Building Cladding Crisis : What’s All the Fuss About?

There has been a huge amount of publicity around non-compliant building cladding but what does it all mean? Kerin Benson Lawyers has created a three part series explaining What the Building Cladding Crisis is about, the Governmental Response and Insurance. Below is the first of these Newsletters. We thank Allan Harriman of BCA Logic for his input.

Nature of the Problem

From early in the 1990s, there has been a significant decline in Australia’s manufacturing base. The effect of this decline has been a transition where the majority of products used in the Australian domestic building market are now imported from overseas. While there are companies like Symonite that manufacture a portion of their product in Australia, most Aluminium Composite Panel products are manufactured internationally in Germany, China, India, Brazil, Japan and the United States.[1]

The prime fire safety risk identified with the importation of construction materials into Australia is the difficulty in establishing if those materials are compliant with the relevant Australian Standards.[2]

It therefore appears that fraudulent or misleading product certification is a significant problem in the Australian construction industry.[3]

And along with deliberately misleading or fraudulent documentation or certification, product substitution has also been identified as perhaps the most significant contributing factor to the prevalence of non-compliant external cladding materials on Australian buildings (ie where an inferior and generally cheaper product is substituted).[4]

Thirdly, and finally, the greater use of performance-based design and assessment has probably also contributed to higher fire safety risks.[5]

Aluminium Composite Panels

There have been at least 19 fires involving building cladding worldwide since 2005. The death tolls from these fires range from none to 80.[6]

In Dubai alone the following major fires have occurred in the last five years in apartment buildings – Tamweel Tower (2012), The Marina Torch (twice – in 2015 and again 2017), The Address Downtown Dubai (2015) and Ajman One (2016).

Aluminium Composite Panels are used in construction where light-weight sheeting is required. Their use can be external or internal on walls, ceilings, roofs or for signage. Some panels are flexible and can be moulded to shape for architectural design features. They do not generally add to the structural integrity of a building.[7] Their benefits include an ability to stop wind and rain entering a building, sound and thermal insulation as well as varying levels of fire resistance.[8]

The panels themselves are comprised of an aluminium inside and outside skin with an inner core comprising some form of insulating material.[9]

The inner core composition of aluminium composite panels usually consists of polyethylene (PE), a mineral fibre and PE mix, or an aluminium extruded core.[10]

Both the outer surfaces and inner core may respond differently to fire. Additionally, the finished product will also respond differently to the isolated materials. Finally, the method of installation can influence the material’s flammability.[11]

It is well known within the building industry that there are a range of different types of Aluminium Composite Panels, some of which contain combustible materials, some of which don’t. Notwithstanding this, it is clear that combustible materials including Aluminium Composite Panels have been used in a manner that does not comply with Volume One of the Building Code of Australia.[12] The Building Code of Australia (BCA) is a uniform set of technical provisions for the design and construction of buildings and other structures throughout Australia. The BCA is produced and maintained by the Australian Building Codes Board (ABCB).[13]

For example, building designers have been specifying and relevant building surveyors approving ‘generic’ brand products such as “brand name or similar” where a particular model of that branded product may comply and another model would not.[14] An example of this in relation to Aluminium Composite Panels would be Alucobond Plus (which is compliant with the Building Code of Australia) and Alucobond PE (which is not compliant for high rise buildings).

Polyethylene Core Aluminium Composite Panels

As PE core material is much cheaper than the fire retardant or non-combustible panelling systems, it has been used extensively in Australia.[15]

PE core Aluminium Composite Panels typically have an insulating core 2 – 5 mm thick made of 100% polyethylene and a 0.5 mm thick aluminium skin. Panels are produced in various formats but can span 2 – 6 m in length and be 600 mm to 2 m wide.[16] In a fire, heat from the fire will conduct quickly to the core through the thin aluminium. This causes the core to lose the ability to bind, causing the outer skins to deform and delaminate. Finally, the core melts and can ignite.[17] Once the core ignites it melts which results in PE droplets forming and dripping causing the fire to move down the building as well as moving up the building.[18]

The problem with PE Core Aluminium Composite Panels was described as follows by an Australian Safety Engineer, Mr Tony Enright, in a recent ABC Four Corners program:[19]

“A kilogram of polyethylene will release the same amount of energy as a kilogram of petrol, and it gets worse than that because polyethylene is denser than petrol too, so that’s about, a kilogram of polyethylene is like about one and a bit, one and a half litres of petrol. If you look at a one metre by one metre square section [of PE Core ACP cladding] that will have about three kilograms, the equivalent of about five litres of petrol.”

Aluminium Composite Panels with a PE core have been banned in countries such the USA and Germany.[20]

Non-Compliant v Non-Conforming Products

There is an important distinction to be made between non-compliant and non-conforming products.

Non-conforming products are products that are not appropriate in any circumstances because they:[21]

  • do not meet the required Australian Standards for their intended use; or
  • are not fit for purpose or of acceptable quality; or
  • purport to be something they are not and are supplied or marketed to deceive those who use them.

For example, a building product labelled or described as being non-combustible but is combustible is a non-conforming product. Or a building product that is combustible, and described as such, but is used in a situation where a non-combustible product is required under the National Construction Code, is not fit for purpose (ie it is a product used in a manner that does not comply with the National Construction Code).[22]

The non-compliant use of a product is typically associated with decisions by those determining how a product is used.[23] That is, non-compliant building products should not be used in situations where they do not comply with the National Construction Code but there may be situations where such products are compliant.

Alucobest is an example of a non-compliant product. It is an aluminium cladding product that contains PE and therefore is highly combustible. It does not meet the performance requirements for combustibility in the Building Code of Australia for high rise buildings. However, Alucobest may meet the performance requirements for low rise buildings and consequently is a non-compliant product rather than a non-conforming product.

Standards

The relevant standards in Australia which Aluminium Composite Panels must comply with are set out below.

The performance requirement under the National Construction Code (NCC) provides that a building must have elements that will avoid the spread of fire in a building and between buildings, in a manner appropriate for that building.[24] The NCC is an initiative of the Council of Australian Governments (COAG) developed to incorporate all on-site building and plumbing requirements into a single code.[25]

The NCC sets the minimum requirements for the design, construction and performance of buildings throughout Australia.[26]

The NCC is comprised of the Building Code of Australia (BCA), Volume One and Two; and the Plumbing Code of Australia (PCA), Volume Three.[27]

The current Australian Standard in relation to combustibility is AS 1530.1.

AS 1530.1

Non-combustible is a defined term in the BCA. The compliance of a material with the BCA non-combustibility definition can be determined by conducting an AS 1530.1 standard combustibility test. If the material satisfies the criteria outlined in the test method the material is not deemed to be combustible.[28]

AS 1530.1 is a small-scale material fire test involving immersing a small sample of the material in a furnace held steady at 750°C. There are three criteria in AS 1530.1 which determine whether a material is deemed combustible:[29]

  1. the mean duration of sustained flaming, as determined in accordance with AS 1530.1 Clause 3.2, is other than zero. In summary, the material is combustible if flaming sustained for a period of 5 seconds or longer occurs at any time during the test for any of the five samples tested;
  2. the mean furnace thermocouple temperature rise, as determined in accordance with AS 1530.1 Clause 3.1, exceeds 50°C; and
  3. the mean specimen surface thermocouple temperature rise, as determined in accordance with AS 1530.1 Clause 3.1, exceeds 50°C. The test method is intended to provide material property data on individual materials, not systems or composites. However, if any one layer or element of a system or product is combustible then the whole system or product is considered combustible.

AS 1530.1 requires 5 samples to be tested and the minimum test time is 30 minutes. If a sample fails by means of sustained flaming early in the testing process, the test is terminated to prevent damage to equipment. In this case, the intended 30 minute test exposure requirement of the standard has not been satisfied for number of samples and test duration, hence calculations for criteria related to furnace temperature rise and specimen temperature rise cannot be carried out. However, in these instances CSIRO (the organisation conducting the testing) will issue a formal test report stating the material to be of a clear fail on criteria (a) and that the material is deemed to be combustible.[30]

Aluminium composite panels are a bonded laminate product, consisting of 3 primary layers and clause 1.4 of AS 1530.1 states the test is not applicable to bonded laminate materials as a result of differing results due to the bonding agents.

In short, it appears that AS 1530.1 is a standard that is not suitable for Aluminium Composite Panel  products because the actual test is not intended for these types of products.[31]

AS 5113

Standards Australia, in consultation with the Australian Building Codes Board (ABCB), industry and the Australian Fire and Emergency Services Authority Council, has developed a new Australian Standard (AS 5113), that provides procedures for the fire propagation testing and classification of external walls of buildings according to their tendency to limit the spread of fire via external walls and between adjacent buildings.[32]

The test consists of building a corner wall scenario of up to 4.5m high with a fire located within a ‘window’ at the bottom. This test is designed to better reflect actual fire scenarios and is commonly referred to as a ‘full scale test’. AS 5113 will not replace AS 1530 but rather is an additional test method.

CodeMark Scheme

A current Certificate of Conformity issued under the ABCB’s voluntary CodeMark Scheme is evidence that a building material or method of design fulfils the specific requirements of the National Construction Code.

State and Territory legislation requires building approval authorities to accept Codemark Certificates of Conformity as evidence of compliance with the BCA, as long as the product is used as specified on the certificate.[33]

Currently there are a number of external wall products on the market, including some aluminium composite panels, that have a CodeMark Certificate of Conformity.[34]

Case Study – Lacrosse Apartments

An example of what can befall an apartment building with PE core Aluminium Composite Panels may be seen with the Lacrosse Apartments.

On 25 November 2014, a fire occurred at the Lacrosse Apartment building in Docklands Melbourne. The fire was started on an eighth floor balcony by an unextinguished cigarette and in approximately 11 minutes the fire travelled the full extent of the building – 23 floors. Upon arrival, the Metropolitan Fire and Emergency Services Board (MFB) observed that the entire building was on fire.

The MFB found that the use of PE core Aluminium Composite Panels was a contributing factor to the vertical spread of the fire.[35]

The MFB observed that “it was fortunate that the installed fire sprinkler system operated well above its designed capability preventing further internal spread”. The MFB noted that if not for the performance of the sprinkler system and the quick and professional response by MFB fire-fighters, there “could have been a greater likelihood of serious injury or even loss of life”.[36]

Following the fire, the Victoria Building Authority referred the:

  • building surveyor, registered builder and fire safety engineer to the Building Practitioners Board (Vic); and
  • architect to the Architects Registration Board of Victoria (although the Architects Registration Board has determined not to proceed with any action against the architect).

In addition, a rectification order was issued on the owners corporation requiring the apartment owners to replace the non-compliant cladding.

In turn, the owners corporation commenced court proceedings against the builder, LU Simons, claiming more than $15 million in damages (which equated to about $40,000 per apartment). Work completed to date has already cost $6.5 million including almost $700,000 to dry out the building. It is estimated that it will cost another $9 million to remove and replace the remaining unburnt cladding to comply with the rectification order.[37]

In late November 2017, the builder of the Lacrosse Apartments released a statement to The Herald Sun in Melbourne indicating that it had agreed to replace the combustible cladding on the Lacrosse Apartments and would seek to recover cost of the replacement works from others.[38]

Consequences of non-conforming Aluminium Composite Panels

Owners of apartments in buildings with non-conforming Aluminium Composite Panels should be aware that doing nothing is not an option as the owners corporation may be required to rectify, replace or manage the risk under work, health and safety legislation as well as under common law duties of care.

Further, apartment owners need to fully consider what steps they need to take on the following issues given the range of consequences of non-conforming Aluminium Composite Panels:

  • liability for personal injury and property damage;
  • cost of alternative accommodation;
  • significantly increased insurance premiums or the inability to obtain insurance;
  • decreasing property values;
  • very significant rectification costs which may force some owners to sell. Owners wishing to re-finance will need to advise the mortgagee of the reason for re-financing which would result in the bank questioning whether the normal terms and conditions of a mortgage can be met;
  • reduced rental income as well as increased vacancies;
  • costs associated with additional fire trucks and fire ladders in the event of false alarms;
  • business interruption suffered by commercial tenants; and
  • potential difficulties in selling apartments which are under suspicion of having non-conforming Aluminium Composite Panels.

Next Steps

It is important that owners corporations are pro-active so that as much as possible they can manage the risk posed by non-conforming Aluminium Composite Panels.

That is, if an owners corporation ignores the potential presence of Aluminium Composite Panels on their building, the owners corporation may find itself completing more work and incurring more expense than was necessarily required to properly manage the issues.

The first step is to identify whether non-conforming Aluminium Composite Panels have been put on the building or not. In this regard, it is important to retain the advice of a fire safety engineer to identify the nature of the cladding. This process may begin with a paper trail audit from documents but given products or labels can be illicitly substituted by an installer or at some other point in the supply chain, the building itself needs to be checked to verify the paper trail.[39]

In short, unless there is a Codemark Certificate of Conformity which specifies that the material on the building conforms with the Building Code of Australia, a section of the suspected Aluminium Composite Panel will need to be inspected or removed from the building and tested to determine it’s nature.[40]

In addition, as indicated above, if Aluminium Composite Panels are present on the building, then apartment owners need to consider issues around:

  • the notification of insurers;
  • the notification of mortgagees;
  • building reputation; and
  • falling apartment values.

Thirdly, owners corporations need to consider whether it can recover the cost of rectifying the non-conforming Aluminium Composite Panels from some third party such as the builder.

[1] Victorian Cladding Taskforce, Interim Report, November 2017 at p. 9.

[2] The Senate Economics References Committee, Non-Conforming building products, Interim Report: aluminium composite cladding, February 2017, p.25.

[3] Ibid, p. 26.

[4] Ibid, p. 27.

[5] Ibid, p. 28 and 32.

[6] The Senate Economics References Committee, Non-Conforming building products, Interim Report: aluminium composite cladding, February 2017, p.10.

[7] Victorian Cladding Taskforce, Interim Report, November 2017 at p. 9.

[8] Strata Community Insurance, “Demystifying Cladding!”

[9] Ibid.

[10] Ibid.

[11] Ibid.

[12] Industry Alert, Victorian Building Authority, 24 February 2016 (updated 28 June 2016).

[13] https://www.mbqld.com.au/laws-codes-and-regulations/building-act/building-code-of-australia

[14] Ibid.

[15] https://certmark.org/articles/2017/06/cmi-advisory-note-aluminium-composite-panels-acp-fire-risk-australia-new-zealand/

[16] Victorian Cladding Taskforce, Interim Report, November 2017 at p. 8.

[17] Strata Community Insurance, “Demystifying Cladding!”

[18] http://www.sgi-architectural.com.au/wp-content/uploads/2015/07/PE-ACM-The-Issue-of-Combustibility.pdf

[19] The Senate Economics References Committee, Non-Conforming building products, Interim Report: aluminium composite cladding, February 2017, p.5.

[20] Minter Ellison, “Cladding: To Ban or not to Ban, that is the Question”, 12 September 2017.

[21] https://www.abcb.gov.au/Connect/Articles/Non-compliant-and-non-conforming-products

[22] https://www.abcb.gov.au/Connect/Articles/Non-compliant-and-non-conforming-products

[23] https://www.abcb.gov.au/Connect/Articles/Non-compliant-and-non-conforming-products

[24] ABCB, “Advisory Note 2016-3 : Fire Performance of External Walls and Cladding” September 2016 @ p.3.

[25] https://www.mbqld.com.au/building-and-planning/national-construction-code

[26] https://www.mbqld.com.au/building-and-planning/national-construction-code

[27] https://www.mbqld.com.au/building-and-planning/national-construction-code

[28] CSIRO, Fire safety guideline for external walls, 18 April 2016 @ p.4.

[29] Ibid, p. 4.

[30] Ibid, p. 5.

[31] Senate Enquiry Hansard Record, Economics References Committee, “Non-conforming Building Products – the use of non-compliant external cladding materials in Australia”, Wednesday 19 July 2017, p. 67.

[32] ABCB, “Advisory Note 2016-3 : Fire Performance of External Walls and Cladding” September 2016 @ p.8.

[33] http://www.abcb.gov.au/Product-Certification/CodeMark-Certification-Scheme.

[34]  ABCB, “Advisory Note 2016-3 : Fire Performance of External Walls and Cladding” September 2016 @ p.9.

[35] The Senate Economics References Committee, Non-Conforming building products, Interim Report: aluminium composite cladding, February 2017, p.5.

[36] Ibid, p. 6 and 7.

[37] Ibid, p 8.

[38] https://www.propertyobserver.com.au/forward-planning/investment-strategy/property-news-and-insights/78752-builder-to-replace-flammable-cladding-on-lacrosse-tower.html

[39] Harriman, A., “Strata Fire Safety Forum”, 31 August 2017

[40] Ibid.

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