Contents

Chapter 2
Options for allocating liability among multiple defendants

Proportionate liability

2.12Proportionate liability is the name given to systems of allocating liability among multiple wrongdoers so that each wrongdoer is liable for no more than their relative share of fault. For proportionate liability to operate effectively, it is necessary for all potentially liable parties to be joined in the same proceedings. The court will determine whether each of the parties is liable, and then determine their relative liability. The plaintiff can then recover from each of the wrongdoers but only in accordance with their assessed shares.

2.13The major ramification of proportionate liability is that the plaintiff bears the risk of uncollectable shares. If a liable defendant becomes insolvent or otherwise unavailable after judgment, the plaintiff cannot look to the other liable defendants to pay the outstanding amount. Therefore, the relative liability of the wrongdoers becomes a matter of concern to the plaintiff, who will have an interest in ensuring that a greater proportion of the loss is allocated to wrongdoers who are likely to be able to satisfy the judgment.

2.14Proportionate liability presents a difficult conceptual and procedural problem: how to deal with parties who are not joined to the proceedings?29 This is known as the “empty chair” or “phantom defendant” problem. Empty chairs or phantom defendants can occur for different reasons and the effects on the parties and the proceeding may vary.30 One example might occur in a leaky building claim where the building company has been liquidated before the commencement of proceedings. In some jurisdictions, the court may take account of the liability of absent parties in determining the relative shares. In other jurisdictions the court will ignore the potential liability of absent parties. Both options present problems.

2.15Allowing the liability of an absent party to be taken into account is consistent with the principle behind proportionate liability. The difficultly with this option is that it risks creating highly complex litigation. Defendants will have a strong incentive to identify as many missing parties as possible and to argue that they all would have been liable if available. Without access to information known only to the absent party or parties, it may be difficult for the courts to accurately assess their relative liability. Of course, courts will adopt a robust approach to parties seeking to rely on highly speculative arguments or evidence about parties who cannot be shown to have a real connection with the matter in hand. There is nevertheless potential for fairness issues to arise for plaintiffs. Each dollar of liability allocated to an absent, possibly insolvent defendant may directly reduce the plaintiff’s recovery, with the plaintiff having little ability to challenge the scale of impact.

2.16Ignoring the liability of an absent party is also problematic and is a departure from the rationale for proportionate liability. Doing this at trial would create a difference in outcome depending on when a potentially liable party becomes unavailable. If a building company becomes insolvent and is liquidated before the plaintiff discovers the defects and brings a claim, the other parties will bear what would have been the absent party’s share. If the building company is liquidated after judgment, the plaintiff will be unable to recover the share allocated. However, there could be an incentive for plaintiffs to delay bringing claims for as long as possible to increase the likelihood that financially vulnerable parties become unavailable before the proceedings rather than after.

29For a detailed discussion of this issue, see N Marcus “Phantom Parties and Other Practical Problems with the Attempted Abolition of Joint and Several Liability” (2007) 60 Ark Law Rev 438.
30Possibilities include: where a wrongdoer is already insolvent or is approaching insolvency; the wrongdoer has died (but the wrongdoer’s estate may still be liable); the wrongdoer has physical, geographical or other barriers that affect their ability to participate; or a wrongdoer who could participate elects, either tactically or from ignorance, not to answer summons.