The Design and Building Practitioners Act 2020 (NSW) introduces a key statutory duty of care in Section 37. This affects both construction professionals and property owners significantly.
For homeowners and strata corporations, it provides legal grounds to seek compensation for economic losses due to construction defects. For builders, it emphasises the need to maintain high standards to avoid legal and financial consequences.
Previously, claiming damages for construction defects was complex. The DBP Act aims to simplify this process, marking a shift in NSW property law.
This article explores Section 37’s implications, its real-world impact, and how it protects property owners. We’ll examine how this legislation changes the legal landscape for construction-related issues in New South Wales.
Understanding the Statutory Duty of Care in Construction under DBP Act Section 37
The Design and Building Practitioners Act 2020 (NSW) establishes a statutory duty of care for building professionals. Section 37 is crucial for protecting building owners and subsequent buyers in NSW.
This provision applies to a wide range of practitioners, from builders to project managers. It requires them to exercise reasonable care to avoid economic loss caused by defects in building work.
For the construction industry, grasping this law is vital. It defines responsibilities and builds consumer confidence.
Under section 37, individuals involved in construction can be personally liable for losses from defects. This includes directors and employees, based on their control over the building process.
A recent court case highlighted this. When a strata corporation sued a builder and developer for defects, the court emphasised that potential control over construction, even if not exercised, was key in determining liability.
Understanding these obligations is essential for construction professionals to mitigate risks and uphold industry standards.
The Extensive Reach of Section 37’s Duty of Care in the DBP Act
Section 37 of the Design and Building Practitioners Act (DBP Act) establishes a broad duty to prevent economic losses. This statutory obligation applies retroactively, covering losses that emerged in the ten years before the Act’s implementation (as per sch 1, cl 5).
Notably, the Act’s scope extends beyond traditional residential buildings and work, such as class 2 apartment complexes. The Environmental Planning and Assessment Act 1979 (NSW) (EPAA) defines ‘construction work’ to include a wide range of structures, significantly broadening the Act’s applicability.
A key case illustrating this is Goodwin Street Developments Pty Ltd atf Jesmond Unit Trust v DSD Builders Pty Ltd (in liq) [2022] NSWSC 624. The central question was whether the DBP Act’s duty of care covered construction on a boarding house. The court’s ruling confirmed the duty’s broad scope, stating it applies not only to class 2 buildings or typical residential projects, but also to diverse structures like boarding houses and commercial properties. This interpretation ensures comprehensive protection for many stakeholders in the construction industry.
Unravelling Economic Loss from Defects
The Design and Building Practitioners Act (DBP Act) requires building professionals to exercise due care to prevent economic loss caused by defects. Section 38 broadens the definition of economic loss beyond immediate damage costs, encompassing various scenarios arising from defects.
For owners corporations, economic loss occurs when they bear the cost of fixing defects and related damage. Importantly, they can claim this loss regardless of whether they owned the land during construction.
Individual lot owners face economic loss differently. They may incur costs for alternative housing if defects make their property uninhabitable. For landlords, this could mean providing other accommodations for tenants. Economic loss also includes direct repair costs, lost rental income, and missed opportunities with potential tenants.
The DBP Act focuses on latent defects in strata buildings that were reasonably foreseeable during construction. When calculating losses, courts consider previous rectification costs claimed by the owners corporation on behalf of lot owners. This prevents double-claiming of the same economic loss, either in a single lawsuit or across multiple legal actions, ensuring fair compensation.
Scope of Statutory Duty of Care in NSW’s DBP Act
The Design and Building Practitioners Act (DBP Act) clearly defines who benefits from the statutory duty of care. It protects current and future building owners. Section 37(2) specifies that this duty extends to all landowners for whom construction work was done, and subsequent owners. This empowers entities like owners corporations, individual lot owners, and future buyers to take legal action against builders or developers for economic losses due to strata building defects.
This marks a significant change from previous legal interpretations. Before the DBP Act, only subsequent purchasers who relied on the builder’s expertise or couldn’t protect themselves against such losses could claim damages for economic losses from construction defects. The Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61228 [2014] HCA 36 case exemplifies this earlier approach.
However, the right to claim under this duty of care isn’t absolute. A recent NSW Supreme Court case, Owners – Strata Plan No 87060 v Loulach Developments Pty Ltd (No 2) [2021] NSWSC 1068, illustrates this. An owners corporation sued a developer and builder for water ingress and poor cladding. Their claims were dismissed, not due to lack of defects, but failure to prove negligence or breach of duty of care.
For instance, one defect cited was “Unit 5- Bathroom: Corrosion affecting the door jambs”. But the critical question was: What specific breach of duty caused this corrosion? Was it:
- Using incorrect lining?
- Installing the wrong PC item?
- Some other reason?
This case highlights that identifying defects alone isn’t enough. Claimants must convincingly show that defects resulted from a breach of the statutory duty of care by the developer or builder, and that this breach caused economic loss.
Remedies for Duty of Care Breach Under the DBP Act
The Design and Building Practitioners Act offers clear paths for redress to those affected by construction defects in strata properties. Section 37(3) of the DBP Act allows both owners corporations and individual lot owners who’ve suffered economic losses from defects to legally pursue developers for breaching their duty of care.
Importantly, this provision doesn’t limit or replace other legal options. Owners can still seek remedies under the Home Building Act 1989, other relevant laws, or common law rights. This gives claimants a diverse set of legal tools, ensuring comprehensive protection of their rights.
Affected parties can thus choose the most appropriate legal avenue based on their specific circumstances, potentially strengthening their case for compensation.
Duty of Care and Contractual Relationships in the DBP Act
The Design and Building Practitioners Act (DBP Act) establishes a broad duty of care. Section 37(4) extends this duty to owners regardless of any contractual relationship or specific arrangement related to the construction work.
This means defects alone may be grounds for a claim, without the need for a formal building contract to establish the duty of care. Potential claimants should note that lack of a direct contractual relationship doesn’t prevent them from seeking damages under the DBP Act.
This provision significantly widens the scope for claims, allowing owners to pursue remedies even in cases where traditional contract law might have limited their options. It reinforces the Act’s intent to protect property owners’ interests comprehensively.
Concluding Thoughts: Key Takeaways from DBP Act Section 37
The Design and Building Practitioners Act (NSW) introduces crucial protections for strata property owners. Section 37 notably empowers current and future strata property owners, along with owners corporations, to pursue claims against developers or builders for economic losses related to their strata schemes.
While this Act provides a pathway for redress, claimants must be aware of relevant limitation periods to assess their eligibility accurately. It’s crucial to understand that a successful claim requires proving both a breach of duty of care and resulting economic loss.
For strata property owners dealing with construction defects, or developers and building practitioners defending against economic loss claims, seeking expert advice is essential. Consulting with a legal professional specialising in strata law in NSW can provide crucial guidance on the intricacies of the DBP Act and help determine the most appropriate course of action for your specific situation.
