MS Amlin Corporate Member Limited v LU Simon Builders Pty Ltd

Federal Court of Australia|2023-06-05|Before: Mr P, Jackman J

The Separate Question be answered as follows: Question: Did the first and second respondents give notice to the applicants and the third respondent of any facts that gave rise to the Atlantis Claims (as defined in paragraph 22 of the Amended Statement of Claim), in the sense contemplated by s 40(3) of the Insurance Contracts Act 1984 (Cth), prior to the expiry of the 2014/15 Policies (as defined in paragraph 12 of the Amended Statement of Claim), such that the insurers are not relieved of liability under the 2014/15 Policies in respect of the Atlantis claims by reason only that they were made after the expiration of the period of the insurance cover provided by the 2014/15 Policies? Answer: Yes
The parties file and serve written submissions (not exceeding 5 pages) together with any affidavit in support on the questions of costs, consequential orders and future case management by 12 June 2023.
The parties to file and serve any written submissions in reply (not exceeding 3 pages) together with any affidavit in support by 19 June 2023. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 In these proceedings, the applicants (the Excess Layer Insurers) seek a declaration that insurance cover under professional indemnity policies for the period 30 June 2014 to 30 June 2015 (the 2014/15 Policies) is not available in respect of certain claims made against the first and second respondents (the Insured). The third respondent (Chaucer) is the insurer for the primary layer of cover provided to the Insured. I refer to the Excess Layer Insurers and Chaucer together as the Insurers. The Insured operate a construction and project management business. The local Australian insurance broker for the Insured was EBM Construction & Marine (EBM), and the London placing broker was Thompson Heath & Bond Ltd. 2 The insuring clause in the primary policy for the 2014/15 Policies provides as follows: We the Insurer hereby agrees [sic] to indemnify the Insured up to but not exceeding the Limits of Indemnity: a) for any civil liability which the Insured may become obligated to pay arising from any claim or claims first made against the Insured, and/or; b) against loss and/or expense necessarily incurred by the Insured with the consent of the Insurer, in respect of any action taken to mitigate a loss or potential loss that otherwise would be the subject of a claim under this Policy; during the Period of Insurance as a result of: i) any circumstance or breach of warranty or authority in the conduct of the Insured or of any party presently or previously employed or engaged by the Insured or for whom the Insured is responsible; and/or ii) breach of warranty or guarantee of the fitness or suitability for purpose or the reasonable fitness or suitability of any work or materials which are the subject of a contract (including any deed of collateral warranty or duty of care agreement) entered into by the Insured, or by any party on behalf of the Insured, arising from the carrying out of the Activities and Duties anywhere within the Territorial Limits. 3 The first and second excess layer policies underwritten by the Excess Layer Insurers follow the form of the primary policy. 4 It will be noted that the insuring clause is triggered by any civil liability which the Insured may become obligated to pay "arising from any claim or claims first made against the Insured … during the Period of Insurance". It is common ground that the claims in issue in these proceedings were not made during the Period of Insurance, being 30 June 2014 to 30 June 2015. The Insured relies on s 40 of the Insurance Contracts Act 1984 (Cth) (Insurance Contracts Act), which provides relevantly that: (1) This section applies in relation to a contract of liability insurance the effect of which is that the insurer's liability is excluded or limited by reason that notice of a claim against the insured in respect of a loss suffered by some other person is not given to the insurer before the expiration of the period of the insurance cover provided by the contract. … (3) Where the insured gave notice in writing to the insurer of facts that might give rise to a claim against the insured as soon as was reasonably practicable after the insured became aware of those facts but before the insurance cover provided by the contract expired, the insurer is not relieved of liability under the contract in respect of the claim, when made, by reason only that it was made after the expiration of the period of the insurance cover provided by the contract. 5 On 14 March 2023, I made an order that, pursuant to r 30.01 of the Federal Court Rules 2011 (Cth), the following question be determined as a preliminary question in the proceeding (Separate Question): Did the first and second respondents give notice to the applicants and the third respondent of any facts that gave rise to the Atlantis Claims (as defined in paragraph 22 of the Amended Statement of Claim), in the sense contemplated by s 40(3) of the Insurance Contracts Act 1984 (Cth), prior to the expiry of the 2014/15 Policies (as defined in paragraph 12 of the Amended Statement of Claim), such that the insurers are not relieved of liability under the 2014/15 Policies in respect of the Atlantis Claims by reason only that they were made after the expiration of the period of the insurance cover provided by the 2014/15 Policies? 6 The applicants contend that the Separate Question should be answered in the negative, whereas all other parties contend that the Separate Question should be answered in the affirmative.

The Claims against the Insured 7 Paragraph 22 of the Amended Statement of Claim identifies the Atlantis Claims as three proceedings which have been commenced against the Insured in respect of the alleged breaches of certain warranties by the Insured under its contract with the developer, Avon Grove Pty Ltd, and pursuant to statute, for the construction of a 36-storey building located at 288 Spencer Street, Melbourne, Victoria, known as the Atlantis Towers. The warranties in question concern the quality and suitability for purpose of materials supplied by the Insured for use in the work carried out under that contract, the Insured's compliance with laws and legal requirements in carrying out work under that contract in respect of the Atlantis Towers, and the fitness for purpose of the work performed under the contract and any material used in carrying out the work. The proceedings are as follows: (a) by application dated 17 November 2019, the Atlantis Towers Owners Corporation (Owners Corporation No. 19S600940E), together with the owners of apartments in the Atlantis Towers, commenced proceedings against the Insured in the Victorian Civil and Administrative Tribunal (VCAT) in relation to the residential part of the Atlantis Towers (Proceeding Number BP226/2019); (b) by application dated 6 July 2020, the developer of, and owner of the hotel in, Atlantis Towers, Avon Grange Pty Ltd, commenced proceedings in VCAT in relation to the commercial part of the Atlantis Towers (Proceeding Number BP2278/2019); (c) by writ dated 29 November 2020, the developer of, and owner of the hotel in, Atlantis Towers, Avon Grange Pty Ltd, commenced proceedings in the County Court in relation to the commercial part of the Atlantis Towers (Proceeding Number CI-19-05760), (together, the Atlantis Claims). 8 In the first of the Atlantis Claims, VCAT Proceeding Number BP226/2019, the Owners Corporation makes allegations relevantly that the Atlantis Towers building was required to have elements which would, to the degree necessary, avoid the spread of fire in the building, and a combustible material could only be used as an attachment to a building element if it did not constitute an undue risk of fire spread via the façade of the building. It is alleged that the builder, being the first respondent in these proceedings (LU Simon), constructed the building using aluminium composite panels (ACPs) which contained a 3mm core composed of approximately 90% polyethylene (the Cladding) as part of the external walls of and attachments to the building, and identified the Cladding as having been stamped with the identifier "Alcotex Dae Nyung". It is alleged that the Cladding was combustible and not fire-resistant, did not to the degree necessary avoid the spread of fire in the building, constituted an undue risk of fire spread via the façade of the building, did not comply with the Building Code of Australia (BCA), and was not good or suitable or fit for the purpose of being used in the external walls of the building, being a building containing residential apartments. Accordingly, it is alleged that the first respondent breached various warranties incorporated in the contract by the Domestic Building Contracts Act 1995 (Vic). The loss and damage claimed included the cost of replacing the Cladding in order to bring the building into compliance with a Building Order issued by the Municipal Building Surveyor for the City of Melbourne (MBS) on or about 20 August 2019. In a claim made by LU Simon against other parties in those proceedings, LU Simon alleged that the Cladding on the building used "Alcotex" ACPs. The defence of the architect in those proceedings referred to the drawings produced by the architect as referring to the use of an ACP product known as "Alucobond", but said that the developer had given an instruction specifying the use of the ACP known as "Alcotex". 9 Similarly, in VCAT proceedings BP2278/2019, the developer made allegations as to LU Simon installing ACPs to the exterior faces of the building, and that the Cladding contained a 3mm core composed of approximately 98.6% to 98.9% polyethylene, which was not fire resistant or non-combustible and did not avoid the spread of fire, and accordingly it was not good or suitable for the purpose for which it was used and did not comply with the relevant legal requirements under the BCA. In its defence, the architect states that the initial design drawings specified the use of "Alucobond" ACPs for the façade, but an instruction was later given by the developer to use "Alcotex" ACPs. 10 The proceedings in the County Court raise similar allegations, in which the developer alleges that LU Simon installed ACPs containing a 3mm core composed of approximately 98.6% to 98.9% polyethylene, which was not fire-resistant or non-combustible and did not avoid the spread of fire as required. Accordingly, it is alleged that the Cladding was not good or suitable for the purpose for which it was used and did not comply with the relevant legal requirements under the BCA. LU Simon identifies in its defence in those proceedings that it constructed the Cladding using "Alcotex" ACPs. The architect maintains a consistent line with the VCAT proceedings to the effect that it had in its initial drawings referred to the use of the ACP product described as "Alucobond", but was later instructed by the developer to use "Alcotex" ACPs. 11 Accordingly, the basis of all three Atlantis Claims is that ACPs known as "Alcotex" were used as the Cladding for the building.

The Notifications 12 The respondents and fourth and fifth cross-respondents (EBM and AGR respectively) to these proceedings rely upon two notifications given to the Insurers by EBM, the broker for the Insured, by emails dated 5 May 2015 and 14 May 2015 (the Notifications). There was also an email dated 7 May 2015, but no reliance is placed on that for the purpose of s 40(3). 13 The text of the email of 5 May 2015, under the subject line "Potential Claim" was as follows: Attached is a notification of circumstances that may result in a claim under LU Simons Policy. We have prepared this statement on facts know[n] to date on the Insured's behalf[.] Really most of the noise is around the press release really. We bring this to your attention in terms of the policy. No formal claim has been made against LUS at this point in time. The email attached two documents, being a newspaper article from The Age dated 28 April 2015, and a document headed "Lacrosse Apartments - Docklands" specifying the date of the incident as 25 November 2014. 14 Both attachments referred to a fire which had occurred on 25 November 2014 in a building known as the "Lacrosse Apartments", being a residential high-rise building in metropolitan Melbourne. LU Simon was the builder of the Lacrosse Apartments. 15 The newspaper article in The Age contains the following salient passages: The rapid spread of a fire through a Docklands apartment tower was caused in part by combustible construction materials, a review has found, sparking an investigation into building practices and paving the way for an expensive class action. The Victorian Building Authority has launched an investigation into LU Simon Builders after the MFB [Metropolitan Fire Brigade] revealed on Monday that the external cladding of the 23-storey Lacrosse Building was untested and had "contributed to the spread of the fire". … Fast-running flames soon ignited external wall cladding and aided by "combustible material located within the wall structure" quickly spread to the top of the building, the MFB reported. … More than 100 owners and residents have contacted law firm Slater and Gordon regarding a potential class action. … MFB chief fire officer Peter Rau said the building's external cladding, Alucobest, had undergone scientific testing and was found in breach of combustibility requirements for a high-rise building. "The external cladding material on this building did not prevent the spread of the fire, as required by the building code," Mr Rau said. LU Simon managing director Peter Devitt said aluminium composite panels including Alucobest had been widely used in Australia for decades. He said the cladding complied with Australian standard tests for ignitability, spread of flame, heat and smoke. But in 2010, when the building was commissioned, there was no such product that passed the test for "combustibility", he said. Ben Hardwick, of law firm Slater and Gordon, said legal action potentially worth tens of millions had been on hold awaiting the outcome of the MFB investigation. … Victorian Building Authority technical and regulation director, Jarrod Edwards said the new investigation would probe the conduct of LU Simon Builders and the building surveyor. Mr Edwards said investigators would try to identify whether the non-compliant external cladding had been used elsewhere. 16 Pausing there, while much of that article is focused on the Lacrosse Apartments building and the particular brand of ACPs used in the construction of that building, the article points to a wider problem. The article begins by referring to "an investigation into building practices", which conveys a wider investigation than one confined to the Lacrosse Apartments building, although the article refers to the investigation as being an investigation into LU Simon. The subject matter of the investigation was thus reported as the building practices generally of LU Simon. The comment attributed to the managing director of LU Simon, Peter Devitt, is important because it refers to ACPs having been widely used in Australia for decades, and although Mr Devitt referred to ACPs as including Alucobest, the comment is not confined to that particular brand. Mr Devitt is reported as having stated that in 2010, when the building was commissioned, there was no "such product", clearly referring to ACPs in general, that passed the test for "combustibility". That is plainly a reference to a general problem for buildings constructed in the period up to 2010 which had incorporated ACPs, given that no ACPs which were then available are said to have passed the test for combustibility. The article also attributes statements to Mr Edwards of the Victorian Building Authority (VBA) to the effect that the new investigation would probe the conduct of LU Simon, and that investigators would try to identify whether the non-compliant external cladding had been "used elsewhere". That statement read literally appears to be a reference to the non-compliant external cladding which had been used at the Lacrosse Apartments Building, but in the context of the whole of the article, including the earlier references to an investigation into building practices, the ordinary and natural meaning of Mr Edwards' comment was not confined to the Alucobest product. 17 In relation to Mr Devitt's comment that in 2010 when the Lacrosse Apartments building was commissioned there was no "such product" (being ACPs) that passed the text for combustibility, it is relevant to note certain statements in the proposal for the 2014/15 Policies. The proposal by the Insured for the 2014/15 Policies indicated that LU Simon was established in 1955 and conducted a business of commercial construction including high-rise residential buildings. Reference was made to an attached booklet, but that has not been tendered. The proposal indicated that in the last financial year, 100% of LU Simon's work related to high-rise buildings over six storeys. In answer to the question whether LU Simon had undertaken in the past any activities other than those disclosed in the proposal, the Insured answered "no". Accordingly, the comment attributed to Mr Devitt, together with his comment that ACPs had been widely used in Australia for decades, indicated to the Insurers that it was likely that other buildings constructed by LU Simon had used ACPs which did not pass the test for combustibility. The comment therefore conveyed to the Insurers that there was, at the least, a real and tangible risk of LU Simon facing claims for rectification of that aspect of its building work on this and other buildings it had constructed, together with claims for economic loss associated with the replacement of cladding incurred by owners of the buildings which it had constructed. 18 Contrary to the argument put by the Insured, I do not regard the statement by Mr Hardwick of the potential legal action being worth "tens of millions" as a reference to any buildings other than the Lacrosse Apartments. I refer below to estimates of loss for the Lacrosse Apartments as $2m to $5m, but those estimates appear to relate specifically to the fire damage. The estimate of "tens of millions" appears to relate to the cost of replacing the cladding at the Lacrosse Apartments with non-combustible material, rather than a reference to replacing the cladding on other buildings constructed by LU Simon. 19 Turning then to the second of the documents attached to the email of 5 May 2015, the document entitled "Lacrosse Apartments - Docklands", that document begins by referring to the fire on 25 November 2014 at the residential high-rise building which had been constructed by LU Simon. The document says that there was nothing unusual about the fire except that the Metropolitan Fire Brigade (MFB) were of the view that it spread too quickly and because of this, undertook a formal investigation. The document contains the following salient passages: The reason for notifying insurers is that there has been some discussion by media outlets that the spread of the fire was due to the types of materials used on the façade of the building and due to their alleged inadequacy contributed to the rapid spread of the fire. No claim either formal or otherwise has been made against LU Simon. The material used was an Alucobest aluminum cladding purchased from a company, Shanghai Huayuan New Composite Materials Co. Ltd in China, and widely used throughout the world. There is discussion by the MFB that the product had not been tested to AS1530.1 1994 which is a standard test for combustibility in Australia and perhaps was not the most appropriate cladding for use in this project, and, although they concede that no like product has passed the test, they suggest that certified Codemarked products should have been used. They [ie the MFB] omit to add however that there were no Certified Codemarked products at the time of construction [ie in 2010]. … Attached is an article published by the Melbourne Age regarding possible legal action for recovery for the tenant and building owners. , but we understand that its commencement is imminent. Summary: At this stage no claims have been made against LU Simon and it is possible that no claims will be made against them since the materials used are in widespread use in Australia and were agreed to use by the building superintendent and architects. The products were not inferior and were the same as those used for decades all over the world. … The cost to rectify the damage caused by the fire is between $2m-$5m according to the MFB. 20 Although much of that document concerns the Lacrosse Apartments building and the product known as "Alucobest" in particular, there are aspects of the document which refer to a wider problem. Of particular importance is the comment that the MFB has stated that "no like product has passed the test for combustibility" under AS1530.1 1994, and there was no certified Codemarked product of this kind at the time of construction in 2010. The class of products referred to in those comments is ACPs in general, given the description in the previous paragraph of the material used being a brand of aluminium cladding, and also when read in the context of the article which appeared in The Age which was specifically referred to in the document. 21 The second document relied upon as notification to the Insurers is the email of 14 May 2015 which was given the subject line "Potential Claim". The text of the email is as follows: Attached please find a copy of the design and construct contract which is an Australian standard (AS4300) which was the basis of Lacrosse and sets out our insured's obligations. Also attached for your interest is a copy of the Melbourne Fire Brigade (MFB) [sic] report which may also be of interest for insurers. Page 24 is of particular interest and generally the report is critical of many contributing factors in regards to this incident. 22 The report by the MFB is entitled "Post Incident Analysis Report" in relation to Lacrosse Docklands (the MFB Report). The details set out on p 4 refer to the loss as $5,000,000, which, as I have said above, appears to relate only to the fire damage. The executive summary refers to the report as providing a detailed account of the fire incident that occurred at the Lacrosse Building on 25 November 2014. The main observations are said to include: • External wall cladding (Alucobest) rapid fire spread. • Use of combustible external wall cladding on Type A construction. • Building material design, selection and installation. 23 Section 5 of the MFB Report deals with "Building Construction Assessment". It refers on pages 22 to 24 to the external walls of the Lacrosse Apartments building as follows: These walls are built of lightweight steel stud construction. The internal face of the walls are lined with 2 layers of 13mm standard grade gypsum plasterboard, contain insulation batts, along with a combustible PVC stormwater downpipe and several combustible electrical/television cabling and input face plates. The external face is lined with a 4mm aluminium/polyethylene composite panel façade containing a polyethylene core. … MFB Fire Investigators removed a large sample of the aluminium/polyethylene composite panel façade, fitted to the southern end of the balconies, for further investigation. The removed section of panel contained manufacturer labelling and serial identification on the internal face indicating the following: "ALUCOBEST 11060167 HY 103 4mm 2011/06/17 20: 51: 45". … It is assumed this panel is the standard grade Alucobest panel, as there is nothing to indicate otherwise. The product is believed to incorporate a Polyethylene core material. The Alucobest Technical Manual provided on the web link at www.alucobest.com, indicates that it is a product manufactured by a China based company titled Shanghai Huayuan New Composite Materials Co. Ltd. … Alucobest Aluminium/Polyethylene Composite Panel - Fire Behaviour Properties As mentioned above, it is assumed the Alucobest panel taken from the Lacrosse building is the standard grade, and not the "Fire Resistant" model, detailed on the Alucobest Technical Manual. All references made to the "Fire Resistant" range is referred to as Alucobest FR. … Alucobest FR is detailed in the technical manual to have been subjected to a number of international fire behaviour tests, including ASTM-84 etc. Alucobest FR, however, does not appear to have been tested in accordance with AS1530.1, and does not meet the characteristic requirements of C1.12 of the BCA. Therefore, like standard grade Alucobest, it cannot be consisted non-combustible for the purpose of assessment under the BCA. Testing of Alucobest to 1530.1 The MFB forwarded a sample of the "Alucobest" aluminium/polyethylene composite panel taken directly from the facade of the Lacrosse building to the CSIRO test facility in North Ryde NSW, for indicative testing in accordance with AS 1530.1:1994 - Combustibility Test for Materials. … On April 1, 2015 the CSIRO determined the following indicative test outcomes: "Observations: Sustained flaming was observed on the specimen at 55 seconds into the test. The test was terminated at 96 seconds due to excessive flaming and smoking. Designation: The material is deemed COMBUSTIBLE according to the test criteria specified in Clause 3.4 of AS 1530.1: 1994." In considering the above, the following must be noted: - only one sample was tested in lieu of the required five samples and for duration of less than 60 seconds, in lieu of the required 30 minute test duration. This was due to sustained flaming to the test specimen prior to 60 seconds, causing clear failure with the criteria detailed in item (a) above and therefore test failure. The test was terminated to prevent damage to the CSIRO test equipment. Due to test termination, CSIRO are unable to provide calculation for criteria (b) and (c) above. - AS 1530.1:1994 states that test results demonstrate the specimen's behaviour under the test procedure conditions only and are not intended as the sole measure for determining the extent of fire hazard that the product/material may or may not represent when installed. Additionally, the test is limited to materials other than "coated, faced or laminated products" due to difficulties associated with defining appropriate test samples specifications for these types of products, due to their often unique composition. The standard states "The performance of coated, faced or laminated products may be determined by other reactions to fire tests". Importantly, MFB is not aware of any competitor aluminium/polyethylene panel product which has been successful in being determined as non-combustible when tested under AS1530.1: 1994 - Combustibility Test for Materials. As mentioned elsewhere in this report, many competitor products have however gained a Certificate of Conformity for their use under the ABCB - CodeMark Scheme based on alternative test results. The CodeMark scheme provides Certificates of Conformity which can be used as evidence to demonstrate that the properties and performance of a building material achieves compliance with specific requirements of the BCA. 24 Mr Muston SC, who appeared for the Excess Layer Insurers, accepted that Alcotex (as used at the Atlantis Towers) was a competitor ACP product within the meaning of that final paragraph (T27.28-32). He also accepted that the standard known as AS1530.1:1994 was the applicable standard for combustibility (T27.11-15). That paragraph appears on page 24, to which the email of 14 May 2015 made particular reference. The email was therefore drawing the attention of the Insurers to the fact that there were no ACP products then available in the market which had passed the AS1530.1:1994 test for combustibility. That was consistent with what Mr Devitt was reported as having said in The Age article as to the position in 2010, but the MFB was now updating that to 2015. While the final paragraph says that many competitor ACP products have gained a Certificate of Conformity under the CodeMark Scheme, it appears from the "Lacrosse Apartments - Docklands" document sent on 5 May 2015 that that was not the case at the time of construction of the Lacrosse Apartments building in 2010. In any event, as discussed below, s 40(3) of the Insurance Contracts Act does not require the potential claim to be strong or likely to succeed. 25 Section 6 of the MFB Report is entitled "Issues". On page 27 the following statement appears: Appendix 12 contains examples of similar international fire incidents involving facades clad with aluminium/polyethylene composite panels. Appendix 12 refers to a report in June 2014 by the Fire Protection Research Foundation entitled "Fire Hazards of Exterior Wall Assemblies Containing Combustible Components". Appendix 12 then refers to seven fires which had occurred in recent years in residential building towers in other countries, in each of which the material used is described as "Aluminium/polyethylene composite panel facade". Appendix 12 then contains the following statement: What is evident from the photos and descriptions above is the rapid and extensive vertical fire spread up and down the buildings in direct correlation with the fire at 673-683 La Trobe Street Docklands. Whilst the brand and make of the panels are not identified in the report, they would all appear to be a very similar material and construction to the material installed in the façade of the subject building. That is plainly a reference to the combustibility of ACPs in general, and expressly states that the problem is not confined to the particular brand of ACP which had been used at Lacrosse Apartments. 26 Section 6 of the MFB report then goes on to state as follows: Due to the use and number of storeys, Stage 1 of The Lacrosse Apartment Building is considered a building requiring Type A construction when determined under C1.1 of the BCA. In accordance with the deemed-to-satisfy requirements of Specification C1.1 of the BCA, external walls of Type A buildings must be non-combustible, notwithstanding any requirement for fire rating. Non-combustible is a defined term in the BCA and is defined as the following: Applied to a material - not deemed combustible as determined by AS1530.1- Combustibility Test for Materials; Applied to construction or part of a building - constructed wholly of materials that are not deemed combustible. Additionally, a material may be considered non-combustible under C1.12 of the BCA, if it meets the defined criteria within that clause. Standard grade Alucobest aluminium/polyethylene composite panel does not meet the criteria and nor is it likely that it has been successfully tested in accordance with AS1530.1. Therefore, a building permit application specifying the use of standard grade Alucobest aluminium/polyethylene composite as an external wall cladding system, proposes an alternative solution to the deemed-to-satisfy requirements of the BCA. Evidence of suitability for the material and form of construction must be obtained in accordance with A2.2 of the BCA, to demonstrate it meets the relevant performance requirements. This may be in the form of a Certificate of Conformity/Accreditation. The MFB have not been able to gain such documentation for the Alucobest range and these products are not included in the ABCB - Register of CodeMark Certified Products. … The MFB has been unable to obtain the complete building approval documentation as the total of the approved drawings, specifications was not available at the Council Offices. 27 Section 7 is entitled "Conclusion". It contains the following statements: The fire behaviour on the morning of the 25 November 2014, clearly demonstrated to all concerned, that the elements installed to the external walls of this building did not avoid the spread of fire to the degree necessary. … Clearly, the external cladding material on this building did not to the degree necessary avoid the spread of fire as required by the Building Code of Australia. Simultaneous internal fire ignition events over multiple floors are simply an unacceptable fire safety solution for a residential high-rise building, or any other occupiable building for that matter. … Prevention of similar incidents in new and existing developments should be a priority for the entire construction industry. This must start with ensuring an improved process and/or understanding for appropriate material selection, approval and installation. In particular, the MFB would urge all stakeholders in the construction industry to exercise greater diligence and caution with the selection and installation of aluminium/polyethylene composite cladding panels, and encourage selection of those products with appropriate and clear product accreditation and certificates of conformity. 28 In the context of the earlier passages of the MFB Report, those conclusions are referrable not merely to the Alucobest product but to ACPs in general. The last paragraph of those conclusions expresses a strongly held opinion by the MFB that ACPs without appropriate accreditation and certification represent an unacceptable fire safety risk for residential high-rise buildings, or indeed any occupiable buildings, and there was a need to prevent similar incidents not only in new developments, but also in existing developments. I deal further below with the question whether the fact that an opinion is expressed by someone with relevant expertise is itself a fact for the purpose of s 40(3) of the Insurance Contracts Act. For present purposes, I observe that the conclusions, consistently with the MFB report as a whole, refer to a problem with ACPs in general, rather than merely Alucobest as used at the Lacrosse Apartments building in particular. 29 Section 8 of the MFB Report is entitled "Recommendations". Recommendation 8.1, together with the relevant aspects of the explanation for it, is as follows: The relevant building surveyors, architects, developers and designers should pay careful consideration to the external wall construction and all associated cladding materials to be adopted in construction proposals requiring Type A construction. Many aluminium/polyethylene composite panel products have current Certificates of Conformity under the ABCB - CodeMark Scheme. The MFB encourages designers and certifiers to adopt the products with current certificates, and ensure compliance with all conditions imposed on the certificate. … A form of construction or individual components can only be considered non-combustible under one of the following methods of the BCA: • Meets the criteria for being determined as non-combustible under C1.12; • Has been successfully tested in accordance with AS1530.1 - Combustibility Tests for Materials; or • Has evidence to demonstrate that the materials and form of construction to be adopted is "fit for the purpose for which they are intended" under A2.1. 30 Recommendation 8.12 is as follows: That all relevant Australian state building agencies/authorities develop strategies and policies for the risk mitigation of the potential fire hazard associated with the use of combustible Aluminium/Polyethylene composite panelling within their jurisdiction. 31 The MFB Report includes a circulation list for the report, which includes the VBA, the Insurance Council of Australia, and various other regulators and representative industry bodies. 32 Appendix 1 to the MFB Report is a report by the MBS dated April 2015 (the MBS Report). The executive summary to that report says that the fire at the Lacrosse building on 25 November 2014 raised a number of questions relating to, among other matters, "the external wall cladding system used and whether it has been approved and accredited". It refers to inspections after the fire which had raised questions about the materials used on the external wall façade and referred to the MFB Report having identified that the external wall was not non-combustible, contrary to the requirements of the BCA for Type A Construction. Reference was made also to a review of the documentation lodged by the Private Building Surveyor with Council as having highlighted various deficiencies. The executive summary then states: The key areas highlighted that are recommended for review are: • The product accreditation process is not widely utilised in Australia and the constant introduction of new ranges of products being used by the building industry each year suggests that policing of these products is unchecked. • The use of non-accredited products within the building industry which may go largely unchecked. … 33 Section 6.1 of the MBS Report referred to the inspection of the Lacrosse building immediately after the fire by the MBS, and referred to the MFB having obtained a sample of wall cladding material for testing which had determined that the material and wall cladding system were not non-combustible when tested in accordance with AS1530.1. The report then stated: The aluminium cladding system and material is commonly used in many commercial type constructions, typically low to medium rise. The typical product used is a product known as "Alucobond". It was later revealed that the aluminium cladding product is known as "Alucobest", and not Alucobond (refer MFB report). 34 Section 7 of the MBS Report referred to the next steps for the MBS and, in relation to actions in the "medium term", referred to the CSIRO report which determined that the Alucobest product used at the Lacrosse building was not non-combustible as required. It then stated: A further range of inspections will be required to the building and depending on access to premises will determine the timing. A building notice pursuant to s. 106 of the Act will then be issued by the MBS, to the owners of the property and to the owner's corporation. 35 I interpolate that s 106 of the Building Act 1993 (Vic) (the Building Act) provides relevantly that a municipal building surveyor may cause a building notice to be served on an owner of a building if the building surveyor is of the opinion that any one of the circumstances there set out exists, including building work having been carried out in contravention of a building permit or the Building Act or the building regulations, or the building is unfit for occupation, or the building is a danger to the life, safety or health of any member of the public or any person using the building. I will return to that provision later when I deal with the question of whether opinions may be "facts" for the purpose of s 40(3) of the Insurance Contracts Act. 36 In section 8.4 of the MBS Report, entitled "Product Specification and Accreditation", the following statements appear: Product accreditation in Australia is hit and miss, with many of the new products being supplied and installed without proper accreditation or review. Common products which may have been accredited are being replicated in part and provided without equivalent accreditation. … Taking into consideration the complexity of building today and the variety of building products and methodology it has become almost impossible to police. … From a visual inspection after installed, it is not possible to distinguish Alucobest from Alucobond. 37 Section 8.5 makes the point that product substitution on building sites has been known to occur. 38 The passages which I have referred to above in the MBS Report point to a problem generally with ACPs, rather than merely the particular use of the product "Alucobest" as used at the Lacrosse Apartments. 39 Appendix 13 to the MFB Report gives hyperlinks to four media reports, the second of which was an article appearing in the Sydney Morning Herald on 7 December 2014 under the headline "Fear over high-rise tower fire risk in Melbourne". That article referred to an audit of Victoria's building permit system by the VBA which found that high-rise towers in inner Melbourne may be at risk of damage by fire and residents could face other safety concerns. The article said that the audit revealed a pattern of poor compliance with regulations and that "buildings may be a risk to occupants in a fire situation". The article referred to the audit having examined 1,000 permits from 20 different local government authorities, and found that 450 were missing information. Although the VBA found that 95% of sub-standard permits pose no risk to health and safety, the article said: But with 100,000 building permits issued in Victoria each year, the lack of compliance revealed by the audit sample suggests paperwork for as many as 2250 may harbour serious breaches, calling into question the effectiveness of fire safety and other building regulations. These were clearly references to a problem which was not confined to the particular brand of product used at the Lacrosse Apartments. 40 There was an issue debated before me as to whether the reference to that article by way of hyperlink in the MBS Report (which was itself part of the attached MFB Report in PDF format) was itself part of the disclosure to insurers. In my opinion it was. The task of clicking on a hyperlink is not significantly more demanding than turning a physical page of a document, and there is no reason to treat the hyperlinked media reports in a PDF document as not being part of the MFB Report which was disclosed to the insurers. In reaching that conclusion, I should not be taken as saying that any hyperlinked material at all would be part of the disclosure. For example, if a hyperlink were given to the website of a large media organisation, it would be unrealistic to think that that was a disclosure to the insurers of every article which could be found on that website. However, in the present case, the cross-referencing by way of hyperlink was to four specific media reports described by reference to their headlines, each of which was concerned with the fire on 25 November 2014 at Lacrosse Apartments or the investigations which that fire had prompted.

Subsequent events 41 On 27 May 2015, the VBA issued a notice to a director of LU Simon to supply information and documents under s 227C of the Building Act. Those documents included documents relating to the external cladding used at seven sites, including the Atlantis Towers. On 19 June 2015, LU Simon provided the information sought in that notice, and made a further response on 27 November 2015. 42 On 17 February 2016, the VBA issued a report entitled "VBA External Wall Cladding Audit Report", dealing generally with widespread non-compliant use of external wall cladding materials. 43 On 29 April 2016, the VBA wrote to LU Simon, referring to a number of sites at which LU Simon had been identified as the builder, including the Atlantis Towers. That building was said to be non-compliant by reason of combustible external wall cladding. Reference was then made to the matter having been referred for consideration by the MBS. 44 On 28 December 2018, the MBS sent a building notice pursuant to s 106 of the Building Act to the Owners Corporation of the Atlantis Towers. The notice expressed the opinion of the MBS as to the building being a danger to the life, safety or health of any member of the public or any person using the building, in that combustible ACPs had been used as a cladding component of the external walls of the building, including their location near and directly over exits from the building. The notice required the Owners Corporation to show cause as to why it should not remove all of the combustible ACPs from the building or remove sufficient of them to render the building safe and compliant. 45 On 20 August 2019, the MBS, by his delegate, issued a building order under s 111 of the Building Act to the Owners Corporation of the Atlantis Towers, expressing the opinion that insufficient cause had been shown by the owner of the property to warrant the cancellation of the building notice dated 28 December 2018. The building order which was enclosed required a building permit to be obtained to replace the ACPs on the Atlantis Towers and to complete the cladding replacement works to be undertaken in accordance with that building permit by 14 December 2020. 46 In due course, the proceedings to which I have referred to above as the Atlantis Claims were commenced.

Principles concerning section 40(3) of the Insurance Contracts Act 47 In P&S Kauter Investments Pty Ltd v Arch Underwriting at Lloyd's Ltd [2021] NSWCA 136; (2021) 105 NSWLR 110 at [31]-[33], Meagher JA (with whom Bathurst CJ and Bell P agreed) said in relation to the language used in s 40(3): (a) there must be a sufficient correspondence between the facts notified as facts "that might give rise to a claim" and a claim subsequently made for the latter to be identified as "the" or a claim arising or resulting from those facts; (b) it is not necessary that the notified facts identify the likely claimant or claimants; (c) the notification may be of a problem which of itself may give rise to a claim or claims by persons or entities having particular characteristics, although the quantum of such claims and the identity of the claimants may not be known at the date of notification; (d) the requirement that the notification be of "facts" indicates that s 40(3) is concerned with the notification of objective matters that bear on the possibility of a claim being made, rather than matters of belief or opinion as to that possibility; (e) a fact will be one which "might give rise to a claim" if, alone or taken with other notified facts, it is reasonably to be regarded as having that character; and (f) the reference to the possibility of a "claim", rather than of a liability, encompasses claims which may not have significant prospects of success, and thus the notified facts could include an event which, in common experience, is followed by the making of claims notwithstanding that those claims may have modest or limited prospects of success. 48 As to the proposition in sub-paragraph (d) above, I do not regard Meagher JA's reasoning as being to the effect that a reasoned opinion given by an expert within his or her field of expertise is not capable of constituting a "fact". Rather, his Honour was concerned to emphasise that the "facts" are the objective matters that bear on the possibility of a claim being made, and it is not sufficient to point to a mere belief or opinion that a claim might be made. The fact that an opinion has been given by a person with appropriate expertise is itself a fact, as Mr Muston SC accepted (T14.41-15.27). In circumstances where that opinion is given by a person in a position of public authority, such as the MFB or the MBS, the publication of that opinion may well be a most important fact that might itself give rise to a claim. The opinions expressed by the MFB and the MBS in their investigations following the fire at the Lacrosse Apartments as to the apparent widespread non-compliance in high-rise residential buildings in Melbourne with the requirements for non-combustible external wall cladding, and the consequent risk to public safety, were intrinsically matters which might give rise to claims by developers of, and owners in, those buildings relating to such matters as the cost of replacing the non-compliant and unsafe cladding with compliant and safe materials. 49 Further, as Mr Lawrance SC on behalf of EBM submitted, if the MBS had formed an opinion pursuant to s 106 of the Building Act as to non-compliant or unsafe work at a particular building before the expiry of the 2014/15 Policies, then that opinion would itself have been a fact (or more precisely, a jurisdictional fact, as Mr Lawrance SC submitted) which might give rise to a claim. I mention that example for illustrative purposes, as the opinion formed by the MBS pursuant to s 106 in relation to the Atlantis Towers does not appear to have been clearly and explicitly formed until 28 December 2018, well after the expiry of those policies, although such an opinion in relation to the Lacrosse Apartments was foreshadowed confidently in section 7 of the MBS Report in April 2015. On a fair reading of that passage in section 7 of the MBS Report (extracted above), the MBS had expressed an intention to form that opinion in relation to the Lacrosse Apartments and issue a building notice under s 106, and the objective fact that it had stated publicly that subjective state of mind was itself a fact for the purposes of s 40(3). That fact, in the context of the problem relating to ACPs generally which was identified in the MFB Report and the MBS Report, itself indicated a real and tangible risk of the MBS taking a similar stance in relation to other high-rise residential buildings which used ACPs. 50 In contrast to the reasoning of Meagher JA in P&S Kauter, in Uniting Church in Australia Property Trust (NSW) v Allianz Australia Insurance Ltd [2023] FCA 190 at [242]-[243], Lee J rejected what seems to me to have been an entirely correct submission by Mr Potts SC on behalf of Allianz that the opinion of an expert, such as a professional investigator, based on reasoned explanations and substantive evidence, may constitute a "fact" for the purposes of s 40(3). Lee J held that while the opinion of a professional investigator may carry with it a notification of facts which might give rise to a claim, it is not the opinion itself that is capable of constituting a "fact" within the meaning of s 40(3). His Honour said that an opinion may form "the firmament" above a substratum of facts which support the process of reasoning that led to its adoption, but one must have regard to the terms of s 40(3) which concern the notification of facts which might give rise to a claim. With great respect to his Honour, I do not agree with that reasoning, and I regard it as inconsistent with the reasoning of Meagher JA to which I have referred. All that Meagher JA was concerned to reject was a bare belief or opinion to the effect that it was possible that there might be a claim. I do not regard any part of Meagher JA's reasoning as precluding an expert opinion on a relevant matter from itself being a fact which might give rise to a claim. 51 As a separate matter, it is not necessary for the purposes of s 40(3) that notice be given in a single document: Darshn v Avant Insurance Ltd [2021] FCA 706; (2021) 154 ACSR 1 at [158] (Moshinsky J); and see Avant Insurance Ltd v Darshn [2022] FCAFC 48 (Avant Insurance) at [51] (Jagot, Derrington and Colvin JJ). Nor is it necessary that the giver of the notice have an intention to give notice of facts that might give rise to a claim under s 40(3) (Avant Insurance at [44]), although in the present case the emails of 5 and 14 May 2015 gave as their subject, "Potential Claim", thereby evincing such an intention. It is not necessary that words such as "Potential Claim" be used: Avant Insurance at [53].

Application of s 40(3) to the Notifications 52 I have referred above to various respects in which the material notified to the Insurers concerned a problem which was not confined to the particular fire at the Lacrosse Apartments or the particular brand of ACP product which had been used as the cladding at that building. The article in The Age, the separate document dealing with the Lacrosse Apartments at Docklands, and the MFB Report (which included the MBS Report) all referred to a wider problem concerning the use of non-compliant and unsafe ACP products on other buildings in Australia. That was referred to as a problem for LU Simon generally and the buildings which it had constructed, as well as for other builders which had used ACPs, highlighted by the fact that the email of 7 May 2015 made specific reference to page 24 of the MFB Report which dealt generally with the lack of compliance by ACPs in relation to their combustibility. The inclusion in the MBS Report and the MFB Report of some matters of opinion does not preclude those statements of opinion from themselves being "facts". The fact that they were stated by the relevant public authorities with appropriate expertise to express those opinions is itself a "fact" which might give rise to a claim. As noted above, it does not matter that the potential claimants were not identified, although the developers, owners or owners corporations of buildings which had non-compliant and unsafe ACP cladding would be obvious candidates to be making such claims. 53 In my view, there is clearly sufficient correspondence between the Notifications and the Atlantis Claims. As I have said above, the focus of the three proceedings which constitute the Atlantis Claims is the non-compliant and unsafe nature of the ACP Cladding affixed to the Atlantis Towers, with its attendant risk of fire spread and threat to the safety of the public and occupants of the building. The particular complaints relating to the use of the ACP branded "Alcotex" are a particular instance of the general problem concerning ACP products that had been notified in May 2015. Even if I am wrong in concluding that certain statements of opinion can constitute "facts" for the purposes of s 40(3), I consider that the facts underlying the various documents comprising the Notifications were sufficient to notify the Insurers of the general problem concerning ACP products in high-rise buildings. 54 Moreover, there is a clear causal connection between the investigation conducted by the VBA which was reported upon in the Notifications, and the progression to the Atlantis Claims. Several weeks after the Notifications in May 2015, an auditor appointed by the VBA called for documents for the purposes of seeking to identify whether non-compliant external Cladding had been used on the Atlantis Towers. That was the same VBA investigation identified in the attachments to the 5 May 2015 email. The result of that investigation was the report issued by the VBA on 17 February 2016. That report was followed shortly afterwards by the letter issued to LU Simon on 29 April 2016, giving the VBA's reasons for concluding non-compliance and its decision to refer the matter to the MBS. In due course, the MBS issued a building notice on 28 December 2018, which was followed by the building order of 20 August 2019 requiring that the Owners Corporation replace the Cladding on the Atlantis Towers by 14 December 2020. The proceedings that were ultimately commenced by the Owners Corporation of the Atlantis Towers claimed damages for the cost of compliance with that building order. The developer made corresponding claims. 55 It follows that the Insured gave notice to the Insurers before 30 June 2015 of facts that gave rise to the Atlantis Claims within the meaning of s 40(3). 56 Accordingly, I answer the Separate Question: "Yes".

Further Orders 57 It was agreed between counsel for the various parties that the question of costs should be dealt with following the delivery of reasons for judgment. I will therefore give the parties the opportunity to address that question in written submissions, together with the question of what consequential orders flow from the answer which I have given to the Separate Question. Mr Muston SC accepted that if the Separate Question was answered affirmatively, that would be the end of the claim by the Excess Layer Insurers. However, Mr Muston SC said that there may remain live questions on the cross-claims. I invite the parties to deal with any questions of future case management of such claims in the written submissions to be exchanged. To the extent that I am able, I will deal with those questions on the papers. 58 Accordingly the orders which I make are as follows: (1) The Separate Question be answered as follows: Question: Did the first and second respondents give notice to the applicants and the third respondent of any facts that gave rise to the Atlantis Claims (as defined in paragraph 22 of the Amended Statement of Claim), in the sense contemplated by s 40(3) of the Insurance Contracts Act 1984 (Cth), prior to the expiry of the 2014/15 Policies (as defined in paragraph 12 of the Amended Statement of Claim), such that the insurers are not relieved of liability under the 2014/15 Policies in respect of the Atlantis claims by reason only that they were made after the expiration of the period of the insurance cover provided by the 2014/15 Policies? Answer: Yes (2) The parties file and serve written submissions (not exceeding 5 pages) together with any affidavit in support on the questions of costs, consequential orders and future case management by 12 June 2023. (3) The parties to file and serve any written submissions in reply (not exceeding 3 pages) together with any affidavit in support by 19 June 2023. I certify that the preceding fifty-eight (58) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jackman.

Building Act 1993(Vic)ss 106, 111, 227C

(2021) 105 NSWLR 110

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