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NOTES ON THE LACROSSE FIRE VCAT DECISION

In the early morning of 24 November 2014, a fire broke out on the balcony of Apartment 805 in the Lacrosse apartment tower in Melbourne Docklands. Starting from an unextinguished cigarette butt, the fire proceeded to climb up 13 storeys on the face of the building in just 11 minutes before firefighters brought it under control.

The Metropolitan Fire Brigade (MFB) attributed the rapid spread of fire to combustible Aluminium Composite Panels (ACPs) used as exterior cladding on the tower. In 2018, affected property owners sued the builder for damages in the Victorian Civil and Administrative Tribunal (VCAT) along with the architect, the building surveyor, and the fire engineer. This article is derived from the tribunal’s decision, issued on 28 February 2019.

The owners’ application named eight respondents in total (including the person that started the fire) but, for brevity, we shall focus on the parties whom the tribunal ruled as significantly liable, i.e.:

The builder:                        LU Simon Pty Ltd
The architect:                     Elenberg Fraser Pty Ltd
The building surveyor:     Gardner Group Pty Ltd
The fire engineer:              Tanah Merah Pty Ltd, trading as Thomas Nicolas

Key points in the decision

Elenberg Fraser, Gardner Group, and Thomas Nicolas were engaged by the building developer, Pan Urban Pty Ltd in 2007. In 2010, all three consultants signed deeds of novation to LU Simon. These consultant agreements would later be pivotal in ascribing liability for damages following the fire.

ACPs were first proposed by Elenberg Fraser sometime after the Town Planning stage. Architectural drawings provided to Thomas Nicolas for the Fire Engineering Report (FER) referred to the proposed facade cladding as ‘composite wall cladding – silver aluminium composite sheet’. However, this was never queried or even mentioned in the FER that was eventually submitted to the MFB for report and approval, and to Gardner Group for the Building Permit Application. For their part, Gardner Group also did not query the use of ACPs as cladding, and eventually issued the Stage 7 Building Permit approving construction of the external walls using this material.

During the documentation phase, Elenberg Fraser subcontracted writing of the architectural specification to specialist firm Davis Langdon, who used the now immortal words ‘indicative to Alucobond’ to describe the facade cladding material in the version of the specification used for construction.

The VCAT decision goes into some detail about the history of ACPs, industry knowledge about their combustibility, and what ‘indicative to Alucobond’ could reasonably have been taken to mean at the time. There has also been some discussion amongst architects around this case regarding LU Simon’s substitution of Alucobest for Alucobond during construction of the tower. In essence, the tribunal found that:

  1. When used as cladding on a high-rise residential building, ACPs with a 100% polyethylene core did not comply with the Building Code of Australia (BCA), which required external walls of such buildings to be ‘non-combustible’.
  2. Without additional detail, the word ‘Alucobond’ in the context of the specification would have been reasonably assumed to be the most commonly used product in the range at the time i.e. Alucobond with a 100% polyethylene core (since renamed ‘Alucobond PE’). ‘Indicative to Alucobond’ would have been construed to mean either the actual product named, or a product of equivalent quality, not just one of equivalent visual quality. Hence, Elenberg Fraser’s argument that they only approved the sample from LU Simon for appearance, but expected a BCA-compliant product and installation was rejected.
  3. The fact that Alucobest was used instead of Alucobond was not relevant, as both were (combustible) ACPs with a 100% polyethylene core, and there was no evidence to indicate that Alucobond-brand ACPs would have performed any differently in the fire. Notably, a joint report by five fire-engineering experts unanimously excluded product substitution and fixing method as factors contributing to the spread of the fire.

In response to the argument that the balcony of Apartment 805 should not have been used as storage, the tribunal ruled that there was no evidence proving that the stored items contributed to the ignition and subsequent spread of fire, and that the timing and extent of their role in the ignition of the ACPs was entirely speculative.

The Result

LU Simon was found to have breached the warranties implied into the Design and Construct contract under Sections 8 (b), (c), and (f) of the Domestic Building Contracts Act. The tribunal agreed with the owners’ submission that injury was caused by breach of absolute warranty, not from failure to exercise reasonable care. This meant that LU Simon was wholly responsible for the injury suffered, rather than an apportionment based on LU Simon’s determined contribution to the injury.

Interestingly, LU Simon did not actively dispute the relevance of those absolute warranties in the case against them, while similarly arguing that there was no failure to exercise reasonable care on their part, not because they had considered ACPs appropriate for use as cladding, but because any reasonably competent builder at the time would have relied on the expert advice of their consultants and installed ACPs ‘indicative to Alucobond’ as specified.

Having established that LU Simon was liable to the owners, the tribunal effectively absolved the builder of any blame by ruling that responsibility for those damages should be borne by the consultant team on account of their failure to fulfil their obligations with reasonable care. One relevant section of the decision is worth quoting in its entirety to sum up the judge’s finding on this point:

307   Each of the building professionals engaged in the process of construction of the Lacrosse tower was an important link in the chain of assurance and compliance with the BCA. Each seeks to point to the others as having the responsibility to have taken steps that would have avoided loss. In my view, the builder sits in a different category to the other building professionals. Certainly LU Simon bears front-line responsibility to the developer and owner. But for a large and complex project, it 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. I agree with LU Simon’s senior counsel that:
“The other respondents appear to submit that LU Simon was capable of second-guessing the advice and performance of those experts who had been contracted to provide that advice and performance and who are in breach of their contracts for failing to provide it.”

In other words, ignorance of the combustible nature of ACPs was a successful defence by the builder, but not in the case of their consultants when it came to disclaiming responsibility. Based on the tribunal’s determination of proportional liability, about $5.75M in damages payable to the owners were divided among the consultant team as follows:

Thomas Nicolas:  39%
Gardner Group:   33%
Elenberg Fraser:  25%

Another $6.82M or so remain unresolved, meaning that the consultants (or I assume, their insurers) are likely to be further out of pocket.

Our unwitting firestarter, Mr. Jean-Francois Gubitta, did not escape unscathed, at least not on paper. The tribunal found him responsible for starting the blaze, but not for its subsequent spread. He was apportioned 3% of the damages, although the judge noted that he had ‘left the jurisdiction’, leaving LU Simon to pick up the tab.

I don’t anticipate a spirited protest from the builder against this outcome.

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