In a decision that will be of interest to manufacturers and suppliers of goods to New Zealand consumers, the Court of Appeal confirmed that overseas manufacturers are covered by the Consumer Guarantees Act 1993 (CGA) irrespective of whether they have a place of business in New Zealand.^[1]  The Court also considered whether products that are incorporated into a building remain covered by the consumer warranties provided by the CGA.   

In this FYI we look at the details of the case and its potential wide-reaching impact. Click here to read more.

We examine the key points arising from the judgment in Body Corporate Number DPS 91535 & Ors v 3A Composites GmbH [2023] NZCA 647 as it relates to consumer claims, including the challenges that parties face when bringing construction product defect claims under the CGA. 

Background

Following the 2017 Grenfell Tower fire tragedy in London, there has been growing recognition of the fire risks associated with the use of aluminium composite panel (ACP) cladding on buildings. 

3AC is an ACP cladding manufacturer based in Germany with no New Zealand premises. 3AC’s product, called Alucobond, was sold in New Zealand through two suppliers: Skellerup Industries Ltd and Terminus 2 Limited (formerly known as Kaneba Limited). Both suppliers are respondents in the claim. 

The appellants are two building owners^[2] who used Alucobond on their respective buildings. The appellants claim against 3AC that Alucobond is defective. The appellants asserted, among various other claims, that 3AC breached its obligations to them as consumers by supplying a defective cladding product in New Zealand. 

The appellants served their claim on 3AC in Germany. 3AC filed a protest to jurisdiction of the New Zealand Courts and argued that an overseas manufacturer is not subject to the CGA. 

The CGA applies to overseas manufacturers of goods that are supplied to NZ 

The Court of Appeal considered the focus of the CGA, which is to provide meaningful remedies to consumers of goods supplied in New Zealand. On that basis, the Court held that the CGA applies to overseas manufacturers of goods supplied in New Zealand. 

The Court determined that the fact that the manufacturer is not located in New Zealand is not a reason to excuse them of their responsibility to produce safe quality goods to New Zealand consumers. In response to the argument that a consumer might be able to recover damages from multiple parties, the Court held that any loss or damage can only be recovered once; so there is no unfair duplication of liability between manufacturer and importer/distributor.

The Court of Appeal’s approach is consistent with that taken by the Courts in Australia^[3] and broader principles of private international law. The Court of Appeal embraced these broader principles by acknowledging that a focus on the place of manufacture would be unsatisfactory.

In the end the Court held that both the supplier and manufacturer can be liable for any breaches of the warranties owed under the CGA to consumers in New Zealand, whether the goods are manufactured here or not.

However, obstacles remain when bringing a construction product defect claim under the CGA

The CGA provides rights of redress against a manufacturer in respect of goods supplied to, or through, a consumer.^[4] However, whole buildings are excluded from the definition of “goods” under the CGA.^[5] Alucobond cladding had been supplied to a builder, who then incorporated it into the appellants buildings. The appellants did not purchase the Alucobond – rather they acquired the Alucobond product when they purchased the building. The Court considered whether the Alucobond cladding fitted the definition of “goods” after having been incorporated into the buildings. 

The Court held that because the Alucobond cladding was attached to the buildings, it had been incorporated into a building so as to lose its separate identity.

So, even though the right of redress against a manufacturer of goods survives a sale by one consumer to another, “it must still be the relevant goods that have been acquired by one consumer, and then sold by that first consumer to the second consumer.”

Observations 

The judgment confirms that an overseas manufacturer or supplier is liable under the CGA for products supplied in New Zealand. The question of whether a manufacturer could be liable under the CGA even if it did not intend for, or was aware of, its products being supplied in New Zealand was left open.

However, in a blow to plaintiffs in claims relating to defective construction products that have been incorporated into a building, a claim under the CGA is unlikely to succeed.^[6]

The appellants have applied for leave to appeal to the Supreme Court. We will keep a close eye out for any developments in this case. In the meantime, if you have any questions about this case or any aspect of how this decision may impact your business, please get in touch with one of our experts.

Thanks to Joeli Filipo, Solicitor, for his assistance with preparing this article.