Proportionate liability is where a wrongful person is not legally responsible for compensatory damages in excess of the percentage share assessed against them. Proportionate liability is generally applicable to claims for property damage and pure economic loss arising from:
- misleading or deceptive conduct, and;
- failure to take reasonable care.
To explain, misleading or deceptive conduct is any conduct which is deceptive and misleading in nature or is likely to deceive or mislead, and thus is unlawful in trade or commerce.
Furthermore, the Court defines that, a defendant will only be legally responsible, in negligence, for failure to take reasonable care to prevent some kind of foreseeable harm to a plaintiff, in circumstances where the law imposes a duty to take such care.
Usually, claims to which proportionate liability is applicable are ‘apportionable claims.’ Although each piece of legislation varies in nature, they all underlie several general principles. These are:
- Proportionate liability policies do not extend to conduct relating to personal injuries.
- Each concurrent wrongful person must have legal responsibility for a defendant to rely on a proportionate defence with the complainant.
- Selective pleadings can not prevent the operation of proportionate liability regimes.
- Some states allow parties to contract out of the corresponding liability regimes, while others do not.
Requirements to use Proportionate Liability as a defence
In order for Proportionate Liability to be a defence, the following conditions apply:
- The argument of a complainant gives rise to the legal liability of a defendant in damages resulting either from violation of a statutory duty of care or from the legislation.
- The defendant’s legal responsibility consists of financial loss or;
- Loss of property or damage, and no loss arising out of personal harm (personal injury).
- There are many wrongful persons that have committed the misdeed that resulted in damages.
- The wrongful person who is entitled to the benefit of proportionate liability is negligent or innocent.
Some Examples
Example 1.
Say you are engaging a contractor to build high-rise apartments. The contract specifies that the contractor must give you full compensation for any loss or damage caused by structural failure. Because of the building engineer’s incompetence, the buildings collapse.
You may not be able to recover any money from the contractor as a result of proportionate liability, despite providing a statutory settlement that guarantees that the contractor must assume 100 per cent of your loss. If the engineer is insolvent and insures inadequately, you may end up carrying the entire bill.
Example 2.
Secondly, assume you’re building a wind farm. You subcontract a manufacturer’s turbine supply and get full compensation for their output. The turbines fail to achieve outputs when built. The developer of a wind farm is suing you.
You are trying to move the loss on to the turbine maker, but you receive an argument that the turbine is defective due to a component made by a supplier without proper consideration.
Proportionate responsibility can mean that you are unable to recover any amount from the manufacturer despite having a contractual settlement that guarantees that the manufacturer must assume 100% of your loss.
