Lacrosse Tower Fire Review: How ACT Owners Corporations Could Be Affected

When the Lacrosse apartment tower in Melbourne’s Dockland precinct burned down in November 2014,  it sparked a nationwide review into the use of and risks associated with combustible wall cladding products. 

what happened?

On 28 February 2019, the Victorian Civil and Administrative Appeal Tribunal (VCAT) handed down its decision in Owners Corporation No. 1 of PS613436T v LU Simon Builders Pty Ltd (Building and Property) [2019] VCAT 286 (Lacrosse Tower). The decision was in regards to liability for the installation of combustible cladding, namely Alucobest Aluminium Composite Panels (ACP’s), on the external building façade of the Lacrosse Tower. The cladding, which we understand is or was commonly used on external building facades, saw a fire that started on the 8th floor of the Lacrosse Tower reach the 21st floor in just 11 minutes. The damages claimed in respect of the fire totalled approximately $12 million.

Ultimately, the VCAT delivered a decision that apportioned the $12 million sought in damages for the Lacrosse Tower fire between:

• The building surveyor (33%);
• The architect (25%);
• The fire engineering consultant (39% per cent); and
• The individual who caused the fire (3%). 

The Tribunal’s decision was appealed.

On 26 March 2021, the Victorian Court of Appeal handed down its Judgment which upheld the VCAT’s decision. The question that arose from this case both at first instance and on Appeal, aside from quantum, was: who was to blame? A question which, when faced with a multi-million dollar bill, was hotly contested. 

For the purposes of this article (noting that the owners corporation of the Lacrosse apartment tower were plaintiffs to the abovenamed proceedings), the questions we pose are:

• What if the owners corporation had had actual knowledge or were aware that the cladding installed in the Lacrosse Tower posed a potential fire risk? and;
• Would the outcome and party ultimately liable for multi-million dollar bill have then been different?

Potential Scope For Liability

It's well established that owners corporations (and, by extension, executive committees) owe a statutory duty to maintain common property.[1][2]

In the ACT, it's a function of the owners corporation to control, manage and administer common property[3]. Section 24 of the Unit Titles (Management) Act 2011 (ACT) (UTMA) provides a statutory basis for the obligation on owners corporations in the ACT to maintain common property. 

Also in the ACT, strata-titled units are either class A or class B units and are defined as such by the registered units plan. We pause here to note that class A units are typically located in multi-storey apartments, and class B units are typically townhouse-style or stand-alone type units. 

In relation to class A units, the common property is comprised of that part of the building from the midpoint of the walls to the outside of the unit (and is as defined on the registered units plan). Owners corporations for class A units are responsible for the defined parts of a building (including balconies and load-bearing walls, columns, footings, slabs and beams)[4]. As such, fixtures to the external façade of any building of class A units will, in most circumstances, generally fall within the definition of property which is to be maintained by the owners corporation. This obligation to maintain therefore includes, but is not limited to, the maintenance of cladding on walls of buildings comprising class A units. 

Historically, the duties of owners corporations and resultant damages (in circumstances where those duties are breached) have been thought to be wholly governed by statute. As evident from the most recent New South Wales and Victoria Strata cases, however, it appears that Courts are increasingly extending the scope of duties owed.

Cases involving allegations of common law negligence (in the context of strata management claims) have predominately arisen in New South Wales and Victoria. However, ACT Courts often derive guidance from these jurisdictions when making their own findings on questions of law and fact. Accordingly, it's likely that the findings made by New South Wales and Victorian Courts concerning the scope of duties owed by owners corporations at common law will be considered by Courts in the ACT.

Common law duties and their associated breaches are different to statutory breaches. First, they involve consideration of different elements such as:

• The existence of a duty (such as a duty of care, a breach (a failure to do something); and
• Causation (whether the breach in fact caused the loss or damaged alleged).

Secondly, they extend the scope of damages that can be awarded beyond what might otherwise be prescribed by statute.

Most importantly, however, is that consideration and/or application of common law duties (particularly to owners corporations) broadens the scope of their potential liability.  This can result in a number of different types of claims being brought, the most likely being for ‘negligence’.

Relevant Principles

The law of negligence as it applies in the ACT is drawn from the common law and has been codified by the Civil Law (Wrongs) Act 2002 (ACT) (‘Act’)[5]. 

 In relation specifically to claims based on “negligence”, Chapter 4 of the Act defines “Negligence” to mean the failure to exercise reasonable care and skill[6].

 The Act specifies that the standard to be applied when assessing whether person(s) (or owners corporations as is the case here) have breached their duty of care will be that of a ‘reasonable person’[7]. 

Whilst the standard of what a reasonable person would have done in a particular factual scenario must inevitably vary from case to case, broadly speaking, a person is not likely to be found liable in negligence for failing to take precautions against a risk unless:

• The risk was foreseeable (that is, it is a risk of which the person knew or ought to have known); 
• The risk was not insignificant; and
• In the circumstances, a reasonable person in the person’s position would have taken those precautions.[8]

Application

In circumstances where no action is taken in the event of actual knowledge of an identified fire risk, the starting point for assessing the liability of owners corporations is whether or not there is an existing duty of care to occupiers of the property.

The answer is a resounding ‘yes’. However, the origins of these duties vary on a case by case basis. For example, in Ridis v Strata Plan 10308 [2005] NSWCA 246 (Ridis), the relevant ‘duty’, in relation to common areas of the property, arose from the unambiguous obligations imposed on owners corporations by section 62 of the Strata Schemes Management Act 1996 (NSW)(SSM)[9] (the NSW equivalent of the UTMA).

Relevantly, her Honour Hodgson JA in Ridis described the obligation(s) conferred on owners corporations by provisions such as section 62 as being ‘not merely to exercise reasonable skill and care with a view to achieving the requirements of those subsections: it is absolute.’[10]

Alternatively, in McElwaine v The Owners — Strata Plan 75975 [2017] NSWCA 239 (McElwaine), his Honour White JA found that the duty arose from the owners corporations being the legal owners and occupiers of the land.[11]

Adopting either scenario, a duty of care will likely be found to exist. Applying this specifically to the ACT, the duty will either arise from:

• The owners corporations being the legal owners of the property (as it did in McElwaine); or
• Sections 16(b), 35(2)(a)(i) and 24(1) of the UTMA  (with reference to Ridis). This expressly states that the obligation to maintain the common areas of a building or property (as well as its defined parts with respect to class A units), rests with the owners corporation and, by extension, its executive committee.   

When adopting the assumption that a duty of care will be found to exist, the question then changes. Now, it becomes whether or not the ‘risk’, such as a fire risk posed by combustible cladding, is significant. 

In paragraphs 168 to 194[12] of the Lacrosse Tower decision, the VCAT detailed a history of the importation and installation of ACP’s into Australia. Relevantly, it appears that the fire risks associated with ACP’s were identified and have been the subject of investigation from as early as the late 1990s to the early 2000s.[13] As such, and with reference to his Honour’s judgment, the fire risks associated with combustible cladding and certain types of ACP’s are historically, and arguably well known since the Lacrosse Tower fire. 

Therefore, it's likely that a Court would consider the fire risk posed by combustible cladding as not insignificant. 

Accordingly, the final question is whether in the circumstances, ‘a reasonable person’ would have taken precautions against the risk. McColl JA provides a concise summary of the applicable standard at paragraph 126 of Ridis[14]. In this regard, her Honour says:

Ultimately, whether or not an owners corporation will be found liable for an identified fire risk will depend on the response to either mitigate or rectify the risk. In assessing the response taken, if any, and with reference to the comments made by McColl JA, a Court will have regard to, amongst other things, the cost or inconvenience of addressing that risk.

Where no action is taken in response to an identified fire risk, it's likely that a Court would have little difficulty in finding an owners corporation liable. In the alternative, and where steps are taken to mitigate or rectify the fire risk, whether or not the steps taken are ‘reasonable' will ultimately turn on findings of fact and will be assessed on a case by case basis.

[1] Ridis v Strata Plan 10308 [2005] NSWCA 246.

[2] McElwaine v The Owners — Strata Plan 75975 [2017] NSWCA 239.

[3] UTMA, s16.

[4] UTMA, s24.

[5] Civil Law Wrongs Act 2002 (ACT)

[6] CLWA, s40.

[7] CLWA, s41.

[8] CLWA, s42.

[9] Ridis v Strata Plan 10308 [2005] NSWCA 246 at [5] per Hodgson JA.

[10] Ridis v Strata Plan 10308 [2005] NSWCA 246 at [5] per Hodgson JA.

[11] McElwaine v The Owners — Strata Plan 75975 [2017] NSWCA 239 at [26] per White JA.

[12] Owners Corporation No. 1 of PS613436T v LU Simon Builders Pty Ltd (Building and Property) [2019] VCAT 286 at [168] to [194] per Woodward J.

[13] Owners Corporation No. 1 of PS613436T v LU Simon Builders Pty Ltd (Building and Property) [2019] VCAT 286 at [73] per Woodward J.

[14] Ridis v Strata Plan 10308 [2005] NSWCA 246 at [126] per McColl JA.

[15] Ridis v Strata Plan 10308 [2005] NSWCA 246 at [126] per McColl JA.