VCAT’s Lacrosse decision sparks controversy for building professionals28 February 2019 | Professional Indemnity & Financial Lines
A few hours ago, in a courtroom with standing room only, his Honour Judge Woodward handed down what could end up being the most anticipated decision for 2019 – the decision flowing from the rectification of the cladding on Melbourne’s Lacrosse residential tower (Lacrosse), following the 24 November 2014 fire that is alleged to have caused current and anticipated losses exceeding $12 million.
The commencement of the fire was quite simple – the tenant, returned from a working holiday in France, dropped his backpack, and decided to smoke a cigarette. He left his cigarette butt in a plastic food container that served as an ashtray and the rest is history. The unextinguished cigarette butt was held to be the ignition source but the rapid spread of fire up the side of the building was facilitated by the aluminium composite panels (ACPs) used on the on the southern wall. The ACPs had a 100% polyethylene core.
In late 2018, the builder agreed to replace the ACPs which resulted in this proceeding focusing on the allocation of responsibility as between the remaining respondents.
The judgment focuses on the selection, approval and installation of the ACPs that enabled the fire spread. Critically, his Honour found that the ACP did not satisfy the Deemed-to-Satisfy provisions of the Building Code of Australia (BCA).
His Honour found that the builder breached the warranties implied into the design and construct contract under section 8 of the Domestic Building Contracts Act 1995 (Vic) (the Act). That is, the warranties as to:
- suitability of materials; (section 8(b) of the Act);
- compliance with the law (which includes the BCA) (section 8(c) of the Act); and
- fitness for purpose (section 8(f) of the Act).
His Honour confirmed the well established position that the builder’s liability for design and construction was not merely an obligation to use reasonable care and, in particular, the warranty for fitness for purpose was “absolute”. Further, the obligation of the builder must be measured by reference to the purpose for which the building was required under the conditions likely to be encountered (i.e., Lacrosse was a multi-storey residential apartment building).
The builder was found to have breached the warranties and, therefore, held primarily liable to the owners.
However, his Honour found that the builder did not fail to exercise reasonable care in the construction of Lacrosse by installing ACP.
Instead, his Honour found there was no evidence that the builder failed to take reasonable care and no evidence adduced from any party to the effect that the builder did not act reasonably or in accordance with what would be expected of a reasonably competent builder in the circumstances of the case. The critical point here:
“for a large and complex project, [the builder] has sought to cover acknowledged shortcomings in its own expertise by engaging highly skilled professionals to (in a variety of different ways) direct and supervise its work.”
His Honour held the following parties responsible for the loss:
- the fire engineer was responsible for 39%;
- the building surveyor for 33%;
- the architect for 25%; and
- the tenant for 3% (which the builder cannot recover as no parties sought judgment against him (in default of appearance or otherwise)).
Each of the building surveyor, fire engineer and architect were all held to have breached their consultancy agreement with the developer.
The building surveyor
His Honour found that the building surveyor failed to exercise due care and skill in issuing the building permit which approved the architect’s specification of ACPs “indicative to Alucobond” and in failing to notice and query the incomplete description of the cladding systems in the fire engineering report.
As his Honour had found that the ACPs did not satisfy the Deemed-To-Satisfy provisions of the BCA, he also found that the defence of peer professional opinion based under section 59 of the Wrongs Act 1958 (Vic).
The architect too failed to exercise due care and skill in failing to:
- remedy defects in its design (namely, in the architect’s the specification and drawings which provided for the extensive use of ACPs on the façades).
- ensure, as head design consultant, that the ACP sample provided by the builder was compliant with its own design intent articulated in the specification and the BCA.
The fire engineer
The fire engineer failed to:
- conduct a full engineering assessment of Lacrosse with the requisite assessment level dictated within the International Fire Engineering Guidelines and failing to include the results of that assessment in its fire engineering report; and
- recognise that the ACPs proposed for use on Lacrosse did not comply with the BCA and failed to warn (at least) the builder (but probably to the building surveyor, the architect and the superintendent) of that fact.
Given the likely implications of the decision, we now wait to see who files the appeal first.
Owners Corporation No.1 of PS613436T v LU Simon Builders Pty Ltd (Building and Property)  VCAT 286