The High Court has released its latest decision in the long-running litigation between the Ministry of Education (MoE) and Carter Holt Harvey (CHH) – this time, on an application by 54 councils to strike out CHH’s third party claims against them.
Background
The MoE’s claim against CHH alleges that its Shadowclad product is defective and will likely allow water ingress in the future.833 school buildings throughout the country use Shadowclad, a number of which are alleged to already be leaking and suffering structural damage.The claim seeks damages for the cost of removing and replacing the Shadowclad.
CHH denies Shadowclad is defective or has caused damage, and says that any loss suffered by MoE is because of defective building works signed off by the councils.In 2013, CHH filed third party notices claiming contribution from 54 councils but did not serve the notices until December 2016.At the same time, CHH served separate contribution claims against the councils.
Broadly speaking, the councils applied to strike out CHH’s claim because: (a) claims against 416 school buildings were time-barred; (b) prejudice had been suffered due to the excessive delay in service of third party notices; (c) the claims were insufficiently particularised; and (d) the Ministry’s claims against CHH and CHH’s claims against the councils were not in respect of the “same damage”.
Judgment
The result was that claims in relation to 28 of the 833 school buildings were clearly time-barred.The rest of the claims survived the strikeout application.
10-year longstop period in relation to contribution claims
Importantly for councils, the Court determined that the ten-year longstop provisions under the Building Act 2004 did apply to contribution claims.The purpose of s 393 of the Act is to focus on proceedings relating to building work, which these proceedings clearly were.What this means is that in proceedings relating to building work, claims against third parties must be brought within 10 years of that building work being performed – even if that date is concurrent with the date on which a defendant is served with a claim.
However, while the councils sought that 416 school buildings be struck out on this basis, evidential issues prevented the Court from finding in the councils’ favour on a strikeout application basis.In a typical leaky building case, identifying the date the council issued a CCC (being the date of the act or omission on which proceedings are based) is straightforward.This case was unusual in that there were over 800 buildings, and the building descriptions put forward by MoE differed to the descriptions on the CCCs (because the MoE’s claim is not focused on the CCCs), often making the buildings difficult for the councils to individually identify.
The Court acknowledged the significant work that the councils had undertaken in attempting to identify the relevant CCCs.However, only one council provided sufficient affidavit evidence to explain the process it had gone through to ensure the appropriate CCCs had been identified. CHH were able to cast enough doubt as to the accuracy of the CCCs subject to the limitation argument.The Court did suggest, though, that this issue could be dealt with other than at trial and that the parties come together to confirm which CCCs should be removed from the claim.
Other grounds
On the other grounds raised by the councils, the Court refused to strike out the claim because:
- The threshold for suffering prejudice was not reached.The only prejudice suffered was the councils’ loss of potential to issue contribution claims in relation to about 6% of the buildings in issue, and loss of ability to inspect about 5% of the buildings in issue (as they had already been repaired or demolished).
- Although CHH’s claim was insufficiently particularised, the councils had not taken the first step of making an application for further and better particulars.The Court suggested that the matter of particulars should be rectified following the strike-out application.
- At least for the purposes of strike out, both the defective product and the defective building work both contributed to the “same damage” i.e. the buildings had weathertightness issues and consequent structural damage requiring repair costs.
Take home points
This case is another in a long line of decisions confirming that the Building Act 10-year longstop applies to contribution claims. Although there were evidential issues, the Court had sympathy for the councils and encouraged CHH to work with the other parties to identify the buildings outside the 10-year period. It will be interesting to see whether CHH will appeal the point to the Court of Appeal to avoid losing those school buildings from its claim.
The case also serves as a reminder that a court will require very good evidence before it will confidently rely on it for a strike-out application. Councils can assist with this by always maintaining accurate records and having clear processes for obtaining historic information.
