Design and Building Practitioners Act 2020 (NSW) - Construction Work the Subject of the Act – Owner to whom the Duty is Owed

04/07/2022

The various Acts that apply in relation to claims by Owners and Subsequent Owners for damages for alleged defects include but are not limited to the following:

1. The Design and Building Practitioners Act 2020 (NSW) (“the DBP Act”);
2. The Home Building Act 1989 (NSW) (“the HB Act”);
3. The Environmental Planning and Assessment Act 1979 (NSW) (“the EPA Act”).

With the introduction of the DBP Act, there are many additional factors that must be considered by an Owner or Subsequent Owner affected by defective building work in relation to the claim that the Owner makes.  We refer to our articles dated 29 July 2020, 30 May 2022 and 6 June 2022 in which we have briefly referred to some issues since the introduction of the DBP Act. 

One case decided by Stevenson J 24 May 2022 deals with two of the issues.  In the case of The Owners – Strata Plan 84674 v Pafburn Pty Limited [2022] NSWSC 659 on 24 May 2022, Stevenson J considered the proper interpretation in the DBP Act of:

• “construction work”;
• “otherwise having substantial control over the carrying out of any work”; and
• section 37(1) whether “person” includes the Owner of the land for which construction work is carried out.

The issues arose from the form of the List Statement filed at the commencement of the proceedings. 

The case involved a claim by an Owners Corporation in respect of a strata development at North Sydney. 

• The First Defendant, Pafburn Pty Limited was the Builder of the Project.
• The Second Defendant, Madarina Pty Limited was the Developer and was up until registration of the Strata Plan, the Owner of the land on which the development occurred.
• Mr and Mr Obeid owned the shares in the Builder. 
• The Builder owned all the shares in the Developer. 
• Mr and Mrs Obeid were Directors of the Builder.
• Mr Obeid was the Sole Director of the Developer. 

The Builder and Developer claimed there was a Building Contract by which the Builder contracted (orally) to undertake the works.

Issues arose as to the interpretation of Section 37 having regard to the definitions within Section 36 of the DBP Act.

Section 37 states:

          “37 Extension of Duty of Care

(1)      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.

(2)      The duty of care is owed to each owner of the land in relation to which construction work is carried out and to each subsequent owner of the land.

(3)      A person to whom the duty of care is owed is entitled to damages for the breach of the duty as if the duty were a duty established by the common law.

(4)      The duty of care is owed to an owner whether or not the construction work was carried out –

(a)      under a contract or other arrangement entered into with the owner or another person; or

(b)      otherwise than under a contract or arrangement”.

“Construction work” is defined in Section 36(1) of the DBP Act to mean, relevantly:

          “36 Definitions

          …

          construction work means any of the following –

          (a)      building work,

          …

(d)      supervising, coordinating, project managing or otherwise having substantive control over the carrying out of any work referred to in paragraph (a) …”    

The Court in considering the proper interpretation of “construction work” having regard to Section 36(1)(d), considered whether to establish that a person had “substantial control over the carrying out of” building work, it was necessary to show that the person actually exercised such “substantial control”; or whether it was sufficient to show that the person had “substantial control” in the sense of having the ability to exercise such control whether or not such control was in fact exercised. 

The Court held that it is sufficient to enliven the definition to establish that the person was in a position where he or she was able to control how the work was carried out.

This is a factual matter to be determined on the actual facts of the case.

A second issue related to the proper interpretation of a “person” referred to in Section 37(1) of the DBP Act.  This issue relates to whether the Owner of the land is a person within Section 37(1) who owes the duty to each Owner as referred to in Section 37(2) of the Act.  The Court considered the matter and held that each Owner as referred to in Section 37(2) did not include the Owner that had itself carried out the construction work in question. 

It may be that the person carrying out the construction work by supervising, co-ordinating, project managing or otherwise having substantive control over the carrying out of any work referred to in sub-sections (a), (b) or (c) of the definition and as such, that supervision etc is construction work within the meaning of the DBP Act.  The matter is a question of fact to be decided on the evidence by the Court (unless otherwise agreed).

There are many other issues that are alive in relation to the interpretation and operation of the DBP Act which will likely be raised in the cases coming before the Court.  There are some that we are aware of which have not been raised at this stage. 

There are many matters requiring considerations by an Owner who wishes to make a claim against a party, whether it be a Builder, Developer, Professional Designer or another within the definition of persons liable under either the Home Building Act or the DBP Act. 

At Watson & Watson our highly experienced building and construction lawyers can assist you in this regard.  These matters should be carefully considered at an early stage to consider the factual matrix and to proceed on the best cost effective basis in relation to your claim.  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.