No Proportionate Liability in the Design and Building Practitioners Act

Introduction

Whether a breach of the non-delegable duty in the Design and Building Practitioners Act 2020 (NSW) (DBP Act) s 37 was apportionable has remained uncertain ever since the DBP Act was enacted. However, the issue was finally clarified by the NSW Court of Appeal in The Owners – Strata Plan No 84674 v Pafburn Pty Ltd [2023] NSWCA 301. The Court held that proportionate liability under Civil Liability Act 2002 (NSW) (CLA) pt 4 is not applicable to breaches of the duty in DBP Act s 37 because such duty was non-delegable. The Court utilised two separate approaches that led to the same conclusion.

Facts

The applicant, The Owners – Strata Plan No 84674 (Owners Corporation), commenced proceedings against Pafburn Pty Ltd (Pafburn) and Madarina Pty Ltd (Madarina). The Owners Corporation claimed that Pafburn and Madarina were responsible for defects at 197 Walker Street, North Sydney.  

General Law Incoherency Approach

The approach preferred by the Court of Appeal was the general law approach. The Court held that the non-delegable nature of the duty in DBP Act s 37 per DBP Act s 39 excludes, ‘by necessary implication’, proportionate liability under CLA pt 4.

The Court noted five observations:

1. The language of CLA s 34(2), in referring to two parties whose acts or omissions caused the damage, is ‘not apt’ to include where one person undertook no act or omission which caused the loss;
2. The language of CLA s 35(1) means that it would be ‘awkward’ to apportion a claim where a defendant’s liability is entirely vicarious and the defendant themselves has not failed to exercise reasonable care;
3. CLA s 39 states that CLA pt 4 does not prevent a person from being held vicariously liable for a proportion of a claim for which another person is liable;
4. CLA s 36 prevents recovery of loss deemed to be apportioned to another individual. In situations where the defendant is only liable for a small proportion of the loss, proportionate liability would defeat the purpose of a non-delegable duty; and
5. When designating the duty as ‘non-delegable’, Parliament recognised the legal significance of the concept of non-delegable duties.

Per Adamson JA, the purpose and effect of a non-delegable duty is such that a wrongdoer is liable to the injured party for the whole of their loss.

CLA s 5Q Approach

The CLA s 5Q approach was the approach utilised by the primary judge. CLA s 5Q states that any non-delegable ‘duty’ is to be treated in the same manner as vicarious liability under the CLA, and this applies to any action in ‘tort’.

The primary judge held that ‘tort’ and ‘duty’ in CLA s 5Q only referred to common law torts and duties. Under this interpretation, the DBP Act duty did not fall within CLA s 5Q.

However, the Court of Appeal disagreed and held that CLA s 5Q may also encompass statutory torts and duties, believing that the primary judge erred in reading down CLA s 5Q. The Court gave five reasons for coming to this conclusion:

1. Under DBP Act s 37(3), a breach of the duty is treated ‘as if the duty were a duty established by common law’. Even assuming that the duty is not a ‘common law’ tort, it is deemed as such, and to give effect to the deeming any claim of breach must be brought under the common law for all purposes including in addressing the application of the CLA;
2. The basic definition of ‘tort’ encompasses all liability from a breach of a duty fixed by law. The content of the duty or the fact it derives from statute is not relevant;
3. The duty under DBP Act s 376 is not a freestanding duty but an extension of the existing duty;
4. There is authority suggesting that concurrent liability in contract and tort may arise, and that a breach of a statutory duty could give rise to liability in tort; and
5. While negligence may have originated in judge-made law, statutes have played an important part in shaping the duty of care as an element of negligence.

Therefore, on this approach, the duty in the DBP Act also falls within CLA s 5Q. ‘A reference in s 5Q of the Civil Liability Act to an action “in tort” cannot sensibly be construed as excluding tortious liability dependent to some extent, or even in all respects, upon statute’.

Cross-Claims

However, the Court of Appeal held that the defendant can cross-claim against concurrent wrongdoers but cannot reduce their own liability by reference to these wrongdoers.

Effect of Decision

The decision overturns the decision in The Owners – Strata Plan No 84674 v Pafburn Pty Ltd [2023] NSWSC 116 and is contrary the observations of the NSW Supreme Court in Boulus Constructions Pty Ltd v Warrumbungle Shire Council (No 2) [2022] NSWSC 1368.

On 11 April 2024, the High Court of Australia granted special leave to appeal this decision: Pafburn Pty Ltd v The Owners – Strata Plan No 84674 [2024] HCASL 96.

A full copy of the judgment can be found here.

If you require any advice on the DBP Act, including if you have a potential claim under the DBP Act or have a claim made against you pursuant to the DBP Act, please do not hesitate to contact us at admin@valorumlaw.com.au or voregan@valorumlaw.com.au. Our expert construction lawyers will be on hand to assist you.

The information contained in this article is general information only and not legal advice. The currency, accuracy and completeness of this article (and its contents) should be checked by obtaining independent legal advice before you take any action or otherwise rely upon its contents in any way.

Contributors: Harry Chen