In Kazzi v KR Properties Global Pty Ltd t/as AK Properties Group [2024] NSWCA 143, the Court of Appeal has confirmed the liability of the sole director of a builder in a defects claim, arising from his involvement as the nominated supervisor of a builder in the construction of a building.
The director/nominated supervisor was held to be liable under the Design and Building Practitioners Act 2020 (NSW) for a breach of his section 37 statutory duty of care by "making decisions as to the progress and manner of the works that gave rise to the defects on which the Owners relied".
The builder had sued the developers to recover outstanding amounts under the building contract. The developers cross-claimed for defective and incomplete works.
The developers' claim against the director/nominated supervisor failed at first instance, with the Court below finding that the quantum evidence and submissions were not specific enough to establish the director/nominated supervisor's liability for the defects.
However, the developers raised on appeal that in cross-examination, the director/nominated supervisor had clearly admitted to three breaches of the duty of care.
The Court of Appeal agreed, finding that the director/nominated supervisor had been heavily involved in the decision-making process.
The Court outlined the decisions that the director/nominated supervisor had made which led to a finding of his personal liability:
[94] ...Mr Kazzi's failure to undertake the necessary check surveys, or cause them to be performed, involved a breach of the duty of care in s 37 of the DBP Act with respect to this work...
[101] By causing Oxford, under his supervision, to construct the foyer and façade in a manner that significantly departed from the approved plans, Mr Kazzi breached the duty of care in s 37 of the DBP Act...
[108] Given Mr Kazzi's position as the nominated supervisor, his involvement in the decision to install non-compliant door jambs in favour of a performance solution constituted a breach of the statutory duty of care. The non-compliances with fire resistant requirements which were the subject of defect B16, which included the installation of non-fire rated cladding on the external walls of units C5 and C6 without installing any fire protection beneath that cladding, also involved a breach on the part of Mr Kazzi of his statutory duty of care in supervising the building works."
There is an emerging trend towards personal liability of director/nominated supervisors under section 37 of the Design and Building Practitioners Act 2020 (NSW). Similarly in Mangano v Amescorp Pty Ltd [2024] NSWDC 195, the director/nominated supervisor was found personally liable even though he had hired an on-site supervisor, due to his regular attendance on site.
Next steps
In terms of what follows, traditional asset protection structures at the cottage end of the industry clearly have some catching up to do (or are perhaps just redundant), as do contracts of employment for staff nominated supervisors at the bigger end of the industry. It's not just a forward-looking issue. The emerging trend will have all levels of the industry looking at legacy projects from the last 10 years and identifying risks that were never recognised in structures, indemnities, pricing or wages.
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