A major decision by the High Court of Australia has changed the game for developers and builders in NSW. The Court ruled that if there are defects in a building, developers and head contractors cannot shift blame to subcontractors using the proportionate liability defence under the Civil Liability Act 2002 (NSW).
Instead, if they’ve taken on construction work, they owe a non-delegable duty of care under the Design and Building Practitioners Act 2020 (NSW) (DBP Act). That means they’re fully responsible if a subcontractor makes a mistake that causes financial loss to the building owners.
What This Means in Simple Terms
- Builders and developers remain liable for construction defects, even if the problem was caused by someone they hired (like a subcontractor).
- They can’t argue that the fault lies with the subcontractor in order to reduce or split their liability.
- The responsibility to make sure construction work is done properly can’t be passed on to someone else.
- This makes it easier for owners to seek compensation, because they don’t have to chase after multiple subcontractors.
Background to the Case
This ruling came from a dispute over defects in a residential building in North Sydney. The owners sued both the builder (Pafburn Pty Ltd) and the developer (Madarina Pty Ltd). The builder and developer tried to argue that their subcontractors were at fault and that liability should be apportioned to the other wrongdoers.
Initially, the NSW Supreme Court accepted this argument. The owners appealed and the Court of Appeal allowed the appeal and found that the duty of care in the DBP Act can’t be delegated. The High Court agreed, confirming that developers and builders are vicariously liable for the subcontractors’ work and that fault cannot be apportioned in all cases.
Why It Matters?
This decision means builders and developers take on more risk. If something goes wrong on-site due to a subcontractor’s poor work, the head contractor and developer are still on the hook. That could lead to higher insurance premiums, increased contract disputes, and more court action, as they may need to sue subcontractors themselves to recover costs.
Advice for Builders and Developers
- Be careful who you contract with and work with subcontractors who are reliable, skilled and financially stable.
- Check your contracts to make sure limitation of liability and exclusion clauses are solid and offer some protection.
- Understand that under the DBP Act, claims can go far beyond just repair costs and they may include broader financial impacts as well.
Let us know if we can assist
It is always important to seek advice that is relevant to your individual situation. Please contact us here or call us on (02) 4944 3322 if we can assist you.
