Lacrosse builder escapes penalty for flammable cladding inferno

By Leith van Onselen

The Victorian Civil & Administrative Tribunal has ruled that those who consulted to builder LU Simon on Melbourne’s Lacrosse Building were responsible for the combustible cladding that caused a potentially fatal fire in 2014. LU Simon must now pay apartment owners $5.75 million in damages arising from the fire, but the consultants, which include architecture firm Elenberg Fraser, must reimburse LU Simon for this cost, as well as paying an additional $6.8 million for the cost of the cladding’s replacement. From The ABC:

The owners of apartments at Melbourne’s Lacrosse tower in Docklands have won more than $5.7 million in damages in a lawsuit launched after a fire fuelled by flammable cladding caused significant damage to the building in November 2014…

That claim for damages covered the cost for owners of replacing non-compliant cladding, damaged property, additional insurance premiums and “anticipated future losses”.
In a decision handed down in the Victorian Civil and Administrative Tribunal (VCAT) by Judge Ted Woodward on Thursday, LU Simon was ordered to pay more than $5.7 million to apartment owners.

However, most of that money would be paid to LU Simon by the architect, fire engineer and building surveyor who worked on the project, after Judge Woodward found they had breached contractual obligations…

In his ruling, Judge Woodward found the architects Elenberg Fraser had failed to remedy “defects in its design”, specifically designs which allowed the “extensive use” of aluminium composite panels (ACPs) on the east and west facades of the building…

He also found the building surveyor, Gardner Group, breached its agreement with LU Simon by failing to exercise due care when it issued a building permit in 2011 for those architect plans.

Thirdly, he found the fire engineer, trading as Thomas Nicolas, failed to recognise and warn the builder that the ACPs proposed for use on the building did not comply with the building code…

As a result, he ordered that the three parties pay LU Simon a combined total of 97 per cent of the damages owed to apartment owners.

Gardner Group was ordered to pay 33 per cent, Elenberg Fraser 25 per cent and Thomas Nicolas 39 per cent…

Some of the $12.7 million sought by apartment owners is yet to be resolved.

This is great news as it means that the owners that purchased apartments in these buildings in good faith will not be left carrying the cost. It also sets an important precedent for future cases, which is particularly important given there are potentially hundreds of buildings that will require non-conforming cladding to be removed.

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Unconventional Economist
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  1. Will make everyone in the chain more conservative and risk averse. As they should be.

    • But it does seem to encourage builders not to have any technical knowledge or ability and instead rely on consultants who they can blame if they get things wrong.

      • C.M.BurnsMEMBER

        That’s a policy problem and requires a policy solution. Not a judicial solution.

      • This has always been the case: what will happen now is that there will be a merry-go-round of lawsuits among all parties involved, potentially including parties not named in the case, each blaming another party.

        It is common for an array of consultants to be engaged for construction projects — of all types. Better have good professional indemnity insurance! A mate of mine is representing a guy in his 60’s who is being sued for $5m+ (and is not insured). He will be financially ruined if he loses the case.

      • Great for GDP!!! Lawyers add so much to the productivity of the nation. With their high pay everyone sought be a lawyer. We’d all be rich!!

    • Not really. Most directors use discretionary trusts to protect themselves from liability. Just because they owe does not mean they will pay.

      • C.M.BurnsMEMBER

        The ramifications will flow through; and be enforced by insurance and reinsurance markets.

      • Why would a con artist with no money to lose, care about paying exorbitant liability insurance?

      • Con artists probably have a little more exposure when dealing with tens of millions of dollars and multiple storeys tall buildings. Not saying there isn’t a tonne of dodgyness around highrise construction, but at some point someone needs insurance.

      • I agree they’ve just crafted a deal that is guaranteed to find the most empty pockets and than apartment owners will cry poor-mouth because the Architects etc were under/un insured.
        Unfortunately this is just step one in attaching these liabilities to the public purse.

    • Forrest GumpMEMBER

      Rather, it will make the lawyers whom draft the contracts very busy.

      I foresee limited liability written all over sales contacts, and I see full liability written into contracts for sub-contactors and suppliers.

      Thinking this through….yeah your right…all the way through the chain….
      Maybe the lawyers can get in on the sales contracts for the buyers?

      • haroldusMEMBER

        limited liability written all over sales contacts

        Do you mean for the developer?

    • For everyone in a high rise building built with cladding one presumes?

      Has anyone heard about the insurance premium situation for buildings with construction faults given that also seems to be common?

    • C.M.BurnsMEMBER

      I’m more interested in the flow through effect on the insurance premiums for all the professional services organizations in the value chain. Eg architects, building certifiers and fire certifiers.

  2. reusachtigeMEMBER

    This is a terrible decision for business. Quite frankly, the state and federal governments should be the ones coughing up for getting in the way of free enterprise by having regulations in the first place!

    • This is an outrageous attack on free enterprise and societies innovators and risk takers. Those who deserve to profit through making our cities more vibrant and exciting.

      >> PS: How am I doing?

      • It’s actually the responsibility of every individual Australian to support these poor apartment owners, builders, developers, consultants, certifiers and everybody else. We all have to kick in, because it’s the Australian way. Lets get the Kickstarter going, right now people!

      • haroldusMEMBER

        LSWCHP, LSWCHP, LSWCHP…kickstarter pfffft.

        That’s voluntary, unlike a special levy.

    • Yes! How are we going to build cheap apartments if we can’t import the cheapest materials from wherever? How are we going to house all the new immigrants? Bet the judge didn’t think of that!

  3. I agree with the decision. The builder gets expert design advice which always has a clause in the contracting stating that plans and advice need to be in accordance with Australian Standards etc etc…

    If the advice they receive is wrong, the person who provides the advice should be liable.

    • UrbanWasteland

      On that building, the Fire Engineer was pushing for just one fire escape stair, and it was the mechanical engineer who insisted there be two, as required by code. You can’t make this stuff up.

  4. I bet Opal Tower owners wish they had the Little Lucifer’s as cladding as well, they could just flick a cigarette at the cladding and all there problems would be over….!

    • C.M.BurnsMEMBER

      Do we know that they don’t ? Remember the high risk list is secret due to “concerns” about terrorism

      • How is not publishing an exhaustive list supposed to stop terrorists who have functioning eyes from discovering one or more buildings with a good chance of having cladding?

  5. This is a fucking terrible decision as every cunt developer and builder forced their consultants to sign off on their dogshit will breathe a sigh of relief knowing the liability passes through them. The buck should stop with whoever was responsible for the cash as the decision to cut corners only ever comes from the person signing the cheques.

    Failure to warn my arse. The conversation would’ve gone like this –
    “You can’t use that material”

    “Don’t tell me that, we need the sign off, by the way we have plenty of work coming up”


    • Liability is an illusion. If you were going to sign a document that could financially destroy your family you would protect yourself by transferring all assets into a family trust. You would also structure your company so that you pay yourself a small wage, and pay larger dividends to the family trust, or wife, or anyone else except you.

      It is the same deal if you were a rich person marrying a young ditzy blonde. Assets into a trust. She gets nothing when you eventually dump her for an even younger ditzier blonde.

      • Ronin8317MEMBER

        The ruling says the builder have to pay out first, and then claim the money back from the consultant, Do you think the builder will do business with someone who hide their asset from now on?

      • Ronin, reread lignje’s post. The builders know they have built a defective building, the building certifier knows it. They are all breaking the law and would all protect themselves financially.

      • Yep. What Freddy says. People who spend their lives putting up buildings know exactly what they are doing. They’re not idiots. They know where money is to be saved, and where money is to be made.

        There is a reason why so few in the construction game would ever dare to put any of their wealth in a dwelling they’ve been contracted to complete. When they do build for themselves, they do it ‘properly’, because they know what that means.

    • I agree with you somewhat. The consultant always has the choice to sign or not. If they lack the spine, character or temerity to say “No”, then they deserve what they get.
      I work with these clowns all the time and they are sh!t and incompetent. They deserve what they get.
      The builder however should exercise more care and be held accountable to a greater extent.

      • What if the push to sign off on bad decisions is part of a decade long degradation of the industry. Ie you as fire engineer won’t be getting any work if you are not bending the rules, until they are bent too far overall and there is a recoil we are seeing now.

    • But builder has to pay out first. …then try to collect from -mum-insured or under-insured fire engineer/whoever.

      The builder carries the credit risk on that. So it’s no really all roses for the builder.

      • Huh??
        The builder must pay damages of $5.75M (probably most of that will go in legal fees…the lawyers know the game so they’re making sure they get paid) they could care less if the builder ever recoups this cost.
        The Architects etal must pay the $.6.8M for the replacement of the cladding and reimburse the builder.
        Looks to me like a win for the legal profession while everyone else involved looks to the government for remedy.

      • The legal profession is always the winner and, most of the time, the ONLY winner!!! Should be a RC into the legal profession including judges. It’s all cosy!

    • lignje absolutely spot on analysis of how this shit-storm works.
      This country has Industry associations coming out of its ears, It will be interesting to see if spineless rent-seekers like Professionals Australia, the Arcitect’s Institute, Institute of Building Surveyors and Enginer’s Australia finally step up and do something about this attack on their members. A national Engineer’s strike alone would stop the country in its tracks. The Society of Construction Law has admitted that its members are part of the problem, they’ll do stuff all about it though, how limp are their wrists? These phuckers need to stand up. The developer may be able to say they got bad advice but they should share the blame for not checking and for forcing the consultant’s prices down until there’s no time/resources to do a proper job.

  6. Should call it illegal cladding rather than flammable cladding.

    My pants are flammable but perfectly legal.

  7. The totally crazy thing about Aluminium composite cladding is it’s obvious dangerous chemistry. This is where a science education counts. In garage or ground or first floor entertainment / enclosed deck areas great stuff. Cheap, durable with high R rating for thermal insulation. Even good acoustics. Easy to install too. On high rise exterior cladding above 2 storeys you get the well known “chimney effect ” where increased oxygen encourages combustion. Now Al is high on the activity series of the Periodic Table, note Magnesium Mg is little higher & that burns
    underwater but you get the drift? Both need an an oxidiser and boom you have a raging fire that water finds hard to extinguish.
    Al plus polystyrene once it gets real hot has large surface area of Al , lots of air in chimney effect and a prodigious amount of slow burning polystyrene to encourage further oxidation. It was always the dumbest of materials to clad exterior high rise. The fault lies with the BCA now NCC code . I have a Dip in this silly qualification and having read the text books you find terms like “fit for purpose” , ” satisfactory performance characteristics” WTF is that ? and the anomalous terminology just goes on. The upshot was there was never any rules about what you build your structure with as long as you stayed within ASA guidelines of structural engineering load estimates and ASA recommendations regarding sealing against water etc and other basic design standards. Now the BCA/NCC folks & ASA are wetting their pants against possible charges of vicarious liability redesigning originally faulty concept regulations to cover their backsides when east coast high rise apartments due for Billions cause they are fire hazards .

  8. It’s good news for the owners that they won their case. However as always there is a sting in the tail. All professional indemnity policies issued subsequent to the Lacrosse fire have specifically excluded claims relating to flammable cladding. Unless everyone notified their insurers of a potential claim in that year (and there will be many who didn’t) owners may win their case only to find that there’s no money to be had. One of the problems with “claims made” policies.