Australia: Lacrosse judgment summary

In brief - final orders have now been made in the closely followed Lacrosse litigation, the first case to go through the courts system to examine the liability for buildings which have been constructed using aluminium composite panels (ACPs) on a building's façade.

In addition to the well publicised make-good costs in the amount of $5.7m awarded for reinstating the building after the fire, on 1 April 2019 the Victorian Civil and Administrative Tribunal ordered the further amount of just under $7m to be paid for the costs of bringing the building into compliance, various other heads of claimed loss and interest.

These amounts are ultimately payable by the design consultants in the same proportion as the first tranche of damages orders and brings the amount awarded to $12,747,929 plus costs.

The design consultants, who between them were held liable for having contributed 97% of the damages, must pay that share of the total amount awarded.

Much has been reported about the case. As the Tribunal's reasons for decision state, some factors which led to the outcome are very much specific to the Lacrosse case and guided by the evidence given by some of the witnesses.  Other factors will have more lasting impact.  Here is our assessment of the most critical findings as they relate to all cladding cases.

Compliance of Aluminium Composite Panels

An enduring argument promoted in cladding cases is that combustible ACPs fell within the "Deemed-to-Satisfy" (DTS) provisions of the Building Code of Australia 2006 (BCA) and as such, did not have to be assessed for combustibility. The Tribunal found that the ACPs used on the external walls of Lacrosse Apartments did not meet the DTS provisions of the BCA as at June 2011. The two bases upon which entities have argued DTS compliance were addressed by the Tribunal and the findings were that:

• the ACPs were used in a way that mean they were part of an external wall and not an 'attachment' and as such could not be said to be BCA compliant pursuant to a DTS pathway for 'finishes' or 'linings'; and
• the polyethylene based core was a constituent part of a 'laminate' (within the meaning of C1.12(f) of the BCA) and as such ACPs were not compliant by reason of the DTS provision permitting the use of combustible bonded laminates, where each 'laminate' must be non-combustible, on external walls.

What was not considered in the Lacrosse case was where ACP material is used in a manner which the BCA considers an attachment to a building. A situation where an ACP has been genuinely used as an attachment is a rare one and even then the suggestion that a combustible ACP is compliant when so used can attract its own controversy.

For the majority of ACP uses, the Tribunal's interpretation of the relevant provisions of the BCA confirms that the only means by which an ACP could be used as part of an external wall of a Type A construction is by way of a performance solution.

The owners' claims against the builder

The Tribunal's findings in relation to the Owners' claims against the builder for breaches of the implied statutory warranties under the Domestic Building Contracts Act 1995 (Vic) clarified some areas, but due to a tactical decision by the Owners very late in the trial, one area was unresolved.

The overarching points are that:

• a builder's obligation pursuant to the statutory warranties are not qualified or limited by any obligation of reasonable care and skill (hence the builder was found to be 100% liable to the Owners, despite a finding that the builder did not fail to exercise reasonable care); and
• after the hearing on evidence had concluded, the Owners withdrew any reliance on the warranty requiring work to be carried out in a proper and workmanlike manner. As a result, the Tribunal was not required to consider whether a breach of this warranty might involve a failure to take reasonable care (and by extension, constitute an apportionable claim).

Liability of the consultants

The Tribunal's decision on this front can possibly best be described as giving primacy to the contractual terms parties in fact sign up to, rather than their generalised understanding of what is usual practice within a profession. In upholding the builder's various claims against the professional consultants, the Tribunal found as follows:

• while the obligations under the consultants' contracts required the professionals to exercise reasonable care, they were not able to be limited by reason of what the professional argued was 'usual practice';
• the certification issued by the Building Surveyor and the report issued by the Fire Engineer, both of which represented that a design incorporating the use of ACPs in the external façade was BCA compliant, constituted actionable misleading and deceptive conduct;
• the Tribunal confirmed its acceptance of the typical 'waterfall' contractual regimes which exist whereby a contractor (engaged under a D&C Contract) engages a number of specialist professionals to cover acknowledged shortcomings in its own expertise and passes down risk to subject matter experts; and
• where a builder is able to show that it complied with the various specifications and instructions given to it by the expert building professionals which it engaged, then it stands a better chance of resisting a finding of negligence in relation to the use of ACPs.

Colin Biggers & Paisley acted on behalf of the builder (L.U. Simon Builders Pty Ltd).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.