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Friday, April 30

Company executive fined for Fair Trading Act breach

The former managing director of a timber company that has gone into liquidation has pleaded guilty to 36 charges of breaching the Fair Trading Act in relation to misleading timber retailers and consumers about the characteristics of timber frames and roof trusses. He has been fined a total of $15,000 and has been ordered to pay costs of $130 in the Auckland District Court on 28 April 2010.

Larry Roger Binns was the managing director of Total Frame and Truss Limited, a west Auckland-based company, which supplied computer-designed prefabricated timber wall frames and roof trusses to hardware retailers, independent building companies and contractors throughout New Zealand and particularly in the greater Auckland area.

The charges relate to a period between April 2007 and October 2008 and allege that Total Frame and Truss represented to its customers that the frames and trusses had been manufactured using MSG8 timber. MSG8 is a premium grade of timber that has been machine stress graded and is suitable for building frames. However, at the direction of Mr Binns, the majority of the timber used was a lower grade, known as either non-load bearing or ‘reman’ timber, which does not have the required characteristics of MSG8 timber.
The Commerce Commission commenced an investigation after receiving a complaint from the Department of Building and Housing. A Department of Building and Housing’s investigation was triggered when a building inspector noticed that timber used in a frame was different to that stated on the specifications.

 “All businesses must ensure that the claims made about goods and services are accurate and not misleading. This is of particular importance where claims are not able to be easily verified by an ordinary consumer. It would not have been possible for a consumer to know whether frames and trusses were manufactured using MSG8 timber by looking at a completed product. Reliance was placed on the documentation supplied by Total Frame and Truss. Consumers and other retail businesses alike should have been able to trust the information they received about their frames and trusses,” said Greg Allan , Commerce Commission Fair Trading Manager, Wellington .

The Commission estimates that around 4,000 structures such as houses, garages and new extensions around New Zealand , in particular in the greater Auckland area, were built using frames and trusses supplied by Total Frame and Truss. The Commission has received expert advice that while there is no risk of the frames or trusses failing, there is a possibility that some frames may bend under extreme conditions.

As Total Frame and Truss is in liquidation, many of the businesses that the frames and trusses were manufactured for have taken responsibility for the assessment, repair and maintenance costs associated with buildings where the frames and trusses were used.

“These businesses are to be commended for the responsible approach they have taken to this issue, which was not of their making. They, as well as the consumers, are victims of Mr Binns’ offending,” said Mr Allan.

“This case highlights the fact that, even when a company is in liquidation, if the Fair Trading Act has been breached, company executives can be held to be liable under the Fair Trading Act and may face prosecution. Senior management should ensure that they are familiar with and comply with all relevant legislative requirements. Failure to do so can not only have serious consequences for their companies, but for them personally,” said Mr Allan.