Proportionate Liability in Australia: The Devil in the Detail

Abstract

The introduction of proportionate liability for claims for purely economic loss and property damage arising out of tortious or contractual negligence, or misleading and deceptive conduct by corporations and others, will change the way litigation will be planned and conducted in Australia, as it has in those states in the United States where proportionate liability has been in place for some time. The reforms are of particular interest to auditors and other professional advisors and their clients. Defendants will no longer be subject to joint and several liability for a plaintiff's whole loss but will have their contributions to the plaintiff's loss assessed at the outset according to what the court considers is a just amount reflecting their comparative responsibility. The risk of an insolvent defendant shifts onto the plaintiff rather than onto other defendants. The provisions raise many practical questions. A key issue is the extent to which a court will be prepared to consider the responsibility of those who are not parties to the action. Another issue is the extent to which the provisions apply to those who are liable under statute as accessories to corporate breaches. The provisions are not just of interest to litigators: parties to a contract should also consider how the proportionate liability regime may be circumvented or regulated by contractual terms. Those to benefit most from the legislation are "deep-pocket" defendants who have previously shouldered the bulk of the liability where loss is caused by the fault of many.

Keywords: tort, contract, trade practices legislation, proportionate liability, joint and several liability, concurrent wrongdoers, insolvency, corporate breaches, misleading and deceptive conduct, statutory interpretation, litigation, onus of proof

JEL Classification: K10, K12, K13, K22, K41