Finally some Relief to the Lot Owners of Lacrosse Tower in Docklands over Cladding

Tuesday March 5, 2019

Finally some Relief to the Lot Owners of Lacrosse Tower in Docklands

Lately there has been much discussion (and confusion) surrounding who is responsible for the rectification of defective cladding.
There is no direct answer to this question and it will be decided on a case by case basis.

However, the Decision of His Honour Judge Woodward, Vice President of the Victorian Civil and Administrative Tribunal (VCAT) released on 28 February 2019, in the matter of Owners Corporation No.1 of PS613436T, Owners Corporation No. 2 of PS613436T, Owners Corporation No. 4 PS613436T & Ors v LU Simon Builders, Stasi Galanos, Gardner Group & Ors [2019] VCAT 286 (the Lacrosse tower, Docklands) provides some guidance. The reasons consist of 647 paragraphs or 227 pages.
The Lacrosse tower was the first prominent case in Victoria relating to combustible cladding. The fire in Lacrosse tower occurred in November 2014. It started when a late-night cigarette left in a plastic container by a French tourist on a working visa ignited on a balcony located on the eighth floor and, in turn, raced up combustible cladding being Aluminium Composite Panels (ACPs) on the building's exterior.

The Proceeding went as follows:

The Application to VCAT was brought by 208 Lot Owners together with three Owners Corporations.
There were eight Respondents:

  • builder, LU Simon Pty Ltd (LU Simon);
  • building surveyor Stasi Galanos and his employer Gardner Group Pty Ltd (Gardner Group);
  • architects Elenberg Fraser Pty Ltd (Elenberg Fraser);
  • fire engineer Tanah Merah Pty Ltd, (Thomas Nicolas); 
  • apartment owner Mr Gyeyoung Kim;
  • French tourist on working visa Mr Gubitta; and
  • superintendent under the building Contract, Property Development Solutions (Vic) Pty Ltd (PDS).

Neither Gyeyoung Kim nor Mr Gubitta took any part in the proceeding.  They were joined for the sole purpose of ensuring they are accounted for in any orders apportioning liability among the Respondents.
The hearing lasted a total of 22 sitting days, commencing on 3 September and concluding on 11 October 2018. During the six week trial, over 30,000 pages of documents were put into evidence along with seven lay witnesses, 11 expert witnesses, 15 expert reports and over 60 witness statements.
On 28 Feb 2019 His Honour Judge Woodward, in his judgment, found LU Simon breached the warranties of suitability of materials, compliance with the law and fitness for purpose implied into its Design and Construct Contract with the developer under s8(b), (c) and (f) of the Domestic Building Contracts Act 1995 (Vic) (DBC Act), and was therefore primarily liable to pay damages to the Owners. However, LU Simon did not fail to exercise reasonable care in the construction of the Lacrosse tower by installing combustible ACPs. His Honour, in his ruling, found that Elenberg Fraser had failed to remedy defects in its design and allowed extensive use of ACPs on the building. The building surveyor, Gardner Group, breached its duty to exercise due care when issuing its building permit in 2011 for those architect plans. His Honour also found that the fire engineer failed to advise the builder that the ACPs known as Alucobest, were highly flammable and non-compliant with the building code.
His Honour further stated that the failure to exercise reasonable care by each of Gardner Group, Elenberg Fraser, Thomas Nicolas and Mr Gubitta was a cause of the harm to LU Simon resulting in its breach of the Contract within the meaning of s51 of the Wrongs Act 1958 (Vic) (Wrongs Act) and each is a concurrent wrongdoer within the meaning of s24H of the Wrongs Act. Further, the damages that LU Simon is obliged to pay to the Applicants for its breaches of Contract, all arose naturally according to the usual course from the breach of the various consultant agreements or were within the reasonable contemplation of the parties to those agreements. Accordingly, His Honour found that the damages payable by LU Simon to the Applicants are to be apportioned between each of the concurrent wrongdoers pursuant to Part IVAA of the Wrongs Act in the following proportions: ‒Gardner Group: 33% ‒Elenberg Fraser: 25% ‒Thomas Nicolas: 39% ‒Mr Gubitta: 3%. No party sought orders against Mr Gubitta, who was found liable as to 3%.
In summary, the sum to be paid by LU Simon to the Applicants based on His Honour’s findings totalled $5,748,233.28 and each of Gardner Group, Elenberg Fraser and Thomas Nicolas will be ordered to reimburse LU Simon in respect of that payment in proportions of 33%, 25% and 39% respectively, leaving 3% to be borne by LU Simon. Further sums to be claimed totalling at least $6,823,165.65 are yet to be resolved.
In this case it is a favourable outcome for the Applicants. However, could this case be used as a precedent for determining the hundreds of potential defective cladding cases to come before the Tribunal?
The ruling of Judge Woodward has been a much awaited decision by lot owners across Melbourne to identify the party responsible for flammable cladding on their buildings. In this regard, Judge Woodward stressed that his ruling should not be taken as setting a precedent for Owners Corporations in general. He further stressed that many of his findings have been based on the contracts between the parties and events occurring in the course of the Lacrosse project that may or may not be duplicated in other building projects.
In short, His Honour emphasised that combustible cladding cases will be determined on a case by case basis.  
Contact Matthew Hicks, Director and Principal Lawyer, for further advice or assistance with any cladding or other building defect concerns.