The NSW Court of Appeal has held unanimously that the duty of care to avoid economic harm provided by s 37 of the Design and Building Practitioners Act 2020 (NSW) (DBP Act) extends to construction work carried out on boarding houses. In so doing, the Court of Appeal resolved competing interpretations of the legislative regime which the Court described as ‘labyrinthine’ and which ‘appeared to have been drafted so as to make comprehension of it as difficult as possible’ (at [180]).

Background

Goodwin Street Developments Pty Ltd (Goodwin) entered into a building contract with DSD Builders Pty Ltd (DSD) on 10 July 2017, for DSD to construct three boarding houses on Goodwin’s land in Jesmond, NSW. These buildings were intended for student accommodation.

Mr Roberts supervised and project managed DSD’s construction work.

In early 2018, a dispute arose between Goodwin and DSD relating to alleged defective building works and the progress of the works. On 2 March 2018, Goodwin served a notice requiring DSD to remedy the asserted defects within 10 working days. Following the issuing of that notice, DSD stopped working at the site. Between 2 and 19 March 2018, Mr Roberts entered the site and maliciously damaged the buildings under construction. On 19 March 2018, Goodwin terminated the contract with DSD. Goodwin commenced proceedings against DSD in August 2018 and joined Mr Roberts as second defendant in April 2019. DSD went into liquidation in early 2021 and the proceedings against it were stayed pursuant to s 471B of the Corporations Act 2001 (Cth). Goodwin’s claim against Mr Roberts had several bases. Relevantly, it claimed in negligence pursuant to the extended statutory duty of care in s 37, within Part 4, of the DBP Act.

At trial Stevenson J found that Mr Roberts was liable to Goodwin for breach of the duty in s 37, with Goodwin’s loss quantified by reference to the cost of rectifying the defective work. In so finding, Stevenson J held that the phrase ‘building work’ when used in Part 4 of the DBP Act includes building work relating to a boarding house, being the type of buildings the subject of the contract.

On appeal, Mr Roberts argued that Stevenson J erred in construing the references to ‘construction work’ and ‘building work’ in relevant parts of the DBP Act as extending to work done on boarding houses.

The issue

Section 37(1) of the DBP Act provides as follows:

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.

Section 36(1) of the DBP Act states that ‘building’ as used in Part 4 ‘has the same meaning as it has in the Environmental Planning and Assessment Act 1979’ and, by s 36(2), a reference to ‘building work’ in Part 4 ‘applies only to building work relating to a building within the meaning of his Part’, i.e., a building within the meaning of the Environmental Planning and Assessment Act 1979 (NSW) (EPA Act).

The definition of ‘building’ in s 1.4(1) of the EPA Act – and thus under Part 4 of the DBP Act – is defined as ‘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 (NSW)’. That definition includes boarding houses.

However, the liability in s 37(1) of the DBP Act arises when a person carries on ‘construction work’. That is defined in s 36(1) of the DBP Act by reference to ‘building work’, which is itself defined in s 36(1) inclusively, namely that it ‘includes residential building work within the meaning of the Home Building Act 1989’. Boarding houses, being the buildings in issue in this case, do not fall within the definition of ‘residential building work’ within the meaning of the Home Building Act 1989 (NSW) (HB Act). Further, there is also a general definition of ‘building work’ in s 4 of the DBP Act which provides as follows:

1. For the purposes of this Act, building work means work involved in, or involved in coordinating or supervising work involved in, one or more of the following:

(a) the construction of a building of a classnor type prescribed by the regulations for the purposes of this definition,

(b) the making of alterations or additions to a building of that class or type,

(c) the repair, renovation or protective treatment of a building of that class or type.

2. The regulations may:

(a) prescribe additional work that is building work for the purposes of this Act, and

(b) exclude work from being building work for the purposes of this Act.

3. In this Act, a reference to a building (including a building as defined in Part 4) includes a reference to part of a building (including a building element).

As noted by the Court of Appeal, this definition of ‘building work’ addresses two topics, namely, identifying the type of work undertaken, and identifying the type of buildings on which that work is undertaken (at [189]).

However, the latter matter (being the type of buildings) is not addressed by s 4 itself. Instead, clause 12 of the Design and Building Practitioners Regulation 2021 provides that ‘For the purposes of section 4(1) of the Act … a building is prescribed if the building, or a part of the building, is a class 2 building’. It was not in dispute that boarding houses were not a class 2 building. The central issue, therefore, was whether ‘building work’ was to be understood in the way defined in s 4(1), as extended by the inclusion of ‘residential building work’ within the meaning of the HB Act. If it was to be so understood, then Part 4 of the DBP Act did not apply to the buildings at issue. On that construction, Goodwin’s claim for damages under s 37 would fail.

At trial, Stevenson J held that the general definition in s 4(1) has no application to Part 4 of the DBP Act (at [193(3)]) and that s 37 did apply to construction work undertaken of boarding houses.

Court of Appeal decision

Kirk JA and Griffiths AJA, with whom Ward P agreed (at [78]), considered in detail the legislative history of the provisions (at [195]-[210]) and noted the principles applicable to statutory construction (at [211]-[218]).

Their Honours said that the 'central issue’ between the parties was ‘whether and, if so, how the general definition of ‘building work’ in s 4(1) of the [DBP] Act applies having regard to the further specific definition of that notion in s 36(1)’ (at [219]).

As to this issue, their Honours held as follows:

• The reasonable expectations of the public created a construction promoting greater certainty in the application of Part 4 than one which was more uncertain (at [220]-[222]). Increasing certainty ‘militates against the construction supported by the appellant to the effect that the statutory definition of ‘building work’ in s 4(1) applies without qualification to the further definition of that term in s 36(1), because that leaves the scope of the buildings to which Part 4 applies substantially at large, save for the extent to which the definition of residential building work in the Home Building Act applies’ (at [222]).

• Both ‘text and purpose’ militated against Mr Roberts’ construction (at [223]). Their Honours noted that s 36(2) (stated above) ‘supports a conclusion that the issue of the type of building to which Part 4 applied … was always intended to be the subject of distinct articulation, separate from any regulations made addressing the issue generally for the purposes of s 4(1)’ and that the type of ‘building’ to which Part 4 applies was ‘exhaustively defined’ by reference to the meaning of that term in the EPA Act (at [223]-[224]).

• Merely because a boarding house was not a ‘dwelling’ for the purposes of the HB Act did not have the effect, however, of taking a boarding house outside the scope of s 37. That is because the definition in s 36(1) of ‘building work’ was not an exhaustive definition. Rather, the reference to ‘residential building work’ within the meaning of the HB Act made clear that such work constitutes ‘building work’ for the purposes of s 36(1). However, ‘there is room left for other work relating to a building to qualify as ‘building work’ (at [228]).

• The general definition in s 4(1) does apply to the further definition of ‘building work’ in s 36(1), but only as regards the first topic addressed in the general definition (identifying the type of work undertaken), with the second topic (the type of buildings on which work is undertaken) ‘being addressed by the definition of ‘building’ in s 36(1)’ (at [230]).

Accordingly, the Court of Appeal applied different reasoning in agreeing with the conclusion of Stevenson J that s 37 of the DBA Act did apply to the boarding houses the subject of the parties’ contract. In so doing, the Court rejected the narrower scope of application of the duty of care for which Mr Roberts contended. BN