Liability Cemented: High Court Declares Full Developer and Builder Liability
In a highly anticipated ruling for the construction and development industry, the High Court of Australia has confirmed that developers and head contractors cannot rely on proportionate liability laws to diminish their exposure under the Design and Building Practitioners Act 2020 (NSW) (DBPA).
In Pafburn Pty Ltd & Anor v The Owners – Strata Plan No 84674 [2024] HCA 49, the Court held—by a narrow 4:3 majority—that the statutory duty of care imposed by section 37(1) of the DBPA is non-delegable and, therefore, not subject to the proportionate liability regime under Part 4 of the Civil Liability Act 2002 (NSW) (CLA). This pivotal decision reinforces the legal position that developers and builders are personally liable for defective building work, even when subcontractors or consultants carry out that work.
Developer & Builders Initial Attempt to Apportion Defects Claim
The proceedings were initiated by the Owners Corporation of a residential strata complex in North Sydney. The Owners Corporation commenced proceedings against both Pafburn Pty Ltd (the builder) and Madarina Pty Ltd (the developer), alleging defective construction and seeking damages for breach of the statutory duty of care under section 37(1) of the DBPA.
Section 37(1) of the DBPA requires that any person carrying out construction work must 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.
The builder and developer argued that the claim was an “apportionable claim” under section 34 of the CLA. They contended that any liability they bore should be reduced to the extent that “concurrent wrongdoers”—such as subcontractors and other consultants—may have contributed to the alleged defects.
Split Court Decisions on Whether DBPA Claims Are Apportionable
The matter has traveled a complex and evolving path through the courts, marked by initial divergent interpretations of whether claims under the Design and Building Practitioners Act (DBPA) can be apportioned. Over time, a series of key rulings, shifting judicial reasoning, and pivotal case developments have shaped the legal landscape, continually influencing how DBPA claims are interpreted and applied.
- NSW Supreme Court: Rees J accepted the developer and builder’s arguments, and held that the claim was apportionable under the CLA. Her Honour found that the statutory duty under section 37 was distinct from traditional non-delegable duties in tort.
- NSW Court of Appeal: Reversed the Supreme Court’s decision. The Court found that the duty under the DBPA was indeed non-delegable, and therefore the claim was not apportionable under the CLA. The Court stated that section 5Q of the CLA applies, meaning that developers and builders are parties that owe a non-delegable duty and therefore liable for the acts or omissions of others to whom the duty was delegated.
The builder and developer then obtained special leave to appeal to the High Court, which delivered its final decision in late 2024.
High Court Majority: DBPA Duty is Non-Delegable & Not Apportionable
In a 4:3 majority decision, the High Court dismissed the appeal, affirming that proportionate liability provisions do not apply to breaches of the statutory duty of care under the DBPA.
Key Findings from the Majority (Gageler CJ, Gleeson J, Jagot J, Beech-Jones J)
- Statutory Duty is Non-Delegable: The Court found that the duty imposed by section 37(1) of the DBPA is inherently non-delegable, meaning that a person cannot discharge the duty simply by engaging someone else to do the work. They also said this is reinforced by section 39 of the DBPA, which states that engaging a third party does not satisfy the duty.
- Vicarious and Personal Liability Applies: The majority held that section 5Q of the CLA applies to the DBPA. As a result, developers and builders may be vicariously liable for the actions of subcontractors and consultants, regardless of their direct involvement.
- No Apportionment Permitted: As the duty is non-delegable, the claim does not fall within the definition of an “apportionable claim” under Part 4 of the CLA. This means developers and head contractors cannot limit liability by pointing to other responsible parties.
The majority ruling reinforces the interpretation that such duties are non-delegable and cannot be distributed among multiple parties, signifying a considerable clarification in the scope of liability under the Act.
Dissenting Opinions & Minority Reasoning
Justices Gordon, Edelman, and Steward dissented from the majority, offering a different interpretation of the statutory framework:
- Duty May Be Delegable: Section 37(1) should not be read as imposing a non-delegable duty in all circumstances. The statutory language did not clearly indicate that liability was intended to be so strict.
- Proportionate Liability Should Apply: If the duty can be delegated, they contended, then the standard principles of apportionment among concurrent wrongdoers should apply. This would enable developers and head contractors to make a cross claims against from subcontractors, consultants or any other party engaged for defective work alleged.
Implications of the High Court’s DBPA Ruling for Developers, Builders, & Contractors
The High Court’s decision is a significant development for the construction industry, particularly in New South Wales, where the Design and Building Practitioners Act (DBPA) has introduced broad statutory duties for those involved in construction work. The ruling establishes that these duties are non-delegable and fall outside the scope of proportionate liability, thereby reshaping the legal responsibilities of developers, builders, and other professionals across the sector.
DBPA Ruling: Legal Takeaways for the Construction Industry
- Responsibility on Developers and Builders
The ruling confirms that developers and builders are responsible for ensuring compliance with the duty of care under the DBPA. They cannot shift blame to subcontractors, architects, certifiers, engineers, or other consultants involved in the construction process. - Apportionment Not Available as a Defence
This decision removes a key defence strategy in the early stages of the DBPA. Developers and builders will not be able to reduce their liability by arguing that others were also responsible. This significantly increases the risk exposure for principal parties. - Subcontractors Still in the Picture?
Interestingly, the High Court did not decide whether other parties who fall within the scope of “construction work”—such as certifiers, engineers, architects, and subcontractors—can apportion liability back to developers and builders. This remains an open question and will inevitably be tested in future litigation.
Trusted Advisors on DBPA Liability Across NSW
Need Advice on DBPA Claims or Construction Litigation Generally?
The Design and Building Practitioners Act (DBPA) was introduced in New South Wales (NSW) in 2020. As a result, claims made under the Act are increasingly being adjudicated by the Courts. Stakeholders in building and construction agreements should remain on high alert as more cases dealing with the statutory interpretation of the DBPA and its interplay with other statutes and common law are heard and determined over time.
Our experienced litigation and construction legal division regularly advises developers, builders, and consultants on complex construction law matters. We provide tailored legal guidance not only on the evolving landscape of claims under the Design and Building Practitioners Act (DBPA), but also across the broader spectrum of construction-related disputes and regulatory obligations.
If you are facing a DBPA claim or want to better understand your legal obligations and risk exposure, contact us today to discuss how we can assist.
This article is provided for general informational purposes only and does not constitute legal advice. While every effort is made to ensure the accuracy of the information provided, Madison Marcus Law Firm makes no representations or warranties, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the content. Readers are advised to seek professional legal advice tailored to their specific circumstances before taking any action based on this information. Madison Marcus Law Firm accepts no liability for any loss or damage incurred as a result of reliance on the information presented herein.MM Website Enquiry Form
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