Strike out application struck out – the proportionate liability regime applies to breaches of the duty of care in the Design and Building Practitioners Act (NSW)

13 March 2023

In proceedings against defendants for breach of the duty of care in the Design and Building Practitioners Act, the defendants pleaded proportionate liability against other parties.

The plaintiff applied to strike out/dismiss that defence, as the duty is non-delegable, and allegedly prevents reliance on the proportionate liability regime. The Court rejected that application and held that the proportionate liability regime applies.

In issue

  • Whether a defendant is able to rely on the proportionate liability provisions contained in Part 4 of the Civil Liability Act 2002 (NSW) (CLA) when it has been sued for an alleged breach of a non-delegable statutory duty of care imposed under section 37 of the Design and Building Practitioners Act 2020 (NSW) (DBPA).

The background

The plaintiff is the Owners Corporation of a strata development in North Sydney (Owners). The defendants were the builder of that development, Pafburn Pty Limited and the developer, Madarina Pty Limited (collectively referred to as the Defendants).

The Owners alleged that the development contained defects and commenced proceedings against the Defendants in the Supreme Court of New South Wales for breach of the statutory duty of care owed under the DBPA. In response, the Defendants pleaded a proportionate liability defence, naming 9 others as concurrent wrongdoers.

The Owners sought to summarily dismiss or strike out the proportionate liability defence due to the combined operation of section 39 of the DBPA and sections 5Q and 39(a) of the CLA. Relevantly:

  1. section 39 of the DBPA provides that the statutory duty of care within the DBPA is non-delegable, meaning that a party allegedly owing this duty cannot discharge it by delegating it elsewhere;
  2. section 5Q of the CLA equates liability in tort of a person for breach of a non-delegable duty with vicarious liability; and
  3. section 39(a) of the CLA provides that nothing in Part 4 of the CLA 'prevents a person from being held vicariously liable for a portion of any apportionable claim for which another person is liable'.

The Owners argued that those sections preclude a defendant’s reliance on the proportionate liability regime for breaches of the duty under section 37 of the DBPA, otherwise the ‘non-delegable’ statutory duty in the DBPA would become ‘delegable’.

In response, the Defendants argued that if the Owners were correct, every defendant that owed it a duty of care under the DBPA would be liable for 100% of the damage from their alleged breach, regardless of the magnitude of their role in the works. It said that such an outcome would be 'unusual and onerous'.

The decision at trial

Rees J dismissed the Owners’ application and concluded that the Defendants could plead proportionate liability for the reasons discussed below.

Her Honour considered that the Court’s discretion to summarily dismiss a claim should be 'sparingly invoked', and it must be clear that the claim has no prospects of success.

In coming to her decision, her Honour noted that section 34(3A) of the CLA explicitly states that claims for breach of the statutory warranty under Part 2C of the Home Building Act do not fall under the proportionate liability regime, but says nothing on the statutory duty imposed under the DBPA. In conjunction with section 41(3) of the DBPA, which subjects part 4 of the DBPA (ie. the part containing the statutory duty of care) to the CLA 'without limitation', her Honour found that the proportionate liability regime applies to claims for economic loss in an action for damages under the DBPA.

Her Honour also found that the duty under the DBPA is a statutory duty, not a tortious duty, such that section 5Q of the CLA does not apply at all as it is only enlivened where the non-delegable duty arises in tort. Given that conclusion, her Honour also found that section 39(a) of the CLA did not arise in the present circumstances.

Implications for you

This case is another helpful addition to the growing list of cases that clarify the scope and operation of the DBPA (see our previous case notes here and here).

Defendants to a claim for breach of the statutory duty of care contained in the DBPA will no doubt draw comfort from this decision and continue to plead the ‘proportionate liability defence’, rather than issuing cross-claims to recover any loss.

Updated 8 February 2024: On 13 December 2023, the NSW Court of Appeal overturned this decision. The proportionate liability defences were struck out.

The Owners – Strata Plan No 84674 v Pafburn Pty Ltd [2023] NSWSC 116

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