‘To ensure’, a bridge too far for DBP Act duty of care defect claims
Andrew Hales | Laura-Rose Lynch | Luke Sundercombe
Key takeout
The statutory duty of care in the Design and Building Practitioners Act 2020 (NSW) (DBP Act) does not require a person to ‘ensure’ the carrying out of construction work avoids economic loss caused by defects. It only requires that a person must take ‘reasonable care’ to avoid economic loss caused by defects.
Facts
The proceedings concerned claims arising from the development of a residential home. By way of cross claim, the owners of the developed land sued the builder for (among other things) the costs incurred to complete the works and rectify defective works. The owners claimed approximately $400,000 for the cost of completing the works and $420,000 for defect rectification. Importantly, the owners sued the sole director and shareholder of the builder personally for breach of the statutory duty of care under section 37 of the DBP Act in respect of defects.
Decision
Stevenson J accepted that the director was a person who, having attended site regularly to oversee the construction of the building, supervised and had substantive control over the building work at the site and was able to control how the work was carried out.
The court considered how the owners had pleaded their case against the director, which stated variously that the director was responsible for ‘ensuring that’ works complied with particular requirements including codes of practice, laws and regulations, and were carried out with due care and skill.
In response the builder for the director highlighted that the pleading of a ‘failure to ensure’ is different to a pleading of want of reasonable care, and directed the court to Gummow J’s decision in Road and Transport Authority of NSW v Dereder (2007) 234 CLR 330 that:
‘ … whatever their scope, all duties of care are to be discharged by the exercise of reasonable care. They do not impose a more stringent or onerous burden.’
While the court considered the pleading ‘unfortunate’, it nevertheless accepted that the fair reading of the substance of the pleading was that the owners alleged the director acted in breach of a duty to exercise reasonable care.
Save for in respect of a handful of particular defects, the owners encountered two subsequent and critical issues with their pleadings. First, they relied on the existence of defects to particularise how the director breached the statutory duty of care and secondly, their proof of loss arising from the defects.
In respect of the first issue, his Honour cited another of his earlier decisions in The Owners – Strata Plan No 87060 v Loulach Developments Pty Ltd (No 2). In that decision the owners had not identified the specific risks that the director was required to manage and the precautions that should have been taken to manage those risks.
In respect of the second issue, the owners’ evidence failed to satisfy the court as to the proportion of costs incurred in rectifying defects as opposed to carrying out other works the builder had contracted to perform but failed to complete. The owners had failed to adequately prove their loss arising from any breach by the director of his statutory duty of care.
The court rejected the owners’ evidence which sought to distinguish the costs incurred for rectification works and those incurred in carrying out the remaining scope. While the court accepted the total amount of $820,000 fairly represented the owners’ claim against the builder, the court was not convinced by the evidence of the owners’ architect (who was not qualified as an expert witness) as to how and by what reasoning the architect sought to distinguish the costs incurred ‘based on his knowledge’ of the works.