The DBP Act’s statutory duty of care under the microscope
The statutory duty of care introduced under the Design and Building Practitioners Act 2020 (NSW) (DBP Act) has been the subject of three recent Supreme Court of NSW decisions, which are among the first to consider its application.
Under section 37 of the DBP Act, a statutory duty of care is owed by a person who carries out construction work. That duty is to exercise reasonable care to avoid economic loss caused by defects, and is owed to the owner of the land (and each subsequent owner) on which the construction work is carried out.
Section 36(1) of the DBP Act further provides that construction work not only means building work, but also means supervising, coordinating, project managing or otherwise having substantive control over the carrying out of building work. The three Supreme Court of NSW decisions we highlight below have given broad application to the meaning of ‘construction work’ under the DBP Act, and considered the circumstances in which persons who supervise, project manage or have substantive control over the carrying out of building work will owe this statutory duty of care. They have also provided guidance on what detail is required in Court proceedings to allege a breach of the statutory duty of care.
Quick refresher on the statutory duty of care
Section 37 of the DBP Act imposes a statutory duty on any person who carries out construction work to exercise reasonable care to avoid economic loss caused by defects:
- in or related to a building for which the work is done; and
- arising from the construction work.
‘Construction work’ is defined broadly in section 36(1) of the DBP Act and includes:
- building work, which includes residential building work within the meaning of the Home Building Act 1989 (NSW);
- the preparation of regulated designs and other designs for building work;
- the manufacture or supply of a building product used for building work; and
- supervising, coordinating, project managing or otherwise having substantive control over the carrying out of any work referred to above.
This statutory duty of care is owed to owners of the land on which the construction work is carried out and extends to subsequent owners. It cannot be contracted out of or delegated, and importantly, it has retrospective application. This means that while the duty of care commenced on 10 June 2020, owners may enforce it for economic loss caused by defects in existing buildings where the loss became apparent in the 10 years prior to commencement.
Below we discuss two recent NSW Supreme Court decisions which consider the circumstances in which persons who supervise, project manage or have substantive control over the carrying out of building work will owe this statutory duty of care.
What is meant by ‘supervision and project management’?
Goodwin Streets Development Pty Ltd atf Jesmond Unit Trust v DSD Builders Pty Ltd (in liq)  NSWSC 624 (‘Goodwin decision’)
The Goodwin decision was handed down on 19 May 2022. Along with the other decisions discussed in this article, it is among the first to consider and apply the statutory duty of care under the DBP Act. The Court interpreted section 36 of the DBP Act broadly, finding that it captures persons who have engaged in project management and supervision of the relevant construction work.
A developer, Goodwin Street Developments Pty Ltd, entered into a contract with a builder, DSD Builders Pty Ltd (in liq), to construct residential boarding houses on private land near the University of Newcastle. The boarding houses were intended for university student accommodation.
The builder’s works commenced in July 2017. However, the licensed supervisor of the builder departed his employment and was not replaced. From that point, the work was only supervised by a representative of the builder, Mr Roberts, who had negotiated the contract with the developer. Issues began to arise with the builder’s works, including defects in the work and a lack of progress on site. These issues came to a head when the developer sent the builder a Notice to Remedy Defects on 2 March 2018. The builder carried out no further work after 2 March 2018 and later entered into liquidation.
Not long after the Notice to Remedy Defects was given, someone attended site and damaged the works by inserting concrete in sewer pipes, cutting through structural floor beams with circular saws, drilling holes in box gutters, and by removing items including internal doors, windows and stairs, along with causing other damage. After hearing evidence in relation to the complaint made to the police about the damage caused and evidence from a subcontractor on site who claimed to have witnessed the damage being caused, the Court concluded that Mr Roberts caused the damage.
The developer claimed that Mr Roberts was a person who carried out construction work within the meaning of section 37 of the DBP Act. Further, the developer alleged that Mr Roberts acted in breach of his duty to exercise reasonable care to avoid economic loss caused by defects arising from the construction work.
The Court first considered whether the construction of a boarding house was ‘construction work’ within the meaning of the DBP Act. After extensive statutory interpretation of five other Acts cross-referenced in the DBP Act, the Court concluded that the construction of a boarding house was construction work.
The Court then considered whether Mr Roberts had engaged in ‘project management’ of the construction works (which forms part of the definition of ‘construction work’ in section 36(1) of the DBP Act). The Court found that not only had Mr Roberts engaged in project management, he had also supervised the works. The Court came to this conclusion after considering evidence that Mr Roberts had introduced himself as the builder of the project, had undertaken supervision after the original supervisor had left, and had given assurances to the developer that defects would be attended to and fixed.
Accordingly, the Court found that Mr Roberts had engaged in ‘construction work’ and therefore owed a duty of care for the purposes of section 37 of the DBP Act. The Court determined that Mr Roberts was liable to pay damages to the developer for the cost of rectifying the defects.
The Goodwin decision is authority that the statutory duty of care in section 37 of the DBP Act is owed by a person who has engaged in project management of the site and supervision of the construction work.
What constitutes substantive control over the carrying out of building work?
The Owners – Strata Plan No 84674 v Pafburn Pty Ltd  NSWSC 659 (‘Pafburn decision’)
The Pafburn decision was handed down on 24 May 2022, and also considered the scope of the statutory duty of care under the DBP Act.
A strata development in North Sydney was carried out between 2008 and 2010 by the builder, Pafburn Pty Ltd, for the developer, Madarina Pty Ltd. The Owners Corporation commenced proceedings in 2020, five days within the 10 year limitation period concerning actions for defective building work under the Environmental Planning and Assessment Act 1979 (NSW).
In the proceedings, the Owners Corporation alleged that the developer and the builder breached the statutory duty of care under section 37 of the DBP Act. Against the builder, the Owners Corporation alleged that the builder had constructed the building defectively. As to the developer, the Owners Corporation alleged that the developer had engaged in ‘construction work’ for the purposes of section 37 of the DBP Act, in that it had supervised, coordinated, project managed and substantively controlled the building work carried out by the builder.
During the proceedings, the Court was tasked with considering what is meant by ‘otherwise having substantive control’ over the carrying out of the work described in the definition of construction work in section 36(1) of the DBP Act.
As to supervising, coordinating and project managing, the Court considered that this would be established if a person actually performed those functions.
However, when considering the words ‘otherwise having substantive control’, the Court concluded that this would be established if the person was in a position where it was able to control how the work was carried out (even if it did not exercise that control). For instance, a situation where a developer owned all the shares in a builder, and had common directors, may lead to an inference of an ability to control.
On a separate matter of interpretation, the Court considered that under section 37(2) of the DBP Act, the statutory duty of care is not owed to an owner that has itself carried out the construction work in question, as that would otherwise lead to an anomalous result.
What is required to allege a breach of the duty of care in Court proceedings?
The Owners – Strata Plan No 87060 v Loulach Developments Pty Ltd (No 2)  NSWSC 1068(‘Loulach decision’)
The Loulach decision was handed down on 15 November 2021. In these proceedings, the Owners Corporation (of Strata Plan No 87060) alleged that the developer (Loulach Developments Pty Ltd) and the builder (Loulach Street Pty Ltd) (collectively, Loulach), were responsible for a large number of defects in a residential strata development in Parramatta.
The proceedings relied on an alleged breach by Loulach of the statutory warranties under the Home Building Act 1989 (NSW). The Owners Corporation sought leave to amend its pleadings to add a claim for a breach by Loulach of the statutory duty of care under section 37 of the DBP Act.
In its proposed amended list statement, the Owners Corporation pleaded that the mere existence of defective construction work was sufficient to demonstrate a breach by Loulach of its statutory duty of care under section 37 of the DBP Act.
The Court held that this was insufficient, with Stevenson J stating 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’. The Court also held that a plaintiff, such as the Owners Corporation, alleging a breach of a duty of care must still ‘identify the specific risks that the builder was required to manage, and the precautions that should have been taken to manage those risks… It is not sufficient to simply assert a defect and allege that the builder was required to take whatever precautions were needed to ensure that the defect not be present.’
The Loulach decision is authority that in order to establish a breach under the DBP Act it is not as simple as pointing to the existence of a defect. The party alleging such a breach must set out in its pleadings and evidence a causal link between the existence of a specific defect and a specific breach of the statutory duty of care. In this case, the Court suggested this could be done by adding further columns to a Scott Schedule filed in the proceedings.
The statutory duty of care imposed by the DBP Act represented a significant change in law when it came into effect on 10 June 2020.
The first two NSW Supreme Court decisions considered in this Insight article provide useful guidance as to the specific circumstances in which the statutory duty of care under the DBP Act may apply. Given the broad definition of ‘construction work’, they also serve as an important reminder as to who may be caught by the scope of this statutory duty of care.
In the case of the Loulach decision, it provides clarity as to the requirements for establishing a breach of the statutory duty of care, and that the existence of a defect in the construction work does not automatically mean that a breach has occurred.
If you would like more information on the DBP Act or the statutory duty of care generally, please reach out to a member of the Construction and Infrastructure team at McCullough Robertson. We will be discussing these issues at our upcoming events.
Thank you to Alex Power for preparing this article.
 The Owners – Strata Plan No 87060 v Loulach Developments Pty Ltd (No 2)  NSWSC 1068 at .
 The Owners – Strata Plan No 87060 v Loulach Developments Pty Ltd (No 2)  NSWSC 1068 at -.
This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.