Fined two million dollars for breaches of the Fair Trading Act, Steel & Tube increased revenue by some four million selling as a premium product steel mesh misrepresented as satisfying earthquake standards when no appropriate testing had been carried out. Steel & Tube management were ‘grossly careless’ in not checking staff followed correct procedures, the High Court ruled.
Agitation from the local steel industry about allegedly inferior steel imports and subsequent Radio New Zealand enquiries about local practices resulted in local supplier Steel & Tube Holdings Ltd under investigation. Commerce Commission identified that some 480,000 sheets of SE62 grade steel mesh manufactured and sold by Steel & Tube between 2012 and 2016 had not been tested according to industry protocols and in many cases carried certification falsely certifying mesh had been independently tested. The ‘E’ in SE62 signified the mesh was better able to maintain strength when stretched by earthquakes.
Pleading guilty to Fair Trading Act charges brought by Commerce Commission, Steel & Tube management said the problem lay with a former senior technical staff member at its Christchurch plant. Methodologies required for industry testing were not followed. The staff member considered in-house processes were a sufficient substitute. Independent testing was carried out on sample batches as the product was developed, then copies of the independent test certificate attached to subsequent production runs which had not been independently tested. In the High Court, Justice Duffy said management was grossly careless in not having its manufacturing process audited. Expert evidence indicated the untested SE62 mesh was not a ‘risk to life’ if used for slab flooring; its performance was unknown for suspended floors – the lack of proper testing left open the question of whether it would perform adequately, or not.
The High Court dismissed Steel & Tube’s complaint that the level of fine was excessive. It was a false representation to sell steel mesh described as being independently tested, when it had not. The company, through its senior management, had to accept responsibility for the work of its technical staff.
Commerce Commission v. Steel & Tube Holdings Ltd – High Court (23.08.19)
19.152