David was admitted as a solicitor in 1985 and has since that time practiced extensively as a litigator, problem solver and strategist in commercial and complex construction and engineering disputes.
As an experienced and conditioned litigator, David is skilled in the management of large scale and complex litigation and in the efficient and cost-effective management of project support teams in that litigation.
David is also well seasoned in all forms of structured and unstructured alternative dispute resolution including formal and informal negotiations, mediations, expert determinations, reference hearings, arbitrations, Supreme Court and Federal Court proceedings and disputes involving ICC International Commercial Arbitration processes.
David is a regular presenter and educator to members of peak industry groups and clients and professional bodies in construction, engineering and related industries and provides training in contract and risk management in NSW, Queensland and South Australia.
During his career David has acted for a variety of banks, insurance companies, corporations, liquidators, construction companies, developers, major mechanical, fire, electrical engineering, civil and dredging contractors and subcontractors in a range of jurisdictions across Australia.
In addition, David is experienced in the development and substantiation of complex and engineering claims and has a particular interest and expertise in time-related claims for delay, disruption and acceleration. David regularly acts for clients in major claims under The Building and Construction Industry Security of Payment Act 1999 (NSW) and corresponding legislation throughout Australia and New Zealand.
Currently David is a member of the Law Society of NSW, Society of Construction Law of Australia, Master Builders Association of NSW and the Australian Centre for International Commercial Arbitration as well as a director of various not-for-profit organisations.
An important decision of the NSW Supreme Court earlier this year dealt with the meaning of “on account” payments.
In Calibre Construction Group Pty Ltd v Kaloriziko Pty Ltd [2025] NSWSC 593, the Court found that once a variation is approved and paid, it cannot be challenged on the basis of being “on account.”
The decision challenges the long-standing industry assumption that payments under construction contracts are always “on account only.”
The Builder entered into a $31m design and construct contract with a Developer in 2017 for a mixed-use development in Ryde. Based on an AS 4902-2000 agreement, the project comprised four towers and approximately 100 units.
Included in claims made by the Builder were claims for retention, the sum of $270,000 for unpaid variations and approximately $250,000 for the balance of the contract price.
Relevantly, the Developer disputed the claims for variations and by cross claim, sought to recover amounts previously paid for variations, along with damages for delay and defective work.
Clause 5.5 imposed a contractual obligation on the Developer to:
“appropriate and set aside as a separate trust fund a sum equal to that part of the sum certified in any interim certificate as due in respect of work completed which the [party in the Developer’s position] is entitled to retain” [15]
Despite clause 5.5 of the Contract; the Developer did not receive or set aside any cash retention in a separate trust fund.
Instead, the Developer financed the project through a loan that covered only 90% of each progress payment. Because of this, the Developer did not receive or set aside the remaining 5%, which was meant to be held as retention for the Builder.
Although the Builder was paid 95% of each claim, the Developer never actually held the retained 5% in cash or in trust, despite the contractual requirement to do so.
The Builder referred to an affidavit relied upon by the Developer in separate proceedings, in which the Developer stated it had retained retention monies claimed by the Builder.
Aside from the Developer’s claims for setoffs arising from defects, delays and disputes over variations; the Developer accepted that it was contractually liable to repay the retention to the Builder.
The Builder argued, however, that:
In addition to pursuing the Developer directly, the Builder also raised claims against individuals and related entities for knowing involvement in the breach of trust.
The Court found that:
Without a trust, there could be no breach of trust and therefore no liability for those allegedly involved in such a breach.
With respect to the variation claims, between November 2017 and September 2020, the Builder claimed and received $1.38 million for variations. The Developer later disputed nine of those variations, seeking to recover $689,922 by way of a crossclaim.
Separately, the Builder claimed $270,434 for unpaid variations. The Developer disputed 15 of those, amounting to $256,409.41.
During the project the Developer approved and paid for some variations and approved others without payment. For example, in Variation Claim 19, the Builder submitted a detailed cost document that was stamped “Approved” and signed by the Developer’s representative.
However, the Developer later argued that these approvals were only “on account,” not a final agreement to pay beyond the $31 million contract sum.
In support of its position, the Developer relied upon a sentence in clause 37.2 of the contract to contend that any “pricing” by the Developer’s Representative under clause 36.4 was provisional and “on account” only.
Clause 37.2 provided relevantly:
“Subject to subclause 37.6, the [Developer’s Representative] shall within 15 Business Days after receiving the progress claim pay to the [Builder] the balance of the progress certificate.
If any set-off under clause 37.6 produces a negative balance, the [Builder] shall pay that balance to the [Developer] within 7 days of receiving written notice thereof. Neither a progress certificate nor a payment of moneys shall be evidence that the subject [Work Under Contract] has been carried out satisfactorily. Payment other than final payment shall be payment on account only.” [106]
The Developer argued that approvals and payments for variations were only “on account,” meaning they could be revisited later. But the Court rejected this argument. It found that once the Developer’s representative directed the Builder to carry out variation work under clause 36.1 and then priced it under clause 36.4, the variation was final.
The Court found that clause 37.2, which refers to progress payments being “on account,” had not role to play in the proper interpretation of clause 36.4 of the contract [107].
In considering the Developer’s “on account argument” the Court examined the variation provisions in clause 36 and held that:
In particular the Court said:
‘Either way, there is no suggestion in any of these provisions that such “pricing” was to be in any sense provisional. On the contrary, it was to be done “as soon as possible;” and in the case of cl 36.1(b) directed work, after the work was done.’ [101]
‘What cl 36.4 required the Developer’s Representative to do was to price “each variation;” not something which may or may not constitute a variation.’ [101]
“Reasonable persons in the position of the parties would not understand that the effect of the words used in these provisions to be that the Developer’s Representative could, first, give a direction to the Builder under cl 36.1 to vary the Work Under Contract and then price the variation on the basis set forth in cl 36.4(a), but leave it open to the Developer later to contend that there has been no “variation” [109].
“Having given the direction under cl 36.1 to the Builder to vary the Work Under Contract in any one of the ways specified in the sub-cll (a) to (e) of cl 36.1, and then having “priced” that work under 36.4, it was not open to the Developer then to argue that the work in question did not constitute a “variation”.’ [110]
With respect to retentions the judgment provides a reminder that:
With respect to the “on-account argument”, the Court made clear that:
The direction, approval and pricing process under clause 36.4 was treated as final, not subject to later revision.
The key message of the case is that once a variation is directed and priced under the contract, Principals and superintendents cannot later argue that approved variations were provisional unless expressly allowed by the contract.
For more information on how to protect your entitlement to variations, please contact David Glinatsis at Kreisson.
14 November 2022
After implementing the Design and Building Practitioners Act 2020 which focuses on class 2 residential apartment buildings, the NSW Government has proposed additional reforms to improve the quality of other types of residential buildings.
The proposed reforms include the release by NSW Government of three Bills as part of the 2020 15 Construction NSW transformation strategy aimed at restoring public confidence and creating a customer facing building and construction sector by 2025.
The reforms proposed are grouped into the following broad topics of change:
The NSW Government is seeking industry and community input and consultation on the proposed changes.
According to the NSW Fair Trading Commissioner Natasha Mann¹:
“The feedback here will refine proposals to improve building regulatory standards across the State that have been co registered through our on going engagement with key industry and community stakeholders..
A second consultation will propose comprehensive reforms to the NSW building regulatory framework including enhanced consumer protections and changes to strata.
We want those who work in the industry and members of the community to help us improve rules around the design, construction, certification and ongoing safety of NSW buildings..’
The Consultation is open until Friday 25 November 2022.
The Bills comprise of the following:
Key amendments that are proposed in the Building Bill² include:
(a) the expansion of licensing requirements to cover trades operating in the commercial building sector;
(b) expanding licensing requirements to cover trades operating in the commercial building sector;
(c) expanding the definition of ‘developer’ to better cover those who should be responsible for contractual and statutory warranty responsibilities, obligations under the home building compensation scheme, and ensuring a definition that is consistent and fit for purpose for commercial developers;
(d) clarify contract processes for residential building work around variations and payment processes. This includes prescribing when payments can be claimed in relation to major work contracts;
(e) restricting the work an unlicensed person can do under the owner-builder permit system;
(f) revising the statutory warranty scheme and the definition of ‘major defect’ for residential building work;
(g) enhancing the dispute resolution model for residential building work to provide a more time and cost-effective way to resolve disputes between licence holders and residential customers;
(h) making it a requirement for all licence holders to supervise the work of unlicensed people in accordance with gazetted practice standards;
(i) bringing all certificates that come after development consent through the planning system into the building system;
(j) consolidating all fire safety requirements for building work, from the design stage, through installation and certification and to maintenance and annual audits, under a single Bill to improve fire safety, and
(k) introducing a new regulatory scheme for pre-fabricated and manufactured housing.
As set out in the Regulatory Impact Statement; the key amendments that are proposed in the Building and Construction Legislation Amendment Bill 2022³ include:
a) amendments to the Building Products (Safety) Act 2017 (BPS Act) to impose responsibilities on everyone in the building product supply chain, including designers, manufacturers, importers, suppliers and installers, to ensure building products are compliant and fit for their intended purpose.
b) Enhancing rectification of strata buildings – proposed amendments to the Strata Schemes Management Act 2015 (SSM Act) and supporting regulations to enhance the operation of the Strata Building Bond and Inspections Scheme (SBBIS) by:
(i) expanding the use of the building bond provided by developers to rectify defects identified in the final inspection report.
(ii) Penalising people for falsely representing themselves as building inspectors.
(iii) Making the requirements for the appointment of Authorised Professional Associations (APAs) and building inspectors more transparent.
(iv) Phasing out the transitional arrangement initially provided for developers to transition into the scheme.
c) Improving professional standards and competencies – proposed amendments to ensure practitioners are suitably competent to operate in the industry and actively seek to maintain, improve and broaden their knowledge, expertise and competence, including:
(i) Recognising skills assessments from associations operating with a PSS for the registration of certifiers under the Building and Development Certifiers Act 2018 (BDC Act).
(ii) Standardising approaches to CPD across all building and construction-related functions.
(iii) Enabling inspectors to impose an order to undertake a training or education course instead of issuing a penalty infringement notice (PIN).
d) Ensuring fair and prompt payment – proposed amendments to Building and Construction Industry Security of Payment Act 1999 (SOP Act) and supporting regulations to better promote fairness between the parties and strengthen protections for secure and prompt payment, through:
(i) Requiring payment claims to owner occupiers to attach a Homeowners Notice information to help them understand their obligations in responding to a payment claim and the consequences of not doing so.
(ii) Extending protections by requiring retention money to be held in trust for projects with a value threshold of $10 million.
(iii) Strengthening the powers for adjudicators to arrange for the testing of, and engage experts to investigate and report on, relevant matters for the adjudication.
(iv) Establishing a right for claimants and respondents to apply for a review of an adjudication determination.
e) Robust regulatory intervention – proposed amendments to strengthen the regulator’s compliance and enforcement powers to proactively respond to risks on construction, including:
(i) Expanding the scope of certifier powers to require the rectification of defects as an early intervention tool during construction under the Environmental Planning and Assessment Act 1979 (EP&A Act).
(ii) Expanding the scope of the regulator’s powers to require the rectification of defects arising out of noncompliance with the Plumbing Code of Australia (PCA) or other relevant specifications or standards under the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (RAB Act).
(iii) Allowing NSW Fair Trading to attempt to resolve disputes, under the Home Building Act 1989 (HB Act), for strata building work prior to the appointment of a building inspector under the strata building bonds inspection scheme.
(iv) Clarifying and making consistent the operation of the privilege of self-incrimination for individuals and corporations in relation to investigations of corporate wrongdoing.
(v) Imposing a duty on practitioners to take reasonable steps to not form business associations with individuals who have engaged in intentional phoenix activity.
(vi) Allowing the recovery of reasonable costs and expenses associated with investigating non-compliance.
Key amendments that are proposed in the Building Compliance and Enforcement Bill 2022⁴ include:
a) consolidating and strengthening the powers for authorised officers to investigate, gather information and enter premises;
b) providing remedial action including undertakings, injunctive powers and issuing orders to seek compliance, stop work as well as rectify building work;
c) establishing a consistent disciplinary action process across all licence holders;
d) introducing a demerit points scheme to deter licence holders from committing offences and provide sanctions for repeat offenders;
e) increasing penalty offences for serious matters;
f) expanding the application of the developer notification scheme and complementary prohibition order powers to more classes of buildings.
You can make submissions to the proposals for reform by 25 November 2022.
For more information go to:
https://www.haveyoursay.nsw.gov.au/reforming-building-laws
1 https://www.nsw.gov.au/customer-service/media-releases/have-your-say-on-building-reforms
2 NSW Government Regulatory Impact Statement Building Bill 2022 Part 1 – Who can do the work August 2022 page 10
3 Regulatory Impact Statement Building and Construction Legislation Amendment Bill 2022 and Building and Construction Legislation Amendment Regulation 2022 (Amendment Bill RIS) August 2022 at page 17 to 18
4 Regulatory Impact Statement Building Compliance and Enforcement Bill 2022 at page 9
Please contact us on (02) 8239 6500 or at excellence@kreisson.com.au if you have any queries or need any assistance.
This communication is sent by Kreisson Legal Pty Limited (ACN 113 986 824). This communication has been prepared for the general information of clients and professional associates of Kreisson Legal. You should not rely on the contents. It is not legal advice and should not be regarded as a substitute for legal advice. The contents may contain copyright.
12 November 2022
On 12 October 2022, his Honour Justice Stevenson of the NSW Supreme Court delivered an important decision (Boulus Constructions Pty Ltd v Warrumbungle Shire Council [2022] NSWSC 1368) which gives guidance to the scope of the duty of care under Part 4 of the Design and Building Practitioners Act 2020 (NSW) (DBPA).
Although the case dealt with an interlocutory matter and is subject to final hearing, the decision has wide ranging consequences by expanding the potential ambit of the duty to exercise reasonable care to avoid economic losses under section 37 of the DBPA to “persons” such as a director and employees of a builder.
The matter began with the applicant, Boulos Constructions Pty Ltd (the Builder), bringing a claim against Warrumbungle Shire Council (Council) for moneys owed for works rendered.
The Council responded with a cross claim against the Builder for defective works.
The Builder then brought an additional 2 cross claims against Council alleging that Council was not entitled to remedy for defective works due to Council’s failure to obtain a valid Development Consent and Construction Certificate [4].
However, the focus of this judgment was on Council’s motion to amend its cross claim which endeavoured to join the Builder’s managing director and project manager to these proceedings, arguing that they, as well as the Builder, owed a duty of care to avoid economic losses under section 37 of the DBPA.
The Court considered the meaning to be given to “person” in the expression in section 37 “a person who carries out the construction work”.
The Builder argued that a narrow interpretation should be given to the concept of a “person” otherwise every person on a construction site who has substantive control or supervision over some building work could potentially be a “person who carries out construction work” and would be subject to an automatic statutory duty of care to current and future owners of the property [30].
In particular the Builder argued that:
“…. Such a broad interpretation could make hundreds, or on a very large job even thousands, of people personally liable in respect of the construction work over which they have control or supervision, which would have far reaching and negative impacts on the construction indutry… ” [30]
The Builder also argued that:
“…. a broad interpretation of section 37 would also result in building cases that balloon to include huge numbers of defendants, increasing the cost and complexity of what is already a costly and complex area of litigation. This is especially so when one considers the potential for the defence of proportionate liability that can be pleaded in defence of a claim under [the Act] to raise the same issues of liability of multiple third parties even if the plaintiff does not join all potential defendants to their claim.” [30]
The Builder also argued that:
“… obviously intended to refer to more than just a builder, and by reference to their function encompasses roles such as the architect, the project manager, the design consultants and possibly sub-contractors…” [32]
It was the Builder’s position however, that “person” should be construed narrowly as “a person who carries out construction work in their own capacity” and as not including a person who acts as agent for another (at [33]).
Section 37
In dealing with the meaning of “person” for the purposes of section 37; the Court undertook a statutory interpretation exercise to determine this issue.
Section 37 of the DBPA reads as follows:
“37 Extensions of the duty of care
(1) A person who carries out construction work has a duty to exercise reasonable care to avoid economic loss caused by defects—
(a) In or related to a building for which the work is done, and
(b) arising from the construction work.
(2) The duty of care is owed to each owner of the land in relation to which the construction work is carried out and to each subsequent owner of the land.
(3) A person to whom the duty of care is owed is entitled to damages for the breach of the duty as if the duty were a duty established by the common law.
(4) A person to whom the duty of care is owed is entitled to damages for the breach of the duty as if the duty were a duty established by the common law.
(a) under a contract or other arrangement entered into with the owner or another person, or
(b) otherwise, than under a contract or arrangement
“Person” is not defined but “Practitioner” is defined
The Court observed that the term “person” is not defined in the DBPA [48].
However, the term “practitioner” is defined in section 3 to mean:
“… a design practitioner, principal design practitioner, professional engineer, specialist practitioner or building practitioner.”
The Court considered the definitions of each of these categories of practitioner under the DBPA and said at [49] that “persons” who carry out particular functions are deemed to be “practitioners” of one kind or other for the for the purposes of the Act. For example, design practitioner is defined to mean “a person who prepares regulated designs”.
However, the Court said that there are other provisions of the Act where reference is made to “persons” who, because of the context in which they are referred, could not be “practitioners” [50] meaning that sometimes the word “persons” is used in the Act to mean a person deemed to be a “practitioner” and “sometimes it is not” [52].
In the critical part of the Act, Part 4 (entitled “Duty of care”), the Court said that there are a number of references to a “person” other than the “person” having the statutory duty under section 37(1) to carry out construction work with reasonable care [53].
At [61] the Court said:
“Parliament has taken care to define “practitioner” and to define the various activities within that definition by reference to “persons” carrying out those activities, it has used the expression “person” in s 37(1). That must mean someone who is not necessarily a “practitioner” and not necessarily a person acting in their capacity as a “practitioner”; nor necessarily acting “in their own capacity”. As I said in Pafburn, [31] this will be a question of fact in each case.”
The Court therefore held that the term “person” as used in the DBPA is to be read widely and to include persons other than just practitioners.
What is “Construction Work”?
The Court also considered the meaning of construction work in section 36 of the DBPA which defines “construction work” as 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).
The bolded text gives the term a wider meaning and has allowed for additional actors involved in supervising and controlling construction work, such as managing directors, to be held accountable under Part 4 of the DBPA.
Sub-clause (d) was considered in an earlier decision of Stevenson J in Owners – Strata Plan No 84674 v Pafburn Pty Ltd [2022] NSWSC 659 (Please see Kreisson’s Case Note Insight titled “Potential Liability of Developers Under the DBP Act“) where the Court held that ‘having substantive control over the carrying out of any work’ extends the Statutory Duty to a person able to control how the work was carried out even if they did not control how the construction work was carried out.
What did Council argue?
On this point Council argued that the Managing Director and the Project Site Supervisor were able to and in fact did exercise control over the carrying out of the building work.
In particular and with respect to the Managing Director; Council argued that:
“…the managing director of [the Builder]… had the power and ability to and did substantively control all of the building works comprising the entire project, such control including the appointment and control of the project delivery staff working for [the Builder] (including the appointment and control of [Mr McCarthy]), the supervision of the adequacy of the works performed by such project delivery staff, the selection and appointment of subcontractors to perform elements of the Works for which [the Builder] was ultimately responsible, and the overall supervision and acceptance of the works performed by [the Builder’s] employees and subcontractors, for the ultimate benefit of [the Council]. Further, as the managing director of [the Builder], (the Managing Director) had the ultimate ability to control how the Works performed by [the Builder] were carried out.” [27]
With reference to the Site Manager, it was alleged that:
“… the site supervisor for the Project, …actively supervised, coordinated and project managed all of the primary elements of the building works comprising the project, and coordinated and directed how the Works performed by [the Builder] were carried out, including by directing and engaging with [the Builder’s] subcontractors in the performance of their works.” [28]
In response to the Builders’ argument that the Parliament intended that Section 37 to apply primarily to practitioners, the Court said although “That may be so… the fact is that the word used in s37(1) is “person” not “practitioner.” [63]
The Court then proceeded to explain how Parliament ensured Part 4 of the DBPA is prevented from having an overly expansive reach.
In particular His Honour referred to section 41 which provides that the DBPA is subject to the proportionate liability regime under the Civil Liability Act 2002 (NSW) (CLA).
This meant that persons such as the Managing Director and Site Manage could apportion liability to each wrongdoer involved, meaning that “persons” are able to share their fault with others involved [64]
After considering the arguments by the parties, the Court granted leave to Council to amend its cross claim cross summons and cross claim List Statement.
To summarise, the Court held that:
1. The duty of care as provided in section 37 is owed not only by practitioners but also persons involved in “construction work”.
2. The managing director and project manager of the Builder were caught by section 37 due to their supervision and control over the construction work.
The Court allowed Council to join these persons to the proceedings.
Although the decision was made on a preliminary procedural issue with a final and binding decision yet to be made, some of the key take ways include at least the following:
1. Consistent with the approach of earlier DBPA related decisions, the Court has given a broad interpretation to the application of the statutory duty under the DBPA.
2. Based on the decision the statutory duty of care could depending on the facts extend to directors, project managers, construction managers and site supervisors.
3. By reason of the extended application of the statutory duty under the DBPA, Building companies should:
(a) Make sure that their insurance is sufficient and appropriate, and covers their employees and directors, as well as the company itself for the potential liabilities under the DBPA.
(b) Properly price potential increase to insurance premiums and other risks due to the expanded scope of “Building work” to which the DBPA applies and the increase in number of claims against persons who now need to be covered as additional insureds.
(c) Consider any potential conflict of interest issues in the event that the company and its directors and or employees are joined in any proceedings under the DBPA.
(d) Make sure that all persons involved in construction work are aware that they potentially owe a duty to exercise reasonable care to avoid economic loss caused by defaults and need to ensure that they have implemented appropriate risk mitigation measures.
(e) Improve risk mitigation and other risk management strategies including training and upskilling personnel to avoid the risk of employees; directors and companies becoming liable for damages under the DBPA for breach of statutory duty of care.
Please contact Gretel Wathen, Lawyer or David Glinatsis, Managing Director on (02) 8239 6500 if you have any questions regarding anything above or if you need any assistance.
This communication is sent by Kreisson Legal Pty Limited (ACN 113 986 824). This communication has been prepared for the general information of clients and professional associates of Kreisson Legal. You should not rely on the contents. It is not legal advice and should not be regarded as a substitute for legal advice. The contents may contain copyright.
