Useful Resources

Proportionate liability – the scope of accountability

What is proportionate liability?

The objective of proportionate liability is to ensure that liability rests with all defendants in proportion to their contribution to a plaintiff loss.

The legislation which governs proportionate liability varies in each State and Territory in Australia.

Why is it a problem?

It is, or may not be. It certainly is a risk! Don’t get caught taking all the risk or not passing off risk.

You always need legal advice here.

Application of Proportionate Liability

Proportionate liability will apply in a broad range of commercial contracts. This includes both contracts for products and services for example, licences, service contracts, leases and commercial contracts.

Contracting Out

Usually, it is important to not ‘contract out’ of proportionate liability. If a contract contains indemnity clauses that do not reflect proportionate liability principles, or does not preserve the operation of the legislation, you can be ‘deemed’ to have contracted out of the legislation in some states.

Contracting out is where parties to a contract agree between them that the proportionate liability legislation will not apply.

You can also agree to indemnify each other on a basis not reflective of proportionate liability principles.

Concurrent Wrongdoer

To have liability apportioned, one must also establish that other parties are “concurrent wrongdoers” as defined in the applicable legislation.

One must identify other parties whose acts or omissions caused the loss or damage claimed and establish that wrongdoer has or had a legal liability to the plaintiff and actually caused the same loss or damage that is the subject of the claim.

Small Businesses and Proportionate Liability

Recent cases before the courts have highlighted the importance of ensure that contracts do not inadvertently contract out of the proportionate liability regime. Moreover, contracting parties need to take detailed legal advice in considering existing contractual arrangements to understand whether they might inadvertently contract out of the proportionate liability regime.

Note

Proportionate liability does not apply to negligence claims involving death or personal injury, intentional damage, vicarious liability, nor absolute or strict warranties or conditions in a contract.