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A person performing residential building work, as defined in the Home Building Act 1989 (NSW) (Home Building Act), and certain other work related to that building work, now has a duty to exercise reasonable care to avoid economic loss caused by defects in the building and arising from the work. The duty of care is owed to each owner of the land in relation to which the work is carried out and to each subsequent owner of the land.

The duty of care came into effect on 10 June 2020, when Part 4 of the Building and Design Practitioners Act 2020 (NSW) (Practitioners Act) came into effect. It applies even if the work was performed before that date and regardless of whether an action for breach of a common law duty of care has commenced before that date, subject to a limitation that the economic loss caused by a breach of the duty first became apparent within the 10 years before 10 June 2020.

The types of work that the duty of care applies to are:

  • residential building work (and will extend to building work on classes of buildings that become subject to the Practitioners Act regulating design and construction of those buildings from 1 July 2021)
  • the preparation of designs for that work
  • the manufacture or supply of a building product used for that work, and
  • supervising, coordinating, project managing or having substantive control over the carrying out of any of the above.

The duty of care cannot be delegated and cannot be contracted out of. The prohibition on contracting out extends to any ‘contracting out’ in place before 10 June 2020.

A person to whom the duty of care is owed is entitled to damages for breach of the duty as if the duty were a duty established by the common law.

The duty of care is in addition to the duties, statutory warranties and other obligations imposed under the Home Building Act, other Acts and the common law. It will be subject to the statutory limitation periods for bringing an action provided for in the Limitation Act 1969 (NSW) and the Environmental Planning and Assessment Act 1979 (NSW). The limitation period for bringing an action for a breach of a statutory duty is 6 years from the date the cause of action first accrues, subject to a further limitation for defective building work of 10 years from the completion of the work.

Key effects

The intention of the creation of the statutory duty of care is to return the law in New South Wales to the position at common law that was overturned by the High Court’s 2014 decision of Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 & Anor [2014] HCA 36. The duty will give owners and subsequent owners, which include owners corporations and apartment owners, the ability to recover from those performing the work that the duty applies to, including for such work performed prior to the duty commencing on 10 June 2020. Questions will arise regarding the availability of professional indemnity insurance to cover such liabilities and as to how to structure contractual provisions going forward.

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