A class action believed to involve hundreds of individuals and companies caught up in the cladding crisis could help developers recoup restoration costs.
In what will likely be the biggest courtroom battle in the country this year, the outcome of the cladding crisis will play out publicly as parties and their legal eagles look to resolve the long-running dispute that has threatened to push some into bankruptcy.
Authorities have deemed more than 3400 residential apartment buildings unsafe—constructed with combustible cladding.
Fixing the cladding crisis will cost billions. The nation is dealing with the crisis state by state, with governments handling the rectification works—no mean feat during a global pandemic and construction materials supply shortage.
It’s not just money at stake, either. Reputations lay on the line.
While developers involved in the catastrophe are largely laying low, the issue raises questions about whether the potential for levies applied by respective state government’s could result in cost blowouts for construction projects in the pipeline.
Melbourne barrister Joel Silver, of Svenson Barristers, specialises in commercial, building, property and planning. He told The Urban Developer he’s representing smaller residential builders, owners and others involved in the construction sector, some of whom have cladding-related claims.
“You would think that [the litigants] could ultimately come up with a sensible settlement solution, but I suspect I’ll have a few cases from it in the years to come,” he said.
Silver says it appears that a lot of cladding-related cases are being handled in-house by insurers, with many yet to spill into courtrooms.
Who is liable for the crisis comes down to the individual case, he said.
“I highly encourage anyone involved to watch class action proceeding through the Federal Court at the moment closely,” Silver said.
“Liabilities are often shared in Australia. There’s never simply one culprit. For example, someone could have manufactured a bad product but then there’s someone responsible for certifying that product as suitable for use, such as a building surveyor, a fire engineer, an architect. If they didn’t do their job, then they can quite equally be in trouble.
“So it’s very hard to give general advice as to what will happen in any given case. Just because one outcome occurred in one case or one set of facts arose in another case, it doesn’t mean that a developer or a builder or a consumer can assume that the same is going to occur in another case.
“The issue will be with us for some years to come, I think.”
The combustible cladding issue came to light after the deadly fire at Grenfell Tower in London and the Lacrosse building in Melbourne.
These incidents have contributed to higher property insurance premiums. In some cases, insurers have refused to provide cover at all.
In fact, some insurance groups have walked away from offering this type of insurance, arguing the risks are too high until the dust settles and building regulations are set in stone.
Litigation funding company Omni Bridgeway is working with William Roberts Lawyers on two class actions, funding the legal costs to run the class actions and also covering any exposure to pay the manufacturers’ legal costs. This means the case is essentially being run on a “no win, no pay” basis.
Willoughby City Council is among the members of the class action after the cladding product was used to build one of the north shore’s centrepiece entertainment venues.
The nine-storey Concourse performing arts hub in Chatswood —William Roberts Lawyers will allege that the Alucobond PE was not fit for purpose.
Omni Bridgeway is also investigating possible class actions against other manufacturers of cladding products deemed to be combustible.
A federal court judgment has outlined the Alucobond cladding class action could be worth many billions of dollars and take in more than 1000 buildings. William Roberts Lawyers told The Urban Developer that it has not formally released any public statements and cannot provide comment on specific class members.
The lead claimant of the class action has been publicly named as Shore Dolls Point building in southern Sydney, which argues that the polyethylene-core panels were unsafe and not fit for purpose.
William Roberts Lawyers says the current class action initiative won’t necessarily be restricted to buildings with Alucobond PE cladding products or Vitrabond PE cladding products.
“Accordingly, if you have a building with PE core cladding that is not Alucobond or Vitrabond, you are also encouraged to register your interest,” its website says.
Bill Petrovski, principal of William Roberts Lawyers, said that the class action represents an opportunity for owners corporations to recover compensation. If funds have been borrowed to fund rectification works related to the cladding, class action members will have the right to claim compensation in relation to the rectification of the relevant cladding, along with other losses.
The first class action is against 3A Composites GmbH and Halifax Vogel Group, which manufacture the Alucobond PE and Alucobond Plus products. second is against family-owned business Fairview Architectural, which manufactures the Vitrabond PE and Vitrabond FR products.
Petrovski explains that this is open class action, which means that anyone that satisfies the class membership definitions is in as a class member and able to benefit from the class actions, unless they opt out. The opt out deadlines have now expired.
“Developers will be class members and can benefit from the class actions if they are owners of buildings affected by the relevant cladding products and to satisfy the other class member criteria,” Petrovski says.
Caught in the firing line, Fairview has invested more than $800,000 into stringent testing of the Vitrabond panels, stating on its company website that it’s “100 per cent confident in the product’s credibility”.
The Fairview website claims the company has been a smear campaign against some of its products that has played out in the media.
According to the court documents, the main compensation to be sought is the replacement cost of the cladding, along with associated costs.
Other losses that may be claimed include the cost of making the building fire safe where the cladding can remain on the building, insurance premium increases due to the cladding, building safety assessment costs and losses suffered due to the devaluation of a property.
Meanwhile, Maurice Blackburn opted not to proceed with a cladding class action following investigations.
The state of Victoria, having given a notice of consent in November 2020, has also since opted out of the class actions.