Professional Accountants
LegalJune 07, 2022

NSW: Personal liability for defects for directors, supervisors, project managers and developers under the DBP Act

By: Jonathan Nathan
In a recent decision of the Supreme Court of NSW, the court found a person who was a project manager and supervisor of the builder personally liable for defective works of the builder under the Design and Building Practitioners Act 2020 (NSW) (DBP Act).

In 2020, the DBP Act was introduced which, amongst other things, mandated a duty of care to be owed by “a person who carries out construction work” (see s 37 of the DBP Act).

Until recently, there was some doubt as to who exactly would be “a person who carries out construction work”. For example, it was unclear whether such class of persons was limited to the entity that contracted to do the work (i.e. the builder), the developer or all persons involved in doing the work (e.g. nominated supervisors, directors, project managers and the like).

In the recent decision of Goodwin Street Developments Pty Ltd atf Jesmond Unit Trust v DSD Builders Pty Ltd (in liq) [2022] NSWSC 624, Stevenson J of the Supreme Court of NSW determined that a project manager of the builder was liable for defective works under the DBP Act.

In that case, the builder was placed into liquidation and the developer brought proceedings against Mr Roberts the husband of a director of the builder. The court found that Mr Roberts was a project manager of the builder and had supervised the construction works. On that basis, Mr Roberts was found to be “a person who carried out construction work” within the meaning of the DBP Act and found to be liable for the subsisting defects (see Goodwin at 3 and 137-138).

In another decision of Stevenson J in The Owners – Strata Plan No 84674 v Pafburn Pty Ltd [2022] NSWSC 659, proceedings were brought by an owners corporation against a builder and developer. In that case, the court found, inter alia, that a developer could be held liable under the DBP Act as a person who carried out construction work (see Pafburn at 58). The court also found that a person could be liable under the DBP Act if that person could have, but not necessarily did, have control of the construction works carried out (see Pafburn at 58).

Given the two decisions referred to above, it now appears that directors, nominated supervisors, project managers, developers and even subcontractors may be liable to owners under the DBP Act as long as it can be shown that such persons could have exercised control over the carrying out of the relevant construction works.

The above has far reaching consequences particularly because s 37 of the DBP Act applies to buildings (defined broadly in the EPAA) where the loss became apparent in the 10 years prior to the commencement of the DBP Act (see clause 5 of Schedule 1 to the DBP Act). For example, in Pafburn, the proceedings were commenced within 5 days of this 10 year limitation period (see Pafburn at 8).

There is however some work to be done in pleading cases against individuals and developers under the DBP Act, as a plaintiff pleading such an action will need to show the specific risks that the relevant defendant was required to manage and the precautions that the defendant should have taken to manage those risks (see The Owners of Strata Plan No. 87060 v Loulach Developments Pty Ltd (no.2) [2021] NSWC1068 at 40 to 44).

Jonathan Nathan
Barrister-at-Law, University Chambers
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