Handed down on 28 February 2019, the 227-page judgment of His Honour Judge Woodward traces the history of Melbourne’s Lacrosse tower, from its inception as a mixed use development in April 2007, through a GFC-driven hiatus in May 2008, redesign into smaller stages from July 2009, through to completion in 2012.
The focus of the judgment is, of course, the dramatic fire on 24 November 2014 that spread from level 8 to level 21 in a matter of minutes, causing damage and rectification costs of almost $13 million (though fortunately no loss of life).
In this two-part series, we’ll draw out some of the key lesson for consultants.
You can also learn more from one of the solicitors who worked on the trial at our webinar about the Lacrosse judgment on 11 April. (Discounts available for Planned Cover clients and some association members – contact us for details.)
The most important aspect of the judgment is the court’s clarification of the Building Code of Australia (“BCA”, and now forming part of the National Construction Code) provisions on external walls and non-combustibility and, in particular, the “bonded laminate” and “attachment” provisions, which we’ll discuss below.
The court’s findings on the liability of the consultants and builder are useful only as a very general guide, because the judgment emphasises how greatly the outcome depended on the specific design, contracts and dealings on this project. On other projects, with different roles and contracts in place, the allocation of liability could be very different. The statutory warranties that underpinned the builder’s liability only apply to domestic projects, and may not be identical in other states.
Finally, the judgment could be appealed, and its findings superseded by a superior court. For now though, for all its limitations, it’s the best guidance that we have.
On the factual cause of the fire, the court adopts the findings from the Metropolitan Fire Brigade’s Post Incident Analysis (April 2015), in parts almost verbatim. An unextinguished cigarette in a plastic container ignited the contents of the tabletop, the table itself, and nearby balcony contents such as the A/C unit. The resulting flames degraded the outer 0.5mm aluminium sheet of the Alucobest cladding panels, exposing their polyethylene core. Then the combustible material in the cladding “added to a rapidly spreading fire up the vertical wall”.
We’ve summarised in this table who the court found legally liable, the percentage allocation, and the court’s reasons. We’ll go into more detail in the section “What did each party do wrong (or right)?”.
|Builder||100% – but recoverable from others||Liable to Owners Corporation for breach of statutory warranties, such as compliance with the law. But can recover almost 100% of that amount from its consultants in the percentages mentioned below. Only the 3% share of the tenant will actually be paid by the Builder
Builder found not negligent because the Builder was not expected to have the same knowledge about combustible cladding as its consultants
|Building Surveyor||33%||Issuing a building permit for a building clad with a polyethylene core aluminium composite panel (“ACP”) which did not comply with the BCA|
|Architect||25%||Specifying a cladding system “indicative to Alucobond”, which did not meet the requirement under the BCA to be non-combustible, and also approving the Builder’s substitution of Alucobest|
|Fire Engineer||39%||Failing to obtain a clear understanding of the model of cladding to be used, and misdescribing the cladding in a report|
|Project Manager||No liability||Role as Superintendent was to review samples for “visual characteristics only”, their consultancy agreement did not require them to ensure compliance with the BCA, and there was not enough evidence to establish they were negligent|
|Owners Corporation||No liability||Excessive storage of material on balconies did not cause the damage because the fire could have spread from the cigarette to the table to the cladding without these items being present|
|Owner of unit where fire started||No liability||Smoke detectors in the unit being covered with foil did not cause the loss, because earlier activation of the fire alarm would not have prevented the fire, or stopped it spreading|
|Cigarette smoking tenant||3%||Negligent for failing to ensure that his cigarette was fully extinguished|
|Manufacturer of Alucobest||No liability||Not joined as parties to the litigation, so no findings could be made against them|
|Façade sub-contractor||No liability|
|Specification writer||No liability|
Did the Alucobest cladding comply with the Building Code of Australia?
As the judgment reiterates, there are only two pathways to compliance with the Building Code of Australia:
- Alternative solution – There was no record of any alternative solution for the installation of Alucobond or Alucobest, so this pathway was not available.
- Deemed to satisfy – For Type A construction, this requires external walls to be non-combustible under AS 1530.1. The court finds that the Alucobest panels failed this requirement, and notes that the polyethylene core has a calorific value “similar to petrol”.
The Building Surveyor’s defence relied on two concessions to the deemed to satisfy requirement in Specification C1.1 of the BCA. The court rejects both of them:
- Clause C1.12(f) allowing “bonded laminated materials” to be used as a non-combustible material. The court finds that, to invoke clause C1.12(f), both the external layers and the core must be non-combustible, as the core is one of the lamina. Noting that C1.12(f) carefully limits the thickness of the adhesive layer to 2mm, it would be illogical to construe it as permitting an equally combustible core up to 5mm thick. On this interpretation, Alucobest, with its 100% polyethylene core, clearly failed to qualify for the bonded laminate concession.
- Clause C2.4 1 – allowing combustible materials to be used as a “finish or lining”. The court finds that “finish or lining” means things like a paint or lacquer, and the cladding panels were not a “finish or lining”.
This may seem harsh given what seems to be common reliance in the industry on these concessions. Yet when you return, as the judgment does, to the fundamental purposes of the BCA, it’s obvious that it can’t be the intention for a concession to allow large quantities of highly combustible plastics to cover the external surface of a high-rise building.
|Lesson: Products with 100% polyethylene core cannot be used as a cladding system on buildings requiring Type A construction, and in particular the concessions in Specification C1.1 of the BCA cannot be relied on. Products containing lower amounts of polyethylene are best avoided, and if used will require a well documented performance solution signed off by qualified fire engineer and building surveyor.|
|Lesson: When interpreting concessions in the BCA, always keep sight of the broader BCA objectives, especially safety.|
So, in short, the court finds that a product that did not comply with the BCA has been specified by the Architect, substituted by the Builder, and approved by the Fire Engineer and Building Surveyor. Who is liable, and why?
What did each party do wrong (or right)?
Duty of Care – Architect
The Architect’s initial specification of “lightweight wall infill” at town planning stage evolved into “aluminium composite panel. Source unknown” by December 2007. The most developed specification, the “T2 Specification” dated April 2008, called for:
- “Composite metal panel wall and soffit cladding system indicative to Alucobond manufactured by Alucobond Australia Pty Ltd”
Another provision in the cladding section of the T2 Specification, said:
- “All elements shall be non-combustible or not easily ignitable with low flame spread characteristics and shall not produce excessive quantities of smoke or toxic gases.”
These two specifications conflict, since the court finds that all ACPs in the Alucobond range were combustible.
It’s the T2 Specification on which the judgment turns. Regarding two key defences raised by the Architect:
- That the T2 specification of Alucobond is for “visual quality” only. The court rejects this and finds that it indicates the general quality of the product.
- That the reference to Alucobond means the fire rated models, Alucobond Plus or A2. The court finds this argument “not sustainable” – and in any case even these models did not meet the BCA requirement of non-combustibility.
The end result is that the T2 Specification “at least permitted, and on one view expressly prescribed” an ACP with a 100% polyethylene core, which was in breach of the Architect’s obligation to use reasonable care to produce a design compliant with the BCA.
At the time of the T2 Specification, the Architect knew that the “PE” core in Alucobond meant polyethylene, and knew polyethylene was combustible. While recognising that the Architect may have been less expert in the applicable BCA provisions than the Fire Engineer and Building Surveyor, the Architect was still “sufficiently expert to be alert to the need to ensure that the materials it specified did not unduly contribute to flame spread”.
On this basis, the Architect is found liable. The court also finds the Architect liable for approving the Builder’s substitution of Alucobest, which we will discuss in part 2 of this article.
Duty of Care – Building surveyor
When they issued the Stage 7 Building Permit in June 2011, the Building Surveyor knew that would give approval for a building using polyethylene core aluminium composite panels.
Although the court accepts that the Building Surveyor probably held “a genuine belief” that the bonded laminate concession permitted the use of ACP cladding, they had never “undertaken a robust and critical analysis” of this, and their belief was “unreasonable”. The Building Surveyor relied on a defence of peer professional opinion, i.e. that their conduct was widely accepted within their profession. However, the peer professional opinion defence under the Wrongs Act only applies if the profession’s view is reasonable, and the court finds it was “both irrational and unreasonable”.
On this basis, the Building Surveyor is held liable for failing to exercise reasonable care.
Duty of Care – Fire Engineer
The Fire Engineer “was the primary consultant responsible for fire safety compliance”. They were also “unique among the building professionals” in holding an actual view that polyethylene core ACPs did not meet the deemed to satisfy provisions of the BCA.
It is not clear that the Fire Engineer ever saw the T2 Specification that called for Alucobond specifically, but they did receive materials schedules indicating that a composite panel would be used. The court finds that from about March/April 2008, the Fire Engineer knew that 4mm ACPs were proposed to be used on the external facades of the tower, and should have been aware there was a “high likelihood” they would contain highly combustible polyethylene. And yet in November 2010, they issued the Fifth Fire Engineering Report, which described the external cladding system only as “precast panel wall systems” and did not mention ACPs at all.
Having promised a “full fire engineering assessment”, the Fire Engineer had to at least “actively enquire about what ACPs were proposed and advise accordingly”. Instead, they failed to fully appraise themselves of relevant information, or failed to give notices of the ambiguities, with the result that the Fire Engineer failed to obtain a clear understanding of the cladding.
The Fire Engineer was liable both for this failure, and for issuing the Fifth Fire Engineering Report which misdescribed the cladding system by failing to mention ACPs.
|Lesson: Fire engineers should obtain a complete picture of the building and materials on which their assessment is based, and record all relevant details in their reports.|
Duty of Care – Builder
The Builder “unarguably” breached statutory warranties it owed to the owners corporation, because the Alucobest panels were not fit for purpose and is therefore liable for the owners corporation’s loss.
However, the Builder is permitted to fully recover that amount from its consultants, because the Builder was not itself negligent. This is because, in 2011, there was “a poor understanding among building professionals … of the fire risks associated with ACPs”, and:
- “it would be fair to expect fire engineers, building surveyors, and architects (in that order) to have a better grasp than building practitioners of fire risks and the application of the BCA to those risks.”
The judgment effectively treats a large design-and-construct builder’s role and expertise as being no greater than an ordinary construct-only builder, and finds the Builder had effectively transferred its entire design responsibility to its consultants. The judgment does not mention whether the Builder charged the client extra for design services it was not actually providing.
In a quote that sits starkly at odds with how the Architect described the post-novation relationship, the court says:
- “The builder sits in a different category to the other building professionals … for a large and complex project, it has sought to cover acknowledged shortcomings in its own expertise by engaging highly skilled professionals to … direct and supervise its work”
|Lesson: Regardless of the level of control the builder exerts on the ground, it is the consultants who are likely to bear liability for design decisions if something goes wrong. Do not acquiesce to risky decisions, and set a fee that covers the work required to “direct” the builder’s work.|
How contracts caught the consultants out
The Architect, Building Surveyor and Fire Engineer are all found liable for ordinary negligence – failure to take reasonable care. They are not caught out by contract terms prescribing a high standard of care or perfection. And yet the court says the consultancy agreements were “pivotal in ascribing liability”. Why? Because they defined the scope of the consultants’ services, and in each case the consultant was found to have a much broader responsibility than they had thought.
The importance of a carefully negotiated and priced scope of services is the single most important take-away for consultants, especially on novated projects where the scope may be reduced. The court quotes one of the expert witnesses as saying:
- “The contract’s certainly important – [but] the contract, I don’t believe, can redefine basic professional roles.”
This could not be more wrong. The judgment dismisses this misconception and confirms that, yes, contracts can and do redefine professional roles.
The Architect was caught out by contract provisions requiring them to prepare Contract Material that would satisfy the BCA, to undertake “detailed design” and “fully define all building elements, finishes, materials, fixtures and finishes”, and to “inspect and approve samples as required”.
The Fire Engineer, likewise, was caught out by a scope that promised “a full fire engineering assessment”, and the Building Surveyor by promises like “make all due inquiry … to ensure compliance with” the BCA. The court rejects the Fire Engineer’s claim that its role was only to consider departures from the deemed to satisfy requirements that were identified by the Building Surveyor.
In the witness box, the Architect said their role was much more limited, with the Builder exercising a high level of control. But this carries little weight with courts, because of the paramount importance of contracts in the law. A contract is a legally binding promise to perform the obligations set out in it (and that includes the scope of services). The fact that the parties on the ground behaved differently did not diminish the legal obligations to which the consultants had bound themselves when their contracts were signed.
The contract of the Project Manager and Superintendent, by contrast, promised only to “use reasonable endeavours” to ensure construction in accordance with the D&C contract, and “manage the project consultants” to design the project in compliance with the BCA. Of the consultants, only the Project Manager was found not liable.
|Lesson: Invest time in negotiating scope of services, and link it to price. If your role includes investigating hundreds of builder substitutions, charge for that work. If it doesn’t, add to your scope of services/consultancy agreement a clause expressly stating that this is not your role, and (for architects) that any approval of substitutions by you will be for aesthetic/visual purposes only. For building surveyors and fire engineers, clearly state in your scope what your role does and doesn’t include, and avoid broad terms like “full fire engineering assessment” unless you will actually provide that level of service. Don’t rely on approval stamps or specifications alone, as these are too low in the hierarchy of contracts to reduce your scope.|
Coming up next
In Part 2 of this series, we will consider some more specific questions, like product substitution, lessons for record keeping, the title “head design consultant”, and the decision to delete sprinklers from balconies.