Proportionate liability: The risks of early settlement with some tortfeasorsApr 2021 | Insurance
One of the many benefits of the proportionate liability regime is the ability to resolve a claim against one tortfeasor and pursue any other concurrent wrongdoers to judgment. In this newsletter we look at the implications of early settlement and the impact it can have on the remaining defendants.
The Owners Corporation and Unit Owners (owners) suffered property damage to their 12-unit block (building). A new property (development) being constructed by the developer (developer) adjacent to the building had works undertaken close to the boundary and retaining wall between the two properties. Shoring works were commenced near the northern light well to install a shoring wall, however the works:
- caused movement of the retaining wall and shoring wall;
- one or both of these movements caused the foundation strata under the building to move; and
- the movement caused cracking, and other aesthetic and structural damage to the building of approximately $5 million (decided by a referee).
Proceedings were commenced by the owners against:
- Jeffery and Katauskas (J&K), geotechnical engineers (fifth defendant) engaged by the developer in 2009. The proceedings were settled.
- Hughes Trueman Pty Ltd (Hughes Trueman), consulting structural engineers (sixth defendant) engaged by the developer in 2009, and who provided the shoring layout plans.
- Northwood, structural engineers (fourth defendant) engaged by the developer in 2010 in respect of cost saving in relation to the Hughes Trueman basement plan. The proceedings were settled against Northwood.
- Southern Cross Constructions (Builder), builders (first defendant) engaged by the developer in 2010 to construct but not design the development.
- Pile & Bucket, excavators (second defendant) engaged by the first defendant to carry out piling, excavation and capping works at the development. The proceedings against Pile & Bucket were settled.
- The Builder’s insurer1 (third defendant) joined in circumstances where the builder had gone into liquidation by the time of trial.
- NMK (Aust) Pty Ltd, excavators (seventh defendant), who did excavation at the development but who ultimately proceedings were discontinued against.
A number of factors were alleged to have contributed to the damage in relation to both the movement of the shoring wall and the movement of the retaining wall including:
The shoring wall2
- inadequate design;
- removal and replacement of props;
- cutting down the piles in the shoring wall; and
- the bulk excavation.
The retaining wall3
- the movement of the shoring wall; and
- inadequate temporary propping of the retaining wall.
The judge at first instance found for the defendants.
Issues on appeal
By the time the matter went to trial and subsequently the appeal, the owners were only pursuing Hughes Trueman and the builder (and its insurer). Settlement on an undisclosed basis had taken place with respect to each of the other tortfeasors.
The grounds of appeal as against the Builder were complex and ultimately all but one ground failed. The builder was found liable for directing Pile & Bucket to conduct excavations around the northern light well and failing to install adequate temporary propping contrary to advice received from J&K.4 The grounds in relation to Hughes Trueman were also complex and not made out.5
The builder sought to reduce its exposure by seeking a discount based on the proportionate liability of one of the former defendants, Northwood.6 The Court found Northwood did have an exposure based on its negligence by virtue of the designs which necessitated the removal and replacement of steel props.7
The Court found the builder’s proportionate liability to be 40% once it had factored in Northwood’s liability as a concurrent wrongdoer.8
The terms and nature of the owners settlement with Northwood were not before the Court. Emmett AJA commented that he did not need to consider the settlement given the absence of a contention by the builder that the owners may be recovering more than their actual loss.9
Despite many arguments made against both the builder and Hughes Trueman the owners were successful only on one complex ground against the builder. The court held that the appropriate order in relation to costs was that the builder (and insurer) pay the owners’ costs in relation to the ‘reference out’ which determined quantum.
Costs of the proceeding
The order for costs of the proceeding at first instance was that the builder (and insurer) pay 75% of the owners’ costs.
The owners submitted that the builder and insurer should pay the costs that the owners were ordered to pay Hughes Trueman. The owners asserted that the builder was responsible for the joinder of Hughes Trueman to the proceedings, given the owners had initially only commenced proceedings against the builder.
The Court found that although the builder had joined Hughes Trueman to the proceedings, the owners made a forensic decision to maintain proceedings against Hughes. There was no evidence by the owners that their claims were advanced on the basis of concurrent wrongdoing of the builder. The builder and insurer were therefore not required to pay the costs that the owners had been ordered to pay Hughes Trueman.
Costs of the appeal
The Court ordered that the builder and insurer pay 60% of the owners’ costs of the proceeding, taking into account the time in the appeal dedicated to Hughes Trueman and the fact that the owners bwere only successful on one ground of appeal.
Proportionate liability - Remembering that a plaintiff should not be ‘over compensated’, where settlement has occurred in favour of one or more concurrent wrongdoers, evidence of the nature of the settlement should be before the court if a defendant wishes to argue that the fact of the settlement should reduce their potential exposure to the plaintiff.
Costs - Like all litigation, focus on the winnable issues in dispute. By narrowing the issues, your prospects of a full recovery of costs even in the event of success on one or more grounds of appeal.
1 Allianz Australia Insurance Ltd.
2 Owners of Strata Plan No 30791 v Southern Cross Constructions (ACT) Pty Ltd (in liquidation)  NSWCA 199  ('liability judgment').
3 Liability judgment (n 2) .
4 Liability judgment (n 2) –; Owners of Strata Plan No 30791 v Southern Cross Constructions (ACT) Pty Ltd (in liq) No 2)  NSWCA 35  ('proportionate liability and costs judgment') .
5 Liability judgment (n 2) –.
6 Proportionate liability and costs judgment (n 4) .
7 Proportionate liability and costs judgment (n 4) .
8 Proportionate liability and costs judgment (n 4) .
9 Proportionate liability and costs judgment (n 4) .
This article may provide CPD/CLE/CIP points through your relevant industry organisation.
The material contained in this publication is in the nature of general comment only, and neither purports nor is intended to be advice on any particular matter. No reader should act on the basis of any matter contained in this publication without considering, and if necessary, taking appropriate professional advice upon their own particular circumstances.