Apartment towers fitted with high-risk cladding could become a target for arsonists or terrorists if their locations across Melbourne are revealed, the city’s fire service warns. This warning comes as authorities complete testing to confirm the make-up of cladding on Spencer Street’s NEO 200 tower, rated a low risk, caught fire earlier this year causing residents to vacate the building for a fortnight.

Lacrosse Fire Docklands       Click to enlarge

Apartment occupants deserve to know if they are living with a fire risk around them. If the State knows of buildings with flammable cladding material in them, its silence only creates a climate of fear among all high rise occupants. Another reason to withhold  information on buildings swathed in illegal cladding is the effect it would have on valuations and the current owner’s resale prospect.

The government wants apartment owners to foot the bill using the Cladding Rectification Scheme, which was announced in the lead-up to last year’s state election, which offer owners low-interest loans to remove the cladding. Owners could then repay the loans through their municipal rates over a minimum of 10 years.

Why do apartment owners have to pay for something they had nothing to do with?

The answer to this


question is very simple. In line with past policy, the government has decided to protect rogue builders and transfer responsibility to blameless owners.

As always, there has been superlative spin, secrecy and incredible storytelling. Unearthing the truth required a long, complicated and tortuous path to find what has been hidden – that consumers remain wholly unprotected.

Not a single loan has been granted in Victoria since the plan was launched last October, and only a handful of councils in Melbourne have agreed to participate in the scheme.

In the meantime the court have awarded the Lacrosse apartment building owners $5.7 million in damages after a combustible cladding blaze swept up the building.

“Many of my findings have been informed by the particular contracts between the parties in this case and by events occurring in the course of the Lacrosse project that may or may not be duplicated in other building projects.

The Lacrosse blaze caused millions of dollars of damage to the 21-storey building, prompting apartment owners mounting a bid to recoup more than $12 million in damages.

That claim for damages covered the cost for owners of replacing non-compliant cladding, damaged property, additional insurance premiums and “anticipated future losses”.

In a decision handed down in the Victorian Civil and Administrative Tribunal (VCAT) by Judge Ted Woodward on Thursday, LU Simon was ordered to pay more than $5.7 million to apartment owners.

However, most of that money would be paid to LU Simon by the architect, fire engineer and building surveyor who worked on the project, after Judge Woodward found they had breached contractual obligations.

Judge Woodward, in his ruling, found the architects Elenberg Fraser had failed to remedy “defects in its design”, specifically designs which allowed the “extensive use” of aluminium composite panels (ACPs) on the east and west facades of the building.

“That caused the design to be non-compliant with the [Building Code of Australia] and not fit for purpose,” he said in his 227-page ruling which laid out how costs should be paid.

He also found the building surveyor, Gardner Group, breached its agreement with LU Simon by failing to exercise due care when it issued a building permit in 2011 for those architect plans.

Thirdly, he found the fire engineer, trading as Thomas Nicolas, failed to recognise and warn the builder that the ACPs proposed for use on the building did not comply with the building code.

The cladding used on the outside of the building, known as Alucobest, was found to have been highly flammable and did not comply with Australian building standards.

It was ordered that the three parties pay LU Simon a combined total of 97 per cent of the damages owed to apartment owners.

Gardner Group was ordered to pay 33 per cent, Elenberg Fraser 25 per cent and Thomas Nicolas 39 per cent.

The remaining 3 per cent of costs were attributed to Jean-Francois Gubitta, who was on a working holiday in Melbourne from France, and whose abandoned cigarette sparked the blaze.

But Judge Woodward found Mr Gubitta’s responsibility for the loss and damage was “minimal” and made no order directly affecting Mr Gubitta.

Instead, LU Simon was ordered to pay that share of the costs itself.

Some of the $12.7 million sought by apartment owners is yet to be resolved.

Judge Woodward said the calculated compliance cost of nearly $6 million sought by the owners seemed reasonable, but he made no order on the sum while the parties continued to negotiate the matter.

The ruling may be closely followed by apartment owners across Melbourne considering who will foot the bill to replace non-compliant flammable cladding on their buildings.

However, Judge Woodward stressed that his ruling should not be taken as setting any particular precedent for bodies corporate more generally.

“These reasons should not be read as commentary generally on the safety or otherwise of ACPs and their uses,” he said.



  1. Gavin says:

    It is outrageous to suggest that apartment owners, who bought the units in good faith, should now have pay for the cladding rectification. At the end of the day it will be the taxpayers who will have to pay while dodgy architects, surveyors, fire safety officers and the bureaucrats who knew of the dangerous cladding can walk away scot free.

  2. Harold Shillinglaw says:

    The bureaucrats gambled on there not being a cladding fire during their tenure. It was known well before the West London fire that they were approving the installation of combustible cladding throughout Australia.
    The flammable cladding scandal could well be the beginning of a shakeout in the high-rise sector that could lead to the revaluation of apartments across Australia as owners and banks realise the property they own, or hold as security, do not comply with the building code. The dilemma for lending authorities is whether to reduce their lending ratio or introduce a tougher lending criteria in terms of borrower equity, because either way it would not be in their best interests if these sorts of measures contributed to a sharp fall in apartment values. Another issue will be the attitude of insurance companies.

  3. Patton says:

    The owners in the Panorama apartment building, corner Tram and Doncaster Roads, have received letters from the authority that no illegal cladding had been used in the construction of their building.
    We have not received any assurances as yet for our apartment building which might be because it has not been inspected yet or it could be that they have found combustible cladding and have delayed informing owners or renters at this point of time which is a worry because our life savings have been invested in this dog box.

  4. Geraldine says:

    The council rectification loans can be transferred if the owner wishes to sell but who is going to invest in an apartment encumbered with higher rate payments in addition to paying body corporate fees when apartments have no capital gain? What are the choices for low income purchasers?

  5. Bud says:

    By the time you deduct Council rates and Owners Corporation fees you will be lucky if you get a 3.5% net rental return. Without having the the rectification fees imposed on the owners.
    When you take into account an annual depreciation at of 15%, plus the legal costs when you purchase, it is hardly what you would call a wise investment.

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