Litigation, Disputes and Employment
From Joint and Several Liability to Proportionate Liability
In August 2025, Cabinet agreed to shift the basis of liability for awards of damages in the building and construction sector from joint and several liability to proportionate liability. This means that parties are accountable only for their own contribution to defective building work - as opposed to the previous joint and several liability regime - where defendants may be found liable for the entirety of the plaintiff’s loss, irrespective of the degree of the individual defendant’s causal contribution.
The shift to a proportionate liability regime means that liability outcomes will no longer be driven by solvency, insurance position, or defendant availability, but by proof of causation and relative responsibility.
The Building Amendment Bill implementing these changes is expected to be introduced in early 2026, followed by a one-year implementation period, before the new regime becomes operational in 2027. As at the date of this article, the wording of the Building Amendment Bill is not yet publicly available.
The benefit of proportionate liability is that it prevents the transfer of unrelated loss to defendants who are likely to be insured (architects, engineers, and project manager) and local Councils who are often the ‘last standing’, despite varying levels of responsibility for the plaintiff’s loss.
From a legal perspective, the shift from joint and several liability to proportionate liability will affect how cases are investigated, pleaded, and proved. For example, early identification of all potentially culpable actors will be critical. Failure to identify or join relevant parties risks distorted outcomes within the proportionate liability framework and may confine the court’s apportionment to an incomplete field. Plaintiffs can no longer rely on locating one solvent defendant and leaving responsibility redistribution to the Court, assuming that the defendant has joined other potentially liable parties.
Further, expert evidence will move from being merely prudent practice to essential and paramount in assisting lawyers in forming a realistic view of the range of apportionment a Court is likely to award, so that settlement positions can be tested against probable judicial outcomes. Independent experts will play an important role in contribution and liability assessments.
Australia has had a proportionate liability regime for around 20 years. Cases of Australian jurisdiction may be used as a reference point for New Zealand decisions on proportionate liability decisions.
For example, in the Australian case of Owners Corporation No1 of PS613436T v L U Simon Buildings Pty Ltd [2019] VCAT 286 (the Lacrosse case), the Australian Court of Appeal found the fire engineer was held to have contributed to the most harm and liability, even where a different party caused the damaging event.
The Docklands Lacrosse Tower was set on fire by an occupant who discarded a cigarette that ignited a curtain on a balcony. The loss was caused by vertical fire spread facilitated by the non-compliant façade system. The architect, building surveyor and occupant and fire engineer were joined to the proceedings. At first instance, the Tribunal found that responsibility was apportioned as 39% to the fire engineer, 25% to the architect, 33% to the building surveyor and 3% to the occupant. Ultimately, responsibility was adjusted to 42% for the fire engineer, 25% to the architect, 30% to the building surveyor and 3% to the occupant.
Other direct consumer protections
The Government has announced two insurance-based supporting measures to operate alongside proportionate liability:
- Mandatory home warranties
are to apply to all new residential buildings three stories or under and renovations $100,000 and over, involving restricted building work and a building consent, to be covered by a minimum 1-year defects and a 10-year structural warranty. The function of the home warranty regime is to protect homeowners where a builder has ceased trading, retired, become insolvent, or is otherwise unable to meet the cost of rectifying defective work.
- Mandatory professional indemnity insurance
will apply to building design or related work includes architects, designers, and engineers. The policy rationale is that under proportionate liability, such professionals are no longer exposed to assuming others’ liabilities, so in return, they must stand behind their own contribution with their own insurance. However, this mandatory requirement does not apply to builders. Builders are addressed through the home warranty framework, not through professional indemnity cover.
Other changes
Increased maximum disciplinary penalties for licensed building practitioners will be implemented. The maximum fine that can be issued to a licensed building practitioner (LBP) will increase from $10,000 to $20,000. The maximum suspension period that can be issued to an LBP for a disciplinary offence will increase from 12 months to 24 months.
Conclusion
Insured parties ought to take the opportunity now (before the Building Amendment Bill comes into force) to review your insurances against probable apportioned liability, not previous joint and several liability assumptions.
We recommend seeking independent legal advice regarding any concerns you may have on how the above reforms may affect your indemnity cover or your liability for any potential or future claims.
