When considering the liabilities of today’s construction professionals, morality isn’t always the first thing that comes to mind. However, the principle of ‘joint and several liability’ is one such area capable of rousing passionate responses on both sides of the debate.
This legal principle allows a claimant who wins a case against multiple parties to enforce the judgment against any one of them for the full extent of their losses – providing they are all liable to the claimant in respect of the same damage. Typically, this burden falls on the party that is solvent, trading well, and insured.
The blunt application of this principle raises questions about its fairness. Should an engineer, whose responsibility for a loss might be just 1%, be liable for the remaining 99% simply because other team members are insolvent or uninsured?
Put another way, should the 99% ‘innocent’ engineer foot the entire bill?
The argument is often made that the client is entirely ‘innocent’, so why should they bear any risk whatsoever? Consider that clients:
- Select their construction and professional teams based on their own criteria.
- Balance cost and quality, choosing tenders that meet their standards.
- Set the terms and conditions for their team.
Are we saying that a client who focuses solely on cost reduction at the expense of everything else shouldn’t bear some responsibility for the project they have procured? Even if only for the insolvency risk of the team they themselves have chosen?
We believe this area is ripe for review. Rather than a binary choice between ‘proportionate liability’ and ‘joint and several liability’, the alternative available run a broad spectrum.
International models for liability
Various international models for dealing with this question exist, such as:
- Reallocation Mechanisms: Some jurisdictions maintain joint and several liability but have statutory mechanisms to reallocate the risk of unenforceable judgments across all remaining parties, including the claimant. This encourages clients to select financially stable teams, benefiting everyone.
- Threshold-Based Liability: In some systems, defendants are jointly and severally liable only if their responsibility exceeds a certain percentage. For example, if a defendant is 20% responsible, they are jointly liable with others. If they are 19% responsible, proportionate liability applies. This prevents marginally culpable defendants from facing disproportionate costs and recognises the inherent unfairness of penalising those (on a joint and several liability basis) where their responsibility for the overall loss is marginal. The actual percentage figure can obviously vary from system to system, but it provides a useful tool in ensuring that a marginally culpable defendant isn’t exposed to an enormous bill simply because of the inability of other more culpable defendants to pay their fair share.
- Economic vs. Non-Economic Claims: Some systems assess purely economic claims (not based on property damage or injury) on a proportionate liability basis, while other claims are assessed on a joint and several basis. This ensures buildings are repaired and people compensated, but saying that pure economic costs are a case where parties need to be more cautious in ensuring their teams are more financially secure to meet the claim.
- Consumer vs. Commercial Claims: Some jurisdictions distinguish between consumer claims and business-to-business claims. Joint and several liability applies to consumer claims, reflecting their limited resources and expertise. Commercial claims are assessed on a proportionate basis, acknowledging the parties’ ability to fund claims, negotiate terms and to make prudent decisions.
A Call for Fairness
While these models may not be entirely suitable for the UK construction industry, it’s time to consider what ‘fair’ looks like in this context. Beyond the usual issues of joint and several liability driving up claims costs and with it the premium burden placed on professionals, new building safety legislation is prompting a shift towards viewing buildings more holistically and with it an invitation (and perhaps even a requirement) to consider aspects of the project beyond those which strictly fall within someone’s scope.
Looking at buildings holistically is something that should rightly be encouraged, but it is plain to see why construction professionals might be extremely cautious about doing so in light of the spectre of joint and several liability.
Our latest risk management publication Constructing change: evolving the status quo or time to reset? explores this and other industry issues in more detail.
