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Building cladding products have been a contentious issue in New Zealand over the past three decades. Particularly it’s involvement in the infamous, significant and financially burdensome saga of leaky homes. This article explores a legal case heard by the New Zealand Court of Appeal, specifically regarding a dispute involving the supply of a building cladding product. The case involved two building owners who initiated legal proceedings against the German-based manufacturer and New Zealand-based distributors. The building owners alleged that the product was faulty and posed risks to their buildings, leading to potential loss and expense.
On 15 December 2023, the New Zealand Court of Appeal delivered its judgment in the case of Body Corporate Number DPS 91535 v 3A Composites GmbH [2023] NZCA 647. In its judgment, the Court considered, among other things, whether the Consumer Guarantees Act 1993 (the Act) applies to overseas manufacturers of goods that are supplied to consumers in New Zealand. It held that it does. A summary of the key facts of the case and its significance is discussed below.
The litigation relates to a building cladding product called Alucobond. The product is manufactured by a German based manufacturer, 3A Composites GmbH (3AC). In New Zealand, Alucubond is distributed through Skellerup Industries Limited and Terminus 2 Limited.
Two building owners, Body Corporate Number DPS 91535 and Arosy Property No 1 Ltd, used Alucobond on their buildings. They initiated proceedings against 3AC and the New Zealand-based distributors because they were concerned about the risks posed by the Alucobond cladding used on their buildings, and that addressing those risks will cause them loss and expense.
Among other allegations, the building owners argued that 3AC violated consumer obligations by supplying a faulty product in New Zealand. The claim was served on 3AC in Germany, prompting 3AC to contest the jurisdiction of New Zealand courts, contending that an overseas manufacturer is not bound by the Act.
The Act provides consumers with a right of redress against suppliers and manufacturers for breaches of implied guarantees. One of these guarantees is the guarantee as to acceptable quality. The guarantee of acceptable quality is assessed at the time of supply of goods. In practice, this means that at the time the goods are supplied to consumers, the supplier is deemed to have promised that the goods are of an acceptable quality.
The Court affirmed that the Act applies to overseas manufacturers whose goods are supplied in New Zealand. This decision has significant implications for consumer protection and product liability, ensuring that consumers have recourse against overseas manufacturers for defective goods.
The Court's decision stems from a detailed analysis of the Act, its text, purpose, and broader principles of private international law. Central to the Court's decision was the recognition that the Act focuses on the supply of goods to consumers in New Zealand as the territorial connecting factor. This ensures that consumers have access to effective remedies for defective products, even if the manufacturer is based overseas. The Act imposes strict liability on manufacturers for the quality and safety of goods supplied in New Zealand, irrespective of their conduct within this country.
Furthermore, the Court emphasised the importance of concurrent (i.e., parallel ) liability, holding both overseas manufacturers and New Zealand-based importers or distributors accountable for defective goods. This ensures that consumers can seek redress through accessible channels without facing unfair duplication of liability.
The ruling also addresses potential concerns regarding overseas manufacturers' liability, particularly in cases where they may be unaware of their products being sold in New Zealand. Despite these complexities, the Court's decision underscores the overarching goal of consumer protection and ensures that consumers have avenues for seeking justice for defective goods.
Overall, the Court's decision reaffirms the robustness of consumer protection laws in New Zealand and sends a clear message that overseas manufacturers cannot evade accountability for supplying defective goods in the country. It highlights the importance of holding all parties in the supply chain responsible for ensuring the safety and quality of products available to consumers in New Zealand.
UPDATE: The Body Corporate’s application for leave to appeal the Court of Appeal’s Consumer Guarantees Act finding was dismissed by the Supreme Court on 9 May 2024.
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Email: candrews@mcveaghfleming.co.nz
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© McVeagh Fleming 2024
This article is published for general information purposes only. Legal content in this article is necessarily of a general nature and should not be relied upon as legal advice. If you require specific legal advice in respect of any legal issue, you should always engage a lawyer to provide that advice.
