James Hardie and Carter Holt Harvey lose in leaky homes hearings

Friday, 12 July 2019

Filmed in 2020, Lesley Wheatley asked what would happen if James Hardie cannot pay out on leaky home claims if ordered to do so by the court.

A homeowner involved in leaky building law suit against James Hardie is concerned about the financial strength of its New Zealand companies.

Lesley Wheatley is involved in a class action lawsuit seeking damages for around 1000 leaky building owners claiming James Hardie's Harditex, Monotek and Titan products, which were widely used to clad new homes, were faulty products.

The lawyer heading the class action, Adina Thorn, told the High Court in Auckland last month that the building supplies company was 'balance sheet insolvent'.

'What happens if James Hardie are insolvent, and don't have any money?' Lesley Wheatley said.

James Hardie was the supplier of some forms of cladding that are common on leaky buildings. (File photo)

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James Hardie is a multi-national group of companies and has been trying to get its Irish parent company, and several overseas based James Hardie companies, excluded as defendants from leaky building claims in New Zealand.

That would leave its New Zealand companies alone responsible for paying compensation should the homeowners win in their claim, which centres on properties built or re-clad with James Hardie products between 1983 and 2011.

'That's why we need the parents to stay involved. They need to be held accountable for the child they have created in New Zealand,' Wheatley said.

So far James Hardie has not succeeded in getting its overseas companies excluded from the lawsuit and Wheatley said it must not be allowed to happen.

James Hardie has been approached for comment.

Wheatley has attended every hearing, and was shocked late last month when Thorn told the court that the New Zealand James Hardie companies were 'balance sheet insolvent'.

Lesley Wheatley spent $200,000 fixing her Albany unit that leaked.

Now living on a lifestyle block, she spent nearly $300,000 to reclad the unit in Albany she owns.

'When the boards came off, it was like black rot underneath,' she said.

'You could push you fingers into the timbers.'

Other units were worse than hers, Wheatley said.

The case is being paid for by an English litigation funder which will take cut of any compensation awarded by the court.

Thorn said James' Hardie's New Zealand holding company posted a balance sheet deficit of $5.8 million at the end of March 2018.

It would not have slipped into the red, except that it paid a $13m dividend to its overseas parent, Thorn said after the hearing.

Lawyer Adina Thorn is acting on behalf of owners of leaky buildings against James Hardie.

It also had debts of $43m in related party loans to an overseas James Hardie company.

Thorn said the financial state of the James Hardie New Zealand companies indicated the importance of the overseas companies remaining as defendants to the court case.

The balance sheet position of James Hardie NZ Holdings showed the importance to the owners of leaky homes of the overseas James Hardie companies, Thorne said.

Clair Kirby was one of the homeowners who were quick to join legal action against Carter Holt Harvey for supplying allegedly faulty exterior cladding. (File photo)

'This is the kind of stuff we can't be allowing to happen in New Zealand,' she said.

Leaky building claimants are fighting rearguard legal skirmishes in a bid to keep their claims progressing.

Thorn is also taking a case for 130 owners of homes that leaked against Carter Holt Harvey, and on Wednesday defeated a bid by the building company to have the case thrown out for 'abuse of process'.

The homeowners, who are also suing Auckland Council, owned homes clad with Carter Holt Harvey exterior Shadowclad panels, which they claim were inherently defective, and not fit for the purpose of cladding the outside of buildings.

Carter Holt Harvey's lawyers argued the in High Court in Auckland that the homeowners needed the court's permission to bring a case using litigation funding, that the litigation funding was 'objectionable', and that Thorn had made misleading statements about the case to media outlets, including how much money was being claimed.

This, the company argued, had resulted in the wrongful encouragement of 'meritless claims'.

The homeowners argued there was nothing misleading in the promotional work done by Thorn to attract homeowners to join the case, and if there was, it should not derail their legal claim.

Among Carter Holt Harvey's concerns was that Thorn had made comparisons between the claim and the legal case being taken by the Crown against the company over leaky school buildings.

Judge Matthew Downs dismissed Carters Holt Harvey's application to throw the case out, though he did detect the 'whiff of overstatement' in one statement Thorn made saying the plaintiffs' case was 'exactly the same' as the Crown case in an interview with Stuff.

Justice Downs also found Thorn had made misleading statements about how much the claim was for, telling one news organisation in 2017 that it potentially exceeded $100m.

But, the judge found there was nothing objectionable in the litigation funding from London-based Harbour Fund 3 Limited Partnership, and that the homeowners did not need to seek permission for their claim from the courts.

'I am satisfied the misleading statements fall well short of an abuse of process.'