Potential reprieve for cladding claims in the NSWSC?

Following the devastating impacts of the Grenfell fire in 2016, much of the discussion around ACPs has been very black and white i.e. that all ACPs are a dangerous product and must be immediately removed from buildings. The decision of Strata Plan 92450 v JKN Parra 1 Pty Ltd [2022] NSWSC 958 demonstrates that arguments in relation to ACPs have become more nuanced and sophisticated.

In this case, Black J found that the Courts are powerless to make a determination as to whether or not a material is “combustible” pursuant to the BCA, unless the material has been subject to Australian Standard 1530.1 testing.

The decision demonstrates a high-level of sophistication and knowledge regarding the intricacies of cladding claims, fire engineering and BCA compliance, and that the Courts are willing to meaningfully engage in these issues to determine an outcome. 

Key Takeaways 

• Parties seeking to rely on certificates to demonstrate the combustibility or otherwise of cladding will need to forensically examine whether the certificates relate to the cladding in situ or not. In this case, the Owners’ expert reportedly relied on a particular certificate (to demonstrate combustibility) that did not relate to the cladding product that was actually installed;
• Simply because cladding installed on a building is a banned product under the Building Products (Safety) Act 2017 (NSW) (BPSA) does not equate to liability on the part of a defendant; 
• In the absence of any combustibility testing under AS1530.1 - 1994 (AS1530.1), the Court cannot make a determination as to whether or not a material is “combustible” as defined under the BCA; and
• Retrospective Alternative Solutions can be provided to demonstrate compliance with the BCA and do not have to be prepared as at the time of installation.  

Background

The Owners– Strata Plan No 92450 (Owners) are the effective owners of the ‘Parramatta Rise’ building in N.S.W (the Building). Until 15 July 2016, JKN Para 1 Pty Ltd (JKN) was the owner and developer of the Building, with Toplace Pty Ltd (Toplace) carrying out the design and construction of the Building. A final occupation certificate for the Building was issued on 10 March 2017. 

The parties to the proceedings agreed on the following:

• Toplace carried out all or part of the “residential building work” within the meaning of the Home Building Act 1989 (NSW) (HBA);
• the Owners are the immediate successor in title to JKN in respect of the common property at the Building;
• the cladding installed on the Building did not comply with the Deemed to Satisfy (DtS) provisions of the Building Code of Australia (BCA); and
• the cladding installed on the Building is now a banned product under BPSA.

The Owners alleged that JKN and Toplace (together, the Defendants) installed aluminium composite panels (ACPs) on the Building that were combustible, thereby engaging in “residential building work” in breach of the statutory warranties under section 18B of the HBA as the ACPs did not comply with the BCA.

The Defendants responded by stating that the ACPs installed on the Building complied with the BCA at the time of the installation. 

Pathways to compliance under the BCA

One of the issues in the case was how the Building complied with the Performance Requirements of the BCA which could be established by compliance with the DtS Provisions or formulating an Alternative Solution (as defined) or a combination of those matters. 

DtS provisions satisfy Performance Requirements under the BCA. Alternative Solutions provide an alternative route for compliance, allowing appropriately qualified experts to prepare a solution that complies with the relevant Performance Requirement, but does not strictly comply with the DtS provisions in the BCA. A common example occurs in respect of fire engineering, where for example, in order for a building to comply with certain DtS provisions, it must have a complete sprinkler system, but there may be other means to achieve the same outcome (i.e. an Alternative Solution) without having to incur the cost required to strictly comply.

Issues

In claiming that the Defendants had not complied with the BCA in their installation of the allegedly combustible ACPs, the Owners were required to adduce evidence to answer the following questions put forward by the Court:

1. Whether the cladding installed on the Building complied with the DtS provisions of the BCA?
2. Was the cladding otherwise compliant with the BCA by way of an Alternative Solution under the BCA?
3. Whether the cladding is composed of material that is ‘not good and suitable’ for the purpose for which the cladding is used? 
4. Whether the cladding resulted in a dwelling that is not reasonably fit for occupation as a dwelling?

Decision 

In coming to a final decision, Black J answered all of the above questions in the negative such that, simply because the cladding installed on the Building did not comply with the DtS provisions of the BCA and would not have been compliant with the BCA by way of an Alternative Solution, this did not mean that the cladding was composed of a material that:

1. was ‘not good and suitable’ for the purpose that the cladding was used; and
2. resulted in the dwelling not being reasonably fit for occupation as a dwelling. 

While the parties agreed that the cladding did not comply with the DtS provisions of the BCA, the Owners had failed to establish that the ACP cladding was combustible within the meaning of the BCA or for the purposes of AS1530.1. Critically, the Owners’ expert expressed the view that the cladding did not comply with the DtS provisions of the BCA based on a CSIRO test certificate which indicated that the Building’s ACP cladding was combustible. It was later determined that the CSIRO test certificate, which indicated that Vitrabond FR was combustible when tested in accordance with AS1530.1, was based on testing done to an unidentified Vitrabond product rather than being tested on Vitrabond FR. 

This finding had numerous flow on effects throughout the proceedings, as the assumption that the ACP cladding was “combustible” was critical to the Owners’ position. Questions 3 and 4, relating to the suitability of the cladding and the dwelling not being reasonably fit for occupation as a dwelling due to the allegedly deficient cladding, were both answered in the negative as there was no persuasive evidence put before Black J which adequately addressed the rate at which the combustion would occur. 

Questions 3 and 4 hinged on a finding that the Defendants breached the statutory warranties under section 18B of the HBA. However, without cogent evidence (namely a combustibility test under AS1530.1) which established that there was a real risk of fire spreading by the façade, there was no avenue for Black J to make the determination that these statutory warranties were breached without this evidence at hand. 

With respect to question 2 regarding an Alternative Solution, Black J determined that the cladding was not compliant with the BCA by way of an Alternative Solution under the BCA as no Alternative Solution was prepared prior to the issue of a construction certificate for the Building and no Alternative Solution was prepared as at the time of the proceedings. Moreover, neither party adduced evidence that established that an Alternative Solution would not have been available in the circumstances. 

Implications 

Given the focus on ACP claims in recent years, the level of knowledge (including that of the Courts) has increased and become more sophisticated such that a building with ACPs (even if fitted with ACPs that are banned products) does not necessarily equate to a finding of liability on the part of defendants.

Parties seeking to bring a claim will need to forensically examine whether they have sufficient evidence as to whether ACPs do not meet the DtS or Performance Based solutions under the BCA. 

Construction professionals, their insurers, and owners of apartment complexes will be encouraged by this decision. They will be well served by engaging in the forensic exercise of understanding the precise products that have been installed, and whether there is a solution other than a complete replacement of the cladding that can be achieved.