By Nicole Wilde

2 April 2019

Tisher Liner FC Law’s summary of the VCAT decision in Owners Corporation No.1 of PS613436T & Ors v LU Simon Builders Pty Ltd & Ors [2019] VCAT 286.

The following fact sheet provides a summary of the Lacrosse Tower decision: LU Simon Builders Pty Ltd “Docklands Lacrosse fire” flammable cladding case: Owners Corporation No.1 of PS613436T & Ors v LU Simon Builders Pty Ltd & Ors [2019] VCAT 286  (22 December 2017).

Facts:

On or about midnight on Monday 24 November 2014, Jean-Francis Gubitta returned home to apartment 805 of the Lacrosse apartment tower at 673-675 La Trobe Street, Docklands.

Mr Gubitta went out to the balcony to smoke and left his cigarette butt in a plastic food container that served as an ashtray, sitting on the timber topped balcony table.

At 2.23am, the smoke detector in the hallway outside apartment 805 activated, generating an automatic alarm to the Metropolitan Fire Brigade (“MFB”).

At 2.29am, the first fire crew arrived on scene. The fire had already climbed to level 14, travelling rapidly up the external wall cladding and spreading on to each level’s balcony. The rapid fire compromised the Emergency Warning and Intercommunications System.

At 2.35am, the fire had reached the roof of the tower above level 21.

At 2.55am, the fire appeared to be under control and all of the approximately 400 occupants of the building evacuated safely and without injury.

Issued on or about May 2015, the MFB Post Incident Analysis Report revealed that the fire was accidental: started by the cigarette butt, developed from the plastic container and extended to involve the timber table.

The developing fire impinged onto the ‘Alucobest’ façade of the wall. The burn patterns were predominantly found on the exterior façade. These were vertical in nature leading the MFB report to suggest the cladding contributed to the rapidly spreading fire.

Fire engineers claimed that the factors contributing to the spread of the fire were:

the design of the exterior walls of the Lacrosse building;

the use of aluminum composite panels as part of the exterior walls of the Lacrosse building;

the fuel load on the balconies;

the deletion of sprinklers from the balconies; and

the fuel source that was in close proximity to the balcony walls. At 215–216

The current and anticipated future losses claimed by the applicants amounted to the sum of $12,765,812.94.

Issues:

“This proceeding concerns the attribution of responsibility to (and among) the eight respondents for the damage caused by the fire.

“The primary focus is on the selection, approval and installation of the aluminum composite wall cladding that carried the fire.” At 3

Held:

Pursuant to section 51 of the Wrongs Act 1958 (Vic) (“Wrongs Act”), the two conditions are the:

failure by Mr Gubitta to fully extinguish his cigarette; and

the installation of an aluminum composite panel with a 100% polyethylene core (“ACP”) on the external walls of the tower.

LU Simon was found primarily liable to pay damages to the Owners.

211 Applicants (“Owners”):

The first applicant is the Owners Corporation No 1 PS613436T (“OC 1”), the parent corporation of Owners Corporation No 2 PS613436T (“OC 2”) and Owners Corporation No 4 PS613436T (“OC 4”). The members of OC 1 are all of the owners of individual lots on Plan of Subdivision 613436T, as well as the owners of residential apartment on level 3 of the Lacrosse Tower.

The second applicant is OC 2. The members of OC 2 are the owners of retail properties on levels 1 and 2 of the Lacrosse tower.

The third applicant is OC 4. The members of OC 4 are the owners of the apartments on levels 4 to 21 of the Lacrosse tower.

The fourth to 211th applicants are the owners of individual apartments that are seeking damages in the proceeding.

Please note that the claim brought by Gardner Group against the Owners for contribution of the spread of the fire was abandoned.

First Respondent – LU Simon Pty Ltd (“LU Simon”)

The builder LU Simon breached sections 8(b), (c) and (f) of the Domestic Building Contract Act 1995 (Vic) (“DBC”) by failing to take reasonable care and is therefore primarily liable to pay damages to the Owners.

Section 8(b) of the DBC: LU Simon did not supply good and suitable materials.

Section 8(c) of the DBC: LU Simon did not comply with the law by not carrying out the work in accordance with the Building Act 1993 (Vic) and the regulations made under that Act.

Section 8(f) of the DBC: the building owner relied on the skills and judgement of the builder that the work and materials used would be reasonably fit for the purpose of the building, implied into its Design and Construct Contract dated 14 May 2010 with the developer 675 La Trobe Street Pty Ltd.

LU Simon is ordered to pay the total sum of $5,748,233.28 to the Owners.

Of the total sum of $12,765,812.94 in damages claimed by the Owners, $4,851,937.19 is agreed.

The sum of $4,851,937.19 comprises of make-safe works, dry out costs, reinstatement works, professional fees, strata manager, project management fees and items of Owners’ uninsured loss agreed.

In addition, the Owners are awarded $195,025.93 in respect of reinstatement and loss of rent, and $701,270.16 in respect of additional insurance premiums.

The balance of $7,017,579.66 includes the disagreed amount of reinstatement of property damaged by the fire, compliance costs subject to ongoing negotiations and unquantified future costs relating to recladding works.

The damages payable by LU Simon to the Owners are to be apportioned between each of the concurrent wrongdoers pursuant to Part IVAA of the Wrongs Act:

Gardner Group (33%) for breach of contract;

Elenberg Fraser (25%) for breach of contract;

Thomas Nicolas (39%) for breach of contract; and

Jean-Francois Gubitta (3%) for failure to exercise reasonable care.

LU Simon must pay Jean-Francois Gubitta’s portion of 3% of the total sum, amounting to $172,447.00.

LU Simon breached section 51 of the Wrongs Act, by breaching its Design and Construct Contract.

LU Simon exercised reasonable care in the construction of the Lacrosse tower by installing combustible ACPs on the east and west façades of the tower.

Second and Third Respondent – Anastasios (‘Stasi’) Galanos and Gardner Group Pty Ltd (“Gardner Group”)

Gardner Group is vicariously liable for any breach of duty by the building surveyor Mr Galanos.

Gardner Group breached its Consultant Agreement with the developer executed in January or February 2010 and later novated to LU Simon, by failing to exercise due care and skill in:

issuing the Building Permit for of Stage 7 of the construction of the Lacrosse tower;

approving the Elenberg Fraser’s specification of ACPs of the T2 Specification, which did not comply with the Building Code of Australia (“BCA”); and

failing to notice and query the incomplete description of the cladding systems in the Fire Engineering Report prepared by Thomas Nicolas (“FER”).

The conduct of Gardner Group constituted the making of representations that were misleading and deceptive in contravention of section 18 of the Australian Consumer Law, but does not materially add or alter the proportionate liability of Gardner Group.

Gardner Group was a cause of the harm to LU Simon resulting its breach of the Design and Construct Contract and breached section 24H of the Wrongs Act, as a concurrent wrongdoer.

Gardner Group fails in its defence based on peer professional opinion under section 59 of the Wrongs Act.

Gardner Group is ordered to reimburse LU Simon 33% of the total sum, amounting to $1,896,916.98.

Please note that Gardner Group is found to have properly inspected the works.

Fourth Respondent – Elenberg Fraser Pty Ltd (“Elenberg Fraser”)

The architects Elenberg Fraser breached its Consultant Agreement with the developer executed on or about 4 August 2010 and later novated to LU Simon, by failing to exercise due care and skill in:

failing to ensure that its design of the external cladding satisfied all the legislative requirements applicable to the design of the work, including the applicable requires of the BCA and was otherwise fit for purpose; and

failing as head design consultant to ensure that the ‘Alucobest’ ACP sample provided by LU Simon was compliant with the BCA, Elenberg Fraser’s design intent, and was otherwise fit for purpose.

Elenberg Fraser was a cause of the harm to LU Simon resulting its breach of the Design and Construct Contract and breached section 24H of the Wrongs Act, as a concurrent wrongdoer.

Elenberg Fraser is ordered to reimburse LU Simon 25% of the total sum, amounting to $1,437,058.32.

Fifth Respondent – Tanah Merah Pty Ltd, trading as Thomas Nicolas (“Thomas Nicolas”)

The fire engineer Thomas Nicolas breached its Consultant Agreement with the developer executed on or about 9 July 2010 and later novated to LU Simon, by failing to exercise due care and skill in failing to:

conduct a full engineering assessment of the Lacrosse tower in accordance with the International Fire Engineering Guidelines;

include the results of the full engineering assessment of the Lacrosse tower in the FER; and

recognise that the ACPs proposed for use in the Lacrosse tower did not comply with the BCA and failing to warn at least LU Simon of that fact.

Thomas Nicolas was a cause of the harm to LU Simon resulting its breach of the Design and Construct Contract and breached section 24H of the Wrongs Act, as a concurrent wrongdoer.

Thomas Nicolas is ordered to reimburse LU Simon 39% of the total sum, amounting to $2,241,810.98.

The conduct of Thomas Nicolas constituted the making of representations that were misleading and deceptive in contravention of section 18 of the Australian Consumer Law, but does not materially add or alter the proportionate liability of Gardner Group.

Sixth Respondent – Gyeyoung Kim

The claims brought against the occupier of apartment 805, Mr Kim, were not established.

Mr Kim did not owe a duty to the Owners to exercise reasonable care not to create a fire hazard in the use and occupation of the apartment.

The evidence of fire spread does not support a finding that the storage of items on the balcony of apartment 805 contributed to the ignition of the ‘Alucobest’ ACPs or subsequent fire spread.

Seventh Respondent – Jean-Francois Gubitta

Mr Gubitta breached his duty to the Owners to take care in the disposal of his smouldering cigarette and that he breached that duty by failing to ensure that his cigarette was fully extinguished.

Mr Gubitta was a cause of the harm to LU Simon resulting its breach of the Design and Construct Contract and breached section 24H of the Wrongs Act, as a concurrent wrongdoer.

The extent of Mr Gubitta’s liability is confined to the balcony of apartment 805 and to the cleaning up after the fire. Mr Gubitta’s responsibility for the loss and damage is minimal.

Mr Gubitta is ordered to reimburse LU Simon 3% of the total sum, amounting to $172,447.00.

Please note that there will be no order directly affecting Mr Gubitta, as he has not taken part in the proceeding and no party has sought judgment against him.

Therefore LU Simon is ordered to pay 3% of the total sum, amounting to $172,447.00.

Mr Gubitta is not found in breach of negligence by the Gardner Group and Thomas Nicolas.

Eighth Respondent – Property Development Solutions (Vic) Pty Ltd (“PDS”)

The claims brought by Gardner Group and Thomas Nicolas against the superintendent under the building contract, PDS were not established.

PDS is found to have exercised reasonable care in its involvement in the sample approval process.

 

For more information regarding owners corporation matters or flammable cladding rectification inquiries, please contact Nicole Wilde or a member of the Owners Corporations Team.

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