The Lacrosse cladding fire: Owners Corporation v LU Simon Builders Pty Ltd

In the Victorian Civil and Administrative Tribunal, His Honour Judge Woodward recently handed down the long-awaited decision determining liability for the fire at Melbourne’s Lacrosse building in November 2014.[1]

A cigarette butt that was disposed of in a plastic container led to the rapid ignition of the external cladding used in the east and west façades of the Lacrosse residential tower. The use of aluminium composite panels (“ACPs”), with a 100% polyethylene core, was found by His Honour to be ‘primarily responsible for causing the spread of flame up the side of the building’.[2] In the circumstances, the ACPs were found to be non- compliant with clause CP2(a)(iv) of the Building Code of Australia (“BCA“), as they did not, to the degree required, avoid the spread of fire in the building.[3]

Despite the media rhetoric surrounding the use of cheap cladding imported from China, there was no evidence that suggested the use of these panels would have contributed to the rapid spread of fire above that of the well-known Alucobond material. It was agreed by all experts that the combustibility properties of the two products were ‘fundamentally the same’.[4]

The liability of LU Simon as builder 

The ACPs were found to be unsuitable for use in the external walls of a high- rise residential building and were similarly not fit for purpose.[5] Therefore, the builder was in breach of the warranties in ss 8(b) and 8(f) of the Domestic Buildings Contract Act 1995 (Vic) (“the DBC Act“). It was confirmed by his Honour that the warranties contained in the DBC Act are not merely obligations to use reasonable care, but instead impose absolute liability on the builder, particularly when considering fitness for purpose.[6]

As the ACPs did not comply with the deemed- to- satisfy provisions of the BCA, requiring material used in external walls to be non-combustible, the builder was also found to be in breach of the warranty in s 8(c) of the DBC Act. This included a failure to satisfy s C1.12(f) of the BCA, which allows for the use of prescribed combustible materials, as the ACPs did not fall within the bonded laminate exception. The builder was found to be primarily liable, with his Honour ordering the owners of the building to be paid approximately $5.7 million in damages. A further amount of approximately $6.8 million is yet to be determined.

His Honour did not, however, find that the builder’s conduct, in installing the ACPs, involved a failure to take reasonable care. The builder had no actual knowledge of the risks associated with ACPs, and the evidence established that, at the time, there was a limited understanding of their risks among builders. Therefore, the skill involved in identifying these fire risks was ‘beyond that which can be expected of a reasonably competent builder’.[7] By engaging with each of the ‘highly skilled’ consultants to ensure compliance with the relevant legislation, LU Simon was largely acquitted of its obligation to exercise reasonable care in the circumstances.[8]

His Honour held that three consultants engaged by the builder had breached their contractual obligations, and were liable to reimburse the builder in the following proportions:

  • Gardner Group (the building surveyor) for 33%
  • Elenberg Fraser (the architect) for 25%
  • Thomas Nicolas (the fire engineer) for 39%

The French back-packer, who negligently disposed of the cigarette, was also found to be 3% responsible. In failing to ensure that the cigarette was properly extinguished before leaving it in the plastic container, he was in breach of his duty to the owners to take reasonable care. However, as no parties sought judgment against him, the 3% was left to be borne by the builder.

The Gardner Group

In its acceptance in its role of providing building surveying services, the Gardner Group was engaged specifically to protect against non-compliance with the BCA, assuming a distinct responsibility to ensure that compliant materials were used. The building surveyor firm did not exercise due care and skill as it failed to give ‘adequate or reasonable consideration’ to the use of ACPs and their compliance and suitability under the BCA.[9] It also failed to identify the deficiencies within the fire report. In issuing the building permit, the design documentation provided for cladding that did not avoid the spread of fire in the building and therefore did not meet the requirements of CP2(a)(iv) of the BCA.

Whilst the building surveyor firm relied on peer professional opinion as a defence under the Wrongs Act,[10] his Honour found that the opinion in question, being the use and compliance of ACP’s with a 100% polyethylene core, did not have a logical basis, and did not withstand logical analysis. The Gardner Group was found to have ‘uncritically adopted what they thought was an industry wide approach’, [11] without giving adequate consideration to the appropriateness of the ACPs for their proposed use, nor the compliance of the ACPs with the BCA.

In issuing the building permit, the building surveyor firm also represented to the builder, in trade or commerce, that the use of ACPs as part of the external façade of the tower was compliant with the BCA. This representation was found to be misleading or likely to mislead in contravention of s 18 of the Australian Consumer Law.[12]

Elenberg Fraser

Under its Consultant Agreement, the architect assumed express duties to the builder to exercise due care and skill and to ensure compliance with the legislative requirements.[13] The use of ACPs on the external walls of the Lacrosse tower was specified in the architect’s designs and drawings. His Honour found that, in specifying the non-compliant ACPs, and subsequently failing to correct the non-compliance, the architect did not exercise due care and skill. The design work undertaken extended further than the building’s visual characteristics, which was amplified by the fact that it had undertaken to act as head consultant. While the architect may have been less experienced in applying the provisions in the BCA than the fire engineer and building surveyor, it was ‘sufficiently expert’ to be aware of the need to ensure that the materials it stated would not significantly contribute to the spread of flames.[14]

Thomas Nicolas

In failing to query and evaluate the proposed construction materials to determine any potential fire hazards, the fire engineer did not conduct a full engineering assessment as required under the Consultant Agreement.[15] The fire engineer possessed actual knowledge that the use of ACPs on the east and west facades were proposed as construction materials and was aware that ACPs with a polyethylene core were combustible and a potential fire danger. It therefore had an obligation to actively enquire about what ACPs were proposed, as it were ‘uniquely placed’ to warn against the risk associated with their use.[16] Instead, it ‘wrongly assumed’ the ACPs would be non- combustible,[17] without any justification for holding such an assumption.

The fire engineer was also found to have represented to the builder and the building surveyor, in trade or commerce, that the use of ACPs in the external façade complied with the BCA, and that these representations were misleading or likely to mislead.[18]

Implications

While this decision is a cause of concern for builders and consultants who have approved the use of similar cladding in high rise buildings, his Honour emphasised that the decision was firmly based on the factual circumstances of the case. Consequently, the use of ACPs in building projects does not necessarily signify non-compliance with the BCA. Despite this, the decision may have far- reaching ramifications for building professionals, with the case opening the floodgates for potential litigation. As it stands there has already been two new large scale, yet confidential, disputes listed in court over the use of combustible ACPs, and it will be interesting to see how future litigation progresses.

[1] Owners Corporation No.1 of PS613436T v LU Simon Builders Pty Ltd (Building and Property) [2019] VCAT 286 (28 February 2019).

[2] Ibid [193].

[3] Ibid [194].

[4] Ibid [216].

[5] Ibid [290].

[6] Ibid [285]-[286]; See Barton v Stiff [2006] VSC 307.

[7] Ibid [308].

[8] Ibid [307].

[9] n (1) [349].

[10] 1958 (Vic) s 59(2).

[11] n (1) [387].

[12] Competition and Consumer Act 2010 (Cth) sch 2 (‘Australian Consumer Law’).

[13] n(1) [446].

[14] n (1) [448].

[15] Ibid [498]-499].

[16] n (1) [595].

[17] Ibid [484].

[18] Australian Consumer Law (n 5) s 18.

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