Kapila v Monument Building Group Pty Ltd [2025] NSWSC 1306
Section 37 of the Design and Building Practitioners Act 2020 (NSW) (DBP Act) allows an owner to bring a claim for defective work against building professionals involved in the work. Parties facing a section 37 claim often raise an apportionment defence (or proportionate liability defence) under Part 4 of the Civil Liability Act 2002 (NSW).
However, the High Court decision in Pafburn Pty Ltd v Owners – Strata Plan No 84674 (2024) 99 ALJR 148 and the recent Supreme Court decision in Kapila v Monument Building Group Pty Ltd [2025] NSWSC 1306 firmly shut the door on apportionment defences in the context of section 37 claims.
Background
The section 37 claim
Section 37 of the DBP Act imposes a duty on any person carrying out construction work to avoid economic loss caused by defects. An owner of a property can bring a claim under section 37 for breach of that duty against any person involved in the defective building work, e.g. a builder, developer or other building professional, even in the absence of any direct contractual relationship.
The apportionment defence
A claim under section 37 is essentially a claim in tort. This opens the door for contractors and other persons facing such a claim to raise an apportionment defence under Part 4 of the Civil Liability Act 2002 (NSW), which is commonly used in defending against tort claims. In a typical apportionment defence, a contractor facing a section 37 claim will say that:
- other concurrent wrongdoers, e.g. subcontractors and design consultants engaged by the builder as well as the certifier are also responsible for the defect;
- the liability for defective work should be apportioned among the contractor and these other concurrent wrongdoers;
- it is up to the owner to decide whether it wishes to bring a claim against the other concurrent wrongdoers to recover their respective share of liability;
- however, in so far as the contractor’s liability is concerned, the contractor is only liable to pay compensation reflecting its share of responsibility, i.e. its liability should be proportionately reduced.
The High Court decision in Pafburn
The High Court in Pafburn confirmed that the section 37 duty is non-delegable, hence persons facing a section 37 claim cannot apportion their liability to other persons to whom they delegated or entrusted construction work. They are vicariously liable for the breach of duty by those they entrusted the work. For instance, a developer cannot seek to apportion its liability to contractors it contracted to construct a building. Similarly, a contractor cannot apportion its liability to subcontractors or consultants it engaged to carry out work or design packages.
However, the Pafburn decision left open an argument; whether a party can apportion liability among parties whom it did not entrust any work. For example, whether a contractor can apportion its liability against a consultant engaged by a developer or a certifier.
Now it appears Richmond J in Kapila v Monument Building Group Pty Ltd [2025] NSWSC 1306 has put this remaining argument to bed.
The Kapila case
Facts
In the Kapila case, the owner of a terrace brought a section 37 claim against the builder and its director for various defects in the building work, from defective waterproofing and electrical work to non-conforming walls and roof gutters. The builder and its director denied the defects and raised an apportionment defence that if they were found liable, their liability should be apportioned against the engineer and consultants (not engaged by the builder) who prepared the structural and architectural drawings, as well as the certifier.
Decision
Much of the judgment concerns whether the work carried out by the builder was defective. When it comes to the apportionment defence, Richmond J noted despite the Pafburn High Court decision (which may have left open an argument regarding an apportionment defence), the Pafburn Court of Appeal decision already made it clear that an apportionment defence is not available as a defence to a section 37 claim, and the Supreme Court is bound to follow the Court of Appeal’s decision (which was upheld by the High Court and binds lower courts). Accordingly, there is no room for an apportionment defence to operate.
Key takeaway
The upshot of the Kapila case is simple – forget about apportionment defences when defending against section 37 claims. If there are concurrent wrongdoers for the defective works, the appropriate course of action is to bring a cross claim against them.
If you would like to discuss this article with us, please contact Simon Mok, Partner on (02) 9261 5900.