It is crucial that all parties involved in the construction of a building understand their duties under the Design and Building Practitioners Act 2020 (the Act). It is also important that owners corporations are aware of the changes in the law and the opportunities available to them.
The Act has imposed a duty of care to avoid economic loss caused by defects in the construction of a building upon an array of entities not previously captured by legislation. The duty to avoid defects now extends to any “person who carries out construction work”. Thus, determining the applicability of this duty depends on whether an individual engaged in ‘construction work’.
The NSW Supreme Court has recently examined the definition of ‘construction work’ under the Act and provided tests to determine whether an entity’s work enlivens the duty. The Court’s findings provide that the work of supervisors, project managers, directors of the building companies or developer can comprise ‘construction work’ and can therefore be held liable for the economic loss of Owners Corporations affected by building defects.
Goodwin Street Development v DSD Builders Pty Ltd (in liquidation) [2022] NSWSC 624 (Goodwin)
In 2017, Goodwin entered into a building contract with DSD to construct three residential boarding houses in Newcastle. A sole director oversaw DSD; however, all administrative dealings involved with carrying out the building contract were undertaken by Mr Roberts as a representative of DSD.
In 2018, a dispute arose between the parties due to latent building defects and delays. Upon Goodwin serving a Notice to Remedy Defaults, DSD stopped working on the site. Later, a termination notice was served on DSD by Goodwin after discovering more building damage and missing property.
In 2018, Goodwin commenced proceedings against DSD and Mr Roberts. The claim against Mr Roberts relied on a breach of Section 37 of the Act, which imposes a duty of care to avoid economic loss caused by defects. The Court found Mr Robert breached the duty and was liable to pay damages. The Court’s findings hinged on the interpretation of ‘construction work’. The Court found Mr Robert’s engagement in the project management of the site, as well as supervision of the construction amounted to ‘supervising’ and ‘project managing’ in the context of ‘construction work’ under the Act. The building defects lawyers acting for the developer were successful.
The Owners – Strata Plan No 84674 v Pafburn Ltd [2022] NSWSC 659.
Upon discovering building defects, the Owner’s Corporation of Strata Plan 84674 commenced proceedings against Pafburn [the builder] and Madarina [the site developer] for the breach of their duty of care under Section 37 of the Act. The primary question before the Court was in respect of the correct interpretation of ‘construction work’, specifically determining whether a person had ‘substantive control over carrying out’ construction work.
The Court deemed the appropriate test is whether the individual was in a position where they were able to control how the work was carried out. In this matter, the Court applied the test and found the role of the developer involved undertaking ‘construction work’ and thus the developer could be held liable for defects.
Conclusion
The recent judgements of the NSW Supreme Court have far reaching consequences for all parties involved in the construction of a building. It has afforded Owner’s Corporations greater protection and has placed developers, supervisors, directors and project managers alike at a greater risk of being found liable for defective works. It is important for all parties to apprise themselves of their duties under the Act. If you are a member of a strata committee in a scheme where there is defective work, contact a building defects lawyer (strata lawyer) at Carneys Legal to discuss pursuing the entities responsible.
