Forrest v Yuncken Builders & Project Managers Pty Limited

Before: Hammerschlag CJ in Eq

Decision: Application for the determination of separate questions is dismissed.

Catchwords: CIVIL PROCEDURE — Uniform Civil Procedure Rules 2005 (NSW) r 28.2 — Design and Building Practitioners Act 2020 (NSW) ss 37, 40, Schedule 1 Para 5 — Application for separate determination of questions involving contractual and statutory construction — Where an appeal is likely — Where the principal proceedings are in an advanced state of preparation — Where the Applicant has recently amended its defence which amendment gives rise to the issue sought to be dealt with by the separate questions — HELD — Application for separate determination of questions dismissed

Legislation Cited: Design and Building Practitioners Act 2020 (NSW) ss 37, 40, Schedule 1 Para 5
Uniform Civil Procedure Rules 2005 (NSW) r 28.2

Cases Cited: Idoport Pty Ltd v National Australia Bank Ltd [2000] NSWSC 1215
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37
Neumann Contractors Pty Ltd v Wyong Shire Council [2011] NSWSC 481
Owners - Strata Plan No 84674 v Pafburn Pty Ltd (2023) 113 NSWLR 105; [2023] NSWCA 301
Roberts v Goodwin (2023) 110 NSWLR 557; [2023] NSWCA 5

Category: Procedural rulings

Parties: John Ewing Forrest (Plaintiff/Respondent)
Yuncken Builders & Project Managers Pty Ltd (First Defendant)
Corben Architects Pty Ltd (Second Defendant/Applicant)
Form Building Certifiers Pty Ltd (Third Defendant)

Representation: Counsel:
JP Knackstredt (Plaintiff/Respondent)
J Giles SC / M Sheldon (Second Defendant/Applicant)
Solicitors:
Macpherson Kelley (Plaintiff/Respondent)
MinterEllison (Second Defendant/Applicant)

File Number(s): 2023/00465238

Publication restriction: Nil

Ex Tempore JUDGMENT

1. On 12 August 2011, the plaintiff Mr John Ewing Forrest (Forrest) entered into a written contract with the second defendant architects (the A****rchitects) under which he appointed them to act as architects and project managers for a new house Forrest intended to build on his property at Mosman, a Sydney suburb. The contract comprises a Fee Commission letter, Scope for Works, and Terms and Conditions of Engagement (the Conditions).

2. Clause 1 of the Conditions is headed Architectural Services and provides that the Architects shall provide the services in the Fee Commission letter in accordance with the Conditions and shall exercise reasonable skill and care in conformity with the normal standards of the practice of architecture.

3. Clause 11 of the Conditions provides:

11 Type of Loss and Amount of Liability

The liability of CA to the Client arising out of the performance of the Architectural Services, whether under the law of contract or tort shall be limited to the cost of rectifying the Works which are the subject of the Architectural Services and notwithstanding the foregoing, the maximum amount of liability of the Architect to the Client arising out of the performance or non-performance of the Architectural Services, whether under the law of contract or tort shall be $300,000 unless otherwise stated.

4. On 13 May 2016, Forrest entered into a written building contract with the first defendant builder (the Builder) by which he engaged the builder to demolish the house which then stood on the property and build a new one, for a contract price exceeding $9 million.

5. Also in 2016, Forrest engaged the third defendant certifiers (the Certifiers) to provide certification services for the building work to be done.

6. The building work started at the end of May 2016. The Builder engaged a waterproofer to do the waterproofing works. On 1 August 2017, the Certifiers issued a construction certificate and, on 25 July 2019, issued a final occupation certificate.

7. Forrest alleges that the house was not impervious to water and leaked. It has been fixed.

8. By Summons and accompanying Technology and Construction List Statement sued out of the Court on 22 December 2023, Forrest commenced proceedings against the Architects, the Builder and the Certifiers for damages, said to be of the order of $4 million being the cost of the repairs carried out. The Builder has cross-claimed against the waterproofer.

9. Forrest’s claim against the Architects is framed in two ways (in paragraphs C28 and C31 of the List Statement). Firstly, it is framed in contract and second, as a breach of the duty of care imposed on the Architects by s 37 of the Design and Building Practitioners Act 2020 (NSW) (the Act) to which assent was given on 11 June 2020, that is, after the contract was entered into. That section:

37 Extension of duty of care

(1) A person who carries out construction work has a duty to exercise reasonable care to avoid economic loss caused by defects—

(a) in or related to a building for which the work is done, and

(b) arising from the construction work.

(2) The duty of care is owed to each owner of the land in relation to which the construction work is carried out and to each subsequent owner of the land.

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

(4) The duty of care is owed to an owner whether or not the construction work was carried out—

(a) under a contract or other arrangement entered into with the owner or another person, or

(b) otherwise than under a contract or arrangement.

10. Section 37 is in part 4 of the Act. References to sections are to sections of the Act.

11. At this point it is apt to refer to other relevant sections.

12. Section 40 (which is also in part 4 of the Act) provides:

40 No contracting out of Part

(1) This Part applies despite any contracts or stipulations to the contrary made after the commencement of this Part.

(2) No contract or agreement made or entered into, or amended, after the commencement of this Part operates to annul, vary or exclude a provision of this Part.

13. Schedule 1 to the Act is headed Savings, transitional and other provisions. Paragraph 5 of Schedule 1 provides:

5 Application of duty of care provisions to existing buildings and contracts and arrangements

(1) Part 4 of this Act extends to construction work carried out before the commencement of section 37 as if the duty of care under that Part was owed by the person who carried out the construction work to the owner of the land and to subsequent owners when the construction work was carried out.

(2) Subclause (1) only applies to economic loss caused by a breach of the duty of care extended under that subclause if—

(a) the loss first became apparent within the 10 years immediately before the commencement of section 37, or

(b) the loss first becomes apparent on or after the commencement of that section.

(3) Part 4 of the Act as extended by subclause (1) applies regardless of whether an action for breach of a common law duty of care has commenced before the commencement of section 37 and may be taken into account in those proceedings unless the court considers that it would not be in the interests of justice to do so.

(4) Section 40 extends to a contract, agreement or stipulation relating to the construction work whenever made.

(5) For the purposes of this clause, a loss becomes apparent when an owner entitled to the benefit of the duty of care under Part 4 of this Act first becomes aware (or ought reasonably to have become aware) of the loss.

(6) Words and expressions used in this clause have the same meaning as in Part 4 of this Act.

14. The Architects filed their Technology and Construction List Response on 8 March 2024. They did not then plead that their liability is limited by cl 11 of the Conditions.

15. However, by amendment to the List Response made with leave granted on 20 June 2025 (that is, more than a year later) they now plead that limitation.

16. It is appropriate at this point to describe the state of the proceedings. By 22 November 2024, the plaintiff had served all his evidence in chief, lay and expert. On 14 April 2025, directions were made for the Architects to serve their affidavits. They served an affidavit of Mark Briton Clark, the Managing Director of the Architects responding to evidence served by Forrest. The affidavit does not deal with quantum.

17. On 24 April 2025, further directions were made for the extension of the time by which the defendants and cross-defendants were to serve any expert and lay evidence, to 16 May 2025. On 20 May 2025, the Architects proposed consent orders including an order that the Architects file and serve any application for the hearing of a separate question by 28 May 2025. The matter came before Stevenson J for directions on 23 May 2025. His Honour made directions for the service of evidence by the Certifiers, for Forrest to serve any lay or expert evidence in reply, for the waterproofer to file and serve a List Response and its lay and expert evidence and for the Builder to serve lay and expert evidence in reply. His Honour referred the matter to mediation before 3 September 2025. The mediation did not take place by then. On 1 August 2025, Peden J extended the date for the mediation to occur to 5 November 2025.

18. I was informed from the bar table that the Builder has served its evidence in chief, but there may be a possibility of further evidence on quantum.

19. In summary, much of the interlocutories in the proceedings has been completed. The Architects have not served any expert evidence on quantum but one might not expect there to be a significant deviation between what they might put on (if anything) and what the Builder has already put on. Either way, the approach taken by Forrest is to claim the actual cost of repairs which the Architects, one might expect, would be in a good position to contest if they wish to.

20. I was informed from the bar table that the estimate for trial is seven to ten days. Even on my limited knowledge of the case, seven days appears to be on the generous side given that there will be expert conclaves and joint reports.

21. Rule 28.2 of the Uniform Civil Procedure Rules 2005 (NSW) provides:

Division 2 Separation of questions

28.2 Order for decision

The court may make orders for the decision of any question separately from any other question, whether before, at or after any trial or further trial in the proceedings.

22. An applicant for such an order must establish that separate determination is warranted and desirable. Whether such an order should be made is within the Court’s discretion: Neumann Contractors Pty Ltd v Wyong Shire Council [2011] NSWSC 481 at [21]; Idoport Pty Ltd v National Australia Bank Ltd [2000] NSWSC 1215 at [7].

23. Against this background, by Notice of Motion filed 16 June 2025, the Architects seek that the Court hear the following separate questions (recast by me, without alteration to the substance):

(a) Whether any liability which may be found against the Architects arising out of the breaches pleaded by Forrest against them is liability under the law of contract or tort? (b) If yes, whether the maximum amount of liability of the Architects to Forrest arising out of those breaches is $300,000?

24. Only Forrest and the Architects appeared on the application.

25. It does not appear to be in issue that one of the claims against the Architects is in contract. For present purposes, the reference to contract in the separate questions can be put aside.

26. The questions as framed give rise to the following issues for determination:

27. whether the claim by Forrest that the Architects breached the duty of care imposed on them by s 37 is one “under the law of … tort” within the meaning of those words in the Conditions, on their proper construction;

28. if so,

(a) does s 40 operate to render cl 11 of the Conditions inoperative because it is a contract or agreement entered into after the commencement of Part 4 to annul, vary or exclude a provision of Part 4; or (b) is cl 11 otherwise inoperative because it is an impermissible attempt to exclude the operation of the Act?

27. None of these questions is easy to answer.

28. Recently, in the Owners - Strata Plan No 84674 v Pafburn Pty Ltd (2023) 113 NSWLR 105; [2023] NSWCA 301 the Court of Appeal considered that because of the deeming provision in s 37(3), a liability under s 37 is liability in tort for the purposes of s 5Q of the Civil Liability Act 2002 (NSW) (CLA) which provides:

5Q Liability based on non-delegable duty

(1) The extent of liability in tort of a person (the defendant) for breach of a non-delegable duty to ensure that reasonable care is taken by a person in the carrying out of any work or task delegated or otherwise entrusted to the person by the defendant is to be determined as if the liability were the vicarious liability of the defendant for the negligence of the person in connection with the performance of the work or task.

(2) This section applies to an action in tort whether or not it is an action in negligence, despite anything to the contrary in section 5A.

29. By majority, the High Court dismissed an appeal, holding that the duty under s 37(1) is the kind of non-delegable duty which s 5Q of the CLA contemplates.

30. But the first question here is not one of statutory construction. It is one of contractual construction. There is no clear and direct authority binding on me which answers this question of contractual construction. Settled canons of construction of contracts will apply, including as to when regard may be had to background circumstances when the contract was entered into: see Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37.

31. One relevant circumstance here may well be that at the time the contract was entered into, the Act was not yet in existence with the consequence that the parties could not have contemplated that the reference to tort would be one to statutory liability under the Act. The expression used in the contract is “under the law of tort”. The Act no doubt contemplates retrospective effect. It is a different matter whether the parties to the contract can be taken to have intended the term to have ambulatory meaning and operation so as to impose liability on them for a breach which occurred before the Act came into effect.

32. Either way, it appears that over $3 million turns on the point and I would regard an appeal by the losing party (which will of course require leave) on the issue to be a matter of high probability.

33. The first leg of the second question is one of statutory construction and therefore, perhaps of more public importance. It involves consideration of how s 40(2) operates.

34. Paragraph 5 of Schedule 1 makes the Act operate with regard to work carried out before the commencement of s 37. Paragraph 5(4) extends operation of s 40 to a contract relating to the construction work whenever made. Arguably, there is tension between this paragraph and s 40(2) which might be resolved by construing commencement of the Part to be the date the contract is entered into. Arguably, there is tension between the policy of the Act to operate retrospectively by imposing a statutory liability which previously did not exist: see Roberts v Goodwin Street Developments Pty Ltd (2023) 110 NSWLR 557; [2023] NSWCA 5, but allowing a limitations clause agreed before the statute was assented to, nevertheless to operate to exclude that liability.

35. The second leg of the second question raises a policy question, whether the Act cannot be contracted out of anyway despite the inclusion in it of s 40.

36. It is not appropriate at this point to offer any observations on the prospects of success or otherwise of the propositions contended for by the parties, save to state that I regard the possibility of an appeal as high. I do not think that the possibility should be discounted that the High Court may consider the questions of statutory construction sufficient to warrant that Court’s attention.

37. Appeals would give rise to fragmentation and potential delay of the proceedings which should be avoided.

38. In the worst of worlds, the separate questions could be answered in the Architects’ favour, the trial run and the separate questions be answered differently by an appellate court thereafter so that the trial would have run on a false premise and would have to be remitted.

39. The advanced state of the proceedings and the relative lateness of the amendment to the Architects’ List Response which gives rise to this application (after Forrest has proceeded to serve his evidence in chief on the footing of the List Response as it previously stood) are additional reasons why I consider that the Court’s discretion to order the separate questions should not be exercised in this case.

40. I do not consider that in these circumstances judicial resources should be deployed so as to ensure the hearing and determination of separate questions by this Court and the Court of Appeal with such a degree of expedition so as not to interfere with setting of the principal proceedings down for hearing in the ordinary course. This leaves aside a possible application for special leave to appeal to the High Court (plus any appeal with leave) the timing of both of which would be a matter entirely for that Court.

41. I record that the Architects conveyed to the Court that if the separate questions were to be entertained and they won, that they would consent to judgment for $300,000 plus costs and interest, but without any admission of liability. I do not consider this to be persuasive given the high stakes involved.

42. The application for the determination of separate questions is dismissed.

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