NSW Court Decision Escalates Liability Risks for Construction Industry

The DBP Act, which came into effect on 1 July 2025, introduced a statutory duty of care aimed at protecting property buyers. This duty is non-delegable, retrospective, and applies to all participants in the construction process, including individual employees and directors. The recent court ruling has clarified that breaches of this statutory duty result in full liability for developers and builders, regardless of whether subcontractors or other parties contributed to the defects.

Previously, developers and builders could apportion blame to subcontractors, thereby limiting their own liability. However, the court's decision establishes that they are now fully responsible for the entire cost of rectifying defects. This shift places the onus on developers and builders to pursue subcontractors through separate legal actions if they seek to recover costs.

For the construction industry, this ruling underscores the importance of comprehensive risk management strategies and robust professional indemnity insurance coverage. Companies must reassess their insurance policies to ensure they are adequately protected against the increased liability risks. Additionally, the ruling highlights the need for meticulous oversight of all aspects of construction projects, as any defects can lead to significant financial and reputational consequences.

In light of these developments, construction professionals are advised to:

• Review and update their professional indemnity insurance policies to ensure sufficient coverage.
• Implement stringent quality control measures throughout the construction process.
• Maintain thorough documentation of all project stages to support potential legal defences.
• Engage in proactive communication with subcontractors to ensure adherence to quality standards.

By taking these steps, construction companies can better navigate the evolving legal landscape and mitigate the heightened risks associated with building defects.