From: Neil Foster <neil.foster@newcastle.edu.au>

Sent: Wednesday 11 December 2024 01:13

To: obligations@uwo.ca

Subject: ODG: HCA on proportionate liability for breach of building duty

 

Dear Colleagues;

This week seems to be private law week at the High Court of Australia. All 4 cases involve private law in different contexts, though I will be commenting only on two that I most directly interested in. (The ones I will not be commenting on today are Kramer v Stone [2024] HCA 48 (11 Dec 2024), in what looks like an interesting decision on proprietary estoppel, and Commonwealth of Australia v Sanofi [2024] HCA 47 (11 Dec 2024), which I had thought was about patents but looks to be more about how an appellate court deals with facts found by a lower court. I leave it to others to comment on these.)

In this first email, I want to note the decision in Pafburn Pty Limited v The Owners - Strata Plan No 84674  [2024] HCA 49 (11 Dec 2024), which concerns issues around statutory duties imposed on builders and whether the proportionate liability regime applies to such claims. (My second email will note the fourth decision, about contract damages for psychological harm.)

Pafburn will be mainly of interest to NSW colleagues, but the issues may come up in other contexts elsewhere. In our State, the Design and Building Practitioners Act 2020 (NSW) ("DBPA") was introduced following a series of scandals about defective buildings, especially in high-rise apartments, and the decision of the High Court in Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 (2014) 254 CLR 185  that the original developer of a high rise building did not owe a duty of care in the law of negligence to subsequent purchasers. The DBPA provides that a duty is owed to subsequent owners (s 37(2)), and it also provides that the duty is to be treated as if the duty were a duty established by the common law (s 37(3)). It then says in s 39 that "A person who owes a duty of care under this Part is not entitled to delegate that duty."

In this litigation a building developer and a builder, having been sued for economic loss, claimed that they should be able reduce their own liability by invoking the provisions of the Civil Liability Act 2002 (NSW), Part 4, which provides for a regime of proportionate liability in economic loss and property damage claims. Part 4 abolished the usual common principle of solidary liability , under which a plaintiff can sue any tortfeasor who is has materially contributed to their loss for 100% of the damages, leaving it up to the tortfeasor to find others who may be joined or sued for contribution. Instead, where Part 4 applies, each tortfeasor can only be sued for the precise proportion they have contributed to the loss.

In the Court of Appeal, it was held that Part 4 of the CLA did not apply to claims under the DBPA, through a three-step process of reasoning.

  1. Under Part 4 of the CLA, s 39 of that Act provides that the proportionate liability regime is not applicable to liability based on vicarious liability for a tort committed by an employee or other party for whom VL will be imposed. The reason is clear- at common law vicariously liability makes both the superior party (usually an employer) and the actual tortfeasor jointly liable for the tort, and to apply proportionate liability to that situation would effectively negate the operation of vicarious liability altogether.
  2. Under s 5Q of the CLA, liability arising due to the doctrine of non-delegable duty is to be treated under the CLA as if it were vicarious liability.
  3. When the DBPA s 39 specified that duties under that Act could not be delegated, this created a non-delegable duty which is equivalent to that recognised at common law, and hence by virtue of s 5Q s deeming of the NDD to be VL, Part 4 did not apply to the DBPA duty.

The High Court by majority agreed with the Court of Appeal (GAGELER CJ, GLEESON, JAGOT AND BEECH-JONES JJ). They in effect (with some complications not mentioned) adopted the above reasoning.

 

[58] Section 39(a) of the CLA also operates to ensure that nothing in Pt 4 of the CLA "prevents a person from being held vicariously liable for a proportion of anyapportionable claim for which another person is liable". In the case of the liability of a defendant for a wrongdoer under s 5Q, that proportion for the defendant is necessarily 100% of the liability.

 

I myself think the majority are correct- this is both a plausible reading of the legislation and also seems to represent good policy, that Parliament would not intend unit owners to have to pursue multiple businesses to recover full compensation.

As someone who has written about non-delegable duty (see here for those interested) I appreciated the clarity of what the majority said about the issue, see eg

 

[20] the content of the duty is personally to ensure that that other person performing the function in fact takes reasonable care. Liability for breach of a non-delegable duty, therefore, is generally considered to be "direct" or "personal" liability (because the person subject to the non-delegable duty is taken to have breached that duty by not ensuring that reasonable care was taken by the other person performing the function) rather than "vicarious" liability.

 

Colleagues who teach Torts may also appreciate that we get a brief definition of the term!

 

[21] "Tort" is a concept of significant elasticity and indeterminacy which extends to any form of wrong which attracts a remedy in civil law and not within another recognised class of actionable wrongs (such as breach of contract or breach of trust). 

 

The dissent disagrees (GORDON, EDELMAN AND STEWARD JJ). Of course there are plausible points that they make, but I still think on balance the majority are correct.

 

Regards

Neil

 

NEIL FOSTER

Associate Professor, School of Law and Justice

College of Human and Social Futures,

University of Newcastle, NSW

 

T: +61 2 49217430

E: neil.foster@newcastle.edu.au

 

Further details: http://www.newcastle.edu.au/profile/neil-foster

My publications: http://works.bepress.com/neil_foster/ , http://ssrn.com/author=504828 

Blog: https://lawandreligionaustralia.blog

 

 

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