While the task force suggested that the state government could achieve this by requiring owners to transfer their legal rights to the state as a condition to receiving the rectification funding, we do not consider that this approach is likely given that it would transfer the cost and inconvenience of pursuing recovery onto the state. We think it is more likely that a condition will be imposed similar to that introduced in the UK as part of its funding scheme in May this year, requiring those who receive funding to take "reasonable steps" to recover the costs from those responsible for the cladding's presence. This leaves the onus on building owners to purse builders and building practitioners to recover the replacement costs, whilst allowing the rectification works to be carried out in the interim.
However, both of these approaches presuppose that the building owners can establish a cause of action against one or more of the parties responsible for the use of the cladding on the building. Although the report refers to a recent decision by the Victorian Civil and Administrative Tribunal (VCAT) in relation to the Lacrosse building as a basis for asserting that these causes of action exist, it is important to note that the judge clearly stated that his reasons for his decision "should not be read as a commentary generally on the safety or otherwise of [aluminium composite panels] and their uses".
Every building is different. As such, each building will have to be assessed separately to determine if there has in fact been non-compliance with the Building Code of Australia and also whether, and to what extent, there is actually a fire risk posed by the use of the combustible cladding on the building.
Although liability may be able to be established in certain circumstances, it is in our view highly unlikely that the liability of builders, design consultants or building surveyors will be able to be established in all cases where the Victorian Building Authority (VBA) says that cladding needs to be replaced. This is particularly so given that there were clear pathways under the Building Code of Australia that permitted the use of combustible cladding where certain conditions were satisfied prior to the amendments in 2018. As such, we anticipate that many builders, design consultants and building surveyors will have a sound legal basis to deny liability.
However, regardless of these difficulties, one thing is certain: the funding scheme will include a mechanism through which the state can seek to offset the funding costs of the scheme through claims against builders, design consultants and building practitioners. As the task force notes in its report, such claims are subject to limitation periods, which means that they will need to be expedited if the state is to recover these costs. Consequently, the industry should brace itself for a significant spike in claims being brought against those parties involved in the design and construction of affected buildings across the state once this scheme is implemented.
Melbourne-based Greg Campbell and Nicholas Whitmore are experts in building regulations and resolving disputes in the infrastructure sector at Pinsent Masons, the law firm behind Out-Law.