37. It is useful to give brief consideration to the manner in which a system of proportionate liability might be implemented in practice. Upon such consideration it becomes apparent that there are several practical difficulties involved with structuring a model for proportionate recovery. These apply whether the movement to proportionate liability is general or is restricted to certain types of damage or categories of cases.
38. The first difficulty to be considered is the manner in which the proportionate share of each concurrent wrongdoer is to be determined. There is no real difficulty in cases where all concurrent wrongdoers are represented in the action. Proportionate shares could be determined in the same manner as is presently done with respect to contribution proceedings.The one difference would be that the plaintiff would have an interest in the determination of the proportionate responsibility of each defendant which he or she does not have under a system of solidary liability. For example, there might be argument as between P and D1 as to share of responsibility of D2, who P and D1 both suspect is insolvent. In this situation P might be put in the somewhat unusual position of arguing against the imposition of liability on D2 in order to maximise the proportionate share of D1 and therefore the amount of recoverable damages.
39. However, difficulty does arise when all possible concurrent wrongdoers are not party to the dispute. At present a plaintiff need not join all wrongdoers but can choose to sue only one of a number of possible defendants. If proportionate liability was the rule, a plaintiff would obviously have an interest in joining all persons responsible for his or her loss in order to achieve full recovery. But the question arises as to how far this should go. Should a plaintiff be expected to take action against all persons who might conceivably be liable in some degree for fear that a defendant might raise their possible liability in order to minimize his or her share of liability? Should the plaintiff be expected to take action against persons who are obviously insolvent or are otherwise not amenable to action, perhaps because they are out of the jurisdiction? The consequences for the cost and efficiency of litigation in such a course are obvious. Particular difficulty would also arise with respect to joining potential defendants who are subject to winding up proceedings or a petition for bankruptcy.19
40. Moreover, while it would be possible for the proportionate liability of a non-party (D2) to be determined for the purposes of a claim by P against D1, this also raises the possibility of unfairness to P. The determination of D2’s liability in the initial action would not be binding on D2 in any subsequent action by P against D2 and there is a possibility that a later court might hold D2’s liability to be less than originally assessed. In this case P would be undercompensated, even assuming both D1 and D2 are solvent.
41. In the Commission’s opinion, any system of proportionate liability would have to be structured in a way to take account of these difficulties. One option might be to restrict the assignment of shares of liability solely to the parties to a particular action. This is analogous to the approach currently taken in respect of contribution proceedings.20 This option would obviously have to be accompanied by a procedure allowing a defendant to join other parties as defendants to the plaintiff’s claim. Therefore under this system a plaintiff might still choose to sue only one defendant and it would then be the responsibility of that defendant to join other wrongdoers in order to avoid full liability for the plaintiff’s claim. While this option might provide for a workable system of proportionate liability it is still open to the criticism of expanding the scope and complexity of litigation.
42. The Commission is also concerned about the effect that the introduction of proportionate liability would have on the settlement of claims. At present the matters in dispute between a plaintiff and a particular defendant are restricted to the question of the liability of that defendant (which will often be clearly established) and the assessment of the plaintiff’s total loss. To add to these issues the question of the possible complicity of any other wrongdoers and the assignment of proportionate liability would introduce a new measure of uncertainty to litigation and might well hinder settlements being reached, thereby further clogging the courts. To the extent that this uncertainty would work in the favour of either party, it is likely to favour defendants, or more particularly their insurers, who are generally in a far better position to bear the risk of an adverse finding and to wait for a court resolution than are plaintiffs.
43. The final matter to be considered is the need for some reservation of the application of proportionate liability in particular cases. The obvious example is the case where D1 is vicariously liable for the negligence of D2. To apply proportionate liability in such a case would make a nonsense of the principle of vicarious liability and the policy behind it. The application of proportionate liability to other cases in which one party assumes responsibility for the conduct of another, and to joint liability generally, would also need some examination. In situations in which two people assume a single obligation or combine to commit a single breach of duty it can be argued that any division of responsibility for that breach (other than as between themselves) is inappropriate. Even where liability is several there may be cases where the relationship between D1 and D2 suggests that proportionate liability is inappropriate, for example if D1 is a company and D2 is the director and principal shareholder of that company.
FOOTNOTES
19. Where an order has been made for the winding up of a company, or a provisional liquidator has been appointed in respect of a company, no action or other civil proceeding may be commenced or proceeded with against the company except by leave of the Court: Companies (New South Wales) Code s371(2). With respect to bankruptcy, while an action might be available, it might be futile to proceed with this action as demands in the nature of unliquidated damages arising otherwise than by reason of a contract, promise or breach of trust are not provable in bankruptcy: Bankruptcy Act 1966 (Cth) s82(2).
20. See Fleming, note 7 above, at 250.
