HOBANZ says that the class actions against cladding manufacturers may look like a panacea for leaky homeowners but the complexities and risks must be grasped to avoid further disappointment.

Leaky home owners eying the $100 million class action lawsuit which has the backing of a litigation funder, and the most recent class action claim spearheaded by a Wellington law firm, will have to ask some smart questions to establish if it could be the solution they are in need of to remedy their defective homes. Amongst others the questions that should be asked are;

  1. Can the cladding brand on my home be accurately identified?
  2. Who pays for the professional assessment of the property and ongoing production of expert evidence?
  3. How much will the professional assessment and the services of that professional to provide expert evidence cost?
  4. Who selects the experts and if it is out of the hands of the owners will the selected expert have the necessary competency, capability and credibility to sustain the claim?
  5. Will invasive testing have to be undertaken?
  6. If invasive testing is undertaken what will happen if other more serious issues such as structural deficiencies are uncovered and will they be claimable?
  7. Will there be enough interested owners with valid claims for this to be an attractive proposition for the litigation funder to back this class action?
  8. Will I be provided with a legal opinion before the claim is filed in the court regarding the quality of my individual claim and any red flags relating to issues that might impair my claim?
  9. How long will it take to get a result?
  10. What if the claim does not succeed; am I potentially exposed to claims made against me by the manufacturers in order to recover the costs they have incurred? If so what is the exposure in dollar terms.
  11. If the class actions succeeds; how much of the sum awarded will be consumed by non-recoverable legal and expert fees and how will the balance be apportioned to the owners involved?
  12. Will any contributory negligence adjustments be made to the sums paid out to owners and how will those adjustments be quantified and by whom?

and questions specifically related to the litigation funder backed claim;

  1. What are the chances of the decision being appealed to a higher court and if it is, will the litigation funding be available to cover the costs of appeal(s)?
  2. If the class actions succeeds; how much of the sum awarded will be taken by the litigation funder?
  3. Is the litigation funder able to pull its funding support at any stage and what are the conditions that will trigger that action?

and finally, and perhaps most importantly;

  1. After the deductions; what is the likelihood of owners being left with a meaningful amount to cover the cost of the re-cladding and repair of their homes.

These are all important questions the homeowner needs to have answered before committing themselves.

Proving failure of the product and which manufacturer is potentially liable relies on properly determining the type and brand of cladding actually fitted and the nature of the failure causing the damage.  Another complex issue is whether or not any alleged product failure was the sole cause of the loss suffered.

“I know lots of leaky home owners will rejoice at the possibility of these class action claims going ahead, but there are good reasons why any of the Australasian litigation funder’s has not appeared before now. If a funder pulls out because there are not enough approved cases, I fear owners will be dealing with heart ache all over again” says John Gray, President of HOBANZ.

Whilst there appears to be a potential case for the manufacturer’s to answer regarding their knowledge of the particular failings of their system, it still has to be proven to the extent required by law in order for them to attract any liability. 

HOBANZ’s experience with these kinds of cases has revealed that a majority of problems have not necessarily been a failure of the cladding in and of itself, rather it has been brought about by the improper installation by the builders.

This particular kind of claim is also reliant on winning the argument that states the failure of the cladding is not classified as “building work” and therefore not subject to the 10 year limitation under the Building Act. This is one of the primary issues being argued in the Ministry of Education versus Carter Holt Harvey case currently before the High Court. 

It is too early to know when or if a decision in that case will be handed down by the court. If that case is decided by the courts, as opposed to the parties reaching a confidential out of court settlement, and the Ministry of Education wins it will establish a precedent that will definitely open the door for others to take the same cause of action. However, until a precedent is set in this regard any claims along similar lines will be purely speculative and owners’ claims will still be subject to the limitation periods under the Limitation Act as it applies to pre-2010 acts or omissions.

Not that HOBANZ would agree, but one of the defenses the cladding manufacturers would likely adopt is the assumption of risk by those buying a house with that type of cladding in the first place.  It is likely they would argue that the owners ought to have mitigated their loss by discounting the price they were prepared to pay or to have walked away. This would be a counter claim of contributory negligence.  If the owners did pay less than the then market price their case would also be undermined as it would be argued that they have already abated their loss or not suffered a loss at all. 

What should leaky homeowners do if seriously considering joining either of these class actions? By all means sign up but HOBANZ urges owners to get independent legal advice not only on the merits of the potential claims but, where applicable, they should also seek legal advice on the litigation funding arrangements and do detailed due diligence.

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For more media information contact Sandra Thompson, Communications Manager, sandra.thompson@hobanz.org.nz