With market share sliding after rival Juken entered the market for timber framing, Red Stag sued alleging Juken misrepresented Building Code compliance for its laminated product. It failed. Red Stag, and many building supply companies, wrongly confused Code hazard classes with treatment specifications, the High Court ruled.
If breach of the Fair Trading Act had been proved, Red Stag was in line for a damages award totalling $6.9 million.
At issue was market views on the respective merits of traditional whole sawn timber framing and Juken’s product produced by gluing together slices or veneers of timber pressed together under high pressure.
Glued veneer timber is structurally stronger than conventional whole sawn timber.
Strength is not the sole issue. Rotten/leaky homes constructed from untreated kiln-dried timber led to New Zealand’s ongoing ‘leaky home’ crisis and a tightening of Building Code requirements that framing timber be treated chemically to resist mould should water penetrate exterior cladding.
Building Code requirements for house framing timber specify framing as being a H1.2 Hazard Class. The product must be able to withstand borer and mould. Typically, boron is forced under pressure into framing timber to provide chemical protection.
Red Stag alleged Juken was misrepresenting its laminated product as H1.2 framing when it had not undergone full penetration boron treatment.
Juken was in breach of the Fair Trading Act, it claimed.
Juken marketed its product under the brand: J-Frame. Marketing material described J-Frame as ‘treated to meet or exceed H1.2 … treatment standards.’ First sales were in late 2007.
Much of the court’s time was taken up with argument over the level of boron penetration into J-Frame’s layered veneer compared with traditional whole sawn timber; an argument over what amounted to ‘full penetration.’
Justice Venning ruled Juken’s boron treatment complied with product requirements for H1.2 Hazard Class construction.
The standard demanded by Red Stag for Juken’s product exceeded compliance requirements for its own product, Justice Venning said.
There had been no misrepresentation by Juken.
With an appeal in prospect, Justice Venning then calculated what damages might have been payable to Red Stag if Juken had misrepresented its product. This required a counter-factual assessment of market shares as if Juken had been temporarily forced from the market and required to reformulate its product.
It was assumed Red Stag would have picked up a fifty per cent share of this vacated market. This represented potential revenue otherwise not gained, calculated at $3.9 million. With addition of compensation for the present value of this revenue loss, total damages awarded would have been $6.9 million.
Red Stag Timber Ltd v. Juken New Zealand Ltd – High Court (10.05.24)
24.118