Following the appointment of the Office of the NSW Building Commissioner (OBC) in 2019, the State has undergone major changes across the building and construction industry.
Construction Risk Reform
These changes have been underpinned by a set of six pillars of reform, focused on building the following:
- a better regulatory framework;
- ratings systems;
- skills and capabilities;
- better procurement methods;
- a digital future; and
- the reputation for quality research.
The DBP Act, which commenced in July 2021, was the OBC’s first step in regulatory reform.
The DBP Act has established a number of new obligations on building, engineering and design practitioners, including requirements that:
- designers, builders and engineers be registered under a statutory registration scheme;
- mandatory compliance declarations be made by design practitioners and building practitioners in respect of their work; and
- practitioners be covered by a professional indemnity insurance scheme, prior to their commencement of works.
It also imposed a statutory duty of care on persons carrying out construction work to exercise reasonable care to avoid economic loss caused by defects in or related to a building or arising from construction work.
Interpretation of the statutory duty of care
Under section 37 of the DBP Act, a statutory duty of care is owed by a person who carries out construction work. That duty is to exercise reasonable care to avoid economic loss caused by defects and is owed to the owner of the land (and each subsequent owner) on which the construction work is carried out.
The duty cannot be contracted out of or delegated, and importantly, it has retrospective application meaning that it applies to economic losses which became apparent within 10 years immediately before the DBP Act commenced (subject to relevant limitation periods).
What is required to allege a breach of duty of care under the DBP Act?
An owners corporation or an association is taken to suffer economic loss if they bear the cost of rectifying defects (including damage caused by defects) that are the subject of a breach of the duty of care under the DBP Act.
To identify such breach, the plaintiff would be required to identify:
- the specific risks that a person who carries out construction work is required to manage; and
- the precautions that should have been taken to manage those risks.
Notwithstanding, the Courts have taken an increasingly stringent view of how parties plead a cause of action under section 37 of the DBP Act. In University of Sydney v Multiplex  NSWSC 383, it was affirmed that a plaintiff must:
- particularise in its pleadings the factual matters that show how the defendant had control over the construction works; or
- show that the defendant had the ability or power to control how the work was carried out.
In Multiplex, it was also determined that to prove causation, a plaintiff must be specific when identifying the steps a reasonable person would have been taken when managing risks.
Ultimately, this decision highlights the need for claimants to particularise when pleading claims under the DBP Act and serves as a warning against the over-generalisation of pleadings in construction matters.
For a more detailed review of the above decision, please refer to our article here.
Which classes does the DBP Act apply to?
The DBP Act applies to all class 2 buildings and from 3 July 2023 it will apply to construction work on new class 3 and 9c buildings under the NSW Government’s new Building Legislation Amendment (Building Classes) Regulation 2023 (NSW).
However, in respect of the statutory duty of care under section 37 of the DBP Act, the courts have established that this duty applies to all classes of buildings in NSW.
If you would like more information on the DBP Act or the statutory duty of care generally, please contact a member of the Construction team.