A New Zealand law academic wants legislative change to overcome inequities in contribution between tortfeasors when there are two or more causes of damage.

Prof Stephen Todd, from the University of Canterbury, told the NZILA conference the principles in s17 of NZ’s Law Reform Act (LRA) were “satisfactory” if joint tortfeasors caused the same damage. But he highlighted the difficulty when liabilities arose in different ways.

In Marlborough DC v Altimarloch Joint Venture Ltd (NZSC 2012), the purchaser of a property was misled about the land’s water permits by the vendors’ real estate agent and solicitor and Marlborough District Council, which issued a water permit.

In fact, there were insufficient water rights for the purchaser to establish a vineyard. The vendors were found liable to the purchaser for their agents’ misrepresentations and the council owed the purchasers a duty of care. The vendors sought a contribution from the council.

Prof Todd said the “tricky” issues raised were:

• What was the measure of damages payable by the vendors under the relevant Act?
• What was the measure of damages payable by the council for a negligent misstatement?
• What caused the purchasers’ loss?
• Could a party in breach of contract seek a contribution in equity from a tortfeasor?
• Were the vendors and the council liable for the same damage?

In contract, damages may be awarded to achieve performance, by compensating the purchaser for loss of the bargain. The loss may be measured by the difference in value between what was promised and what was supplied or by the cost of curing the breach.

Prof Todd said damages payable by the vendors, based on the difference in value, were $400,000 – the difference in the property’s value with and without the water rights. But damages based on the cost of putting right the breach were $1,055,907 - the cost of buying extra rights and building a dam to make up for the water shortfall. In a 3:2 majority decision, the NZSC awarded the latter sum.

In tort, damages seek to restore the plaintiff to the position he or she would have been in had the tort not been committed. So the measure of damages in the claim against the council was not performance based but the difference between the contract price and the land’s value without the water rights - $125,000.

The Supreme Court majority found the council had caused loss to the purchasers. But no contribution claim was possible under s17 of the LRA because the vendors were contract-breakers, not tortfeasors. “Could the vendors seek contribution from the council in equity? Four members of the court agreed the test was whether the liabilities were ‘of the same nature and extent’, but could not agree on what that required,” Todd said.

Justice Tipping said equity would order contribution when two parties were under a coordinate liability – a liability of the same nature and extent – to make good one loss. But in Altimarloch, the liabilities were “distinctly dissimilar”. An order for contribution would overpay the vendors, who would receive more than the property was truly worth.

Justice McGrath said equity “eschewed too technical an approach”. The reality was both the council and the vendors made the same error, with the same result that caused the purchaser loss of the same nature. The vendors would not be “overpaid” and would not receive any “profit”. An order for contribution would simply hold the council to account.

Prof Todd said Chief Justice Elias had “sympathy for the wider view” but considered the council did not cause loss, so there was no occasion for contribution.

So, while the claim was lost, there was no agreement on why. The council could be considered “unjustly enriched” because it did not have to pay anything, but would have, had it been sued alone.

Prof Todd said subsequent decisions confirmed Altimarloch had not expanded relevant principles of law about the availability of a right to contribution in equity. “However, the decision does not bar any such expansion, and the opportunity for further development of the law remains.”

“What matters is whether the damage overlaps, not whether the liabilities of A and B are “of the same nature and extent”. Perhaps the courts could develop a test which asks whether payment of a plaintiff by A discharges, in whole or part, any obligation to pay the plaintiff owed by B.”

Prof Todd said a legislative solution was “probably needed”, but had been recommended by the NZ Law Reform Commission in 1998 and “nothing has happened”.

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