Cridge v Studorp  NZHC 2077
Studorp, trading as James Hardie, is a large manufacturer of building products in New Zealand. Between 1987 and 2005, it marketed a cladding product called Harditex. The period of time this product was in use coincided with the leaky building crisis in New Zealand. Thousands of houses built in this period were leaky. As at mid-2014, 9912 dwellings had been the subject of claims. Of all the claims filed, nearly 90% of the dwellings had monolithic cladding. In Cridge v Studorp  NZHC 2077, 144 owners joined forces to sue James Hardie in a long-running, heavily disputed case.
The homeowners’ case
The homeowners argued that Harditex was an inherently flawed product. It was moisture absorbent and relied heavily on painting which was often impractical and difficult to achieve; where painting could be achieved, it was susceptible to cracking due to pouting created by the movement of the sheets which James Hardie’s literature directed to be nailed too closely together; the Harditex system lacked a drainage and drying system and led to moisture being passed onto the internal structure; the system was too complicated to be properly installed; and the instruction manual lacked the necessary detail. In addition, the homeowners argued that James Hardie did not carry out testing before placing the product on the market, and it failed to warn consumers of the deficiencies with the product. In 2005, James Hardie introduced a better product called Monotek but failed to alert homeowners of deficiencies with the earlier product.
James Hardie’s case
James Hardie argued that Harditex was a safe product to use when appropriately installed; it was not a revolutionary product and builders should have been familiar with the installation requirements. James Hardie argued that the houses were leaky because of design faults and poor building practices.
The High Court judgment
The High Court held for James Hardie. The homeowners’ case failed in its entirety. The judgment is 287 pages long, and this is not an attempt to summarise it all. Below are just a few observations on it.
Does cladding need to be resistant to moisture?
An interesting debate was the owners’ argument that Harditex’s absorbency was an inherent defect. The Court summarily dismissed this argument saying that other building materials also absorb moisture. In fact, the Court was so dismissive that it questioned why this was even pleaded. The judge compared Harditex with concrete and brick, which are porous and also absorb moisture. The Court said that “the fact that a cladding in its natural (uncoated) state is moisture absorbent is not, and cannot be, an inherent defect.” With respect, that cannot be right. Could we build houses made out of cardboard then? Of course not. The underlying cladding material must have some measure of resistance to moisture. And it is difficult to see the comparison between a brick house (which is often left unpainted) and a Harditex house which needs to be meticulously painted and requires constant recoating throughout the years in order to remain structurally sound. Perhaps even more surprising was the Court’s conclusion that the absorbency “rather than a defect, it is an advantage”. The Court thought it was a benefit that the water that penetrates the exterior cladding can be safely stored in the cladding and then removed in vapour form. One would have thought that it would be better not to have water penetrate the exterior cladding at all.
When the paint job holds the key to the integrity of the house structure
The evidence from the homeowners (to which James Hardie appeared to agree) was that the Harditex system was heavily reliant on painting. Basically, a poor painting job had the potential to undermine the integrity of the cladding. For example, the bottom of the Harditex wall was not supposed to touch the ground and had to be sealed by paint. If not, the Harditex sheet would absorb water and pass that moisture to other building elements through a process called wicking. The owners argued that the system was difficult to implement, because the painters would rarely if ever paint the bottom of the wall due to accessibility. Even assuming a painter would have been determined to do the job, the lack of clearance would have made the painting application too inconsistent to be relied on. James Hardie’s literature directed a 2-3mm clearance over a concrete finish, and 20mm (and from 1995, 50mm) over unpaved ground. None of these instructions complied with the legal standards of the time (for example, the BRANZ Standard for unpaved ground was 175mm).
The paint also had to be flexible. If not, it would be susceptible to movement which would cause it to crack and allow water entry. Regular maintenance was required including checking for cracks and recoating every few years – things that most homeowners were not aware of. The Harditex system relied on precision building and immaculate maintenance, but the Court was not satisfied that this was an inherent defect.
When a lack of proper design is saved by imperfect building practices
Another point of contention was whether the Harditex system had a drainage system (ie whether water that managed to get inside the cladding system had a way to drain away). James Hardie’s technical literature directed that the Harditex sheets be nailed to the house studs, with a building wrap (a thin, usually synthetic material) sandwiched in between the studs and the Harditex sheet. The homeowners argued that because of the way the Harditex was attached, water had no way to drain away, and it was transferred to other building elements.
Experts called by James Hardie put forward a “small gap” theory saying that “the reality of a building” is that the nailing won’t be uniform and that generally there are tolerances in the timber which means it is not completely straight, so these irregularities provide small gaps for water to drain away. Unlucky if the builders did a good job of nailing the sheets uniformly or the timber substrate happened to be straight!
The Court thought that the small gap “literature” was convincing. The most commendable piece of literature was a Master paper prepared overseas under the supervision of one of James Hardie’s experts. The judge also cited a piece of research from overseas which concluded that “in most of the above cases some moisture appears to have migrated downward even though the siding should have been tightly clamped to the wall”. With respect, that quote is far from convincing. First, only some moisture appears to have migrated downward, but we are not told how much is “some”, and whether “downward” is still a place within the building envelope, but just further down from the original point of entry. Second, the statement is qualified by the words “appears to”. That suggests a qualified conclusion, rather than a definitive statement.
The Court acknowledged that James Hardie did not design or plan for a drainage system but that they achieved that somehow “without recognising the underlying science.” Interestingly, the judge found that not all moisture will drain away. It said that some “will absorb into the back of the fibre-cement sheet”, other “will no doubt find its way in liquid form into the timber frame through perforations in the wrap” caused by staples and nails. And with 63 nails per sheet, there was a lot of scope for water to travel into the timber frame. Despite this, the Court ultimately held that some moisture could drain away.
The homeowners commissioned a testing company to build a Harditex wall and subjected it to various tests. The results were so poor that the judge rejected them saying they were “too bad to be true”. The Court did not accept James Hardie’s testing results either saying the wall worked so marvelously, it was hard to believe a house ever failed.
Does Harditex rot?
There was a significant dispute between the experts over whether Harditex was susceptible to fungal decay. Dr Wakeling, the most prominent mould expert in New Zealand, gave evidence for the owners saying he has seen decay within Harditex on “hundreds of occasions”. The judge was critical of his evidence saying he never produced imagery of this for others to observe and comment on. When asked, Dr Wakeling said that people would not know what they would be looking at. The judge found his approach unhelpful. The owners brought in a second expert, a microbiologist, Ms Burnie. She showed slides exhibiting rot on Harditex. James Hardie’s experts claimed that the slides were unclear, and they didn’t know what they were looking at, so the judge chose to ignore the evidence presented by Ms Burnie.
The owners then produced a report prepared by James Hardie in 1990 following testing of their product in Australia. The test involved leaving a piece of Harditex, unpainted, exposed to the elements for 7 years. The report noted that after the first 12 months, a thin layer of mould covered 100% of the sheet. After two years the mould thickened and the surface under the mould softened and lost some flexural strength. After five years, the sheet lost 25% of its cellulose. After seven years there was significant cellulose degradation. The internal James Hardie report noted the results with concern. However, the judge questioned the relevance of this test. The judge preferred James Hardie’s evidence that Harditex “never rots or decays” concluding that “there is no inherent mould growth risk in the Harditex system.” The conclusion seems at odds with James Hardie’s own test.
Were the houses poorly built?
The second part of the judgment focused on the damage to the homeowners’ houses. The homeowners chose eight houses to represent the overall problems. Significantly, they all had building defects and indicated poor building practices. The Court assumed that none of the 151 houses owned by the plaintiffs were free of construction defects, otherwise the homeowners would have put those forward. This was a major challenge for the homeowners in terms of their claim against James Hardie.
The owners argued that the building defects were a result of the impracticalities of installing the Harditex system, a system which did not tolerate mistakes. A second argument was that the building defects alone could not explain the extent of damage and that the Harditex system was to blame.
The homeowners’ position was difficult. Having failed to convince the Court that the Harditex system had any inherent flaw, their argument that the system was the main cause of the defects in the face of poor workmanship became impossible.
An army of experts dismissed
Given the technical nature of many of the arguments, each side engaged experts to present evidence in support of their case. There were many aspects of expert evidence, and so each side had ten experts or more. In this case, the Court preferred James Hardie’s experts’ evidence. While it is not unusual for the Court to prefer one party’s evidence, the extent of the preference in this case was unusual. The Court seemed to reject the evidence of all the homeowners’ experts, no matter what topic they presented on.
The Court discounted the homeowners’ experts. Mr Wutzler, a specialist in leaky building remediation with 28 years of experience, was overlooked because he only had a trade certificate; he was told he could not compete with “truly qualified witnesses” such as those engaged by James Hardie, who had PhDs. Mr Wakeling, New Zealand’s most prominent mould specialist, was criticised for not presenting images showing rot in Harditex sheet and self-aggrandising by saying that others would not know what they would be looking at. When another expert for homeowners (Ms Burnie) presented images showing rot in Harditex sheets, the Court dismissed them because James Hardie’s experts argued they did not know what they were looking at, which is exactly what Mr Wakeling said in the first place.
Mr Proffitt, a registered building surveyor whose business included weathertightness remedial works for public schools, gave evidence that Harditex was a difficult product to install. The Court did not accept his evidence because Mr Proffitt also thought that the standard of skill in the building industry was low. The Court thought that the latter view could not justify his opinion on the Harditex product.
Ms Burnie was told off for relying on an article which was not peer-reviewed and calling this “literature”. Mr Peryer’s evidence was marred by the fact that “he had a dim view of the Harditex as a product” and because his evidence was unclear. Mr Lalas was criticised for going outside his area of expertise.
Mr O’Sullivan of Prendos Ltd, a prominent building surveyor, was described as a person who “agitated for a [wall] cavity” and a “vocal critic” of the use of untreated timber. The Court made it sound as if his suggestions were wrong, despite finding that his recommendations were later incorporated into the new national building standards.
The Court also rejected the evidence from Mr Holmes, the owner of Holmes Construction who said that the Harditex system was really difficult to install and that tolerances were impossible to achieve. The Court discounted his evidence on the basis that his expertise was mostly with multi-storey buildings rather than residential houses. It is unclear how the installation of the Harditex system was different for multi-storey buildings.
There is a lot more covered in the judgment, and it is well worth a read. As for the homeowners, their case was dismissed. Unfortunately, they could not have had a more unsympathetic court.