Lacrosse tower decision handed down

The Victorian Civil Administrative Tribunal (VCAT) recently handed down the eagerly awaited Lacrosse decision,[1] providing guidance as to how a tribunal (or court) may apportion liability between those involved in the selection and use of aluminium composite panels (ACPs). 

The facts 

On or around 14 May 2010, LU Simon (the Builder) entered into a design & construct contract with 675 La Trobe Street Pty Ltd (the Developer) for construction of Lacrosse tower. Warranties of suitability of materials, compliance with the law and fitness for purpose were implied in the design & construct contract pursuant to section 8 of the Domestic Building Contracts Act 1999 (DBC Act) (similar to the statutory warranties under Part 2C of the Home Building Act 1989 in the NSW context). The design & construct contract also imposed design obligations on LU Simon (relied on by the architects Elenberg Fraser). 

The Developer separately entered into consultancy agreements with Gardner Group (for building surveyor services), Elenberg Fraser (for architectural services) and Tanah Merah Pty Ltd trading as Thomas Nicolas (for fire engineering services) (the Consultants). These consultancy agreements were subsequently novated to LU Simon. 

The Consultants commenced the design and development phase of Lacrosse tower in 2007 and 2008, with the design eventually consisting of extensive use of ACP on the east and west facades, including the balconies. The ACP approved by the Consultants and installed by LU Simon (i.e. Alcubond Plus) had a 100% polyethylene core.

LU Simon completed construction of Lacrosse tower in 2012 and the tragic fire occurred on the night of 24 November 2014. While the source of the ignition of the fire was Mr Gubitta’s cigarette butt, evidence determined that the subsequent rapid spread of the fire was primarily caused by the ACP (with a 100 per cent polyethylene core). The ACPs were ultimately found not to satisfy the “Deemed to Satisfy” provisions of the relevant Building Code of Australia (BCA).

The tragic fire has caused significant loss and damage, claimed by the Owners as exceeding $12 million.  

The decision 

While the Tribunal at first instance concluded that LU Simon was liable to pay damages to the Owners for breach of warranties under the design & construct contract and DBC Act, the Tribunal consequently determined that the damages payable by LU Simon were to be reimbursed by the other respondents as ‘concurrent wrongdoers’ by operation of Part IVAA of the Wrongs Act 1958, in the following proportions:

· Gardner Group: 33 per cent

· Elenberg Fraser (the architects): 25 per cent

· Thomas Nicolas (the fire engineer): 39 per cent

· Mr Gubitta (the resident who disposed of the cigarette): three per cent

The Tribunal proportioned liability on the basis that LU Simon exercised reasonable care in constructing the Lacrosse tower, and notwithstanding the design obligations, LU Simon was not responsible for including ACPs into the design. Further, the Tribunal found that LU Simon complied with the specifications and instructions given by the Consultants, and ultimately, the Consultants were in breach of their consultancy agreements for failing to exercise due care and skill. 

Gardner Group was in breach by issuing a building permit despite Elenberg Fraser’s specification on ACPs not complying with the BCA. Gardner Group also failed to notice the insufficient description of cladding systems in the fire engineering report. Given the hazards associated with ACPs have been known since 2010, the Tribunal held the Gardner Group could not rely on a defence of peer professional opinion under section 59 of the Wrongs Act. 

Elenberg Fraser was in breach for failing as a head design consultant to ensure that the ACP sample provided by LU Simon complied with its specification and BCA and for failing to remedy defects in its design (which was clearly not fit for purpose).

Thomas Nicholas was in breach for failing to conduct the requisite full engineering assessment and for failing to recognise that the proposed ACP did not comply with the BCA. 

Implications on industry participants

Generally, this decision will undoubtedly heighten awareness of the risks (from an exposure to liability perspective) that are associated with ACPs, particularly those with a 30 per cent plus polyethylene core.  

The decision is controversial for building professionals and will have further implications on the already rising premiums on public indemnity insurance. 

It will be interesting to see if the NSW tribunal and courts adopt a similar approach to apportionment, noting that the NSW landscape includes s.18C of the HBA by which developers owe the same statutory warranties as the builder.

Footnote

1 Full citation: Owners Corporation No.1 of PS613436T, Owners Corporation No. 2 of PS613436T, Owners Corporation No. 4 PS613436T & Ors v Lu Simon Builders P/L, Stasi Galanaos, Gardner Group & Ors [2019] VCAT

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.