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NSW Court Decision Escalates Liability Risks for Construction Sector

Implications of the Pafburn Case on Developers and Builders

NSW Court Decision Escalates Liability Risks for Construction Sector?w=400

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A recent landmark ruling in New South Wales has significantly altered the liability landscape for the construction industry.
The court's decision removes the ability for developers and builders to rely on proportionate liability defences under the Design and Building Practitioners Act 2020 (DBP Act), thereby increasing their exposure to claims related to building defects.

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.

Published:Sunday, 7th Jun 2026
Author: Paige Estritori

Please Note: We do not endorse any specific products or companies. Some content is sourced from third parties, including press releases, and may not be independently verified for accuracy or completeness.

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Claim:
A formal request made by the policyholder to the insurance company for payment of a loss covered by the insurance policy.