Chapter 3
The appropriate liability system for multiple defendants

Issues in loss allocation

3.25As the above discussion demonstrates, allocating loss among multiple wrongdoers is always complicated. Our Issues Paper discussed advantages and disadvantages of different options for apportioning liability and many of these points were also mentioned by submitters. In general terms, defendants have argued that it is unfair to hold them liable for the full loss when the loss was not caused by their actions alone. Plaintiffs have argued that it is unfair they should bear loss when a solvent wrongdoer remains available. There is no way to completely reconcile these two points of view.

3.26Not all issues in loss allocation raise such fundamental points of principle. Many submitters commented that under joint and several liability plaintiffs target parties that appear most likely to have the capacity to pay, even when there are other available parties. For example, local authorities are particularly concerned that they are likely to bear the whole of the uncollectable share in leaky building claims when one liable defendant is insolvent even if there are other solvent liable defendants. This is because contribution rights do not extend beyond the amount or proportion originally allocated to a particular party on judgment, and so one liable defendant cannot recover a share left unpaid from another liable co-defendant. This problem may perhaps be addressed through more moderate changes to our system of civil litigation and we discuss such possibilities in Chapter 6.

3.27Many submitters also pointed to issues that arise because of other features of New Zealand law, rather than because of the way loss is allocated. The central difference between proportionate and joint and several liability is limited to who bears the cost of losses allocated to an absent party. Our terms of reference do not extend to a more fundamental review of civil litigation in New Zealand. For example, no matter what system of loss allocation is adopted, there is always a possibility that the courts will impose a higher standard of care than defendants consider is reasonable in some or all classes of cases. Further, civil litigation always involves at least the risk that an innocent party is joined as a defendant, and elects to settle the claim rather than bear the financial and other costs of defending it. The extent of the plaintiff’s legal duty to protect their own position is also a distinct issue. While the stakes may be higher under joint and several liability (because a single liable defendant may end up facing the full loss), joint and several liability does not create the underlying causes of defendants’ complaints in these other areas, and this reference does not include these issues.