The NSW Court of Appeal recently ruled in Kazzi v KR Properties Global Pty Ltd, confirming that individuals, such as directors and supervisors, can be held personally liable under the Design and Building Practitioners Act 2020 (NSW) (DBP Act) for defective construction work. Highlighting the significant legal and financial risks for those involved in the construction industry.
As would be commonly known in the construction industry, the DBP Act introduced a duty of care to avoid economic loss caused by defects, owed by a person carrying out construction work, to owners of land on which the construction work is carried out.
Key Points of the DBP Act
- Duty of Care: Section 37 of the DBP Act imposes a duty on anyone involved in construction work to exercise reasonable care to prevent economic loss due to defects in the building or related construction work.
- Scope of Liability: This duty extends not just to construction companies but also to individuals who have substantial control over the construction process, including project managers and supervisors.
Background:
- Parties Involved: Mr. Kazzi, the sole director and supervisor of Oxford (NSW) Pty Ltd, was involved in a project to build a 6-unit apartment complex.
- Issues: The project faced significant delays, and the owners eventually terminated the contract after approximately a two-year delay. They claimed damages for defects, additional completion costs, and interest Mondue to the delay.
Allegations:
- The owners argued that Mr. Kazzi, as the nominated supervisor, had a statutory duty under the DBP Act and common law to ensure the work was done correctly and according to approved plans. They alleged that Mr. Kazzi’s decisions led to various defects and delays.
Court Findings:
- The Court of Appeal upheld findings that Mr. Kazzi breached his statutory duty of care in several ways:
- He made decisions that led to defects, such as using incorrect materials and failing to comply with approved plans.
- He admitted to negligence in supervising various aspects of the construction, including structural integrity, fire safety, and general compliance with regulations.
- The court found that his actions were a significant cause of the delays and defects, thus leading to financial losses for the owners.
Financial Liability:
- Mr. Kazzi was ordered to personally pay $918,545.56, covering rectification costs, completion costs, and additional interest incurred due to delays (known as Hungerford’s interest).
Implications:
- Personal Liability: This ruling underscores that individuals in significant roles within the construction industry can be held personally liable under the DBP Act, not just the companies they represent.
- Industry Impact: Construction professionals, including directors and supervisors, should be aware of their potential personal liability for defective work and ensure compliance with the DBP Act. This case highlights the importance of thorough oversight and adherence to approved plans and standards.
In summary, the Kazzi v KR Properties decision reinforces the broad scope of personal liability under the DBP Act for those in control of construction projects, stressing the need for diligent compliance to avoid significant legal and financial risks.
Referenced from the article found on Bartier Perry Lawyers: