Contents

Chapter 3
The appropriate liability system for multiple defendants

The appropriate liability system

3.33The Law Commission has assessed the relative merits of the two broad liability systems of joint and several liability and proportionate liability and recommends the retention of the joint and several liability system. We do, however, endorse some modifications to the joint and several liability regime. In Chapter 5 we discuss giving the court power to make orders that would mitigate the full application of joint and several liability to liable defendants who have only a minor responsibility for a loss relative to other liable defendants. In Chapter 6 we recommend an expansion of the rules of contribution, to enable the cost of uncollected shares to be more fairly distributed among available and solvent liable defendants. We also discuss some specific measures for the building and construction sector and auditors in the professional services sector in Chapters 7 and 8.

3.34The principal reason for the recommendation is that joint and several liability provides the best assurance that plaintiffs will be compensated for their loss. Provided there is a present and solvent liable defendant who has caused the loss, the plaintiff will receive full compensation irrespective of the proportion of the loss actually caused by that present and solvent liable defendant. The proportionate system, which limits the liability of a liable defendant to the proportion of the loss they have been judged responsible for, means that if liable defendants are absent or insolvent, it is the blameless plaintiff who will be out of pocket. It is imperative to note that proportionate liability is not a case of the plaintiff sharing some of the risk that there may be insolvent liable defendants. Under straight proportionate liability, that risk is allocated purely to the plaintiff.55

3.35Many have argued that the policy issue comes down to a choice between an innocent plaintiff paying for an absent liable defendant, or an innocent liable defendant paying more than their fair share of a loss. However, this is an incorrect summary of the issue and one which is too commonly made. This statement misunderstands divisible and indivisible loss.

3.36Joint and several liability only arises where there is indivisible loss. This is where each liable defendant has caused or contributed to a single indivisible loss suffered by the plaintiff. The unfairness of the proportionate system of liability is that the risk of the uncollected share will be carried by a party, the plaintiff, who has not actually caused and is not in any sense responsible for the loss. Our conclusion is that the asserted “unfairness” of joint and several liability to some defendants is, at best, overstated. No defendant is called upon to meet up to 100 per cent of the plaintiff’s damages unless they have first been found to have caused the plaintiff’s loss in some material way, and meet all other legal requirements to be held liable. In simple terms it is just for such a defendant to be called upon to make good the harm suffered by the plaintiff.56

3.37Thus the Commission is of the view that fundamentally the policy issue comes down to a choice between a blameless plaintiff taking on the risk of an absent defendant, or a wrongdoer co-defendant taking on that risk. On this issue, the Commission comes down in favour of the innocent party. Unless there is some substantial reason of public policy that demands some adjustment, parties who have actually caused the harm are the parties who should bear the risk.

3.38As discussed above, the appeal of proportionate liability rests on supporting industry or commerce by promoting economic efficiency. When there is no sound evidence that it would be more efficient within the wider economy for our country as a whole to move this risk to the innocent party via a proportionate liability regime, the Commission finds that there can be no justification to depart from our current rule of joint and several liability.

Recommendation

R1 Where two or more civil defendants are held liable to a plaintiff for the same, indivisible damage, the basis for determining liability should continue to be that of joint and several liability.

55It is possible to build a system of proportionate liability with reallocation, where some or all of any uncollected share is eventually reallocated amongst available defendants (potentially including the plaintiff if they are judged to be contributorily negligent). Such a system could, in theory, decide what portion of the uncollected share risk should be borne by a blameless plaintiff, a negligent plaintiff and defendants. However, the closer such a system moved towards full reallocation, the nearer end results would be to simple joint and several liability, but by an administratively more complex and costly process. On the other hand, a system that allowed only a fraction of the uncollected share to fall on a blameless plaintiff could still be seen as achieving the worst of all worlds: the plaintiff is at risk of not recovering some necessarily arbitrary portion of their loss, defendants would still have to meet liability disproportionate to their responsibility, and all parties would likely bear additional costs, including extra court costs and time to dispose of claims.
56We acknowledge however that this justice may appear strained when the relevant defendant bears only a very small share of responsibility for the loss. We therefore recommend in ch 5 that a “minor defendant” exception be provided, to avoid or mitigate apparent unfairness in what should be a small number of cases.