High Court Clarifies Scope of Statutory Duty of Care Under NSW Construction Laws

The Design and Building Practitioners Act 2020 (NSW) (DBP Act) was introduced to restore consumer confidence in the residential construction sector following concerns over defective building work. A key element of the DBP Act is the statutory duty of care under section 37, which has been central in recent construction defect litigation.

The Pafburn Case: A Significant Rule

In The Owners – Strata Plan 84674 v Pafburn Pty Ltd, the Owners Corporation of a North Sydney residential building sued the builder, Pafburn, and the developer, Madarina, for alleged defects. Pafburn accepted it owed the statutory duty of care, while Madarina denied it. Both raised a proportionate liability defence, seeking to reduce their liability by pointing to others such as subcontractors, designers, and certifiers.

The NSW Court of Appeal struck out this defence, holding that the statutory duty of care is not subject to proportionate liability. The High Court upheld this decision in a narrow 4:3 ruling, confirming that defendants cannot reduce their liability by blaming others. The decision significantly broadens liability under the DBP Act. Developers, builders, and financiers with control over construction work could be held fully liable for defects, even if others contributed to the issues. This is particularly relevant in distressed projects where financiers or receivers take control.

Practical Consideration

• Financiers and Controllers – Those taking control over a project should actively monitor construction quality, as having the power to control work – even if not exercised can attract liability. 

• Former Landowners – Developers and others involved in supervision or control during construction may face claims, even after selling the property.

• Distressed Projects – Financiers should assess whether completing a project without taking control might reduce liability risks.

Key Takeaway

The High Court’s decision reinforces that those with control over construction work bear responsibility for defects under the DPB Act. Stakeholders must carefully manage their involvement and ensure robust oversight to mitigate liability.

For assistance or guidance on the recent High Court decision that may impact you, please contact one of our people.

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