Are you a concurrent wrongdoer? Proportionate liability applies to claims under the Design and Building Practitioners Act 2020

On 23 February 2023, the NSW Supreme Court handed down its decision in The Owners – Strata Plan No 84674 v Pafburn Pty Ltd [2023] NSWSC 116.

Justice Rees confirmed that if a defendant is in breach of the non-delegable statutory duty of care under section 37 of the Design and Building Practitioners Act 2020 (NSW) (DBPA), they are entitled to rely on the proportionate liability defence in Part 4 of the Civil Liability Act 2002 (NSW) (CLA).

This decision is important for building practitioners and their insurers as the proportionate liability regime means that building practitioners may only be liable to the extent they have contributed to the damage or loss suffered.

Background

On 1 December 2020, the Owners Corporation commenced proceedings against Pafburn Pty Limited (Pafburn), the builder, and Madarina Pty Limited (Madarina), the developer, for defective building work in respect of a strata development in Walker Street, North Sydney.

The Owners Corporation brought a claim against Pafburn and Madarina for breach of statutory duty of care prescribed by section 37 of the DBPA. Pafburn and Madarina sought, by Notice of Motion, an order that the proceedings be dismissed or, alternatively, an order that the List Statement be struck out.

On 24 May 2022, Justice Stevenson refused the notice of motion and the strike out application. In doing so, his Honour clarified that the statutory duty of care under section 37 of the DBPA can apply to developers if they had the ability and power to control how the construction work was carried out, regardless of whether such control was in fact exercised.

A link to our article exploring the earlier decision can be found here: NSW Court of Appeal confirms statutory duty of care under the Design and Building Practitioners Act 2020 (NSW) applies to all buildings.

In response, Pafburn and Madarina pleaded a proportionate liability defence, naming nine other concurrent wrongdoers.

Accordingly, the Owners Corporation sought to strike out the proportionate liability defence on the basis that the provisions of the CLA do not apply. Relevantly, the Owners Corporation argued that:

• section 39 of the DBPA provides that the statutory duty imposed under section 37 is non-delegable;
• section 5Q of the CLA treats liability in tort for breach of a non-delegable duty as equivalent to vicarious liability; and
• section 39(a) of the CLA provides that nothing in Part 4 (proportionate liability provisions) of the CLA ‘prevents a person from being held vicariously liable for a portion of any apportionable claim for which another person is liable’.

The Owners Corporation claimed that the combined effects of the abovementioned provisions precluded Pafburn and Madarina from utilising the proportionate liability defence where the statutory duty was non-delegable.

Judgment

Justice Rees rejected the Owners Corporation’s claim and held that the proportionate liability provisions were available to Pafburn and Madarina. In reaching her decision, her Honour considered the following issues.

Whether the proportionate liability provisions under the CLA apply to the DBPA

Section 34(3A) of the CLA provides that the proportionate liability provisions do not apply to a claim for breach of statutory warranties under the Home Building Act 1989. However, her Honour found that this section is silent as to claims for breach of statutory duty under section 37 of the DBPA.

Further, section 41(3) of the DBPA expressly provides that statutory duty under the DBPA is “subject to the Civil Liability Act 2002” – meaning the CLA will apply in the event of an inconsistency with the DBPA. When read together, her Honour found that the proportionate liability provisions of the CLA apply to a claim under section 37 of the DBPA, whether that claim is an action “in contract, tort or otherwise”.

Her Honour reinforced the above point by reference to the decision of Stevenson J in Boulus Constructions Pty Ltd v Warrumbungle Shire Council (No 2) [2022] NSWSC 1368 and the Second Reading Speech for the Building Legislation Amendment Bill 2021, which highlighted Parliament’s intention to ameliorate the extensive statutory duty under the DBPA by enabling defendants to rely on the proportionate liability provisions of the CLA.

Whether Pafburn and Madarina can rely on the proportionate liability defences

In finding that the proportionate liability provisions contained in the CLA apply to the DBPA, it was then necessary to consider section 39 of the DBPA which provides that the statutory duty is non-delegable.

The Owners Corporation submitted that the combined operation of section 39 of the DBPA and sections 5Q and 39(a) of the CLA precluded the Pafburn and Madarina from relying on the proportionate liability provisions in respect of their non-delegable duty. It reasoned that the non-delegable duty imposed under section 39 of the DBPA would become a delegable duty.

Section 5Q of the CLA states:

5Q Liability based on non-delegable duty

(1) The extent of liability in tort of a person ( “the defendant” ) for breach of a non-delegable duty to ensure that 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 is to be determined as if the liability were the vicarious liability of the defendant for the negligence of the person in connection with the performance of the work or task.

(2) This section applies to an action in tort whether or not it is an action in negligence, despite anything to the contrary in section 5A.

Pafburn and Madarina argued that if this interpretation was correct, no defendant to a claim under section 37 of the DBPA could apportion their liability under the CLA. Put simply, every defendant would be liable for 100% of the damage from their breach of duty. Her Honour observed that this would create an unusual and onerous outcome.

The crux of the debate was whether section 37 of the DBPA is a claim brought “under statute” or “in tort” within the meaning of section 5Q of the CLA. Her Honour held that section 37 of the DBPA is a statutory duty, whereas section 5Q of the CLA is directed to a defendant’s liability in tort. Her Honour relied on the legislative history of section 5Q and the Ipp Report, which clearly contemplated tortious claims for breach of a non-delegable duty. As such, the proportionate liability provisions were available to Pafburn and Madarina because section 5Q of the CLA did not apply to the statutory non-delegable duty under the DBPA.

Implications

This decision confirms that if a person is in breach of the statutory duty under the DBPA, they can rely on the proportionate liability provisions within the CLA to limit their liability to the extent they caused or contributed to the plaintiff’s damages.

We are currently acting for a number of Owners Corporations, developers and builders in building defects proceedings whereby reliance is placed on the DBPA. This decision is another addition to the growing list of cases that clarify the application of DBPA.

The contents of this publication are for reference purposes only. This publication does not constitute legal advice and should not be relied upon as legal advice. Specific legal advice should always be sought separately before taking any action based on this publication.

Liability limited by a scheme approved under Professional Standards Legislation.

Author: Maysaa Parrino & Matt Armota