Over the last few years in Victoria, there have been many applications for compliance assessments for Aluminium Composite Panels, or ACPs.   

These applications are seeking approval from the Building Appeals Board for “combustible” cladding material to remain on a building.   

This determination is applied for even though the cladding material is deemed “combustible” under the Building Code and is therefore seen as non-compliant with the prescriptive Code requirements. 

Which regulations currently apply?

Such an application may be made under section 160A of the Building Act 1993 for a compliance assessment.   

It is often made in response to a Building Notice or a Building Order from either a local Council or the Victorian Building Authority.  

A legitimate and arguably more amenable route would be to apply to the Building Appeals Board to appeal a Building Notice or Building Order (rather than pursuing a s160A compliance application). 

The Notice or Order will generally call for the ACP cladding to be:  

1. removed entirely from the building; or  
2. that there be a determination obtained from the Building Appeals Board (“the BAB”) that there is sufficient compliance with performance requirements under the Building Code to allow some or all of the cladding to remain. 

There are two routes to compliance with Building Code standards, in order to meet the minimum benchmarks.   

This is via satisfaction of the “prescriptive” deemed-to-satisfy Building Code requirements, or alternatively via a “performance” based solution that can be demonstrated to be at least equivalent to the prescriptive standards. 

As part of that BAB application, it will be necessary to have a supporting fire engineering report that looks at all active and passive fire safety mechanisms and features at the building, such as: 

• any automatic sprinkler system; 
• building occupant warning systems;  
• paths of travel and egress; 
• accessibility to fire-fighting personnel; and 
• an examination of the nature and location of the cladding product itself. 

There is also the ability of the owner of a building, or an Owners Corporation (responsible for common property in apartment buildings) to make an application to Cladding Safety Victoria for a funding application to replace the combustible cladding on a building.   

Consideration would need to be given by a building owner about whether to pursue such a funding application with CSV.   

If funding is accepted, then subject to a funding agreement being entered into with CSV and a builder engaged for the rectification work, the Owner will not need to pay for the cost of replacement.  

Also, an expensive and uncertain BAB proceeding would not be necessary. 

Recent legislation in regard to Cladding Safety Victoria (“CSV”) and funding for cladding replacement commenced from 1 February 2021.   

Namely, there is the Cladding Safety Victoria Act 2020 (“the CSV Act”) and the Cladding Safety Victoria Regulations 2020 (“the Regulations”). 

Sections 27-29 of the CSV Act are the funding requirements with CSV.  Pursuant to section 27, a notification can be made by the Municipal Building Surveyor of Council to CSV.   

That notification is that, in the opinion of the municipal building surveyor (MBS), a particular building is in need of cladding rectification work (which can mean replacement of cladding with non-combustible material).   

Following any section 27 notification by the Council MBS, the provisions of sections 28 to 29 of the Act are activated.   

Section 28 states that CSV must prioritise for “potential financial assistance” any buildings in respect of which it has been notified by an MBS that cladding rectification work is needed.   

CSV must have regard to “the prescribed criteria” when prioritising a building in this way.  (Refer to Clause 7 of the CSV Regulations in this regard). 

Pursuant to section 29 of the CSV Act, CSV may invite the owner or Owners Corporation of a building that has been prioritised under section 28 to apply to register for potential financial assistance for cladding rectification work.   

Subsection 29(2) says that: “After considering an application to register an owner or owner’s corporation of a building for potential financial assistance, Cladding Safety Victoria may accept or refuse to accept the application.”   

It is said at s29(3) that CSV must consider the prescribed matters when deciding whether to accept or refuse to accept the application.   

Clause 7 of the Regulations contains CSV’s funding assessment criteria. The previous VBA system of risk categorisation of “low”, “moderate”, “high” or “extreme risk” is no longer the criteria. 

Section 5 of the CSV Act states that Cladding Safety Victoria is a body corporate with perpetual succession and that may sue or be sued. There is no discernible and specific right of appeal should the CSV decline an application for CSV funding made by Owners.   

That said, and noting the requirement of the CSV to give written reasons for a decision declining a funding application (s29(8)), there is likely a general administrative law right of judicial review to the Supreme Court.  

This could be on the grounds that any decision to decline an application for funding was made unreasonably or by misapplying the prescribed matters, taking into account irrelevant considerations, and so forth. 

The Minister’s Prohibition Declaration effectively ‘banned’ the new use of certain combustible cladding products from 1 February 2021.   

As a consequence, it may be harder to argue that a large apartment building is not able to qualify for full replacement funding from CSV.   

Clause 7 of the Regulations refers to “Prioritisation of buildings for potential financial assistance” and it says (amongst other things): 

“(1) For the purposes of section 28(2) of the Act, Cladding Safety Victoria must have regard to the following criteria when prioritising a building for potential financial assistance – 

1. any written advice from the Authority, the municipal building surveyor or Fire Rescue Victoria about the overall risk to the building associated with any non-compliant or non-conforming external wall cladding product;…” 

From 1 February 2021, various ‘combustible’ cladding products including for instance, Alpolic / fr cladding, was banned by the Minister of Planning (pursuant to the Ministerial Declaration), due to not having at least 93% inert material core composition.   

This ban is prospective only and not retrospective.  A number of cladding products are now effectively banned for use on new buildings. 

While previously some thought that ACP products that had less than 30% combustible polymer core were seen as lower risk, and only risk category “B” under the Insurance Council of Australia guideline, this marker is now effectively superseded by the Ministerial Prohibition Declaration. 

While there may be fire engineering experts who disagree with the Minister’s ban on certain cladding products, this situation is now something that Owners should take into consideration in terms of:  

(i)          likely increased insurance premiums (or excess increases) in the future (the Minister’s Risk Impact Statement prior to the Minister’s Declaration anticipates this may occur); and 

(ii)         possible reduced property values (also known as “the Stigma effect”) due to having a banned cladding product in large quantities on a building’s façade (compare for example the New Zealand experience in terms of the Stigma effect of ‘leaky’ buildings).  

We note the stated grounds behind the Minister’s Prohibition includes a declaration that a “risk of severe damage” is likely (in the future).   

This is not something that is necessarily covered by a performance-based section 160A compliance assessment through the BAB process, which is an assessment on compliance with the Building Code performance requirements for the building as designed and constructed.   

It is also not something that would be covered by a Section 142 application to appeal a Building Notice or Order.  However, it will have an effect on Insurers and consumers into the future. 

For instance, if we look at the situation with asbestos on buildings this has created insurance issues and reduced the property value of buildings decades after construction.   

In some cases, Insurers will not even offer coverage for buildings that contain asbestos because of the likely clean-up costs and risks.  

This is despite any consideration that the asbestos may have been compliant at the time of construction, and despite the asbestos ‘ban’ not being retrospective. 

Where authorities such as the VBA or the MBS call for cladding replacement or make statements that the product is seen as “high risk”, this can support an argument that the building comes within the Reg 7 criteria for cladding replacement funding. 

Owners need to be mindful of the risks of embarking on an application for a compliance assessment at the BAB.  

For instance, there could be a decision that large sections of cladding need to be replaced, and then finding later on that CSV does not regard the situation as “high priority” enough to qualify for replacement funding.   

In such a situation the Owners will be required to pay for cladding replacement themselves in what will be a very expensive exercise. 

Even a BAB outcome that no cladding needs to be replaced could be problematic if it leaves a “banned” cladding product in large quantities on a building, due to the possible increased insurance costs and diminution in property value. 

We will now look at some recent case law decisions with regard to combustible cladding. 

“Lacrosse” Case decision 

The earlier decision at VCAT was upheld on appeal by the Supreme Court of Appeal that the primary wrongdoers in relation to combustible cladding (and the ignition) were: 

1. the Fire Engineer; 
2. the Relevant Building Surveyor; 
3. the Architect; 

as opposed to the Builder, who was only liable for a very small portion of the loss and damage. 

The percentages of liability for the other co Respondents were in the range of about 29% to 39%. 

The primary allegation against the Fire Engineer was that he failed to conduct a “full engineering assessment” of the proposed building design pursuant to the appropriate level of detail called up by the IFEG.  This is what was required by the terms of the consultancy agreement. 

There was not the systematic hazard analysis that would have discovered the use of 100% polyethylene core ACP.   

This should have led to the conclusion that there was an unacceptable risk of spread of fire in the location and configuration proposed on the architectural drawings. 

Tanah Merah Vic v Owners Corporation No 1 [2021] VSCA 72 

Performance Based Solutions 

The prescriptive Deemed to Satisfy test for compliance of combustible cladding (such as EPS) won’t necessarily be the governing test if:  

1. the performance requirements in CP2 and CP4 of the Building Code are satisfied; and 
2. if the holistic fire safety situation of the premises otherwise results in a satisfactory level of fire safety. 

Passive and active fire safety features can include: an automatic sprinkler system, smoke detection system, a reinforced concrete structural frame, internal smoke proof walls between SOUs and corridors, fire separation between basement carpark and habitable levels above. 

In the Matter of 14 Elliot Avenue, Carnegie [2020] VBAB 19. 

This was a section 160A compliance application made to the BAB. 

The Board found that at the time of construction, the design of the building complied with the relevant BCA performance requirements for fire safety.  Key factors were: 

1. Reliance on CodeMark Certificates and a BRAC certificate in regard to EPS and ACP panels; 
2. Fire risk mitigated by a sprinkler system to AS2118.4; 
3. ACP only installed to the top level as an eave feature with no risk of vertical fire spread; 
4. EPS only installed on the top two storeys and not the ground level and the floor above it.  No undue risk of vertical fire spread; 
5. Configuration of external walls for the separate storeys to ‘cascade back’ in a ‘wedding cake’ type design. 

The Board stated that the assessment of fire risk for a building is “an integrated assessment which is not automatically determined from a single variable”.  

The probability of ignition was just one factor to consider when deciding the level of risk for the building as a whole. 

If in doubt about your rights in a dispute situation including those concerning cladding regularisation, do not hesitate to engage expert advice from lawyers well versed in building dispute resolution and Owners Corporation requirements.

By Justin Cotton, Director, Lovegrove & Cotton Pty Ltd 

Disclaimer

This article is not legal advice and discusses it’s topic in only general terms. Should you be in need of legal advice, please contact construction law firm. Lovegrove & Cotton Lawyers and our experienced lawyers will assist you based on the facts and circumstances of your case.

Lovegrove & Cotton Cladding Compliance and Regularisation Lawyers

For thirty years, Lovegrove & Cotton have provided advice and represented property owners, builders, and building practitioners in cladding regularisation matters. Please see the cladding section page for more information.

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