Wellington, Feb 27 NZPA - The Commerce Commission was today rolled by the Court of Appeal over one of its biggest wins under fair trading law - the $900,000 fine imposed against timber giant Carter Holt Harvey for selling timber with a high strength label when it knew the timber did not consistently meet that grade.

The fine was imposed after CCH pleaded guilty to 20 charges of misleading customers.

MGP10 is a high-strength timber used for trusses and framing in homes and buildings. It was marketed as a premium product, but in many cases weaker wood was labelled as high strength and sold for a premium price.

The Commerce Commission said it had found the company knowingly sold nearly $200 million worth of sub-standard timber - enough for about 20,000 new houses.

Then half owned by the world's biggest forest products company, International Paper of the US, CCH was alleged to have decided it would have been "financial suicide" to own up to the behaviour.

In addition to CCH being fined for price-gouging, half a dozen executives were prosecuted under the Fair Trading Act and individually fined as much as $20,000 in the District Court.

The commission claimed in the High Court that CCH's MGP10 sales between May 3 1998 and October 29, 2003 ran to about $63.4 million a year. A packet of 600m of MPG10 cost $3008, while an identical packet of weaker wood was priced at $1566.

But today an appeal court panel of three judges, Justice Robert Chambers, Justice David Baragwanath and Justice Grant Hammond, unanimously ruled that the commission delayed too long in prosecuting, so that the case was held more than three years after it discovered the losses.

CCH said that the commission discovered the likelihood of loss or damage on October 14, 2002, when the executive director of the NZ Timber Industry Federation, Wayne Coffey, provided evidence gathered by Forest Research, or when search warrants were issued on October 24, 2003.

The commission said the limitation clock was never ticking, or if it did start, it was not until raids on CHH premises on October 29, 2003 - which meant that proceedings were filed two days inside the three-year deadline.

But the judges said today the commission breached the three-year limit and that the commission's prosecution in the High Court was struck out "on the ground that it is time-barred".

In addition it hit the commission with significant costs in the appeal court case, and ordered costs in the High Court case to be fixed in light of the judgment in the Appeal Court.

Justice Hammond said: "This gives me no satisfaction whatsoever.

"There is evidence that CCH behaved in an aggressive and bullying sort of way to tray and scare off the commission.

"This may have had something to do with the caution with which the commission proceeded, and which regrettably, has led to the commission's proceeding ... getting out of time".

Use of incorrectly graded timber in a roof truss can cause sagging or deflection but not the failure of the truss.

Carter Holt had promoted its product as having "sophisticated" machine grading of structural timber with every piece of wood tested.

But in December 2003 Carter Holt forestry chief Devon McLean said some product did not always achieve the standard and the company had taken too long to fix a problem it had known about for some time.

Changes in forestry management, in which trees were felled younger, had caused some of the problem as 40 to 50 percent of young trees did not produce stiff enough wood for structural purposes.

Carter Holt Harvey has since been taken over by New Zealand billionaire Graeme Hart.

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