The Court of Appeal ruled on Wednesday that homeowners can bring a class action against two James Hardie companies. The Court's decision addresses a number of significant issues for class action claims in New Zealand.
Under New Zealand's High Court Rules, a class action can only be brought if each proposed class member has "the same interest in the subject matter of the proceeding". In this case,1 the homeowners claimed that they all purchased James Hardie cladding systems that were inherently defective, and that James Hardie's technical literature was misleading. They sought to bring a product liability claim on behalf of all homeowners, in tort and under the Fair Trading Act 1986.
James Hardie argued that the claim would require a "house by house investigation", and was therefore unsuitable for a class action.
The Court of Appeal rejected this. It acknowledged that the homeowners' claim for pure economic loss against a cladding manufacturer was novel, and that assessing such a novel claim would ordinarily require "a fact-intensive inquiry", involving individual issues of causation and damage. However, the Court of Appeal concluded that it was unlikely that any differences between individual homeowners would affect its conclusion as to the existence of a duty.
James Hardie also sought to rely on decisions from the United States and Canada where class actions had not been allowed to proceed. Significantly, however, the Court of Appeal said that these cases were not applicable, because the class action regimes in the United States and Canada are "more restrictive" than in New Zealand.
The Court of Appeal concluded that questions as to whether James Hardie owed a duty of care, whether it breached that duty, and whether it made misleading statements, were common issues which could be efficiently dealt with in a class action.
The Court of Appeal also ruled that potential class members had not been given sufficient time to "opt-in" to the proceeding. The High Court had given potential class members just weeks to join. The Court of Appeal extended this to five months to give sufficient time for the opt-in orders to be publicly notified, and for homeowners to take legal advice about joining the proceeding.
Unlike the United States, Canada and Australia, New Zealand does not have a modern class action regime. Instead, the courts have been required to fill the gaps under existing High Court Rules. Given the Court of Appeal's indication that New Zealand's Rules will be interpreted more expansively than overseas jurisdictions, we expect to see calls for the balance to be redressed through specific class action legislation.
James Hardie applied for leave to appeal this decision to the Supreme Court. This application was declined on 27 November 2017.
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