Faulty Facades and Consumer Warranties

Samuel Beswick, Frank Knox Memorial Fellow, SJD candidate, Harvard Law School *

The North American pine grows throughout New Zealand and is a major part of the country’s wood products industry. Another export to the South Pacific country was Canadian consumer law. Saskatchewan’s Consumer Products Warranties Act 1977—now, Part III of the Consumer Protection and Business Practices Act 2014 [CPBPA (SS)]—shaped New Zealand’s own Consumer Guarantees Act 1993 [CGA (NZ)], which has gone on to shape product liability law in the construction industry.

Until recently, the most significant consumer warranties case in New Zealand concerned a faulty second-hand Nissan Navara. But the Act’s significance surged when in 2013 the Ministry of Education, on behalf of hundreds of schools suffering weathertightness issues, filed a billion-dollar claim against the country’s major cladding product manufacturers: Carter Holt Harvey Ltd v Minister of Education (CHH v MoE). The claim alleged that systemic defects in the design and manufacture of Carter Holt’s plywood “Shadowclad” product (as well as other manufacturers’ products) caused widespread failures in the function and performance of the buildings in which it was used. The Court of Appeal refused to strike-out the claim under the CGA (NZ) and the Supreme Court recently upheld the Minister’s other causes of action in tort.

That even the government is a protected “consumer” highlights the policy rationale of the statutory scheme: to regulate defective products, not necessarily vulnerable consumers. The case also raises two points—concerning warranties for building products and the interpretation of limitation periods—which may be of interest to Canadian lawyers.

Building product warranties

Both the New Zealand and Saskatchewan consumer protection schemes set out mechanisms to facilitate compliance and enforcement of statutory warranties that consumer products be of acceptable quality (s6 CGA; s19(d) CPBPA), fit for their purpose (s8 CGA; s19(e) CPBPA) and correspond to their description (s9 CGA; s19(c) CPBPA).

Both also limit the scope of product liability claims to personal chattels (not real property or buildings). The CPBPA (SS) defines consumer products as “any goods ordinarily used for personal, family or household purposes”, and goods as “personal property” (ss10(1)(e)(i) and 2(e)). The CGA (NZ) defines goods as “personal property of every kind” and specifically excludes “a whole building, or part of a whole building, attached to land” (s2). In practice, though, the scope of coverage is construed generously and actions may lie in respect of allegedly defective building components even where they are incorporated into buildings. The Court of Queen’s Bench for Saskatchewan has previously accepted that modular homes and installed residential roofing, windows and doors are consumer products under the Act.

Likewise, the New Zealand Court of Appeal in CHH v MoE rejected the defendant cladding manufacturer’s argument that the cladding systems they supplied were exempted as “parts of whole buildings” (at [143]). Although noting that the question would require evidence at trial, the Court considered that it was “not untenable to propose cladding was supplied in a manner bringing it within the ambit of the CGA and that it constituted a good to which the CGA applies” (at [144]). This seems right, given that the plaintiffs’ complaint is as to the quality of cladding systems as purchased, not just as installed. As a result, many more consumer actions against cladding manufacturers are now working their way through the New Zealand courts.

Limitation

These cases have highlighted the significance of carefully drafted limitation periods. Most Canadian provinces now have dual-layered limitation statutes: civil claims must be filed within a general limitation period (usually of around 2 years), which runs from the date the claim was reasonably discoverable, and in any event no later than an ultimate limitation period (usually, a 10 or 15 year longstop). This is sensible. It avoids claims becoming ‘stale’ by compelling plaintiffs to act promptly, while still protecting their interests in pursuing civil remedies where they have late knowledge of a potential legal claim. By setting a clear cut-off point, the longstop provides certainty and finality (and peace-of-mind to defendants and their insurers).

In New Zealand, it was not until 2011 that the old Limitation Act (requiring claims to be filed within 6 years of the seemingly ambiguous “date on which the cause of action accrued”) was replaced by a tri-layered limitation statute: there is now a primary limitation period of 6 years, which can be extended by a late knowledge period (during which claimants have up to 3 years to file a claim), subject to an ultimate 15 year longstop period. A shorter longstop period of 10 years applies to civil proceedings “relating to building work”, but in CHH v MoE the Supreme Court held that “building work” meant exactly that: it could not be read expansively to include the supply of building elements or building materials (at [93] and [129]).

The upshot is that it is not yet clear what the limitation period under the CGA (NZ) is: whether limitation runs from the date of the product defect or, instead, from the date it could have been discovered. While it might seem that the legislative scheme favours an occurrence-based, not a knowledge-based, limitation period (see Carter at [29] and K Tokeley at 494), there is no decisive case law on point. The cladding manufacturer in CHH v MoE opted not to argue this point on strike-out, instead focusing its limitation arguments on its (unsuccessful) bid to coopt the 10 year “building work” longstop (see [104]). In the recent case of Carter v Metal Design Solutions Ltd, a defendant cladding manufacturer sought to strike-out proceedings filed more than 6 years after its product was installed but within 6 years of the plaintiffs discovering defects. While noting that the plaintiffs faced “significant hurdles” in proving that their claim was not time-barred, the High Court Associate Judge opted for a cautious approach and declined to strike-out the claim on the basis that it was “at least arguable that something akin to reasonable discoverability may apply even to actions under the Act” (at [40]).

So we await a final determination on that question. Meanwhile, as the pine trees fall in New Zealand forests, we can be sure that consumers are making a noise.

 

* I should disclose that I worked on the Minister of Education’s claim as a solicitor at Meredith Connell, New Zealand, in 2012/13.