Proportionate liability for economic loss or damage to property where there are “concurrent wrongdoers”
You’re an architect, certifier or engineer – one of many contractors with input into a development. Following delivery of the project, the owner brings proceedings against the builder for breach of contract as a result of construction failures. The builder insists that the problem is, at least in part, your responsibility.
While you may be responsible for 5% of the loss, can you be held liable for the lot?
The short answer is: no. That is, more accurately: not if you ensure that you take steps necessary to spread the risk according to how and where it should properly rest.
Whereas it was once possible for a plaintiff claiming economic loss to recover 100% from a party causing only 1% (therefore pursuing the wrongdoer with ‘the deepest pockets’), the law now requires that liability for economic loss and property loss be apportioned according to the proven responsibility of each ‘concurrent wrongdoer’.
Over the past decade a body of law has developed defining and limiting liability of defendants where it is established that the loss or damage is actually caused by multiple wrongdoers.
The introduction of the concept of “proportionate liability” into legislation in a range of jurisdictions throughout Australia – including in Victoria, under Part IVAA of the Wrongs Act 1958 (Vic) and (where the loss or damage arises from misleading or deceptive conduct) Part VIA of the Competition and Consumer Act 2010 (Cth) – means that in certain circumstances those who are found by a court or tribunal to be liable (along with others) as multiple wrongdoers causing loss and damage – can limit their liability to a proportion which properly reflects their contribution to the loss and damage caused to the plaintiff.
The proportionate liability regime applies to claims for economic loss or damage to property in an action for damages (whether in tort, in contract, under statute or otherwise) “arising from failure to take reasonable care”: Wrongs Act s.24AF (1)(a).
Two concepts are central to determining proportionate liability.
1. “Apportionable Claim”
First requirement of the operation of the proportionate liability regime is the existence of an “apportionable claim” – being an action for damages arising from a failure to take reasonable care: Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd
An apportionable claim under the Wrongs Act must be one made in an action for damages – i.e. defined to include a claim for any form of monetary compensation: s. 24AE.
An apportionable claim under the Competition and Consumer Act applies to claims for damages under s. 82 for economic loss or damage to property caused by misleading and deceptive conduct: s.87CB(1) It goes further to provide provides for “a single apportionable claim” in proceedings in respect of the same loss or damage even if the claim for loss and damage is based on more than one cause of action – even where those are of a different kind (e.g., in contract as well as in misleading and deceptive conduct): s.87CB(2).
Claims for personal injury do not fall within the proportionate liability regime as “apportionable claims”: s. 24AG Wrongs Act; ss. 236 and 238 Competition and Consumer Act.
Section 24AI of the Wrongs Act provides that in any proceeding involving an apportionable claim
(a) liability of a defendant who is a concurrent wrongdoer in relation to that claim is limited to an amount reflecting the proportion of loss or damage claimed which the Court considers just and appropriate having regard to the extent of a defendant’s responsibility for the overall loss and damage;
(b) Judgment must not be given against that defendant for more that the amount considered properly attributable to that claim.
Section 24AI(3) requires that in apportioning responsibility between defendants in a proceeding the Court cannot take note of any alleged comparative responsibility of a person who is not a party to the proceeding unless it is not a party because it is dead or, if a corporation, the corporation is being wound up.
As a consequence, if a defendant wishes to have the proportionate liability regime applied so as to attribute liability either in whole or in part to some other person who is not a party to the proceedings, then that defendant must join that person to the proceeding by way of third party claim.
2. “Concurrent wrongdoer”
This is a person who, in relation to a claim, is one of two or more persons whose acts act or omission caused, “independently of each other or jointly”, the damage or loss that is the subject of the claim: (see e.g., Wrongs Act s. 24AH; Competition and Consumer Act s.87CB(3).
Critically, a defendant who is aware of a basis for apportioning liability to a person not already a party to the proceeding must
2.1 Notify the plaintiff of the identity of that wrongdoer and provide details of the basis for its joinder to the proceeding as a concurrent wrongdoer; and
2.2 Join that person to the proceeding as a concurrent wrongdoer.
As between those joined to a proceeding as concurrent wrongdoers, the court cannot give judgment against a defendant for more than the proportion of loss or damage that the Court considers appropriate having regard to a particular defendant’s proven responsibility for it: e.g., Competition and Consumer Act s. 87CD.
Significantly, it does not matter that the concurrent wrongdoer is insolvent, is being wound up, has ceased to exist or has died: Wrongs Act s. 24AH (2); Competition and Consumer Act it s.87CB (5).
Moreover, it is not necessary for all concurrent wrongdoers to be parties to the proceeding. A person may be joined pursuant to Part IVAA of the Wrongs Act or Part IVA of the Competition and Consumer Act to proceedings as a concurrent wrongdoer if any party to the proceeding alleges there to be a cause of action or claim for contribution and indemnity against the person to be joined in respect of the loss or damage.
3. Apportioning liability under the Australian Competition Law (ACL)
Sections 236 to 238 (inclusive) of the ACL provide for compensation in respect of loss or damage suffered “because of” a contravention of a relevant provision of the ACL such as s. 18 or (misleading and deceptive conduct in trade or commerce) or s.20 (unconscionable conduct such as to improperly take advantage of an opportunity to the detriment of another).
The threshold question is whether or not the alleged conduct materially contributes to the loss complained of. This involves examination of the conduct of all the parties.
Indeed, if it is determined that the plaintiff’s own conduct significantly contributed to its loss it may be open to the Court to reduce the overall award of damages or decline to make other orders under s.87 of the CCA – such as rescission (or treating the contract between the parties as not binding upon the plaintiff) or restitutionary orders restoring the plaintiff to the position that it was in prior to the impugned conduct.
S. 137B of the Competition Consumer Act 2010 (Cth) requires apportionment of liability according to each party’s role in and responsibility for the loss and damage suffered. The amount of loss and damage recoverable by the plaintiff under s. 236 (1) of the ACL is to be reduced to the extent to which the Court thinks “just and equitable having regard to the claimant’s share in responsibility for the loss and damage”.
In that case, the plaintiff would be met by a defendant’s cross-claim alleging the plaintiff’s contribution to the loss and damage of which it complains. Where, for example, the plaintiff becomes aware of the misleading or deceptive conduct but fails to act to protect its position it may be said to have acquiesced to it and instead affirmed the contract – along with the risk of loss.
4. Apportionment of liability for misleading and deceptive conduct/unconscionable conduct in respect of financial services
S. 12 CA and s. 12 DA of the Australian Securities and Investments Commission Act 2001 (Cth) (“ASIC Act”) prohibit unconscionable conduct and misleading and deceptive conduct, respectively, in connection with the supply or acquisition or possible supply or acquisition of financial services.
A person suffering loss or damage arising from breach of these provisions may recover “against any person involved in the contravention”: s.12GF (1)1.
Apart from injunctive orders preventing conduct in contravention of
1. However this can be limited state or territory professional standards’ law limits on liability: s.12GNA (1) ASIC Act
sections 12 CA or 12 DA and a range of “punitive” and “non-punitive” orders against those in breach, a person affected by the conduct may seek
“compensation” for the amount of loss or damage (s.12 GF (1)) or obtain “such other orders” as the Court considers will in the circumstances appropriately compensate the person for – “or…prevent or reduce” the loss or damage: s.12 GM (1).
5. Vicarious liability/ partnerships
This proportionate liability regime does alter the existing law relating to vicarious liability; prevent a person from being jointly and severally liable for conduct of that person’s agent; prevent a partner from being held liable for another partner’s conduct; prevents an award of exemplary or punitive damages being awarded against a single defendants; or affects several liability being imposed under other legislation: s.24AP
6. Take care in any terms of settlement
Plaintiffs must ensure that any concurrent wrongdoer brought into the proceeding by a defendant is also added the plaintiff as a defendant to the main claim, otherwise the plaintiff will not obtain the benefit of that newly joined party’s proportionate liability if it is established.
In the key case of Godfrey Spowers (Vic) Pty Ltd v. Lincolne Scott Australia Pty Ltd the Victorian Court of Appeal stated that where a defendant is found to be a concurrent wrongdoer in an apportionable claim under Part IVA A of the Wrongs Act then the extent of liability for which that party is found responsible will be the limit upon the amount of any judgment that can be made against that defendant.
This means that such a defendant is protected from any further claims of contribution and indemnity by other parties.
As a result of the Godfrey Spowers decision, a potential concurrent wrongdoer is able to settle a claim brought against him and yet go on to seek contribution and indemnity from other defendants who may be also liable for a plaintiff for the same loss.
However, any concurrent wrongdoer settling a claim must ensure that it obtains releases from the plaintiff for the other concurrent wrongdoers in order to preserve its right to seek contribution from those other wrongdoers (defendants) in respect of the same.
If you are a defendant to a proceeding in which the proportionate liability regime applies and are anticipating a settlement and release from the proceeding then you must ensure that in settling the claim it be made clear in the terms of settlement that the monies paid – or other form of consideration providing for your release – in settlement is paid in settlement of the entirety of the plaintiff’s claim and not just the proportionate amount – i.e., considered to be attributable to you.
Please feel free to contact us to address these issues in the event that they may apply to you.
Baird & McGregor Lawyers
9 Lydiard Street North
BALLARAT CENTRAL. Vic. 3350
T: 03 5331 3100
This communication is intended as a guide only, to provide commentary and general information. It should not be relied upon as legal advice. Baird & McGregor Lawyers excludes all liability in respect of your use of this bulletin. Professional legal advice must be sought in respect of particular transactions or on matters of interest arising from this bulletin.