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Not so iron clad


16 Dec 2022

Not so iron clad
 
Background Facts

The Owners- Strata Plan No 92450 (owners corporation) commenced proceedings against the developer (JKN Para 1 Pty Ltd) (JKN) and builder (Toplace Pty Ltd) (Toplace) regarding, amongst other defects, what it alleged to be combustible aluminium composite panels installed as cladding (Cladding) on the building (Building). The building was a 28 storey 133 lot strata scheme located at Parramatta.

Specifically, it alleged that JKN and Toplace had breached the statutory warranties under section 18B of the Home Building Act 1989 (NSW) (Warranties) as the Cladding did not comply with the 2013 version of the Building Code of Australia (BCA) when the Cladding was installed because it was “combustible” and no alternative solution was available. Consequently, it sought damage for removal and replacement costs in the sum of approximately $5,000,000.

The parties agreed that the Cladding, at least on the east, south and west performed a waterproofing function and was part of the external wall (a specification within the BCA required that the external walls of buildings of the same category of the Building be “non-combustible” (as defined)), did not comply with the Deemed to Satisfy (DtS) provisions of the BCA and was a banned product under the Building Products (Safety) Act 2017 (BPSA). There was a dispute as to whether any “alternative solution” (AS) was performed to demonstrate compliance with the performance requirements of the BCA in circumstances where the DtS provisions were not satisfied.

Decision

Unfortunately for the owners corporation, the Court made several determinations against it. In summary, it found that the owners corporation had failed to discharge its evidentiary onus to demonstrate that the Cladding should be removed for want of compliance with the performance requirements of the BCA.

Specifically, the Court found that that there was no evidence that the Cladding on the Building had been tested in accordance with the relevant standard under the BCA to demonstrate its combustibility or otherwise. The expert for the owners corporation, had relied upon a test certificate from CSIRO that the Cladding was combustible to form his opinion. However, the certificate did not refer to the Vitrabond FC product actually used on the Building but rather an unspecified Vitrabond product.

Moreover, in relation to the issue as to whether an AS had been available to satisfy the performance requirements of the BCA, the expert was of the view that it was available however there was insufficient information to allow the AS to be undertaken. The Court found that attempts could have been made to obtain the information (including the undertaking a relevant test to establish the suitability of Vitrabond FC for an AS). As this was not done, the Court found that it was not known whether the AS could have complied with the BCA at the time.

The owners corporation also attempted to rely upon a brochure published by the manufacturer of the Cladding at some time after 2019. The brochures noted that the Cladding was combustible as it did not pass the relevant test under the BCA. The Court however found that the brochure could be read as indicating that the Cladding was combustible in its “separate component parts” as distinct from the “bonded Vitrabond FR panels installed at the Building” and that the composition of the Cladding may well have changed with the passage of time between the installation and the publishing of the brochure.

Finally, the Court rejected arguments that:

  • the Cladding material was composed of material that was not good and suitable for its purpose (and therefore in breach of the Warranties) simply by virtue of being a banned product under the BPSA;
  • the Cladding installation resulted in the Building not being reasonably fit for occupation as a dwelling.

The Court accepted that an AS could in principle be developed and accepted retrospectively to achieve compliance with the BCA.

Having regard to the above, the Court found that it could not award damages to the owners corporation in circumstances where it had not been demonstrated to the requisite evidentiary standard that the substantial cost of replacing the Cladding would be proportionate to the benefit to be obtained (quoting his Honour, Stevenson J in The Owners-Strata Plan No 74602 v Brookfield Australia Investment Pty Ltd [2015] NSWSC 1916).

The take away from this decision is a reminder to ensure that documents briefed to experts relate to the actual product in issue.  Furthermore, appropriate testing should be undertaken to determine whether an AS is available. A plaintiff will need to satisfy the Court that an AS was and is not available (in the absence of compliance with the DtS provisions) before a Court will find that an award of substantial rectification costs are proportionate to the benefit to be obtained or that rectification is a reasonable course of action to take.

This is general information and should not be considered to be legal advice. You should obtain legal advice specific to your individual situation.

Author: Thomas Waugh