Red Stag Timber Limited v Juken New Zealand Limited
[2024] NZHC 1151
•10 May 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2017-404-002753
[2024] NZHC 1151
BETWEEN RED STAG TIMBER LIMITED
Plaintiff
AND
JUKEN NEW ZEALAND LIMITED
Defendant
Hearing: 12–15, 19–23, 26–28 February 2024
5–6, 8, 11–12, 15, 18–19 March 2024
Appearances:
N Flanagan, E Rutherford, R Kendall and A Tapsell for Plaintiff
A R Galbraith KC, C L Bryant, G Luen, C Harnett and J van Riele for Defendant
Judgment:
10 May 2024
JUDGMENT OF VENNING J
This judgment was delivered by me on 10 May 2024 at 2.15 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors: Meredith Connell, Auckland
Hesketh Henry, Auckland Counsel: A R Galbraith KC, Auckland
RED STAG TIMBER LTD v JUKEN NEW ZEALAND LTD [2024] NZHC 1151 [10 May 2024]
TABLE OF CONTENTS
Introduction [1]
Issues [2]
J-Frame [4]
General background to the regulatory environment [5]
Acceptable Solutions (s 19(1)(b)) [9]
Verification methods (s 19(1)(ba)) [10]
Product certification (s 19(1)(d)) [11]
CodeMark [12]
Alternative solutions [13]
BRANZ Appraisal [14]
Leaky building crisis [15]
TimberSaver [17]
Chronology [18]
Red Stag’s claim and its pleaded representations [19]
Evidence [31]
Limitation [46]
The relevant provisions of cl B2 — Durability [76] The parties’ cases on J-Frame’s compliance with the Code and standards [83] The position prior to December 2012 [88]
The effects of the amendments to NZS 3640, AS/NZS 1604.4 and B2/AS1 [116]
What is the meaning of H1.2? [148]
Complete penetration [163]
Envelope treatment [199]
Efficacy testing [213]
AsureQuality testing [217]
The law [245]
The representations in issue [270]
J-Frame was treated to H1.2 [295]
J-Frame met the requirements of the relevant standards [298]
J-Frame was an acceptable solution [304]
The minor variation issue [308]
J-Frame had complete sapwood penetration [316]
Body Corporate 366567 [323]
Secondary meanings [327]
The Masterspec issue [336]
Corrective disclosure [340]
Quantum [349]
Result — damages [422]
Result [428]
Costs [429]
Introduction
[1] Red Stag Timber Limited (Red Stag) and Juken New Zealand Limited (JNL) are competitors in the timber framing market in New Zealand. Red Stag says that JNL has competed unfairly in that market since JNL’s introduction of its product J-Frame in 2007. Red Stag says JNL made a number of false representations about J-Frame, including how it was treated, that it complied with relevant standards and that it was an acceptable solution under the Building Code. Red Stag says that if JNL had not falsely represented J-Frame, JNL would not have achieved the market share for the product that it did, and that Red Stag would have picked up most of JNL’s market share. Red Stag seeks to invoke the Fair Trading Act 1986 (FTA) to recover the profits from the sales it says it lost to JNL because of JNL’s false representations about J- Frame.
Issues
[2]Four principal issues arise for determination in this case:
(a)What were the applicable Building Code requirements and treatment standards for JNL’s J-Frame at the relevant time (post-December 2012 in particular)?
(b)Did J-Frame meet the applicable Building Code requirements and treatment standards?
(c)Did JNL’s marketing of J-Frame (including its labelling and branding) amount to misrepresentation(s) in breach of the provisions of the FTA?
(d)If JNL’s marketing of J-Frame breached the FTA what, if any, losses did Red Stag suffer as a consequence?
[3] There are a number of subsidiary issues but the above are the principal issues raised by Red Stag’s claim. Before addressing the principal issues I set out a number of general background features of the case, Red Stag’s pleadings and also identify the principal witnesses the parties called to support their cases.
J-Frame
[4] J-Frame is a structural Laminated Veneer Lumber (LVL) product made from radiata pine. During its manufacture, veneers of the required grade are stacked with a resin. The stacks are hot pressed at high temperatures and under high pressure. The finished product is very suitable for use as framing as the stiffness and strength of the LVL is consistent across the framing. J-Frame is an alternative framing solution to both solid timber and structural steel.
General background to the regulatory environment
[5] Prior to the Building Act 1991, the design and construction of buildings was regulated by local councils under a system of by-laws. At the time the by-laws were typically based on New Zealand Standards Specifications. The Building Act 1991 established building regulations which contained the New Zealand Building Code (Code).1 The Code’s use became mandatory from 1 January 1993. The Building Act 2004 (the Act) replaced the Building Act 1991. The Code remained in force under the Act.
[6] The Code provides for a number of technical clauses. Each clause sets out its objective, the functional requirements to meet the objective and the performance criteria to satisfy the objective and functional requirements. For present purposes the relevant clauses of the Code that apply to timber framing, including Red Stag’s solid wood product and JNL’s J-Frame, are:
B — Stability
B1 — Structure; and B2 — Durability.
[7] JNL says J-Frame complies with the structure and durability requirements of B1 and B2. In this proceeding, B1 — Structure is not in issue. The focus is on J- Frame’s compliance with the requirements of B2 — Durability. For B2 — Durability, the objective and functional requirements are:
1 Building Regulations 1992.
Objective
B2.1 The objective of this provision is to ensure that a building will throughout its life continue to satisfy the other objectives of this code.
Functional requirement
B2.2 Building materials, components and construction methods shall be sufficiently durable to ensure that the building, without reconstruction or major renovation, satisfies the other functional requirements of this code throughout the life of the building.
[8] Compliance with the Code’s requirements for the relevant clauses can be demonstrated using various pathways. Section 19 of the Act sets out a number of means of compliance with the Code which must be accepted by a Building Consent Authority (BCA). As relevant, it provides:
19 How compliance with building code is established
(1)A building consent authority must accept any or all of the following as establishing compliance with the building code:
(a)compliance with regulations referred to in section 20:
(b)compliance with an acceptable solution:
(ba) compliance with a verification method:
(c)a determination to that effect made by the chief executive under subpart 1 of Part 3:2
…
(d)a current registered product certificate, if every relevant condition in that product certificate is met:
…
Acceptable Solutions (s 19(1)(b))
[9] Individual standards are identified by reference number, for example NZS 3602, which provided standards for timber and wood-based products to be used in buildings.3 Compliance with a particular standard is often specified as an acceptable solution. Acceptable solutions (and verification methods) are usually referred to by their Code clauses and unique identification numbers. For example, the April 2004 version of B2/AS1 provided that Part 1 of NZS 3602 was an acceptable solution for
2 The Code is administered by the Ministry of Business, Innovation and Employment (MBIE).
3 Some standards apply to both Australia and New Zealand, for example AS/NZS 1604.4.
meeting the durability requirement of the Code for timber building elements, and that NZS 3604 was an acceptable solution for meeting the durability requirements of buildings within its scope.4
Verification methods (s 19(1)(ba))
[10] Verification methods are tests or calculation methods that prescribe one way to comply with the Code. The central regulator (currently Ministry of Business, Innovation and Employment (MBIE)) uses them as “deemed to comply” solutions. Like acceptable solutions, verification methods must be accepted by a BCA as demonstrating compliance with the Code.
Product certification (s 19(1)(d))
[11] The product certification scheme was established by the Act and is administered by MBIE. The current certification scheme is known as CodeMark. If a building product or system is certified under CodeMark, it must also be accepted as complying with the Code when used as specified.
CodeMark
[12] JNL obtained product certification for J-Frame and J-Lintels under a CodeMark certificate on 18 June 2015. The product certificate confirmed compliance with the requirements for durability on the basis of treatment in accordance with AS/NZS 1604.4. Further revisions to JNL’s CodeMark certificate followed in February 2016 and September 2017. The current product certificate for J-Frame was issued on 2 March 2022.
Alternative solutions
[13] If a building element, such as timber framing, does not meet the requirements to be an acceptable solution, compliance can, in some instances, be achieved by way of an alternative solution. An alternative solution is, in this case, a product which differs in whole or part from an acceptable solution, but which demonstrates
4 B2/AS1 was amended in April 2004, April 2011 and then February 2014. B1/AS1 was amended in August 2011.
compliance with the performance requirements of the Code. A BCA is not obliged to accept an alternative solution. Commonly, the information to support a claim of code compliance for the alternative solution is provided by the manufacturer or supplier supported by a third party review, such as a BRANZ Appraisal.5
BRANZ Appraisal
[14] A BRANZ Appraisal is an independent evaluation of a building product to assess its fitness for purpose and whether or not it meets the Code’s performance requirements. JNL obtained its first BRANZ Appraisal for J-Frame in March 2009. The BRANZ Appraisal for J-Frame was subsequently updated on a number of occasions.
Leaky building crisis
[15] In the late 1990s and early 2000s, particularly prior to changes to the Code under the Act, construction methods and the products used in New Zealand led to what is referred to colloquially as the leaky building crisis. A number of factors, including poor design, construction methods, and defective building products contributed to the crisis. Apart from issues raised by certain types of cladding, a particular issue had been the change to NZS 3602 in 1995 to allow kiln dried untreated radiata pine which was prone to rot when exposed to moisture.
[16] The leaky building crisis led to changes to a number of standards, particularly to NZS 3602 and NZS 3640. NZS 3640:2003 introduced a new hazard class for New Zealand conditions: H1.2.6 The leaky building crisis also led to an awareness in the public generally and the timber industry in particular, of the need for timber used in building elements (including framing) to be treated to meet the standards and the requirements of the Code.
5 BRANZ is the Building Research Association of New Zealand.
6 Generally, the year the standard was published or amended is not referred to throughout the judgment. The exception to that practice is in the chronology or where, as in this instance, the year of the amendment is relevant.
TimberSaver
[17] Red Stag’s witnesses referred to the TimberSaver issue as an example of the market’s concern as to the suitability of timber products following the experience of the leaky building crisis. PlaceMakers introduced TimberSaver to the market shortly after NZS 3640 was published in December 2003. PlaceMakers developed TimberSaver as a kiln dried radiata pine sawn timber product. It was treated with a preservative manufactured and supplied by Osmose New Zealand Ltd (Osmose). A boron treatment was sprayed on the outer timber surfaces to achieve an envelope penetration pattern to a depth of 3 mm. The treatment did not meet the complete sapwood penetration requirements under NZS 3640 for timber to be used in hazard class H1.2.
[18] TimberSaver was stamped “TimberSaver boron” and was coloured orange rather than pink (the colour used for boron treated timber). It was marketed by PlaceMakers as T1.2. That led to confusion in the market. Some in the market considered T1.2 was the same as, or was actually a reference to, H1.2. PlaceMakers ultimately accepted it had breached the FTA by mislabelling TimberSaver. It withdrew TimberSaver from the market in 2005.
Chronology
October 2007–
2008
The first sale of J-Frame in the market.
From 2008 JNL labels and or brands J-Frame H1.2 and dyes it pink.
5 March 2009 First BRANZ Appraisal. The Appraisal is of an acceptable solution when LVL framing is used in accordance with NZS 3602 Tables 1C and 1E and an alternative solution when LVL is used in accordance with NZS 3602 Table 1D. February 2011 NZS 3604:2011 is published. 4 April 2011 B2/AS1 Amendment 7 is published.
The following standards form an acceptable solution for timber building elements (as relevant):
(b) NZS 3640 and Part 1 NZS 3602 for radiata pine as amended
(c) NZS 3604 with reference to NZS 3602 (and NZS 3640) as amended.
31 January 2012 The BRANZ Appraisal is updated. The Appraisal is of an acceptable solution when J-Frame is used in accordance with NZS 3604, s 2.3.9, and an alternative solution when used as an alternative to treatment level H1.2 or H3.1 radiata pine solid timber. 26 November
2012
AS/NZS 1604.4:2012 is published. 21 December
2012
NZS 3640:2003 Amendment 5 is published. As at December 2012 AS/NZS 1604.4:2012; NZS 3602:2003; NZS 3604:2011 and
NZS 3640:2003 Amendment 5 are the operative standards.
3 February 2014 AsureQuality TTP certificate issued for the JNL treatment plant for NZS 3640 and AS/NZS 1604.4 for “boron H1.2”. 14 February 2014 B2/AS1 Amendment 8 is published. The following standards form an AS for timber building elements:
(a) NZS 3602 (as modified)
(b) NZS 3640 (as modified)
(c) NZS 3604 with reference to NZS 3602 (and NZS 3640) as modified.
It provides for a six month transition period.
4 June 2014 The BRANZ Appraisal is updated. The Appraisal is of an acceptable solution when LVL is used in accordance with NZS 3603 and NZS 3604. It is of an alternative solution when used as an alternative to treatment level H3.1 radiata pine solid timber. June/July 2014 Carter Holt Harvey (CHH) tests J-Frame samples. 8 August 2014 CHH sends JNL a letter querying the use of the H1.2 label and treatment of J-Frame. 14 August 2014 The six-month transition period for B2/AS1 Amendment 8
ends. It becomes operative.
17–18 September
2014
Wood Innovations Conference at Rotorua. CHH and Red Stag attend. Ms Drysdale presents a paper on proposed changes to timber treatment standards. She says veneer and envelope treatments in AS/NZS 1604.4 are not correct for H1.2. 4 November 2014 Red Stag carries out spot testing of J-Frame. 6 November 2014 Mr McConnochie of CHH sends a complaint letter to JNL. 17 November
2014
Red Stag sends samples of J-Frame to Independent Verification Services (IVS) for testing. 24 November
2014
JNL responds to CHH.
The IVS test results are circulated amongst Red Stag management. Mid-December 2014 Red Stag notifies members of the market that J-Frame is not fully penetrated and does not comply with NZS 3640 and/or B2/AS1. February 2015 Scion commences a J-Frame accelerated decay trial. 2 April 2015 Red Stag complains to the Commerce Commission re J- Frame marketing and branding. 18 June 2015 CodeMark certificate issued for J-Frame. The certificate states J-Frame is produced and supplied treated in accordance with AS/NZS 1604.4:2012 para 1.9. Between July 2015 and
February 2016
Red Stag raises its concerns about J-Frame with MBIE. 27 August 2015 MBIE provides an opinion which confirms:
LVL can be branded as H1.2 compliant under AS/NZS 1604.4 providing the LVL:
1. is treated and analysed to full sapwood ‘penetration’ (assumption 1);
2. uses boron compounds to NZS 3640 “retention” levels (assumption 2);
3. demonstrates comparable efficacy performance with H1.2 solid timber (assumption 3); and
4. is treated in NZ at a registered treatment plant and complies with agreed protocols enabling approved, independent third party verification and inspection (Assumption 4).
28 August 2015 AsureQuality TTP Certificate is reissued. The scope
includes AS/NZS 1604.4:2012 for “boron treated to meet H 1.2”.
31 August 2015 The BRANZ Appraisal is updated. LVL is appraised as an alternative to radiata pine solid timber, treated such that it is suitable for use where Hazard Class H1.2 applies. 1 December 2015 MBIE determination 2015/079. J-Frame treated with CCA to H3.2 is an acceptable solution via NZS 3602 and NZS 3604:2011. 9 June 2017 The Commerce Commission issues a compliance advice letter to JNL. It refers to possible breaches of ss 10 and 13(a) of the FTA. 15 June 2017 JNL notified customers of the Commission’s advice with its comments. 16 June 2017 Red Stag circulated the Commerce Commission advice with its interpretation.
1 September 2017 JNL changed its treatment to a proprietary standard which includes a boron glueline additive in its commercial
production so that boron is incorporated into the adhesive resin between veneers.
J-Frame’s CodeMark is revised and refers to the proprietary treatment standard.
7 September 2017 BRANZ Appraisal is updated to include the change in J-
Frame’s treatment standard. It confirms LVL has been
appraised as an alternative to radiata pine solid timber, treated such that it is suitable for use where Hazard Class H1.2 applies.
17 November
2017
Red Stag commences these proceedings.
Red Stag’s claim and its pleaded representations
[19] Red Stag says JNL misleadingly labelled and marketed J-Frame as H1.2 and compliant with relevant standards for commercial advantage and to its, Red Stag’s, detriment.
[20] Red Stag says JNL’s misrepresentations fall into two broad categories: promotional representations and identification representations. Red Stag says JNL engaged in the following promotional activities:
(a)publishing and supplying brochures, product information sheets, BRANZ Appraisals, and other promotional materials for distribution in the market;
(b)providing information to Construction Information Ltd for incorporation into the Masterspec website for J-Frame at align="left">(c)publishing and maintaining a website;
(d)publishing and supplying advertisements and advertorials on the internet, in magazines and/or in television commercials;
(e)distributing media statements, letters and/or emails to customers;
(f)meetings with customers; and
(g) marketing directly to customers through JNL’s employees and agents (“promotional activities”).
[21] Relevantly, it is said that in the course of its promotional activities, JNL represented that J-Frame:
(a)was treated to H1.2; and/or;
(b)met the requirements of and/or complied with NZS 3640, NZS 3602,
NZS 3604; and/or AS/NZS 1604.4; and/or
(c)was an acceptable solution; and/or
(d)had complete sapwood penetration.
[22] Further, in relation to the identification and labelling of J-Frame (the identification representations) Red Stag says that JNL marketed J-Frame in New Zealand with an H1.2 label until September 2017 and until around 2014, dyed it pink. At no stage was J-Frame marketed or sold with an “E” or envelope penetration label, with the accompanying warning that remedial treatment must be applied to fresh-cut surfaces, as was required.
[23] By labelling and colouring J-Frame in that way (and in failing to label it with an “E” label and an accompanying warning), Red Stag says JNL represented J-Frame:
(a)was treated to H1.2; and/or
(b)complied with NZS 3640 and/or AS/NZS 1604.4; and/or
(c)complied with acceptable solution B2/AS1; and/or
(d)had complete sapwood penetration; and/or
(e)did not have an envelope penetration pattern.
[24] JNL accepts that, in general, it engaged in the promotional activities that Red Stag alleges.
[25] In relation to the particular promotional and identification representations Red Stag relies on, JNL says H1.2 was a hazard class, not a treatment specification, and at all material times J-Frame has been treated with boron for use where hazard class H1.2 applied. NZS 3640 confirmed that non-fixed waterborne preservatives, including boron, are suitable for use in hazard class H1.2 conditions.
[26] JNL says that, until 1 September 2017, J-Frame was treated with boron in accordance with cl 1.9 of AS/NZS 1604.4 to meet or exceed the penetration requirements in that standard and the retention requirements of NZS 3640. J-Frame was labelled in accordance with the requirements of AS/NZS 1604.4 and, until 2014, it was also dyed pink in accordance with cl 105.1 of NZS 3602. JNL accepts J-Frame did not carry an envelope or “E” warning label. It says such labelling was not required.
[27] JNL relies on its BRANZ Appraisals and code compliance certificates. JNL has held BRANZ Appraisals for J-Frame since March 2009. From 18 June 2015, JNL promoted CodeMark as the compliance pathway for J-Frame. The BRANZ Appraisal was amended on 31 August 2015 to reflect the CodeMark.
[28] Since 1 September 2017, J-Frame has been treated and labelled in accordance with a proprietary treatment standard. Again, the BRANZ Appraisal was amended on 7 September 2017 to reflect that change.
[29] Mr Flanagan confirmed that, while Red Stag accepts that J-Frame has been correctly labelled from 1 September 2017, Red Stag maintains its claim for losses from December 2012 through to 2020 as, until July 2019, J-Frame was still being marketed incorrectly and, in any event, the incorrect perception in the market place carried on after the representations ceased.
[30] JNL accepts that from after 1 September 2017, the Masterspec.co.nz website operated by Construction Information Ltd referred to an out-of-date CodeMark certificate (citing treatment to AS/NZS 1604.4 rather than JNL’s proprietary treatment standard). Red Stag made a complaint to the Commerce Commission in February 2019 about the website. The Commission drew the issue to JNL’s attention on or about 16 July 2019. At JNL’s request, the incorrect information was removed from the website on 23 July 2019. The website was updated to refer to the current CodeMark certificate.
Evidence
[31] Red Stag and JNL each called a number of witnesses. The witnesses fell into three broad categories:
(a)Red Stag and JNL management;
(b)participants and customers in the timber framing market; and
(c)experts.
[32] The experts fell into two principal categories. First, those with particular experience in the timber industry, (including a background in developing and interpretating the relevant standards and testing for compliance) and secondly, economic experts.
[33] Mr Verry, the Chief Executive Officer of Red Stag, gave evidence regarding the development of Red Stag’s business from 2003 to 2023. He described the expansion of Red Stag in the timber framing market during that time and confirmed its capacity to pick up the sales of framing timber that had gone to JNL in the event that J-Frame was no longer in the market between 2012 and 2020. Mr Verry did not consider other sawmills had the capacity to take up the slack. He considered Red Stag was in the best position to do so. Mr Verry also gave evidence as to his view that JNL was not in compliance with relevant standards and the steps he took to bring that to the attention of relevant participants in the timber framing market and regulators.
Apart from his communications with members of the industry, he was also responsible for laying complaints with the Commerce Commission.
[34] Mr Lindsay, Operations Manager of Red Stag, gave evidence primarily in response to the evidence of an expert accountant called by JNL, Shaun Hayward, as to the costs associated with the additional capacity required to pick up the JNL sales.
[35] Mr Sandford is a consultant with a close relationship to Red Stag. He has knowledge of the sawmilling market generally. He gave evidence supportive of Mr Verry’s views about the treatment of J-Frame and of the limited capacity of sawmills other than Red Stag to take up JNL’s sales in the event J-Frame was not in the market.
[36] Red Stag also called evidence from Jeanette Drysdale, a consultant in the timber industry. Ms Drysdale has served on standards committees for both NZS 3640 and NZS 3602. For a time, she was chair of the NZS 3640 Committee. She gave her opinion of the interpretation of the applicable standards.
[37] Philip O’Sullivan is a former director of and now consultant with Prendos New Zealand Ltd (Prendos). Prendos and the former entity, Prendos Ltd, became recognised as leading consultants to the building industry and homeowners during the course of the leaky building crisis. Mr O’Sullivan has an engineering degree. He gave his opinion on the influence of the leaky building crisis on the market and participants’ approaches to the standards. He also provided his interpretation of the standards.
[38] Red Stag also called evidence from a number of market participants: Ian McGregor, a consultant and former sales manager of Fletchers, Carters and ITM; Graeme McConnochie, who held a position as the National Compliance Manager with CHH; Ronald (Buster) Young, a National Timber Manager from Fletchers and PlaceMakers; Graeme Wallace, who had held positions with PlaceMakers and Mitre 10; Mr Bickerton, an ITM store owner and Blake Bibbie who worked at PlaceMakers. In addition, Red Stag called evidence from Stephen Thurman, an architect, as to his reliance on timber specifications when preparing plans and lodging consent applications with BCAs.
[39] Finally, Red Stag called Mr Mellsop and Mr Murray to give expert economic and accounting evidence as to the quantum of Red Stag’s losses.
[40] JNL called evidence from Paul Jordan, JNL’s Engineering Manager; Brendan Smith, its Compliance Manager; and Gordon Wilmshurst, JNL’s General Manager of Sales.
[41] In addition, JNL called evidence from a number of experts as to the interpretation of the standards: Dr Greaves, a wood products consultant and formerly a member of the relevant standards committees; John Gardiner, an engineer formerly employed at MBIE as Manager, Determinations and Assurance; Simon Dorries, the CEO of Responsible Wood and former General Manager of the Engineered Wood Products Association of Australasia; and Kevin Hing, a former director of the New Zealand Timber Industry Foundation (NZTIF).
[42] Dr Joseph, the Chemistry Technical Manager at AsureQuality, gave evidence about his laboratory’s testing for the penetration of preservative in J-Frame. JNL also called Dr Tripti Singh, a specialist wood protection scientist, who gave evidence about an interlaboratory test for the penetration of preservative and also about decay trials of J-Frame. Michael Powell gave evidence as to the dispersion of boron through timber after treatment.
[43] JNL then called evidence from a number of building industry participants who used JNL and were supporters of it as a product: Christopher Cook of Skyline; Paul Robertson, formerly of Truss Tech Ltd; and David Buckthought, a director of Capital Precut Solutions Ltd (Capital Precut).
[44] Paul McCreedy, a forestry consultant, gave evidence about the capacity of sawmills other than Red Stag to take up the slack and compete for the JNL sales in the event that J-Frame was no longer in the market.
[45] Finally, JNL called economic evidence from Dr Geoffrey Edwards and accounting evidence from Shaun Hayward in response to the economic theory underlying Red Stag’s assessment of its damages.
Limitation
[46] A preliminary point arises as to whether part of Red Stag’s claim is out of time. Red Stag issued these proceedings on 17 November 2017. JNL pleads an affirmative limitation defence. It says Red Stag’s claim for losses prior to 18 November 2014 is barred by the operation of s 43A of the FTA.
[47] JNL has already had some success on the issue of limitation. During the interlocutory stages of this proceeding, JNL applied to strike out aspects of Red Stag’s claim against it which relied on representations and/or conduct prior to December 2012. In its decision Juken New Zealand Ltd v Red Stag Timber Ltd, the Court of Appeal confirmed that those parts of Red Stag’s claim that sought relief in respect of representations and/or conduct by JNL prior to December 2012, and all claims (or any part thereof) based upon or relying on such allegations, were struck out as time- barred.7 JNL now seeks to extend the time-barred claims period to 18 November 2014.
[48]Section 43A of the FTA provides:
43A Application for order under section 43
A person may apply to a court or the Disputes Tribunal for an order under section 43 at any time within 3 years after the date on which the loss or damage, or the likelihood of loss or damage, was discovered or ought reasonably to have been discovered.
[49] The leading case on limitation in the context of proceedings under the FTA is Commerce Commission v Carter Holt Harvey.8 In that case the Supreme Court ultimately dismissed CHH’s application to strike out the proceeding. The Court identified three issues:
(a)Whose knowledge is relevant to the inquiry into discoverability?
(b)What does the expression “likelihood of loss or damage” mean?
7 Juken New Zealand Ltd v Red Stag Timber Ltd [2023] NZCA 242. The Supreme Court declined leave to appeal in Red Stag Timber Ltd v Juken New Zealand Ltd [2023] NZSC 138.
8 Commerce Commission v Carter Holt Harvey Ltd [2008] 1 NZLR 387 (HC); Commerce Commission v Carter Holt Harvey Ltd [2009] 3 NZLR 573 (CA); and Commerce Commission v Carter Holt Harvey Ltd [2009] NZSC 120, [2010] 1 NZLR 379 [Supreme Court decision].
(c)What degree of awareness of the loss or damage does one need before being found to have discovered it and how likely must the suffering of loss or damage be before it can be said to have been discovered?
[50] The first consideration is not in issue in the present case. Clearly the relevant knowledge is that of Red Stag. On the second issue, Tipping J, delivering the decision of the plurality, agreed with Asher J in the High Court that the phrase, “likelihood of loss or damage” meant the probability of a loss yet to occur.9 Reference to likelihood is forward looking.
[51] The most relevant considerations in the present case are the degree of awareness of the loss or damage required and how likely must the loss be before it can be said to be discovered? In Carter Holt Harvey, Tipping J held that an applicant discovered loss or damage when he or she acquired knowledge of it.10 If there was any doubt about actual awareness, the inquiry moved to whether the plaintiff ought reasonably to have been aware of it. As to the extent of knowledge of loss, Tipping J considered there was merit in adopting the same standard of likelihood for past loss as for future loss.11 Time should not start running when past loss was a mere possibility, nor should the commencement of the three year period be deferred until past loss was a near certainty.12 The question to be answered was, when did the applicant become aware that it was more probable than not that it had suffered loss as a result of the contravention of the Act?
[52] To succeed with its strike-out in Carter Holt Harvey, CHH had to show that the Commission knew or ought reasonably to have known on or before the date three years prior to the issue of the proceedings that some person or persons were likely to have suffered loss or damage as a result of a probable contravention of the Act by CHH. Ultimately, the Supreme Court considered that the evidence did not establish the Commission ought to have known that a contravention was more probable than not before the limitation date. Relevantly, the Court accepted that the Commission
9 Supreme Court decision, above n 8, at [25].
10 At [29].
11 At [30].
12 At [31].
required more information to ascertain whether CHH was engaging in contravening conduct.
[53] In the present, case JNL has to show that Red Stag knew or ought reasonably to have known, on or before 18 November 2014, that it was likely (more probable than not) to have suffered loss as a result of a contravention of the FTA by JNL.
[54] In support of its limitation argument, JNL pleads the following factors in its defence to the eighth amended statement of claim (8ASOC):
(a)J-Frame’s branding and marketing material was in the public domain and was known to Red Stag, a competitor;
(b)on 8 August 2014, Carters (a division of CHH) wrote to JNL raising the issue subsequently complained of by Red Stag in this proceeding regarding the branding of J-Frame as H1.2, compliance with treatment standards, and the extent of the sapwood penetration;
(c)on a date unknown to JNL, Red Stag was informed by CHH of its concerns relating to J-Frame;
(d)on or before 4 November 2014, Red Stag performed colorimetric penetration tests on six samples of J-Frame and arranged for the samples to be tested by IVS; and
(e)on or about 6 November 2014, CHH wrote to JNL raising the same concerns about the treatment branding and marketing of J-Frame made in this proceeding and referred to testing of the J-Frame product.
[55] Further, JNL says that prior to 18 November 2014, Red Stag had identified that JNL was undercutting its prices.
[56] Although the last issue is denied by Red Stag in its reply, the evidence is clear that, prior to November 2014, Red Stag was aware JNL was undercutting its prices. In an internal monthly report for October 2014, Mr Rigter of Red Stag expressly
referred to the fact that J-Frame was undercutting Red Stag’s price at the time. Red Stag must have known at that time it was losing sales to JNL. So, it is clear enough that before November 2014, Red Stag knew it was suffering loss as a result of JNL’s sales of J-Frame. The issue is when it knew or reasonably ought to have known (on its case) it was likely (more probable than not) J-Frame did not meet the requisite standards and thus JNL’s marketing of it as complying with the Code in that way was in breach of the FTA. The relevant date is 18 November 2014.
[57] In submission on the limitation point Mr Galbraith KC referred to the earlier interlocutory decision of Gault J,13 and submitted that the question was whether Red Stag knew or ought reasonably to have known (before 18 November 2014) that J- Frame was not treated with a glueline treatment such as Azotek and that the standards arguably required that. While Mr Galbraith made that submission, the particular point was not directly pleaded as a particular in support of the limitation defence.
[58] It appears from an internal email of 11 March 2014, that Red Stag was aware by that time that LVL treated using a glueline method might be an acceptable solution following the amendments to NZS 3640 in December 2012. But even if Red Stag was aware of that, and that J-Frame was not treated with a glueline treatment, that does not address the issue of whether J-Frame was otherwise able to meet the requirements of the Code or otherwise complied with the relevant standards.
[59] Red Stag’s claim in the initial statement of claim for the period after December 2012 was pitched at a general level. While it did refer to the glueline method for the treatment of J-Frame, it also alleged J-Frame was treated to an envelope penetration pattern and it went on to allege that J-Frame did not comply with the requirements of cl B2 either:
(a)by complying with an acceptable solution; or
(b)by relying on an alternative solution.
13 Red Stag Timber Ltd v Juken New Zealand Ltd [2021] NZHC 2662.
[60] Red Stag then alleged JNL had made a number of representations in trade as to the treatment of J-Frame. It pleaded that:
(a)JNL’s conduct and representations were likely to mislead and deceive purchasers to believe J-Frame:
(i)met or exceeded the requirements of NZS 3640; and/or
(ii)was an acceptable solution; and/or
(b)JNL’s conduct would have been likely to mislead and deceive purchasers to believe J-Frame met or exceeded the requirements of AS/NZS 1604.4; and/or
(c)JNL’s conduct would have been likely to cause purchasers to believe J-
Frame was not envelope treated; and
(d)overall, JNL’s conduct would have been likely to mislead and deceive purchasers to believe that J-Frame complied with the Code.
Similar pleadings followed for the subsequent time periods.
[61] I do not consider that Red Stag’s initial pleading in the claim it brought in November 2017, for the period after December 2012, was restricted to the complaint that JNL was misrepresenting J-Frame as it was not glueline treated.
[62] Returning to the particulars of the pleaded limitation defence, while in August 2014 Carters wrote to JNL querying its compliance with the relevant standards, there is no evidence Red Stag was aware of that letter (or of JNL’s later response).
[63] While accepting CHH also wrote to JNL on around 6 November expressing concerns about the treatment of J-Frame and JNL’s representations about J-Frame, Red Stag says it was not aware of that prior to 18 November 2014. While it is now aware that on or around 24 November 2014 JNL responded to CHH’s letter, it obviously could not have been aware of that prior to 18 November 2014.
[64] Red Stag says that it was only in early November 2014 that CHH informally advised it of its concerns which, in turn, triggered Red Stag’s interest. That led to Red Stag conducting its own in-house spot tests on six samples of J-Frame before it subsequently arranged for IVS to test samples of J-Frame. Those test results became available in a report on 24 November 2014.
[65] The principal evidence on the issue of limitation was from Mr Verry of Red Stag and Mr McConnochie of CHH. Both were cross-examined about their knowledge of whether J-Frame complied at the relevant time. Mr McConnochie accepted that CHH had started testing J-Frame on 14 June 2014 and queried JNL’s use of the H1.2 label in August 2014, but noted that it only directly complained to JNL on 6 November 2014. Mr McConnochie did not recall having any communication with Red Stag concerning CHH’s communications with JNL. He did accept it was possible that he was the person who alerted Red Stag to his and CHH’s concerns at some time, but could not recall when that may have been.
[66] Mr Verry accepted that before these proceedings were issued in November 2017, he had made some inquiries to ascertain when Red Stag first became aware of the issue. Initially there was a suggestion the first occasion Red Stag was alerted to the fact there may have been an issue with how J-Frame was treated was at a Timber Preservation conference on 17 and 18 September 2014. Ms Drysdale had made a presentation at the conference and representatives of both CHH and Red Stag were present. However, the slides from Ms Drysdale’s presentation focus on the differences between AS/NZS 1604.4 and NZS 3640. There is no evidence J-Frame was directly discussed at the conference or that the Red Stag attendees were made aware of the issue now relied on by Red Stag.
[67] There was also reference to a Timber Reference Group meeting held in Wellington in September 2014 as the possible source of information regarding the issue. Mr Roberts of Red Stag attended the conference as did representatives of CHH.
[68] Mr Verry accepted that at some stage “the guys got wind that it [J-Frame] wasn’t fully penetrated and it’s hard to test it and that’s what we started to do in 2014”, but he denied that CHH or Mr McConnochie had alerted him to the particular issue or
that Mr McConnichie had shared CHH’s test results of J-Frame with Red Stag. Mr Verry’s evidence that he only became aware of the possible issues with J-Frame’s compliance in early November 2014 is consistent with his and Red Stag’s actions thereafter. Given Mr Verry’s enthusiastic pursuit of the issue, and Red Stag’s plain economic interest, it is more likely than not that once the issue came to his (Red Stag’s) attention, he would have acted promptly to investigate the issue further.
[69] Red Stag’s case is that it was only after it received the results from the testing that it had commissioned on 17 November 2014 that it was able to conclude J-Frame was not compliant.
[70] On the evidence, JNL cannot satisfy the Court that CHH shared its test results with Red Stag. The evidence establishes that Red Stag was, at some time, (likely late October/early November 2014), alerted to the fact there may have been an issue with the treatment of J-Frame. As a result, on 4 November 2014 Red Stag’s treatment co- ordinator, Mr Clark, carried out spot tests on J-Frame. In his email of 5 November to Mr Roberts and Mr Lindsay he confirmed he had asked IVS to quote on the boron retention issue. The IVS testing was not carried out until 17 November 2014. The report of those tests was not signed off by IVS and circulated amongst Red Stag management until 24 November 2014. The results of those tests supported Red Stag’s concern (on its case) that J-Frame was non-compliant. Red Stag then undertook further testing which Mr Verry also referred to.
[71] As the evidence stands, the Court is not able to say, on the balance of probabilities, that Red Stag was aware prior to 18 November 2014 of the likelihood that J-Frame was being falsely marketed by JNL as meeting treatment standards when it did not. At the highest, Red Stag was aware there may have been an issue with the treatment of J-Frame and consequently, JNL’s marketing of it. But it was reasonable for Red Stag to have samples of J-Frame tested by an independent laboratory to satisfy itself that that was the case before it could be said that it ought to have known it was more likely than not JNL was contravening the FTA. It was only after the test results were received on 24 November 2014 that it can be said Red Stag ought reasonably to have known that (on its case), it was likely JNL was misrepresenting J-Frame which was causing it, Red Stag, loss.
[72] While the facts of JNL’s marketing of J-Frame and the competitiveness of J- Frame in the market (and so the potential for it to cause loss to Red Stag) were readily apparent before 18 November 2014, on Red Stag’s case, the loss claimed arises out of breaches of the FTA because of the non-compliance of J-Frame with the Code and relevant standards. Until Red Stag had carried out its own independent testing to enable it to confirm its view of J-Frame’s compliance or otherwise, (and in the absence of evidence it was aware of the detail of the CHH’s testing), it cannot be said that Red Stag ought to have been aware before 18 November 2014 of the losses it now claims. At best, from JNL’s point of view the issue is not clear.
[73] The persuasive onus on the issue of limitation rests on JNL. In a case of doubt as to the date of discoverability, Tipping J in Humphrey v Fairweather suggested it is fairer to hold the defendant failed to prove the barring of the remedy than to hold that the plaintiff, for lack of proof, had lost its right to pursue the claim.14
[74] JNL also claims that in various amended statements of claim, Red Stag has added claims in relation to misrepresentations of compliance with NZS 3604 and NZS 3602. I do not consider those amendments amount to fresh claims or fresh causes of action. The amended pleading referring to the breach or failure to comply with additional standards is not an essentially different pleading to the original pleading which generally alleged non-compliance with relevant standards.15 While a question of degree, there has not been a change in character of the proceeding by the amendments. Put another way, the additional claims do not set up a fresh case “varying so substantially” from the previous pleadings.16 There has been no change to the fundamental legal basis for the claim which is based on the allegation that JNL has misrepresented that J-Frame complied with relevant standards and requirements of the Code.
[75] JNL cannot succeed on its attempt to extend the limitation period of barred claims beyond December 2012.
14 Humphrey v Fairweather [1993] 3 NZLR 91 (HC).
15 Chilcott v Goss [1995] 1 NZLR 263 (CA).
16 Commerce Commission v Visy Board Pty Ltd [2012] NZCA 383.
The relevant provisions of cl B2 — Durability
[76] B2/AS1 Amendment 5 confirmed that from 1 April 2004, NZS 3602 was an acceptable solution for meeting the durability requirements of timber building elements and NZS 3604 was an acceptable solution for meeting the durability requirements of buildings within its scope.
[77] B2/AS1 Amendment 6 in September 2010 did not relevantly affect that position. As of December 2012 (the starting point for Red Stag’s claim), B2/AS1 Amendment 7 from April 2011 confirmed that NZS 3640 and Part 1 of NZS 3602 as amended were acceptable solutions for B2/AS1 to meet the durability requirements of timber building elements. As was NZS 3604 with reference to NZS 3602 (and NZS 3640). The accompanying and amended tables noted that the hazard class for radiata pine framing was H1.2.
[78] In February 2014, B2/AS1 Amendment 8 was published. It confirmed NZS 3602, NZS 3640 and NZS 3604 (with reference to NZS 3602) and NZS 3640 were an acceptable solution for B2/AS1 and met the durability requirements of timber and wood-based building elements. Again, the relevant hazard class for radiata pine framing was H1.2.
[79]Amendment 8 to B2/AS1 also went on to provide:
Laminated veneer lumber (LVL) treated using LOSP borne azoles as specified for H3.1 in NZS 3640 Table 6.2 satisfies the minimum treatment requirement of H1.2.
[80] The two relevant timber treatment standards are NZS 3640 and AS/NZS 1604.4. NZS 3640:2003 was published in November 2003. It sets out the requirements for the preservative treatment of different types of timber. AS/NZS 1604.4:2004 was updated in 2004. It is the joint Australian/New Zealand standard which specifies the requirements for the preservative treatment of LVL.
[81] Two particularly important concepts associated with the preservative treatment of timber are penetration and retention. NZS 3640 defined penetration as “[t]he depth to which a prescribed preservative is present in the timber” and provided for the
preservation penetration and retention requirements for the different types of timber as follows:17
3.3Preservative penetration and retention
3.3.1Penetration
The penetration of the preservative into timber shall be checked using a chemical reagent appropriate to the preservative being tested in accordance with AS/NZS 1605. The preservative shall be found throughout the wood to the required depth.
Some active ingredients such as synthetic pyrethroids, tebuconazole and propiconazole cannot be checked with a chemical reagent. Other actives e.g. boron, may be present at a concentration below the sensitivity limit of the chemical reagent. In such cases, penetration shall be confirmed either by chemical analysis or by use of a penetration tracer whichever is the most applicable to the active in question. Penetration for the azoles used for timber framing shall be confirmed by chemical analysis.
3.3.2Retention
The retention of preservative shall be determined by chemical analysis in accordance with AS/NZS 1605 where available, and shall be expressed as per cent mass of preservative per mass of oven dry wood. Alternative analytical methods may be submitted to Standards New Zealand as part of the approval process, the application form for which is set out in Appendix D.
The triadimefon and cyproconazole retention analysis for LVL is to be determined according to the method of analysis described in Appendix E of this Standard.
[82] Table 6.1 of NZS 3640 provided for the retention standard of 0.4% m/m in the softwoods cross-section for oven-dried weight of wood treated with boron. Red Stag does not suggest that the boron treatment of J-Frame failed to meet the retention requirements of NZS 3640. Its case is that J-Frame failed to meet the penetration requirements of the relevant standards, including NZS 3640.
The parties’ cases on J-Frame’s compliance with the Code and standards
[83] Red Stag’s case is that J-Frame was not compliant with the requirements of either NZS 3640 or AS/NZS 1604:4 for the penetration of preservative. Nor did it comply with NZS 3602 or NZS 3604. As a consequence, J-Frame was not an acceptable solution. It did not meet the requirements of B2/AS1. It was not treated to
17 The retention requirement of NZS 3640 is not to be confused with the quantitative retention testing to test for the penetration of the preservative.
meet the requirements of H1.2 so it was not a straight swap for framing timber where such was specified as “H1.2 SG8”. It was therefore misleading for JNL to label it H1.2 and dye it pink, and thus to represent that it met the requirements of the standards and was an acceptable solution and/or had complete sapwood penetration.
[84] Red Stag’s first proposition is that, prior to December 2012 and Amendment 5 to NZS 3640, the relevant standards did not provide or permit LVL to be used as framing timber. So J-Frame could not be labelled as H1.2 (and dyed pink) or be an acceptable solution. Red Stag then says that, from December 2012 and following the amendments to NZS 3640 and AS/NZS 1604.4, particularly the compliance pathways specific for LVL (the glueline treatment), LVL, such as J-Frame, had to follow that particular pathway to comply with the standards and be labelled H1.2. Red Stag finally says that even if in theory the standards could apply to LVL, then for it to comply with them, complete sapwood penetration of the boron treatment was required. As LVL does not have complete sapwood penetration it was non-compliant in any event.
[85] JNL accepts J-Frame was not treated to comply with the preservative penetration requirements for solid timber provided for in NZS 3640, nor was it treated with the glueline treatment provided for in the 2012 amendments to NZS 3640 and AS/NZS 1604.4 and referred to in Amendment 8 to B2/AS1. But JNL says that J- Frame meets the retention requirements of NZS 3640 and, at the relevant time, the penetration requirements in AS/NZS 1604.4 applied to it. As it met the penetration requirements of AS/NZS 1604.4 it could be used where hazard class H1.2 applied.
[86] JNL accepts that initially it marketed J-Frame as an alternative solution (on Ms Drysdale’s advice). The first BRANZ Appraisal was issued on that basis. After NZS 3604 was amended in August 2011, the BRANZ Appraisal was updated in January 2012 to provide J-Frame was an acceptable solution when used in accordance with NZS 3604, s 2.3.9. Following the amendments to B2/AS1 in February 2014, the BRANZ Appraisal of J-Frame was again amended in June 2014 to provide J-Frame was an acceptable solution under NZS 3604. From June 2015 until 1 September 2017, JNL relies on its CodeMark as its compliance pathway. As noted, since 1 September
2017 J-Frame has been treated and labelled in accordance with a proprietary treatment standard.
[87] To establish its compliance with the preservative penetration requirements of AS/NZS 1604.4, JNL relies on AsureQuality’s certification of its testing of J-Frame (under a JASANZ accredited quality assurance programme).
The position prior to December 2012
[88] Red Stag’s case is that initially it was never contemplated that LVL would be used as framing. Between 2003 and 2012, J-Frame could not be treated according to the standards and labelled H1.2 because the treatment and labelling requirements for H1.2 in the standards did not apply to LVL. They only applied to solid wood.
[89] Red Stag’s argument is primarily based on Ms Drysdale’s interpretation of AS/NZS 1604.4, in particular cl 1.9 and the tables to NZS 3602. It also relies on the evidence of Mr O’Sullivan. Both he and Ms Drysdale consider the standards are not forward looking.
[90] Ms Drysdale has over 50 years’ experience in the wood and preservative treatment industry, involving developing treatment formulation and processes, test methodology and assessments, and product registrations and approvals. She also provides independent consultancy. She has served on and been a member of the Australasian Wood Preservation Committee and between 2003 and 2013, represented chemical supply interests on the Standards New Zealand NZS 3640 Wood Preservation Committee, being involved in the development of Amendments 1 to 5 of that standard. In 2016 she was appointed by Standards New Zealand as an independent wood preservation expert to the Committee for NZS 3602 and NZS 3640. For a time, she was chair of the NZS 3640 Committee.
[91] Ms Drysdale considers that cl 1.9 of AS/NZS 1604.4 did not specify a preservative penetration for LVL to meet hazard class H1.2. Before the 2012 amendments provided expressly for the glueline treatment of LVL, NZS 3640 only applied to solid timber. Ms Drysdale notes that LVL was not included in the relevant tables of NZS 3602, particularly Table 1D.
[92] As noted, NZS 3602 was amended in December 2003 in response to the leaky building crisis.18 It provided for the level of treatment required for timber and wood- based products for particular uses in building which was expected to provide compliance with the durability requirements of cl B2 of the Code.
[93] NZS 3602 specified treatment options for radiata pine framing to be used in a variety of situations dependent upon the level of risk. The standard identified a number of hazard classes to apply in different situations.19 For example, it provided for the following hazard classes:
(a)H3.1 in high risk situations; and
(b)H1.2 for medium risk situations.
[94] NZS 3602 expressly referred to LVL. Clause 102.6, the definition section of NZS 3602:2003, defined LVL as:
[a] structural product which is an assembly of veneers laminated with adhesive, in which the grain direction of the outer veneers and most of the other veneers is in the longitudinal direction.
[95] The definition of “Wood-Based Building Component” in NZS 3602 also expressly included LVL.
[96]NZS 3602 cl 104.4 provided:
104.4Engineered wood products (EWP), including glue laminated timber
104.4.1
Tables 1 and 2 require preservative treatment of a particular species and quality of timber used in EWP or laminated timber component.
…
104.5Glue laminated timber
Exemption from the treatment requirements of 104.4.1 shall apply if the glue laminated timber member is installed in an interior position in the building fully protected from the weather. …
18 NZS 3602:2003.
19 The detailed hazard classes were provided for in NZS 3640.
[97]NZS 3602 then provided at cl 105.1:
105.1
Timber and wood-based products which use those species of wood which table 1, table 2 and table 3 require to be treated shall be clearly identified in accordance with NZS 3640. … Where required, [LVL] shall be treated and branded to the requirements of AS/NZS 1604.4.
[98] The relevant table in NZS 3602 for present purposes is Table 1D which refers to framing. The table heading confirms that where radiata pine is to be used for framing, it is to be of a structural grade and is required to meet the level of treatment to “NZS 3640 or AS/NZS 1604”.
[99] Based on Ms Drysdale’s and Mr O’Sullivan’s opinions, Mr Flanagan submitted that, as LVL was not referred to expressly in Table 1D of NZS 3602, the standard could not apply to it. He noted (as did Ms Drysdale and Mr O’Sullivan) that in some cases LVL was expressly referred to in the tables, particularly Tables 1C and 1E. In those cases where it was referred to, it was not required to be treated to any particular standard. In closing, Mr Flanagan suggested cls 104.4 and particularly 105.1 of NZS 3602 were “dormant”. He submitted that it could not be said that the tables “required” the treatment of LVL.
[100] For her part, Ms Drysdale suggested the requirement for treatment of LVL in the final sentence of cl 105.1 was “not triggered”. She considered that, if LVL was to be treated and used as framing timber, then AS/NZS 1604.4 would have been referred to as a treatment specification in B2/AS1.
[101] Mr O’Sullivan confirmed his opinion that untreated LVL was only an acceptable solution via NZS 3602 in terms of the limited applications under Tables 1C and 1E and, after Amendment 8 to NZS 3640 in 2014, the only treatment that was an acceptable solution for LVL for use where H1.2 applied, was the glueline treatment. In his reply brief, Mr O’Sullivan suggested that LVL had been intentionally excluded from the tables in NZS 3602. However, under cross-examination Mr O’Sullivan accepted that it was clearly envisaged that LVL framing would be used in some situations.
[102] In closing Mr Flanagan suggested that, under cross-examination, Dr Greaves, an expert called by JNL, had agreed with Red Stag’s case on this point, namely that LVL was not provided for by NZS 3602.
[103] Dr Harry Greaves has a PhD in plant pathology and a Doctor of Science for his research in wood products, preservation and biodeterioration. Dr Greaves has acted as a technical adviser and expert for Global-Mark, an Australian-based certification provider, and has been chairman of the Standards Australia Committee TM-006 Timber Preservation and Durability, which later became AS/NZS 1604 and AS/NZS 1605.
[104] Dr Greaves confirmed the different types of conditions of biological hazards to which timber-based products may be exposed are known as “Hazard Classes”. He noted that in New Zealand, under NZS 3640:2003, hazard class H1 was split into two subclasses: H1.1 and H1.2. In Dr Greave’s opinion, LVL could be used where hazard class H1.2 applied. The preservative treatment required was treatment for retention under NZS 3640 and for penetration under AS/NZS 1604.4 by reference to cl 1.9 of that standard.
[105] The suggestion that Dr Greaves agreed with Red Stag’s witnesses on this point is not borne out either by his evidence-in-chief or by the relevant passages of his cross- examination. His original evidence was clear. He did not resile from it. In cross- examination Dr Greaves did no more than agree that for a particular product to be directly referred to and included in any amendment to a standard, it would have to be efficacious.
[106] JNL also called Mr Hing to respond on this and other points. Mr Hing is a retired director of the NZTIF. He also served on the New Zealand Timber Preservation Council Inc (NZTPC). NZTPC owns and manages an ISO-9000-based quality assurance programme for treated timber known as WOODmark. The programme is based on NZS 3640. Mr Hing was a member of the Standards Review Committee for NZS 3602 and NZS 3640 and AS/NZS 1604.
[107] Mr Hing referred to the TM-006 committee’s review of AS/NZS 1604.4 in 2004. The review led to the inclusion of cl 1.9 to address the need to provide for treatment where LVL was to be used where hazard class H 1.2 applied. In Mr Hing’s view, cl 1.9 was included to provide LVL with a pathway for compliance with NZS 3602 Part 1 and the Code. LVL treated in compliance with AS/NZS 1604.4 was to be an acceptable solution. In Mr Hing’s view, Ms Drysdale’s interpretation does not take sufficient account of cl 104.4.1 and cl 105.1 of NZS 3602.
Result
[428] However, for the reasons given, I do not consider Red Stag has established that JNL was in breach of the relevant provisions of the FTA. Red Stag’s claim against JNL is dismissed. There will be judgment for the defendant JNL.
Costs
[429] Given the complexities involved in the case I consider the case is appropriately categorised as category 3. I allow for second counsel for the hearing. There will also be some instances where time band C as opposed to time band B would be appropriate given the volume of documentation involved, but that may not apply to all steps.
[430] However, as there may have been a relevant exchange on the issue of costs, I formally reserve the issue of costs.
[431] If counsel are unable to agree, costs will be dealt with by way of exchange of memoranda. JNL is to file and serve its memorandum within 30 working days of the date of delivery of this judgment. Red Stag is to respond within 20 working days later with any reply to be filed within a further 5 working days. The Registrar is to then refer the matter to me to be dealt with on the papers. The original memoranda are to be limited to 10 pages (although schedules may be filed to provide details of cost assessments and witness expenses sought). Any reply is to be limited to five pages.
Venning J
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