Legal Update: Senate Interim report on aluminium composite cladding

The Senate Economics References Committee released the interim report on aluminium composite cladding, part of the broader Non-Conforming Building Products Inquiry, on September 5.

The document, which will be followed by a further iteration on the illegal importation of asbestos on 31 October, and a final inquiry report expected before 30 April 2018, outlines the Committee’s recommendations on managing the risks posed by the use of aluminium composite cladding.

While a particular focus is given to high-rises, following the 2014 Lacrosse fire and the Grenfell tragedy earlier this year, the Committee’s recommendations take into consideration the broader challenges facing the Australian construction industry.

The most significant recommendation is arguably that urging legislative reform to impose a liability on builders to end users. The Committee has recommended the creation of a consistent statutory duty of care protection for end users in the residential strata sector. If implemented, end users such as owners’ corporations will be able to reach builders where it is not currently possible.

In addition to urging swift regulatory action with regard to banning the importation, sale and use of polyethylene core aluminium composite, the Committee has endorsed recent Queensland legislation designed to spread accountability for building materials design, selection and use across the supply chain. We note the dissenting report by Coalition senators, as well as the subsequent statement by the Assistant Minister for Industry, Innovation and Science, Craig Laundy MP, that “calls to ban materials at the border will not work.” Bipartisanship on implementation may not be guaranteed.

Should the Commonwealth and other state governments choose to adopt similar legislation to Queensland, designers, manufacturers, importers, suppliers and installers would share accountability for ensuring building product compliance. This could potentially translate into shared liability should non-compliance lead to regulatory action, litigation or even class action.

In an effort to support long-term change and enhanced safety, the Committee has recommended the creation of a national licensing scheme with requirements for continued professional development for all building practitioners, which could, if adopted, entail considerable time and resource investment on behalf of companies in the sector.

With industry compliance identified as an area of improvement in the report, two of the Committee’s recommendations centre on enforcing current regulation and standards through a combination of strengthening the office of the federal Safety Commissioner and of introducing a more drastic penalty regime for non-compliant firms.

If adopted, the combination of safety standards, ongoing professional training and statutory duty of care may go a long way to respond to the construction sector’s request for enhanced clarity in respect to conformity standards in building products, the insurance industry’s risk management response and introduction of exclusions, and the public’s expectations of enhanced safety for residential buildings.

Eight recommendations were made to the Government:

1. The Commonwealth Government urgently implement a total ban on the importation, sale and use of polyethylene core aluminium composite panels;
2. The establishment of a national licensing scheme through cooperation between Commonwealth and all state governments, covering surveyors, building inspectors, builders and project managers. This includes the implementation of nationally consistent mandatory on-site inspections throughout the construction process;
3. The Building Minister’s Forum introduce nationally consistent measures to increase accountability across the supply chain, along the lines of recent Queensland legislation;
4. The Commonwealth Government consider making all Australian Standards and Codes freely available. This would remove a significant cost to builders accessing Australian Standards required for National Construction Code (NCC) compliance;
5. Imposition of penalty regime for non-compliance with the NCC such as revoking accreditation or bans from tendering for Commonwealth construction projects and substantial fines;
6. Increased resources to the Federal Safety Commissioner;
7. Support for the Commonwealth Government’s consideration to Director Identification Numbers to combat illegal phoenix activity; and
8. Nationally consistent statutory duty of care to make those in the supply chain liable to end users in the residential strata sector.

You can read the Senate interim report here. As well as the Senate inquiry, there are various other processes and reviews being undertaken at a national level. We will continue to provide updates as the regulatory debate continues.