Until recently, there was a sense of uncertainty in the construction sphere surrounding the application of the statutory duty of care imposed by the Design and Building Practitioners Act 2020 (NSW) (Design Act). The general consensus amongst construction professionals was that the Design Act only applied to “class 2” buildings, including residential flat buildings and boarding houses.
On 19 May 2022, the NSW Supreme Court delivered its decision in Goodwin Street Developments Pty Ltd atf Jesmond Unit Trust v DSD Builders Pty Ltd (in liq) [2022] NSWSC 624 (Goodwin v DSD).
In Goodwin v DSD, Justice Stevenson clarified that the statutory duty of care prescribed by s 37 of the Design Act applies not only to class 2 buildings, but also to the construction of any ‘building’ within the meaning of the Environmental Planning and Assessment Act 1979 (NSW) (EPA Act). His Honour also found that representatives of construction companies (ie employees, directors, etc) can also be personally liable under the Design Act.
We are currently acting for a number of Owners Corporations, developers and builders in proceedings whereby reliance is placed on the Design Act. As will be explained below, the decision of Goodwin could have far reaching consequences for those involved in the construction industry.
Background:
The plaintiff, Goodwin Street Developments Pty Ltd (Goodwin) was the owner of land in Jesmond New South Wales, located close to the campus of the University of Newcastle.
On 10 July 2017, Goodwin entered into a building contract with the first defendant, DSD Builders Pty Ltd (DSD), to construct three residential boarding houses intended for student accommodation.
Goodwin alleged that the second defendant, Mr Roberts, who was a representative of DSD, negotiated the building contract with Goodwin, administered the building contract on behalf of DSD and controlled the carrying out of the construction work on the site on behalf of DSD (at [4]).
In early 2018, a dispute arose between Goodwin and DSD relating to defective building works and the progress of the works. Goodwin suspended works during this period. On 19 March 2018, Goodwin served a notice on DSD terminating the building contract with immediate effect. Prior to terminating the building contract, Goodwin attended the site and observed substantial damage to the buildings on the site and that doors, windows, stairs and other items that had previously been installed in the buildings were missing (it was later found by Justice Stevenson that Mr Roberts was responsible for this).
In August 2018, Goodwin commenced proceedings against DSD in the NSW Supreme Court. On 11 April 2019, Mr Roberts was added as second defendant.
In early 2021, DSD was ordered to be wound up in insolvency.
Judgment:
The judgment by Justice Stevenson concerned two primary issues, particularly, whether Mr Roberts:
- caused the damage to the buildings and removed the materials, fixtures and fittings that had been incorporated into the buildings; and
- carried out “construction work” on the site for the purposes of s 37 of the Design Act and acted in breach of his statutory duty of care under s 37 of the Design Act.
As to the first issue, following consideration of the evidence put before the Court, Justice Stevenson found that Mr Roberts caused the damage to the buildings and removed the materials, fixtures and fittings that had been incorporated into the buildings.
As to the second issue, Justice Stevenson found that on the proper construction of the Design Act, the definition of ‘building work’ in s 4 of the Design Act has no application to Part 4 of the Design Act, which concerns the statutory duty of care. That is, for the purposes of determining the scope of the statutory duty of care imposed by s 37 of the Design Act, regard should only be given to the scope of such duty as found in s 36 of the Design Act. His Honour came to this determination by placing reliance on two main points (at [106] and [113], respectively):
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- a) When introducing the amendments which gave effect to the current definitions of “building” and “building work” contained in the DBP Act, Mr David Shoebridge, moving “The Greens amendments”, stated:
- “Amendment No. 1 provides that the duty of care applies to all buildings and includes a definition of “building” for the purpose of the duty of care and that “building” has the broad meaning of “building” in the Environmental Planning and Assessment Act. Amendment No. 2 makes clear that the duty of care extends to building work, including residential building work within the meaning of the Home Building Act. This amendment will ensure that the duty of care amendments will have broad coverage, which is the intent.”
- a) When introducing the amendments which gave effect to the current definitions of “building” and “building work” contained in the DBP Act, Mr David Shoebridge, moving “The Greens amendments”, stated:
- b) Part 4 of the Design Act commenced on 10 June 2020, when the Design Act was assented to. It is given retrospective operation by clause 5 of Schedule 1 of the Design Act. On the other hand, Parts 2, 3 and 5 to 9 of the Design Act did not commence until 1 July 2021, which was the same date on which the Design and Building Practitioners Regulation 2021 (NSW) commenced.
It followed that, by reason of s 36(2) of the Design Act and the definition of “building” in s 36(1) of the Design Act, the statutory duty of care found in s 37 of the Design Act applies to “construction work” carried out in relation to a boarding house.
Further, Justice Stevenson found that Mr Roberts carried out “construction work” for the purposes of s 36(1) of the Design Act as he engaged in the project management of the site and also the supervision of the construction. His Honour pointed towards various examples in the evidence which supported this, including Mr Roberts’ sole attendance (as the representative of DSD) at each bi-weekly site meeting and Mr Roberts’ assurances given to rectify the defects in the construction works.
In light of this, Justice Stevenson determined that Mr Roberts breached his statutory duty of care imposed by s 37 of the Design Act.
Implications:
Given the wide application of the duty of care adopted in this case, it is important that those persons who carry out ‘building work’ are aware of the implications their actions may have under the Design Act, especially in circumstances where they may be personally liable.
The contents of this publication are for reference purposes only. This publication does not constitute legal advice and should not be relied upon as legal advice. Specific legal advice should always be sought separately before taking any action based on this publication.
Authors: Maysaa Parrino, Matt Armota
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