Key Takeaways

•  Nominated supervisors, carry out “construction work” as defined under section 36(1) of the DBP Act. This included supervising and having substantive control over the construction work.
• As such, nominated supervisors are likely to personally owe the statutory duty of care under section 37 of the DBP Act. This is a statutory duty of care to exercise reasonable care to avoid economic loss caused by defects in or related to a building arising from the construction work.
• Nominated supervisors should review their work systems to protect against such claims.

 Summary

These proceedings concern a residential building dispute between a homeowner plaintiff and Monument Building Group (the Builder) and the director of the Builder (Mr Brujic), as defendants. The plaintiff’s claim for damages was for the Builder’s breach of contract for defective works and the defendants breaches of the duty of care owed under s 37 of the DBP Act. Section 37 of the DBP Act imposes a statutory duty of care on all parties who carry out construction work (including individuals) to exercise reasonable care to avoid economic loss caused by defects in or related to a building arising from the construction work. This duty is owed to the owner of the land and cannot be delegated to another person. The Builder and Mr Brujic were found to have breached the duty of care under s 37 of the DBP Act.

Why was the director found liable?

The court found that Mr Brujic, as the sole director and nominated supervisor of the Builder, was directly involved in supervising and making decisions about the construction work. Specifically, he was responsible for the defective work, including the failure to properly waterproof certain areas of the property, such as the garage level walls, planter boxes, and the roof and skylights. These defects caused water ingress and economic loss to the plaintiff.

The court determined that Mr Brujic, in his capacity as the nominated supervisor, carried out “construction work” as defined under section 36(1) of the DBP Act. This included supervising and having substantive control over the construction work. As such, he personally owed the statutory duty of care under section 37 of the DBP Act.

The court held that Mr Brujic’s failure to ensure the work was carried out with due care and skill, particularly in relation to the waterproofing and installation issues, constituted a breach of this duty.
The court also clarified that the imposition of liability on Mr Brujic under section 37 of the DBP Act did not require piercing the corporate veil. Instead, it was based on the plain language of the DBP Act, which imposes liability on individuals who carry out construction work, including those in supervisory roles, for failing to exercise reasonable care to avoid economic loss caused by defects.

This decision reinforces that directors of building companies may be held liable under the DBP Act. In the uptick of DBP Act claims against builders and their directors, we recommend

1. builders are actively involved in supervising their employees and subcontractors works;
2. maintaining detailed records of all actions taken in the supervision of works including documenting inspections, instructions and steps taken to cause subcontractors to rectify defects; and
3. implementing appropriate measures to mitigate the risk of defects arising including:

1. 1. a)  ensuring such works are carried out in accordance with the plans, specifications and relevant standards; and
   3. b) ensuring construction methods comply with industry standards.