On 9 September 2026 the District Court delivered judgment in Drummond v Karakatsis [2026] NSWDC 322. Two owners of a house on Sydney's Lower North Shore sued the builder's director personally under section 37 of the Design and Building Practitioners Act 2020, over both the original construction of their house and the remedial work carried out years later under an NCAT work order. They recovered $1,736, plus interest.
The figure is worth sitting with, because very little about the claim was legally weak. The duty applied. The limitation defence failed. The owners were not shut out on any of the points a builder's lawyer would usually reach for first. They recovered $1,736 because of what they could prove about the condition of the house, and when they proved it.
The house was built between January 2009 and March 2011 under a contract with a building company of which the defendant was the sole director. In 2017 the owners took the company to NCAT over alleged defects. In May 2018 NCAT made a work order requiring specified remedial works, and the company carried those works out between July and September 2018.
The owners then obtained a report from their building consultant and formed the view that the remedial work was itself incomplete or defective. They moved to restore the NCAT proceedings. During that hearing, in June 2020, the Tribunal was told the company had gone into external administration. The owners withdrew the application in September 2020 and, in December 2020, commenced court proceedings against the director personally.
By the time of the hearing the claim had narrowed, but it was still substantial. The costings the owners relied on included roughly $59,000 for cracked and drummy render, about $16,760 for efflorescence, about $6,181 for balcony rectification, $25,863.33 for trades and inspections, $25,906 in building expert costs from the renewal proceedings, and $24,037.99 in legal costs from those proceedings.
The Court awarded two items. $1,400 to lift about six skirting tiles on the first floor balcony and cut slots so the weepholes they covered could work again, and $336 to clean nine weepholes on the second floor balcony that had render in them. Everything else failed.
Section 37 imposes a duty on a person who carries out construction work to exercise reasonable care to avoid economic loss caused by defects in or related to the building and arising from that work. Section 36 defines construction work broadly, and it expressly includes supervising, coordinating, project managing or otherwise having substantive control over building work.
The director admitted in his defence that he supervised, coordinated and project managed the work on the company's behalf. That admission did most of the work. The Court found he carried out construction work both under the original contract and under the work order, and was therefore subject to the section 37 duty in respect of both.
This is the part of the decision that owners tend to underestimate. The building company had been in external administration since August 2020, and was not a party to the court proceedings at all. The duty attached to the individual who ran the job, because of what he did rather than what he signed. Section 39 also provides that the duty cannot be delegated, which the High Court confirmed in Pafburn Pty Limited v The Owners - Strata Plan No 84674 [2024] HCA 49.
The director argued the claim was out of time, on the basis that the owners knew about every pleaded defect by May 2012, more than six years before proceedings were filed. Section 14(1)(b) of the Limitation Act 1969 gives six years from the date the cause of action first accrues.
The Court rejected that argument. Section 37 commenced on 10 June 2020. A cause of action does not accrue until there is someone who can bring it, and until that date no section 37 claim existed. The proceedings were filed on 22 December 2020 and were therefore in time. Schedule 1, clause 5 supplies the retrospective reach, extending Part 4 to construction work carried out before commencement where the loss first became apparent within the preceding ten years, and the owners had observed defects after moving in during January 2011.
That is a District Court decision rather than an appellate one, so it is not the last word. But it is a useful illustration of why a section 37 claim can remain open on a build that finished well over a decade ago, long after the statutory warranty periods have closed.
Has remedial work under a work order left the problem unfixed?
Whether a claim is worth running usually turns on what can be proved about the building today, not on what the reports said several years ago. Our Building and Construction team can assess the evidence and the scope before the position hardens.
Free consultationTwo things defeated it. The first is a pleading and proof requirement that catches a lot of defect claims. Section 41(3) makes Part 4 subject to the Civil Liability Act 2002, and section 5B of that Act asks whether a reasonable person would have taken precautions against a foreseeable, not insignificant risk of harm. In The Owners - Strata Plan No 87060 v Loulach Developments Pty Ltd (No 2) [2021] NSWSC 1068, Stevenson J held that a plaintiff alleging breach of the statutory duty must identify the specific risks the builder was required to manage and the precautions that should have been taken. It is not enough to assert a defect and say the builder should have taken whatever precautions were needed to avoid it.
The second is simpler, and it is the one that decided most of the items. The owners had to prove the defects still existed and still represented a loss. On the evidence, most of them did not.
The owners' building consultant inspected the property in 2015, 2016, 2018 and June 2019, and then did not inspect again until the week before he gave evidence in June 2026. His conclusions rested substantially on photographs taken before the remedial work was finished. He did not fold his late inspection into the joint expert report, which he signed after that inspection. On several items he took the position that he would assume a defect existed until someone demonstrated otherwise, in some instances suggesting destructive investigation was needed to satisfy him, without a clear reason to suspect the work had not been done.
The Court generally preferred the other expert, who had inspected in January 2020 and again in December 2025 and had tap tested significant areas of the render. On that evidence there was no drummy render, no efflorescence, and no cracking beyond hairline, which Table C1 of AS 2870 classifies as negligible and not a defect requiring repair.
The render argument had a further difficulty. The owners said the real problem was the absence of vertical articulation joints in the brickwork, contrary to the Building Code. The Court found they had not established the relevant clause applied, since the site soil classification appeared to be class S, which is exempt, and no specific non-compliant wall location was identified. More tellingly, the owners' own expert accepted in cross-examination that brick growth stops being an issue after about a decade, and that bricks laid in 2009 would have stopped moving. Once he accepted that, there was no future risk of harm left to justify the rectification cost.
None of this is about a weakness in section 37. It is about the ordinary discipline of proving a case: current inspections, an expert who addresses the building as it stands today, and a costed scope tied to a defect that is still there.
The owners also sought the building expert costs and legal costs of the renewal proceedings in NCAT, together roughly $50,000, as damages rather than as a costs order.
That failed on two grounds. When the owners withdrew the NCAT application in September 2020, they signed consent orders providing that there be no order as to costs, with each party to bear its own. On the authority of Anderson v Bowles (1951) 84 CLR 310 and Avenhouse v Hornsby Shire Council (1998) 44 NSWLR 1, a party who has accepted that costs position generally cannot recover the same costs later by recasting them as damages.
Separately, the owners had not established the link between the renewal proceedings and any breach of section 37 by the director. There were no findings of liability in the renewal proceedings, because the owners withdrew them. The Court also noted that the application for a lump sum costs order under section 98(4)(c) of the Civil Procedure Act 2005 was misconceived, since if those costs were recoverable at all it would be as a component of damages, not as a costs order.
The practical point for owners is narrow but valuable. The costs position you accept when you dispose of a tribunal proceeding is usually the end of those costs, including in a later claim against a different person arising out of the same building work.
The owners sought interest under section 100 of the Civil Procedure Act from the date the cause of action arose. The proceedings had sat in the Inactive List from August 2021 while the owners pursued separate litigation through the Supreme Court and the High Court, and were only restored in 2025. The Court accepted the defendant's argument and awarded interest from 1 April 2025 to judgment, not from accrual.
Costs of the District Court proceedings were not decided in the judgment. The Court said it would hear the parties on costs, so where those land, after a three day hearing, is still open.
Four things follow from the judgment. Inspect close to the hearing, because a report capturing the building as it was years ago invites the answer given here, that the work was finished after your last visit. Prove the defect as it exists now, since historic photographs show what the building used to look like but not a present need to spend money. Plead the risk and the precaution rather than just the defect, which since Loulach is the difference between a claim that can be assessed and one that cannot. And read the costs terms carefully when a tribunal matter ends, because they can bind you against someone who was never a party to it.
None of that makes section 37 a weak provision. This judgment is a reminder of how far it reaches: to an individual, years after the company has gone, on a house finished in 2011. The reach was never the issue. The proof was. For the groundwork on what the law treats as a defect and what evidence a claim needs, our earlier article on what counts as a building defect in NSW covers it.
Section 37 and the proof requirements are identical everywhere in NSW. What varies by region is the kind of building work that produces these disputes, and how easy it is to get an expert to the property on short notice, which this judgment shows is not a minor logistical detail.
The house in this case was on the Lower North Shore, and the profile is typical of the area's disputes: a knockdown and rebuild on an established block, followed by an argument about render, balconies and waterproofing rather than about structure. The North Shore also carries a fast-growing medium and high-density corridor around Chatswood, St Leonards and Lane Cove, where the same evidentiary questions arise for owners corporations instead of individual owners. We advise North Shore owners and schemes.
Blacktown has one of the largest new-dwelling pipelines in the state and The Hills sits at the centre of the North West Growth Area, while Campbelltown is absorbing sustained development alongside Camden and Wollondilly, including growth associated with the Wilton Junction corridor. Estates built through the 2010s are now at the age where defects surface and where a section 37 claim may be the remaining route once statutory warranty periods have closed. We advise owners in Blacktown, The Hills and Campbelltown.
Liverpool sits at the core of the Western Sydney Aerotropolis catchment, with approval and construction volumes few areas in NSW match. Rapid delivery tends to produce repeated details across many dwellings, which cuts both ways in evidence: a recurring defect supports an argument about design or workmanship rather than maintenance, but it also means a builder can often point to the same detail performing adequately elsewhere. We advise Liverpool and South-West Sydney owners.
Wollongong has sustained infill and medium-density construction and is comparatively underserved by practices doing this work locally. Around Nowra and the Shoalhaven, rebuilding and rectification following the 2019 and 2020 bushfires continues to generate contract and defect disputes years on. In both, the practical risk is the one this case illustrates: an expert engaged late, or inspecting infrequently, because there are fewer of them nearby. We advise Wollongong and Illawarra and Nowra and Shoalhaven clients.
Sydney buyers moving to the Southern Highlands have driven construction, renovation and subdivision around Bowral and Mittagong, in a market with limited access to construction litigation advice. Distance makes repeat inspections expensive, which is exactly the pressure that produces a stale report. The answer is usually to instruct the expert later and closer to the hearing rather than earlier and more often. We advise Bowral and Southern Highlands clients remotely.
If you are considering a claim over defective work, or over remedial work that you think has not fixed the problem, the useful first question is not whether a duty is owed. It usually is. It is whether the defect can be proved to exist today, and at what cost to put right. Our Building and Construction team advises homeowners and apartment owners on defect claims and on work orders that have not delivered what they promised, and our Litigation and Dispute Resolution team runs the NCAT and court side. Get in touch for a free consultation.
This publication is intended as general information only and does not constitute legal advice. Please seek independent legal advice before acting on anything contained in it.
Liability limited by a scheme approved under Professional Standards Legislation.
Section 37 of the Design and Building Practitioners Act 2020 requires anyone who carries out construction work to exercise reasonable care to avoid economic loss caused by defects in the building. It is owed to each owner and each later owner, whether or not they had a contract with that person, and it cannot be delegated.
Potentially yes. Construction work under section 36 includes supervising, coordinating, project managing or otherwise having substantive control over building work. A director who ran the job personally can owe the duty in their own right. In Drummond v Karakatsis the director admitted supervising the work and the duty was found to apply.
It can. Schedule 1, clause 5 extends the duty to construction work carried out before section 37 commenced on 10 June 2020, provided the economic loss first became apparent within the ten years immediately before that date, or afterwards. In Drummond v Karakatsis it reached work carried out between 2009 and 2011.
Not because the duty failed. The Court accepted the duty applied and rejected the limitation defence. The owners could not prove most of the claimed defects still existed. Their expert had last inspected properly in 2019 and relied on photographs predating completion of the remedial work, so the loss was not established.
Usually not, if you agreed to a costs outcome in the tribunal. In this case the owners had consented to no order as to costs when withdrawing. Long-standing authority prevents a party recovering as damages the costs they accepted or were refused in the earlier proceeding.
Current enough to describe the building as it is when the court decides. Damages compensate a present need to spend money, so a report resting on older inspections invites the answer that the problem was since fixed. Where remedial work has been done, inspect after it is finished.
Get an inspection promptly after the work finishes, while the evidence is fresh, and record what was and was not done. Take care with any consent orders disposing of the tribunal proceedings, particularly on costs, because those terms can limit what you recover in a later claim.
