Supreme Court of NSW confirms broad ambit of duty of care for design and building professionals

In Boulus Constructions Pty Ltd v Warrumbungle Shire Council [2022] NSWSC 1368, the Supreme Court of New South Wales has provided further guidance on the broad application of the statutory duty on construction industry participants to exercise reasonable care recently introduced by section 37 of the Design and Building Practitioners Act 2020 (NSW) (DBP Act).

Following a relatively limited number of recent decisions that traverse the duty of care (which we discuss in detail here), his Honour Justice Stevenson has confirmed, in the context of an amendment application, that:

• The duty of care under the DBP Act can potentially be owed by any person involved in "construction work", which includes:
  • building
  • design work,
  • manufacture or supply of building products;
  • supervision, co-ordination, project management, or the exercise of substantive control over any of the above.
• The definition of "construction work" is broad and contemplates a wider range of person than those specifically mentioned in the definition of "construction work" in the DBP Act.
• It is not necessary that a person be a "Practitioner" as defined by the DBP Act to be captured by the duty of care; it can be any person, whether or not required to be a registered professional, involved in the above activities.
• Whether a person can exercise "substantive control" over the carrying out of building or design work or the manufacture or supply of building products will be assessed on the facts of each particular case. Substantive Control includes, but is not limited to, being able to control how the "construction work" is carried out.

In coming to his decision, his Honour affirmed his decision in The Owners - Strata Plan No 84674 v Pafburn Pty Ltd, and his indication that directors (and, in this case, the managing director) of design or construction companies can have "substantive control" over the carrying out of construction work.

Implications

This decision reinforces the expanded liability risk faced by construction industry participants, individuals and their insurers following the introduction of the DBP Act.

Industry participants, particularly subcontractors, should view risk involved in a project from a holistic perspective, and not just limited to their risk to their head contractor when pricing and undertaking work.

Construction companies should ensure that their insurance is sufficient and appropriate, and cover their employees and directors, as well as the company itself.

Insurers should take steps to ensure that their premiums are adjusted to meet the risk implications associated with the expansive scope of "building work" to which the DBP Act. applies, and the increase in claims against individuals who may be covered as additional insureds or under an expanded definition of "insured".

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