Statutory Apportionment – Divergence of Views in NSW and Victoria
The Victorian proportionate liability regime, introduced through Part IVAA of the Wrongs Act 1958 (Vic) in 2003, was intended to promote fairness in multi-defendant proceedings. The scheme limits the liability of each defendant to the extent of their individual responsibility for the plaintiff’s loss. It is often a point of interest in construction law litigation. However, recent appellate decisions have revealed a growing divergence between Victorian and New South Wales courts on the interpretation of what constitutes an “apportionable claim.” In turn, both practical and strategic concerns for litigants have surfaced.
Key feature of the Victorian Regime
Under section 24AF(1) of the Wrongs Act, proportionate liability applies to claims for economic loss or property damage that arise from a “failure to take reasonable care,” regardless of whether the claim is brought in tort, contract, under statute, or for misleading or deceptive conduct under section 18 of the Australian Consumer Law (Victoria). Where the regime applies, each defendant that is found to be a “concurrent wrongdoer”, is liable only for the proportion of the loss that the court considers just, under section 24AI(1)(a). Notably, in apportioning responsibility between different concurrent wrongdoers in the proceeding, the court must not have regard to the comparative responsibility of any person who is not a party to the proceeding unless the person is not a party because the person is dead or, if the person is a corporation, the corporation has been found to be insolvent (per s 24AI(3).
Decisive Victorian decision
The leading Victorian authority on this issue is Tanah Merah Vic Pty Ltd v Owners Corporation No 1 of PS613436 [2021] VSCA 72, known as the Lacrosse case. Litigation proceedings arose following a fire at a residential tower caused by combustible cladding. The owners brought proceedings against the builder for breaches of statutory warranties under the Domestic Building Contracts Act 1995 (Vic) (DBCA), including warranties regarding materials and fitness for purpose. Crucially, the plaintiffs deliberately chose not to plead any failure to take reasonable care.
The Victorian Court of Appeal upheld the owners’ approach, finding that the claim was not apportionable. The Court asserted the rule regarding proportionate liability is that whether a claim arises from a failure to take reasonable care depends primarily on how it is framed in the pleadings. The Court rejected the argument that underlying facts or alternative pleadings could transform a non-apportionable claim into an apportionable one. This effectively permits plaintiffs to “plead out” of the proportionate liability regime, limiting the availability of apportionment for defendants.
Thus, this case makes clear that in Victoria, the characterisation of a claim as apportionable under the Wrongs Act 1958 (Vic) depends primarily on how the claim is pleaded, allowing plaintiffs to avoid the proportionate liability regime by framing their claims to exclude any alleged failure to take reasonable care.
Diverging view: the NSW perspective
The New South Wales Court of Appeal in Gerrard Toltz Pty Ltd v City Garden Australia Pty Ltd (in liq) [2024] NSWCA 232 provides a different view. There, the court expressed reservations about this Victorian approach. In obiter, the Court suggested that the application of proportionate liability should be informed not only by the pleadings but also by the factual findings of the court. This more substance-over-form view may broaden the reach of proportionate liability in NSW. The commentary in this case signals a shift in New South Wales toward a more substance-based approach, where courts focus on the underlying facts of a claim, such as whether the conduct involved a failure to take reasonable care, rather than solely relying on how the claim is formally pleaded.
This judicial inconsistency has significant implications and will affect all parties. Persons involved should consider the following:
Plaintiffs: In the NSW view, it will be more difficult to avoid the operation of the proportionate liability regime, even for cases limited to breaches of strict contractual warranties if the defendant was also negligent.
Defendants: Defendants might deny any breach of strict contractual warranties to avoid liability but may now consider conceding negligence as an alternative to reduce liability via apportionment.
Concurrent wrongdoers: All parties must carefully consider whether to pro-actively join or make available potential ‘concurrent wrongdoers’ to their claims. The state in which the claim is brought forward will influence this decision.
Conclusion
Regarding statutory apportionment, unless and until the High Court provides clarity, careful attention must be paid to the way claims are pleaded, particularly in complex, multi-party disputes. The divide between Victoria and NSW reinforces the importance of jurisdiction-specific advice and highlights the continuing evolution of Australia’s proportionate liability landscape.
To learn more about any of the matters discussed here, or if you require legal assistance, please contact Chris Moshidis, Director and Principal Lawyer on +61 3 9521 7956 or chris@urbanlawyers.com.au.