On 26 March 2021, the Court of Appeal in the Supreme Court of Victoria largely upheld an earlier finding by the trial judge that the builder of the Lacrosse apartment building should not be liable to pay damages of $12 million for a fire caused by combustible cladding that had been negligently installed.

The decision reinforces the fact that builders cannot necessarily be expected to know the complexities of products outside their technical area of expertise and knowledge, or for which they have subcontracted specialist consultants to advise on.

In particular, design consultants will be well advised to review the nature of the expert advice being provided by them, and the terms and conditions that apply when such advice is given, in connection with projects in light of the decision.


The Court: Victorian Supreme Court of Appeal (VSCA)
The Case: Tanah Merah Vic Pty Ltd v Owners’ Corporation No 1 [2021] VSCA 72
and
The Tribunal: Victorian Civil and Administrative Tribunal (VCAT)
The Case: Owners Corporation No.1 of PS613436T v LU Simon Builders Pty Ltd (Building and Property) [2019] VCAT 286
The Legislation: The Wrongs Act 1958 (Vic); Building Act 1993 (Vic)


Background

In March 2016, 211 applicants (comprising mostly of individual owners of apartments) commenced proceedings seeking compensation for damages caused by the Lacrosse apartment building fire that occurred on 24 November 2014.

VCAT Matter

On 28 February 2019, the VCAT found that while the builder (LU Simon) was 100% liable for the applicant’s damages claim, it was able to rely on the expert advice of its design consultants and shift the liability that it would otherwise have to those consultants in certain proportions. At first instance it was held that the consultants were liable in the following proportions:

  • Fire Engineer: 39%
  • Building Surveyor: 33%
  • Architect: 25%

The remaining 3% of liability was attributed to a resident who had failed to exercise reasonable care to extinguish a cigarette that he had been smoking on the balcony of one of the apartments in the building.

The VCAT determined that because the resident had not taken part in the proceedings, and no party had sought judgement against him, that there would be no order directly affecting him. The effect of that was that his liability was absorbed by the builder.

Supreme Court Appeal

The VSCA found that none of the proposed grounds of appeal argued by the fire engineer or the architect had any real prospects of success and must be refused. Similarly, all but one of the surveyor’s proposed grounds of appeal also failed.

The ‘peer professional opinion’ defence under s 59 of the Wrongs Act 1958 could not be relied on by the consultants. The consultants were effectively found 100% liable between them.

The proportionate liability legislation does not apply to a breach of an express contractual obligation simply because the breach arises, factually, from a failure to exercise reasonable care. Rather, the proportionate liability legislation only applies to claims that legally arise from a failure to take care (i.e. where the failure to take care is an essential element of the claimant’s cause of action).

Takeaways

Consultants should exercise caution when accepting contract terms to ensure they are fully aware of the liability that they may be assuming as a result.

While this decision clarifies the obligations and responsibilities of design consultants, it should not be perceived as a universal solution for all combustible cladding matters because the determination of the appeal was made on the specific facts presented by the parties to the case.

In this case, for example, the fire engineer had accepted contract terms that other consultants would not have accepted, and accordingly, the case should not be used as a definitive benchmark approach.

If you have any doubts or concerns around liability or contract terms, Morrissey Law + Advisory is always here to help.

 


 

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