Statu­to­ry Duty of Care – Part 4 Design and Build­ing Prac­ti­tion­ers Act 2020 – ‘…the risk of harm was fore­see­able… not insignificant…not far-fetched or fanciful’

On 5 July 2024, His Hon­our Jus­tice Waugh hand­ed down his deci­sion in The Own­ers – Stra­ta Plan 80867 v Da Sil­va [2024] NSWDC 263.

Swaab, instruct­ing William Mar­shall of 7 Went­worth Sel­borne Cham­bers, act­ed for the Plain­tiff Own­ers Cor­po­ra­tion in the pro­ceed­ings, which were brought against Mr Da Sil­va (the Builder). The Builder per­formed reme­di­al works in a res­i­den­tial stra­ta title build­ing, to rec­ti­fy orig­i­nal build­ing defects. 

Those reme­di­al works were proven to be defec­tive, in breach of the con­tract terms and the implied statu­to­ry war­ranties under sec­tion 18B of the Home Build­ing Act 1989 (HBA) and impor­tant­ly were found to cause eco­nom­ic loss with the Builder held to be in breach of the extend­ed duty of care afford­ed under sec­tion 37 of the Design and Build­ing Prac­ti­tion­ers Act 2020 (DBP Act).

DBP Act

As not­ed by Waugh J when dis­cussing the applic­a­ble pro­vi­sions under Part 4 of the DBP Act at [231] ​‘there have been very few cas­es apply­ing or inter­pret­ing these pro­vi­sions to date’. This deci­sion there­fore pro­vides fur­ther wel­comed clar­i­ty for prac­ti­tion­ers over the appli­ca­tion of the duty of care pro­vi­sions of the DBP Act to con­struc­tion works per­formed in NSW.

Sec­tion 37 of the DBP Act pro­vides that ​“A per­son who car­ries out con­struc­tion work has a duty to exer­cise rea­son­able care to avoid eco­nom­ic loss caused by defects…” under a con­tract or oth­er­wise. That duty is estab­lished by the DBP Act. The ques­tions for deter­mi­na­tion in such cas­es are lim­it­ed to whether the duty was owed by the defen­dant, whether such duty was breached and whether the dam­age, if any, aris­es from the breach [236].

His Hon­our dis­cussed the appli­ca­tion of sec­tion 37 of the DBP Act to a ​‘per­son who car­ries out ​‘con­struc­tion work’ includ­ing, but not lim­it­ed to, car­ry­ing out build­ing work or super­vis­ing, coor­di­nat­ing or hav­ing sub­stan­tive con­trol over the car­ry­ing out of that work [229], which by rea­son of sec­tion 36, includes ​‘res­i­den­tial work with­in the mean­ing of the HBA’.

Waugh J went beyond the find­ings in Loulach[i] where Steven­son J held ​‘that s5B of the Civ­il Lia­bil­i­ty Act 2002 applies to a claim for dam­ages for breach of the statu­to­ry duty in s37 of the DBP Act…’ to state at [239] ​‘In my opin­ion, anoth­er pro­vi­sion of the Civ­il Lia­bil­i­ty Act 2002 that would apply is s5D. It address­es the ques­tion of whether neg­li­gence caused a par­tic­u­lar harm’. 

Paf­burn[ii] was ref­er­enced, hold­ing that ​‘Part 4 of the Civ­il Lia­bil­i­ty Act 2002…does not apply to a claim for dam­ages for breach of statu­to­ry duty is expressed to be non-del­e­gable’[iii] along with Kazzi[iv], which held that a super­vi­sor of the works (Mr Kazzi) ‘…breached his statu­to­ry duty of care, as the nom­i­nat­ed super­vi­sor of the works, by mak­ing deci­sions as to the progress and man­ner of the works that gave rise to the defects on which the own­ers relied’.

Whilst in this deci­sion (the Da Sil­va case) at [246], the Builder acknowl­edged his duty of care to the Own­ers Cor­po­ra­tion, and admit­ted the works were ​‘res­i­den­tial build­ing works’, he argued that his work com­plied with a var­ied scope which dis­pensed with the require­ment to com­ply with the Build­ing Code of Aus­tralia (BCA) and the rel­e­vant Aus­tralian Stan­dard (AS4654.2 – 2012) (AS 4654). In answer to the claim that he breached the sec­tion 37 duty, he also assert­ed that ​‘rea­son­able care’ did not require him to stop work when his work was not going to be of stan­dard or to com­mu­ni­cate that posi­tion to the Own­ers Corporation. 

The Builder owed the Own­ers Cor­po­ra­tion a duty to exer­cise rea­son­able care to avoid eco­nom­ic loss from defects. To meet this duty, His Hon­our held the Builder was required to per­form con­struc­tion works in accor­dance with the BCA and AS 4654[254]. If instruct­ed to per­form the works incon­sis­tent­ly with the BCA and the Aus­tralian Stan­dard, he should have warned the Own­ers Cor­po­ra­tion in writ­ing of the like­ly eco­nom­ic loss or refused to per­form the works. This is an impor­tant, albeit some­what obvi­ous reminder, that the duty of care imposed by the DBP Act can­not eas­i­ly be over­come by a lack­adaisi­cal approach to com­pli­ance with the BCA and rel­e­vant Aus­tralian Stan­dards in deter­min­ing the scope of works under a con­tract for res­i­den­tial work gen­er­al­ly and specif­i­cal­ly in the con­text of reme­di­al works.

At [256] Waugh J made the fol­low­ing fur­ther find­ings that in this case the risk of harm ​‘if the water­proof­ing work was not per­formed in accor­dance with the BCA and Aus­tralian Stan­dard’ was fore­see­able, that the risk of harm ​“was not insignif­i­cant” nor ​“far-fetched or fan­ci­ful” and, that ​“a rea­son­able water proofer in Mr Da Sil­va’s posi­tion would have tak­en the pre­cau­tion of” com­ply­ing with the BCA and Aus­tralian Stan­dard as he had agreed to do under the con­tract.

Breach of Con­tract and Defences raised by the Builder

The Builder raised defences to the con­trac­tu­al claim of non est fac­tum, that the scope of the build­ing works were var­ied oral­ly, along with defences of con­trib­u­to­ry neg­li­gence and pro­por­tion­ate lia­bil­i­ty under Part 4 of the Civ­il Lia­bil­i­ty Act 2002. 

Defence of non est factum

The builder, who oper­at­ed a build­ing com­pa­ny, plead­ed a defence of non est fac­tum claim­ing the con­tract was void and of no effect because when he signed it he believed he was sign­ing a rou­tine doc­u­ment for insur­ance and safe­ty pur­pos­es, and not a con­tract giv­ing rise to per­son­al liability. 

The court referred to the High Court deci­sion in Petelin v Cullen (1975) 132 CLR 355, con­clud­ing that the builder did not meet the cri­te­ria for this defence, as there is no evi­dence sug­gest­ing he was unable to under­stand the doc­u­ment he signed, only that he chose not to read it. There­fore, the court was not con­vinced that the builder signed the doc­u­ment believ­ing it was some­thing else.

Vari­a­tions to contract

The builder accept­ed that the con­tract includ­ed the express terms relied upon by the Own­ers Cor­po­ra­tion but claims those terms were var­ied, absolv­ing him from adher­ing to the BCA and AS 4654. He insist­ed that the oth­er defen­dants, pur­port­ed­ly act­ing for the Plain­tiff, direct­ed these changes and that he per­formed the work as per the new scope. 

The court reject­ed the builder’s asser­tions, find­ing no cred­i­ble evi­dence that oth­er par­ties had the author­i­ty to alter the con­tract or, that they direct­ed the work to be done in a par­tic­u­lar way. Instead, emails and tes­ti­monies showed repeat­ed warn­ings were made against the way the builder was pro­ceed­ing with the work. 

The court also did not accept that the Own­ers Cor­po­ra­tion or its agents agreed to any con­tract vari­a­tions, giv­en their con­sis­tent con­cern for com­pli­ance with stan­dards. In addi­tion, as the work was res­i­den­tial build­ing work under the HBA, if there was a vari­a­tion of the con­tract it had to be in writ­ing signed by the par­ties to be effec­tive pur­suant to Paraiso v CBS Build Pty Ltd [2020] NSWSC 190. 

Find­ings

The plain­tiff in this case was award­ed the sum of $462,707.93 for breach of con­tract and for breach of statu­to­ry duty of care under the DPB Act which was the full cost of the cost­ed rec­ti­fi­ca­tion works reduced by the sum reflect­ing con­tri­bu­tions paid to the Plain­tiff Own­ers Cor­po­ra­tion through set­tle­ments reached with the sec­ond and third defendants.

[i] The Own­ers – Stra­ta Plan Num­ber 87060 v Loulach Devel­op­ments Pty Ltd (No 2) [2021] NSWC 1068

[ii] The Own­ers – Stra­ta Plan No. 84674 v Paf­burn Pty Ltd [2023] NSW­CA 301

[iii] Note: Paf­burn is present­ly on appeal to the High Court

[iv] Kazzi v KR Prop­er­ties Glob­al Pty Ltd t/​as AK Prop­er­ties Group [2024] NSW­CA 143

To read the Dis­trict Court New South Wales Judge­ment click here.