By Stephen Aroney, Partner and Cassandra McAlary, Lawyer

In Taylor Construction Group Pty Ltd v Strata Plan 92888 t/as The Owners Strata Plan 92888 [2021] NSWSC 1315, Henry J found in favour of the Owners Corporation against the Builder and the Developer for total replacement of the Biowood cladding. Whilst the Owners Corporation succeeded in their claim, each combustible cladding case has to be taken on its own merits with some guidance being provided by this judgment.

Background

NCAT Proceedings

The Owners Corporation Strata Plan 92888 (the Owners Corporation) commenced proceedings in NCAT against Taylor Construction Group Pty Ltd (the Builder) and Fraser Putney Pty Ltd (the Developer) in 2019 alleging that the “Biowood” cladding installed on the external walls of at the property was defective as it was combustible and created an undue risk of fire thereby failing to comply with the Building Code of Australia (BCA) amounting to a breach of the statutory warranty under the Home Building Act 1989 (NSW) (the Act).  It is noted that Biowood (wooden panelling) is commonly used on residential and commercial buildings in Australia as well as overseas.

The Tribunal found that Biowood cladding was not fit for purpose and that the Builder and the Developer were ordered to rectify the works at the property by removing the Biowood attachments installed on the façade and replacing it with cladding that complied with the BCA and statutory warranties. Additionally, the Tribunal ordered that the Builder and the Developer pay the Owners Corporation’s costs.

NCAT Appeal Panel

The Builder and the Developer appealed this decision to the NCAT Appeal Panel (Appeal Panel). The primary question for the Appeal Panel was whether the Biowood material complied with the requirements of the BCA.  On 4 August 2020, Appeal Panel handed down their decision dismissing the appeal and affirming the orders made by the Tribunal.

Subject Proceedings

The Builder and the Developer then appealed to the Supreme Court of New South Wales (the Subject Proceedings) pursuant to s 83 of the Civil and Administrative Tribunal Act 2013 (NSW). The Subject Proceedings were heard before Justice Henry on 16 October 2020. Her Honour was to ascertain whether NCAT and the Appeal Panel made any errors of law in their findings. Her Honour provided her decision a year later on 18 October 2021.

Threshold issue

Prior to her Honour’s consideration of the grounds of the appeal, she first considered the threshold issue raised by the Owners Corporation that leave to appeal should be refused as the appeal was “futile or moot.” Her Honour disagreed with the Owners Corporation and was satisfied that the outcome of the appeal before the Supreme Court of New South Wales had the potential to change the decision of NCAT and the Appeal Panel and was therefore not futile and as such leave to appeal was granted to proceed.

Grounds for Appeal

The submissions put forward by the Builder and the Developer included grounds for the appeal, namely that the Appeal Panel had:

1. erred in its formulation of the test when determining whether Biowood constituted an “undue risk” of fire spreading via the façade of the building.
2. erred in its application of the proper test to the facts, giving rise to an erroneous conclusion.
3. erred in its application of the BCA to the facts, giving rise to an erroneous conclusion.
4. found the existence of “undue risk” in the absence of evidence.
5. erred in finding that the use of “Biowood” breached the statutory warranties in ss 18B(1)(b), (c) and (f) of the Act in the absence of evidence and/or by application of the errors identified in grounds 1 to 4 above.
6. failed to provide adequate reasons.

Her Honour’s determination

Her Honour considered each ground of appeal brought by the Builder and the Developer, focussing on the phrase “undue risk of fire spread.” Her Honour’s reasoning for her decision is set out below:

1. Her Honour found that a multi-factorial approach is to be taken when considering the risk assessment of fire spread (such as the extent of the use of materials, their relationship to other parts of the building such as windows and balconies, as well as their combustibility, ignitability and rate of flame spread) and one cannot look at sole factors in isolation (or be too literal or narrow when construing the term).
2. Even though the Biowood had a Spread of Flame Index of 0, this meant it has a slower rate of fire spread (not zero rate). Further, it is not simply the risk of fire spread via the façade that has to be considered, it is also the possibility that the Biowood, if ignited, would allow fire spread between levels of the building via the windows and balconies. The fact is that the Biowood cladding was combustible and given the seriousness and consequences of potential injury, these factors need to be considered when weighing up the degree of fire spread allowed, what constitutes undue risk.
3. Her Honour carefully dissects every argument put by the Builder and the Developer that the Appeal Panel did not provide proper reasons or jumped to conclusions (or did not have the expert evidence to support their findings of undue fire risk) and her Honour concludes that the Builder and the Developer failed to make out their grounds of appeal. Her Honour says the Owners Corporation was able to demonstrate that the Appeal Panel did have the factors, evidence and reasons to support their findings.

Therefore, her Honour concluded that the Builder and the Developer failed in establishing any grounds of appeal against the decisions in NCAT or the Appeal Panel (or any error of law). As such, the appeal was dismissed with the Builder and the Developer to pay the Owner Corporation’s costs.  It is unknown at this stage whether this decision will be further appealed by the Builder and the Developer.

Implications

Other Owners Corporations with cladding issues and actions, will view this judgment as a favourably and seek to rely on it against builders, developers, building professionals and insurers. However, we note that her Honour was not determining the case afresh as the Appeal was focussed on the whether NCAT and the Appeal Panel had made any errors of law. Defendants in proceedings involving cladding need to be strategic and identify distinguishing factors when briefing experts, preparing evidence and defending these matters.