Insurance and Reinsurance Forum

Insurance and Reinsurance Forum PROPORTIONATE LIABILITY - LEGISLATIVE REFORMS AND THEIR IMPLICATIONS Andrea Martignoni and Philip Hopley 1 1. What does proportionate liability mean? Proportionate liability is relevant where one or more contribute to a plaintiff's loss. Traditionally, each wrongdoer is jointly and severally liable for the whole amount of the plaintiff's loss. Under joint and several liability, the plaintiff may elect to sue or enforce a judgment against any one or a number of. Under proportionate liability, the liability of each wrongdoer is limited having regard to an assessment of the extent of its responsibility for the plaintiff's loss. The plaintiff will only be able to recover the whole amount of its loss if it sues all concurrent. The plaintiff bears the risk of any concurrent wrongdoer being insolvent or absconding. Under joint and several liability, this risk is borne by the defendants against whom the plaintiff chooses to enforce any judgment. Those defendants will generally have rights of contribution against any concurrent, but such rights may be of little value where the wrongdoer is insolvent or has absconded. The impetus for the current reforms has largely stemmed from a perceived need to reduce the cost of professional indemnity insurance cover. Under joint and several liability, professional advisers were typically viewed by plaintiffs as having "deep pockets" through their liability insurers and have been seen as major targets for recovery of losses, even in circumstances where they played a relatively minor part in the events which gave rise to the losses. There was a perception in the industry that as a consequence the cost of professional indemnity insurance has risen dramatically over the last decade or so, to the point where for many it had become unaffordable. 2 1 The authors acknowledge the assistance derived from papers produced by John Morgan and Mark Lindfield "Proportionate Liability and Contribution" dated 6 October 2004 for Allens Arthur Robinson Insurance and Reinsurance Forum, a paper produced by Michael Quinlan and Matthew Skinner entitled "So What Different Does It Make? Civil Liability Reforms", dated 25 November 2004 for University of New South Wales Continuing Legal Education Seminar and a paper produced by Oscar Shub and Mark Lindfield entitled "Proportionate Liability in Australia" for the Fall 2005 edition of the Federation of Defense and Corporate Counsel Quarterly. This is an updated version of a paper prepared by Andrea Martignoni and Kim Reid in June 2005. 2 See Reform of Liability Insurance Law in Australia, Commonwealth Department of Treasury, February 2004 pwhs A0107087662v1 150520 2.5.2006

2. Which jurisdictions have introduced proportionate liability? Proportionate liability legislation has now been proclaimed in all Australian jurisdictions. It is worth noting that Australia is not the only country with a proportionate liability regime. Such a system exists in one form or other in Ireland, British Colombia and in 30 states of the United States. 3. To what claims does proportionate liability apply? Legislation in each jurisdiction delineates the claims to which proportionate liability will apply. In New South Wales, the provisions for proportionate liability are contained in Part 4 of the Civil Liability Act 2002 (NSW) The provisions apply to proceedings commenced after the relevant date prescribed in the legislation (in the case of New South Wales, 1 December 2004) but only in relation to liabilities that arose after another prescribed date (being 26 July 2004 at New South Wales and Commonwealth level). A liability based on the tort of negligence or for misleading and deceptive conduct under the Trade Practices Act 1974 (Cth) will only arise when damage is suffered. Proportionate liability is likely to apply to many such claims which are now brought. In order to avoid the operation of the proportionate liability provisions, plaintiffs may choose to rely on a breach of contract (which may be based on a concurrent contractual duty of care). A cause of action in contract arises when the relevant breach occurs. For many claims, the breach may occur well before any damage is suffered by the plaintiff. The provisions apply wherever a claim involves two or more "concurrent ". Section 34(2) defines "concurrent " to comprise persons whose acts or omissions (or act or omission) caused, independently of each other or jointly, the damage or loss that is the subject of the claim. Section 34(1)(a) makes it clear that the proportionate liability provisions apply to any claim for economic loss or damage to property (whether in contract, tort or otherwise) arising from a failure to take reasonable care. The legislation will not apply to a party liable under a contractual warranty, or under principles of vicarious liability, which applies irrespective of any want of reasonable care. The legislation also does not apply to intentional (section 34A). This is discussed further below. 5 The relevant contribution legislation is s5 Law Reform (Miscellaneous Provisions) Act 1946 (NSW); Pt 4 Law Reform (Miscellaneous Provisions) Act 1955 (ACT); ss5-9 Law Reform Act 1995 (QLD); ss5, 6 Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA); s3 Wrongs Act 1954 (TAS); ss23a-24ad Wrongs Act 1968 (VIC); s7 Law Reform (Contributory Negligence and tortfeasors' Contribution) Act 1947 (WA); Pt IV Law Reform (Miscellaneous Provisions) Act 1956 (NT). pwhs A0107087662v1 150520 2.5.2006 Page 2

Besides applying to common law claims, the New South Wales provisions also apply to claims for damages for economic loss or damage to property under the Fair Trading Act 1987 (NSW) (caused by misleading and deceptive conduct in breach of section 42). There is a single apportionable claim in proceedings in respect of the same loss or damage even if the claim for loss or damage is based on more than one cause of action, whether or not of the same or a different kind (section 34(1A)). The effect of the above provisions is that proportionate liability operates more broadly than claims for contribution between joint tortfeasors, or even claims for contribution in equity. Contribution between joint tortfeasors requires that each party be liable in tort 5. Contribution in equity is not available unless the claims against the parties arise from "co-ordinate liabilities" or a "common obligation" Burke v LFOT Pty Ltd (2002) 187 CLR 612. At Commonwealth level, the provisions apply to claims for damages in relation to economic loss and property damage caused by misleading and deceptive conduct in contravention of section 52 of the Trade Practices Act 1974 (Cth) (TPA), or the equivalent provisions of the ASIC Act (section 12DA) and the Corporations Act (section 1041H) see subsection 87CB(1) of the TPA. The Commonwealth legislation also creates a statutory defence of contributory negligence to allegations by a plaintiff that a defendant has breached the misleading and deceptive conduct prohibitions. This has the effect of reversing the impact of the decision in I&L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109, in which the High Court rejected the availability of any contributory negligence defence to a s52 claim. The defence does not apply where the breach was intentional or fraudulent see subsection 82(1B) of the TPA. 4. What differences exist in the legislation between various jurisdictions? To what extent is it possible for a plaintiff to choose between jurisdictions? The most significant areas of difference between various jurisdictions are as follows: (a) (b) (c) (d) (e) Whether or not there is an obligation on a defendant to notify the plaintiff of other concurrent, and if so the extent of that obligation. Whether the Court can take into account the liability of any party not joined to the proceedings in determining the proportion of damage attributable to parties who are joined. Whether there is a consumer carve-out. The Queensland, ACT and Northern Territory provisions are the only ones to contain such a carve-out. Differences in the definition of "concurrent wrongdoer". In Queensland and South Australia, the definition does not include persons whose actions "jointly cause" the loss or damage claimed. Whether it is permissible to contract out proportionate liability. pwhs A0107087662v1 150520 2.5.2006 Page 3

(f) Differences in the transitional provisions Obligations to notify of other concurrent Both the Commonwealth and New South Wales legislation contains provisions to the effect that if a defendant has reasonable grounds to believe that a particular person may be a concurrent wrongdoer and fails to give to the plaintiff, as soon as practicable, written notice to that effect, with the consequence that the plaintiff unnecessarily incurs costs which would not have been incurred if the plaintiff was aware that the other person may be a concurrent wrongdoer, the Court may order that the defendant pay all or any of the costs of the plaintiff 6. These costs may be assessed on an indemnity basis or otherwise (section 87CE of the TPA and section 35A of the CLA (NSW)). Similar provisions exist in WA, the ACT, Tasmania, SA and the NT 7. The Queensland provisions go even further. Firstly, they impose a positive obligation on the claimant to make claims against all persons it has reasonable ground to believe may be liable for the loss or damage (section 32 CLA (Qld)). There is also a positive obligation on each defendant to notify the claimant in writing, as soon as practicable after becoming aware of the claim being made or of learning of any other persons who the defendant has reasonable grounds to believe is also a concurrent wrongdoer in relation to the claim. (Section 32(3)). The sanction for failing to comply with this obligation includes not only costs but the Court is also entitled to make orders which would have the effect of making the party who failed to notify bear the loss attributable to the concurrent wrongdoer (section 32(4) and (5)). In Victoria, there is no obligation on defendants to notify of other concurrent. However, a failure to do so may have consequences in relation to a Victorian court's ability to take into account the liability. Liability In Western Australia, South Australia and Tasmania, the legislation provides that a Court is to to the proportionate liability of persons who are not parties to the litigation 8. By contrast, the Commonwealth, New South Wales, Queensland, the ACT, and the Northern Territory legislation states that the Court may of those non-parties 9. Until the Courts begin to apply the legislation it will be unclear on what basis they will or will not exercise their discretion to. The Victorian legislation sits alone in expressly prohibiting a Court from having regard to the liability, unless they are insolvent or deceased (section 24AI(3) Wrongs Act (VIC)). This may produce some anomalous results in circumstances where, for example, a Court is required to to a non-party's proportionate liability for misleading and deceptive conduct under the TPA but must not to that party's liability in a current negligence claim. 6 s87ce Trade Practices Act 1974 (Cth); s35a (NSW) 7 s5aka (WA); s107g(act); s43d (TAS); s1o (SA); s12 (NT) 8 s5ak(3) (WA); s8(2)(b) (SA); s43b(3)(b) 9 s87cd(3)(b) (Cth); s35(3)(b) (NSW); s31(3) (QLD); s107f(2)(b) (ACT); s13(2)(b) (NT) pwhs A0107087662v1 150520 2.5.2006 Page 4

Consumer claims The Queensland, ACT and Northern Territory provisions contain a carve-out for consumer claims 10. In Queensland and the ACT a "consumer" is defined as an individual whose claim is based on rights relating to goods or services, or both, required for personal domestic or household use or consumption, or relate to advice given by a professional to the individual for the individual's use, other than for business carried on by the individual. The language of the consumer carve-out in the ACT legislation contains some potentially material differences. In the ACT provisions, a "consumer claim" is defined to extend to a claim relating to "personal financial advice supplied to the claimant by a defendant" 11. The Northern Territory's carve out is more limited and applies only to claims relating to breaches of consumer product safety and product information legislation. 12 Jointly caused losses Perhaps the most significant difference arises from the fact that the Queensland and SA legislation does not apply to persons whose actions jointly cause the loss or damage claimed. The requirement in that legislation that the conduct of the defendants cause, independently of each other, the loss or damage that is the subject of the claim will exclude many claims 13. The rationale for excluding such claims is unclear. It is possible to imagine many circumstances in which it will not be clear whether the conduct of two or more defendants can be said to have jointly caused the loss or independently did so. For example, suppose a plaintiff lost money due to lending in reliance on a negligent valuation. The plaintiff also relied on a financial adviser who failed to detect the negligent valuation. The conduct of the financial adviser would not have caused the loss but for the negligent valuation. In this circumstance it seems that both the valuer and the financial adviser jointly caused the loss. If the financial adviser had failed to properly assess the credit worthiness of the lender, independently of the negligent valuation, its conduct may have independently caused the loss. There is no reason in principle why apportionment should not apply in either case. The Court has a sufficiently wide discretion to take account of all relevant circumstances in determining what apportionment is just. It is difficult to see why jointly committed torts ought to be excluded from proportionate liability. It should also be noted that the Queensland provisions contain an unusual requirement to the effect that a concurrent wrongdoer who contravenes the state prohibition on misleading or deceptive conduct is "severally liable for the damages awarded against any other concurrent wrongdoer to the apportionable claim." 14 10 s29 (QLD); s107c (ACT) 11 s107c(b) (ACT) 12 Pt 4 Consumer Affairs and Fair Trading Act (NT) 13 s30(1) (QLD); s107d(1) (ACT) 14 s32f (QLD) pwhs A0107087662v1 150520 2.5.2006 Page 5

Contracting out In New South Wales, Western Australia and Tasmania, there is an express provision permitting parties to contract out of the proportionate liability provisions. 15 No such provision exists in the Commonwealth, Victorian, South Australian, Northern Territory or ACT legislation. In Queensland, there is an express prohibition against contracting out in relation to proportionate liability. 16 Forum shopping Where causes of action cross borders, a question arises whether differences in civil liability provisions between states and territories provide an opportunity for forum shopping. This depends upon whether the conflicting aspects of the legislation are procedural or substantive. If they are merely procedural, then they will be determined by reference to the place where the action is commenced. If they are substantive then they will be determined by the law of the place where the tort was committed, and there will be no opportunity for forum shopping. Now it appears that many of the provisions will be substantive, including limitation periods and assessment of damages John Pfeiffer Pty Limited v Rogerson (2000) 203 CLR 503). It is arguable that the question whether the defendant should notify the plaintiff of other concurrent, or the sanction which follows for failure to do so, is a matter of procedure rather than substance. This may encourage some forum shopping (mostly by plaintiffs seeking to take advantage of the stricter Queensland provisions). Each of the other matters above appear to be matters of substance rather than procedure. There should be no opportunity for forum shopping to take advantage of the differences between jurisdictions on those matters. Differences in the transitional provisions Prospective plaintiffs and defendants alike will need to be aware of the differences in each jurisdiction's transitional provisions as these contain differing commencement dates for the proportionate liability regimes based on the date of the cause of action and/or the date proceedings are commenced. 17 Plaintiffs may now find themselves in the unfamiliar position of arguing for the earliest possible date of commencement of a cause of action in order to take advantage of joint and several liability - and vice versa for defendants. 15 s3a (NSW); s4a (WA); s3a (Tas) 16 s7 (QLD) 17 A table setting out the relevant commencement dates as well as a summary of the main differences between Australian jurisdictions appears at the end of this paper. pwhs A0107087662v1 150520 2.5.2006 Page 6

5. What are the significant areas where proportionate liability does not apply? Apart from those areas outlined above where there are differences between the jurisdictions, there are important substantive areas where the proportionate liability provisions do not apply. These comprise the following: (a) (b) (c) at the Commonwealth level, the application of the provisions is limited to breaches of section 52 of the TPA (or equivalent provisions of the ASIC Act and the Corporations Act). Section 52 has been popular with plaintiffs because it covers a broad range of conduct. Other more specific provisions may nevertheless cover a fairly wide range of activity. These specific provisions are now likely to prove much more valuable to plaintiffs seeking to avoid the operation of the proportionate liability provisions. The scope of these provisions is discussed further below. intentional or fraudulent conduct is excluded; nothing prevents a person being held vicariously liable for an apportionable claim for which another person is liable. In the case of partnerships, nothing prevents a partner from being held severally liable with another partner for that proportion of an apportionable claim for which the other partner is liable. Significant TPA provisions to which proportionate liability does not apply Section 53 is the main alternative prohibition. It prohibits particular types of conduct, much of which may also be caught by section 52. Section 53 relevantly provides: A corporation shall not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with a promotion by any means of the supply or use of goods or services: (a) (aa) (b) (bb) (c) falsely represent that goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use; falsely represented that services are of a particular standard quality value or grade; falsely represent that goods are new; falsely represent a particular person has agreed to acquire goods or services; represent that goods or services has sponsorship, approval, performance characteristics, accessories, uses or benefits they do not have; (e) (f) (g) make a false or misleading representation with respect to the price of goods or services; make a false or misleading representation concerning the need for any goods or services; or make a false or misleading representation concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy. pwhs A0107087662v1 150520 2.5.2006 Page 7

Clearly, these prohibitions have the potential to extend to a wide range of commercial activity. Because of the broad operation of section 52, the limits of these prohibitions have largely remained untested. There is divergent authority on the question of whether "falsely represent" requires some degree of knowledge of the falsity of the representation on behalf of the person making it. In Murphy v Farmer (1988) 165 CLR, a case involving the application of section 229(1) of the Customs Act 1901(Cth), the High Court was inclined to interpret 'false' to mean 'purposely untrue' in circumstances where the importer of a motor vehicle had made an incorrect, but not deliberately incorrect, customs declaration. If this was the case in relation to section 53, a clear distinction could be drawn between it and section 52. However, in Given v CV Holland (Holdings) Pty Ltd (1977) 29 FLR 212, where the defendant offered for sale a car with an odometer reading of 23,700 miles, when in fact it had travelled substantially in excess of that mileage, Franki J said (at page 217): The next matter to consider is whether the words 'falsely represent' in s53(a) are satisfied if the representation is not correct, or whether it must be known to be false by the person making the representation I am satisfied that, if a representation is in fact not correct it comes within the words of the section, even if it is not false to the knowledge of the person making the representation. This view was endorsed by the Full Court in Darwin Bakery Pty Ltd v Sully (1981) 51 FLR 90 (see also Gardam v George Wills & Co Ltd (1988) 82 ALR 415 and TPC v The Vales Wine Company Pty Ltd (1996) 6 FCR 336. Other significant more specific provisions of the TPA includes section 53A (false or misleading representations in connection with land) and section 55A. The latter relates to "conduct that is liable to mislead the public as to the nature, the characteristics, the suitability for their purpose or the quantity of any services". TPC v J&R Enterprises Pty Ltd (1991) 99 ALR 325 involved the sale by the defendants to businesses of advertising space in an advertising scheme called the 'System 2000' which was a home organiser and information centre, at a time when they knew there was no prospect of the System 2000 be available in the Adelaide area in the foreseeable future. O'Loughlin J held (as with sections 53 and 53A) that there was no need to show any intention to mislead on the part of the defendants. Relying upon the authority of Westpac Banking Corporation v Northern Metals Pty Ltd (1989) 14 IPR 499, the Court found that the term 'liable to mislead' in section 55A was narrower than the words 'likely to mislead' in section 52. Hence a greater degree of evidence is required to establish a breach of section 55A. The words 'the public' did not mean the world at large or the whole community. It was sufficient that an approach had been made that was general and at random and that the number of people approached was sufficiently large. 19 s1b (Cth) pwhs A0107087662v1 150520 2.5.2006 Page 8

Other significant Commonwealth provisions which may receive more attention include those which relate to unconscionability. Rationale for the Commonwealth's approach The rationale for the Commonwealth's approach may be that a distinction should be drawn between provisions of the TPA which are capable of giving rise to an offence (eg. section 53) and those which are not (section 52). If so, the distinction is a curious one and inappropriate to draw in relation to much of the conduct which may be caught by s53, particularly if it is accepted that knowledge of the falsity is not required for s53 to be breached. Intentional It remains to be seen what the practical impact of excluding intentional will be. While the intentional wrongdoer is unable to rely upon the benefit of the proportionate liability provisions, that wrongdoer nevertheless falls within the definition of "concurrent wrongdoer". Consequently, in assessing the liability of other defendants, it appears that its culpability ought to be taken into account. This seems to be a circumstances where plaintiffs stand to lose the most as a result of the application of proportionate liability. It seems that unless all of the defendants have committed wrongs intentionally, the Court must perform the exercise of attributing liability proportionately. It is often the case that the intentional wrongdoer is impecunious. In these circumstances, a plaintiff who proves dishonesty against a wrongdoer faces a double jeopardy. In the first instance, any applicable professional indemnity or directors and officers insurance is likely to be invalidated. Secondly, other things being equal, the non-intentional would stand to have substantially reduced proportions of the plaintiff's loss attributed to them. Their culpability would have to be small in comparison with the intentional wrongdoer. 6. How will the apportionment of liability be made? The legislation gives the Courts a discretion in relation to the apportionment of damages. Under joint and several liability, questions of apportionment arise where claims for contribution are brought against joint tortfeasors. The relevant contribution legislation provides that the amount of contribution recoverable "shall be such as may be found by the Court to be just and equitable having regard to the extent of that person's responsibility for the damage" 19. Only the Queensland and South Australian provisions mirror this requirement. 20 The Commonwealth, the New South Wales, Western Australian, Victorian, ACT and NT provisions do not contain the words "and equitable". It remains to be seen whether the slight difference in language has any significance. There is no rational basis for drawing any distinction between the apportionment which ought to apply where parties are joined directly by the plaintiff to that which should apply where they are joined by way of cross-claims for contribution. 20 In South Australia, the Court's assessment is to be "fair and equitable"; s8 (NT) pwhs A0107087662v1 150520 2.5.2006 Page 9

The High Court considered the question of apportionment in Podrebersek v Australian Iron and Steel Pty Ltd (1985) 59 ALR 529, albeit as between plaintiff and defendant where there was a question of contributory negligence. The Court said: The making of an apportionment as between a plaintiff and a defendant of their respective shares of the responsibility for the damage involves a comparison of both culpability ie the degree of departure from the standard of care of a reasonable man (Pennington v Norris (1956) 96 CLR 10 at p 16) and of the relative importance of the acts of the parties in causing the damage; Stapley v Gypsum Mines Ltd (1953) AC 663, at p 682; Smith v McIntyre (1958) Tas SR 36 at pp 42-49 and Broadhurst v Millway (1976) VR 208, at p 219 and cases there cited. It is the whole conduct of the negligent party in relation to the circumstances of the accident which must be subjected to comparative examination. The significance of the various elements involved in such an examination will vary from case to case; for example, the circumstances of some cases may be such that a comparison of the relative importance of the acts of the parties in causing the damage will be of little, if any, importance. Although this involved apportionment between plaintiff and defendant, there is no reason why similar principles should not apply in making an apportionment between concurrent. The language of the apportionment legislation is similar to that used by the Court which is highlighted in bold above. Both culpability and causation appear to be relevant. Even assuming that there is no material difference between what is "just", what is "just and equitable" and what is "fair and equitable", given the relatively narrow range of claims to which the contribution legislation extends, decisions applying that legislation are likely to give little guidance on how the apportionment should be made. Significant questions which arise include the following: (a) (b) (c) Other things being equal, should a greater degree of responsibility be attributed to defendants who breach a statutory prohibition relating to misleading and deceptive conduct, as distinct from defendants who are liable only at common law? How will the fact that one of the defendants acted with intent affect the liability of the others? Consider the situation where there is a corporate collapse as a result of dishonest conduct on the part of one or more directors, but auditors and other external advisers are also found to have acted negligently. How does the dishonesty of the directors impact upon what is recoverable, collectively, from the auditors and external advisers? Is it possible to apportion all of the responsibility to one defendant? The contribution legislation makes it clear that the Court has that discretion (see s5(2) in the New South Wales legislation). Even more significant issues arise from the expansive definition of 'concurrent wrongdoer'. The definition includes all persons whose conduct causes the damage or loss. Where a party is able to rely upon a contractual exclusion or limitation of liability, it is unclear what effect that will have on the liability of other concurrent. The contractual exclusion/limitation would appear to provide a defence, but would not appear to diminish the defendant's responsibility (as a matter of fact) for the damage or loss. If that is the pwhs A0107087662v1 150520 2.5.2006 Page 10

right approach then the plaintiff must bear any loss or damage which is the subject of an exclusion or limitation. Under joint and several liability, an exclusion or limitation in favour of one defendant would operate to the detriment of other defendants, who are each fully liable to compensate the plaintiff. Similarly, the plaintiff will stand to lose where a limitation period has expired in respect of its cause of action against a concurrent wrongdoer who played a significant part in causing the plaintiff's loss. The definition of 'concurrent wrongdoer' is so broad that it could even extend to parties who cause the loss or damage but owe no duty of care to the plaintiff. Depending upon the facts, questions of culpability may suggest that the liability to be apportioned to a party who owes no duty of care may be nil, or at least a very small portion of the plaintiff's loss. 7. What practical impact is proportionate liability likely to have on the way in which litigation is conducted where there are multiple defendants? Proportionate liability generally encourages plaintiffs to join all parties responsible for causing the loss or damage. Defendants will have less interest in doing to, particularly in those jurisdictions where the liability of a non-party can be taken into account (which is all those except Victoria). Those defendants will be able to assert, and lead evidence to the effect, that a large apportionment should be allocated to a non-party, in circumstances where a non-party will not be present to raise any evidence in reply. There are provisions which prevent concurrent in relation to an apportionable claim from being required to contribute to any damages or contribution recovered from another concurrent wrongdoer, or being required to indemnify any such wrongdoer. 21 Consequently, claims for contribution between concurrent are no longer necessary. Although the provisions were presumably intended to address claims for contribution based on liability to the plaintiff they are drafted in such wide terms that they appear to exclude the exercise of contractual rights of indemnity. It is unlikely that this was intended and the Courts are likely to read down the provisions to avoid that result. Where contribution or indemnity is based on liability to the plaintiff, the appropriate course is for defendants to notify plaintiffs of any other concurrent and for the plaintiff to decide whether to join any named persons. It is theoretically possible for defendants to seek contribution from other not joined to the proceedings, but in general this should not be necessary. Proportionate liability creates a potential for multiplicity of proceedings and an associated increase in legal costs. If the plaintiff sues only some of the concurrent and is not satisfied with the judgment it obtains, there is nothing to prevent it from bringing further proceedings against any other concurrent. Any findings in the first proceedings as to the extent of the plaintiff's loss and the relative contribution of the parties not joined will not be binding in the later proceedings in all jurisdictions except South 21 s87cf TPA (Cth); s36 (NSW); s24aj (VIC); s32a (QLD); s5al (WA); s43c (TAS) pwhs A0107087662v1 150520 2.5.2006 Page 11

Australia. 22 Indeed, all issues will need to be re-litigated. The legislation contains provisions to the effect that a plaintiff cannot recover damages in any further proceedings which, having regard to damages recovered in the prior proceedings, would result in it receiving compensation that is greater than the damage or loss it actually sustained. 23 However, these provisions do not prevent the plaintiff from trying to establish in any later proceedings that the quantum of its loss was greater than as assessed in the previous proceedings. Conversely, the defendant may seek to establish that the plaintiff's damages are, in fact, a lesser amount. Clearly, the potential for multiplicity of proceedings creates a serious risk of inconsistent findings of fact. 8. Reported cases under the new provisions To date, only one decision involving the application of proportionate liability legislation has been reported. Unfortunately, the case itself offers little practical guidance to an area which will no doubt require a great deal of judicial interpretation before the full impact of the reforms can be assessed. In Commonwealth Bank of Australia v Witherow 24 the Victorian Court of Appeal allowed an appeal by the Commonwealth Bank against the first instance decision of the county court which dismissed its application for summary judgment against plaintiff guarantor, a company director, under a deed of guarantee. The plaintiff argued at the summary judgment hearing that his liability was reduced by operation of the proportionate liability provisions in Victoria and sought to join his accountant as a concurrent wrongdoer. This was on the basis that the plaintiff had relied on the accountant's advice as to the solvency of the borrower company. The Victorian Court of Appeal held that the bank's claim was not an apportionable claim under Part IVAA of the Wrongs Act 1958 (Vic) as it was not a claim for damages but rather a claim for a liquidated sum under the deed of guarantee, and entered summary judgment for the full amount of the guarantee. The Court noted that the plaintiff would be able to bring contribution proceedings against his accountant in negligence. 9. Conclusions In conclusion, there are many issues which arise from the proportionate liability provisions. Perhaps the most significant of these are: (a) (b) Whether the liability of a party able to rely on a contractual exclusion or limitation of liability is to be borne by the plaintiff or other concurrent. The extent to which plaintiffs will be able to avoid the operation of the provisions by bringing claims under one or more specific provisions of the TPA, besides s52. 22 s.11 (SA) 23 s87cg TPA (Cth); s37 (NSW); s4 (VIC); s32d (QLD); s5am (WA); s107i (ACT); s43e (TAS) 24 [2006] VSCA 45 (17 February 2006) pwhs A0107087662v1 150520 2.5.2006 Page 12

(c) (d) (e) (f) How liability of intentional will impact on what is recoverable from innocent. How apportionment will apply in practice and how the Courts will deal with non parties in exercising their discretion in relation to apportionment. Whether proportionate liability will result in multiplicity of proceedings, and consequent inconsistent findings. Whether any significant forum shopping will be available. There will inevitably be more interlocutory disputes as the Courts are required to deal with these and other questions as they arise. The existence of the proportionate liability provisions will have a significant impact upon the appropriate strategy both for plaintiffs in bringing proceedings and defendants in defending them wherever there are multiple. Allens Arthur Robinson 3 May 2006 pwhs A0107087662v1 150520 2.5.2006 Page 13

Comparative summary of the main differences between jurisdictions NSW QLD SA WA ACT VIC TAS NT Cth Court may Court may Court is to Court is to Court may Court must Court is to Court may Court may not have regard to the liability of non- parties unless non-party dead or wound up Costs D must inform Costs Costs Costs No sanction Costs Costs Costs sanction for P of identity of sanction for sanction for sanction for for failure to sanction for sanction for sanction for failure to failure to failure to failure to notify of other failure to failure to failure to inform P of positive inform P of inform P of inform P of concurrent inform P of inform P of inform P of other obligation to other other other other other other make claims Carve out for Carve out for Carve out for consumer consumer some types of claims claims consumer claims Does not Does not apply to apply to who jointly who jointly cause loss cause loss pwhs A0107087662v1 150520 2.5.2006 Page 14

NSW QLD SA WA ACT VIC TAS NT Cth Contracting Contracting No Contracting No No Contracting No out allowed out prohibited contracting out allowed contracting contracting out allowed contracting out out out out "just" "just and "fair and "just" "just" "just" "just" "just" "just and equitable" equitable" equitable" Proceedings commenced on or after 26 on or after 8 on or after 26 July 2004 and March 2005 October 2005 December March 2005 January 2004 June 2005 June 2005 July 2004 and proceedings 2004 proceedings commenced commenced December December 2004 2004 pwhs A0107087662v1 150520 2.5.2006 Page 15