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Interviewer: Tsigereda Lovegrove – Building Lawyer – Adj Fellow SCU of Lovegrove and Cotton Construction Lawyers.

On the 18th of August the New Zealand Minister for Construction the Hon Chris Penk announced major reforms to the NZ building consent process. A key element in the reform agenda included the demise of joint and several liability and the embracing of the responsibility based liability doctrine more commonly known as proportionate liability. 

On that historic day Minister Penk said:“under this new model each party will only be responsible for the share of work that they carry out.” 

This heralds and paves the pathway for the introduction of proportionate liability in NZ.

To shed light on this reform, Tsigereda Lovegrove — an Australian construction lawyer — speaks with Kim Lovegrove. He was retained as a law reform consultant by MBIE to provide policy advice pathways on how to move from joint and several liability to proportionate liability. 

Tsigereda Lovegrove: Kim, for those with no legal background, what exactly is proportionate liability?

Kim Lovegrove: Proportionate liability is a responsibility-based doctrine. It allocates liability between multiple parties according to the degree of responsibility each bears for the loss or damage. In other words, if you are 20% responsible, you are liable for 20% of the damages — period.

Tsigereda Lovegrove: How does proportionate liability differ from joint-and-several liability?

Kim Lovegrove: Under joint-and-several liability, a plaintiff can recover the entire amount from just one defendant, regardless of that defendant’s level of fault. Proportionate liability provides that each party only pays their assessed and jurisprudentially ‘adjudicated’ share.

Tsigereda Lovegrove: What will be some of the benefits for NZ?

Kim Lovegrove: In New Zealand, as in Australia before 1993, territorial authorities — local councils — have often been cast as the “insurer of last resort” in building defect litigation. Even when their involvement has been remote or peripheral — for example, confined to part of the approval process — they have often been left‘carrying the can’ when more directly responsible parties have become impecunious.

Underwriting the liabilities of insolvent primary wrongdoers has imposed severe financial burdens on councils and ratepayers, the NZ citizen if you will. That burden becomes harder to sustain. Proportionate liability shifts the focus to actual responsibility, aiming to ensure that each party pays its fair share. It is axiomatic that no one should have to underwrite the liability of other culpable in fact often more culpable parties.

Tsigereda Lovegrove: You were involved in the fashioning of proportionate liability in Australia in the 1990s. What did that involve?

Kim Lovegrove: I was Assistant Director of Building Control and the instructing officer to the Parliamentary Counsel’s Office in Victoria when proportionate liability was first introduced under the Building Act 1993.

I was also the Project Director of the Australian National Model Building Act project team — the law reform template for the overhauling of some Australian building legislation in a number of jurisdictions in the early 90s. The work involved deep consultation, preparing drafting instructions for legislative drafters, and balancing fairness for defendants with adequate recovery for plaintiffs.

Tsigereda Lovegrove: In practical terms, how does proportionate liability work in court?

Kim Lovegrove: The court assesses each party’s percentage of responsibility for the economic harm. The plaintiff recovers that percentage from each defendant directly. There’s no mechanism for forcing a “deep pocket” defendant to cover other defendants’ unpaid shares.

Tsigereda Lovegrove: What are the advantages of proportionate liability?

Kim Lovegrove: It removes the exposure of insurers and respondents who would otherwise have to underwrite as it were, the errors and omissions of other parties. It also encourages all parties to actively manage risk, knowing they will be liable for their own mistakes.

Tsigereda Lovegrove: What lessons have been learned from Australia’s experience?

Kim Lovegrove: One crucial lesson is the need for careful drafting of pleadings and the joinder of all responsible respondents. It is essential to ensure that every party who has contributed to the loss is identified and joined as a defendant or third party. 

Without that, the court is challenged in apportioning liability accurately, and gaps in responsibility can undermine fairness, leaving the plaintiff short-changed. Skill is required in the shaping of legal proceedings for proportionate liability cases, but that skill exists in the construction law practitioner cohort. So it behoves a plaintiff to engage a construction lawyer well versed in the application of the doctrine. 

Tsigereda Lovegrove: If New Zealand adopts proportionate liability, should it replicate Australia’s model?

Kim Lovegrove: New Zealand is in the so very fortunate position of being able to look to Australia as a “road tested laboratory.” Some Australian legislative provisions that govern proportionate liability have delivered exactly what was intended; others not necessarily so. 

It is critical that New Zealand’s proportionate liability provisions are drafted to cover all relevant bases and avoid those pitfalls, as the well-worn cliché states the devil is in the detail. Regard must be had to the exemplar regulatory provisions that do exist in Australia that have generated straightforward jurisprudential interpretation.

The wording must precisely mirror the legislature’s intent. The advantage is that much of the legislative wording has been road-tested in Australia, and for fear of labouring the point this advantage cannot be understated as there is much to be gained by the involvement of those with experience in the Australian setting to help fashion best practice regulatory narrative and to have regard to interpreting the case law on proportionate liability. 

Tsigereda Lovegrove: New Zealand has considered introducing proportionate liability before but decided against it. Why is it now the right time?

Kim Lovegrove: I think it was a superb decision and commendations to Minister Penk, his outstanding team that I was graced with working with at MBIE and the government for doing this. I would reframe the question: why have countries like Australia, and jurisdictions in the United States and Canada, adopted proportionate liability? 

• Fairness in allocation — Each party pays according to their actual responsibility, rather than one solvent or insured defendant underwriting the mistakes of all others.
• Reducing systemic risk — Joint-and-several liability often leaves councils or insurers carrying disproportionate burdens, which distorts premiums and places unfair pressure on ratepayers and the public.
• Market sustainability — Proportionate liability helps keep insurers in the market and ensures that risk is spread in a way that is economically viable for the long term.

Tsigereda Lovegrove: What should lawyers and industry professionals in NZ start doing now?

Kim Lovegrove: Begin familiarising themselves with proportionate liability principles, review risk allocation in contracts, and think about litigation initiation strategy changes in readiness for when the reforms are promulgated. In proportionate liability jurisdictions, the onus is on all litigants  to ensure all potentially liable parties are brought before the court.

Tsigereda Lovegrove: You’ve worked on building law reform advisory deployments for the World Bank, the Japanese Government, and now New Zealand. any comparative insights?

Kim Lovegrove: I was engaged by MBIE as the law reform consultant to advise on amendments to the Building Act to introduce proportionate liability. Lovegrove & Cotton, the construction and planning law firm I lead, was the law firm of record on the reforms. This has allowed me to bring together decades of international reform experience with New Zealand’s specific needs. Regard has been had to off shore illustrations of the application of the doctrine.

Tsigereda Lovegrove: Finally, for New Zealanders, why does this matter?

Kim Lovegrove: Because liability rules influence the cost and availability of building services, insurance, and the viability of councils in terms of their ability to deliver their statutory functions. A well-designed proportionate liability regime can create a fairer, more resilient construction sector — and that ultimately benefits every homeowner, ratepayer, and taxpayer.

About the Interviewer:

Tsigereda Lovegrove is the Practice Manager of Lovegrove & Cotton, Australia, a construction lawyer and Chair of the IBQC Construction Dispute Resolution Coalition. She is a legal professional with significant experience in construction law, policy development, and dispute resolution. She participated in advising on the proportionate liability reform project for which Lovegrove & Cotton was tasked by MBIE, and has advised on building regulation reforms with a strong interest in fair and sustainable legal frameworks.

 About the Interviewee:

Professor Kim Lovegrove, Hon DLitt, is Chair of the International Building Quality Centre, an Honorary and Adjunct Professor at multiple universities, and a construction lawyer with more than three decades of practice across Australia and New Zealand.

He has headed national building law reform projects, served as Assistant Director of Building Control and instructing officer to the Parliamentary Counsel’s Office, and was Project Director of the national Model Building Act team. He is also a past president of the Northern Chapter of the NZIOB and has been a senior law reform consultant to the World Bank.

His firm, Lovegrove & Cotton, has advised on major building law policies including the current MBIE-led proportionate liability project.