Australia's building safety reforms in the shadow of Grenfell Tower

The Grenfell Tower catastrophe has had a huge impact upon Australia’s building industry and its regulation.

Leshinsky and Johnston wrote about Australia’s early regulatory response in October 2018. They noted:

• The 2014 cladding-fuelled fire at the Lacrosse apartment building in Melbourne – from which, fortunately, all residents escaped – was already influencing policy reforms and the subject of potential claims when the Grenfell fire occurred.
• Australia’s federal governmental structure dictates that responses are largely via initiatives across the eight states and territories, though with some national coordination via the Building Minister’s Forum (now Meeting); significantly, its commissioning of the Building Confidence Report by Shergold and Weir.
• An important immediate aspect of these state-based responses was the establishment of taskforces to evaluate the risk posed by combustible materials within the existing building stock, as well as to consider effective ways to address that risk via rectification, restriction of the use of building products, or otherwise.

These strands continue to evolve as we reach the fifth anniversary of the Grenfell fire:

• Lacrosse case: Justice Woodward’s 2019 decision on the claims by apartment owners, and related claims for contribution amongst the various project parties, was recognised globally as a landmark for its detailed consideration of liability relating to combustible cladding materials. As Hanmer noted, the ruling appeared on its face to represent a significant ‘win’ for those owners, but – due to the operation of Victoria’s ‘proportionate liability’ regime (which has no analogue in the UK) – most of the liability ultimately fell at the feet of the consultants on the project rather than the design and build contractor. (In 2021, Sawtell and Maxwell reported on the appeal in that case, largely upholding the findings at trial but with some reallocation of liability amongst the consultants.)
• An ‘Australian’ approach? It remains overly simplistic to speak of an ‘Australian reform program’, except in relation to matters which lie within the Commonwealth legislative bailiwick – notably, importation of building products. That said, the Building Confidence process has galvanised state-based reforms, especially its priority recommendations relating to registration and training of practitioners, building inspections, and documentation. Moreover, each state and territory keeps a weather eye on what its neighbour is doing. For example, Victoria’s Building System Review has consideration of statutory duties of the type implemented in NSW (discussed below) within its terms of reference, and Dame Judith Hackitt is bringing her UK expertise to bear as a member of the Review’s Expert Panel. As a result, the ‘experiments’ in the states’ respective ‘laboratories’ offer useful insights for observers outside Australia.
• Restriction and rectification of combustible cladding: Just as in the UK, the restriction on use, and rectification, of combustible materials on buildings has been somewhat piecemeal and the cause of significant anxiety and cost for residents (compellingly documented in the research of Preece,  Moore and others). The Victorian government’s early move to appoint as chairs of its Cladding Taskforce a former Premier (Ted Baillieu) and Deputy Premier (John Thwaites), from opposing parties but sharing a desire to drive effective responses, means that that state’s approach merits serious consideration across Australia and beyond. The starting point was recognition that the so-called cladding crisis represented a regulatory failure justifying state intervention, and (as Thwaites noted in 2019) that there were significant risks if such intervention was insufficiently robust. In turn, the state instituted a rectification program (including a project management strategy and bespoke insurance arrangements) administered by a new agency, Cladding Safety Victoria, and deployed A$600 million raised through government funding and levies on new developments.
   

  

  The rectification program was initially slow (and, inevitably, hampered by Victoria’s long-running COVID-related lockdowns during 2020-21). It has, as at mid-May 2022, been completed in respect of around 250 buildings out of the 1,000-odd within its scope. Similarly, widespread banning of the use of combustible materials was not implemented in Victoria until early 2021, and even then it applies:
  • primarily to apartment buildings : the declaration rests upon Australia’s National Construction Code classifications, meaning that there is no direct comparison with the UK’s 11m v 18m height debate; its effect is to exclude from the ban ‘ordinary’ low-rise homes and other buildings under two storeys (or, three storeys for some other classes of building) and
  • to ‘high-risk’ cladding products (aluminium composite panels with a core of less than 93% inert content, and expanded polystyrene products in external insulation and finish wall systems).
• Similar ‘holes’ within the ‘safety blankets’ of other Australian jurisdictions serve to illustrate that, as in the UK, the restriction and rectification of dangerous cladding products continues to pose a difficult balancing act for regulators.   

New South Wales under the microscope

The most far-reaching state-based reforms so far implemented are those passed in 2020 in NSW, primarily by way of that state’s Design and Building Practitioners Act 2020 (‘DBP Act’) and Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020.  I noted when that legislation was passed that the reforms included:

• extended practitioner registration requirements
• a statutory duty of care to protect homeowners against economic loss (unlike the recent extension to the Defective Premises Act in the UK discussed by Britton, this duty applies retrospectively)
• powers for the regulator to hold up occupancy of apartment buildings until serious defects are fixed, and to order rectification of such defects in existing buildings.

The NSW reforms were given impetus by high-profile building failures, including the evacuation of the newly-completed Opal Tower near Sydney’s Olympics precinct on Christmas Eve in 2018 due to structural defects. Rectification costs ran to tens of millions of dollars; the ensuing claims by the owners reportedly settled in May 2022.

Lessons from the NSW experience

The way in which NSW’s reforms have been implemented offers many possible lessons for programs elsewhere. Perhaps the most important of these – resonating with Bright’s concern about undue haste in the passage of the UK’s Building Safety Act – is to ensure that the intent of the legislation is clearly and workably reflected in its operational provisions:

• As with the UK reforms, much of the detail of the NSW scheme has been progressively implemented (and further tweaked) by way of secondary legislation within the hands of the relevant ministry. The risk of ‘devils in the detail’ is real. For example, regulation 77 of the Design and Building Practitioners Regulation 2021 (NSW) essentially allows relevant practitioners to determine the adequacy of their own professional indemnity. This may be seen as a pragmatic way of balancing the reality that even a state government has little power to mandate requirements to the extent they are incompatible with the regulatory force of the globalised insurance market. Nonetheless, these types of apparent compromises require – at the very least – nuanced consideration and explanation.
• When claims are made against industry practitioners based on liabilities created or enhanced by the new regime, the detail of the provisions will be placed under intense scrutiny. On 19 May 2022, Justice Stevenson handed down his decision in Goodwin Street Developments Pty Ltd v DSD Builders Pty Ltd. He found the defendant builder’s contract administrator liable via the statutory duty for the cost of rectifying defects due to his failure of project management and supervision. Bearing in mind that the relevant work was done more than two years before the Act was passed, that finding offers powerful confirmation (pending possible appeals) of the duty’s retrospective effect. However, Justice Stevenson’s criticisms of the Act’s ‘labyrinthine’ drafting exposed significant ambiguities in the legislative regime. This is of real concern, especially in the face of the revelations which continue to emerge from Phase 2 of the Grenfell Tower Inquiry about how poor industry practices can slip through such ambiguities and other ‘holes’ in the regulatory ‘net’.

Where to from here?

As of mid-2022, Australia’s building industry is facing a raft of severe and in some cases unprecedented challenges, including supply chain delays, labour shortages and inflationary pressures. High-profile commercial builders have entered voluntary administration, and there remain concerns over the viability of the nation’s largest house builder, Metricon. These challenges are by no means limited to Australia. Their current prominence serves to remind us that construction, renovation and maintenance of the buildings in which we live is subject to a dynamic range of risks which threaten to undermine our assumption that those buildings are in fact ‘safe as houses’.

It also emphasises the wisdom of reform reviews by Hackitt, Shergold and Weir, and others, that the quest for robust regulatory system to promote building safety requires an holistic understanding of the many ‘levers’ which drive outcomes in construction procurement and therefore how those levers ought optimally to be set. It has often been said – but, cannot ever be said enough – that the shadow of Grenfell and other building-related tragedies requires a clear-eyed commitment from our policy-makers, industry and broader community to continue that quest for the benefit of us all.

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