submission to department of treasury & finance - domestic ... · - domestic building consumer...

Submission to

Department of Treasury & Finance

- Domestic Building Consumer

Protection Framework

Synopsis

Slater and Gordon commend the State Government for conducting a review into the consumer protection

framework for the Victorian domestic building industry. We are at the “coalface” when it comes to domestic

building consumers in Victoria, particularly where disputes arise. We are broadly in support of the reform

models outlined in the Public Consultation Paper. The critical issues for consumers is to abolish the

insurance of last resort scheme, to streamline the work of different government agencies and to enhance

the disciplinary mechanisms and resources available to statutory authorities to sanction poor performing

builders.

The Consultation Paper sought the identification of issues not presented in the paper (s 5.5). In our view the

most critical issue not identified in the paper and the single issue that is most affecting the industry at the

present time is the use of waffle raft slabs in new home construction. This submission identifies how this

issue and the difficulties experienced by consumers in having their disputes resolved, cuts across almost all

of the issues identified in the Consultation Paper. Slater and Gordon’s position is that the Government must

give consideration to the situation of Victorian consumers impacted by waffle slab failures when considering

any of the proposed models and the adoption of any transitional and/or reform models. Moreover, we believe

this group of consumers deserves a range of special purpose measures to have their disputes resolved

without resort to litigation.

Slater & Gordon have received over 100 enquiries from owners of new homes where the waffle raft was

used in construction. These home owners have discovered critical defects in the foundations of their homes.

The waffle slab was designed to cope with reactive soils1 but has failed. Reactive clay foundations swell with

changes to moisture conditions and cause a phenomenon known as “slab heave”. This phenomenon now

affects a significant yet unknown number of homes throughout Victoria, where slabs have failed to cope with

foundation movement caused by moisture change. From our initial expert reports, the failures can be

categorised as either site classification, design or construction, or a combination of these, and may differ for

each home. A common feature to all of the cases is that during the time of construction, the builder failed to

properly drain the site and take precautionary measures, often allowing water ingress to the foundation.

Water penetrates the underlying clay causing swelling. Slab heave often occurs before paving or

landscaping is installed. Some of the affected homes are new homes located in well-established areas

alongside older homes that are not experiencing the same defects. The distinguishing feature between these

homes is use of the waffle raft. The gravity of this problem cannot be under-estimated. In many cases,

because the root of the problem is the very foundation of the dwelling, the expert conclusion will be that the

only effective remedy will be to demolish the home and re-construct it.

1 As defined in AS 2870 1.744 reactive site being a site consisting of a clay soil which swells on wetting and shrinks on drying by an

amount that can damage buildings on light strip footings or unstiffened slabs. Includes sites classified as S,M,H or E in accordance with

Section 2.1

Executive Summary

1. Special consideration needs to be given to this group of consumers because there has been a

systemic failure of:

a) The formulation of existing building codes and standards;

b) The building permit and certification process;

c) The enforcement of building standards process;

d) Accountability by the builder post construction;

e) The dispute resolution process;

f) Building Commission acting as an effective watchdog, and

g) Insurance of last resort that has not assisted home owners in this situation.

2. As a consequence of the systemic failure of the building industry to address the waffle slab issue,

hundreds of Victorians (potentially thousands) are residing in homes where:

a) The homes are no longer structurally sound;

b) They may result in possible fatal consequences due to catastrophic failure of roof trusses and

c) Home owners are faced with the prospect of not being able to capitalise on what may be their

only significant asset in their lifetime.

What is a waffle raft (slab)?

a) A waffle raft (for convenience hereafter referred to as slab) is constructed on a levelled site

with no footing excavation or trenches, with concrete poured over polystyrene void formers

to achieve the “waffle” form.

What are the consequences of the use of waffle slabs?

Foundation heave occurs commonly in the highly reactive soils found in many of the new housing estates,

particularly in Melbourne’s north and west. Reactive soils have always been a feature of this region. Waffle

slabs have only been used in this region for 10-15 years. The slab heave problem does not arise solely as a

consequence of the changes in weather conditions. Adverse conditions aggravated the problem. The heave in

the footing system has had a huge impact on dwellings. Homes constructed using waffle slabs are failing

when they experienced foundation heave caused by poor site drainage and reactive soils. The damage is

common and characterised by cracked walls beyond normal tolerances and floors lifting (see appendices 1,

2 & 3).

Reports obtained from engineers suggest that, in some instances, the actual movement of the slab also

affects the integrity of the roof of the dwelling, as the trusses are constructed upon, and supported by, the

internal wall frames (see appendix 4). In the most serious of cases, the integrity of some roofs has already

been compromised. Some homeowners have found that walls have literally become elevated from the floor

by up to 10mm (see appendix 5). Other serious defects caused by the slab movement include the separation

of cornice from the ceiling (see appendices 6 & 7), door thresholds no longer being square (see appendices

8a, 8b, 8c & 9) - often resulting in the inability to close a door and cracks of varying severity to plasterwork

and render (see appendices 1, 2 & 3). The precise cause of the problem may vary from site to site, or it may

simply prove that waffle slabs are simply not suitable for the highly reactive soils present in Melbourne’s

outer suburbs.

Some of the “aggravating” causes and consequences include:

a) Wetter conditions causing reactive soil to swell, resulting in slab heave/movement

compounded by poor site drainage;

b) Failure to comply with the prescribed dimensions in Figure 3.4 of As 2870;2

c) The same surveyor has approved each stage of the works regardless of the failure by the

builder to comply;

d) Possible incorrect soil classification that has resulted in the wrong slab design i.e. H M or P

for the particular site;

e) Incorrect slab by the engineer;

f) P class slab piers have moved and/or lifted or failed;

g) Soil between pier and slab not properly laid thereby not protecting slab from reactive soil

and moisture;

h) Failure to leave 85 mm slab thickness between polystyrene and concrete;

i) Trees/shrubs have affected soil moisture in surrounding area;

j) Failure by one of the subcontractors to perform works in a diligent manner (for example

incorrect installation of concrete and water running towards the home);

k) Failure to pour correct MPa concrete levels, and

l) Failure to install correct wire mesh.

The situation faced by homeowners?

The home owners contacted our firm because they were unable to obtain a satisfactory resolution through

their builder, nor through the existing building dispute conciliation processes managed by Consumer Affairs

Victoria and the Building Commission. Many of the home owners have reported making unanswered

complaints to their builders for years without resolution. Home owners have reported that the builder would

find a way to blame them for the cause of the slab heave pointing to any landscaping or gardening works

having breached CSIRO guidelines. Apparently, the new homes have been unable to withstand even modest

landscaping. Alternatively, where rectification works have agreed to be undertaken by the builder, these

works tended to be limited to cosmetic works and did not go to the core issue, namely, defects in the

foundation of the house. In other cases, the quality of the rectification works undertaken has been

substandard.

Following consultation with our clients and various independent experts working within the industry, it is our

view that many of the individuals working in the dispute resolution process for Consumer Affairs Victoria and

the Building Commission are too ready to accept the representations made by builders that they have

undertaken some rectification works at the property and thereby adopt the attitude that the job has been

completed. A further view communicated by our clients is that due to the essence of the issue being

foundational failure, those attempting to reach a resolution of the client’s complaint too often place the

client’s situation in the “too hard basket”.

It is interesting to note that some of the major builders did not seriously respond to our clients’ complaints

until this issue emerged publicly in late 2011. Our clients reported a noticeable improvement in the attitude of

major builders to their grievances following this publicity.

What options do homeowners have?

The types of building distress and/or cause will be important when assessing whether, if any legal

proceedings should be brought, and if so, against whom. Liability will depend on whether it is a soil

classification, design or construction issue. In order to make this assessment it is often necessary to obtain a

report from an expert builder as well as an expert engineer. The potential respondents will differ in each

case. If litigation proceeds, the potential respondents could include:

a) Site Classifier [not an engineer in many cases] (if incorrect classification);

b) Engineer/Designer;

c) Surveyor;

d) Builder; and

e) Subcontractor.

By reason of the proportionate liability regime, it is inevitable that a number of respondents will be joined to

the proceedings, whether they be joined by the consumer or some other building professional. The resultant

nature of the proceedings is likely to be protracted meaning that the amount of legal fees will make it very

difficult for the average home owner to fund the case to the end. Additionally, they run the risk of the costs

outweighing the benefits they may receive in any determination.

Solution to the waffle slab problem

Slater & Gordon welcomes the Victorian State Government’s initiative in re-examining consumer protection

laws in the domestic building industry. Slater & Gordon thanks the Victorian State Government for the

opportunity to make a submission. The firm would welcome the opportunity to make further submissions.

Building is a cornerstone of Victoria’s economy and it relies on homeowners having confidence in the

industry. By not taking the actions set out below immediately, the Government, the Building Commission and

the industry will jeopardise the confidence the community has in it:

1. The Victorian State Government needs to develop a Waffle Slab Task Force to:

a) Determine the number of homes affected or likely to be affected;

b) Determine whether there are health and safety risks associated with roof trusses;

c) Establish a dispute resolution scheme to be funded by the industry, but managed

independently. The scheme would address the grievances of registered proprietors that:

I. Have constructed a domestic building as defined by the Domestic Building Contracts Act

1995 (Vic);

II. Used a waffle raft; or

III. Used an approved footing system and the residence is experiencing distress caused by

or attributed to:

footing and foundation movement caused by reactive clays and or

climatic conditions, either directly or indirectly;

incorrect soil classification;

incorrect design or construction;

any distress arising in connection to waffle rafts;

may have only recently noticed such distress which may have

occurred outside of the statute of limitation listed under s 134 of the

Building Act to a maximum period of 15 years from the date of the

issuing of the building permit;

or

have obtained an order from a Court or tribunal in relation to the

above and such order remains unsatisfied;

and

not eligible for payments from an insurer.

2. The dispute resolution scheme would include:

I. a process for obtaining independent expert reports on the scope of rectification

works required;

II. a process for having issues concerning disputes on the level of rectification or

demolition mediated and/or arbitrated;

III. incentives and/or penalties for builders or engineers who refuse to participate in the

dispute resolution scheme, and

IV. while the dispute resolution scheme would not bar either party from ultimately

bringing legal proceedings, they would be contractually bound to fully participate in

the process.

3. A register of complaints should be established making it compulsory for builders, engineers and surveyors

to report consumer complaints received concerning footing and foundation issues. Penalties should apply

if they fail to do so. Keeping a track of these homes, including the builder, engineer and surveyor is in the

interests of ongoing monitoring and accountability by the industry. The report should also indicate:

I. The name of the engineer

II. The name of the surveyor

III. The name of the soil classifier

IV. Attempts at rectification

V. Proposed scope of works to be approved by an engineer, other than the designer

VI. What steps the statutory authority will take in addressing the complaint including

follow ups and disciplinary action.

Ben Hardwick

Victorian Practice Group Leader

Robert Auricchio

Associate

Appendices

Waffle raft – The failure to design and construct in accordance with Australian Standards

1. The evidence collated by Slater and Gordon indicates that the waffle rafts were not properly designed

or constructed and will continue to fail. The factors listed below have aggravated poor design and

construction. The attached photographic evidence indicates that at the outset, builders failed to

adequately prepare the sites particularly in terms of drainage. The evidence thus far indicates that the

major breaches of AS 2870 include but are not limited to:

a) Failure to comply with 1.3.1. The distress suffered by the homes indicates that they have not

achieved serviceability and safety during the design life. Many of the homes failed within

months of receiving their certificate of occupancy;

b) There was nothing inherently different about these site locations. Homes had been built in

these areas and not failed. The use of the waffle slab was the major change together with

the failure to properly follow the standard. Regardless of the soil classification site whether it

was, M; H or E, the distress suffered is evidence that the waffle slab could not cope as

required in Tables 2.2 and 2.3 of AS 2870;3

c) Photographs attached depict the common method of construction especially amongst

volume builders. The photographs show that the ground is flat. Construction proceeds and

the edge of the slab rest upon the reactive soil (see appendix 10). Further elaboration on the

drainage issues are explained below. During construction, there is a lack of drainage4 and

the soil is not graded away;

d) The structural design of prefabricated timber roof trusses is carried out with no consideration

for the whole building system – the footing system deflection is not considered. Slab heave

affects the integrity of roofs where the trusses are constructed upon internal walls, which

move differently from the perimeter walls. It may be that some roofs have already been

compromised, some of which may end up in failure;

(d) Breaching section 1.3.3 of the code, namely, failing to install flexible plumbing or installing

plumbing under the slab that resulted in plumbing leaks affecting soil moisture (see

appendix 11);

3 The Tables provide for movement tolerances for strip footings and slabs on ground.

4 Non compliance with Section 1.4.3 (a) giving consideration to effective drainage on site.

Page 9

e) 1.4.1 Use of standard designs instead of engineering principles5. The standard of care by

engineers did not comply with the duty of care. The drawings, for example, did not show

how soil was to be graded. The builder was simply referred to the soil engineers report on

the plans. On some of the drawings, the engineer merely requests the builder to note the

soil engineers requirements. Most builders would not bring with them the soil engineers

report on-site;

f) The building distress suffered by the homes indicates that foundation movement exceeded

five percent chance of being exceeded in the life of the structure which was taken to be fifty

years.6 The multiple uses of the drawings by volume builders are likely to exacerbate the

problem. Consequently, the problem continued to manifest itself and affect many home

owners. The same engineer may be called out to inspect the problem. It was not uncommon to

read findings in the very same engineers’ report that the slab heave was caused not by the

builder but by some act of the home owner. No consideration is given by the engineer of the

past failure of the waffle slab in similar conditions.' Soil engineers; design engineers;

builders; surveyors and inspectors have obligations under 2.2.3 and 2.3 8to estimate

movement range and ensure final construction complies. The fact that the homes have been

exceeding this level indicates prima facie a failure to comply with engineering principles;

g) Failure to adhere to Section 1.4.3 of As 28'0. The engineers failed to allow adequate

spacing between internal walls and roof truss allowing no room for foundation movement,

resulting in internal cracking to walls and cornices. These are not cosmetic matters, but

structural failures. If patching of walls is undertaken as some builders have attempted, the

lack of room for expansion in the gaps results in additional distress; and

h) A failure to reclassify a site were warranted.9 The failure to

comply with AS 2870- Proper Drainage an essential requirement

1. The failure to comply with section 5 of AS2870 is a major feature of the cause of distress. The

decision to develop sites on well known reactive soils required the highest standard of care. Very little

water ingress is required for the soil to react. The onus should not be upon the home owner who may

have limited understanding of the complicated geological factors underlying CSIRO guidelines10

associated with reactive soils and construction. The onus is at all material times upon the soil

classifier, designer; and builder to ensure that minimal risk occurs.

5 The Engineering principles are referenced in AS 3600.

6 The failure of the structure to move in accordance with this standard is a breach of Section 1.4.2 Load effects.

' This is a breach of Section 1.4.3 (b).

8 Site investigation requirements. 9 Reclassification may be warranted where fill is concerned to a P class.

10 Reference to CSIRO, Division of Building, Construction and Engineering- A guide to Home owners on Foundation movement and

Footing performance.

2. The photographs attached show that slab heave is likely to commence immediately, regardless of any

future work to be performed by the home owner. The slab is not protected from water ingress. The

balance of the photographs show the effects of slab heave on the home. AS 2870 notes the need to

consider factors when it comes to floor level above finished ground level.11 Breaches of section five of

AS2870 include:

a) Drainage is to be designed and constructed to avoid ponding against or near the footing.

Care of drainage is a priority from the start of construction;12 However ponding is allowed to

occur. During construction little or no grading is attempted. Rain ingress is allowed to occur

during construction. The photograph below shows that the overflow is not connected during

the course of construction, hence water pours onto the ground and the reactive soil below.

As can be seen in photograph even the tap is allowed to drip and flow to the base of the slab

contemporaneously with the unconnected rainwater pipe (see appendices 12 to 14).

b) Failure to backfill clay and compact or to protect water ingress beneath footing system;

c) In one definite case, the builder installed subsurface drains following the commencement of

legal proceedings in an attempt to give the impression of compliance. Clearly there had

been a failure to install during the course of construction;13

d) Scoria is often poured around the site for builders access which only results in water

penetrating down to the slab;

e) Vapour barriers are incorrectly installed;

f) Edge rebates are not constructed in accordance with 5.3.4. Edge beams are not protected

from wind or water erosion;14

g) Installation of flexible plumbing is almost non existent; 15the failure of which results in broken

pipes leaking water (refer to appendix 11). The irony is that the builders often seek to utilise

this as the cause of slab heave to avoid responsibility when they have failed to instruct the

plumber to install flexible plumbing and ensure that they have done so.

11 Reference is made to factors 5.2.2 (a) to (g) 12 As 2870 5.5.3 (a) 13 Such conduct being a clear breach of As 2870 5.5.3 14 Breaching 6.4.3 (b) 15 Breaching Section 5.5.4 (b)

Appendix 1:

Appendix 2:

Appendix 3:

Appendix 4:

Appendix 5:

Appendix 6:

Appendix 7:

Appendix 8b:

Appendix 8c:

Appendix 9:

Appendix 10:

Appendix 11:

Appendix 14:

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