Chapter 6
The Australian experience and Closer Economic Relations

Lessons from the Australian experience

6.11There has been substantial commentary on how the legislation has been applied since its enactment nearly 10 years ago.94 There appears to be a tentative conclusion that the proportionate system has caused a “considerable increase in the complexity and cost of litigation and made settlement by way of an effective offer of compromise or negotiation and mediation more difficult”.95

6.12However it could be argued that the problems of complexity arise irrespective of which liability regime applies. The Australian concern about complex litigation is also reflected in New Zealand’s experience with leaky buildings cases. These have become well known for the complexity of proceedings and for defendants or plaintiffs joining all conceivable wrongdoers. Obviously, this is happening under the existing joint and several liability regime.

6.13It is therefore probable that either system of liability will result in complicated proceedings whenever the underlying factual situation is complex and there are multiple possible defendants. In circumstances where loss has been caused by many concurrent wrongdoers, there will inevitably be incentives to join them all, because other parties will be seeking to minimise their own liability. The key issue is whether it is the claimant or the defendants who have the incentive to join as many potentially liable parties as possible. This decision is dependent on which side of the dispute bears the risk of meeting the liability of unjoined parties.

6.14From this perspective the two different liability regimes simply shift the burden of risk between the available parties, and it is unlikely that one will result in more or less complex proceedings. It should also be noted that under either a joint and several regime or a proportionate regime, it is intended that defendants will ultimately only bear their proportionate level of liability. The difference is only apparent if one or more liable defendants is unavailable to pay their allocated share of the loss.

6.15This is the factor which distinguishes the two liability regimes. From the point of view of the plaintiff, the advantage of joint and several liability is that they can recover the entire loss whether or not a particular defendant is absent or insolvent. Conversely, from the perspective of the defendant this is its very disadvantage. We would therefore expect defendants to favour proportionate liability and plaintiffs to favour retaining joint and several liability.

94See for example D Levin “Proportionate Liability: the Australian Experience – Parts 1, 2 and 3” (2011) 9-11 BuildLaw; O Hayford “Proportionate Liability – its impact on contractual risk allocation” (2010) 26 BCL 11; B McDonald, above n 92; D Jones “Proportionate Liability – Reform or Regression?” (2007) ICLR 62.
95Levin, Part 1above n 94 at [12]; see also Part 2 at [11].