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The Court of Appeal’s recent decision in Cridge v Studorp Ltd [2024] NZCA 483 confirms that a manufacturer of cladding products owes a non-delegable duty of care to building owners (commercial and residential alike) to exercise reasonable skill and care in relation to the design, manufacture and supply of defective building products.
Background
This judgment concerns a dispute between James Hardie New Zealand Ltd (James Hardie), the manufacturer and supplier of a sheet cladding system (Harditex) for use in residential homes, and a group of homeowners whose homes were built using Harditex (Homeowners). The Homeowners claimed that Harditex was a defective product vulnerable to water ingress and that their homes had suffered moisture-related damage as a result.
The High Court held that James Hardie owed a duty of care to the Homeowners, but (on the specific factual context) concluded that the cause of the moisture damage to the homes was incompetent building and poor texture coating, more so than it was defects in Harditex.
The Homeowners appealed the decision. James Hardie sought to argue it did not owe any duty of care to the Homeowners at all. The appeal involved almost a complete re-litigation of most trial issues, and the questions for determination were “significant and multifaceted”.
Existing law
The existence of a “duty of care” (i.e. a responsibility to take reasonable care not to do anything likely to injure a “neighbour”) is a requirement of the tort of negligence. It has been settled law for some time that builders and local authorities owe duties of care to building owners, but it was not clear whether a manufacturer would owe the same.
The only real authority on the question of manufacturers was Carter Holt Harvey Ltd v Minister of Education [2016] NZSC 95, in which the Supreme Court said that it was “arguable” that such a duty of care existed. However, that decision concerned only the appeal of a strike-out application, and so the substantive legal issues were left for an appeal that never came about. This left the question open.
Requirements for a duty of care
To establish a duty of care, there are three considerations. Here, the first consideration was whether the harm that might have been caused to the Homeowners was foreseeable to James Hardie. The second was whether James Hardie had a “close and direct relationship” to the Homeowners. The third was whether there are policy considerations that tend to negate or strengthen the existence of a duty of care for manufacturers.
That the harm caused to the Homeowners was foreseeable was taken as being beyond argument. The manufacturer of a cladding sheet system promoted for use as exterior wall cladding must be taken to have foreseen that its products would be used in buildings and that, if those products were defective, it would result in damage of this kind.
However, James Hardie argued in relation to the second consideration that manufacturers have a different relationship with building owners (when compared to those engaged in “building work” under the Building Act 2004). It said that the functionality of a product used in construction depends upon the separate work of builders, designers and inspectors, and upon compliance with technical specifications – over which manufacturers have no real control.
Outcome of the appeal
The Court of Appeal upheld the decision of the High Court in respect of the duty of care. French J articulated the following duty, which is owed by a manufacturer of cladding products to building owners (at [77]):
The manufacturer of a cladding product intended for use as a key component in the construction of a weathertight building owes a duty of care to an owner of the building to exercise reasonable care and skill in the design, manufacture and supply of the product so as to prevent loss from damage to the building caused by water ingress.
The Court was careful not to be too abstract; the duty was formulated specifically in relation to the kind of harm to be avoided, the class of person who owes it, and the class of person to whom it is owed. It would not be applicable to claims that might seek to make a manufacturer liable for a defect created by someone else (e.g. by error or omission during installation) – it applies only to defects said to have been created by the manufacturer itself.
The Court also did not limit the duty to residential homes (a distinction no longer made in the case of builders and local authorities for reasons found equally applicable to manufacturers).
The Court referred to a general “duty to warn”, seeing that any negligence claim pertaining to alleged errors or deficiencies in a product’s technical specifications falls within the realm of negligent misstatement (at [82]):
A manufacturer who was aware of deficiencies in its product that rendered it unfit for its intended purpose and likely to cause harm but then did not remove that product from the market or warn of the risk of harm would clearly be negligent.
However, while the Court of Appeal agreed with the High Court that James Hardie owed a duty of care to the Homeowners, it also agreed with the High Court’s decision that, on the facts, James Hardie did not breach this duty. The Homeowners had failed to prove that Harditex was inherently flawed or unable to deliver a watertight and durable home. Whilst capable of improvement, this did not mean that the product was not fit for purpose.
What does the decision mean?
The decision confirms that a manufacturer of cladding products owes a non-delegable duty of care to owners of buildings in relation to the design, manufacture and supply of defective building products. This is not particularly surprising, considering that it has been settled law for quite some time that (almost) every other party in the building chain from architect through to the relevant building consent authority owes a duty of care to building owners.
The Court was careful to formulate this duty of care specifically in relation to the facts before it. That being said, there is no reason why it could not be expanded to manufacturers of other building products intended to be a key component in the construction of a building.
If you have any questions about this decision or duties of care, please get in touch with our Construction Team or your usual contact at Hesketh Henry.
Disclaimer: The information contained in this article is current at the date of publishing and is of a general nature. It should be used as a guide only and not as a substitute for obtaining legal advice. Specific legal advice should be sought where required.
