More Than A (Bare) Pleading – The Implications of the Supreme Court’s First Decision on the Statutory Duty of Care under the DBPA

The New South Wales Supreme Court has issued its first decision concerning the statutory duty of care in section 37 of the Design and Building Practitioners Act 2020 (NSW) (DBPA), which carried important implications in relation to the operation of the statutory duty of care in defects disputes. Vincent Young has previously reviewed the operation of the statutory duty of care here.

Facts

In The Owners – Strata Plan No 87060 v Loulach Developments Pty Ltd (No 2) [2021] NSWSC 1068 (Loulach), His Honour Stevenson J examined an application by a plaintiff Owners Corporation (OC) to amend its list statement, which was based on alleged breaches of the statutory warranties provided under the Home Building Act 1989 (NSW) (HBA). The OC sought to add a claim in relation to a breach by the builder (and developer) of the duty of care established in section 37 of the DBPA.

In its proposed amended list statement, the OC pleaded that the builder had breached the statutory duty of care “by reason of the defective construction work referred to in the particulars to paragraph 16 above.” Paragraph 16 in turn referred to the various expert reports commissioned by the OC in relation to the alleged defects.

In support of its proposed amendments, counsel for the OC submitted that the mere existence of a defect proved that the builder had acted negligently and in breach of its statutory duty of care under section 37 of the DPBA, otherwise “there wouldn’t be a defect.”

Consideration by the Court

Stevenson J wasted few words in reply to the OC’s submissions, stating (emphasis added):

[23] I do not agree.

[35] The DBP Act was enacted to alleviate the need for a party like the Owners Corporation to prove a duty of care owed to it by the Builder…

[36] The DBP Act was not intended to provide a shortcut as to the manner by which a breach of such duty might be established.

[42] [The] authorities establish that a plaintiff alleging a breach of duty of care by a builder, and this must include a breach of the Statutory Duty of Care, must identify the specific risks that the builder was required to manage, and the precautions that should have been taken to manage those risks.

[43] It is not sufficient simply to assert a defect and allege that the builder was required to take whatever precautions were needed to ensure that the defect not be present.

Key Implications

The decision in Loulach provides that establishing a breach under the statutory duty of care is not a simple equation – the existence of a defect ≠ a breach of the statutory duty of care.

This is an important distinction, as in our experience to date any pleadings which have included a claim under section 37 of the DBPA have relied on the above premise.

Instead, a party seeking to rely on the statutory duty of care must sufficiently link the existence of a specific defect to a specific breach of the statutory duty of care. This linking exercise requires a party to identify:

  1. the relevant risk of harm in relation to specific works (i.e. what could go wrong?); and
  2. the content of the duty of care in relation to those works (i.e. what should a reasonable builder do to avoid things going wrong?); and
  3. the breach of the duty of care which caused a defect in those works (i.e. what did the builder do wrong/fail to do which caused the defect?).

The best practice for a party seeking to rely on the statutory duty of care is to set out its pleadings and evidence in the manner recommended by Stevenson J at para 44 of Loulach, where a party would draft any annexures / Scott Schedules “to add further columns identifying, in relation to each defect, the relevant risk and, more importantly, exactly what the [builder] should have done in relation to that risk.”

Accordingly, plaintiffs should take caution when making a claim made under section 37 of the DBPA to ensure any claim meets the requirements to establish a breach of the statutory duty of care.

This publication is for general information purposes only and does not constitute legal advice. You should seek legal advice regarding your particular circumstances.