Building and Design Practitioners Act: Supreme Court considers contractors’ statutory duty of care for the first time

In?The Owners – Strata Plan No 87060 v Loulach Developments Pty Ltd (No 2)?[2021] NSWSC 1068, the New South Wales Supreme Court considered the statutory duty of care imposed by section 37 of the?Design and Building Practitioners Act 2020?(NSW) (DBP Act) for the first time.?The decision carries important implications for contractors with projects in New South Wales and provides some clarity around the operation of the statutory duty of care.

The Duty

Under Part 4 of the DBP Act, any person that carries out construction work owes a duty of care to the landowner and all subsequent landowners to exercise reasonable care to avoid economic loss from defects.

The duty operates both prospectively and retrospectively. It covers loss that first became apparent within 10 years prior to, and loss arising after, the commencement of the DBP Act on 11 June 2020.

Section 41 of the DBP Act provides that the statutory duty of care is subject to the?Limitation Act 1969?and section 6.20 of the?Environmental Planning and Assessment Act 1979. These provisions have the potential to reduce a contractor’s liability under the DBP Act.

Background

The dispute centred around alleged defects in the development. The Owners Corporation alleged Loulach Developments had breached the statutory warranties implied into the construction contract under the?Home Building Act 1989?(NSW). The Owners Corporation then sought to amend its list statement by adding a claim for an alleged breach of the statutory duty of care created by section 37 of the DBP Act.

The Owners Corporation submitted that the existence of a defect, in and of itself, was sufficient to establish that the builder had breached section 37 of the DBP Act. That is, without the builder’s breach, there would be no defect.

The Decision

The Court rejected the Owners Corporation’s submission that the mere existence of a defect established that the builder had breached the statutory duty of care.

The Court stated that the DBP Act was enacted to circumvent the need for landowners to establish a builder’s duty of care, following the infamous building failures at Opal Tower and Mascot Tower. The DBP Act was not intended to serve as a shortcut for an owner (or subsequent owner) to avoid having to establish that the builder had breached its duty of care.

The Court held that it was not sufficient to simply assert a defect and allege that the builder was required to take the appropriate precautions to ensure that defect not materialise. A party alleging a breach of the statutory duty must, with sufficient specificity, identify the link between the existence of the defect and the relevant breach of the duty of care.

Takeaway

This decision demonstrates that establishing a breach under the statutory duty of care is not a simple equation: the existence of a defect does not automatically amount to a breach of the statutory duty of care.

A party alleging a statutory breach of the duty of care under the DBP Act by a builder must identify the specific risks that the builder was required to manage, and the precautions that ought to have been taken by the builder to manage those risks.

We recommend that any party pursuing a claim under section 37 of the DBP Act ensure they take the necessary steps to sufficiently demonstrate the link between the defect and the breach of the duty of care. Further, the Act’s retrospective operation means that contractors should consult legal advisers to determine their exposure to any potential claims arising from works completed after 10 June 2010 (i.e. within 10 years of the DBP Act’s commencement).

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader’s specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances, please contact the author(s).