Universities may not be immune from non-compliant building materials31 October 2017
The fire in the Lacrosse apartment building in Melbourne in 2014 and, more recently, the devastating fire in the Grenfell Tower in London, have brought the consequences of using non-compliant building materials into stark relief. However, these were not isolated incidents. Since 2005, there have been at least 19 fires worldwide involving cladding material alone (Senate—Economics References Committee, September 2017, Interim Report: Aluminium Composite Cladding, para 2.22).
The decline in Australia's manufacturing base means the majority of the products now used in the domestic building market are imported from overseas. The biggest risk associated with importing construction materials is that they may not be compliant with the relevant Australian standards.
This, combined with the exponential growth in the residential building market—particularly the growth of high rise apartments in the eastern states and the rapidly increasing student accommodation market—means the likelihood of non-compliant building materials having been used in recent residential and commercial developments is high. In New South Wales (NSW) alone, it is estimated that approximately 1,000 buildings have aluminium and other types of non-compliant cladding installed, which might pose a fire risk.
Governments and other regulatory bodies across Australia are implementing significant reform agendas around building regulation to address the issues relating to non-compliant building products (such as temporary bans on flammable aluminium cladding products with polyethylene cores and the recent Queensland chain of responsibility legislation). Such reforms may provide little assistance to owners of existing buildings who may face the prospect of:
- investigating the extent of any non-compliant building materials installed in their building
- having to alter or replace non-compliant building materials installed in their building, and
- increased insurance premiums, due to insurers having greater difficulty establishing their risk profile because of the prevalence of non-conforming building products.
While Australia's current reform environment is likely to impact the whole supply chain (including importers, manufacturers, builders, certifiers, owners and occupiers) and related industries, such as the insurance and finance sectors, this article expands on the issues facing universities as owners of existing buildings and the risk that non-compliant building products may have been used in the construction of their buildings.
Importance of having investigations carried out
Importantly, the use of non-complying building products might not require wholesale changes to be carried out. However, the extent of any necessary rectification works can only be determined by a suitably qualified engineer and only after a comprehensive inspection has been carried out.
With the risk of non-complying building materials presently front of mind, universities should undertake an audit of their building and safety systems to ensure they are compliant with the relevant codes and regulations.
If a building has non-complying building materials and requires these materials to be replaced or repaired, the university may look to recover costs from another party, such as the designer or the builder. However, this is not always a straightforward process.
Recovering the cost of rectification
If the university is the original owner (that is, the original contracting party with the builder), it might have a number of legal avenues for recourse against the builder to recover the Universities may not be immune from non-compliant building materials costs of repairing or replacing any non-compliant materials.
The most obvious is a claim for breach of contract. However, limitation periods may prevent owners of older buildings from bringing such claims. For example, in NSW, a building action must be brought within 10 years of the final occupation certificate being issued or the last day on which the building work was inspected by a certifying authority (s 109ZK of the Environmental Planning and Assessment Act 1979 [NSW]). A similar provision applies for building disputes in Victoria.
For student accommodation, a university might also have the benefit of warranties implied in the building contract for residential building work under the relevant state legislation, for example, s 18B of the Home Building Act 1989 (NSW). However warranties are not implied in all building contracts. For instance, on-campus student accommodation does not fall within the definition of a dwelling under the Home Building Act 1989 and the statutory warranty scheme would, therefore, not apply in respect of on-campus accommodation. In contrast, a university might have the benefit of implied statutory warranties in respect of non-compliant building materials used in the construction of off-site student accommodation, depending on the particular facts and circumstances.
If the university is a subsequent purchaser of a building, recovering the cost of repairing or replacing non-complying building products can be more difficult. This is because without a claim in contract or under the Australian Consumer Law, the university will have to resort to a claim in tort.
It is well known that such claims are difficult to successfully prosecute. As cases such as Woolcock Street Investments Pty Ltd v CDG Pty Ltd  HCA 16 (Woolcock) and more recently Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288  HCA 36 (Brookfield Multiplex) have shown, a duty of care from the builder to the subsequent purchaser will not be readily found to exist. This is particularly so if the building in question is a commercial building (such as in Woolcock) or is a large strata scheme intended mostly as a commercial arrangement (such as in Brookfield Multiplex).
In this time of heightened awareness of noncomplying building products, universities should not delay in taking steps to investigate and understand their potential exposure to the risk of such products having been used in their buildings. This is important not only from a health and safety perspective but because recovering any costs or losses associated with this issue might be difficult and those limited rights could be further eroded through the expiration of limitation periods.