VCAT cladding decision sets ‘roundabout’ precedent

By Meg Hill

Victorian Civil and Administrative Tribunal’s (VCAT) Lacrosse decision is both a win for apartment owners and an absolution for builders, despite its convoluted legal expression.

The VCAT Lacrosse fire decision in February hit consultants with the bulk of damages, despite finding the builder primarily liable.

The indirect allocation of blame, however, reconciles a discrepancy between legal relationships and liability. The claim was filed by the owners' corporation (OC) against the builders, but architects, building surveyors and fire engineers were then joined to the claim by the builder as additional parties.

“Because the OC doesn’t have any formal contractual relationship with these consultants, its course of action lies against the builder,” said strata lawyer Tom Bacon.

“The Domestic Building Contracts Act [1995]imposes a statutory warranty so the OC can recover against the builder if the building is defective or does not comply with the law. So that makes the builder primarily responsible to the OC.”

“But the builder had their own claim and separate cause of action under contract and statutory negligence with all these other consultants, because the builder may have delegated its duties of designing a compliant building to its architect and engineers.”

The decision found that the consultants failed their duty of care to the builder, breaching their agreements in the processes, which led to the approval and installation of the flammable cladding.

The amount of damages settled by the decision was $5.7 million. Building surveyor Gardner Group, architect Elenberg Fraser and fire engineer Thomas Nicolas were ordered to reimburse the builder LU Simon 33 per cent, 25 per cent and 39 per cent of the damages respectively.

LU Simon will pay only the 3 per cent apportioned to Jean-Francois Gubitta, the man whose cigarette started the 2014 fire.

Judge Woodward highlighted that the decision was based on the particular contracts between the parties, and therefore may not apply to other cases.

But Mr Bacon said other buildings with defective cladding might find that their builder and developer would have similar contractual arrangements in place.

It is possible that, if the VCAT decision is not successfully appealed, future decisions might apportion responsibility in a similar pattern.

But Mr Bacon said an appeal was likely.

“Everyone in the legal industry in Australia was waiting for this decision to come out, and to see what this result would be so that it can advise their own clients accordingly. There may well be an appeal to this decision, there were so many parties involved.”

Over $7 million relating mostly to replacement costs from the Lacrosse claim remains unsettled and is likely to be resolved outside of court.

On March 19 Planning Minister Richard Wynne stripped local councils of cladding removal responsibility for certain affected buildings, reallocating it to the Victorian Building Authority (VBA).

“Making the VBA the municipal building surveyor (MBS) for these higher risk buildings allows a consistent and co-ordinated response for this community safety issue, while also alleviating pressure placed on local councils, in particular their building departments and MBSs,” VBA spokesperson Karen Lyon said.

“Until now, the vast majority of work for these buildings has been driven by local government and their building departments which has laid the foundations for the work the VBA will continue.”

“It’s important to note that these buildings are safe to live in, as short-term fire safety measures have been put in place by council MBSs. The role of the VBA is to now deal with longer-term rectification.”

There are 64 privately-owned buildings in need of cladding replacement in the City of Melbourne.

Builder LU Simon started Lacrosse’s replacement work in January and, it is expected to be completed by May.