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This piece is written for New Zealanders in the construction industry—lawyers, builders, architects, engineers, building surveyors, and allied professionals—as an aide-mémoire on how proportionate liability operates in Victoria, Australia.

For more than three decades, Victoria has run a system that replaced joint and several liability with responsibility-based apportionment, otherwise known as proportionate liability.

Far from theoretical, it is a living case study: tested in major disputes, refined through precedent, and now embedded in everyday practice.

The aim here is to provide our New Zealand colleagues with an accessible overview of this mature regime—how it works in practice, what it demands of participants, and the lessons it may hold for those considering liability reform in NZ.

It is an expansion of a paper that I presented in April at the Wellington National conference hosted by MBIE on liability reform options for the NZ Building Act 2004.

 What is Proportionate Liability?

It is a liability apportionment doctrine that dictates that each liable party is responsible only for the share of the loss they are found to have caused. Fault is apportioned according to the party’s contribution, rather than their ability to pay.  By “party”, this refers to the respondent entity, be they either a natural person individual or a company.

 Thirty Years of Proportionate Liability in Victoria

Victoria has operated under a proportionate liability framework for building disputes for more than thirty years. When the Building Act 1993 (Vic) came into effect in 1994 it established a liability apportionment system that replaced joint and several liability.

In doing so it ended the tenure of a liability apportionment doctrine colloquially known as the deep pocket syndrome that had been in existence for decades. This means that the “last man standing” can end up carrying the can for other impecunious respondents to the claim (or defendants), including where other respondents may have become insolvent before judgment is handed down.

Liability would then fall back on that last remaining respondent to the claim.

 The ‘Usual Suspects’ in Building Failure Cases

Where a building fails, because of defective building works (be they structural, fire safety, or for compliance related issues) it is common for multiple defendants to be drawn into legal proceedings. The builder, the engineer, the architect, and the building surveyor are often implicated, and sometimes other parties.

 The Original Proportionate Liability Provision in Section 131 of the Building Act 1993

The original proportionate liability provision was found in section 131 of the said Building Act.  It provided that where a multi-party building dispute was heard by a court, the judge would divide liability strictly according to each party’s contribution to the defective outcome (or level of causative “fault” to that outcome). Liability “assumed domicile with the author” of the wrongful acts or omissions.

 Transition to the Wrongs Act 1958, Part IVAA

Section 131 of the Building Act 1993 was repealed and superseded by Part IVAA of the Wrongs Act 1958 (Vic). Section 24AI provides the operative principle.¹

1. In any proceeding involving an apportionable claim— (a) the liability of a defendant who is a concurrent wrongdoer in relation to that claim is limited to an amount reflecting that proportion of the loss or damage claimed that the court considers just having regard to the extent of the defendant’s responsibility for the loss or damage; and (b) judgment must not be given against the defendant for more than that amount in relation to that claim.

 The Imperative to Join All Parties

The key operational reality is this: you have to join all liable parties from the ‘get go’ because if a culpable respondent is left out, the apportionment will be incomplete, leaving gaps in recovery.

 Limitation Periods in Victoria

In Victoria, the limitation period for building actions is up to 10 years from the date the relevant building surveyor issues an occupancy permit, whether by a private certifier or a building surveyor in the employ of council (though in practice most are issued privately).²

 The Necessity of Early Expert Evidence

It is paramount that early expert evidence is accessed at the genesis of the dispute. Robust building, engineering, architectural, and possibly also building surveying expert witness reports are the backbone of any apportionment case, quantifying the degree of responsibility attributable to each defendant. Without them, liability division is challenging.

 Illustrative Precedent – The “Lacrosse” Case in Victoria

An instructive example of the application of proportionate liability is the Lacrosse cladding fire case in Victoria.  This concerned fire spread on the façade of the “Lacrosse” apartment building in the city.

In Owners Corporation No 1 of PS613436T v LU Simon Builders Pty Ltd [2019] VCAT 286, the tribunal found a number of parties liable for the damages that flowed from a vertical fire spread event.³

Applying proportionate liability and contractual indemnities, the tribunal allocated 97% of the loss to the project consultants: fire engineer 39%, building surveyor 33%, architect 25%.

The remaining 3%, attributed to the occupant whose discarded cigarette started the fire, was at first instance absorbed by the builder.⁴

On appeal, the Court of Appeal upheld the proportionate liability approach but re-allocated the shares as: fire engineer 42%, building surveyor 30%, architect unchanged.

See the Court of Appeal decision in Tanah Merah Vic Pty Ltd v Owners’ Corporation No 1 of PS613436T [No 2] [2021] VSCA 122.⁵

The case remains a touchstone for how Victorian courts apply proportionate liability in circumstances where several parties are implicated for construction failure.

Conclusion – A Proven and Enduring Model

From the vantage point of seasoned legal practitioners, one of whom has worked within the framework for more than 2 decades, Victoria’s proportionate liability regime has proved to be robust and sustainable.

It has embedded a culture where responsibility follows fault, with legal process shaped around early identification of all liable actors, strict observance of time limits, and reliance on high-quality expert evidence.

After three decades, proportionate liability is hardwired into the operational “DNA” of Victorian building law. Its longevity and its alignment of liability with culpability offer New Zealand a mature case study in liability reform.

Through legislative evolution and amendment, the doctrine has become the prevailing liability-apportionment framework in Australia, with its bandwidth broadened well beyond the original corral of building disputes to now apply across other spheres of the law.

Although some in the legal fraternity proffer well informed views on the complexities of joining implicated parties, which in this writer’s view can be resolved by very vigilant focus on ensuring that all implicated parties are joined at the outset, there is no realistic prospect of Victoria reverting to joint and several liability. For all practical purposes, that regime is obsolete in this jurisdiction.

A Note on Compulsory Insurance

Mention should also be made of the fact that insurance is compulsory in Victoria for most building practitioners.

References:

[1] Wrongs Act 1958 (Vic) section 24AI ‘Proportionate Liability for Apportionable Claims’.

[2] Building Act 1993 (Vic) section 134 ‘Limitation on time when building action may be brought’

[3] Owners Corporation No 1 of PS613436T v LU Simon Builders Pty Ltd [2019] VCAT 286, [7].

[4] Ibid.

[5] Tanah Merah Vic Pty Ltd v Owners’ Corporation No 1 of PS613436T [No 2] [2021] VSCA 122.

The author, Justin Cotton is a New Zealand born construction lawyer with more than 23 years’ experience in construction law. More recently he was part of the law reform work by the Lovegrove and Cotton law reform team that was engaged by MBIE as consultant policy advisers to advise on pathways to transition from joint and several liability to proportionate liability.

Justin  is a construction lawyer in both Lovegrove & Cotton, Australia and Lovegrove & Cotton, New Zealand. And can take instructions on both sides of the Tasman.

Disclaimer
This article is for general informational purposes only and does not constitute legal advice. For advice specific to Owners Corporations, building defects, or dispute resolution, please contact Lovegrove & Cotton at enquiries@lclawyers.com.au or call (03) 9600 4077.

Image Acknowledgements:

The digital renders used in this article were developed collaboratively by Lovegrove & Cotton and ChatGPT. The photo images that are not the digital renders are stock images sourced from Shutterstock.