On 5 July 2024, His Honour Justice Waugh handed down his decision in The Owners – Strata Plan 80867 v Da Silva [2024] NSWDC 263.
Swaab, instructing William Marshall of 7 Wentworth Selborne Chambers, acted for the Plaintiff Owners Corporation in the proceedings, which were brought against Mr Da Silva (the Builder). The Builder performed remedial works in a residential strata title building, to rectify original building defects.
Those remedial works were proven to be defective, in breach of the contract terms and the implied statutory warranties under section 18B of the Home Building Act 1989 (HBA) and importantly were found to cause economic loss with the Builder held to be in breach of the extended duty of care afforded under section 37 of the Design and Building Practitioners Act 2020 (DBP Act).
DBP Act
As noted by Waugh J when discussing the applicable provisions under Part 4 of the DBP Act at [231] 'there have been very few cases applying or interpreting these provisions to date'. This decision therefore provides further welcomed clarity for practitioners over the application of the duty of care provisions of the DBP Act to construction works performed in NSW.
Section 37 of the DBP Act provides that "A person who carries out construction work has a duty to exercise reasonable care to avoid economic loss caused by defects..." under a contract or otherwise. That duty is established by the DBP Act. The questions for determination in such cases are limited to whether the duty was owed by the defendant, whether such duty was breached and whether the damage, if any, arises from the breach [236].
His Honour discussed the application of section 37 of the DBP Act to a 'person who carries out 'construction work' including, but not limited to, carrying out building work or supervising, coordinating or having substantive control over the carrying out of that work [229], which by reason of section 36, includes 'residential work within the meaning of the HBA'.
Waugh J went beyond the findings in Loulach i where Stevenson J held 'that s5B of the Civil Liability Act 2002 applies to a claim for damages for breach of the statutory duty in s37 of the DBP Act...' to state at [239] 'In my opinion, another provision of the Civil Liability Act 2002 that would apply is s5D. It addresses the question of whether negligence caused a particular harm'.
Pafburnii was referenced, holding that 'Part 4 of the Civil Liability Act 2002...does not apply to a claim for damages for breach of statutory duty is expressed to be non-delegable'iii along with Kazziiv, which held that a supervisor of the works (Mr Kazzi) '...breached his statutory duty of care, as the nominated supervisor of the works, by making decisions as to the progress and manner of the works that gave rise to the defects on which the owners relied'.
Whilst in this decision (the Da Silva case) at [246], the Builder acknowledged his duty of care to the Owners Corporation, and admitted the works were 'residential building works', he argued that his work complied with a varied scope which dispensed with the requirement to comply with the Building Code of Australia (BCA) and the relevant Australian Standard (AS4654.2 – 2012) (AS 4654). In answer to the claim that he breached the section 37 duty, he also asserted that 'reasonable care' did not require him to stop work when his work was not going to be of standard or to communicate that position to the Owners Corporation.
The Builder owed the Owners Corporation a duty to exercise reasonable care to avoid economic loss from defects. To meet this duty, His Honour held the Builder was required to perform construction works in accordance with the BCA and AS 4654[254]. If instructed to perform the works inconsistently with the BCA and the Australian Standard, he should have warned the Owners Corporation in writing of the likely economic loss or refused to perform the works. This is an important, albeit somewhat obvious reminder, that the duty of care imposed by the DBP Act cannot easily be overcome by a lackadaisical approach to compliance with the BCA and relevant Australian Standards in determining the scope of works under a contract for residential work generally and specifically in the context of remedial works.
At [256] Waugh J made the following further findings that in this case the risk of harm 'if the waterproofing work was not performed in accordance with the BCA and Australian Standard' was foreseeable, that the risk of harm "was not insignificant" nor "far-fetched or fanciful" and, that "a reasonable water proofer in Mr Da Silva's position would have taken the precaution of" complying with the BCA and Australian Standard as he had agreed to do under the contract.
Breach of Contract and Defences raised by the Builder
The Builder raised defences to the contractual claim of non est factum, that the scope of the building works were varied orally, along with defences of contributory negligence and proportionate liability under Part 4 of the Civil Liability Act 2002.
Defence of non est factum
The builder, who operated a building company, pleaded a defence of non est factum claiming the contract was void and of no effect because when he signed it he believed he was signing a routine document for insurance and safety purposes, and not a contract giving rise to personal liability.
The court referred to the High Court decision in Petelin v Cullen (1975) 132 CLR 355, concluding that the builder did not meet the criteria for this defence, as there is no evidence suggesting he was unable to understand the document he signed, only that he chose not to read it. Therefore, the court was not convinced that the builder signed the document believing it was something else.
Variations to contract
The builder accepted that the contract included the express terms relied upon by the Owners Corporation but claims those terms were varied, absolving him from adhering to the BCA and AS 4654. He insisted that the other defendants, purportedly acting for the Plaintiff, directed these changes and that he performed the work as per the new scope.
The court rejected the builder's assertions, finding no credible evidence that other parties had the authority to alter the contract or, that they directed the work to be done in a particular way. Instead, emails and testimonies showed repeated warnings were made against the way the builder was proceeding with the work.
The court also did not accept that the Owners Corporation or its agents agreed to any contract variations, given their consistent concern for compliance with standards. In addition, as the work was residential building work under the HBA, if there was a variation of the contract it had to be in writing signed by the parties to be effective pursuant to Paraiso v CBS Build Pty Ltd [2020] NSWSC 190.
Findings
The plaintiff in this case was awarded the sum of $462,707.93 for breach of contract and for breach of statutory duty of care under the DPB Act which was the full cost of the costed rectification works reduced by the sum reflecting contributions paid to the Plaintiff Owners Corporation through settlements reached with the second and third defendants.
Footnotes
i The Owners – Strata Plan Number 87060 v
Loulach Developments Pty Ltd (No 2) [2021] NSWC
1068
ii The Owners – Strata Plan No. 84674 v
Pafburn Pty Ltd [2023] NSWCA 301
iii Note: Pafburn is presently on appeal to the High
Court
iv Kazzi v KR Properties Global Pty Ltd t/as AK
Properties Group [2024] NSWCA 143
To read the District Court New South Wales Judgement click here.
For further information please contact:
Helen Kowal, Partner
Phone: +61 2 9777 8321
Email: hek@swaab.com.au
Jennifer Hold, Partner
Phone:+61 2 9233 5544
Email: jjh@swaab.com.au
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