Forrest v Yuncken Builders & Project Managers Pty Limited

On 12 August 2011, the plaintiff Mr John Ewing Forrest (Forrest) entered into a written contract with the second defendant architects (the Architects) 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).

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.

Clause 11 of the Conditions provides:

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.

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

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.

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

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.

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:

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

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

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

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

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.

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.

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.

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.

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.

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.

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.

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

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].

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):

Only Forrest and the Architects appeared on the application.

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.

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

None of these questions is easy to answer.

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:

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.

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.

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.

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.

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.

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.

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.

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.

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

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.

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.

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.

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.

The application for the determination of separate questions is dismissed.