25 October 2022

CASE NOTE – Goodwin Street Developments Pty Ltd atf Jesmond Unit Trust v DSD Builders Pty Ltd (in liq) [2022] NSWSC 624

On 19 May 2022, the Supreme Court of NSW handed down the decision of Goodwin Street Developments Pty Ltd atf Jesmond Unit Trust v DSD Builders Pty Ltd (in liq) [2022] NSWSC 624.

The decision clarified the meaning of “building work” in Part 4 of the Design and Building Practitioners Act 2020 (NSW) (DBP Act) and as such clarified circumstances in which the statutory duty outlined in section 37 of the DBP Act is owed.

The case also has particular relevance for “project managers” engaged in construction work for the purposes of section 36 of the DBPA Act.

 

BRIEF SUMMARY OF FACTS

• On 10 July 2017, Goodwin Street Developments Pty Ltd (Goodwin) entered into a building contract with DSD Builders Pty Ltd (DSD) to construct three residential boarding houses on one site. Goodwin was the developer and DSD was the builder.
• A residential boarding house is a class 3 building. Class 2 buildings are essentially apartment buildings.
• Mr Roberts, the then fiancée of the sole director of DSD, project managed the construction work on the site on behalf of DSD.
• Within 6 months into the project, disputes arose between Goodwin and DSD relating to defective building works carried out by DSD.
• Works were subsequently suspended so that the disputes between the parties could be resolved.
• Two weeks after the works were suspended, it was discovered that previously installed fixtures such as windows and doors had been removed and portions of the construction work completed by DSD had been damaged.
• Goodwin issued a number of default notices on DSD which DSD did not action. Subsequently, Goodwin terminated its contract with DSD.
• Goodwin commenced proceedings against DSD and Mr Roberts claiming, among other things, that DSD and MR Roberts carried out “construction work” within the meaning found in section 36 of the DBP Act and that they breached their statutory duty under section 37 of the DBP Act to avoid economic loss caused by defects identified in the construction work undertaken.

 

ISSUES CONSIDERED

Was a “boarding house” construction work?

The Court considered the issue of whether the construction of a boarding house was within the meaning of “construction work” found in Part 4 of the DBP Act.

This issue needed to be considered to determine whether DSD and Mr Roberts owed the statutory duty of care outlined in section 37 of the DBP Act.

The Supreme Court ultimately held that construction of the boarding houses was construction work as it was building work under Part 4 of the DBP Act.

In coming to this conclusion, the Supreme Court analysed the definitions of “building”, “building work” and “construction work” found within section 36 of the DBP Act and considered the underlying parliamentary intent for the amendments made to these definitions when determining their meaning.

These definitions are extracted below for convenience.

“36  Definitions

(1)      In this Part –

building has the same meaning as it has in the Environmental Planning andAssessment Act 1979…

building work includes residential building work within the meaning of the Home Building Act 1989.

construction work means any of the following—

(a) building work,

(b) the preparation of regulated designs and other designs for building work,

(c) the manufacture or supply of a building product used for building work,

(d) supervising, coordinating, project managing or otherwise having substantive control over the carrying out of any work referred to in paragraph (a), (b) or (c)…”

 

Intent of Parliament

The Court held that the intent of Parliament was for the definition of building in section 36 to have the same meaning as the definition of building in section 1.4 the Environmental Planning and Assessment Act 1979 (NSW) (extracted below) and as such a boarding house is a building within that definition which states:

“building includes part of a building, and also includes any structure or part of a structure (including any temporary structure or part of a temporary structure), but does not include a manufactured home, moveable dwelling or associated structure within the meaning of the Local Government Act 1993.”

 

Clarification of the two definitions of “Building Work”

The Court also clarified the connection between the two definitions of building work found in the DBP Act held that the definition of Building Work found in section 4 of the DBP Act had no application to Part 4 of the same Act.

Accordingly, the definition of building work in section 36 is not restricted to work relating to only a class 2 building.

Statutory Duty of Care established

The conclusion that the construction of the boarding houses was “construction work” led to the Supreme Court to a finding that Mr Roberts carried out construction work as he supervised and managed the construction works.

Accordingly, Mr Roberts was found to have owed Goodwin the statutory duty of care outlined in section 37 of the DBP Act. Based on the evidence adduced by Goodwin, the Supreme Court held that Mr Roberts breached that duty of care.

Evidence relied upon by the Court

In making that conclusion, some of the key facts considered by the Court included that:

(1) there was no dispute that the:

(a) work was defective; and

(b) costs of rectification were circa $300,000.

(2) Mr Roberts:

(a) did not only engage in “project managing” but also supervised DSD’s construction of the project.

(b) introduced himself as “the builder” of the project.

(c) continually throughout the project said, “don’t’ worry about that. I’ll fix it. Don’t worry about that I’ll fix it…”

(d) gave assurances that the defect would be “all fixed“.

(e) the defects were not corrected despite Mr Robert’s assurances that “I’ll fix it“.

Project Manager found liable

His Honour Stevenson J said that as Mr Roberts did not give evidence in answer to Goodwin’s Claim. His Honour was “enable(d) … to move readily to draw an inference that the defects that he constantly assured Goodwin he would “fix” were brought about by a want of care on (Mr Roberts) part in his project management and supervision of the work and thus his engagement in “construction work” for the purpose of s36(1) of the DBPA Act.“

The Court accordingly found Mr Roberts liable to pay damages for the cost of rectifying the defects.

The Supreme Court also held that NSW Parliament intended for the definition of “building work” in Part 4 of the DBP Act to be a non-exhaustive definition which included “residential building work” within the meaning of the Home Building Act 1989 (NSW) (HBA 1989) but also includes work related to the construction of a building not considered to be a dwelling under the HBA 1989.

 

KEY TAKEAWAYS

1. The statutory duty of care outlined in Part 4 of the DBP Act is owed by building practitioners who carry out the construction of almost any type of building in NSW, and not just the construction of a Class 2 Building.

2. The statutory duty of care is owed by individuals and corporations alike. An individual will not be able to seek protection behind the corporate veil to avoid personal liability.

3. An individual can be liable for a breach of the statutory duty of care despite the fact that the corporation that entered into the contract to carry out construction work is wound up.

4. The decision confirms the initial intention of Parliament that the obligations found in the DBP Act would eventually apply to buildings other than class 2 buildings.

5. Project Managers and others who project, manage and supervise construction work and engaged to “construction work” for the purposes of the DBP Act need to take measures to avoid the risk of “any want or care” and the making of assurances to “fix” defects without taking the necessary steps in the rectification of the defects.

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