WOBO appreciates the update from Kim Lovegrove, Lovegrove & Cotton Lawyers

Kim addressed the annual FireNZ Conference in Auckland on the critical topic: How Proportionate Liability Will Benefit Designers and Fire Engineers in a Revised Setting of Responsibility-Based Liability Allocation

New Zealand is replacing joint and several liability with proportionate liability in construction law. In this interview, Kim Lovegrove explains the benefits, challenges, and lessons from Australia’s regime, and how the reforms will create a more sustainable system for territorial authorities, insurers, and homeowners.

On the 18th of August the New Zealand Minister for Construction the Hon Chris Penk announced major reforms to the NZ building consent process. A key element in the reform agenda included the demise of joint and several liability and the embracing of the responsibility based liability doctrine more commonly known as proportionate liability.

On that historic day Minister Penk said:“under this new model each party will only be responsible for the share of work that they carry out.” 

This heralds and paves the pathway for the introduction of proportionate liability in NZ.

To shed light on this reform, Tsigereda Lovegrove — an Australian construction lawyer — speaks with Kim Lovegrove. He was retained as a law reform consultant by MBIE to provide policy advice pathways on how to move from joint and several liability to proportionate liability.

Tsigereda Lovegrove: Kim, for those with no legal background, what exactly is proportionate liability?

Kim Lovegrove: Proportionate liability is a responsibility-based doctrine. It allocates liability between multiple parties according to the degree of responsibility each bears for the loss or damage. In other words, if you are 20% responsible, you are liable for 20% of the damages — period.

Tsigereda Lovegrove: How does proportionate liability differ from joint-and-several liability?

Kim Lovegrove: Under joint-and-several liability, a plaintiff can recover the entire amount from just one defendant, regardless of that defendant’s level of fault. Proportionate liability provides that each party only pays their assessed and jurisprudentially ‘adjudicated’ share.

Tsigereda Lovegrove: What will be some of the benefits for NZ?

Kim Lovegrove: In New Zealand, as in Australia before 1993, territorial authorities — local councils — have often been cast as the “insurer of last resort” in building defect litigation. Even when their involvement has been remote or peripheral — for example, confined to part of the approval process — they have often been left‘carrying the can’ when more directly responsible parties have become impecunious.

Underwriting the liabilities of insolvent primary wrongdoers has imposed severe financial burdens on councils and ratepayers, the NZ citizen if you will. That burden becomes harder to sustain. Proportionate liability shifts the focus to actual responsibility, aiming to ensure that each party pays its fair share. It is axiomatic that no one should have to underwrite the liability of other culpable in fact often more culpable parties.

Tsigereda Lovegrove: You were involved in the fashioning of proportionate liability in Australia in the 1990s. What did that involve?

Kim Lovegrove: I was Assistant Director of Building Control and the instructing officer to the Parliamentary Counsel’s Office in Victoria when proportionate liability was first introduced under the Building Act 1993.

I was also the Project Director of the Australian National Model Building Act project team — the law reform template for the overhauling of some Australian building legislation in a number of jurisdictions in the early 90s. The work involved deep consultation, preparing drafting instructions for legislative drafters, and balancing fairness for defendants with adequate recovery for plaintiffs.

Tsigereda Lovegrove: In practical terms, how does proportionate liability work in court?

Kim Lovegrove: The court assesses each party’s percentage of responsibility for the economic harm. The plaintiff recovers that percentage from each defendant directly. There’s no mechanism for forcing a “deep pocket” defendant to cover other defendants’ unpaid shares.

Tsigereda Lovegrove: What are the advantages of proportionate liability?

Kim Lovegrove: It removes the exposure of insurers and respondents who would otherwise have to underwrite as it were, the errors and omissions of other parties. It also encourages all parties to actively manage risk, knowing they will be liable for their own mistakes.

Tsigereda Lovegrove: What lessons have been learned from Australia’s experience? Follow the link to read more