In response to the insurance crisis of 2002, each Australian jurisdiction introduced its own proportionate liability legislation; however, inconsistencies between the jurisdictions' legislation and the lack of clarity of some key provisions have been the subject of criticism and uncertainty. These issues led the Standing Council on Law and Justice (formerly the Standing Committee of Attorneys-General) to undertake an extensive review of the regime.
As a result of this review, the Standing Committee released its draft Model Proportionate Liability provisions on 16 September 2011 (see our article, Are you paying your fair share? Proposed changes to proportionate liability in Australia). Following public consultation on the draft provisions, the Standing Council released its revised draft model legislation in October 2013. Each state and territory will need to introduce the model legislation into their own jurisdiction to achieve consistency and clarify key provisions.
Proportionate liability involves a defendant only compensating a claimant for the proportion of damage they are responsible for. This protects marginally liable defendants with "deep pockets", such as those with insurance, from being liable for the whole of the loss suffered. Proportionate liability effectively shifts the risk of recovery from other defendants—who may be unavailable, insolvent or poor—from the defendant to the claimant.
What is an apportionable claim?
Under the draft legislation, an apportionable claim is a claim for economic loss or damage to property and it is an action for damages:
- where a failure to take reasonable care is an element of the claimant's action, or
- where there are statutory misleading or deceptive conduct claims.
Proportionate liability is not intended to apply to claims based on breach of strict or absolute contractual obligations.
The following claims are excluded from the proportionate liability regime:
- claims under prescribed legislation, as tailored by each jurisdiction
- consumer claims, and
- exemplary/punitive damages
- intentional or fraudulent conduct
- liability excluded by other legislation, and
- vicarious liability and the liability of a partner.
Who is a concurrent wrongdoer?
A concurrent wrongdoer is defined as one of two or more persons:
- whose conduct caused the same or "substantially or materially similar" loss or damage, and
- who, if sued, would have been liable for the loss or damage.
The draft legislation is intended to incorporate the High Court's reasoning in Hunt & Hunt, meaning that people may be concurrent wrongdoers even if they cause the loss or damage in different ways (see our article, High Court gives guidance on proportionate liability).
Requirement of notification
The draft legislation requires the defendant to:
- provide the claimant with information about the identity, location and circumstances giving rise to their belief that any other person is a possible concurrent wrongdoer, and
- notify the other possible concurrent wrongdoers and the court.
If the defendant alleges that there is another concurrent wrongdoer in a proceeding, the defendant bears the onus of establishing a prima facie case against them.
After receiving this notice, and if there was a reasonable opportunity to include the person as a defendant in the earlier proceedings, the claimant will only be able to bring subsequent proceedings against that concurrent wrongdoer with the leave of the court
Further, in those subsequent proceedings, the first judgment acts as:
- a cap of the claimant's damages
- the minimum proportionate liability of each concurrent wrongdoer who was a party to the first proceeding, and
- the minimum contributory negligence of the claimant.
When apportioning liability, the court:
- must consider the comparative responsibility of any concurrent wrongdoer joined to the proceedings
- may consider the comparative responsibility of concurrent wrongdoers who are not joined, and
- is to consider what is "just and equitable" having regard to the defendant's responsibility for the loss or damage.
To encourage early settlements, the draft provisions prevent a concurrent wrongdoer who settles with a claimant from being exposed to contribution claims from other concurrent wrongdoers.
Contracting out is prohibited under the draft legislation. However, there is an exception for agreements for one concurrent wrongdoer to contribute to the damages recoverable from, or to indemnify, another concurrent wrongdoer.
The draft legislation gives individual jurisdictions the option to exclude the proportionate liability regime from arbitral tribunals or other entities capable of making a binding determination, unless they are a court or tribunal.
Insurers need to monitor the development of this legislation given its potential impact on their liability, and ability to recover from other parties. Further, as the legislation may override any contractual risk allocation, insurers will need to ensure their risk assessment position reflects the regime that is ultimately passed.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.