Little is known of the early life of David Proudfoot. He was born in Gilmerton, near Edinburgh, Scotland, probably in 1838 or 1839, the son of George Proudfoot, a coalminer, and his wife, Marion Jack. The family emigrated to Victoria, Australia, in 1852. George Proudfoot ran a contracting business which David took over on his father's death. He moved to Dunedin, New Zealand, in the early 1860s. In 1865 he took up the contract for building the Dunedin Water Works. He then built the Port Chalmers railway, completed in 1872; it was soon purchased by the government, giving Proudfoot and his backers a substantial profit.
This marked the start of a remarkable programme of railway construction. In addition to several large sections of the South Island main trunk line, Proudfoot was responsible for the branch lines to Orepuki, Otautau, Tapanui and Awamoko, and for the Peninsula and Ocean Beach railway. The latter route linked Dunedin with the neighbouring borough of St Kilda, where Proudfoot owned land and where he had built his imposing Grand Pacific Hotel (later known as Onslow House). Personal differences with his fellow directors apparently caused him to leave the Dunedin, Peninsula and Ocean Beach Railway Company.
Proudfoot had begun running trams between the inner city and northern suburbs in 1879. When he extended their operations to Caversham and St Kilda, the profitability of the Ocean Beach railway was destroyed. The tram service gave Dunedin the most advanced urban transport system in the colony. Although a prolific cause of litigation, it was believed to yield Proudfoot a return of £6,000 a year.
Many other works kept Proudfoot's capital in remunerative employment. He widened streets in Dunedin, built roads and bridges in both islands, supplied sleepers for the Waimea Plains railway, erected the Invercargill Waterworks, and performed contracts for dredging and reclamations in Otago Harbour. So extensive were his feats of engineering that he was once described as the 'New Zealand Brunel'. He also acquired the lease of Barewood station and undertook to buy the Kuriwao estate in 1877. His freehold lands were officially valued at £93,203 in 1882, and he owned a number of ships.
Proudfoot was a director or provisional director of no fewer than 15 Dunedin companies. The Otago Guardian was partly owned by him and invariably gave him a sympathetic press. Its editor, George Fenwick, married Proudfoot's sister, Jane, in 1874. Horse-racing was one of Proudfoot's great passions. He spent – fruitlessly – considerable sums in attempting to win a Melbourne Cup. The famous horse, Sir Modred, was at one time in his possession.
At the height of his career Proudfoot was a household name in Dunedin. The 'familiar shape of a wire-pulling, successful contractor' was everywhere known. Probably no other man in Otago commanded as much available capital. He also had useful political connections through his close relations with Robert Stout, James Macandrew, William Larnach, Henry Smith Fish and Henry Driver. Despite his success, however, his application to join the Dunedin Club was rebuffed: violent displays of temper and his proclivity for fisticuffs confirmed that wealth alone did not qualify him as a gentleman.
Other businessmen were suspicious of Proudfoot's power. When he attempted to buy the Otago Daily Times in 1877, hostile shareholders stated that they would not sell if he were to be the purchaser. The deal had to be effected through a dummy offer by Henry Driver and W. H. Reynolds and was clinched only after illegal bonuses were paid to two major shareholders.
Controversies dogged Proudfoot. The Bank of New Zealand, which was virtually a partner in some of his ventures, was accused of exerting improper influence to have the government buy the Port Chalmers railway at an inflated price. There was an outcry over the offering of tenders for the Tapanui railway, the terms of payment being allegedly 'framed to suit…large contractors, who had an unlimited command of money.' To the horror of certain newspapers, a faction of Otago Harbour Board members sympathetic to Proudfoot brazenly promoted his private interests and those of the Dunedin, Peninsula and Ocean Beach Railway Company.
The worst scandal involving Proudfoot was the trial of his brother George for the rape of a domestic servant in 1877. After two special juries failed to agree on a verdict, the charge was withdrawn. This unusual step was rumoured to have been procured by David Proudfoot's ministerial friends. Those newspapers not controlled by Proudfoot were vehement in their denunciation of the outcome.
Proudfoot was not insulated from the effects of the recession of the 1880s. Financial pressure caused the Dunedin tramways to be conveyed to a company, but this brought little relief either to Proudfoot or to his creditors. Another sign of strain was his failure to complete the Kuriwao purchase. As the slump set in he anxiously sought more grist for his mill, offering to build the Otago Central railway in 1881 and winning a £500,000 contract for the Uralla to Glen Innes line in New South Wales. He even negotiated for the building of railways in Japan. Proudfoot was said to have employed 1,000 New Zealand workmen in Australia, a measure of the vast scale of his operations. The delay in completing the Glen Innes contract through labour troubles and other causes resulted in a loss, and may have depleted his reserves of cash. Unable to meet his liabilities in New Zealand he was declared bankrupt in 1885. The crisis was apparently short-lived and further contracts allowed him to make some recovery by the end of the decade.
Proudfoot seems to have left Dunedin around 1883, although other members of his family continued to reside there. He died in Sydney on 20 March 1891 while undergoing surgery. He had never married.