Author
Travis Toemoe  
Senior Associate

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Peter Stockdale  
Partner
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Philip Ward  
Partner
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Brisbane
Justin McDonnell  
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Canberra
John Topfer  
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Hong Kong
Stuart Valentine  (萬思陶)
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The NSW Courts have recently provided some useful guidance on the operation of the proportionate liability provisions of the Civil Liability Act 2002 (NSW) (CLA) and in particular how liability is to be apportioned between concurrent wrongdoers. The following cases provide some useful guidance on the assessment of proportionate liability particularly in cases involving professional advisers. Whereas previously plaintiffs simply pursued professional advisers on the basis that they had the deepest pockets by virtue of their professional indemnity insurance (and left it to them to seek contributions from less solvent third parties), now plaintiffs must take steps to pursue all parties that contributed to their loss.

In general terms, the proportionate liability provisions of the CLA provide that in cases where two or more people have contributed to loss and damage (referred to as ‘concurrent wrongdoers’), their liability is limited to an amount reflective of their responsibility for such loss. Proportionate liability only applies to ‘apportionable claims’ which include tortious claims and breaches of fair trading provisions.

Proportionate liability represents a major change in the law. Previously a person was jointly and severally liable for damage caused and a plaintiff would pursue the defendant with the deepest pockets. It was up to that defendant to seek contributions from other parties. Following the CLA, a plaintiff should now pursue all parties who contributed to the damage. Should a plaintiff fail to do so, then they will only recover that loss to which the pursued defendants contributed.

One of the first cases in which proportionate liability was considered was Yates v Mobile Marine Repairs Pty Ltd [2007] NSWSC 1463. Palmer J provided the following useful guidance on the apportionment of responsibility between concurrent wrongdoers:

“The Court must exercise a large discretionary judgment founded upon the facts proved in each particular case. … it seems clear enough … that a wrongdoer who is, in a real and pragmatic sense, more to blame for the loss than another wrongdoer should bear more of the liability.”

Within six months of Yates, Young CJ (in eq) was providing further guidance on the issue in Vella v Permanent Mortgagees Pty Ltd [2008] NSWSC 505. The case involved a number of fraudulent property transactions undertaken, without Mr Vella’s knowledge, by his former business associate (C). C forged Vella’s signatures on a number of documents and those signatures had been ‘witnessed’ by a solicitor (F). The mortgage provider (MM) was unable to recover its monies from Vella and cross-claimed against their solicitors (H) essentially for failing to properly secure the loan.

During the course of a lengthy judgment, Young CJ (in eq) made the following comments on the approach to assessing each wrongdoer’s share of liability:

“The assessment of the percentages by which the loss or damage must be apportioned is, of necessity, a matter for judgment and is not a matter of scientific exactitude. … a judge “must make a comparison of the culpability and of the acts of the parties causing damage and, thus, to the relative blameworthiness and the relevant causal potency of the negligence of each party”.

His Honour found that C was the most culpable contributor to MM’s loss and hence was responsible for 72.5%. Whilst H was found to have breached their duty of care, they were only held liable for 12.5% of MM’s loss. F was only held responsible for 15% despite his involvement in witnessing C’s forged signatures.

In cases involving solicitors and fraud by another party, the courts seem to be taking the view that the blame to be attributed to the solicitor should be far less than the fraudster. Hoeben J assessed the solicitor’s liability at 10% in Ginelle Finance v Diakakis [2007] NSWSC 60 and Bryson AJ made a similar assessment in Chandra v Perpetual Trustees Victoria Ltd (2007) 13 BPR 24,675. Clearly the fraudster is more to blame than the solicitor and hence has made a greater contribution to the loss.

For professional negligence insurers, the relatively small liability attributed to professional advisors in cases involving fraud should be reassuring and detract from the apparent use by clients of professional services as providing ‘de facto insurance’ for risky transactions. Furthermore, with the current upheaval in credit markets, insurers should be keenly aware of the extent to which other parties might have contributed to loss and plaintiffs should be advised of such other parties as soon as practicable.

(Whilst the cases referred to above all concern the NSW CLA, given similar legislation in other jurisdictions, the cases provide useful guidance on how equivalent provisions might apply.)