Combustible cladding - can we blame the product?
29 July 2026
Case note: The Owners – Strata Plan No 87231 v 3A Composites GmbH (No 10) [2026] FCA 351
On 27 March 2026 after a 16-day trial, the Federal Court dismissed a class action that alleged two combustible cladding products were inherently defective.[1] The Court's answer was that the aluminium composite panels were not defective, because they could be used safely and lawfully when selected and used correctly by the building professionals engaged on the projects.
The decision indicates how product liability class actions about building products might be approached by litigants and Australian courts in the future: namely, the question of product risk in the context of professional decision-making of developers, architects, builders, fabricators, project managers, fire engineers and certifiers, who design, construct and certify buildings, may now be more heavily scrutinised than simply considering the liability of the manufacturers and suppliers of the product itself.[2]
Background
The case was a representative class action brought by the owners corporation of a Dolls Point and Five Dock building clad in Alucobond PE and Alucobond Plus (together, the Alucobond Products).[3] The respondents were the German manufacturer, 3A Composites GmbH (3A) and its exclusive Australian distributor, Halifax Vogel Group Pty Ltd (HVG).[4] Both the Alucobond Products were considered ‘combustible’ as the Building Code of Australia (BCA) defines that term.[5] The litigation unfolded against a backdrop of aluminium composite panels (ACPs) (i.e. cladding) having been implicated in a number of high-profile fires, most notably the Lacrosse fire in Melbourne and the Grenfell Tower fire in London.[6] The applicants sought to frame the case as a systemic consumer-law failure, attributable to the products themselves, rather than as building-by-building design failures. It was notable that the applicants brought no claims against the architects, certifiers, builders or fire engineers involved.[7]
The applicants pursued two claims:[8]
- a consumer guarantee claim, which alleged that at the time of supply the Alucobond Products were not of merchantable or acceptable quality under the Trade Practices Act 1974 (Cth) (TPA) (s 74D) and the Australian Consumer Law (ACL) (s 54 of Sch 2 of the Competition and Consumer Act 2010 (Cth) (CCA), on the basis of their fire-risk properties, alleged BCA non-compliance and consequent risk of removal orders, and[9]
- a misleading conduct claim, which alleged that 3A’s and HVG’s marketing brochures and websites misrepresented the products as safe, suitable and compliant when that was not the case, and failed to warn.[10]
The Court’s decision
Both claims failed.[11] The Court found that the applicants had failed to establish that the Alucobond Products were not of merchantable or acceptable quality at the time they were supplied.[12] The misleading conduct claim was also not made out,[13] and was, in any event, time-barred.[14]
The Court’s reasoning
A foreign manufacturer can still be caught by Australian law
Even though 3A is a German manufacturer, the Court nonetheless found that 3A engaged in conduct as a manufacturer in Australia,[15] and carried on business in Australia for the purposes of s 5(1) of the TPA and s 5(1) of the CCA.[16] This was based on the exclusive distribution terms that allowed 3A to control the promotion of Alucobond within Australia, 3A actively exercising its right to control the marketing and promotion of the Alucobond Products in this country, contributing to HVG’s marketing budget, regular visits by a 3A representative who met architects, fabricators and other customers and providing warranties upon request directly to Australian customers of HVG.[17] This finding indicates that supplying through a local distributor (which the ACL may treat as a ‘deemed manufacturer’) does not necessarily put the overseas manufacturer out of the reach of Australian Courts, or beyond the reach of Australian consumer law.[18]
The transformation argument failed
3A and HVG argued that the façade installers acquired the panels for the purpose of using up or transforming the panels into a ‘façade system’ and that there was never a supply of the panels to the relevant consumer (i.e. the developers) as the panels had ceased to exist as panels and became different goods manufactured by the façade installers.[19] However, the Court rejected that submission, finding that fabricating and fixing the panels did not turn them into an entirely new ‘third party product’, as they remained identifiable as the same goods supplied. The threshold requirements under the TPA and ACL require more than mere alteration: the panels were not transformed in such a manner so as to be no longer identifiable as the same individual panels.[20] The Court’s reasoning provides guidance to manufacturers and suppliers about the extent of transformation required for supplied goods: it seems they must be wholly converted into something new before reaching the end user to escape liability. The extent to which such transformation will have taken place will, however, depend on the nature of the goods supplied.
Capacity for misuse does not make a product defective
The Court held that acceptable quality under s 54 of the ACL is assessed against what a reasonable consumer would regard as acceptable. In this case, the reasonable consumer of Alucobond Products was a qualified professional, namely developers, builders, fabricators, architects, certifiers, project managers and fire engineers who design, certify, and construct buildings using the products, as opposed to an owner or tenant, on behalf of whom the class action was brought.[21] It was held that such professionals are taken to know that:[22]
- laws and regulations govern minimum building requirements, including fire safety
- buildings must be designed and constructed by qualified professionals
- some materials are combustible or dangerous if used improperly, and
- it is their responsibility to ensure materials are used ‘in a way to ensure the building complies with applicable building and safety regulations.
The Court held that the Alucobond Products were in fact of merchantable and acceptable quality as they were capable of being used for their intended purpose.[23] This was on the basis that the qualified professional would:
- not expect the Alucobond Products (or, indeed, any building materials) to be risk-free in order to be of merchantable or acceptable quality[24]
- know that the BCA did not permit the Alucobond Products to be used in any way that the qualified professional saw fit, on any building, thus the fact that the use of the Alucobond Products was constrained by the BCA as to particular uses did not mean the panels were not of merchantable or acceptable quality[25]
- expect that whether the Alucobond Products are of merchantable or acceptable quality is to be determined by reference to their lawful use and in compliance with the Building and Safety Regulations of the BCA,[26] and
- know that the panels could be used safely and compliantly with the BCA.[27]
The third-party defence would have succeeded, as the only cause of non-compliance was the negligence of the professionals
Although the Court found that the owners corporations did not establish the consumer guarantee claim under s 74D of the TPA and ss 54 and 271 of the ACL, the Court nonetheless considered whether the statutory defence under s 271(2)(a) would apply, should the Full Court decide the consumer guarantee claim differently on appeal.[28]
Section 271(2)(a) of the ACL excuses a manufacturer where the breach is caused only by another person's act or omission.[29] The Court accepted that design or installation choices by professionals can engage this provision.[30] On the facts, the Court found the panels were selected and used negligently by the professionals who designed and constructed the buildings so as to give rise to a material fire risk or non-compliance with the BCA, such that the only cause of any non-compliance was that negligence of the professionals who designed and constructed those buildings, and not any inherent defect in the product.[31]
The marketing material was not misleading, and the absence of warnings did not mislead
The Court found that the brochures and websites were directed to the qualified professionals who were responsible for designing, constructing and certifying the buildings that complied with the BCA. They included architects and designers who specified ACPs, façade fabricators who constructed facades using ACPs and building certifiers who certified compliance with the BCA.
Broadly speaking, the Court found that the applicants’ misrepresentation case was premised on the notion that the marketing material conveyed to professionals that they could use the Alucobond Products on any particular building and in any way, and they did not need to specifically and independently concern themselves as to how compliance with the BCA or safety was being achieved on their particular building[32].
Following a careful review of the text and images of buildings containing the Alucobond Products in the marketing material, the Court found that they did not contain unqualified representations that Alucobond cladding was suitable for any use on any building as alleged and that any proposed use required individual assessment by a qualified professional regarding design and BCA requirements applicable to each building.
The Court also found that a qualified professional would not have been led into error by 3A’s and HVG’s marketing of the Alucobond Products that they were suitable and compliant for, in effect, any application. Further, statements like ‘anything is possible’ would be properly understood as mere puffery that a qualified professional would not take literally or rely upon in determining the suitability or compliance of the product.[33]
Additionally, the Court accepted that the clear implication of the representation ‘the non-combustible aluminium cover sheets protect the plastic core’, was that, in contrast to the non-combustible aluminium cover sheets, the polyethylene core was combustible. Further, the Court found that a degree of protection was afforded by the cover sheets, although the extent of that protection was ‘application-specific’.[34] The suitability, compliance and fire-performance representations were therefore not false or misleading.[35]
As for the absence of warnings, the Court found that the relevant audience were qualified professionals such as BCA certifiers or fire safety engineers, who were aware that the use of ACPs was constrained by the requirements of the BCA and ACPs were not suitable and/or safe for use on all buildings for all purposes. Further, the Court found that it was not necessary to state the obvious common-sense proposition, that qualified professionals who proposed to use the ACPs in complex façade cladding systems who did not possess the knowledge or qualifications necessary to assess fire hazards, needed to seek expert advice from other qualified professionals who did have that specialist knowledge. As such, the Court found that there was no obligation on 3A and HVG to give warnings about the use and application of the Alucobond Products and their omission was not liable to mislead the public as to the nature, characteristics and suitability for purpose of those products.[36]
There was also no evidence that 3A’s and HVG’s websites containing publications and statements about the Alucobond Products were accessed by persons in Australia[37], including by any of the qualified professionals involved in the design, construction and certification under the BCA. While it appears that some brochure material was provided to the professionals involved in the design and construction, the Court found that this would not have been sufficient to establish reliance by those professionals on any misleading statements[38]. Further, an occupation certificate was issued after the potential non-compliance of the Alucobond Products with the BCA was brought to the attention of the builder, developer and building certifier on the Five Dock building, which would have severed the causal link between the loss claimed and any misleading conduct, had that been established[39].
This was fatal to the misleading conduct claim.
Different limitation periods to bring the claims
The claimed loss arising from misleading conduct was treated as economic loss flowing from physical damage on installation, fixed when the strata plan was registered on 24 August 2012, so the six-year ACL limitation period had expired before the claim was brought.[40]
The consumer guarantee claim, however, was found to have been brought within the 3 year time period mandated by s 273 of the ACL, as the owners could not reasonably have known before August 2018 that the cladding on the building was Alucobond PE and the BCA non-compliance and fire reactivity properties of Alucobond PE and other ACPs ‘became generally available’ (e.g. through Grenfell).[41]
A broader judicial trend: focus on design responsibility rather than inherent product defect
The decision in 3A Composites sits alongside a growing body of Australian authority which examines combustible cladding disputes through the prism of design responsibility, specification decisions, and Building Code compliance, rather than treating combustible panels as inherently defective. In The Star Entertainment Sydney Properties Pty Ltd v Buildcorp Group Pty Ltd [2026] NSWSC 27 which we wrote about here, the Supreme Court of New South Wales similarly emphasised the importance of contractual design responsibility and professional decision-making when determining liability arising from aluminium composite panel cladding. The decision reinforces that questions of safety and compliance are frequently dependent on how products are selected and incorporated into the particular building, as opposed to merely the characteristics of the product in isolation.
Key takeaways
- By linking considerations of ‘merchantable or acceptable quality’ of Alucobond Products with the actions of the qualified professionals who use them,[42] the decision squarely focuses liability on builders, designers, specifiers, certifiers and fire engineers in how they elect to use materials during the construction of buildings.[43] As such, those qualified professionals are unlikely to have success in seeking to direct attention to the products themselves, if the products are capable of being used in a compliant manner.
- For qualified professionals, it is unlikely to be a defence that they were unaware of the properties of a product that they specified, and relying upon a lack of warnings by the supplier or manufacturer is also unlikely to carry much, if any, weight.
- The decision reinforces the need for design professionals to know the products they are using in construction projects and the safe and compliant ways in which such products can be used. The Court has confirmed that it is incumbent on professionals engaged in the design, construction and certification process to know when the use of building products will breach BCA requirements and prevent that from occurring.
- The decision also arrives against the backdrop of continuing domestic and international regulatory attention on combustible cladding and construction products more broadly. While Australian Courts appear increasingly willing to scrutinise the role of construction professionals in determining whether a product has been safely and compliantly used, overseas regulators continue to pursue significant reforms aimed at strengthening construction product oversight following the Grenfell Tower Inquiry.[44] Together, these developments demonstrate that liability exposure in the construction sector will increasingly turn on both product characteristics and the conduct of those responsible for specifying, using and certifying those products.
- The decision also serves as a timely reminder to manufacturers and suppliers of building products more generally to carefully consider the audience of their marketing material and to review and update that material on an ongoing basis: a Court will carefully consider this material to ensure that it is not prone to leading its audience into error.
- A relevant ‘consumer’ may not be the person to whom goods are supplied. In this case, the consumer was held to be the developer, rather than the façade installer who acquired the Alucobond Products. This may potentially extend the reach of a manufacturer’s or supplier’s liability to unintended end users, if products are BCA non-compliant.
- Insurers of the manufacturers and suppliers of building products and professionals in the construction industry who specify, use and certify those products, are likely to carefully consider the scope of insurance cover available for building projects, including the professional indemnity cover available for building professionals, and whether they are prepared to renew cover and, if so, whether cladding exclusions are to be imposed. Here, the presence of ACPs created an increased property and liability risk factor, and the presence of a fire non‑compliance issue, which impacted the willingness of insurers to renew terms. Manufacturers and suppliers of building products and professionals in the construction industry seeking cover, should carefully review their insurance arrangements to ensure that the cover provided is as intended.
[1] The Owners – Strata Plan No 87231 v 3A Composites GmbH (No 10) [2026] FCA 351 at [1376]-[1377]
[2] Ibid at [1352]–[1360], [1376]–[1377].
[3] Ibid at [1], [4]–[5].
[4] Ibid at [6], [49].
[5] Ibid at [20].
[6] Ibid at [3], [24]–[29].
[7] Ibid at [10].
[8] Ibid at [8].
[9] Ibid at [8], [119].
[10] Ibid at [8], [121]–[122]. Contrary to ss 29 and 33 of the ACL and ss 53 and 55 of the TPA.
[11] Ibid at [1361], [1821], [1828].
[12] Ibid at [1361].
[13] Ibid at [1682].
[14] Ibid at [1906].
[15] Ibid at [752].
[16] Ibid at [832].
[17] Ibid at [806]–[832].
[18] Ibid at [752], [832].
[19] Ibid at [1085].
[20] Ibid at [1086].
[21] Ibid at [1349], [1352]–[1353].
[22] Ibid at [1352].
[23] Ibid.
[24] Ibid at [1353], [1356] citing Australian Competition and Consumer Commission v Jayco Corporation Pty Ltd [2020] FCA 1672 at [27] (Wheelahan J); Medtel Pty Ltd v Courtney [2003] FCAFC 151 at [64] (Branson J, Jacobson J agreeing at [81]).
[25] Ibid at [1355].
[26] Ibid at [1357].
[27] Ibid at [1355].
[28] Ibid at [1362].
[29] Ibid at [1364].
[30] Ibid at [1372].
[31] Ibid at [1360], [1376]–[1377].
[32] Ibid at, for example [1465]
[33] Ibid at [1648]
[34] Ibid at [1662]–[1663], [1667].
[35] Ibid at [1682].
[36] Ibid at [1716].
[37] Ibid at [1587] to [1589]
[38] Ibid at [1818]
[39] Ibid at [1827]
[40] Ibid at [1900]–[1906].
[41] Ibid at [1882]–[1883].
[42] Ibid at [1352]–[1353], [1377].
[43] Ibid at [1360], [1376].
[44] Ministry of Housing, Communities & Local Government, ‘Consultation Outcome: Construction Products Reform Green Paper 2025’, Gov UK (Web Page, February 2025)
