The Design and Building Practitioners Act 2020 (Act) has been in operation since 2020 creating a statutory duty of care on designers, builders, engineers and project managers to conduct construction work with reasonable care to avoid economic loss caused by defects. The Act provides a statutory basis for owners of land where building work done on their property is defective, to make a claim against the builder and other parties who performed, controlled, or had significant involvement with the building works. In 2022, the Supreme Court of NSW handed down its first decision in relation to the duty of care under the Act in the case of Goodwin Street Developments Pty Ltd atf Jesmond Unit Trust v DSD Builders Pty Ltd (in Liquidation) by extending the statutory duty of care to buildings other than Class 2 buildings which are apartment buildings. The first instance trial decision was appealed and then dismissed by the NSW Court of Appeal which ruled that that the statutory duty of care was to apply to all buildings other than just Class 2. You can view the trial decision here Case Summary The landowner, Goodwin Street Developments Pty Ltd (Goodwin) entered a building contract with DSD Builders Pty Ltd (DSD) for the construction of three boarding houses. The construction works commenced in 2017 and were initially supervised by Mr Johnstone, who left DSD sometime later. Mr Roberts, the husband of DSD’s sole director, took control of all the works and represented himself as the builder, performing as the project manager and supervisor onsite. The construction of the boarding houses was well advanced by early 2018 when a dispute arose between Goodwin and Mr Roberts about delays and defective work. As the situation worsened, Goodwin was threatened by DSD’s creditors, and the works were maliciously damaged. Goodwin then terminated the building contract. Proceedings were then commenced against DSD in 2018, however in 2021 when DSD went into liquidation, Goodwin added Mr Roberts as the second defendant in the proceedings, bringing a claim against him on the basis that he breached section 37 of the Act and failed to exercise reasonable care to avoid economic loss arising from the construction works. Mr Roberts argued that he did not owe a duty of care on the basis that the boarding houses did not fall within the meaning of the Home Building Act 1989 or within section 4 of the Act which sets out that building works means a Class 2 Building. Justice Stevenson concluded that Mr Roberts supervised and managed the construction of the boarding houses and this work fell under the meaning of “construction work” and therefore he was found to be in breach of the duty of care under section 37 of the Act. The NSW Court of Appeal decision Mr Roberts then appealed the first instance trial decision claiming that the duty of care only applied to Class 2 Buildings and to ‘residential building work’ and not a boarding house which was an argument not accepted by the Court. The NSW Court of Appeal decision is here The dispute regarding duty of care turned to what is the definition of “building work” as it applies to the Act. Definitions of ‘building work,’ ‘building’ and ‘construction work’ in the Act Section 4 definition: (1) For the purposes of this Act, Building Work means work involved in, or involved in coordinating or supervising work involved in, one or more of the following: the construction of a building of a class or type prescribed by the regulations for the purposes of this definition, the making of alterations or additions to a building of that class or type, the repair, renovation, or protective treatment of a building of that class or type. (2) The regulations may— prescribe additional work that is building work for the purposes of this Act, and exclude work from being building work for the purposes of this Act. the repair, renovation, or protective treatment of a building of that class or type. (3) In this Act, a reference to a building (including a building as defined in Part 4) includes a reference to part of a building (including a building element). Section 36 in Part 1 definition: Building has the same meaning it has in the Environmental Planning and Assessment Act 1979 which includes part of a building and also includes any structure or part of a structure (including any temporary structure or part of a temporary structure) but does not include a manufactured home, moveable dwelling or associated structure. Section 36 further provides that: Construction Work means any of the following: building work, the preparation of regulated designs and other designs for building work, the manufacture or supply of a building product used for building work, supervising, coordinating, project managing or otherwise having substantive control over the carrying out of any work referred to in paragraph (a), (b) or (c). Decision The Court of Appeal considered the various definitions of building work in the Act by addressing the legislative history and the Government’s intention, including the definition of “building”. The Court unanimously agreed the definitions of ‘building work’ from the Act, required cohesion and determined that the definition of “building work” should be more expansive and extended the Duty of Care to apply to all buildings, noting that this is what parliament had intended. Section 37 of the Act being the operative provision was then extended to mean that the Duty of Care is to encompass all buildings as defined in the Act and therefore is not limited to Class 2 Buildings as defined in section 4. The decision also confirms that a Duty of Care applies to: the preparation of designs; supply of building products; work performed by supervisors; those coordinating the building works; and in fact any person on site who has substantive control over the works. What you need to know Construction personnel such as builders, designers, project managers, engineers and those who supervise, and control building works may be exposed to claims where defects arise in relation to all classes of buildings, and which may include dwellings. The statutory duty of care covers both current and subsequent owners of buildings. If defects are present and the statutory duty of care is breached, owners will be entitled to be financially compensated. A builder or professional in the construction industry may be exposed to claims retrospectively for historical issues, noting there is a 10 year limitation period. A statutory duty of care claim can be made in addition to statutory warranties claims. The statutory duty of care cannot be contracted out of by including special terms in contracts. If more than one person is responsible for the defects, a court may apportion the damages payable to the claimant. How we can help? Our building and construction team at Russell Kennedy Lawyers can assist you by providing tailored advice specific to your business needs and to ensure you are complying with the relevant laws. For more information, please contact Goran Gelic, Joe Denina or Snjezana Steele from our Dispute Resolution and Infrastructure, Building and Construction teams. 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