The Leaky Homes Saga: ongoing class action against cladding manufacturers

Leaky cladding

In March 2015, a call went out to owners of leaky buildings in the Auckland area to become part of a possible class-action civil lawsuit to be brought against cladding manufacturers. The plaintiffs brought legal proceedings against several companies, lumped together as James Hardie, to seek damages for losses suffered under what they believe has been negligence by the suite of companies in the sale of concrete fibre cladding and the resulting Leaky Homes Crisis that engulfed the New Zealand construction sector from the mid-90s to the mid-2000s. Estimates of the cost to repair the damage have run as high as $11 billion with the majority of that cost being borne by the building owners themselves.

There are two main sets of class-action lawsuits being undertaken against James Hardie concurrently in Auckland and Wellington. In Auckland, the initial claim of damages against the cladding manufacturers came to more than $100 million at the time. The cost of bringing the case was covered by litigation funders (Harbour Litigation Funding [UK]) and the response by interested was overwhelming.

In Auckland

In the Auckland case against James Hardie and its suite of associated companies, the class-action lawsuit has been led by Adina Thorn Lawyers. Starting with her call for potential plaintiffs to group together into a class action in March 2015, by July, the Auckland case had received a boost from the Court of Appeal decision in a similar proceeding between the Ministry of Education and Carter Holt Harvey that the limitation period of 10 years did not apply to building products. This was again backed by the Supreme Court in August 2016 on appeal allowing the abolition of the limitation period to stand in product liability claims. Around the same time, it was reported that the case had assembled a strong legal team and had received full funding by litigation funders in the UK.

In December of 2015, the claim was filed in excess of $200 million against James Hardie and a group of affiliated entities, holding companies and umbrella corporations. This action mirrored claims against the same group of companies in Wellington.

In Auckland, the case has been slowed down over the last three years by interlocutory applications by the group of building owners to join new plaintiffs to the action or by James Hardie to exclude some of James Hardie’s affiliated companies from the scope of the claim. Interlocutory applications are secondary proceedings related to a main claim. They usually relate to how a case will proceed through the courts. In the Auckland action, the interlocutory applications have revolved around whether new plaintiffs can be joined to the action against James Hardie.

The very latest on this case bodes well for the lawsuit as the Court of Appeal has again confirmed that all the companies and affiliated entities related to the claim are liable to be brought before the courts. The decision struck down all four issues relating to the liability of the various James Hardie companies brought to the Court by the interlocutory application.

In Wellington

The experience of Wellington litigants has been quite similar. In October 2015, self-funded representative proceedings were filed by Parker & Associates on behalf of the plaintiffs against James Hardie Companies, Studorp Limited and James Hardie New Zealand. The plaintiffs of this action contended that the Harditex and Titan Board cladding systems were inherently defective and unsuitable for the wet New Zealand climate, leading to leaks and significant damage to buildings.

In this particular case, the class-action proceeding against James Hardie has been delayed by interlocutory applications and appeals related to the representative nature of the proceedings. The High Court issued a decision to accept the case as a class-action lawsuit in October 2016 and issued orders in December 2016. Subsequent appeals to deny the plaintiffs a representative proceeding by James Hardie’s lawyers have been thrown out by both the Court of Appeal in August 2017 and the Supreme Court in November 2017.

Other cases

Elsewhere, legal action against manufacturers and suppliers of other defective cladding systems have enjoyed some success. In the most recent example, in Whangārei, a case brought by a couple building their dream home against Global Fibre8, the suppliers of the K3T wall panel system, found that the building supply company had engaged in deceptive conduct in recommending its product for the construction work.

Where to from here?

The long-delayed settling of interlocutory applications in these class-action cases now allows beleaguered building owners in both cities to carry on with the primary claims of the lawsuits against James Hardie: the matter of its allegedly defective cladding products that have caused so much financial and personal woes to the affected owners.

The experiences of both sets of class actions in Auckland and Wellington, and other cases elsewhere in the country, demonstrates that the class-action proceeding is gradually increasing in popularity and has proven utility with the Courts in New Zealand. Support from foreign litigation funders also signals a high degree of confidence in the class-action lawsuit to deliver on its promise in this country of allowing individual plaintiffs to band together to bring proceedings against bigger and better-resourced opponents.

However, the long delays in getting to the crux of the primary claims against James Hardie perhaps lends credence to calls from lawyers for the creation of a fit-for-purpose “Building Court” with an appropriate level of resourcing compared to that of the High Court where these cases are currently heard and can drag on for years.