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Recent Supreme Court decision regarding Building Act

Supreme Court Considers the Design and Building Practitioners Act New Obligations

The Design and Building Practitioners Act (referred to as the Act in this article) recently introduced a statutory duty of care for people who carry out construction work in NSW.  In simple terms, there is a duty of care which obliges construction workers to avoid economic loss caused by defects relation to or arising from the relevant work.  The duty of care created by the Act cannot be delegated.  This duty of care is owed to owners of the land and to each subsequent owner of the land.  Where the duty of care is breached, a party is entitled to seek damages.

Recently, the New South Wales Supreme Court has had the opportunity to comment on the operation of the duty of care outlined in s37 of the Act .  The Supreme Court considered this duty of care in the case of The Owners-Strata Plan No 87060 v Loulach Developments Pty Ltd (No 2) (the Case).

The Owners – Strata Plan no 87060 v Loulach Developments Pty Ltd (No 2).

The Context

The subject of the Case was a dispute between the Owners Corporation (referred to in this article as the Owners) of a strata development and the developer and builder of the development (collectively in this article referred to as “Loulach”).  The Owners alleged that Loulach was responsible for various defects in the development and that they had breached their duty of care under the Act.

The Issue

For the purpose of this article, the relevant issue for the court’s determination in the case was whether Loulach had in fact breached their duty of care under the Act.

The Decision

The court rejected the Owner’s contention that Loulach had breached their duty of care under the Act.  The court stressed that “there is no provision in the Act stating that the mere fact of a defect establishes a breach” of a duty of care.  The court took the view that the Act was meant to “alleviate the need for a party like the Owners to prove a duty of care owed by the Builder” and emphasised the fact that the Act’s duty of care provision was not intended to be a shortcut for establishing a breach of that duty.

The court explained that parties claiming a breach of the duty of care under the Act must provide adequate evidence to substantiate the claim and indicated that prospective plaintiffs “must identify the specific risks that the builder was required to manage, and the precautions that should have been taken to manage those risks”.  The court also clarified that a breach of the duty of care will not necessarily exist simply where a defect is asserted, and the plaintiff claims the builder failed to take all steps necessary to prevent the defect.

In short, the court explained that prospective plaintiffs alleging a breach of the duty of care within the Act should ensure they specify the defect, the risks the builder was responsible for and what the builder should have done to manage the risk.

Cited Authorities

The court’s decision was supported by the comments made by justices of both the Court of Appeal and the Supreme Court in the case of Garzo v Liverpool/Campbelltown Christian School (Garzo).

The court embraced the view of the Court of Appeal in Garzo that plaintiffs should formulate claims in a manner which considers: the precautions the defendant should have taken, the risks of damage which eventuated and how the precautions should have been directed at such risks.

The court endorsed the observations made by the Supreme Court in Garzo in relation to claims of a similar nature to those in the Case before the court.  In short, the court endorsed the view that plaintiffs should articulate the risk of harm with respect to which the defendant was to take precaution.  As such, clear articulation of these risks properly positions the court to assess the the defendant’s liability for the risk or harm resulting from it.

It should be noted, the court in this Case appropriately extrapolated the judicial material in Garzo, which dealt with claims under the Civil Liability Act.  This is because the duty of care provisions in the Act have been expressed as being subject to the Civil Liability Act.

Closing Thoughts and Relevance to Duty of Care

The Supreme Court’s decision in the case serves as an effective form of guidance as to the operation of the duty of care under s37 of the Act.  The decision ensures that claims of a breach of duty of care will not be automatically founded under the Act where only a defect exists.  Accordingly, plaintiffs and defendants alike should take note that claims alleging breach of a duty must specify the connection between the defect and the breach of the duty.

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