Councils on the hook for product liability?

NBR reports that Carter Holt Harvey has issued third party claims against 47 local body councils, alleging breach of duty in the building consent process.

The Ministry of Education is suing Carter Holt Harvey in negligence, claiming its Shadowclad plywood cladding product is inherently defective, and has contributed to weathertightness problems in hundreds of school buildings nationwide. Carter Holt Harvey failed last year in its bid to have the claim thrown out on limitation grounds, with the Supreme Court determining that product liability claims are not claims relating to ‘building work’, and therefore the 10 year longstop limitation period  for building work in the Building Act does not apply.

Presumably Carter Holt Harvey has joined the councils to this proceeding on the basis that if Shadowclad is not fit for purpose and does not meet the building code, the councils were negligent in issuing building consents for projects in which Shadowclad was being used. If the third party claims proceed to trial, the product first must be shown to be inherently defective. Second, Carter Holt Harvey will need to show that it was unreasonable for the councils, in discharging their own duties to ensure applications for building consent comply with the building code, to rely on Carter Holt Harvey’s advice that Shadowclad (if installed appropriately) was compliant with the building code.

Councils have demonstrated understandable frustration at the considerable and disproportionate burden they have borne in relation to leaky building claims, largely due to their status as ‘deep pocket’ defendants, despite a minimal level of culpability compared to builders, consultants and manufacturers. They will be deeply resistant to these new claims, particularly given the lack of protection against product liability claims afforded by the 10 year longstop.


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