Boulus Constructions Pty Ltd v Warrumbungle Shire Council (No 2) [2022] NSWSC 1368

Andrew Hales  |  Laura-Rose Lynch |  William Vu

Key takeout

The definition of a ‘person’ who owes a duty of care under the Design and Building Practitioners Act 2020 (NSW) (DBP Act) is not limited to ‘practitioners’ (as defined in the DBP Act). This means that any person with ‘substantive control’ over the carrying out of building work or design work owes a duty of care, including managing directors and site supervisors.

This case further clarifies the operation of the duty of care, previously considered in the decisions in Pafburn (summarised here and here) and in Goodwin (summarised here).

Facts

Boulus Constructions (builder) entered into contract to build a retirement village in Dunedoo on behalf of the Warrumbungle Shire Council (Council).  The proceedings relate to the builder’s claims for breach of the contract and the Council’s cross-claim for damages arising from defective work.

The builder sought to amend its List Statement to claim the Council was not entitled to damages as the works were carried out illegally without a development consent.  In response, the Council sought to amend its Cross-Claim List Statement to include a claim for breach of the duty of care established by section 37 of the DBP Act by the builder as well as its managing director and project site supervisor.  In that regard, section 37(1) provides that ‘[a] person who carries out construction work has a duty of care to exercise reasonable care to avoid economic loss caused by defects’. 

The builder opposed that amendment on the basis that the persons subject to the duty of care should be narrowly interpreted and are limited to a ‘person who carries out construction work in their own capacity’, as opposed to a person who acts as an agent for another. The builder argued that a broad interpretation of ‘a person’ could mean the duty of care is potentially owed by thousands of persons involved in a large project, which would have far reaching and negative impacts on the construction industry.

Decision

Defence of illegality does not trump the duty of care

Stevenson J held that whether or not the works were carried out illegally did not impact whether the statutory duty was owed under section 37 of the DBP Act.  His Honour held that the cases concerning illegality relied on by the builder addressed whether a duty of care was owed at all. Here that question does not arise because the DBP Act says there is a duty.

A ‘person’ is not limited to a ‘practitioner’ for the purposes of section 37

Stevenson J rejected the builder’s argument that the reference to ‘a person’ in section 37 of the DBP Act should be limited to building and design ‘practitioners’ under the DBP Act.

His Honour undertook a careful analysis of how the word ‘person’ was used in the DBP Act.  Whilst ‘person’ is not defined, parliament had taken care to define ‘practitioner’ and use that term throughout the DBP Act, whilst ‘person’ is used in section 37.  Therefore, the reference to ‘a person’ must mean someone who is not necessarily a practitioner nor a person acting in their own capacity.  This was assisted by considering the fourth limb of the definition of ‘construction work’, which is the supervision, coordination and project management or having substantive control over the carrying out of ‘any’ work referred to in the first three limbs of the definition (ie building work, design work, and manufacturing and supply of building products).  His Honour held this work necessarily encompasses a wider range of activity than is described in the first three limbs.

His Honour also suggested in obiter that as the DBP Act is expressed to be subject to the Civil Liability Act 2002 (NSW), the proportionate liability regime under Part 4 of the Civil Liability Act thus applies to actions for breach of the section 37 duty. His Honour then reasoned that a person such as the managing director could seek to use that regime to identify concurrent wrongdoers and have their liability for breach of the duty limited.

Conflict of laws and prejudice

The builder also argued the duty of care imposed on a managing director conflicted with the Corporations Act 2001 (Cth) and the director’s independence from a corporation. However, the builder did not substantiate its claims and did not address the fact that the same duty was imposed on the director and the corporation.

His Honour also dismissed submissions that the late addition of a claim for a breach of the duty of care would be prejudicial as the court was not given any evidence of the alleged financial impact on the builder.