Law Commission sticks with joint and several liability
Law Commission sticks with joint and several liability
The Law Commission is strongly of the view that New Zealand should retain joint and several liability but has suggested some changes to make the system fairer for both sides.
The options
The
big question for the Law Commission was whether to retain
joint and several liability or recommend that New Zealand
move to a system of proportionate liability.
Joint and
several liability
...works from the principle that
all parties who contributed to a loss are each liable for
the full amount of the damages awarded. The effect of this
is that, if one party is insolvent or for any other reason
unavailable to pay, the others may have to front up with the
difference in order that the plaintiff can recover in full.
Proportionate liability
...is used in a number
of jurisdictions, including Australia. Under this rule,
each liable defendant is apportioned a share of the total
liability based on the court's assessment of their share of
the responsibility or fault. No-one can be made to pay more
than their share, meaning that the plaintiff carries the
risk that there may be a missing liable
party.
Recommendations
The Commission
found that joint and several liability was "clearly the
preferable system" but has recommended a number of
adjustments to deliver fairer outcomes. Key among these
are:
• giving the courts power to make orders that would
mitigate the full application of joint and several liability
where this would create a "clear injustice" to defendants
who have only a minor responsibility. In such situations,
the court would be expected to ensure that the plaintiff
still receives an "effective remedy"
•
• changing
the rules of contribution so that the costs of an
uncollected share can be spread proportionately among the
remaining solvent and liable defendants (currently a
defendant which has been required to pay losses in excess of
its share can chase up the others but they cannot be
required to pay more than their allocated
contribution)
•
• introducing liability caps for
building consent authorities for new liabilities after the
leaky home claims have been dealt
with
•
• introducing to New Zealand a version of
the capped liability schemes for auditors applying in almost
all of the Australian States. It is anticipated that the
capped scheme would apply only where a very large audit firm
was exposed to a catastrophic loss.
•
Where
now?
The Government has undertaken to respond to
the recommendations early next
year.
ends