The Owners – Strata Plan No 84674 v Pafburn Pty Ltd (No 2) [2022] NSWSC 1002

Andrew Hales  |  Sophie Wallwork  |  Jaime Parker

Key takeout

A person must have ‘carried out construction work’ for the purpose of section 37(1) of the Design and Building Practitioners Act 2020 (NSW) (DBP Act) to owe a duty of care to an owner.

In the circumstances of this case, allegations as to whether a person who has concurrent capacities as sole director and thus ‘controlling mind’ of a developer and as the builder’s nominated supervisor, in fact supervised, coordinated and project managed the carrying out of building work or had the ability to control how building work was carried out, should be determined at hearing rather than on an application to summarily dismiss the claim.  

Facts

This case further clarifies the decision in The Owners – Strata Plan No 84674 v Pafburn Pty Ltd [2022] NSWSC 659. Reported here.

The plaintiff is the owners corporation of a strata development in North Sydney (owners corporation).  Pafburn Pty Ltd (builder) was the builder of the development and Madarina Pty Limited (developer) was the owner of the land, until the strata plan was registered.

The builder and the developer are related bodies corporate.  Relevantly:

• the builder owned all the shares in the developer;
• Mr Antonios Obeid and Mrs Maria Obeid owned all the shares in, and were directors of the builder; and
• Mr Obeid was the sole director of the developer.

The owners corporation commenced proceedings against the builder and the developer claiming that they both acted in breach of the duty of care prescribed by section 37(1) of the DBP Act.

On the previous occasion, the court held that on the proper construction of the DBP Act, a ‘person’ who carries out construction work as referred to in section 37(1) of the DBP Act includes the owner of the land in relation to which the construction work is carried out; and a person ‘otherwise having substantive control’ over the carrying out of any work for the purposes of the definition of ‘construction work’ in the DBP Act includes a person who, as a matter of fact, is ‘able to control how the work is carried out’.

The critical question in this judgment was whether the allegation in the proposed amended list statement that the developer itself ‘carried out construction work’ for the purpose of section 37(1) DBP Act was so obviously untenable that it could not possibly succeed such that the proceedings against the developer should be summarily dismissed.  The Owners Corporation sought to establish that the developer ‘carried out construction work’ on the following basis:

• Mr Obeid, as sole director and controlling mind of the developer, contracted on behalf of the developer and appointed himself as nominated supervisor of the building work;
• at all material times, the developer supervised, coordinated and project managed the building work; and
• the developer, by Mr Obeid, had the ability and power to control how the building work was carried out and thus had substantive control over the building work.

Decision

Stevenson J declined to dismiss the proceedings against the developer. It was noted that the jurisdiction to terminate an action is to be used sparingly and is not to be used unless it is a clear case in which the court is satisfied that it has the requisite material and the necessary assistance to reach a definite and certain conclusion that the claim cannot possibly succeed.

Supervising, coordinating and project managing building work

In relation to the proposition that because Mr Obeid concurrently held the positions of sole director and was thus the ‘controlling mind’ of the developer and also the builder’s nominated supervisor he, in his capacity as the sole director and ‘controlling mind’ of the developer, in fact ‘supervised, coordinated and project managed the carrying out of the building work’ Stevenson J held that it may not be made out at the hearing but he could not conclude at this stage that it certainly will not be.

Substantive control

It was considered at least arguable that because Mr Obeid had concurrent capacities as sole director of the developer and the builder’s nominated supervisor, he may, as a matter of fact, and in his capacity as a director of the developer, have had the ability to control how the building work was carried out, and this should be explored at the hearing.