The James Hardie Group is facing 370 plaintiffs who are alleging that their products and cladding systems were defective, not weathertight and failed to comply with the prevailing building standards. The causes of action brought against the Group are based on tort, the Consumer Guarantees Act 1993, and the Fair Trading Act 1986.
James Hardie NZ Holdings (JHNZH) and RCI Holdings Pty Limited (RCIH) (both holding companies only) applied for summary judgement on the grounds that the plaintiffs’ causes of action against them were bound to fail. The plaintiffs needed to show they had an arguable case for their claims that JHNZH and RCIH knew, or ought to have known, that the products would be deficient and that therefore they owed and breached a duty to warn, inform and/or take reasonable steps to withdraw the products.
The plaintiffs argued that because the holding companies had directors in common with the manufacturing companies, knowledge of the deficiency should be attributed to JHNZH and RCIH. The duty to warn issue was more contentious, but ultimately the High Court ordered the application for summary judgement to be set aside on the basis that the plaintiffs had an arguable case and a serious issue to be tried.
While the case has not yet been tried, it opens up the possibility that a holding company will not be able to plead ignorance when the board has actual knowledge of deficiencies with products distributed to the market by an operating subsidiary.