The ministry, represented by Jim Farmer, QC, Nick Flanagan and Karen Chang, summarised the case in a written synopsis to the Court of Appeal: " ... Cladding sheets and cladding systems designed, manufactured, promoted and supplied by CHH (known as Shadowclad) are inherently defective and routinely fail.
"The failure of Shadowclad allows moisture to enter the respondents' buildings or retains it when it enters by other means, causing physical damage.
"The result is that the cladding, framing and other elements of the buildings rot, eventually causing serious harm to the buildings and posing a risk to the health of their occupants, who stand to inhale fungal spores from the decaying timber around them."
David Goddard, QC, Ian Gault and Jesse Wilson, representing Carter Holt Harvey, presented submissions arguing the business had no liability because there was a contractual chain involving many other parties, including builders, so Carter Holt was having a liability imposed on it that it never agreed to assume.
"CHH manufactures Shadowclad cladding sheets and supplies those cladding sheets in New Zealand through building supplies merchants (including its own merchant division, Carters). The merchants then supply the sheets to their customers, including the building trade and commercial and domestic customers. CHH's terms of trade with merchants (and Carters' terms of trade with its customers) provide for (among other things) limits on CHH's liability.
"The builders who purchase Shadowclad ... in turn enter into contracts to construct buildings for customers, including the plaintiffs in this case. Those contracts can also be expected to make provision for limits on the builders' liability.
"Thus there is a chain of contracts between CHH and one or more of the plaintiffs in respect of each building that has been constructed using Shadowclad. The terms of each contract in the chain govern the allocation or risk between the parties to that contract.
"The plaintiffs do not sue pursuant to the contracts they entered into with the builder who constructed the defective buildings ... Rather, they seek to cut across the contractual chain by suing CHH in tort, under the Consumer Guarantees Act 1993 and under the Fair Trading Act 1986.
"CHH applied to strike out the tort claims, the CGA claims and all claims in relation to the buildings that were constructed more than 10 years before the proceeding was filed. The High Court declined to strike out these claims. CHH appeals from that decision.
"The tort claims should have been struck out because this is a straightforward case involving a chain of commercial contracts, each of which governs liability between the parties to that contract," the Carter Holt submission said.
But the ministry's submissions said the preservative treatment applied to Shadowclad sheets was below the level required and insufficient to prevent fungal rots and Shadowclad was inherently prone to absorbing significant amounts of moisture.
Justice Randerson rejected the Herald's application to reveal the names of the schools involved.
School litigation
•Carter Holt Harvey versus Ministry of Education.
•Case heard in Court of Appeal, decision pending.
•At issue is liability over 880 school buildings.
