Education Ministry launches lawsuit against James Hardie over leaky schools

The Ministry of Education has launched a representative action against two James Hardie Industries subsidiaries and other parties, claiming several thousand school buildings are leaky and is seeking repair costs and damages.

The Australian company is working with its legal advisers to work out a response, and is not yet able to assess how much of the claim relates to its subsidiaries, it says in a statement. The Education Ministry has started action in the New Zealand High Court.

"The New Zealand Ministry of Education is claiming weather tightness defects in relation to several thousand New Zealand school buildings and is seeking repair costs and unspecified and unquantified damages in relation to the alleged defects," the company says.

"At this stage, James Hardie is not able to assess what proportion of the claim relates to the companies or comment about the validity and/or any potential financial impact of the claim." 

James Hardie halted trading in its shares earlier today pending the announcement. The shares fell 2.1 percent to $A9.57 when they resumed trading.

Earlier this year, the company increased its charge for a New Zealand product liability by $US7.5 million to $US13.2 million in the 2013 financial year.

James Hardie has been and continues to be joined in leaky building claims relating to residential and a small number of non-residential buildings built between 1998 and 2004.

James Hardie NZ Holdings, the local holding company, flagged potential claims by customers from recognised sales as a contingent liability in its 2012 annual report filed to the Companies Office.

“The extent of James Hardie NZ Holding’s liability is currently uncertain, however, management have recognised provisions for their best estimate of future liabilities of these claims,” the report said.

“It is expected that the matters to which the current provision relates could potential settle or go to trial before April 1, 2013,” it said.

As at March 31, 2012, the New Zealand holding company took a $20.9 million provision in its current liabilities, and a further $10.3 million provision in its non-current liabilities.

The Ministry of Education did not immediately respond to BusinessDesk inquiries.

(BusinessDesk)