This article was co-authored with Daniel Corban and Kylie Lightman.
The NSW Supreme Court recently handed down its first decision on the scope of the statutory duty of care to avoid economic loss under Part 4 of the Design and Building Practitioners Act 2020 (NSW) (DBP Act).
In Goodwin Street Developments Pty Ltd atf Jesmond Unit Trust v DSD Builders Pty Ltd (in liq)  NSWSC 624, the Supreme Court confirmed that the statutory duty of care to avoid economic loss is not limited to class 2 (residential apartment) building works, and is also owed by individuals such as supervisors and project managers.
The statutory duty of care was introduced by the DBP Act and came into force on 11 June 2020. It extends to construction work carried out before this date, if the economic loss first became apparent within the preceding 10 years (or after 11 June 2020). It imposes a statutory duty of care on a person who carries out construction work to exercise reasonable care to avoid economic loss caused by defective construction work. This duty is owed to owners and subsequent owners.
Before the NSW Supreme Court decision, it was clear that the statutory duty of care applies to residential building work as defined in the Home Building Act 1989 (NSW) (HBA), but it was unclear whether the duty extends to other types of building work. As the Court observed in the decision, the relevant provisions are labyrinthine and difficult to comprehend.
In this update, we provide an overview of the decision and consider some key implications.
The plaintiff, Goodwin Street Developments Pty Ltd (Goodwin), engaged DSD Builders Pty Ltd (DSD) to construct three boarding houses for university student accommodation.
Goodwin commenced proceedings against DSD and the builder’s representative, Daniel Roberts.
Proceedings against DSD were stayed because DSD was declared insolvent. Goodwin sought damages against Mr Roberts for breaching his statutory duty of care under Part 4 of the DBP Act to avoid economic loss arising from defects in the construction of the boarding houses. Mr Roberts argued that this statutory duty of care did not extend to construction work carried out on a boarding house.
The Court found that the statutory duty of care under Part 4 of the DBP Act did apply, even though a boarding house is excluded from the definition of “dwelling” under the HBA.
The statutory duty of care applies to “construction work”. For work to be construction work, it must be “building work”, which expressly includes residential building work within the meaning of the HBA. The Court found that the definition of “building work” is an inclusive, not exclusive definition, and it extends to all building work relating to a “building” as broadly defined under the Environmental Planning and Assessment Act 1979 (EP&A Act).
This means that the statutory duty of care in Part 4 applies to a much broader range of building work than the practitioner obligations in Part 2 of the Act. Based on the reasoning in this decision, it appears that the statutory duty of care applies to nearly all buildings (including commercial buildings), with only limited exceptions such as manufactured homes and moveable dwellings.
Under Part 4, “construction work” extends to supervising, coordinating, project managing or otherwise having substantive control over the carrying out of building work. The Court found that Mr Roberts had project managed and supervised the project. He had introduced himself as the builder, attended regular site meetings and was the only supervisor of the work (after a previously nominated supervisor left). The Court also found that Mr Roberts had breached his statutory duty of care and was personally liable for the cost of rectifying the defective work. Goodwin had drawn each defect to his attention.
The Court found that, given Mr Roberts was project managing and supervising the work, the fact that the defects were not corrected despite his assurance that he would fix them bespoke of his want of care in project managing and supervising the work. The fact that Mr Roberts did not give evidence enabled the Court to more readily draw an inference that the defects were brought about by a want of care on his part.
Implications and key takeaways
The decision confirms the statutory duty of care under Part 4 of the DBP Act has real breadth and clout.
In addition to applying to most buildings, it provides a broad avenue for owners to directly recover against individual supervisors, project managers, designers and suppliers, as well as corporations, for defective work. This may be particularly important for owners where a builder corporation has become insolvent (as was the case in the Goodwin case). Owners will still need to establish a connection between an individual’s want of care and the defect which has caused economic loss.
The Court’s decision in Goodwin was closely followed by a further decision: The Owners – Strata Plan 84674 v Pafburn Pty Ltd  NSWSC 659. That decision indicates that a person may be considered to “otherwise have substantive control” over the carrying out of building work for the purpose of the definition of “construction work” (and therefore to hold the statutory duty of care) 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 Court noted that this will be a question of fact in each case. That decision indicates that company directors could also be exposed to liability for breach of the statutory duty of care.
Link to Goodwin Court decision
Link to Pafburn Court decision
Our previous update on the statutory duty of care