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Lacrosse Tower combustible cladding VCAT decision

Summary

Yesterday his Honour Judge Woodward, Vice-President of VCAT, handed down the first major decision in Australia in relation to the respective liability of parties involved in the design and construction of a building which included combustible cladding.

Facts

The case concerned the well-publicised fire at the 21 storey Lacrosse Apartment Tower in La Trobe Street, Docklands. That fire has prompted widespread critical analysis of the adequacy of building regulation by governments across Australia.

In the early hours of 24 November 2014, a resident on level eight of the Lacrosse Tower left his cigarette butt in a plastic food container. At 2.23am, the smoke detector in the hallway outside his apartment activated and notified the Metropolitan Fire Brigade. A fire crew arrived minutes later, by which time the fire had travelled rapidly up the external wall cladding to the fourteenth floor and spread to the balcony on each level. Six minutes later the fire had reached the roof of the Tower.

The proceeding

211 Applicants (comprising the relevant owners corporations and apartment owners) (Owners) brought proceedings in VCAT against the following Respondents:

  • the builder of the Tower, L U Simon Pty Ltd (L U Simon)
  • the building surveyor and his employer (Gardner Group)
  • the architect, Elenberg Fraser Pty Ltd (Elenberg Fraser)
  • the fire engineer Tanah Merah Pty Ltd, trading as Thomas Nicolas (Thomas Nicolas)
  • the occupier of apartment 805, Gyeyoung Kim (Mr Kim)
  • the resident who lit the cigarette, Jean-Francois Gubitta (Mr Gubitta)
  • the Superintendent, Property Development Solutions Pty Ltd (PDS).

None of the Respondents had a direct contractual relationship with the Owners.

The case was heard over 22 sitting days, with 91 volumes of tribunal books. Evidence was given by seven lay witnesses and 13 expert witnesses. Mr Kim and Mr Gubitta did not participate in the proceeding. PDS reached a settlement and withdrew their involvement before the hearing.

Judge Woodward’s findings

His Honour found that:

  1. The external cladding specified in the original design, namely Alucobond, failed to comply with the Building Code of Australia (BCA). The substitute aluminium composite cladding (ACP) ultimately installed also failed to comply with the BCA and accordingly, the Building Regulations 2006 (Vic). 
  2. In installing the cladding, L U Simon breached the implied warranties of suitability of materials, fitness for purpose and compliance with the law set out in section 8 of the Domestic Building Contracts Act 1995 (Vic) and is therefore liable to pay damages to the Owners. However, his Honour found that L U Simon did not fail to exercise reasonable care in the construction of the Tower.
  3. Each of the consultants (Gardner Group, Elenberg Fraser and Thomas Nicolas) breached their obligations to L U Simon under their respective consultant agreements (which were novated to L U Simon by the developer) by failing to exercise due care and skill in that:
    • Gardner Group issued a Building Permit for the relevant stage of the building approving the specification by Elenberg Fraser of the ACP. Gardner Group also failed to notice and query the incomplete description of the cladding system in a report produced by the Thomas Nicolas.
    • Elenberg Fraser failed to remedy defects in its design (namely the specification of ACP and design drawings providing for extensive use of ACPs at the Tower) which caused the design to be non-compliant with the BCA and not fit for purpose. Elenberg Fraser also failed as head consultant to ensure the ACP sample provided by L U Simon was compliant with Elenberg Fraser’s design intent as articulated by its specification and the BCA.
    • Thomas Nicolas failed to conduct a full engineering assessment of the Tower in accordance with the International Fire Engineering Guidelines and failed to include the results of that assessment in its fire engineering report. Thomas Nicolas also failed to recognise that the ACP used at the Tower did not comply with the BCA and did not warn L U Simon (or Gardner Group, Elenberg Fraser or PDS) accordingly.
    • The resident, Mr Gubitta, had breached a duty of care owed to the Owners by failing to take care in the disposal of his smouldering cigarette, but concluded that his responsibility for the loss and damage was minimal.

The Result

While his Honour concluded that L U Simon was liable to pay damages to the Owners, he then determined that the damages payable by L U Simon were to be reimbursed by the other Respondents as ‘concurrent wrongdoers’ pursuant to Part IVAA of the Wrongs Act 1958, in the following proportions:

  • Gardner Group: 33 percent
  • Elenberg Fraser: 25 percent
  • Thomas Nicolas: 39 percent
  • Mr Gubitta: three percent

Because Mr Gubitta had taken no part in the proceeding and no party had sought judgment against him, no order was made against Mr Gubitta and L U Simon was not reimbursed the three percent damages it is liable to pay to the Owners that was apportioned to Mr Gubitta.

The Owers claimed at least $12,765,812.94 in damages, $4,851,937.19 was agreed between the parties.

Including the agreed sum, his Honour awarded damages in the sum of $5,748,233, finding that damages in the sum of $194,414.01 were not proven by the Owners and were disallowed. The remainder of at least $6,823,165 are to be the subject of further submissions and remain unresolved.

In his reasons, his Honour takes care to note that his comments ‘should not be read as commentary generally on the safety or otherwise of ACPs and their uses’. His Honour notes that there may be circumstances (such as signage or decorative use) where the use of ACP can be compliant, including where made subject to a performance-based solution under the BCA, or where types of ACP with a lower polyethylene content is used. His Honour notes that his findings relate only to the particular use of ACP at the Tower and are informed by the particular contracts between the parties in the case.

Implications for the construction industry

The decision will have significant consequences for regulators, builders, design consultants, building surveyors, insurers, developers and owners of affected properties.

In the coming weeks, we will publish a series of articles on those impacts in each sector and invite you to participate in a seminar series addressing those issues.

AUTHORS
  Simone Holding | Partner
+61 3 9258 3858
simone.holding@maddocks.com.au
Natalie Burgess | Associate
+61 3 9258 3631
natalie.burgess@maddocks.com.au

Summary

Yesterday his Honour Judge Woodward, Vice-President of VCAT, handed down the first major decision in Australia in relation to the respective liability of parties involved in the design and construction of a building which included combustible cladding.

Facts

The case concerned the well-publicised fire at the 21 storey Lacrosse Apartment Tower in La Trobe Street, Docklands. That fire has prompted widespread critical analysis of the adequacy of building regulation by governments across Australia.

In the early hours of 24 November 2014, a resident on level eight of the Lacrosse Tower left his cigarette butt in a plastic food container. At 2.23am, the smoke detector in the hallway outside his apartment activated and notified the Metropolitan Fire Brigade. A fire crew arrived minutes later, by which time the fire had travelled rapidly up the external wall cladding to the fourteenth floor and spread to the balcony on each level. Six minutes later the fire had reached the roof of the Tower.

The proceeding

211 Applicants (comprising the relevant owners corporations and apartment owners) (Owners) brought proceedings in VCAT against the following Respondents:

  • the builder of the Tower, L U Simon Pty Ltd (L U Simon)
  • the building surveyor and his employer (Gardner Group)
  • the architect, Elenberg Fraser Pty Ltd (Elenberg Fraser)
  • the fire engineer Tanah Merah Pty Ltd, trading as Thomas Nicolas (Thomas Nicolas)
  • the occupier of apartment 805, Gyeyoung Kim (Mr Kim)
  • the resident who lit the cigarette, Jean-Francois Gubitta (Mr Gubitta)
  • the Superintendent, Property Development Solutions Pty Ltd (PDS).

None of the Respondents had a direct contractual relationship with the Owners.

The case was heard over 22 sitting days, with 91 volumes of tribunal books. Evidence was given by seven lay witnesses and 13 expert witnesses. Mr Kim and Mr Gubitta did not participate in the proceeding. PDS reached a settlement and withdrew their involvement before the hearing.

Judge Woodward’s findings

His Honour found that:

  1. The external cladding specified in the original design, namely Alucobond, failed to comply with the Building Code of Australia (BCA). The substitute aluminium composite cladding (ACP) ultimately installed also failed to comply with the BCA and accordingly, the Building Regulations 2006 (Vic). 
  2. In installing the cladding, L U Simon breached the implied warranties of suitability of materials, fitness for purpose and compliance with the law set out in section 8 of the Domestic Building Contracts Act 1995 (Vic) and is therefore liable to pay damages to the Owners. However, his Honour found that L U Simon did not fail to exercise reasonable care in the construction of the Tower.
  3. Each of the consultants (Gardner Group, Elenberg Fraser and Thomas Nicolas) breached their obligations to L U Simon under their respective consultant agreements (which were novated to L U Simon by the developer) by failing to exercise due care and skill in that:
    • Gardner Group issued a Building Permit for the relevant stage of the building approving the specification by Elenberg Fraser of the ACP. Gardner Group also failed to notice and query the incomplete description of the cladding system in a report produced by the Thomas Nicolas.
    • Elenberg Fraser failed to remedy defects in its design (namely the specification of ACP and design drawings providing for extensive use of ACPs at the Tower) which caused the design to be non-compliant with the BCA and not fit for purpose. Elenberg Fraser also failed as head consultant to ensure the ACP sample provided by L U Simon was compliant with Elenberg Fraser’s design intent as articulated by its specification and the BCA.
    • Thomas Nicolas failed to conduct a full engineering assessment of the Tower in accordance with the International Fire Engineering Guidelines and failed to include the results of that assessment in its fire engineering report. Thomas Nicolas also failed to recognise that the ACP used at the Tower did not comply with the BCA and did not warn L U Simon (or Gardner Group, Elenberg Fraser or PDS) accordingly.
    • The resident, Mr Gubitta, had breached a duty of care owed to the Owners by failing to take care in the disposal of his smouldering cigarette, but concluded that his responsibility for the loss and damage was minimal.

The Result

While his Honour concluded that L U Simon was liable to pay damages to the Owners, he then determined that the damages payable by L U Simon were to be reimbursed by the other Respondents as ‘concurrent wrongdoers’ pursuant to Part IVAA of the Wrongs Act 1958, in the following proportions:

  • Gardner Group: 33 percent
  • Elenberg Fraser: 25 percent
  • Thomas Nicolas: 39 percent
  • Mr Gubitta: three percent

Because Mr Gubitta had taken no part in the proceeding and no party had sought judgment against him, no order was made against Mr Gubitta and L U Simon was not reimbursed the three percent damages it is liable to pay to the Owners that was apportioned to Mr Gubitta.

The Owers claimed at least $12,765,812.94 in damages, $4,851,937.19 was agreed between the parties.

Including the agreed sum, his Honour awarded damages in the sum of $5,748,233, finding that damages in the sum of $194,414.01 were not proven by the Owners and were disallowed. The remainder of at least $6,823,165 are to be the subject of further submissions and remain unresolved.

In his reasons, his Honour takes care to note that his comments ‘should not be read as commentary generally on the safety or otherwise of ACPs and their uses’. His Honour notes that there may be circumstances (such as signage or decorative use) where the use of ACP can be compliant, including where made subject to a performance-based solution under the BCA, or where types of ACP with a lower polyethylene content is used. His Honour notes that his findings relate only to the particular use of ACP at the Tower and are informed by the particular contracts between the parties in the case.

Implications for the construction industry

The decision will have significant consequences for regulators, builders, design consultants, building surveyors, insurers, developers and owners of affected properties.

In the coming weeks, we will publish a series of articles on those impacts in each sector and invite you to participate in a seminar series addressing those issues.

AUTHORS
  Simone Holding | Partner
+61 3 9258 3858
simone.holding@maddocks.com.au
Natalie Burgess | Associate
+61 3 9258 3631
natalie.burgess@maddocks.com.au