Demystifying the duty of care provisions in the Design & Building Practitioners Act

The Design and Building Practitioners Act 2020 (NSW) (the “DBP Act”) introduced a statutory duty of care that is owed to owners and subsequent owners of land by “a person who carries out construction work”. This could include builders, suppliers and manufacturers of building products, project managers, architects, engineers, and certifiers.

Since the commencement of the DBP Act in 2020, there have been very few instances where the Courts have been required to consider the application of the new duty of care, but two recent cases have provided us with some guidance.  We explore these cases below.

Background – what was introduced?

Our earlier article outlines the new duty of care provisions in the DBP Act. In summary, section 37 provides that a person who carries out “construction work” has a duty to exercise reasonable care to avoid economic loss caused by defects in or related to a building for which the work was done and arising from the construction work. “Construction work” is defined to mean:

(a) building work,

(b) the preparation of regulated designs and other designs for building work,

(c) the manufacture or supply of a building product used for building work,

(d) supervising, coordinating, project managing or otherwise having substantive control over the carrying out of any work referred to in paragraph (a), (b) or (c).

Case 1 - Goodwin Street Developments Pty Ltd atf Jesmond Unit Trust v DSD Builders Pty Ltd (in liq) [2022] NSWSC 624

Goodwin Street Developments (Goodwin) was the developer and owner of land in Jesmond and entered into a building contract with DSD Builders (DSD) to construct residential boarding houses intended for student accommodation.

A dispute arose between Goodwin and DSD regarding defective works which led to Goodwin commencing Supreme Court proceedings against both DSD and Mr Daniel Roberts, being the husband of DSD’s sole director. Proceedings against DSD were stayed because DSD was declared insolvent.

There was no dispute that the work was defective and the issues to be determined included whether Mr Roberts carried out construction work in accordance with the definition of the DBP Act and if so, whether he breached any statutory duty of care owed to Goodwin.

Goodwin alleged that Mr Roberts was the representative of DSD because he negotiated and administered the building contract and supervised and controlled the carrying out of the construction work on site on behalf of DSD as required by the definition of “construction work”.

It was submitted on behalf of Mr Roberts that the statutory duty of care did not extend to work carried out on a boarding house as it was not residential building work under the Home Building Act 1989 (NSW) (HBA).  The court disagreed with this submission.

The court held the definition “building work” in the DBP Act is an inclusive, not an exclusive, definition.  The logic set out in the judgment suggests the duty applies in relation to any building work being undertaken, as long as it is to a "building" as defined in the Environmental Planning and Assessment Act 1979 (NSW).  

In relation to whether Mr Roberts engaged in construction work, the evidence positively showed that:

• from the outset, Mr Roberts introduced himself as the “builder” of the project;

• Mr Roberts was present at every site meeting (often alone) and was the only representative of the builder who discussed building issues;

• construction works were undertaken by DSD under the supervision of Mr Roberts; and

• when asked by Goodwin about defective works, Mr Roberts would respond along the lines of “don’t worry about it’ll all be fixed”.

In light of the evidence, the court held that Mr Roberts was a person who carried out “construction work” and acted in breach of his duty of care under section 37 of the DBP Act.

Mr Roberts was ultimately ordered to pay damages to Goodwin for the cost of rectifying the defects.

Case 2 - The Owners – Strata Plan No 84674 v Pafburn Pty Ltd [2022] NSWSC 659

The Owners Corporation (the Owners) of a strata development in North Sydney commenced court proceedings under the DBP Act against a builder, Pafburn Pty Ltd (Pafburn), and the developer, Madarina Pty Ltd (Madarina) for defective works. Proceedings were commenced almost 10 years after the strata plan was registered on the basis that:

• Pafburn constructed the building defectively; and

• Madarina engaged in ‘construction work’ for the purposes of s37 of the DBP Act in that it supervised, coordinated, project managed and substantively controlled the building work carried out.

The Supreme Court was required to consider, among other things, whether Madarina carried out “construction work” as defined in the DBP Act, and in particular, whether the person who owes the duty of care is required to actually exercise substantive control, or whether the ability to exercise substantive control is sufficient.

The court noted that the words “otherwise having substantive control” in the definition of “construction work” point to a conclusion to be reached having regard to all relevant circumstances.

Ultimately, the court held that a person could have substantive control over the carrying out of work notwithstanding the fact, at any particular moment in time, the person was not actually doing anything to cause that control to be exercised; provided the person had the ability and the power to control how the work was carried out.

Key takeaways:

These decisions indicate that the new statutory duty of care provisions in the DBP Act will be given a broad and expansive interpretation by the court.

In particular, it is apparent from these cases that:

• The statutory duty of care in section 37 of the DBP Act is not limited to class 2 buildings and perhaps not even limited to residential building works under the HBA. The logic set out in the Goodwin judgment suggests the duty applies in relation to any building work being undertaken, as long as it is to a "building" as defined in the EPAA. The EPAA definition of "building" is broad and vague.

• In addition to applying to most buildings, the duty of care provides a means for owners to make a claim for damages for defective work against individuals involved in the construction process as well as corporations. This is significant for owners in circumstances where a builder corporation has become insolvent.

• A person may be found to have carried out “construction work” under the DBP Act even if they are in a position where they are able to control how the work was carried out, regardless of whether they actually do anything to exercise that control. The Pafburn judgment indicates that company directors could also be exposed to liability for breach of the statutory duty of care.

If you would like legal advice on a construction related dispute, Bartier Perry’s specialist construction team is experienced and able to assist you in interpreting the Act, regardless of whether you are an owner, builder, developer, or play another role in the construction process.

Authors: Sharon Levy, Rebecca Renshaw, Abina Kirubaharan