The Law Commission's report on the feasibility of reform of the law on joint and several liability is the result of repeated calls for reform. Auditors in particular claim to be paying substantial damages for losses for which they do not view themselves wholly responsible.
The underlying principle of joint and several liability, which the report upholds, is that an innocent plaintiff should bear no risk of not being reimbursed because of the non-payment of damages. Instead, risk is transferred to co-defendants when seeking contribution from defendants who may be insolvent or unidentifiable.
Because professional defendants are viewed as having deep pockets they are seen as soft targets in joint liability cases. As a result, auditors say, the magnitude of some claims is rendering it prohibitive for them to insure against joint liability risks. Therefore they proposed the introduction of proportionate liability in non-personal injury cases.
Proportional liability limits a defendant's liability according to the extent of their negligence. The plaintiff's loss is then divided between the parties to the action according to responsibility, so transferring the risk of an insolvent defendant to the plaintiff.
The key question the report asks is whether it is acceptable to place any risk on the plaintiff. It concludes that there is not enough evidence to suggest that public interest would be better served by proportionate liability. The auditors' arguments fail for four reasons.
Firstly, proportionate liability is unfair because it shifts risk to the innocent plaintiff. This is only acceptable, the report states, in the case of a contributory negligent plaintiff.
Secondly, for a plaintiff to bring successful joint liability action they must show causation for the entire loss. This is described by the report as a “formidable hurdle” for the auditor's argument. It defeats the claim that a defendant who is only 1 per cent liable pays 100 per cent of the damages.
Thirdly, in a proportionate liability case there would be a possible “oddity of the plaintiff being worse off by being the victim of two wrongs”, where one of two defendants brought to court is insolvent.
Finally, the report says “even if one were to recognise that the law operates harshly against a wrongdoer who is only trivially blameworthy”, if a wrongdoer is insolvent, risk should not be borne by the plaintiff.
Since its publication in February there has been criticism by accountants that the report ignores commercial issues. They also say the mooted amendment of section 310 of the Companies Act does not compensate for the failure to reform.
Responses to the report's findings were invited by the DTI and a report on them is anticipated by the end of the year.
The legal profession has been slow to join the debate. However, the Law Society is preparing its response to the report and that is due later this year.