Chapter 21 When will proportionate liability apply?

The proportionate liability regime applies to a defendant if:

  • the claim is an apportionable claim; and
  • the defendant is a concurrent wrongdoer.

Apportionable claim

What ‘apportionable claim’ is varied by jurisdiction?

In all states and territories, a claim for economic loss or damage to property in an action for damages arising from a failure to take reasonable care is an apportionable claim. Damages are usually defined as any form of monetary compensation, with limited exceptions.

Proportionate liability may apply to a claim relating to a contract for services, as there is implied by operation of law into every contract for services, an obligation on the service provider to exercise reasonable care.

All states and territories exclude claims for economic loss arising from personal injury or death, and most exclude any claim arising from personal injury or death. In most states and territories, apportionable claims include claims for misleading and deceptive conduct in trade under the relevant fair trading or consumer law.

For example, in NSW, an apportionable claim is, subject to certain exemptions:

  • a claim for economic loss or damage to property in an action for damages (whether in contract, tort or otherwise) arising from a failure to take reasonable care,(except for personal injury) or
  • a claim for economic loss or damage to property in an action for damages for breach of section 18 of the Australian Consumer Law (which deals with misleading and deceptive conduct in trade).

Each jurisdiction exempts a unique list of statutory and contentious causes of action from the definition of an apportionable claim. Most states and territories exempt statutory claims for worker’s compensation, claims for compensation under motor vehicle accident legislation, claims for compensation due to discrimination, claims for dust diseases and claims for personal injury caused by use of tobacco products.

An individual defendant loses the benefit of proportionate liability in most jurisdictions if the wrongdoer intended to cause or fraudulently caused the economic loss or damage to property the subject of the claim.

Concurrent Wrongdoer

In all states and territories, except South Australia and Queensland, persons are concurrent wrongdoers if their acts or omissions caused, independently of each other or jointly, the damage or loss that is the subject of the claim. Under South Australian and Queensland legislation, the persons in question cannot have acted jointly. To determine whether a defendant is a concurrent wrongdoer according to this test, two questions must be answered:

  • what is the damage or loss that is the subject of the claim; and
  • is there a person other than the defendant whose acts or omissions also caused that damage or loss?

The damage or loss that is the subject of the claim is the injury or other foreseeable consequence suffered by the plaintiff or, for economic losses, the harm suffered to the plaintiff’s economic interests. These tests essentially ask whether the various wrongdoers had contributed to the same negative outcome the plaintiff suffered.

CASE STUDY

Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd  [2013] HCA 10

Facts
  • Two people entered into a loan agreement and mortgage by forging the landowner’s signature.
  • The bank lent $1million to the fraudsters.
  • The bank’s solicitor did not include a clause in the mortgage preventing this kind of fraud. The mortgage only provided recourse against the void loan agreement.
  • The bank sued its solicitor, who applied to join the fraudsters and invoke proportionate liability.
Result
  • The damage or loss the bank suffered was its inability to recover the amount it had lent. The court rejected the narrower interpretation of the damage or loss to the bank caused by the solicitors as being the bank’s inability to call on its security.
  • The damage or loss that is the subject of the claim is the injury or other foreseeable consequence suffered by the plaintiff or, for economic losses, the harm suffered to the plaintiff’s economic interests.
  • Whether the wrongdoers caused the same loss was simply a factual enquiry into whether each wrongdoer had materially contributed to the bank’s inability to recover the amount it had lent.

 

Prior to the 2013 High Court decision in Hunt v Hunt, the courts answered the question of whether several wrongdoers had caused the same ‘damage or loss the subject of the claim’ by analysing whether the circumstances by which each wrongdoer caused the plaintiff loss were the same. The courts also required each wrongdoer’s act or omission to have in some way contributed to the wrongful actions or omissions of other wrongdoers for them to have caused the same loss. This line of authority, illustrated in the below case study, has been overturned by Hunt v Hunt.

How is the apportionment of responsibility assessed?

In assessing the responsibility of a defendant under the Commonwealth, NSW, NT and Queensland regimes, courts may look to the proportionate responsibility of defendants who have not been joined to the litigation.

In Western Australia, Tasmania and South Australia, courts must look to the proportionate responsibility of defendants who are not joined.

In Victoria, courts may only look to the proportionate responsibility of a party who has not been joined if that party is dead, or is a company which has been wound up.

Under the Commonwealth regime and in most states, once litigation has commenced, a defendant is under a duty to inform a claimant of the identity of other persons who may be responsible for the claim, and the circumstances of that responsibility.

CASE STUDY

St George Bank v Quinerts [2009] VSCA 245

Facts
  • A valuer overvalued a property.
  • The bank lent too much against the property on the basis of the valuer’s overvaluation.
  • The borrower defaulted.
  • The bank could not recover the full value of its debt from the borrower or guarantor.
Result
  • The damage or loss caused by the valuer was not the same damage or loss as that caused by the lender and guarantor.
  • The court considered the loss or damage caused by the borrower and guarantor was their failure to repay the loan. The loss or damage caused by the valuer was to cause the bank to lend against inadequate security.
  • The valuer did not cause the borrower and guarantor to default, nor did the borrower or guarantor cause the bank to accept inadequate security on the loan. Implicit in the Court’s statement is a requirement that one wrongdoer contribute to the wrongful actions of the other wrongdoer for them to have caused the same damage.

Hunt v Hunt makes it clear that several wrongdoers can contribute to the same foreseeable injury or harm to the plaintiff through completely different causal mechanisms, without in any way contributing to any other wrongdoer’s harm, and be found to be concurrent wrongdoers. The test is simply whether their wrongs caused (individually or jointly) the same harm, injury or damage to the plaintiff.

Next