The Victorian Building Authorities’ Statutory Powers to Issue Directions to Fix Limited by the Supreme Court

L U Simon Builders Pty Ltd v Victorian Building Authority [2017] VSC 805

In November 2014 a fire broke out on the balcony of an apartment at the Lacrosse building in Docklands. The fire spread
quickly upwards from the balcony via the façade which was built using non-compliant aluminium composite cladding.

The Lacrosse fire and the subsequent Grenfell Tower tragedy in London has resulted in scrutiny of building materials used in
the construction of high rise apartment towers and high rise commercial buildings. It would seem that increasingly entities
involved in design and construction of high rise buildings have accessed inferior and, sometimes non-compliant materials.
Local councils, State governments and the Commonwealth Government have launched various inquiries and undertaken
corrective measures to attempt to address the problems arising from the use of materials such as aluminium composite
cladding.

The Victorian Building Authority (VBA) issued the builder of the Lacrosse building, LU Simon, with a direction pursuant to
section 37B of the Building Act 1993 (Vic) (Act) to fix certain building works and specifically to replace the cladding.

LU Simon challenged the legality of the VBA’s direction. Justice Cavanough of the Victorian Supreme Court was asked to
determine whether the relevant State authorities have the legal power to give a direction to fix building work under section
37B(2) of the Act. After reviewing the objects and provisions of the Act His Honour determined that relevant State authorities
such as the VBA cannot issue a direction to fix pursuant to section 37B of the Act after a certificate of final inspection or
occupancy permit has been issued for a building. His Honour also determined that a direction to fix under the Act could only
be issued during the building stage.

In opposing LU Simon’s contention that the direction to fix power was limited to the period before the issuing of an occupancy
permit or certificate of final inspection, the VBA submitted that section 37B’s power to issue a direction to fix should be
exercisable within a ‘reasonable period of time’ after completion of the building works. This argument was not accepted.

The reasons for Cavanough J arriving at his conclusion included:

  1. That section 37B and the power to give a direction to fix, whilst not expressly setting a time limit for operation, must
    be read in the context of the Act as a whole;
  2. The direction to fix power in section 37B is found in Division 2 of Part 4 of the Act which relates to the phase or
    period between the issue of a building permit and the issue of the certificate of final inspection or occupancy permit;
  3. The wording of section 37B suggests that, before a direction to fix can be issued, there must be a builder in charge
    and on the site carrying out building work;
  4. Other sections of the Act provide that building work cannot be carried out unless there is a current building permit in
    force (and doing so gives rise to a criminal offence). LU Simon submitted that it would be ‘inconceivable’ that
    Parliament would intend that a builder, after the issue of an occupancy permit or certificate of final inspection (i.e.
    many years after a building permit has expired ), a builder would be required to undertake corrective building work
    and thereby commit a criminal offence; and
  5. Practical problems could arise if a direction to fix was given a long time after the issuing of an occupancy permit or
    certificate of final inspection. For example, a person or entity who was no longer a builder could be forced to attend
    and carry out corrective works even if they had no right to enter property and even if they had no rights of
    contribution from other parties (such as consultants and sub-contractors) due to the passage of time and statutory
    limitations of liability.

The VBA has not appealed the decision. There is no indication that the Victorian Government will pass legislation to amend
the Act to allow for directions to fix to be issued at or after final inspection or the issuing of an occupancy permit.

This decision is significant for the following reasons:

  1. The powers of the VBA and Local Councils to issue directions to fix under section 37B of the Act are limited to the
    period before the issuing of an occupancy permit or certificate of final inspection. As a consequence, the VBA and
    Local Councils cannot issue directions to fix months or years after the completion of building works – often when the
    non-compliance becomes known to owners and responsible authorities;
  2. Owners and owners corporations who discover non-compliant building works and defects can no longer turn to the
    VBA and Local Council and request that they intervene and issue a direction to fix under section 37B of the Act to the
    builder and/or to subcontractors. Instead, owners and owners corporations must pursue rights in their own names
    and either seek to negotiate with the builder or refer the matter to the Domestic Building Disputes Resolution Victoria
    (DBDRV) and/or to VCAT or to the Courts, at the expense of owners and owners corporations. Often such disputes
    run for a period of several years and involve considerable expense; and
  3. The outcome is favourable for builders as it prevents authorities from issuing effective directions to fix building works
    to builders potentially many years after works have been completed.

Queries

Should you have any queries, please contact Peter Macnish, Special Counsel  or Richard Hutchings, Senior Associate or any member of our Building & Construction Team

Disclaimer

This article does not constitute legal advice, it is commentary on a topical issue. If anything discussed in this article concerns you please seek legal advice.

The Author

Richard Hutchings

PARTNER, MELBOURNE