A recent decision in the Supreme Court of NSW has provided new light on the application of the Statutory Warranties within the Design and Building Practitioners Act 2020 (“the DPB Act”).

Key Takeaways

This case significantly holds that:

• The duty of care to exercise reasonable care with construction works, as to not cause economic loss from defects, will extend to all buildings and not just Class 2 buildings;
• The definition of “building work” in Part 4 of the DBP Act is an inclusive, not an exclusive, definition. “Building work” will extend to “residential building work” under the Home Building Act 1989 (“HBA”) insofar that it relates to works to a “building” as defined within the Environmental Planning and Assessment Act 1979 (“EPAA”); and
• Individual project managers and building supervisors will be taken to also be persons who perform  “construction works” for the purposes of Part 4 of the DBP Act.

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

Facts:

Goodwin Street Developers (“Plaintiff”) engaged DSD Builders Pty Ltd (“First Defendant”) to construct 3 residential boarding houses intended for university student accommodation (“the Contract”).

Mr Daniel Roberts (“Second Defendant”) negotiated and administered the Contract, and was also responsible for carrying out the construction work on behalf of the First Defendant.

The construction works pursuant to the Contract commenced in July 2017. One month after the commencement of the construction works, the First Defendant’s supervisor left the project, leaving Mr Roberts as the sole supervisor for the project.

In early 2018, disputes arose regarding defective building works and the overall progress of the works not meeting schedules. The Plaintiffs also found that the construction works had been substantially damaged, and many materials, fixtures and fittings incorporated into the building had been removed.

Works were suspended on 2 March 2018, with the contract being terminated by the Plaintiffs on 19 March 2018.

The Plaintiffs thereafter commenced proceedings against the First and Second Defendants.

Court Findings:

The Plaintiffs contended that:

1. Mr Roberts caused the damage to the buildings, and removed materials, fixtures and fittings that had been incorporated into the buildings; and
2. Mr Roberts carried out “construction work” on the site for the purposes of s 37 of the DPB Act and acted in breach of his statutory duty of care under s 37 to avoid economic loss caused by identified defects in the buildings arising from that construction work.

The Court held in favour of the Plaintiffs for both of the contended points above, outlining that Mr Roberts did cause the damage and remove materials incorporated into the buildings, and was also liable for a breach of the statutory duty of care outlined within s 37 of the DBP Act.

The Court’s reasoning was as follows

1. Did Mr Roberts cause the damage to the buildings?

Through evidence submitted, the Court found there was no doubt someone had damaged the site and removed materials, fixtures and fittings.

The Court considered an Affidavit from a witness who outlined they had observed Mr Roberts cause damage to the building works and remove some of the fixtures and fittings incorporated into the building. This Affidavit evidence was consistent with evidence from a quantity surveyor and a director of the Plaintiffs of the damages that had occurred to the buildings.

Mr Roberts gave no evidence to dispute the Affidavit which lead the Court to find that the damage had been caused by Mr Roberts.

2. Did Mr Roberts carry out “Construction Work” for the purposes of statutory duty of care under s 37 of the DBP Act?

 Section 37(1) of the DBP Act provides:

“(1) A person who carries out construction work has a duty to exercise reasonable care to avoid economic loss caused by defects—

(a) in or related to a building for which the work is done, and

(b) arising from the construction work.”

It first had to be determined whether a Boarding House was captured by the definition of “construction work” for the purposes of Part 4 of the DBP Act.

The Court held that it did as:

• The Definition of “construction work” includes “building work” and “supervising, coordinating, project managing or otherwise having substantive control over” carrying out “building work”;
• “Building work” under Part 4 of the DBP Act is different to the definition of “building work” within Section 4 of the DBP Act, and instead is defined broadly to mean works to a “building” as defined under the EPAA;
• The Parliamentary Debate highlights the intention of the DBP amendments were to provide a duty of care to ALL buildings as defined under the EPAA.

The Court also highlighted that the “building work” for the purposes of Part 4 of the DBP Act is also defined to include “residential building work” under the HBA. The Court held that the effect of this appears to be that to the extent that “residential building work” under the HBA is also work relating to a “building” as defined in the EPAA, it comes within the scope of Part 4 of the DBP Act. The Court found that even though “residential building works” does not include Boarding Houses under the HBA, the definition of “building work” in Part 4 of the DBP Act is an inclusive, not an exclusive, definition. A Boarding House was still captured as a “building” under the EPAA.

As the Court held a Boarding House was captured by the definition of “construction work” for the purposes of Part 4 of the DBP Act, it then had to be determined whether Mr Roberts was carrying out this “construction work” to be held personally liable for a breach of the DBP Act statutory duties.

The Plaintiff presented unchallenged evidence that Mr Roberts was engaged in the project management and supervision of the construction works on the site. The Court held that project management and supervision of the construction works on the site was captured under “construction works” for the purposes of Part 4 of the DBP Act.

Mr Roberts was held personally liable as he did not correct the defects despite giving assurances to the Plaintiff’s that he would fix the defects.

Concluding Comments:

Whilst the circumstances in this matter are at the extreme given the evidence that Mr Roberts deliberately trespassed and caused damage to the buildings, supervisors and project managers will need to be aware that they may be personally liable under the DBP Act for a breach of the statutory duty of care outlined in Section 37.

This decision confirms the statutory duty of care applies to individuals and corporations. Supervisors, project managers and other personnel in a supervisory role who do not exercise reasonable care in their duties to avoid economic loss may see themselves personally liable for damages.