The Court of Appeal has thrown out Carter Holt Harvey's bid to block legal action against it over leaky school buildings.
The Ministry of Education lodged a claim against the company in 2013 over sub-standard cladding materials that may have been used in up to 1400 schools.
Carter Holt asked the Court of Appeal to strike out the ministry's claim after the High Court refused to do so.
Among its reasons was that the ministry should be pursuing the lead contractors, not the suppliers of the materials.
The Court of Appeal upheld one part of the company's bid but refused to allow the rest of the appeal.
Associate Education Minister Nikki Kaye said the ministry was still open to settlement discussions with Carter Holt.
Ms Kaye said those school buildings at greatest risk had already been repaired and the rest were also being fixed.