While some arguments in favour of proportionate liability are based chiefly on the need to provide justice to solvent wrongdoers in situations where other wrongdoers are not amenable to judgment, at present a move from the system of solidary liability with contribution is not justified as there is no clear indication that the introduction of proportionate liability will achieve the desired results or even be generally beneficial.
1.10These reports did not settle the issue. One specific reason in New Zealand was the leaky building crisis.
1.12The continuing nature of the crisis and the exposure of typically small construction firms to multiple claims means that a significant number of defendants have become insolvent. Practices such as use of single development companies by developers or builders have further added to pressure on the solvent defendants that do remain – in particular local authorities responsible for building inspection and certification. This major crisis, with the significant potential for uncollectable shares to fall on solvent defendants, has inevitably raised again whether joint and several liability operates as the fairest, most efficient or workable liability rule.
1.13The other major source of potential loss and liability over the past decade is the financial crisis. This crisis was particularly concentrated in the finance company sector, with over 60 companies failing between 2006 and 2010. The losses have occurred to both bond and debenture holders and to holders of equity. The bond and debenture losses are estimated to be over $3 billion.
1.14Potential liability typically arises from the reliance by investors on statements and information not only from the managers or promoters of failed investments but also from any of the entity’s professional advisers. Potential solvent defendants include any external accountants, auditors, legal advisors, any trustee or statutory supervisor, plus any guarantors, insurers or underwriters that investors may rely on. There has been considerable interest in proportionate liability from such parties.
1.15The cost and availability of indemnity insurance has been a further factor in stimulating interest in proportionate liability as a means of providing greater certainty in assessing risk. In Australia issues arising from the uncertainty of indemnity insurance were a major factor in all states agreeing to shift from joint and several liability to proportionate liability for economic loss.