The Victorian Court of Appeal has upheld the Judgment of the lower Court in the Lacrosse mater. On 26 March 2021, the Victorian Court of Appeal handed down its decision largely upholding the trial judge’s rulings in the 2019 decision.
At around 2:23am on 24 November 2014, a fire broke out on the balcony of apartment 805 of the Lacrosse apartment tower in Latrobe Street, Docklands. The fire started after a cigarette butt was incompletely extinguished and left in a plastic container by a guest staying in the apartment. The plastic container was left on a timber top on the balcony of the apartment. The fire spread from the plastic container to the table and then to the nearby external cladding of the building.
The cladding used on a building was a product known as Alucobest a form of aluminum composite panel, which contained a polyethylene core. After the fire spread around the building rapidly onto the balcony on each level, the fire reached the roof of the building within a matter of six minutes. The damage to the building was extensive and the claimed losses exceeded $12 million.
The March 2016 Proceedings
In March 2016, proceedings were commenced in the Victorian Civil and Administrative Tribunal (‘VCAT’) in relation to the damage caused by the fire. The proceedings constituted 21 applicants, comprising owners’ corporations and the owners of individual apartments in the building (the ‘Owners’). At the center of those proceedings was the attribution of responsibility to, and among, eight respondents in the proceeding for the damage caused by the fire and for the replacement cost of cladding which was now recognised to constitute a fire hazard (although it was not damaged).
The Tribunal held that Lu Simon Pty Ltd (the ‘builder’) had breached warranties concerning the suitability of materials, compliance and fitness for purpose implied into its Design and Construct Contract and was therefore primarily liable to pay damages to the Owners. It was also held that each of the consultants (Gardner Group, Elenberg Fraser, Thomas Nicols) was found to have breached consultancy agreements to which they were parties with the builder, by failing to exercise due care and skill in the provision of their services. Additionally, the Tribunal held that Mr Gubitta breached a duty of care he owed the Owners by failing to ensure that his cigarette was fully extinguished before leaving it in the plastic container. Moreover, the Tribunal concluded that each of the consultants and Mr Gubitta were concurrent wrongdoers within the meaning of s 24AH of the Wrongs Act 1958.
The damages payable by the builder were to be apportioned between the consultants and Mr Gubitta in the following proportions:
• Gardner Group: 33 per cent;
• Elenberg Fraser: 25 per cent;
• Thomas Nicolas: 39 per cent;
• Mr Gubitta: 3 per cent.*
* The effect of the Tribunal’s apportionment was that LU Simon would not be reimbursed for 3 per cent of the damages it was liable to pay to the Owners as Mr Gubitta had not taken part in the proceedings and no party sought judgment against him.
The consultants, in separate applications, sought leave to appeal from the Tribunal’s orders. Among 25 proposed grounds of appeal, the parties identified 11 issues that required resolution.
Did the Tribunal fail to consider part of the case against LU Simon?
Thomas Nicolas submitted that the Tribunal’s consideration of the evidence shows that it excluded from its consideration the wider case against LU Simon that it was negligent in selecting an Alucobond product with a polyethylene core. The Owners argued against a finding that LU Simon failed to take reasonable care by submitting that ‘the evidence in this case does not suggest any failure to take reasonable care on the part of LU Simon’s part’. The Court noted that the Tribunal, in its reasons, went on to say that LU Simon’s construction of the Lacrosse building using non-compliant ACP’s was clearly an error – which error had given rise to a breach of warranty by LU Simon under the DBC Act. The Tribunal then stated that while LU Simon’s breach of warranty rendered it liable to compensate the Owners, it was trite that not every error was negligent and therefore, LU Simon had not been shown to have failed to take reasonable care. The Court summarised the Tribunals’ reasons for this conclusion. Relevantly, the Tribunal elaborated on one point in particular being, while LU Simon bore responsibility to the developer and owner, ‘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.’
The Court ultimately rejected any suggestion that the Tribunal erred in its treatment of, or conclusion about, whether LU Simon failed to take reasonable care.
Did the Tribunal err in relation to the issue of apportionment?
The Court then turned its mind to whether the Tribunal erred in relation to the issue of apportionment. Thomas Nicolas contended that, the Tribunal erred in failing to determine the claims made by the Owners against LU Simon, and then failing to apportion liability for the Owner’s claim against LU Simon and the other respondents. The Court determined that these submissions are without merit. The Court conducted a detailed analysis of the course taken by the Tribunal and found that the Tribunal acted fairly as no party (including the consultants) raised any argument against the Tribunal making an order on the Owner’s claim against LU Simon for the amount of the Owners’ claim.
Part IVAA of the Wrongs Act
The expression ‘apportionable claim’ is defined in s 24AE to mean, ‘a claim to which this Part applies’. Thomas Nicolas and Elenberg Fraser relied upon Reinhold and Dartberg to support arguments that the Owners’ claims against LU Simon were apportionable. The Court held that the plain meaning of the statutory provision requires a claim arising from a failure to take reasonable care. The definition does not extend to a claim ‘involving circumstances arising out of a failure to take reasonable care’.
The Court held that the Tribunal did not err when it determined that the breach of warranty claims it upheld against LU Simon were not apportionable. At best, those claims involved circumstances arising out of failures to take reasonable care by the consultants and Mr Gubitta.
The Court was left to consider the issue of whether a proper analysis of the apportionable claim issue commences with the identification of the loss or damage that is the subject of the claim. It was noted by the Court that the analysis proposed (the identification of the loss or damage, followed by the identification of the persons whose acts or omissions caused that loss or damage) was relevant to ‘a claim’ – which claim must be a claim to which an apportionable claim applies. The flaw in this analysis is that they require consideration of the question of who a concurrent wrongdoer in respect of a claim is, before considering whether the claim is one to which the part applies.
The correct approach – is to determine whether the ‘claim’ is apportionable, before then determining whether there are any concurrent wrongdoers in relation to that claim.
On the proper construction of the T2 Specification and Elenberg Fraser’s drawings, was LU Simon directed and/or permitted to select the product Alucobest or any composite metal cladding product that was contrary to the Building Act 1993 and the Building Code of Australia?
The Court rejected the submission that, as between Elenberg Fraser and LU Simon, it was for LU Simon to ensure the product selected by it complied with the BCA. It was found that the Elenberg Fraser submission would have the unreasonable result of absolving it of its liability to LU Simon because of the contractual obligations owed by LU Simon to the developer.
Did the Tribunal err in finding that Elenberg Fraser was negligent in respect of its inspection and approval of the Alucobest sample?
The Court found, as did the Tribunal, that ‘Elenberg Fraser had an ongoing role in implementing the T2 Specification. Included in that role was the express obligation to inspect the works during construction for compliance with the client brief, contract material and all legislative requirements applicable to the services, exercising the knowledge, skill and expertise of an appropriately experienced competent and qualified architect.’
Did the Tribunal err in its construction of cl C1.12(f) of the BCA?
At paragraph 210 of the Judgment the Court noted that, in Victoria at the time in issue, the BCA was relevantly adopted by, and formed part of, the Building Regulations 2006 by reason of building regulation 109, which was in turn authorised by s 109 of the Building Act 2006.
It was submitted by Gardner Group that the word ‘laminate’ where used in C1.12(f)(i) does not include the polyethylene core of the ACP’s utilised to clad the Lacrosse building and hence such core was not required to be non-combustible. The Tribunal rejected this construction and the Court agreed with the Tribunal’s analysis although it preferred the view that ‘layer’ is deliberately used within requirements (ii) and (iii) of sub-cl (f) as a component of the phrase ‘adhesive layer’ and as distinct from the structural elements of the material comprising laminates which are bonded together to create the whole.
The construction adopted by the Tribunal clarifies the underlying purpose of the section of the BCA containing this provision which is to provide for effective fire safety in buildings of particular types.
Did the Tribunal err in its conclusion that the ‘peer professional opinion’ was ‘unreasonable’ for the purposes of s 59(2) of the Wrongs Act 1958?
The Court ultimately held that the ‘peer professional opinion’ defence was not available to the respondent consultants.
In Victoria, section 59 of the Wrongs Act provides that in some cases a peer professional opinion constitutes a defence to a claim of negligence on the part of an individual practising a profession.
Without considering the balance of the grounds of appeal before the Court, the implications for this decision are far-reaching. The issue of combustible cladding has been looming over the construction industry for a while now as consultants and manufacturers alike strive to produce fire-rated alternatives to aluminium composite panels (ACP).
This decision in a first of its kind demonstrates the passing of the buck to the builder and subsequently to the building consultants contracted for construction of buildings with ACP cladding. Professional indemnity insurers should also keep a keen eye on this space and how it may affect their coverage into the future.