The Burning Issue of Regulatory Action in Victoria and NSW for Aluminium Composite Cladding
Published on October 23, 2018
The involvement of aluminium composite panel cladding (ACP) in fires in multi-storey residential buildings in Australia and internationally, most notably in the Lacrosse apartment building in Melbourne in 2014 and the Grenfell Tower in London in 2017, has rippled a shockwave of concern amongst property owners, building industry participants, insurers and regulators.
The use of ACP in the facades of multi-storey buildings in Australia has resulted in many owners of buildings and strata units actioning the following:
- Identification of types of ACP present and assessment of suitability;
- Performing risk assessments concerning ACP cladding;
- Identifying necessary remedial works to address fire hazards to life and property caused by the use of ACP; and
- Considering recovery action that may be taken against the party/ies responsible for ACP being used.
ACP has been involved in a number of fires and while regulators grappling with issues surrounding the use of ACP in Australia following a very destructive fire in the Lacrosse apartment building in Melbourne, it was the Grenfell Tower fire that resulted in the tragic loss of 71 lives that has given greater impetus to this issue.
This article looks at some of the recent legislative reforms that have been proposed in NSW and Victoria surrounding the use of ACP.
ACP – What Is It?
ACP comprises two sheets of aluminium with a core which is composed of a number of different materials ranging from a combustible polymer (such as polyethylene) to materials deemed non-combustible by the National Construction Code (NCC) (such as compressed fibre cement). Most ACP contains a combustible polymer with the amount of that material ranging from 1% to 100% depending upon the type of ACP used.
ACP products have been used in multi-storey residential and commercial buildings in Australia for the past 40 years, being a cost effective building material.
ACP – Involvement In Fires
As identified above, two recent fires involving ACP which have been widely reported and commented upon are the Lacrosse fire and the Grenfell fire.
The fire spread in the Lacrosse building was rapid, having started from an unextinguished cigarette on an 8th floor balcony and spreading to the 21st floor within 10 to 15 minutes, penetrating adjacent internal rooms as it travelled.
The ACP product used, Alucobest, was found in the post-incident analysis conducted by the Metropolitan Fire Brigade (MFB) to have contributed to the rapid spread of the fire.
The fire caused substantial damage to property, however, through favourable weather conditions and good fortune the Lacrosse fire caused no loss of life.
During the MFB investigation it was noted that the Lacrosse Building was a Type A construction under the Building Code of Australia (BCA), and accordingly, the deemed-to-satisfy requirements of the BCA stipulated that external walls must be non-combustible, as determined by the AS1530.1 Combustibility Test for Materials. The MFB arranged for the Alucobest ACP to be tested by the CSIRO for combustibility using the Australian Standard and the material failed dramatically. The minimum test time for combustibility under AS1530.1 is 30 minutes and the sample failed within the first minute of the test, with the test being cancelled soon after to avoid damage to the CSIRO equipment.
The MFB found that there was no alternative solution as required by the BCA when the deemed-to-satisfy requirements are not met for the use of Alucobest referred to in the occupancy permit or the fire engineering report referenced in the occupancy permit.
In those circumstances it has been suggested that the use of Alucobest did not comply with the BCA and the Victorian Building Authority (VBA) issued an order to the builder, LU Simon, to replace the cladding. LU Simon successfully resisted the VBA order in circumstances where the Supreme Court found that the Building Act 1993 (Vic) does not give the VBA power to direct a builder to rectify building work after an occupancy permit has been issued.
Since the Supreme Court decision as a gesture of “good faith” LU Simon has offered to replace the cladding, with litigation in VCAT currently underway to determine where liability will lie for those replacement costs. Estimates of the cladding replacement costs that the owners would have incurred have ranged from $40,000 to $60,000 per apartment.
In addition to the Grenfell fire over the past 11 years, there have been at least 15 other fires in high rise apartment buildings in the United Arab Emirates, Azerbaijan, Russia, Turkey, France, China, South Korea, and the USA.
ACP – How Widespread Is It
Audits are being conducted by the States and Territories in Australia to ascertain how prevalent ACP is.
In Victoria, following the Lacrosse fire, an audit of 168 central Melbourne buildings was carried out and 51% of those buildings were assessed as being non-compliant with the NCC. Risk assessments carried out on those buildings by the VBA, with the City of Melbourne and the MFB, found there was no risk to the safety of any occupants. One other building, the Harvest Apartment building in South Melbourne which fell outside the scope of the audit was, however, found to be non-compliant and required immediate action.
The Victorian Cladding Taskforce in its November 2017 Interim Report identified that through the Victorian Centre for Data Insights up to 1,369 privately owned buildings constructed since 1997 in three specific categories were likely to contain combustible cladding. The three categories of buildings considered were:
- Class 2 buildings (multi-unit residential buildings), three storeys and above;
- Class 3 buildings (short-term accommodation buildings), three storeys and above; and
- Class 9 buildings (buildings of a public nature), two storeys and above.
The VBA is currently carrying out an audit of those buildings and is contacting residents, owners’ corporations and owners.
In NSW it has been reported in the media that there could be as many as 2,500 buildings that are affected by ACP, based upon documentation obtained by the opposition under freedom of information laws, however, the NSW government has refuted that figure is accurate.
The NSW Data Analytics Centre have identified that 1,184 buildings may potentially contain combustible cladding and as at 4 June 2018 there were 412 buildings that had been identified as requiring further assessment as a high priority.
The Victorian government has introduced the Building Amendment (Registration of Building Trades and Other Matters) Bill 2018 into parliament. The second reading of the bill occurred on 7 August 2018 and debate has been adjourned to 21 August 2018.
The key reforms to address the use of non-compliant combustible cladding that are proposed in the bill are as follows:
- The Minister will have the power to ban a combustible external wall cladding product if the Minister is satisfied that the product is causing or will likely cause:a) risk of death or serious injury to building occupants, neighbouring building occupants or members of the public; or
b) severe damage to property
- Prior to issuing any ban the Minister may at his/her discretion seek public submissions.
- Any failure to comply with a ban may attract a fine of up to $400,000 or up to 5 years imprisonment.
- Municipal building surveyors and private building surveyors may take samples of building products and arrange for destructive tests to be carried out if they hold a reasonable belief that it is reasonably necessary to do so.
- In response to LU Simon & Others v Victorian Building Authority, clarification has been made that a private building surveyor, when acting as a relevant building surveyor, can continue to issue building notices and orders after the issue of an occupancy permit.
- A mechanism is provided for lot owners in strata to obtain loans through “Cladding Rectification Agreements” of at least 10 years to meet the costs of replacement of non-compliant cladding, with the loans to be paid back through Council rates and liability for the loans passing to new owners on the sale of lots.
On 18 December 2017, the Building Products (Safety) Act 2017 (NSW) (the BPS Act) commenced. Whereas the proposal under the Building Amendment (Registration of Building Trades and Other Matters) Bill 2018 specifically targets combustible cladding that is considered by the Minister to be a high risk to public safety, the BPS Act gives much broader powers to the Fair Trading Commissioner to ban any building product that is considered to be a “safety risk” by causing or threatening risk of death or serious injury to the occupants of a building.
On 10 August 2018, the Fair Trading Commissioner gave notice of an intention to impose a ban, to come into force on Wednesday 15 August 2018, of any ACP with a core comprised of greater than 30 percent polyethylene in any external cladding, external wall, external insulation, façade or rendered finish to:
- Type A construction, class 2, 3 and 9 buildings with a rise in storeys of three or more and class 5, 6, 7 and 8 buildings with a rise in storeys of four or more; and
- Type B construction, class 2, 3 and 9 buildings with a rise in storeys of 2 or more and class 5, 6, 7 and 8 buildings with a rise in storeys of three or more.
There will be an exception if:
- The ACP is not deemed combustible under AS 1530.1 “Methods for fire tests on building materials, components and structures”; or
- The ACP has passed a test for “external wall fire spread” and “building-to-building fire spread” in accordance with AS 5113 “Fire Propagation Testing and Classification of External Walls of Buildings”, with those test results dated on or after 1 July 2017.
The ban will come into force on Wednesday 15 August 2018 and has retrospective effect to apply to buildings constructed after that date and also to buildings constructed before the order came into effect that contain the banned building product.
Accordingly, the owners of buildings which contain a banned product may be issued with a building product rectification order under the BPS Act requiring remedial works to be performed to address the safety risk associated with the banned product.
A breach of the BPS Act by using a product after it has been banned or failing to act on a building product rectification order may result in fines for corporations of up to $1.1 million for a corporation (with $110,000 continuing per day for each day the offence continues), or $220,000 or imprisonment for 2 years or both for an individual (with $44,000 continuing per day for each day the offence continues).
NSW is also considering introducing a mechanism for building owners to “self-report” any combustible cladding to the Secretary of the Department of Planning and Environment with a register to be maintained on buildings which contain this type of cladding.
The draft Environmental Planning and Assessment Amendment (Identification of Buildings with Combustible Cladding) Regulation 2017 (NSW) was on exhibition for public comment until 16 February 2018 and has not yet been approved. Key features of the regulation are:
- Owners will be given 3 months from the regulation being passed to comply.
- Within that timeframe, the owners of buildings which contain combustible cladding must provide information including as to the nature of the cladding, a description of where the cladding has been applied to the Secretary.
- Class 2, 3, 9a or 9c buildings not fitting with a sprinkler system, or early childhood centres not fitting with a sprinkler system must within 7 months of the regulation being passed provide a statement from a qualified expert with a safety risk assessment and detailing any actions to address risks.
- All other buildings have 11 months to provide such a statement from a qualified expert, with a progress report on that statement to be provided at the 7 month mark.
- The register maintained by the Secretary may be made available to Fire and Rescue NSW, the public and published on the Department’s website.
In NSW the Home Building Act 1989 has been amended so that any building product which is the subject of a ban under the BPS Act is defined as a “major defect”, essentially attracting a 6 year statutory warranty period. In addition, cladding that causes or is likely to cause a threat to safety to occupants of a building if a fire occurs is now classified as a “major defect”.
Building industry practitioners, owners and insurers should be aware that regulatory reform is coming for combustible cladding and with costly rectification costs likely to be incurred, building owners will be seeking to recover rectification costs. While it is beyond the scope of this article, those claims will involve issues such as the type of combustible cladding used, design responsibilities, products specified, products used, BCA / NCC provisions which applied at the time of construction, statutory warranties, contractual terms, and any representations made concerning the combustible cladding products.
This article was originally published in the LexisNexis Australian Civil Liability Newsletter Volume 15 Number 5
 “Metropolitan Police Media Release, 16 November 2017: http://news.met.police.uk/news/family-tributes-to-victims-of-grenfell-tower-fire-247006.
 Metropolitan Fire and Emergency Services Board Post Incident Analysis Report, Lacrosse Docklands 673 – 675 La Trobe Street, Docklands, 25 November 2014.
 Adam Dalrymple, Director, Fire Safety, Metropolitan Fire Brigade, Official Committee Hansard, Senate Economics References Committee, Non-Conforming Building Products, Friday 13 November 2015.
 Specification C1.1 of the BCA.
 LU Simon Builders Pty Ltd v Victorian Building Authority  VSC 805 (22 December 2017)
 “Lacrosse builder LU Simon to pay recladding costs as ‘gesture of good faith’”, Australian Financial Review, Michael Bleby, 22 November 2017.
 “Apartment Owners face $60,000 cladding blow after court ruling protects builders”, The Age, Madeleine Heffernan, 20 January 2018.
 Ajman One Tower, UAE (28 March 2016); The Address Downtown Hotel, UAE (31 December 2015); Sharjah, UAE (1 October 2015); Baku, Azerbaijan (19 May 2015); Marina Torch, UAE (21 February 2015 and 2017); Grozny City Tower, Russia (3 April 2013); Tamweel Tower, UAE (18 November 2012); Polat Tower, Turkey (17 July 2012); La Tour Mermoz, France (14 May 2012); Al Tayer Tower, UAE (24 April 2012); Dynasty Wanxin, China (3 February 2011); Jing’an District, China (15 November 2010); Sonacotra Building, France (14 November 2010); Wooshin Golder Suites, South Korea (1 October 2010); Water Club Tower, USA (23 September 2007).
 Victorian Building Authority, Media Release, “VBA Releases External Wall Cladding Audit Report”, 17 February 2016.
 “NSW government unsure how many buildings may have dangerous fire cladding” Sydney Morning Herald, James Robertson and Lisa Visentin, 16 June 2017.
 Department of Finance, Services and Innovation, NSW government, “Update on the Fire Safety and External Wall Cladding Taskforce, 4 June 2018.
  VSC 805 (22 December 2017).