NSW Court of Appeal confirms that statutory duty of care under the DBP Act applies to all buildings

The NSW Court of Appeal has confirmed that the statutory duty of care under the Design and Building Practitioners Act 2020 (NSW) (DBP Act) applies to all buildings as defined in the Environmental Planning and Assessment Act 1979 (NSW) (EPA Act), not just those which are class 2 apartment type buildings. 

This duty of care is owed by every person who carries out construction work, which includes building work, the preparation of designs, supply of building products and supervising, coordinating, project managing or otherwise having substantive control over carrying out of construction work.

In the recent decision of Roberts v Goodwin Street Developments Pty Ltd [2023] NSWCA 5, the NSW Court of Appeal considered the statutory duty of care owed under section 37 of the DBP Act. In doing so, the Court affirmed the previous Supreme Court of NSW decision, clarifying how the courts will interpret the relatively untested legislation and confirming that the duty applies to all buildings.

Supreme Court decision

In the case of Goodwin Street Developments Pty Ltd atf Jesmond Unit Trust v DSD Builders Pty Ltd (in liq) [2022] NSWSC 624, the Supreme Court of NSW considered the operation of the DBP Act.

Facts

On 10 July 2017, Goodwin Street Developments Pty Ltd (GSD) entered into a building contract with DSD Builders Pty Ltd (DSD) to construct three residential boarding houses in Jesmond, Newcastle, New South Wales (the property). Mr Daniel Roberts (Mr Roberts) was a builder who operated through (DSD). Mr Roberts is the husband of the sole director of DSD, which is now in liquidation. Although not a director of DSD, Mr Roberts introduced himself as “the builder” in relation to the project, attended every site meeting at the property between August 2017 and February 2018 and supervised the work performed at the property.

Several disputes arose between GSD and DSD relating to late payment, defective works, and general delays and works were suspended. During the period that works were suspended, Mr Roberts caused malicious damage to the buildings, and removed materials, fixtures and fittings. GSD terminated the building contract and commenced proceedings in the Supreme Court against DSD and later joined Mr Roberts, alleging Mr Roberts breached his duty of care under the DBP Act as well as alleging other claims relating to trespass.

Findings and decision of the Supreme Court

Justice Stevenson found that statutory duty of care in section 37 of the DBP Act applies to “construction work” in relation to a boarding house. In addition, a boarding house falls within the definition of “building” in the EPA Act, thereby falling within section 36 of the DBP Act.

Further, it was found that Mr Roberts carried out “construction work” and “building work” for the purposes of section 36 of the DBP Act as he engaged in project management of the site and supervision of the construction. In doing so, the Court confirmed that individual building practitioners, as well as the contracted building company, can owe the duty of care under the DBP Act. It was found that Mr Roberts was in breach of that duty.

Mr Roberts appealed the decision of the Supreme Court to the NSW Court of Appeal.

Court of Appeal Decision

Grounds of appeal

Mr Roberts raised three grounds of appeal, including that the primary judge had wrongly construed that “construction work” and “building work” in section 36 of the DBP Act included boarding houses. Mr Roberts contended that the duty of care in section 37 of the DBP Act applied to “residential building work” within the meaning of the Home Building Act 1989 (NSW) (HBA) and did not include boarding houses.

The other grounds of appeal related to the trial judge’s finding with respect to trespass.

Decision of the Court of Appeal

The Court dismissed the appeal on all three grounds.

The Court of Appeal agreed with the primary judge’s view that section 36 of the DBP Act is a “labyrinthine provision” and that it was drafted to make comprehension of it as “difficult as possible”.[1] Nonetheless, the Court of Appeal focused on the text, content and purpose of the DBP Act to affirm the decision of the primary judge.

A central part of the dispute in the appeal related to whether and how the general definition of “building work” in section 4(1) of the DPB Act applied to the inclusive definition of “building work” in section 36(1).

Notably, the Court determined that the definition of “building work” in section 36(1) is not an exhaustive definition and reference to “building work” including “residential building work” within the meaning of the HBA makes it clear that such work is included in the interpretation of the definition. The appellant argued that the word “includes” should be interpreted as “means”. In accordance with statutory construction, the Court rejected this argument.

After analysing the legislative history of the DBP Act provisions and the principles of statutory construction, ultimately, the Court found that:

1. The primary judge’s conclusion that section 37 of the DBP Act applied as regards to boarding houses was correct, albeit that the Court adopted different reasoning to his Honour.

2. The general definition of “building work” in section 4(1) of the DBP Act does apply to the further definition of “building work” in section 36(1), but only with respect to identifying the type of work undertaken. In relation to identifying what type of buildings that work is undertaken on, one must look to the definition of “building” in section 36(1).

3. A boarding house falls within the definition of “building” in the EPA Act and thereby falls within section 36 of the DBP Act, meaning that section 37 of the Act applies[2].

Takeaway

Based on the limited cases heard by the court to date regarding the DBP Act, and the provisions of the DBP Act itself, it is important for those working in the construction industry and those engaging construction workers, be aware of the following:

• The statutory duty of care to avoid economic loss caused by defects under section 37 of the DBP Act extends to all buildings as defined in the EPA Act - it is not limited to class 2 buildings.

• This duty of care is owed by every person who carries out construction work. This includes building work, the preparation of designs, supply of building products and supervising, coordinating, project managing or otherwise having substantive control over carrying out of construction work.

• In some circumstances, 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.

• Building practitioners, such as directors and project site supervisors, can be found personally liable for damages under section 37.

• The statutory duty of care is owed to current and subsequent owners of buildings.

• The duty of care is owed retrospectively, provided the economic loss became apparent within 10 years immediately before the commencement of the DBP Act, or on or after the commencement, with a 10 year long stop.

• Builders, designers, building consultants, and all those in the construction industry, as well as their insurers, have greater exposure to claims relying on the statutory duty of care.

If you require any advice in relation to the DBP Act or this area of law generally, please contact the authors for assistance.

Authors: Sharon Levy, Elisabeth Krstanovski and Francois Salama (Counsel, 13th Floor St James Chambers)

[1] Goodwin Street Developments Pty Ltd atf Jesmond Unit Trust v DSD Builders Pty Ltd (in liq) [2022] NSWSC 624 at [180].

[2] Roberts v Goodwin Street Developments Pty Ltd [2023] NSWCA 5 at [230]-[232] (Kirk JA and Griffiths AJA, Ward P agreeing at [79])