Has the fire been extinguished? A case update on the Lacrosse decision

Construction & Engineering Update - 1 March 2019

Summary

The project consultants have carried the lion's share of the liability. Whilst the builder, LU Simon, was found primarily responsible, it was able to pass through 97% of its liability to the project consultants in the following shares:

  • The fire engineer: 39%
  • The building surveyor: 33%
  • The architect: 25%

The French backpacker who inadvertently started the fire was found to bear 3% responsibility, with this cost to be picked up by LU Simon. 

The decision will provide guidance in other cladding related litigation, but the Tribunal emphasised that this decision turned on the specific facts of the case.

The Tribunal found that the aluminium composite panels (ACPs) used on the façade of the building did not comply with the Building Code of Australia on a deemed to satisfy basis (and that the bonded laminate exemption did not apply). 

It is likely that the decision will be appealed.

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Key facts

The Lacrosse Building is a 23 storey mixed-use building located in Docklands, Melbourne.

In November 2014, the building was engulfed in flames and 450-500 residents had to be evacuated. The fire's spread was aided by the ACPs on the building's external façade. The ACPs used on the exterior of the building were manufactured in China and had a highly combustible polyethylene core.

Parties

In 2016, the owners of the Lacrosse building commenced a civil action against the builder, LU Simon in the Victorian Civil and Administrative Tribunal (Tribunal). In turn, LU Simon joined various project consultants to the proceeding, including the building surveyor, Gardner Group, the architect, Elenberg Fraser and the fire engineer, Thomas Nicolas. LU Simon also joined the occupier of the apartment where the fire started as well as French backpacker, Mr Jean-Francois Gubitta, who started the fire with a stray cigarette butt.

The supplier and the manufacturer of the ACPs used on the building were not parties to the proceeding.

The proceeding was the subject of several unsuccessful mediations and then ran to full hearing in late 2018. Yesterday, Judge Woodward handed down his decision.

The decision

In his judgment, Judge Woodward found that:

  • LU Simon breached its obligations to the owners by supplying ACPs on the façade of the Lacrosse building which were not fit for purpose. Because of the statutory warranties it owed the owners, LU Simon was primarily liable to pay damages to them.
  • However, the project consultants were contractually liable to indemnify LU Simon for 97% of the assessed damages. More specifically: 
    • The fire engineer was 39% responsible.
    • The building surveyor breached its consultancy agreement with LU Simon by failing to exercise due care and skill, and it was liable to pay 33% of the assessed damages.
    • The architect breached its consultancy agreement by failing to exercise due care and skill and it was liable to pay 25% of the assessed damages.
  • The use of ACPs with a polyethylene core did not meet the deemed to satisfy requirements of the Building Code of Australia. Specifically, the Tribunal found that the bonded laminate exemption, which formerly existed under C1.21(f) did not apply.

The implications

Importantly, the Tribunal has apportioned liability in accordance with the contractual chain of responsibility, as all of the project consultants were novated to LU Simon. This will not be the position in all building projects.

The Tribunal has been careful to emphasise that the decision is fact specific for this particular building and project and that not all applications of ACPs will be problematic. Building professionals are already encountering great difficulty obtaining professional indemnity insurance at all or at premiums which are affordable. The decision is unlikely to improve this position.

The decision is likely to be the subject of an appeal to the Supreme Court of Victoria.

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Further information

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