Builder’s statutory duty of care extended in New South Wales
June 24, 2022
In the matter of Goodwin Street Developments Pty Ltd atf Jesmond Unit Trust v DSD Builders Pty Ltd (in liq)  NSWSC 624 the New South Wales Supreme Court considered the scope of the duty of care in s 37 of the Design and Building Practitioners Act 2020 (NSW) (the Act).
Goodwin Street Developments (Goodwin) contracted with DSD Builders to build boarding homes. Various disputes arose between the parties regarding defects and the progress of the works. This ultimately led to Goodwin terminating the contract and commencing proceedings against DSD Builders and Mr Daniel Roberts (who Goodwin asserted was DSD Builders’ representative) for costs associated with damage caused to the buildings and missing materials.
In 2021, DSD Builders became insolvent and the proceedings against them were stayed. Accordingly, Goodwin sought to recover losses from Mr Roberts, on the basis that (amongst other things) he breached his statutory duty of care pursuant to s 37 of the Act.
- Section 37(1) of the Act states:
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.
- ‘Construction work’ is defined in s 36 of the Act and includes ‘building work’.
- Section 36 of the Act goes on to define ‘building work’ as including ‘residential building work’ within the meaning of the Home Building Act 1989 (NSW) (HBA).
In determining whether Mr Roberts had breached the statutory duty of care contained in s 37 of the Act, it was necessary for the Court to first determine:
- whether a boarding house fell within ‘construction work’ for the purposes of the Act; and
- whether Mr Roberts was carrying out ‘construction work’, such that he could be in breach of his duties under the Act.
Is a boarding house construction work for the purposes of the Act?
Mr Roberts submitted that the statutory duty of care did not extend to constructing boarding houses as the definition of ‘residential building work’ under the HBA means ‘the construction of a dwelling’, which does not include boarding houses.
Stevenson J disagreed. In reaching his decision, his Honour held that the legislative requirements were as follows:
- The definition of ‘building work’ in s 36 of the Act is not limited to ‘residential building work’ within the meaning of the HBA.
- Section 36(1) includes a non-exhaustive list. Further, pursuant to s 36(2), any references to building work can only apply to building work ‘relating to a building within the meaning of this Part’.
- For the purpose of Part 4, including s 37(1) above, ‘building’ is defined in s 36 by reference to the meaning given to it in the Environmental Planning and Assessment Act 1979 (EPAA).
- Under the EPAA, ‘building’ is broadly defined to include ‘any structure or part of a structure’.
- In making amendments to the Act, Parliament’s intention was to give broad coverage to the statutory duty of care, such that the duty should apply to ‘all buildings’.
In light of the above, Stevenson J held that a boarding house constituted a building to which the s 37 statutory duty of care applied.
Was Mr Roberts engaged in ‘construction work’?
Stevenson J noted that the definition of ‘construction work’ in s 36(1) also includes “…supervising, coordinating, [and] project managing…”. There was no argument between the parties that Mr Roberts had been involved in a project management capacity on the construction project and evidence further showed that he also had a supervisory role – for example, attending site meetings and representing DSD onsite. Based on this evidence, the Court was satisfied that Mr Roberts was engaged in ‘construction work’ for the purpose of s 36(1) of the Act.
The final element for consideration before the Court was whether the defects present in the boarding houses were caused by Mr Roberts breaching his statutory duty of care to Goodwin. There was no dispute that the work was defective. Evidence was also presented that Mr Roberts provided Goodwin assurances that certain defects would all be fixed. As Mr Roberts was project managing the construction and the works were undertaken under his supervision, Stevenson J was satisfied that Mr Roberts had breached his statutory duty to exercise reasonable care to avoid economic loss caused by defects and he was therefore liable to pay damages to Goodwin.
While the Court did not expressly state that the s 37 duty of care extends to all buildings, the decision emphasised that the definition of building work in the Act is much broader than initially perceived and may extend the statutory duty to exercise reasonable care to avoid economic loss caused by defects beyond residential buildings.
The full decision can be found here.