Cladding Update – May 2021

Lacrosse Appeal - contribution and causation

The Lacrosse case related to a 2014 fire in a Melbourne apartment block with ACM cladding.  The first tier Court found that the main contractor had breached its statutory warranties as to regulatory compliance but declined to attribute any of the loss to it. The Court found the consultants engaged by the contractor (building surveyor, fire engineer and architect) negligent and apportioned the loss entirely between them and the resident who started the fire. 

On appeal:

• The Court of Appeal declined to re-apportion the loss so as to also hold the main contractor partly responsible.  This was because of the way in which the claim had been pleaded and defended under Australian law: 

  • The owners had originally claimed only against the main contractor both in negligence and for breach of statutory warranty (which gave rise to a strict liability). At trial, however, they pursued (and won) only the statutory warranty claim, adducing no evidence about the main contractor's negligence.  The owners did not sue the consultants at all; they were pursued for a full indemnity by the main contractor.  It was found that the relevant Australian statute governing apportionment between parties did not allow apportionment to the main contractor, as the original claim against it was based on a breach of a strict liability duty and there was no evidence of the contractor's negligence.

• As a reminder, this is similar to the position under English law: contributory negligence cannot be raised as a defence if the claimant (here the main contractor) has not committed any act or omission with an element of fault on his or her part. 

• All other grounds of appeal failed, except that the Court of Appeal agreed that the building surveyors' failure to identify that there was no reference to ACM panels in the documents provided to the fire authority was not causative of the loss; even if the building surveyor had done so, on the facts the ACM panels would still have been used. 

Finally, the Court of Appeal also endorsed the original Court's finding that, based on the evidence before the Court, the building surveyor could not rely on the relevant Australian statutory defence of "peer professional opinion", which provides a defence if the professional "acted in a manner that was...widely accepted in Australia by a significant number of respected practitioners in the field...as a competent professional practice in the circumstances". The relevant Act also provides, however, that the defence fails if a court determines that the practitioner's acceptance of the relevant practice was "unreasonable". These concepts are similar to the Bolam test and associated Bolitho exception in the UK, and while it remains to be seen what findings an English Court might make in an equivalent context, it is of interest that the Australian Court was of the view that there was evidence that, in the Australian market, ACM panels were known to be a fire hazard "long before 2010".  This appears to be in contrast to the expert opinion given to the Grenfell Inquiry about UK industry knowledge regarding the nature of ACM panels, which we discuss below. 

Evidence to the Grenfell Inquiry - industry knowledge of ACM panel cladding

Mr Jonathan Sakula, the independent expert appointed by the Grenfell Inquiry to discuss the construction industry's knowledge relating to ACM panels and their use between 2012 to 2017, gave his evidence to the Inquiry on 5 May 2021.  His evidence is summarised below and is also publicly available here.

At the outset it should be noted that Mr Sakula, while an experienced façade consultant, is not a cladding contractor, architect or fire engineer.  Further, as he himself accepts, he had only very limited experience of working directly on high-rise residential rain-screen cladding projects, and spent significant portions of his career working outside of the UK.  The nature of his experience may reflect the apparent difficulties which the Inquiry had had in appointing an expert to this particular role at all in the circumstances.  This background does not necessarily lessen his credibility per se, but in our view it is worth bearing in mind in relation to how much weight should be granted to his opinion, especially as the purpose of the Inquiry is, of course, also not about ascertaining civil or criminal liability.

Mr Sakula was asked to consider industry knowledge between 2012 and 2017, in particular focussing on the position of a reasonably competent specialist cladding subcontractor. 

In summary, in his view:

• The tower fires in the UAE between 2012 to 2016 in particular would or should have raised awareness in the cladding industry that ACM panels with a PE core were readily combustible, but that the danger was perhaps not recognised as there was no great loss of life. However, prior to 2012, the fire risks posed by ACM panels were not in fact well known within the industry.

• A reasonably competent cladding subcontractor would have expected that if they complied with the guidance in Approved Document B (ADB) then that would ensure compliance with the functional requirements on the building regulations (and also that ADB would be given precedence over other sources of information).

• A reasonably competent cladding subcontractor would have been familiar with the concepts of "class 0" and other UK fire-rating classifications, but would not have been (or needed to be) familiar with the equivalent European system at that time.

• A reasonably competent cladding subcontractor would have considered a relevant product which had a "class 0" classification (and was used and installed in accordance with its relevant BBA certificate and manufacturers' literature etc) would have satisfied paragraph 12.6 of ADB.

• Paragraph 12.7 ADB, however, would not have applied to the "core" of an ACM Panel. He was critical of the guidance, for instance because it was effectively "silent" about matters such as the core of a panel; and also critical of a system that, in his view, may have allowed manufacturers to mislead.

• Despite the above, however it was also his view that, in relation to ACM panels with a PE core, the growing knowledge in the industry after the fires in the UAE in particular meant that it was not reasonably competent or "common sense" to have specified ACM panels with a PE core for use on high-rise residential buildings, even if they met ADB requirements. 

Of course, there may be other experts or industry participants whose views differ from that of Mr Sakula and his evidence is not determinative of what a court might find in relation to any given contractor or consultant's conduct in relation to any given building.  However, his views and comments do reflect, especially in relation to ACM panels used on buildings constructed later in the 2012-2017 period, the likely hurdles that may be faced, in a post-Grenfell environment, in convincing a Court that the use of such panels met the functional requirements of the Building Regulations that it was not negligent to have specified them.

The Fire Safety Act 2021 - still no respite for leaseholders

This Act came into force on 29 April 2021, and, like the separate Building Safety Bill, is another piece of legislation which is geared towards remedying inadequacies in the building regulatory system that have been exposed post-Grenfell.  

It is a short document that extends the ambit of the Regulatory Reform (Fire Safety) Order 2005 (the "RRO") to cover, among other things, the external walls etc of residential buildings with more than one dwelling (ie blocks of flats etc), regardless of the height of the building.  

The Fire Safety Act seeks to fill a gap in previous legislation. Previously the RRO (which imposes a duty on a building owner or manager to manage fire safety risks and perform yearly fire-safety risk assessments) applied only to certain "non-domestic" premises, such as commercial premises and certain internal communal areas of residential buildings with multiple homes in them.  This meant that building owners were not subject to any duties (or enforcement sanctions) regarding some communal areas in residential multiple-home buildings, such as external walls or balconies etc.

The change means that (i) building owners will be required to, among other things, obtain fire risk assessments in relation to the external walls of multiple-dwelling residential buildings, regardless of height (which may of course increase the scope for potential claims, justified or otherwise); and (ii) the Fire Service may now, for example, be able to take enforcement action under the RRO in relation to such buildings eg where freehold owners refuse to remediate unsafe ACM cladding used on external walls. 

Despite political and media pressure, a late proposed amendment to the draft Act designed to ensure that leaseholders would not be liable for the costs of remedying defective cladding was ultimately defeated by the Government. This leaves leaseholders presently subject to the relatively narrow requirements of the current Building Safety Fund process, which excludes a number of types of fire safety issues from its remit and does not cover buildings below 18m. 

In this context, also on 29 April 2021 the Housing, Communities and Local Government Select Committee issued its Cladding Remediation follow up Report, which recommends that the Government do more to create a scheme that covers all fire safety issues, regardless of height or product considerations, and ensures that leaseholders do not have to pay.

Finally, the Government has separately commenced its formal consultation process for its proposed Residential Property Developer Tax (announced in February 2021 as one part of its "5 point plan" regarding building safety).  At this stage, the suggestion is that the tax will be charged against developers who have profits over £25m, and the consultation website can be found here.