Ensuring Responsibility is Fairly Apportioned
Why does apportioning liability matter?
Like the construction process itself, construction disputes often involve multiple parties, who have often caused or contributed to loss or damage.
In the context of construction litigation, particular challenges arise where loss or damage is alleged under the Home Building Act 1989 (NSW) (the HBA) or the Design and Building Practitioners Act 2020 (NSW) (the DBPA).
However, there are mechanisms to ensure there is a proper framework before the Court to enable responsibility to be fairly apportioned amongst those who are responsible for loss or damage.
If a defendant does not ensure that this apportionment occurs in the one set of proceedings, it may lose the chance to properly apportion or pass on liability, under principles of res judicata, issue estoppel or Anshun estoppel. This is on the basis that in any subsequent proceedings such claims may be barred because they could and should have been raised in the first set of proceedings.
Claims under common law and contract
In proceedings brought under common law negligence or breach of contract, the Civil Liability Act 2002 (NSW) (CLA) enables a defendant to reduce liability to a plaintiff by demonstrating there are ‘concurrent wrongdoers’ who are responsible for a proportion of the loss or damage to the plaintiff.
This can force a plaintiff to join all concurrent wrongdoers to the proceedings or risk recovering less than 100% of their loss.
However, the CLA regime is not available if the claim also arises under the HBA or the DBPA.
Claims under the Home Building Act
Part 2C of the HBA implies statutory warranties into all residential building contracts. These include warranties that the work will be done with due care and skill and in accordance with the principal’s project requirements.
The statutory warranties under the HBA are not apportionable under subsection 34(3A) of the CLA. This means that a defendant can be held liable for all the loss of the plaintiff even if the subcontractors or consultants or parties engaged by the plaintiff caused or contributed to the loss or damage.
In such circumstances, the defendant must consider cross claiming against the parties it contends have caused or contributed to the loss or damage.
Claims under the DBPA
Under section 37 of the DBPA, there is a non-delegable duty on a party that carries out construction work to exercise reasonable care to avoid economic loss.
In the recent decision of Pafburn Pty Limited v The Owners – Strata Plan No 84674 [2024] HCA 49, the High Court determined claims under the DBPA are not apportionable under the CLA. This means that builders can be liable for all the loss of the plaintiff irrespective of whether that loss was contributed to by others.
Once again, a defendant must consider cross claiming against the parties it contends have caused or contributed to the loss or damage to pass on or at least reduce its liability.
How to establish a framework for apportionment
Where a plaintiff alleges breach of the HBA or DBPA and the defendant contends that another party caused or contributed to the loss or damage the plaintiff has suffered, the defendant should consider cross claiming against that third party:
- if there is a contract between the defendant and the third party, damages for breach of contract or reliance on a contractual indemnity;
- if the third party is a joint tortfeasor (who would if sued by the plaintiff be liable to the plaintiff), the third party should contribute to the loss or damage under section 5 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW);
- in the event that neither of the above apply, under the principle of equitable contribution;
- alleging a common law duty owed by that third party to the defendant to avoid economic loss; and/or
- for misleading or deceptive conduct under the Australian Consumer Law.
Key takeaway
A plaintiff can be expected to be strategic about what parties it commences against and what causes of action it brings.
Even if there are multiple defendants, it is important that the pleadings provide a proper framework so that there will be: (a) the relevant evidence; and (b) a mechanism for the Court to determine who should be liable to whom and in what amounts or proportions. This may mean cross claims between defendants.
If such cross claims are not properly brought, there may not be an ability to fairly apportion or pass on liability and such an opportunity may be lost.
If you would like to discuss this article with us, please contact Brett Vincent, Partner, Duncan Macfarlane, Special Counsel or Jordan Russell, Foreign Lawyer on (02) 9261 5900.