Chapter 7
Other jurisdictions

United Kingdom

Statutory reforms

7.2Around the time that the New Zealand Law Commission was undertaking the apportionment of liability project, the United Kingdom Law Commission released a consultation document regarding joint and several liability.98  The Commission reached the conclusion that there were “convincing arguments of principle against replacing joint and several liability by full proportionate liability”.99 Further, the Commission noted that:100

If there were an overwhelming case in terms of economic efficiency, or the overall public interest, for sacrificing sound principle, we would consider the form of modified proportionate liability which excludes consumers and reallocates some of the uncollected share up to 50 per cent of each defendant’s share (exemplified by the US reform of securities legislation) to be the most pragmatic way of reforming joint and several liability. But we regard the policy objections to joint and several liability to be, at best, insufficiently convincing to merit a departure from principle…

7.3The United Kingdom Law Commission stated that they did not believe that a full project on joint and several liability should be undertaken,101 although they suggested other possible solutions to the plight of professional defendants be looked at, such as reforming s 310 of the Companies Act 1985 to allow auditors to limit their liability and/or statutory caps.102
7.4This is a convenient point to note that the issue of “deep pockets” is more relevant to professional defendants in the United Kingdom, rather than in the building and construction sector. This is because, with respect to the latter, a local authority’s duty of care is more limited than in New Zealand, and they are generally not liable if a building, when finished, is defective in quality or causes pure economic loss.103
7.5In respect of one subset of professional defendants, namely directors and auditors, the United Kingdom Department of Trade and Industry released a consultative document in December 2003 about their liability.104 In it, it was noted that, since the Feasibility Investigation of Joint and Several Liability, the Government had also “rejected the arguments developed by the major accountancy firms for fundamental reform of the principle of joint and several liability.”105

7.6However, the United Kingdom Government had invited the Company Law Review to consider the issue further, and brought forward the Limited Liability Partnerships Act 2000. The Company Law Review, though, also rejected proposals for proportionate liability, as it would shift the burden from the at fault auditor to the innocent plaintiff.

7.7The Department of Trade and Industry commented that the Government did not believe it right to consider the adoption of proportionate liability solely in respect of the audit industry, and that it would need to be part of major reform of the law of negligence.106 As such, it was outside the scope of this consultative exercise. Instead, reform of s 310 of the Companies Act 1985, so as to allow auditors to limit their liability by contract, was floated.107 Such reform was effected by sections 532 to 538A of the Companies Act 2006 (UK), albeit subject to conditions.108

Developments in case law

7.8For a short period in 2006 it appeared that the United Kingdom Courts would replace joint and several liability with proportionate liability for a narrow and rare type of personal injury case. The House of Lords applied a tightly confined exception to joint and several liability in the case of Barker v Corus UK Ltd,109 based on their approach to causation and how they analysed loss, on the particular facts. The plaintiff was the widow of a mesothelioma victim. Mesothelioma is a fatal disease caused by inhalation of asbestos fibre, and can be contracted through a single exposure. The victim had been exposed to asbestos by two employers and also when self-employed. The House of Lords held that the defendant employer was liable on the basis of having materially increased the risk of harm, but was liable on a proportionate basis rather than jointly and severally, because the exposure was a separate source of increased risk rather than an indivisible cause of a single injury.

7.9This limited adoption of proportionate liability did not last. Joint and several liability was immediately restored by statute as the rule for mesothelioma cases by section 3 of the Compensation Act 2006 (UK). The rejection by Parliament of proportionate liability was apparently a direct result of public discontent with the restriction on compensation that proportionate liability would lead to for the families of mesothelioma victims.

98United Kingdom Law Commission Feasibility Investigation of Joint and Several Liability (1996).
99At [7.1] (emphasis in the original).
100At [7.4].
101At [7.5].
102At [7.6].
103Murphy v Brentwood District Council [1991] 1 AC 398 (HL). The Judicial Committee of the Privy Council declined to overturn the New Zealand Court of Appeal’s refusal to follow Murphy in Invercargill City Council v Hamlin [1996] 1 NZLR 513 (PC), a decision which has recently been confirmed by the New Zealand Supreme Court in North Shore City Council v Body Corporate 188529 (Sunset Terraces) [2010] NZSC 158, [2011] 2 NZLR 289 and further developed in Body Corporate 207624 v North Shore City Council (Spencer on Byron), above n 70.
104Department of Trade and Industry (UK) Director and Auditor Liability: A Consultative Document (December 2003).
105At [6.6].
106At [6.7].
107At [6.8] – [6.12].
108The prohibition in New Zealand on auditors limiting their liability, as found in s 204 of the Companies Act 1955, was removed by s 33 Companies Amendment Act 1993, and was not re-enacted in the Companies Act 1993.
109Barker v Corus [2006] UKHL 20, [2006] 2 AC 572.