The Owners – Strata Plan 80867 v Da Silva [2024] NSWDC

Claire Tait  |  Alice Mason  |  Cedric Barakat

Key takeouts

• Any variations under a residential building contract must be in writing and signed by the parties in order to be effective.

• In order to meet the duty to take reasonable care to avoid economic loss caused by defects under the Design and Building Practitioners Act 2020 (NSW) (DBP Act), a builder who carried out waterproofing works owed the Owners Corporation a duty to comply with the Building Code of Australia (BCA) and the relevant Australian Standards as they relate to waterproofing.

• A claim for breach of duty under the DBP Act is not apportionable so that a defendant cannot reduce its own liability for loss by contending that other concurrent wrongdoers contributed to that loss.

Facts

In 2014, Da Silva (builder) was contracted by the Owners Corporation to carry out remedial works in a residential strata title building to rectify original building defects. The remedial works included removing and replacing defective tiles on the common balcony terrace of some of the units in the residential strata title building. The Owners Corporation alleged that the remedial works carried out by the builder were defective and commenced proceedings against the builder for:

1. breach of contract; and
2. in the alternative, breach of the duty to exercise reasonable care to avoid economic loss under section 37 of the DBP Act.

Decision

1. Claim for breach of contract

The builder raised a number of defences in relation to the claim for breach of contract, including:

• a defence of non est factum; and
• a defence that the contract terms were varied so as to absolve him of the need to comply with the BCA and the relevant Australian Standards.

Defence of non est factum

The builder claimed that the contract was void because when he signed the contract he believed he was sign­ing a routine doc­u­ment for insur­ance and work, health and safe­ty purpos­es, and not a contract giv­ing rise to per­son­al liability.

The Court dismissed this defence of non est factum. The Court referred to the High Court decision in Petelin v Cullen (1975) 132 CLR 355 and found that the builder did not meet the narrow class of persons that the defence of non est factum applies to as there was no evidence to suggest that the builder was unable to read the contract that he signed or that he, due to no fault of his own, was unable to understand the contract that he signed.

Instead, the Court found that the evidence established that the builder was able to read the contract and was able to understand it, but chose not to read it.

Defence that the contract terms were varied

The builder claimed that the contract was varied with the result that the varied works dispensed with the need to comply with the BCA and the relevant Australian Standards.

The builder asserted that persons acting for the Owners Corporation directed variations to the scope of work under the contract. The Court rejected this assertion that the contract was varied as it found no credible evidence that the persons purported by the builder to have been acting for the Owners Corporation had the authority to vary the contract. Instead, the Court found that emails from those persons contained warnings against proceeding with the works in the way the builder was proposing. In applying the Court of Appeal’s interpretation of the relevant provisions of the Home Building Act 1989 (NSW) (HBA) in Xu v Jinhong Design & Construction Pty Ltd [2011] NSWCA 277, the Court affirmed the position that any variation to the scope of residential building work under the HBA must be in writing and signed by the parties in order to be effective

2. Claim for breach of the duty of care under the DBP Act

The Owners Corporation also made a claim that the builder owed the Owners Corporation a duty to exercise reasonable care to avoid economic loss caused by defects arising from the construction work performed by the builder. This duty is established by section 37 of the DBP Act.  

While the builder accepted that he owed a duty of care to the Owners Corporation because the work he did was construction work, he again argued that his work complied with a varied scope of work which absolved him of the need to comply with the BCA and the relevant Australian Standards. Thebuilder also argued that ‘reasonable care’ did not require him to stop the works when it became apparent that it was not going to comply with the BCA and the relevant Australian Standards or to communicate this position to the Owners Corporation.

The Court:

• went beyond the findings in The Owners-Strata Plan Number 87060 v Loulach Developments Pty Ltd (No 2) [2021] NSWSC 1068 where Stevenson J held that section 5B of the Civil Liability Act 2002 (NSW) applies to a claim for damages for breach of the statutory duty in section 37 of the DBP Act, by also finding that section 5D of the Civil Liability Act 2002 (NSW) applies, as it addresses the question of whether negligence caused a particular harm;
• found that to meet the duty to exercise reasonable care to avoid economic loss from defects, the builder was required to perform the works in accor­dance with the BCA and the relevant Australian Standards as they relate to waterproofing; and
• found that the builder breached that duty of care by failing to perform the works in accordance with the BCA and the relevant Australian Standards.

Finally, the Court affirmed the Court of Appeal’s decision in The Owners – Strata Plan No 84674 v Pafburn Pty Ltd [2023] NSWCA 301 (Pafburn) where it was found that liability for a breach of a duty of care under section 37 of the DBP Act is not apportionable with the result that a defendant cannot reduce its own liability for loss by contending that other concurrent wrongdoers contributed to the loss. Instead, a defendant must bring a cross-claim against any concurrent wrongdoers.

Pafburn was (unsuccessfully) appealed to the High Court, with a decision handed down on 11 December 2024. Read our review of the High Court’s decision here: Developers and builders beware: High Court rules on non-delegable duty of care for defects   – Construction Law Made Easy