Major reforms to the Building Act 2004 have resulted in a fundamental shift in how responsibility for building defects will be allocated. Adj Professor Kim Lovegrove discusses the new regime of proportionate liability.
On 18 August 2025, the Hon Chris Penk, New Zealand Minister for Building and Construction announced major reforms to the Building Act 2004 (NZ).
The Minister confirmed that “the Government will scrap the current framework, known as joint and several liability, and replace it with proportionate liability. Under this new model, each party will only be responsible for the share of work they carried out”.1
For territorial authorities (TA), homeowners, insurers, and industry professionals, this marks a fundamental, if not tectonic shift in how responsibility for building defects will be allocated. As the Minister stated, “it’s time to put the responsibility where it belongs”.2
Joint and several liability (JSL) has been the prevailing liability regime in New Zealand construction law for decades.
Under JSL, where multiple parties are responsible for defective building work, a plaintiff may in certain circumstances recover the entirety of their loss from any one solvent defendant. The outcome depends on the factual mosaic of the case, not limited to considerations such as whether a code compliance certificate has been issued by the TA, whether inspections took place and the degree of culpability of each respondent.
This doctrine was ostensibly designed to protect claimants, providing a way to recover compensation even if one or more parties had become insolvent. But in practice, the consequences have on several fronts been problematic:
Thus, JSL was seen as unsustainable in Australia. Certain states in Canada and the United States, have also adopted proportionate liability.
Furthermore, the sustainability of local government underwriting was always in question, as its raison d’être was not to serve as the financial backstop of malaise in the building sector particularly where the authors of that malaise were unrelated and remote actors.
The philosophical debate over JSL has also revealed an often-overlooked truth: the doctrine benefited the plaintiff class of consumer in one sense while penalising the citizen in another.
From a utilitarian perspective, the larger class is the ratepayer body. A sufficiently significant consensus emerged that preferencing the interests of this broader community delivers greater systemic fairness when compared with preferencing a narrower group of plaintiffs.
This recognition formed part of the intellectual backdrop for reform. Policy discourse acknowledged that while JSL may benefit individual plaintiffs, it does so by transferring significant and at times massive costs onto the wider population. Hence the common refrain familiar to the writer ‘why am I as a rate payer underwriting the liabilities of bankrupt contractors?
Another problem with JSL was how it could distort the way some TAs allocated resources. Faced with open-ended liability exposure, they diverted significant management time and financial resources into defending against potential claims to the detriment of delivering core services.
Proponents of proportionate liability say that it allows TAs to preoccupy themselves with their statutory responsibilities. Time, funding, and institutional capacity can be redirected towards what matters most: ensuring compliance with the Building Code and safeguarding public safety through higher proactive inspectorial interventions.
The new regime of proportionate liability is a fundamental departure from the ‘last man standing’ rule.
It is a fault-based doctrine where:
This represents a dramatic paradigm shift. Solvent defendants, especially TAs, and insured respondents will no longer bear the financial responsibility of others’ defaults. Responsibility will reside with the authors of the loss.
Importantly proportionate liability has a proven pedigree. In Australia, it has been the prevailing doctrine in the building industry for more than three decades, honed with judicial scrutiny, evolving through case law, and embedding itself in everyday legal and insurance practice.
The Australian experience provides reassurance for New Zealand policymakers, industry, and the courts.
Proportionate liability was introduced in the early 1990s under building regulatory amendments. The Victorian Building Act 1993 was the pioneer statute in this space. It represented a decisive departure from JSL, setting a template that would eventually be adopted across multiple Australian jurisdictions at the turn of the century.
The writer served as instructing officer to Parliamentary Counsel in the development of the Victorian Building Act, helping to formulate the liability provisions that anchored the proportionate liability regime. Since its enactment, he has worked with the system extensively in practice as a construction lawyer and can state that:
More than thirty years on, the system has proven sustainable:
Australia’s long-running experience shows that proportionate liability balances fairness to defendants with adequate protection for consumers. There has been no significant consumer disquiet, a key factor in its sustainability.
The jurisprudential nuancing in the drafting of proportionate liability provisions by the venerated offices of parliamentary counsel in New Zealand will be critical. Lessons can be drawn from Australian exemplar clauses, which have been tested in litigation and refined over decades.
Equally significant is the pioneering contribution of the International Building Quality Centre (IBQC), which is chaired by the writer.
The IBQC has spearheaded the development of an internationally recognised exemplar proportionate liability provision.
Drafting has been led by a former Chief Parliamentary Counsel in Victoria and former Law Reform Commissioner, working closely with the writer on the creation of a new International Model Building Act–an instrument that places best-practice proportionate liability provisions at its core.
This work will now be subject to interrogation and refinement by senior jurists and leading construction lawyers from several countries, who will review the draft wording considering challenges encountered in judicial interpretation.
The ambition is clear: to craft a provision that sets a global benchmark–minimising ambiguity, closing loopholes, and providing a durable framework capable of withstanding the toughest tests of litigation.
By drawing on both Australian precedents and international good practice drafting models, New Zealand can leverage of and implement a regime already forged in the furnace of experience and road-tested on the highways of jurisprudence.
Litigators, plaintiffs and respondents alike will need to adapt to the new regime. Under proportionate liability, all potentially responsible parties must be joined at the outset. Failure to do so risks leaving plaintiffs undercompensated and defendants exposed to unbalanced apportionment.
Even greater reliance will fall upon early-stage deployment of expert witnesses. Courts will require forensic dissection of responsibility across multiple disciplines – architectural design, engineering, construction methodology, inspections, and certification. Each share of responsibility must be evidenced and quantified.
Statements of claim and defence will need to articulate the specific responsibilities of each party, with precision in allegations and crossclaims. Poorly drafted pleadings could prejudice a client’s ability to ensure fair allocation of liability.
Courts ‘divvy up’ shares of liability based on evidence. While New Zealand courts will chart their own path, they can draw on a wealth of Australian precedent.
The Minister has already flagged supporting mechanisms for proportionate liability, including:3
These mechanisms may look to the Australian model, where insurance and warranty schemes have long co-existed with proportionate liability.
Critics of proportionate liability often raise the concern that plaintiffs may recover less if some responsible parties are insolvent and not joined. This can be a risk, but can be overcome through safeguards and holistic liability and risk ecology:
The long-term outlook is positive. By reducing TA exposure, the reform could well be an enabler for more efficient and confident consenting. By ensuring that each actor bears their fair share, it promotes accountability and professionalism across the sector.
There are broader benefits too. Harmonisation with Australia’s proportionate liability regimes should bode well for trans- Tasman insurance compatibility and may be conducive to additional insurance providers.
The transition from joint and several liability to proportionate liability is not merely a technical adjustment in legal doctrine; it represents a fundamental recasting of the architecture of New Zealand’s construction law liability ecology.
For councils, it lifts the longstanding burden of underwriting the insolvency risk of others. For builders, designers, and engineers, it provides clarity in the delineation of responsibility. For New Zealand citizens, the ratepayers, it promises relief from the inequitable task of subsidising the liabilities of remote actors.
For insurers, it ensures they underwrite only the liabilities of their insured, rather than being compelled to act as de facto underwriters of others. This reform could also exert downward pressure on premiums.
In its place, proportionate liability, complemented by a refined insurance ecology, offers a fairer and more targeted framework of protection without distorting the system.
New Zealand is entering a new era of accountability, guided by lessons from Australia and underpinned by a doctrine that aligns liability squarely with those who cause the loss.
1. Hon. Chris Penk, “Biggest Building Consent System Reform in Decades”, Beehive NZ (18 August 2025), paragraphs 12-13.