In the March 2024 issue of CouncilConnect, Bartier Perry discussedthe Court of Appeal Judgment in The Owners - Strata Plan No 84674v Pafburn Pty Ltd [2023] NSWCA301 (the Appeal).
On 11 December 2024, the HighCourt of Australia handed down afinal judgment in the case. Wediscuss this further below.
Recap
The complainant, OwnersCorporation, had accused MadarinaPty Ltd (the Developer) and PafburnPty Ltd (the Builder) of breachingsection 37 of the Design andBuilding Practitioners Act 2020 (NSW) (DBP Act).
Section 37 of the DBP Act states that a person who "carries outconstruction work" has a duty toexercise reasonable care to avoideconomic loss caused by defects.
Construction work can include:
- performing construction/buildingwork
- preparing designs
- manufacturing a building product
- supervising, project managing,coordinating or havingsubstantive control over the work.
As part of their defences, the Builder and the Developer alleged that other parties (such as the waterproofer, the manufacturer and local council as the consent authority) were proportionately liable for any economic loss. In otherwords, each party was liable onlyfor their portion of contributed loss.
However, the Owners Corporationclaimed that the duty of care in theDBP Act was 'non-delegable', making the Developer and theBuilder wholly liable.
Chronology of findings
In the initial judgment, the Supreme Court found that the Builder and Developer could plead proportionate liability defences.
After the Owners Corporation appealed that decision, the Court of Appeal found that the Builder and Developer could not plead proportionate liability defences.
The proceedings were ultimatelyappealed to the High Court ofAustralia.
The High Court's findings
In a 4:3 split, the High Courtdismissed the Builder andDevelopers' appeal, finding that:
- the Developer and Builder whollyowed the duty of care undersection 37 of the DBP Act
- the duty of care was notdelegable to subcontractors,consultants or certifiers engagedby or on behalf of the Developeror the Builder.
What was the High Court's rationale?
The Court found that:
- Parliament had introduced the DBP Act to respond to the "crisis of confidence in respect of the safety and quality" of construction works in New South Wales, particularly because of building defects in incidents such as Mascot Towers.
- If the duty of care was delegable, it would create a collective liability, which would contradict the intention of the DBP Act by complicating redress.
- The duty alleged to be owed bythe council and
principalcertifying authority remainsnon-delegable:
"... even if the source of these alleged duties on the part of the local council and the principal certifying authority is not s 37(1) of the DBPA (as pleaded), but is the common law (as also pleaded in respect of the principal certifying authority), the duties alleged to have been owed by the local council and the principal certifying authority remain within the scope of the non-delegable duties each appellant is pleaded to owe under s 37(1) of the DBPA and are therefore subject to the operation of s 5Q of the CLA, making each appellant vicariously liable for any failure by the local councilor the principal certifying authority to have exercised reasonable care in the carrying out of the tasks entrusted by the appellants to them."
1. Neither the Developer or the Builder could discharge their duty by delegating the 'construction work' to someone else. The Court said:
"Contrary to the appellants'submissions, the duty created by ss 37(1) and 39 of the DBPA is precisely the kind of nondelegable duty which s 5Q of the CLA contemplates
"Neither Madarina nor Pafburn,however, could discharge,exclude, or limit their s 37(1) dutyby delegating or otherwiseentrusting their 'constructionwork' to another competentperson. On that basis, the liability of each of Madarina and Pafburn is 'as if the liability were the vicarious liability of' them for the whole of the construction work in relation to the Building."
2. It is not self-evident that a certifier or local council is 'a person who carries out construction work' under the DBP Act.
What does this mean for council?
When push comes to shove, head contractors and developers can be wholly liable for breaches of the statutory duty under the DBP Act and cannot delegate this duty to downstream contractors. However, the question of whether a council is captured by the scope of the DBP Act remains open.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
