing so I wish to deal with an unnecessary distraction. The homeowners place considerable emphasis on the doctrine of res ipsa loquitur. The argument is that rapid deterioration of the weatherboard necessarily implies the weatherboards were defectively manufactured and not fit for purpose. But, as the Judge found, that doctrine has no obvious application where, as here, there is probative
39 Belgiorno-Nettis v Auckland Unitary Plan Independent Hearings Panel [2019] NZCA 175, [2019] 3 NZLR 345 at [80].
evidence of an alternative explanation for that deterioration.40 In this case there was ample evidence pointing to a non-manufacturing cause. It was therefore necessary for the homeowners to show by reference to probative evidence, on the balance of probabilities, that the weatherboards were not of an acceptable quality.41
[99] Having said that, the rapid deterioration of the weatherboards within a matter of a month or so, if proven, supports an inference that something had gone wrong with the manufacturing process and that the weatherboards were not of an acceptable quality given especially the applicable standard required durability for at least 15 years. Hence, a clear finding on this point was essential.
[100] I turn then to consider the issues not directly or adequately addressed by the Judge, namely:
(a)Whether there was rapid and serious weather damage to the KLC weatherboards?
(b)And, if so:
(i)Were the weatherboards of an acceptable quality?
(ii)Was the homeowners’ use of the weatherboard unreasonable (s 7(4))?
(iii)Were the homeowners the sole cause of the failure of the weatherboards (s 26)?
40 Stephen Todd “Negligence: Breach of Duty” in Stephen Todd (ed) Todd on Torts (8th ed, Thomson Reuters, Wellington, 2019) at 7.5.03. See Scott v The London and St Katherine Docks Co (1865) 3 H & C 596, 159 ER 665 at 667 and Attorney-General for England and Wales v R [2002] 2 NZLR 91 (CA) at [82].
41 I note that the homeowners did not need to show that any inherent defects were the sole cause of the weatherboard damage in order to establish liability. See Stephen Todd ”Causation and Remoteness of Damage” Todd on Torts (8th ed, Thomson Reuters, Wellington, 2019) at 20.2.02.
Was there rapid and serious weather damage to the KLC weatherboards?
[101] Yes. The evidence overall supports an inference that the KLC weatherboards showed signs of serious weather damage within one to two months of installation. Ms Monsbourgh gives direct observational evidence of serious splitting and cracking of the boards. Her builder and the site foreman considered the damage to be sufficiently significant to engage with Mr Attwood about it and to replace 175 lineal metres of it by June (only three months after installation commenced). Other cracks had to be filled with epoxy. While Mr Attwood was dismissive of the damage, even he thought it was sufficiently serious to warrant replacement of some of the boards, and his evidence that he thought the weatherboards had been physically damaged in transit further supports the inference that the KLC weatherboards were obviously damaged.
[102] I also find that at this stage of the installation most if not all of the boards were KLC boards. It is most unlikely that the LOSP boards were introduced at this time given that ample KLC weatherboards had already been supplied. More likely, the builder sourced LOSP boards to replace some of the cracked KLC boards that were removed. Furthermore, the proportion LOSP boards identified in the samples was small, suggesting that they formed only a small part of the total boards used in any event.
[103] The finding of rapid deterioration of the KLC boards is important because all of the experts and the industry participants, including Mr Attwood, agreed that the rapid damage to or deterioration of the boards, and the nature of the observed damage was very unusual. It demands more than a cursory explanation and supports the homeowners’ basic claim that the boards as supplied were not of an acceptable quality. It also adds weight to the homeowners’ primary complaint about the District Court’s failure to squarely address the significance of this important fact.
Were the weatherboards of an acceptable quality?
[104] The homeowners’ case is that the weatherboards were inherently defective in multiple respects as described in the evidence of Dr Wakeling and recorded in the pleadings. While he could not identify the definitive “cause” of the weatherboard
failure, he remained adamant that the primary reason for the rapid failure was “multifactorial;” that is a combination of factors inherent to the weatherboards. He was particularly critical of the use of ACQ treatment, noting it increased dimensional instability and was not a common for treatment of weatherboards (a point also acknowledged by Mr O’Sullivan). The presence of other features, including the development of soft rot so quickly, wide growth rings and a large proportion of latewood were also said to be indicative of inherent weakness. He dismissed the suggestion paint failure was the primary cause, though he initially accepted it could have been a contributing factor. Mr Smith was similarly dismissive of the suggestion paint failure was the main cause, noting the paint thickness he had observed was adequate and in any event paint thickness could not explain the rapid nature of the weatherboard failure.
[105] KLC’s case rested, in part, on the evidence of compliance with relevant New Zealand standards for the treatment of weatherboards, evidence that other factors such as the presence of rings and latewood were naturally occurring and not excluded by the relevant standards and evidence that there were no other defect claims in relation to the balance of the same batch of weatherboards. Mr Paykel, who has extensive experience in the application of New Zealand’s timber standards, gave evidence supporting KLC’s claims in this respect.
[106] KLC also offered evidence of an alternative cause for the weatherboard failure, namely an inappropriate or inadequate paint system. This relied on a combination of the evidence of Mr O’Sullivan, who has extensive experience in the assessment of the cause of cladding defects, and Mr Coveny, a paint expert. Based on Mr Coveny’s assessment of a sample of weatherboards, Mr O’Sullivan identified a correlation between boards that presented with defects and the quality of the paint work. He concluded that where the paintwork was substandard, there was a corresponding deterioration in the quality of the weatherboard. He attributes this to the failure of the paintwork to adequately mitigate water ingress at the time of the installation, which meteorological records show was a particularly wet period with unusually high rainfall.
Assessment
[107] I am satisfied that the weatherboards as supplied were inherently susceptible to rapid weather damage. I also find that the speed and nature of the damage suffered by the weatherboards was highly unusual. As noted by Dr Wakeling, this susceptibility was likely due to the morphology of the timber, including the presence of juvenile heartwood of low density, wide rings and reaction wood and a large proportion of latewood, as well as dimensional instability induced by the ACQ treatment. In this regard, only Dr Wakeling was specifically qualified to give expert opinion evidence as to the significance of the micromorphology of the weatherboards, decay micromorphology and the performance of preservative treated wood and wood decay micromorphology. While he could not be definitive about the features most likely to have caused the rapid deterioration, his expert opinion that the features present in the weatherboards indicate they were inherently susceptible to rapid weather damage was not contradicted by an expert similarly qualified to do so.42 Mr O’Sullivan also accepted the latewood was not ideal, and the AS/NZS 2311 standard identifies the problems associated with latewood and paint adhesion.
[108] The rapid deterioration, in fact, of the KLC weatherboards, including the presence of soft rot within three years, notwithstanding the H3.2 treatment, is also strongly suggestive of inherent and unusual susceptibility to weather damage, especially if not painted correctly. In this regard it is apt to note that, as explained by the BRANZ Good Practice Guide, H3.2 radiata pine can last as long as 15 years uncoated and Mr O’Sullivan said that H3.2 timber weatherboard should not require painting.43 I also prefer Dr Wakeling and Mr Smith’s evidence as to the nature of the damage to the weatherboards, including their observations that the cracking extended into those boards. Not only are they experts in such matters, Dr Wakeling had the largest sample from which to make his assessment. The significance of this is that the
42 Mr O’Sullivan is a well-known expert on cladding systems, the standards applicable to those systems and on the significance of evident flaws in those systems (including flaws in the timber treatment and painting systems) in terms of moisture ingress and the effects of such ingress. But he does not purport to hold himself out as an expert in wood micromorphology or wood decay micromorphology. Indicative of this, Mr O’Sullivan disclaimed any expertise on timber treatment or timber preservation. Mr Paykel is in the same position. This is important because, in a contest about the micromorphology of the weatherboards, and their inherent qualities, Dr Wakeling is the only expert witness in this proceeding who carries the requisite subject matter expertise.
43 BRANZ Good Practice Guide: Timber Cladding at 2.3.1.
damage was not simply surficial paint delamination as observed by Mr O’Sullivan and assumed by Mr Paykel.
[109] Perhaps, however, the best evidence of the inherent susceptibility of the weatherboards to weather damage, even though treated to H3.2 level and painted with two coats of primer, is the KLC sticker. It strongly suggests that the weatherboards will not meet the applicable durability standards unless painted in the way specified. I am therefore satisfied that the weatherboards were inherently prone to rapid deterioration at least if not painted correctly.
[110] But the hypothetical reasonable consumer will be aware that all timber is subject to natural variation and will be susceptible to weather damage to varying degrees. Further, as Mr Paykel observed, the same consumer will be familiar with the New Zealand Timber Grading Rules (NZS 3631:1988) and know the standard does not provide guidance on permitted allowances for the natural features identified by Dr Wakeling, that ¾ sawn timber and sloping grain is not prohibited, and that ACQ treatment is permitted.44 Furthermore, a hypothetical reasonable consumer aware of the KLC specification must take the weatherboards subject to a caveat that they are to be painted in the way specified. In addition, the hypothetical reasonable consumer will be deemed to be aware of the requirements to paint the substrate in accordance with the painting standards, as noted above, and must take all reasonable steps to ensure compliance with that specification and the painting standards. The standards and industry experience (as well as the absence of other reported failure) also suggest that, given the H2.3 treatment level and the application of a suitable painting system, the KLC timber weatherboards are fit for purpose.
[111] As to the contest about the level of the treatment of the weatherboards, this issue was only raised belatedly, Dr Wakeling having been initially of the view that treatment levels were not in issue. In any event, I am not satisfied that the treatment levels have been shown to be inadequate. While the DDAC levels appears substandard, there is no conclusive evidence that the treatment levels overall were inadequate.
44 I also note that while there is evidence that the treatment may have been deficient in one key respect, there is no evidence that the treatment was substandard overall.
[112] As a consequence of the foregoing, I find that a hypothetical reasonable consumer would consider the KLC weatherboards to be of acceptable quality provided a protective coating is applied to them in accordance with the KLC sticker specification and the applicable building standards.
Was the homeowners’ use of the weatherboards unreasonable?
[113] I have come to the view that the failure of the painting system applied by the home owners at the time of installation did not accord with the KLC specification or relevant New Zealand standards and that this, in combination with the weather conditions at the time, ultimately led to the rapid deterioration of the KLC weatherboards. More specifically, the homeowners’ did not follow KLC’s specification and they did not follow the standards that require, critically in this case, seeking advice in advance of installation from the manufacturer of the weatherboards as to the proper painting system per cl 3.2.8 of AS/NZS 2311:2009. To that extent, and subject to what I have to say about the KLC sticker and the conduct of KLC during installation of the weatherboards (see [120]-[123] below), the homeowners’ use of the weatherboards was therefore unreasonable.
[114] To elaborate: first, as Mr Smith, Dr Wakeling and Mr Coveny explained, paint adhesion is critically important to the performance of the paint system. In his initial report, Dr Wakeling identified poor adhesion of the base primer to the weatherboards as one reason for moisture ingress and weatherboard failure. He had wrongly assumed for that purpose that the primer was a solvent based primer. But the significant point is his expert opinion that the paint system is critical to the efficacy of the performance of the weatherboard.
[115] Second, Mr Coveny’s explanation as to the problem with the painting of the weatherboards and its contribution to the rapid deterioration of the weatherboards is cogent and persuasive. It is based on a larger sample than that used by Mr Smith and is broadly consistent with the evidence of the conditions at the time of painting. As Mr Coveny explained, the test results show that performance is related to coat thickness and the mode of failure indicates that insufficient coating thickness has allowed moisture and solar radiation to reach the timber causing dimensional
instability, possibly with cellulose breakdown, which has destroyed what paint adhesion the primer offered. This breakdown would have been compounded by the mismatch of tensile rigidity of the solvent based primer over the water based one. Relevantly also, the homeowners had not achieved the requisite thickness of 120 microns on any of the samples reviewed as poor or average in appearance.
[116] Third, the weather records show that April 2013 was a particularly wet period in the locality of the home. This is the best evidence of the likely weather conditions at the time of installation. I also agree with Mr O’Sullivan that Mr Attwood’s measurements of moisture of the timber at about 12 to 15 per cent provide a snapshot only of the likely moisture of the weatherboards over this period.45 Furthermore, while I have no reason to doubt the truthfulness of the homeowners in terms of their belief that the weatherboards had adequately dried out before applying the topcoats, they are not professional painters and their judgement on such matters is not reliable.
[117] Fourth, it is clear from the totality of the evidence that moisture ingress at this key stage of installation is most likely to have been a significant contributor to subsequent dimensional instability which rapidly manifested itself in terms presentation of splits and cracking. The fact that non-KLC boards also painted in the same way suffered from similar defects supports an inference that the painting system failed and thus was the major contributor to the weatherboard cracking and splitting. Conversely, the absence of any evidence of KLC weatherboard failure out of the same batch tends to support (although weakly) an inference that paint system failure in this case led to the rapid deterioration.
[118] In the result, I am satisfied on the balance of probabilities that the homeowners’ use of the weatherboards was not reasonable insofar as they knowingly did not follow the KLC specification and failed to comply with the applicable building standards. Subject to what I have to say below, that unreasonableness is a complete defence to the CGA claim, either pursuant to s 7(4) or s 26.
45 The circumstances in which these test results came before the Court is troubling. The results were not referred to by Mr Attwood in his brief of evidence and he was not cross examined on them. Indeed, evidence of these results was only introduced through cross-examination of other witnesses.
The KLC sticker and KLC’s failure to intervene
[119] However, two important factors, peculiar to this case, potentially mitigate the unreasonableness of the homeowner’s use and go to the issue of causation. Problematically, neither matter was addressed in the decision below (and should have been) and was not the subject of full argument before me.
[120] First, it is at least arguable that the KLC sticker was not present on the boards at the time of the installation. In this regard, Ms Monsbourgh was adamant it was not and given the careful approach taken by the homeowners to their painting task (albeit without input from the manufacturer), it is available to infer that had they been aware of the specification they would have followed it. Mr Attwood said it was there, producing weatherboards at the trial with it affixed, apparently stored all this time in his garage. The admissibility of that evidence is doubtful. If it was going to be relied upon, it should have disclosed, at the latest, at the time of the exchange of the evidence in chief. Furthermore, it is also arguable that if the KLC sticker specification was going to be relied upon by way of defence, it should have been pleaded. Accordingly, this is not obviously a case of knowing disregard for a manufacturer’s specification (though they still should have made inquiries with KLC as to paint treatment in accordance with cl 3.2.8 of AS/NZS 2311:2009).
[121] Second, the homeowners brought the rapid weatherboard failure to the attention of the KLC in May 2013 soon after it appeared and still during installation of the weatherboards. At this point, KLC had the opportunity to examine the issue and determine whether there had been a painting system failure. As the manufacturer it was best placed to understand the likely cause of the failure and to advise on the most appropriate remedy. Instead, Mr Attwood was dismissive with the result that the homeowners persisted with their flawed painting methodology through to practical completion. In these circumstances it is arguable that, as a prudent manufacturer, KLC should have investigated or engaged a suitably qualified person to investigate the cause of the known coating issues prior to allowing the installation of the boards to practically complete.46 This basic point was aptly made by Mr Paykel (see [53] above)
46 He did this belatedly, by which time the weatherboards required replacement according to the advice received by the homeowners.
in reference to the builders, supervisors and designers. Intervention of this kind is also envisaged by the scheme of the CGA which contemplates engagement with and intervention by suppliers who are on notice of the apparent defects with their products.47
[122] If both these matters are resolved favourably to the homeowners, then it is also arguable that their ongoing use of the weatherboards was not unreasonable in terms of s 7(4) and that the homeowners were not the sole cause of the weatherboard failure for the purpose of s 26 of the CGA. Unfortunately, the first matter requires resolution of the credibility of Ms Monsbourgh and Mr Attwood. The second matter demands close examination of the nature of the obligation of manufacturers (if any), to intervene if put on notice of a product failure and the extent to which this bears on CGA liability. As I have said, this aspect of the homeowners’ claim was not addressed by the Judge and neither matter was argued before me. That argument is now required in order to do justice between the parties.
Outcome
[123] The Judge’s reasons for dismissing the homeowners’ claim were inadequate. I find that there was rapid weather damage to the KLC weatherboards. Closer examination of the cause of that damage was therefore necessary. On this I find that the KLC weatherboards were inherently susceptible to rapid weather damage but were, nevertheless, of an acceptable quality if painted correctly. I also find that the rapid damage to the weatherboards was caused by high levels of moisture at the time of installation and painting system failure. I am satisfied that the homeowners’ use of the weatherboards was unreasonable insofar as they knowingly did not paint the weatherboards in accordance with the KLC specification and the applicable painting standards. Prima facie, this unreasonableness provides a complete defence to their claim under s 6 of the CGA.
[124] But it is at least arguable that the KLC specification was not brought to the attention of the homeowners and that KLC should have intervened when put on notice of the weatherboard failure in May 2013. If both these matters are resolved favourably
47 Section 18.
to the homeowners, then it is also arguable that the ongoing use of the weatherboards was not unreasonable, and the issue of shared responsibility comes into focus. As neither of those matters were addressed in the judgment below or before me in argument, they must be sent back to the District Court for resolution, together with an assessment of damages (if required). Alternatively, I am prepared to consider having those matters resolved in this Court, but only with the agreement of the parties. If so, counsel should seek a conference before me.
Costs
[125] The District Court failed to adequately address the homeowners’ claim. The appeal was successful to that extent. However, on a substantive review of the evidence, KLC has largely succeeded on the merits to this point. The homeowners’ use of the weatherboards appears to have been unreasonable. Given this combination of success (and failure), I consider costs should lie where they fall. If, however, submissions are necessary, they should be filed within 10 working days (and be no longer than three pages in length).
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