In Pafburn Pty Limited v The Owners – Strata Plan No 84674 [2024] HCA 49 the High Court considered whether a developer and a head building contractor (the appellants) could limit their liability under the Design and Building Practitioners Act 2020 (NSW) (the DBPA) by apportioning it across several alleged wrongdoers under the Civil Liability Act 2002 (NSW) (the CLA).

MolinoCahill previously provided commentary on the first instance decision in The Owners – Strata Plan No 84674 v Pafburn Pty Ltd [2022] NSWSC 659 here, on the issue of the proper interpretation of a “person” carrying out “construction work” under the DBPA.

An owners corporation for a residential strata claimed damages from the appellants for breach of their duty to exercise reasonable care to avoid economic loss caused by defective building works under s 37(1) DBPA. On appeal, the appellants sought to rely on Pt 4 of the CLA to limit their liability for the owners corporation’s loss by reason of the failure of other parties (including their subcontractors) to take reasonable care in carrying out the works. Pt 4 of the CLA provides that in any proceeding involving an “apportionable claim”, if the defendant is a concurrent wrongdoer, the defendant’s liability is limited to an amount reflecting the proportion of the damage or loss for which they are responsible.

The High Court dismissed the appeal, with the majority (Gageler CJ and Gleeson, Jagot and Beech-Jones JJ) analysing the interaction between provisions of the DBPA and CLA to find that the CLA cannot be relied upon to apportion liability for breach of the s 37(1) DBPA duty.

The Court first confirmed that s 37(1) of the DBPA imposes a duty on a person carrying out construction work to exercise reasonable care to avoid economic loss caused by defects in the building arising from the carrying out of that work. The Court then clarified that s 39 of the DBPA provides that a person who owes the s 37(1) duty is not entitled to delegate that duty (being a “non-delegable duty”), meaning the appellants could not limit or exclude their duty by merely delegating its performance to other downstream parties.

As s 41(3) of the DBPA renders Part 4 of the DBPA subject to the CLA, the Court affirmed that s 5Q of the CLA applies to the appellants’ s 37(1) DBPA duty. Section 5Q of the CLA provides that where a defendant is in breach of a non-delegable duty (such as DBPA s 37(1)) to ensure that reasonable care is taken by another person carrying out works, the defendant will be held vicariously liable for their work.

The majority concluded that the above provisions read together meant that the appellants’ liability is to be determined on the basis they were vicariously liable for the negligence of the party actually performing the delegated work. Their Honours noted that the duty created by s 37(1), read in the context of the relevant DBPA and CLA provisions, is “…precisely the kind of non-delegable duty which s 5Q of the CLA contemplates”, with this conclusion maintaining unity of the CLA and DBPA.

As the appellants are to be treated as if they are vicariously liable for any downstream party’s breach of the DBPA s 37(1) duty by virtue of s 5Q, they cannot exclude or limit their liability by apportioning any part of it to any party they delegated work to. The appellants are entirely liable for any breach of the s 37(1) duty. This is supported by s 39(a) of the CLA, clarifying that nothing in Part 4 of the CLA prevents a party from being vicariously liable for any part of a claim for which another party may otherwise be liable.

The appellants were therefore held to be wholly liable for the defective work of any subcontractor to whom they delegated any part of the construction.

The High Court majority further observed that this decision is consistent with the objects and intent of the DBPA, enacted in response to a “crisis of confidence” in NSW consumers following a series of highly publicised defective building works, including the Opal Tower in Sydney.

The amendments to the DBPA were designed to ameliorate these concerns by providing direct pathways of redress for owners, reassuring consumers as to the effectiveness of available redress by imposing individual and collective responsibility on practitioners for their work. The Court noted that if the DBPA did not create a non-delegable duty in s 37(1), the DBPA would only impose a form of collective liability, requiring the aggrieved party to pursue all parties involved in the work and thus contribute to the intricacy of redress the DBPA was enacted to address.

The decision can be found here.