Guide: Holding Builders & Developers Accountable for NSW Strata Defects after the Pafburn High Court Case

Introduction

Strata building defects can cause significant financial and practical challenges for owners corporations across New South Wales. The legal responsibilities of builders and developers for these defects have been clarified by the High Court in the Pafburn Pty Limited v The Owners – Strata Plan No 84674 [2024] HCA 49 case, making it clear that builders and developers cannot avoid liability by subcontracting work or shifting blame to others involved in the construction process.

This guide explains how the law now provides stronger protections for strata owners, ensuring that developers and builders are held directly accountable for defects in strata buildings and clarifying who pays for a building defect in NSW. Understanding these legal duties is essential for anyone involved in strata property, as it shapes the rights and remedies available when defects arise.

Interactive Tool: Check Who Is Responsible for Your Strata Building Defects

The Non-Delegable Duty of Care in Strata Construction Explained

What Is a Non-Delegable Duty Under the DBPA

Under the Design and Building Practitioners Act 2020 (NSW), builders and developers bear personal responsibility for the quality of their construction work.

Section 37 establishes a statutory duty of care, which requires them to:

• exercise reasonable care to avoid economic loss caused by defects,
• owe a duty to the initial property owner and all subsequent owners, including the owners corporation of a strata scheme.

Section 39 reinforces this responsibility by explicitly stating that the duty of care is non-delegable. In practice, this means builders and developers cannot transfer or outsource legal responsibility to another party, simplifying the question of who is responsible for building defects. Even when construction work is performed by subcontractors or other consultants, the head contractor and developer remain primarily responsible for ensuring the work is free from defects.

How This Prevents Apportioning Blame for Strata Defects

The non-delegable nature of this duty has significant implications for how blame is assigned in strata defect claims.

Typically, under Part 4 of the Civil Liability Act 2002 (NSW), defendants can argue that other parties—known as concurrent wrongdoers—also share responsibility for the loss. This approach reduces their own share of liability. Commonly cited concurrent wrongdoers include:

• subcontractors,
• architects,
• certifiers,
• product manufacturers.

However, in a landmark 4:3 split decision, the High Court of Australia ruled that the proportionate liability scheme does not apply to claims made under the Design and Building Practitioners Act 2020 (NSW).

Because the duty of care is non-delegable, developers and head contractors cannot limit their liability by blaming subcontractors, architects, certifiers, or product manufacturers for defects. This ensures they are held 100% liable for the economic loss suffered by the owners of a strata property.

How the High Court's Pafburn Ruling Affects Your Strata Rights

Background of the Pafburn Strata Defects Case

The case of Pafburn Pty Limited v The Owners – Strata Plan No 84674 [2024] HCA 49 involved a dispute over a multi-story residential strata building in North Sydney.

The key parties included:

• Owners Corporation — the building's representative body.
• Pafburn Pty Limited (builder) — the head contractor responsible for construction.
• Madarina Pty Limited (developer) — the developer behind the project.

The Owners Corporation initiated legal proceedings against both the builder and developer, alleging significant building defects that compromised the property's structural integrity and safety.

In response to the claim, Pafburn and Madarina argued that their liability should be reduced.

They sought to apportion blame to various other parties involved in the construction, including:

• Subcontractors — specialist trades engaged on site.
• Architects — designers responsible for plans.
• Certifiers — those who approved compliance.
• Product manufacturers — suppliers of building materials.

By naming these parties as "concurrent wrongdoers," the builder and developer aimed to limit their own financial responsibility under the proportionate liability provisions of the Civil Liability Act 2002 (NSW).

The Court's Decision & What It Means for Holding Builders Accountable

The High Court of Australia dismissed the appeal by the builder and developer, affirming that the statutory duty of care under the Design and Building Practitioners Act 2020 (NSW) is non-delegable.

This means developers and head contractors cannot pass on their responsibility for defects by subcontracting the work to others.

The court also ruled that these parties cannot use the proportionate liability scheme to limit their financial exposure.

As a result, the builder and developer were held 100% liable for the economic loss caused by the building defects.

This landmark ruling sets a clear and powerful precedent for future strata defect claims, empowering owners corporations to hold principal contractors and developers fully accountable.

Key Implications for Builders & Developers

Increased Financial Exposure & Accountability

The High Court’s decision significantly increases the financial risks and costs for builders and developers involved in NSW strata projects. As they can no longer use proportionate liability defences, they are now 100% personally liable for economic loss caused by all building defects, regardless of whether the work was performed by subcontractors.

The primary financial consequences include:

• Facing increased insurance premiums to cover the expanded risk.
• Fully funding defect claims upfront due to the inability to apportion liability.

To manage these new responsibilities, builders and developers may need to implement more rigorous internal processes, including:

• Performing more thorough due diligence when engaging subcontractors and consultants.
• Closely monitoring performance at each stage of construction.
• Utilising robust quality assurance processes, such as third-party inspections and peer reviews, to identify and rectify defects as they arise.

The Role of Cross-Claims Against Subcontractors

Builders and developers are now wholly liable to the owners corporation for strata defects, so their primary method for recovering costs is by pursuing cross-claims. This approach involves initiating separate legal actions against the specific subcontractors or consultants whose negligence or defective work caused the loss.

A successful cross-claim allows a builder or developer to recoup the money paid to the owners corporation.

However, this approach also presents significant challenges:

• Shifting the procedural burden entirely onto the builder and developer, who must join any potentially liable third parties to the legal proceedings.
• Bearing the solvency risk associated with subcontractors, meaning if a subcontractor is insolvent or unable to pay, the builder or developer remains fully liable for the entire claim.

Unresolved Questions for the Strata & Construction Industry

Can 'Downstream' Professionals Still Apportion Liability?

The High Court's ruling focused on developers and head contractors who delegate construction tasks, leaving the position of other professionals uncertain. In particular, a key unresolved question is whether "downstream parties" who do not typically entrust their work to others can still argue for proportionate liability in strata defect claims.

This ambiguity affects a range of professionals whose roles are often independent:

• Engineers
• Project managers
• Land surveyors

Because these professionals seldom delegate their core duties, the legal reasoning that holds developers fully liable may not apply to them in the same way. The majority in the High Court did not provide a definitive answer, which means it remains open for these parties to plead apportionment in future legal disputes.

The Ambiguous Role of Certifiers in Defect Claims

The liability of certifiers is a particularly contentious and unresolved issue.

It remains legally debatable whether the work performed by a certifier qualifies as "carrying out construction work" under the Design and Building Practitioners Act 2020 (NSW). This distinction is critical because it determines whether certifiers owe the statutory duty of care in the first place.

The minority judges in the Pafburn case observed that it was "not self-evident" that a certifier is a person who carries out construction work. Until that point is clarified by further court rulings or legislative amendments, the extent of a certifier's liability in strata defect cases remains unclear.

Conclusion

The High Court’s decision regarding the Design and Building Practitioners Act 2020 (NSW) confirms that builders and developers hold a non-delegable duty of care for strata defects, making them fully liable for economic losses. This ruling prevents them from apportioning blame to subcontractors, significantly strengthening the rights of owners corporations in NSW.

If you are an owners corporation facing building defects or need expert legal advice on your options, contact the strata dispute lawyers at PBL Law Group today. Our team offers unparalleled expertise to help you navigate the complexities of building defect litigation and secure the protections you deserve in NSW, and we can also connect you with specialist strata defect lawyers for targeted advice on rectifying construction issues.

Frequently Asked Questions