NSW Parliament Introduces a Statutory Duty of Care for Residential Building Work

In Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 (2014) 313 ALR 408, the High Court found that a builder did not owe a common law duty of care to the developer of residential apartment buildings or its successors in title (including an owners corporation) for economic loss caused by defective work.

The High Court held that these parties do not have the requisite element of ‘vulnerability’ to establish a duty of care, reasoning that contractual protections are available to a developer in its contract with the builder and also subsequent purchasers through their contracts with the developer.

The New South Wales Parliament has taken steps to reverse this position following recent high-profile reports of defective building work in high-rise apartment buildings (please see our recent article).

The Design and Building Practitioners Act 2020 (the Act) provides that a person who carries out construction work has a duty to exercise reasonable care to avoid economic loss caused by defects in the building and arising from the construction work. The duty of care is owed to each owner and subsequent owners of the land.

Entitlements to claim for a breach of the duty of care are in addition to other rights which an owner may have, including enforcement of the statutory warranties under the Home Building Act 1989 (NSW).

The Act prohibits the delegation of the duty of care or contracting out of the duty.

The Act also introduces a regime requiring registered design practitioners who prepare regulated designs to issue a compliance declaration stating that their design complies with the Building Code of Australia. A regulated design is a design for a building element (including fire safety systems, waterproofing, load bearing components of a building, and services required to achieve compliance with the Building Code of Australia), a design prepared for a performance solution, or as prescribed by the regulations to be made.

Registered building practitioners must build in accordance with the declared designs and issue a compliance declaration stating that the final building (including any variations) complies with the Building Code of Australia.

A principal certifier is prohibited from issuing an occupation certificate for the building unless it is satisfied that all compliance declarations have been lodged.

The Act has enormous implications for owners of buildings and apartments as it creates an additional avenue to recover economic loss for defective building work. On the other hand, it increases the potential exposure of contractors, developers and designers which will have flow on impacts on the insurance industry and housing affordability.

Please contact our team if you would like to discuss how this legislation will affect you.

Authored by:

Michael Bampton, Partner
Del Chin, Senior Associate