Pafburn Pty Ltd v The Owners – Strata Plan No 84674 [2024] HCA 49
The High Court held, by four Justices to three, that a developer or head contractor alleged to have carried out construction work for a whole building cannot apportion its liability for breach of the duty in section 37(1) of the Design and Building Practitioners Act 2020 (NSW) to those to whom it entrusted that work.
What the court decided
The owners corporation for a residential strata building in North Sydney sued the developer and the head building contractor [1], [3]. It alleged that the developer, Madarina, owned the land and contracted with the head contractor, Pafburn, to construct the building [5], [56]. The claim was for breach of the duty in section 37(1) of the Design and Building Practitioners Act 2020 (NSW) to exercise reasonable care to avoid economic loss caused by defects [1]. The owners corporation alleged that Pafburn carried out construction work by constructing the building, and that Madarina did so because it supervised and had substantive control over Pafburn's work [7]. The defendants admitted the first allegation and denied the second [11].
The question was whether the defendants could limit their liability under Part 4 of the Civil Liability Act 2002 (NSW) by relying on another person's failure to take reasonable care [1]. Their pleading named as concurrent wrongdoers the waterproofing subcontractors, the manufacturer, supplier and installer of the aluminium composite panels, the architect, the principal certifying authority and the local council [12]. On the owners corporation's application to strike out [14], the Court of Appeal (Ward P, Adamson JA and Basten A-JA), on appeal from the primary judge (Rees J), struck out the paragraphs pleading proportionate liability and naming concurrent wrongdoers [2].
The High Court dismissed the appeal with costs, by four Justices to three [66], [69]. The joint reasons of Gageler CJ, Gleeson, Jagot and Beech-Jones JJ held that section 39, which prevents delegation, makes the duty imposed by section 37(1) personal to each person who carries out construction work [53]. In substance, the duty is to ensure that reasonable care is taken by those to whom the work is entrusted [54]. It is the kind of non-delegable duty that section 5Q of the Civil Liability Act contemplates [56]. Because section 41(3) makes Part 4 of the Design and Building Practitioners Act subject to the Civil Liability Act, the extent of each defendant's liability, if established, is to be determined as if it were vicarious liability for the negligence of those to whom it entrusted the work [55]. The scope of the duty follows the construction work a person carries out: for the whole building, all defects in or related to it; for part of the building, defects in or related to that part; for a single trade, defects in or related to the building arising from that trade [52].
On the owners corporation's case, Madarina supervised the whole of the construction work and Pafburn constructed the whole building [56]. Neither defendant could apportion any part of its liability to those to whom it entrusted any part of the construction work, and each would be 100 per cent liable for any failure by those persons to take reasonable care [57], [58]. Their Honours described the position of the certifier and the council as "perhaps seemingly anomalous", but assumed, as the defendants pleaded, that those bodies carried out construction work [60]. On that pleading, one or both defendants had entrusted functions within the construction work to those bodies, so the same result followed [61]. Their Honours noted that sections 37(1) and 39 do not prevent the defendants cross-claiming against others they allege breached a duty of care owed to them [65]. They left open whether a principal contractor taken by section 7(3) of the Design and Building Practitioners Act to do building work carries out construction work for that reason alone, as the point had not arisen below or been fully argued [49].
Gordon, Edelman and Steward JJ dissented, concluding that Part 4 of the Civil Liability Act applies to a claim for breach of section 37 [67]. In their Honours' view, section 39 does not transform the section 37 duty into a common law non-delegable duty to ensure that subcontractors take reasonable care [81]. On that view, section 5Q did not apply [90]. They said it was not self-evident that a certifier or the local council carries out construction work [104]. They would have allowed the appeal in part and remitted whether the pleading could be maintained against each alleged wrongdoer [103], [104].
Why it matters
In my view, the majority's reasoning bears most directly on a developer or head contractor whose construction work in New South Wales extends to the whole building. Such a party cannot apportion its liability to those to whom it entrusted that work, although breach, causation and loss must still be proved [62], [65]. The decision does not settle whether a certifier or council carries out construction work, which was assumed from the defendants' own pleading, or whether Madarina did, which it denied. Nor does it hold that any cross-claim lies, only that sections 37(1) and 39 do not prevent one. The Court applied the New South Wales Acts and considered no Victorian statute.
Numbers in square brackets are paragraph numbers of the judgment. This note summarises a decided case for education and is not legal advice. See how the notes are written.