Contents

Chapter 6
Supplementary contribution

Rationale for reform

6.6Under the current enforcement rules, a plaintiff may seek the full judgment sum from any defendant held liable, as soon as judgment has been sealed.70 Liable defendants’ claims against each other are addressed through contribution orders. Liable defendants who are well-resourced, or insured against liability, or both, have expressed the concern that in a case where one (or more) liable defendants are unavailable but two (or more) liable defendants are available, it is unfair that one liable defendant can be made to pay the full amount of the uncollectable share. Such a result is not required to achieve the goal of full compensation for the plaintiff, although it is a possible and relatively likely result from the operation of joint and several liability and contribution.

6.7This situation is best illustrated through an example:

The court finds that D1, D2, and D3 are jointly and severally liable for the plaintiff’s loss of $100,000. The court assesses contribution orders at the same time as giving judgment and determines the relative liability of the defendants as follows:

D1 – 20 per cent - able to recover up to $30,000 in contribution from D2 and up to $50,000 from D3.

D2 – 30 per cent - able to recover up to $20,000 in contribution from D1 and up to $50,000 from D3.

D3 – 50 per cent - able to recover up to $20,000 in contribution from D1 and up to $30,000 from D2.

The plaintiff is aware that D1 is insured up to $100,000. The plaintiff therefore seeks the full judgment sum from D1. D1 then seeks to recover from D3, who has assets but is uninsured, and D2. D1 successfully recovers from D3 but is unable to recover from D2, who has absconded.

Even though D1 was adjudged to have the smallest share of responsibility, it ends up bearing the same cost as D3 ($50,000), who had a much greater responsibility. D3 does not bear any of the unrecoverable share caused by the absence of D2. This is not fair result as between D1 and D3.

6.8As this example demonstrates, the current rules can have unfair results for some defendants, even when they are not required to bear the full loss. Other defendants liable for the same damage effectively share in a corresponding windfall. The plaintiff is theoretically unaffected, other than benefitting from the normal operation of joint and several liability. The defendant’s inability to seek recovery from others is not required to achieve the goal of full compensation for the plaintiff. The result occurs only because current rules governing contribution do not extend to this situation, despite it being highly analogous to the traditional operation of contribution.

6.9The question we addressed is whether it is possible to remove or mitigate the potential for injustice between defendants, but without introducing any prejudice to plaintiffs. The problem could be mitigated by, for example, requiring plaintiffs to initially sue defendants only up to the contribution levels awarded by a court; or by allowing a liable party to delay payment while they pursue contributions from others. Apart from being cumbersome and difficult to administer, such solutions would significantly affect at least the operation of joint and several liability, if not the underlying rule and principle. The frequent result would be increased difficulties and costs for plaintiffs and most likely fewer plaintiffs achieving full recovery of judgment sums owed to them.

6.10We recommend instead making an adjustment to the rules of contribution to address the potential unfairness between defendants. This is a modest reform that will benefit all solvent defendants, including well-resourced and insured defendants, and produce more equitable or proportionate distribution of uncollected shares, without involving any change in plaintiffs’ rights and freedom to enforce judgment. The basic rules of contribution, expressed in section 17 of the Law Reform Act 1936 and in equity, will remain unchanged and operate as now. The new rule we propose will only operate beyond the range of existing rules and in the limited case of a defendant having paid beyond their required contribution, due to an uncollected share.

70Unless the judgment allows time for payment, before enforcement may commence: High Court Rules, r 17.3(3).