Against the grain

June 26, 2010
It might have ended with a whimper, but a massive lawsuit fought by Nelson MP Nick Smith and a North Island timber scientist was a high-stakes ride from the outset. By Geoff Collett and Karen Goodger.
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Nick Smith remembers Christmas 2005 better than most. The Saturday before, the Nelson MP was in his usual place at the city fleamarket, flying the Nick Smith flag and meeting with constituents. He didn't recognise the man who had made an appointment to see him, but the intention soon became clear.
"How can I help you?" Dr Smith asked the visitor to his caravan office. "I've got a writ for you, " came the reply, as the man handed over the papers advising the MP that he was facing potentially the biggest defamation claim in New Zealand's history.
There was no merry Christmas in wait for Dr Smith, and not much of a happy New Year either. With the country's legal fraternity in shutdown mode, so no lawyers to talk to, he spent the holidays stewing over how he might defend himself against the claim, that he was liable for $15 million in losses faced by timber preservation company Osmose New Zealand.
The two had been involved in an intermittent slanging match during the previous six months about a new form of treated building timber, marketed as T1.2, developed using a product made by Osmose, called TimberSaver.
Dr Smith had made some colourful, critical remarks about T1.2, linking it to the ongoing leaky homes crisis. Osmose had called the claims "unfounded" and demanded an apology. He had never imagined it coming to this.
For Dr Smith, June 9 this year should also be a date he won't forget for the rest of his political career. It may not have been his finest hour, but if he felt on Christmas Eve 2005 that the sky had fallen in on him, 4 1/2 years later, he could finally satisfy himself that it was more or less back in place.
In the High Court at Auckland that morning, his lawyer, Peter McKenzie, read a short apology from the MP, with Dr Smith looking on from the public gallery. "I apologise for having made public statements that did not fully represent the position in relation to TimberSaver. In particular, I now accept I overstated the risks associated with the use of TimberSaver; that the problems were with the marketing of timber, and ensuring the conditions of use were complied with, that were not primarily the responsibility of Osmose; and that, as a result, some of the statements I made were incorrect and unfair to Osmose."
Dr Smith paid some money - the details are confidential - and the case was closed. He was met by a clutch of journalists outside the courthouse and made it clear he was ready to move on.
But even if Osmose v Smith (and seven others) finished with something of a whimper - and even if, in Dr Smith's words, "this particular debate over timber treatment is long over" - its lessons will not be quickly forgotten.
If Nick Smith's sympathisers think he had it tough during the four years the lawsuit was hanging over him, spare a thought for his principal co-defendant.
Robin Wakeling is a Rotorua scientist specialising in timber preservation. He runs a private consultancy and has a lengthy track record of working with the timber industry, as well as being an expert adviser on leaky homes.
As Dr Wakeling explains it, the timber preservation industry has its problems and its share of dirty laundry, illustrated graphically by various Commerce Commission investigations.
It's also high stakes, judging by his experience. At the same time he was caught up with Dr Smith as a principal defendant in the Osmose action, a second wood preservation company, Kop Coat, was suing him "for very similar reasons" - he had raised questions casting doubt on the performance of one of its products. The Kop Coat case never proceeded, the company dropping its action.
Dr Wakeling is prevented from discussing his settlement in the Osmose case by the same sort of confidentiality agreement as Dr Smith's, other than to say that, unlike the MP, he wasn't required to apologise for anything he said.
But he can go into detail about the technical and industry issues that he says are important to the context of the argument.
The leaky homes crisis was ramping up; the Government had only recently moved to reintroduce rules requiring house framing timber to be treated to protect against both dampness and borer, after the disastrous mid-1990s decision to allow untreated timber; the building industry's frustrations with using timber treated with traditional methods (which either interfered with the drying process or added to the cost) made things ripe for a new product.
Osmose's TimberSaver was seen by some as the answer - it was sprayed on to the wood, and while it might not penetrate right through, as traditional preservatives were expected to, the company came up with a compelling case to convince the rulemakers that TimberSaver and T1.2 timber worked effectively, so long as it was handled properly.
Dr Wakeling's entanglement started when he wrote a short, dry article about the bureaucratic process that had allowed T1.2 wood to be introduced to the market, and the technical shortcomings he saw in its performance.
He maintains that his concern was focused on the "double standard" he saw in an industry reeling from the mounting disaster of leaky homes.
"The issues weren't really about a single product, " he says today. "It's unfortunate that that's where the focus went, because these issues are far more generic and widespread."
Dr Smith, meanwhile, as the then-Opposition spokesman on building issues, was hearing different concerns, principally from contacts in the building industry: that builders were ignorant of how T1.2 needed to be handled to ensure it provided the protection it promised; that the building trade was confused about the differences between it and traditionally- preserved wood; and that builders had no idea about what product they were getting. As he gathered his evidence, he discovered it being routinely sold in Placemakers stores as a traditionally-treated timber. This led to a complaint to the Commerce Commission and action against the building supplies chain.
T1.2 was taking off in the market - one report suggests that by 2005, it was accounting for half the treated framing timber being sold in New Zealand. According to Osmose, that soon changed.
After spending weeks researching and meeting with industry contacts - during which he first met Dr Wakeling - Dr Smith went on television and radio and to the newspapers, criticising T1.2 timber and the Government, for allowing it to be approved. His initial statements were accompanied by Dr Wakeling's article.
A flurry of publicity followed and, according to Osmose, the market for the product collapsed.
It argued that testing supported TimberSaver and T1.2, and that Dr Smith was acting for his own political advantage. Suggestions emerged that Dr Wakeling was working for a rival company with a rival product. A writ was born. Dr Wakeling and Dr Smith were eventually joined by six others, including Osmose's business rival Arch Wood Protection, and one of its biggest clients, Bay Treatment, plus Bay Treatment's Robert Lynds; a company Dr Wakeling worked for called Primaxa, which had developed a wood treatment system for Arch Wood; a Christchurch public relations company, Momentus, whose principal, David Lynch, had helped Dr Smith develop his campaign on the issue; and Ron Moon, an Arch Wood executive.
These days, Dr Wakeling is surprisingly philosophical about more than four years spent under the weight of a mammoth defamation claim.
He defended himself for much of it, to hold his costs down - Dr Smith was able to convince Parliament's Speaker that, as he attracted the action through his work as an elected politician, he was entitled to some taxpayer support, and received $207,000 from the state to help cover his fees. Dr Wakeling had no such luck.
"You learn to put these things in a box, " he says. "It's part of staying sane when you've got big American corporations [Osmose and Kop Coat were American-owned], well- resourced corporations, gunning for you - although you're also aware they're not necessarily gunning for you [personally]. You may to a degree be caught in the crossfire."
He thinks his double exposure to defamation actions says a lot about the American corporate approach to doing business, where recourse to the courts is a normal part of sorting out disputes and challenges.
Dr Smith is keen to highlight what he sees as a worrying side-effect of the Osmose action.
Throughout, he insisted he was expressing the "freedom of speech" of a politician to debate important public interest issues. Now, he says, the enormous writ he faced has had a "chilling effect" on politicians wanting to speak out about similar issues. For his part, "I've become very afraid of defamation law and defamation lawyers".
The argument about the rights of politicians (and others) to speak out about issues of high public interest became a bit of a side issue in the Osmose case, arising when Dr Smith and Dr Wakeling tried to get media companies that had reported their views added to the action.
The media companies resisted, and won, costing Dr Smith and Dr Wakeling even more in costs.
Defamation law expert Ursula Cheer of Canterbury University says a ruling made during these preliminary proceedings further opened the possibility of using public interest as a defence for making defamatory statements. While it is developing law, Ms Cheer says that if any MPs, like Dr Smith, fear that the Osmose case will "chill" their willingness to speak out, the evolving situation around when it is safe to air such views should give them some comfort.
An obvious question is why Dr Smith didn't make his criticisms in Parliament, where he would have had complete legal protection for anything he might have said. His counter: "I've always been of the view that if you have the courage of your convictions, you should be able to express your view inside and outside of Parliament." But now he tempers that - not when your financial security is at stake.
Inevitably, Dr Smith's involvement in the case - the latest instance where he has found himself the target of court action during his 20 years in Parliament - prompted views that he had yet again shot from the lip. Dr Wakeling does not see it that way.
"I have a lot of respect for Dr Smith. I know he comes with a reputation, but I suppose a lot of politicians won't do anything until they know which way the wind's blowing.
"A lot of people, when you mention Nick Smith, say he's got a big mouth - well, politicians are supposed to have a big mouth. They're there to speak for the public."
Dr Smith now describes himself as "older, wiser and poorer" for his experience. "At least I know Linley [his second wife, who he met and married while the saga dragged on] didn't marry me for my money, " he jokes.
More seriously, he points to how difficult the experience has been. The legal bills kept pouring in, and while he had taxpayer support, plus a fundraising trust set up by friends to help him through, he personally paid out more than $230,000.
He tried to borrow funds, but banks wouldn't touch him.
"No bank is prepared to give you a mortgage or any financial assistance when you've got a $14 million writ sitting over your head. You just cannot do any normal transactions for five years. It has quite a debilitating impact."
He takes a pragmatic view of having to make an apology in court, pointing out that "the industry is consistently complying with the New Zealand standards regarding timber treatment" - so the concerns he had in the first place have been addressed.
He says the cost of settling was less than it would have cost to defend himself through a full hearing.
Dr Wakeling also says the experience has made him cautious about what he says, but he continues to watch out for behaviour in the timber preservation industry that might trigger concern.
Actually, he says, some things have improved. The government regulators are better skilled and informed; the big companies have developed their own quality control systems, to avoid being stung by the regulators; the industry generally has realised that there are people - including pesky MPs - keeping watch.
"I don't hold any grudges against Osmose, " he adds. "I send customers their way all the time - they have good products."
For its part, Osmose says it has moved on. It has limited its comments to a written statement following the end of the defamation case, including that it was "satisfied with the settlement and with the apology that Dr Smith has provided, in which he acknowledged that statements made about timber treated with TimberSaver were incorrect and unfair to Osmose".
And Dr Smith has learned some lessons - including that these days, when someone wants to make an appointment to see him at the market, he first has his secretary politely ask what it's about.