Potential cap for local authority liability

Building and Construction Minister Dr Nick Smith has made a press release commenting on the Law Commission’s report into joint and several liability. We have previously written on the Law commission report and a summary can be found here. The main recommendations in relation to the building sector are to:

  • retain the regime of joint and several liability where all parties who have contributed to the same damage will be liable for the full amount of that damage; but
  • limit the exposure of local authorities to a monetary cap (the Commission recommended a cap of $300K per dwelling, $150K per unit, $3m per multi-unit development).

The Minister has welcomed the Commission’s recommendations around sector specific risk and the Government has agreed to investigate the issue further.

The press release notes that the Government has directed the Ministry of Justice and the Ministry of Business, Innovation and Employment to further analyse the value and potential impact of the Law Commission’s recommended changes, and to report back to Ministers by the end of 2015.

Notwithstanding the recommendation and the Minister’s current support to explore the options, the question raises important questions around liability and fault. The current position is that a plaintiff is entitled to claim all of its loss from any party that jointly contributes to that loss. Due to their deep pockets, Councils usually end up fronting the brunt of this expense as others involved in the building process are not around to share the burden. This proposal may mean that any shortfall in funding will lie with the plaintiffs who in many cases have absolutely nothing to do with the defective building process.

To read an article outlining some of the considerations around limiting joint and several liability click here to read an NBR article where comment has been provided by Mary Haggie.

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