Recent development

Proportionate liability regimes in Australia are complex and, in many respects, untested in their application by appellate courts. One area where there had been uncertainty is whether damages will be apportioned in circumstances where a plaintiff alleges several causes of action each giving rise to the same damage, not all of which are the subject of a proportionate liability regime.

On 13 May 2015, the High Court handed down judgment in Selig & Anor v Wealthsure Pty Ltd & Ors [2015] HCA 18 unanimously finding that the proportionate liability regimes in the Australian Securities and Investments Commission Act (ASIC Act) and the Corporations Act were not able to be used to apportion damages for other statutory or common law causes of action which are not otherwise apportionable.

Each of the proportionate liability regimes under the Corporations Act and ASIC Act are concerned with misleading or deceptive conduct.

Case overview

A couple invested in a company, which became insolvent, on the advice of a representative of a financial adviser. The couple commenced proceedings against the financial advisor and its representative alleging contraventions of various statutory provisions, including sections 1041H of the Corporations Act and 12DA of the ASIC Act, a breach of a retainer and a duty of care. 

The insolvent company, another company who promoted the insolvent company and various directors of each of those companies were joined by the financial advisor and its representative to the proceedings.

At first instance, the Federal Court found that the financial advisor, its representative and two directors were each liable for the whole of the damage suffered and that the proportionate liability regimes did not apply. A Full Court of the Federal Court determined on appeal that the proportionate liability regimes did apply.

What does the case say?

The question before the High Court was whether, in circumstances where the loss or damage suffered for each of the claims was the same, the proportionate liability regimes were limited in their application to the claims based solely on a breach of the misleading or deceptive conduct provisions (which were subject to apportionment) or also applied to claims which, by themselves, were not apportionable but which arose in the same circumstances as the apportionable claims.

In other words, are non-apportionable claims "subsumed" into a "single apportionable claim" where they arise from the same circumstances? 

The High Court, applying well-settled principles of construction, concluded that the proportionate liability regimes in the ASIC Act and the Corporations Act were not able to be used to apportion damages for statutory or common law causes of action which are not otherwise apportionable because: 

  • under each applicable proportionate liability regime, only a claim for contravention of the misleading or deceptive conduct provision was capable of being an "apportionable claim";
  • "claim" must have the same meaning throughout a provision (in this case, section 1041L of the Corporations Act); and
  • the reference to "claim" in sub-section (2) of section 1041L, which provides for a "single apportionable claim" where the claim is based on more than one cause of action, was limited to other apportionable claims and could not be extended to also include non-apportionable causes of action.

The High Court therefore found that the defendants who were ordered to pay damages were each liable for the full amount of the loss, even though the financial advisor and its representative were found to be concurrent wrong-doers in respect of the apportionable claim for misleading or deceptive conduct.

The High Court also made a costs order against the insurer of the financial advisor and its representative, who conducted and funded the appeals, on the basis that the insurer was acting to better its position rather than the insureds. 

Actions to consider

This decision may have consequences for parties involved in proceedings where multiple causes of action are alleged.

In particular, from a defendant's perspective:

  • the existence of any non-apportionable claims may significantly increase the defendant's financial exposure; and
  • different responses to claims may be required depending on whether a proportionate liability regime applies, namely:
    • apportionment defences, where apportionment applies; and
    • cross-claims for contribution or indemnity, where apportionment does not apply.

Defendants should also carefully consider their potential exposure in setting reserves in respect of different types of claims.

This decision also highlights the importance of careful pleading by claimants where proportionate liability regimes may apply. In particular, claimants should appreciate that the same facts and circumstances may give rise to some causes of action which are apportionable (for example, contract, negligence and claims for damages under section 236 of the Australian Consumer Law) and some causes of action which are non-apportionable (for example, claims for relief such as compensation under section 238 of the Australian Consumer Law). 

Where multiple causes of action are available, claimants should consider whether it is in their best interests to plead only non-apportionable claims, only apportionable claims or some combination of both.   For example, if a claimant includes a non-apportionable claim, the potential reduction in the damages recoverable from a defendant due to the operation of proportionate liability regimes may be avoided. Equally, if the goal is to avoid the introduction of other parties via defendant cross-claims the decision might be taken to limit claims to apportionable claims.