05 August 2019

Is Australia headed for a cladding crisis?

This three-part series examines the implications of the widespread use on non-compliant for the construction industry.

Part 1

is australia heading for a cladding crisis 1With the last insurer offering industry-compliant professional indemnity cover for certifiers pulling out of the Australian market, the states with high numbers of questionable buildings are facing issues around building standards and regulatory compliance, as well as who will pay for the defects.

This has serious implications for building or project owners, architects, surveyors, fire engineers and other construction industry certifiers.

A recent analysis by Victoria’s Deakin University of 212 building audits in three states found that more than half of multi-storey buildings had at least one defect: 97% in New South Wales, 74% in Victoria and 71% in Queensland.

The problems for these experts are spearheaded by the use aluminium composite panel (ACP) cladding, which was responsible for the speed, spread and difficulty of managing both the London Grenfell Tower and Melbourne Lacrosse apartment block fires. These types of panels were originally developed in the 1970s for use in signage and contain polyethylene (PE) or expanded polystyrene fillings.

What makes ACP cladding combustible?

Short answer: the PE filling. Polyethylene is derived from petroleum and is more flammable, although PE cladding can be combined with non-combustible materials to reduce this, and the actual degree of combustibility can only be established by testing the filling.

Aluminium itself is not fire resistant and is a heat conductor. When the CSIRO tested the flammability of samples from the cladding used on the Lacrosse building the process had to be suspended to avoid damaging the machines involved, the Australian Financial Review reports.

Acting Deputy Chief Officer of the Melbourne Fire Brigade Adam Dalrymple said the Lacrosse blaze, which raced up the exterior walls to the 21st floor of the building within eight minutes, was unlike anything the Melbourne Fire Brigade had encountered in its 125-year history.

“You have multiple sets of fires over multiple levels all at the same time. That challenges the way you fight a fire.”

Dangerously popular

is australia heading for a cladding crisis 2Due to its lightness, versatility and slick appearance ACP cladding has been adopted extensively for exterior building treatments. According to ABC News, in Australia it has been used on:

  • countless high-rise developments such as Jackson’s Landing in Pyrmont, Sydney
  • public buildings such as the Fremantle Maritime Museum in Perth
  • a number of hospitals in Melbourne.

State audits of external cladding on multi-storey buildings in New South Wales and Victoria identified more than 1000 buildings in each state with dangerous ACP panels, according to The Guardian and ABC News, but the actual figure may be much more.

“How many? It’s unquantifiable… it could be more than thousands,” Dalrymple said in an interview with news.com.au in September 2017.

How did we get here?

Under the Home Building Act 1989 (NSW) builders are held responsible for significant problems in fire safety and fire safety systems in residential buildings are covered by the six-year period of statutory warranty for major defects.

The CSIRO Fire safety guideline for external walls states that the overarching Building Code of Australia Deemed to Satisfy requirement for external walls of buildings is that they must be non-combustible The guide notes that makers of cladding systems usually produce a range of products and that a particular brand of ACP cladding could include panels with different core materials, ranging from 100% PE cores to substantial amounts of fire retardant and mineral filler added to a polymer core, making selection by brand alone unreliable.

Investigation by the Melbourne Municipal Building Surveyor of the cladding used for the Lacrosse building found the commonly used ACP product was not non-combustible, but the builder claimed it had been cleared for use by international testing agencies and approved by local experts.

The judge for the Lacrosse Tower liability case found no evidence that the builder failed to take reasonable care in installing the cladding but apportioned 39% of the $5.7 million damages to the fire engineer who approved the product, 33% to the surveyor who approved the building, 25% to the architect and 3% to the smoker of the cigarette that sparked the blaze.

Ripple effect

is australia heading for a cladding crisis 3Now there is a multitude of other cases where the use of ACP is triggering claims for remediation by owners and body corporates against contractors and by contractors against their consultants who now cannot rely on their professional indemnity insurance to cover them for damages.

Insurers are understandably reluctant to expose themselves to a known risk, which means that “it is absolutely critical that building or project owners understand the combustibility of the product selected and provide a transparent disclosure of the presence and properties of cladding used on external walls”, Gallagher’s property expert Martin Andrews advises.

But the product itself isn’t the only area of ambiguity. In Part 2 of this series we will look at the range of factors involved in the combustible cladding issue.

Need advice?

Gallagher brokers have the expertise and industry knowledge to formulate insurance solutions for complex construction projects and assist stakeholders with managing their risk exposures.

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Read Part 2 of our cladding series of articles here.