Pafburn Pty Limited v The Owners – Strata Plan No 84674 [2024] HCA 49
When construction defects emerge in major residential buildings, responsibility often becomes a tangled web of contractors, subcontractors, developers and consultants. In Pafburn Pty Ltd v Owners – Strata Plan No 84674, the High Court of Australia was asked to decide a deceptively simple but enormously consequential question: can a builder or developer facing a claim under s 37 of the Design and Building Practitioners Act 2020 (NSW) reduce their liability by pointing to other wrongdoers?
The answer, for now, reshapes the landscape of building liability in New South Wales.
Factual Background
The respondent, the Owners – Strata Plan No 84674, was the owners corporation of a strata scheme in North Sydney. It commenced proceedings in the Supreme Court of New South Wales pursuant to the Design and Building Practitioners Act 2020 (NSW) (the DBPA). It alleged that the second appellant, Madarina Pty Ltd (Madarina), was the previous owner of the land on which the strata scheme was constructed. It alleged that Madarina contracted with the first appellant, Pafburn Pty Ltd (Pafburn), to construct the building on the land, that Pafburn conducted the building and construction work and that Madarina supervised, co-ordinated and project managed the construction work. As such, it claimed that Pafburn and Madarina each owed it a duty in the conduct of the construction, pursuant to s 37(1) of the DBPA, to exercise reasonable care to avoid economic loss caused by defects in or related to the building arising from construction work. It further claimed that, by operation of s 39 of the DBPA and s 5Q of the Civil Liability Act 2002 (NSW) (the CLA), Pafburn and Madarina owed it a duty to ensure that reasonable care was taken by a person carrying out any work or task delegated to them and the extent of their liability for breach of this duty was to be determined as if they were vicariously liable for the negligence of the person conducting the work.
Pafburn and Madarina responded that, if the respondent did suffer loss of damage as a result of their breach of duty, such a claim was an apportionable claim within the meaning of s 34 of the CLA. They identified concurrent wrongdoers as being the subcontractors for waterproofing the building; the manufacturer, supplier or installer of the aluminium composite panels on the building; the architect of the building; and the local council as the consent authority in respect of the building.
The respondent applied to have the claims relating to apportionable claims struck out, pursuant to r 14.28 of the Uniform Civil Procedure Rules 2005 (NSW). At first instance, the trial judge, Rees J, dismissed the application (Owners – Strata Plan No 84674 v Pafburn Pty Ltd [2023] NSWSC 116). The New South Wales Court of Appeal (Ward P, Adamson JA and Basten AJA) struck out the claims relating to apportionable claims (Owners — Strata Plan No 84674 v Pafburn Pty Ltd (2023) 113 NSWLR 105; [2023] NSWCA 301). Pafburn obtained special leave to appeal to the High Court of Australia.
The Appeal
This was an appeal against a decision of the New South Wales Court of Appeal (Owners — Strata Plan No 84674 v Pafburn Pty Ltd (2023) 113 NSWLR 105; [2023] NSWCA 301) in relation to whether a claim for damages for breach of s 37 of the DBPA was an apportionable claim within the meaning of Pt 4 of the CLA.
Decision
The High Court dismissed the appeal (Gageler CJ, Gleeson, Jagot and Beech-Jones JJ; Gordon, Edelman and Steward JJ dissenting).
Majority (Gageler CJ, Gleeson, Jagot and Beech-Jones JJ)
The majority held that anyone who supervises or undertakes construction work owes a duty under s 37 of the DBPA that covers all defects connected to that work. Because s 39 makes that duty non-delegable, it is a personal duty that cannot be shifted to subcontractors or others involved in the project: at [51]-[54].
The Court explained that, as Pt 4 of the DBPA sits alongside the CLA, Pafburn and Madarina’s liability under s 37 must be treated as if they were vicariously liable for anyone they delegated work to. This type of responsibility is exactly what s 5Q of the CLA is designed for. As a result, they cannot reduce their liability by pointing to subcontractors, consultants, or other alleged wrongdoers. They remain personally liable for the entire economic loss caused by the breach, provided causation and loss are proved: at [55]-[58], [62], [65].
Dissent (Gordon, Edelman and Steward JJ)
The dissent took a narrower approach. Their Honours considered that the phrase “carries out construction work” in the DBPA should not be interpreted broadly. While s 39 prevents a person from delegating the duty in s 37, it does not turn that duty into a strict, non-delegable duty that automatically makes a head contractor liable for a subcontractor’s negligence. In their view, the duty remains one of reasonable care, not a guarantee of a subcontractor’s work: at [68], [69], [81], [83], [84], [88].
Their Honours also concluded that s 5Q of the CLA does not apply to s 37 of the DBPA. The duty under s 37 is aimed at expanding who the duty is owed to and ensuring it cannot be delegated, rather than imposing strict liability regardless of contractual arrangements or ownership history: at [90].
On this reasoning, a claim for breach of s 37 is an apportionable claim under the CLA: at [97].
Implications
The High Court has now confirmed that, in certain circumstances, breaches of the statutory duty in s 37 of the DBP Act cannot be defended on the basis of proportionate liability. A builder or developer may be held fully responsible for the loss, even where other parties – such as subcontractors, product manufacturers, certifiers, or consultants – also contributed to the defects. If they wish to involve those parties, they must pursue them through cross-claims, rather than reducing their own liability through apportionment.
However, the Court’s reasoning focused narrowly on whether developers and head contractors can rely on proportionate liability in response to s 37 claims. This leaves open important questions for consultants and their insurers. In situations where consultants might previously have raised a proportionate-liability defence, it is now unclear whether they must proactively commence cross-claims instead. That issue remains unresolved and may ultimately need to be clarified either through legislative amendment or by a consultant bringing the issue before the courts in a future case.
