Review of Design and Building Practitioners Act 2020 Part 2 (Sections 36 to 41) Designers and Builders have further Duty of Care to avoid economic loss to Owners

08/06/2022

The Design and Building Practitioners Act 2020 (“DBP Act”) commenced in 2020 and further Sections commenced as from 1 July 2021.  We have referred to these briefly in our Articles 29 July 2020 and 30 May 2022.

Duty to avoid economic loss to Owners

Part 4 of the DBP Act provides circumstances in which a person who carries out construction work has a duty to exercise reasonable care to avoid economic loss caused by defects as referred in Section 37 of the DBP Act.

The DBP Act is an Act which supersedes the decisions of the High Court which for example in 2014, in the case of Brookfield Multiplex Limited v Owners Corporation Strata Plan 61288 held that a Builder did not owe a duty of care to an Owners Corporation.  Similarly it supersedes the decision of the High Court in an earlier case Woolcock Street Investments Pty Limited v CDG Pty Limited in 2004, where an Engineering Company which had designed inappropriate footings did not owe a duty to the subsequent purchaser of the building. 

The DBP Act is a very important development in particular, in relation to possible claims against Design Practitioners and secondly, in relation to possible claims against the Builder and Developer.

In a recent case of the Owners – Strata Plan 87060 v Loulach Developments Pty Limited (No 2) Stevenson J in the Supreme Court of NSW, considered various sections in Part 4 of the DBP Act which relates to the duty of care pursuant to the DBP Act.

These sections (Section 36 to 41) were considered by the Supreme Court in relation to a decision as to the adequacy of pleadings by an Owners Corporation v Loulach Developments Pty Limited (the Developer) and Loulach Steel Pty Limited (the Builder) on the basis of breach of Section 37 of the DBP Act.  The decision is very important and critical as to the requirements to prepare the claim at the outset for example, the Technology and Construction List Statement which is required in relation to matters such as those, required to be commenced in the Technology and Construction List in the Equity Division of the Supreme Court of NSW where such cases are listed and determined.

The Court referred to and considered:

1.       Section 37 of the DBP Act which provides an extension of duty of care and that a person who carries out construction work has a duty to exercise reasonable care to avoid economic loss caused by defects:

(a)      In or related to a building for which the work is done; and

(b)      Arising from the construction work.

Further the duty of care is owed to each Owner of the land in relation to which the construction work is carried out and to each subsequent Owner of land. 

His Honour referred to this as the “statutory duty of care”. 

2.       Section 36 of the DBP Act sets out definitions which apply in relation to Part 4 (Duty of Care)

3.       Section 38 in particular, refers to economic loss – Owners Corporations and Associations.  For example, an Owners Corporation is taken to suffer economic loss for the purpose of the Part if the Owners Corporation bears the cost of rectifying defects (including any damage caused by defects) that are subject of a breach of the duty of care imposed for example, by Section 37).

4.       Section 39 states that a person who owes a duty of care under this Part for example, Section 37 is not entitled to delegate that duty.

5.       Section 40 provides that the parties to a Contract or Agreement made or entered into or amended after the commencement of Part 4 cannot operate to annul, vary or exclude a provision of the Part.

6.       Section 41 provides that:

(1)      The provisions are in addition to the duty of statutory warranties or other obligations imposed by the Home Building Act 1989 and other Acts;

(2)      This part does not limit damages that may be available to a person under another Act or at common law because of a breach of a duty by a person who carries out the construction work; and

(3)      This part is subject to the Civil Liability Act 2002.

As a consequence of the DBP Act, there is a requirement to properly consider the alternative remedies that are available for example, to a subsequent Owner of a property including for example, claims under the Home Building Act and the separate claim under the Design and Building Practitioners Act. 

One must consider:

1.       The different rights and obligations of each of the parties involved in the building process;

2.       The time limits that apply in relation to the claims; and

3.       The effect of limiting or extending the claim for example, limiting the claim to a claim under the Home Building Act for breach of statutory warranties on the one hand or extending the claim to be for breach of Section 37 of the DBP Act.

There are consequences as to the basis of making a claim.  One example if the claim is brought under the DBP Act, the claim is the subject of the Civil Liability Act 2002 (NSW) whereas if the a claim is for breach of statutory warranty under the Home Building Act, the claim is one that is not subject to the Civil Liability Act 2002. 

A claim to which the Civil Liability Act 2002 applies allows for apportionment of the responsibility for the defects.  This allows a Defendant for example, a Builder or a Developer to assert that other parties are partly responsible for the damages.  In those circumstances, the Court can order that each of the parties who are partly responsible for the damages are only liable for a proportion of the damages.  This can encourage parties to expand the blame for the losses and damages. This has associated costs consequences for example, who will bear the costs and possibility of recovery (or inability to recover a judgment) from the various parties who may be responsible; and further, the risk of joining a party who may not be responsible and the associates costs.

Important decisions are needed to be made as early as possible to consider the available claims, the rights and obligations of the parties and the costs associated in particular, if the case is widely expanded because of the issues that relate to the Civil Liability Act claims.

One must always be aware of the limitation periods and the rights and obligations of each of the parties.

If you have any issues, please contact Watson & Watson Lawyers who have had in excess of 30 years experience in dealing with an extensive range of matters involving building and construction and strata related matters.  Please contact Richard Watson, Accredited Specialist Commercial Litigation specialising in Building and Construction or his Personal Assistant Shereen Da Gloria to discuss your matter and seek appropriate and timely advice.

This is only a preliminary view and is not to be taken as legal advice without first contacting Watson & Watson Solicitors on 9221 6011.