At the High Court in Auckland today, Hughes said James Hardie eagerly marketed Harditex to New Zealand homeowners, despite concerns about drainage.
He said company memos and external correspondence showed concerns about drainage were raised in 2000.
But Hughes said the company kept its lips sealed.
"Crucially in 2000, having identified very clear inadequacies in the Harditex product, James Hardie's instinctive reaction appears to be: 'We need to maintain our market share'."
He said the company never thought: "Why don't we go to the market and warn the market that Harditex has these problems?"
Hughes said consumers had believed Harditex would work, and would keep their homes dry.
The plaintiffs - the people suing James Hardie - have argued Harditex could never work as James Hardie intended.
"The design intent is that the water stops at the first external barrier," Hughes said. "The fundamental design intent is acknowledged, in effect, not to be achieved."
Hughes has argued James Hardie encouraged joints to be perfectly sealed and the system failed to let any moisture drain adequately to the outside, or to dry out.
The plaintiffs say an impossibly high level of workmanship was needed to make the system work, and James Hardie never properly tested Harditex in New Zealand conditions.
Hughes said even in the 1990s, problems with Harditex were uncovered.
"There were too many opportunities for water to get in, no matter how well it was constructed."
Harditex was not withdrawn until 2005.
The court has been told James Hardie enacted an "improvement plan" around Harditex, and this led to a new product named Monotek.
Hughes said James Hardie felt Monotek featured better waterproofing elements in the cladding, including an engineered building wrap and sealing system.
James Hardie has not yet had a chance to respond at length to Hughes' remarks.
The trial before Justice Christian Whata started yesterday and is expected to last at least four months.
