Chapter 8
Liability of professional service providers and advisers

Closer economic relations with Australia

8.5In the Issues Paper, the Law Commission considered the impact of Closer Economic Relations with Australia (CER) on the development of the law in this area.127 The intent of CER, which came into force in 1982, was to bring about greater harmonisation of law and policy in New Zealand and Australia, particularly as it relates to commercial matters.

8.6Since CER the two countries’ economies have been much more integrated. Certain aspects of commercial activity have been fully harmonised, particularly in competition and corporation law. In recent years there has been an increased impetus to this work and, as the Issues Paper noted, in 2009 a trans-Tasman Options Framework was announced. Included under this Framework was business law, and in particular insolvency law, financial reporting policy, competition policy, personal property, securities law, intellectual property law and consumer policy.

8.7One of the specific challenges facing regulators is determining those sectors of the economy that are most appropriate for harmonisation. The basic test is the extent to which a trans-Tasman market exists. If there is no such market then there will be no compelling case for a harmonised legal framework.

8.8In our Issues Paper we asked the question of the importance of a harmonised legal liability regime. We noted that this would inevitably mean that New Zealand would adopt a proportionate liability regime given that in Australia, both the Commonwealth and the states made this shift in 2003.

8.9We received considerable feedback on this question. Submitters who represented organisations operating on both sides of the Tasman preferred New Zealand to adopt the proportionate system of liability. This was most evident in the area of professional services.128 Other submitters also wanted a proportionate liability system but did not make the case primarily on the basis of trans-Tasman considerations. Instead they focused on the increased costs that joint and several liability imposes on business providers. This was particularly evident amongst the submissions of those involved in the building industry.

8.10The New Zealand building industry is marked by its relatively small scale. Unlike Australia, the industry has not developed a comprehensive manufacturing approach to building, and a large amount of work is undertaken at the final site with high levels of customisation. As a result there is no significant trans-Tasman market for the supply of new residences. New Zealand suppliers are primarily concerned with the provision of homes in New Zealand, rather than for export markets. The industry is therefore essentially domestic. Thus trans-Tasman harmonisation arguments are not strong in relation to changing the liability regime to meet the needs of the building industry.

8.11As discussed above, the Law Commission has come to the view that the joint and several liability system with modifications is the most appropriate liability regime for New Zealand. In the absence of a trans-Tasman market, there are insufficient reasons, particularly within the building industry, to make the case for a general shift to a proportionate liability regime. However, the question arises as to whether other specific sectors would benefit from reform where CER is particularly relevant.

127Law Commission Review of Joint and Several Liability (NZLC IP32, 2012) [Issues Paper] at ch 6.
128For example, see submission of Beca Group on Issues Paper.