The Law Commission was asked to review the joint and several liability rule, and to consider alternatives.
The joint and several liability rule determines the liability of multiple parties in civil proceedings where a person has suffered loss, and how responsibilities for the loss are allocated where there are several liable defendants. The application of the rule in New Zealand has been in focus in the building and construction sector as a result of the leaky buildings crisis.
The Law Commission carried out a broad review of the effects of the rule across all sectors. The review also considered possible alternatives.
The most commonly proposed alternative is a system of proportionate liability. Other alternatives combine some elements of joint and several liability with elements of proportionate liability, or involve introducing caps on total liability in some circumstances or for some defendants.
References to the review in the media
Scoop 'Review of joint and several liability' 10 October 2011
- Published 30 May 2012
The Government has asked the Law Commission to review the application of the joint and several liability rule in New Zealand.
Where two or more parties are liable for the same loss or damage to another party, because of separate wrongful acts, the joint and several liability rule holds both or all of the wrongdoers 100% liable for the loss caused. The party who suffered the loss can claim against one wrongdoer to recover the whole of the loss. That defendant can then seek contribution from any other wrongdoers.
The Law Commission will consider whether the rule should be retained, replaced or amended, either generally, or in relation to particular professions or industries, including the building and construction industry, auditors and accountants.
The Commission will consider the key advantages and disadvantages of different forms of liability, including:
- joint and several liability;
- proportionate liability;
- liability capped by statute; and
- contractual limitations on liability.
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Published 24 Jun 2014The Law Commission’s Report, Liability of Multiple Defendants (NZLC R132), was tabled in Parliament on 24 June 2014. The Report is available below as a PDF, or you can view the online version and download the eBook here.The Report recommends that joint and several liability remain the normal rule to govern the liability of multiple defendants for the same damage, but with several modifications to achieve better fairness in more extreme or unusual circumstances or for some classes of defendants.The modifications propose:
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- Courts should have power to grant relief to a truly minor defendant, who bears only a small responsibility or share of fault for the plaintiff’s loss, but who would otherwise be required to pay all or nearly all of the damages because they are the only remaining solvent defendant. Relief would be discretionary but subject to clearly defined criteria, including that if some relief is granted, the plaintiff will still receive an effective remedy.
- A Court may order supplementary contribution, so that the cost of paying an uncollected share caused by an absent defendant is distributed among all remaining solvent defendants, according to their shares of responsibility.
- Caps on liability (including a maximum liability of $300,000 in respect of any freestanding dwelling) should apply to local authority building consent authorities’ liability (for liability arising from future acts or omissions by an authority), to limit the effects from building consent authorities’ structural exposure to excessive or deep pocket liability.
The Government will consider the recommendations and respond to them in due course.
- A scheme or schemes to cap the liability of auditors who undertake the largest and most complex audits, to introduce similar conditions for New Zealand auditors and firms to those available to Australian audit firms, who also participate in the New Zealand market.
Obtain a Hard CopyAvailable online only.Published 21 Nov 2012
The Law Commission released an Issues Paper on Joint and Several Liability on 21 November 2012. The paper is available below in PDF and eBook form, or you can view the online version. The submissions deadline closed on Thursday 31 January 2013.
The Issues Paper describes how the rule of joint and several liability works, and identifies its key strengths and weaknesses. Its purpose is to raise issues and encourage submissions based on an informed view of the current law and the alternatives.
The Paper describes the leading options for the apportionment of liability, and examines the advantages and disadvantages with each option. At this stage, the Commission has no preference for any particular option (including the status quo).
The Law Commission previously reviewed this area of law in the 1990s. This Paper summarises the previous Reports, as well as examining the commentary on liability options in light of more recent developments such as the leaky buildings crises and financial collapse. The Paper compares the New Zealand approach to that in Australia, the United States, Canada and the United Kingdom. In particular, it examines how proportionate liability operates in Australia and the implications of CER for this review. Finally, the economic literature is summarised to provide an analysis of which options may produce more economically efficient outcomes.
- Published 8 Mar 2013
The full text of submissions received is available below, with submissions organised alphabetically by submitter. Some submitters have requested anonymity or confidentiality for aspects of submissions provided. These requests have been assessed against the grounds contained in s 9 of the Official Information Act, and information has been redacted or excluded in some instances.
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- Published 24 Jun 2014In their Report, Liability of Multiple Defendants (NZLC R132), the Law Commission recommends that the existing rule of “joint and several liability” be retained, with some modifications.Joint and several liability provides that where two or more people (defendants) are liable to a person they have harmed (claimant) for the same harm or loss, they are each individually liable for all the damages awarded for the loss.Please see below for the full media release.
- Published 21 Nov 2012
The Law Commission released an Issues Paper on its Review of Joint and Several Liability. Submissions closed on 31 January 2013.
In New Zealand, civil liability is governed by the principle of joint and several liability. This rule provides that where two or more people are liable for the same loss, then each defendant will be potentially liable for the whole of the loss.
The joint and several liability principle has been controversial in recent years, particularly as a result of the leaky homes crisis and financial crises.
The Issues Paper is available here.