Proportionate Liability Act 2005

The Act has a wide but targeted reach. It directly affects every defendant in proceedings involving an apportionable claim. Because the definition of “defendant” in s 3 includes any person joined as a defendant (whether under the Act or otherwise), architects, engineers, builders, valuers, solicitors, accountants, financial advisers, real-estate agents and any other professional or commercial actor whose conduct can give rise to a failure-to-take-reasonable-care claim fall within its scope.

Plaintiffs are also affected. While they retain the ability to recover full compensation by suing multiple concurrent wrongdoers, they must now litigate against each to the extent of that party’s assessed share. The procedural notice obligation in s 12 places an onus on plaintiffs to respond promptly once a defendant identifies additional potential wrongdoers.

The Crown is bound in all capacities to the extent of the Legislative Assembly’s power (s 5). Government departments, statutory corporations and public authorities that commission building works, provide regulatory approvals or give advice are therefore subject to the proportionate-liability regime both as defendants and, indirectly, as claimants.

Concurrent wrongdoers who are not joined as parties are still relevant: the court may take their comparative responsibility into account when apportioning liability among those who are before the court (s 13(2)(b)). Insolvent or dissolved entities therefore continue to influence the quantum recoverable from solvent defendants.

Legal practitioners, claims managers and litigation funders must understand the Act because it alters settlement dynamics, contribution rights and the economics of pursuing or defending multi-party claims. Insurers are affected because policy limits and aggregation clauses interact with several-liability outcomes rather than the former joint-and-several exposure.

Finally, the Act affects the building and construction industry in a particular way: it repealed the earlier proportionate-liability regime contained in ss 154–158 of the Building Act 1993 and replaced it with a uniform regime applicable across all professions and trades (subject to the transitional savings in s 19).

The Act creates no new substantive duties of care; it is purely procedural and remedial in character. Its key innovations lie in the rights and obligations it confers on parties once a claim is characterised as apportionable.

Defendants obtain the central right to have their liability limited to their assessed proportionate share (s 13(1)). That right is not lost merely because other concurrent wrongdoers are insolvent, dead or not joined (ss 6(2) and 10). A defendant also gains the right to notify the plaintiff of additional concurrent wrongdoers and thereby protect itself from adverse costs orders (s 12).

Plaintiffs retain the right to sue any concurrent wrongdoer for that wrongdoer’s proportionate share and to bring subsequent actions against others provided they do not obtain double recovery (s 16). They have the right to resist joinder of additional parties only where those parties were already parties to a previously concluded proceeding on the same claim (s 11(2)).

The court is given express powers and duties. It must apportion responsibility having regard to the extent of each defendant’s responsibility (s 13(1)(a)), exclude contributory negligence of the plaintiff from the apportionment exercise (s 13(2)(a)), and may consider non-party concurrent wrongdoers (s 13(2)(b)). It may join additional concurrent wrongdoers (s 11(1)) and may make costs orders on an indemnity basis where a defendant has breached the s 12 notice obligation.

Concurrent wrongdoers who acted intentionally or fraudulently lose the benefit of proportionate liability (s 7). Their liability is determined according to ordinary rules, which in practice usually means joint-and-several liability with any other intentional wrongdoers.

Partners retain their joint-and-several liability for the proportionate share assessed against another partner (s 14(b)). Persons subject to vicarious liability remain liable for the share assessed against the person for whose acts they are vicariously responsible (s 14(a)).

The Act preserves any contractual rights of contribution or indemnity (s 15(2)), so carefully drafted deeds of release, proportionate-liability clauses and insurance arrangements continue to operate.

The Act contains no criminal offences or civil penalties in the conventional sense. Enforcement occurs entirely through the civil litigation process and costs sanctions.

The principal enforcement mechanism is the court’s power under s 12 to order a defendant to pay costs (including on an indemnity basis) that a plaintiff unnecessarily incurred because the defendant failed to give timely written notice of another possible concurrent wrongdoer. The precondition is that the defendant had reasonable grounds to believe another person may be a concurrent wrongdoer and failed to provide the plaintiff with the identity and circumstances “as soon as practicable”.

Apart from that costs sanction, the Act is self-executing through the judgment the court is required to give under s 13. Once the court has determined the proportionate share, judgment may be entered only for that amount; there is no further enforcement step required against the defendant for the balance of the loss.

Because the Act does not disturb contractual indemnities, enforcement of those separate agreements occurs under ordinary contract law.

The Act is expressly designed to sit alongside other Commonwealth and Territory legislation. Section 4(2)(b) and the definition of “Australian Consumer Law (NT)” in s 4(5) incorporate the Australian Consumer Law as applied by Part 4 of the Consumer Affairs and Fair Trading Act 1990 (NT). Only s 18 contraventions are apportionable; contraventions of the product-liability and defective-goods provisions in Parts 3-3 and 3-4 are excluded (s 4(3)(b)).

The Act does not affect the operation of any other Act that imposes several liability for what would otherwise be an apportionable claim (s 14(c)). It also preserves vicarious liability and partnership liability (s 14(a) and (b)).

Transitionally, the Act repealed ss 154–158 of the Building Act 1993 but preserved their operation for pre-commencement proceedings and for loss incurred wholly before commencement (s 19). Those repealed sections therefore continue to govern a narrow class of legacy building claims.

At common law the Act displaces the former joint-and-several liability rule for the claims it covers. It does not, however, disturb the ordinary rules for assessment of damages, causation or contributory negligence. Contributory negligence is simply removed from the apportionment between defendants and is instead applied first against the plaintiff’s overall claim (s 13(2)(a)).

The Act interacts with procedural rules governing joinder and costs in the Supreme Court Rules and Local Court (Civil Procedures) Act. Section 11’s leave requirement for joinder of additional concurrent wrongdoers overlays the ordinary joinder powers.

Because the Act binds the Crown (s 5), it interacts with the Crown Proceedings Act and any statutory immunities or limitations that apply to public authorities.

Finally, the regulation-making power in s 17 allows the Administrator to exclude particular claims or classes of claims, providing a flexible mechanism to fine-tune the regime without primary legislative amendment. To date the only amendment to s 4 has been the 2010 update to replace references to the former Trade Practices Act with the Australian Consumer Law (NT).

The version reproduced is as in force at 1 January 2011. The only substantive amendment since enactment was made by the Consumer Affairs and Fair Trading Amendment (National Uniform Legislation) Act 2010 (Act No 41 of 2010), which substituted updated references to the Australian Consumer Law (NT) for the former Trade Practices Act 1974 (Cth) references. That change was part of the national harmonisation of consumer-law provisions and ensured that the proportionate-liability regime continued to capture misleading-or-deceptive-conduct claims under the new uniform law.

Formal amendments of a non-substantive nature were later made by the Interpretation Legislation Amendment Act 2018 to ss 1, 4 and 18.

No further substantive expansion or contraction of the regime has occurred. The Northern Territory has not followed some other jurisdictions in extending proportionate liability to personal injury or in creating specific caps or thresholds. The 2011 version therefore remains substantially the same as the 2005 original, with the consumer-law update being the only significant change required to keep the Act aligned with national reforms.

The transitional provisions in s 19 continue to operate for the dwindling number of legacy building claims, but for all practical purposes new proceedings commenced after 1 June 2005 are governed by the uniform regime created by the Act.

Because the Act is relatively concise and largely mirrors model provisions adopted in other Australian jurisdictions, reported Northern Territory case law is limited. Courts have nevertheless been required to grapple with several recurring issues that the text leaves to judicial determination.

First, characterisation of a claim as “arising from a failure to take reasonable care” has generated debate. In claims that plead both breach of contract and breach of a concurrent duty of care, courts must decide whether the whole claim, or only the tortious portion, is apportionable. The Act’s language in s 4(2)(a) (“a claim for damages … arising from a failure to take reasonable care”) suggests a broad approach, but precise pleading can affect the outcome.

Second, the interaction between s 13 and contributory negligence has required careful analysis. Section 13(2)(a) directs the court to exclude the plaintiff’s contributory-negligence proportion from the apportionment between defendants. This can produce counter-intuitive results where a plaintiff’s own fault is large: the defendants’ shares are calculated only on the remaining portion, potentially increasing each defendant’s percentage of a smaller pie.

Third, the extent to which the court may consider the responsibility of non-party concurrent wrongdoers under s 13(2)(b) has been contentious. Defendants routinely plead “others” and adduce evidence of their culpability. Plaintiffs sometimes object that this forces them to litigate against absent parties. The Act expressly permits the exercise, reflecting a policy choice that solvent defendants should not bear the share of insolvent or absent wrongdoers.

Fourth, the scope of the s 7 exclusion for intentional or fraudulent conduct has been tested. Where one concurrent wrongdoer acted fraudulently and others were merely negligent, the fraudulent party remains jointly and severally liable while the negligent parties receive proportionate protection. Courts must therefore separate the loss caused by the fraud from loss caused by negligence—an exercise that can be factually difficult.

Fifth, the costs sanction in s 12 has been invoked in multi-defendant litigation where late identification of additional concurrent wrongdoers forced the plaintiff to amend pleadings and incur extra expense. Courts have treated “as soon as practicable” as an objective standard measured from the time the defendant first had reasonable grounds to believe another person may be a concurrent wrongdoer.

No constitutional challenges or High Court decisions directly concerning the Northern Territory Act have arisen. The regime’s compatibility with Chapter III of the Commonwealth Constitution (judicial power) has not been doubted, given that the court retains the ultimate responsibility of determining what is “just” having regard to responsibility.

Most practitioners assume that once proportionate liability applies, each defendant’s exposure is automatically capped at their insurance-policy limit. That is not necessarily so. Section 13 caps the judgment that may be entered against the defendant at the proportionate share, but if the defendant has a contractual indemnity or an insurance policy with an aggregation clause, the actual funds available to satisfy that capped judgment may still be limited. Plaintiffs therefore sometimes strategically sue only well-insured defendants, hoping the court will attribute a larger share to them when fewer parties are before the court.

Another trap is the interaction between s 16 and deeds of release. A plaintiff who gives a full release to one concurrent wrongdoer may inadvertently bar itself from recovering the balance from others, because s 16(2) prevents recovery that would result in over-compensation. Careful drafting of partial releases that preserve rights against other concurrent wrongdoers is essential.

The definition of “economic loss” in s 3 (“does not include economic loss resulting from a personal injury”) is narrower than many expect. Consequential economic loss flowing from personal injury remains non-apportionable even if pleaded as a pure economic-loss claim. Conversely, pure economic loss that happens to coincide with personal injury to someone else may still be apportionable.

Section 11(2) is often overlooked. Once a concurrent wrongdoer has been a party to a concluded proceeding, that person cannot be joined again in a later proceeding by another plaintiff. This creates a “use it or lose it” dynamic for defendants who wish to spread liability.

The transitional provision in s 19(1)(b) catches many practitioners out. Even proceedings commenced years after 1 June 2005 remain governed by the old Building Act provisions if the economic loss and rectification costs were incurred wholly before commencement. Forensic accounting evidence is often required to determine the precise date loss crystallised.

Finally, many assume that proportionate liability automatically applies to all misleading-and-deceptive-conduct claims. Only s 18 contraventions are caught; claims under other provisions of the Australian Consumer Law (NT) that sound in damages for loss or damage (for example, certain unfair-contract terms or unsolicited-consumer-agreements provisions) fall outside the regime unless they independently satisfy the “failure to take reasonable care” limb.

Compliance for defendants and their advisers is essentially forensic and procedural.

1. Early identification: As soon as a claim is received, map every possible concurrent wrongdoer. Gather identity and circumstantial information and provide written notice to the plaintiff “as soon as practicable” to avoid s 12 costs sanctions.

2. Pleading: Plead proportionate liability expressly and, where appropriate, plead the responsibility of non-party concurrent wrongdoers with sufficient particularity to allow the court to make findings under s 13(2)(b).

3. Evidence: Prepare expert or factual evidence that quantifies the relative causal contribution and moral culpability of each concurrent wrongdoer. Courts apportion on the basis of both causal potency and blameworthiness.

4. Joinder strategy: Consider applying under s 11(1) for leave to join additional concurrent wrongdoers early. Weigh the tactical advantage of spreading liability against the risk that joined parties will cross-claim or complicate settlement.

5. Settlement: When settling with one concurrent wrongdoer, obtain a release that expressly preserves the plaintiff’s rights against others and records the settlement sum so that s 16(2) can be applied in later proceedings.

6. Contractual protection: Include proportionate-liability clauses in contracts where permitted, and ensure professional-indemnity policies respond to several-liability judgments rather than requiring the insurer to respond as if joint-and-several liability applied.

7. Insurance notification: Notify insurers of all potential concurrent wrongdoers so that subrogation and contribution rights can be protected.

8. Record keeping: Maintain detailed files showing when information about additional wrongdoers came to light. This evidence will be critical if a s 12 costs application is threatened.

For plaintiffs, compliance consists of acting promptly once notice is received, considering whether to join additional parties voluntarily, and structuring claims to maximise the prospect that the court will attribute substantial responsibility to well-resourced defendants.

Government agencies and regulators should ensure that internal approval and advice processes are documented so that, if sued, their share of responsibility can be accurately assessed.

In all cases, the key to compliance is early, systematic identification of every concurrent wrongdoer and transparent communication with the plaintiff and the court. The Act rewards diligence and penalises (through costs orders) those who withhold information.