By Gabriella Hijazi and Alyce Kliese

In the case of Goodwin Street Developments Pty Ltd atf Jesmond Unit Trust v DSD Builders Pty Ltd (in liq) [2022] NSWSC 624 (Goodwin v DSD) Justice Stevenson of the NSW Supreme Court addressed the scope of Part 4 of the Design and Building Practitioners Act 2020 (DBP Act).

Legislative background

Part 4 of the DBP Act came into force on 11 June 2020. It imposes a statutory duty of care on persons carrying out construction work to exercise reasonable care to avoid economic loss caused by defective construction work. This duty can be applied successively, meaning that people carrying out construction work owe a duty of care to current and subsequent owners.

The duty of care imposed under Part 4 of the DBP Act extends to construction work carried out prior to 11 June 2022, if the economic loss first became apparent any time after 11 June 2012.

This statutory duty of care has traditionally been interpreted to apply to class 2 buildings only (such as multi-residential apartment buildings or buildings with a class 2 part). This because the scope of the DBP Act is defined in s4 of the DBP Act and s12 of the Regulation and refers to class 2 buildings only.

Goodwin v DSD

In this case Goodwin (the Applicant developer) pursued DSD (the respondent builder) and its representative, Mr Daniel Roberts (the project manager of the respondent builder), for the damage and defects in student accommodation in Newcastle which occurred during construction in 2017 to 2018.

In early 2021, DSD was ordered to be wound up in insolvency and the proceedings against DSD were paused. The proceedings continued against Mr Roberts. The Court therefore only considered Mr Roberts’ personal liability, in his capacity as representative of DSD.

In this case, Justice Stevenson applied the principles of statutory interpretation to determine that section 37 of the DBP Act applies the statutory duty to all building work (both residential and commercial projects) related to the construction of a ‘building’ as defined in the Environmental Planning and Assessment Act 1979. This means that the statutory duty of care is broadly applied to building work on nearly all buildings (including commercial buildings), with only limited exceptions such as moveable dwellings.

Given the above, the Court was able to apply the duty of care to the subject sites, which were residential boarding houses.

Ultimately the Court found that Mr Roberts owed a duty of care under part 4 of the DBP Act to Goodwin. Mr Roberts was found to have breached that duty of care because the defects were not corrected despite his assurance that they would be. This finding resulted in Mr Roberts being personally liable to pay the owner of the land the cost of making good the damage and rectifying the defects.

What does this mean?

The key take-aways from this case are as follows:

  1. all building work, not just residential building work or class 2 buildings, will be caught by the duty of care provisions under part 4 of the DBP Act;
  2. the statutory duty of care imposed by part 4 of the DBP Act is owed by corporations and by individuals too. This means that industry participants can no longer hide behind the corporate veil; and
  3. if a developer/building company no longer exists, there may still be a cause of action with respect to the project management and/or supervision of the construction work during the project. This is because it is possible to pierce the corporate veil where it can be proved that a person retained such control of the works that are specifically linked to the pleaded defects (such was the case with Mr Roberts).