Paine v Carter Holt Harvey Ltd
[2019] NZHC 478
•18 March 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2018-404-001143
[2019] NZHC 478
UNDER the Consumer Guarantees Act 1993, Fair Trading Act 1986 and High Court Rule 4.24 BETWEEN
DAVID ERIC PAINE and LYNDA CAROLINE BOWERS
First Plaintiffs
KEVIN BRYAN START and FLORENCE ELIZABETH START
Second Plaintiffs
.../Third and Fourth Plaintiffs cont over page
AND
CARTER HOLT HARVEY LIMITED
Defendant
Hearing: 4 March 2019 Counsel:
AS Ross QC, AJ Thorn and RA Dellow for Plaintiffs JG Miles QC, M Heard and ED Nilsson for Defendant
Judgment:
18 March 2019
JUDGMENT OF DOWNS J
This judgment was delivered by me on Monday, 18 March 2019 at 4 pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors/Counsel:
Adina Thorn Ltd, Auckland. LeeSalmonLong, Auckland. AS Ross QC, Auckland.
JG Miles QC, Auckland.
PAINE v CARTER HOLT HARVEY LTD [2019] NZHC 478 [18 March 2019]
DONALD BRAMWELL JACKSON and HEATHER MAY PROCTOR JACKSON, and DONALD
BRAMWELL JACKSON, HEATHER MAY PROCTOR JACKSON and HOLLAND BECKETT TRUSTEE
No.11 LIMITED as trustees of the Jackson Family Trust 2011Third Plaintiffs
STEPHEN MATHEW DEVCICH, JESSIE DIANA DEVCICH and JOHNNY CHARLES AUGUST as
trustees of the Devcich Family Trust Fourth Plaintiffs
The issues in context
[1] The plaintiffs own homes clad in Shadowclad, a plywood product. Carter Holt Harvey Ltd1 makes, supplies and promotes Shadowclad. The plaintiffs allege Shadowclad is inherently defective, so, it is only a matter of time before it fails. They also allege Carter Holt knew or ought to have known this. Carter Holt denies the allegations. It contends Shadowclad is fit for purpose providing it is used as anticipated, installed correctly and properly maintained. The claim is representative; four plaintiffs act for owners of another 127 homes.
[2] Carter Holt seeks particulars for many aspects of the claim. The plaintiffs have already provided Carter Holt some. They resist the balance. Carter Holt also seeks security for costs until discovery is complete. The plaintiffs offer $145,000 until then. Carter Holt seeks more than $1.1 million. The difference lies not in principle; rather, cost of anticipated disbursements in relation to discovery.
The claim
[3] There are five causes of action: negligence, negligent failure to warn, negligent misstatement, breach of the Consumer Guarantees Act 1993, and breach of ss 9 and 13 of the Fair Trading Act 1986. In brief, the first three allege Carter Holt:
(a)Owed a duty of care to ensure Shadowclad was fit for purpose; a duty it breached by its ongoing manufacture, supply and promotion of Shadowclad.
(b)Knew or ought to have known Shadowclad was inherently defective, thereby requiring it to warn the plaintiffs.
(c)Made materially inaccurate promotional statements about Shadowclad.
[4] The fourth and fifth causes of action have similar elements, deployed in a consumer-protection framework. As observed, Carter Holt denies the allegations. It raises limitation defences too.
1 Carter Holt.
Particulars
[5]The parties agree on principle, just not how they bite.
[6] As Kos J memorably observed, particulars exist “in a sometimes uncomfortable no-man’s-land between material or essential facts (which must be pleaded …) and evidence (which must not)”.2 A Court may order particulars, including of its own motion, when it considers a pleading defective or inadequate.3
[7] Particulars can be an important tool to inform a defendant about the case they must meet, limit matters the plaintiff may put in issue, facilitate informed assessment about what defence evidence may be required, and provide opportunity to seek (summary) determination the claim cannot succeed.4 But, overcooked or needlessly refined particulars can hinder the administration of civil justice through obfuscation, delay, and cost.5 Proportionality is relevant to whether particulars are ordered.6 So too the availability of case management techniques—including trial staging—and provision of witness briefs.7
[8] In Platt v Porirua City Council, Kos J considered particulars in a “leaky home case” between a homeowner, local body, and others.8 The Judge said if “proof and pleading are indirect”, the plaintiff must particularise:9
(a) what, physically the defects are that caused loss (i.e. the “where”);
(b) the particular standards that the third parties failed to meet in the case of each defect, either individually or collectively (i.e. “how” they were “defects”);
(c) the circumstances in which the defendant came to have an inspectoral or supervisory role (including, normally, when);
(d) the standard(s) required of the defendant in undertaking that role;
(e) particulars of the breach of duty by the defendant; and
2 Ayers v LexisNexis NZ Ltd [2012] NZHC 3055, (2012) 21 PRNZ 313 at [49].
3 High Court Rules 2016, r 5.21(3).
4 Platt v Porirua City Council [2012] NZHC 2445 at [19].
5 BNZ Investments Ltd v Commissioner of Inland Revenue (2008) 23 NZTC 21,821 (HC) at [45].
6 Westpac New Zealand Ltd v Anderson [2017] NZHC 2204 at [21](h).
7 At [21](i).
8 Platt v Porirua City Council, above n 4.
9 At [24].
(f) the loss thereby caused (that is – the loss caused by the third parties’ defective performance which would have been avoided by the defendant performing its duty to the required standard).
[9] Carter Holt contends the same particulars are required in relation to each of the 131 homes (albeit after recalibration; Platt involved a claim against the council). The plaintiffs acknowledge Platt governs typical leaky-building claims but say this is not one. Rather, they say their claim is about a defective product.
[10] This differing taxonomy is reflected in a similar, ongoing case. Minister of Education v Carter Holt Harvey is a claim by the Crown against Carter Holt in relation to Shadowclad on almost 1,000 schools. Carter Holt sought particulars. Fogarty J ordered some but not others.10 His Honour noted Carter Holt characterised the claim as a leaky building case, the Minister as a product liability claim.11 This difference appears to endure, a point noted by Fitzgerald J in her carriage of that case.12 I regard taxonomy as indecisive in this context.
Particulars of how the allegedly represented parties consented to being represented
[11] Carter Holt seeks particulars of how the represented parties “allegedly consented to being represented by the plaintiffs”. Carter Holt acknowledges the plaintiffs have provided the date each owner joined the claim, but notes this does not extend to how consent was given.
[12] Precedent exists. In Strathboss Kiwifruit Ltd v Attorney-General,13 Dobson J ordered represented growers of kiwifruit to provide particulars to assess whether they were properly part of the class. However, the alleged duty of care in that case was extremely broad: one owed by the Ministry for Primary Industries “to those involved in the New Zealand kiwifruit industry to prevent the incursion into New Zealand of harmful biological substances”.14 Here, those affected all own homes clad in Shadowclad, an allegedly defective product.
10 Minister of Education v James Hardie New Zealand [2014] NZHC 2432 [Fogarty J particulars judgment].
11 At [35].
12 Minister of Education v James Hardie New Zealand [2018] NZHC 22 at [15].
13 Strathboss Kiwifruit Ltd v Attorney-General [2016] NZHC 206.
14 Strathboss Kiwifruit Ltd v Attorney-General, above n 13, at [1].
[13] At the hearing, Carter Holt observed if the homeowners joined the claim by signing the litigation funding agreement, it did not require more. I consider how the homeowners consented to being represented is unlikely to be informative of anything material. This application is dismissed, assuming it remains unanswered.
Building type
[14] Carter Holt seeks particulars of the type of building owned by the represented parties. It contends the generic term “residential” is inadequate to fairly inform it of the plaintiffs’ claim, and more specificity required.
[15] Imagine all homes were apartments. That apparent coincidence could be informative of whether Shadowclad is inherently defective, hence directly relevant to the case Carter Holt must meet. But, this part of the application has been overtaken by events. At the hearing, the plaintiffs tendered an updated schedule (dated 4 March 2018) in relation to all homes. Building type is refined, for example, to “Residential
– Stand Alone House”, or “Garage”. This level of specificity is sufficient to inform Carter Holt of this aspect of the plaintiffs’ claim. Carter Holt did not argue otherwise.
[16]This application is granted, albeit resolved.
Building consent particulars
[17] Carter Holt seeks the dates on which building consent and code compliance certificates were issued in relation to all homes, and the period within each was built or Shadowclad installed.
[18] The plaintiffs have supplied the latter. And, the former in relation to approximately half of the homes. They contend this is sufficient for the moment, especially given proportionality.
[19] I accept Carter Holt’s position here for the reasons it gives: dates in relation to building consents and code compliance certificates are necessary to assess limitation defences, whether Shadowclad has performed (there may be a difference, for example,
between a five-year old sheet and a much older one), what standards apply, and whether the product was correctly installed, at least in the eyes of local bodies.
[20]Cost to the plaintiffs should be modest, which addresses proportionality.
[21] Locals bodies are not always perfect historians. Consequently, the application succeeds only in so far as the information is reasonably available. Moreover, the plaintiffs need only provide, as they have already done, the approximate date of their homes’ construction and Shadowclad’s installation. This is sufficient to illuminate the plaintiffs’ claim and enable Carter Holt to make an informed assessment of its defence.
[22]The application is granted with these caveats.
Particulars relating to the purchase and supply of Shadowclad
[23] Carter Holt seeks the dates on which Shadowclad was purchased, “including dates of the relevant contract between supplier and purchasers, and the contractual chain where the Shadowclad was not purchased directly by the relevant party”. Carter Holt also wishes to learn whether any contracts were the “result of a competitive tender process and whether the contract contains any provisions excluding or limiting liability of the operation of the Consumer Guarantees Act”.
[24] Carter Holt argues “the contractual matrix” is directly relevant to the existence of the duty of care in negligence, and whether the respective parties are consumers and suppliers under the Consumer Guarantees Act. The nature of the supplier is also said to be relevant to whether the goods are of “acceptable quality” under the Act, to the possibility of limitation defences, and to the possibility of statutory exclusions.15 I do not accept this analysis, at least as requiring particularisation.
[25]First the obvious: breach of contract is not alleged.
[26] Second, while the contractual matrix can inform the existence of a duty of care in relation to negligence, the material aspect of the plaintiffs’ claim is that Carter Holt
15 Before mid-2014, the Consumer Guarantees Act 1993 did not apply to contracts entered as a result of a competitive tender process.
owed them a duty of care irrespective of this matrix. This because the defendant manufactured, supplied and promoted exterior cladding allegedly unfit for purpose. Carter Holt may have a complete answer to this. But, that answer ought not involve sidestepping the gravamen of the plaintiffs’ claim to facilitate a request for particulars in relation to subsidiary aspects. Moreover, arguments about particularisation of the contractual matrix must confront the reality of the construction industry in New Zealand: typically, the supply-chain is short.
[27] Third, the Consumer Guarantees Act 1993 defines consumers, suppliers and manufacturers very broadly.16 A consumer may sue a supplier of goods under that Act in certain situations.17 A consumer may also sue a manufacturer under that Act when another supplies goods to the consumer, and those goods are not of acceptable quality (in breach of the guarantee created by the Act).18 The Act defines supply expansively too.19 As observed, Carter Holt makes Shadowclad. So, the plaintiffs as consumers may sue Carter Holt as manufacturer, irrespective of the precise contractual matrix between factory and home, providing of course these statutory definitions are met.
[28] Asher J reached this conclusion in relation to Shadowclad in Ministry of Education v Carter Holt Harvey:20
However, this is far from a complete answer to the claim against Carter Holt. This is because the guarantee as to acceptable quality in s 6 gives the consumer a right of redress not only against the “supplier”, but also against the manufacturer.21 Sections 7(1)(i), s 9(4)(b) and s 13 apply to both “suppliers” and “manufacturers”. A “manufacturer” is defined as:
Manufacturer means a person that carries on the business of assembling, producing, or processing goods, and includes—
(a)Any person that holds itself out to the public as the manufacturer of the goods:
(b)Any person that attaches its brand or mark or causes or permits its brand or mark to be attached, to the goods:
(c)Where goods are manufactured outside New Zealand and the foreign manufacturer of the goods does not have an ordinary place
16 Consumer Guarantees Act 1993, s 2(1).
17 Section 16.
18 Section 25.
19 Section 2.
20 Minister of Education v Carter Holt Harvey Ltd [2014] NZHC 681 at [85]–[86].
21 Consumer Guarantees Act 1993, s 6(2)(b).
of business in New Zealand, a person that imports or distributes those goods:
Carter Holt can be seen as a manufacturer in that it carries out the business of assembling, producing or processing goods. The guarantee sections apply to a manufacturer when another person “supplies” the goods. Section 25 sets out the right of redress against manufacturers, and I cannot assume at this strike out stage that any of the exceptions in s 26 apply.
[29]Fogarty J adopted this reasoning in declining particulars about contracts:22
Accordingly, there is no basis now for the defendant to require the plaintiffs to plead all contracts entered into by them for the construction of individual school buildings, as sought in paras 2, 4 and 15 of the application for further particulars. Rather, it is sufficient for the plaintiffs to plead that all the Shadowclad affixed to the buildings were manufactured by CHH. The application for further particulars as to supply is dismissed.
[30] This is what the plaintiffs have done. This aspect of the application therefore confronts broad statutory language, framed with the consumer in mind, and analogous reasoning of two High Court Judges in relation to similar pleadings concerning the same product.
[31] Fourth, Carter Holt contends this reasoning is wrong. But, it abandoned its appeal in that case.23
[32] Fifth, particularisation of this aspect would place a disproportionate burden on the plaintiffs, especially as they are unlikely to have much of this information.
[33] Carter Holt observes Fitzgerald J recently accepted “contractual arrangements are an important aspect of the material that will need to be before the Court when assessing duty of care”.24 However, this observation was made in the context of an argument about discovery, not particulars. The question is not whether the contractual matrix may be relevant to the existence of a duty of care or statutory guarantees—it may be—but whether Carter Holt needs this information now.25 I consider it does not.
[34]The application is dismissed.
22 Fogarty J particulars judgment, above n 10, at [86].
23 Carter Holt said it abandoned its appeal for good reason(s). I do not doubt that. However, Fogarty J’s reasoning stands.
24 Minister of Education v James Hardie New Zealand [2019] NZHC 245 at [67].
25 This is not to express a view on relevance.
Reliance on promotional statements, advertising and product literature
[35] Carter Holt seeks particulars “in relation to public statements, advertising and product literature, promotional activities and the plaintiffs’ and represented parties’ reliance on them”. The application extends to information about the person who allegedly relied on the promotional activities or product literature, specific activities relied on, and date of reliance. Carter Holt argues this information is necessary to respond to the claim of negligent misstatement.
[36]Carter Holt made an identical request of Fogarty J in Minister of Education.26
The Judge dismissed it. His Honour’s reasoning is important:27
We are all familiar, as consumers, with the phenomenon of relying on the reputation of a manufacturer when purchasing goods. We buy products relying on the quality of the manufacturer. The purpose of consumer protection legislation, such as the CGA, would be frustrated if plaintiffs were required to prove with particularity what advertisement, set of advertisements, or combination of advertisements and consumer satisfaction they personally relied upon before buying.
In the claim of the tort of negligent misstatement, this originated in a client relationship, and has quasi-contractual character. Usually it is not deployed in this context. But if it can succeed here, I think the same reasoning applies.
CHH is a major and reputable manufacturer. There is no need for the government plaintiffs to have to prove specific and conscious reliance, line- by-line, on promotional material distributed with the product by the reputable manufacturer. When manufacturers sell generic products advertised for a purpose, here cladding, it will normally carry the implicit assurance that it is fit for the purpose.
These particulars would impose a huge burden on the plaintiffs and not serve to advance the ability of CHH to defend the claim. Given the widespread application by the government of CHH Shadowclad product, CHH must have known that the government was a major customer and would draw the normal conclusion that it was a major customer because of reliance on CHH products. The common law of negligence is a robust body of law and does not, in a context like this, call for proof by individuals to be found in many government organisations, over a long period of time, to give evidence of what particular document they relied on.
[37] Carter Holt contends this reasoning is distinguishable as central government is not involved here. It stresses this is a claim by more than a hundred individuals exercising independent choice and judgement, not “government [as] a major
26 Fogarty J particulars judgment, above n 10.
27 At [89]–[92].
customer”.28 Each decision to purchase necessarily involved discrete acts of reliance, all which should be pleaded.
[38] I consider the reasoning remains applicable. That 131 homeowners chose to use Shadowclad on their homes implies reliance on reputation, and presumably, Carter Holt’s expertise, standing, and longevity in the New Zealand building industry. Such reliance is arguably more applicable to a host of individuals across the country than a single governmental actor with large, pooled resources at its disposal. Like Fogarty J, I consider these particulars would impose “a huge burden on the plaintiffs and not serve to advance the ability of CCH to defend the claim”.29
[39] A sense of perspective is also required. Most consumers do not file note their reasons when making purchasing decisions.
[40]The application is dismissed.
Alleged misleading conduct and representation
[41] Carter Holt seeks particulars “of the particular conduct or representation that is alleged to have misled or deceived the relevant party, the date, and the actions taken in reliance”. Carter Holt contends it needs this information to defend the fifth cause of action, the Fair Trading component of the claim.
[42] The same application was made to Fogarty J in Minister of Education. As with particulars for negligent misstatement, the Judge dismissed it. The Judge relied on his earlier reasoning, and said this:30
The plaintiffs’ response is that its case on reliance is quite simple. That the plaintiffs were consumers of Shadowclad and, as consumers, relied on CHH as a designer, manufacturer and supplier with specialist and expert knowledge. They argue that such reliance is inherent in the act of the plaintiffs purchasing Shadowclad and/or allowing it to be installed in school buildings. They rely upon a dictum by Asher J in the strike-out decision:
There is little that can be said about reliance at this stage, except that the plaintiffs presumably had the expectation that cladding supplied by reputable manufacturers could be relied on to be waterproof.
28 Fogarty J particulars judgment, above n 10, at [92].
29 At [92].
30 At [96]–[99] (footnotes omitted).
The FTA was enacted in New Zealand following the enactment of a similar set of provisions into the Trade Practices Act 1974 in Australia. It was intended to be a consumer-friendly legislation.
The recent Supreme Court decision of Red Eagle Corporation Ltd v Ellis recognises a clear distinction between the objective breach of s 9 of the FTA as to misleading conduct in trade, and the proof required to obtain damages under s 43. In Red Eagle, the Supreme Court found the causal link on the facts because one businessman relied upon another, both having a long association with each other, and from that relationship a good reason to rely.
The pleadings of reliance in the amended statement of claim are sufficient, given the relationship was not a direct one, CHH being the manufacturer. The application for further particulars on reliance is dismissed.
[43] Carter Holt notes Red Eagle Corporation Ltd v Ellis was not about particulars, so care must be taken with its ambit.31 I agree. However, Fogarty J’s crisp distillation of Red Eagle is undoubtedly correct. Like Fogarty J—and Asher J in relation to strike out—I consider the plaintiffs may argue they relied on Carter Holt’s expertise, standing and longevity in the construction industry. My other reasoning in relation to negligent misstatement is also applicable here.
[44]The application is dismissed.
Particulars of defects and risk characteristics
[45]Schedules 3 and 4 of the statement of claim read:
Schedule 3 – Defects
Defects which Shadowclad has or developed include the following:
Primary defects which are the underlying causes of the secondary defects. They result in moisture ingress and the inability of the cladding sheet to dry out any moisture ingress and manage moisture egress to the exterior of the cladding system: 1. Treatment – The preservative treatment is below the level required by the relevant standard and insufficient to prevent fungal rot: 2. Moisture Absorbtion – The cladding sheets are inherently prone to
absorbing moisture. In part this is because the end grains are exposed on all edges of the sheet and difficult to manage once the cladding has been
installed;
3. Moisture Transfer – absorbed moisture gets transferred to the adjacent
timber framing and building components. This occurs because the cladding sheets have been direct fixed to the framing, rather than with the allowance
31 Red Eagle Corporation Ltd v Ellis [2010] 2 NZLR 492.
of a cavity between the building walls and the cladding sheet to allow moisture absorbed into the product to escape; and 4. Flashing Corrosion – Galvanised flashing in direct contact with the cladding sheets are prone to corrosion caused either by trapped salts or the cladding preservative treatment or both. Secondary defects which result in a pathway for moisture ingress into and past the cladding sheet, and over time into the timber framing and/or other building
components without adequate management of moisture egress to the exterior from the cladding:
1. Shadowclad Sheets – The sheets themselves are susceptible to: (a) surfacecracking; (b) warping; (c) delaminating; (d) mould and fungi growth, including Stachybotrys (black mould); (e) losing tensile strength, including for bracing purposes; and (f) Under normal New Zealand environmental conditions, and early in the expected life of an exterior cladding product and/or system: (i) The cladding sheets disintegrate and delaminate; (ii) The cladding sheet faces crack; and (iii) Even if the product and/or system is installed perfectly, it fails or will fail. 2. Detailing Issues – Poor and inadequate detailing around windows and doors, including: (a) Slotted sheet at the ends of the head flashings allows water to enter in behind the sheet causing water damage to the building components where the cladding sheets have been direct fixed to the framing; and (b) The detail allows the use of unprotected galvanised flashings at the mid-wall, corner junction and/or apron flashings between two
cladding sheets and the interstorey joint which are prone to corrosion caused either by trapped salts or the cladding preservative treatment or both.
Schedule 4 – Risk Characteristics The risk characteristics of Shadowclad are those associated with the Defects, including the following tendencies, dispositions and/or susceptibilities to or towards: 1. Moisture ingress into the cladding sheets and surrounding structures. 2. Moisture damage to the cladding sheets and surrounding structures. 3. Loss of strength of the cladding and surrounding structures. 4. Rot of the cladding sheets and surrounding structures. 5. Growth of moulds and/or fungi including Stachybotrys (black mould). 6. Failure, or likely failure, even if installed perfectly.
[46]In relation to these, Carter Holt seeks particulars of:32
(a) the relevant standards, preservative treatment below the level required, and discrepancy between the required treatment level and the level in the sheets on the claim buildings in relation to each alleged primary defect;
(b) the alleged defects and risk characteristics in respect of each building (eg, if it is alleged that an allegedly defective CHH detail has been constructed, where that has occurred);
(c) the ways in which it is alleged that Shadowclad does not comply with the applicable standards….
[47] Carter Holt argues the pleadings “fall well short of the particulars required”. Doubt remains about its alleged failings in relation to its use of preservative treatment (see the third row). And, not all homes are without a cavity, so Schedule 3’s reference to direct fixing (see the moisture transfer row) is both over-inclusive and uninformative. The same is true of the schedule’s opening phrase: “Defects which Shadowclad has or developed include the following.”33 Carter Holt is anxious about ambush.
[48] The plaintiffs respond they have supplied Carter Holt with particulars of preservative treatment,34 and the pleadings are sufficient to fairly inform Carter Holt of the case against it. I agree.
[49] First, case law emphasises the undesirability of needless over-pleading, which can “obscure rather than clarify” the issues.35 The proposed particularisation risks this. The central element of the claim is that Shadowclad is inherently defective. There are only so many ways this can be expressed. Imagination is finite.
32 Likewise consequential damage, a topic addressed shortly.
33 Emphasis added.
34 Namely: “The New Zealand and Australian standards applying to the preservative stated by the Defendant as having been applied in the manufacture of the particular Shadowclad at issue at the date of manufacture. From the November 2001 Shadowclad Product Information onwards, the standards applying to treatment used in Shadowclad were specified in the Shadowclad Product Information under the headings “Preservatives” or “Application” or “Preservative Treatment”.
35 BNZ Investments Ltd v Commissioner of Inland Revenue, above n 5, at [45].
[50] Second, the plaintiffs’ case relies heavily on circumstantial evidence and inference. Reasoning of this nature is incapable of precise refinement, a point made by Kos P in Platt.36
[51] Third, Carter Holt is Shadowclad’s manufacturer, supplier and promoter; not someone more removed. Relatedly, the plaintiffs’ claim does not allege double omissions (for example, an omission by a builder compounded by an omission by the council), a pleading that can call for heightened detail.
[52] Fourth, schedules 3 and 4 sufficiently identify, when read in context, how Shadowclad does not comply with applicable standards. One example should suffice. Paragraph 34 of the statement of claim sets out clause E2 of the Building Code. Put broadly, this clause is concerned with weathertightness. Schedules 3 and 4 allege, among other things, Shadowclad admits water, risks mould and fungi growth, and rots. These phenomena are clearly inconsistent with clause E2.3.2 of the Code, which requires exterior walls prevent “penetration of water that could cause undue dampness, or damage to building elements”.
[53] My reference to “when read in context” acknowledges this aspect of the claim could be drafted a little more tightly, with explicit linkage between defects/risks and standards. However, the claim’s obvious foci are E2 of the Code, and B2, which is concerned with durability of building materials. Given the nature of product— external cladding—this is hardly surprising. Moreover, I do not doubt Carter Holt understands what confronts it. In short, I consider schedules 3 and 4 fairly inform Carter Holt of the material aspects of the plaintiffs’ claim in relation to Shadowclad’s alleged defects and risks. Again, additional detail is unnecessary and would be repetitive. Residual concerns about ambush, if any, can be met through case management.
[54]The application is dismissed.
36 Platt v Porirua City Council, above n 4, at [20].
Particulars of breaches of the duty of care
[55] Carter Holt seeks particulars of how it allegedly breached its duty of care in relation to the first cause of action, and how it allegedly failed to take reasonable care to ensure its statements were true, accurate and complete in relation to the second cause.
[56] The statement of claim identifies a series of allegedly breached standards. These include the Building Act 1991, Building Act 2004, specific clauses of the Building Code, and specific building industry authority standards. As observed, unifying themes are weathertightness and durability.
[57] Carter Holt considers the list insufficiently detailed. I consider it is for the reasons at [49]-[53], save for one exception. The list concludes with an omnibus and amorphous pleading, “Good building practices and standards”. The plaintiffs accept this aspect should be struck out as over-broad. I do that.
[58]The application is dismissed.
Particulars of damage and loss
[59] Carter Holt seeks particulars of alleged damage the plaintiffs have or will suffer in relation to each home. Carter Holt contends it should know, now, the nature, location and extent of damage for every home. It invites attention to causation, and the concomitant need for early assessment of this. Carter Holt also seeks particulars of remedial work undertaken or allegedly required, consequential loss, diminution in value, if any, and of alleged losses in relation to health and safety.
[60] Carter Holt observes it is facing a claim “for an unspecified amount based on an unknown extent of damage allegedly resulting from generic defects which have not been linked to particular buildings”. It stresses Platt’s “template” applies to every home; “it is utterly irrelevant” whether there is “one plaintiff or 1,000”. It follows each plaintiff should have an expert37 promptly inspect their home to garner this information, without which, Carter Holt may suffer prejudice.
37 The term is intended broadly.
[61] Before addressing this, I record what Carter Holt knows about each home. This is best done by reproducing a schedule the plaintiffs have provided for all properties:38
Plaintiff(s)
[redacted]
Address of the property
[redacted]
Body Corporate Number
N/A
CT Number
NA 123A/248
Legal Description
Lot 11 Deposited Plan 193859
Building ownership
I am the current owner of the building and I live there
Property Purchase Information
We acquired the property from other owners. We are subsequent owners of the building.
1(c)(v) Approximate year building constructed (the approximate date Shadowclad products used is shown separately if different).
2008
1(c)(i) The type of building
Residential – Stand-Alone House
1(c)(ii) The approximate date on which a building consent was issued
December 2007
1(c)(viii) The date on which a code compliance certificate was issued in respect of each installation of
Shadowclad
December 2011
1(c)(vi) The nature of Shadowclad products installed on the building
Groove
1(c)(vi) The extent of Shadowclad products installed on the building & 1(c)(vii) The location of the
Shadowclad products installed on the building
All of North wall All of South wall All of West wall All of East wall
1(c)(ix) The date on which the
building was acquired by the relevant allegedly represented party
2.12.2016
7(a) Shadowclad has caused damage
Yes
7(b) Shadowclad has not already caused but will cause Damage
N/A
38 Carter Holt helpfully provided its own schedule identifying the particulars sought.
7(c) The type of damage caused in relation to the property
Warping Nails popping Cracking
10(a) The heads of loss each plaintiff has or will suffer
Cost to repair / re-clad General Damages
Consequential Losses
Losses caused by harm to health and safety
10(b) Cost of remedial work if undertaken
N/A
Date joined to action
13 June 2018
[62] As will be apparent, Carter Holt knows the identity of each homeowner; when they joined the claim; their connection to the property; when they acquired it; its location; title; when the home or structure was built; when Shadowclad was installed; the nature of the building (see [15]); the species of Shadowclad on it; the location and extent of that cladding, at least in general terms; whether Shadowclad has caused damage (beyond allegedly inherent damage); if so, the type of damage; and anticipated heads of loss.
[63] True, more detail could be given of damage and loss. Ultimately, more must be given.39 However, more is not required now for three, interrelated reasons.
[64] First, unlike a typical leaky-home case, this claim is primarily about an allegedly defective product, and its replacement with cladding fit for purpose. Damage and loss must be viewed through this lens.
[65] Second, the claim is an obvious candidate for trial staging, in which there would be a preliminary trial to determine liability including, obviously, whether the plaintiffs can establish Shadowclad is inherently defective. If so, only then would there be a second trial to address quantum, hence damage and loss. This is how Fitzgerald J is trying Minister of Education. And, how Whata J is trying White v James Hardie.40
39 High Court Rules 2016, part 8, and Minister of Education v James Hardie Ltd [2018] NZHC 1481 at [112].
40 White v James Hardie New Zealand [2018] NZHC 1627, (2018) 24 PRNZ 198.
[66] White is a product liability claim involving more than 1,200 homes and five retirement villages. The plaintiffs allege James Hardie manufactures, supplies, and promotes faulty exterior cladding: Harditex, Monotex and Titan, which are on their properties. As here, the plaintiffs allege the cladding is inherently defective; James Hardie respond that poor design, construction and maintenance are the true culprits. Whata J has decided the case should have a staged trial; the first stage concerning, in short, the existence of a duty of care and whether it was breached, and the second to determine causation and quantum.
[67] I have made no staging decision yet, or decided how issues may be split, because no one had asked me to.41 However, the similarity of these cases is obvious. All of which suggests particularisation of damage and loss is premature.
[68] Third, limited inspection of the plaintiffs’ 131 homes is unlikely to yield more information about damage and loss than is already known. Intensive examination would. But, this is expensive. It would not be right to visit this cost on the plaintiffs now. I acknowledge the presence of a litigation funder, about whom more shortly. I acknowledge also the argument this should tip the balance. However, this claim is ultimately brought by homeowners about their homes, and one by its pleadings that adequately informs Carter Holt of the plaintiffs’ case—for now.
[69]The application is dismissed.
Security for costs
[70] Carter Holt seeks more than $1.1 million in security until completion of discovery. The plaintiffs agree they should provide security, but nothing like this sum. They offer $145,000. The plaintiffs’ claim is being funded by Harbour Fund III Limited Partnership, a litigation funder.42 The funder is a limited partnership in the Cayman Islands. Harbour Litigation Funding Ltd, apparently Europe’s largest
41 At the hearing, the plaintiffs said a prompt case management conference is needed.
42 Harbour Fund.
litigation funder, ultimately controls it.43 Harbour Fund is not unknown to our Courts; it is also funding the White plaintiffs.44
[71] Carter Holt submits New Zealand Courts recognise “generous security” is appropriate when commercial non-party litigation funders are involved. I agree.45 However, this principle does not divide the plaintiffs and Carter Holt. Their differences reside in cost categorisation, likely steps until completion of discovery, and likely cost of disbursements.
[72] Carter Holt contends the correct categorisation is 3C; the plaintiffs 2C. The plaintiffs emphasise the case is not as complex as Minister of Education, White, or Strathboss (the kiwifruit case mentioned at [12]). They note this case has fewer “bits”, and because of rulings in those cases, the path reasonably well-trodden to judgment. I consider these indecisive. That those cases are more complex does not mean this one is not. The claim is significant. Difficult arguments—and decisions—lie ahead. Overall, 3C is right.
[73] Carter Holt’s figure contemplates third party notices and related replies, and second counsel at case management conferences. This adds more than $42,000 on a 3C basis. While undue refinement is not contemplated—the cases emphasise judgement in this context, not mathematics—I accept the plaintiffs’ submission these should not be included.46 Costs vis-a-vis third party claims by Carter Holt are not obviously referable to the plaintiffs. And, I am not persuaded second counsel should be costed for case management. True, the case is complex. But it should not be overloaded.
[74] This produces a figure of approximately $164,000 and leads to the biggest difference between the parties: likely disbursements. The plaintiffs say these should be $70,000; Carter Holt more than the $950,000. The plaintiffs estimate electronic discovery should cost $20,000, and expert witnesses until completion of discovery,
$50,000. Carter Holt says $250,000 is appropriate for electronic discovery, and
43 White v James Hardie New Zealand [2019] NZHC 188 at [4].
44 At [4].
45 See for example, Houghton v Saunders [2013] NZHC 1824 at [125].
46 See for example, Sharp v Pillay [2017] NZHC 647 at [17].
$700,000 for expert witnesses.47 Carter Holt notes its discovery figure is lower than an estimated range provided by Deloitte (of $311,000 to $572,000) “based on current data volumes”.
[75] The plaintiffs say all this is “extravagant”. They note Carter Holt sought much lower sums from them in October 2018: $100,000 for discovery, and another $100,000 for experts. They argue Minister of Education discovery will generate “major efficiencies” given similarity of subject matter. And, they question the need for significant expert costs at this stage.
[76] In reply, Carter Holt emphasises the cost of experts based on its Minister of Education experience, and the likelihood discovery will be much more burdensome than the plaintiffs suggest. Millions of documents apparently exist in that case.
[77] Discovery in a case like this will be expensive for obvious reasons: there will be many documents, and getting, categorising and listing them will take time. Carter Holt’s experience thus far—including its familiarity with some of the material—may affect cost but is unlikely to produce the efficiencies the plaintiffs suggest, even with a sophisticated digital system. Human input is still required, so too judgement. Carter Holt’s estimate of $250,000 for discovery strikes me as about right. I frame the conclusion this way; it is one of impression.
[78] Sadly, experts tend to be expensive (one reason civil justice can lie beyond reach for many). However, I do not accept $700,000 is required for experts until completion of discovery. They should play a relatively modest role in this period and a much greater one later. The plaintiffs’ contention of $50,000 is still too low though. In a case like this, it is not difficult to quickly spend this sum. I settle on a figure similar for discovery; $200,000. This is appreciably lower than $700,000, but twice that sought by Carter Holt for experts late only last year. I reach it conscious of the involvement of a large litigation funder on the other side. And, what is at stake.
[79]This produces security of $164,000 plus $250,000 plus $200,000 totalling
$614,000; a figure roughly halfway between the parties. I do not stay the claim until
47 Other small items make up the balance.
it is paid for the same reason Whata J did not in White. There is no reason to believe it will not be.48
[80]The application is granted as above.
Costs
[81] My preliminary view is the plaintiffs should enjoy costs in relation to particulars, with costs lying where they fall in relation to security. If the parties disagree they may submit memoranda of not more than five pages each:
(a)The plaintiffs by 8 April 2019.
(b)Carter Holt by 15 April 2019.
Case management conference
[82] The Registrar is to arrange a case management conference before me within the next six weeks.
……………………………..
Downs J
48 White v James Hardie New Zealand, above n 43, at [22].
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