On 11 December 2024, the High Court handed down its decision in Pafburn Pty Limited v The Owners – Strata Plan No 84674 [2024] HCA 49. By a majority of 4 to 3, the High Court held that the duty under section 37 of Part 4 of the Design and Building Practitioners Act 2020 (NSW) (DBPA) is not apportionable under Part 4 of the Civil Liability Act 2002 (NSW) (CLA).
Section 37 of the DPBA places a duty of care on a person carrying out construction work 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.
Brief summary of background
The Owners – Strata Plan No 84674 (OC) sued the builder Pafburn Pty Limited (Pafburn) and the developer Madarina Pty Ltd (Madarina) for losses arising from “construction work”, alleging breach of the section 37 statutory duty to exercise reasonable care to avoid economic loss arising from defects under the DBPA.
Both Pafburn and Madarina denied liability but also pleaded by way of defence that the claim brought by the OC was apportionable under section 34 of the CLA and named other parties as “concurrent wrongdoers”. In so doing, they alleged that any liability on their part was limited under section 35 of the CLA to the loss arising from the extent of their responsibility.
The OC brought an application to strike out this defence arguing that the duty of care was not able to be delegated under section 39 of the DBPA and that therefore by virtue of section 5Q and section 39 of the CLA, apportionment did not apply. In particular, section 5Q (1) of the CLA states:
(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
Decisions of Lower Courts
At first instance, his Honour Justice Rees held that Pafburn and Madarina could plead the apportionment defence as the application of section 5Q of the CLA was limited to common law non-delegable duties.
The NSW Court of Appeal overturned the decision of Justice Rees holding that Pafburn and Madarina could not plead the apportionment defence as it was excluded by virtue of section 39 of the DBPA and therefore, section 5Q and section 39 of the CLA.
Decision of High Court
In arriving at its decision, the majority gave consideration to the Second Reading Speech of the DBPA, and particularly the “criticality of the need to restore consumer confidence” (para 43).
The Court did not accept the submission of Pafburn and Madarina that the duty of care, is limited to the actual performance of the work (on the basis of the wording “A person who carries out construction work”) but applies more broadly to all defects arising from “construction work” as defined in the DBPA. Accordingly, when read in context with section 39 of the DBPA, the duty of care was non- delegable (para 54).
Therefore, as sections 37 and 39 of the DBPA were subject to section 5Q the CLA (by virtue of section 41 (3) of the DBPA), the High Court held at (para 58).
“the extent of the liability of Madarina and Pafburn for their alleged respective breaches of the duty imposed by s 37(1) of the DBPA, if liability is established, “is to be determined as if the liability were the vicarious liability of [each of Madarina and Pafburn] for the negligence of the person in connection with the performance of the work or task” involving construction work (as defined in s 36(1) of the DBPA) that each of Madarina and Pafburn delegated or otherwise entrusted to any other person in respect of the Building.”
In so holding, the High Court noted that their conclusions gave effect to and “maintained the unity” of all provisions of the DBPA and CLA and accorded with the “objects of the DBPA as disclosed in the Second Reading Speech (paras 63 and 64).
Takeaways
Significantly, the High Court has now confirmed that builders and developers can be liable in toto (that is, in total) for breach of the duty of care. Both entities will now need to make forensic and commercial decisions as to whether to commence cross-proceedings against other potentially liable parties.
This is general information and should not be considered to be legal advice. You should obtain legal advice specific to your individual situation.
Author: Tom Waugh