A ban on combustible cladding and extending legal duties of care: Senate report recommendations turn up the pressure on property and building industry

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By Scott Higgins, Partner and Lucy Hancock, Lawyer

The Senate has released its interim report on the use of Aluminium Composite Panel (ACP) in Australia as part of its enquiry into non-conforming Building Products. ACP is combustible and considered by experts to have exacerbated the spread of the London fire. As set out in our previous update, the NSW government is yet to clarify whether and how it intends to compel replacement of the combustible cladding, which is utilised on over 1000 buildings in NSW alone.

The report acknowledged that there have been extensive delays by State governments in implementing measures to address non-compliance and non-conformity of building products. Many are questioning why the fire at Melbourne’s Lacrosse building in 2014, also caused by ACP, did not send alarm bells through the industry and the bodies tasked with oversight and compliance.

Although the report noted that there are potentially compliant uses of ACP with polyethylene (PE) core, it ultimately stated that “the committee does not consider there to be any legitimate use of PE core ACP on any building types… there is no place for PE core ACPs in the Australian market”. It is not entirely clear whether a reference to “PE Core ACP” includes all ACP (including “fire-rated” ACP) or only those ACP with an 100% PE Core. This will need to be clarified.

The most noteworthy recommendations made in the report include:

  • The Australian Government implement a total ban on the importation, sale and use of PE core aluminium composite panel as a matter of urgency.
  • The Commonwealth government work with state and territory governments to establish a national licensing scheme with requirements for continued professional development for all building practitioners.
  • The Building Minister’s Forum give further consideration to introducing nationally consistent measures to increase accountability for participants across the supply chain. The Report suggested that this might include mandatory on-site inspections throughout the construction process (including by experts such as fire-safety engineers) and acknowledged that there needs to be a central oversight role independent from industry to provide assurance to the public that structures are built according to standards. The report also noted that that responsibility for building compliance is currently weighted too heavily at the end of the supply chain (with not enough accountability from manufacturers, importers, suppliers and installers) and that measures were needed to address this.
  • The Commonwealth government consider imposing a penalties regime for non-compliance with the National Construction Code such as revocation of accreditation or a ban from tendering for Commonwealth funded construction work and substantial financial penalties.
  • State and Territory governments work together to develop a nationally consistent statutory duty of care protection for end users in the residential strata sector.

Senator Nick Xenophon has already indicated that he will introduce a “safe cladding bill” banning the import of PE core ACP next week.  Craig Laundy, the Turnbull government’s assistant minister, suggested that the government would not support a total ban.

From a liability perspective, the development of a nationally consistent statutory duty of care for end users (residential owners) would have significant ramifications. The common law presently only imposes a duty of care owed by building professionals and developers to subsequent owners of buildings where direct contractual relationships exist or where there is an element of vulnerability which prevented the claimant from protecting its interests. Generally, it is the statutory warranties under the Home Building Act 1989 (NSW) which provide the only avenue for claims by subsequent owners of residential apartments. To impose a statutory duty of care in favour of “end users” would certainly widen opportunities for claims against builders, certifiers, engineers, architects and suppliers.

That said, it remains unclear as to who in the supply chain will ultimately be liable to pay. Proportionate liability legislation enacted across all states means that there can be concurrent wrongdoers and there will be a significant chain of contractual liability right through the supply chain. It is most likely that the particular facts of each case and the relevant contractual matrix, will govern who is ultimately held responsible for the cost of rectifying any non-complaint or non-conforming cladding.

Mills Oakley will keep you updated of further developments.  In the meantime, if you are a property owner, builder, supplier, installer, architect or certifier and you have concerns about issues of potential liability, the use or replacement of combustible cladding and issues surrounding rectification, replacement and cost recovery, please contact the authors.

For further information, please do not hesitate to contact us.

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