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Residential Focus

01 December 2021

#Property, Planning & Development

Published by:

Daniel Fane

Residential Focus

What is necessary to make a claim for breach of the statutory duty of care under the Design and Building Practitioners Act?

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.

Facts

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.

Decision

The Court refused the Owner leave to file its amended pleadings, but made orders permitting the Owner to prepare a further amended pleading.

Reasoning

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:

  • the builder failed to read the architectural plans
  • the builder failed to follow the architectural plans
  • the builder inappropriately selected the location at which the cladding was to be installed
  • the manner in which the cladding was installed, in particular, locations that converted otherwise acceptable cladding into unacceptable cladding
  • the builder had a duty to choose cladding other than that specified by the architect
  • the builder failed to ask questions, and if so what questions, about the specification of the cladding in the architect’s plans
  • that the builder should have commissioned a flammability report
  • something else.

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.

Implications

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

In the media

Detached home building to remain strong throughout 2022
“Demand for new detached and multi-unit housing has remained strong, suggesting that the current boom in home building will be sustained throughout 2022,” stated HIA Chief Economist, Tim Reardon (19 November 2021).  More...

Opal Tower builder under fire over other projects
The NSW Building Commissioner has taken aim at the builder involved in multiple projects across the city embroiled in legal action with apartment owners (22 November 2021).  More...

NSW government protecting regional apartment buyers
As the building and construction sector continues to flourish and grow in regional NSW, the NSW Government will be inspecting developments in the North Coast to ensure that buildings are being built and constructed to the highest standards of compliance and safety (18 November 2021).  More...

Published – articles, papers, reports

BIM and Beyond: Design in Architecture 2021
Australian Institute of Architects and NBS: November 2021.
Aims to assist architectural practices in future-proofing their operations with data that informs investment decisions and examines the use of Building Information Modelling in architectural practice today and forecasts its uptake in years to come. The report cites a number of surveys and overseas studies. Read more here.

ABCC Industry Update – 16 November 2021
The November issue of Industry Update puts a spotlight on sexual harassment in the construction industry by sharing key statistics, case studies, and findings of the Respect@Work report. Learn about the Fair Work Commission's new powers, including what they mean for building industry participants and how to access them if you experience sexual harassment. Read the Industry Update – November 2021 edition.

Practice and courts

ISCA: The Draft Culture Standard for the Construction Industry 
The ISv2.1 Rating Scheme tackles this head on through workforce sustainability credits, rewarding projects for effectively addressing strategic workforce planning and bringing into focus the most material issues for people in the construction workforce. The ISCA sees three areas that the Culture Standard could further address: The IS wider view of diversity and inclusion, modern slavery and nature of subcontracting. The consultation period on the draft Culture Standard closes on 17 December 2021. Provide feedback on the draft Culture Standard here.

ABCB: Which version of an NCC referenced document applies and when?
Knowing which NCC referenced document to use can be confusing, especially when they are updated between NCC amendment cycles. The use of a Deemed-to-Satisfy Solution must use the version of the referenced document listed in Schedule 4 of the NCC. Check out this article for more guidance on understanding NCC referenced documents (18 November 2021). Read more here.

ABCB WMTS:535–2021: Public comment draft round 1
For public comment Technical Specification for the WaterMark Certification Scheme. This specification includes requirements for air valves for plumbing applications. Closes 2 December 2021. Read more here.

GBCA: Registrations for Green Star – Design & As Built close 17 December 2021
At the time of launch we announced a transition period: Whereby applicants could register projects using either Green Star – Design & As Built, or Green Star Buildings. This transition period ends on 17 December 2021 and applicants will no longer be able to register their projects under Green Star – Design & As Built. Read more here.

EPA: National Asbestos Awareness Week: Think twice about asbestos and know where to look
Your home might be the 1 in 3 that has asbestos so if you’re considering DIY renovations or maintenance the EPA wants you to get in the know, take it slow and get a pro (23 November 2021). Read more here.

Residential Apartment Buildings (Compliance and Enforcement Powers) Act orders register
Orders are issued by the Building Commissioner under the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020. Read more here.

Guide for design practitioners and engineers
Consult Australia, Engineers Australia and the Australian Institute of Architects have joined forces to develop the Guide for design practitioners and engineers to help their members tackle the recent NSW Building Confidence reforms. There are multiple new obligations on design practitioners, engineers and building practitioners throughout the life of a building under the NSW Design and Building Practitioners Act 2020 and the Design and Building Practitioners Regulation 2021.

Cases

Woolaston t/as AAA Z Prop Maintenance v Robertson [2021] NSWCATAP 382
1. Time is extended pursuant to s 41 of the Civil and Administrative Tribunal Act 2013 to lodge the appeal.
APPEAL – consumer contract – home building – unlicensed works – no issue of principle.
Australian Consumer Law; Civil and Administrative Tribunal Act 2013 (NSW) – ss 50(2), 41, 80; cl 12 of Sch 4; Fair Trading Act 1987 (NSW); Home Building Act 1989 (NSW).

Vella v LB Dellit Pty Ltd t/as Dellit Design and Construct [2021] NSWCATAP 376
COSTS – HOME BUILDING – whether relevant considerations taken into account on exercise of discretion.
Civil and Administrative Tribunal Act 2013 (NSW), ss 60, 80, 81, Sch 4 cll 12; Civil and Administrative Tribunal Rules 2014 (NSW), rr 38, 38A.

Raffie v JIH Building Designs Pty Ltd [2021] NSWSC 1512
CIVIL PROCEDURE – appeal from decision of NCAT Appeal Panel – Fair Trading Act – competency of appeal – UCPR 50.16 – no question of law raised – whether decision of tribunal member at first instance appealable – affected paragraphs dismissed as incompetent.
The dispute was in relation to the provision of design services by the defendant to the plaintiff. It appears that the plaintiff claimed the sum of $59,756.79.

Frangieh v City of Canada Bay Council [2021] NSWLEC 1720
APPEAL – Building Information Certificate – consent orders in previous civil enforcement proceedings not complied with – complying development certificate landscaping plan not complied with – orders.

Modern Design Wardrobes Pty Ltd v Clayton [2021] NSWCATAP 378
APPEALS – consumer claim – contract for the supply and installation of wardrobes – defects in design and installation – breach of statutory warranties – money order directed against supplier and cost of removal – whether decision was contrary to the evidence or otherwise unreasonable – whether Tribunal considered the rights of the appellant – whether money order should have been made – whether costs of removal should be awarded against appellant.
Civil and Administrative Tribunal Act 2013 (NSW); Home Building Act 1989 (NSW); Modern Design was ordered to pay the respondents the sum of $10,306 immediately.

Day v Quince’s Quality Building Services Pty Ltd (No 2) [2021] NSWCATAP 373
COSTS – discretion to award costs – general rule is each party is to pay their own costs – where party has been unsuccessful on some issues – where those issues have not significantly added to costs.

Shaw v Niru Construction Pty Ltd & Anor (No.3) [2021] NSWDC 624
COSTS – multiple defendants – plaintiff successful against company first defendant only – whether plaintiff should pay costs of director second defendant where same legal representatives were retained – application for Sanderson order – application for exemption from statutory cap for costs.

The Owners – Strata Plan No 87060 v Loulach Developments Pty Ltd (No 2) [2021] NSWSC 1068
BUILDING AND CONSTRUCTION – Design and Building Practitioners Act 2020 (NSW) – statutory duty under s 37 – application to amend Technology and Construction List Statement – whether sufficient merely to identify the alleged defects – whether necessary to plead the risks the builder was required to manage and the precautions the builder should have taken to manage those risks.

Legislation

Environmental Planning Instruments
State Environmental Planning Policy (Housing) 2021 (2021–714) – published LW 26 November 2021
State Environmental Planning Policy Amendment (Fire Sprinkler Systems) 2021 (2021–715) – published LW 26 November 2021

Regulations and other miscellaneous instruments
Environmental Planning and Assessment (Development Certification and Fire Safety) Regulation 2021 (2021–689) – published LW 26 November 2021
Environmental Planning and Assessment Amendment (Housing) Regulation 2021 (2021–692) – published LW 26 November 2021

Bills introduced – government – 19 November 2021
Licensing and Registration (Uniform Procedures) Amendment Bill 2021
Home Building Act 1989 No 147 – [1] Section 19 Application to contractor licences of Licensing and Registration (Uniform Procedures) Act 20022; Home Building Regulation 2014; Clause 42 Certificates of registration may be issued in digital or physical form.

Disclaimer
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.

Published by:

Daniel Fane

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