On 12 October 2022, the NSW Supreme Court handed down its decision in Boulus Constructions Pty Ltd v Warrumbungle Shire Council [2022] NSWSC 1368 (Boulos).
In Boulos, Justice Stevenson confirmed that directors of building companies and site supervisors owe a duty of care under the Design and Building Practitioners Act 2020 (NSW) (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 Boulos could have far reaching consequences for those involved in construction work.
Background
Boulos Constructions Pty Ltd (Builder), the plaintiff/cross-defendant, undertook the construction of a retirement village known as the Three Rivers Regional Retirement Community on behalf of Warrumbungle Shire Council (Council), the defendant/cross-claimant.
On 6 November 2018, the Builder commenced proceedings against the Council, seeking compensation for unpaid work. The Council brought a cross-claim alleging defective works – Council alleged 300 defects in total comprising some 30 different kinds of defect in multiple locations.
By Notice of Motion, the Council now sought to amend its Cross-Claim Cross-Summons and Cross-Claim List Statement to include a claim under s 37 of the Design Act against the Builder itself, as well as against the Managing Director of the Builder, Mr Brian Boulus, and the Project Site Supervisor, Mr Bradley McCarthy. Mr Boulus and Mr McCarthy were not presently cross-defendants.
Judgment
Whether Mr Boulus and Mr McCarthy are “persons” for the purposes of s 37
The Builder argued that Mr Boulus and Mr McCarthy are not “persons” for the purposes of s 37 of the Design Act.
The Council alleged that Mr Boulus and Mr McCarthy were both able to, and in fact did, exercise control over the carrying out of the building work.
In relation to Mr Boulos, it was alleged that he had control over the carrying out of building work by:
- the appointment and control of the project delivery staff working for the Builder (including the appointment and control of Mr McCarthy),
- the supervision of the adequacy of the works performed by such project delivery staff,
- the selection and appointment of subcontractors to perform elements of the Works for which the Builder was ultimately responsible,
- the overall supervision and acceptance of the works performed by the Builder’s employees and subcontractors, for the ultimate benefit of the Council, and
- as the managing director of the Builder, the ultimate ability to control how the works performed by the Builder were carried out.
In relation to Mr McCarthy, it was alleged that as the site supervisor for the Project, he:
- supervised, coordinated and project managed all of the primary elements of the building works comprising the project, and
- coordinated and directed how the works performed by the Builder were carried out, including by directing and engaging with the Builder’s subcontractors in the performance of their works.
Justice Stevenson considered the meaning to be given to “person” in the in s 37 of the Design Act.
In coming to a decision, Justice Stevenson undertook an analysis of the definition of “construction work” under section 36 of the Act, namely subpar (d), which reads:
“… (d) supervising, coordinating, project managing or otherwise having substantive control over the carrying out of any work referred to in paragraph (a), (b) or (c)”.
His Honour held that the potential ambit of this aspect of the definition of “construction work” is wide and encompasses a wider range of activity than is described in subpars (a), (b) and (c) of the definition. It also contemplates a wider range of ‘actors’ carrying out those activities. That word the Parliament has used to determine those actors is “person” rather than “practitioner”
His Honour concluded by finding that it is not necessary that a person be a ‘design practitioner’, ‘principal design practitioner’, ‘professional engineer’, ‘specialist practitioner’ or ‘building practitioner’ for them to owe a duty of care under the Design Act; it can be any person.
Conflict of Laws
The Builder also argued that the automatic duty owed by directors of building companies is relevantly in conflict with the Corporations Act 2001 (Cth) (Corporations Act), and in particular sections 119, 124 and 516 and the definition of ‘a company limited by shares’ in section 9.
Justice Stevenson held that he does not see what relevance those sections have to the issues in Boulos and did not agree with the Builder’s argument that the imposition on company directors of the automatic duty under s 37 of the Design Act is contrary to the independence of a corporation from its directors and members.
Implications
The judgment confirms the decision of Justice Stevenson in The Owners – Strata Plan No 84674 v Pafburn Pty Ltd [2022] NSWSC 659. That is, any ‘person’ undertaking construction work owes a duty of care under the Design Act.
Given the wide application of the duty of care, it is important that those persons who carry out ‘construction work’ are aware of the implications their actions may have under the Design Act, especially in circumstances where they may be personally liable – whether it be a director, site supervisor or subcontractor.
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.
Liability limited by a scheme approved under Professional Standards Legislation.
Authors: Maysaa Parrino, Matt Armota
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