Building and Construction Contract Law – Essay

Ali Zahr – 32013844

Word count – 3571 (10% rule applied)

I – Introduction

Construction law presents numerous challenges when it comes to dealing with the economic losses
suffered by subsequent buyers due to hidden defects in structures. In the case of Brookfield
Multiplex Ltd v Owners Corporation Strata Plan No 61288, Kiefel and Hayne JJ discuss how
reliance and vulnerability play a crucial role in determining liability for these losses. 1 They
emphasize that reliance alone is not enough, stressing the importance of contractual safeguards
against negligence. In contrast, Gageler J suggests that the best approach to granting legal
protection to subsequent purchasers is through legislative measures.

Given these perspectives, this essay will carefully evaluate the Design and Building Practitioners
Act 2020 (NSW) as an extended legal duty of care. It aims to assess whether this legislation can
provide a suitable means for seeking compensation in cases of economic loss caused by hidden
defects. Moreover, it will explore alternative avenues of recourse, both within common law and
statutory frameworks, in situations where a negligence claim cannot be established. To gain a
comprehensive understanding, this essay will also undertake a comparative analysis of the legal
stances in New South Wales and Western Australia. Finally, potential adjustments to the existing
laws will be outlined, considering how they can effectively address the risks associated with latent
defects in structures.

II – Critical Assessment of the Design and Building Practitioners Act 2020 (NSW)

A – Explanation of the extended statutory duty of care under the Act

The Design and Building Practitioners Act 2020 (NSW) brings in a new legal duty to care, which is
meant to tackle the problem of financial loss caused by hidden defects in structures. This duty of
care goes beyond the regular obligations of design and building professionals involved in
construction projects. According to the Act, professionals like architects, engineers, and builders
must use reasonable care and skill in their work. This duty applies not only to the client they are
currently working for but also to anyone who buys the property later on. In simple terms, it means
that their responsibility extends beyond the initial contract to include those who become owners of
the structure after it's finished.2
1
(2014) 254 CLR 185, 210 (Kiefel and Hayne JJ).
2
‘The Design and Building Practitioners Act 2020 (NSW): Establishing a New Statutory Duty of Care for the Built
Environment’ [2020] (Dec 2020-Feb 2021) Built Environment Economist: Australia and New Zealand 19.
The Act places certain responsibilities on design and building professionals throughout the different
stages of a project, including design, construction, and certification. These professionals are
required to carry out their work in a manner that aligns with relevant standards, regulations, and the
reasonable expectations of future buyers. Additionally, the Act introduces compulsory compliance
declarations for design and building activities. 3 These declarations oblige practitioners to verify that
their work meets the required standards and regulations. This acts as an extra measure to safeguard
subsequent buyers from hidden defects and ensures that practitioners are accountable for the
excellence and safety of their work.

The extended legal duty of care established by the Design and Building Practitioners Act (NSW)
intends to offer subsequent buyers a way to seek legal remedies when they suffer financial losses
due to hidden defects.4 This ensures that design and building professionals are held responsible for
their actions and promotes elevated levels of professionalism and accountability within the
construction sector.

B - Evaluation of the Act’s potential as a recourse avenue for economic loss due to latent defects

The Design and Building Practitioners Act 2020 (NSW) shows potential as a way for people to seek
compensation when they experience financial losses caused by hidden defects in structures. The Act
establishes a stronger legal duty of care to tackle the difficulties faced by subsequent buyers who
are affected by these defects and suffer economic setbacks as a result.

The Act broadens the responsibility of design and building practitioners to encompass both the
initial client and those who purchase the property later on. This extension of duty enables
subsequent buyers to pursue legal action against the professionals involved in the construction
process. The Act establishes obligations that span the entire project timeline, including design,
construction, and certification phases, thereby encouraging greater professionalism and
accountability within the industry.

Additionally, the Act mandates the use of compliance declarations, which require design and
building practitioners to affirm that their work adheres to the relevant standards and regulations.
This added protection empowers subsequent purchasers to safeguard themselves against hidden
defects and ensures that practitioners are held responsible for the excellence and safety of their
work.

Yet, the true effectiveness of the Act as a means of seeking compensation for economic loss will
rely on how it is put into practice and enforced. There may be difficulties in establishing a clear link

3
Design and Building Practitioners Act 2020 (NSW) s 18.
4
Ibid 37.
between the latent defects and the resulting financial loss. Furthermore, the Act's efficacy is
contingent upon the availability of appropriate remedies and the efficiency of the legal procedures
employed in resolving such disputes.5

C – Analysis of the Act’s effectiveness in addressing the issue

Since the landmark case of Bryan v Maloney, the High Court has consistently emphasized the
significance of contract law when it comes to addressing pure economic loss arising from breached
contractual expectations.6 This approach was underscored in the joint judgment of Crennan, Bell,
and Keane JJ in the Brookfield case, where it was noted that the common law traditionally refrained
from altering the allocation of economic risks between contracting parties through additional tort
duties. However, the enactment of the Act marks a departure from this trend.

In the case of Goodwin Street Developments Pty Ltd atf Jesmond Unit Trust v DSD Builders Pty Ltd
(in liq), the Court determined that Mr. Roberts, acting as the project manager and supervisor for
DSD, qualified as a person involved in construction work under Part 4 of the Act. 7 This
classification was established through a complex evaluation, as described by Justice Stevenson, and
ultimately concluded that a boarding house, despite being a non-class 2 building, fell within the
scope of Section 37 of the Act. Consequently, it was found that Mr. Roberts had violated his duty of
care as stipulated by the Act.8

Additionally, the case of Woolcock involved the design of foundations for a warehouse and office
building in Townsville.9 The land was owned by a property trust, and the design phase included
obtaining a geotechnical report. However, either the owner or the company responsible for the site's
development refused to pay for the report, resulting in its omission. Years later, after the building
was sold to Woolcock, signs of significant structural distress emerged due to the inadequate
foundations. The contract of sale did not include a warranty of defect-free construction or the
assignment of any rights against the builders and designers. The court applied the principle
established in Bryan v Maloney, which established that a builder has a duty to subsequent
purchasers who rely on their expertise to protect them from foreseeable decreases in value caused
by hidden defects.10 However, this duty is limited to the specific circumstances of that case. The
court also emphasized that the vulnerability of the plaintiff, in terms of their inability to protect

5
Sebastian Brodowski and Patrick Wiggins, ‘Property law: A new duty of care - 'Design and Building Practitioners Act
2020'’ (2020) 69 Law Society Journal 74, 75.
6
(1995) 182 CLR 609.
7
[2022] NSWSC 624.
8
Ibid 138.
9
Woolcock Street Investments Pty Ltd v Cdg Pty Ltd (Formerly Cardno & Davies Australia Pty Ltd) (2004) 20 BCL 176.
10
Ibid 26.
themselves, plays a crucial role in determining whether the defendant owes a duty of care to prevent
negligently causing economic loss to the plaintiff.11

These cases demonstrate that the Act fills a crucial gap in the law by safeguarding subsequent
buyers from financial losses caused by hidden defects. It establishes clear rules for practitioners,
enhancing consumer protection and providing fair remedies for construction-related issues. The Act
acknowledges the trust placed in builders and designers by subsequent purchasers and offers a
structured framework to address their failures.

III – Alternative Avenues of Recourse

A – Examination of a common law option for economic loss when negligence claims are not viable

When it's not possible to pursue negligence claims, it is important to consider other ways to seek
compensation for economic losses.

One option available under common law is the doctrine of misrepresentation. This doctrine applies
when one party makes false statements or representations that lead another party to enter into a
contract. If the subsequent purchaser can prove that the seller or the design and building practitioner
made deceitful or careless misrepresentations about the property's condition or quality, they may be
eligible to seek compensation for the economic losses suffered. In the case of San Sebastian Pty
Ltd, negligent misrepresentation was acknowledged as a distinct category that establishes a duty of
care.12 This means that if someone makes a false statement and it leads to harm or loss for another
party, they may be held responsible for their negligent misrepresentation. The suggestion that the
duty could be extended – for instance – to the professional who prepares the site information, even
if the information was actually provided to the contractor by the principal, was also seen in Bell
Bros Pty Ltd.13 The above concepts are displayed in Multiplex Constructions, in which it was
clarified that if Party A makes a representation, Party B relies on that representation, and as a result,
Party C suffers passive injury, including pure economic loss, Party A may be held liable towards
Party C.14

Therefore, it can be argued that negligent misrepresentation is a recognized category for the
purposes of this argument.

11
Ibid 170.
12
San Sebastian Pty Ltd v Minister Administering the Environmental Planning and Assessment Act 1979 (1986) 162 CLR
340 (Gibbs CJ, Mason, Wilson, and Dawson JJ).
13
Bell Bros Pty Ltd v Metropolitan Water Supply, Sewerage and Drainage Board (unreported, WASC, Brinsden J, 11
April 1980).
14
Multiplex Constructions Pty Ltd v Amdel Ltd (1991) 10 BCL 115, 127.
 B – Discussion of statutory alternatives for seeking compensation

When considering alternative statutory options for seeking compensation in situations of economic
loss, it's important to note that there are several avenues available beyond specific acts such as the
Design and Building Practitioners Act or the Home Building Act.

An important option to consider is consumer protection legislation, which aims to protect

consumers in different industries, including construction. These laws offer ways to seek
compensation, like claiming damages or pursuing remedies for breaches of contract or deceptive
practices. They may also establish organizations or processes to help consumers resolve disputes
and receive fair compensation. These statutes play a significant role in safeguarding the rights and
interests of individuals involved in construction projects, ensuring they have avenues to pursue
justice when faced with issues or economic losses.

Furthermore, apart from the broader application of common law principles to invalidate agreements
that were not entered into freely, there have been various statutory advancements concerning
unconscionable conduct since the Amadio case.15 For instance, the Competition and Consumer Act
2010, previously called the Trade Practices Act, provides another way to seek compensation if you
suffer financial loss. This law focuses on safeguarding consumers and ensuring fair competition. It
includes rules that forbid businesses from engaging in misleading or deceptive behavior, making
false statements, and acting unfairly.16 According to the act, if a consumer experiences financial loss
due to false or misleading information given by a business, they have the right to seek
compensation. The act offers various ways to make things right, such as providing monetary
compensation (damages), court orders to stop the deceptive behavior (injunctions), or any other
necessary actions to address the economic harm caused. 17 Additionally, the act sets up the Australian
Competition and Consumer Commission (ACCC) as the organization in charge of ensuring
businesses comply with consumer protection laws. 18 The ACCC has the authority to investigate
complaints, take legal action when necessary, and impose penalties on businesses that have been
involved in illegal activities.

The Competition and Consumer Act 2010 establishes a system that promotes consumer protection
and fair competition. This act provides individuals and businesses with a means to pursue
compensation for economic loss resulting from deceptive or unfair practices.

15
Commonwealth Bank of Australia Ltd v Amadio (1983) 151 CLR 447.
16
Competition and Consumer Act 2010 (Cth) s 51ADG.
17
Ibid s 56BO.
18
Ibid s 6A.
 C – Assessment of the availability and effectiveness of these alternative avenues

The Competition and Consumer Act 2010 is a law that applies to many industries and businesses. It
protects consumers from things like false information, misleading actions, and unfair behavior. This
means that if someone experiences financial loss because of these actions, they might be able to get
compensation under this law.

In assessing its effectiveness, the act provides a range of remedies to tackle economic loss,
encompassing the option to pursue compensation, request injunctions, and secure other suitable
orders. These remedies strive to reinstate individuals to their pre-loss state and dissuade businesses
from partaking in unjust or deceitful practices. Moreover, the act grants substantial authority to the
Australian Competition and Consumer Commission (ACCC) as the regulatory body entrusted with
upholding consumer protection laws. The ACCC's extensive investigative powers, capacity to
initiate legal proceedings, and ability to impose penalties on transgressing businesses augment the
act's effectiveness in deterring misconduct and facilitating redress for affected parties.

For instance, in the Robinson case, Reed Constructions Australia Pty Ltd (Reed) and 470 St Kilda
Road Pty Ltd (St Kilda Road) entered into a contract. 19 Reed, acting as the contractor, agreed to
undertake the design and construction of a building redevelopment project in Melbourne on behalf
of St Kilda Road, the principal. In early February 2012, all of Reed's subcontractors left the
construction site. Reed shared a list of creditors with St Kilda Road, indicating that there were
outstanding payments totaling $175,242 to subcontractors and suppliers from October 2011, and
$2,585,512 from November 2011 that had not been paid yet. The principal claimed that if they had
known the actual situation of Reed, they would not have approved the payment to Reed. They
believed that Reed had provided false information, and as a result, they decided to withhold the
entire payment, issue a show cause notice, and terminate the contract. Based on the given
information, the Court held that Mr. Robinson had committed misleading and deceptive conduct,
through the Courts interpretation and application of s 87CB of the Act.20

In summary, by exploring both statutory and common law options, individuals and businesses can
effectively navigate the complex process of seeking compensation for economic loss caused by
latent defects. This comprehensive approach ensures fair outcomes for those affected by such issues
and provides a framework for addressing their grievances.

IV - Comparative Analysis: New South Wales and Western Australia

19
Robinson v 470 St Kilda Road Pty Ltd [2018] FCAFC 84.
20
Competition and Consumer Act (Cth) s 87CB.
 A – Overview of the legal positions in both jurisdictions regarding economic loss from latent
defects

The legal positions regarding economic loss from latent defects differ between New South Wales
(NSW) and Western Australia (WA). In NSW, the Design and Building Practitioners Act 2020 was
enacted to tackle latent defects. This law places obligations on design and building practitioners,
with the goal of safeguarding subsequent buyers from financial losses resulting from hidden defects.

In contrast, in Western Australia (WA), there is no specific legislation similar to the Design and
Building Practitioners Act. However, the Building Services (Complaint Resolution and
Administration) Act 2011 is used as an alternative remedial piece of legislation that sets out the
potential actions one may raise in the event of defective homes.

B – Comparison of the approaches and remedies available in New South Wales and Western
Australia

When we compare the approaches and remedies available in New South Wales (NSW) and Western
Australia (WA) for addressing economic loss caused by latent defects, we can see that there are
some notable differences in their legal frameworks.

As mentioned previously, the Design and Building Practitioners Act in NSW establishes a broader
legal duty of care that specifically deals with latent defects. This law imposes responsibilities on
design and building practitioners and offers a path for subsequent purchasers who experience
financial loss due to these defects to seek redress. The DBPA places importance on contractual
agreements and aims to improve transparency and accountability within the construction industry.

In contrast, Western Australia does not have a dedicated legislation like the DBPA. Instead, the
Building Services (Complaint Resolution and Administration) Act 2011 (WA) is a law in Western
Australia that deals with resolving complaints about building services. 21 Its goal is to make the
process of resolving disputes and addressing issues related to building construction and services
easier and more efficient. The Act allows anyone who is impacted or likely to be impacted by a
building service or the actions of a registered building service provider to lodge a complaint. 22 This
includes homeowners, tenants, and other individuals involved in the construction process. The
Building Services Board is the authority responsible for overseeing and managing the resolution of
these complaints. Additionally, it sets out the steps for submitting and investigating complaints,
which includes the authority to conduct inquiries and collect pertinent evidence. 23 It also offers
options for alternative dispute resolution, like mediation or conciliation, as an alternative to going to
21
Building Services (Complaint Resolution and Administration) Act 2011 (WA).
22
Ibid 15.
23
Ibid 65.
court. These approaches help in resolving conflicts in a less formal and more cooperative manner.
The Act defines the authority and responsibilities of the Building Commissioner, who ensures that
registered building service providers comply with the Act. 24 The Commissioner has the power to
take enforcement actions against those who do not fulfill their obligations. These actions can
include disciplinary measures like imposing fines, suspending activities, or even canceling their
registration.

V – Proposed Changes to Address Latent Defect Risks

Exploring potential modifications to the law involves looking at possible changes to improve the
existing legal framework. The goal is to better protect subsequent purchasers and make it fairer and
easier to resolve disputes related to economic loss from latent defects. This examination looks at
areas where the law can be enhanced to provide stronger safeguards for buyers and create a more
efficient process for resolving conflicts.

Potential modifications could involve making changes to the law to improve the duty of care that
building practitioners owe to others. This might mean introducing stricter rules and regulations for
these professionals and expanding their responsibility for latent defects. These modifications could
also include setting clearer expectations for builders, developers, and others involved in
construction, ensuring they meet higher standards of quality and workmanship. The aim is to create
a more robust legal framework that holds practitioners accountable and promotes better outcomes
for those affected by latent defects.

Moreover, changes to the law could be made to improve consumer rights and make it easier to seek
legal remedies. For example, the time limits for bringing claims could be extended to give
individuals more time to take action. Specialized tribunals or courts could be set up specifically to
handle disputes related to construction. Additionally, introducing compulsory insurance schemes
could provide financial protection to subsequent purchasers, ensuring they have recourse if they
experience economic loss due to latent defects. These modifications aim to empower consumers and
make the legal process more accessible and effective for those affected by such issues.

Furthermore, potential modifications can focus on enhancing transparency and accountability in the
construction industry. This can be achieved through measures like mandatory reporting of latent
defects, strengthening licensing and registration procedures for building practitioners, and
implementing regular inspections and audits of construction projects. These changes aim to ensure
better quality control, promote accountability, and ultimately improve the overall integrity of the
construction sector.

24
Ibid 57.
 VI - Conclusion

In summary, this essay has thoroughly analyzed the Design and Building Practitioners Act 2020
(NSW) in its role as an extended legal duty of care. The main focus was to assess whether the Act
can serve as a viable means of seeking compensation for economic losses caused by hidden defects.
Through a detailed examination of the Act's provisions and exploration of alternative avenues for
recourse, this essay has offered a comprehensive evaluation of its effectiveness.

In this essay, a thorough comparison has been made between the legal stances of New South Wales
and Western Australia regarding latent defects and economic loss. By examining any differences
and similarities in their approaches, this analysis enriches the evaluation of the Design and Building
Practitioners Act, providing a more comprehensive perspective.

Furthermore, this essay has delved into alternative options for seeking recourse within both
common law and statutory frameworks. It has thoroughly examined the availability and efficacy of
these alternatives in situations where a negligence claim cannot be established. By doing so, it has
offered a comprehensive perspective on the potential remedies available to subsequent purchasers
who experience economic loss as a result of undisclosed defects.

Finally, this essay has presented suggestions for potential modifications to current laws, considering
the imperative of mitigating the risks posed by latent defects in structures. These proposed
adjustments aim to strengthen the legal framework, providing better safeguards for subsequent
purchasers and fostering greater levels of professionalism and accountability within the construction
industry. The comprehensive analysis conducted in this essay serves as a solid groundwork for
future discussions and deliberations concerning the legal landscape pertaining to this issue.
 Bibliography

Articles/Books/Reports

 ‘The Design and Building Practitioners Act 2020 (NSW): Establishing a New Statutory
Duty of Care for the Built Environment’ [2020] (Dec 2020-Feb 2021) Built Environment
Economist: Australia and New Zealand 19

 Damien Cremean et al, Brooking on Building Contracts: The Law and Practice Relating to
Building And engineering Agreements (LexisNexis Butterworths, 2019)
 Sebastian Brodowski and Patrick Wiggins, ‘Property law: A new duty of care - 'Design and
Building Practitioners Act 2020'’ (2020) 69 Law Society Journal 74

Cases

 Bell Bros Pty Ltd v Metropolitan Water Supply, Sewerage and Drainage Board (unreported,
WASC, Brinsden J, 11 April 1980)
 Brookfield Multiplex Ltd v Owners Corporation Strata Plan No 61288 (2014) 254 CLR 185
 Bryan v Maloney (1995) 182 CLR 609
 Commonwealth Bank of Australia Ltd v Amadio (1983) 151 CLR 447
 Goodwin Street Developments Pty Ltd atf Jesmond Unit Trust v DSD Builders Pty Ltd
[2022] NSWSC 624
 Multiplex Constructions Pty Ltd v Amdel Ltd (1991) 10 BCL 115
 Robinson v 470 St Kilda Road Pty Ltd [2018] FCAFC 84
 San Sebastian Pty Ltd v Minister Administering the Environmental Planning and
Assessment Act 1979 (1986) 162 CLR 340
 Woolcock Street Investments Pty Ltd v Cdg Pty Ltd (Formerly Cardno & Davies Australia
Pty Ltd) (2004) 20 BCL 176

Legislation

 Building Services (Complaint Resolution and Administration) Act 2011 (WA)

 Competition and Consumer Act (Cth)
 Design and Building Practitioners Act 2020 (NSW)