APPORTIONMENT OF INTRODUCTION LIABILITY IN THE ...

APPORTIONMENT OFLIABILITY IN THECONSTRUCTIONINDUSTRY-TRUTH ORILLUSION?Bryan Thomas

PartnerRigby Cooke, Solicitors

Vice President of the BOPS

INTRODUCTIONIn the late 1980s there wasincreasing concern in the buildingand construction industries at thecost of insurance, both to buildingprofessionals and to local councils.The consequences of insureddefendants bearing the burden ofdamages in joint and severalliability cases was estimated to beadding between 2and 3 per cent tothe cost of projects. 1

A number of reports were producedproposing reform of the doctrine ofjoint and severalliability.2ln 1991,the Australian Uniform BuildingRegulations Council [AUBRC, abodyfunded by the Commonwealth,State and Territory governments towrite the Building Code of Australiaand to advise on regulatorymatters] published a series ofdocuments leading to the NationalModel Building Act[NMBAJ. It wasintended that the NMBAwould beused by the State and Territorygovernments as a template toamend their building regulatorylegislation.

A major reform proposed was thereplacement of joint and severalliability by proportional liability inbuilding litigation. Victoria, SouthAustralia and the Northern Territoryintroduced the reforms in 1993 andNew South Wales did so in 1998.Neitherthe Commonwealth, norany of the other States has done so.

THE DOCTRINE OF JOINTAND SEVERAL LIABILITYrSOLIDARY']Put simply, a plaintiff is free torecover his loss from any number ofconcurrent wrongdoers responsiblefor his loss. A particular defendantcan be called upon to pay the entireamount of the plaintiff's loss, even ifthat defendant's responsibility forthe plaintiff's loss is minorcompared with that of the otherconcu rrent wrongdoers.

Therefore a plaintiff is not requiredto sue all wrongdoers in order tocompletely recover his loss; he may

choose to sue only one wrongdoeror two or more in the single action.The choice of who to sue will bedictated by such considerations asthe evidence available against aparticular defendant and theperceived ability of a defendant tomeet a judgment obtained againstthem. If a plaintiff is successfulagainst two or more defendants in asingle action, judgment will beentered against each defendant forthe entire amount of the plaintiff'sclaim. The plaintiff is then free toenforce his judgment against anyone or more of the defendants,subject only to the limitation that hecannot recover more than the totalof his judgment. The result maywell be that a single defendant isobliged to meet the whole or asubstantial part of the plaintiff'sjudgment. Therefore, a plaintiffneed not be concerned with therelative responsibility of aparticularwrongdoerfor his loss.

Although the court has powerto joina party to a proceeding,3 adefendant has no right to insist thatthe plaintiff join another concurrentwrongdoer as a co-defendant to theplaintiff's action. A defendant may,however, join as a third party to theplaintiff's proceeding, a concurrentwrongdoer aga inst whom thatdefendant considers he has a claimfor contribution or indemnity.However, this does not result in thethird party becoming a defendant tothe proceeding, and the plaintiff canonly obtain judgment against thedefendant. The defendant may inturn obtain judgment against thethird partyforthe amount of theplaintiff's claim.

Thus joint and several liability, inconjunction with contribution amongdefendants, allows forthe sharingof liability amongst a number ofpersons in proportion forwhicheach was responsible forthe loss,but throws the risk of insolvency oruntraceability of anyone of thedefendants onto the otherdefendants, and permits the

10 AUSTRALIAN CONSTRUCTION LAW NEWSLETTER #90 MAY/JUNE 2003

plaintiff to recover the whole of hisloss from those defendants who aresolvent.

THE DOCTRINE OFPROPORTIONATE LIABILITYProportionate liability allows for thesharing of liability among a numberof wrongdoers. Each wrongdoer isonly liable to the plaintiff for hisproportionate share of the plaintiff'sloss. Therefore to fully recover hisloss, the plaintiff must sue andobtain judgment against allconcurrentwrongdoers. This meansthat the plaintiff accepts the riskthat one or more of the defendantsmay be insolvent or that he may notrecover his judgment against thatdefendant.

There are two major differencesfrom joint and several liabilityidentified by Oavis:4

(a) Proportionate liability placesthe risk of insolvency oruntraceability of a defendant on theplaintiff. To recover the whole of hisloss, the plaintiff must obtainjudgment and satisfaction againsteach wrongdoer responsible for hisloss;

(b) Whereas joint and severalliability assumes that eachwrongdoer found liable is a causeof the plaintiffs loss, proportionateliability apportions liabilityaccording to the degree of fault ofeach wrongdoer.

Thus the liability of each defendantis limited to the extent to which thatparty is considered to beresponsible forthe plaintiffs loss.There is no right of contributionbetween various defendants asnone would be liable to pay theplaintiff any more than the propershare owed by each defendant.

JOINT AND SEVERALLIABILITY VPROPORTIONATE LIABILITYSwanton and McOonald5 list thefollowing against solidary liability infavour of proportionate liability:

(a) Targeting of defendants withdeep pockets-it is unjust that adefendant whose comparative faultis minor, should be called upon tomeet the whole of the plaintiffsclaim simply on the basis of abilityto paywhen the principal reason forthe loss lay in the acts or omissionsof others overwhom he had nocontrol;

(b) Fairness between defendants isachieved;

(c) Liability insurance crisissolidary has contributed to dramaticincreases in the cost of insuranceand restrictions being placed on theavailability of insurance;

(d) The plaintiff bears the risk of theinsolvency or untraceability of adefendant if the plaintiff is unable toshow that more than one person isresponsible for his loss-whyshould that risk be transferred fromthe defendants simply because twoor more wrongdoers areresponsible forthe plaintiffs loss?;

(e) Solidary provides no incentive torisk minimization;

(f) Contribution proceedingsbetween defendants would nolonger be necessary.

Arguments in favour of solidaryliability against proportionateliability identified by Swanton andMcOonald6 are:

(a) Solidary aims to provide fullcompensation to the plaintiff;

(b) Solidary puts the burden ofconducting complex legalproceedings on the defendants whoare often more able to meet thecost;

(c) Causation-each concurrentwrongdoer has caused indivisibledamage to the plaintiff andtherefore it is just that eachwrongdoer is fully liable forthatdamage. Justice between multiplewrongdoers is ach ieved by theavailability of rights of contributionbetween them without any impacton the plaintiffs right of fullrecovery;

AUSTRALIAN CONSTRUCTION LAW NEWSLETTER #90 MAY/JUNE 2003 11

(d) Innocent plaintiff, guiltydefendant- proport ionate liabili tythrows the risk of the insolvent oruntraceable defendant on theplaintiff. Where the plaintiff is theinnocent party, this allocation ofrisk is unjust;

[e) Procedural cost andinconvenience-underproportionate liability, the plaintiffwould have to sue all personsresponsible for the loss to obtainfull recovery, involving greater timeand cost in identifying all potentialdefendants and determiningwhether they are solvent, resultingin litigation becoming morecomplex;

(f) The supposed insurance crisis-it is not clearwhat effectproportionate liability has oninsurance costs and availability;

(g) Arbitrariness-a plaintiff who iswronged by two or more personsmay be worse off, in terms ofdamages recovered, than a plaintiffwho is wronged by a single person;

(h) Plaintiff has an interest in theproportions of liability-if theplaintiff suspects one defendant isinsolvent, he may argue that theother solvent defendants wereresponsible for the greater part ofhis loss, thereby lengthening thetrial and possibly distorting theevidence;

[i) Hindrance to settlements-alldefendants would have to agree notonly on their own liability and thequantum of the plaintiffs loss, butalso their own share ofresponsibility before the plaintiffcould receive any compensation.The resulting uncertaintywouldbenefit defendants, particularlythose who are insured;

(j) Rights to contribution-it is onlywhere othertortfeasors are totallyinsolvent or untraceable that anyone concurrent tortfeasorwill haveto bear 100 per cent of the plaintiffsloss;


[k) Identification of all possibledefendants-often a defendant willbe better placed to identify andtrack down a potential defendantthan will the plaintiff; thus solidaryliability combined with contributionbetween defendants will be morepractical and just;

[l) Incentive for risk minimisation-the greater the potential liability,the greater the resources that willbe allocated to risk prevention; bydecreasing the potential liability ofconcurrent wrongdoers,proportionate liability reduces theincentive for effective accidentprevention;

[m) Limitation to contributorilynegligent plaintiffs-the plaintiffsfault may be less reprehensible orof a different type than that of thedefendants;

[n) Procedural fairness-how doesthe court apportion liability in theabsence of some, or even all butone, of the defendants? Are theabsent defendants bound by thatapportionment?

Thus, as Swanton and McDonaldputit: 7

The essence of the matter is theissue ofwho should bear the risk ofone orsome of the defendants orpotential defendants beinguntraceable or becoming insolventwhere a number ofparties are toblame: the plaintiff or the othersolvent defendants? ... Muchdepends on the responsibilitiesassumed by the particularparty onwhom it is sought to impose liability.

The authors give the followingexamples pertinent to theconstruction industry:8

... fllf an architect is specificallyemployed to supervise buildingwork bya builder, is it unfair thatthe architect should be liable to theclient for the whole loss caused bythe builder's negligence? On theother hand it may be argued thatthe avoidance ofsuch loss is thevery point of the architect's

engagement in that particularcircumstance. On the otherhand,the architect mayanswer that he orshe has taken the risk ofsupervising the builder's work butnot ofsupervising the builder'ssolvency orability to pay. Anothervariant may be whether it was theplaintiffwho selected the variousparties to work on a project orwhether the otherparties werebrought in at the request,recommendation orsuggestion ofthe defendant. In the first caseproportionate liability may appearfair-why should one defendantbear the burden of the plaintiff'sbad choice ofcontractors?whereas in the second case it is lessclear why the defendant should notbe primarily liable and bear the riskofseeking contribution from theothers.

THE PRACTICAL EFFECT OFPROPORTIONATE LIABILITYAs Swanton and McDonald9 pointout:

Factually there are two types of'concurrent' wrongdoing; that whichis }oint' and that which is 'several'.Wrongdoing is }oint' where a singleharm results from onlyonewrongful act for which two personsare liable [e.g. vicarious liability} ...It is 'several' where a single harmresults from more than onewrongful act, for example ... boththe builderand the architect arenegligent in relation to theconstruction ofa building thecollapse ofwhich causes loss ordamage to the plaintiff ... Thuswhere two ormore wrongdoers areliable to the plaintiff for the samedamage, anyone wrongdoer can becalled upon to pay the entireamount of the plaintiff's claim evenif that defendant's share of fault isminor compared with that ofotherconcurrent wrongdoers.

The scheme for proportionateliability will effectively reverse theadvantage enjoyed byplaintiffs whosufferproperty damage or financialdamage at the hands of two or

more 'several' wrongdoers. In orderto ensure that they recoup 700 percent of their loss without multiplelitigation, plaintiffs will be obliged atthe outset to identify, find and sueall parties responsible andestablish the identity ofeach one. Ifthey do not, they run the risk ofadefendant proving that some otherperson [not a party to theproceedings} was also responsible,thus reducing the defendant'sliability.

WHY THE NEED FORREFORM?During the 1990s a number ofenquiries and reviews, both inAustralia and overseas, examinedthe doctrine of joint and severalliability in the context of it beingreplaced in whole or in part by thedoctrine of proportionate liability.lOIn addition, the issue has beendebated by commentators bothgenerally, and with particularreference to the constructionindustry.l1

It is somewhat trite that in thecurrent debate on professionalindemnity and public liabilityinsurance, the arguments forthereform of tortuous liability are notdissimilarto those advanced forthereform of joint and severalliability-an 'insurance crisis'.

The push for proportionate liabilityin the late 1980s came particularlyfrom professions whose memberswere required to shoulder an unfairburden of liability as they tended tobe selected from a range ofpotential defendants as the easiestand most 'deep pocketed' forlitigation. In the constructionindustry, the argument was thatjoint and several liability waspatently illogical and unfairwithinsured defendants being forced tocarry the insurance liability of lessresponsible parties, with the resultthat the cost of insuring certainbuilding professionals and publicauthorities responsible for theapproval of building works wasbecoming so high, due to insured

defendants having to meet theliabilities of uninsured orimpecunious defendants, thatinsurers were consideringwithdrawing from certain types ofinsurance altogether. Consequently,all defendants would be uninsuredand either the plaintiffwould notrecover any damages, orwellresourced individuals, corporationsand authorities would have to paysuch high levels of damages thatthey could be left financiallyunviable; that is, effectivelybankrupt.

Insurers were increasingly in theinvidious situation of effectivelyhaving to underwrite the activities ofimpecunious members of theconstruction industry; in effectproviding ·strangercoverage'. Thiswas reflected in the cost ofpremiums and inevitably this costwas increasingly being transferredback to insured members of theindustry.

Further, needing to compete withuninsured competitors in anincreasingly difficult market,insured members of the industrywere being forced to divestthemselves of increasinglyexpensive insurance. Theywouldestablish and trade as '$2' or'project specific' companies withminimal assets, in the knowledgethat either they would not be suedbecause a plaintiff could easilyestablish that the company had noassets [and sue a more bountifuldefendant] or, if sued, would simplyplace the company into voluntaryliquidation. However, this optionwas not available to local councils,which were increasinglyfindingthemselves as the last remainingdefendant in construction litigation.

In the broader context, it wassuggested that the risks undersolidary liability were a deterrent topeople entering variousprofessions, for exampleobstetricians, and that defensivepractice aimed at avoiding liabilityin professions such as accounting,


would lead to increased costs to thecommunity. Thus, solidary liabilityhas a detrimental effect on riskminimization in that it encouragedplaintiffs to take action againstwell-resourced defendants nomatter how little their level ofresponsibility. 12

TYPES OF PROPORTIONATELIABILITYDavis13 identified four options:

Proportionate liability in allcircumstancesThis is the system in Victoria, SouthAustralia, the Northern Territoryand New South Wales and has noregard to whether the plaintiff hasalso been in anyway at fault. Thelegislation will be examined indetail below.

Its advantages are twofold:

(a) it is fair that each defendantshould bear no more than theproper proportion of the loss thathas been suffered by the plaintiff;

(b) the complicated rules as tocontribution between defendantsare longer necessary.

But the risk of the insolvency oruntraceability of a defendant istransferred from the solventdefendants to the plaintiff.

Proportionate liability wherethe plaintiff is partly at faultThis option applies in BritishColumbia, Canada, and allowsproportionate liability only incircumstances where the plaintiffhas been contributorily negligent.

The Negligence Act 7979[BritishColumbia] provides:

ApportionmentofLiabilityfordamages7. Where by the fault of two ormore persons damage or loss iscaused to one or more of them, theliability to make good the damageor loss shall be in proportion to thedegree in which each person was atfault, except that:


fa) if, having regard to all thecircumstances of the case, it isnot possible to establishdifferent degrees of fault, theliability shall be apportionedequally; and

fb) nothing in this section shalloperate so as to render aperson liable for damage towhich his fault has notcontributed.

Provisionsgoverning awarding ofdamages7. The awarding ofdamage or lossin everyaction to which section 7applies shall be governed by thefollowing provisions:

fa) ... ;

fb) The degree in which eachperson was at fault shall beascertained and expressed inthe terms ofa percentage of thetotal fault;

fc) As between each personwho has sustained damage orloss and each otherperson whois liable to make good thedamage or loss, the personsustaining the damage or lossshall be entitled to recover fromthat otherperson thepercentage of the damage orloss sustained as correspondsto the degree of fault of thatotherperson.

However, this option fails torecognize the fact that the fault of acontributorily negligent plaintiff isnot necessarily the same as, thefault of a defendant. The fault of theplaintiff may not necessarily cause,or be the substantial cause of, thefault of the defendant. However, inclaims for economic loss orproperty damage, as distinct frompersonal injury, it is not easy todistinguish between causescontributing to the damage sufferedand the breach of duty.

Proportionate division of aninsolvent defendant's shareThis option is based on the theoryput forward by Professor Glanville

Williams14 that where the plaintiffhas been contributorily negligent heis partly responsible for his ownloss and therefore the contributoryplaintiff and the solvent or fundeddefendant should each bear part ofthe cost of the impecuniousdefendant. In otherwords, theshare of damages of theimpecunious defendant should bedivided between the plaintiff andthe solvent defendant where thereIS:

• a contributorily negligent plaintiff;

• at least one defendant who isable to pay his share of thedamages awarded to the plaintiff;and

• one or more impecuniousdefendants.

Williams considered this as acompromise providing fairness toboth a contributory plaintiff and to adefendant who may only be liablefor a small proportion of thedamages awarded to the plaintiff.The plaintiff would not receive 100per cent of the damages awardedand the solvent defendant wouldnot be liable for 100 per cent of thedamages.

Thus, this option, which has beenadopted in Ireland, allowsproportionate liability where anydefendant is insolvent oruntraceable; his share of the loss ordamage is divided rateablybetween all other parties, includingthe plaintiff, in proportion to theirrespective shares of responsibility.[In British Columbia the risk of aninsolvent defendant is thrown onto acontributorily negligent plaintiffalone.]

The Civil LiabilityAct 1961 provides:

38. [1} Where an action is broughtagainst one or more concurrentwrongdoers byan injured personwho is found in such action to havebeen guilty ofcontributorynegligence and it is held that it isjust and equitable that the plaintiffsdamages should be reduced under

subsection [1} ofsection 34 havingregard to his contributorynegligence, the judgment againstone wrongdoer shall not be for thewhole of the recoverable damagesbut the court shall determine therespective degrees of fault of theplaintiffand ofall the defendants tothe plaintiffs claim at the time ofjudgment, leaving out ofaccountthe degrees of fault persons whoare not defendants, and shall givethe plaintiffa several judgmentagainst each defendant for suchapportionedpart ofhis totaldamages as the court thinks justand equitable having regard to thatdefendant's degree of faultdetermined as aforesaid.

However, this approach wouldrequire a plaintiff to face court asecond time, and the costs of asecond adjudication may outweighthe fairness of the ultimate result.

Proportionate liability and adefendant's degree of faultThis option operates in somejurisdictions in the United States,and allows proportionate liability solong as a defendant's degree offault or share of responsibility isless than a specified percentage;for example 20 per cent.

However, fairness is bought at theprice of being arbitrary: there maybe little difference betweendefendants who are found to be 19per cent and 21 per centresponsible forthe plaintiffsoverall loss, but the consequencescould be drastic. The liability of theformer may be proportionate andlimited to 19 per cent, while that ofthe latter may be joint and several,and depending on the solvency ofthe other parties, could beeffectively 100 per cent of theoverall loss.

A variant of these options is thatproposed by Canadian StandingSenate Committee on Banking,Trade and Commerce15 in cases offinancial loss of recognising a classof plaintiffs, described as

'unsophisticated', towhom thesolidary principle would continue toapply. The 'unsophisticated' plaintiffwould be identified by a means of anet worth test. However, apart fromthe arbitrariness of a financial limit,however defined, and the potentialfor avoidance of proportionateliability by 'asset stripping', theCommittee was unable torecommend an appropriate test fornet worth.

REFORM IN AUSTRALIAIn 1991, the Australian UniformBuilding Regulations CoordinatingCouncil published a series ofpapers which led to the drafting ofthe National Model Building Act[NMBAJ. The NMBAwas intendedto be a template for the State andTerritory governments to amendtheir building legislation andregulations. Replacement of jointand several liability byproportionate liability in civilbuilding actions under buildinglegislation was proposed.

The NMBA proposed:

Limitations on liabilityofpersonsjointlyandseverally liable180. (1) Afterdetermining an

award ofdamages in anaction, a court is to apportionthe total amount of thedamages between all personswho are found in that action tobe jointly and severally liablefor those damages, havingregard to the extent ofeachperson's responsibility for thedamage.

(2) The liability for damagesofa person found to be jointlyand severally liable fordamages in an action is limitedto the amount apportioned tothe person by the court.

Note the reference to a 'person' inthe section, the significance ofwhich will be addressed below.

As pointed out by Lovegrove: 16

The intent ofs. 180 was, in essence,twofold:


• To abolish the doctrine ofjointand several liability in all buildingactions; and

• To make clear that no party to anaction should be liable to pay morethan their share ofa plaintiffsdamages.

With the unfortunate resultsexamined below, the NMBAwasnot enacted federally. However, theNMBA, and in particulars.180,formed the basis fortheintroduction of proportionateliability in civil building litigation inVictoria, the Northern Territory andSouth Australia and later, NewSouth Wales.

THE LEGISLATIONVictoriaThe Building Act 1993wasproclaimed on 1July 1994.ln hissecond reading speech on theBuilding Bill 1993, Mr Maclellan[Minister for Planning] had thefo llowi ng to say by way ofbackg rou nd to the reformsintroduced by the Bill: 17

Traditionally a building owner hashad to contend with the everpresent risk ofnot being able toenforce a court determinationawarding damages because thefinancial position ofconstructionpractitioners not backed withinsurance can make such actionpointless.

... Abolition of the unfair doctrine ofjoint and several liability, or thedeep-pocket syndrome, willintroduce a far more equitable andresponsible allocation of risk. Nodefendant will be liable for morethan his individual apportionment.

This means that architects,engineers, local governmentofficers and building surveyors willnot have to assume liability for themistakes ofother defendants.Traditionally, a large part of thecost of insurance premiums hasresulted from the risk that anuninsured practitioner has had toaccept for awards involving


insolvent defendants. The reformswill diminish the risk to insurerswhich in turn will restrain insurancepremiums. This reform is one of themajor factors that will give insurersthe incentive to stay in theconstruction industry ... Togetherwith the new compulsory insurancerequirement, the measures willestablish a fair and responsibleliability regime.

The limitation of liability provisionsare contained in Part 9, Division 2 ofthe Act.

Section 131 provides:

Limitations on LiabilityofpersonsjointlyorseverallyLiable

(1) After determining an award ofdamages in a building action, thecourt mustgive judgment againsteach defendant to that action who isfound to be jointly or severallyliable for damages forsuchproportion of the total amount asthe court considers to bejust andequitable having regard to theextent of that defendant'sresponsibility for the loss ordamage.

(2) Despite anyAct or rule of law tothe contrary, the liability fordamages ofa person found to bejointly and severally liable fordamages in a building action islimited to the amount for whichjudgment is given against thatperson by the court.

(3) ...

Section 132 provides:

Rights to contributionDespite anything to the contrary inthe Wrongs Act 1958, a personfound to be jointly and severallyliable for damages in a buildingaction cannot be required tocontribute to the damagesapportioned to any otherperson inthe same action or to indemnifyanysuch otherperson in respect ofthose damages.

'Building action' is defined in s.129to mean:

an action [including a counterclaim}for damages for loss or damagearising out ofor concerningdefective building work;

and 'building work' is defined asincluding:

the design, inspection and issuing ofa permit in respect ofbuilding work.

Section 3 defines 'building' toinclude:

structure, temporarystructure, andanypart ofa building structure,

'building work' to mean:

[W}ork for or in connection with theconstruction, demolition or removalofa building,

and 'construct' as:

[a) build, re-build or re-erect thebuilding; and

[b) repair the building; and

[c) make alterations to thebuilding; and

[d) enlarge or extend the building;and

[e) place or relocate the building onland.

The term 'defective building work' isnot defined, and as noted byVa rg hese :18

... [T}he architects of the legislationintend the term to have its broadestmeaning as understood in theindustry. This intention is probablyeffected by the application of theDivision to all actions for damagescaused by defective work [excludingdamages for death orpersonalinjury by operation ofs. 73D}whether based in contract, in tort, orfor breach ofstatute. Thus actionscaught by Division 2 extend beyonddefects arising from noncompliance with the legislation andinclude actions for breach ofcontract by failure to comply withthe standards set byprivatecontract including matters ofaesthetics.

Interestingly, itwould appearthats. 131 has no appli ca t ion toarbitration proceedings, and yet atthe time of the Act's proclamation, alarge number of constructiondisputes, including defective workclaims, were resolved througharbitration in preference tolitigation. However, the terminologyused in s.131, 'the court', 'buildingaction' and 'judgment' supports thisview; an arbitrator is not a court andan award is not a judgment.Therefore, as noted by Varghese, 19

building professionals, wishing totake advantage of theapportionment legislation inrespect of defective work, have thecommercial option open to them ofdeleting arbitration clauses fromtheir contracts with principals.

Although s.131 is clearly based ons.180 of the NMBA, for reasons thatare not clear, the language in s.131is not true to that used in s.180;s.131 uses the words 'eachdefendant' in lieu of the words 'allpersons' used in s.180. As will beexplained below, this divergencehas had unfortunate ramifications inthe context of the judicialinterpretation of s.131 ,with theresult that the replacement of jointand several liability byproportionate liability in buildinglitigation has not been fullyachieved.

Northern TerritoryThe Building Acts.155 [Limitationon liability of persons jointly andseverally liable] provides:

(7) After determining an award ofdamages in an action, a court shallapportion the total amount ofdamages between all persons whoare found in the action to be jointlyand severally liable for thedamages, having regard to eachperson's responsibility for thedamage.

(2) The liability for damages ofaperson found to be jointly andseverally liable for damages in anaction is limited to the amount

apportioned to the person by thecourt.

Section 156 [Rights to contribution]provides:

(7) A person found to be jointly andseverally liable in an action cannotbe required to contribute to thedamages apportioned to any otherperson in the same action or toindemnify anysuch otherperson.

(2) A person found to be jointly andseverally liable for damages in anaction may recover contributionfrom any other tortfeasor not aparty to the action who is, or wouldissued have been, liable in respectof the same damage, whether as ajoint tortfeasor orotherwise.

(3) ...

Section 157 [Amounts ofcontribution] provides:

(7) In proceedings for recovery ofcontribution unders. 756, theamount ofcontribution recoverablefrom a person shall be that foundby the court to be just and equitablehaving regard to the extent of theperson's responsibility for thedamage.

(2) ...

'Action' referred to in s.155 isdefined in s.154 as:

(7) ... [A}n action of tort [includingan action for damages for breach ofstatutory duty} for damages foreconomic loss and rectificationcosts resulting from defectivebuilding work or other work carriedout under this Act.

'Building work' is defined in s.4 tomean 'work for or in connectionwith the construction, demolition orremoval of':

[a) a building; or

[b) plumbing ordrainageservices, whether ornotconnected to a building ...

'Building' is defined to include 'astructure and a part of a building orstructure'. 'Construct' is defined inthe same terms as the Victorian Act.


Section 180 was clearly used as atemplate and the wording wastransposed almost verbatim. Theonly variation is that the words 'theaction' are used in s.151 [1] insteadof the words 'all persons'. Again, thereason for the divergence isunclear, but fortunately the effect isinsignificant.

South AustraliaThe DevelopmentAct 1993s. 72provides:

(1) !f-

(a) building work is defective;and

(b) the defect or defects arisefrom the wrongful acts ordefaults of two or morepersons; and

(c) those persons would,apart from this section, bejointly and severally liable fordamage or loss resulting fromthe defective work; and

(d) an action is broughtagainst anyone or more ofthose persons to recoverdamages for that loss ordamage;

the court may onlygivejudgment against a defendant,oreach defendant, for suchamount as may be just andequitable having regard to theextent to which the act ordefault of that defendant,contributed to the loss ordamage.

(2) ...

'Building work' is defined in s.4 tomean work or activity in the natureof:

(a) the construction,demolition or removal ofabuilding; or

(b) the making ofanyexcavation or filling for, orincidental to, the construction,demolition or removal ofabuilding; or


(c) any otherprescribed workoractivity

'Building' is defined to mean 'abuilding or structure or a portion ofa building or a structure [includingany fixture or fittings which aresubject to the provisions of theBuilding Code of Australia] whethertemporary or permanent, moveableor immovable... ·

The term 'construct' is defined interms similar to the definition in theVictorian Act.

Clearly, s.72 does not remain trueto the wording of s.180, and yet theonly judicial interpretation of s. 72was consistent with the thrust ofs.180.

New South WalesOn 1July 1998, the EnvironmentalPlanning andAssessmentAct 1997was proclaimed. Section 109ZJ ofthat Act provides:

(1) After determining an award ofdamages in a building action orsubdivision, a court mustgivejudgment against each contributingparty for such proportion of thetotal amount ofdamages as thecourt considers to bejust andequitable, having regard to theextent of that party's responsibilityfor the loss or damage in respect ofwhich the award is made.

(2) Despite anyAct or law to thecontrary, the liability for damagesofa contributing party is limited tothe amount for which judgment isgiven against that party by thecourt.

(3) A contributing party cannot berequired:

(a) to contribute to thedamages apportioned to anyotherperson in the samebuilding action orsubdivisionaction, or

(b) to indemnifyanysuchotherperson in respect ofthose damages.

(4) In this section contributing party,in relation to a building action orasubdivision action, means adefendant to the action found by thecourt to be jointly orseverally liablefor the damages awarded, or to beawarded, in the action.

'Contributing parties' are defined as'defendants' [s.l 09ZJ[4]] and'building action' is defined in s.l 09Z1as meaning 'an action [including acounterclaim] for loss or damagearising out of or concerningdefective building work'.

'Building work' is defined in s.4 asmeaning 'any physical activityinvolved in the erection of abuilding', but in s.l 09Z1 is defined asincluding 'the design, inspection andissuing of a Part 4A certificate orcomplying development certificatein respect of building work'.

Although there are some five yearsbetween the Victorian and NSWActs, there is a close conceptualsimilarity between sections 131 and109ZJ, and the problems that haveemerged with s.131 are reflected ins.109ZJ.

VARIATIONS IN THELEGISLATIONThere are several points ofvariation in the proportionateliability legislation of the States andthe Territory identified byMcDonald :20

[1 ) Victoria, New South Wales andthe Northern Territory excludeactions for death and personalinjury from the legislation, butSouth Australia appears not to doso.

(2) The Victorian, New South Walesand the Northern Territoryprovisions only deal with adefendant's liability in proportion tothat of other defendants to thesame action, whereas the SouthAustralian legislation allows thecourt to take into account thecontribution to the damage bypersons who are not parties to theaction.

(3) Only South Australia expresslydeals with the position of vicariousliability and closes the loopholethrough which persons who wouldotherwise be vicariously liablecould escape liability, although itcould be argued that s.156[3] of theNorthern Territory Building Actdoes so.

(4) The Victorian and NorthernTerritory legislation use the term'jointly or severally liable', whereasSouth Australia uses the expression'jointly and severally liable'. It isarguable that the result is that theSouth Australian legislationtherefore only applies to personswho are both jointly and severallyliable [joint tortfeasors, partners],whereas the Victorian and NorthernTerritory legislation applies toparties who are not jointly but areseverally liable to a plaintiff for thesame damage. In most constructioncases, where a range of defendantsare sued, each would be several orindependent ratherthanjoint, and itis this situation that the legislation isdirected, ratherthan instances ofjoint liability. The New South Waleslegislation is silent on the matter

Furthermore, the Victorian, NewSouth Wales and South Australianlegislation each use the term 'justand equitable' despite the fact thatit does not appear in NMBA s.180.The reason forthe inclusion isunclear The Northern Territorylegislation contains no suchreference, being the closest to theNMBA.

JUDICIAL INTERPRETATIONOF THE PROPORTIONATELIABILITY LEGISLATIONApart from Victoria, the legislationhas not been subjected to closejudicial scrutiny, but the Victoriandecisions have some ramificationsfor New South Wales.

VictoriaSection 131 has been closelyanalysed by the Court of Appeal intwo appeals which were heardtogether: Boral Resources vRobak

Engineering and Construction PtyLtd and Foster Hall Pty Ltd['Robak'] and FCH Consulting PtyLtd vWimmera-Mallee RuralWaterAuthorityand R&L TankFabrications Pty Ltd [' WimmeraMallee '].21

Both appeals were from separatejudgments of Gillard J, and in eachcase the plaintiff [Robak andWimmera-Mallee] had sued onlyone defendant-Boral and FCHrespectively. Each defendant hadjoined a third party to theproceeding [Foster Hall and R & LTank respectively] and beforeGillard J, sought to join those thirdparties to the proceeding asdefendants, under Supreme CourtRule 9.06, so as to have the benefitofs.131 intheeventthattheplaintiff obtained a judgmentagainst the original defendants attrial.

Gillard J held that:

• Robak-the obligation to pay partonly of the plaintiff's damage unders.131 only arises if there are atleast two defendants.

-It is not 'just' under9.06[b][ii] torequire the plaintiff to proceedagainst a party it does not wish tosue; justice requires that theplaintiff be permitted to conduct thelitigation as it sees fit.

-Nothing in s.131 requires theplaintiff to sue all legal entities whomay have responsibility for thedamage the plaintiff has suffered.

• Wimmera-Mallee-s.131 onlyoperates if there is more than onedefendant.

As noted by Lovegrove,22 the Courtof Appeal considered that there twoissues'raised by the appeals:

1. Is a person who has been joinedas a third party to a building actiona 'defendant' forthe purposes ofs.131 [1]?

2. Can third parties be added asdefendants pursuant to Rule9.06[b][ii] of the Supreme CourtRules?


Rule 9.06[b] states:

At any stage of the proceeding theCourt may order that:

fb) any of the following persons beadded as a party, namely:

(i) a person who ought tohave been joined as a party orwhose presence before theCourt is necessary to ensurethat all questions in theproceeding are effectually andcompletely determined andadjudicated upon; or

(ii) a person between whomand any party to theproceeding there may exist aquestion arising of or relatingto or connected with any claimin the proceeding which it isjust and convenient todetermine as between thatperson and that party as wellas between the parties to theproceeding.

The Court of Appeal held:

Issue 1A third party is not a defendantwithin the meaning of s.131 [1 J.Basing his findings on the acceptedprinciples of statutoryinterpretation, Chernov JA, whodelivered the principle judgmentand with whom the other membersof the Cou rt ag reed stated :23

... [T}he terms of the Act aresufficiently clear to warrant givingthe word 'defendant' in s. 737[7} itsnormal and usual meaning,namely, a party which is named assuch in the building action ... In myview, a third party is not such a'defendant': it is a respondent to thedefendant's claim it as expressed inthe third party notice. Such a partycould properly be described as a'party to the proceeding [or action}',but not as a 'defendant to theaction' in that proceeding.

Issue 2A defendant can join a third party asa defendant to a proceeding-thusturning each of these cases fromsingle defendant to multi-


defendant cases, and thereforegiving s.131 an operational function.Pertinent reasons for thisconclusion include:

• the mere fact that a plaintiff doesnot wish to proceed against aproposed defendant is not enoughto prevent the proposed party being

joined;

• in the context of a building action,the fact that the plaintiff has suedone defendant only so as to avoidthe proportionate liabilityprovisions, becomes a relevantconsideration in determining what is'just' in 9.06[b][ii);

• given that neither Robak orWimmera-Mallee claimed that theywould be prejudiced by having thethird party joined as a defendant,then it would be 'just' to determine

the relevant questions between thetwo sets of parties; and

• neither Boral or FCH Consultingwould be in a position to availthemselves of the benefit of theproportionate liability legislation,and therefore their claims byway ofthird party procedure would not beafforded their full 'protection' .

Again as Lovegrove24 points out, thejudgment raises a number of issues.

The meaning of ·defendanfThe Court was in no doubt as to thegeneral intent of s.131 ; forexample, BattJAat 511:

... [T}he policy behind ss. 737 and732 is that no building practitionershould be liable for damagesexceeding the amountproportionate to that practitioner'sresponsibility for the loss ordamage of the plaintiff,

andat512:

... Consequently it cannot accordwith the policy of the Division for thewishes of the person suing to be asignificant factor on an applicationforjoinder ofa person as adefendant,

and Chernov JA at 526:

... The legislative purpose orpolicybehind the provisions was to avoidthe mischiefwhich was perceived toexist at the time of their introduction... The introduction ofproportionateliability was aimed at encouraginginsurers to provide indemnity to allbuilding practitioners and to reduceand level out premiums charged tothem.

However, both the Minister's speechand s.131 [1] use the word'defendant', instead of the word'person' which was used in s.180 ofthe NMBA.

The importance the Court attachedto 'defendant' is best indicated byChernov JA at 521 :

... [T}he court can onlygivejudgment for the plaintiffagainstpersons who are defendants. Itcannot give judgment for theplaintiffagainst persons who are,say, third parties in the proceedings,

and:

... [Ilt is unlikely that 'defendant'was intended to mean anything buta person whom the plain tiffjoinedas a respondent to its claim .... Itmust have been obvious to thedraftsperson that 'defendant'normally means the respondent tothe plaintiff's claim, yet analternative expression which has awider meaning was not used.

Is more than one defendantrequired?All parties were of the opinion thats.131 only applies to cases weremultiple parties are responsible forthe plaintiffs damages, and at leasttwo of those parties are'defendants'. Accordingly, thematterwas not the subject ofexamination by the Court of Appeal,but it is clear from the judgmentsthat the court was of the view thatmore than one defendant wasrequired to make s.131 operational.

Can adefendant join anotherdefendant?Fortunately in Robak, the court wasable to find other means to enforce

the legislative intent in at leastsome building cases byenablingthe joinder of additional defendantsby the partywhowould otherwisehave been the sole defendant.

However, regarding Supreme CourtRule 9.06 certain specificcharacteristics must exist and caseswith different characteristics maynot fall within the ambit of thecourt's judgment.

The necessary 'ingredients' in abuilding case are therefore:

1. There must be a claim in theproceeding against the headcontractor.

2. There must be a questionbetween the sub-contractor and thehead contractor.

3. The question must be onearising out of or relating to orconnected with the claim againstthe head contractor.

4. The question must be one whichcan be determined between thesubcontractor and the headcontractor as well as between theplaintiff and the head contractor.

5. It must be just and convenient todoso.

Consequently, care must beexercised to identify a questionwhich has the necessary connectionwith the claim made by the plaintiff,and which is common to the plaintiffand the existing defendant and alsothe existing and the proposeddefendant.

Chernov JA accepted that a personcan be joined as a defendant even ifthe plaintiff does not have a causeof action against that person.However, a decision of Byrne J on9 May 2000 in Wimmera-MalleeRural WaterAuthority v FCHConsulting Pty Ltd, in anunsuccessful application by FCH tojoin a second third party [MGC PtyLtd] to the proceeding,demonstrates that the existing'... must demonstrate that thereexists a viable cause of action in theAuthority against MGC ... ' and an

indication would be reliance by theAuthority on MGC's design inauthorising construction. Byrne Jwas not so satisfied and refusedFCH's application.25 In a subsequentapplication by FCH, which wasopposed by MGC, on 16 May 2000Byrne J held that in such a situationwhere the duty of care is unclear,the applicant has a higher onus todischarge under 9.06[b][ii].26

The phrases 4just and equitable'and 4just and convenient'NMBA s.180 does not include thewords 'just and equitable'. Althoughthose words as used in s.131 havenot been judicially considered, thecourt in Robakdid comment on thewords 'just and convenient' as usedin 9.06[b][ii]. The word 'just'connotes the idea of 'fairness' andthe court chose to interpret thewords 'just and convenient' in amanner that was not restrictive of adefendant's ability to joi n fu rtherdefendants, and consideration ofthe plaintiffs interests was only onematterto which the court shouldhave regard and not the primaryfactor.

Consequences of Robak1. Section 131 only applies wherethere is more than one defendant.

2. A third party is not a defendantwithin s.131.

3. A third party may be joined as adefendant under specialci rcu mstances.

4. If those special circumstancesdo not exist, in a sole-defendantcase s.131 is not available and thedoctrine of joint and several liabilityapplies.

Robakwas followed by Byrne J inHampton Park Central Pty Ltd vAustralian Safeway Stores PtyLtd.27

Thus, Robak has negated theapplication of s.131 in singledefendant cases, and possiblyreintroduced the principle of jointand several liability in such casesexcept where the facts fit within the


Despite the apparentintention of those whodrafted the legislation,certainly in Victoria, andprobably in New SouthWales, joint and severalliability has not been entirelyrevoked in building actions.

limits of the joinder provisions ofthe Supreme Court Rules.

South AustraliaSection 72 of the Development Acthas been the subject of only onereported decision-NBD Bank vSouth Italy Tiling SA andAnor.28

It covers similar ground to Robak,and considered the followingquestions:

• Who has the onus of joining aparty to the proceedings?

• Does a pa rty have to be a pa rty tothe proceedings in order to be heldliable for a plaintiffs damages?

Kitchin concluded that:

• A defendant who pleads s. 72must bring evidence of another'swrongful act to bring that personwithin the scope of s. 72, that is, it isthe responsibility of the defendantto bring evidence of a third partybeing involved.

.It is not a precondition of s. 72 tobe brought into operation thatpeople whose acts or defaults havecontributed to the plaintiffs loss bejoined as parties to the proceedings.However, the defendant must givesufficient particulars of the materialfacts upon which he relies, and theevidence must be such that ifaccepted would enable the court togive effect to s. 72.

• If s. 72 is pleaded by thedefendant there is an onus on thedefendant to call or adduceevidence of those material facts.

Thus, NBD Bank came to theopposite conclusion to Robak inthat the court can apportiondamages to a defendant havingconsideration to the responsibilityof the third party; that is, theproportion that would be payable bythethird party, if a defendanttotheaction, can be subtracted from theamount that must be paid by thedefendant to the action.

Northern TerritorySections 155 and 156 of theBuilding Actwere considered by the

Supreme Court in Proprietors UnitsPlan No 95/98 vJiniess Pty Ltd.29

His Honour noted that NBD Bankrequired s.72 to be specificallypleaded, but held that:

S. 155 of the Building Act imposesan obligation on the court to'apportion the total amount ofdamages between all persons whoare found in the action to be jointlyand severally liable' ... The matteris not one for the parties [to raise}but rathera statutory obligationimposed on the court.3D

New South WalesSection 109ZJ does not appear tohave been the subject of judicialinterpretation to date. However, asnoted by Bell31 as s.l 09ZJ ismodelled closely on s.131 , theproblems raised by Robakwouldappear to apply in New SouthWales.

EVALUATION OF THEPROPORTIONATE LIABILITYLEGISLATIONDespite the apparent intention ofthose who drafted the legislation,certainly in Victoria, and probably inNew South Wales, joint and severalliability has not been entirelyrevoked in building actions. Only inthe Northern Territory, whoselegislation is true to the philosophyof the NMBA, have the problemsraised by Robak been avoided .Thus, only in the Northern Territoryis full effect unquestionably given tothe intention of the reforms.

The South Australian legislationappears to have been drafted todeal with the multiple defendantssituation by expressly providing thatit does not matterwhether anyother responsible party was adefendant or even whether it was inthe litigation at the time. It avoidsthe problems of s.131 by:

• specifying that s.72 comes intooperation only if the defect that isthe subject of the action arises from'the wrongful acts or defaults of twoor more persons';


• intermixing the word 'person' and'defendant' ;

• not stipulating that all'defendants' must be parties to thesame action.

The use of the word 'defendant' ins.131 is the key to the problemshighlighted by Robakwith theunfortunate result that there is alingering doubt as to the intention ofthe legislation and its clarity. Thuss.131 isinneedofamendmentbyreplacing the word 'defendant' with'person' in ss.[l].

Similarly, there is no justification inretaining the words 'as the courtconsiders just and equitable'; thesewords do not appear in NMBAs.180 and their justification is notclear. Surely having determined anaward of damages as appropriate,the court simply apportions thedamages according to its findings'as to the extent of each person'sresponsibility forthe damage'.

The use of the word 'responsibility'in the Victorian, New South Walesand Northern Territory legislation,in the context the loss and damagein respect of which the award ofdamages is made, as Bell notes,32may give rise to consequencesunintended and may rob acontracting party of the protection itexpects to receive under itscontract. Bell gives the example ofa principal who deliberatelycontracts with a large respectablesolvent contractor because of thesecurity provided in the event of,amongst other things, defectivework. The principal has the comfortof knowing that the contractorwillbe able to satisfy any judgment orwill carry insurance sufficient tocoverthe potential exposure.However, the contractor maychoose to sub-contract part of theworks to a less substantial [orrespectable] sub-contractorwhocarries out the work defectively.

Most standard form contracts, forexample AS2142-1992 cl9.3 andAS4000-1997 cl9.5, provide that

the contractor's liability is notaffected by sub-contracting.However, was it intended that thecontractor could use theapportionment legislation to hidebehind an insolvent sub-contractorleaving the principal with effectivelyno remedy, even though based on asimple action for breach ofworkmanship warranties, theprincipal would otherwise havebeen able to recover fully againstthe contractor?

This situation raises the issue ofhow a court will approach thequestion of 'responsibility'. If theapproach is simply to require thepa rties to 'honou r thei r contracts',why would a 'contracting defendant'be less than 100 per cent liable?Such an approach would seem tobe at odds with the intent of thelegislation and Robak. Thisproblem is addressed in thediscussion of concurrent liability incontract and tort below.

Finally, the legislation and inparticular s.131, raise the followingquestions:

• Entitlements only accrue oncelitigation has commenced and jointand severable liability has beenfound; butwhen mustthejointandseverable liability exist? When thedefective work was performed orwhen the proceeding reachesjudgment?

• What if a settlement has beenreached between the principal andan impecunious sub-contractor andthe Court finds the sub-contractorjoint and severably liable?

.Howcanafindingunders.131 bemade if a defendant has alreadybeen released from the proceedingby agreement with the plaintiff or byestoppel?

• What if the plaintiff has releaseda potential defendant beforeproceedings are commenced?

THE TRADE PRACTICESACTAND PROPORTIONATELIABILITYThe unfortunate consequence ofthe failure of the NMBA to beenacted by all States andTerritories, and instead its adoption,albeit in a piecemeal fashion, byonly three States and the NorthernTerritory, is that the proportionateliability legislation can beeffectively bypassed by resort to theTrade Practices Act 7974 ['the TPA].As noted by Gerber,33 constructionlawyers have recognized thebenefits of combining claims incontract and tort with allegationsunder the TPA; in particular:

• Exemption clauses areineffective;

• Contributory negligence is not adefence,

• There is a broad range ofremedies;

• There is the potential to piercethe corporate veil.

Section 52 of the TPA prohibits a'corporation' [as defined] fromengaging in misleading anddeceptive conduct in trade orcommerce. The equivalent StateFair Trading Acts prohibit a personfrom doing so.

For a professional person to provideincorrect information or advice maywell be regarded as misleadingconduct; the more so because s.52may be infringed despite the factthat all reasonable care was takenin the circumstances.

There is nothing to prevent aclaimant from suing two or morepersons who, either jointly orseverally, have caused him damageby a breach of s.52. However,concepts relevant to either joint andseveral liability or proportionateliability do not feature in thescheme of the TPA. The TPA doesnot make provision for the exerciseof rights between persons foundconcurrently liable for a breach ofthe statute.


While misleading anddeceptive conduct may notbe confined torepresentations, it is difficultto see how a negligent act ona building site, without more,can be misleading ordeceptive.

As noted byVarghese,34 actionsunder the TPA relevant to therecovery of damages for defectivework fall into two categories:

(1) Section 52 establishes a normof conduct to be observed bycorporations in commercialtransactions. However, it is difficultto conceive how a court wouldconstrue conduct under s.52 asfalling within the definition of'building work'.

(2) Sections 71,72 and 74 set outimplied warranties [compliancewith description, fitness for purpose,correspondence to sample,services supplied with due care andski llJ.

Does s.131 operate to apportiondamages where the conductcomplained of on the part of oneco-defendant is negligentmisstatement? Probably not,because the definition of 'buildingwork' in s.129 does not includenegligent misstatement.

However, Seddon35 argues thatfrom a causation aspect, there isnothing in the TPA to prevent theapplication of a principle ofproportionality, and a court coulddecide, simply as a matter ofcausation, that a respondent wasnot responsible for the entire losssuffered by the applicant, andadjust the remedy accordingly. Aseminently reasonable as thisargument may be, it has not beenadopted by the Federal Court todate, and would probably need tobe the subject of amendment to theTPA.

On the other hand, Tapsell36 pointsout that building litigants usuallyrely on s.52 alleging misleadingand deceptive conduct as a back upto claims in contract and tort.Although nothing in the TPAprevents a defendant from claimingcontribution from anotherdefendant, and judgments amongstdefendants do not affect their jointand several liability to pay thewhole of the damages to the

successful plaintiff, the question iswhether the State and Territoryapportionment of liabilitylegislation is inconsistent with theTPA. If so, then under s.l 09 of theConstitution, s.131 will not operatewhere the plaintiff succeeds underthe TPA. Therefore, if negligentdesign or supervision can becharacterized as a breach s.52,building owners can frame theirclaims under s.52, apportionmentof damages will not apply and theadvantages provided by s.131 willbe illusory.

While misleading and deceptiveconduct may not be confined torepresentations, it is difficult to seehow a negligent act on a buildingsite, without more, can bemisleading or deceptive. Not everynegligent misrepresentation thatoccurs on a building site will be abreach of s.52. However,architectural or engineeringdrawings or a quantity surveyor'sestimates can be misleading if theycontain information which isinaccurate, and which is reliedupon. They are representations of afuture fact within s.51A, and if theprincipal can establish that thearchitect,· engineer or quantitysurveyor had no reasonable groundfor making the representation,there will be a liability for damagesunder s.87, but the effect is toprevent the operation of s.131 tosever joint and several liability.

Gerber 37 argues that the HighCourt's decision in Wallis vDownard-Pickford [NorthQueensland} PtyLtd,38 in holdingthat the cap on liability in theQueensland Carriage ofGoods byLand [Carriers' Liability}Act 7967was inconsistent with s. 74 of theTPA, clearly demonstrates that theTPA can be used to circumvents.131 ; there is little differencebetween the attempt by theQueensland parliament to limit theliability of carriers and that byVictoria to limit the joint and several


liability of tortfeasors in buildingactions.

Gerber also notes that the effect ofthe High Court's decision in WardleyAustralia Ltd v Western Australia 39

is that the 1O-yeartime limit afterthe issue of the occupancy permit ins.134 of the Building Actwill havelittle effect if a claim includescauses of action underthe TPA.

The end result is that there wouldappearto be few situations in whicha building professional can takeadvantage of s.131 ; s.131 will beineffective where judgment is givenunder the TPA.ln the main, theapportionment legislation isinconsistent with the liabilityimposed by the TPA, and as a resultmay be ineffective to sever joint andseveral liability for a breach of s.52.Only defendants who are notcorporations who are sued underthe state Fair Trading Acts can availthemselves of the protection of theapportionment legislation as thelatter makes it clear that it appliesnotwithstanding any State Act to thecontrary.

PROPORTIONATE LIABILITYAND CONCURRENT DUTIESUNDER CONTRACT ANDTORTSection 131 yields to anycontractual terms between theparties to the contract as to liabilityfor defective workmanship. Onlydamage flowing from a tortuousliability can be apportioned unders.131.

However, the Domestic BuildingContractActs.8 implies into MajorDomestic Building Contracts [asdefined] warranties by the builderas to fitness for purpose, goodquality materials and againstdefective workmanship:

Part 2-Provisions thatApply to all DomesticBuilding ContractsDivision 1-GeneraL warranties8. Implied warranties concerningall domestic building work.

The following warranties about thework to be carried out under adomestic building contract are partofevery domestic building contract:

[a) the builder warrants that thework will be carried out in a properand workmanlike mannerand inaccordance with the plans andspecifications set out in thecontract;

[b) the builder warrants that allmaterials to be supplied by thebuilder for use in the work will begood and suitable for the purposefor which they are used and that,unless otherwise stated in thecontract, those materials will benew;

[c) the builder warrants that thework will be carried out inaccordance with, and will complywith, all laws and legalrequirements including, withoutlimiting the generality of thiswarranty, the Building Act 7993 andthe regulations made under thatAct;

[d) the builder warrants that thework will be carried out withreasonable care and skill and willbe completed by the date [or withinthe period) specified by thecontract;

[e) the builder warrants that if thework consists of the erection orconstruction ofa home, or is workintended to renovate, alter, extend,improve or repair a home to a stagesuitable for occupation, the homewill be suitable for occupation atthe time the work is completed;

[f) if the contract states theparticularpurpose for which thework is required, or the result whichthe building owner wishes the workto achieve, so as to show that thebuilding owner relies on thebuilder's skill andjudgment, thebuilder warrants that the work andany material used in carrying outthe work will be reasonably fit forthat purpose or will be ofsuch anature and quality that they mightreasonably be expected to achievethat result.

In the non-residential arena, theProperty Council of AustraliaProject Contract PC-1 1998, clause6.6 [Fitness for Purpose] providesthat the Contractor warrants that:

[a) the Design Documentation itprepares will be fit for its intendedpurpose; and

[b) upon Completion the Works oreach Stage will, to the extent thatthey are designed by theContractor, be fit for their intendedpurpose.

Each of the standard constructioncontracts provide for the contractor/builder to give a warranty to theprincipal/owner against defectiveworkmanship.

The MBA/RAIAABIC MW-1 2001majorworks contract clause 02[Indemnity before practicalcompletion] provides:

7 ... the contractormust indemnifythe owner in respect ofany liabilityarising from negligence orbreachofstatutory duty, by the contractororanyof the contractor'semployees, agents orsubcontractors.

The Australian Standards Designand Construct Contract AS 4902clause 2.2 provides:

2.2 Contractor's warrantiesWithout limiting the generality ofsubclause 2.1, the Contractorwarrants to the Principal that:

[a) the Contractor:

(j) at all times shall besuitably qualified andexperienced, and shallexercise due skill, care anddiligence in the carrying outand completion ofWUC;

Iii) has examined anypreliminary design included inthe Principal's projectrequirements and that suchpreliminary design is suitable,appropriate and adequate forthe purpose stated in thePrincipal's projectrequirements;


(iii) shall carry out andcomplete the Contractor'sdesign obligations to accordwith the Principal's projectrequirements and, ifsubclause9.4 applies, accept thenovation and retain thePrincipal's consultants for anywork that subject ofa priorcontract with the Principal;and

(iv) shall carry out andcomplete WUC in accordancewith the design documents sothat the Works, thencompleted, shall:

(A) be fit for their statedpurpose; and

(B) comply with all therequirements of theContract; and

(b) subject to clause 9, theconsultants identified in theContractor's tenderare suitablyqualified and experienced.

It is not uncommon in multi-levelcontractual arrangements inconstruction projects for theprincipal, in addition to requiring thecontractorto enter into a detailedconstruction contract, to alsorequire the sub-contractors,engineers or other entities engagedby the contractor, to provide directcontractual warranties in favour ofthe principal. However, theprotection afforded to the principalby the original commercial decisionto engage the contractor may bereduced if the sub-contractor'responsible' for a major defect, isfound 'liable' under the contractualwarranty. This could result in themajority [if not all] of the damagesbeing apportioned to theimpecunious or uninsuredsub-contractor. Thus, the principalwould be better off without thesub-contractor's warranty.

Therefore, the ability of a contractorwho has given a warranty againstdefective work in the contract withhis principal to rely on theproportionate leg islation depends


on whether he has a tortiousliability to the principal concurrentwith his contractual liability underthe contract.

As noted by Singh:40

Judicial opinion on the question ofwhether there exists a concurrentliability in contract and tort hasebbed and flowed over time andhas been marked by conflictingviews at anyone time in Australiaand England.

The courts have found thatconcurrent liability exists forarchitects [Voli v Ingelwood ShireCouncil 41 ], engineers {Brickhill vCooke 42 ; Pullen vGutteridgeHaskins & Davy Pty Limited 43

], aswell as other professionals,including solicitors: Macpherson &Kelley vKevin, Prunty &Associates.44 Lush J at 580 said:

... {Ut is nowaccepted thatconcurrent liability in contract andtort is imposed on a numberofskilled professions ... the dualliability has now been applied tomost skilled occupations ...architects.

Murphy J said at 584:

In the present case, no question hasbeen raised concerning anydifferences that might existbetween damages for breach ofcontract and damages for the tort ofnegligence ...

Much confusion, I think, flows fromsaying that a solicitor is liable onlyin contract. He can be clearly beliable in tort just as can anypersonin a Hedley Byrne situation ...

And Beach J said at 603:

It is clear from the authorities towhich I have referred that membersof the various professions may beliable to their clients in contract andin tort. Into this category fall ...architects, engineers ...

The decision of the Privy Council inTai Hing Cotton Mill Limited vLuiChong Hing Bank Limited 45

appeared to swing the tide against

concurrent liability, at least in

England. Lord Scarmen at 107observed:

Their lordships do not believe thatthere is anything to the advantageof the law's development insearching for a liability in tort wherethe parties are in a contractualrelationship. This is particularly in a

commercial relationship ... TheirLordships believe it to be correct inprinciple and necessary in the lawto adhere to the contractualanalysis: on principle because it is arelationship in which the partieshave, subject to a few exceptions,the right to determine theobligations to each other, and forthe avoidance ofconfusion becausedifferent consequences do followaccording to whether liability arisesfrom contract or tort, for example,in the limitation ofactions.

InAustralian Mutual ProvidentSociety v Dowell AustraliaLimited 46 Rogers CJ noted:

... [W}hat the Privy Council in TaiHing teaches us is simply wherethere is a contract in existence, theobligations that it imposes and anylimitations on liability that itprovides for, have to be regarded asthe parameters of liability even inan action in tort ... They werepointing out that the fact of theagreement of the parties embodiedin the contract, the springing intoexistence ofa duty in tort and itsextent, ifany, is dependent on theterms of the agreement.

However, in Frederick WNeilson[Canberra} Pty limited v PoCConstructions [ACT} Pty Limited,47the Court was less reticent about

rejecting concurrent liability. Kelly J[at 9] said:

... The plaintiff [Neilson}, havingchosen to regulate its relationshipwith the first defendant [POC} bythat agreement, cannot, in myopinion, now be heard to say thatthe breaches alleged are breachesofa duty of care to ensure that theplaintiffsuffers no economic loss.

His Honouralso noted:

Where, however, parties to abuilding contract enter into a

detailed written agreementintended to regulate theperformance of the contract therelationship between the parties isgoverned by that writtenagreement, subject only to theimplication ofsuch terms as arenecessary to be implied in theabsence ofexpress terms dealingwith the subject matter of theimplications. [at 5}

In RWMiller& Co PtyLimitedvKrupp [Australia} Pty Limited,48Krupp [the contractor] claimed that

it owed a duty of care to Miller [the

principal] concurrent with the

contractual obligations that Krupp

had in its contract with Miller. Krupp

had design responsibilities in

addition to construction.

Giles J found that the contract

between Krupp and Millerwas a

detailed document setting out the

bargains struck between the parties

and found that Miller did not rely on

some common law duty by Krupp to

take care in the execution of the

works but on the absolute

obligations contained in the

contract. Reliance on the contract

was not a sufficient reliance to give

rise to a duty in tort. He noted [at227]:

However, the law ofcontract hasnot been assimilated to the law oftort by routine imposition ofa dutyof care coextensive with acontractual obligation. / take thePrivy Council in Tai Hing Cotton MillLimited v Lui Chong Hing BankLimited [7 986} 7AC 80 at 707-8 tohave cautioned against over-readyascription of liability in tort when therights and obligations of the partiesare covered by a contract, but itdepends upon a fording ofproximityin the sense that the word is used inrelation to a duty of care in tort. Therelationship created by the contractmay in particular circumstances beor be part ofa relationship ofproximitygiving rise to a duty of

care ... Unless the incidents of therelationship have been settled,whether there is a relationship ofproximity requires examination ofthe particular circumstances.

His Honour held that in that case it

was not a situation where the

recognition of concurrent liability

had been settled.

In NRMA/nsuranceLimitedvFRCoyle Pty Limited & Ors 49 His

Honour Cole J [as he then was]

said:

Where, as here, the onlyaspectpleaded as giving rise to therelationship is said to ground atortuous duty is the contract, andwhere the alleged breaches ofanytortuous duty are entirelyconcurrent with the contractualobligations between NRMA and thebuilder, in my view there can be nobasis for holding that there existsconcurrently with the contractualobligation, a tortuous duty incoincidental terms. Where thecontract is a detailed recitation ofthe agreed rights, obligations andresponsibilities of the builder to theproprietor as it is here, there is nobasis in my view for erecting anytortuous duty different to theagreed contractual responsibility.

Tai Hing came under challenge

from the House of Lords in

Henderson v Merrett SyndicateLtd 50 where the court appeared to

reverse the trend in Tai Hingtorecognize that a duty of care can

coexist with a contractual

relationship. Goff LJ at 532 and 553

said:

My own belief is that, in the presentcontext, common law is notantipathetic to concurrent liability,and that there is no sound basis fora rule which automatically restrictsthe claimant to eithera tortuousduty ora contractual remedy. Theresult may be untidy; but, given thatthe tortuous duty is imposed by thegeneral law, and the contractualduty is attributable to the will of theparties, / do not find it objectionable


that the claimant may be entitled totake advantage of the remedywhich is most advantageous to him,subject only to ascertaining whethertortuous duties are so inconsistentwith the applicable contract that, inaccordance with ordinaryprinciple,the parties must be taken to haveagreed that the tortuous duty is tobe limited or excluded.

However, the House of Lords wasprepared to accept that within thebuilding industry, the contractualstructure where no contract isentered into between the principaland the sub-contractorwasinconsistent with a duty of carebetween them. Goff LJ at 534commented:

For there is generally noassumption ofresponsibility by thesubcontractor orsupplier direct tothe building owner, the partieshaving so structured theirrelationship that it is inconsistentwith anyassumption ofresponsibility.

The High Court's pronouncement onthe issue was given in Astley vAustrust Limited.51 Gleeson CJ,McHugh, Gummowand HayneJJ at13 noted that:

... [T}he law has evolved to theconclusion that concurrentliabilities in both contract and tortmay arise in cases ofprofessionalnegligence. Their Honours notedthat the House ofLords inHenderson v Merrett SyndicatesLtd, in finding that an action couldbe brought for professionalnegligence against underwritingagents both in contract, rejected theview ofDeane J in Hawkins vClayton52 that where a tortuous dutyto take reasonable care exists,there is nojustification for implyinga term of the same content into thecontract, and consequently, noaction for breach ofan implied termto take reasonable care can arise.The majority concluded that thecorrect view was that expressed bythe House ofLords.

Thus AstlevvAustrust Limitedwould appear to be authority for theproportion that in situations ofconcurrent liability involvingprofessionals, a plaintiff may sue ineither tort or contract or both andthe duty to take reasonable carewill exist under both causes ofaction unless the contract expresslyexcludes the duty.

However, in the case ofsubcontractors, whilst it has beenheld that a subcontractor does notowe a duty of care to a principal, ina standard project contractstructure, the issue requires aconsideration of the facts of eachcase; for example, in NationalMutual Life Nominees Ltd v MarbleTile Co Ltd,53 Rolfe J refused tostrike out a pleading that allegedthat a sub-contractor owed a dutyof care to a principal.

The uncertainty for sub-contractorsand the potential for adding furtherdefendants can be seen from thedecision of Byme J in HamptonPark Pty Ltd vAustralian SafewayStores PtyLtd,54 where His Honourheld in a joinder application by thebuilderto gain the benefit of s.131which was opposed by the plaintiff,that he should not enquire in detailinto the relevant facts and thereforecould not rule out the existence of aduty and an order for joinderwasmade. However, it appears that fora duty of care to arise and thereforea tortuous liability, there needs tobe reliance by the plaintiff on thesub-contractor

So, there may be concurrentliability for building professionalsentitling them to relyon theproportionate liability legislation,but the position of 'non professional'sub-contractors is less clear and isin need of specific judicial finding.

CONCLUSIONSThe replacement of joint andseveral liability by proportionateliability in civil building litigation hasnot achieved completely theintention of the NMBA to limit

liability as to quantumproportionate to fault. None of theState or Territory Acts remove theright of the claimant/plaintiff toelect to commence against oneonly of a number of personsresponsible for defective buildingwork. The use of the word·defendant' in the Victorian and NewSouth Wales legislation and, in thatcontext, the effect of Robak,seriously compromises theeffectiveness of the legislation, andnegates its application in singledefendant cases. Forthis reasonalone, both the Victorian and NewSouth Wales legislation is in need ofamendment to mirror s.180 of theNMBA.

However, the fact that the NMBAwas not enacted federally, hasmeant that the individual State andTerritory proportionate liabilitylegislation can be circumvented bythe Trade Practices Act, in certainci rcumstances.

The concurrent liability in tort andcontract provides some scope forbuilding professionals, as distinctfrom sub-contractors, to benefitfrom the legislation, where theyhave been required by the principalto contractually give warrantiesagainst defective work.


REFERENCES1. lovegrove, K., Lovegrove onBuilding Law, Part 9-liability, at9-14-16.

2. Office Of local Government,Commonwealth Department ofImmigration, local Governmentand Ethnic Affairs, 'The liability oflocalAuthorities: Options forReform', 1988; Butterworth, R.,'Professional liability in theBuilding Industry', RoyalAustralianInstitute of Architects, 1988;National Building and ConstructionCouncil and National Public WorksConference, Joint Committee onliability and Insurance, 'liabilityInsurance in the ConstructionIndustry', 1988.

3. Victorian Supreme Court Rules9.06.

4. Davis, J.l.R., 'Inquiry into thelaw of Joint and Several liabilityReport of Stage Two',Commonwealth of Australia, 1995.

5. Swanton, J. and Mcdonald, B.,'Reforms to the law of Joint andSeveral liability' (1997) 5TlJ 109at 114-115.

6. ibid. at 115.

7. ibid. at 118.

8. ibid. at 118.

9. ibid.at110.

10. New South Wales law ReformCommission, 'Contribution AmongWrongdoers: Interim Report onSolidary liability' (July 1990); NewSouth Wales law ReformCommission, 'Contribution BetweenPersons liable for the SameDamage', Report 898 (APRI l1999); Richardson, M., 'Report onthe Economics of Joint and Severalliability Ve rsus Proport ionateliability', law Reform AdvisoryCouncil Expert Report 3;'Contribution Between Personsliable for the Same Damage', NewSouth Wales law ReformDiscussion Paper38 (September1997); 'joint and Several liabilityand Professional Defendants',

Report of the Standing SenateCommittee on Banking, Trade andFinance (Canada) APRil 1998.

11. Mcdonald, B., 'Reforms toliability in the ConstructionIndustry' (1994) 3 TlJ 285);Muirhead, S., 'The liability ofDesign Professional for Economicloss and the Apportionment Underthe Trade Practices Act 1974'(220)18 BCl 180; Sharkey, J., 'liabilityIssuesArising Underthe NewBuildingAct 1993'[unpublishedpaper given to the litigationlawyers Section of the law Instituteof Victoria, 1June 1994); Swanton,J. and Mcdonald, B., 'Reforms tothe law of Joint and Severalliability-Introduction ofProportionate liability', (1975) 5TlJ 109.

12. New South Wales law ReformCommission, 'Contribution BetweenPersons liable forthe SameDamage' (Report 89, APRil 1999)at41-42.

13. Davis, J.l.R., 'Inquiry Into thelaw of Joint and Several liability:Report of Stage One',Commonwealth of Australia,1994 at 48.

14. Williams, G.l., Joint Torts andContributory Negligence (1951)at paragraph 102.

15. Canadian Standing SenateCommittee on Banking, Trade andCommerce, 'Joint and Severalliability and ProfessionalDefendants', APRil 1998, Part IIIat 7.

16. Lovegrove above at 9-14-20.

17. The Hon. Rob Maclellan,'Second Reading Speech', BuildingBill, legislative Assembly(11 November 1993l.

18. Varghese, R., 'The New BuildingControl legislation' (1994)ACLN-Issue 39,7 at 10.

19. ibid. at 13.

20. Mcdonald, B., 'Reforms toliability in the ConstructionIndustry' [1 994) 3 TlJ 285 at 291 .

21. [1999] 2 VR 507.


23. op. cit. at 521.


25. [2000] VSC 102.

26. [2000] VSC 193.

27. Unreported VSC 20 October2000.

28. (1997) SADC 3596 (Kitchin Jl.

29. [2000] NTSC 89.

30. ibid. para 134.

31. Bell, G., 'Practical Problemswith Proportionate liabilitylegislation' [2001] 17 BCl 96 at 98.

32. ibid. at 99.

33. Gerber, P, 'Federal law andBuilding Cases', May 2001, BOPSNewsletter, 3.

34. Above at 11.

35. Seddon, N., 'MisleadingConduct: The Case forProportionate liability' 71 AlJ 147.

36. Tapsell, K., 'Severing liability inBuilding Cases' [1998] 14 BCl463.

37. ibid. at 3.

38. [1994] 179 ClR 388.

39. [1992] ATPR 41-189.

40. Singh, A., 'liability of ContractAdministrators', 1999 lMMSConstruction litigation Seminar, 14.

41.[1963] 110ClR74.

42. [1984] 3 NSWlR 396.

43. [1992] Australian Torts Reports,Cases 61 384.

44. [1983] VR 573.

45. [1996] AC 80.

46. Unreported, SCNSW, Rogers CJof Comm D, 8 November 1998.

47. [1987] 71 ACTR 1.

48. [1992] 11 BCl 74.

49.[1994] 13AClR231.

50. [1994] 3 All ER 506.

51.187ClR1.

52. [1998] 164 ClR 539.


53. Unreported, SCNSW, Rolf J, 28July 1992.

54. Unreported, SCV, Byrne J, 20October 2000.

BIBLIOGRAPHYAttard, M., 'Multi-Party Actions inthe Courts and Tribunals', July 2000Building Dispute PractitionersSociety Newsletter, 1.

Bailey, I.H., 'Unsuccessful Sever ofJoint liability in Building Actions',1999 lSJ 38.

Bell, G., 'Practical Problems withProportionate liability legislation',[2000] 17 BCl 96.

Bramson, A., 'ContributoryNegligence: legislativeAmendment', [2001] 17 BCl 338.

Burrows, A., 'Should One ReformJoint and Several liability and TortsTomorrow: A Tribute to JohnFlemming', lBC InformationServices 1998, 102.

Confos, E., 'New South WalesAdopts Abolition of "Deep Pocket"Syndrome', [2002] 84ACLN53.

Dams, J.l.R., 'Inquiry Into the lawof Joint and Several liability Reportof Stage One', ACLN-Issue 37, 36.

Dams, J.l.R., 'Inquiry Into the lawof Joint and Several liability Reportof Stage Two', ACLN-Issue 41, 18.

Emmerson, J., 'Apportionmentlegislation and AsleyvAustrust:Three Years later', 2002 14 AClB13.

Gerber, P, May 2001 , BuildingDisputes Practitioners SocietyNewsletter, 3.

lamert, G., 'Australian BuildingRegulation and liabilitv Reforms',Report prepared for CanadianHome BuildersAssociation andCanada Mortgage and HousingCorporation, September 1999.

legg, M., 'The High Court's Decisionon Concurrent liability andContributory Negligence in Astley vAustrust Limited', [1999] 18 ABlR262.

levin, D., 'Update on Developmentsin Building and Construction law',June 1999 Building DisputePractitioners Newsletter, 3.

little, A., 'liability of DesignProfessionals', 1999 lMMS'Construction litigation' Seminarpapers.

lovegrove, K., Lovegrove onBuilding Law, Part 9-liability,'Background to Proportionateliability', (9-14-1 J.

lovegrove, K., 'liability andInsurance Reforms of the EPA Act',2000 lTJ 63.

lovegrove, K., 'The New BuildingAct', 1994 llJ 604.

lovegrove, K. and Borthwick, l.,'The Robak Case: Implications forSole Defendants', 72 llJ 72.

McDonald, B., 'Reforms to liabilityin the Construction Industry', [1994]3 lTJ 285.

Muirhead, S., 'The liability ofDesign Professional for Economicloss and the Apportionment Underthe Trade Practices Act 7974',2002BCl180.

New South Wales law ReformCommission, Co-Report 65:'Contribution Among Wrongdoers:Interim Report on Solidary liability'[July 1990).

New South Wales law ReformCommission, Report 89:'Contribution Between Personsliable for the Same Damage' (April1999).

New South Wales law ReformCommission-Discussion Paper 38:'Contribution Between Personsliable forthe Same Damage'.

Richardson, M., 'Report on theEconomics of Joint and Severalliability Versus Proport ionateliability', Victorian AttorneyGeneral's law Reform AdvisoryCouncil Expert Report 3.

Rogers, A., 'Fairness or Joint andSeveral liability', [2000] 8 TlJ 107.

Seddon, N., 'Misleading Conduct:The Case for Proportionateliability', 71 AlJ 146.

Sharkey, J., 'liability Issues ArisingUnder the New Building Act 7993',unpublished paper given to thelitigation lawyers Section of thelaw Institute of Victoria, 1June1994.

Singh, A., 'liability of ConstructionAdministrators', 1999 lMMS'Construction litigation' Seminarpapers.

Standing Senate Committee onBanking, Trade and Finance[Canada] Report: 'Joint and Severalliability and ProfessionalDefendants' .

Swanton, J. and McDonald, B.,'Reforms to the law of Joint andSeveral liability-Introduction ofProportionate liability', [1997] 5TlJ 109.

Tapsell, K., 'Severing liability inBuilding Cases', 1998 llJ 42.

Tapsell, K., 'Severing liability inBuilding Cases', 14 BCl463.

Tilbury, M., 'Fairness Indeed?: AReply to Andrew Rogers', [2000] 8TlJ 113.

Uren, A.G., 'Boral Resources vRobak Engineering and ItsImplications', September 1999Building Dispute PractitionersSociety Newsletter, 7.

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Bryan Thomas's article waspreviously published in the BuildingDispute Practitioners'SocietyNewsletter (Issue 12-April2003).It is reprinted with permission.


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