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More players but missing the target: the effect of proportionate liability legislation

Cover Story

Cite as: (2005) 79(4) LIJ, p. 28

Proportionate liability amendments to the TPA and the Wrongs Act have considerably changed the way claims are to be brought and defended. However, they have also resulted in uncertainty over how litigation should be conducted.

By Matthew Blycha

On 26 July 2004, Part VIA of the Trade Practices Act 1974 (Cth) (TPA) came into operation. As a result, claims of misleading and deceptive conduct are now apportionable. Part VIA also allows a court, when faced with a claim for breach of s52 of the TPA, to consider a plaintiff’s contributory negligence when considering granting an award of damages under s82 of the TPA.

On 1 January 2004 Part IVAA of the Wrongs Act 1958 (Vic) became operational. This part introduces proportionate liability to claims for economic loss or damage to property arising from the failure to use reasonable care. Part IVAA also applies to claims for damages for breach of s9 of the Fair Trading Act 1999 (Vic) (FTA), the Victorian equivalent of s52 of the TPA.

These changes dramatically affect how civil litigation is conducted in Victoria. This article reviews these changes and the practical effects they are likely to have. It also considers how the interaction between the two Acts may cause uncertainty, particularly in relation to the conduct of litigation involving numerous parties with a variety of claims.

Joint and several v proportionate liability

Before addressing the substantive changes, it is first necessary to understand the difference between joint and several liability and liability that is apportioned. The common law position in relation to claims of negligence was a joint and several one. This meant that if a person was a cause of someone’s loss, then that person could be liable for making good the entire loss, notwithstanding that others may have also been to blame for causing the loss.

Claims for damages for contravention of s52 of the TPA had also been interpreted by the High Court as being joint and several as the TPA did not specify that contributory negligence or another party’s actions could be considered as a basis for a reduction of a defendant’s liability. In I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd it was said:

“There is nothing ...in the terms in which remedies for contravention are provided, that warrants injecting into the inquiry some a priori assumption about distributing responsibility for loss or damage suffered between those who have contravened the Act and those who have not”.[1]

The joint and several principle saw a “deep pockets” approach taken to litigation where often claims were only brought against insured persons or those seen as having sufficient funds to pay, notwithstanding that the actual level of responsibility of the party with the deep pockets may have been minor.

Apportionable liability is a system whereby if more than one person has caused a loss, each person has their liability for that loss limited to the proportion of the loss they actually caused.[2] In practical terms, the whole of a plaintiff’s loss is calculated and a percentage of that figure is awarded against a defendant. The legislative changes bring an apportioned approach to all claims for damages for s52 TPA breaches and to all other claims, in tort or contract, arising from a failure to take reasonable care. A significant exclusion to the proportionate liability regimes are claims for personal injury.

TPA provisions

Part VIA of the TPA was introduced through the Corporate Law Economic Reform Program (Audit Reform & Corporate Disclosure) Act 2004 (CLERP 9), and applies to causes of action arising after 26 July 2004. CLERP 9 also introduced similar provisions regarding proportionate liability into the Australian Securities & Investments Commission Act 2001 (s12GF(1)) and the Corporations Act 2001 (s1041I). These provisions refer to misleading and deceptive statements regarding financial products and financial services.

Operative provisions
The new operative provisions set out how apportionable claims are to be determined and the amendments can be seen in ss87CB to 87CI and the addition of sub-s1B into s82.

An apportionable claim can be simply understood as one where there are concurrent wrongdoers. A concurrent wrongdoer is defined in s87CB(3) as “one of two or more persons whose acts or omissions (or act or omission) caused, independently of each other or jointly, the damage or loss subject of the claim”.

Section 87CD is the key provision as it states how apportionment will operate. It says:

“(a)

the liability of a defendant who is a concurrent wrongdoer in relation to that claim is limited to an amount reflecting that proportion of the damage or loss claimed that the court considers just having regard to the extent of the defendant’s responsibility for the damage or loss; and

(b)

the court may give judgment against the defendant for not more than that amount”.

The effect of the section means that as defendants are now only liable for the loss they actually cause, contributory negligence allegations can be made against a plaintiff. The section also puts an end to claims for contribution between defendants as each defendant is only liable for their share. Section 87CF specifically states contribution is not recoverable between defendants. Consequently, the position held by the High Court in I & L Securities has been reversed by the legislative change.

It should be noted that a reference to a “defendant” includes any person joined as defendant or other party in the proceeding (except as plaintiff). Consequently, third parties and cross defendants can also obtain an apportionment of liability.[3]

Another important change is that a defendant must notify a plaintiff of any and all concurrent wrongdoers of whom they are aware: s87CE(1). This notification must:

  • be in writing;
  • state the identity of the other person;
  • state the circumstances which make the other person(s) a concurrent wrongdoer; and
  • be done “as soon as reasonably practicable”.

If a plaintiff unnecessarily incurs cost because of being unaware of another concurrent wrongdoer, the court may order that the defendant pay all or any of those costs, on an indemnity basis or otherwise: s87CE(2). This clearly places a burden on a defendant to undertake investigations regarding the liability issues in a particular claim at an early stage.

The rationale for this provision can be seen when viewed next to s87CD(3)(b) which says that in apportioning liability between defendants in a proceeding, a court may have regard to the comparative responsibility of any concurrent wrongdoer who is not a party to the proceeding. Therefore, if a defendant notifies a plaintiff of a potential concurrent wrongdoer and the plaintiff does not seek to join that wrongdoer to the proceeding, the plaintiff risks a shortfall in obtaining a full recovery should their claim be successful.

Excluded concurrent wrongdoers
Certain parties do not obtain the benefit of an exercise of apportionment under the Part VIA changes. Where a concurrent wrongdoer has intended to cause or fraudulently causes the economic loss or damage, their liability remains joint and several: s87CC. The obvious effect of this provision is that, if at all possible, plaintiffs will draft their pleadings so as to allege a wilfulness on the part of a defendant in order to maximise their chance of obtaining a full recovery from that defendant alone.

The amendments do not affect vicarious liability and consequently employers can still be held liable for their employees, principals can continue to be held liable for the actions of their agents and a partner is still able to be held severally liable with another partner for that proportion of an apportionable claim for which the other partner is liable: s87CI.

Wrongs Act provisions

The amendments to the Wrongs Act became effective for proceedings issued after 1 January 2004, some seven months prior to the TPA amendments. The Wrongs Act provisions are largely, but not entirely, in line with the TPA amendments and apply to both claims for damages for economic loss or property damage (in contract, tort or otherwise) arising from a failure to take reasonable care and claims for damages for contravention of s9 of the FTA. It should be noted that “a failure to take reasonable care” is, arguably, a phrase that covers a broader range of conduct than that which may be considered “negligent” conduct.

Operative provisions
The relevant sections are ss24AE-24AS and a “concurrent wrongdoer” is defined in the same terms as the TPA. It is also stated that in relation to apportionable claims, the liability of a defendant who is a concurrent wrongdoer is limited to the amount of loss or damage claimed that the court considers just, having regard to the extent of the defendant’s responsibility for the loss or damage: s24AI(1)(a).

Similarly, each of the amendments contains a provision that states that “it does not matter that a concurrent wrongdoer is insolvent, is being wound up, has ceased to exist or has died”: s87CB(5) TPA and s24AH(2) Wrongs Act. However, a point of difference between the two Acts is that s24AI of the Wrongs Act states that the court “must not have regard to the comparative responsibility of any person who is not a party to the proceeding, unless the person is not a party because the person is dead or wound up”.

In addition, there are no provisions within the Wrongs Act that require a defendant to notify a plaintiff of concurrent wrongdoers of whom they are aware. This divergence has significant practical effect.

As litigation practitioners will know, while claims of negligence and claims of breaches of s52 of the TPA are separate causes of action, the two are often pleaded in parallel. In many instances, such as when a professional provides advice, the difference between what is misleading and deceptive and what is negligent cannot be readily determined. The consequence of this difference means that when both causes of action are alleged, in respect of the TPA claim the onus is on the plaintiff to ensure all relevant parties are joined to a proceeding (or they risk a shortfall). In respect of the negligence claim, an onus is placed on defendants to ensure as many potential concurrent wrongdoers are joined to the proceeding as possible.

If a defendant does not seek to join, as co-defendant or third party, another concurrent wrongdoer in respect of the negligence claim, they risk a joint and several approach being taken to the assessment of their liability. This is because the court cannot take into consideration the liability of other parties not joined to the proceeding unless they are dead, wound up, insolvent or have ceased to exist. This places both plaintiffs and defendants in a game of bluff as to who will take the step to join further parties to the proceeding and therefore who will face the cost consequences of that joinder if it proves unsuccessful.

While the inconsistency apparent between the two Acts has not been fully explored, the current situation is far from satisfactory. It is worth noting that at present only Victoria and New South Wales have in effect legislation that deals with proportionate liability for negligence claims. In December 2004, Part IV of the Civil Liability Act 2002 (NSW) became operational. Part IV implements proportionate liability for negligence claims in New South Wales, although unlike the Wrongs Act changes, the NSW amendments are in line with the TPA. As a result, notwithstanding that Part IV became operational some months after the TPA provisions, the procedural difficulties that will likely arise in Victoria are less likely to cause great concern in New South Wales. While all the other states have indicated an intention to implement similar legislation, it may be that Victoria, and to a lesser extent New South Wales, will be a testing ground for how the procedural aspects of apportionment will apply.

A further difficulty can be seen in the timing of when the apportionment provisions of the TPA and the Wrongs Act became operational. As there is a seven month lag between the two, claims that were issued in the first half of 2004 for damages for economic loss or for property damages caused by a failure to take reasonable care and which also have allegations of a breach of s52 of the TPA will have both a joint and several component and an apportionable component. The High Court in Boland v Yates Property Corp Pty Ltd has said that: “The damages recoverable for breach of s52 of the Act are not necessarily co-extensive with those recoverable in negligence”.[4] Consequently, it is difficult to ascertain the category of damages payable and whether it will be necessary to distinguish between conduct that constitutes a breach of s52 and conduct that amounts to a failure to take reasonable care. It is also possible that plaintiffs who have only recently become aware that they have a joint and several claim against a defendant may seek to amend their pleadings to remove the negligence allegations to focus solely on the TPA arguments. This would simplify what would otherwise be a difficult exercise in determining those aspects of their claim that are apportionable and those that are not.

Possible effects of the changes
The position of insurers, at least initially, appears to be improved as they can now underwrite risks in the knowledge they are only liable for their insured’s actions. However, it is likely that this benefit will be offset by the fact that the number of parties involved in litigation will increase as defendants will seek to ensure they are not left facing the entirety of a plaintiff’s loss. Plaintiffs may also seek to ensure they are not left short on the amount claimed. More parties to a proceeding will protract litigation. Against the increase in the number of parties to litigation is the likely effect of a reduction in smaller speculative litigation. This will occur when the primary wrongdoer is impecunious or uninsured. Further, the amounts awarded against defendants will undoubtedly be reduced and the instances of a plaintiff failing to recover the full extent of their loss will be increased. This in turn may see a slight reduction in the overall amount of claims brought.

The reforms have brought about uncertainty as to how litigation is to be conducted. Until a consistent approach is taken to apportionment legislation in all jurisdictions, this uncertainty will continue. If a national approach is not adopted, there is no doubt that “forum shopping” will be a consideration for all plaintiffs bringing an action for economic loss based on negligence and/or s52 of the TPA. A follow-on from this is the possibility of unknowingly prejudicing a claim or defence should one not fully appreciate the apportionment regime in operation in a particular jurisdiction.


MATTHEW BLYCHA is an associate with Gadens Lawyers, practising commercial, insurance and construction litigation.

The author would like to thank barrister Bernard Carr for his comments regarding this article.


[1] [2002] HCA 41, at para 60. This interpretation of how damages are to be awarded for s52 TPA breaches was initially stated in Henville v Walker (2001) 182 ALR 37.

[2] Construction lawyers in Victoria have dealt with proportionate liability legislation prior to the Wrongs Act amendments. Section 131 of the Building Act 1993 (Vic), which was repealed by the Wrongs and Limitation of Actions Act (Insurance Reform) Act 2003, stated that liability relating to “building work” was apportionable. Section 131 continues to apply to actions commenced before 1 January 2004.

[3] The fact that third parties can take the benefit of apportionable liability is a novel concept as the Building Act 1993 (Vic) only allowed liability to be split between “defendants”. The change may be an attempt to get around the procedural difficulties that were noted by the Court of Appeal in Boral Resources Pty Ltd v Robak Engineering & Construction Pty Ltd & Anor [1999] VSCA 66.

[4] [1999] HCA 64.

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