Is the design and building practitioners act an extra arrow in the quiver of homeowners for building defect claims?

The Owners – Strata Plan No 87060 v Loulach Developments Pty Ltd (No 2) [2021] NSWSC 1068

State of play

Statutory warranties would under the Home Building Act 1989 (HBA) have been the main basis for defect claims against builders. Many owners had hoped that the passing of the Design and Building Practitioners Act (DBPA) in 2020 provide a stronger legal avenue for claims against design and building practitioners. In brief, the DBPA legislated that design and building practitioners owed a duty of care for their work, to owners of land, which operated alongside the HBA.

Until now, there has not been any significant legal direction as to how the HBA and DBPA interact, what is needed to satisfy a claim under the DBPA, or how a claim under the DBPA should be successfully brought.

What has happened?

The owners corporation of a residential strata scheme in Parramatta brought proceedings against a builder for defects in a residential development.

The proceedings were initially brought on the basis that the builder had breached the statutory warranties under the HBA. The owners corporation then sought leave to add to their claim that those defects amounted to breaches of the statutory duty of care in the DBPA.

Stevenson J refused that leave, on the basis that the breaches of the DBPA were not properly articulated in the subsequent claim.

Why is this important?

This judgment was the first of its kind handed down, thereby providing guidance on the breadth and effect of the DBPA and how the Courts will construe DBPA claims. This may affect the way that claims are articulated by lawyers, how experts prepare their evidence, and how likely it is that a claim under the DBPA is successful.

What was the decision?

The key question in dispute was whether the owners corporation had sufficiently made out a breach of the DBPA.

The owners corporation had identified various defects and stated that the fact that the defects existed was sufficient to establish that the builder had failed to take the required precautions, thereby breaching its duty of care under the DBPA.

Stevenson J disagreed. His Honour stated that whilst the statutory duty of care meant that the owners corporation did not need to establish that the builder owed a duty of care, it did not mean that the owners corporation did not need to comply with the typical elements of negligence established under common law, including that the duty of care has been breached in a certain manner and that damage caused was causally linked to that breach.

What does this mean?

Stevenson J stated that a DBPA claim will not be successful if it simply asserts that a defect exists, and that a builder was required to take whatever precautions that were needed to ensure that the defect not be present.

Therefore, claims under the DBPA will need to identify:

1. the specific risk the builder was required to manage; and
2. the specific precautions that should have been taken to manage that risk.

Stevenson J suggested that it may be possible for this to be achieved by adding columns to a Scott Schedule that outlines the relevant risk for each defect, and what the builder should have done in relation to that risk for each defect. Whilst that may be an effective process for the purposes of the pleadings, that is not to say that such a claim would be successful.

What should I take away from this?

Experts and lawyers should take note of this decision and ensure that any claim under the DBPA adequately deals with those elements, or it will likely be unsuccessful in accordance with the precedent set by this decision.

Homeowners should feel some confidence in that they can benefit from this additional guidance on how a claim should be brought against a design and building practitioner.

Design and building practitioners should also take some reassurance from this decision, by noting that the statutory standard required by the DBPA will likely be consistent with, and not beyond, the existing common law framework.

If you believe that you are exposed to risks due to the DBPA or building defects, please contact us for advice on your rights under the HBA and DBPA.

Disclaimer: The information contained in this article is provided as general information only. It is not intended to be legal advice and it should not be used or relied on as legal or professional advice.