Fletcher Building Announces Joint Industry Response to WA Plumbing Issues
Fletcher Building Limited (“the Company”) has announced that its subsidiary, Iplex Pipelines Australia (“Iplex AU”), has reached an in-principle agreement with the Western Australian Government and key industry stakeholders to address plumbing issues related to Typlex Pro-Fit pipes installed in some WA homes. This agreement, known as the Joint Industry Response (“JIR”), aims to resolve the plumbing failures effectively.
Subject to finalizing the JIR, the Company anticipates recording a pre-tax provision of approximately A$155 million in its FY25 financial statements.
Key Elements of the Joint Industry Response
The proposed JIR includes the following key points, pending final documentation:
- Coverage: The JIR will apply to all WA homes with Pro-Fit pipes manufactured from Typlex resin, regardless of ownership status.
- Builder Responsibilities: Participating Builders will handle all plumbing failures and repair damage in affected homes. They will also undertake additional work, including replacing ceiling pipes and, if needed, re-piping entire homes. Temporary accommodation will be provided for homeowners undergoing full re-pipes.
- Cost Sharing: Iplex AU will cover 80% of the direct costs incurred by Participating Builders, with the WA Government covering the remaining 20%. Participating Builders will be responsible for their own administrative costs.
- Product Recall: The JIR does not involve a product recall, as it is deemed an inappropriate response to the plumbing issues.
- No Time Limit: Homeowners can access JIR benefits indefinitely through their Participating Builder. They will not need to seek alternative funding or handle repairs independently.
- Builder Participation: Most builders involved in affected homes, except BGC, have agreed to join the JIR. BGC will be offered the opportunity to participate under the same terms.
- Leak Detection Units: Iplex AU will provide free leak detection units to all relevant WA homeowners, including those with non-participating builders, to help mitigate the impact of plumbing failures.
- Legal and Policy Changes: The WA Government will extend the complaint period for affected homeowners from 6 years to 15 years and introduce a policy to ensure consistency in building remedy orders. Builders not participating in the JIR will still be required to comply with these orders but will not receive funding from Iplex AU or the WA Government.
- Funding Limits: Iplex AU’s contribution to Participating Builders’ costs is uncapped, while the WA Government’s contribution is capped at A$30 million, with provisions for review if the amount reaches A$26 million.
- Liability and Future Claims: The JIR is entered into on a no liability, no admissions basis. If a third-party class action is successful, the JIR will terminate for those involved, but will continue for non-class action participants. Future claims and their impact on the JIR will be evaluated as needed.
Current Litigation and Future Prospects
A class action has been filed against Iplex AU, alleging that the Pro-Fit product was of unacceptable quality. BGC has also filed a claim against Iplex AU, seeking damages. While BGC is not currently part of the JIR, discussions are ongoing about its potential inclusion. Iplex AU intends to defend the existing legal proceedings and is prepared for additional claims.
Provision Details
The Company expects to record a pre-tax provision of approximately A$155 million, covering:
- Iplex AU’s share of repair costs: ~A$120 million
- Installation of leak detectors: ~A$20 million
- Associated administration costs: ~A$15 million
This provision is based on the assumption that about 35% of affected WA homes will experience leaks, and that the WA Government’s contribution will be capped at A$30 million.
Interim Fund Extension
To support builders and homeowners, Iplex AU has extended its Interim Fund until the end of September 2024, maintaining continuity of funding while finalizing documentation.
Statement from Fletcher Building
Interim CEO Nick Traber stated: “We appreciate the efforts of Minister Ellery and the WA Government in facilitating a solution for WA homeowners. The in-principle agreement represents a practical and timely response to the plumbing issues, focusing on effective remediation and homeowner support. We believe the Joint Industry Response is the most sensible approach for all parties involved.
