The Owners – Strata Plan No 84674 v Pafburn Pty Ltd [2023] NSWCA 301

Andrew Hales |  Maciej Getta  |  Luke Sundercombe

Key takeout

Developers, builders and other persons who owe the statutory duty to exercise reasonable care to avoid economic loss caused by defects under the Design and Building Practitioners Act 2020 (NSW) (DBP Act) can no longer rely on any proportionate liability defence.

Earlier in 2023, the Supreme Court of NSW held that the proportionate liability regime applied to claims for breach of the statutory duty of care despite the duty being non-delegable. Our update on this decision can be read here: Proportionate liability regime applies to NSW statutory duty of care – Construction Law Made Easy   

On appeal the NSW Court of Appeal has unanimously overturned that decision.

The result being that persons owing the statutory duty of care will be liable for the acts of persons to whom they delegate the performance of ‘construction work’ as defined in the DBP Act.  Developers and builders will be liable for the acts of subcontractors and consultants who breach the statutory duty of care.

Facts

The owners corporation originally brought a claim for damages for breach of the statutory duty of care imposed by section 37 of the DBP Act for alleged defects in the common property. The builder and developer pleaded a proportionate liability defence naming nine concurrent wrongdoers.

The owners corporation’s application to strike out the proportionate liability defences failed at first instance. The judge at first instance held that the statutory duty of care could be distinguished from a ‘tort’ under section 5Q of the Civil Liability Act 2002 (NSW) (CLA) as opposed to a common law tort for breach of a common law duty of care. The judge held that as section 5Q of the CLA applies only where the non-delegable duty imposed arises in tort, the section is not engaged and the issue of vicarious liability for an apportionable claim under section 39(a) of the CLA does not arise.

Decision

The appeal was allowed and the Court of Appeal:

1. overturned the primary decision on the basis that breaches of statutory duties are, in fact, torts;
2. found the notion that a duty could be non-delegable (and therefore mean that the principal would be vicariously liable for the acts of other actors) was inconsistent with the existence of a proportionate liability defence, and this was consistent with the intention of parliament; and
3. affirmed the position that, regardless of the independence of any contractor, the fact that the developer and builder owed the non-delegable statutory duty of care meant that the developer and builder were vicariously liable for their actions.

Adamson JA gave reasons and considered that the clear legislative intention underpinning the statutory duty of care was to create a new cause of action deriving from statute, which is to be treated as if it were a cause of action in tort. Her Honour relied on section 37(3) of the DBP Act in support of this proposition.

Section 37(3) provides ‘[a] person to whom the duty of care is owed is entitled to damages for breach of the duty as if the duty were a duty established by common law’.  Further, section 39 of the DBP Act provides that the duty of care is non-delegable. Her Honour considered that sufficient to exclude the proportionate liability regime by necessary implication.

Her Honour further found the distinction between a tort and a claim arising under statute to be inapt, finding that ‘the word “tort” is apt to refer to an action for breach of a statutory duty’.  Consequently, section 5Q of the CLA rendered the builder vicariously liable for the breaches of any concurrent wrongdoers.

Her Honour rejected the builder’s submission that to deprive it of the benefit of the proportionate liability regime would be unfair and contrary to public policy, on the basis that the consequence (ie builders being 100% liable for breaches of the statutory duty of care caused by others) flows from the character of the statutory duty of care being non-delegable. 

Her Honour therefore found that although the builder is entitled to cross-claim against concurrent wrongdoers, it cannot reduce its own liability for the whole of the loss suffered by the plaintiff by reference to such wrongdoers.

Basten AJA also held that a ‘tort’ as referred to in section 5Q of the CLA included a cause of action based on a statutory duty of care and that the non-delegable nature of the statutory duty of care excluded the proportionate liability regime in Pt 4 of the CLA.

Ward P agreed that the fact that the statutory duty of care is non-delegable, by reason of section 39 of the DBP Act, excludes by necessary implication the proportionate liability regime.