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What is proportionate liability?

Proportionate liability is a critical legal principle in Australia. It is particularly relevant in cases involving multiple parties responsible for economic loss or property damage.

This article was written by our commercial contract lawyer. The article explores the frameworks, principles, and practical implications of proportionate liability. It offers insights for businesses, legal professionals, and individuals navigating this complex area of law.

Key Takeaways

  • Proportionate liability ensures that each party is only responsible for the portion of loss or damage they caused
  • Governed by Federal and State laws, including the Civil Liability Act 2002 (NSW) and Wrongs Act 1958 (Vic)
  • Landmark decisions such as Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd have shaped its application
  • Parties can agree to exclude proportionate liability in contracts in some States and Territories, but this may have insurance implications.
  • Proportionate liability influences litigation strategies, settlements, and risk allocation among defendants
Prosper Law legal team

What is Proportionate Liability?

Proportionate liability is a legal framework that allocates responsibility among multiple parties based on their contribution to the harm or loss. Unlike joint and several liability, where one defendant can be held liable for the entire loss, proportionate liability ensures that each party is only accountable for their share.

Proportionate liability:

  • applies to economic loss and property damage, but typically excludes personal injury claims
  • enables courts to assess the degree of fault of each party
  • does not apply to intentional or fraudulent conduct

Legislative Frameworks Governing Proportionate Liability

Federal Legislation

  • Competition and Consumer Act 2010 covers misleading or deceptive conduct under Part VIA
  • Corporations Act 2001 addresses liability in financial and corporate contexts

State and Territory Legislation

Each jurisdiction has its own laws governing proportionate liability. Below is a summary:

Jurisdiction

Legislation

Key Provisions

New South Wales

Civil Liability Act 2002 (NSW)

Part 4 outlines proportionate liability.

Victoria

Wrongs Act 1958 (Vic)

Part IVAA governs apportionable claims.

Queensland

Civil Liability Act 2003 (Qld)

Provisions for economic loss claims.

Western Australia

Civil Liability Act 2002 (WA)

Part 1F applies to property damage claims.

South Australia

Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA)

Part 3 governs liability apportionment.

Key Court Cases Shaping Proportionate Liability

Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd [2013] HCA 10

This case clarified how courts determine the extent of each party’s contribution to misleading conduct. The High Court emphasised that liability must align with the degree of fault.

Reid v Amaca Pty Ltd [2020] VSC 276

In this asbestos-related case, the court apportioned liability between two manufacturers based on their respective contributions to the plaintiff’s mesothelioma.

Ingrid Stephenson v Parkes Shire Council [2015] NSWSC 719

This case involved a helicopter crash caused by multiple failures, with liability apportioned among the aviation company, council, and powerline owner.

what is proportionate liability

Practical Implications of Proportionate Liability

Impact on Businesses

Proportionate liability impacts businesses in the following ways:

  • it encourages businesses to assess and manage risks more effectively
  • defendants may contest claims more vigorously to limit their share of liability
  • contracting out of proportionate liability may affect insurance coverage

Impact on Settlements

Proportionate liability often complicates settlement negotiations, as parties must agree on their respective contributions to the loss.

Contracting Out of Proportionate Liability

Parties can agree to exclude proportionate liability in their contracts. However, this requires careful consideration of:

  • insurance coverage, as some insurance policies may not cover losses arising from contracting out
  • indemnity clauses and contracts to ensure clear allocation of liability between parties

Frequently Asked Questions (FAQs)

What is the difference between proportionate liability and joint and several liability?

Proportionate liability limits each party’s responsibility to their contribution to the loss. On the other hand, joint and several liability allows a claimant to recover the full amount from any one defendant.

Can proportionate liability apply to personal injury claims?

No, proportionate liability generally applies only to economic loss or property damage claims. Personal injury cases typically fall under joint and several liability.

Can parties contract out of proportionate liability?

Yes, parties can agree to exclude proportionate liability in their contracts, but this may have implications for insurance coverage and risk allocation.

How do courts determine each party's contribution to the loss?

Courts assess factors such as the degree of fault and the relative importance of each party’s actions in causing the harm.

What are the key legislative frameworks for proportionate liability in Australia

Proportionate liability is governed by Federal laws such as the Competition and Consumer Act 2010 and State laws like the Civil Liability Act 2002 (NSW) and Wrongs Act 1958 (Vic).

About the Author

Farrah Motley
Director of Prosper Law. Farrah founded Prosper online law firm in 2021. She wanted to create a better way of doing legal work and a better experience for customers of legal services.

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