Lacrosse Appeal: Findings and Implications of Judgement

CASE STUDY – Tanah Merah Vic Pty Ltd v Owners Corporation No 1 and Ors [2021] VSCA 72

Background

At around 2:23am on 24 November 2014 a fire broke out at the Lacrosse apartment tower (Lacrosse) which started from an incompletely extinguished cigarette butt left to burn out in a plastic container.

The fire spread across 14 floors of the building’s facade within 12 minutes. The rapid spread was a consequence of the use of combustible aluminium composite panels (ACPs) that had been installed on the building’s façade.

Although all 400 or so occupants were successfully evacuated from the building, the damage to the building exceeded $12 million.

VCAT decision

The owners and owners’ corporation (Owners) brought a claim in VCAT against the building professionals involved with the construction of Lacrosse. The building professionals included the builder (Builder), the building surveyor, the architect and the fire engineer (collectively, the Consultants).

The Owners were largely successful in their claims against the Builder, with Judge Woodward ordering the Builder to compensate the Owners for their loss.

At the same time, the Builder succeeded in its claim against the Consultants, with the Judge ordering the Consultants to reimburse the Builder 97% of the damages awarded to the Owners.

The practical implication of this VCAT decision was that although the Builder was technically liable, the Builders’ claims against the Consultants were apportionable so the Builder only had to pay 3% of the damages.

The Appeal

The Victorian Court of Appeal upheld the VCAT decision and further affirmed that:

• the use of ACPs on the façade of buildings was not compliant with the Building Code of Australia;
• the installation of ACPs breached the statutory warranties given by the builder under the Domestic Building Contract Act 1995 (Vic)
• the builders between 2007 to 2010 were not expected to have known about the risk of installing ACPs on buildings;
• despite the builder’s breaches of statutory warranties, the liability for the losses suffered by the Owners ultimately lies with the Consultants by operation of the Wrongs Act 1958 (Vic);
• the “peer professional defence” will not be available to building surveyors who have approved the use of ACPs.

Key Takeaways

The recent Appeal decision maintains the status quo in the construction industry after the original VCAT decision was made.

Although the Builder in this proceeding emerged relatively unscathed, builders still need to be aware that each case will turn on its facts including the builder’s involvement in the selection and specification of cladding material and its compliance.

Recent legislative changes such as the ban on specific combustible cladding products (which we discussed about in our February 2021 e-Newsletter) will help ensure that the circumstances leading up to this case are prevented in the future.

Subcontractors should carefully consider if their contract contains any design obligations and consider either purchasing professional indemnity insurance or engaging a design consultant who carries professional indemnity insurance.