The NSW Supreme Court clarified that the scope of the statutory duty of care under the DBP Act extends to beyond class 2 buildings. The decision demonstrates that the statutory duty under the DBP Act has a much wider application as it applies to almost all types of buildings.
In Issue
In a recent New South Wales Supreme Court judgment, his Honour Stevenson J was tasked with the interpretation of section 36 of Part 4 of the Design and Building Practitioners Act 2020 (NSW) (DBP Act) and the extent of a duty owed by a building practitioner under section 37 of the DBP Act in the context of a building dispute relating to a building other than class 2 (being apartment buildings). Specifically, his Honour considered whether the representative of a construction company engaged by the plaintiff carried out “construction work” within the meaning of section 36 of the DBP Act and whether he breached a duty of care imposed by section 37 of the DBP Act in relation to such “construction work”.
The background
In July 2017, the plaintiff, Goodwin Street Developments Pty Ltd (Goodwin), the owner of the land located in Jesmond in New South Wales (NSW) (land) retained DSD Builders Pty Ltd (now in liquidation) (DSD), the first defendant, pursuant to a building contract to construct three residential boarding houses on the land.
It was Goodwin’s case that, at the time the building contract was entered into, Mr Roberts, the second defendant, was DSD’s representative who negotiated and administered the building contract and controlled the carrying out of the construction work on behalf of DSD. Goodwin further contended that following DSD’s supervisor’s departure, in or around August 2017, the work was thereafter solely supervised by Mr Roberts.
In early 2018, a dispute arose between Goodwin and DSD relating to defective building works and the progress of the works (amongst other matters) culminating in Goodwin issuing a Notice to Remedy Defaults (Notice) to DSD pursuant to the building contract.
On 19 March 2018, Goodwin terminated the building contract in circumstances where DSD failed to comply with the Notice.
In August 2018, Goodwin commenced proceedings, initially against DSD, and subsequently joined Mr Roberts as the second defendant.
The decision at trial
In determining whether Mr Roberts was a person who carried out “construction work” within the meaning of section 37 of the DBP Act and whether he breached his duty to take reasonable care to avoid economic loss caused by defects in the building arising from the construction defects imposed by section 37(1) of the DBP Act, his Honour considered three relevant questions.
First, his Honour examined whether the statutory duty arose in relation to a boarding house. In dismissing Goodwin’s submission that the statutory duty under the DBP Act did not extend to “construction work” carried out on a boarding house, his Honour acknowledged that interpretation of section 36(1) was “fiendishly difficult”. Guided by the NSW Legislative Council intent for duty of care amendments to have “broad coverage” his Honour found that a boarding house was a “building” within the meaning of the Environmental Planning and Assessment Act 1979 (NSW) (EPAA) and thus within the scope of section 36(1).
Second, when considering the meaning of “construction work”, his Honour examined at [113] the definition of the “building work” within the meaning of s36(1) being the building work as defined in the Home Building Act 1989 (NSW)(HBA). In this regard, his Honour agreed with DSD’s submission that whilst “building work” was generally defined in section 4 of the DBP Act as a class 2 building; on the proper construction of the DBP Act, the definition of “building work” in section 4 had no application to Part 4 of the DBP Act.
His Honour reasoned that the above interpretation was confirmed by the fact that section 36(1) of the DBP Act contained its own definition of “building work” expressed to be applicable “in this Part” and further qualified by section 36(2) of the DBP Act which provides that “in this Part, a reference to building work applies only to building work relating to a building within the meaning of this Part”, being the “building” as defined in the EPAA. Accordingly, his Honour concluded, by reason of the operation of section 36(2) and the definition of “building” in section 36(1), Part 4 (including section 37) applies to “building work” and therefore “construction work” in relation to a boarding house.
His Honour went further to say that the fact that the boarding house was not a “dwelling” within the meaning of the HBA and therefore the construction of a boarding house was not “residential building work” under the HBA, did not mean that work in relation to a “boarding house” is not a “building work” for the purpose of Part 4 of the DBP Act. Because the definition of the building work in section 36 of the DBP Act is an inclusive and not an exclusive definition, it merely meant that work in relation to a boarding house is not, for the purposes of the DBP Act, “building work” by reason of any provision in the HBA, insofar as those provisions are incorporated by reference into Part 4 of the DBP Act.
As to the third issue, his Honour had no difficulty concluding that Mr Roberts carried out “construction work” within the meaning of section 36(1) of the DBP Act in circumstances where there was unchallenged evidence that Mr Roberts:
- engaged in “project management” of the construction and supervised DSD’s construction of the relevant project;
- introduced himself as “the builder” of the project;
- attended every meeting (often alone); and
- was the only representative of the builder who discussed building issues at the regular site meetings.
Finally, his Honour found that Mr Roberts breached a duty of care under section 37 of the DBP Act and despite lack of evidence that Mr Roberts engaged in any particular act in relation to the defects, absent any evidence in response on behalf of Mr Roberts, his Honour was able to readily draw an inference that Mr Roberts was liable for the defects and the associated rectification costs.
Implications for you
The decision serves as useful guidance to building practitioners and their insurers that the statutory duty of care in section 37 of the DBP Act is not limited to class 2 buildings. Rather the duty is likely to apply in relation to a broader range of buildings – i.e. any building work performed in respect of a "building" within the meaning of section 36(1) of the DBPA Act. In other words, a building as defined in the EPAA.
This decision further demonstrates that building practitioners can be found personally liable for damages under section 37.
Update: An appeal by Mr Roberts against this decision was dismissed by the NSW Court of Appeal on 10 February 2023.
