In a case of great importance to insurers underwriting risks in the financial services sector, the High Court in Selig v Wealthsure Pty Ltd has confirmed that the proportionate liability regime contained in Div 2A of Part 7.10 of the Corporations Act 2001 (Cth) applies solely to contraventions of s1041H (that is, claims of misleading or deceptive conduct in the provision of financial products or services), and does not extend to other claims arising from the same facts.

This decision has wide reaching ramifications as plaintiffs will often plead a claim under s1041H as an alternative to other causes of action. As a result of Selig, if a plaintiff is also successful in claiming the same damages on the same facts pursuant to an alternative cause of action where proportionate liability does not apply (such as contravention of other statutory provisions in the Corporations Act), then the damages awarded will not be apportioned.

Without the application of proportionate liability, a plaintiff is entitled to obtain payment of the entire judgment sum from a “deep pocket” defendant (such as an insurer). It would then be incumbent on that defendant to seek contribution from any other defendants. In Selig, this course was not feasible as some of the other defendants were insolvent or bankrupt.

Further, the case operates as a reminder that a non-party may be ordered to pay costs where they played an active part in the conduct of, and had an interest in the subject of, the litigation. Here, Wealthsure’s professional indemnity policy provided cover to a maximum of US$3 million for any one claim inclusive of legal costs. The insurer decided to attempt to better its position by appealing the first instance judgment. In so doing, funds that it would otherwise have contributed to the judgment sum were diverted to meet the costs of the appeals, at the expense of the plaintiffs. In these circumstances, the Court found it appropriate to award costs against the insurer itself.

A full copy of this decision can be found at: http://www.austlii.edu.au/au/cases/cth/HCA/2015/18.html