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The new Duty of Care - NSW

From 11 June 2020 all of those involved in construction work, including both residential and commercial, low, medium and high rise now owe a Duty of Care to individual homeowners, owners corporations and any subsequent owners.

This information sheet explains what this new duty means for you and the construction work you carry out.

Overview

Q. What is a ‘Duty of Care’?

Under the Design and Building Practitioners Act 2020 (the DB&P Act) anyone carrying out construction work now has a duty to exercise reasonable care to avoid financial loss caused by defects.

Those in the building and construction industry are now a part of a range of relationships where a Duty of Care has been found, for example:

  • Doctors and other medical practitioners owe their patients a Duty of Care.
  • Schools owe their students a Duty of Care.
  • Drivers owe a Duty of Care to other road users, including their passengers and pedestrians.
  • Employers owe a Duty of Care to their employees.
  • Manufacturers owe to people who use, not just those who buy, their products a Duty of Care.
  • Owners and occupiers owe to the people who come onto their land and premises a Duty of Care.

Q. Who owes a Duty of Care?

Anyone who carries out construction work will owe a Duty of Care. 

Construction work includes design work, the supply or manufacture of building products, and the supervision, coordination and management of work. It also includes residential building work within the meaning of the Home Building Act 1989 (HBA).

Q. What classes of buildings does the Duty of Care apply to?

The Duty of Care applies to all classes of buildings including commercial buildings.

Breach of Duty

Q. How could I breach my Duty of Care? 

The Civil Liability Act 2002 (the CLA) provides some guidance as to how a court determines whether there has been a breach of a Duty of Care.

1. The builder knew about the potential for action (or inaction) to cause harm and did nothing. 

The first thing that a homeowner would have to show is that there was a risk of harm that a builder (or other practitioner engaging in construction work) should have known about and was negligent for failing to take precautions. Under the CLA ‘harm’ includes damage to property and economic loss.

2. It was likely that the action (or inaction) would result in loss or damage.

Next the homeowner would have to establish that at the time the work was carried out the risk of harm was foreseeable, or should have been foreseeable by the builder. Under the CLA the risk of harm must be ‘not insignificant.’

3. The harm was a result of the actions (or inactions) of the builder.

The homeowner would then have to prove that the actual harm they suffered was caused by the negligent work that the builder performed, or was responsible for.

4. Reasonable precautions were available when compared to the risk of harm.

The homeowner would also need to prove that the precautions that needed to be taken to avoid the harm were reasonable when compared with the risk of harm. This means that the homeowner would need to demonstrate not only that there were precautions available, but that a reasonable person in the builder’s position at the time would have taken those precautions.

Example: ABC Building has been contracted to build a new home. ABC Building decide that as part of the design of the house they will also design the footings. 

Once completed, the homeowners start to find significant cracking in the walls. It is then found that this cracking is due to the failure of the footings. This failure caused significant damage to the house and loss to the homeowner. 

1. In this case, the builder would (or should) have known that if the footings were designed incorrectly, that would cause harm yet did nothing to prevent that. The builder would (or should) have known that it is common practice for builders to engage a geotechnical engineer to classify the site and then engage a structural engineer to design the footings, yet did not do that.

2. It was foreseeable at the time of designing the footings, that the risk of designing those footings incorrectly would cause loss and damage.

3. The failure by the builder to engage an engineer caused the harm suffered by the homeowner.

4. Considering the risk that inadequate footings pose to the structure, the risk of harm is high enough that a builder or reasonable person would use an engineer despite not necessarily being required to by law.

Q. What happens if I am found to have breached my Duty of Care?

If those carrying out construction work breach their Duty of Care an owner may be entitled to financial compensation for the breach.

Q. The homeowner is claiming there are defects – is that a breach of my Duty of Care?

Not every defect will have resulted from a breach of the Duty of Care. Homeowners will have to prove in a court or tribunal that the work carried out was performed negligently, that it falls below the appropriate legal standard and that it was the performance of the work that actually caused the defect.

Q. The homeowner is claiming that I breached my Duty of Care – what should I do?

You will have to prove that the construction work was carried out in a manner that was widely accepted by other professional builders as being a suitable professional practice.

This means that even if defects are present, if you can prove that the work performed was undertaken by using a typical method, or means that is customarily used by other professional builders and to a standard common to the industry there will have been no breach of duty.

Q. What steps can I take to make sure that I don’t breach my Duty of Care?

It is unlikely that a court would find that a builder breached their Duty of Care obligations if, when carrying out the work, they exercised reasonable care and followed the requirements of the Building Code of Australia and the relevant Australian Standards.

Others may be at fault

Q. What if someone else is partly at fault?

Under the CLA, if someone else is partly responsible for harm that has been suffered it is possible to assign responsibility or fault to other parties where those acts or omissions caused the harm that is the subject of the claim.

For example a sub-contractor engaged by a builder, or an engineer who prepared the design or plans that the builder followed maybe partly responsible for the harm that has been suffered.

Q. What if the homeowner is partly at fault?

Under the CLA if the homeowner who is claiming a breach of Duty of Care has contributed to the harm by failing to take precautions against the risk of that harm, the homeowner can be found liable for the damage and associated costs as well. This is known as ‘contributory negligence’. 

To prove contributory negligence you must establish that a reasonable person in the position of the homeowner knew, or should have known that their actions or inactions would contribute to the risk of harm.

It is possible to reduce the amount owed by proving that the homeowner contributed to the harm by up to 100% if the court thinks it just and reasonable to do so.

Existing laws still apply

Q. But what about Statutory Warranties?

Nothing has changed regarding the application and operation of the statutory warranties under the HBA. The Duty of Care provisions apply in addition to all the existing legal obligations builders must comply with.

It is most likely that where they are available, the statutory warranties will remain a homeowner’s primary way of making claims for defective building work. It should prove easier and cheaper for a homeowner to prove breach of a statutory warranty than breach of a Duty of Care. Breach of a statutory warranty also provides for rectification orders which is not available for a breach of Duty of Care.

Q. Contracts and the Duty of Care

Under the DB&P Act a contract cannot include a term that attempts to exclude the application of the Duty of Care. Even if such a term is included, it will not affect the application of the Duty of Care.

The DB&P Act also prevents delegating or assigning the duty down the contract chain to other contractors performing building work.

This will mean for example that the clauses design professionals commonly use delegating responsibility of compliance to the builder will no longer be effective.

Q. Has anything really changed for detached residential dwellings?

Yes and no.

Builders, architects and engineers have often been held accountable to homeowners to perform their work with reasonable care and have been found to owe a Duty of Care to homeowners. For example a builder who constructed a house using inadequate footings breached his duty to take reasonable care in the construction of the house to a subsequent buyer of the house.

Also under the Australian Consumer Law (ACL) a person who supplies goods or services of under $40,000 to a consumer, must guarantee that the services will be provided with due care and skill. 

Example: Joe Builder was asked to purchase and install new windows for a homeowner. The cost was less than $40,000 so the consumer guarantees under the ACL applied to the work.

Joe Builder did not measure the opening for some windows correctly. This resulted in the homeowner incurring additional cost when the owner had to pay a different contractor for the extra work needed to fit the new, incorrectly sized, window to the opening.

In this case it was reasonably foreseeable that the homeowner would incur extra cost to have the window fitted in an opening that was the wrong size. Joe Builder failed to provide due care and skill when carrying out its services.

Timeframes

Q. How long am I liable for a breach of Duty of Care?

An owner can sue those responsible for a breach of Duty of Care for up to six years after becoming aware of the breach. This is potentially longer than the statutory warranty periods. A homeowner will have to take the matter to court within 10 years after a building has been completed.

Example: If you completed a building in May 2021 a homeowner must bring any action for a breach of Duty of Care by May 2031. If the homeowner became aware of the breach of duty in May 2029, the homeowner would have until May 2031 to sue those responsible.

Q. Do I owe a Duty of Care for buildings already built?

Yes. The Duty of Care applies to any construction work that was completed in the last 10 years.

Example: If you completed a building in 2012, a homeowner may be able to sue you for breach of Duty of Care until 2022.

HIA Workplace Services

1300 650 620