Dublin-registered but historically Australian building materials supplier James Hardie Industries plc has failed in an attempt to limit, to local subsidiaries, a court action over defective cladding taken by 5 Metlifecare retirement village companies & individual unit owners.
The Supreme Court decision, out today, contains one of the smallest dollar figures in this long-running saga: “The application for leave to appeal is dismissed. The applicants are to pay to the respondents costs of $2500.”
The retirement village companies & unit owners alleged the cladding products were defective and sought damages over associated weathertightness problems against 7 James Hardie companies – 4 operating companies (Studorp Ltd, James Hardie NZ Ltd, James Hardie Australia Pty Ltd & James Hardie Research Pty Ltd) & 3 holding companies.
The holding companies are the ultimate group parent, James Hardie Industries plc, RCI Holdings Pty Ltd (Studorp’s immediate parent) & James Hardie NZ Holdings Ltd (James Hardie NZ Ltd’s immediate parent).
The overall group parent, James Hardie Industries plc, was served in Ireland but protested the jurisdiction of the New Zealand High Court. The Supreme Court judges hearing this issue – Justices Willie Young, Susan Glazebrook & Mark O’Regan – said in the reasons for their decision: “Under the relevant High Court rules it [the Irish company] was entitled to be dismissed from the proceedings unless the claimants could show, inter alia, that there is a serious issue to be tried on the merits.
“RCI & James Hardie NZ Holdings sought summary judgment in the High Court; this on the basis that it was clear, they argued, that they did not participate in, and were not responsible for, the actions of the operating companies.
“In issue in both the High Court & Court of Appeal was whether: (a) the claimants had shown that there was a serious case against James Hardie Industries to be tried on the merits; and (b) RCI & James Hardie NZ Holdings had shown that the claims against them would fail.”
Leaving aside the onus of proof, the judges said the central issue on jurisdiction & summary judgment was whether the claimants had arguable claims against the 3 holding companies.
“The claimants allege that the development, manufacture, marketing & sale of the cladding products was, in effect, a joint effort in which all the James Hardie companies, including the holding companies, were engaged.
“The claimants say that this resulted in the holding companies incurring liability in the following respects: (a) In negligence – pleaded separately as: (i) negligence in terms of the manufacture, marketing & sale of the defective profits; (ii) negligent misstatement in respect of the promotion of the products; and (iii) a breach of a duty to warn, inform &/or take reasonable steps to withdraw the products. The liability of the holding companies is said to arise because of their direct involvement in the development, manufacture, marketing & sale of the cladding products and their superior knowledge (as compared to that of the operating companies) of the products.
“(b) Under the Consumer Guarantees Act, on the basis that all James Hardie companies, and thus the holding companies, are within the definition in that act of ‘manufacturer’.
“(c) Under the Fair Trading Act, this in terms of misleading & deceptive conduct in respect of the marketing of the cladding products, which resulted in the respondents believing that the products were fit for purpose.”
The Supreme Court judges said what was required of them was an assessment of the evidence adduced by affidavit: “As against James Hardie Industries at least, the claimants are at something of a disadvantage because the facts bearing on its role in respect of the operating companies lie largely in its control.”
The Supreme Court judges also noted that the Court of Appeal commented adversely on the limited nature of the evidence tendered by the holding companies.
Ultimately, the judges said, there would be limited utility & some disadvantages if leave to appeal were granted.
Among the 7 points the Supreme Court judges raised concerning jurisdiction, they said: “There is a distinct disadvantage to the claimants if the progress of their claims is further delayed.” And, they added: “Elaborate & costly arguments on jurisdiction can be disproportionate to the interlocutory character of the challenge.”
But the most telling point of the Supreme Court decision was more a shrug of the shoulders: “Members of the James Hardie group of companies being necessarily parties to the proceedings, there is comparatively little disadvantage to James Hardie Industries if it remains a party.”
14 December 2018: Court rules James Hardie parent company can’t wash its hands of cladding defects