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Residential Focus

27 July 2022

#Property, Planning & Development, #Construction, Infrastructure & Projects

Published by:

Nicholas Achurch, Annie Papageorgiou

Residential Focus

The complexities of evidence in combustible cladding claims

In Strata Plan 92450 v JKN Para 1 Pty Ltd & Anor [2022] NSWSC 958, an Owners Corporation failed to establish breach of statutory warranty in a combustible cladding case. So what is required, in a cladding case, to satisfy the Court on the balance of probabilities?

Background

The Owners Corporation of a building in Parramatta (Building) commenced proceedings against Toplace Pty Ltd (Builder) and the JKN Para 1 Pty Ltd (Developer), alleging that the Vitrabond FR aluminium composite panels (ACP), installed as external cladding on the building, breached the statutory warranties under section 18B of the Home Building Act 1989 (NSW) (HBA). It was alleged that the ACP was combustible and therefore did not comply with the Building Code of Australia (BCA).

The defendants responded that the ACP installed on the Building complied with the BCA at the time of installation.

The parties agreed on a number of facts, relevantly:

  • the Builder carried out all of the residential building work relating to the common property
  • the estimated costs of replacing the cladding exceed $5 million
  • external cladding of the Building performs a waterproofing function
  • the cladding does not comply with the Deemed to Satisfy (DtS) provisions of the BCA
  • the cladding installed is now a banned product under the Building Products (Safety) Act 2017 (NSW).

The parties disagreed as to whether any alternative solution had been adopted under the BCA to demonstrate that the cladding complied with the performance requirements under the BCA or the DtS provisions.

The core of the dispute at trial was whether or not the ACP installed on the Building complied with the DtS and if not, whether an alternative solution was available to ensure that the Building complied with the fire safety requirements of the BCA.

Executive summary of findings

The findings in this case can be summarised as follows:

  • there was insufficient evidence that the AS1530.1 test was or is available to establish that the ACP is, or is not, combustible for the purposes of the BCA
  • the issue of an occupation certificate is not determinative of a particular product’s compliance with the BCA, nor does it provide an “irrebuttable presumption”[1] that the relevant statutory warranties have been complied with
  • there was no evidence before the Court regarding an alternative solution to ensure that that Building met the fire safety requirements of the BCA
  • there was insufficient evidence before the Court to establish that:
    • the cladding resulted in a dwelling that is not reasonably fit for occupation as a dwelling
    • the Builder and Developer had breached the statutory warranties under section 18B of the HBA.

The standard

The relevant standard, which is indicative of compliance with the DtS, is AS 1530.1, which includes a method of fire testing on building materials, including combustibility.

The Court found that there was there was insufficient evidence to suggest that testing of the ACP was carried out in accordance with AS 1530.1. The owners’ expert concluded that it was ‘likely’ that the cladding would cause risk to life[2]. The Court found that the rate of combustibility of the ACP could be ascertained by conducting a calorimeter test, however no such test was carried out and a conclusion that the ACP were ‘combustible’ as defined under the BCA, could not be drawn.

Counsel for the owners drew similarities to the Grenfell Tower and the Lacrosse Tower fire events. However, the Court found that the ACP in those particular instances, consisted wholly of polyethylene and, by contrast, the ACP in this case comprised a substantial proportion of flame retardant material. The Court found that this instance was dissimilar to the Grenfell Tower and the Lacrosse Tower fire events given the difference in ACP composition so little weight was given to the owners’ comparison.

Alternative solution

A question arose as to whether an alternative solution was available to ensure the Building’s compliance with the fire safety requirements of the BCA.

The owners led expert evidence to suggest that an alternative solution could not be prepared in respect of the building[3]. The Court ultimately found that the Owners had not established that an alternative solution court not be prepared, and also found conversely, that the Defendant had not established that an alternative solution could be prepared, and the defendants had conversely established that an appropriate alternative solution could be devised.

The Court found that the cladding could not satisfy the DtS provisions of the BCA, because no AS 1530.1 test was or is available to establish that the ACP were not combustible for the purposes of the BCA and no alternative solution was suggested by either party to ensure compliance with same.[4]

Were the materials good and suitable for the purposes for which they were used?

The Court affirmed a point made in Taylor Construction Group Pty Ltd v Strata Plan 92888 that an occupation certificate does not create an “irrebuttable presumption” that the relevant statutory warranties have been complied with, or preclude a claim that the building does not comply with the BCA.[5]

The owners sought to establish that the ACP were not good and suitable for their purpose because they were combustible. The owners reasoned that as the ACP had a core which consisted of 35-40 per cent polyethylene, they were combustible, as determined by AS 1530.1 and a banned product under the BPSA. The owners furthered that, therefore, the ACP were not compliant with the BCA.

The Court considered the owners’ submission to be untenable, noting that where the legislature subsequently bans a product that was previously permitted, a conclusion cannot be drawn on its face that the product has never been good and suitable for the purpose for which it has been used.[6]

The Court repeated that there was no evidence to suggest that the ACP was ‘combustible’ within the meaning of AS 1530.1 as no test complying with that standard had been carried out. The Court also accepted the defendant’s submission that the fact that a component is combustible is not conclusive of is suitability, particularly where combustible components are used as an attachment to a building or because they can be used to achieve an alternative solution for the purposes of the BCA[7].

The Court could not find that the combustibility of the ACP had been established or that the evidence before the Court established that the ACP were, or were not combustible.

It followed that the Court also could not find that there had been a breach of the statutory warranties under the HBA.

The Court commented that it was plainly possible that the ACP did not comply with the BCA when it was installed and that a breach of the statutory warranties under the HBA may exist, but those matters had not been established.

The Court furthered that such matters could well have been established, if the owners had undertaken a cone calorimeter combustibility test of the ACP.

Evidence Act considerations

The Court considered whether it was necessary to approach the assessment of the evidence having regard to section 140 of the Evidence Act 1995 (NSW), which allows the Court to take into account, among other things, the gravity of the matters alleged.

Ultimately, the Court found that the owners had not established the relevant breach of the BCA or the statutory warranties on the balance of probabilities, whether or not regard was had to the gravity of the allegation, and had not established that the defendants were liable.

In summary

The Court has made it clear that simply establishing that it is 'possible' that there is a non-compliance or that a party may have breached the relevant law is not enough to establish, on the balance of probabilities, that any breach of the statutory warranties has in fact occurred.

Authors: Christine Jones, Nicholas Achurch & Annie Papageorgiou

[1] See [53]
[2] See [46].
[3] See [49].
[4] See [70].
[5] See [53].
[6] See [55].
[7] See [56].

In the media

Government winds back Australian Building and Construction Commission's powers to 'bare legal minimum'
The federal construction watchdog's powers will be stripped back to the "bare legal minimum" within days, in a federal government move to dump what it describes as "ridiculous" rules (24 July 2022).  More...

Women in construction say greater diversity will stamp out sexism and fix labour shortages
When project manager Ashleigh Kopac joined the male-dominated construction industry six years ago, it didn't take long to experience sexism on the job. Her current boss, Dominique Gill – the owner of construction company Urban Core – has copped similar treatment from men while at work (21 July 2022).  More...

Renovation boom slows as construction costs skyrocket
The renovation boom could be coming to an end as construction costs skyrocket and the property market softens. The COVID-19 pandemic saw a rise in residents choosing to renovate their homes after lockdowns saw us trapped inside (20 July 2022).  More...

Construction collapses to “wreak havoc” on economy
Australia’s home builders continue to fall like dominos with 10-year old Sydney building company Jada Group yesterday joining the long list of collapses. The soaring cost of materials was cited as a key factor. “It’s been very difficult for builders to price the construction of a home… given the rapid increase in prices and builders typically bear that risk” stated Tim Reardon, Housing Industry Association Chief Economist (20 July 2022).  More...

Sydney building company Jada Group collapses owing $2.4m
A Sydney family face never being able to build their dream home after their builder collapsed in March owing millions and the cost of their home’s construction jumped to $1.9 million, a whopping $800,000 more than the original quote (19 July 2022).  More...

The house prices that are still rising: How inflation is blowing out building costs
Property prices may be falling for the established housing market, but new homes are bucking the trend and have become the canary in the coal mine, as far as inflation goes. Almost every category of building materials has become more expensive (19 July 2022).  More...

Apartment owners sound alarm over alleged building defects
Building defects cost in the order of $2.5 billion nationally per year, according to a 2021 report from the Centre for International Economics (CIE) prepared for the Australian Building Codes Board. The report found defective apartment buildings accounted for 52 per cent of the problem, at an annual cost of $1.3 billion (18 July 2022).  More...

Published – articles, papers, reports

Australian Building Codes Board - Planned update to Indoor Air Quality (IAQ) Handbook
Indoor air quality (IAQ) is generally described as a measure of the condition of air in a room with respect to the health and comfort of its occupants. It includes the physical, chemical and microbiological makeup of the air. Our Indoor Air Quality (IAQ) Handbook is being reviewed and updated to reflect the latest scientific evidence from the COVID-19 pandemic (19 July 2022). Read more here.

Master Builders Australia - Latest Unemployment Figures
The latest drop in unemployment to the lowest level in nearly 50 years is very positive news. However, it also highlights the need to grow workforce capacity to deliver the future construction pipeline. “With the labour market at or near capacity, there is an urgent need for the Federal Government to encourage the return of migration, particularly skilled migration,” stated Denita Wawn, CEO of Master Builders Australia (15 July 2022). Read more here.

Australian Bureau of Statistics – Building activity, Australia
Provides estimates of value of building work and number of dwellings commenced, completed, under construction and in the pipeline (March 2022: released 13 July 2022). Read the results here.

Practice

Mascot Towers assistance package - owner investor
The NSW Government will provide financial assistance to eligible owner- investors of apartment units in Mascot Towers. Eligible owner-investors can claim assistance from the period of 1 July 2021 (19 July 2022). Read more here.

Housing Industry Association - National Construction Code - NCC 2022
NCC 2022 will be the largest single amendment to the building code since its inception and HIA has been working hard for members over the last five years to minimise the impact of the changes. There are many significant changes with amendments across Volumes One, Two and Three. HIA will be running NCC 2022 seminars at various venues across Australia. Read more here.

Cases

FKP Commercial Developments Pty Limited v Zurich Australian Insurance Limited [2022] FCA 862
INSURANCE – separate questions – construction of design and construction professional indemnity insurance policy – extent of cover – insuring clause – professional services – claims conditions – advance payment of claim expenses – defence costs.
Home Building Act 1989 (NSW) ss 18B, 18C, 18D, pt 6; Home Building Regulation 2014 (NSW) pt 6; Limitation Act 1969 (NSW) s 33; Design and Building Practitioners Act 2020 (NSW) s 37; Strata Schemes Management Act 2015 (NSW) s 8(1).

Abdelsher v Commissioner for Fair Trading [2022] NSWCATOD 81
ADMINISTRATIVE REVIEW – Home Building Act – internal review application unreasonably refused – jurisdiction – extension of time – summary dismissal.
Administrative Decisions Review Act 1997; Building Legislation Amendment Act 2021 (NSW); Civil and Administrative Tribunal Act 2013; Civil and Administrative Tribunal Rules 2014; Home Building Act 1989.

Strata Plan 92450 v JKN Para 1 Pty Ltd & Anor [2022] NSWSC 958
BUILDING AND CONSTRUCTION – Home Building Act 1989 (NSW) – Statutory warranty – Proceedings for breach – Where the plaintiff owners corporation seeks a range of relief relating to allegedly combustible cladding on a residential unit block – Where the parties seek the determination of several separate questions – Whether the cladding complied with the Building Code of Australia with respect to combustibility – Whether any statutory warranties were breached in relation to the cladding – Whether the plaintiff suffered assessable loss recoverable against the defendants.
Building Products (Safety) Act 2017 (NSW); Environmental Planning and Assessment Act 1979 (NSW); Home Building Act 1989 (NSW), s 18B, s 18C, s 18D.

Fantastic Cement Rendering Pty Ltd v Virtuoso Construction Services Pty Ltd [2022] NSWCATAP 237
BUILDING AND CONSTRUCTION – quantum meruit – quantification – no question of principle.
Civil and Administrative Tribunal Act 2013 (NSW), Sch 4, cl 12(1)(c).

Warburton v County Construction (NSW) Pty Ltd [2022] NSWSC 941
BUILDING AND CONSTRUCTION – Contract – Damages – Defects – Where plaintiff homeowners initially contracted with the defendant builder for the construction of a residential home – Where parties entered into a second agreement by which the plaintiffs took responsibility for the payment of subcontractors and materials, and the defendants undertook to carry out all the work reasonably necessary to manage and supervise the completion of the works – Where the second agreement also included a mutual release – Where plaintiff alleges there are defects with the construction of the home – Whether defects arose from work done prior to or after the second agreement – Whether defects arising from work done after the second agreement resulted from a failure by the defendant to carry out all the work reasonably necessary to manage and supervise the completion of the works – Whether any statutory warranties under the Home Building Act 1989 (NSW) were breached by the defendants.
Civil Procedure Act 2005 (NSW), ss 58-58, s 60, s 64; Home Building Act 1989 (NSW), s 18B, s 18E, s 18G.

Legislation

NSW

Environmental Planning Instruments
Blacktown Local Environmental Plan 2015 (Map Amendment No 2) LW 22 July 2022
Liverpool Local Environmental Plan 2008 (Map Amendment No 5) LW 22 July 2022
Mid-Western Regional Local Environmental Plan 2012 (Map Amendment No 5) LW 22 July 2022
Penrith Local Environmental Plan 2010 (Amendment No 40) LW 22 July 2022
Bega Valley Local Environmental Plan 2013 (Amendment No 39) LW 15 July 2022
Blayney Local Environmental Plan 2012 (Amendment No 11) LW 15 July 2022
Byron Local Environmental Plan 2014 (Amendment No 34) LW 15 July 2022
Clarence Valley Local Environmental Plan 2011 (Map Amendment No 4) LW 15 July 2022
Dubbo Regional Local Environmental Plan 2022 (Amendment No 2) LW 15 July 2022
Glen Innes Severn Local Environmental Plan 2012 (Amendment No 5) LW 15 July 2022
Goulburn Mulwaree Local Environmental Plan 2009 (Map Amendment No 7) LW 15 July 2022
Kiama Local Environmental Plan 2011 (Map Amendment No 2) LW 15 July 2022
Ku-ring-gai Local Environmental Plan 2015 (Map Amendment No 3) LW 15 July 2022
Liverpool Local Environmental Plan 2008 (Map Amendment No 4) LW 15 July 2022
Muswellbrook Local Environmental Plan 2009 (Map Amendment No 2) LW 15 July 2022
Sutherland Shire Local Environmental Plan 2015 (Amendment No 24) LW 15 July 2022
Wagga Wagga Local Environmental Plan 2010 (Map Amendment No 7) LW 15 July 2022
Kiama Local Environmental Plan 2011 (Map Amendment No 1) LW 14 July 2022

Disclaimer
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.

Published by:

Nicholas Achurch, Annie Papageorgiou

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