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Limebite 02/23

NSW Court of Appeal confirms expanded duty of care for building professionals, with duty set to expand further

Alex HaslamJulian Peake
Authors (from left):

Roberts v Goodwin Street Developments Pty Ltd [2023] NSWCA 5

The NSW Court of Appeal has dismissed an appeal by an employee of a building company (now in liquidation) who was found by the Supreme Court of NSW to owe a duty of care to the owner and developer of  a student accommodation project.

In the first instance decision of Goodwin Street Developments Pty Ltd atf Jesmond Unit Trust v DSD Builders Pty Ltd (in liq) [2022] NSWSC 624, the Supreme Court determined that the duty to exercise reasonable care to avoid economic loss caused by defects contained in section 37 of the Design and Building Practitioners Act 2020 (NSW) (DBP Act) applies to all building work, that is, to both residential and commercial projects, so long as it relates to the construction of a “building” as defined in the Environmental Planning and Assessment Act 1979 (NSW) (EPA Act).

If a structure is not classed as a “building”, or the work undertaken relates to matters separate to the construction of a “building”, the duty will not apply. However, noting the expansive definition of “building” in the EPA Act, the application of the duty is far reaching.
The decision also confirmed that the duty can apply to any “person” engaged in construction work, including: employees, directors and agents of a company that entered into a design and/or construction contract, even if they did not themselves enter into the construction contract or were mere employees.
The builder appealed, pleading that the trial judge had wrongly construed the DBP Act on finding that it applied to student accommodation.
The NSW Court of Appeal dismissed the appeal. Although the Court did not agree with the trial judge’s construction of sections 4 and 36(1) of the DBP Act , it clarified that parliament’s stated intent when introducing the duty of care contained in section 37 was that it should have “broad coverage” and apply to “all buildings”, whether residential or not, so long as they fall within the ambit of the EPA Act.

What’s next?

The reach of the duty of care contained in section 37 of the DBP Act is only set to increase with the foreshadowed enactment of the Building Bill 2022 (NSW).

The current wording of the Building Bill:

• expands the application of the current duty of care to all building work, including work relating to commercial building projects and subdivision work i.e. work that does not necessarily relate to the construction of a particular “building”;

• expands the duty of care to certifiers and for inspection and certification of building work, which is arguably not captured (in some circumstances) under the current duty of care;

• has the potential to extend the warranty period for serious defects in residential construction to 10 years (currently 6 years under the Home Building Act 1989 (Cth)).

Submissions in respect of the Building Bill have now closed.

Related articles:
Recent developments in the liability landscape for design and building professionals 

Supreme Court confirms broad ambit of duty of care for design and building professionals 

This publication constitutes a summary of the information of the subject matter covered. This information is not intended to be nor should it be relied upon as legal or any other type of professional advice. For further information in relation to this subject matter please contact the author.