Background
In a landmark decision on 11 December 2024, the High Court of Australia, in a 4:3 split, dismissed the appeal in Pafburn Pty Ltd v The Owners – Strata Plan No 84674 [2024] HCA 49, affirming the NSW Court of Appeal’s ruling ([2023] NSWCA 301). This case grappled with a pivotal question: whether the proportionate liability framework under Part 4 of the Civil Liability Act 2002 (NSW) (CLA) applies to breaches of the statutory duty of care imposed by section 37 of the Design and Building Practitioners Act 2020 (NSW) (DBPA) on developers, builders, and other construction professionals.
The dispute originated from a claim by the owners of a multi-story residential building in North Sydney, alleging breaches of the statutory duty under section 37 of the DBPA. This provision mandates reasonable care to avert economic loss from defects arising during construction work. The builder acknowledged performing “building work” and “construction work” as defined in section 36 of the DBPA, while contesting the extent of the developer’s role in supervision, coordination, and project management. The builder argued that the claim was apportionable under the CLA, seeking to distribute liability among subcontractors as concurrent wrongdoers. This raised a critical issue: does the statutory duty under the DBPA permit apportionment when viewed alongside the CLA’s proportionate liability regime?
The High Court’s Judgment
In a closely contested 4:3 decision, the High Court held that the statutory duty of care under section 37 of the DBPA constitutes a non-delegable duty, precluding the application of the proportionate liability scheme. The majority’s reasoning hinged on section 5Q of the CLA, interpreting it to impose a form of vicarious liability on duty holders for failures in reasonable care by those to whom construction tasks were delegated or entrusted. Consequently, developers and builders cannot discharge this duty merely by prudently selecting others to perform specialised tasks; they must ensure that these third parties exercise reasonable care in execution.
The dissenting justices highlighted practical concerns, cautioning that it would be anomalous to hold a main contractor—lacking expertise in niche areas—personally or even criminally liable for the negligence of a reasonably chosen specialist subcontractor. The majority countered that this liability attaches not to the physical execution of specialised work but to the supervisory, coordinating, and managerial roles assumed by the main contractor, ensuring oversight of third-party performance.
Implications
This ruling robustly favours property owners, reinforcing their right to pursue negligence claims for economic loss stemming from defects in common property. It solidifies the existence of the statutory duty under the DBPA, though claimants must still prove breach, causation, and resultant damage to succeed in negligence.
For main contractors, including builders and developers, the decision nullifies the utility of the NSW proportionate liability scheme. They now face full liability for defective work breaching the DBPA’s statutory duty, irrespective of who performed the task. Treated as vicariously liable for subcontractors’ negligence, contractors bear a heightened procedural burden, compelled to pursue separate cross-claims for indemnification rather than apportioning liability directly.
While the judgment underscores the expansive nature of the duty to avoid economic loss from defects, merely identifying defects is insufficient. Claimants must pinpoint specific risks that required management and the precautions contractors should have taken. Breach, causation, and loss remain factual matters to be proven.
This outcome may complicate litigation, as defendants might join multiple parties to proceedings, unable to apportion liability directly. This raises challenges, particularly when third parties operate in specialised domains beyond the contractor’s expertise, alongside potential cost risks in joining such parties. This complexity appears to conflict with the objectives of the Uniform Civil Procedure Rules 2005 (NSW), section 2.1, which emphasizes the “just, quick, and cheap” resolution of disputes. Moreover, the elevated risk exposure is likely to drive up professional indemnity insurance costs for main contractors.
Submissions in Light of Pafburn: Contextual Considerations
A recent building case run by Valorum Law Group* (decision by the Supreme Court is pending) has illuminate the nuanced application of the Pafburn ruling. Where a head contractor, recognized as a building professional, delegates or entrusts construction work to downstream contractors, the non-delegable nature of the duty under section 37 of the DBPA, as interpreted through section 5Q of the CLA, bars reliance on the CLA’s apportionment provisions. This reflects a policy intent to spare plaintiffs the burden of joining all parties engaged under a head contract, holding the main contractor accountable for the collective work.
However, a key distinction arises in “construct-only” contracts, where other professionals are directly engaged, paid, and instructed by the plaintiff, not the defendant contractor. In such scenarios, defendants may legitimately point to these third parties—or even the plaintiff—as potentially responsible for defects, invoking section 35 of the CLA or arguing complete liability transfer, should defects be established. The absence of explicit pleadings invoking section 5Q of the CLA or section 39 of the DBPA, or inadequate articulation of the duty’s content, may further distinguish such cases from Pafburn.
Even where Pafburn influences outcomes, it does not preclude defendants from filing cross-claims against others alleged to have breached applicable duties of care. Courts retain power under section 22 of the Civil Procedure Act 2005 (NSW) to grant relief to defendants against third parties as if separate proceedings were initiated, binding cross-defendants to judgments unless otherwise ordered.
Conclusion
The High Court’s decision in Pafburn marks a pivotal shift, strengthening protections for property owners while imposing stringent accountability on main contractors. By deeming the DBPA’s statutory duty non-delegable, it forecloses proportionate liability, reshaping construction litigation dynamics. Subsequent submissions highlight contextual nuances, particularly in construct-only contracts, where liability attribution may still implicate third parties or plaintiffs. As litigation grows more intricate, contractors face increased burdens and costs, underscoring the need for meticulous risk management and robust oversight in construction projects.
*as at the date of this article (June 2025) the Supreme Court decision is pending. We will provide a further update once that decision is handed down.
Previous Articles
- Further Developments in the Design and Building Practitioners Act 2020 (NSW)
- No Proportionate Liability in the Design and Building Practitioners Act
- The Labyrinthine Design and Building Practitioners Act
This article is provided for general informational purposes only and does not constitute legal advice. If you have any queries, please do not hesitate to contact us, Ms Valentina O’Regan at admin@valorumlaw.com.au or voregan@valorumlaw.com.au. Our expert construction lawyers are on hand to provide advice.
