Chapter 3

Liability regime for multiple defendants

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.

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Partial reform options

R2 A hybrid rule, incorporating some elements of proportionality into joint and several liability, should not be introduced into the liability regime for multiple defendants.

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Relief for a minor defendant

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.

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Supplementary contribution

R6 The rules of contribution should be extended to allow a defendant required to pay all or part of a share of liability left unpaid by another defendant, to apply for supplementary contribution from other solvent defendants or judgment debtors. A court or tribunal ordering supplementary contribution should do so by ordering contributions proportionate to the shares of responsibility of each solvent party, including the applicant.

R7 The additional rule should be modelled on proposed section 17 of a draft Civil Liability and Contribution Bill appended to the Law Commission’s Report, Apportionment of Civil Liability, and added, with all necessary modifications, to the existing provisions governing contribution in section 17 of the Law Reform Act 1936.

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The building sector

R8 Participants in the building sector should remain subject to the normal application of joint and several liability.

R9 The liability of building consent authorities held liable in tort for acts and omissions relating to building consents and all related work should be capped.
  • The cap should be set initially at: $300,000 for a single dwelling; $150,000 per unit in a multi-unit development; and $3 million per multi-unit development, with such rates reviewed over time against appropriate indices to ensure each cap remains fair to potential plaintiffs and authorities.
  • Any cap should apply only to new claims arising from acts or omissions that occur after 23 July 2016 (which is the date the Financial Assistance Package is due to close to new claims).
R10 The Building Act 2004 should be amended to clarify the responsibility and potential liability of building consent authorities for commercial building consents by enacting a new section, section 52Z, which defines the extent and limits of building consent authority liability for commercial consents, in similar form to sections 52I and 52L (which deal with responsibilities for simple and low risk residential consents, respectively).

​R11 The Ministry of Business, Innovation and Employment should continue to develop, for implementation if proved feasible, a comprehensive residential building guarantee scheme with options suitable for both standalone and multi-unit dwellings.

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Liability of professional service providers and advisers

R12 Professional service providers and advisers should remain subject to the normal application of joint and several liability.

R13 Auditors and audit firms conducting large or complex audits in New Zealand, including audits of listed companies, other issuers or Financial Market Conduct reporting entities, should be able to participate in a capped liability scheme covering their audit work, provided the scheme is approved by the Financial Markets Authority (FMA) and individuals and firms qualify for and comply with the scheme.

R14 The New Zealand Institute of Chartered Accountants (NZICA), its successor and/or other accredited professional bodies should be invited to develop an initial scheme to be submitted to the FMA or other suitable statutory supervisor, which may approve the scheme.

R15 The cap for each audit firm should be based on revenue, with a $2.5 million cap where income from large or complex audits is under $10 million per annum, a $25 million cap where income from large or complex audits is between $10 and $20 million per annum and an $80 million cap where income from large or complex audits is over $20 million per annum.

R16 The cap will apply to all claims from contracting parties or third party investors, whether founded in contract, equity, tort, or otherwise but will not apply to liability arising from fraud, dishonesty or other intentional wrongdoing.

R17 Approval of a scheme will be for a maximum of five years, with the professional body able to make an application for a new or renewed scheme at that time.