24 Oct 2018

Steel and Tube fined a record $1.9m for 'grossly negligent' conduct

6:21 pm on 24 October 2018

Steel and Tube has been fined a record $1.9 million for making false and misleading representations about its steel mesh products.

A worker spreads ready-mix concrete over steel mesh (file)

Steel and Tube has been fined $1.885 million for misleading representations about its steel mesh. Photo: 123RF

The fine is the highest ever handed down under the Fair Trading Act.

The company pleaded guilty to 24 charges laid by the Commerce Commission under the Fair Trading Act.

The charges covered Steel and Tube's actions between 2012 and 2016 and related to 482 batches and approximately 480,000 sheets of steel mesh, which the company sold for about $24m.

On batch tags and test certificates, advertising material and on its website, Steel and Tube said its SE62 steel mesh was 500E grade steel mesh, which met the Australia/New Zealand Standard for reinforcing steel. However, these claims were untrue.

The company also made false and misleading representations on batch test certificates and on its website that the steel mesh had been independently tested, when it had not.

Steel mesh products are used in construction to provide strength and stability in the event of an earthquake.

In a decision released today, Judge Cathcart described Steel and Tube's actions as "grossly negligent".

"Senior management ought to have known of the large scale non-compliance over the four-year charging period," he said.

"The technical manager was not properly supervised. Steel and Tube cannot be permitted to wash their hands of taking responsibility for that negligent oversight.

"It was Steel and Tube's responsibility to have proper systems in place to ensure compliance with the standard. This is particularly so given the significant revenues Steel and Tube derived from its sales of SE62 and the heavy extent of its reliance on the standard and its marketing of that product... the lack of robust procedures would have been self-evident even if basic enquiries had been made."

But non-compliance with the standard did not necessarily mean the products lacked the physical and mechanical properties of earthquake grade steel mesh.

"Questions about the soundness of the mesh remain largely unanswerable, which was precisely the mischief the standard seeks to address," Judge Cathcart said.

"And the whole purpose of the standard is to safeguard people from injury caused by structural failure... and to protect other property from physical damage.

"Steel and Tube's conduct therefore strikes at the core foundation of the Fair Trading Act."

The Commerce Commission started investigating Steel and Tube in March 2016.

A month later, Steel and Tube voluntarily stopped selling its SE62 product.

Commission chairperson Mark Berry said the fine handed down demonstrated that the company's actions were unacceptable.

"Consumers have no choice but to trust and rely on representations about standard compliance. That's why standards exist," he said.

Litigation lawyer Adina Thorn said today's fine would send more property owners her way - she is trying to launch a class action against Steel and Tube over the mesh.

"In my view, the owners of properties who built using non-compliant mesh are facing an increased level of concern, potential losses in resale value, and likely insurance complications in any future earthquake event," Ms Thorn said in a statement.

Steel and Tube's share price gained 0.74 percent following news of the court decision.

The steel manufacturer posted a loss of $32m in the financial year to June, after taking a $50m hit in one-off costs from writedowns of a business and stock, and the cost of an external review of its operations and leadership.

Its value slid slightly this month after Fletcher Building pulled its takeover bid for the company.

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