Has a precedent been set that will allow others to seek recovery due to non-conforming building materials?

Has a precedent been set that will allow others to seek recovery due to non-conforming building materials?

It was reported in The Age today that builders LU Simon have been ordered to pay $5.748m to the 211 applicants in the case of the fire at the
Lacrosse building in Melbourne’s Docklands following a fire in 2014 that was fueled by combustible cladding.

However, it has also been reported that while LU Simon will have to pay the initial sum, other respondents in the case were found to have failed to exercise reasonable care and have been ordered to reimburse the building company for almost the entire amount.

The other respondents in the case include the building surveyor and his employer Gardner Group, the architects Elenberg Fraser, and the fire engineer Thomas Nicholas.

The building surveyor’s employer the Gardener Group have been ordered to pay 33 per cent of the damages, the architects 25 per cent, the fire engineer 39 per cent.

The remaining 3 per cent will be paid by LU Simon.

Judge Woodward found the builder LU Simon “breached the warranties of suitability of materials, compliance with the law and fitness for purpose” implied in its contract with the owners.

However, he said it “did not fail to exercise reasonable care” in the construction of the tower by installing the combustible aluminium composite panels – the cladding – on the facades of the tower.

The Gardner Group, which employed the building surveyor, was found to have failed to exercise “due care and skill” in issuing the building permit for the construction of the tower, and approving the cladding, which “did not comply with the building code of Australia”.

The fire is said to have been started by a resident who had left a cigarette disposed in a plastic container on a balcony.  The man was also a respondent in the case, but the judge ruled the man’s responsibility for loss and damage was “minimal”.

It should be noted that the judge did stress that his findings on the use of PE-core cladding on Lacrosse were not intended to be a judgment on the use of the material generally and that it could be used safely in certain circumstances.

Having said this, it will no doubt encourage others to look at a recovery.

This case raises a number of important issues for many in our community. Here are a few that immediately come to mind.

  • Professionals have a duty of care to those who will be effected by their work. This goes right back to the landmark case of Donoghue v Stevenson.
  • Many insurers have introduced exclusions in their professional indemnity, management liability and or directors and officers policies specifically excluding claims for non-conforming building materials.
  • There are a number of class actions already underway in respect of non-conforming building materials.
  • While a person may think they are protected by their employer while acting as an employee, if they are found negligent they may well be held personally liable for damages. We have seen this in the case of a truck driver whose employer did not have insurance on the truck and who went into liquidation. The truck driver changed lanes onto another vehicle causing significant damage. The driver was left ‘holding the bag’.

This should be a massive wake up call for any company, professional, and individual that they may be called to account and it may not be covered by insurance.

I do urge owners and committees do not wait to address the possible recovery strategies but get in and make their premises safe.

Another area that I foresee problems for professionals is valuers who have been reducing the valuations on properties in North Queensland due to the increasing insurance premiums. Those same people that you think you are helping will turn on you and blame you when the property is found to be well under insured.

All of us have to act professionally and ethically.

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