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  • Harry Chen

The 'Labyrinthine' Design and Building Practitioners Act

Updated: Feb 7

Over three cases, the NSW Supreme Court and the NSW Court of Appeal have clarified the extent of the statutory duty of care for people carrying out construction work under the Design and Building Practitioners Act 2020 (NSW) (DBP Act). The duty allows for people who carry out construction work to be held personally liable for defective construction work and was introduced by the NSW Parliament in 2020 in the aftermath of the defects in the Mascot Towers and Opal Tower buildings.


Schedule 1, clause 5 of the DBP Act extends the duty so that it operates retrospectively, applying to defects relating to construction work which cause economic loss and which have appeared in the 10 years immediately preceding the commencement of section 37 of the DBP Act on 10 June 2020.


Summary

  • The statutory duty of care in section 37 of the DBP Act is broad, applying to any person who carries out ‘construction work’, which includes ‘building work’.

  • The definition of ‘building work’ in the DBP Act has two parts. The type of building that ‘building work’ applies to is found in section 36 of the DBP Act, encompassing all buildings under the Environmental Planning and Assessment Act 1979 (NSW). The type of work that is covered in ‘building work’ is found in section 4 of the DBP Act but is extended by the definition of ‘building work’ in section 36 of the DBP Act.

  • The duty applies to any person who has ‘substantial control’ over the construction work. A person has ‘substantial control’ if they have the ability and power to control the construction work, even if they did not actually do anything to exercise that control.

  • A person who breaches this duty of care may be found personally liable but the proportional liability scheme under the Civil Liability Act 2002 (NSW) may provide a defence to a claim.

  • There is uncertainty as to whether insurers would cover retrospective claims under the DBP Act. This would likely be dependent on the terms of the insurance policy and the circumstances of the claim itself.

  • The NSW Government recently amended the scheme to exclude some types of construction work from falling under the statutory duty of care, such as Sydney Metro works. The scheme would likely be further amended in the future.


The Statutory Duty of Care

Section 37 of the DBP Act defines the duty that is owed:


‘Construction work’ is defined in section 36 of the DBP Act:


The Meaning of ‘Building Work’

In defining ‘building work’ for the statutory duty of care, the DBP Act has been described as ‘labyrinthine’ and ‘drafted so as to make comprehension of it as difficult as possible’: Goodwin Street Developments Pty Ltd atf Jesmond Unit Trust v DSD Builders Pty Ltd (in liq) [2022] NSWSC 624.


One definition for ‘building work’ is included in section 36 of the DBP Act. Section 36 provides definitions for Part 4, under which the statutory duty in section 37 of the DBP is contained:


Under section 36(1) of the Environmental Planning and Assessment Act 1979 (NSW) (EPA Act), a ‘building’ ‘includes part of a building, and also includes any structure or part of a structure (including any temporary structure or part of a temporary structure), but does not include a manufactured home, moveable dwelling or associated structure within the meaning of the Local Government Act 1993’.


This is further complicated by another definition of ‘building work’ in section 4 of the DBP Act, which applies to the whole DBP Act:


Clause 12 of the Design and Building Practitioners Regulation 2021 (NSW) (DBP Regulations) limits this definition of ‘building work’ to buildings that are class 2 under the Building Code of Australia. The definition includes a building where part of a building is class 2 e.g. for a mixed-use building, which comprises class 2, class 3 and class 6, the class 3 and class 6 parts are also included.


This ultimately means that there are two seemingly different definitions of ‘building work’ applicable to the statutory duty of care. The definition under section 36 seems to be broad, incorporating all buildings under the EPA Act. The definition under section 4 seems to be narrower, only encompassing class 2 and mixed-use buildings where a part of the building is class 2.


The NSW Court of Appeal in Roberts v Goodwin Street Developments Pty Ltd [2023] NSWCA 5 (Roberts) reconciled these two provisions in clarifying the definition of ‘building work’ by analysing the provisions of the DBP Act and inferring the intent of Parliament in passing the DBP Act.


Roberts, the appellant, was a builder who was contracted by Goodwin Street Developments, the respondent, to construct student accommodation in Jesmond, close to the University of Newcastle. A dispute arose between the parties regarding allegedly defective work and the progress of the works. The respondent issued a notice to the appellant to remedy the defective works or the building contract would be terminated. However, the defective works were not remedied. The appellant later entered the property and maliciously damaged the buildings that had been constructed. A key question in the appeal was whether ‘boarding houses’ were covered by the statutory duty of care in the DBP Act.


When introducing the Bill into Parliament, Kevin Anderson MP, the Minister for Better Regulation and Innovation, told Parliament ‘it is envisaged that the duty of care will apply to construction work in a building that is class 1, 2, 3 and 9 under the Building Code of Australia’.


However, the NSW Government accepted Amendment No 1 which extended the application of the duty of care before passing the Bill. This amendment was moved by David Shoebridge MLC and now forms the basis of the definition of ‘building’ in section 36 of the DBP Act. In proposing the amendment, Shoebridge told Parliament that:


‘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


The NSW Court of Appeal held that the broad meaning of ‘building’ within the EPA Act was applicable in determining the statutory duty of care in section 37 of the DBP Act. This definition applies to the type of ‘building’ that ‘building work’ applies to.


However, the Court noted that the section 36 of the DBP Act did not exhaustively describe the type of work that the statutory duty of care applied to. The definition of ‘building work’ in section 36 to include ‘residential building work within the meaning of the Home Building Act 1989’ merely provides an inclusive not exclusive definition so there are other types of ‘building work’ to which the duty could apply to.


The Court believed that this inclusive definition suggests that the definition in section 4 of the DBP Act provided some guidance as to the type of work that would be included in the duty. They also noted that ‘building work applies only to building work relating to a building within the meaning of this Part’, which suggests that the NSW Government had planned for different types of ‘building’ to apply to the statutory duty of care compared to other sections of the DBP Act.


Therefore, the Court held that the general definition in section 4 applies only in defining the type of ‘building work’ undertaken covered by the statutory duty of care, with the definition in section 36 defining the type of ‘building’ the work is undertaken on.


The Meaning of ‘Otherwise Having Substantive Control’

The type of construction work that is covered by the duty is not limited to people who physically carry out the construction work as the definition of ‘construction work’ in part 4, section 36 of the DBP Act includes ‘supervising, coordinating, project managing or otherwise having substantive control over the carrying out of’ any relevant building work, the preparation of regulated or other designs for building work and the manufacture or supply of a building product used for building work.


The NSW Supreme Court in The Owners – Strata Plan No 84674 v Pafburn Pty Ltd [2022] NSWSC 659 (Pafburn) gave this provision a broad meaning. In that case, the second defendant Madarina Pty Ltd was the developer and the owner of the land at the time of the allegedly defective works. The Owners Corporation claimed that Madarina breached the statutory duty of care with regards to the defective works because they had ‘substantial control’ over the development.


The Court held that a person could have ‘substantive control’ over the work even if they did not actually do anything to exercise that control. The Court noted that the phrase used was ‘having substantial control’, not ‘substantively controlling’. This means that a person owes the statutory duty of care if they are in the position of having the ability and power to control how construction work is carried out, even if they do not actually exercise that power.


The Meaning of ‘Person’

No definition of ‘person’ is provided in the DBP Act. This means that 'person' is given a broad meaning under section 21 of the Interpretation Act 1987 (NSW) to include ‘an individual, a corporation and a body corporate or politic’.


The NSW Supreme Court has further clarified the meaning of ‘person’ in Boulus Constructions Pty Ltd v Warrumbungle Shire Council (No 2) [2022] NSWSC 1368 (Boulus), holding that a ‘person who carries out construction work’ does not need to be a ‘practitioner’ under the DBP Act.


Boulus Constructions were constructing a retirement village on behalf of Warrumbungle Shire Council on the site of an old hospital in Dunedoo. Boulus Constructions claimed that they were owed payments for completed works while Warrumbungle Shire Council lodged a cross-claim for alleged defective works by Boulus Constructions. An issue that arose in the case is whether Brian Boulus, the Managing Director of Boulus Constructions, and Mr Bradley McCarthy, the Project Site Supervisor, could be held liable for any defective works under the statutory duty of care in the DBP Act.


The Court noted that the DBP Act provides definitions for many different types of ‘practitioner’ who carry out specific functions, such as ‘design practitioner’, ‘professional engineer’, ‘specialist practitioner’ and ‘building practitioner’. Thus, the Court held that it would be odd for the DBP Act to use ‘person’ to merely refer to ‘practitioners’ given there are extensive definitions of different types of ‘practitioners’ under the Act while there is no definition for ‘person’. This suggests that ‘person’ has a broader meaning than just ‘practitioners’.


The Court also looked at other instances where the word ‘person’ was used in the DBP Act. For example, the statutory duty of care in section 37 of the DBP Act states that ‘a person to whom the duty of care is owed is entitled to damages for the breach of the duty’. Because it would be illogical for the ‘person to whom the duty of care is owed’ to always be a ‘practitioner’ under the DBP Act, the Court held that this accords with the broader meaning of ‘person’.


The result of this decision is that anyone who carries out ‘construction work’ as defined in section 36 of the DBP Act is subject to this duty and may be held personally liable for defective works.


In Pafburn, the NSW Supreme Court also confirmed that a ‘person who carries out construction work’ can include the owner of the land in question who has carried out the requisite works. The Court held that there is nothing in the DBP Act that suggests that there is an exception for the owner of the land. The Court however believed that this construction did not mean that an owner of the land owed a duty to themselves for defective works that they completed but that the duty may be owed to any future owners of the land. This meant that Madarina could be subject to the statutory duty of care for carrying out ‘construction work’ despite also being the owner of the land.


Concurrent Liability under the Civil Liability Act 2002

Because the duty is framed as if it were under the common law, the NSW Supreme Court in

Boulus confirmed that the statutory duty is subject to the Civil Liability Act 2002 (CLA).


This means that the proportionate liability regime in section 35 of the CLA can be applied, which allows defendant parties to identify concurrent wrongdoers to reduce their liability in a claim under section 37 of the DBP Act. Where there has been defects in building work, a defendant may choose to identify other people involved in the construction and hold them liable for the same defects, such as engineers, architects and builders.


Insurance

As the number of people exposed to potential liability has increased due to the statutory duty of care in the DBP Act, it is unclear as to how insurers will respond. It remains to be seen whether insurers will offer insurance that covers claims under the DBP Act and whether there will be an increase in premiums for this coverage. This is especially the case due to the retrospective operation of the duty, which may expose policy holders to 10 years of possible liability and which may leave the insurer out of pocket unless premiums are vastly increased.


In the case of existing policies, there is likely no definitive answer as to whether a policy held at the time of the alleged defective construction work but issued before the commencement of the DBP Act would cover a claim under the DBP Act. This would likely depend on the specific terms and conditions of the policy and the circumstances of the claim.


The broad nature of the duty of care also raises issues as to the liability of senior officers, such as directors. Many directors have director’s liability insurance but whether claims under the DBP Act would be covered would also likely depend on the type of policy and its terms.


Further Changes to the DBP Act

The NSW Government has recently amended the DBP Regulations through Design and Building Practitioners Amendment (Miscellaneous) Regulation (No 2) 2022 (NSW), which commenced on 16 December 2022. It provides for more types of work to not be classified as ‘building work’ under the DBP Act.


Clause 13(1)(k) of the DBP Regulations previously exempted ‘work that is the fit-out of part of a building’ from being ‘building work’ if it related to a class 5 or 6 part of the building, the work primarily relates to fit-out and the work does not relate to a structural component. This exemption has now been extended to include class 5, 6, 9a or 9b building parts.


Clause 88B of the DBP Regulations has been introduced into the DBP Regulations to exempt ‘Sydney Metro works’ from being 'building work' and thus falling under the statutory duty of care.


Conclusion

The DBP Act is an extremely broad piece of legislation which sets out a duty of care to not cause economic loss from defective building work for any person involved in construction work as defined under the DBP Act. A person can be found personally liable for any resulting economic loss, which can be applied retrospectively from 10 June 2010.


Its full implications and repercussions are yet to be seen.

A copy of the DBP Act can be found here.


The full judgment in Roberts can be found here.


The full judgment in Pafburn can be found here.


The full judgment in Boulus can be found here.


If you require any advice on the DBP Act, including if you have a potential claim under the DBP Act or have a claim made against you pursuant to the DBP Act, please do not hesitate to contact us. Our expert construction lawyers will be on hand to assist you.


The information contained in this article is general information only and not legal advice. The currency, accuracy and completeness of this article (and its contents) should be checked by obtaining independent legal advice before you take any action or otherwise rely upon its contents in any way.



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