NSW: An Entirely “Proportionate Response” To Proportionate Liability

This article is about proportionate liability and the a duty owed by persons carrying out “construction work” to exercise reasonable care.

A decision of the New South Wales Court of Appeal has yielded a favorable outcome for owners corporations and others wishing to (or being required to) pursue proceedings under the Design and Building Practitioners Act 2020 (NSW) (DBPA) for breach of the statutory duty of care in section 37 (Duty).

The Duty, simply stated, is a duty owed by persons carrying out “construction work” to exercise reasonable care to avoid economic loss caused by defects in a building arising out of the work.

Section 39 of the DBPA provides that the person owing the Duty is not entitled to delegate the Duty. The Duty is also said to be subject to the Civil Liability Act 2002 (NSW) (CLA).

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Briefly summarising the facts, the The Owners – Strata Plan 84674 (Owners Corporation) sued the Builder, Pafburn Pty Ltd and Madarina Pty Ltd under the DBPA for breach of the Duty.

Both the builder and developer sought to rely upon the proportionate liability defence available under Part 4 of the CLA pursuant to which they named 9 contractors involved in the work as “concurrent wrongdoers”. In so doing, they sought to reduce their own liability only to the extent to which they were responsible for any loss suffered as a result of the alleged breach of the Duty.

The Owners Corporation applied to strike out the relevant parts of the defence arguing that the CLA did not apply because the Duty was non – delegable. At first instance, this application was dismissed as the Court held that the CLA did apply.

However, on appeal, the Court of Appeal held that breach of the Duty was a tort to which section 5Q of the CLA applied. This section relevantly states as follows:

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.

Consequently, the Court of Appeal held that as a result of the inability to delegate the Duty provided for under section 39 of the DBPA, the Duty was “non-delegable” and that this was enough to “exclude Part of the Civil Liability Act by necessary implication”.

The consequences of this decision are a boon for those litigants seeking to bring claims under the DBPA. Specifically, a defendant will no longer be able to limit their liability under Part 4 of the CLA by apportioning the blame amongst other persons involved in the loss. As a corollary, a defendant will now be liable for the entirety of the loss suffered (assuming the breach of the Duty is established). A defendant will now be required to issue a cross-claim against other relevant parties in order to claim contribution for any damages awarded against it.

Given these consequences, it seems difficult to accuse those who are the recipients of the benefits of this decision of reacting “out of all proportion”.

Allison Benson & Thomas Waugh
Kerin Benson Lawyers
E: [email protected]
P: 02 4032 7990

Please note: This is not intended to be legal advice. You should seek legal advice specific to your situation.

This post appears in Strata News #690.

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This article has been republished with permission from the author and first appeared on the Kerin Benson Lawyers website.

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