Domestic building disputes feeling the ripples of the landmark Lacrosse case

The Lacrosse Appeal

Three months ago, the Victorian Court of Appeal handed down its long-awaited decision in relation to the litigation arising from the Lacrosse fire (Lacrosse Appeal).¹ It was Australia's first flammable cladding case decided in a superior court.

In the judgment at first instance Judge Woodward, the presiding VCAT Vice President, emphasised that the decision turned on the specific facts of the case. However, relevantly, the decision at first instance and on appeal provided important clarity around the operation of warranties and the proportionate liability regime in relation to building defects claims.

Bellini v Meldan

In the recent decision of Bellini v Meldan (Vic) Pty Ltd (Bellini),² VCAT was charged with considering the operation of the statutory warranties under section 8 of the Domestic Building Contracts Act 1995 (Vic) (Builder's Warranties) and the operation of the proportionate liability regime. VCAT adopted a similar approach to that in Lacrosse.

The Bellini case concerned a straightforward building defects case in VCAT. The owners sued the builder and the building surveyor for a handful of defects at their Newport home. The owners argued that the builder breached the Builder's Warranties, and the builder sought to limit its liability by raising apportionment defences pursuant to Part IVAA of the Wrongs Act 1958 (Vic) (Wrongs Act). The owners argued that the claims were not apportionable.

Prior to the hearing, the owners and building surveyor settled for an undisclosed amount. However, the building surveyor remained in the proceeding for the purposes of apportionment. Under section 24AF of the Wrongs Act, a concurrent wrongdoer can raise a defence of apportionment in circumstances where there is a claim for economic loss or damage to property, which arises from a "failure to take reasonable care". If the defence is successful, the respondent or defendant can reduce the extent of their exposure to a judgment against them, relative to the fault of any other "concurrent wrongdoers".

Counsel for the owners referred VCAT to the Lacrosse Appeal, which affirmed VCAT's decision that claims for breach of Builder's Warranties were not apportionable, because the breach of warranty claims which it upheld did not arise from a failure to take reasonable care.

In line with Lacrosse, VCAT determined that only the defects that arose from a failure to take reasonable care were apportionable. Other defects that were a breach of other Builder's Warranties, for example, s8(c) (work will be carried out in accordance with, and will comply with, all laws), were not apportionable and the builder was entirely responsible for those defects. Further, the terms in which the claim is framed are an essential determinant of whether a claim can be said to arise from a failure to take reasonable care.

The implications of the Lacrosse Appeal are wide and far-reaching, and its impact is likely to extend far beyond the ambit of flammable cladding claims.

¹Tanah Merah Vic Pty Ltd & Ors v Owners Corporation No 1 of PS613436T & Ors [2021] VSCA 72

²Bellini v Meldan (Vic) Pty Ltd (Building and Property) [2021] VCAT 833