Written by Sindri Bergsson
Yesterday (11 December 2024), the High Court of Australia issued a majority 4:3 decision which held that claims for breaches of the statutory duty owed under s37 of the Design and Building Practitioners Act 2020 (NSW) (DBP Act) are generally not apportionable, and a builder or developer will be liable for the work carried out by its subcontractors.
A link to the High Court decision is here: https://eresources.hcourt.gov.au/downloadPdf/2024/HCA/49
The Facts
The Owners – Strata Plan No. 84674 (Owners) was the owners corporation for an apartment complex in North Sydney.
The Owners brought a claim in the NSW Supreme Court against the builder, Pafburn Pty Ltd (Builder) and developer, Madarina (Developer) alleging breaches of the statutory duty of care owed under section 37 of the DBP Act.
The Builder and the Developer defended the claim by arguing the claim was apportionable and identified a number of third parties as concurrent wrongdoers who had been involved in the building work. The case turned on the issue of whether the duty owed by both the Builder and the Developer under the DBP Act was an apportionable claim within the meaning of Part IVA of the Civil Liability Act 2002 NSW (CLA), and whether the liability of the Builder and the Developer was apportionable.
Initially, the Owners brought an application in the NSW Supreme Court to strike out the proportionate liability defence, by relying on section 5Q of the CLA. The Owners contended that s5Q means the Builder and Developer were vicariously liable for the conduct of their subcontractors and that, as a consequence, the Builder and Developer could not rely on a proportionate liability defence. The Supreme Court dismissed the Owners’ application, finding that s5Q did not apply to the duty owed under s37 of the DBP Act. The Builder and Developer were therefore permitted to run their proportionate liability defence(s).
The Owners then appealed to the NSW Court of Appeal. In 2014, the Court of Appeal overturned the decision by the Supreme Court and found that s5Q of the CLA did apply to the statutory duty owed under s37 of the DBP Act. Therefore, the Builder and Developer would not be permitted to run their proportionate liability defence(s).
The Builder and Developer then appealed to the High Court of Australia. The primary argument run by the Builder and Developer was that the duty owed under s37 of the DBP Act is only owed by a person who “carries out” the building work, whereas other provisions in the DBP Act deal with a broader concept of somebody “who does” building work. They contended that s5Q of the CLA was only intended to apply in limited circumstances, in particular to the precise duty to “ensure” reasonable care is taken by a person in the carrying out of any work or task delegated or otherwise entrusted to the person by the defendant.
In a split 4:3 decision on 11 December 2024, the High Court ruled against the Builder and the Developer and found that the duty owed by the Builder and the Developer under s37 of the DBP Act is not apportionable.
Implications
This is a significant decision for all those involved in the construction space. It confirms that claims for breaches of the statutory duty owed under s37 of the DBP Act are not apportionable; although it must be noted that the High Court’s decision was specific in that it only considered the liability of the Builder and the Developer. There remains some scope for argument for other contractors who carry out building work.
What this means, in a practical sense, is that where an owner brings a claim under s37 of the DBP Act against a builder and/or developer, the builder and developer cannot defend the claim as being an apportionable claim and will need to bring a cross claim against any other involved parties.
Should you wish to discuss any of the above, please contact Sindri Bergsson on 02 9044 3263 or any member of the Ligeti Partners team on 03 9947 4500.
