NSW Court Decision Escalates Liability Risks for Construction Sector

The DBP Act, which came into effect on 1 July 2025, introduced a statutory duty of care that is non-delegable, retrospective, and applies to all buildings and participants in their construction, including individual employees and directors. This duty of care aims to protect property buyers by ensuring accountability throughout the construction process.

The significance of the recent court decision, particularly in the Pafburn case, lies in its removal of the proportionate liability defence previously relied upon by developers and head contractors. Proportionate liability allowed these parties to limit their legal responsibility for building defects by attributing portions of liability to other parties involved in the construction process. With this defence no longer available, developers and builders now face full liability for defects, regardless of the involvement of subcontractors or other third parties.

This ruling has far-reaching implications for the construction sector. Developers and builders must now exercise heightened diligence in all aspects of their projects, as they can no longer mitigate liability through proportionate defences. This change is likely to influence contractual arrangements, risk management strategies, and insurance requirements within the industry.

For businesses operating in the construction sector, it is crucial to reassess existing contracts and insurance policies to ensure they align with the new legal landscape. Engaging with legal and insurance professionals to understand the full implications of this ruling and to implement appropriate risk mitigation measures is advisable.

In summary, the recent NSW court decision represents a significant shift in construction liability, emphasising the need for developers and builders to adopt more comprehensive risk management practices to navigate the increased exposure to claims.