Barry.Nilsson. Lawyers’ Hubert Wajszel, Principal; Senior Associate Emily Schneider and Lawyer Chanelle Blasis discuss the recent VCAT decision on the use of flammable Aluminium Composite Panels on the Lacrosse building, which generated controversy for building professionals. The 2014 fire was alleged to have caused current and anticipated losses exceeding $12 million, they write.
Recently, 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:
A. 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).
B. 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:
1. 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
2. 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.
Hubert Wajszel is a principal in the Insurance and Health team and is based in the Melbourne office. Hubert says: “I was young when I completed my law degree, but I was lucky enough to be offered an in-house position with the Australian Medical Association (Victoria), which nurtured my interest in tort law and, more specifically, professional indemnity. Since then, I have predominately worked in that area having practised in firms both in Australia and the UK.” At Barry.Nilsson., Hubert specialises in professional indemnity insurance with a special focus on: Construction (including architects, engineers, building surveyors and conveyancers); Financial institutions (including accountants, financial planners and mortgage brokers); Health care; Local government (including councillors and officers). Contact Hubert at firstname.lastname@example.org or connect via LinkedIn
Senior Associate Emily Schneider is in the Insurance & Health team and is Barry.Nilsson’s national pro bono manager. Emily joined the Melbourne office in 2017. She says: “Barry.Nilsson. is fast developing an extremely strong reputation in the Melbourne and National market as a strong market leader and as a great place to work. To be joining the firm during this exciting time is an opportunity I couldn’t resist.” Having practised at other leading insurance firms in Melbourne for nearly 10 years, Emily specialises in complex and high value professional indemnity claims. Emily’s practices focuses on professional negligence claims acting for financial advisors, directors and officers, solicitors and law firms, and construction professionals. Emily works closely with her clients to guide them through the legal process in a way which is tailored to their business. Emily says: “The nature of my work means that I often advise sophisticated insured clients. I enjoy working with them because getting to know their business can be fascinating, and ultimately helps the file run smoothly.” In addition to her insurance practice, Emily, as national pro bono manager, will further develop and strengthen the pro bono and corporate social responsibility program at Barry.Nilsson. Contact Emily at email@example.com or connect via LinkedIn
Chanelle Blasis is a solicitor in Barry.Nilsson.’s Insurance & Health practice. She joined the Melbourne team in September 2017, coming from a background in external dispute resolution. Chanelle says: “B.N. is a very friendly and approachable team, and there is a big focus on learning and development, which is valuable to staff and clients. The work I do is interesting, technical and rewarding – no two days are the same at B.N.!” As a junior lawyer, Chanelle is involved in a range of matters and assists in all stages of legal proceedings. On a daily basis she reviews files, drafts advices and provides general communication to clients. At B.N., Chanelle works in the areas of: Public and products liability; Injury liability; Professional indemnity. She also has experience in the workings of the Financial Ombudsman Service. Chanelle works with professionals such as architects, building surveyors and accountants. Chanelle has a Bachelor of Laws / Bachelor of Business (Accounting), a Graduate Diploma of Legal Practice, and was admitted to practice in June 2016. She is active and engaged, holding memberships with Women in Insurance, Young Insurance Professionals and the Law Institute of Victoria. Contact Chanelle at firstname.lastname@example.org