Project Lawyers are currently acting for Owners Corporations and Builders/Developers in a number of NSW Supreme Court proceedings in which the Design and Building Practitioners Act 2020 (NSW) (Design Act) is relied upon. We have been very careful in how we plead a cause of action pursuant to the Design Act and have relevantly taken issue in circumstances where Design Act claims are made against our clients.
The NSW Supreme Court decision in The Owners – Strata Plan No 87060 v Loulach Developments Pty Ltd (No 2)  NSWSC 1068 (Loulach) has affirmed our position on the importance of particularising a Design Act claim with precision.
The Owners Corporation commenced proceedings against Loulach Development Pty Ltd (Loulach Development), the developer, and Loulach Steel Pty Ltd (Loulach Steel), the builder, alleging a large number of defects in a residential strata development in Parramatta, primarily concerning water damage and defective cladding.
The Owners Corporation’s claim was originally based upon alleged breaches of the statutory warranties implied into the relevant building contract by the Home Building Act 1989 (NSW).
By way of application, the Owners Corporation sought leave to amend its Technology and Construction List Statement (TCLS) to add a claim relying on an alleged breach of the statutory duty of care created by section 37 of the Design Act.
In its proposed TCLS, the Owners Corporation articulated a claim under the Design Act by pleading that Loulach Steel had breached its statutory duty of care “by reason of the defective construction work referred to in the particulars to paragraph 16 above”. However, paragraph 16 of the TCLS simply referred to the various expert reports submitted by the Owners Corporation in the proceedings.
Loulach Steel opposed leave being granted on the basis that the pleading in its current form proposed leaves the question of breach of that duty “wholly unarticulated”.
Contrarily, the Owners Corporation submitted that, in effect, a defect constituting a breach of the statutory warranties under the HBA translates into a breach of the statutory duty of care under the Design Act.
Stevenson J disagreed with the position taken by the Owners Corporation and made it abundantly clear that the Design Act was “was not intended to provide a shortcut as to the manner by which a breach of such duty might be established.”
Instead, as explored in the Second Reading Speech for the Design and Building Practitioners Bill 2019 (NSW), “any person who wants to proceed with litigation will be required to meet the other tests for negligence established under the common law and the Civil Liability Act 2002. This includes determining that a breach of the duty occurred and establishing that damage was suffered by the owner as a result of that breach.“
In light of this, Stevenson J emphasised the importance of identifying the specific risks that one is required to manage and the precautions they ought to have taken when managing those risks when pleading a breach of the statutory duty of care under the Design Act. His Honour went even further and stated that “it is not sufficient simply to assert a defect and allege that the builder was required to take whatever precautions were needed to ensure that the defect not be present.”
His Honour suggested that, contrary to the approach taken by the Owners Corporation, a degree of specificity could be achieved by revising the Scott Schedule to “to add further columns identifying, in relation to each defect, the relevant risk and, more importantly, exactly what the Owners Corporation contends Loulach should have done in relation to that risk.”
The contents of this publication are for reference purposes only. This publication does not constitute legal advice and should not be relied upon as legal advice. Specific legal advice should always be sought separately before taking any action based on this publication.