NSW Court of Appeal confirms expanded duty of care for building professionals

In dismissing an appeal by a director of a building company (now in liquidation), the NSW Court of Appeal has recently confirmed and ruling that the statutory duty of care applies to all buildings, and the duty can apply to any “person” engaged in construction work, even if they themselves did not enter into the construction contract (i.e., directors and employees).

With the legislation previously untested by the appeal court , the enlarged duty of care will have far reaching implications. Owners of all buildings (not just class 2 buildings) will now be able to bring claims against builders and consultants for breach of this duty, potentially giving rise to an influx of claims on different classes of buildings and against a greater number of possible defendants.

For those concerned about  all-too-common strata building defects, liability being held against building professionals who don’t exercise reasonable care will be seen as a step in the right direction. This is another important step towards reforming  building practice. The economic and reputation loss must now surely outweigh the quick buck made by doing shoddy work.

My summary below

Roberts v Goodwin Street Developments Pty Ltd [2023] NSWCA 5

When was the case decided? 10 February 2023.

What was decided? The duty to exercise reasonable care to avoid economic loss caused by construction work that is contained in s 37 Design and Building Practitioners Act 2020 (NSW) (DBP Act) applies to both residential and commercial buildings except manufactured home, moveable dwelling or associated structures. Previously it was though the duty only applied to class 2 residential high-rise buildings.

What is the DBP ACT duty? The duty under s 37 DBP Act is a duty to exercise reasonable care to avoid economic loss caused by construction work.

What is construction work? Construction work means any of the following:

a) building work

b) preparing designs for building work

c) manufacture or supply of a building product

d) supervising, co-ordinating, project managing or otherwise having substantive control over any of the above.

To whom is the duty owed? The duty is owed to each owner of lands in which work was done and each subsequent owner of that land. This includes owners corporations.

Who owes the duty? The duty is owed by the corporation that carries out the work any “person” engaged in construction work, including employees, directors and agents of a company that entered a design and/or construction contract, even if they did not themselves enter into the construction contract or were mere employees. The duty cannot be delegated.

How long does the duty exist? 10 years from completion of work. The duty also applies retrospectively for 10 years from 11 June 2020 i.e., for all work done since 11 June 2010.