Can hydraulic brake fluid damage the pads?

Yes most definitely. It is vital that the hydraulic system is in good working order. All calliper seals and hoses should be checked for leakages when the pads are fitted. An easy way to check is to look for a sticky area with caked dirt, this will indicate where the leak is coming from in your system. Brake hoses and seals should last 6-8 years under normal conditions.