‘LACROSSE’ Tanah Merah (Vic) Pty Ltd v Owners Corporation
Background
In 2014, a cigarette left by a backpacker on a balcony ignited a fire in a Docklands apartment building. Fourteen storeys of the building were burnt due to the aluminium composite panels (ACP) installed on the outside of the building, comprising of 100% polyethylene core. In 2019, the Victorian Civil and Administrative Tribunal (VCAT) held that the $12,000,000.00 in damages should be apportioned between the building surveyor (33%), the architect (25%), the fire engineer consultant (39%), and the individual who caused the fire (3%).
Proceeding History
In Tanah Merah Vic Pty Ltd v Owners' Corporation No 1 of PS631436T [2021] VSCA 72, the Court of Appeal sustained the Tribunal’s initial decision that the builder had breached the implied warranty under the Domestic Building Contracts Act 1995 (Vic) and also the Building Act 1993 (Vic) by constructing a building that did not comply with the Building Code of Australia (BCA). However, the Court of Appeal found that the builder was not negligent under the Wrongs Act 1958 (Vic) (Wrongs Act), as the three consultants had argued it should be.
In May 2021, the Court of Appeal handed down its judgment in Tanah Merah Vic Pty Ltd v Owners Corporation No 1 of PS613436T [No 2] [2021] VSCA 122, reallocating the damages responsibility percentage accordingly; the fire engineer was apportioned 42% (up 3%), the building surveyor was apportioned 30% (down 3%), while the backpacker who started the fire and the architect’s apportionment percentage remained at 3%.
In reaching this verdict, the Court had considered:
the extent of liability for each offender from the standard of care reasonably expected of that wrongdoer.
the causal result of the negligent act(s) or omissions.
Discussion
The Court held that the builder had no requirement in ensuring that the materials selected complied with the BCA, even though ACP was referenced in the original architectural plans, as it remained the responsibility of the architect, not the builder. The Court agreed with the VCAT decision that the ‘peer professional opinion’ defence did not apply, as the relevant peer professional opinion relied upon was ‘unreasonable’. Notably, the court never withdrew their initial decision that the builder was not liable to the owners of the building, but rather, it was able to pass the liability on to the responsible consultants.
Leave to appeal was granted on the issue of the building surveyor’s failure to identify and correct an omission in a fire engineering report. The building surveyor successfully argued that VCAT erred in finding that the building surveyor’s failure to identify and remedy deficiencies in a fire engineering report caused the loss, and the Court set aside that finding. The Court agreed with the building surveyor’s position that as the fire engineer was already aware that ACPs were proposed for the cladding, the inaction by the building surveyor had no causal consequence. The Court held that the fire engineer sat at the top of the hierarchy by a clear margin, but the building surveyor bore “a not insignificantly greater responsibility than the architect”. The Court agreed with the original findings that the fire engineer’s failures had considerable causal potency, while also maintaining the view that it had frontline responsibility.
The Court noted that while it might have appeared that it simply assigned the reduction in the building surveyor’s share of the apportionment to the fire engineer without increasing the architect’s share, the revised percentages reflected the Court’s view about each party’s relative responsibility.
Conclusion
The case has been the catalyst for exclusions in professional indemnity insurance cover, withdrawals of insurance cover and increased premiums for practitioners in the building and construction industry, including consultants such as those in this case (architects, building surveyors and fire engineers). The appeal decision means that the issues plaguing the professional indemnity insurance industry are unlikely to cease any time soon.
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