The recent decision of the NSW Supreme Court in Goodwin Street Developments Pty Ltd atf Jesmond Unit Trust v DSD Builders Pty Ltd (in liq) clarifies the scope of the statutory duty found in Part 4 of the Design and Building Practitioner’s Act 2020 (NSW) (DBP Act). Section 37(1) of the DBP Act provides that a person who carries out construction work has a duty to exercise reasonable care to avoid economic loss caused by defects–

• in or related to a building for which the work is done, and
• arising from construction work.

Justice Stevenson explains that the duty extends not only to class 2 and mixed-use buildings (typically multi-story residential/mixed-use apartment buildings) but to all building types.

Facts & issues

The plaintiff, Goodwin Street Developments Pty Ltd (Goodwin), was the owner of land located close to the University of Newcastle. In July 2017, Goodwin entered a building contract with the first defendant, DSD Builders Pty Ltd (DSD), for the construction of three residential boarding houses on the land. Goodwin contended that the second defendant, Mr Roberts, negotiated and administered the building contract and controlled the carrying out of construction work on the site on behalf of DSD.[1]

In early 2018, disputes arose between Goodwin and DSD in relation to defects and delays in the building works. In March 2018, Goodwin discovered that someone (found by Justice Stevenson to be Mr Roberts) had maliciously damaged the buildings and works at the site – including by removing materials, fittings and fixtures.[2]

Goodwin terminated the building contract and commenced proceedings against DSD and Mr Roberts. DSD became insolvent in 2021. Justice Stevenson’s judgment concerns claims brought by Goodwin against Mr Roberts for:

• trespass, in respect of the malicious damage to the site, and
• breach of the statutory duty owed under section 37 of the DBP Act, in respect of the pre-existing defects in the works.

In relation to Goodwin’s claim for breach of the statutory duty, Justice Stevenson considered whether:

• the statutory duty of care could arise in relation to the construction of a boarding house;
• Mr Roberts did “construction work” for the purpose of section 36(1) of the DBP Act; and
• Mr Roberts breached the requisite standard of care.

Does the statutory duty of care arise in relation to a boarding house?

Mr Roberts argued that he did not owe a duty of care to Goodwin under section 37 because the construction of a boarding house did not fall within the definition of “construction work” in the DBP Act.

The definition of “construction work” at section 36(1) of the DBP Act includes (a) building work, […] and (d) supervising, coordinating, project managing or otherwise having substantive control over the carrying out of building work. There is a tension between the definitions of building work under section 4 and 36 of the DBP Act.

On the one hand, section 4(1) provides that “for the purposes of this Act” building work only includes buildings of a class or type prescribed by the regulations – that is, class 2 and mixed-use buildings.[3] On the other hand, section 36(1) provides that in Part 4, “building” has the same meaning as it has in the Environmental Planning and Assessment Act 1979 (NSW) (EPAA). The EPPA of “building” is much broader and extends to any structure or part of a structure (with certain exceptions such as manufactured homes and moveable dwellings).[4] It is worth noting that section 36(5) of the DBP Act states that the regulations may exclude work from being construction work for the purposes of Part 4.

Justice Stevenson resolved this tension by finding that the definition of “building work” in section 4 of the DBP Act (and in the regulations) has no application to the statutory duty at Part 4 of the DBP Act.[5] His Honour reached this conclusion for two main reasons:

• It appears from parliamentary transcripts that the legislature intended for the duty of care to provide “broad coverage” for “all buildings”.[6]
• Part 4 of the DBP Act commenced in June 2020 with retrospective operation, but the regulations, along with Parts 2, 3 and 5 to 9 of the DBP Act, only commenced in July 2021 and have no retrospective operation. Justice Stevenson therefore held that the statutory regime could only operate coherently if the section 4 definition of “building work” is limited to the parts of the DBP Act commencing in July 2021 and does not apply to Part 4.[7]

Following this reasoning, the boarding house is a “building” on which “construction work” was done under section 36(1). The boarding house therefore fell within the scope of the statutory duty in section 37(1).[8]

Did Mr Roberts do “construction work” on the boarding house?

Justice Stevenson held that Mr Roberts had clearly done “construction work” because he had been engaged in project management and supervision of DSD’s works within the meaning of section 36(1)(d) of the DBP Act. Mr Roberts’ supervision of the works included introducing himself as the builder and repeatedly assuring Goodwin of the progress of the works and status of defects.[9]

Did Mr Roberts breach the requisite standard of care?

There were 38 defects in the construction of the boarding house. Mr Roberts gave repeated written assurances that defects would be “all fixed” and that Goodwin should not worry.[10] Justice Stevenson held that breach of the statutory duty was established because Mr Roberts was the project manager and supervisor of the construction works, gave these repeated assurances, but failed to correct the defects.[11]

Given that Goodwin had successfully established the existence of duty, breach and causation, Mr Roberts was liable for damages reflecting the cost of rectifying the defects.[12]

Justice Stevenson’s explicit discussion of breach is consistent with his Honour’s previous remarks in The Owners – Strata Plan No. 87060 v Loulach Developments Pty Ltd (No 2).[13] In that case, his Honour explained that although claimants can rely on section 37 of the DBP Act as a shortcut to establishing duty, they are still required to adequately establish that the duty has been breached. Our previous article, available here, discusses this case in further detail.

Key takeaways

Building professionals beware: the decision in Goodwin Street Developments Pty Ltd atf Jesmond Unit Trust v DSD Builders Pty Ltd (in liq) means that you may be liable in negligence for a failure to exercise reasonable care in construction works on virtually all buildings – not just class 2 or mixed-use buildings.  Further, that liability is not necessarily limited to the contracting entity (usually a company) that is engaged as the builder.

Bradbury Legal is experienced both in assisting owners with potential claims under the DBP Act, and in acting on behalf of building professionals to defend these claims. For specialist and tailored advice, please contact a member of our team by phone on (02) 9030 7400 or by email at info@bradburylegal.com.au.

 

 

 

 

[1] Goodwin Street Developments Pty Ltd atf Jesmond Unit Trust v DSD Builders Pty Ltd (in liq) [2022] NSWSC 624, [1]–[5].

[2] Goodwin Street Developments Pty Ltd atf Jesmond Unit Trust v DSD Builders Pty Ltd (in liq) [2022] NSWSC 624, [6]–[10].

[3] Design and Building Practitioner’s Regulation 2021 (NSW) s 12.

[4] Environmental Planning and Assessment Act 1979 (NSW) s 1.4.

[5] Goodwin Street Developments Pty Ltd atf Jesmond Unit Trust v DSD Builders Pty Ltd (in liq) [2022] NSWSC 624, [11].

[6] Goodwin Street Developments Pty Ltd atf Jesmond Unit Trust v DSD Builders Pty Ltd (in liq) [2022] NSWSC 624, [106].

[7] Goodwin Street Developments Pty Ltd atf Jesmond Unit Trust v DSD Builders Pty Ltd (in liq) [2022] NSWSC 624, [113].

[8] Goodwin Street Developments Pty Ltd atf Jesmond Unit Trust v DSD Builders Pty Ltd (in liq) [2022] NSWSC 624, [118]–[120].

[9] Goodwin Street Developments Pty Ltd atf Jesmond Unit Trust v DSD Builders Pty Ltd (in liq) [2022] NSWSC 624, [133]–[138].

[10] Goodwin Street Developments Pty Ltd atf Jesmond Unit Trust v DSD Builders Pty Ltd (in liq) [2022] NSWSC 624, [142]–[144].

[11] Goodwin Street Developments Pty Ltd atf Jesmond Unit Trust v DSD Builders Pty Ltd (in liq) [2022] NSWSC 624, [145].

[12] Goodwin Street Developments Pty Ltd atf Jesmond Unit Trust v DSD Builders Pty Ltd (in liq) [2022] NSWSC 624, [148].

[13] The Owners – Strata Plan No. 87060 v Loulach Developments Pty Ltd (No 2) [2021] NSWSC 1068, [35]–[36].