In Pafburn Pty Limited v The Owners – Strata Plan No 84674 [2024] HCA 49 (Pafburn), the High Court held that a developer or head building contractor could not limit or exclude their liability under the Design and Building Practitioners Act 2020 (NSW) (DBP Act) by relying on the proportionate liability regime under Part 4 of the Civil Liability Act 2002 (NSW) (CLA).
Facts
The Owners commenced proceedings against Pafburn Pty Ltd (the head contractor) and Madarina Pty Ltd (the developer) for breach of the statutory duty of care under s 37 of the DBP Act in respect of defects at the property. The head contractor and developer pleaded proportionate liability defences naming nine other contractors as concurrent wrongdoers for the purposes of Part 4 of the CLA.
The primary issue for determination by the High Court was whether the developer or the head contractor could rely on the failure of another person to take reasonable care in carrying out construction work, or otherwise performing any function in relation to that work, to limit their liability under Part 4 of the CLA to an amount “reflecting the proportion of the loss that a court considers just having regard to the extent of the responsibility of each for the damage or loss”[1].
Held
The High Court held that the developer and the head contractor could not exclude or limit their liability by apportioning any part of that liability to another third party as they are to be treated as vicariously liable for any failure by a third party to take reasonable care.[2] In this case, Madarina and Pafburn were therefore held to be 100% liable for any failure to exercise reasonable care to avoid economic loss caused by defects in the building on the part of the wrongdoers who carried out the work or task from which the defects arose.[3]
What are the practical consequences of this decision?
For developers and builders
The decision in Pafburn confirms that the duties under the DBP Act are broad and strict in that developers and head contractors cannot discharge their duties under the DBP Act by purporting to delegate them to another party, nor can their liability be excluded or apportioned to a third party failing to exercise reasonable care in carrying out construction work.
Developers and head contractors may therefore be held vicariously liable for their subcontractors failing to exercise reasonable care in carrying out construction work that fall within their duty of care under the DBP Act. To the extent that there are other liable parties, the developers and builders will need to bring cross-claims to recover losses from subcontractors and consultants.
For Owners
This decision provides procedural benefits for owners as it will enable them to focus and consolidate their claims against the developer or the head contractor, rather than having to consider proceedings against multiple wrongdoers. The decision also shifts risk and accountability on developers and head contractors who are best positioned to manage construction standards and subcontractor performance.
To discuss the practical implications of the Pafburn decision in more detail, contact a member of Addisons’ Construction & Infrastructure team.
1 Pafburn n 1, [1].
2 Pafburn n 1, [37].
3 Ibid.