Update on NSW regulatory response to the “cladding crisis” and recent case law developments

After the fires in Grenfell Tower, Lacrosse Tower and the Torch between 2014 and 2017, the use of potentially combustible cladding, in particular aluminium composite panels (ACP) containing polyethylene, has become a major crisis in the Australian construction industry.

Each of the state governments has responded to the issue differently.

This article summarises the measures adopted by the NSW Government to address the defective cladding already installed and prevent any further defective cladding from being installed, since the inter-agency Fire Safety and External Wall Cladding Taskforce was established on 16 June 2017, consisting of the representatives from various departments.

The most recent development was the issue of a notice of intention to issue an ACP ban by the NSW Commissioner for Fair Trading last week. However, we have on 4 December 2019 confirmed with Fair Trading that the notice was issued in error, and that there is no intention to issue a further or updated ACP ban.

Addressing existing problem

A range of measures have been introduced to identify existing affected buildings and to provide their owners of buildings which include or will include these types of products with pathways to address the problem:

  • creating a registration regime requiring owners of private buildings to identify whether their buildings are likely to be affected by non-conforming building products (NCBPs) and to prepare a building fire safety risk assessment
  • expanding the definition of 'major defect' under the Home Building Act 1989 (NSW) on 20 April 2018, to include the use of a banned building product, giving beneficiaries a 6 year statutory warranty
  • on 23 October 2019, introducing the Design and Building Practitioners Bill 2019 (NSW) (Bill) which will impose a statutory duty on any person who carries out construction work, owed to every owner of land on which construction work is carried out (including subsequent purchasers), to exercise reasonable care to avoid economic loss caused by defects arising from the construction work. It is not yet known if the duty will operate retrospectively and which kinds of construction work/ building the duty will apply to. The Legislative Assembly passed the Bill on 13 November 2019, and the Legislative Council (LC) is currently reviewing it. We estimate the LC will vote on the Bill either later this year or early in the new year.

Preventing future problems

In terms of restricting the future use of these types of products, the following measures have been introduced:

  • on 15 August 2018, the Commissioner imposed a building product use ban on ACP with a core comprised of greater than 30 per cent polyethylene by mass (Ban)
  • legislating that, from 1 September 2018, a building product is not compliant, even if it has a Codemark certification, if it is a product prohibited under theBuilding Products (Safety) Act 2017 and in November 2019 issuing a flowchart for the review of potentially combustible cladding
  • introducing a requirement that, from 22 October 2018, Fire and Rescue NSW approve all performance solutions for the use of combustible cladding, and that it be provided with a copy of all construction certificates issued for particular building types.
  • amending state planning policies for exempt development so that, from 31 August 2018, building approval is required for any work that includes the use of combustible cladding
  • in late June 2019, amending the Building Professional Regulation to provide that a professional indemnity policy required for the purpose of obtaining registration is permitted to include exclusions regarding the use of non-compliant cladding
  • on 28 November 2019 the Commissioner indicated her intention to reissue the existing Ban with additional explanatory notes about its intended application.

Recent case law developments

On 15 November 2019 the NSW Civil and Administrative Tribunal delivered judgment in the case of The Owners Strata Plan No 92888 v Taylor Construction Group Pty Ltd and Frasers Putney Pty Ltd [2019] NSWCAT (Unreported, 15 November 2019).

It found that the Tribunal held the builder and the developer of the residential apartment building 100 per cent liable for the replacement of combustible timber cladding “Biowood” installed at the property.

The claim by the owners corporation was for breach of statutory warranties in section 18B of the Home Building Act 1989 (NSW).

This case demonstrates the difference between cases commenced in the Tribunal in NSW (where it is not possible to apportion statutory warranty claims or bring cross claims against consultants in NCAT) and in Victoria (where the Lacrosse claim was decided and the relevant consultants were joined to the proceeding and found partially liable for the defective cladding).

What 2020 holds and how we can help

We will provide a further update once the LC vote on the Bill has occurred. In particular we await a draft Regulation, which, it is assumed, will fill in the detail as to the Bill’s intended application.