Proportionate Liability legislation was introduced in response to the ‘insurance crisis’ of 2001-2002. Its purpose is to distribute the responsibility of compensating injured parties among all parties that may have contributed to the damage. The goal was to find a fair balance and prevent excessive insurance premium costs.
In contractual agreements between a principal and a contractor, this means that if subcontractors (who are not parties to the contract) have caused damage to the principal, the principal will have to seek compensation from both the contractor and the subcontractor, based on their respective contributions to the loss.
In general, parties can agree to various terms in a contract, including clauses that limit or exclude different forms of liability, even those protected by the Proportionate Liability legislation. The only exception is if a specific legislative provision explicitly prohibits such exclusions. For instance, in Queensland, parties cannot exclude the application of Proportionate Liability legislation. Other jurisdictions either allow its exclusion or do not address the matter directly.
In jurisdictions where exclusion is permitted (such as NSW, Tas, WA), it is common to see contracts between principal and contractors that exclude these legislative provisions as a means of limiting liability.
The exclusion of a Proportionate Liability provisions can be indicated in a contract by directly referring to the relevant Act or by describing how the apportionment of liability among multiple wrongdoers will work. In the case of Aquagenics Pty Ltd v Break O’Day Council (No 2) [2009] TASSC 89, even without an explicit reference to the exclusion, the court determined that the language used in the contract effectively eliminated the application these provisions.
In Victoria, it has been debated whether contracting out of these provisions is allowed given that the Wrongs Act 1958 (Vic), which includes the proportionate liability provisions, allows contracting out for several of its other provisions. Since there is no specific mention of contracting out of the proportionate liability provisions, it suggests that such exclusions may not be permitted. On the other hand, in cases where an exclusion clause is absent from a contract, as seen in Aquatec-Maxcon Pty Ltd v Barwon Region Water Authority, the court may still rule that the proportionate liability provisions do not apply.
The cases above highlight the importance for parties to carefully draft exclusion clauses that comply with the applicable law and reflect the reality of their contracting arrangements.
| State | Proportionate liability legislation | Exclusion |
| QLD | Civil Liability Act 2003 (Qld) | Exclusion is not allowed as per s 7(3). |
| NSW | Civil Liability Act 2002 (NSW) – Part 4 (NSW Act) | Exclusion allowed as per s 3A(2). |
| Tas | Civil Liability Act 2002 (Tas) – Part 9A | Exclusion allowed as per s 3A(3). |
| WA | Civil Liability Act 2002 (WA) – Part 1F | Exclusion allowed as per s 4A. |
| Vic | Wrongs Act 1958 (Vic), Pt IVAA. | Exclusion is likely not allowed |
| SA | Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA) – Part 3 | Undetermined |
| ACT | Civil Law (Wrongs) Act 2002 (ACT) – Chapter 7A | Undetermined |
| NT | Proportionate Liability Act 2005 (NT) | Undetermined |
Further reading:
Legal Briefing – Proportionate Liability by Australian Government Solicitor
Disclaimer: The contents of this article do not constitute legal advice, are not intended to be a substitute for legal advice and should not be relied upon as such. You should seek legal advice or other professional advice in relation to any particular matters you or your organisation may have.
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