The Law Commission has released an Issues Paper on the strengths and weaknesses of the rule of joint and several liability. The purpose of the Paper is to encourage submissions on whether the current rule is the best way to apportion liability and the risk of non-recovery where there are two or more defendants in a civil case. Sectors that would be particularly affected by any change in approach include the construction and professional services sectors, and other sectors affected by civil litigation which often involves more than one defendant.
Currently, the rule of joint and several liability applies whenever two or more defendants are held liable at civil law for a particular form of loss. Each defendant is separately liable for the full extent of the loss and the plaintiff can recover full compensation from any of the defendants who have caused that harm (up to the full amount of the loss).
The main alternative to the current rule is proportionate liability, where each co-defendant who is found liable for causing the particular loss is made liable only for the proportion of the overall loss attributable to them. Under this rule, the plaintiff may or may not be able to recover the full amount of loss. This is because the share allocated to an absent or insolvent defendant cannot be sought from other defendants unless the system provides for further re-allocation. Other alternatives considered in the Paper include hybrids of the two competing rules, contracting out, liability capping and warranty schemes.
The Commission previously reviewed this area in 1998. It decided at that time to retain the joint and several liability rule. This further review is intended to respond to developments since then such as the leaky homes crises and the recent financial crises that have particularly affected the finance company sector. It also provides an opportunity to discuss whether New Zealand should follow Australia and shift to proportionate liability, in line with the principles of the Trans-Tasman Closer Economic Relations Trade Agreement (CER).
Submissions on the Issues Paper are due by 31 January 2013. The Commission has expressed no preference for any particular option (including the status quo) and is interested in discussion of which rule or combination of measures will produce the most efficient and fair results. A copy of the Paper can be found here.
The Commission will undertake consultation and release its final report by June 2013. This will then inform Government consideration of whether any regulatory or legislative changes may be necessary.