The recent decision in SP87060 v Loulach clarifies that a plaintiff claiming breach of the statutory duty of care in section 37 of the Design and Building Practitioners Act 2020 (NSW) (DBP Act) must plead all elements of that duty of care, including identifying a specific risk of harm that the defendant was required to manage, and not just that there are defects in the building the subject of the claim.
The Owner commenced proceedings in the Supreme Court of NSW (Court) against the developer and the builder of the property. The claim was for the cost of rectifying various defects, including water ingress and non-compliant cladding.
The Owner’s original cause of action was for breach of the statutory warranties in section 18B of the Home Building Act 1989 (NSW) (HBA). Subsequently, the Owner sought leave from the Court to amend its pleadings to add a cause of action for breach of the statutory duty of care in section 37 of the DBP Act against the builder.
Section 37 of the DBP Act places a statutory duty to exercise reasonable care to avoid economic loss caused by defects on persons who carry out construction work within the meaning of the DBP Act. The duty is owed to each owner and subsequent owner of the land, regardless of whether the construction work was carried out under a contract. The duty is not delegable (section 39 of the DBP Act) and operates in addition to the warranties in section 18B of the HBA (section 41 of the DBP Act).
The Owner’s proposed amended pleadings included a Scott schedule, which identified the various defects at the property, and said that because of those defects, the builder had breached the duty and was liable to the Owner for loss and damage.
The builder opposed the Owner being granted leave to file its amended pleadings on the basis that, while it admitted that the duty was owed to the Owner, the amended pleadings did not adequately identify how the duty was said to have been breached.
The Court refused the Owner leave to file its amended pleadings, but made orders permitting the Owner to prepare a further amended pleading.
In reaching its decision, the Court held that the DBP Act “was not intended to provide a shortcut as to the manner by which a breach of such duty might be established”.
Rather, as provided in the Second Reading Speech for the Design and Building Practitioners Bill 2019 (NSW), “any person who wants to proceed with litigation will be required to meet the other tests for negligence established under the common law and the Civil Liability Act 2002”.
Accordingly, the Court held that a pleading, including a claim for breach of the duty, must identify and articulate the risk of harm the defendant was alleged to have had a duty to take precautions against, as well as that the defendant had actual knowledge of the risk, thereby rendering the risk foreseeable and allowing the Court to determine what steps ought to have been taken to manage this risk (see Sergienko v AXL Financial Pty Ltd [2019] NSWSC 151).
The Court held that the Owner’s proposed amended pleadings did not adequately articulate the basis on which the Owner said that the builder had breached its duty.
The Court gave a number of examples to illustrate the level of detail that it expected to be included in an amended claim, or an associated Scott schedule, in claims for breach of the duty.
In relation to non-compliant cladding, the Court held that the amended pleading needed to state not just that there was non-compliant cladding at the property, but also how the builder had breached its duty, for example, because:
In circumstances where the Owner’s proposed amended pleading did not identify what risks the builder was required to manage and how it had failed to do this, the Court refused the Owner leave.
Although this decision relates to essential elements of a pleading under section 37 of the DBP Act, it also provides guidance as to the evidence that parties will be required to serve to prove a claim for breach of the duty.
It will be insufficient to merely rely on evidence of the existence of defects, which will generally be sufficient to prove a claim for breach of the warranties in section 18B of the HBA. Rather, it will be necessary to lead evidence as to what the person completing the work should have done, but did not do, thereby causing the defects, loss and damage.
Authors: Christine Jones, Marie-Louise Scarf & Daniel Fane
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Environmental Planning Instruments
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Regulations and other miscellaneous instruments
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The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.
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