9.15A possible shift to proportionate liability raises the issue of the protection of the consumer interests. In the case of the building sector, the building owners are consumers who are making claims against the suppliers and regulators of building services. Since proportionate liability results in plaintiff homeowners bearing the risk of absent or insolvent defendants, it is necessary to have a system which ensures that defects are remedied in the event that the wrongdoer is absent or insolvent.
9.17It is the view of the Law Commission at this stage that a shift from joint and several liability to proportionate liability can only be justified if there is adequate protection of the plaintiffs’ or the consumer interest.
9.18This has particular significance given the background of the leaky building crisis. The building industry through industry bodies and the territorial local authorities have been the principal proponents for a change from joint and several liability to proportionate liability. They have been of the view that it is unfair that a defendant, who may have only contributed to a minor extent should incur liability for the absent or insolvent co-defendant. There is less direct evidence of the views of building owners, but we infer that they are more likely to consider that anyone who has actually caused their loss should be responsible for compensating them for it. We are interested in receiving submissions and comments about the operation of the joint and several liability rule from persons who have experience as plaintiffs in claims involving multiple defendants, as well as from defendants who have been subject to the rule.
9.19There has been some recognition in discussions about the operation of joint and several liability of the importance of consumer protection. Local Government New Zealand has proposed that there should be a compulsory building warranty scheme. This is seen as one of the necessary elements, along with the new regulatory regime that is being introduced to improve building quality. However, the experience of the Australian states shows that an effective warranty scheme will either have to be provided by government, or have a government guarantee. How or if such a scheme could work in the commercial building sector, after Spencer on Byron, is a further issue that would need to be resolved.
9.20The Law Commission’s present view in respect of at least the residential sector of the building industry is therefore that a shift from joint and several liability to proportionate liability would have to be accompanied by the establishment of a compulsory building warranty scheme that would provide cover in the event that the builder failed to rectify defects. There would need to be a clear indication from Government that a compulsory warranty scheme would be established as an element of any changes to the liability regime that weaken the ability of homeowners to recover fully from defendants. It is likely that the two propositions of a change in liability regime and the introduction of a builders warranty scheme would need to be introduced as a package to ensure continuity of consumer protection. The package should also detail how the interests of commercial building owners would be addressed.