CONSTRUCTION & INFRASTRUCTURE CASE REVIEW

NSWSC 624 GOODWIN STREET DEVELOPMENTS PTY LTD ATF JESMOND UNIT TRUST V DSD BUILDERS PTY LTD (IN LIQ)

Article written by Jina Kim

Court awards damages against Builder’s Director in breach of duty of care under section 37 of

the Design and Building Practitioners Act 2020.

In the recent Supreme Court decision, Goodwin Street Developments Pty Ltd atf Jesmond Unit Trust

v DSD Builders Pty Ltd (in liq) [2022] NSWSC 624, Justice Stevenson found:

(i) the second defendant, Daniel Roberts, who was related to the builder company, being the

director’s fiancé, project-managed and supervised the construction works;

(ii) defects were caused by want of his care; and

(iii) as such, he breached his duty of care under section 37 of the Design and Building Practitioners

Act 2020 (DBP Act).

Background

Goodwin Street Developments entered into a building contract for DSD Builders to construct 3

residential boarding houses for university students in Newcastle. Whilst Goodwin and DSD were in

dispute over defective works, Goodwin terminated the contract and subsequently, the director

caused substantial damage to the construction works.

Goodwin sought 2 groups of orders:

1. to rectify malicious damage allegedly caused by Mr Roberts after the building contract was

terminated; and

2. in relation to allegedly defective construction work.

Proceedings were initially commenced against the building company, however it went insolvent

and Mr Roberts was added as a 2nd defendant.

The Court found in Goodwin’s favour on both, in that:

/ Mr Roberts carried out “construction works” for the purpose of section 36 of the DBP Act, as he both project managed and supervised the construction work.

/ Mr Roberts breached his duty of care under section 37 of the DBP Act.

/ Mr Roberts is liable to pay Goodwin the cost of rectifying the defects and damages.

Director’s engagement in “construction works” under s 36 of the DBP Act

Section 36 of the DBP Act defines “construction work” as follows:

(a) building work,

(b) the preparation of regulated designs and other designs for building work,

(c) the manufacture or supply of a building product used for building work,

(d) supervising, coordinating, project managing or otherwise having substantive control over the carrying out of any work referred to in paragraph (a), (b) or (c).

Based on the evidence that the director attended every meeting with Principal and the contractor

administrator; the director was the only representative of the builder; and further evidence given

that construction works were undertaken under the director’s supervision, Court accepted that the

director was engaged in “construction works” in accordance with section 36.

Director’s breach of duty of care under s 37 of the DBP Act

In the circumstances where Mr Roberts supervised the construction works, administered the

building contract on behalf of the builder company, and assured Goodwin that the defects would be

rectified, Court found that he acted in breach of his duty of care under section 37 and therefore, he

is liable to pay the costs of rectification to Goodwin.

MADI SON M A RCUS L AW F IRM

Key Takeaways

Since the DBP Act commenced in June 2020, the number of cases joining directors of the builder

companies or subcontractors as defendants under section 37 of the DBP Act is increasing. This

case confirms they can be found liable.

However, if you are a principal or owner, care should be taken to determine whether to bring claims

under the DBP Act. Just because someone is a director of a builder company for a project (or

possibly of the developer company) or a subcontractor of the project, it does not automatically

mean that the director or subcontractor has carried out “construction work” for the purpose of

section 36 of the Act and is liable under section 37. This should be determined based on thorough

assessment of evidence available to the principal or owner.

If you are a builder or developer or a subcontractor, it might be prudent to keep a log or record of

individuals’ roles and the extent of their involvement in terms of executing construction projects.

This article is not to be taken as legal advice without first contacting Madison Marcus. Our dedicated

construction and infrastructure team is available to provide immediate assistance to help navigate

this unprecedented period.

For more information or any enquiries, please contact James Moir, Director, or John De La Hoyde,

Partner, on 02 8022 1222 or email james.moir@madisonmarcus.com.au or john.delahoyde@madisonmarcus.com.au .

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