Contents

Chapter 5
Relief for a minor defendant

Detail of proposed reform

5.10A provision to allow discretionary relief to a minor party must be simple, and avoid replacing one injustice with another. The objective should be to avoid unduly complicating existing litigation and to achieve results that balance the interests of plaintiffs as well as minor liable defendants.

5.11We have considered many options for how to provide relief to a minor liable defendant. Our recommendation is to provide an additional tool in statute to be applied by judges with regard to all the circumstances in a particular case. The judge’s determination will of a matter of fact, but involving a substantial level of discretion. This will provide flexibility and allow the application of the law to progressively develop based on decisions of the courts.

5.12A judge’s decision in such a case will inevitably involve an exercise of discretion. The discretion for relief should be limited, with discretion to depart from joint and several liability as little as is necessary to avoid or reduce injustice. We expect that exercise of the discretion would typically apply to defendants who are at or just above the threshold for being held liable.

5.13Joint and several liability will remain the norm in the great run of multiple defendant cases. The provision for relief of minor defendants should be a limited but important exception to the normal rules. It will deal with those cases where applying the normal rules to bring plaintiff recoveries as close as possible to the damages awarded would lead to a clear injustice or unfairness. If a minor party would otherwise be left to pay the balance of damages left unpaid by other, significantly more blameworthy defendants, despite their own minor responsibility and possibly marginal liability, it is appropriate that a court or tribunal be able to assess a fair result as between plaintiff and the minor defendant.

5.14Any provision for relief should contain considerable hurdles for a would-be minor defendant to overcome. Even where a minor defendant has limited or very limited responsibility for the relevant damage, they may still fail to gain relief because they do not satisfy all requirements.

5.15The minor defendant exception should be a general provision, not limited to particular sectors and with no group or category of defendant either automatically included or excluded. Minor defendants can be expected to fall at the very bottom end of liability and comparative responsibility – they should not qualify as minor defendants otherwise. However, there should be no qualifying or disqualifying percentage threshold, to avoid sterile arguments from counsel that a liable defendant’s share of responsibility falls “just below” or “just above” it. The size or proportion of a liable defendant’s responsibility is clearly highly relevant but is better considered in the context of the particular facts including where applicable, a comparison or contrast with the responsibility of others. And, even though a minor defendant is very likely to have the smallest share or responsibility, this should not be treated as a sufficient condition. Shares of responsibility will vary widely, and whether any defendant can be treated as a minor defendant must always be determined after assessing all relevant factors.

5.16Any relief provision should address the relatively frequent case where a party becomes jointly and severally liable for some damage after performing or failing to perform some inspection, verification, audit or other similar independent service in relation to a transaction or event involving other principal parties. This party is often referred to as a “gatekeeper” because of the way in which they can help prevent damage to others if they carry out their functions competently and refuse to support anything falling below required standards. Negligence by a gatekeeper can readily contribute to or cause damage to a prospective plaintiff and the gatekeeper is likely to be liable to the plaintiff, usually along with a main party or parties whose misconduct the gatekeeper failed to pick up.

5.17A gatekeeper’s share of responsibility based on simple negligence is likely to be considerably less than that of the principal actor.66 This raises the question of whether such gatekeepers ought to be at risk of joint and several liability. This is particularly where the gatekeeper is performing a socially useful function and should not be discouraged from doing so. An argument can be made that gatekeepers, as a class, should either be treated as minor defendants to restrict their liability, or have their liability restricted even further, for instance by restricting their liability to only their proportion of responsibility (proportionate liability).

5.18We do not recommend this approach. Gatekeepers are important but their roles are also very diverse. Gatekeeper responsibilities are often conferred or developed by detailed statutory schemes, and may be subject to different common law or statutory rules regarding their potential liability. The extent to which particular schemes need to be reinforced by gatekeeper liability is mainly an issue for particular schemes, as applied by the courts. It would not be helpful to propose that all gatekeepers, however defined, should be subject to a different liability regime from other defendants.

5.19In any case, we doubt that gatekeepers will necessarily or regularly incur a low enough share of responsibility to qualify as minor defendants. Auditors, building consent authorities, valuers and solicitors may have a lesser share of responsibility in an impugned transaction than a principal actor. However, the gatekeeper’s actions may be a strong “but for” cause to the extent that it is difficult to say their responsibility is minor or limited. The relief provision should therefore require that each case must be examined on its merits, with no presumption that certain behaviours or responsibilities are likely to fall in the “minor” range. As discussed above, bare percentages of responsibility will not be enough. A gatekeeper may be allocated a relatively low share of responsibility, for example because there are several “main” defendants to share responsibility around. However, it is still necessary to determine whether the gatekeeper’s responsibility can be characterised as minor, taking into account all relevant factors. Such factors should include but not be limited to their responsibilities and level of responsibility, the nature of their negligence or other fault and the consequences of their actions.

5.20Some gatekeepers may act because they are under a statutory obligation to do so. If they incur liability as a result of acting, there should again be no presumption that their responsibility is less only because it was compelled. After all the relevant statute will have required reasonable and lawful action. If any general allowance is to be made for performing a statutory duty, it would be better for this to be done through the enabling statute imposing those obligations or through the courts settling the primary issue of whether the party should be held liable. The fact that a particular defendant was obliged to act in a given set of circumstance may of course be a factor for a court to weigh along with all others when deciding whether the liable defendant is a minor defendant or not.

5.21We have considered whether or how the nature of the relationship between plaintiff and minor defendant should affect the availability of relief. In at least one situation we consider it must be determinative. If a valid contract exists between the parties, it will be necessary in all cases to establish whether the parties have either expressly or impliedly agreed to exclude the possibility of minor defendant relief. If so, then the parties’ bargain should apply. We see no reason to prevent parties agreeing to contract out of the minor defendant provisions, and there is similarly no case for a court to re-examine any decision of the parties on this matter. There is no consumer protection issue in this situation. It is unlikely that a consumer will be seeking minor defendant status or relief, especially if the counterparty is a commercial party.

5.22If the parties have a contract but it is silent on the minor defendant exception, it will still be necessary for the court to consider the terms of the contract to determine whether or how they might impact on the availability of relief. Even if a contract makes no mention of minor defendants or does not deal with limitations of liability at all, it would still be open to the court to consider the nature of the obligations between the parties, and whether they are consistent with one of them being relieved from some liability as a minor defendant.

5.23The relief provision for a minor defendant should not be a hybrid in the sense discussed in Chapter 4. No element of proportionate liability should be involved. The minor defendant remains subject to joint and several liability. Rather, this provision is a judicial discretion to alleviate the effect of joint and several liability to a level that the court holds is just in all the circumstances, and to plaintiff and defendant. We do not recommend that the minor defendant’s liability be limited to their proportionate share of responsibility, because on too many occasions this would be unfair to the plaintiff and prevent the plaintiff receiving an effective recovery. The court should be allowed to set a ceiling for recovery from a minor defendant that achieves fairness between minor defendant and plaintiff. This requires that the plaintiff will still recover a much more substantial portion of their loss than the minor defendant’s share of responsibility, but the minor defendant is relieved from having to pay 100 per cent of the total award. We propose that a court or tribunal satisfy itself, when determining the level of any relief, that the result achieves reasonable fairness as between plaintiff and minor defendant.

5.24We consider limits must be put on any minor defendant relief for the protection of plaintiffs. We would not support any relief to a minor defendant if the result would be that the plaintiff would not have an effective remedy. The court or tribunal should be required to verify this point before determining any application. Clearly, “an effective remedy” does not mean the plaintiff must recover in full; there are many reasons why a plaintiff may not recover in full despite a sealed judgment in their favour. To provide some reasonable relief to a minor defendant it may be necessary in some cases to reduce the plaintiff’s recovery by some proportion. Subject to the important qualification in the next paragraph, such a reduction should be mainly for the courts to assess on the circumstances before them.

5.25Setting some “floor” for the plaintiff’s recovery will help to ensure an effective remedy. We recommend that no relief to a minor defendant should be allowed to reduce the plaintiff’s recovery below 50 per cent of the judgment damages, because it would be difficult or impossible to categorise any lower amount as an effective remedy. We stress that this floor is only a minimum to protect the plaintiff – it should not be treated as the target by minor defendants. Depending on what the plaintiff has managed to recover from other liable defendants, there should be situations where the plaintiff’s remedy can remain well above this floor, but with some substantial relief for the minor defendant.

5.26We expect that successful applications for relief as a minor defendant will be infrequent. We envisage that applications will only be favourably considered when a considerable portion of damages is still outstanding, and the minor defendant (or minor defendants if the court approves more than one), is the only viable judgment debtor. The minor defendant route should not normally be available if the plaintiff is making demand, but the minor defendant would rather not pay before other debtors who are still available. The supplementary contribution provision that we recommend in Chapter 6 may be appropriate if a minor defendant can and does pay some part of an insolvent party’s uncollected share and wishes to recover proportionately from other solvent parties.

Procedure

5.27Applications and other steps relating to the draft provision should be dealt with in accordance with existing court rules. The necessary procedural steps should be simple, and kept consistent with normal court rules for analogous situations.67

5.28We anticipate that an application to be considered a minor defendant, or a minor defendant if liable, would be brought by the relevant party during the trial and would be determined in the main judgment (if not already determined), or whenever applications for contribution are dealt with. If it is clear by the end of trial that a potential minor defendant will be “last man standing” and will inevitably be responsible for uncollected shares as well as their own responsibility, then the court might determine the relief issue at the end of the trial as well. However, in many or most cases it is unlikely to be clear until sometime later whether a minor defendant is exposed to uncollected shares, for how much, and whether they face that prospect alone or with others. A minor defendant seeking relief should therefore make an application, supported by affidavit evidence under normal rules, if and when they wish to seek relief as a minor defendant. The plaintiff will have the main interest in opposing such an application, but remaining defendants who can be located should also be served.

5.29If for some reason the party concerned did not apply to be declared a minor defendant at the trial, then they should not be prevented from applying later, but the application should be subject to the court granting leave. The best evidence of a party’s responsibility to the plaintiff is likely to be available at trial, and a party applying later could reasonably expect to have to justify the delay and perhaps bear some costs consequences.

5.30Finality of proceedings is important, which means the ability to apply for relief should not be open-ended. The relative ease or difficulty in collecting judgment debts varies considerably, and it may take some time for a minor defendant to have confirmed that they will have to pay uncollected portions. Nevertheless, we think it is reasonable that any application for relief be made within 12 months of the date of judgment in the matter, with a court or tribunal able to enlarge time, where the interests of justice require.

5.31A provision to allow relief for minor defendants must be prospective in the usual way. This could be in respect of acts or omissions that occur after the date any legislation comes into force, or from a date six or 12 months after that. The choice of “acts or omissions” not “causes of action” is important. It avoids difficulties with latent defect cases, where the relevant conduct might occur before new provisions come into force but the cause of action is delayed until discovery of damage, potentially well after new provisions apply.

Draft provisionTop

5.32Draft wording for a proposed provision is included in Appendix A.

Recommendations

R3 While joint and several liability remains the rule, a court or tribunal should have discretion to make orders mitigating the full application of joint and several liability in respect of a defendant who has only a minor and limited responsibility for the plaintiff’s loss, if the court or tribunal is satisfied that requiring the minor defendant to pay the full or part of an amount unpaid by another defendant would be unduly harsh and unjust.

R4 The relief for a minor defendant should be provided for in a new s 17A of the Law Reform Act 1936 or another appropriate statute, if that Act is consolidated.

R5 The new provision should include terms to ensure that:
(1) A minor defendant means a party held liable in a civil action but which or whom the court or tribunal determines bears only a minor and limited responsibility for the plaintiff’s loss.
(2) A liable party is not a minor defendant only because:
  • the party’s share of responsibility falls below a particular percentage or proportion, or is less than any other party’s share of responsibility, or both;
  • the party’s involvement in relevant events was largely or completely restricted to providing verification, certification or other independent services required to facilitate the events or elements of them; or
  • the party was under a statutory obligation to provide relevant services or take relevant actions.
(3) The minor defendant may apply to the court or tribunal to be relieved from the full effect of their joint and several liability to the plaintiff, except that an application made more than 12 months after the relevant judgment was sealed is subject to leave to apply being granted.
(4) In granting relief, the court or tribunal must be satisfied that:
  • the minor defendant, together with any other minor defendant approved by the court, is or are the only parties available to pay the judgment sum or any remaining unpaid portion of the judgment sum;
  • requiring the minor defendant to pay all or some part of the unpaid amount would be unduly harsh and unjust; and
  • the circumstances provide justification for some relief from joint and several liability.
(5) When granting any relief under this section the court or tribunal must ensure that:
  • the plaintiff will still receive an effective remedy;
  • the result achieves reasonable fairness between plaintiff and minor defendant; and
  • the relief does not reduce the plaintiff’s potential recovery from all liable parties to less than half the damages they were awarded in respect of the relevant damage.
66If a gatekeeper engaged in reckless conduct or knowingly participated in, for instance, a fraud, then their share of responsibility will likely be much higher and the question of minor defendant or not will be unlikely to arise.
67It may be that the Rules Committee might prefer to include a reference to the procedure for seeking relief as a minor defendant in the High Court Rules, where convenient. Or the Rules Committee may prefer to make a short rule to expressly take account of the proposed provision and clarify how it will be treated and applied within the High Court Rules. In our view the emphasis should be on conforming to existing procedures, and avoiding creating new processes. We expect that for most issues adapting rules for interlocutory procedures should achieve the desired result.