A huge legal claim against Carter Holt Harvey over hundreds of leaky school buildings can proceed, the Supreme Court has ruled.

This morning's unanimous judgment is a major victory for the Ministry of Education.

It only clears the way for legal action that Carter Holt sought to have struck out - the fight over liability and any compensation is still to come.

That could act as a test case and result in other claims involving cladding companies.


Education Minister Hekia Parata said the ruling was a major victory for New Zealand taxpayers.

"This is the largest product liability claim ever made in New Zealand. Action was taken to protect the Crown's significant investment in education infrastructure, and to promote better building practices in the future."

The decision to go after cladding manufacturers, in addition to builders and architects, is unusual.

The ministry alleges Carter Holt's cladding sheets and systems used in 880 school buildings were inherently defective.

It has estimated the cost of fixing leaky schools to $1.1 billion to $1.3 billion, and in 2013 launched a legal action against a number of cladding manufacturers.

Confidential settlements were subsequently reached with Australian manufacturers James Hardie and CSR, but Carter Holt Harvey has fought to have most of the claim struck out.

The cladding was only one component of the buildings, its legal team has argued, and no damage or injury had materialised.

It also argued the proceedings were brought out of the 10-year limitation period set by the Building Act 2004.


The High Court declined to strike out the claim.

That decision was appealed to the Court of Appeal, which dismissed the appeal save for one of the five claims.

At the same time the ministry cross-appealed the Court of Appeal decision that it couldn't sue on the basis that Carter Holt negligently mis-stated claims about cladding.

In a unanimous judgment, the Supreme Court dismissed Carter Holt's appeal, and awarded costs of about $45,000 to the ministry.

On the cross-appeal, the Supreme Court ruled the negligence claims were arguable and therefore could be included in legal action.