Building supply company Carter Holt Harvey says it should not face legal action over hundreds of leaky school buildings because it is protected by the 10 year limitation on claims under the Building Act.

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In a three-day hearing in the Supreme Court this week, the building supply company asked the court to apply the limitation, and throw out the Education Ministry's claim that it was negligent in failing to warn that its cladding product, Shadowclad, might not work in the way the schools intended.

The company's lawyer, David Goddard QC, told the court yesterday the only purpose of the product was to carry out building work, so the 10 year limitation on claims should apply.

"It supplied an input into building work for the purpose of carrying out building work in a manner that would - if properly applied - achieve compliance with the building code.

"The alleged defects in the product all depend on an intention that the product would be used to carry out building work."

However, the Ministry's counsel, James Farmer QC, said the claim was not about the way the cladding was used but about what Carter Holt failed to do.

"The defence that we're going to face eventually in this case is that the product can be installed adequately or properly. We dispute that. We say the product is inherently defective."

The 10 year limitation period applied only to building work, not building products, he said.

If Carter Holt succeeds in having the 10 year limitation applied, that will remove about 600 of the 890 buildings from the ministry's claim in the High Court, which was given the green light by a Court of Appeal ruling last year.

At the same time the ministry is cross-appealing an Appeal Court decision that it cannot sue on the basis that Carter Holt negligently mis-stated claims about Shadowclad.

In court yesterday, another of the ministry's lawyers, Nicholas Flanagan, said it was reasonable to assume that builders, architects and others relied on the company's claims that its product met the building code.

The only reason manufacturers issued specifications was to persuade the public to buy their products, and nobody could use a cladding with unknown qualities, he said.

However, Mr Goddard said it would not be fair to expect the company to be held responsible for the way in which its product was used in every building, because it had no control over that.

The Court of Appeal was correct in ruling the ministry would have to prove that specific individuals relied on specific claims made by the company in each of the 890 buildings involved, he said.

The case, which began three years ago when the ministry launched a $1.5 billion action against Carter Holt and two other cladding manufacturers, could potentially pave the way for other claims involving cladding companies.

The ministry has since reached confidential settlements with the other two companies, James Hardie and CSR Building Products.

The Supreme Court has reserved its decision.