How common are multi-party disputes? How is liability apportioned between multiple defendants? Does your jurisdiction recognise net contribution clauses (which limit the liability of a defaulting party to a “fair and reasonable” proportion of the innocent party’s losses), and are these commonly used?
According to the Disputes Act of 2005 several parties may sue or be sued in the same case if the claims are under Norwegian jurisdiction, the claims are submitted under the jurisdiction of the court and the claims can be handed by the court with the same composition and mainly according to the same case processing rules. Parties on the same side in a lawsuit are considered as independent parties to the counterparty.
The Disputes Act of 2005 also opens for a lawsuit being submitted for or against a group (e.g. of people, organisations, companies) on the same actual and legal basis. A verdict will be binding on all participants in the group.
It is not uncommon to have multiple parties on one or more sides in a dispute. However, group lawsuits are more uncommon.
Clauses limiting the liability of the party in breach is recognised, but is often limited by gross negligence and intent. This is especially common in advisory contracts as well as in manufacturing contracts. The liability for delay liquidated damages is limited in the NS contracts. Limitations in Norwegian contracts are usually limited to a predefined limit, and not on the basis of what is fair and reasonable.
Multi-party construction disputes are not very common in Sweden. If multiple defendants are held liable, they will be jointly and severally liable to the claimant under Swedish law, unless otherwise agreed. The defendants are free to regulate in their agreement how to internally apportion their liability. There are no statutory provisions that regulate the internal apportionment of the liability between the defendants. If it cannot be ascertained what loss each defendant has caused, general Swedish contract law principles provide that the liability shall be apportioned between them in a “fair and reasonable way”. In practice, this will often be in equal shares.
It is common for disputes in the industry to involve multiple parties, but given the consensual and contractual basis for arbitration, it is rare for there to be multi-party arbitrations in Hong Kong. Multi-party court actions are more common.
Some Hong Kong standard form construction contracts allow for consolidation of related disputes, or for “name borrowing” (whereby a subcontractor may sue the employer directly in the main contractor’s name). In addition, the HKIAC 2013 Administered Arbitration Rules expressly allow for joinder of additional parties and consolidation of related arbitrations.
It is fairly standard for Hong Kong contracts, where one of the contracting parties is a multi-party unincorporated joint venture, to provide that the members of the joint venture are jointly and severally liable for their contractual obligations.
In apportioning liability between multiple defendants, a court or tribunal generally will have regard to the contract terms and the particular facts of the case. The Civil Liability (Contribution) Ordinance (Cap. 377) allows a defendant who has incurred liability, for which one or more other parties is partly responsible, to recover from those parties according to the degree of responsibility for the liability that each of them bears.
Net contribution clauses are not commonly seen in Hong Kong, although generally the Hong Kong courts prioritise freedom of contract and consequently would be likely to uphold such clauses, subject to the Control of Exemption Clauses Ordinance (Cap. 71). This Ordinance, which is substantially similar to the UK Unfair Contract Terms Act 1977, provides that, where a party contracts on the basis of its own standard terms of business, and a provision of those standard terms purports to exclude or restrict liability for breach of contract or tort, such a provision is only enforceable to the extent that it satisfies the requirement of reasonableness. Between sophisticated commercial parties, it would be uncommon for any such term to be deemed unreasonable.
Many disputes involve multiple parties, given the preponderance of complex contractual frameworks, overlaps in design responsibility and difficulties establishing causation (for example, a defect might be caused by poor design or workmanship).
The English courts have wide case management powers to join parties and consolidate disputes. However, the costs of multi-party litigation can be prohibitive.
Moreover, since the most common method of dispute resolution in the industry is adjudication, most formal disputes are between two parties. This is because of the short time frames involved, which leave little scope for consolidation or joinder. It is possible to have two adjudications, one between the subcontractor and main contractor, and one between employer and main contractor, held at the same time as and before the same adjudicator.
Where two parties are liable for the same damage, they are held to be jointly and severally liable to the claimant, and one claim a contribution from the other under the Civil Liability (Contribution) Act 1978.
Net contribution clauses are sometimes adopted in collateral warranties from consultants, and where used they are upheld by the courts.
Multi-party disputes are common in the United States. For example, it is not uncommon for an owner asserting a claim for defective work to sue both the contractor and the designer for the same scope of damages. Likewise, claims can be asserted against multiple parties for delay damages were there are multiple concurrent delay events resulting in the assessment of liquidated damages or delays to substantial and final completion.
While multi-party disputes are common in the United States, the use of net contribution clauses is not. In fact, depending upon the nature of the claim the methodology for apportioning liability will depend upon the state where the dispute proceeds. For example, in the tort arena every state has adopted a different methodology for apportionment of liability. Some states, such as Maryland and Virginia are pure joint and several liability states. That means that plaintiffs prevailing against multiple parties on tort claims can recover the full amount of their damages from any one of the parties. Other states, such as Georgia and Kansas, have adopted pure several liability, meaning that each party is responsible to pay for only its portion of the awarded damages. As with most other issues in the United States, the answer as to how liability will be apportioned will be dictated based on the location of the dispute.
In the context of breach of contract actions, most courts hold that a party is responsible for all the damages resulting from its breach. Moreover, most courts reject comparative fault in a breach of contract claim. As a result, a party who breaches its contract will be responsible for all of the damages sustained regardless whether there are multiple concurrent breaches by other parties. Some states have ameliorated this sometimes harsh result by adopting legal standards, such as the substantial factor test, that look for the most culpable party who caused the damages. Such rules are, however, the minority view in the United States.
Generally the multi-party disputes are common in Serbia.
The liability between multiple defendants could apportioned by; i) separate liability of each defendant in specific default; ii) joint liability of all defendants.
Serbian law provides that a provision of a contract shall be valid by which the highest amount of compensation is determined, unless such amount is in obvious disproportion to the damage and unless the law provides otherwise for the specific case.